REVOLVING DOOR : Reagan Administration Officials Find the Path to Private Jobs Is Paved With Gold

At the Pentagon, he presided over what critics say is a bloated, badly managed, occasionally corrupt bureaucracy.

But when former Defense Secretary Frank C. Carlucci walked away Jan. 20 from 30 years of government service, he was transformed into a darling of the corporate world.

In a matter of weeks, he accepted posts on the boards of directors of nine corporations--four of them major defense contractors. Between them, he easily will earn in excess of $150,000 a year--considerably more than the $99,500 he was paid to be second in command of the nation’s defense. And that doesn’t even count the income, in an amount undisclosed, from his full-time job as vice chairman of a Washington investment firm.

But Carlucci was only the most aggressive of Ronald Reagan’s Cabinet members in striding into the corporate power elite. And the Reagan Cabinet is only the latest to participate in a long--if not universally regarded as honorable--tradition in which top officials convert their government experience into earnings and influence in the corridors of corporate power.

At best, critics of Washington’s “revolving door” say, the flow of officials from the highest reaches of national government to corporate board rooms--and, sometimes, back again--creates an appearance that government is at the beck and call of big business. At worst, they say it fuels public suspicion that national policy and spending is compromised by top government executives’ ties to private industry.

And at a minimum, some analysts find it unseemly for Cabinet members to appear to be cashing in on their public service by lending their star value, and maybe the secrets in their Rolodexes, to industry.

“Whatever they say,” said Thomas L. Whisler, a University of Chicago business professor who has studied corporate boards, “my suspicion is what (companies) are getting is just a gorgeous bunch of information about who’s doing what, who to see and who to call.”

Of the 10 Reagan Cabinet members who left office with the President, five have accepted appointments to corporate boards: Secretary of State George P. Shultz, Secretary of Labor Ann Dore McLaughlin, Secretary of Housing and Urban Development Samuel R. Pierce, Secretary of Commerce C. William Verity and Carlucci.

Such service is not illegal. Federal ethics laws put limits on the contact senior government officials can have with the agencies they served, including a range of prohibitions on sales and lobbying. But they do not restrict officials’ post-government employment or their service on corporate boards.

That doesn’t mean that the conduct of former top government officials is free from controversy, however.

Former senator and arms negotiator John Tower lost his bid to become Carlucci’s successor in part because of questions about his work as a defense industry consultant after leaving the government. Former President Gerald Ford has faced stiff criticism from ethics experts and historians for going on more than a dozen boards and accepting consulting fees from yet more companies after his exit from the Oval Office--a merchandising program that made him a millionaire.

The Reagan Cabinet has not faded into the board room’s oak-paneled woodwork quietly, either.

When Chevron shareholders met Tuesday in New Orleans, right-wing political organizer Howard Phillips, chairman of the Conservative Caucus, had hoped for a face-to-face confrontation with Shultz, who recently joined the oil company’s board.

Phillips and some other conservatives strongly opposed Reagan Administration policy toward Angola, charging that the United States was not fierce enough in its support of the non-communist rebels who are fighting to topple the Marxist regime in Luanda. As they saw it, Shultz and Reagan’s policy was tilted toward protecting Chevron’s extensive oil-drilling holdings in Angola--holdings that generate the taxes and fees that prop up a pro-Soviet regime.

Phillips did not get to challenge Shultz, who missed last week’s meeting. And shareholders overwhelmingly rejected his resolution calling for Chevron to pull out of Angola. But Phillips insists, nonetheless, that the former secretary of state’s election to Chevron’s board caps years of devoted service to the company’s interests.

Wants Pull-Out

“Clearly, Chevron has multibillion-dollar interests in Angola,” said Phillips. “Clearly it is outrageous that the clear interests of the United States have been subordinated to the interpretation that what’s good for Chevron is good for the U.S.A.”

Shultz, a professor of international economics at Stanford University, could not be reached for comment. Sherri Zippay, spokeswoman for the San Francisco-based company, called the allegations “totally absurd and ridiculous” and “an insult to the people involved.”

Carlucci’s board service with four large defense contractors--Westinghouse Electric, Kaman Corp. and Ashland Oil, all among the Pentagon’s 100 top contractors, as well as Santa Monica’s RAND Corp.--crystallizes, for Pentagon critics and ethicists, dilemmas that pervade the Defense Department’s relationships with its contractors.

Congress for years has tried to devise a way to guard Pentagon procurement against the conflicts, and appearances of conflict, that arise when personnel drift back and forth between jobs in the defense industry and the Defense Department. At the same time, legislators have not wanted to deny individuals a livelihood in their field of expertise, nor deny the nation the talents of some of its finest defense experts.

