A Feb. 10 story about Republican presidential candidate Lamar Alexander incorrectly reported one of his law firm's clients. The client is Baptist Hospital of Nashville. (Published 02/23/96)

Lamar Alexander was a very busy man in 1995. Nearly every day was scheduled with events, sometimes five or more, for his fledgling campaign for the Republican presidential nomination.

Still, he was paid nearly $300,000 by a Tennessee law firm -- whose partners include Alexander's long-time mentor, former senator Howard H. Baker Jr. -- to provide legal and business advice to three clients.

"I tried to design the best system I could to let him work with us and earn some money and stay free to run," Baker told a Tennessee newspaper last year.

Managing partner Ben Adams said the former Tennessee governor's "salary is reasonable . . . specifically, he brings in more income than he takes out."

There is nothing unusual about a law firm hiring a big-name "rainmaker" who may spend no time poring over law books but is paid well for bringing in business. But in Alexander's case, it seems more of a contradiction. The man whose campaign symbol is the red-and-black flannel shirt of a working man portrays himself as an outsider in his bid for the presidency. But his political and financial history is that of the insider, who -- in public office and out - has profited handsomely from his connections.

Alexander on the campaign trail disdains "Washington, D.C." But his first job in politics was as a Washington aide to Sen. Baker, and he has served in two Republican administrations. Alexander says the federal government should have only the most limited role in education and that the Education Department should be abolished. But he acknowledges he never advanced the idea of doing away with the department when he served as its secretary from 1991 to 1993.

Alexander assails Malcolm S. "Steve" Forbes Jr. for designing a flat-tax proposal that assures "his yacht is tax deductible." But Alexander wrote off much of the cost of a six-month tour of Australia with his family when he wrote a book about the experience.

It is in his personal finances that critics say Alexander's outsider image most collides with his insider history. Alexander has dutifully released his tax returns and disclosed his finances since he first entered public life, and they show his net worth increasing substantially, in large measure because friends and political supporters included him in deals not available to the ordinary citizen.

Alexander in the past has dismissed such criticism. "It's always possible to say that because I was governor I gained some notoriety and met some people that allowed me to make money that I would not otherwise have made," he said. "It's also true that if I were not governor I would have made a lot more money."

Others see it differently. As Charles Lewis of the Center for Public Integrity put it in a book analyzing the financial involvements of all the presidential candidates, "If anything distinguishes Lamar Alexander's career as a public official, it is how much that career has benefited Lamar Alexander." Egghead to Populist

When Alexander announced his run for the presidency at the Maryville, Tenn., courthouse, he was wearing the red and black flannel shirt and attacking "the arrogant empire in Washington, D.C."

If those inside the Beltway were surprised at the attire and the attitude, those in Tennessee were not.

After losing in 1974 when he first ran for governor, it was a more folksy Alexander who carried the GOP banner four years later. He reintroduced himself to voters by donning the red and black and walking more than 1,000 miles across the state. The walk -- which he recreated with a drive across the country in the summer of 1994 and a walk across New Hampshire last fall -- helped Alexander shed his image in Tennessee as a somewhat aloof egghead for a more populist persona.

A 1977 campaign plan drafted by the Republican consulting firm of Bailey, Deardourff & Associates shows striking similarities with Alexander's presidential race, from the idea of a statewide walk complete with "walk uniform"; the motto of "Alexander's Ragtime Band with its Come on along' theme"; the candidate playing piano on the stump, and a distinct tack to the right.

"In the event of a primary, it would be prudent for the Alexander campaign to reinforce the Republican perception of him in a somewhat more conservative mold than he benefits from today," Bailey Deardourff advised the would-be governor.

Alexander served two terms as governor, from 1979 to 1987, where he won plaudits for bringing jobs to the state -- he was instrumental in bringing Nissan and Saturn plants to Tennessee -- and reformed its education system with a bold plan that featured merit pay for teachers.

He also raised taxes, an issue his GOP opponents are poised to exploit if Alexander begins to rise in the polls. He pushed a 1-cent increase in the sales tax to pay for his education program, the largest tax increase in state history, and raised gasoline taxes three times to finance road improvements. One rival campaign that has researched Alexander's record said it counted a total of 52 increases in taxes and fees during his tenure.

