Nine days before becoming U.S. attorney general, William French Smith received an unusual $50,000 severance fee from a California steel company. The fee, listed in Smith's 1982 financial disclosure statement, is being reviewed by the Office of Government Ethics because of a federal law that prohibits salary supplements.
On Jan. 12, 1981, the board of directors of the Earle M. Jorgensen Co., which is headed by a member of the Reagan "kitchen cabinet," passed a resolution authorizing "a severance pay of $50,000" to Smith, who stepped down from the company's board that day to avoid possible conflict of interest as attorney general.
J. Jackson Walter, the director of the ethics office, said he learned about the $50,000 fee on Thursday, when he initially reviewed Smith's disclosure report. "It just flashed off the page," he said.
Walter said aides to Smith have examined the fee and found it "acceptable." But, he added, "I don't have a conclusion . . . . Clearly it was something we would want to review and the review process is not over."
The $50,000 fee could raise legal questions because the law has been interpreted by the Justice Department for some time to prohibit federal officials or those nominated for federal service from receiving income supplements.
Such supplements are permitted if they are part of a bona fide pension, profit sharing or stock bonus plan that is routinely given and not tailored to a specific individual, according to the Justice Department.
John F. Watkins, the senior vice president for administration of Jorgensen, said yesterday it was the only time the company has given a cash severance payment to an outside director.
The board of directors passed two resolutions at Smith's last meeting. The first was to extend Smith its "heartiest wishes for the greatest success and wants him to know that his wise counsel, though missed by us, will be welcomed by the country he will be serving during the next four years."
The second resolution, which according to the minutes passed unanimously, said: "Resolved, that Mr. William French Smith be paid by the company a sum in the amount of $50,000 severance pay for his loyal and dedicated past service to the company as a member of the board of directors and audit committee."
Watkins said that "all outside board members have been given a fine gift," generally a gold watch, on retiring or resigning. He could not recall who proposed the severance payment. "It was just one of those things, it was different perhaps . . . not a fee, but a severance, a personal thing."
Smith's spokesman, Thomas P. DeCair, said that Smith was "surprised" at the severance award and took the payment in a check that day. Smith, who was designated attorney general a month before receiving the $50,000, served on the Jorgensen board for six years and the audit committee for three years.
DeCair said yesterday, "The attorney general believes this a perfectly proper and fully disclosed transaction. It was reviewed in the normal course at the Justice Department and submitted to the Office of Government Ethics for its approval."
Earle Jorgensen, 82, has been a long-time friend and political supporter of the Reagans. Last year he contributed $50,000 to the private fund set up to redecorate the White House family living quarters.
On Smith's 1982 disclosure form submitted this week, Smith reported outside income and fees totalling $137,513. In addition to the $50,000 from Jorgensen was $77,221 in settlement income from his former law firm, Gibson, Dunn & Crutcher of Los Angeles. He also reported director's fees from four companies on whose boards he had served totaling about $9,000.
He also reported $500 from Jorgensen as a director fee for attending the Jan. 12, 1981, board meeting.