The story began when a plan to purchase a 2,154-acre property just north of Phoenix, Ariz. and convert it into a golf course surrounded by several hundred luxury homes was scuttled due to opposition from local environmentalists. According to McClatchy, John Lang, the developer who sought to buy the property, known as Spur Cross Ranch, enlisted McCain’s help to arrange a land swap to trade the plot for 1,700 acres of land in the Tonto National Forest, just outside the wealthy community of Scottsdale’s city limits. The property’s owners included Carl Lindner — who, with Keating, had been accused by the Securities and Exchange Commission of fraud in 1979.

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.

[Forest Service Southwest Regional Chief Eleanor] 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…

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.”

According to the article, McCain dropped his interest in the deal when the Scottsdale city council voted against the deal.

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 [Lindner's] Great American [Insurance Company'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.

It is no secret in the Mountain West, where the federal government owns vast amounts of land, that land swaps often provide a vehicle for legislators to do favors for friends and contributors. A land deal that benefited a close business associate was at the heart of the controversy that led to the indictment of Rep. Rick Renzi (R-Ariz.) on 35 felony counts.

This isn’t the first land swap in which McCain’s involvement has drawn attention. The New York Times reported in April that McCain’s actions have repeatedly benefited Donald R. Diamond, a longtime donor, including McCain’s assistance in a land deal in California that ultimately netted Diamond a $20 million profit.

Moreover, as the McClatchy article notes, these incidents call into question McCain’s assertion in his 2002 book, “Worth the Fighting For,” that he has never intervened with federal regulators since Keating Five, and he only involves himself when there is a clear public interest.

Cindy McCain addresses the Republican National Convention. (Wikimedia)

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.

Illustration by: Matt Mahurin

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.

On a McCain campaign-organized conference call with reporters, high-powered Washington lawyer and political fixer John Dowd defended McCain against criticism from the Obama campaign in response to McCain’s efforts to tie Sen. Barack Obama to former Weatherman William Ayers.

Dowd represented McCain during the Senate Ethics Committee investigations into the “Keating Five” scandal, in which McCain and four other senators were accused of corruption. McCain was ultimately cleared of wrongdoing, but was admonished by the committee for exercising “poor judgment.” Dowd described the scandal as “a smear job” against McCain.

Those who followed the hearings on former Attorney Gen. Alberto Gonzalez’s politicization of the Justice Department last year may remember Dowd as Monica Goodling’s attorney.

In the conference call, Dowd attempted to spin an apparent negative — McCain’s involvement in the scandal — into a positive, in that McCain fully cooperated with the investigation.

“From the time the initial allegations were made by the New York Times and Archibald Cox, John was completely open, both with the public and with the Senate — and in particular with the Senate Ethics Committee. He fully cooperated. He and his wife, Cindy, produced all documents requested by Bob Bennett, who was the special counsel. He gave interviews, he gave sworn testimony by way of deposition, and he testified at the hearing conducted by the Senate Ethics Committee. He was the only Republican in that hearing, and so it had some political overtones, given that a number of Democrats were in deep trouble.”

When asked to describe the relationship between Keating and McCain, Dowd was sparing:

“They were friends. They had known each other socially, I believe, as early as ‘80 or ‘81. So, they were social friends, and then Keating raised this business about [Keating's American Continental Corporation, the parent company of Lincoln Savings and Loan] with John.”

After a long pause, Dowd added:

“And Keating was a contributor to both [McCain's] House and Senate races, as documented by the Senate report.”

However, McCain’s ties to Keating were much deeper than Dowd let on.

Keating donated $112,000 to McCain’s campaigns, and McCain accepted at least nine undisclosed flights on Keating’s private jet, including several trips to Keating’s residence in the Bahamas.

McCain eventually reimbursed Keating for the flights– after the scandal broke, which Dowd pointed to as a demonstration of McCain’s integrity:

“[McCain] believed, I think, in good faith that he had reimbursed Keating for the plane flights. In 1989, when he learned that he had not, he not only reimbursed him, but he reported it to both the House and Senate committees. So no one knew about it, except John. That’s an act of integrity and honesty…I think John handled it appropriately, when he discovered that he had not fully reimbursed for the flights and other costs. He did it voluntarily, and he reported it himself – and that’s exactly what people expect members of the Senate and House to do.”

