Business and government associates of national security adviser Frank C. Carlucci, President Reagan's choice as the new secretary of defense, engaged in an unusual lobbying campaign last summer. They helped to pressure journalists and members of the Senate into laying off a huge Japanese trading company involved in the illegal sale of submarine propeller-milling machinery to the Soviet Union.
The company is C. Itoh. It acted as export broker in the illegal $17 million sale by Toshiba Machine Co., which enabled the Soviets to make quiet submarines. C. Itoh said it didn't know what Toshiba was selling to the Soviets.
But just in case the company's Japanese friends couldn't get this point across to skeptical reporters and senators, there were influential Americans who were willing to do just that at a critical juncture last August. The key pleader was Roderick Hills, former chairman of the Securities and Exchange Commission. He was Carlucci's boss when they ran Sears World Trade Inc., which had a close relationship with C. Itoh.
It was Hills who approached us while we were preparing a series of columns on C. Itoh's trading history and its involvement in the Toshiba deal, which had been woefully neglected in the reporting on the scandal. Hills urged us to spike the columns.
Hills told us he could produce two U.S. officials who would vouch for C. Itoh's innocence in the sale to the Soviets. One was Deputy Secretary of State John C. Whitehead, who told us that, as far as the State Department was concerned, C. Itoh was an "unwitting participant without any negative intentions."
The second official Hills recommended was Ambassador Robert W. Dean, a special assistant on the National Security Council staff headed by Carlucci. Dean had already worked in tandem with Hills to bring pressure on Sen. Alan J. Dixon (D-Ill.), who was trying legislatively to penalize C. Itoh and other trading companies that might be involved in high-technology sales to the Soviets.
Hills told our reporter Gary Clouser that he had tried to get Dixon's staff to amend the bill to omit C. Itoh's name. Hills also acknowledged that he had registered as a foreign agent for C. Itoh after the lobbying effort.
The crucial day for Carlucci's friends bringing pressure on C. Itoh's critics was Aug. 7. On that day the NSC, with Carlucci in charge, reportedly agreed in a closed meeting to restrict the release of information on alleged high-tech diversions as much as possible, to "limit embarrassment" to Japan and other nations.
The same day, Dean was dispatched to give Dixon a briefing, in which he maintained that C. Itoh was "an unwitting agent" for the propeller machinery sale. When Dixon charged that the National Security Council was relying solely on the Japanese investigation of the deal, Dean acknowledged this, our source reported.
Even so, Dixon redrafted his bill to omit C. Itoh's name. But Carlucci's friends didn't have complete success in their lobbying blitz. In remarks he made when he introduced the bill that day, Dixon was scathing about C. Itoh's involvement in the sale.