Staff attorneys for the Office of Government Ethics concluded in a report some time ago that Attorney General-designate Edwin Meese III twice violated federal ethical standards, but the director of the ethics office, David H. Martin, overruled them, it developed yesterday.
The recommendations of the staff attorneys were not disclosed. Instead director Martin, who acted after consulting with White House counsel Fred F. Fielding and Meese attorney Leonard Garment, wrote a letter to the Senate Judiciary Committee saying Meese had complied with all relevant standards.
The ethics report, disclosed in yesterday's editions of The Wall Street Journal, is expected to be a major issue today when the Judiciary panel begins confirmation hearings on Meese.
Chairman Strom Thurmond (R-S.C.), a Meese supporter, summoned Martin and the two staff attorneys to testify. "The senator wants all relevant information to be brought out so we can make a reasoned and intelligent decision," said his press secretary, Mark Goodin.
The leading Meese opponent on the committee, Sen. Howard M. Metzenbaum (D-Ohio), had been arguing that Meese was ethically unfit to be attorney general. He hailed the staff attorneys' report yesterday as "independent confirmation" of that view.
Aides to committee members said Martin was likely to be asked not only about the grounds for his decision but whether it was common practice for him to consult with outside figures such as Fielding and Garment and to overrule his staff.
Meese was first nominated to head the Justice Department last year. The nomination ran into trouble after assorted disclosures about his financial affairs, including that he helped find government jobs for some people who had given him financial help.
An independent counsel was finally named at Meese's request, and cleared him of violating the law. When President Reagan renominated Meese this year, he was expected to win easy approval, even though Metzenbaum and other opponents such as Common Cause still contended that he had ethical problems.
The ethics staff report was critical of Meese's financial relationships with two persons later given government jobs, Thomas Barrack and John McKean. The staff attorneys said Meese violated federal regulations that forbid an official not only from conflict of interest, but from actions that "might . . . create the appearance" of conflict.
The regulations also caution officials not to take actions that create an impression that they have lost "complete independence or impartiality of action."
Meese's lawyer, Garment, said the lawyers who prepared the staff report "had the facts wrong" in the Barrack and McKean cases.
One of Meese's problems when he came here in the first Reagan term was selling his California house. Barrack ultimately helped arrange its sale and contributed part of the money.
Garment said yesterday that the ethics staff lawyers thought Meese had known all this when Barrack was hunting for a federal job, but that in fact Meese "only knew Barrack was helpful in getting an ultimate purchaser for the house."
Meese was part of a four-member senior personnel committee that recommended Barrack for assistant secretary of commerce.
The ethics attorneys also cited Meese's relationship with McKean, who had been Meese's accountant. Meese failed to recuse himself from a meeting that led to McKean's appointment to the U.S. Postal Service board of governors even though McKean arranged two loans to Meese totaling $60,000.
In a memorandum to Martin explaining why he should not adopt the staff conclusion, Garment wrote, "It is clear from the undisputed facts that when the senior staff met in July 1981, Mr. Meese believed, and had good reason to believe, that he was not receiving anything of value from Mr. McKean, except the minimal courtesies that professionals ordinarily extend to clients for general business reasons."
"Mr. McKean had simply arranged the loan . . . . Whatever 'benefits' one could say Mr. McKean had conferred upon Mr. Meese were therefore technical and insignificant."
Martin did not respond yesterday to requests for his version of the events.
Though opposition to Meese's nomination had dwindled, aides earlier had said that senators with reservations would question Meese about several other matters.
Sen. Edward M. Kennedy (D-Mass.) was expected to ask him about his commitment to civil rights enforcement. Several senators also had been expected to question him about his request to the government for reimbursement of more than $700,000 in attorneys' fees that he ran up defending himself during his investigation by the independent counsel. That would involve paying Meese's lawyers up to $250 a hour, while the basic government policy is not to pay more than $75 an hour to lawyers who prevail in cases against it.