The Keating Five, revisited
Richard DelliVeneri, Director of Career Services
Issue date: 10/27/08 Section: Perspectives
Lately, the presidential race has given a lot of attention to an event that occurred some time ago - the Keating Five proceeding before the U.S. Senate Ethics Committee. The spate of articles and You Tube videos has provoked charges and countercharges from both of the candidates and their supporters. If you don't know what the Keating Five is all about, you need to become familiar with it. It's a profound lesson in politics - one that illustrates in the most concrete way how money and power can be used in an effort to corrupt the administration of good government.
The resurrection of this event has been especially important to me. In the fall of 1990, I was serving as a senior lawyer at the Office of Thrift Supervision (OTS) in San Francisco, a federal banking agency responsible for supervising the savings and loan industry. Two of my OTS colleagues had been called to appear as key witnesses before the Committee to give testimony in the Keating Five. William Black was the chief litigation counsel for our office, and Michael Patriarca was the director of the OTS' West Region. I was enlisted to help them prepare for their testimony and accompany them to the hearing with documentary support. While we considered the Committee's hearing a matter of great national importance, I don't think it ever occurred to us that it would become an important issue in a future presidential election campaign.
The Committee initiated the proceeding to investigate the conduct of five U.S. senators: Alan Cranston, D-CA; Dennis DeConcini, D-AZ, John Glenn, D-OH, John McCain, R-AZ, and Donald Riegle, D-MI. These five senators were suspected of exerting improper influence in the regulation of Lincoln Savings and Loan (Lincoln), a California-based thrift institution that was headed by Charles Keating, Jr. Lincoln had engaged in risky investment activities that attracted the attention of the thrift examiners from our San Francisco office. Among other things, the examiners found that Lincoln substantially violated the agency's "direct investment rule," which limited the amount of direct investments a thrift institution could make in real estate. In May 1987, our San Francisco examiners recommended that Lincoln be seized for operating in an unsafe and unsound condition and for dissipating its assets. Unfortunately, the agency's Washington, D.C. office did not accept this recommendation and instead pursued supervisory action that allowed Lincoln to continue to operate until April 1989, when it was seized and placed into conservatorship. The cost of Lincoln's failure to the U.S. government, and ultimately to U.S. taxpayers, was more than $3 billion, the largest failure of any thrift institution up to that time. In January 1993, Keating was convicted on 73 counts of fraud and racketeering by a federal jury in Los Angeles. After serving several years in prison, the verdict was overturned on appeal. But Keating later pleaded guilty to four counts of fraud.
The resurrection of this event has been especially important to me. In the fall of 1990, I was serving as a senior lawyer at the Office of Thrift Supervision (OTS) in San Francisco, a federal banking agency responsible for supervising the savings and loan industry. Two of my OTS colleagues had been called to appear as key witnesses before the Committee to give testimony in the Keating Five. William Black was the chief litigation counsel for our office, and Michael Patriarca was the director of the OTS' West Region. I was enlisted to help them prepare for their testimony and accompany them to the hearing with documentary support. While we considered the Committee's hearing a matter of great national importance, I don't think it ever occurred to us that it would become an important issue in a future presidential election campaign.
The Committee initiated the proceeding to investigate the conduct of five U.S. senators: Alan Cranston, D-CA; Dennis DeConcini, D-AZ, John Glenn, D-OH, John McCain, R-AZ, and Donald Riegle, D-MI. These five senators were suspected of exerting improper influence in the regulation of Lincoln Savings and Loan (Lincoln), a California-based thrift institution that was headed by Charles Keating, Jr. Lincoln had engaged in risky investment activities that attracted the attention of the thrift examiners from our San Francisco office. Among other things, the examiners found that Lincoln substantially violated the agency's "direct investment rule," which limited the amount of direct investments a thrift institution could make in real estate. In May 1987, our San Francisco examiners recommended that Lincoln be seized for operating in an unsafe and unsound condition and for dissipating its assets. Unfortunately, the agency's Washington, D.C. office did not accept this recommendation and instead pursued supervisory action that allowed Lincoln to continue to operate until April 1989, when it was seized and placed into conservatorship. The cost of Lincoln's failure to the U.S. government, and ultimately to U.S. taxpayers, was more than $3 billion, the largest failure of any thrift institution up to that time. In January 1993, Keating was convicted on 73 counts of fraud and racketeering by a federal jury in Los Angeles. After serving several years in prison, the verdict was overturned on appeal. But Keating later pleaded guilty to four counts of fraud.
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