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February 21, 2008
John McCain: Then & Now
Way back in 1988 my co-authors and I were putting the final touches to our book, Inside Job: The Looting of America's Savings and Loans when someone slipped us a plain brown envelop. Inside was a transcript of a meeting between thrift regulators and five US senators who had interceded on behalf of Arizona S&L owner Charles Keating. At the time the regulators were warning that Keating's thrift, Lincoln Savings and Loan, was dangerously insolvent and that Keating and his cohorts -- including then junk bond king, Mike Milken, were robbing the federally-insured thrift blind -- or, more precisely, robbing the US taxpayers blind.
Keating had been generous in sharing his new-found wealth with the five senators, particularly his two Arizona senators, John McCain and Dennis DeConcini. They became known as "The Keating Five."
Alarmed by such high-powered political arm twisting, FHLBB attorney, William Black, decided to document the meeting. He claims to this day that he did not secretly record the five senators. But over the years I've read countless transcripts and I remain certain that the following is a transcription taken off an actual recording.
Of course, once authenticating the transcript we wasted no time including it in the appendix of our book. The disclosure of the meeting and verbatim remarks by each senator caused them no end of misery. One would have thought McCain especially had learned his lesson about messing with the work of federal regulators. And it appeared he had. But then comes the revelation that he once again chummed up to an industry group -- this time telecom -- and inserted himself into the regulatory process in ways that look distressingly similar to the Keating affair.
The Keating affair was about money and influence, not sex. This new revelation may or may not have sex in it -- but fankly, I couldn't care less. I don't lay awake at night worrying if my senator is getting laid by the wrong people, I worry if they are getting paid by the wrong people.
In the case of Charles Keating that money and influence, and the delays caused by political pimping by people like McCain, cost American small shareholders and taxpayers dearly:
Much has been made of the $2 billion that it will cost taxpayers to bail out Charles H. Keating Jr.'s Lincoln Savings and Loan Association. But for the people who were persuaded to invest their life savings in now-worthless securities, the cost is emotional as well as financial. (NYT- 1989)
Anyway, how often have you wished you could be a fly on the wall at one of these closed-door sit downs? Well, here's a rare glimpse at one, up close and personal.
"This meeting is very unusual... to discuss a particular company."
(Chairman, James Cirona, Federal Home Loan Bank, San Francisco, 1987)
Memo
From: William Black, Esq.
To: Chairman, FHLBB, Edwin Gray
April 9, 1987
Meeting of FHLB-SF Personnel with:
Senators Cranston, DeConcini,
Glenn, McCain and Riegle
At your request I am providing you this memorandum, which reflects the substance of yesterday’s meeting with Senators Cranston, DeConcini, Glenn, McCain and Riegle. The Federal Home Loan Bank of San Francisco (FHLB-SF) personnel who attended the meeting were James Cirona (President and Principal Supervisory Agent), Michael Patriarca (Director of Agency Functions), myself (general counsel) and Richard Sanchez (the Supervisory Agent for Lincoln Savings Assoc. of Irvine, Calif.).
The meeting commenced at 6:00 P.M. and ended at approximately 8:15 a.m., with two breaks of approximately 15 and 10 minutes during which time the Senators voted. Senator Cranston was present only very briefly, because of his responsibilities on the Senate floor. The other Senators were present for substantially the entire meeting.
This meeting was the product of an earlier meeting among yourself and Senators Cranston, DeConcini, Glenn and McCain. At that meeting, as related by you (and by these same Senators in yesterday’s meeting) each of the Senators raised their concerns regarding the examination of Lincoln by the FHLB-SF and you noted your unfamiliarity with any specifics of the examination, your confidence in the FHLB-SF and your suggestion that the Senators hear from the FHLB-SF our supervisory concerns regarding Lincoln.
I was the only one at the April 9 meeting who took notes. While not verbatim, my notes are very extensive. At your request, I called you last night and read these notes to you. I have attached a copy of those notes to this memorandum. I have used these notes and my independent recall of the meeting to prepare this memorandum and provide the fullest possible record of the discussions at yesterday’s meeting.
I have circulated this memorandum to Messrs. Cirona, Patriarca and Sanchez for their review to ensure the accuracy of this memorandum. I believe that his memorandum is an accurate and complete record of the substance of yesterday’s meeting.
The Transcript
CIRONA: I am Jim Cirona. I am president of the Federal Home Loan Bank of San Francisco. I have held that position for four years. I am here in my capacity as principal supervisory agent. We have jurisdiction over California, Arizona and Nevada savings and loans. Before becoming president I was in the industry for 20 years.
DECONCINI: Where?
CIRONA: In New York.
DECONCINI: Did you know Bud Bavasi?
CIRONA: Yes. Bud is a good guy.
DECONCINI: Yes. He’s great.
CIRONA: With me is Mike Patriarca, head of our agency function. Mike has joined us recently from the Comptroller of the Currency, where he was in charge of multi-national banks. Before that he was a lawyer for seven years.
McCAIN: We won’t hold that against you.
CIRONA: You were a litigator.
PATRIARCA: No, I was in enforcement seven years.
CIRONA: Also with me is Bill Black, our general counsel. Bill was formerly director of litigation for the Bank Board for three years. Next to bill is Richard Sanchez. He’s been with the San Francisco bank for years. Before that he was an auditor for a commercial bank and before that he was in school.
DECONCINI: Thank you for coming. We wanted to meet with you because we have determined that potential actions of yours could injure a constituent. This is a particular concern to us because Lincoln is willing to take substantial actions to deal with what we understand to be your concerns. Lincoln is prepared to go into a major home loan program – up to 55% of assets. We understand that that’s what the Bank Board wants S&Ls to do. It’s prepared to limit its high risk bond holdings and real estate investments. It’s even willing to phase out of the insurance process if you wish. They need to deal with, one, the effect of your reg... Lincoln is a viable organization. It made $49 million last year, even more the year before. They fear falling below 3 percent (net worth) and becoming subject to your regulatory control of the operations of their association. They have two major disagreements with you. First, with regard to direct investments. Second, on your reappraisal. They’re suing against your direct investment regulation. I can’t make a judgment on the grandfathering issue. We suggest that the lawsuit be accelerated and that you grant them forbearance while the suit is pending. I know something about the appraisal values [Senator Glenn joins the meeting at this point] of the Federal Home Loan Bank Board. They appear to be grossly unfair. I know the particular property here. My family is in real estate. Lincoln is prepared to reach a compromise value with you.
CRANSTON: [He arrives at this point] I’m sorry I can’t join you but I have to be on the floor to deal with the bill. I just want to say that I share the concerns of the other Senators on this subject. [Cranston leaves.]
