Keating Affair Offers Rare View of Campaign Funding : Congress: Ethics committee hearings show how senators brazenly ask strangers for huge sums of money.

Charles H. Keating Jr. has long been a visible proxy for the savings and loan scandal, but to many analysts the defiant owner of Lincoln Savings & Loan Assn. has also become the symbol of a burgeoning crisis in election financing in America.

During five weeks of hearings by the Senate Ethics Committee, the Keating affair has proved to be an allegory that has dramatized the shortcomings of the current campaign finance system. And, to the surprise of some, Keating has emerged as just one of many wealthy men and women who routinely are asked by members of Congress to bankroll their campaigns.

Indeed, the televised “Keating Five” hearings have provided viewers with a rare glimpse into a political nether world--in which members of Congress often skirt the appearance of impropriety by brazenly asking total strangers for huge sums of money and by pressing previous donors for additional contributions to a variety of campaign-related activities.

Sen. Alan Cranston (D-Calif.), for example, regularly telephoned dozens of the nation’s richest men and women, asking them for contributions ranging from $25,000 to $1 million for voter registration groups that he founded in order to assist a broad array of other Democratic candidates.

Records and testimony show that when Cranston met a potential donor, he immediately broached the subject of contributions, took down the prospective contributor’s name and telephone number on a 3-by-5-inch card and then telephoned his fund-raiser to pass the information along for a follow-up call.

Similarly, when Sen. Dennis DeConcini (D-Ariz.) found a potential contributor who also seemed willing to solicit large amounts from other potential donors, he went back again and again for more contributions--not only for himself, but for friends such as Cranston and Sen. Donald W. Riegle Jr. (D-Mich.) as well.

Even though the senators insist they never agreed to do anything improper in exchange for these contributions, the Ethics Committee has unearthed dozens of memos and letters indicating that members of their staffs often saw a direct trade-off between the money and favors that the senators performed for their contributors.

Fred Wertheimer, president of Common Cause, the citizens lobbying group, believes that the Keating Five hearings have exposed so many unsavory aspects of the current campaign financing system that the adverse publicity will force Congress to revise current laws. Wertheimer predicts the chief legacy of the Keating Five affair will be enactment of a campaign reform bill next year.

The hearings, which are scheduled to resume on Jan. 2, have centered on charges that Cranston, DeConcini, Riegle and two other senators--John Glenn (D-Ohio) and John McCain (R-Ariz.)--intervened improperly with federal regulators on Keating’s behalf in exchange for campaign contributions.

Although all five men insist there was no such trade-off, none of them has challenged the evidence showing how they raised the money. Cranston argues that the results only underscore his contention that current campaign rules make such behavior inevitable--and has called for reform of the entire system to finance campaigns with tax dollars.

What is clear from the evidence is that senators, who must raise an average of $12,000 a week for their reelection, no longer look to political action committees or individual donors to provide them with the money. Political action committees may donate no more than $10,000 to a single candidate, while individuals may give no more than $2,000.

Instead, they increasingly depend on rich men and women such as Keating who are willing to pledge that they will raise much larger sums--$25,000, $50,000 or $100,000--from their friends and business associates. Unlike political action committees, such persons are not required by federal law to report their activities to the Federal Election Commission.

Cranston, who raised $13 million for his 1986 reelection campaign, contends he could not have raised that much money by spending his time soliciting individual donations of $2,000 or less. “Large sums were necessary to be successful,” he said. “There was no time to raise them . . . in small denominations from a lot of people.”

The California lawmaker, who has a reputation as a master fund-raiser, says he adheres to three principles in soliciting contributions: People who give once are likely to give again. Rich people like to be asked for large sums. And people who have given to other causes frequently are willing to contribute to Senate campaigns.

A corollary is that donors who give to one senator are more likely to give to another. This is why once DeConcini determined that Keating was a generous contributor, he sought to share his new-found source of funds with other Democrats. Mutual assistance of this kind occurs frequently among senators and helps to seal political alliances.

Another way senators capitalize on the largess of rich contributors such as Keating is to create a variety of separate funds to which rich business executives can contribute.

Kent C. Cooper, the Federal Election Commission official who is responsible for public disclosure of contributions, estimates that lawmakers have devised nearly 50 different types of accounts to collect money legally from rich contributors--including money pools for registering voters, for get-out-the-vote drives and for legal defense efforts.

For example, a PAC that Glenn founded in 1982--which raised $228,000 ostensibly to help other “moderate and centrist” candidates--had three separate accounts: one subject to federal election laws, which gave to congressional candidates; and two others that collected donations (one from individuals and one from corporations) for state and local candidates.

Contributors to the second and third accounts could give unlimited amounts of money to Glenn because those accounts were not subject to the $2,000-per-campaign limit established by federal law. Keating gave $200,000 in corporate funds to Glenn’s PAC.

Cranston not only had his own PAC, known as the Committee for a Democratic Consensus, but he founded several organizations--completely outside of the jurisdiction of federal election laws--devoted to raising funds for registering new voters. The law does not limit contributions to such groups, and donors qualify for a tax deduction as well, something they wouldn’t get with other political contributions.

Keating contributed $850,000 to Cranston’s voter registration efforts, and Joan Kroc, McDonald’s major shareholder, made the largest donation--$1 million. Cranston also received $25,000 from fashion designer Liz Claiborne, $20,000 from Disney executive Frank G. Wells, $25,000 from television producer Gary David Goldberg and $25,000 from junk bond king Michael Milken.

Although Cranston’s voter registration groups were technically nonpartisan--so that donors could qualify for tax deductions on their contributions--internal memos show that the money was actually intended to help Democratic Senate candidates.

Memos to Cranston from his fund-raiser also show that the California Democrat sought to tailor his pitch for money to the individual sensibilities of the wealthy people he was approaching. For example, he received the following advice from his fund-raiser about contacting Blanchette Rockefeller, the widow of John D. Rockefeller III:

“She will want to be approached as an individual, not as a Rockefeller. She is already well aware of what other members of the family are doing. Don’t do a hard sell. . . . I would give her an idea of what you are hoping she will give, but I would be careful about references to Joan Kroc doing a million dollars.”

All of the Keating Five senators say they never promised to help any contributor in exchange for donations, because that would have been unethical, and most members of the Senate insist that they adhere to this rule.

But it is clear that the senators’ top aides took a more pragmatic approach on such issues. In a memo to her boss on Jan. 2, 1987, Cranston’s fund-raiser, Joy Jacobson, listed the names of several contributors who “have been very helpful to you who have cases or legislative matters pending with our office who will rightfully expect some kind of resolution.”

Cranston argues that as the law is written now, senators cannot avoid the appearance of a link between the contribution a person makes and the help that the lawmaker’s office provides. Current rules allow up to three staff members in each Senate office to solicit contributions. In most cases, they are the same people who decide whether to help deal with the constituent’s problems.

Even so, the outlook for overhauling current rules remains murky. While the Keating Five affair appears to have contributed to the growing support for reform of the present system, there is no indication that the Senate is prepared to restrict employees from soliciting money--or to ban any of the other practices that have come to light during the hearings.

The Senate and the House passed separate campaign reform bills last year, but the measures--which died in a House-Senate conference committee--focused on restricting PAC contributions, which played no role in the Keating affair. Wertheimer’s optimism aside, few believe that any bill this year will deal with the questions that the Keating case revealed.