A subsidiary of Sears, Roebuck & Co. has been involved in international arms sales for the past three years under the supervision of Frank C. Carlucci, President Reagan's choice to head the National Security Council, Sears officials acknowledged yesterday.
Through its Sears World Trade subsidiary in Washington, the nation's largest retailer has acted as a consultant to U.S. and foreign companies wanting to sell military equipment, according to James R. Allen, a retired four-star general who directly oversees Sears' defense consulting efforts.
The consulting work has included providing advice on selling anti-aircraft missiles, radar, transport jets, flight simulators and trailers for military equipment to the United States and Canada, said Allen, who heads the International Planning and Analysis Center Inc. (IPAC), the three-year-old consulting subsidiary of Sears World Trade.
Allen and 12 other former military officers make up 18 percent of the 72-member IPAC staff that also provides export marketing advice to Third World companies, with funding from the State Department's Agency for International Development.
Carlucci, who oversees IPAC as chairman of Sears World Trade, confirmed the center's role in military sales but said "in no case have [IPAC officials] ever done consulting on lethal weapons."
"They advise companies on the ins and outs of government procurement policy," said Carlucci, who will leave Sears World Trade at the end of the year for his new post with the NSC.
Earlier this year, Sears announced it would begin dismantling Sears World Trade, created in 1982 to become a major international import-export firm. Faced with troubles in its retailing and financial ventures, Sears concluded it could not continue incurring losses from Sears World Trade, which has had a total of $ 60 million in losses since its inception.
IPAC's military activities apparently were not widely known at Sears' Chicago headquarters, where officials expressed surprise when first questioned about the defense contracts IPAC had worked on.
"We received periodic reports on Sears World Trade as an entire company, but I don't personally remember" being briefed on these particular activities, said Donald Rumsfeld, a former secretary of defense who serves on Sears' board.
"You're kidding," responded another board member, who declined to be named, upon learning of the military contracts. "I have to confess ignorance, and I certainly would have remembered it if it had been discussed," the board member said.
"Senior corporate management doesn't focus on specific deals a subsidiary is doing," said Douglas A. Fairweather, director of Sears corporate media relations. Nonetheless, he added, "we're confident that the transactions we were involved with were perfectly legal and appropriate things for Sears World Trade to be doing."
With Carlucci's appointment as Reagan's national security adviser, Sears World Trade is receiving even more attention than it did as a money-losing venture. After serving as deputy director of the Central Intelligence Agency and deputy secretary of defense, Carlucci joined Sears World Trade as president in 1983 and became chairman a year later. He was instrumental in creating IPAC and hiring former military officers, former Sears World Trade employes said.
Carlucci said, "Sears World Trade was not in the arms business." It has done "nothing other than give advice in the defense contracting area."
According to Allen, "the biggest effort" in this area was IPAC's work with Contraves Co., a Swiss firm that was competing for a $ 600 million contract to build a low-level air defense system for Canada. Teaming with Raytheon Co. of the United States, Contraves was to provide the radar, anti-aircraft missiles and computerized directions for the missiles and guns, Allen said. "We assisted them in preparing their proposal -- providing people that could write in English, since it was a foreign country," Allen said.
Additionally, IPAC advised Contraves on how to meet Canada's rule that any foreign company doing business with the government must buy an equal amount of Canadian goods. IPAC suggested a program in which Contraves would use some Canadian-made parts and buy some Canadian products, such as automobile and refrigerator parts, for resale abroad.
"Contraves did not win that competition," said Allen.
A more successful venture was IPAC's work with McDonnell Douglas Corp. and its efforts to win Air Force backing to develop and build a new transport airplane, the C17. As a former Air Force general and military airlift commander, Allen played a critical role in this contract. "I understand airlift requirements very well and can help [McDonnell] make sure the airplane meets the requirements" of the Air Force.
Allen said IPAC is also working with Canada's CAE Electronics, which makes flight simulators for commercial and military aircraft. "We work with them, helping them conduct market analyses, strategies and market opportunities," to see whether these simulators can be sold to governments, including the United States.
Another IPAC client is a Dutch trailer manufacturer that is seeking to build a special trailer for the U.S. Army that can carry heavy equipment and navigate over narrow roads at the same time.
"That type of trailer is not produced by any U.S. manufacturer so we've been working to find a U.S. manufacturer that would be a good teaming partner by which they could enter this competition. We have found them such a partner, and the necessary contractural agreements have been worked out."
Sears officials point out that Sears World Trade is a minuscule part of the company -- with revenue of one half of one percent of Sears total sales. Sears World Trade had revenue of $ 236.4 million last year; Sears Roebuck's total revenue was $ 40.7 billion. IPAC's revenue last year was $ 3.5 million, Allen said.
With the dismantling of Sears World Trade, IPAC's future is unclear, Allen said. "There are a number of options," he said. Sears officials have said they may either sell the company to another firm or to IPAC employes.