Dowd said he doubted “if you’d find any member of the House or Senate today that would do the same thing.”

Of course, Dowd neglected to address the underlying issue — that McCain accepted the trips at all, and the fact is that McCain did not pay for them until after he was under investigation. Dowd concluded by praising McCain for severing ties to Keating.

“The evidence bore out that [McCain] was honest about what he had done, and he tried to be very careful in the handling of it. When he discovered that Keating was pushing too hard, he threw Keating out of his office and ended all relations with him.”

While McCain’s connection to Keating may have no more relevance to the current race than does Obama’s connection to Ayers, the fact that it is now a campaign issue illustrates that McCain has invited closer scrutiny to his long history in Washington — and he is not without his own questionable friends.

The “Keating Five” scandal became the symbol of the collapse of the nation’s savings and loan industry and the ensuing $124 billion government bailout.

Black and Gray testified before the Senate Ethics Committee in 1990 that McCain, along with Sens. Dennis DeConcin (D-Ariz.), Alan Cranston (D-Calif.), John Glenn (D-Ohio) and Don Riegle (D-Mich.), pressured Gray to relax an investment regulation opposed by Charles Keating. The committee ruled that McCain exercised “poor judgment” for his role in the affair.

Black, now an associate professor of economics and law at the University of Missouri-Kansas City, told me that McCain has long opposed regulation of the financial markets.

“McCain has gotten this stuff wrong from the beginning,” Black said. “One his first acts as a member of the House was trying to stop the re-regulation of the thrift industry” by opposing efforts by regulators to increase capital reserves and reduce the amount of money thrifts could invest, as well as other revisions sought by regulators.

With the economy heading into recession, Obama is bringing up McCain’s unsavory ties to Keating in an attempt to focus the blame for the current financial crisis on the man who was in the eye of the last financial storm to plague the nation the nation–the S&L crisis.

It’s a strategy that could work.

The Obama campaign is aggressively pushing its new video attacking Sen. John McCain on the Keating Five. Campaign spokesman Bill Burton blasted reporters with a terse, dramatic note this afternoon: “Keating-McCain documentary is now live.”

The campaign is also using its email list to juice the video’s traffic. (A preview clip quickly attracted more than a quarter of a million views on YouTube.)

I discuss the offensive more in this post, and here’s the infamous new documentary:

The Obama campaign swung into action immediately.  By the time the Sunday news shows were taping, Democratic surrogates were hitting McCain with opposition research on his associations with extremist, racist groups (Begala) and the Keating Five (Emanuel). Today, of course, camp Obama is pushing a new Keating Economics website, which begins streaming a documentary about McCain’s Keating problem at noon.

Obama’s campaign has never pushed the Keating button before, so this attack carries an original punch–and is clearly salient given the current financial crisis. Because the scandal involved McCain’s actions in public service, it is more likely to arise during the remaining two debates.

McCain’s dredging up of Bill Ayers, in contrast, is not only old news but has no link to anything Obama has done in public life.  Patrick Ruffini, a Republican operative who worked on Bush’s reelection campaign, said today that McCain’s Ayers attacks are so old that airing them now “appears desperate.”

Desperate and risky — given the corrupt skeletons in McCain’s closet.

For more on what The Keating Five says about McCain’s candidacy, check out “Did McCain Learn From the S&L Crisis,” a September TWI article by John Dougherty.

Sen. John McCain (WDCpix)

PHOENIX—In April 1987, William Black watched five U.S. senators, including Sen. John McCain, now the Republican presidential nominee, try to strong-arm federal-thrift regulators on behalf of Charles H. Keating Jr., a Phoenix businessman who owned Lincoln Savings & Loan.

At the time, Black was deputy director of the Federal Home Loan Bank Board, which oversees the nation’s thrift institutions. He had joined his boss, Edwin Gray, in the meeting with the five senators, who took turns pressuring Gray to exempt Lincoln from a regulation on how much capital the thrift could directly invest in assets — a regulation Keating vehemently opposed.

