Posted on Mon, Oct. 27, 2008
last updated: October 28, 2008 03:52:26 PM
WASHINGTON — Years after he resurrected his political fortunes from the Keating Five savings and loan investigation, John McCain promoted an Arizona land swap that would've benefited a former mentor and partner of the scandal's central figure.
The owners of the Spur Cross Ranch, a dramatic 2,154-acre tract of Sonoran desert just north of Phoenix, in the late 1990s sought to sell it to a developer who planned to build a premier golf course surrounded by 390 luxury homes.
Nearby residents and environmentalists, however, wanted to preserve the area's unusual cacti, stone formations and hundreds of Hopi Indian tribal artifacts.
After opposition surfaced, the developer sought McCain's help in forging a land swap with the U.S. Forest Service — a deal that also would benefit the owners of the ranch, including a company controlled by billionaire Carl H. Lindner Jr., an associate of S&L chief Charles H. Keating.
McCain and an aide pushed for the exchange in more than a half dozen sometimes-testy letters and phone calls up and down the Forest Service's hierarchy, according to former agency officials and correspondence. McCain's office even circulated draft legislation that would have overridden the agency's objection to surrendering national forest land. Ultimately, the deal fell apart.
McCain's behind-the-scenes maneuvering on Spur Cross contrasts with his image as a congressional ethics champion and his pledge — made after the Keating scandal in 1991 sullied his reputation — never to intervene with regulators again.
McCain's actions, which went on for nearly two years, also appear at odds with boasts in his 2002 book, "Worth the Fighting For," that he'd never pressured regulators at any time since 1991 and acted only on matters that "serve an obvious public purpose."
McCain said at the time that his efforts were aimed solely at preserving "one of the most pristine and beautiful desert areas in America."
In a statement to McClatchy, McCain campaign spokesman Tucker Bounds denied that the Arizona senator had tried to engineer the exchange and said "he certainly did not try to influence the Forest Service on the land-swap proposal."
Environmentalists contend that McCain seemed to be driven mainly by a desire to "railroad" through a deal benefiting Arizona real-estate developer John Lang and the 70 percent owner of Spur Cross, Lindner's Cincinnati-based Great American Insurance Co.
Some six years after the Senate hearings on the conduct of the Keating Five, Lang and his Pinnacle Group signed a contract to purchase the Spur Cross Ranch.
When he encountered opposition, Lang made a pitch to the Forest Service about swapping Spur Cross for 1,700 acres in the Tonto National Forest, just outside the northern boundary of the affluent community of Scottsdale. When the forest supervisor turned him down, Lang said, he contacted McCain for help.
The sale to Lang appeared to hang on whether a swap for the Tonto tract could be negotiated and whether Scottsdale would agree to annex the newly privatized land. A quickly executed land exchange would have enabled the ranch owners to unload the property before opposition from conservationists depressed its development value.
Bounds said that the senator insisted that all stakeholders agree on any exchange, which gave the Forest Service "an effective veto of the proposal."
However, Eleanor Towns, the Forest Service's southwest regional chief, said in an interview that she was never told the agency could veto the deal and that the Forest Service was left out of most of the discussions.
Bounds, McCain's spokesman, said that the proposed land exchange "was instigated by the adjacent towns of Care Free and Cave Creek and the Hopi Tribe," not by Lang or the landowners.
A spokeswoman for Lindner's Great American Insurance, Anne Watson, said the company never sought McCain's aid and preferred an outright sale to a developer "to maximize the return on our investment."
One of the federal regulators pressured by the Keating Five, William Black, now says that McCain never should've acted to benefit Lindner and instead "should have invoked the 100-foot-pole rule, not the 10-foot-pole rule."
Federal Election Commission records show that in the three years beginning in mid-1997, McCain's Senate campaign and his 2000 presidential campaign received more than $9,000 from Lindner, developer Lang and other backers of the deal. Several donations were made in close proximity to his Forest Service letters. His committees also got more than $25,000 from members of lobbying firms representing Great American's parent, the American Financial Group, on various issues.
This year, the 89-year-old Lindner and his son, Carl H. Lindner III, have raised more than $300,000 for McCain's presidential campaign.
