McCain learned lessons from Keating scandal

0 Comments | Oakland Tribune, Mar 24, 2008 | by Larry Margasak

WASHINGTON -- Sen. John McCain's ethics entanglement with a wealthy banker ultimately convicted of swindling investors was such a disturbing, formative experience in his political career that he compares the scandal in some ways to the five years he was held as a prisoner of war in Vietnam.

"I faced in Vietnam, at times, very real threats to life and limb," McCain told The Associated Press. "But while my sense of honor was tested in prison, it was not questioned. During the Keating inquiry, it was, and I regretted that very much."

In his early days as a freshman senator, McCain was known for accepting contributions from Charles Keating Jr., flying to the banker's home in the Bahamas on company planes and taking up Keating's cause with U.S. financial regulators as they investigated him.

The Keating Five was the derisive name given McCain and four Democratic senators who were defendants in a congressional ethics investigation of their connections to Keating. McCain is the only one still in the Senate. They were accused of trying to intimidate regulators on behalf of Keating, a real estate developer in Arizona and owner of Lincoln Savings and Loan based in Irvine.

Keating and his associates raised $1.3 million combined for the campaigns and political causes of all five. McCain's campaigns received $112,000.

The investigation ended in early 1991 with a rebuke that McCain "exercised poor judgment in intervening with the regulators." But the Senate ethics committee also determined McCain's actions "were not improper nor attended with gross negligence."

McCain has claimed the Keating scandal sensitized him even to the appearance of potential conflicts of interest. But in recent weeks, McCain has defended himself anew over another instance in which he intervened with federal regulators on behalf of a prominent campaign contributor -- years ago, but after the Keating rebuke. Again, McCain denies acting improperly.

McCain wrote two letters in late 1999 to the Federal Communications Commission on behalf of Florida-based Paxson Communications. He urged quick consideration of a proposal to buy a television station license in Pittsburgh, although he did not ask the FCC commissioners to approve the proposal. At the time, one FCC commissioner's formal nomination was pending before McCain's Senate committee, and the FCC chairman complained that McCain's letters were improper.

McCain wrote the letters after receiving more than $20,000 in contributions from the company's executives and lobbyists. Chief executive Lowell W. "Bud" Paxson also lent McCain his company's jet at least four times during 1999 for campaign travel.

In the Keating investigation, the committee said more than a year had passed -- a "decent interval" -- between the last contributions Keating raised for McCain and his two 1987 meetings with banking regulators. McCain later paid $112,000 -- the amount Keating raised for him -- to the U.S. Treasury.

None of the five senators was punished by the Senate. The harshest rebuke went to Alan Cranston, D-Calif., who accepted $1 million in contributions tied to Keating. The ethics committee said Cranston "engaged in an impermissible pattern of conduct in which fundraising and official activities were substantially linked." Cranston died in December 2000.

The ethics committee said McCain took no further action on Keating's behalf after regulators dropped a bombshell during a meeting with the senators: They intended to recommend a criminal probe of Keating and his savings and loan.

"The appearance of wrongdoing, fair or unfair, can be potentially as injurious as actual wrongdoing," McCain told the AP, reflecting on what he said were his lessons from the scandal. "Also, when questions are raised about your integrity or for that matter anything involving your public career, even, for example, a controversial position on the issues, it is best not to hide from the media or public."

Now famously accessible to reporters as a presidential candidate, McCain conducted a poisonous newspaper interview nearly 20 years ago with his hometown Arizona Republic. Flashing his quick temper, he insulted, cursed and hung up on reporters questioning him about his ties to Keating. He said he now recognizes it was the worst way to respond.

"Taking all the questions and making your arguments is the only way you can prevent an unfair or injurious public perception becoming fixed," McCain said.

Former Sen. Warren Rudman, R-N.H., a Republican on the ethics panel who investigated McCain, said McCain's political comeback and his rehabilitation from his time as a POW were his biggest personal obstacles.

"What happened in Vietnam and the Keating Five, those two were life-altering," Rudman said in an interview. "He would not put a losing campaign in the same box. But not wallowing in self pity and doing something positive, that is absolutely John McCain."

Republican Trent Lott of Mississippi, the former Senate majority leader, said McCain's political revival after the investigation was no accident.