Let's just examine who's palling around with whom shall we?
McCain prides himself on being a straight talking war veteran who wants to be your friend. But one thing he probably wants you to forget is how he played a major part in one of the biggest political scandals of the 1980’s and 90’s. John McCain, along with four other senators, were a part of what is known as the Keating Five. This was a group of politicians who, in exchange for substantial political contributions, protected a corrupt business man named Charles Keating and his business called Lincoln Savings and Loan. In 1989, Lincoln Savings and Loan collapsed, costing the federal government over $3 billion. Several elderly investors lost their life savings and about 23,000
Anyway… I recently had the opportunity to interview a man named Arthur* who worked for American Continental Corps, the parent company of
How did you come to work for American Continental Corps?
I knew nothing of Keating nor of the brewing S&L crisis when I got a call from a recruiter at the end of April 1987. I had worked happily for five years as Director of Advertising and Public Relations at a hotel management company in Florida. The recruiter was conducting a nationwide search for a top level hotel advertising guy to join a growing company, American Continental Corporation - parent of Lincoln Savings, in Phoenix. They had interviewed many candidates and had rejected all of them. Since my wife and I were going to be celebrating our wedding anniversary one week later at the Ritz Carlton in Laguna, I told them I would pop over to Phoenix (where I'd never been) for an interview. One morning in Laguna I put on a three piece navy wool suit and tie, and flew from Irvine to Sky Harbor, where I was met by a chauffeured white stretch limo. All very strange. I was brought to a very lavish office complex at 2735 East Camelback, where I was interviewed by eight people. After that - in the heat of the afternoon - I was driven to the Phoenician construction site on Camelback Mountain, and walked through a hard hat tour of it. Needless to say I was melting. Then back to the airport via limo and back to Orange County, still with no clue what I was getting into. A day or two later we were in our hotel room when the phone rang and the voice at the other end said that they had picked me for the position. After I hung up we rolled with laughter for quite a long time.
What were the first signs that something was off about the company?
When I first relocated, they put me up at a luxurious hotel, and I had a lot of room service cheeseburgers and martinis all on the company. My office was really lavish, compared to what I was used to - very expensive furnishings and artwork - and a strange rule that it was unacceptable to leave anything on a desktop after one left. (This is the truth: I made friends with a guy named Frank* in a nearby office and, one day, he had disappeared. When I asked where he was I was told, in seriousness, that he had been fired for "messy desk." I was now through the looking glass!)
Did you know from day one that Charles Keating was a crook?
I had been given a recent issue of a major monthly business magazine which contained a long feature about the Federal Home Loan Bank Board and its pursuit of Charlie Keating - which I read with much fear. Also, on my third day in the office Charlie told me I had to make a speech to the entire corporate staff, at which I was petrified. I don't exactly remember what I said but Charlie made a big fuss, publicly, about how smart I was. OK, I thought.
How was your day to day work affected by Keating’s shadiness?
I noticed two things which were, to me, quite odd. One was that Charlie's daughters (all four on the payroll, along with his idiot son known as C3, who was tucked away at a bank in Europe) kept walking around the office morning and afternoon, as if they were "inspecting." I just waved and said hi. This happened every day. The second thing came to my attention very soon. I had to learn the hotel part of the company quickly since, as advertising VP, I was required to hire an agency within a week! So what I did was I went to the files and read them. OMG. Mid-way I discovered that vendors had been billing the company - and re-billing the company - for the same services performed, and the very same invoices (in some cases over $50K each) were paid more than once! I had never seen any such thing, and I was both shocked and scared. I went to the woman who was head of accounting with this info, and from that moment I was a marked man. Never question the incompetence of an autocrat, especially when it's someone else's money!
Sounds like the accounting practices at ACC were pretty generous.
At the office I quickly discovered that vendors throughout Arizona had discovered, just as ACC corporate staff members had, the amazingly "generous" nature of the corporation's accounting
practices. Cash flow (from Lincoln Savings) into the ACC balance sheet was so fast and furious that all bills, however padded and inflated, were never questioned. Indeed they were often paid more than once. And they were paid within days of invoices being received. No petty monthly cycles there.
How did John McCain and the Keating 5 play into your experience?
My advertising budgets were swamped with requests. No matter how judiciously I had drawn these the money was spent before I ever got near them. This was where my efforts intersected with those of the Keating Five. All politicians seeking big chunks of support, including McCain, were referred to my office. After a call I would routinely contact Charlie's office and was told by his assistant to issue the checks and charge them to hotel advertising. Speaking of spending: all of us had attractive young secretaries who were expensively if modestly dressed. I found out soon that each was provided with a monthly clothing allowance of up to $2K. We had daily catering from Oscar Taylor's, the gourmet deli at the Biltmore, which included lavish multi-course
When did people finally start to catch on to these strange business practices?
After about a year the FHLBB's investigators started moving in. Charlie was interviewed by a newswoman who asked him if he thought his contributions would provide him special access to the lawmakers. He answered, famously, "I certainly hope so!" Indeed the five senators, including some well-respected older ones like Alan Cranston of CA and John Glenn of OH, called a special meeting with the FHLBB to ask them to lay off Lincoln Savings. That was the nub of the Keating Five affair. Flying directly in the face of federal regulations, Charlie had continued since the mid 1980s to funnel hundreds of millions in depositor savings into ACC projects, mostly real estate development. But there was also Catholic charity. Mother Theresa, for example, was a particular beneficiary of Charlie's largesse. The family often flew to meet her at her family home in Yugoslavia. He also had various homes, including an extensive beach and boating compound in Bimini, The Bahamas, where the McCain family was flown several times for vacations. In order for the grown-ups to have their vacation fun, the McCain family babysitter was taken along.
By 1989 the heat was sufficiently high for things to change. Rather than simply siphon depositors' cash, ACC began selling "unsecured debentures" in Lincoln Savings branch lobbies. The 23,000 little old California ladies who forked over their life savings were told that these were government insured investments. They were not. The ladies were fleeced.
So how did it all come to an end?
When attacked by Washington, Charlie circled the wagons. Two young "geniuses" who had been running Lincoln were brought into our office to stem the bleeding - and the evidence. Within months numerous jobs, including mine, were eliminated - although there were gilded – if not golden - parachutes. Ultimately he was brought down, convicted of massive fraud, and served 4.5 years in a Federal pen. I think the final tab to the taxpayers was $3.2 billion or so.
While I escaped with my safety, others of my colleagues did not. Several key players went to jail. Others, including one of my close friends at the company, swallowed their pistols.
So there you go folks. McCain can lie all he wants about Barack Obama palling around with terrorists. He can talk all night and day about how he can fix this economic crisis. But at the end of the day, it’s important to remember the major part he played in the Savings and Loan Crisis.
*names have been changed to protect anonymity