WASHINGTON -- Ethics hearings in the case of the "Keating Five" senators will be delayed for nearly two weeks to make way for the testimony of Charles H. Keating Jr.'s top lobbyist, a move that could push the proceeding into early next year but could also provide some telling evidence.
Mr. Keating is the savings and loan executive and political contributor who repeatedly enlisted the help of the five senators in his battles with federal banking regulators from 1984 to 1989, and prospective witness James Grogan was often his go-between on Capitol Hill.
Documents and earlier testimony show Mr. Grogan to be a central figure in Mr. Keating's campaign to pressure federal banking officials for more lenient regulation of his ailing thrift, Lincoln Savings and Loan Association. A July 1987 memo to Mr. Grogan from Mr. Keating, for example, ordered the lobbyist to use his contacts with then-House Speaker James C. Wright Jr., D-Texas, to oust federal banking regulator William K. Black.
"Highest Priority -- Get Black," the memo began. "Good Grief -- If you can't get Wright and Congress to get Black -- Kill him dead -- you ought to retire."
But Mr. Black was not fired, and in 1989 Mr. Keating's debt-ridden thrift was taken over by regulators. Taxpayers will spend an estimated $2.3 billion paying off the difference between Lincoln's shrunken assets and its insured deposits.
The ethics committee is trying to determine whether the five senators -- Alan B. Cranston, D-Calif., Dennis DeConcini, D-Ariz., John Glenn, D-Ohio, John McCain, R-Ariz., and Donald W. Riegle Jr., D-Mich. -- did anything improper. Committee members also will decide whether the senators' actions were influenced by the approximately $1.3 million Mr. Keating gave their campaign funds and pet political projects.
Mr. Keating, awaiting trial on fraud charges, has already refused to testify to the committee behind closed doors, and he will not be called to the hearings.
Mr. Grogan also has refused to speak to the committee, so members decided Wednesday to induce his testimony with a grant of limited immunity against prosecution. The offer is also expected to free up more documents in the case, adding to the hundreds of boxes of evidence already amassed by the committee's special counsel, Robert Bennett.
After hearing two more witnesses today, the committee will recess until Dec. 12, when members will obtain the documents from Mr. Grogan. On Dec. 17 the committee and attorneys for the senators will question Mr. Grogan behind closed doors. Then, if it turns out he has evidence relevant to the case -- considered likely -- Mr. Grogan will testify before the committee in public.
The delay, and further delays that could be caused by attempts to verify or refute evidence added by Mr. Grogan, could carry the hearings into early next year. The committee had hoped to wrap up the proceeding by Christmas.
Yesterday, the committee continued to hear testimony from the regulator Mr. Grogan was supposed to "get," Mr. Black, who maintained under strenuous cross-examination that the senators had improperly pressured him and other regulators to back off in their actions aginst Mr. Keating's thrift.
Two other regulators have said the same thing, but both said the senators' actions did not slow down regulatory action. Mr. Black disagreed and blamed the senators' pressure for a decision by his higher-ups that reined in an examination of Lincoln.
That examination, he said, would have turned up bogus transactions and a "tax-sharing scam." Instead, he said, the practices went unnoticed for a longer time, delaying the government shutdown of Lincoln and costing taxpayers millions of dollars.