This is a story about people and power in the federal city, and about the rise and fall in the bureaucracy of one of the most extraoridnary women ever to serve in the upper reaches of U.S. officialdom.

As the new Reagan administration comes to town with promises of cutting the fat out of government, the story provides glimpses of some of the vexing problems that may confront such efforts.

The story also provides glimpses into the complex workings of Washington's old-boy network, and into what may or may not constitute abuses of power in a power-sensitive town.

Last Sept. 23, when U.S. Energy Secretary Charles W. Duncan Jr. received a report from the energy department's inspector general changing one of Duncan's top assistants with possible nepotism, he picked up the telephone and called White House counsel Lloyd Cutler for advice.

Cutler, the quintessential Washington insider, had known Duncan for some time and was also well acquainted with the top assistant who was in trouble -- Deanne (pronounced Dee-Anne) C. Siemer, Duncan's $50,000-a-year chief of staff with day-to-day responsibility for managing much of the sprawling DOE and monitoring everything that crossed Duncan's desk.

Cutler knew her because for nine years Siemer had been an associate and then partner in his elite law firm here, Wilmer, Cutler & Pickering -- shortened to Wilmer & Pickering after Cutler was enticed to the White House a year ago.

Early in 1977, Cutler had called Siemer, then 37 years old, into his office and virtually ordered her to abandon her beloved litigation and become general counsel of the Department of Defense in the new administration. It was a powerful post, a presidential appointment.

"You're going," he had said flatly.

"No, Lloyd, I don't want to," she had said.

"You have to do public service," he had said. "You can afford it. You've made all this money."

Cutler prevailed on her to talk with the new secretary of Defense, Harold Brown. President Carter had promised to place a number of women in high government posts and Brown was determined to have one as his general counsel. Cutler told him Siemer was the best in town, and Brown persuaded her to take the job. It didn't matter to him that she was a conservative Republican.

Despite Siemer's initial reluctance, it was a heady time for her. She was getting on the same escalator that took Cyrus R. Vance from the general counsel post, which he held in 1961-62, to secretary of State.

Siemer plunged into her new job with fervor. Lean, intense, and with a commanding personality, she mercilessly cut through red tape to achieve results, terrifying bureaucrats but earning the respect of top officials: a meat eater loose among the bureaucracy's grazers.

At the Defense Department, Siemer had worked closely with Duncan, who was then the No. 2 man there. A former president of Coca-Cola, Duncan came to depend on Siemer at Defense and took her along when he was named secretary of Energy in August of 1979 -- a time when the Energy Department was in chaos and the nation had just emerged from seven weeks of gasoline lines.

At DOE, the pair began dealing with the oil and gasoline crisis and trying to whip into shape a bureaucracy renowned for confusion and inefficiency -- the legacy of former Energy Secretary James R. Schlesinger, who had been too caught up in policy to spend much time on day-to-day management. For a year, they thought they had made progress in improving the day-to-day management of the department, although as a policymaker Duncan never developed a reputation as a strong cabinet officer.

On Sept. 23, Duncan's inspector general sent him the results of a two-month investigation triggered by an anonymous tipster. The investigation concluded that Siemer probably had violated federal anti-nepotism law by trying to have her stepson hired by DOE. The stepson, a 21-year-old college student, was hired for a government paid trip to Alaska and Canada last spring to work as an advance man for a later visit by Duncan. After Duncan learned of this, he ordered the stepson's relationship with DOE severed. The IG report subsequently recommended that disciplinary action be taken against Siemer.

It was a bombshell, its fragments hitting Siemer and glancing off others.

The IG report was strong, saying that Siemer "became insensitive to the distinction between maintaining the public trust and advancing the personal interests of her family. The impropriety of Ms. Siemer's conduct has been compounded by her apparent unwillingness to be entirely forthright with our investigators." It concluded that certain aspects of her version of her role in the hiring of her stepson at DOE were "unconvincing." The IG referred this matter to the Justice Department for criminal prosecution under a law that prohibits false statements. Justice declined to prosecute but did not say why.

