U.S. Attorney Decided Not to Charge Paisley

The FBI conducted a criminal investigation of then-Assistant Navy Secretary Melvyn R. Paisley in 1983 based on allegations of bribery and electronic eavesdropping during his career in private business, but a U.S. attorney decided against prosecution, The Times learned Friday.

Paisley’s main accuser was James E. Durst, who had served as an executive with Paisley at the Boeing Co. Durst told the FBI that Paisley presented “an extraordinary risk to the security of the United States,” according to Durst and government sources familiar with his statement.

Durst, who was questioned by the FBI in three separate sessions, recalled an agent telling him that “they were really digging into it.”

The FBI eventually presented its findings on Paisley’s activities while at Boeing to then-U.S. Atty. Elsie Munsell in Alexandria, Va., the office that is now heading the nationwide investigation into defense procurement fraud.

Two Reasons

Munsell declined to prosecute, a source familiar with the probe said, for two reasons:

The statute of limitations had run out on the bugging, which reportedly took place in 1970; and Boeing, on whose behalf Paisley allegedly paid bribes, had earlier pleaded guilty to charges of failing to disclose at least $7 million in commissions it paid to overseas agents to help win airline orders.

“They had already been hammered pretty hard,” said one source familiar with the decision not to prosecute Paisley.

Paisley, who left his Pentagon job last year to become a consultant, has emerged as one of the central figures in the unfolding investigation of defense procurement practices. Among other things, federal investigators contend that after leaving the Pentagon, Paisley obtained classified information about defense contracts and sold it to his clients.

Munsell, whom Henry E. Hudson succeeded as U.S. attorney in 1986, would not discuss any investigations conducted during her five-year tenure. A spokesman for Hudson who is managing the expanding Pentagon fraud investigation also refused to answer questions about the 1983 Paisley investigation.

Paisley’s lawyer, E. Lawrence Barcella Jr., said disclosure of the FBI probe “is a regurgitation of unfounded allegations that have been examined many times.” He characterized Durst as “a disgruntled former employee whose record on credibility is pretty thin.”

Barcella also minimized the significance of FBI agents making a presentation of their findings to a U.S. Attorney. “That doesn’t necessarily indicate the FBI thought there was a case,” he said, adding that in his 16 years as a federal prosecutor, “there were thousands of petty things agents came to me with.”

The criminal investigation was opened two years after Paisley had undergone the FBI background check which is conducted on all presidential nominees before their names are submitted to the Senate for confirmation. The FBI sent a report on this check to the White House.

A source familiar with the contents of the report as prepared by FBI agents said that it contained “substantial derogatory information” about Paisley but that the material was not nearly as critical as the allegations made by Durst two years later.

Some senators who sat on the Armed Services Committee at the time have said recently that they did not see any unfavorable information about the nominee. It could not be determined whether the White House sent the report or a summary of it to the Senate committee.

Forwarded on Request

Although a former White House official familiar with the nomination process said he could not recall Paisley’s report specifically, he emphasized that if the FBI summary of it included unfavorable information, it would have been forwarded to the Senate panel if they requested the document.

“We furnished it--if asked,” he said. “You can’t remove things from an FBI report.”

During the 1981 background check, the FBI contacted Mildred R. McGetrick, one of Paisley’s three ex-wives, who said she told agents that Paisley was “dishonest with money.” McGetrick said she also told FBI agents that Paisley took gratuities including cash and gifts.

McGetrick said she never heard from the FBI again.

Her sister, Mickey Pierson, said she sent a letter to then-Sen. John Tower (R-Tex.), chairman of the Armed Services Committee, which was considering Paisley’s nomination in November, 1981. Pierson wrote that “Mr. Paisley has been known to take bribes.”

Sue Schnitzer, an FBI spokesman, said the background report or summary was turned over to the White House “without comment or recommendation” on Sept. 29, 1981. She declined to discuss the contents.

But a source familiar with the contents said the negative information was not emphasized in any way in the report that went to the White House. Instead, the report was typical of the kind of “softer” inquiries that the FBI conducted at the start of the Reagan Administration, according to former White House and FBI officials.

The FBI has since toughened these so-called “special inquiries” after being criticized for failing to check the backgrounds of some presidential nominees adequately. Subjects of these investigations, who traditionally had not been questioned by agents, began to be interviewed when derogatory information was raised, one source said.

Met in Home

The 1983 criminal investigation of Paisley began when Durst, a Boeing marketing executive who quit the company in 1977, contacted the Seattle office of the FBI and later met with an agent three times at Durst’s home to outline his allegations.

Durst also wrote the FBI a three-page, single-spaced typed letter with further details on Oct. 10, 1983. Among those he named in this correspondence as being implicated with Paisley was James E. Gaines, who had been Paisley’s aide at Boeing.

Gaines, who followed Paisley to the Pentagon as his deputy, is suspected of supplying classified and proprietary material to Paisley when the latter left to become a defense consultant, according to sources close to the investigation.

Durst also gave the FBI copies of correspondence and other documents concerning allegations about Paisley that he had sent to other officials.

In one of the letters, Durst wrote of Paisley: “I feel very strongly, considering the man’s well known and long established unsavory character and amorality, that he is an extraordinary risk to the security of the United States while he is in such a sensitive military position, because he is almost a textbook example of the kind of man who is very highly susceptible to blackmail and, thus, readily compromised by the enemies of our country.”

Durst said in interviews this week that he based his decade-long campaign to blow the whistle on Paisley on his conversations with him, rather than on documented evidence of wrongdoing. He said Paisley and a Boeing engineer had independently admitted to him that they had bugged a Pan American World Airways office on North Atlantic Avenue in Cocoa Beach, Fla., in 1970, to get Pan Am’s bidding figures for a military contract.

Boeing and the engineer later denied the charges. The engineer acknowledged renting the office beneath Pan Am but said Boeing had sent him there to “debug” Boeing offices at nearby Cape Canaveral. Boeing officials denied that the company had spied on its competitor.

Ronald J. Ostrow reported from Washington and Bob Drogin from Seattle. Staff writers Melissa Healy and Glenn F. Bunting in Washington contributed to this story.