It appeared to be a ceremonial passing of the baton of corporate power when Orin E. Atkins stepped down at Ashland Oil Co. in September 1981.

He had built Ashland from a backwater Kentucky refiner to a diversified $8.4 billion corporation. Now, at 57, he was quitting as chairman and chief executive officer in a seemingly routine retirement and would take his ease in West Palm Beach. "We will miss Orin's leadership," said John R. Hall, who was chosen by a unanimous board to succeed Atkins.

But it wasn't burnout that forced Atkins to leave: it was what he called "a revolution" by other Ashland officers over the way he ran the company. The acknowledged catalyst for the revolt was Atkins' role in tens of millions of dollars in questionable payments to "consultants" and others who had access to Middle East crude oil.

Just six months before, Atkins had been warned that he "might have to spend some time in jail" if some of the payments proved to be illegal and the government found out about them. The warning came from Samuel C. Butler, an influential Ashland director, who is presiding partner of Cravath, Swaine & Moore, one of the nation's top corporate law firms.

As the revolt was gathering steam in late summer, Hall, a leader of the rebels, told an outside investigator he would not let Atkins "lie and mislead the directors" about the payments.

Atkins has denied any improprieties and said he left the company primarily as a result of a disagreement over management policy.

The story of shakeup at Ashland and the events that led to it is based mainly on hitherto unavailable confidential documents obtained in connection with three lawsuits filed in U.S. District Court in Covington, Ky., and also on the litigation itself and on numerous interviews. Two of the plaintiffs are former executives who claimed Ashland fired them because they opposed illegal foreign payments and cover-up attempts. The third complaint was filed by a stockholder.

The court documents allow an extraordinary look at the inner workings of a large oil company as it fought to preserve its supply of crude oil from the Middle East.

The documents -- mostly internal memos of Ashland and its law firms, and sworn statements -- were held under a protective order until the judge modified it to give the government access to the papers. Last week, after a government source had provided copies of numerous papers to The Washington Post, the Louisville Courier-Journal won a court fight to have the order lifted.

Last summer, the Securities and Exchange Commission charged in a lawsuit in U.S. District Court here that both Ashland and Atkins had bribed officials of Oman from early 1980 through most of 1982 in connection with oil from the sultanate. Atkins and the company each signed a consent agreement -- a final court judgment in which a defendant neither admits nor denies past illegal conduct, but faces criminal penalties for future violations.

In connection with Oman crude, Ashland sank -- and quickly lost -- $25 million in a chrome mine in Africa, and $2.3 million in a bizarre effort to perfect slippery casings that could be reused up to 1,800 times in the manufacture of sausages. A $17 million deal for Abu Dhabi oil led to private-eye surveillances and to allegations of forgery, bribes and kickbacks to Ashland employes and executives.

Caught up in an aftermath of the Abu Dhabi deal were the top partners of two of the nation's leading law firms -- Cravath, Swaine and Wilmer, and Cutler & Pickering -- as they battled over the way Ashland should handle a slush fund inquiry by the Internal Revenue Service.

Ashland's and Atkins' use of the corporate till had led to trouble before. In 1973 the government criminally prosecuted Atkins, the company and a subsidiary for secretly contributing $633,000 in corporate funds to U.S. election campaigns. Atkins pleaded no contest and was fined $1,000. Ashland and the subsidiary pleaded guilty and were fined $30,000.

In 1975 the SEC accused Ashland, Atkins and vice chairman William R. Seaton -- now also chief financial officer -- of making more than $4 million in hidden overseas payments that eluded auditing controls and led to false entries in corporate records. The civil complaint was resolved with consent decrees. The defendants pledged never to use corporate funds for "unlawful political contributions or other similar unlawful purposes" or to engage in forbidden financial or record-keeping activities.

It was against this backdrop that the SEC would investigate the possibility that the $44.3 million in foreign payments -- $27.3 million relating to Oman, $17 million to Abu Dhabi -- violated the antibribery provisions of the Foreign Corrupt Practices Act, or FCPA.