Alexander said he has no apologies for his tax record, noting that he balanced the budget in his state while keeping taxes low (Tennessee taxes remained the fifth lowest in the nation) and improving conditions.

"I don't have one minute of regret," he said. "I raised taxes to pay teachers more for teaching well and we had some of the worst roads in the country and now we have among the best. . . . I don't expect to hear any sermons from any Washington politicians who have voted to raise federal taxes about budgets and taxes and deficits."

Alexander's tenure as governor bears striking similarities to that of the man he is now trying to replace. In Arkansas, Bill Clinton was the nation's youngest governor at the time they both served, Alexander the second youngest. But Alexander says a comparison is misleading. "While we were working on a lot of the same things, we {the Alexander administration} were much more focused and got better results," he said. "By any standard, we moved out of the lower tier of southern states to one of the most entrepreneurial, rapidly growing states in America."

There is another comparison to Clinton that Alexander rejects: that questions surrounding some of the deals on which he reaped large profits for minimal investments would inevitably prompt comparisons to the Clintons' Whitewater venture and commodities trading.

Alexander says his investments and financial ventures demonstrate an entrepreneurial spirit lacking in most of his Republican rivals. "Being involved in business and investments will be a plus for me, not a minus," he said in an interview last year. "When I've been in private life I've made a lot of money. Most people would rather have a president who helped to start a business." In Office, Making Money

When Alexander was elected in 1978, his net worth was $151,000; when he became President George Bush's education secretary, his net worth was between $1.5 million and $3 million. Alexander spent all but 18 months of that time in public office, as governor and then president of the University of Tennessee.

His latest financial disclosure form, filed last May, shows him worth at least $3.4 million and possibly in excess of $6 million; Alexander said through an aide that he believes the exact amount is closer to $3 million.

Alexander and his allies say that financial success is a tribute to his business acumen. "Because he's been just as aggressive when he's been in the private sector as when he's been in the public sector, his life is not uncomplicated financially," said Tom Ingram, Alexander's chief of staff as governor.

But at least two transactions in which Alexander and his wife, Honey, made more than $750,000 with minimal investments took place while Alexander was in office.

In one venture, Alexander, during his first term as governor in 1981, was among a group of investors -- including Baker -- who each paid $1 for an option to buy the Knoxville Journal newspaper for $15 million. After deciding not to raise the money themselves, the partners arranged to sell the newspaper to Gannett Co. Alexander received Gannett options and stock eventually worth $620,000.

Asked how the group was put together, one of the investors, Don Stansberry Jr., now a partner in Alexander's law firm, said, "We've all known each other for years and done things before together." He said Baker's former press secretary knew the family that owned the newspaper and was key to securing the option.

Alexander said he became involved in the venture because "I was always planning to go back into private life and I had to find a way to support our family." Although he was only in his first term as governor, he said, "what I wanted to do was be publisher of the paper and it was available."

In another lucrative venture for the Alexanders, Honey Alexander invested $5,000 in a private prison management company, Corrections Corp. of America (CCA), founded by Thomas Beasley, a former state GOP chairman and Alexander backer, and financed by the late Jack Massey, a venture capitalist and Alexander ally.

When Alexander proposed turning over the overcrowded state prison system to a private firm, CCA applied. Honey Alexander said to avoid a conflict of interest she would divest her stock, which was not publicly traded. She exchanged it for other privately held stock, netting $132,000 four years later.

Later, after leaving office, Alexander did work for Whittle Communications, the Tennessee education and publishing firm. In addition to a $125,000 consulting fee, he received an option to purchase $10,000 of stock in Whittle.

Alexander's $10,000 check to buy the stock was never cashed. In the meantime, Alexander became president of the University of Tennessee and -- again to avoid a conflict of interest -- transferred his stock to Honey. Then, after Whittle agreed to sell part of the company for $185 million, a new check was written and Honey Alexander made a $320,000 profit.

