Last Dec. 17, the Postal Rate Commission (PRC), an obscure federal agency, handed down a 3-to-2 decision involving a proposed new system to speed delivery of the mails electronically.
The ruling drew minor notice. It seemed to be of direct concern mainly to telecommunications carriers, heavy-volume mailers and the U.S. Postal Service (USPS).
But the PRC split bitterly in rejecting a greatly expanded, low-priced electronic mail service called E-COM. In such a service, computer-originated messages are flashed to distant postal facilities, only then to be put in envelopes and delivered with ordinary letters.
And now, following that rejection of E-COM, which Western Union had proposed and the USPS had agreed to:
The PRC dissenters have accused chairman A. Lee Fritschler of having, and concealing from them, an apparent conflict of interest involving Western Union.
The USPS complained to the White House of a possible behind-the-scenes contact, forbidden by commission rules, between employes of PRC and Western Union.
PRC Vice Chairman James H. Duffy says an attempt to bully him into joining the majority was made by Fritschler, 42, former acting dean of American University's College of Public Affairs and an author and lecturer on government.
Duffy and fellow dissenter Kieran O'Doherty accuse the majority Fritschler and commissioners Clyde S. DuPont and Simeon M. Bright, of unfair conduct of the E-COM case.
Because Western Union had proposed E-COM to start with, the commission appeared to have handed it a defeat in rejecting the idea.
But in making its E-COM offer Western Union was apprently able to pre-empt the electronic field for itself, against possible rivals.
Now, with E-COM out of the way, Western Union has emerged with an intact monopoly over the only operating computer-originated electronic message service (EMS). Called Mailgram II, it is profitable for Western Union and expensive for users. The first-page price $1.90, compares with 30 to 55 cents Western Union had proposed under E-COM. Western Union's share would have been 19.44 cents.
In addition, Western Union is out from under some possibly onerous terms of the E-COM plan. The company doesn't have to make a first-year $18.5 million investment. It's being spared an expected three-year $25 million operating loss.
The PRC majority rejected the E-COM plan on grounds that it would be anticompetitive -- WU would be the sole message transmitter -- and also on grounds that it would be geographically inconvenient, since there would be only one message entry point.
The majority recommended instead a substitute plan, drawn up by a staff member, with 25 entry points.
Commissioner O'Doherty called this alternative "regulatory hubris." The PRC's mission under the law is simply to advise the USPS on rates and service, he said.
Duffy, also testified that the alternative would let carriers charge "whatever they feel like charging," while rejecting an inexpensive alternative to Mailgram.
The substitute is on Friday's agenda of the USPS's six presidentially appointed governors. They can accept or reject it, or send it back to the PRC for a lengthy reconsideration process.
The conflict-of-interest allegation arose from the 50-50 purchase of a $75,900 vacation apartment in Bethany Beach, Del., by Fritschler and a friend of 15 years, Joel Yohalem, a Western Union attorney.
Fritschler "should have told us . . . should have put it on the record," and "should have recused himself," or declined to participate, O'Doherty told a reporter.
Unlike O'Doherty and Duffy, Fritschler's majority colleagues had no complaint. DuPont, who also wasn't told about the apartment, said, "Whatever a commissioner does is up to him." Bright, praising the chairman as "forthright and honest," said in Keyser, W.Va., that Fritschler had told him about the purchase.
Fritschler, in Paris for a meeting, said, "It just never crossed my mind" to reveal the transaction to his colleagues or recuse himself. He saw no conflict, he said.
PRC rules say a criminal conflict may exist when an employe has "a personal, private or financial interest in a matter that involves his official acts" and forbid him to act on an official matter if he has "a personal interest incompatible with the unbiased exercise of official judgment."
Fritschler, Yohalem and their wives decided to buy the apartment last July 1, about three months after the White House had picked Fritschler for the PRC. In a letter July 14, about four weeks before closing the deal, he disclosed it to the Senate Governmental Affairs Committee. The staff put the letter in a file open to public inspection.
But in his financial disclosure to the PRC for the year ended Aug. 1, a report available to anyone paying a copying fee, Fritschler omitted the then-prospective purchase. The law doesn't require updating of the report until next July 1.
In the letter to the committee, Fritschler described Yohalem as "an attorney" for Western Union. Yohalem is general solicitor in charge of Western Union's regulatory law unit, and represented the company in the Federal Communications Commission phase of the complicated E-COM proceeding.
The Senate committee staff, seeing no important conflict problem, didn't mention the letter to Sen. Carl Levin (D-Mich.), who conducted a perfunctory, 10-minute confirmation hearing July 25. After learning of the letter from a reporter, however, Levin directed the staff to advise him by week's end on whether statements filed with the committee contain "any suggestion of any impropriety."
The behind-the-scenes contact question, according to Duffy and his special assistant, Arpad Kovacsy, arose from a Nov. 15 visit to them by Fritchler's special assistant, Richard D. (Rick) Legon. They said he told them that he and the chairman had learned that Western Union would back out of E-COM even if the PRC were to approve it. Western Union did back out about two weeks later. "The regulatory process had frustrated our objectives," a company spokesman said last week in Upper Saddle River, N.J.
Legon, asked how he had learned of Western Unions intent, was said by Duffy and Kovacsy to have replied that "someone" at Western Union had informed him and Fritschler. Asked who, he reportedly answered that he had said too much already and would have to be taken on faith.
"I never said it," Legon told a reporter. After a pause, he added, "As far as I can recall." Then, in a hand-carried letter to the reporter, he said that he merely had passed a "rumor" on to Duffy and Kovacsy.
On Dec. 13, an unidentified USPS official reported the incident to White House counsel Joseph Onek.
The E-COM case had been at the PRC nearly a year before Fritschler arrived. Busy with administrative matters and then with a three-week trip to points as distant as Hawaii, he was thought to have had little time to master E-COM's complexities.
Yet, said Vice Chairman Duffy, "Almost from the day he appeared, it seemed to me he had a preconceived notion about how the matter ought to be decided."
Fritschler quickly assembled a majority for rejecting E-COM. But he wanted Duffy's vote, too, apparently because both men are Democrats. Duffy is former secretary for the Senate majority.
Nov. 15, Duffy recalled that Fritschler, "I'm sorry to say, yelled that I was being 'dumb', 'stupid' and 'ignorant of the facts.' I told him that 'I regret that you take this attitude about an intellectual disagreement.'"
Fritschler said in Paris: "My goodness. It's incredible that I would say something like that."
Both sides in the dispute say their position are consistent with a White House policy statement of last July in which President Carter declared his support for the USPS-backed E-COM.
In a January memo, however, the White House also said the PRC alternative is in "basic agreement" with that July policy statement.