Michael K. Deaver, appointed yesterday as White House deputy chief of staff, cofounded a California public relations firm five years ago with little more than Ronald Reagan as its client.
As Deaver takes his place in Reagan's innermost circle, the public relations firm that bears his name is claiming the bounty of its close association with the president-elect -- a stable of well-playing conservative clients who have made it one of the fastest-growing firms in the country.
Today, Deaver & Hannaford Inc., formed by Deaver and five other Reagan aides at the end of Reagan's second term as governor of California, might still be fighting obscurity without their special relationship with Reagan. Instead, the firm has offices in four cities, and its income makes it the 37th largest among national public relations firms.
The firm's principals, Deaver and Peter D. Hannaford, both moved into key posts in Reagan's state administration in 1967.As Deaver moves into as official position in a new Reagan administration after nearly two years of campaign work, Hannaford has a contract to write a book about Reagan.
Last year, inside the Reagan campaign organization, Deaver was known as the "keeper of the body," the first staffer to see the candidate in the morning and the last to see him at night.
Deaver, 42, is said by those who have worked with him to keep close confidences. Nancy Reagan is said to trust him because he has developed through 15 years of association with the former governor an intimate knowledge of Reagan's stamina and preferences for scheduling, accommodations, appearances and security.
Because of potential conflicts presented by Deaver's part ownership of the public relations firm, he will make a clean break with the firm by selling his stock, resigning his position and removing his name from the letterhead, Hannaford said yesterday. The reconstituted firm will operate as Hannaford Co. Inc.
Hannaford said there is no contractual stipulation for Deaver to return to the firm. As for any informal agreement, he said, "I'm not going to make any speculation about the future."
Many of the firm's accounts come from organizations and corporations whose officers or directors include active Reagan fund-raisers or advisers.
But the firm's primary account until a year ago, when the former governor announced his candidacy -- the account requiring the most staff and producing the greatest income -- was Reagan's newspaper, radio and public speaking syndicate. Deaver & Hannaford's contract with Reagan called for him to share the new firm's offices.
"It certainly was the most intensive of our accounts," Hannaford said in an earlier interview. "It generated the most activity, and it was the only account we had three or four people assinged to."
The firm was put together in December 1974, the last month Reagan spent in office in Sacramento. It began operating in January 1975. Among those hired out of the governor's mansion was Reagan's longtime driver, Willard (Barney) Barnett.
"The whole thing they worked on was Ronald Reagan," said former Reagan aide Nancy Reynolds, on leave from Bendix Corp. to assist Nancy Reagan during the transition. Reynolds and other Reagan ex-staffers "were brought in to work on the Reagan account," she said.
Hannaford, 48, said it was not contemplated that the firm would be used as a springboard for Reagan's two presidential drives in the past five years. But, he added, "We took the position that if he wanted to run for president we would like to help him."
Less than 12 months after the firm began producing and promoting Reagan's five-day-a-week radio program, twice-a-week newspaper column and his numerous lecture dates, Deaver & Hannaford contracted to help manage Reagan's challenge to former president Gerald R. Ford for the 1976 Republican nomination.
For the services, the firm was paid fees totaling about $58,000, plus expenses.
Hannaford served as research and issues director in 1976, and Deaver helped manage the campaign.
In 1979, Deaver & Hannaford received another $50,000 in fees plus expenses for Deaver's full-time services to the Reagan campaign committee and for Hannaford's speechwriting. The firm also received more than $100,000 in additional fees and salary reimbursements for promoting Reagan's $466,000 lecture and commentary business, according to Reagan's 1979 income tax returns.
In its first three years, the firm was so small it did not list itself in the industry's chief trade journal.In 1979 the directory carried a modest listing showing 13 employes and fewer than a dozen clients. By 1980, the number of staff and clients had more than doubled, and the firm's net income was listed as $704,000, among the top 50 in the country. Latest figures, for the year ending June 30, show the firm's net fees at $845,000.
Among Deaver & Hannaford clients are corporations and conservatives organizations whose boards of directors form a network for Reagan's California Mafia, and include such Cabinet appointees or advisers as William French Smith (attorney general), Casper W. Weinberger (defense secretary) and William E. Simon.
Starting in 1977, Deaver & Hannaford began attracting foreign clients who have paid the firm tens of thousands of dollars to help promote ideas and policies that are similar or identical to Reagan's political views and statements.
This has resulted in the kind of activity that could prove awkward for the Reagan camp:
A group of Guatamalan businessmen who have been trying to turn U.S. attention from human rights violations there and to win resumption of U.S. arms sales put Deaver & Hannaford on a $132,000-a-year retainer in August.
Two weeks before the Nov. 4 election, invitations on Deaver & Hannaford stationery went to key members of Congress to publicize a Dec. 9 briefing by the Guatemalan group in a House Office building. And, as recently as last week, newspaper editors around the country were receiving Deaver & Hannaford literature pressing the right-wing government's views.
The Taiwanese government has kept Deaver & Hannaford on $60,000-a-year retainer in an effort to reverse the process of normalizing relatons with the Peoples Republic of China and to win approval for pending military aid requests. Several members of the firm have crisscrossed the country distributing well-planned propaganda packages on behalf of Taiwan to dozens of newspaper editors and reporters.