Other Alexander friends also helped him financially after he left the governor's mansion. Massey endowed a leadership institute at Belmont University's Massey School of Business, with Alexander paid a total of $150,000 in 1987 and 1988 to head the institute. Alexander spent the first six months of 1987 in Australia, but a campaign spokesman said he met with an official from the Nashville university while abroad to discuss the leadership institute.

A university spokesman said Alexander's work consisted of investigating the feasibility of a permanent leadership institute (not yet created), addressing several classes and a university-wide convocation, and bringing in business leaders.

Massey Burch, a venture capital firm, also put Alexander on its board of advisers, paying him $44,000 in 1988, and arranged for a $200,000 line of credit to buy stock in its start-up companies. Alexander was allowed to borrow at the prime rate without having to put up collateral other than the stock he bought; the loans did not have to be paid off until he sold the stock.

The credit let Alexander purchase $93,000 in shares of stock in PhyCor, then a privately held company that operated medical clinics. Alexander began selling off PhyCor stock after the company went public in 1992, and has made about $220,000, with an additional $50,000 to $100,000 in stock held in trust for his four children.

Alexander's trip to Australia with his family resulted in a book, "Six Months Off." He received $45,000 in book advances and sold the movie rights for $7,500; then took $129,619 in tax deductions. Most of the deductions were for living and travel expenses, including the family's air fare, hotel bills, and rent; the campaign says the deductions were justified for all the Alexanders because the book was about the family's adventures.

Asked how voters might view a vacation financed by tax deductions, Alexander said, "If they can write a book about it and sell it, our tax law allows a reasonable deduction for expenses." Corporate Child Care

Of all his financial involvements, Alexander is most proud of his role in the creation of a company called Corporate Child Care Inc., which operates day-care centers at businesses. In interviews and campaign appearances, Alexander likes to trumpet that he founded a successful company.

"I'm here to offer you a choice, the choice of a Republican candidate from the real world . . . someone who's actually started a company in private life that today has 1,200 employees," Alexander told Ross Perot's United We Stand America conference in Dallas last August.

In fact, as described by those involved in the project, it was conceived by a long-time Alexander backer -- Brad Martin, who now operates a small business selling Alexander's trademark shirt -- and largely implemented by a another ally, a former aide to Alexander as governor.

The concept for Corporate Child Care grew out of a chance meeting in October 1986 between Martin and Bob Keeshan, better known as Captain Kangaroo, when Keeshan went to Tennessee to speak to a teachers' group.

At a dinner later, Keeshan told Martin about visiting a day-care center at a company; Martin saw a good business opportunity that would help Alexander, who was soon leaving office, and set up a meeting between Keeshan and Alexander.

Asked why he brought Alexander into the deal, Martin said, "One, I knew he was going to have time on his hands once he finished in the governor's office. . . . Number two, I think he is probably the best strategic thinker about major issues that I've ever known. I thought he would add a lot of value."

As it happened, the state had recently finished a study of the day-care issue, including a survey of the needs of Tennessee companies. Alexander recruited the aide who directed the study, Marguerite Sallee, to become company president.

As an example of Alexander's strategic thinking, Martin offers: "He felt strongly that the first CEO of this company should be a woman because the child care credentials of women in our society over time have been better than men's; that they would understand the need for quality first and foremost as opposed to simply the business proposition of it."

Alexander put up about $5,000, he and Martin jointly guaranteed a $200,000 loan and, two weeks after leaving office, Alexander took off for Australia.

Sallee said during that time she and Alexander faxed back and forth copies of a draft business plan. The contacts, she said, were "more than once a month, less than once a day."

As outlined by Sallee, Alexander's role in the company after he returned from Australia was largely limited to helping recruit a few top officials and raising venture capital, an endeavor in which, as Sallee described it, Alexander's connections were a critical component of the company's success.

"He made crucial introductions" to venture capital firms considering investing in the start-up business, Sallee recalled. "That's the way it's done all over the country . . . you need someone to help you go to the top of the pile."

In the end, Massey Burch, the venture capital firm on whose board of advisers Alexander was serving, provided $1 million of the initial $2 million in seed money.

Sallee said Alexander was never involved in the day-to-day management of the company "but I wouldn't have expected him to be. Founders do different things and I was to manage the day to day."