"Predictably, the [Justice] Department rejected it out of hand," Siemer wrote in a 29-page response to the IG report that her husband, Howard P. Willens, who is also in the Wilmer & Pickering firm, released on Sept. 29, the same day the IG report was made public by Duncan.

Gerald McDowell, chief of the Justice Department's public integrity section, would not comment specifically on the Siemer case, but he said of such cases in general: "A lot of people have been taking a declination of prosecution [by Justice] as a badge of innocence, but it doesn't necessarily mean one thing or the other. It could merely mean that because a theft, for example, was of so small an amount of money, that it's not worth clogging the courts, and the person should be fired [instead]. As a practical matter, it is not a clean bill of health."

In Siemer's case, Justice referred the matter back to DOE for appropriate administrative resolution within the department.

Siemer denied in her document that she had violated any regulation or law, but said, "It was a substantial error of judgment to believe that I could effectively wall myself off from the hiring of my stepson by a DOE component . . ." She wrote that she would reimburse the Energy Department the $807.23 that the government paid for her stepson's airfare to Alaska and Canada while he was doing DOE work, and would also reimburse the department for $937.80 in expenses that he had claimed.

In the document, Siemer charged that the DOE inspector general's report was biased and represented a conflict of interest and an "abuse of power" because she had at one time tried to remove the inspector general, John Kenneth Mansfield, for "incompetence." Siemer made this accusation even though Mansfield said that he had withdrawn from the investigation and had left it to his deputy, Thomas S. Williamson Jr.

The inspectors general of the federal agencies are appointed by the president and confirmed by the Senate. To insulate the inspectors general from political pressure, only the president can remove them, and when he does so he must report his reasons to Congress. The IGs have full subpoena and investigatory powers to move against fraud and waste.

Siemer offered in her document an alternative theory to what had happened in the matter of her stepson: that Les Daly, a family friend of hers who is Duncan's chief public affairs man, had on his own and without prodding from Siemer promised Siemer's stepson a summer job last Christmas and had tried intensively to arrange one.

Duncan was upset by the IG report. He was close to Siemer, he admired her, she had done a lot for him. He didn't want to hurt her any more than necessary, but it was clear that something had to be done. He called Cutler for advice several times in the week before he announced his action, and he also spoke with Siemer, who was on leave at the bedside of her sick grandmother in Buffalo. Neither Duncan nor Cutler would disclose what was said in their conversations, except that they talked about Siemer.

So finally, on Sept. 29, Duncan released a carefully worded memorandum that cut deeply both ways. He praised Siemer's "outstanding work but said he believed Siemer had made "an error in judgment in the matter of the employment of her stepson . . . ." The memo noted that the IG report contained conflicting testimony, that Siemer was on leave because of an illness in her family, and that she had planned to leave the Energy Department anyway during the fall. The memo then said that Duncan was immediately appointing a new chief of staff to replace Siemer, but that she would remain with DOE for a time to complete a special study for Duncan.

"In view of the above, I find it unnecessary to take further action with respect to Ms. Siemer," Duncan's memo concluded. No formal disciplinary action against her was taken, even though the IG report had recommended it.

In a footnote, the IG report said Daly, the PR man, had "at least technically" violated some of the same regulations as Siemer, and suggested Duncan consider administrative sanctions against him. However, the report did not go as far as to recommend sanctions against Daly, and Duncan did nothing to Daly.

The new chief of staff Duncan named to replace Siemer was Douglas G. Robinson, who had once been the object of an unfavorable IG report that said, "We think that Robinson exercised poor judgment and demonstrated a lack of thought . . . ." Robinson in 1976 had left the old Federal Energy Administration under the Ford administration to join the Carter campaign after having effectively delayed certain aspects of an FEA investigation in "a case potentially embarrassing to candidate Carter," according to the IG report. However, it did not recommend punishment and Robinson was not punished.

