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.

In 2005, the school made another plea for help to McCain, and this time his office “sprang into action,” writing three letters in as many months on Latch’s behalf.

What happened between 2003 and 2005?

According to the New York Daily News, the Latch School appointed Mark Voigt, an old friend, donor and associate of Charles H. Keating Jr., as the head of its board.

Voigt had been the vice president of Charles Keating’s holding company, the American Continental Corp., when Keating was breaking all those banking laws in the ’80s and his associates donated more than $100,000 to McCain.

In 2005, Voigt wrote McCain about the matter, and his office followed up with three letters in three months and finally got action.

Again, it appears to be a worthy cause and the kind of thing legislators do for constituents all the time, but to Democrats, it shows that McCain does do favors for people, in spite of claims from advisers like Charlie Black who said last February, “John McCain does favors for no one.” And in this case, it would be someone tied to a time McCain would like to forget, but which the Obama campaign now wants everybody to remember.

Sure, what McCain did was a legitimate service that any number of senators do for their constituents.

But when companies like, say, Freddie Mac, keep an old McCain friend like Rick Davis on the payroll for no other reason than his close ties to the man who may be president, would they be more likely to have the president’s ear in a McCain administration?

I’ll pause a moment to allow the irony — some might call it hypocrisy — of that sentence to sink in.

PRODUCTION NOTES: Oh, where to begin?

The spot begins with a story that was reported a couple of weeks ago in Missouri. The story was about Obama’s Missouri “truth squad,” which is composed of numerous Missouri public officials, including some prosecutors and sheriffs. The squad’s purpose is to rapidly respond to false or misleading anti-Obama ads in the state.

Missouri Republicans quickly pointed to the presence of law enforcement officials on the squad as evidence that the Obama campaign intended to intimidate, or even lock up, people who criticized its candidate — and the story linked above appeared to confirm that.

Matt Blunt, the Republican governor, issued a statement condemning the truth squad as “scandalous beyond words.”

However, as ABC’s Jake Tapper reported,  John Mills, the reporter, subsequently clarified his story, saying that the truth squad would hold a news conference to call out misleading ads.

As for the rest of the McCain ad, it’s all fair game. There is no question that both candidates have made false claims about each other.

For McCain, however, to try to lay claim to the high road, at this late date, is more than a little absurd — especially after FactCheck.org called a McCain attack ad released yesterday “dishonorable” because of its distortions.

The real kicker is that McCain comes right out and says Obama “lied,” when he “promised better.”

Don’t forget that McCain daily promised through early summer to run an honorable campaign. So perhaps Obama did lie when he promised better, but so did McCain. Neither candidate has lived up to their early promises to run a different kind of campaign — and that’s a real shame.

It’s also the point of the ad. If McCain can convince voters that he hasn’t been the only candidate dragging the presidential campaign into the ditch, he might be able to gin up some sympathy for playing by the old rules.

But McCain’s operation developed a reputation for dishonesty early on, and such labels are hard to shake. By making William Ayers a campaign issue, and reviving Obama’s association with the Rev. Jeremiah Wright, as Gov. Sarah Palin has done, the McCain campaign risks resurrecting its rep for dishonesty.

Obama immediately hit back with Charles Keating. It may have been a smart move, politically, but it also played right into McCain’s hands by showing that Obama is willing to play that game too.