“In an earlier time, those who passed through the ‘revolving door’ were known and praised as citizen-statesmen,” Washington attorney Lloyd N. Cutler, a member of President George Bush’s Commission on Federal Ethics Law Reform, testified at a congressional hearing last year on revolving door issues.

The result of the balancing act has been a prodigious assortment of ethical rules and laws that limit defense workers’ employment options, the job searches they can conduct while still in public office and the work they can do for defense contractors.

None of the rules prohibit a former defense secretary from joining a defense contractor’s board. But Carlucci’s recent predecessors--Donald H. Rumsfeld, Harold Brown and Caspar W. Weinberger--all have steered clear of such posts. (Both Rumsfeld and Brown, though, are $3,000-per-year directors of RAND, a nonprofit think-tank that gets about 75% of its funding from the armed services.)

“Generally, I would not think it appropriate to serve on the board of a company that had extensive contractual relationships with the department, particularly not if they had those relationships while I was in office,” Weinberger said in a written response to questions from The Times.

‘Full Disclosure’

“I do not have in mind any particular rule change which would prohibit a former Secretary of Defense from serving as an executive or director of a defense contractor,” he said. “I do not think it should be done, but I prefer to rely on full disclosure and the good judgment of the individuals concerned to avoid any appearance of, or any substantive, problems.”

Carlucci, a 58-year-old career civil servant who started as a foreign service officer and rose up to No. 2 posts at the Central Intelligence Agency and the Pentagon before becoming defense secretary in 1987, sees things differently.

“Cap is entitled to his own preferences” Carlucci said of Weinberger, his boss in the early ‘70s at the Department of Health, Education and Welfare and later at the Defense Department.

Carlucci turned down board posts at what he called “well-known” defense contractors to rule out, he said, any appearance of impropriety. The defense contractors he serves all are highly diversified, with extensive civilian operations as well, he noted.

All the same, “I did not feel constrained to say ‘no’ because somebody contracts with the Department of Defense,” Carlucci said. “Are we removing all elements of integrity and trust from government service? You can take that appearance-of-conflict-of-interest standard so far and say the only thing you can do when you come out is serve in a monastery or Sears Roebuck.”

Indeed, Sears was the company for which Carlucci worked during the one short period a few years ago when he left government, heading the retailer’s international trading company. Without greater experience in private industry, he said, board service seemed one of his few opportunities to earn the money he needs to support his family.

He won’t be able to send his young daughter to college, Carlucci said, on a $40,000 annual federal pension.

“At age 58 or 59, you don’t start into medical school,” he said.

The contractors that elected Carlucci to their boards say he was selected for his breadth of knowledge and experience, not his insider perspective on the federal pocketbook.

John C. Marous, chairman and chief executive of Westinghouse Electric, the nation’s 18th-largest defense contractor, said “Carlucci’s background matches our goals: He is rich in experience, has a great international background and understands and embraces quality.”

Roger Schrum, spokesman for Ashland Oil, the 75th-largest military contractor, candidly noted one more quality Carlucci contributes: “Quite frankly, he adds a lot of prestige to our board.”

Critics of Carlucci’s conduct ask whether the public is paying too large a price for whatever advantages the former defense secretary and the companies he serves are garnering from the relationship.

Danielle Brian-Bland, an analyst at the Project on Military Procurement, a Washington organization that casts a skeptical eye on defense spending, said a former defense secretary could provide contractors with just the kind of inside knowledge that the government’s Operation Ill Wind prosecutions have sought to protect.

“Coming out of government, you can give these companies advice about ways to tailor their proposals,” she said. “If they have inside information, even if it’s aboveboard, that still can give these companies an unfair advantage.”

Retired admiral Eugene Carroll, deputy director of the Center for Defense Information, another Washington defense watchdog group, said it seemed apparent that it was Carlucci’s Pentagon service that made him an attractive board candidate for defense contractors.

“You invite the man who was in charge of the henhouse to join you in figuring out how to get more eggs out of the chickens,” Carroll said. “He can sure give them some good phone numbers. I’m sure he took his Rolodex with him. And I’m sure if the call is from Frank Carlucci, it will get returned.”

At a hearing in Washington in March, Rep. Charles E. Bennett (D-Fla.), one of the authors of the most recent congressional stab at regulating defense officials’ post-government employment, said Carlucci’s directorships were proof current laws were inadequate and poorly enforced.

Bennett has proposed legislation that simply would bar Pentagon officials from working in the defense industry for two years after leaving the government. The Bush Administration, meantime, wants tighter restrictions on how former officials can use the information they acquired on the inside.

Carlucci says the critics misconstrue the role board members play.

Only once has he been asked a question about the Pentagon at a board meeting. “I was asked, ‘What do I think is going to happen with the defense budget?’ And that is pure conjecture,” Carlucci said. “I was never asked to give any kind of information about defense. That’s not what boards do. Boards are at a level of oversight that does not get into that kind of detail.”