Duncan would not talk to a reporter about the Siemer matter, but J. Michael Kelly, Duncan's official DOE counsel who helped draft Duncan's Sept. 29 memo, called the memo "a very good balancing of the situation . . . . The secretary had adequately picked a middle-of-the-road course that solves the problem for him and leaves Deanne in a position to salvage her career if she acts in the right way."

Kelly characterized what happened to Siemer as "a fairly harsh result.Here's a lawyer whose credibility has been called into question, obviously leaving sooner than [she] had intended, who has had an IG report issued [against her] and had the matter referred to the Justice Department for criminal prosecution (even though they declined). I certainly as a lawyer wouldn't want those things said of me. Deanne may still come out of it where she can still practice law, but it's going to be very damaging."

When Siemer finally returned from Buffalo and a reporter was able to contact her, her first words were: "Why did you write that I quit?"

There are hundreds of people in Washington who know Siemer and who have worked closely with her. To get a sense of the power of her personality, listen to Brent Rushforth, a Washington lawyer who for more than a year was Siemer's deputy at the Defense Department, and who admires her:

"Deanne has this enormous sense that you can do something, even if you go into a giant bureaucracy that has the obvious inertia of a big government agency. She comes out of a much different setting, a very high-flying, hot-shot, smart -- everybody at Wilmer & Pickering is super-smart -- atmosphere on the razor's edge, life in the fast lane; and she goes out of that context over to DOD, where everything is slugabed except Harold Brown, who is one of the smartest men on earth. Deanne developed a very strong working relationship with Brown, just an enormously strong mutual respect. Each of them knew they were dealing with a smart cookie, and I think Deanne performed some tremendously useful service for the secretary . . . .

"If I were the Secretary of Defense and wanted my views to be front-stage and controlling, I don't know who would do it more effectively. She wouldn't make friends, but she woudl do it effectively . . . . She doesn't suffer fools gladly. She simply doesn't have the patience for the kind of lawyering that goes on among the lawyer-bureaucrats [in government]. . . .

"Duncan relied on her a lot. Brown was the brains . . . the technocrat's technocrat, but he doesn't want to have to deal with the day-to-day running of the place, so they brought in Duncan. He dealt with (Capitol) Hill a lot, he was called on for his political instincts, he dealt with the President and his staff a lot, and when Brown was away, he ran the place . . . .

"He met Deanne there, and he basically relied on her completely and totally for the entire transition [when he became Energy secretary]. He didn't even like her out of the room when he was in a key meeting . . . .

"Deanne made an error of judgment [in the matter of her stepson].She made a terrible error, and I think she knows she did. There she was wading through DOE, a hundred times worse than DOD, and I can understand how she could have lost her perspective and said the hell with it. Deanne is so used to screaming, 'Don't tell me you can't do it! Do it!' that she screamed it once too often."

Siemer was not a deep thinker on policy either at DOD or DOE. She liked to know what the boss wanted done, and then to get it done with verve. She relished the combat, just as she had relished the courtroom battles of her days in private practice.

Robert H. Mundheim, who was the general counsel of the U.S. Treasury Department when Siemer was at Defense, called her "extraordinary . . .extra competent," and recalled how effective she had been when they worked together on legislation that became the Ethics in Government Act of 1978, which required detailed financial disclosure by top federal officials and placed new restrictions on their activities after leaving the government.

Lee R. Marks, who was senior deputy legal adviser at the State Department when Siemer was at Defense, said he thinks there is "an element of chauvinism or sexism in reactions to Deanne . . . . What comes across as being macho in a man comes across as being abrasive in a woman . . . . She is a fair and formidable adversary."