One former Ashland vice president, Bill E. McKay Jr., would go further in his lawsuit: he alleged that chunks of the $44.3 million were recycled as kickbacks to Atkins and members of his family. Atkins denies the allegation.

The biggest single loss was the $25 million Ashland invested in a nearly inactive chrome mine in Rhodesia (now Zimbabwe). The SEC would later call the mine investment a cover for a bribe. Ashland wrote off the $25 million -- and its $2.3 million foray into sausage casings -- within two years.

Ashland Vice President J. Dan Lacy calls the company's handling of payment problems since Hall took over the company nearly six years ago "a classic example of corporate governance at work."

To put the foreign-payments controversy in fair perspective, Lacy said in an interview, it is necessary to recall the oil shocks of the 1970s and the impact they had on a company dependent on overseas sources for two-thirds of its crude oil supply.

The first shock occurred in 1973 when Arab nations, through the Organization of Petroleum Exporting Countries, staged a boycott against industrial nations that supported Israel. For most Americans the boycott was a matter of inconvenience as they waited in long lines at the gas pumps. For Ashland it was a near-catastrophe: its flow of foreign crude oil was severely constricted, and domestic supplies were unavailable. To stay afloat, Ashland sold the rights to most of its North American and North Sea oil reserves and also borrowed heavily to diversify away from the oil business.

The second oil shock hit six years later when Iran's new revolutionary regime canceled contracts for 100,000 barrels a day -- one-fourth of Ashland's supply. This, said Lacy, is when the company was forced to turn to consultants to help maintain its supply of crude oil. The cost of the oil and consultants' fees usually amounted to less than spot-market prices, he said.

Although Ashland faced the loss of much of its overseas crude oil supplies, the company did receive $656 million from 1978 through 1982 under a special emergency entitlements program that the federal government created to compel major oil companies to aid independent refiners deprived of low-priced crude.

In the Oman episode, the critical issue was whether two Middle East hands who were close to the sultan of Oman, James T.W. (Tim) Landon and Yehia (pronounced Yah-ya) Omar, were officials of Oman under the FCPA.

The FCPA makes it unlawful for a business executive to try to corruptly influence the official acts of an official of a foreign government by paying him -- even indirectly via "any person" -- to get or retain business for his company. Cravath, Swaine's Butler said he warned Atkins that a linkage between the $25 million chrome investment and Oman crude could be "extremely dangerous."

Landon is a retired British Army officer whom Atkins described in 1981 as "probably the most influential, powerful man in the Omani government." He headed the Oman Palace Office from 1973 until April 1980, when he became special adviser to Sultan Qaboos for intelligence and security. The SEC concluded in its suit against Ashland that Landon worked "directly for the sultan" and was consequently a foreign official under the FCPA.

The Libyan-born Omar, whose worth has been estimated at as much as $1 billion, is a former Omani diplomat turned businessman who operates out of Geneva and Cairo. Atkins called him as "an extremely close friend of the company." Hall described him as an "arms dealer," an "evil force" and "extremely harmful to both Ashland and Atkins."

Omar could not be reached for comment, and an inquiry to his Washington lawyer, Myles J. Ambrose, went unanswered.

Omar spent eight years in Oman's diplomatic mission in Washington. On his arrival in 1975, and on his departure, he and the mission filed the State Department's official notifications for a "foreign diplomatic officer." In the arrival form Omar said he would continue to be "personal adviser to His Majesty the Sultan of Oman for political affairs," a post he had held since 1971, while becoming Oman's "counselor for political affairs" in the United States.

In Libya's 1969 revolt, Omar fled Moammar Gadhafi's rebels, who reportedly wanted to avenge his old-regime ties to the police and foreign oil companies. He found sanctuary in Ashland Libya Co.'s offices and then was evacuated. Ashland was "primarily responsible for his rescue," Atkins has said.

Omar is also at the hub of Bill McKay's allegation that some of the fees Ashland paid to consultants came back illegally to Atkins and members of his family. McKay said in his lawsuit that in December 1980 he became concerned that a "circle of funds" was operating from Ashland to Omar and from Omar to Atkins and his sons, Charles and Randall. McKay said he relayed his fears to Hall and Richard W. Spears, senior vice president for human resources and law, and asked for their help in stopping any payments to Omar.