DECONCINI: I’m not on the Banking Committee and I’m not familiar with how all this works. I asked Don Riegle to explain to me how the Federal Home Loan system works because he’s on Senate Banking. He explained it to me and that’s why he’s here.
McCAlN: Thank you for coming. One of our jobs as elected officials is to help constituents in a proper fashion. ACC is a big employer and important to the local economy. I wouldn’t want any special favors for them. It’s like the Apache helicopter program that Dennis and I are active on. The Army wants to cut back the program. Arizona contractors make major components of the Apache helicopter. We believe that the Apache is important to our national defense. That’s why we met with General Dynamics and tried to keep the program alive.
I don’t want any part of our conversation to be improper. We asked chairman Gray about that and he said it wasn’t improper to discuss Lincoln. I’d like to mention the appraisal issue. It seems to me, from talking to many folks in Arizona, that there’s a problem. Arizona is the second fastest growing state. Land values are skyrocketing. That has to be taken account of in appraisals.
(Sen.John Glenn joins the meeting late,)
GLENN: I apologize for being late. Lincoln is an Ohio chartered corporation, and...
CIRONA: Excuse me. Lincoln is a California chartered S&L.
GLENN: Well, Lincoln is wholly owned by ACC. (Keating's American Continental Corp.)
DECONCINI: You said Lincoln was Ohio chartered. It’s California.
GLENN: Well, in any event, ACC is an Ohio chartered corporation. I’ve known them for a long time but it wouldn’t matter if I didn’t. Ordinary exams take maybe up to 6 months. Even the accounting firm says you’ve taken an unusually adversary view toward Lincoln. To be blunt, you should charge them or get off their backs. If things are bad there, get to them. Their view is that they took a failing business and put it back on its feet. It’s now viable and profitable. They took it off the endangered species list. Why has the exam dragged on and on? I asked Gray about his. Lincoln has been told numerous times that the exam is being directed to continue by Washington. Gray said this wasn’t true.
RIEGLE: I wasn’t present at the earlier meeting. There are things happening that may indicate a pattern that do raise questions [sic]. There is broad concern on the Banking Committee about the American Banker article on the FADA and FSLIC feud. Gray has great confidence in you as a team. He says you are some of the finest people in the system. The appearance from a distance is that this thing is out of control and has become a struggle between Keating and Gray, two people I gather who have never even met. The appearance is that it’s a fight to a death. This discredits everyone if it becomes the perception. If there are fundamental problems at Lincoln, OK. I’ve had a lot of people come through the door feeling that they’ve been put through a meat grinder. I want professionalism, and your backgrounds attest to that professionalism. But I want not just professionalism, but fairness and the appearance of fairness. So I’m very glad to have this opportunity to hear your side of the story.
GLENN: I’m not trying to get anyone off. If there is wrongdoing I’m on your side. But I don’t want any unfairness against a viable entity.
CIRONA : How long do we have to speak to you? A half-hour, an hour?
DECONCINI: As quickly as possible. We have a vote coming up soon.
CIRONA: First, if there’s any fault to be had concerning the length of the examination, it’s on my shoulders. We determine how examinations are conducted. Gray never gave me instructions on how to conduct this exam or any other exam. At this meeting you’ll hear things that Gray doesn’t know.
DECONCINI: Did Gray ever talk to you about the examination of Lincoln?
CIRONA: Gray talked to me when that article ran in the Washington Post. We received no instructions from Gray about the exam of Lincoln. We decide how to do the exam.
CIRONA: This meeting is very unusual... to discuss a particular company.
DECONCINI: It’s very unusual for us to have a company that could be put out of business by its regulators. Richard, you’re on; you have 10-12 minutes.
SANCHEZ: An appraisal is an important part of underwriting. It is very important. If you don’t do it right you expose yourself to loss. Our 1984 exam showed significant appraisal deficiencies. Mr. Keating promised to correct the problem. Our 1986 exam showed that the problems had not been corrected – that there were huge appraisal problems. There was no meaningful underwriting on most loans. We have independent appraisals. Merrill Lynch appraised the Phoenician [Hotel]. It shows a significant loss. Other loans had similar losses.
DECONCINI: Why not get an independent appraisal?
SANCHEZ: We did.
DECONCINI: No, you hired them. Why not get a truly independent one or use arbitration – if you’re trying to bend over backwards to be fair. There’s no appeal from your reappraisal. Whatever it is you take it.
SANCHEZ: If it meets our appraisal standards.
CIRONA : The Phoenician reappraisal process is not complete. We have received Lincoln’s rebuttal and forwarded it to our independent appraisers.
[At this point the senators left to vote. We resumed when Senators DeConcini and Riegle returned.]
SANCHEZ: Lincoln had underwriting problems with all of their investments, equity securities, debt securities, land loans and direct real estate investments. It had no loan underwriting policy manual in elect when we began our 1986 exam. When the examiners requested such a manual they were informed that it was being printed. The examiners looked at 32 real estate loans that Lincoln had made since the 1984 exam. There were no credit reports on the borrowers in all 52 of the loan Files.
DECONCINI: I have trouble with this discussion. Are you saying that their underwriting practices were illegal or just not the best practice?
CIRONA: These underwriting practices violate our regulatory guidelines.
BLACK: They are also an unsafe and unsound practice.
DECONCINI: Those are two very different things.
SANCHEZ: You need credit reports for proper underwriting.
[Senator Glenn returns at this point.]
RIEGLE: To recap what’s been said for Senator Glenn: 52 of the 52 loans they looked at had no credit information. Do we have a history of loans to folks with inadequate credit?
SANCHEZ: $47 million in loans were classified. by examiners due to lack of adequate credit to assure repayment of the loans.
PATRIARCA: They’re flying blind on all of their different loans and investments. That’s what you do when you don’t underwrite.
GLENN: How long had these loans been on the books?
SANCHEZ: A fairly long time.
GLENN: How many loans have gone belly-up?
SANCHEZ: We don’t know at this point how many of the 52 have defaulted. These loans generally have interest reserves.
GLENN: Well, the interest reserves should run out on many of these.
CIRONA: These are longer term investments.
BLACK: I know that Lincoln has refinanced some of these loans.
GLENN: Some people don’t do the kind of underwriting you want. Is their judgment good?
PATRIARCA: That approach might be okay if they were doing it with their own money. They aren’t; they’re using federally insured deposits.
RIEGLE: Where’s the smoking gun? Where are the losses?
DECONCINI: What’s wrong with this if they’re willing to clean up their act?
CIRONA: This is a ticking time bomb.
SANCHEZ: I had another case which reported strong earnings in 198%. It was insolvent in 1985.
RIEGLE: These people saved a failing thrift. ACC is reputed to be highly competent.