"She is one of the most incredibly fine people I have worked with," said Antonia Chayes, an undersecretary of the Air Force who was also a well-connected lawyer before she went to Defense. "She's terribly creative, imaginative, and gets things done fast and cuts through the bureaucracy like a knife through butter." Chayes and Siemer served together on the judicial nominating commission for the U.S. Military Court of Appeals: "She ran that commission for the department," Chayes said, "and everything was just done intelligently and well."

In 1978, President Carter signed an executive order reorganizing the intelligence community. Among other things, the order gave increased authority over intelligence functions to the Director of Central Intelligence. But it failed to give the director as much authority as he wanted, and Siemer was largely responsible for this: She was protecting Brown in what was largely a turf fight.

"I give her all the credit," said Adm. Daniel J. Murphy (USN-Ret.), deputy undersecretary of Defense for policy review. "She was fantastic in grasping the particulars of the problem and then representing the secretary of Defense in a masterful way in some knockdown-drag-out type meetings . . . . She worked around the clock in drafting and redrafting, and she argued our case . . . .

"This is a young woman, who has come far and fast. Granted, she may rub people the wrong way in her effort to get the job done . . . . She's learned that you have to have more respect for the bureaucracy than she had initially. This is typical of people who come into high civilian jobs and think they can step on the bureaucracy. They learn you can't."

In the several weeks just before the IG report was sent to Duncan last September and when Siemer was still under investigation, Cutler called her over to the White House for a special assignment in the Billy Carter-Libya case. At that time, the Billygate investigation was in full swing on Capitol Hill, and Sen. Birch Bayh (D-Ind.), the Senate special subcommittee chairman, didn't want White House lawyers sitting in on depositions of White House staff members for fear they might be intimidated.

So Cutler agreed to get a lawyer from elsewhere in government to sit in on the depositions to represent the interests of the United States, and he picked Siemer. Between Sept. 4 and 15, she sat in on the depositions of nine key White House staffers, including Cutler, Jody Powell, Hamilton Jordan, Zbigniew Brzezinski and Phillip J. Wise, the White House appointments secretary.

Siemer didn't do much talking during the roughly 12 hours of depositions, but her role was critical. Her job was to see that any White House claim to the right to assert executive privilege was properly represented. Siemer did not in fact assert executive privilege during the depositions, however.

Cutler said the fact that Siemer was under investigation for nepotism while sitting on the depositions was irrelevant. "I've never heard anybody raise the slightest question about her ability or skill," he said. ". . . The investigation had no bearing whatsoever on her skills for this particular job."

If all this seems like widespread praise for Seimer, there seem to be at least as many people in Washington who damn her as those who praise her. Some of these, too, have high-ranking jobs, and they invariably ask that their names not be used. One of the top-ranking lawyers in a federal agency said: "She's really quite unbelievable, and if she knows, then I've got to worry about her for the rest of my career. She's been shot out of her job, but she's still alive and kicking. She'll be on the scene."

"The incidents themselves are dumb," this lawyer said, "but they add up. She'll call up your superior and then call you and misrepresent what the superior said. You send her a document to review and she sends it back with her proposed changes underlined, but the crucial changes won't be underlined . . . . She will attack you, accusing you of who knows what, threatening you. She'll agree to meet you and then miss the appointment . . . .

An important staff civilian at the Defense Department: "She's a very tough person . . . but she almost enjoys cutting corners, and she cuts 'em as close as she can . . . . One failing in her, even though she's bright and aggressive and combative, is judgment. I think that was not her strong suit."

A top lawyer at another federal agency: "She's very protective of her client, and very direct and abrupt, sometimes rude, in achieving the objectives of that client, whether it's the secretary of Defense or Energy. When she's out of the office on social occasions, she's a very charming, attractive lady."

One man who watched Siemer closely at Defense, and who said he admires her, described her as "a modern personality, with all the attributes and flaws of that: hard-driving, success-oriented, also caring about her family, but there is a fragmentation there. The IG report caught one little aspect of that personality."