According to the suit, Atkins had said that his son Randall was working for Omar, and that Omar was an investor in The Securities Groups, a tax shelter whose managing general partner was Charles Atkins. Last March 25, a federal grand jury in New York indicted Charles Atkins for a tax-shelter conspiracy that involved The Securities Groups, and that was alleged to have produced more than $350 million in fraudulent tax deductions for wealthy investors.

In the SEC's investigation of the Oman payments, nothing fed the agency's suspicions more than Ashland's chrome mine investment.

It began in 1976, when Tim Landon and his family acquired 70 percent of the stock in the mine. They bought the rest in July 1979 through a Liechtenstein "anstalt" -- an entity designed to keep the owners' identities secret. The price of the 30 percent share was $135,000. By that measure, the entire property was worth $450,000. Nine months later, after Atkins learned from Omar that the mine was for sale, Ashland bought three-fourths of it for $25 million. At the time of the purchase, the SEC later discovered, Landon owned 62 percent of the mine.

When Atkins took the proposed $25 million outlay to the directors in January 1980, he told them the company "was interested in the proposal for the reason that it might thereby be enabled to obtain a contract to purchase crude oil from Oman." The quote appeared in initial drafts of the meeting minutes but, the according to the SEC, "was deleted from the final version ... at Atkins' direction in March 1980."

A lawyer chosen by Atkins to speak for him -- provided he be unidentified -- insisted in an interview that the investment "was viewed as the {prospective} purchase of a strategic metal" in a deal "not tied to a crude oil contract in Oman." Ashland said an internal investigation found no wrongdoing on its part.

In April 1980 Ashland paid the first installment on the $25 million -- of which, according to the now-settled stockholder suit, Omar got $5 million. Also in April, Omar invited Atkins to his Geneva home for a demonstration of reusable Gore-Tex casings for skinless sausages. Six months later, Ashland signed a contract with Oman for 20,000 barrels of crude a day.

Five weeks later, an Ashland corporate counsel asked a law firm with global oil expertise how Oman's criminal code defined a government official. The answer from the firm of Baker & McKenzie: Such an official is "every person who has been appointed by His Majesty the Sultan or by the government ... to carry out a public service with or without remuneration."

The first shipment of crude oil left Oman in December 1980. On Dec. 31, under an arrangement made by Atkins over McKay's objections, Ashland (Bermuda) Ltd. wired $1.35 million into an unnumbered Swiss bank account for "Madame Carini" -- a whimsical cover name. The true owner was Mont d'Or, or Mountain of Gold, yet another Liechtenstein entity. Attorney Butler has testified "that eventually, either directly or indirectly, Mr. Omar was the one to benefit ... "

McKay, in the meantime, was telling fellow executives that Ashland had to get the $1.35 million back, warning that the payment violated both the FCPA and the 1975 consent decrees.

Atkins responded with a plan to silence McKay. Atkins proposed that in gratitude for Omar's refund of the $1.35 million Ashland would pay him $3 million. More precisely: If Omar would yield the $1.35 million that McKay knew about, Ashland would pay Omar $3 million that he would not know about. "I think it is very important that complete security be maintained on this transaction, particularly regarding Bill McKay, until everything is completed and in place," Atkins told Butler.

Atkins' attorney said the payments -- whether $1.35 million or $3 million -- were intended for "additional counsulting services, office space and related facilities for Ashland Oil people in the Middle East, and transportation in his large corporate aircraft." Butler has testified that the $3 million "had been earned and justified by what Mr. Omar had done" to get the Oman crude.

Hall said that Atkins encapsulated the plan in 15 words for the directors on March 19: "We have another one {consulting contract} for Oman, about the same amount per barrel {as in a deal for Saudi crude}, about $3 million." Butler said, "Omar was not mentioned by name and only the briefest description of the transaction was given by Atkins, no questions were asked." The board approved.

