Crossing the Line?

Wavering public trust in Government was jolted again last week by a pair of scandals, one involving top Pentagon brass, the other Henry Kearns, former (1969-73) chairman of the Export-Import Bank. The common element was the charge of crossing the fine line that is supposed to separate business dealings from Government deliberations.

In the Pentagon flap, Jerome Levinson, chief counsel of the Senate Subcommittee on Multinational Corporations, accused the Defense Department and Northrop Corp. of teaming up to shield the names of high officers who accepted company favors in violation of Defense Department conflict-of-interest rules. The officers accepted invitations to spend weekends shooting duck, geese and quail at Northrop's leased hunting preserve near Easton, Md., even though the company, a major defense contractor, is currently angling for a multibillion-dollar contract to build 800 F-18 jet fighters for the Navy.

Heavy Prodding. Last June, Northrop Chief Executive Thomas V. Jones promised to turn over to the subcommittee the names of its Government guests, then had second thoughts, possibly because it realized the backlash it risked. So instead of sending the list to the Senate, Northrop turned it over to the Pentagon, which began a series of investigations. But the months ground on without the Senators hearing anything further on the matter.

At week's end, however, under heavy prodding, the Defense Department finally released its report. It confirmed that 40 high-ranking officers and Pentagon civilians visited the preserve. The department cautioned against such actions in the future, but not a single officer will be subject to disciplinary action. Among the guests: Vice Admiral W.D. Houser, deputy chief of naval operations for air warfare; Admiral John P. Weinel, former planning director for the Joint Chiefs; Nevada Democratic Senator Howard Cannon, chairman of the Senate Subcommittee on Tactical Air Power; and Democratic Representative Robert Legett of the House Armed Services Committee. All were in a strong position to help Northrop sell the F18.

In the Kearns case, Democratic Senator William Proxmire accused the former Ex-Im Bank chief of arranging while in Government service a lucrative sale of stock that was in a "blind trust." Under the rules for such a trust, the beneficiary is not supposed to know what is being done with his stock. Proxmire demanded last week that the Justice Department take action against Kearns. The department had earlier investigated Kearns and said that it found no cause for criminal proceedings.

Kearns admits that "I did mention" the stock to Mitsui & Co., a U.S. affiliate of a Japanese trading house, but adds rather lamely that "the trust sold it, I didn't. They could have refused the sale." In any case, Mitsui did buy, at $5 a share, 100,000 shares of Siam Kraft Paper Co., a Thailand concern that Kearns founded. At the time (1972), Proxmire estimates, the stock was worth no more than $1.75. While Kearns was head of the Ex-Im Bank, which makes low-cost loans to foreign firms so that they can buy American exports, the bank approved 37 separate loans to Mit-sui's parent company in Japan, by Proxmire's count.

Kearns contends that he did nothing improper; Mitsui, he said, bought the stock not in order to get Ex-Im money but because the Thailand firm was a potential buyer of Mitsui pulp, fuels and equipment. The contretemps, however, raises questions about the effectiveness of the blind trust as a device for enabling wealthy men to take public office without running into conflict-of-interest troubles.

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