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An Unusual Meeting of Chief Executives

By Bob Woodward and Ann Devroy
Washington Post Staff Writers
Thursday, August 21, 1997; Page A01

Over the lunch hour on Friday, Aug. 23, 1996, Frederick W. Smith, the chairman of Federal Express, met for 45 minutes with President Clinton in the Oval Office to discuss a problem that was costing his company $100 million a year in lost revenue.

Using charts and graphs, Smith pressed Clinton to impose sanctions on the Japanese government, which has refused to allow Federal Express to deliver cargo from Japan to other lucrative Asian markets, including the People's Republic of China.

Laura D'Andrea Tyson, who headed the National Economic Council in the White House and was in charge of coordinating the administration's policy on the Federal Express-Japan issue, had opposed the one-on-one meeting with Smith in the Oval Office. Officials said Tyson was concerned that imposition of sanctions on Japan could lead to a trade war between Washington and Tokyo.

But Tyson's concerns were overridden when Thomas F. "Mack" McLarty, Clinton's first White House chief of staff and one of his liaisons with the business community, agreed to arrange the Oval Office meeting with Smith. Such meetings between the president and executives of a single corporation are extremely rare, White House officials said.

During an eight-month period before and after the meeting with Clinton, Smith and Federal Express contributed $275,000 to the Democratic National Committee. Less than three weeks after the Smith meeting with Clinton, on Sept. 10, 1996, Federal Express gave $100,000 of the $275,000 to the DNC.

In a telephone interview yesterday, Smith, who is also chief executive officer of FedEx, said the money he and Federal Express contributed to the DNC had nothing to do with the meeting he had with Clinton. "There is absolutely no connection between fund-raising and a meeting with the president or any Federal Express issues," Smith said, adding that he had requested the meeting to point out flaws in what he called the administration's "lily-livered" failure to stand up to the Japanese, who he says are not honoring their treaty obligations to the United States.

"It's precisely why I wanted the meeting, so the president would overrule his own policymaking apparatus," Smith said.

Smith quoted the president as saying in the meeting, "If I impose sanctions [during the presidential campaign], they would think I was grandstanding for political purposes." Smith said Clinton then pledged that after the election he would solve the problem and quoted Clinton as saying, "We are committed to solving this problem."

Smith added, "He understood we were getting screwed and [that] the failure to take on the Japanese showed the ineptitude of U.S. foreign policy."

U.S. negotiators are to meet with Japanese representatives next week to discuss the flight restriction issue, and Smith said the United States will present its strongest position to date, short of sanctions. Smith said he believed this meant Clinton was delivering on his promise to solve the problem.

Administration officials said the Oval Office meeting with Smith had nothing to do with contributions he and Federal Express made to the DNC and that the contributions had no effect on the administration's policy on the Japan issue. The officials acknowledge that it is unusual for the president to have a one-on-one meeting with a chief executive pressing a special business interest without competitors present, and it is general policy to avoid meetings in which Clinton hears only one side from a single-advocate business interest.

"I can say with some certainty that Mr. McLarty rarely set up meetings between the president and business leaders," said Lanny J. Davis, the White House special counsel. Asked for records or numbers of such one-on-one meetings, Davis said, "We just don't know how this and other meetings came to be."

Federal Express officials were delighted by the access they were given to the president. "Fred went on and on about the issue," said Kenneth R. Masterson, the FedEx general counsel who attended the Oval Office meeting with Smith. "I worried we were overstaying our welcome. We had charts and graphs . . . and Fred talked for perhaps 35 to 45 minutes. At the end, the president asked some very intelligent questions."

Masterson said he was not sure who requested the $100,000 contribution the company made to the DNC on Sept. 10. "No one from the administration asked for a contribution," Masterson said. The other contributions were solicited by other Democratic officials or officeholders, Masterson said.

Clinton has said he cannot recall having made any fund-raising calls from the White House. Clinton did attempt to call Smith four months before the August meeting in the Oval Office, but he failed to reach the FedEx chairman, and it was unclear whether the call was made for the purpose of soliciting campaign funds.

The Democratic effort to reach out to Smith and Federal Express began in late 1995. A DNC call sheet prepared for Vice President Gore on Dec. 1, 1995, requested that he call George Tagg, the Federal Express head of government affairs, and ask him "to contribute an additional $100,000 for the DNC Media Fund." Tagg was the chief lobbyist on the Federal Express-Japan issue and spent his time "pounding away" on the matter, according to Smith. Gore spokeswoman Ginny Terzano said the request to call Tagg was one among at least 100 from the DNC and that Gore did not make this call.

Several months before his meeting with Clinton, Smith said, he met with Gore to press the case for Japanese sanctions. Smith called the meeting "very unsatisfactory" and said Gore spent the time "reading from 3-by-5 cards."

Clinton's contacts with Smith came after he received a memo from the DNC asking that he personally solicit a contribution from the FedEx chairman. Smith was one of 12 people Clinton was asked to call personally to solicit contributions. The 12 were listed on a memo prepared for the president by the DNC. A separate memo concerning Smith, dated Feb. 6, 1996, was also prepared for Clinton, and it says in part, "ask him for $150,000." Almost two months later, on March 29, Federal Express gave $50,000 to the DNC. But Smith said he had received no call from Clinton. Masterson said the contribution was requested by Donald Fowler, then the DNC chairman.

On April 24, at 8:20 a.m. (CST), Clinton attempted to reach Smith by phone, but Smith was in Paris. Smith said he returned the call to the White House but never connected with Clinton. Smith said the Japan issue was hot and he assumed the call was about that. But given the memo to Clinton, Smith said it was possible the call was to request a campaign contribution.

A notation on the Feb. 6 memo to Clinton lends some credence to the possibility that the call was related to the DNC request. The notation bears the stamp, "THE PRESIDENT HAS SEEN," with the date May 20, 1996. The notation appears to indicate that Clinton saw the memo some time between when it was written on Feb. 6 and when those who keep presidential records stamped it and wrote the notation on May 20, 1996.

That was not the end of Federal Express giving to the DNC. After the election in November 1996, Federal Express gave another $100,000 to the DNC. Masterson, the Federal Express general counsel, said that contribution was solicited by House Minority Leader Richard A. Gephardt (D-Mo.). Smith also gave $25,000 from his own funds after being solicited by Sen. John F. Kerry (D-Mass.), a classmate at Yale.

Smith said in an interview that he was not a Clinton supporter, that he had backed President George Bush in 1992 and stayed neutral in 1996. In 1995 and 1996, Federal Express gave more than $400,000 to the Republican National Committee.

Smith said he received another solicitation for campaign funds last year from Sen. Bob Kerrey (D-Neb.), who heads the Democratic Senatorial Campaign Committee. At a political event, Smith said, Kerrey asked for $250,000 to $300,000 to help "moderate Democrats" campaigning for Senate seats in last year's elections. Kerrey, in an interview, confirmed that he had requested that sum of money. Federal records show that Federal Express met Kerrey's request, giving $250,000 between July and October 1996.

Asked whether he felt pressured because he and his company were targeted or solicited for campaign contributions by the most important political figures in the Democratic Party, Smith said that it would be unwise for a company with $13 billion in annual revenue not to make the requested contributions. "Sure, you're darn right, you better be responsive," Smith said. "Whether you use the language of the street and call it a shakedown or whether you just call it our system, however you put it, it's a messy system."

Researcher Jeff Glasser contributed to this report.

© Copyright 1997 The Washington Post

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