A major defense contractor dismissed one of its Washington vice presidents, former Defense Department assistant secretary Lawrence J. Korb, after senior Navy officials complained that Korb did not support President Reagan's arms program enthusiastically enough, according to Korb and some of the officials involved.
Two of Navy Secretary John F. Lehman Jr.'s top civilian deputies and an influential Senate aide several months ago told Raytheon Co., the nation's third-ranking arms merchant so far this year, that its future business dealings with the Pentagon could be harmed by Korb's presence. The Massachusetts firm was bidding for two major missile contracts at the time, both of which it later won.
The brief lobbying career of Korb, a defense analyst who served as the Pentagon's manpower chief from 1981 until 1985, provides an unusual glimpse of the workings of what President Dwight D. Eisenhower dubbed "the military-industrial complex."
Korb, who will soon become a dean at the University of Pittsburgh, said in an interview yesterday that he bears Raytheon no ill will, but was "aghast" that some officials would target him "rather than deal with the issues on their merits."
"I thought that in being loyal to the country, that was the highest form of loyalty to the company," Korb said. "One of the things I learned was that in business, the customer is always right."
The customer, in Raytheon's case, is largely the military, which has bought more than $2.5 billion worth of Raytheon missiles and other merchandise this year, according to industry analyst L. Douglas Lee. And the customer, particularly the Navy, protested vehemently when Korb contributed to a report urging the military to reorder its priorities to suit an era of more constrained budgets.
"The Navy objects strongly to officers of our contractors whose salaries are paid in part by Department of Defense, speaking as company officers, attacking President Reagan's program," Everett Pyatt, assistant Navy secretary for shipbuilding and logistics, wrote to a Raytheon executive in March.
Pyatt threatened to stop helping Raytheon in key ongoing competitions for Phoenix and Standard missile manufacturing contracts, Raytheon executives reported to Korb at the time. The executives also told Korb that Carl M. Smith, a Senate Armed Services Committee staffer who oversees the missile budget, had said he would no longer meet with anyone from Raytheon's Washington office.
Pyatt said Thursday that he does not remember whether his telephone conversation with Raytheon touched on any negotiations, but he remembers the call.
"I just called Raytheon, and I said I wondered when you started kicking the customer around," Pyatt said Thursday. "We had a competition going on for a couple of missiles, and Raytheon was a player. . . . The Korb thing was a great shock to me. I just wanted to know how a company could be emphasizing its support of the president's program, its desire to build good weapons at reasonable prices -- and they've been doing a good job -- and then have Korb come so far out of line."
A Raytheon spokesman declined to discuss Korb's departure. "We're just not going to talk about personnel actions within the company, nor are we going to talk about conversations that do or don't occur with the customer," the spokesman said. "He's accepted a job which he is qualified for, and we wish him well."
Korb's problems began with a Feb. 25 news conference of the Committee for National Security, whose board Korb had joined with Raytheon's permission, to release an alternative defense budget. The nonprofit group adopted a moderate position, urging a budget total for fiscal 1987 that was less than Reagan's request but greater than the House Armed Services Committee has since recommended.
"I said at the conference that I would like the budget to go up, but since it's not going to, we should do it in a way that's going to give us the most for our dollar," Korb recalled.
Korb's appearance was detailed in The Washington Post the next day under the headline, "Pentagon Ex-Defender Turns Critic." Korb complained in a March 4 letter to the editor that the article gave "a distorted impression" of his views.
The article quoted Korb saying that he was trying to protect "the excellent gains we've made in the past five years," but also tied him to the report's conclusions that a stronger force could be purchased for $200 billion less than Reagan had proposed for the next five years and that likely budgets could not support Lehman's treasured goal of a 600-ship Navy.
On the day the article appeared, Raytheon senior vice president R.G. Shelley received angry calls from Smith and Melvyn R. Paisley, assistant Navy secretary for research, engineering and systems, Shelley told Korb. At the same time, Pyatt called the chief of Raytheon's missile division, Dennis J. Picard, who "went to my boss, up in arms," Korb recalled.
"Pyatt told Picard, 'I've been helping you with all of these contracts, and you can't count on my help any more,' " Korb said he was told.
At the time, Navy contractors were wrestling with a Lehman edict that they would have to pay for tooling costs and other capital investments for which the Pentagon had always paid previously. According to Korb, Pyatt had worked with Raytheon to help soften the impact of the policy but said he would no longer provide such help.
"It's been a long time," Pyatt said this week, when asked if he made such statements. "I don't remember."
Pyatt also said he did not discuss the telephone call with Lehman, but recalled that Lehman was angry -- "further off the scope than I was" -- about Korb's remarks. Korb and Lehman had tangled inside the Pentagon when Korb questioned whether the Navy could afford enough sailors for all the ships Lehman wanted to buy.
A Navy spokesman confirmed that Lehman was angered by Korb's statements but said the secretary had not urged Raytheon to fire him.
Paisley declined through a spokesman to comment, and Smith could not be reached. Senate staffers like Smith are crucial to defense contractors, since few senators take the time to study the massive defense budget line by line, and Smith is a strong supporter of increased arms spending.
"He handles tactical missiles," Korb said. "He's obviously a very key guy for Raytheon."
Korb was summoned to company headquarters in Lexington, Mass., and told that his job was in jeopardy. He returned to Washington and attempted to explain his position, including his belief that The Post had misrepresented him, to Paisley and Pyatt.
"Paisley called Shelley back and said that he wasn't satisfied with my explanation," Korb said, reporting Shelley's conversations with him. "Paisley also said that John Lehman would be very unhappy with the story."
Two weeks later, Korb said, Raytheon executives said he would have to be replaced because of Navy objections, but that he could stay with Raytheon until September. On March 20, the company announced that Korb was now a "special adviser," not a vice president.
A few days later, Lehman called Korb and said that he had called Raytheon president D. Brainerd Holmes to say that Raytheon was "overreacting" and that Raytheon should "get me another job, out of town," Korb recalled.
In June, the Navy announced that Raytheon would become second-source manufacturer for Standard ship-to-air missiles, formerly a General Dynamics Corp. monopoly, and for Phoenix air-to-air missiles, until then a Hughes Aircraft Co. monopoly. Pyatt said Raytheon will have to pay tooling costs in line with Lehman's policy. Both lines have the potential to become multimillion-dollar additions to Raytheon sales, which totaled $6.4 billion in 1985, half of that to the government.
Korb said he is looking forward to assuming the deanship of the Graduate School of Public and International Affairs in Pittsburgh, a job he said he probably would have accepted in any case although it pays considerably less than he was making at Raytheon. But he said he fears his case may make other ex-officials less likely to debate policy in public.
Pyatt said he sees the episode differently. "Living down here is tough enough," he said. "You guys reporters pick on us all the time," as does Congress. "To get somebody like Korb -- I don't know what the hell he was trying to achieve."
Pyatt said it would have been "inappropriate" for him to tell Raytheon whether to fire Korb.
"I can say, 'I can't stand this guy,' and they can say, 'Too bad, he's our guy,' or 'We'll change him,' " Pyatt said. "I do that all the time."
Which outcome did he expect from his telephone call in this case?
"I don't know," he said. "I didn't much care. I felt good afterward."