Gray’s regulators had found that, by the end of 1986, Lincoln Savings had exceeded the investment regulation by $600 million — and had unreported losses of more than $130 million.

Two years later, press reports about the meeting triggered Common Cause, a non-partisan watchdog group, to request that Congress investigate into whether the senators violated ethics rules by pressuring Gray.

The Senate Ethics committee began an investigation; leading to a high-profile, 23-day hearing in late 1990, during which the media labeled the senators the “Keating Five.” In February 1991, the committee rebuked McCain for exercising “poor judgment” by being at in the meeting — a decision McCain later agreed was appropriate. It was “the wrong thing to do,” McCain acknowledged.

Black, now an associate professor of economics and law at the University of Missouri-Kansas City, said in a telephone interview Wednesday that McCain’s long-standing opposition to regulation of the financial markets and his support for relaxed accounting standards that allow institutions to mask losses makes him unqualified to handle the financial crisis that threatens an economic Armageddon for the country.

“McCain has gotten this stuff wrong from the beginning,” Black said. “One his first acts as a member of the House was trying to stop the re-regulation of the thrift industry” by opposing efforts by regulators to increase capital reserves and reduce the amount of money thrifts could invest, as well as other revisions sought by regulators.

McCain was elected to the House in 1982, and served two terms before moving on to the Senate in 1986. “McCain was very much in favor of accounting forbearance — to game the accounting system,” Black said. “That was his position in 1983. And here we are 25 years later. And he’s learned nothing.”

Black asserts that McCain’s behavior remains unchanged because of McCain’s call last March for a meeting of the nation’s top accountants to relax accounting rules that would allow financial institutions to delay accounting for the decline in value of assets.

Black has been a longtime critic of McCain. He labeled McCain the most culpable of the senators who attended the April 9 meeting in the office of former Sen. Dennis DeConcini, an Arizona Democrat. In addition to McCain and DeConcini, Sens. Alan Cranston (D-Calif.), John Glenn (D-Ohio) and Don Riegle (D-Mich) were also there.

The week before, on April 2, Gray had met with McCain, Glenn, Cranston and DeConcini, who kicked off the proceedings with a reference to “our friend at Lincoln.” Keating had ties to all five senators. He and employees of his companies had contributed $1.3 million to the senators’ campaigns and other related groups, including get-out-the-vote efforts.

All five senators had close relationships with Keating. Keating’s holding company, American Continental Corp., was based in Phoenix and was a major employer there — which drew McCain and DeConcini into his circle. Lincoln Savings, meanwhile, was based in Cranston’s home state of California.

Glenn also viewed Keating as a constituent, because the banker had a business headquartered in Ohio and was a protege of the Cincinnati business icon Carl Lindner. Riegle was a member of the Senate Committee on Banking, Housing and Urban Affairs, and Keating had a big hotel investment in Michigan.

Lincoln Savings failed in 1989 because of bad loans and mounting losses in direct investments, ultimately costing taxpayers more than $3 billion. Keating was convicted on 73 federal counts of wire and bankrutpcy fraud in 1993, and spent four years in prison before his conviction was overturned on appeal. Faced with a second trial, he pleaded guilty to four counts of fraud, and was sentenced to time served.

While McCain and Glenn received the mildest rebukes from the ethics committee, Black contends that McCain’s long-term relationship with Keating made him the only senator who stood to personally benefit from getting regulators to back off from Lincoln Savings.

McCain’s wife, Cindy, and his father-in-law had a $360,000 investment with Keating and others in a shopping center at the time of the 1987 meeting. If the Federal Home Loan Bank Board moved to enforce the direct investment regulations on Lincoln Savings, Keating may have had to dispose of that property at a possible loss. McCain has dismissed Black’s self-dealing allegation — stating that he and his wife maintain separate finances through a prenuptial agreement.

But Keating was also a close friend of McCain. The high-flying banker had paid for McCain and his family to vacation with him in the Bahamas on several occasions. McCain paid Keating $13,400 to cover expenses after the 11 trips were disclosed, years later.

