Bad Option

Reed will go in April

Only a year ago, the Washington gossip was that Thomas Reed, the Special Assistant to the President, would go on to bigger things. A former Secretary of the Air Force under Presidents Ford and Carter, a longtime associate of President Reagan's and a consultant to the National Security Council staff, Reed was thought to have had a good shot at a number of high-level openings down the road. No longer. Reed's troubles go back to 1981, when he made an investment of $3,000 in call options on shares of stock in the Amax mining company. When Standard Oil of California announced the next day that it hoped to buy Amax, Reed's options appreciated to a net value of $427,000. But Reed had spoken with his father, an Amax director, minutes before he purchased the options. The Securities and Exchange Commission began a probe that ended in formal accusations against Reed of illegal "insider trading," charging that he had been tipped off in advance about the impending purchase bid.*

Reed vigorously denied the allegations, but in December 1981 he signed an agreement with the SEC putting his profit in escrow pending the outcome of private litigation; later he promised to donate the funds to charity. In January 1982 his old friend William Clark, President Reagan's National Security Adviser, gave Reed his first consulting assignment.

That appointment now seems questionable. SEC documents obtained by Common Cause magazine and the CBS-TV show 60 Minutes revealed that Government investigators also learned that Reed had backdated the required brokerage forms and signed the names of two other people. Reed says that they and six others were to be the deal's beneficiaries. The U.S. Attorney in New York has launched a "pre liminary investigation." A House subcommittee is looking into why Clark appointed Reed to the sensitive NSC assignment, given Reed's problems with the SEC, and a Senate subcommittee is investigating the SEC's handling of the case.

Reed dismisses the entire flap as politically motivated. He says, "It's the way Washington works. If you can't stand the heat, you should get out of the kitchen." Last week Reed made preparations to do just that. When his current NSC assignment ends next month, he will leave the White House.-

* A stock call option allows the buyer to purchase a particular stock at a specified price during an agreed-upon interval. Insider trading covers investments based on information not available to the public. This file is automatically generated by a robot program, so viewer discretion is required.