In the end, Ashland's Lacy said, Omar "got nothing, directly or indirectly." Atkins' lawyer said that Omar, out of "dismay at what he saw as Ashland's indecisiveness," spurned the $3 million, "and that was the end of their relationship." After making the $25 million and $1.3 million payments, Ashland looked into the possibility of FCPA violations by asking a number of prominent persons whether Omar and Landon were officials of a foreign power. The answers were consistently discouraging.

In January 1981, an Atkins aide sought guidance on Landon from former CIA Director Richard M. Helms, then a $50,000-a-year Ashland consultant. "Two different but equally well-informed sources," Helms told Atkins in a letter, "came up with the same information: Tim Landon ... is still the most influential individual on policy matters with the sultan." The sultan "consults with him constantly" and has kept him on "as chairman of his Planning Review Committee, which is the group making military policy and plans in Oman," Helms added.

For guidance on Omar, Butler consulted Lloyd N. Cutler, who had returned from the Carter White House to Wilmer, Cutler in Washington. In turn, Cutler has testified, he too consulted Helms, as well as then-deputy CIA director Bobby R. Inman, FBI Director William H. Webster, and Harold H. Saunders, former assistant secretary of State for Near Eastern affairs.

Webster and Saunders contributed nothing. But on March 23, 1981 -- four days after the board had approved the deal to pay $3 million to Omar -- Butler summed up a disturbing report: Helms and Inman had told Cutler that "while the matter was not entirely free from doubt, Omar would probably be regarded as a foreign government official for FCPA questions."

Two days later, according to notes made by Ashland general counsel Arloe W. Mayne, Butler told a meeting: "Lloyd Cutler says Y {Yehia} is a govt official."

By mid-April, Cutler had come across the State Department's "Blue Book" list of diplomats, which is widely used in Washington diplomatic circles, and sent to Butler the entry listing Omar as the Oman Embassy's "Counselor (Political Affairs)."

At once, Butler telephoned several Ashland officers and directors and Charles J. Queenan Jr., a Pittsburgh lawyer later hired by the board to investigate the Oman transactions, to offer this assessment: "I was now convinced that we could not satisfactorily demonstrate to the Department of Justice that Omar was not a foreign government official and that the Mont d'Or transaction had to be terminated and the $1.35 million be returned."

At about this time, Ashland lawyers drafted a plea to the sultan of Oman to take Ashland off the FCPA hook, partly by ruling that Omar wasn't an Omani official. But the sultan never signed the papers, and it is unclear whether he actually received them.

Omar made matters worse. He refused to refund the Mont d'Or $1.35 million and indicated he would refuse to certify that he was not an Omani official. Alan C. Stephenson, a Butler law partner who sought the refund, quoted Omar as telling him, "I have many friends in prison and I will have no difficulties in visiting Mr. Atkins in prison."

Not long afterward, however, Atkins seemed to dispel the FCPA cloud by telling Butler and Stephenson that the $1.35 million would be returned after all ($1.35 million did later come from Switzerland). Butler wrote that the announcement set off "exchanges of congratulations," but that Atkins cut the celebration short when he recalled having tolds a board meeting "that the chrome transaction was directly related to a potential oil contract in Oman."

If there were such a chrome-oil link, Butler recalled warning Atkins, "the situation would again be extremely dangerous since it now appeared to all concerned that Landon was, without question, a foreign government official."

But Landon gave troubling opinions about Omar's legal status in a meeting with Hall. In memos on April 20, Hall said Landon told him that Omar "is not able to influence oil policy in Oman," but "that if anyone asked him, he would say that Yehia Omar is a government official {and} that any reasonable person in the government of Oman would consider Yehia Omar a government official." Hall himself concluded that "it is clear that Yehia Omar is probably a government official, that the {$1.35 million} payment was illegal, and ... must be returned."

None of Ashland's lawyers asked the Justice Department for an opinion on the status of Landon and Omar under the FCPA -- a type of opinion routinely given.

Queenan, a senior partner in what is now Kirkpatrick & Lockhart, had been a close friend and classmate of Butler at Harvard Law School and had investigated previous problem payments -- some to Omar -- for Ashland in 1975.

