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Last Updated: Oct 11, 2008 - 8:44:27 AM |
PHOENIX—Sen. John McCain’s wife and father-in-law continued a lucrative
business partnership with disgraced financier Charles H. Keating Jr.
for 11 years after the GOP presidential nominee said he ended his close
friendship with Keating in March 1987.
Cindy McCain’s business partnership with Keating in a real-estate
development between 1986 and 1998 netted her a tidy profit, in addition
to years of significant tax benefits. Her father, who died in 2000,
earned similar returns.
McCain’s campaign and his Senate office did not respond to repeated
phone calls and emails concerning Cindy McCain’s investment with
Keating. McCain and his wife file separate tax returns and signed a
pre-nuptial agreement before their marriage in May 1980. Cindy McCain
owns one of the nation’s largest beer distributorships, Hensley &
Company.
On Monday, McCain’s attorney, John Dowd, said in a conference call with
reporters that McCain was not aware of his wife’s and father-in-law’s
investment with Keating at the time it was made. “John was unconnected
to that and unaware of it at the time and did not participate in it,”
Dowd said.
However, during the Keating Five Senate Ethics Committee hearings in
1990-91, McCain testified that he was aware of the family investment
with Keating in early 1986.
Under questioning from Dowd, McCain said he learned of the investment
from a Hensley & Co. executive.
“I was told …they were going to invest in a shopping center and that
the investment –- the project — was being put together by a subsidiary
of American Continental,” McCain told the ethics committee. “He [the
executive] later told me that had happened. And I had no interest in it
and just noted in passing that this investment took place.”
The GOP presidential candidate writes in one memoir that a turbulent
30-minute verbal altercation in his Senate office on March 24, 1987,
ended his six-year friendship with Keating. The argument began after
McCain heard from another senator that Keating had called him “a wimp.”
“We never met again,” McCain wrote in his 2002 memoir, “Worth the
Fighting For.” “I never had another conversation with him.”
The rupture in their personal relationship, however, didn’t stop McCain
from attending two meetings the next month with federal banking
regulators at Keating’s insistence. McCain’s attendance at the April
meetings nearly halted his political career. The Senate Ethics
Committee, which investigated McCain’s actions on behalf of Keating,
who was seeking regulatory relief for his savings and loan business,
found that McCain used “poor judgment” in his dealings with Keating.
Nor did the end of McCain’s relationship with Keating affect his
immediate family’s business relationship with the financier. Cindy
McCain and her father, James Hensley, remained investors in the Keating
real-estate partnership that included a north Phoenix shopping center.
The center sold in July 1998 for $15.4 million.
Their business relationship with Keating began April 15, 1986, when the
two bought an 8 percent stake in Fountain Square Associates Ltd.
Partnership. Cindy McCain and her father made the $359,100 investment
through Western Leasing Co., a partnership they jointly owned.
Fountain Square Associates was structured as a tax shelter for wealthy
investors. Its only asset was the Phoenix shopping center, which was
built by another Keating-controlled company. The shelter allowed
investors to use real-estate depreciation as a tax deduction, a
provision later banned by Congress.
The Fountain Square Associates’ prospectus promised investors a 37
percent annual return on their investment. Cindy McCain and Hensley
were among 54 investors in the partnership, most of whom were Keating
employees and associates. Western Leasing purchased six shares in the
partnership, Keating bought two and most of the remaining investors one
share or less. Each share sold for $59,850.
Fountain Square Associates’ general partner, which oversaw daily
operations, was American Continental Resources Corp., a subsidiary of
Keating’s Phoenix-based American Continental Corp. American Continental
also owned Lincoln Savings & Loan, the thrift that Keating asked
McCain and the four other senators to protect from regulators.
In 1989, American Continental filed for bankruptcy, leaving more than
23,000 investors holding worthless bonds. Many bondholders were elderly
and thought thought their investments were insured because Keating had
sold them at federally insured Lincoln Savings branches.
Keating was convicted on 73 counts of bankruptcy and wire fraud in
1993, and sentenced to 12 years in federal prison. Four years later,
his conviction was overturned on a technicality. In 1999, Keating
pleaded guilty to four counts of fraud and was sentenced to time served.
Despite the bankruptcy, American Continental Resources managed to keep
control of the shopping center owned by Fountain Square Associates,
which allowed Cindy McCain and Hensley to take advantage of its tax
breaks. After the shopping center sold, McCain’s 1998 Senate financial
disclosure statement reported under “unearned income” that his wife
made between $100,001 and $1 million on the sale of the property. In
previous years, McCain’s financial statements had valued the Fountain
Square partnership at less than $1,000, generating income of less than
$200.
In 1998, Cindy McCain held millions of dollars worth of assets in
stocks, municipal bonds and other securities, including a partnership
share worth at least $1 million in the Arizona Diamondbacks. She also
had investments in two other real estate projects, each worth at least
$1 million, including a master planned community in Yuma, Ariz., and
160 acres of undeveloped property in Mesa, Ariz.
The same year, Cindy McCain also owed more than $1 million to a Phoenix
bank, and had more than $200,000 in loans from the family’s beer
distributorship.
Sen. McCain’s only income in 1998, besides his Senate salary, was his
$49,688 Navy pension. He also listed three bank accounts totaling less
than $31,000. He reported no liabilities.
The Fountain Square sale generated the second largest amount of income
from Cindy McCain’s array of investments in 1998, according to Sen.
McCain’s financial disclosure statement. Only dividends from Cindy
McCain’s investment in Hensley & Company stock, which exceeded $1
million, generated more income.
Cindy McCain’s and Hensley’s 1986 investment in Fountain Square earned
the father and daughter team a nice return. Its greater value to the
family, however, may have had more to do with politics than money.
Their investment was made the same year that McCain was running for the
Senate seat held by the retiring Barry M. Goldwater. Keating and his
employees contributed more than $50,000 to McCain’s campaign, bringing
their total contributions to McCain since 1982 to at least $112,000.
Source:Ocnus.net 2008
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