All My Stepchildren? Or Stepmommie Dearest?

By CHRISTOPHER JOHN FARLEY

On Halloween night in Washington, D.C., in the 1970s, children out for trick- or-treat stopped by the elegant N Street townhouse of Averell and Pamela Harriman. They were greeted by a maid in a white apron holding a silver tray full of dimes. How novel! The wealthy Harrimans -- Pamela was the daughter of a British baron, Averell a financier and former Governor of New York -- were handing out money instead of candy. But not a lot. The maid cautioned: "Just one dime each."

Pamela Digby Churchill Hayward Harriman, Democratic Party power hostess, widow of multimillionaire Averell, and currently U.S. Ambassador to France, has always been fiercely protective of her wealth -- every last dollar, every last dime. Now, money is at the heart of a legal battle between Harriman and Averell's descendants by his first marriage -- two daughters, six grandchildren and 11 great-grandchildren. The scions of the late Governor charge that his second wife, who inherited most of his estimated $65 million legacy, has wasted the $30 million of their trust funds on ill-advised investments, leaving them with a relatively paltry $3 million.

Also named in the suit are luminaries in the Democratic Party firmament: attorneys Clark Clifford and Paul Warnke. Such Washington power brokers were the company of choice for Pamela Harriman. (In fact, White House counsel Lloyd Cutler signed on as her adviser after the suit was filed.) President Clinton once called her "the first lady of the Democratic Party." Indeed, her house and her parties were a haven for Democratic loyalists during the Reagan-Bush epoch. Over the years, she raised more than $12 million for Democratic candidates. Clifford, 87, whose name was muddied by the Bank of Credit and Commerce International (B.C.C.I.) scandal, denies any wrongdoing or mismanagement. "Mrs. Harriman didn't profit one dime," says Clifford. "I didn't either, and neither did Paul Warnke. Paul and I feel very badly that we have gotten drawn into a family imbroglio."

In 1984, Clifford says, Harriman asked him and Warnke, both old friends, to serve as trustees for nine trusts for his children and grandchildren. After her husband's death in 1986, Pamela became a general partner in the enterprise. Within four years the initial $12 million investment had grown to $25 million. Clifford says the heirs complained they were not getting enough income, so the partnership overseeing funds diversified beyond securities. Some of the new investments were money losers. Clifford says more than $4.5 million was invested in a New Jersey resort that he admits "didn't develop in the manner we had hoped." The resort reportedly is partly owned by Robert Brennan, former head of a now-defunct securities firm whose business practices have been under investigation by federal and state regulators. Clifford says, "I didn't know that at the time."

Money matters have always soured Pamela Harriman's relations with her stepchildren. "Pam did not do me any great favors as a stepmother," says Brooke Hayward, whose father Leland Hayward was Pamela's second husband. (Averell was her third; her first was Winston Churchill's son.) "She's greedy beyond the usual human greed." Clifford says Averell's family were deeply unhappy in 1971 when Pamela, then 51, married Averell, then 80. Adds Clifford: "He was generous to Mrs. Harriman during his lifetime, and in his will. That was resented by members of his family."

Not entirely so, say sources close to the Harrimans. Apart from the usual strains, they say, relations were civil. In 1992, however, the heirs were alerted to questionable investments by an accountant who had prepared tax returns for the trusts. At one point, a family representative flew to Paris to discuss the matter with the new ambassador. Today no one is talking. The Harrimans, says Brooke Hayward, are "as close to an aristocratic family as you get in this country. They did not want to air the feud in public. That was a lot of money to lose in that period of time. They sat on their hands for years and went to her with every kind of emissary and deal." A source says the funds' remaining $3 million will be earmarked for the fight with the trustees.

Harriman should be able to match that. She has her inheritance and more. (Her Georgetown residence and adjoining office are on the market for $5 million.) Furthermore, Pamela Harriman has always known how to keep hold of what she believes is hers. According to Life of the Party, a biography of Harriman by TIME's Christopher Ogden, she staged Averell's 1986 funeral at the gravesite where his father, mother, sister and first wife had been interred. What most of the mourners did not know is that Averell was not buried there that day. After the ceremony, the widow had his body moved and refrigerated while another site was prepared where she and her husband could eventually be buried side by side.

With reporting by Victoria Balfour/New York and Ann Blackman/Washington