On his financial disclosure form last May, Alexander valued the shares that he and his wife own in Corporate Child Care at more than $1.1 million. Three Legal Clients

For a law firm, a well-known politician -- and a possible future president -- can be a useful addition to the letterhead.

"Lamar has a lot of contacts, a lot of potential clients -- you can get a door opened with Lamar if you want to get somebody's legal business. He did do that for us," said Randy Bibb, who practiced law with Alexander at an earlier law firm.

At the current firm, Baker, Donelson, Bearman & Caldwell, said managing partner Ben Adams, "based on the dollars he's bringing in and the costs associated with those dollars, he's being treated comparably to other partners."

One of Alexander's three clients during the last year has been Processed Foods Inc., a privately held frozen foods company. Alexander, brought into the company by long-time political supporter Sandy Beall, has invested $230,000 in the company and lists its worth on his financial disclosure form at more than $1.1 million; he also has received more than $1 million in fees, dividends, and capital gains from the company since 1988.

Processed Foods president Graham Hunter did not return telephone calls but told the Wall Street Journal that little work was being asked of Alexander. The law firm said Processed Foods ended its retainer on Feb. 1, when Alexander stopped his law practice. Another client was Texas Instruments, whose general counsel knows Alexander from their days as congressional aides together. Texas Instruments spokesman Robert L. Price said the company hired Alexander, Baker and former secretary of state Lawrence S. Eagleburger to "supply some high-level strategic thinking about events in the world."

He said Alexander advised the company on a model Head Start program it sponsors and briefed company officials after a trip to Japan and China. But he said he was not aware of any work Alexander had done since early 1995. Texas Instruments reduced its retainer to the law firm by one-third at the beginning of this month, when Alexander ended his law practice.

Alexander's third client was Baptist Hospital of Knoxville, which is paying a $10,000 monthly retainer, according to vice president Debby Koch. She said Alexander "has acted as a counselor on strategic and long-range planning issues," discussing such matters as managed care and maternal and prenatal care.

"The hospital president has talked with him about what he has observed in his travels and what he has observed when he was in Washington that was creative and innovative and can help us anticipate what the future of health care holds for us," Koch said. "We're going to be very sorry to lose his thinking." Staff writer Susan Schmidt contributed to this report. CAPTION: A LOOK AT: Lamar Alexander CHILDHOOD

Born July 3, 1940, in Maryville, Tenn. His father, active in GOP politics, worked as an elementary school principal and then at an aluminum plant; his mother ran a preschool. Alexander's many childhood activities included a paper route, sports and early-morning piano practice. EDUCATION Vanderbilt University, B.A., 1962 New York University, J.D., 1965 PROFESSIONAL EXPERIENCE Practicing lawyer, 1971-78 and 1993 to present U.S. secretary of education, 1991-93 President, University of Tennessee, 1988-91 Tennessee governor, 1979-87 White House assistant in congressional relations, 1969-70 Legislative assistant, Sen. Howard H. Baker Jr., 1967-68 Law clerk for U.S. Circuit Judge John Minor Wisdom, 1965 FAMILY Married Leslee "Honey" Buhler in 1969. Children: Andrew, 26; Leslee, 23; Kathryn, 21; and William, 16. HOT ISSUE: Decentralizing government

"I would not just fix welfare in Washington, D.C., I would end it and move the dollars back to you. . . . I have a short list of $200 billion of programs that we would move out of Washington and give the dollars and decisions to you, because you know what to do." About This Article

This is the fifth in a series of articles on the major Republican candidates for president that will look at their careers and philosophies and at how they attempt to address the distrust of the political system shown by many voters. CAPTION: In Waterloo, Lamar Alexander campaigns for Iowa GOP caucus votes. CAPTION: In second but successful run for governor, Alexander takes last steps in 1,022-mile walk across Tennessee in 1978. CAPTION: President Bush welcomes Secretary of Education Alexander to Cabinet in 1991 swearing in at Air and Space Museum. CAPTION: Campaigning for delegates in Monday night's Iowa caucuses, Alexander addresses student group this week at Simpson College, Indianola, Iowa. CAPTION: By three-vote margin, teenage Alexander tasted success at Boys State.