Bounds said any suggestion that he was otherwise motivated is "without basis in fact" and called the campaign donations "irrelevant."
After extensive hearings into the Keating Five affair, the Senate ethics committee cleared McCain of rules violations, but said that he showed "poor judgment" in leaning on the regulators to ease curbs on speculative investments by Keating's S&L. McCain had accepted $112,000 in campaign donations from Keating and his associates and went on family vacations to Keating's Bahamas hideaway.
When the S&L collapsed, it cost taxpayers more than $3 billion.
In 1979, the Securities and Exchange Commission accused Lindner and Keating of defrauding shareholders by diverting assets in a Cincinnati banking and leasing operation to their personal use. The two men signed a court consent order in which Lindner agreed to repay the firm $1.4 million.
Black, the former thrift regulator who's now a University of Missouri-Kansas City law professor, said that McCain should've gone to great lengths to avoid "getting anywhere near people associated with Keating," including Lindner.
Correspondence obtained by McClatchy and interviews with former Forest Service officials show that McCain not only explored a three-way swap involving state and federal land, but also sought support for the federal Land and Water Conservation Fund to buy Spur Cross.
Forest Service Chief Mike Dombeck and his underlings objected both to surrendering lands in the Tonto forest, which bordered the ranch, and to managing a large Spur Cross park in Maricopa County. They said the ranch would rate as a low priority for the Conservation Fund.
Towns said that, while she was still head of the Forest Service's national real-estate office in early 1998, Lang and Scottsdale Mayor Samantha Campana stopped by her office and raised the idea of a swap. Assuming her new job a short time later, she said, she mentioned Lang's visit in an introductory chat with McCain, who told her to use her "best professional judgment" in considering trading forestlands for Spur Cross.
But Towns said that after she took over the regional post in the spring of 1998, McCain aide Deb Gullett phoned her several times to press for an exchange.
"She was aggressive, she was at times rude and she was hell bent on getting that land exchange done," said Towns, who's now retired. "She said, 'The senator wants this land exchange done.'"
Hearing those words, Towns said, she told Gullett of McCain's instruction to use her best judgment, said that if he intended otherwise he should phone himself and slammed down the phone.
Bounds said that McCain "cannot be called to account" based on Towns' recollection of a conversation in which he had no part.
Attempts to reach Gullett, wife of a former top McCain aide, were unsuccessful.
In the summer of 1998, McCain sent letters asking the Arizona Land Trust and the U.S. General Services Administration to identify properties that could be swapped.
His office also circulated draft legislation that would've forced the Forest Service to yield unspecified lands in a complicated exchange that would bypass the usual environmental impact study.
Jack Fraser, a leading conservationist who since has died, later said in a letter to McCain that his draft bill "was a sweetheart deal for the developer but . . . would have been a nightmare for the public interest."
Carla, a former staffer for the McDowell Sonoran Conservancy who formally dropped her last name after a divorce, said nearly every conservation organization, as well as Indian tribes, opposed the exchange. She said they feared the swap "would have set a precedent for opening up land in the Tonto National Forest" to development.
"It was conveyed very clearly to us that our opposition had made McCain furious," she said.
When Scottsdale's City Council voted against the deal, McCain backed away.
After the Arizona land swap died, McCain sent a letter to Forest Service Chief Dombeck accusing Towns and two lower-level agency officials of disseminating "erroneous" information that helped derail the exchange proposals, and questioning whether their conduct complied with agency rules.
Forest Service officials interpreted the letter as a request for disciplinary action, but Bounds said it "simply expressed disapproval" about the employees' conduct.
Dombeck, now a University of Wisconsin faculty member, said he took no action and called Towns "an absolute top-notch regional forester" whom he "would never consider any sort of disciplinary action against."
As for Spur Cross, the state of Arizona, Maricopa County and the town of Cave Creek agreed in 2000 to buy the ranch for $21 million. McCain had no role in the sale.
Two former Keating lawyers whom federal regulators accused of improprieties in the S&L scandal helped negotiate the sale — Gary Birnbaum, serving as the town council for Cave Creek, and Great American lawyer Robert Kielty, who had joined McCain on trips to the Bahamas.
Spur Cross is now a county park.
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