Eric Zausner has more impact on the nation's energy policies than thousands of government officials.
But Zausner does not work for the government. Now only 36, he spent five years working for various federal energy agencies and emerged after the chaotic 1973 Arab oil embargo as the $50,000-a-year No. 2 man in the old Federal Energy Administration.
Since he left government to be an energy consultant, Zausner has helped win at least $31 million in contracts for his firm, Booz-Allen & Hamilton Inc., from his old agency, now the U.S. Department of Energy.
Zausner, who earns more than $200,000 a year, retains a substantial degree of influence of federal energy policy through the studies the government pays him to make.
His rise to fortune illustrates how knowledge and influence work in modern Washington's hugh bureaucratic paper mill. His tale shows how a certain class of technocrats -- people in the right place at the right time with the necessary knowledge and instincts -- can go through the revolving door and cash in on their expertise. And without breaking any laws.
Recent hearings on Capitol Hill raised questions about whether consultants such as Zausner constitute a hidden government that influences public policy but that the public cannot fully scrutinize.
Zausner is an energetic, pudge, pipe-smoking man who says that he broke no rules and regulations in going through the revolving door.
"No question," he says, "I used my understanding of energy in the broadest sense and understanding of the federal government to see where we could be most effective as consultants. That's different from calling Harry up and saying, 'Could I have a hundred grand [for doing a job]' . . . I've never used any of my contacts."
Booz-Allen is one of the nation's oldest and largest management and technical consulting firms. When Zausner took over its energy and environment division in July 1976, there were only 10 people in that division. e
Zausner, now a Booz senior vice president and a member of the 22-member board with many of the firm's partners working under him, built the division into a worldwide energy consulting group with a staff of 120 and more than $100 million in consulting contracts.
Energy department contracts account for about a fourth of all the division's business, Zausner says. Another fourth is with other government agencies and utility companies, and the rest with private companies. "DOE is our most important client," Zausner said.
Booz's energy department contracts include:
$10 million to provide "engineering and management support" to the nation's solar energy development program.
$2.5 million to provide "support services" for the DOE program to develop oil, gas ans shale technology.
$1 million to provide general "support service" for DOE's administrative office.
$9 million to "plan, design and perform management services for [DOE's] electric and hybrid vehicle demonstration project."
$74,000 for a "recommendation of principal issues in nuclear proliferation risk of evaluation criteria for various nuclear reactor and nuclear fuel cycle combinations."
$549,000 for "economic and technical support for [DOE's] office of industrial energy conservation.
Much of this work involves writing massive reports that are delivered to the energy department in loose-leaf binders and that may or may not -- according to congressional testimony -- ever be read by anybody in the department.
The work includes everything from typing letters and licking envelopes to monitoring congressional activities to formulating policy alternatives that will affect the most important energy decisions made in government.
Members of Congress are distressed at the secrecy shrouding these and other consulting contracts. While DOE provided a list of 14 contracts with Booz totaling $31 million, a spokesman said there could be no assurance that the list was correct or complete.
As an example, the department was asked to disclose the names of the other bidders on the $10 million solar contract -- but it refused. It also refused to disclose the amounts of the bids, or any details of the bid proposals.
The agency also would not disclose the names of the members of the group that evaluates the bids; or the name of the official who made the final decision that Booz should win the solar contract.
Zausner said he did not know who these people were on the solar contract, so he had no way of knowing whether they were friends of his from government days.
Zausner, too, reinforced the secrecy. He refused to disclose:
The total amount of his contracts with the energy department or what the contracts were.
What he bid on the $10 million solar contract, or any other details on that contract.
Who are his employes working on his DOE contracts. Zausner said he would not allow them to talk with a reporter.
Although Zausner as a private businessman is under no obligation to disclose such information, legislation is pending in Congress that would require that the information be disclosed by the energy department.
America's vast federal energy bureaucracy -- of which Zausner was part -- had its beginning in the frenetic period just after the oil embargo in October 1973.
The small federal energy office set up by President Nixon burgeoned into the 4,000-member Federal Energy Administration as workers from all over government came to deal with the crisis.
Zausner, a young man with a family entrepreneurial background and an MBA from the Wharton School of Business at the University of Pennsylvania, was one of them. He had worked on energy in the Department of the Interior for three years, and was at FEA from the beginning.
With his analytical, computer-based approach and his workaholic tendencies, Zausner soon became the top numbers man in the federal agency establishment. In 1975, he ran Project Independence, a massive statistical compendium that set the framework for the national energy debate.
By the time he left government, Zausner's contacts were extensive.