BLACK: Lincoln was not a failing thrift when ACC acquired it. It met its net worth requirement. It had returned to profitability before it was acquired. It had one of the lowest rations of scheduled assets in the 11th District, the area under our jurisdiction. Its losses were caused by an interest spread problem from high interest rates. It, as with most other California thrifts, would have become profitable as interest rates fall.
DECONCINI: I don’t know how you can’t consider it a success story. It lost $24 million in 1982 and 1983. After it was acquired by ACC it made $49 million in one year.
McCAIN: I haven’t gotten an answer to my question about why the exam took so long.
SANCHEZ: It was an extremely complex exam because of their various investments. The examiners were actually in the institution from March to October – 8 months. The asset classification procedure is very time consuming.
McCAIN: What’s the longest exam you ever had before?
CIRONA: Some have technically never ended, where we had severe problems with a shop.
McCAIN: Why would Arthur Young say these things about the exam – that it was inordinately long and bordered on harassment?
GLENN: And Arthur Anderson said they withdrew as Lincoln’s prior auditor because of your harassment.
RIEGLE: Have you seen the Arthur Young letter?
CIRONA: No.
RIEGLE: I d like you to see the letter. It’s been sent all over the Senate. [Hands Cirona the letter.]
PATRIARCA: I’m relatively new to the savings and loan industry but I’ve never seen any bank or S&L that’s anything like this. This isn’t even close. You can ask any banker and you know about these practices. They violate the law and regulations and common sense.
GLENN: What violates the law?
PATRIARCA: Their direct investments violate the regulation. Then there’s the file stuffing. They took undated documents purporting to show under writing efforts and put them into the files sometimes more than a year after they made the investment.
GLENN: Have you done anything about these violations of law?
PATRIARCA: We’re sending a criminal referral to the Department of Justice. Not maybe; we’re sending one. This is an extraordinarily serious matter. It involves a whole range of imprudent actions. I can’t tell you strongly enough how serious this is. This is not a profitable institution. Prior year adjustments will reduce that reported $49 million profit. They didn’t earn $49 million. Let me give you one example. Lincoln sold a loan with recourse and booked a $12 million profit. The purchaser rescinded the sale, but Lincoln left the $12 million profit on its books. Now, I don’t care how many accountants they get to say that’s right. It’s wrong. The only thing we have as regulators is our credibility. We have to preserve it.
DECONCINI: Why would Arthur Young say these things? They have to guard their credibility too. They put the firm’s neck out with this letter.
PATRIARCA: They have a client. The $12 million in earnings was not unwound.
DECONCINI: You believe they’d prostitute themselves for a client?
PATRIARCA: Absolutely. It happens all the time.
[The senators left at this point for another vote.]
[We resumed when Senators DeConcini, McCain, and Riegle returned.]
CIRONA I also wanted to note that the Bank Board has had a lot of problems with Arthur Young, and is thinking of taking disciplinary action against it.
BLACK: Not for its actions here. Primarily because of its Texas office, which has never met a direct investment. They think everything is a loan. This has quite an effect on the income you can claim.
PATRIARCA: By regulation we have adopted a regulatory capital standard.
DECONCINI: And you’ll take control of them if they fail your net worth standard – you’ll take operational control of them.
CIRONA: That’s speculative. We’d take steps to reduce their risk exposure.
RIEGLE: What would require them to sell?
CIRONA: We’d probably have them decrease their growth. Time and again we’ve found rapid growth associated with loss. Lincoln has grown rapidly.
BLACK: Are you sure you want to talk about this? We haven’t made any recommendation to the Bank Board yet. The Bank Board decides what action to take. These are very confidential matters.
DECONCINI: No, then we don’t want to go into it. We were just asking very hypothetically and that’s how you [indicating Mr. Cirona] were responding.
CIRONA: That’s right.
DECONCINI: Can we do something other than liquidate them?
CIRONA: I hesitate to tell an association what to do. We’re not in control of Lincoln, and won’t be. We want to work the problem out.
McCAIN: Have they tried to work it out?
CIRONA: We’ve met with them numerous times. I’ve never seen such cantankerous behavior. At one point they said our examiners couldn’t get any association documents unless they made the request through Lincoln’s New York litigation counsel.
RIEGLE: Well, that does disturb me – when you have to go through New York litigation counsel. What could they do? Is it too late?
CIRONA: It’s never too late.
McCAIN: What’s the best approach? Voluntary guidelines instead of a compulsory order?
DECONCINI: How long will it take you to finish the exam?
PATRIARCA: Ten days.
GLENN: Have they been told what you’ve told us?
PATRIARCA: We provided them with our views and gave them every opportunity to have us hear what they had to say. We gave them our classification of asset materials and went through them loan by loan. This is one of the reasons the exam has taken so long.
SANCHEZ: We gave them our classification materials on January . On March 9 we received 52 exhibits, amounting to a stack of paper this high [indicating approximately two feet of material] responding to that. We went through every page of that response.
PATRIARCA: We didn’t use in-house appraisers. We sent the appraisals out to independent appraisers. We sent the reappraisals to Lincoln. We got rebuttals from Lincoln and sent them to the independent appraisers. I don’t think there was any case that Lincoln agreed with the re-appraisal.
SANCHEZ: None where the reappraisal indicated insufficient collateral.
PATRIARCA: In every case, after reviewing the rebuttal, the independent ap-
praiser has stood by his conclusion.
DECONCINI: Of course. They had to.
PATRIARCA: No. The rebuttals claim specific problems with the independent appraisers’ reappraisals: “You didn’t consider this feature or you used the wrong rental rate or approach to value.” The independent appraiser has come back to us and answered those specific claims by saying: “Yes, I did consider that, and here’s why I used the right rate and approach.”
DECONCINI: I’d question those reappraisals. If you want to bend over back-wards to be fair I’d arbitrate the differences. The criminality surprises me. We’re not interested in discussing those issues. Our premise was that we had a viable institution concerned that it was being over-regulated.
GLENN: What can we say to Lincoln?
BLACK: Nothing with regard to the criminal referral. They haven’t, and won’t be told by us that we’re making one.
GLENN: You haven’t told them?
BLACK: No. Justice would skin us alive if we did. Those referrals are very confidential. We can’t prosecute anyone ourselves. All we can do is refer it to Justice.
DECONCINI: They make their own decision whether to prosecute?
BLACK: Yes. I also want to mention that we are already investigating Arthur Anderson because of their role in the file stuffing. We don’t know whether they knew the purpose for which they were preparing the materials. I don’t want to get harassed... no, that’s not the right word; I don’t want to get criticized if we Find out that Arthur Anderson was involved criminally and we have to make a referral on them. We don’t want them to claim retaliation. We’re in a tough spot. With regard to what you can say to Lincoln, you might want to simply have them call us. If you really want to talk to them you can say that it will take us 7 to 10 days to Finish the exam.
