Interior Secretary Donald P. Hodel fired Chrysler Corp. Chairman Lee Iacocca as head of an advisory commission on the restoration of the Statue of Liberty yesterday, saying the administration "would not be bullied" into keeping him.
Hodel said the firing was necessary because of the potential for conflict between the Statue of Liberty-Ellis Island Centennial Commission, a presidentially appointed panel, and the private fund-raising foundation that Iacocca has headed for more than three years.
Iacocca remains head of the private foundation, set up to raise money to restore the deteriorating American landmarks. The commission essentially recommends how the money raised by the foundation should be spent.
The announcement drew a quick and forceful response from Iacocca, who has been asked twice in the last week to relinquish the post and has twice refused.
"The secretary's statement was off the wall and in clear contradiction of the facts," Iacocca said. "I resent any inference on his part of conflict of interest.
"The truth is that the secretary is in conflict with his own charter. This is a grab for four years' worth of contributions by the American people."
Hodel said he had told Iacocca of the decision to fire him Monday, but that Iacocca apparently believed the matter was still under discussion. Since then, according to Interior officials, spokesmen for the Chrysler chairman have blitzed the department and the White House with calls insisting that he be retained.
"I decided that this department would not be bullied," Hodel said. "It was imperative that I not delay further."
Despite Hodel's insistence that the action was aimed only at insuring that Interior get "independent" advice on how to spend more than $230 million raised by the foundation, the firing quickly drew a round of conflicting explanations.
According to two former administration officials, the decision to fire Iacocca was made by White House chief of staff Donald T. Regan several months ago, and goes back to what one called "extremely bad blood" between Regan and Iacocca over Chrysler bailout legislation.
"Don Regan hates his guts," said one of the former officials, adding that the animosity is so deep that Regan asked for a car other than a Chrysler when he joined the White House staff.
Other administration officials said the dismissal was politically inspired, aimed at preventing Iacocca from usurping the limelight at next year's centennial hoopla for the Statue of Liberty.
Iacocca is considered a dark-horse contender for the Democratic presidential nomination, although he has repeatedly denied any White House aspirations. "The worry was that he was too much into self-aggrandizement," said one official. " [Vice President] Bush was really hot."
Others familiar with the work of the Ellis Island renovation project said Iacocca had earned the enmity of some in the business community by his opposition to commercial development of the historic landmark, the landing spot for millions of immigrants -- including Iacocca's parents.
"There had been various proposals to commercialize Ellis Island. Conference hotels, the whole nine yards," said one source. "He was personally opposed to any proposal that would destroy the historic nature of Ellis Island and he said so many times."
As chairman of the commission, Iacocca would have been in a far stronger position to control Ellis Island development.
Administration officials had raised no conflict-of-interest questions when Iacocca, initially appointed to the commission in 1981, was reappointed last November.
Hodel said Iacocca raised the question himself last month when he sought to remove two other commission appointees who also served on the foundation.
In a telegram from the foundation's lawyer, Chicago banker Armen G. Avedisian and Interstate Commerce Commission member J.J. Simmons were told they would have to choose one of the groups because Iacocca wanted "no crossover of commission and foundation board membership."