Justice Dept. Nominee Withdraws : Shepherd Cites Pressures After Being Selected by Meese

John C. Shepherd, Atty. Gen. Edwin Meese III’s second choice for deputy attorney general, withdrew his name from consideration Wednesday on the grounds that he was unprepared for the pressures he encountered, a move that Meese immediately blamed on “intense media attention.”

Shepherd’s anticipated withdrawal was disclosed at an extraordinary Senate Appropriations subcommittee hearing at which Meese’s ethical judgment was repeatedly questioned.

Nevertheless, Meese insisted that “even an unduly sensitive” person would not have spotted potential hazards in the actions he took that have led to an independent counsel’s investigation of him.

Refuses to Criticize

Under questioning by Sen. Warren B. Rudman (R-N.H.)--who at one point noted, “God save us from our friends”--Meese refused to criticize his long-time friend E. Robert Wallach, who is under federal indictment and is at the center of most of the incidents for which Meese is being investigated.

Shepherd, a St. Louis lawyer, friend of Meese and former American Bar Assn. president, said that he was “concerned about the personal and financial sacrifices my family and I were being asked to make in order to accept a very difficult short-term appointment.

“My wife and I were not prepared for the pressures to which someone recommended for this position at this time would be subjected,” Shepherd said in his statement, released in St. Louis. Meese turned to him after his initial choice for the key post, retired federal appeals judge Arlin Adams, decided that he could not leave his Philadelphia law firm to take the job.

The vacancy at the department was created by the unexpected resignation of Deputy Atty. Gen. Arnold I. Burns, who quit to distance himself from Meese’s continuing legal problems and concerns about the impact on Justice Department operations.

Bookkeeper’s Allegations

If Shepherd had not withdrawn, his membership in a country club with no black members and in a social club with no women members seemed certain to be the subject of scrutiny at his confirmation hearings. But Meese said Shepherd was concerned primarily about the “raking over” of false allegations raised by a former bookkeeper of his law firm who was convicted of embezzling $147,000 and claimed that she had had an affair with Shepherd. She claimed he had approved her writing of checks on the firm’s account.

Shepherd denied the allegations at her trial and the jury also convicted the bookkeeper, Denise Sinner, of making false statements to prosecutors.

“All the information raised in the media since he (Shepherd) was named was known to the White House and the (Justice) department in advance and has been fully investigated by the FBI in its background review,” Meese said. “There is nothing whatsoever to suggest that Mr. Shepherd would have had any confirmation problems.”

At the Senate hearing, Meese attempted to minimize the importance of the resignations of Burns and William F. Weld, assistant attorney general in charge of the criminal division, and the unrelated departure of Associate Atty. Gen. Stephen S. Trott to become a federal appeals court judge.

Hollings Sees ‘Disarray’

Sen. Ernest F. Hollings (D-S.C.), chairman of the subcommittee on justice, commerce, state and the judiciary, said that the department is “seemingly in disarray,” noting that three more associate deputy attorneys general also are leaving.

“The newspapers don’t have it quite right,” Meese responded, contending that the three newest departures are Burns’ “personal staff members who resigned.”

Meese said that none of the resignations had “affected the overall performance of the department and I don’t believe it will have any impact.” This view has been challenged by a senior White House official, who said in an interview that the department “is dead in the water,” and by several career and political appointees in the department, none of whom would speak for attribution.

Hollings noted that the government paid Meese’s $472,000 defense costs when an earlier independent counsel examined his loans from individuals who later held government posts and other matters. Hollings asked how much the current defense costs would run.

Offers No Estimate

When Meese responded that he had no idea at this point, Hollings said: “Now if we have to pay these expenses, you get to be a pretty expensive attorney general.”

When the laughter in the jammed hearing room subsided, Meese said that the costs “are not caused by me. They’re the price you pay for the independent counsel law.”

Investigators are probing whether Meese helped arrange government aid for a billion-dollar Iraqi pipeline project being promoted by Wallach. They also are investigating whether Meese improperly benefitted from an investment fund managed by a Wallach associate, W. Franklyn Chinn. And they are studying whether Wallach helped secure a Washington job for Meese’s wife, Ursula, from a Meese friend who later received a multimillion-dollar lease for Justice Department offices.

Rudman’s question of whether Meese had been sufficiently sensitive to the ethical appearance of his connections with Wallach on business and government matters drew the attorney general’s most detailed public defense in the year that he has been under investigation by independent counsel James C. McKay.

He contended that he did nothing wrong in any of the cases.

Meese Defends Actions

“If you take each of these incidents separately, if you look at the state of knowledge I had at the time that the key actions were taken, you probably would agree with me that there was nothing . . . that should have warned a reasonable person or even an unduly sensitive reasonable person of potential dangers or potential hazards,” Meese said.

“It was only when way after the fact when other things that could not be foreseen, that could not be known at that time came to light,” he said. “Then a variety of people for a variety of reasons--some political, some personal attacks, some media hype--these things came together, plus the provisions of the independent counsel act.”

Meese contended that an independent counsel’s investigation subjects government officials covered by the act to “an IRS-type audit of your entire life.”

Rudman said that Meese might have shown more sensitivity to the appearance of impropriety by avoiding “any relationship whatsoever” with Wallach and Chinn. Both men have been indicted for allegedly defrauding a scandal-plagued defense contractor, Wedtech Corp., by taking money to influence Meese.