Keating and employees of American Continental, which controlled Lincoln Savings, had also contributed $112,000 to McCain’s campaigns. The Arizona senator has said that Keating’s contributions to his first House campaign, in 1982, played an important role in that win.

Black says that the two meetings in April of 1987 were among a series of actions, including opposition to increasing capital requirements and tighter regulation of assets, taken by McCain that helped contribute to the S&L crisis, which ultimately required a $125-billion taxpayer bailout.

In an interview Tuesday with National Public Radio’s “Here and Now”, Black was particularly critical of McCain’s role to support the Reagan administration’s unsuccessful effort in getting two Keating associates appointed to the Federal Home Loan Bank.

“I’ll tell you the biggest thing Sen. McCain — then Rep. McCain — tried to do,” Black said on NPR. “The administration attempted to give Charles Keating control over the federal agency regulating savings and loans. There were three presidential appointees and there were to be two members chosen by Charles Keating. Sen. McCain was not only aware of that effort but supportive of it. Had that occurred, the savings and loan crisis, instead of being $125 billion to $150 billion, would have been over a trillion dollars.  It would have probably still been our worst political scandal in history.”

Black said on the phone Wednesday that McCain opposed the bank board’s effort to tighten regulations on the S&L industry, which had grown rapidly after Congress gave thrifts additional lending powers in the early 1980s.

Thrifts began lending to, and in some cases, making direct investments in, risky projects — including racetracks, office buildings in cities with high vacancy rates and undeveloped land. The boom was not accompanied by enhanced supervision, Black said.

By the mid-1980s, the Federal Home Loan Bank Board sounded an alarm: depositors’ funds — insured by the Federal Savings and Loan Insurance Corp. up to $100,000 — were at risk.

To head off a crisis, the bank board regulators moved to institute tougher accounting standards and increase the amount of capital that thrifts had to hold in reserve. But Congress resisted. According to Black, McCain supported the continuation of accounting rules –- dubbed “Keating accounting” by Black– that allowed thrifts to mask their losses for years by overstating the value of their assets, including intangibles like “goodwill” in the thrift’s net worth.

When the subject of the Keating Five came up in McCain’s interview with WKYC-Cleveland reporter Tom Beres last week, the GOP presidential nominee did not say, as he had previously, that attending that April 1987 meeting with Gray was “the wrong thing to do.” Instead, he insisted the “key” to the episode was that Robert Bennett, the lead investigator of the Senate Ethics Committee, recommended that Glenn and McCain be dropped from the case.

“I had done nothing wrong…I was kept in that investigation for political purposes,” McCain told Beres. “It was a very unhappy period in my life,” McCain continued. “But the fact is that I moved forward, and I have been the greatest voice for reform and against corruption in Washington than anybody.”

But Black said McCain has still not learned the lessons of strong financial regulation and strict accounting standards. As evidence, he points to the senator’s March 25 speech on the housing crisis. McCain called for a national meeting of accounting professionals to discuss changing  the “current mark to market” accounting system — that requires lending institutions to price assets at current market value.

“We are witnessing an unprecedented situation as banks and investors try to determine the appropriate value of the assets they are holding,” McCain said, “and there is widespread concern that this [mark-to-market] approach is exacerbating the credit crunch.”

These were terrifying words to the former banking regulator, who had witnessed firsthand the consequences of accounting rules that did not accurately value the assets of thrifts. “McCain’s answer,” Black charges, “is to get the accountants in the room to make sure we create phony capital by not recognizing our losses.”

The current financial crisis and credit crunch, Black said, is the result of a loss of trust in financial markets that began when investors and financial institutions refused to take each others’ word that the prices of their assets were accurate. “Once the trust is lost, it’s very hard to get it back without regulation,” he said. “Why would you trust a fellow banker when you know you are cheating?”

But Black isn’t confident that Congress and the administration will come up with an effective plan to unclog the financial system’s arteries. He is no friend of the Bush administration’s $700-billion bailout proposal. He worries that the government will buy toxic assets at prices far above their market value. “The government gets to be the chump in the market and taxpayers get to bear the losses,” he said.

