The controversial George W. Bush-sponsored poll in South Carolina mentioned John McCain's role in the so-called Keating Five scandal, and McCain says his involvement in the scandal "will probably be on my tombstone." What exactly did McCain do?
In early 1987, at the beginning of his first Senate term, McCain attended two meetings with federal banking regulators to discuss an investigation into Lincoln Savings and Loan, an Irvine, Calif., thrift owned by Arizona developer Charles Keating. Federal auditors were investigating Keating's banking practices, and Keating, fearful that the government would seize his S&L, sought intervention from a number of U.S. senators.
At Keating's behest, four senators--McCain and Democrats Dennis DeConcini of Arizona, Alan Cranston of California, and John Glenn of Ohio--met with Ed Gray, chairman of the Federal Home Loan Bank Board, on April 2. Those four senators and Sen. Don Riegle, D-Mich., attended a second meeting at Keating's behest on April 9 with bank regulators in San Francisco.
Regulators did not seize Lincoln Savings and Loan until two years later. The Lincoln bailout cost taxpayers $2.6 billion, making it the biggest of the S&L scandals. In addition, 17,000 Lincoln investors lost $190 million.
In November 1990, the Senate Ethics Committee launched an investigation into the meetings between the senators and the regulators. McCain, Cranston, DeConcini, Glenn, and Riegle became known as the Keating Five.
(Keating himself was convicted in January 1993 of 73 counts of wire and bankruptcy fraud and served more than four years in prison before his conviction was overturned. Last year, he pleaded guilty to four counts of fraud and was sentenced to time served.)
McCain defended his attendance at the meetings by saying Keating was a constituent and that Keating's development company, American Continental Corporation, was a major Arizona employer. McCain said he wanted to know only whether Keating was being treated fairly and that he had not tried to influence the regulators. At the second meeting, McCain told the regulators, "I wouldn't want any special favors for them," and "I don't want any part of our conversation to be improper."
But Keating was more than a constituent to McCain--he was a longtime friend and associate. McCain met Keating in 1981 at a Navy League dinner in Arizona where McCain was the speaker. Keating was a former naval aviator himself, and the two men became friends. Keating raised money for McCain's two congressional campaigns in 1982 and 1984, and for McCain's 1986 Senate bid. By 1987, McCain campaigns had received $112,000 from Keating, his relatives, and his employees--the most received by any of the Keating Five. (Keating raised a total of $300,000 for the five senators.)
After McCain's election to the House in 1982, he and his family made at least nine trips at Keating's expense, three of which were to Keating's Bahamas retreat. McCain did not disclose the trips (as he was required to under House rules) until the scandal broke in 1989. At that point, he paid Keating $13,433 for the flights.
And in April 1986, one year before the meeting with the regulators, McCain's wife, Cindy, and her father invested $359,100 in a Keating strip mall.