CALIFORNIA ELECTIONS ATTORNEY GENERAL : Smith Asks Foe to Tell Extent of His Ties to S

Standing outside a Lincoln Savings & Loan branch office in West Los Angeles, Democratic state attorney general candidate Arlo Smith demanded Thursday that his Republican foe, former Rep. Dan Lungren, explain the extent of his ties to figures involved in the massive national S&L; scandal.

“How can you (Lungren) be trusted to oversee the criminal investigation of the Lincoln Savings & Loan targets when those very targets are your political patrons?” asked the San Francisco district attorney at the afternoon press conference.

Smith’s statements came on the heels of the disclosure this week of a 1986 letter addressed to the nation’s top thrift regulator requesting secret records concerning controversial investment practices by S&Ls.; The letter was signed by 16 Republican congressmen, including Lungren. Edwin Gray, former Federal Home Loan Bank Board chairman, said in interviews this week that the letter appeared to have been a poorly disguised attempt to pass confidential information to the Orange County-based Lincoln thrift about possible federal actions to tighten controls over it.

Lincoln owner Charles H. Keating Jr. is awaiting trial on securities fraud charges in connection with the sale of junk bonds through the now-bankrupt institution, whose failure could cost taxpayers more than $2 billion.

Gray said Thursday that he believed that Rep. Charles Pashayan (R-Fresno) prepared the letter and then asked other congressmen, including Lungren, Robert K. Dornan (R-Garden Grove), Carlos J. Moorhead (R-Glendale) and now-Secretary of Defense Dick Cheney, to sign it.

These other congressmen, he said, “allowed themselves to be duped and used by people like Charlie Keating.”

“If there’s one thing people ought to learn back (in Washington), it’s that they should know what they sign and who they do favors for and look twice at what they’re doing.”

In his press conference, Smith also criticized Lungren for taking campaign contributions from Lincoln’s lawyers, who are now under investigation, as well as a $500 contribution from Lincoln’s parent company, American Continental Corp.

The American Continental contribution was made to Lungren’s litigation fund in 1988 after the state Senate rejected his selection to the post of state treasurer by Gov. George Deukmejian after the death of Jesse Unruh. At the time, Lungren was unsuccessfully seeking to persuade the State Supreme Court to overturn the Senate’s vote.

Lungren’s current campaign has received the maximum personal contribution of $2,000 from GOP fund-raiser Karl M. Samuelian and another $1,350 from former state commissioner of corporations Franklin Tom. The two attorneys are partners in the Los Angeles law firm Parker, Milliken, Clark, O’Hara & Samuelian, which recently agreed to pay up to $14.3 million to settle class-action lawsuits filed against it by 22,000 individuals who bought junk bonds, now worthless, from Lincoln Savings.

Tom and Samuelian are both under investigation by the Sacramento County district attorney’s office in a state probe of the Lincoln Savings scandal, according to Albert Locher, Sacramento County’s chief deputy district attorney.

“California deserves an attorney general who has the integrity and the guts to take on the savings and loans and the other special interests,” said Smith at his press conference. “Not an attorney general who will do their bidding.”

Lungren, in a telephone interview, said Thursday that he didn’t even remember signing the letter to Gray, but assumed he may have done so at Pashayan’s request.

“We must have been on the (House) floor for some other purpose,” said Lungren, “and Chip (Pashayan) was going around to California (congressmen) saying he needed help.”

Lungren pointed out that the letter contained no red flags since it did not specifically mention Lincoln Savings.

Lungren also said he was not aware of the American Continental contribution to his 1988 legal fund until it was pointed out to him Thursday.

He added that he saw no problem accepting contributions from Samuelian or Tom. Nor does he see a problem in having had Samuelian serve as a co-chairman of a $250-a-plate Lungren fund-raiser at the Bonaventure Hotel earlier this month.

“I feel they have the presumption of innocence. They have the same presumption of innocence as anyone else does,” Lungren said. “I don’t see anything ethically wrong. Karl Samuelian never asked anything of me. Karl Samuelian has given a lot of time to our party on the state level and on the national level. He’s given a lot of his time to Ronald Reagan, George Bush and George Deukmejian.”