Report: Keating accepted money from financier, flunked Bush litmus

A story in the current issue of Newsweek, which hits the stands Monday, said Keating received the money beginning in 1990 from Jack Dreyfus, the founder of Dreyfus mutual funds.

The gifts were legal but Keating never disclosed them to state officials because state law does not require it, the article said.

Dan Mahoney, a spokesman for Keating, said Sunday that the gifts were appropriate and did not play a large role in the governor not being picked to be in Bush's cabinet.

But another factor may have doomed Keating's chances, the article said.

When questions about Bush's possible cocaine use surfaced during the presidential campaign, Keating suggested that the candidate disclose anything "arguably criminal." Those close to Bush did not appreciate the remarks, the article quoted a Keating aide as saying.

The other factor may have been the cash gifts from the former Wall Street financier, the story said.

Keating met Dreyfus in 1988 while he was President Reagan's associate attorney general, the article said. Dreyfus talked with Keating about using the mood-altering drug, Dilantin, to control violent federal prisoners. Dreyfus had no financial interest in the drug, the article said.

Keating set up a meeting between Dreyfus and the Bureau of Prisons, but nothing came of the talks. Two years later, when Keating was chief counsel at the U.S. Department of Housing and Urban Development, Dreyfus offered to give each of Keating's three children a cash Christmas gift of $10,000, the article said.

Keating confirmed that the gifts continued for 10 years after he left HUD, the story said.

"Governor Keating ran the gift past the Government Ethics Office in Washington," Mahoney said. "He has always felt comfortable with accepting the gifts for his children."

Two years ago, Keating arranged for Dreyfus to meet with the director of the Oklahoma Department of Corrections, but nothing came of that meeting either, Newsweek reported. Keating confirmed that the gifts continued annually for 10 years after he left HUD.

In papers submitted to Bush campaign officials last year, Keating called Dreyfus "a kind and generous man" who has never asked for "any actions or material returns from me," the Newsweek story said. Keating told Newsweek the same thing last week, the article said.

"When the governor was asked to fill out a questionnaire for running mate back in June, he went into detail about the Dreyfus issue," Mahoney said.

Dreyfus helped raise money for Keating's first campaign, Mahoney said.

"And he is a strong Democrat up in New York," Mahoney added.

"He was Hillary Clinton's top fund-raiser."

Keating was one of the first Republican governors to openly support Bush and he campaigned tirelessly for the Texas governor, hitting 25 states in 30 days.

"No one has been more loyal to George Bush than Keating,"

Mahoney said.