Sen. William Proxmire (D-Wis.) has asked the General Accounting Office to examine whether any conflict of interest problem exists in the Treasury Department's awarding of a contract to a law firm with which "some recently employed Treasury officials have been associated."
Proxmire, chairman of a Senate Appropriations subcommittee, also wrote Treasury Secretary W. Michael Blumenthal to express his concern with both the contract and the Treasury's failure to mention the contract in a memorandum to the subcommittee on Feb. 24. Proxmire had asked the Treasury to list all firms it had hired to help the agency on the New York bankruptcy question.
The Washington Post reported Wednesday that the Treasury hired the pretigious Wall Street law firm of Debevoise, Plimpton, Lyons and Gates to do legal work for the Treasury on the New York City financing question. A former partner of Debevoise, Stephen Friedman, is deputy assistant secretary for capital markets policy and two former associates of the firm are special assistants to the Treasury's general counsel.
One of those former associates, John Fouhey, is the main liaison between his former law firm and the Treasury. None of the three had anything to do with hiring the firm and all three have severed their relationship with the firm.
General Counsel Robert Mundheim told the Post that he and deputy secretary Robert Carswell picked Debevoise without receiving bids from other firms because they knew New York law firms well and knew Debevoise was the only firm qualified to handle the Treasury's workload that was not already representing someone in the New York bankruptcy.
Proxmire, in a letter to Comptroller General Elmer B. Staats, asked the General Accounting Office to look into the contract award before Proxmire's subcommittee holds hearings on the Treasury's Office of New York City Finance on April 7.
Proxmire also chairs the Senate Banking Committee which must decide whether New York needs any financial help after the current federal aid program expires June 30.
The Wisconsin Democrat told Blumenthal in a separate letter that given the controversial nature of the New York program, "I should think you would be particularly sensitive to the need to avoid any conflict of interest . . . whetther real or apparent."
He said if formal contract papers have not yet been signed, "then I urge you not to sign them and instead to withdraw the contract from the Debevoise, Plimpton firm and give compensation only for services rendered to date.