The firm also has added to its list of about 35 clients a group of Argentinian businessmen seeking to improve their country's image in the United States. Retainer: up to $25,000 a year.
It is too early to tell whether these lucrative client relationships forged by Reagan's close associates will create a problem for the firm and Reagan during his presidency. Reagan has pointed out that his views on Taiwan were expressed long before the island government put Deaver & Hannaford on retainer.
Discussing the firm's client relationships, Hannaford, who helped craft some of Reagan's key speeches during the campaign, said, "Businessmen, or any organization that wants advice on how to deal with Washington, are going to look for somebody who is compatible, sympathetic and willing to listen. One of the rules of this business is that you can't speak for somebody's product effectively unless you believe in it."
Hannaford acknowledges that he has discussed his Guatemalan clients with Richard V. Allen, Reagan's chief foreign affairs adviser. "My friends know who I represent and they know my clients' positions," Hannaford said.
Deaver and Hannaford have another Reagan intimate to thank for their lucrative Guatemalan connection. Nancy Reynolds said she recommended Deaver & Hannaford to the Guatemalan group Amigos del pais.
Some of the names listed among Deaver & Hannaford's clients appear to give the firm a cast of bipartisanship, such as liberal onetime Democratic Party strategist Alan Baron and former Minnesota senator Eugene McCarthy, who surprised many people by endorsing Reagan two weeks before the election.
However, along with former agriculture secretary Earl L. Butz, financial writer Eliot Janeway and conservative columnists Nick Thimmesch, Kevin Phillips and R. Emmett Tyrrell Jr., McCarthy receives from the firm only routine services related to speaking engagements and column or broadcast syndication.
"They're cheaper than most other booking companies," said Baron, editor of a new publication called Opinion Outlook.
From its other clients, however, Deaver & Hannaford draws together key members of Reagan's California Mafia through a web of corporate and institutional connections.
In the state capital, Sacramento, Deaver & Hannaford is on retainer to the Pacific Legal Foundation, a band of young lawyers, backed by big business, who operate a conservative movement against government regulation and environmental restrictions on industry. On the advisory board of the foundation is Edwin Meese III, chief of staff in Reagan's campaign, who will be a power as White House counsel.
At the San Francisco-based Institute for Contemporary Studies, a think tank with a conservative tilt founded by former Reagan staffers, Deaver & Hannaford handles publicity and news conferences for booklength policy studies released several times a year.The most recent study, The Economy in the 1980s: A Program for Growth and Stability, by Stanford economist Michael Boskin, is part of the Reagan transition literature.
Meese is also listed as a member of the institute's board of directors, as is Weinberger.
At Dart Industries Inc., where three key Reagan advisers sat until recently on the corporate board, Deaver &Hannaford is paid about $25,000 a year to help educate employes on the growth, waste and inefficiency of government in connection with Dart's political action committee, which contributed heavily to the Reagan campaign effort, according to James Lindberg, vice president for public affairs.
Justin W. Dart, chairman of the Dart conglomerate; Holmes Tuttle, a Los Angeles car dealer, and Simon, a former treasury secretaryy, sat on Dart's board before its merger with Kraft Inc. The men are among Reagan's closest business advisers, part of a so-called "Kitchen Cabinet" advising on appointments and economic policy during the transition.
The vice president in charge of corporate relations at the Los Angeles-based Pacific Mutual Life Insurance Co., Stephen D. Gavin, said Deaver & Hannaford is on $1,000-a month retainer, but is called upon to do "very little" for the $2.3 billion dollar insurer. One of Pacific Mutual's directors is Smith, the possible attorney general appointee.
"We call on them when we're looking for information on a particular matter or want political counsel, that sort of thing," Gavin said.
Among the firm's other large corporate clients are 3M Co. and Rockwell International. 3M has been trying to convince state officials in California for four years to adopt a proposal requiring use of reflective material in auto license plates. Such a law could mean $500,000 a year in revenues to 3M, but so far the idea has not been persuasive, despite the efforts of Deaver & Hannaford, according to John Milne, 3M national sales director.
At Rockwell, Vice President Patti Mancini said the giant aerospace company has paid Deaver & Hannaford about $25,000 a year for nearly three years. In return, Rockwell received a proposal for an employe newsletter and an employe brochure that have yet to be published for the 14,000 Rockwell workers in Downey, Calif. The holdup, she said, has been getting approval in the corporate chain of command.
Deaver & Hannaford has two corporate clients in Washington D.C. One goes under the imposing name of National Venture Capital Association, and a telephone call to the association rings in the offices of Deaver & Hannaford. The executive director of the association, which seeks a beter climate for investment, is Daniel T. Kingsley, a partner in Deaver & Hannaford and head of its Washington office.
The other corporate client in D.C. is Trigon Sports International Inc., a sports consulting firm operated by two former Nixon White House staffers, Michael T. Harrigan and John A. McCahill. The pair started business immediately after serving as executive director and general counsel, respectively, to President Ford's Commission on Olympic Sports.
Among its many services, Trigon represents the U.S. Olympic Committee before federal agencies and advises firms on the best commercial uses of the Olympic imprimatur.