Zausner remains friends with Deputy Energy Secretary John C. Sawhill, the No. 2 man in the energy department. They have lunch and dinner together. Last April Sawhill gave a speech -- for free -- to Zausner's staff.
'He does it as a favor," Zausner said.". . . We're friends . . . I don't ask him for a contract or say, 'Thirty-seven thousand dollars is held up, can you fix it? He wouldn't be a fried if I did."
Sawhill, who was deputy FEA administrator in 1973 and brought Zausner into that agency, said: "I see a lot of him. He's one of the brightest young business executives in the country today . . . I can't restrict myself from seeing people who do business with the Department of Energy or I couldn't see anybody."
Maxine Savitz, now the energy department's deputy assistant secretary for the conservation, worked for Zausner in FEA. After he went to Booz, she said, "He did not come around soliciting. He's spent his time building up a team. We have put out various solicitations [for consulting work] and they [Zausner's energy division] respond with competent work."
If Zausner didn't use his contacts to drum up business, the temptation -- and occasionally the pressure -- was certainly there.
Bruce A. Pasternack, a key FEA official whom Zausner brought with him to Booz and who is now a Booz vice president for energy strategy and policy said:
"People (in Booz) would come up and say, 'Would you call so-and-so and find out the situation? I always said no, I didn't think it was right. I didn't want to use those contracts for personal gain . . . We do very little walking the halls . . . and trying to get things wired to us."
Christina L. Rathkopf, who was DOE's executive secretay ("top paper-pusher," she calls it) unitl recently and who is now on her way to Harvard Business School, was Zausner's special assistant in FEA. She remembered why he left for Booz:
"It wasn't at all clear that Ford was going to win. Eric was so mentally agile that he had become bored. . . . He said, 'I'm going to go out and find bigger fish to fry.' . . . He had interveiws with big investment firms on Wall Street. He was turning his attention from little numbers to big numbers. He really felt he had the brains, that he should be making three times as much."
Zausner said that before he began interviewing for jobs in 1976, he received an opinion from the FEA general counsel's office on what he could and could not do.
Zausner said he met all the tests and went beyond them to satisfy his own ethical standards. He ruled out working for any oil company, since FEA regulated them, and did not personally propose to do any FEA or DOE work for a year and a half after leaving government, he said.
However, as he took over the small Booz energy division and began building it, he said, he did direct his staff members in their successful efforts to obtain consulting contracts with DOE.
Frank G. Zarb, who headed FEA at the time that Zausner resigned and who is now a general partner at the New York investment banking firm of Lazard-Freres and Co., said of Zausner:
"If good judgment were used and he precluded anything that would take advantage of his government relationships for a responsible period of time -- one or two years -- then he probably handled himself properly."
Booz-Allen makes its 1,500 employes sign a long "statement of professional policies and practices," which includes provisions to protect client information and avoid conflicts of interest.
Booz Chairman Jim Farley summed up the firm's policy for Zausner's group: "Essentially we report to the DOE when they [Zausner's group] are to work on any related commercial assignment."
In recent Capitol Hill hearings, Sen. David Pryor (D-Ark.) said that Booz was doing work for Exxon, Gulf, Shell and other oil companies and for Middle Eastern governments and their oil companies -- Libya, Arabian, American Oil Co., National Iranian Oil Co., Abu Dhbi National Oil Co., and Algerian National Oil Co. -- but was not disclosing this information to the DOE in routine conflict-of-interest disclosure proceedings related to obtaining its contracts with DOE.
"Does the DOE know that the firm it employed last October to provide an objective, outside examination of the Strategic Petroleum Reserve -- this country's first bulwark of defense against another oil embargo -- also claims to do planning for potential sources of the embargo?" Pryor said.
The answer from DOE witnesses last week was: no, they had not known, and they were concerned about it.
Asked about this by a reporter, Zausner conceded that much of what Pryor said was true but that the information was not disclosed to DOE because, among other things, "they never asked any questions."
Besides, Zausner said, the information is not really relevant because there is no real conflict: the work done for the oil companies and the Middle Eastern governments is done by other divisions of Booz, and not by Zausner's energy division.
Pryor and the cochairman of the hearings, Rep. Herbert E. Harris II (D-Va.), have not suggested that Booz and other consultants have necessarily done anything wrong. Their point is that if consultants do act wrongly, the energy department and other federal agencies are not equipped to detect it.
William W. Hogan, who worked in FEA when Zausner was there and who is now a professor at Harvard's Kennedy School of Government, said that the Washington revolving door through which Zausner and others went is on average "good. . . . The nation as a whole invests a lot in developing expertise. It wouldn't make sense if it were developed in one sector never to use it in another. . . . The trick is not to allow abuses to creep in."