Some ethics specialists say it is not at all clear what standard should regulate the revolving door.

If Carlucci--whose reputation for rectitude is unblemished--or some other former Cabinet member takes care not to give inside knowledge to a company he serves as a director, is it fair, they ask, to conjure up scenarios that suggest an appearance of a conflict of interest? And is it reasonable, some ethicists wonder, to bar those who have held high government positions from bringing their experience to bear on the challenges facing American business?

‘Carry Our Resumes’

“We all carry with us our resumes,” said Michael Josephson, president and founder of the Joseph and Edna Josephson Institute for the Advancement of Ethics, in Culver City. “It is certainly clear we want to be careful how people use that when part of that resume was built up by, or in some senses paid for, by the public. On the other hand, you can’t take it away from the person.”

Of course, former government officials can choose on their own to keep their business affiliations to a minimum.

That’s the path former President Reagan has taken. The only board on which he intends to serve is that of the National Review, the conservative political magazine edited by his friend William F. Buckley Jr.

Wick Allison, publisher of the magazine, says board members are called upon regularly to offer advice on editorial policy and ways the publication can increase its influence in the conservative community.

The fee collected by Reagan and the other directors? Not one red cent.

Times researcher Melanie Pickett contributed to this story.

RONALD REAGAN

Former President

NATIONAl REVIEW / MAGAZINE

No fees received

FRANK C. CARLUCCI

Former secretary of defense

ASHLAND OIL / PETROLEUM

$24,000 annual retainer

$1,000 additional payment per board meeting

$1,000 additional payment per

committee meeting

$1,000 per committee assignment

BELL ATLANTIC / TELECOMMUNICATIONS

$24,000 annual retainer

$1,000 additional payment per board meeting

$1,000 additional payment per

committee meeting

FIRST EMPIRE STATE / BANK

HOLDING COMPANY

$10,000 annual retainer

$750-$1,125 additional payment per board

meeting (based on distance)

$500-$750 additional payment per

committee meeting (based on distance)

KAMAN CORP. / AEROSPACE AND DIVERSIFIED TECHNOLOGY

$12,000 annual retainer

$700 additional payment per board meeting

$700 additional payment per committee meeting

QUAKER OATS / FOODS, PET FOODS, TOYS

$28,000 annual retainer

$1,000 additional payment per board meeting

$1,000 additional payment per

committee meeting

RAND CORP. / DEFENSE AND

CIVILIAN RESEARCH

$3,000 annual retainer

No other fees

SUN RESORTS / RESORTS IN WEST INDIES

$10,000 annual retainer

No other fees

WESTINGHOUSE ELECTRIC /ELECTRONICS, BROADCASTING, FINANCE

$22,000 annual retainer

$1,200 additional payment per board meeting

$1,200 additional payment per

committee meeting

NEUROGEN / APPLIED NEUROLOGICAL

RESEARCH (serves as chairman)

Privately held, does not disclosed directors’ salaries

GEORGE P. SCHULTZ

Former secretary of state

CHEVRON / PETROLEUM

$25,000 annual retainer

$1,000 additional payment per board meeting

$1,000 additional payment per

committee meeting

GENERAL MOTORS / AUTOMOBILES, AEROSPACE

$22,000 annual meeting

$750 additional payment per board meeting

($18,000) finance committee membership fee

TANDEM COMPUTERS / COMPUTERS

$30,000 annual retainer

No other fees

BECHTEL / ENGINEERING, DEFENSE, COMMUNICATIONS

Privately held, does not disclose directors’ fees

ANN DORE MCLAUGHLIN

Former secretary of labor

KELLOGG / FOOD PRODUCTS, CEREALS

$22,000 annual retainer

$1,000 additional payment per board meeting

$1,000 additional payment per

committee meeting

$3,000 if director chairs a committee

UNION CAMP / FOREST PRODUCTS,

LAND DEVELOPMENT

$17,500 annual retainer

$1,500 additional payment per board meeting

$750 additional payment per committee meeting

UNOCAL / PETROLEUM

$18,000 annual retainer

$1,250 additional payment per board meeting

$1,000 additional payment per committee meeting

SAMUEL R. PIERCE

Former secretary of housing and

urban development

INTERNATIONAL PAPER / FOREST PRODUCTS,

MINERAL RESOURCES, REAL ESTATE

$18,000 annual retainer

$800 additional payment per board meeting

$800 additional payment per committee meeting

C. WILLIAM VERITY

Former secretary of commerce

W. M. KECK FOUNDATION / CHARITABLE TRUST

Privately held; does not disclose directors’ salaries. However, according to 1987 filings with California Registry of Charitable Trusts, annual retainer is believed to be about $10,000.