RIEGLE: Is this institution so far gone that it can’t be salvaged?
PATRIARCA: I don’t know. They’ve got enough risky assets on their books that a little bad luck could nail them. You can’t remove the risk of what they already have. You can reduce what new risks they would otherwise add on.
BLACK: They have huge holdings in Tucson and Phoenix. The. market there can’t absorb them for many years. You said earlier that ACC was extremely good but ACC has gotten out of its former primary activity, homebuilding. I’m not saying they’re bad businessmen but they had to get out of one homebuilding market after another. They had to get out of Colorado when they had bad models and soil problems. They also had to get out of their second leading activity, mortgage banking. They’re now down to Arizona. That’s not a bad market but no one knows how well it will do over the many years that it would take to absorb such huge holdings in Tucson and Phoenix.
DECONCINI: So you don’t know what you’d do with the property even if you took them over?
BLACK: Bill Black doesn’t. Bill Black is a lawyer. We hire experts to do this work. Our study of their Arizona holdings was done by top experts. Our study of below investment grade corporate debt securities – what folks usually call junk bonds, but I avoid it because I don’t know where you stand on such bonds – was done by top outside experts. I see in this Arthur Young letter that they criticize us for having an accountant with “only” eight years of experience. Well, I think... I don’t see how you can claim eight years as inexperienced. But we didn’t simply rely on him. We had... wasn’t it Kenneth...
SANCHEZ: Yes. Kenneth Laventhol.
BLACK: We had Kenneth Laventhol, outside accountants, work on this. These are also some of the reasons the exam took time.
PATRIARCA: I think my colleague Mr. Black put it right when he said that it’s like these guys put it all on 16-black in roulette. Maybe, they’ll win, but I can guarantee you that if an institution continues such behavior it will eventually go bankrupt.
RIEGLE: Well, I guess that’s pretty definitive.
DECONCINI: I’m sorry, but I really do have to leave now.
[The meeting broke up at this point, approximately at 8:20 P.M.]
( Editor's note: Now with the sub-prime, credit crunch, foreclosure crisis gutting both consumer and investment banking one can wonder how many meetings like this are going on today. I don't know. No one has sent me a transcript -- yet. )
Showing posts with label Keating Five. Show all posts
Showing posts with label Keating Five. Show all posts
Wednesday, February 27, 2008
Sunday, February 24, 2008
McCaingate
http://www.nytimes.com/2008/02/21/us/politics/21mccain.html
February 21, 2008
The Long Run
For McCain, Self-Confidence on Ethics Poses Its Own Risk
By JIM RUTENBERG, MARILYN W. THOMPSON, DAVID D. KIRKPATRICK and STEPHEN LABATON
WASHINGTON — Early in Senator John McCain’s first run for the White House eight years ago, waves of anxiety swept through his small circle of advisers.
A female lobbyist had been turning up with him at fund-raisers, visiting his offices and accompanying him on a client’s corporate jet. Convinced the relationship had become romantic, some of his top advisers intervened to protect the candidate from himself — instructing staff members to block the woman’s access, privately warning her away and repeatedly confronting him, several people involved in the campaign said on the condition of anonymity.
When news organizations reported that Mr. McCain had written letters to government regulators on behalf of the lobbyist’s client, the former campaign associates said, some aides feared for a time that attention would fall on her involvement.
Mr. McCain, 71, and the lobbyist, Vicki Iseman, 40, both say they never had a romantic relationship. But to his advisers, even the appearance of a close bond with a lobbyist whose clients often had business before the Senate committee Mr. McCain led threatened the story of redemption and rectitude that defined his political identity.
It had been just a decade since an official favor for a friend with regulatory problems had nearly ended Mr. McCain’s political career by ensnaring him in the Keating Five scandal. In the years that followed, he reinvented himself as the scourge of special interests, a crusader for stricter ethics and campaign finance rules, a man of honor chastened by a brush with shame.
But the concerns about Mr. McCain’s relationship with Ms. Iseman underscored an enduring paradox of his post-Keating career. Even as he has vowed to hold himself to the highest ethical standards, his confidence in his own integrity has sometimes seemed to blind him to potentially embarrassing conflicts of interest.
Mr. McCain promised, for example, never to fly directly from Washington to Phoenix, his hometown, to avoid the impression of self-interest because he sponsored a law that opened the route nearly a decade ago. But like other lawmakers, he often flew on the corporate jets of business executives seeking his support, including the media moguls Rupert Murdoch, Michael R. Bloomberg and Lowell W. Paxson, Ms. Iseman’s client. (Last year he voted to end the practice.)
Mr. McCain helped found a nonprofit group to promote his personal battle for tighter campaign finance rules. But he later resigned as its chairman after news reports disclosed that the group was tapping the same kinds of unlimited corporate contributions he opposed, including those from companies seeking his favor. He has criticized the cozy ties between lawmakers and lobbyists, but is relying on corporate lobbyists to donate their time running his presidential race and recently hired a lobbyist to run his Senate office.
“He is essentially an honorable person,” said William P. Cheshire, a friend of Mr. McCain who as editorial page editor of The Arizona Republic defended him during the Keating Five scandal. “But he can be imprudent.”
Mr. Cheshire added, “That imprudence or recklessness may be part of why he was not more astute about the risks he was running with this shady operator,” Charles Keating, whose ties to Mr. McCain and four other lawmakers tainted their reputations in the savings and loan debacle.
During his current campaign for the Republican presidential nomination, Mr. McCain has played down his attacks on the corrupting power of money in politics, aware that the stricter regulations he championed are unpopular in his party. When the Senate overhauled lobbying and ethics rules last year, Mr. McCain stayed in the background.
With his nomination this year all but certain, though, he is reminding voters again of his record of reform. His campaign has already begun comparing his credentials with those of Senator Barack Obama, a Democratic contender who has made lobbying and ethics rules a centerpiece of his own pitch to voters.
“I would very much like to think that I have never been a man whose favor can be bought,” Mr. McCain wrote about his Keating experience in his 2002 memoir, “Worth the Fighting For.” “From my earliest youth, I would have considered such a reputation to be the most shameful ignominy imaginable. Yet that is exactly how millions of Americans viewed me for a time, a time that I will forever consider one of the worst experiences of my life.”
A drive to expunge the stain on his reputation in time turned into a zeal to cleanse Washington as well. The episode taught him that “questions of honor are raised as much by appearances as by reality in politics,” he wrote, “and because they incite public distrust they need to be addressed no less directly than we would address evidence of expressly illegal corruption.”
A Formative Scandal
Mr. McCain started his career like many other aspiring politicians, eagerly courting the wealthy and powerful. A Vietnam war hero and Senate liaison for the Navy, he arrived in Arizona in 1980 after his second marriage, to Cindy Hensley, the heiress to a beer fortune there. He quickly started looking for a Congressional district where he could run.