On May 7, 1981, Atkins and Ashland general counsel Mayne discussed with Butler what Butler termed "various ways of dealing with the FCPA problem as a result of the linkage of the chrome and crude contracts."

"We reached agreement that the best solution would be to hire ... Queenan to make a thorough investigation," Butler wrote in the chronology, which he prepared for Queenan. That same day, Butler said, he phoned Queenan to retain him for, as Butler labeled it, "an independent investigation of all the facts."

On April 1, 1981 -- 50 days before Butler hired Queenan -- Atkins told Mayne, according to Mayne's notes, that Queenan "concludes Mr. X {Omar} is not a FO {foreign official}."

On April 28, Stephenson said in a memo that his drafts of the $3 million agreement with Omar were "cleared by Chuck Queenan." Queenan "has no recollection" of this, a spokesman for Queenan said.

On May 4, Queenan had a phone conversation with Mayne. Mayne's handwritten notes quoted Queenan as saying he ... " 'will try hard' to give opinion of counsel {that there was} no violation of the FCPA."

Mayne also wrote: "Conclusion-CQ {Queenan} indicated (reluctantly) he will be willing to opin {opine} no violation of the FCPA are either (i) a finders fee or (ii) consulting agreement if all the documents signed."

The final five words, according to Queenan's spokesman, establish that he had conditioned his willingness to find no FCPA violation on the sultan's certification, which never was provided, that Oman laws had been obeyed.

Queenan declined to be interviewed.

On Aug. 12, Queenan and Mayne asked Helms to put his "blessings" -- Mayne's word -- on the chrome and crude deals. Queenan "was seeking a rational conclusion as to YO's {Omar's} participation other than a payment to influence a government official," Mayne wrote. Helms, according to Mayne, viewed Omar "solely as a businessman," saying, "It never would have occurred to me to consider YO an official of the Omani government after 1975."

Meanwhile, senior Ashland officials were trying to dump Atkins. Hall and Spears wanted the Justice Department to do the job; Bill McKay and Harry D. Williams, another dissident vice president and now a coplaintiff, sought internal reform: they wanted the board to oust Atkins on its own initiative, not on the federal government's.

Along the way, the dissidents came to suspect Atkins of having offered Helms a seat on the board to win his support. At a restaurant on Aug. 26, Spears slipped a note to Williams, and in it he made a stunning allegation: "Helms has taken a dive."

"OEA {Atkins} presented his name ... as director," the note said. Atkins' lawyer said "dive" was Spears' word for Helms' opinion that Omar "was not a government official of Oman -- which he wasn't."

Spears also wrote that McKay "may have to go in 'immediately' {to the Justice Department}." This drew a demurrer from Williams, who continued to hope for self-generated reform. Spears then jotted a final sentence to Williams: "We have to assume Richard {Helms} is down drain -- we don't have that much time."

Ashland said Spears' note "reflects nothing more than bald speculation." Atkins' lawyer said Atkins has conceded "it was possible he suggested Helms" for the board, but added that the chairman of the nominating committee "has testified that Atkins never nominated Helms." Helms said it would be inappropriate to comment because litigation is pending.

On Aug. 31, McKay gave chronologies of the deals for Middle East crude and related documents to each of Ashland's directors, and his lawyer, Michael R. Klein of Wilmer, Cutler, cautioned them in separate letters that Queenan's investigation might tilt toward Atkins.

About a week later, Atkins defended his role in the deals and his relationships with Queenan in a letter to the board. Angered by the letter, Hall phoned David L. McClenahan, a Queenan partner. Hall said he "will not stand by and permit Atkins to 'lie and mislead the directors,' " McClenahan said in a memo on the call. In a second call, however, Hall "calmed down."

Hall was by now a leader of a revolt destined to topple Atkins. With him were the three other officers on the board -- vice chairmen Robert T. McCowan and Seaton, and president Robert E. Yancey -- and Spears, McKay and Williams. By Lacy's account the four inside directors were motivated mainly by concern for the company's direction.