One time, her detractors said, Siemer became so upset about bureaucratic foot-dragging that she threatened to temporarily hold up the paychecks of a small DOE section.

"She's a female Dr. Jekyll and Mr. Hyde," a high-ranking DOE official said. "She could be just as sweet and pleasant and apparently as accommodating as anybody, then what you'd find when you walked out of her office was that the pain in your back was this enormous dagger . . . ."

Siemer declined to grant an on-the-record interview to comment on these and other observations about her and on allegations against her.

Deanne Siemer was raised in upstate New York, was Phi Beta Kappa at George Washington University and received her law degree from Harvard in 1968. She was married, had a child, and then divorced. In 1978, she married Willens. The two had worked closely in the Wilmer, Cutler & Pickering firm and Willens, who in the mid-1960s had been executive director of the President's Commission on Crime in the District of Columbia, was also divorced.

Last Christmas, Willens and Siemer gave a dinner party in their Northwest Washington home for Les Daly and his wife. Daly had been in his job as Duncan's PR man for only a few months, and this was the first time that Siemer and Willens had met his wife.

The relationship between Daly and Willens goes back to 1974 when Daly was corporate vice president for public affairs at the Northrop Corporation in Los Angeles, and Wilmer, Culter & Pickering was representing Northrop in a case. The big Defense contractor had been charged with making illegal campaign contributions to political figures in a position to influence business.

The explosive case, which expanded to include allegations of overseas bribes, was widely publicized. Willens was one of the law firm's chief players in the case, and he and Daly worked closely together on it in a hothouse atmosphere where merdia relations and lawyering were intertwined. (Brent Rushforth, quoted above, had been in a California public interest law firm at the time and had helped trigger the Northrop case with a lawsuit. Siemer, who did not work on the case but was familiar with it, had admired Rushforth's work so much that she had called on him to be her deputy at DOD.)

Daly, known as a charming man with a confidential manner, continued his friendship with Willens over the years, visiting him when he made trips to Washington for Northrop. Daly met Siemer in 1978, and when she went with Duncan to DOE in 1979 and Duncan needed a PR man, Daly came immediately into Siemer's mind. He was on vacation, but she reached him and offered him the job. He took it, and frequently stayed with Willens and Siemer while he was househunting in Washinton.

It was a nice, quiet, family dinner party. Five children were there: the Dalys' two college-age daughters, Siemer's young son from her first marriage, and Willens' two college-age children from his first marriage, including Jonathan, a senior at Swarthmore.

Siemer believes that, in the midst of the general chit-chat, Daly and Jonathan Willens discussed the possibility of a summer job for Jonathan in Daly's DOE office of public affairs, and that Daly told Jonathan to call him about it later.

According to Siemer's document, Jonathan then came to Washington in the second week of March, was interviewed by Daly and "believed that Les had made him an explicit job offer for the summer."

She wrote: "I did not advocate Jonathan's cause or urge Les to give him a job . . . . Les Daly voluntarily offered Jonathan Willens a job in March, 1980 . . . . I had no dealings with Les Daly on the subject of my stepson until after he had made a decision to hire . . . . My efforts were only directed to suggesting how he might do what he had already decided to do."

In short, Siemer contends that her stepson's employment resulted from a voluntary decision by Daly and not by any pressure from her.

"I made no efforts to have [Jonathan Willens] hired," she told the IG investigators.