Mr. Keating, a Phoenix financier and real estate developer, became an early sponsor and, soon, a friend. He was a man of great confidence and daring, Mr. McCain recalled in his memoir. “People like that appeal to me,” he continued. “I have sometimes forgotten that wisdom and a strong sense of public responsibility are much more admirable qualities.”
During Mr. McCain’s four years in the House, Mr. Keating, his family and his business associates contributed heavily to his political campaigns. The banker gave Mr. McCain free rides on his private jet, a violation of Congressional ethics rules (he later said it was an oversight and paid for the trips). They vacationed together in the Bahamas. And in 1986, the year Mr. McCain was elected to the Senate, his wife joined Mr. Keating in investing in an Arizona shopping mall.
Mr. Keating had taken over the Lincoln Savings and Loan Association and used its federally insured deposits to gamble on risky real estate and other investments. He pressed Mr. McCain and other lawmakers to help hold back federal banking regulators.
For years, Mr. McCain complied. At Mr. Keating’s request, he wrote several letters to regulators, introduced legislation and helped secure the nomination of a Keating associate to a banking regulatory board.
By early 1987, though, the thrift was careering toward disaster. Mr. McCain agreed to join several senators, eventually known as the Keating Five, for two private meetings with regulators to urge them to ease up. “Why didn’t I fully grasp the unusual appearance of such a meeting?” Mr. McCain later lamented in his memoir.
When Lincoln went bankrupt in 1989 — one of the biggest collapses of the savings and loan crisis, costing taxpayers $3.4 billion — the Keating Five became infamous. The scandal sent Mr. Keating to prison and ended the careers of three senators, who were censured in 1991 for intervening. Mr. McCain, who had been a less aggressive advocate for Mr. Keating than the others, was reprimanded only for “poor judgment” and was re-elected the next year.
Some people involved think Mr. McCain got off too lightly. William Black, one of the banking regulators the senator met with, argued that Mrs. McCain’s investment with Mr. Keating created an obvious conflict of interest for her husband. (Mr. McCain had said a prenuptial agreement divided the couple’s assets.) He should not be able to “put this behind him,” Mr. Black said. “It sullied his integrity.”
Mr. McCain has since described the episode as a unique humiliation. “If I do not repress the memory, its recollection still provokes a vague but real feeling that I had lost something very important,” he wrote in his memoir. “I still wince thinking about it.”
A New Chosen Cause
After the Republican takeover of the Senate in 1994, Mr. McCain decided to try to put some of the lessons he had learned into law. He started by attacking earmarks, the pet projects that individual lawmakers could insert anonymously into the fine print of giant spending bills, a recipe for corruption. But he quickly moved on to other targets, most notably political fund-raising.
Mr. McCain earned the lasting animosity of many conservatives, who argue that his push for fund-raising restrictions trampled free speech, and of many of his Senate colleagues, who bristled that he was preaching to them so soon after his own repentance. In debates, his party’s leaders challenged him to name a single senator he considered corrupt (he refused).
“We used to joke that each of us was the only one eating alone in our caucus,” said Senator Russ Feingold, Democrat of Wisconsin, who became Mr. McCain’s partner on campaign finance efforts.
Mr. McCain appeared motivated less by the usual ideas about good governance than by a more visceral disapproval of the gifts, meals and money that influence seekers shower on lawmakers, Mr. Feingold said. “It had to do with his sense of honor,” he said. “He saw this stuff as cheating.”
Mr. McCain made loosening the grip of special interests the central cause of his 2000 presidential campaign, inviting scrutiny of his own ethics. His Republican rival, George W. Bush, accused him of “double talk” for soliciting campaign contributions from companies with interests that came before the powerful Senate commerce committee, of which Mr. McCain was chairman. Mr. Bush’s allies called Mr. McCain “sanctimonious.”
At one point, his campaign invited scores of lobbyists to a fund-raiser at the Willard Hotel in Washington. While Bush supporters stood mocking outside, the McCain team tried to defend his integrity by handing the lobbyists buttons reading “McCain voted against my bill.” Mr. McCain himself skipped the event, an act he later called “cowardly.”
By 2002, he had succeeded in passing the McCain-Feingold Act, which transformed American politics by banning “soft money,” the unlimited donations from corporations, unions and the rich that were funneled through the two political parties to get around previous laws.
One of his efforts, though, seemed self-contradictory. In 2001, he helped found the nonprofit Reform Institute to promote his cause and, in the process, his career. It collected hundreds of thousands of dollars in unlimited donations from companies that lobbied the Senate commerce committee. Mr. McCain initially said he saw no problems with the financing, but he severed his ties to the institute in 2005, complaining of “bad publicity” after news reports of the arrangement.
Like other presidential candidates, he has relied on lobbyists to run his campaigns. Since a cash crunch last summer, several of them — including his campaign manager, Rick Davis, who represented companies before Mr. McCain’s Senate panel — have been working without pay, a gift that could be worth tens of thousands of dollars.
In recent weeks, Mr. McCain has hired another lobbyist, Mark Buse, to run his Senate office. In his case, it was a round trip through the revolving door: Mr. Buse had directed Mr. McCain’s committee staff for seven years before leaving in 2001 to lobby for telecommunications companies.
Mr. McCain’s friends dismiss questions about his ties to lobbyists, arguing that he has too much integrity to let such personal connections influence him.
“Unless he gives you special treatment or takes legislative action against his own views, I don’t think his personal and social relationships matter,” said Charles Black, a friend and campaign adviser who has previously lobbied the senator for aviation, broadcasting and tobacco concerns.
Concerns in a Campaign
Mr. McCain’s confidence in his ability to distinguish personal friendships from compromising connections was at the center of questions advisers raised about Ms. Iseman.
The lobbyist, a partner at the firm Alcalde & Fay, represented telecommunications companies for whom Mr. McCain’s commerce committee was pivotal. Her clients contributed tens of thousands of dollars to his campaigns.
Mr. Black said Mr. McCain and Ms. Iseman were friends and nothing more. But in 1999 she began showing up so frequently in his offices and at campaign events that staff members took notice. One recalled asking, “Why is she always around?”
That February, Mr. McCain and Ms. Iseman attended a small fund-raising dinner with several clients at the Miami-area home of a cruise-line executive and then flew back to Washington along with a campaign aide on the corporate jet of one of her clients, Paxson Communications. By then, according to two former McCain associates, some of the senator’s advisers had grown so concerned that the relationship had become romantic that they took steps to intervene.
A former campaign adviser described being instructed to keep Ms. Iseman away from the senator at public events, while a Senate aide recalled plans to limit Ms. Iseman’s access to his offices.
