Justice Dept. Receives Ethics Report on Deaver : Review Concerns Lobbying for Canada; Reagan Calls Request for a Special Counsel ‘Ridiculous’

WASHINGTON — The federal Office of Government Ethics on Friday submitted its review of conflict-of-interest allegations against Michael K. Deaver, President Reagan’s confidant and former aide, to the Justice Department for a full-scale criminal investigation.

David H. Martin, director of the ethics office, said that the letter and supporting documents he sent to Atty. Gen. Edwin Meese III deal principally with lobbying activities on behalf of Canada by Deaver, who has built a multimillion-dollar public relations business since leaving his White House post as deputy chief of staff 11 months ago.

Martin declined to discuss what other matters are covered by the material he submitted to Meese and said the attorney general will have to decide whether to remove himself from the case because of his long association with Deaver.

Martin took his action only hours after Reagan dismissed as “ridiculous” a request by five Democratic senators that appointment of an independent counsel be considered in the Deaver case. Under the Ethics in Government Act, the request by the senators, who constitute more than half of the Democrats on the Senate Judiciary Committee, requires a response from Meese in 30 days.

“I think the whole thing is ridiculous,” Reagan said in Los Angeles on the first leg of his trip to the Tokyo economic summit when a reporter asked about the senators’ request.

Meese’s chief spokesman, Terry Eastland, noting that the attorney general had just returned from a European meeting on terrorism, said there have been no discussions on whether Meese will take part in the case.

However, Justice Department sources said, the referral by Martin is expected to trigger the provision in the Ethics in Government Act that requires Meese to conduct a preliminary inquiry on whether to seek appointment of an independent counsel.

A separate review of Deaver’s lobbying since leaving the White House is being conducted by the General Accounting Office, Congress’ watchdog unit, at the request of Rep. John D. Dingell (D-Mich.). A source familiar with that inquiry said its results will be forwarded to the Justice Department next week, thereby adding pressure for a full-scale inquiry.

Pam Bailey, a spokeswoman for Deaver, said in response to Martin’s action that “Mr. Deaver is confident that a presentation of the complete set of facts will show his absolute integrity while in public service and private business.”

The chief question involving the ethics issue apparently hinges on whether a meeting between Deaver and former Transportation Secretary Drew Lewis, Reagan’s special envoy on the Canadian acid rain issue, violated federal rules prohibiting Deaver from lobbying on issues in which he was personally and substantially involved during his White House service.

$105,000 Contract

In connection with his $105,000-a-year contract with the Canadian government, Deaver met last Oct. 25 with Lewis and the envoy’s Canadian counterpart, William Davis, to discuss a report on rain pollution in Canada caused by heavy U.S. industries. Deaver has sought publicly to minimize his involvement in the acid rain issue while serving in the White House, but others have said that he played a key role in Reagan’s selection of Lewis last year as special envoy.

The appointment of the special envoys was announced jointly by Reagan and Canadian Prime Minister Brian Mulroney at their summit in March, 1985, while Deaver was in the White House.

He left two months later to set up his powerful Washington lobbying and consulting firm, Michael K. Deaver & Associates. A few weeks later, the Canadian government became his first foreign client.

Last month, envoys Lewis and Davis recommended a more aggressive acid rain policy, which included a multimillion-dollar cleanup effort. Reagan, reversing a previous position, agreed to the proposal.

Rockwell Lobbying

Other ethics matters that the five senators said should be examined include Deaver’s lobbying on behalf of Rockwell International Corp. and his contacts with the executive branch on behalf of South Korea. Deaver has acknowledged a meeting with White House Budget Director James C. Miller III involving the possible sale of Rockwell’s B-1 bomber.

Frank Keating, the Treasury Department’s enforcement chief, has said that he met twice recently with Deaver, who was seeking to negotiate a lower monetary penalty for two South Korean steel firms that the U.S. Customs Service charged had illegally “dumped “ steel on the U.S. market.

The Democratic senators who asked for closer scrutiny of Deaver include Minority Leader Robert C. Byrd of West Virginia; Joseph R. Biden Jr. of Delaware; Howard M. Metzenbaum of Ohio; Paul Simon of Illinois and Patrick J. Leahy of Vermont.