He also isn’t confident that the crisis will spur widespread regulatory reform and tougher accounting rules. McCain, Black believes, certainly doesn’t understand the need for regulatory reform and rigorous accounting.

“When you deregulate, you just are not losing the ability to find individual losses and frauds,” Black said. “You lose the scouting function that tells you the lay of the land.”

Without knowledge of what may lurk over the horizon, disaster can strike. “That’s when you walk into ambushes,” Black said.

After disparaging The New York Times and the rest of the media, the campaign officials did get around to the stated purpose of the call — discussing the new ad linking Sen. Barack Obama to key figures within the “Chicago political machine.”

Schmidt assured reporters that the ad was part of a real ad buy — unlike many of the campaign’s past ads, which had been released to the press and never aired. Schmidt declined to say how much money the campaign spent on the media buy. Schmidt said the ad would air in battleground states.

When asked about a line in the ad that mentions Illinois Gov. Rod Blagojevich, without giving any context or information about his connection to Obama, Schmidt was unable to offer any details on the relationship, other than they were both politicians from Illinois.

“They obviously have a close relationship. He’s someone who is under investigation. He comes out of a corrupt machine. Sen. Obama very directly has introduced the issue of associations in this campaign, I think raising fundamentally, that you can tell something about people by the company they keep.”

Finally, Davis responded to a question about whether, in light of the current economic crisis, this ad opens McCain up to criticism to his connections to Charles Keating Jr., the central figure in the Keating Five corruption scandal, in which McCain was implicated but later cleared of wrongdoing. Davis pointed to recent comments by Robert Bennett, the special investigator in the case, who said he recommended to the Senate Ethics Committee that charges not be pursued against McCain for a lack of evidence.

“With regard to the Keating situation, which is a story that is very old, almost two decades, and you go back and you look at the comments of Mr. Bennett, for example, who was the Democratic counsel to the committee, you look at some of the other comments that have been made by people, Sen. McCain, there was a lot of politics involved in that.”

Davis then steered his answer back to Obama’s relationship to Rezko, who Davis referred to as “a slumlord,” and its relevance to the current housing crisis.

However, McCain was also criticized in the Keating affair for taking free flights on Keating’s private jet, and for vacationing at Keating’s residence in the Bahamas. Now that McCain is aggressively attacking Obama for his questionable relationships, it seems likely that the Obama campaign will return fire on Keating.

According to the Center for Responsive Politics, a non-partisan organization that tracks money in elections, employees of a law firm founded by Charles Keating Jr. have bundled more than $50,000 in contributions to Sen. John McCain’s presidential campaign.

In amounts ranging from $200 to $2,300, about 30 partners and employees of the legal firm Keating, Muething and Klekamp, as well as their family members, have contributed $50,200 to McCain’s 2008 campaign. All but two of the contributions came in July, and all but three of those July donations were logged on July 31, suggesting they were delivered at the same time. As with any bundle of campaign contributions, it’s difficult to determine which donor was the “bundler,” the person who solicited the contributions on the campaign’s behalf. McCain’s online roster of bundlers, which purports to name any individual bundling $50,000 or more for the campaign, does not associate any of McCain’s major fund-raisers with the Keating firm.

McCain and Keating were forever linked by the “Keating Five” corruption scandal during the savings and loan crisis of the late 1980s. McCain and four other lawmakers were accused of improperly interfering with federal banking regulators investigating Keating’s Lincoln Savings and Loan Assn., which ultimately failed — costing the federal government and investors billions of dollars. Keating spent more than four years in prison as a result.

Keating was a major campaign contributor to each of the five legislators. During the scandal, it became known that McCain had taken several trips at Keating’s expense — including vacations to Keating’s home in the Bahamas, which McCain later paid for. McCain was eventually cleared of any wrongdoing by the Senate Ethics Committee, though the committee reprimanded him for exercising poor judgment.

While there is certainly nothing improper about McCain receiving contributions from individuals at Keating’s firm, it is a reminder of McCain’s past ethics problems — before he styled himself a maverick reformer. The scandal has hardly been mentioned this election cycle; but it does remain an arrow in the Democrats’ quiver if or, perhaps more likely, when things get ugly.