A Question of Ethics

By Ed Magnuson

The Meese investigation puts the Reagan Administration under a cloud

The turnabout was startling. A mere four weeks ago, Presidential Counsellor Edwin Meese, self-assured and articulate, fended off hostile questions from Democratic Senators at his confirmation hearings and emerged confident that he would quickly become Attorney General of the U.S. But last week a Justice Department investigation into his tangled finances was under way, the press was nipping at his heels, and Meese, first bewildered and then combative, was asking that a special prosecutor be appointed to investigate "the misrepresentations and baseless charges" against him. The probe could take months, delaying and possibly dooming his confirmation.

There was more at stake in the Washington drama than the personal fate of Meese, a 17-year intimate of Ronald Reagan's and until recently one of his most influential aides. Even if found by a special prosecutor to have committed no crime, Meese will still face congressional opposition for accepting financial help from men who were later appointed to federal positions. "There's absolutely no relationship whatsoever between any financial transaction I was involved in and anybody getting a job at any time," Meese insisted. Nonetheless, there was still an appearance of impropriety. Meese's missteps intensified the aura of ethical laxity that has clung to the Reagan Administration from its earliest days. The cumulative impact of questionable dealings and pressured resignations by Reagan appointees has not seemed to hurt the President. But as the November election approaches, the Democrats are certain to portray Reagan as unduly tolerant of misfeasance by his underlings.

Political considerations were, in fact, uppermost in the minds of White House strategists and Reagan's Senate allies last week as they grappled with Meese's deteriorating situation. The relatively routine confirmation was derailed when the Washington Post disclosed that the nominee had failed to report a $15,000 interest-free loan from a California friend, Edwin

W. Thomas, to Meese's wife Ursula; the 1978 Ethics in Government Act requires that any official paid more than $60,000 must list all such loans in financial-disclosure statements. Even Strom Thurmond, the Republican chairman of the Senate Judiciary Committee, agreed that Meese and other witnesses should be called to face more questioning. Declared Thurmond: "There will be no cover-up."

Although Meese had called the omission of the loan "inadvertent," his error posed a dilemma for Attorney General William French Smith, a Meese friend who wants to retire in time to help Reagan campaign for reelection. The Justice Department was prosecuting Republican Congressman George Hansen of Idaho for failing to include loans to his wife on the disclosure forms required of members of Congress. The Hansen loans from Texas Billionaire Nelson Bunker Hunt were larger than Meese's (the largest was $62,000), and Hansen refuses to file amended forms. Meese has readily done so, but that might not be enough to save him. With Hansen on trial last week, Smith would have been criticized if he had not ordered an [investigation into Meese's omission.

Smith also had to worry about Federal Judge Harold Greene. Only last month, Greene ruled that the Justice Department "ignored" the Ethics Act when it failed to seek appointment of a special prosecutor to investigate charges that Reagan campaign aides in 1980 had illegally acquired debate briefing papers and other documents from Jimmy Carter's campaign staff. Instead, Smith had his department conduct its own inquiry and merely issued a press release contending that it had found no "credible evidence" of any crime. Since his confirmation hearings raised new questions about whether Meese had received some of the Carter papers, Smith would be open to charges of ignoring the Ethics Act once again if he decided not to request a special prosecutor.

The political problem as seen by Reagan aides was one of timing. An outside prosecutor could take five months or more to probe all the allegations against Meese. That would keep the controversy burning right up until election time. At the beginning of last week, Smith and Justice Department aides had started a preliminary investigation apparently limited to the Thomas loan. If no wrongdoing was evident, Meese could claim that he had been "cleared," obviating the appointment of a special prosecutor. Meese partisans assumed the nominee would then survive more grilling by the Judiciary Committee and win full Senate confirmation well before the election campaign reached a critical stage.