The inspector general's office, after two months of interviews with DOE personnel and others, disagreed:

". . . Mr. Daly told us that he first learned of [Jonathan] Willens' interest in a summer job with DOE early in March 1980 when Ms. Siemer brought Mr. Willens to his office. Ms. Siemer informed us that she did not take Mr. Willens to Mr. DalS office in March . . . . We found certain aspects of Ms. Seimer's version of her role in her stepson's efforts to secure summer employment at DOE unconvincing. Perhaps most significant is that Mr. Daly . . . . and Mr. [Thomas] Dennis, the then Deputy Director of Special Projects [in the intergovernmental affairs section] told us that in early March they were contacted directly by Mrs. Siemer and asked to consider Mr. Willen's suitability for employment at DOE. Mr. Daly also described to us in considerable detail repeated follow-up efforts by Ms. Siemer urging that Mr. Willens be hired . . . . "

In her document, Siemer suggests that Daly had reason to provide false information about her because he was frightened that what she said were his efforts to obtain employment for his daughter in an international energy organization would be discovered. The IG investigated this charge and said in its report that such speculation was "based on inaccurate facts."

No one at any time alleged that young Jonathan Willens did anything wrong. He was described by officials as bright and hard-working.

The IG report says that, "at the insistence of Deanne Seimer," DOE officials scrambled to find an intern job for him. The report said the effort failed because there was no slot available.

"Ms. Siemer was able to trigger an extraordinary, although ultimately unsuccessful, mobilization of DOE staff in the effort to hire Jonathan Willens," the report said.

Then, it said, Siemer "inquired within the department" about having her stepson work for a DOE contractor. Daly and other DOE officials, "acting on their own initiative rather than at the specific request of Ms. Siemer," assisted Willens in finding such a job, the report said.

After that, the trip to Alaska and Canada on which Willens did advance work for a later trip by Duncan was "arranged at the direction of Ms. Siemer," according to the IG report. Willens took that trip at government expense from May 24 to June 4.

"A tangential basis for our having concern about Ms. Siemer's credibility stems from her characterization of the Alaska advance trip as 'grubby work' that nobody wanted to do," the IG report said " . . . The trip involved meetings with senior Canadian government officials as well as traveling around Alaska during the late spring. Moreover, Sandra Bregman, who was the DOE official in intergovernmental relations formally charged with responsibility for arrnging advance trips, told us that the Alaska trip was viewed as a very attractive opportunity by the DOE staff who normally perform advance work."

The IG report concluded that Siemer's alleged actions in recommending summer employment at DOE for Willens "appear to violate the federal law against nepotism . . . . In addition, those actions and her arranging her stepson's trip to Alaska appear to have violated several provisions of DOE's Conduct of Employees regulations that limit or prohibit preferential treatment of members of the public by DOE officials."

The nepotism law of the United States government -- a non-criminal law -- says that a public official cannot advocate the employment of a relative anywhere in the official's department, according to Margery Waxman, the general counsel in the U.S. Office of Personnel Management. Her office is officially charged with interpreting the nepotism and other personnel laws of the government.

Under the nepotism law, a public official is defined as an official part of whose job includes employing personnel or recommending employment. A stepson, according to a specific enumeration in the law, is considered a relative.

Seimer said in her document that Waxman's office had said that the nepotism statute "applies only to those within a chain-of-command relationship" and "there appeared to be no chain-of-command relationship between me and Mr. Daly . . . . "

But in a telephone interview Waxman said that whether or not there was a chain-of-command relationship between Siemer and Daly was irrelevant to the question of whether Siemer violated the nepotism law. She said that if Siemer was a public official under the narrow definition of the nepotism law, then she would be prohibited from pressing Daly or anyone else in DOE to hire her relative.

"She is a very tough lawyer," Waxman said. "I'm sure she has stepped on people's toes, and I feel that [this], forcing change within DOE, led to this charge in a sense.She might have been given an opportunity to explain it, and the IG might not have jumped so quickly to these conclusions otherwise.

"I admire her because she's effective. She's effective in making changes and it's nice to see some people like that in the government, people who are willing to shake things up. Of course, you wouldn't want to see the government filled with people like that . . . . "

Footnote: Seimer was no sooner out of her chief of staff job at DOE than supportive letters and telephone calls -- some with job offers -- poured in. The Reagan campaign got in touch by telephone.