New Defender of the Greenback

Miller survives "inquisition " to become chairman

From the moment at the end of last year when Jimmy Carter nominated him to be chairman of the Federal Reserve Board, G. William Miller has said that one of his top priorities will be strengthening the battered dollar. But to get the chance to deliver on his words, he had to survive confirmation hearings that turned into an unexpected ordeal--in which his views on the dollar, interest rates, money supply and other matters that a Fed chairman must handle hardly figured at all. Rather, the issue was Miller's personal integrity as chairman of Textron Inc., the giant conglomerate.

Last week Miller handily passed the test. After five weeks of slipshod investigation, the staff of the Senate Banking Committee had compiled 1,400 pages of testimony and evidence about alleged bribery by Textron to push sales of its Bell helicopters in Iran; leaks had inspired innuendo-filled stories in the press. But in nearly four hours of face-to-face grilling, Miller convinced the Senators that there was no proof that Textron had in effect resorted to bribery, and still less that he as boss had condoned it. In a stinging rebuke to its own chairman, Wisconsin Democrat William Proxmire, the committee voted 14 to 1 (Proxmire casting the only dissenting vote) to approve Miller's confirmation. The full Senate then approved the nomination by a simple voice vote. As a result, Miller will swiftly be sworn in and will again testify before Congress this week --this time telling the House Banking Committee what he proposes to do as the nation's top central banker.

That Miller's confirmation should have been delayed at all is a comment on the present anxious climate in Washington about anything concerning ethics. Once upon a very recent time, Miller's nomination would have been approved with only perfunctory debate, if that. But the Senate is still smarting from justified criticism of its overly hasty confirmation of Bert Lance as Budget boss, and business has been tarred by the international bribery practiced by Lockheed and other corporations. Thus when Miller first appeared before the Senate Banking Committee in late January, the Senators took seriously Proxmire's allegation that Textron had resorted to bribery in Iran, and recessed the hearings pending an investigation.

In question was a payment of $2.95 million that Bell Helicopter, a subsidiary of Textron, had made, with Miller's approval, to an Iranian company named Air Taxi. The money was paid as a form of commission at about the time of a sale in 1973 of $500 million worth of helicopters to the Iranian government. The payment itself was legal and no secret; Textron openly recorded it on the books. But Proxmire and the committee staff claimed to have evidence that Air Taxi was secretly partially owned by General Mohammed Khatemi, former head of the Iranian air force and the Shah's brother-in-law. The suspicion was that the payment was actually a bribe to Khatemi to get him to approve the sale.

Khatemi himself can no longer confirm or deny the story: he died in a glider accident in 1975. Proxmire did produce the attorney for a former Bell sales agent, who testified that Khatemi's ownership of Air Taxi was common knowledge in Iran, and that this fact had been called to the attention of top executives of Textron's Bell Helicopter division in the mid-1960s. The executives, however, testified that they had considered the talk "cocktail-party rumor," unworthy of reporting to Miller. That seems plausible enough. At the time Bell officials were allegedly informed of Khatemi's interest in Air Taxi, Iran was a very minor client. Bell had sold only 15 helicopters to all of Asia during a four-year period in the mid-1960s, in comparison with 2,000 helicopters a year to the U.S. armed forces. Further, Bell is only one division of Textron, which also makes chain saws, roller bearings, zippers and myriad other products that claimed Miller's attention.

If the weakness of Proxmire's case was one reason for Miller's confirmation, another was Miller's own coolness under fire. On the eve of his final appearance before the committee, the usually jovial Textron chief turned uncharacteristically snappish with his aides and prepared a 50-page statement in his defense. Once on the stand, however, he found no need to quote from it; his impromptu answers to Proxmire's queries were enough. When Proxmire opened by saying that to him "the facts ring loud and clear; Textron bribed Khatemi," Miller responded that the Senator was making a statement rather than posing a question. Miller insisted that "if General Khatemi did have an undisclosed interest in Air Taxi, then I have been deceived. Deception by others should certainly not be the basis for impugning the integrity of innocent parties." Miller and Bell President James Atkins protested that Proxmire was relying on CIA and Defense Department information about Khatemi's partial ownership of Air Taxi that had been unavailable to Textron.

In the end, Proxmire's badgering tone cost him control of his own committee, whose members had received phone calls the day before from Vice President Walter Mondale and Trade Negotiator Robert Strauss urging Miller's confirmation. Illinois Democrat Adlai Stevenson III complained that the committee was asking Miller to prove his innocence rather than confronting him with evidence of guilt. Conservative Republican John Tower of Texas grumbled that "this type of inquiry is how we get our jollies in the Senate. It is easy harassment."

Nonetheless, Proxmire noted that the Securities and Exchange Commission had opened an investigation into alleged past bribery and false billing practices by Textron in Jamaica and half a dozen other countries around the world in addition to Iran. Then he repeated an editorial suggestion by the New York Times that Miller voluntarily withdraw his nomination. At that, Michigan Democrat Donald Riegle Jr. exclaimed: "This committee has taken every shot we could at Mr. Miller and hasn't touched him in the slightest. Now you're saying to him: 'You take the gun and shoot yourself!' " Miller himself coolly told Proxmire: "I do not intend to withdraw my nomination, and I hope that you will reform your ways and vote yes."

Proxmire did not, but Miller won over everyone else, even though the SEC's investigation may continue to put a burden on him. Miller responded to that with sangfroid: "Only my sleep has been inhibited by the investigation in the past few days. My ability to function at the Federal Reserve won't be." In any case, he can now turn his attention to money supply, interest rates and the dollar, subjects that could benefit from the precision he demonstrated during the hearings.

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