In interviews, the two former associates said they joined in a series of confrontations with Mr. McCain, warning him that he was risking his campaign and career. Both said Mr. McCain acknowledged behaving inappropriately and pledged to keep his distance from Ms. Iseman. The two associates, who said they had become disillusioned with the senator, spoke independently of each other and provided details that were corroborated by others.
Separately, a top McCain aide met with Ms. Iseman at Union Station in Washington to ask her to stay away from the senator. John Weaver, a former top strategist and now an informal campaign adviser, said in an e-mail message that he arranged the meeting after “a discussion among the campaign leadership” about her.
“Our political messaging during that time period centered around taking on the special interests and placing the nation’s interests before either personal or special interest,” Mr. Weaver continued. “Ms. Iseman’s involvement in the campaign, it was felt by us, could undermine that effort.”
Mr. Weaver added that the brief conversation was only about “her conduct and what she allegedly had told people, which made its way back to us.” He declined to elaborate.
It is not clear what effect the warnings had; the associates said their concerns receded in the heat of the campaign.
Ms. Iseman acknowledged meeting with Mr. Weaver, but disputed his account.
“I never discussed with him alleged things I had ‘told people,’ that had made their way ‘back to’ him,” she wrote in an e-mail message. She said she never received special treatment from Mr. McCain’s office.
Mr. McCain said that the relationship was not romantic and that he never showed favoritism to Ms. Iseman or her clients. “I have never betrayed the public trust by doing anything like that,” he said. He made the statements in a call to Bill Keller, the executive editor of The New York Times, to complain about the paper’s inquiries.
The senator declined repeated interview requests, beginning in December. He also would not comment about the assertions that he had been confronted about Ms. Iseman, Mr. Black said Wednesday.
Mr. Davis and Mark Salter, Mr. McCain’s top strategists in both of his presidential campaigns, disputed accounts from the former associates and aides and said they did not discuss Ms. Iseman with the senator or colleagues.
“I never had any good reason to think that the relationship was anything other than professional, a friendly professional relationship,” Mr. Salter said in an interview.
He and Mr. Davis also said Mr. McCain had frequently denied requests from Ms. Iseman and the companies she represented. In 2006, Mr. McCain sought to break up cable subscription packages, which some of her clients opposed. And his proposals for satellite distribution of local television programs fell short of her clients’ hopes.
The McCain aides said the senator sided with Ms. Iseman’s clients only when their positions hewed to his principles.
A champion of deregulation, Mr. McCain wrote letters in 1998 and 1999 to the Federal Communications Commission urging it to uphold marketing agreements allowing a television company to control two stations in the same city, a crucial issue for Glencairn Ltd., one of Ms. Iseman’s clients. He introduced a bill to create tax incentives for minority ownership of stations; Ms. Iseman represented several businesses seeking such a program. And he twice tried to advance legislation that would permit a company to control television stations in overlapping markets, an important issue for Paxson.
In late 1999, Ms. Iseman asked Mr. McCain’s staff to send a letter to the commission to help Paxson, now Ion Media Networks, on another matter. Mr. Paxson was impatient for F.C.C. approval of a television deal, and Ms. Iseman acknowledged in an e-mail message to The Times that she had sent to Mr. McCain’s staff information for drafting a letter urging a swift decision.
Mr. McCain complied. He sent two letters to the commission, drawing a rare rebuke for interference from its chairman. In an embarrassing turn for the campaign, news reports invoked the Keating scandal, once again raising questions about intervening for a patron.
Mr. McCain’s aides released all of his letters to the F.C.C. to dispel accusations of favoritism, and aides said the campaign had properly accounted for four trips on the Paxson plane. But the campaign did not report the flight with Ms. Iseman. Mr. McCain’s advisers say he was not required to disclose the flight, but ethics lawyers dispute that.
Recalling the Paxson episode in his memoir, Mr. McCain said he was merely trying to push along a slow-moving bureaucracy, but added that he was not surprised by the criticism given his history.
“Any hint that I might have acted to reward a supporter,” he wrote, “would be taken as an egregious act of hypocrisy.”
Statement by McCain
Mr. McCain’s presidential campaign issued the following statement Wednesday night:
“It is a shame that The New York Times has lowered its standards to engage in a hit-and-run smear campaign. John McCain has a 24-year record of serving our country with honor and integrity. He has never violated the public trust, never done favors for special interests or lobbyists, and he will not allow a smear campaign to distract from the issues at stake in this election.
“Americans are sick and tired of this kind of gutter politics, and there is nothing in this story to suggest that John McCain has ever violated the principles that have guided his career.”
Barclay Walsh and Kitty Bennett contributed research.
February 21, 2008
The Long Run
For McCain, Self-Confidence on Ethics Poses Its Own Risk
By JIM RUTENBERG, MARILYN W. THOMPSON, DAVID D. KIRKPATRICK and STEPHEN LABATON
WASHINGTON — Early in Senator John McCain’s first run for the White House eight years ago, waves of anxiety swept through his small circle of advisers.
A female lobbyist had been turning up with him at fund-raisers, visiting his offices and accompanying him on a client’s corporate jet. Convinced the relationship had become romantic, some of his top advisers intervened to protect the candidate from himself — instructing staff members to block the woman’s access, privately warning her away and repeatedly confronting him, several people involved in the campaign said on the condition of anonymity.
When news organizations reported that Mr. McCain had written letters to government regulators on behalf of the lobbyist’s client, the former campaign associates said, some aides feared for a time that attention would fall on her involvement.
Mr. McCain, 71, and the lobbyist, Vicki Iseman, 40, both say they never had a romantic relationship. But to his advisers, even the appearance of a close bond with a lobbyist whose clients often had business before the Senate committee Mr. McCain led threatened the story of redemption and rectitude that defined his political identity.
It had been just a decade since an official favor for a friend with regulatory problems had nearly ended Mr. McCain’s political career by ensnaring him in the Keating Five scandal. In the years that followed, he reinvented himself as the scourge of special interests, a crusader for stricter ethics and campaign finance rules, a man of honor chastened by a brush with shame.
But the concerns about Mr. McCain’s relationship with Ms. Iseman underscored an enduring paradox of his post-Keating career. Even as he has vowed to hold himself to the highest ethical standards, his confidence in his own integrity has sometimes seemed to blind him to potentially embarrassing conflicts of interest.
Mr. McCain promised, for example, never to fly directly from Washington to Phoenix, his hometown, to avoid the impression of self-interest because he sponsored a law that opened the route nearly a decade ago. But like other lawmakers, he often flew on the corporate jets of business executives seeking his support, including the media moguls Rupert Murdoch, Michael R. Bloomberg and Lowell W. Paxson, Ms. Iseman’s client. (Last year he voted to end the practice.)