Thurmond and the Judiciary Committee's ranking Democrat, Joseph Biden, had other ideas. They drafted a letter to Smith demanding a broad investigation of all the controversial Meese dealings, including the Carter papers. On Wednesday, Meese met with Thurmond, Senate Majority Leader Howard Baker and Republican Senator Paul Laxalt, Reagan's best friend on Capitol Hill. "We talked about expediting the process," Laxalt explained afterward. But they found no easy way to avoid an outside investigation.

Meese then took the matter forcefully into his own hands. He issued a call for an independent counsel to conduct "a fair and complete hearing" so that he could respond "to any charge raised against me." Meese vowed to "pursue the vindication of my name, the honor of my family and the confidence of the President."

Meese had no reason to doubt that Reagan was still with him. "I've never been one that wanted to throw the baby out of the sleigh to the wolves in order to lighten the load," Reagan told a group of newspaper reporters. While he had not examined Meese's finances, "I do know that he had to make some pretty great economic sacrifices to come here and work for the Government." Reagan said that Meese would remain as his Counsellor until he was confirmed as Attorney General. After completing his required preliminary probe, Smith was expected to ask a panel of three judges to appoint a special prosecutor.

At week's end Meese embarked on an aggressive media campaign, holding spirited interviews with leading publications, including TIME. He assailed his critics as "character assassins," without saying whom he had in mind. Yet he seemed naive when he insisted that he was not wrong in accepting the Thomas loan because "it never occurred to me that an interest-free loan was a thing of value."

If a special prosecutor is assigned to delve into all of the allegations, he will have a full plate. Some of the particulars:

The Thomas Loan. Ursula Meese borrowed $15,000 on Jan. 7, 1981, just two weeks before Reagan's Inauguration. She used the money on Jan. 26 to buy $7,500 worth of stock for each of two children in Biotech Capital Corp., a New York investment company then making its first public stock offering. Meese failed to disclose the loan in his 1981, 1982 and 1983 forms. He also neglected to list the stock holdings as a family asset in 1981. Mrs.

Meese sold the stock on May 13, 1983, taking a loss of $3,398. She repaid $5,000 of the loan in November 1982 and the other $10,000 in June 1983, without interest. Thomas became Meese's aide at a salary of $59,500 on Jan. 29,1981. He moved back to California in February 1982, as a regional administrator of the General Services Administration, earning $69,600. His wife Gretchen got a federal job with the Merit Systems Protection Board at $30,402 in San Francisco on Sept. 5, 1982. Meese obviously had chosen his own deputy. If the appointment of Thomas was made in return for the financial help, that would be a crime.

Other Loans. Four other men who helped Meese out of financial difficulties also wound up with federal positions. They were John McKean, who lent Meese a total of $60,000 in two loans in June and December 1981, and became a member of the Postal Service board of governors on July 31, 1981; Thomas Barrack, who spent $70,000 of his own money to help Meese find a buyer for his California house in the summer of 1982 and became Deputy Under Secretary of the Interior in December 1982; Gordon Luce, chairman of Great American Federal Savings Bank in San Diego, and Edwin Gray, a former senior vice president of the bank, which permitted Meese to fall 15 months behind on mortgage loans of more than $400,000. Luce became alternate U.S. delegate to the United Nations in September 1982; Gray became chairman of the Federal Home Loan Bank board in May 1983. Both are longtime acquaintances of Reagan's and, says Meese, did not need his help in getting federal jobs.

Carter Papers. The independent counsel may try to find out whether Meese was truthful in asserting that he did not know that the Reagan campaign staff had covertly acquired Carter campaign documents in 1980. Investigators found some such papers in Meese's 1980 campaign files. He denies seeing most of them, a claim that Democratic Senator Howard Metzenbaum, his chief Judiciary Committee critic, calls "unbelievable."

Most Administrations have been plagued by ethical breakdowns of varying seriousness. Harry Truman's military aide, General Harry Vaughan, accepted a freezer from a manufacturer and survived the uproar. Dwight Eisenhower fired his chief of staff, Sherman Adams, for giving Government favors to an industrialist and taking a vicuna coat and an Oriental rug from him. Jimmy Carter defended his Budget Director and crony, Bert Lance, until Lance quit under charges that he had permitted relatives to overdraw their accounts in a bank he had headed. And then, of course, there were Richard Nixon's Watergate transgressions.

