President Reagan's appointees to the board of the Legal Services Corp. were warned last summer by the corporation president that they were collecting "substantially more" in fees than previous boards and could become subject to outside criticism.
"I suspect this board will be earning substantially more than prior boards," said then-corporation president Gerald M. Caplan in a confidential July 30 memo to board Chairman William F. Harvey.
The fees have since become publicly controversial, with even Republicans in Congress saying that they were excessive and calling for replacement of the board.
This in turn has become part of the broader debate over Legal Services' future. Reagan first tried to abolish the program, which gives free legal aid to the poor, and now is seeking through the board to curtail its activities.
The Caplan memo said there were good reasons for the higher fees, an apparent reference to the fact that the new members had come to the board with almost no knowledge of poverty law and so had needed time to educate themselves. But he added, "If, at the end of this year most of the board will be reporting earnings of approximately $25,000, we will surely come under criticism."
In another internal memorandum Aug. 18, Caplan, a Republican who had been chosen by the Reagan board as an interim president, once more warned Harvey of the mounting expenses.
"Just a note to alert you to keep your eye on committee expenses. They are adding up," he said. "In the future, you may want to provide each committee chairman with an annual budget and to place a lid on the amount of compensation any board member can receive as a way of keeping spending down."
Caplan, now a law professor at George Washington University, could not be reached for comment. But Legal Services sources say that Caplan also had conversations with some board members, suggesting that they limit consulting fees to $15,000 each and contribute any hours worked beyond that limit on a pro bono basis, or free in the public interest.
Harvey did not respond to a request for comment. William Olson, who preceded Harvey as chairman of the Reagan board, said yesterday he had not seen those memos. He had seen an earlier memorandum from Caplan indicating that the board was operating at a deficit.
Clarence McKee, another board member, said yesterday that he was not aware of the memo, adding that he would oppose putting caps on fees unless they applied to every federal board. He called the fee "a pittance," and said that without it, "I don't know how they'll get the people to do the work."
The fee issue exploded into a controversy earlier this month when a House Judiciary subcommittee summoned Harvey and Olson to testify why the board had collected more than twice as much in part-time consulting fees as had any previous board. The 11-member board had collected more than $156,000 in fees for the 11 months, compared with $72,109 for the previous board.
Harvey, a law professor at Indiana University, and Olson, 33, a Washington lawyer, have said the main reason is that the Reagan board held three times as many meetings as the previous board. In addition, Congress approved an increase in consulting fees allowed board members from the 1981 level of $192 a day to $221 in 1982.
Olson, who received $19,000 in consulting fees, said yesterday that expenses have been higher because of the tremendous amount of time spent by the Reagan board on attempting to reform the corporation.
He said that previous boards have placed "virtually total reliance on the staff of the corporation to manage itself . . . . That's not something this board wanted to emulate." He added that the new board, with different ideas about what the program should accomplish, was faced with a hostile staff and ended up doing most of the work itself "to accomplish work we could not get the staff to do."
William McCalpin, the St. Louis attorney who chaired the Legal Services board in 1980 and 1981, conceded that the board was less active in 1981 after Reagan had announced his intention to abolish Legal Services.
"In 1981, there was a certain amount of treading water after the administration came out and said 'abolish the corporation.' In that uncertain period, there was perhaps less activity . . . , but we had regular board meetings and regular committee meetings."
McCalpin collected $3,456 in consulting fees for 1981 and $3,576 in 1980, compared with the more than $25,000 collected by Harvey in the first 11 months of 1982. McCalpin said he believes the board's workload in 1980 was probably comparable to the Reagan board's. Corporation records show the board collected $71,818 in fees that year.
He said his policy was for board members to charge consulting fees "only when we were out of our own home town on corporation business." Although he could have done so legally, he did not ask for reimbursement for time he spent in his own office on Legal Services work.
Several members of the new board, on the other hand, have filed fees for all the time they have spent on corporation business. Harvey, for example, filed for fees, ranging from a single hour to a full day's pay, on 187 days between Dec. 31, 1981, and Nov. 2, 1982, with most of the fees for time not involving official board meetings.
Olson said members were fully within the board's regulations in collecting the fees for work performed in their own offices. "We've been working at a level I felt was necessary to carry out the responsibility I undertook. My overhead is $45 an hour, and I make $29 an hour from Legal Services. This was a tremendous financial burden for me."
In its final action on its stopgap spending bill, Congress included an amendment to restrict consulting fees for board members to time actually spent attending official board meetings.