Mr. McCain helped found a nonprofit group to promote his personal battle for tighter campaign finance rules. But he later resigned as its chairman after news reports disclosed that the group was tapping the same kinds of unlimited corporate contributions he opposed, including those from companies seeking his favor. He has criticized the cozy ties between lawmakers and lobbyists, but is relying on corporate lobbyists to donate their time running his presidential race and recently hired a lobbyist to run his Senate office.
“He is essentially an honorable person,” said William P. Cheshire, a friend of Mr. McCain who as editorial page editor of The Arizona Republic defended him during the Keating Five scandal. “But he can be imprudent.”
Mr. Cheshire added, “That imprudence or recklessness may be part of why he was not more astute about the risks he was running with this shady operator,” Charles Keating, whose ties to Mr. McCain and four other lawmakers tainted their reputations in the savings and loan debacle.
During his current campaign for the Republican presidential nomination, Mr. McCain has played down his attacks on the corrupting power of money in politics, aware that the stricter regulations he championed are unpopular in his party. When the Senate overhauled lobbying and ethics rules last year, Mr. McCain stayed in the background.
With his nomination this year all but certain, though, he is reminding voters again of his record of reform. His campaign has already begun comparing his credentials with those of Senator Barack Obama, a Democratic contender who has made lobbying and ethics rules a centerpiece of his own pitch to voters.
“I would very much like to think that I have never been a man whose favor can be bought,” Mr. McCain wrote about his Keating experience in his 2002 memoir, “Worth the Fighting For.” “From my earliest youth, I would have considered such a reputation to be the most shameful ignominy imaginable. Yet that is exactly how millions of Americans viewed me for a time, a time that I will forever consider one of the worst experiences of my life.”
A drive to expunge the stain on his reputation in time turned into a zeal to cleanse Washington as well. The episode taught him that “questions of honor are raised as much by appearances as by reality in politics,” he wrote, “and because they incite public distrust they need to be addressed no less directly than we would address evidence of expressly illegal corruption.”
A Formative Scandal
Mr. McCain started his career like many other aspiring politicians, eagerly courting the wealthy and powerful. A Vietnam war hero and Senate liaison for the Navy, he arrived in Arizona in 1980 after his second marriage, to Cindy Hensley, the heiress to a beer fortune there. He quickly started looking for a Congressional district where he could run.
Mr. Keating, a Phoenix financier and real estate developer, became an early sponsor and, soon, a friend. He was a man of great confidence and daring, Mr. McCain recalled in his memoir. “People like that appeal to me,” he continued. “I have sometimes forgotten that wisdom and a strong sense of public responsibility are much more admirable qualities.”
During Mr. McCain’s four years in the House, Mr. Keating, his family and his business associates contributed heavily to his political campaigns. The banker gave Mr. McCain free rides on his private jet, a violation of Congressional ethics rules (he later said it was an oversight and paid for the trips). They vacationed together in the Bahamas. And in 1986, the year Mr. McCain was elected to the Senate, his wife joined Mr. Keating in investing in an Arizona shopping mall.
Mr. Keating had taken over the Lincoln Savings and Loan Association and used its federally insured deposits to gamble on risky real estate and other investments. He pressed Mr. McCain and other lawmakers to help hold back federal banking regulators.
For years, Mr. McCain complied. At Mr. Keating’s request, he wrote several letters to regulators, introduced legislation and helped secure the nomination of a Keating associate to a banking regulatory board.
By early 1987, though, the thrift was careering toward disaster. Mr. McCain agreed to join several senators, eventually known as the Keating Five, for two private meetings with regulators to urge them to ease up. “Why didn’t I fully grasp the unusual appearance of such a meeting?” Mr. McCain later lamented in his memoir.
When Lincoln went bankrupt in 1989 — one of the biggest collapses of the savings and loan crisis, costing taxpayers $3.4 billion — the Keating Five became infamous. The scandal sent Mr. Keating to prison and ended the careers of three senators, who were censured in 1991 for intervening. Mr. McCain, who had been a less aggressive advocate for Mr. Keating than the others, was reprimanded only for “poor judgment” and was re-elected the next year.
Some people involved think Mr. McCain got off too lightly. William Black, one of the banking regulators the senator met with, argued that Mrs. McCain’s investment with Mr. Keating created an obvious conflict of interest for her husband. (Mr. McCain had said a prenuptial agreement divided the couple’s assets.) He should not be able to “put this behind him,” Mr. Black said. “It sullied his integrity.”
Mr. McCain has since described the episode as a unique humiliation. “If I do not repress the memory, its recollection still provokes a vague but real feeling that I had lost something very important,” he wrote in his memoir. “I still wince thinking about it.”
A New Chosen Cause
After the Republican takeover of the Senate in 1994, Mr. McCain decided to try to put some of the lessons he had learned into law. He started by attacking earmarks, the pet projects that individual lawmakers could insert anonymously into the fine print of giant spending bills, a recipe for corruption. But he quickly moved on to other targets, most notably political fund-raising.
Mr. McCain earned the lasting animosity of many conservatives, who argue that his push for fund-raising restrictions trampled free speech, and of many of his Senate colleagues, who bristled that he was preaching to them so soon after his own repentance. In debates, his party’s leaders challenged him to name a single senator he considered corrupt (he refused).
“We used to joke that each of us was the only one eating alone in our caucus,” said Senator Russ Feingold, Democrat of Wisconsin, who became Mr. McCain’s partner on campaign finance efforts.
Mr. McCain appeared motivated less by the usual ideas about good governance than by a more visceral disapproval of the gifts, meals and money that influence seekers shower on lawmakers, Mr. Feingold said. “It had to do with his sense of honor,” he said. “He saw this stuff as cheating.”
Mr. McCain made loosening the grip of special interests the central cause of his 2000 presidential campaign, inviting scrutiny of his own ethics. His Republican rival, George W. Bush, accused him of “double talk” for soliciting campaign contributions from companies with interests that came before the powerful Senate commerce committee, of which Mr. McCain was chairman. Mr. Bush’s allies called Mr. McCain “sanctimonious.”
At one point, his campaign invited scores of lobbyists to a fund-raiser at the Willard Hotel in Washington. While Bush supporters stood mocking outside, the McCain team tried to defend his integrity by handing the lobbyists buttons reading “McCain voted against my bill.” Mr. McCain himself skipped the event, an act he later called “cowardly.”
By 2002, he had succeeded in passing the McCain-Feingold Act, which transformed American politics by banning “soft money,” the unlimited donations from corporations, unions and the rich that were funneled through the two political parties to get around previous laws.
One of his efforts, though, seemed self-contradictory. In 2001, he helped found the nonprofit Reform Institute to promote his cause and, in the process, his career. It collected hundreds of thousands of dollars in unlimited donations from companies that lobbied the Senate commerce committee. Mr. McCain initially said he saw no problems with the financing, but he severed his ties to the institute in 2005, complaining of “bad publicity” after news reports of the arrangement.
