Old Skeletons

Legal woes dog a budget cutter

When Paul Thayer became Deputy Secretary of Defense a year ago, he brought a hard-nosed businessman's approach to the Pentagon bureaucracy. As chairman of both the LTV Corp., a Dallas-based energy, steel and aerospace conglomerate, and the U.S. Chamber of Commerce, he had complained about wasteful Government spending, including the military's. His new job as No. 2 at the Pentagon, with particular responsibility for weapons procurement, gave Thayer the chance to use his private-sector savvy to pare public-sector fat.

But Thayer's business career may prove to be more a burden than a boon.

This week the Securities and Exchange Commission is expected to charge Thayer with helping friends make profitable stock deals by passing along inside information in 1982 while he was chairman of LTV and a director of four other corporations. Since investigators do not charge that Thayer himself profited financially from the inside information, the Government may have difficulty winning its case. Nonetheless, a 1983 U.S. Supreme Court decision suggests that insiders can be held liable for passing along stock tips even if they did not do it for financial gain.

Whatever the legal outcome, it may be publicity that Thayer, as a top Government official, is most concerned about.

Normally, the SEC settles cases of "insider trading," a civil offense, with a "consent decree," in which the defendant neither admits nor denies guilt but promises to obey the law in the future. Thayer's settlement talks with the Government, however, have so far proved fruitless, in part because he has reportedly balked at a full public airing of the facts of the case.

Meanwhile, the Justice Department has launched a criminal investigation of possible perjury and obstruction of justice in connection with the SEC probe.

If Thayer is forced to step down, the Administration would lose a redoubtable scrapper in the struggle against soaring Pentagon spending. He had challenged the costly proposals of Navy Secretary John Lehman, who argues strenuously for a 600-ship Navy. In Thayer, a tough, blunt former naval aviator and test pilot, Lehman had an adversary of substance. This fall Lehman complained that he was "sick and tired of spending 98% of my time up on the Hill undoing the damage that senior Defense officials are doing to the President's budget." By "senior officials," Lehman meant Thayer, who reportedly responded, "This place isn't big enough for both of us."

Events may prove Thayer right, but not in the way he hoped.