No single act by a Reagan subordinate has produced an outright scandal. But taken together, the many mistakes form a troubling pattern of insensitivity to the higher standards of conduct expected in Government service. Perhaps even more disquieting is the fact that the amiable President seems oblivious to the problem. Far from publicly rebuking any wayward officials or nominees, he has been eager to defend his loyalists.

The most notable of the early blots on the Administration involved CIA Director William Casey, who survived charges that he had misled investors about the finances of a New Orleans agribusiness company. A top aide, Max Hugel, was accused of illegal stock manipulation and quit. National Security Adviser Richard Allen resigned after accepting three wristwatches and taking, but not spending, $1,000 from a Japanese magazine to arrange an interview with Nancy Reagan. While saying there were a "disturbing" number of allegations that Secretary of Labor Raymond Donovan was connected to mobsters, a special prosecutor found "insufficient credible evidence" to charge Donovan with a crime. Veterans Administrator Robert Nimmo abused his Government transportation perks, spent $54,183 to decorate his office and resigned. Attorney General Smith took some whopping tax deductions ($66,000 for a $16,500 investment) from investments in oil and gas tax shelters, then agreed to reduce them when they were publicized.

The closest thing to a full-blown scandal was the Environmental Protection Agency's favoritism to companies producing toxic wastes. Administrator Anne Burford and more than 20 other EPA officiate resigned. Rita Lavelle, head of the hazardous-wastes program, was convicted of perjury.

Thomas Reed quit his position as a consultant to the National Security Council staff amid charges of "insider trading" in stocks. Federal Aviation Administrator J. Lynn Helms resigned when grand ju ries probed his past business dealings.

Deputy Secretary of Defense Paul Thayer, accused of insider trading, also left the Government. A dozen or more lesser Ad ministration officials were accused of abusing their offices. any of the Administration officials deny any wrongdoing and vow to clear their names in legal proceedings.

Yet the quantity of accusations seems to suggest, at the least, a cavalier attitude about the appearance of impropriety. Declares former Watergate Prosecutor Archibald Cox, who now heads Common Cause: "There has been an extraordinary and widespread insensitivity to ethical standards in this Administration. The most disappointing thing is that the President has not spoken out on this matter."

J. Jackson Walter, former director of the Office of Government Ethics in the Carter and Reagan Administrations, believes that the Reaganauts' "antiGovernment rhetoric and mentality have some thing to do with" their casual attitude toward ethical judgments. Officials who do not respect many Government pro grams, he contends, have little respect for Government standards. An Administration lawyer agrees that appointees who are "used to the mores of the marketplace find all these disclosure requirements philosophically offensive."

Whatever the cause, the Administration's ethical failings are likely to prove an irresistible target for the Democratic presidential candidates. Gary Hart has released a list of 55 Administration officials who he claims have faced "serious allegations of wrongdoing involving unethical behavior, abuse of power or privilege, or even, in some cases, criminal actions." He charges that "abuse of Government has become a way of life in this Administration, yet it seems to concern no one very much -- not even the President. It should." Walter Mondale last week spoke of the "sleaze fac tor" in the Administration.

"The Democrats are not going to let go of this," a Republican Senator predicted. "Politically, no one can fault them for that, although we will do so publicly. It's going to be a long, hot spring and summer." Either of two men could cool the issue: Ed Meese, by withdrawing from the confirmation proceedings, or Ronald Reagan, by spiking Meese's nomination. But for the best of reasons -- one man's need to vindicate a reputation, the other's loyalty to an old and valued friend -- Republicans are bracing for a long, hard siege. --By Ed Magnuson. Reported by Laurence I. Barrett and Anne Constable/Washington

With reporting by Laurence I. Barrett, Anne Constable