Atkins' lawyer attributed the revolt to Atkins' efforts to sell Ashland -- partly because the petroleum division had lost money for the first time. "Disagreements over certain transactions with Yehia Omar were a minor factor, but they served as a catalyst," he said.

By mid-September, Atkins had thrown in the towel, according to a memo by Queenan law partner J.M. Ewing. "Orin Atkins called me at noon today and said 'there had been a revolution' of the inside directors," Ewing wrote. "He will resign as chairman." The board met that day, Sept. 17. Of the 13 outside directors, only one is said to have aggressively defended Atkins.

Queenan submitted his report to the board on Oct. 26. He cleared Ashland, Atkins and all past or present officers: none, he found, had violated either the FCPA or the 1975 consent decree. He called the crude and chrome deals "separate and independent." Butler said the report "reflects an exhaustive investigation" by the man he chose to make it. The board unanimously approved all of Queenan's recommendations.

Queenan termed it "unlikely that Mr. Omar would be construed as a government official for purposes of the FCPA." He based this conclusion on an opinion by Robert F. Gibbons, a British lawyer said by Williams to have "regularly represented a business associate of Yehia Omar." Queenan's spokesman said he had relied on Gibbons because of his Middle East experience.

Landon was a closer call: Queenan found the evidence "inconclusive and inconsistent," making "it impossible for us to conclude with certainty that {he} would not be construed as a foreign official under the FCPA."

Queenan told the directors that "no legal or other requirement" obligated them to give the report to the SEC. Thus advised, they locked it up -- so tightly that the audit committee, led by outside director Robert B. Stobaugh of Harvard Business School, refused to give a copy even to Ashland's internal auditor.

In the summer of 1983, Ashland fired McKay and abolished Williams' job, and they filed wrongful-dismissal lawsuits. The principal defendants -- Ashland, Atkins and Hall -- counterclaimed that the former vice presidents breached fiduciary duties. All of the defendants, who also include Spears and Queenan, deny any improper activity. The suits are set for trial next April.

Solely for purposes of discovery, the McKay and Williams actions had been consolidated with the stockholder suit, which alleged that Ashland wasted and mismanaged the $44.3 million in Oman and Abu Dhabi payments, and, in doing so, violated the FCPA and the Racketeer Influenced and Corrupt Organizations law.

The suit had named 17 individual defendants, including Butler. In January 1986, after ruling that he and Ronald S. Rolfe, another law partner, were themselves essential witnesses, Judge William O. Bertelsman disqualified Cravath, Swaine from further representation.

"Mr. Butler has no comment" on anything concerning Ashland, his secretary told a reporter. In court papers, and also in an interview with the Crimson, the student newspaper at Harvard, where he is president of the Board of Overseers, he has denied any wrongdoing by Ashland, his law firm or himself.

In 1983, two years after John M. Fedders, then the SEC enforcement chief, had pulled his staff off the case, the SEC began an investigation of the foreign payments. The investigation lasted three years and led to a staff recommendation that the SEC should accuse Ashland and Atkins of violating the FCPA's antibribery provisions by "corruptly" paying $25 million to Tim Landon to induce him to influence the government of Oman to sell crude to Ashland.

In March 1986, however, the commissioners refused to file a suit, reportedly splitting 3 to 2. But a rare reversal came three weeks later, and the complaint was filed in the U.S. District Court for the District on July 8.

The lawsuit said that Tim Landon had been an Oman official "at all relevant times," that the bribery began in April 1980, when Ashland paid the $25 million, and that the bribery ended in October 1982.

The suit neither raised the possibility of violations of the 1975 consent decrees that so concerned Ashland's lawyers, nor alluded to the Abu Dhabi deal, nor so much as mentioned Omar by name, nor cited his and Ashland's odd entwinings in ventures like perpetual sausage casings.

Atkins' lawyer said the staff "never proposed any action based on what Omar did or said -- ever." Other lawyers see the omissions as stigmata of lengthy backstage negotiations -- the kind in which the SEC, like other agencies, commonly makes concessions to avoid the costs and uncertainties of litigation.

Tuesday: Ashland and Abu Dhabi.