Like other presidential candidates, he has relied on lobbyists to run his campaigns. Since a cash crunch last summer, several of them — including his campaign manager, Rick Davis, who represented companies before Mr. McCain’s Senate panel — have been working without pay, a gift that could be worth tens of thousands of dollars.
In recent weeks, Mr. McCain has hired another lobbyist, Mark Buse, to run his Senate office. In his case, it was a round trip through the revolving door: Mr. Buse had directed Mr. McCain’s committee staff for seven years before leaving in 2001 to lobby for telecommunications companies.
Mr. McCain’s friends dismiss questions about his ties to lobbyists, arguing that he has too much integrity to let such personal connections influence him.
“Unless he gives you special treatment or takes legislative action against his own views, I don’t think his personal and social relationships matter,” said Charles Black, a friend and campaign adviser who has previously lobbied the senator for aviation, broadcasting and tobacco concerns.
Concerns in a Campaign
Mr. McCain’s confidence in his ability to distinguish personal friendships from compromising connections was at the center of questions advisers raised about Ms. Iseman.
The lobbyist, a partner at the firm Alcalde & Fay, represented telecommunications companies for whom Mr. McCain’s commerce committee was pivotal. Her clients contributed tens of thousands of dollars to his campaigns.
Mr. Black said Mr. McCain and Ms. Iseman were friends and nothing more. But in 1999 she began showing up so frequently in his offices and at campaign events that staff members took notice. One recalled asking, “Why is she always around?”
That February, Mr. McCain and Ms. Iseman attended a small fund-raising dinner with several clients at the Miami-area home of a cruise-line executive and then flew back to Washington along with a campaign aide on the corporate jet of one of her clients, Paxson Communications. By then, according to two former McCain associates, some of the senator’s advisers had grown so concerned that the relationship had become romantic that they took steps to intervene.
A former campaign adviser described being instructed to keep Ms. Iseman away from the senator at public events, while a Senate aide recalled plans to limit Ms. Iseman’s access to his offices.
In interviews, the two former associates said they joined in a series of confrontations with Mr. McCain, warning him that he was risking his campaign and career. Both said Mr. McCain acknowledged behaving inappropriately and pledged to keep his distance from Ms. Iseman. The two associates, who said they had become disillusioned with the senator, spoke independently of each other and provided details that were corroborated by others.
Separately, a top McCain aide met with Ms. Iseman at Union Station in Washington to ask her to stay away from the senator. John Weaver, a former top strategist and now an informal campaign adviser, said in an e-mail message that he arranged the meeting after “a discussion among the campaign leadership” about her.
“Our political messaging during that time period centered around taking on the special interests and placing the nation’s interests before either personal or special interest,” Mr. Weaver continued. “Ms. Iseman’s involvement in the campaign, it was felt by us, could undermine that effort.”
Mr. Weaver added that the brief conversation was only about “her conduct and what she allegedly had told people, which made its way back to us.” He declined to elaborate.
It is not clear what effect the warnings had; the associates said their concerns receded in the heat of the campaign.
Ms. Iseman acknowledged meeting with Mr. Weaver, but disputed his account.
“I never discussed with him alleged things I had ‘told people,’ that had made their way ‘back to’ him,” she wrote in an e-mail message. She said she never received special treatment from Mr. McCain’s office.
Mr. McCain said that the relationship was not romantic and that he never showed favoritism to Ms. Iseman or her clients. “I have never betrayed the public trust by doing anything like that,” he said. He made the statements in a call to Bill Keller, the executive editor of The New York Times, to complain about the paper’s inquiries.
The senator declined repeated interview requests, beginning in December. He also would not comment about the assertions that he had been confronted about Ms. Iseman, Mr. Black said Wednesday.
Mr. Davis and Mark Salter, Mr. McCain’s top strategists in both of his presidential campaigns, disputed accounts from the former associates and aides and said they did not discuss Ms. Iseman with the senator or colleagues.
“I never had any good reason to think that the relationship was anything other than professional, a friendly professional relationship,” Mr. Salter said in an interview.
He and Mr. Davis also said Mr. McCain had frequently denied requests from Ms. Iseman and the companies she represented. In 2006, Mr. McCain sought to break up cable subscription packages, which some of her clients opposed. And his proposals for satellite distribution of local television programs fell short of her clients’ hopes.
The McCain aides said the senator sided with Ms. Iseman’s clients only when their positions hewed to his principles.
A champion of deregulation, Mr. McCain wrote letters in 1998 and 1999 to the Federal Communications Commission urging it to uphold marketing agreements allowing a television company to control two stations in the same city, a crucial issue for Glencairn Ltd., one of Ms. Iseman’s clients. He introduced a bill to create tax incentives for minority ownership of stations; Ms. Iseman represented several businesses seeking such a program. And he twice tried to advance legislation that would permit a company to control television stations in overlapping markets, an important issue for Paxson.
In late 1999, Ms. Iseman asked Mr. McCain’s staff to send a letter to the commission to help Paxson, now Ion Media Networks, on another matter. Mr. Paxson was impatient for F.C.C. approval of a television deal, and Ms. Iseman acknowledged in an e-mail message to The Times that she had sent to Mr. McCain’s staff information for drafting a letter urging a swift decision.
Mr. McCain complied. He sent two letters to the commission, drawing a rare rebuke for interference from its chairman. In an embarrassing turn for the campaign, news reports invoked the Keating scandal, once again raising questions about intervening for a patron.
Mr. McCain’s aides released all of his letters to the F.C.C. to dispel accusations of favoritism, and aides said the campaign had properly accounted for four trips on the Paxson plane. But the campaign did not report the flight with Ms. Iseman. Mr. McCain’s advisers say he was not required to disclose the flight, but ethics lawyers dispute that.
Recalling the Paxson episode in his memoir, Mr. McCain said he was merely trying to push along a slow-moving bureaucracy, but added that he was not surprised by the criticism given his history.
“Any hint that I might have acted to reward a supporter,” he wrote, “would be taken as an egregious act of hypocrisy.”
Statement by McCain
Mr. McCain’s presidential campaign issued the following statement Wednesday night:
“It is a shame that The New York Times has lowered its standards to engage in a hit-and-run smear campaign. John McCain has a 24-year record of serving our country with honor and integrity. He has never violated the public trust, never done favors for special interests or lobbyists, and he will not allow a smear campaign to distract from the issues at stake in this election.
“Americans are sick and tired of this kind of gutter politics, and there is nothing in this story to suggest that John McCain has ever violated the principles that have guided his career.”
Barclay Walsh and Kitty Bennett contributed research.
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