Some Cracks in Cabinet Ethics

New questions about Donovan, as Smith abandons a tax shelter

Nothing I've heard has changed my, reduced my confidence in Secretary Donovan." So said Ronald Reagan last week during a brief, unscheduled encounter with reporters in the White House press room. Some of the President's aides, however, were worried about fresh allegations concerning Secretary of Labor Raymond Donovan, who has been accused of consorting with organized-crime figures before he joined the Reagan Cabinet. "This is heavy political baggage," admitted one aide, who conceded that the President's reluctance to distance himself from Donovan threatened to make it "a shoestring Lance case." That was a reference to Jimmy Carter's refusal to abandon his Georgia buddy Bert Lance, whom he had appointed Budget Director, until disclosures about Lance's wheeler-dealer banking practices forced Lance to resign his Cabinet post.

Donovan is not the kind of crony to Reagan that Lance was to Carter. Indeed, the President was on solid ground in not criticizing the Secretary while Special Prosecutor Leon Silverman was still investigating Donovan's conduct as a vice president for labor relations of New Jersey's Schiavone Construction Co. Nonetheless, Reagan need not have publicly downgraded the increasing seriousness of the Donovan situation.

Reporters last week were able to examine a financial disclosure statement for 1981 that the Labor Secretary had been required to file with the Office of Government Ethics. That statement indicated Donovan had maintained close ties with the construction company after joining the Cabinet. In 1981 he received $146,300 in salary and bonuses from the company, $94,940 in consulting fees, and $100,000 in dividends from more than $250,000 worth of Schiavone stock. Donovan also received two short-term, interest-free loans from Schiavone totaling more than $65,000. One was repaid in four days, the other in six weeks.

While carrying more than $1 million worth of debt and paying $255,000 annually in interest, Donovan made some puzzling loans of his own. One was for $9,800 to Edward V. Hickey Jr., director of special support services for the White House and a security aide for Reagan when he was Governor of California. A presidential aide said that the loan, which did not require any repayment until Donovan demanded it, was to enable Hickey to pay his "living expenses." Another loan, apparently for about $15,000, was made to James Hooley, one of Donovan's aides at the Labor Department.

Allegations about Donovan continued to surface at a hearing of the Senate Labor and Human Resources Committee. James J. Donelan, who sold flashing highway warning signs to Schiavone during the 1960s, testified two weeks ago that Donovan had told him about getting inside information on contracts being let by officials of the New Jersey Turnpike Authority. Schiavone would make low bids to land the contracts, Donelan claimed, but would later renegotiate portions of the agreements at a higher price. Officials of the turnpike authority heatedly denied the accusations.