A former official of the then Civil Service Commission, in a sworn satement, says he warned the Federal Trade Commission that it would be clearly illegal for the agency to award a $72,000 contract to its law judge handling the cereal case.
Charles Dullea, the former director of the Office of Administrative Law Judges, said in an affidavit that he clearly warned an FTC offical that the contract ultimately offered to Administrative Law Judge Harry Hinkes would violate the civil service rules.
Dullea said he told then FTC Deputy Executive Director Barry Kefauver that the Hinkes contract "would not be in accordance with "applicable" CSC rules and "if challenged, would not be upheld by the courts.
"I never had any doubts about my view that the contract would be illegl," Dullea, now retired, said in a Aug. 1, 1980 affidavit just filed with the FTC.
The affidavit was submitted as part of an FTC inquiry into the circumstances surrounding the events which have come to be known as the "Hinkes affair." Hinkes was awarded the contract in Sept. 1978, after having heard lengthy testimony in the FTC's landmark antitrust suit against the nation's three largest cereal manufacturers.FTC official felt that if Hinkes carried through on retirement plans, the entire case would be in jeopardy.
Six weeks after the contract, approved by FTC Chairman Michael Pertschuk, was signed, Hinkes was said to be "unavailable" to continue hearing the case and Pertschuk subequently said the contract was of "questionable validity."
The cereal companies have aggressively, through a massive lobbying compaign, sought to bring the contract situation to the attention of both the commission and Congress, claiming that it has tarnished the entire matter. Just last week, the FTC rejected a series of procedural motions presented by the firms, but agreed to seek further affidavits from officials involved in the contract flap.
The release of the Dullea affidavit comes just as Sen. Howard Cannon (D-Nev.), chairman of the Commerce Committee and Sen. Wendall Ford (D-Ky.), chairman of the Commerce Consumer Subcommittee have formally written to Pertschuk asking for a "fullreport on the employment contract" of Hinkes.
Noting that the committee "does not wish to involve itself in the substantive issues under consideration" by the FTC, Cannon and Ford said the problem of law judges' independence is "of deep concern" to the Commerce Committee.
The thrust of the Dullea affidavit is contradictory to a December 1979 affidavit of Kefauver, who said at the time that "Mr. Dullea agreed that a contract was the only course to follow if the reemployed annuitant approach was not acceptable to Judge Hinkes."
Kefauver also said that Dullea "stated that he appreciated the difficult position the agency was in and agreed that we had no alternative but to continue pursuing a contract given the large financial investment in the cereal case."
Further, Pertschuk, in a Dec. 1979 statement on the situation, said he was advised by FTC staff that the "arrangement was legally permissable and had been cleared by the " CSC. Pertschuk said later in the statement that "his [Hinkes] reappointment on a contractual basis was not approved by the CSC."