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Former Keating Aide Says Riegle Arranged Meeting

December 14, 1990

WASHINGTON (AP) _ A former top aide to savings and loan owner Charles H. Keating Jr. testified today that Sen. Donald Riegle arranged a meeting between senators and the top federal thrift regulator to discuss Keating’s concerns. Riegle has denied setting up the meeting.

James Grogan, once corporate counsel to Keating’s parent company, told the Senate Ethics Committee that Riegle suggested the meeting when he visited the Arizona facilities of Keating’s American Continental Corp., and met privately with Keating.

Grogan testified under a grant of immunity from prosecution.

The meeting, on April 2, 1987, was held by four senators with then-top regulator Edwin J. Gray. Gray has charged that the senators improperly pressured him in that session to drop a regulatory control of Lincoln Savings and Loan that Keating was protesting.

Riegle did not attend that meeting, and Grogan said he was surprised by the senator’s absence. Riegle did attend a meeting with the other four senators and San Francisco-based regulators a week later. Grogan said he urged Riegle to attend the second meeting and wanted ″to keep the team together,″ referring to the senators.

Grogan also testified that Sen. Alan Cranston, D-Calif., agreed to call Gray’s successor, M. Danny Wall, to arrange a meeting between the regulator and Keating in late 1987. Grogan said Keating made the request to Keating after Grogan delivered $250,000 in checks for a voter-registration drive Cranston was supporting, and together they placed a call by speaker phone to Keating in Arizona.

Grogan said Riegle had suggested that the two Arizona senators, Democrat Dennis DeConcini and Republican John McCain, attend the session with Gray on April 2. He said Riegle asked that the other senators then invite him to attend.

Committee special counsel Robert S. Bennett asked Grogan, ″Is there any doubt in your mind Senator Riegle agreed to arrange the meeting for the senators?″

Grogan replied, ″No, sir.″

Grogan recalled that Riegle said ″he would talk with Ed Gray and he thought he could set up a meeting ... and perhaps set up a process of disengaging from the feud or fighting that was going on″ between Keating and the regulators.

Riegle, in earlier testimony before the committee in its Keating Five hearings, denied setting up that meeting or one a week later with all five senators, including himself, and regulators.

″No, I didn’t arrange either meeting,″ Riegle has testified.

Grogan said that while Riegle and Keating met privately, he met with Kevin Gotlieb, Riegle’s staffer on the Senate Banking Committee, and discussed a fundraiser Keating was organizing for Riegle in Detroit. Keating owned a prominent downtown hotel there.

Bennett asked Grogan, ″Did Senator Riegle ever tell you why he wanted you to ask Senator McCain to ask Senator Riegle to come to the meeting?″

Grogan replied, ″It was apparent to me that ... Senator Riegle knew as a shrewd politician that this was a potentially politically explosive situation because there was tremendous media at the time about Mr. Keating and Mr. Gray and the regulators and all the fighting.″

Grogan said that when he asked McCain, he refused to invite Riegle but did agree ″to at least talk to Riegle about it.″

The panel granted Grogan limited immunity from prosecution to compel his testimony about Keating’s ties to five senators who have been accused of intervening improperly with federal thrift regulators on behalf of Keating’s Lincoln Savings and Loan Association.

Grogan, 36, of Scottsdale, Ariz., gave his first public testimony with his lawyer sitting behind him. None of the five senators under scrutiny was present.

Grogan said he had earned $300,000 a year working for Keating’s company, before resigning last June. He described his relations with Keating as ″strained.″

Keating had extensive contacts with the senators and their staffs. He was a big contributor to each lawmaker, and the committee is considering whether the $1.3 million he and associates donated to their campaigns and related political causes was tied to their assistance.

Keating’s parent company, American Continental Co., went bankrupt in April 1989, and Lincoln was seized by federal regulators. The cost to taxpayers to cover insured deposits is expected to top $2 billion, and Keating is under a state fraud indictment in California.

Grogan was vice president of Lincoln, based in Irvine, Calif., and corporate counsel to American Continental, based in Phoenix.

The five senators are Republican John McCain of Arizona and Democrats Alan Cranston of California, Dennis DeConcini of Arizona, John Glenn of Ohio and Donald Riegle of Michigan.

Keating, Grogan and other aides invoked their Fifth Amendment rights against self-incrimination in refusing to testify. In granting Grogan immunity to compel his testimony, the committee said it would not do so for Keating.

Evidence in the previous four weeks of public hearings has shown that Grogan arranged for political donations to lawmakers and was point man in soliciting congressional help for Keating’s ″all-out war″ with regulators who were closing in on Lincoln.

A memo introduced into evidence last week showed that Keating directed Grogan to try to have a senior career regulator fired for his tough actions against Lincoln.

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