The Wheat Deal (Contd.)

The complexities of the grain market are too confusing to permit quick conclusions on whether the Nixon Administration's wheat deal with the Soviet Union led to improper profits and thus amounts to another scandal from which the Democrats ought to be able to reap campaign benefits. But one facet of the highly complex situation looked like a clear-cut case of conflict of interest. Two high Government officials involved in the negotiations with the Russians quit their Agriculture Department jobs to take top positions with two U.S. exporting firms that had much to gain from the Soviet sales. Last week one of these officials, Clarence Palmby, an Assistant Secretary of Agriculture who became a vice president of Continental Grain Co. at far more than his $38,000 federal salary, was called before Texas Democrat Graham Purcell's House Agriculture Subcommittee on Livestock and Grains. When the brief hearing was over, Purcell declared that "if there was anything done that was legally wrong, we didn't prove it."

He did not, in fact, try. Purcell's questions were perfunctory, and all of Palmby's denials of advance information and unusual profits for his new bosses were accepted at face value. Yet Palmby's story invites skepticism. He testified that he was asked to join Continental last March, took part in initial negotiations with the Russians in Moscow in early April, discussed the sales further in Washington with the Soviet deputy of foreign trade in May, and announced his intention to resign two days later. He joined Continental on June 8 --and on July 2, he escorted the Soviet grain buyers on a sightseeing tour of Washington, D.C. On July 5, Continental sold 150 million bu. of wheat and 41 million tons of feed grains to Russia. This was three days before the Administration announced its big grain deal. After the announcement, Continental quickly sold Russia another 37 million bu. of wheat.

When Palmby denied bringing any inside information to Continental, no one on the committee pressed him on why Continental sold wheat at precisely the same terms as those announced three days later by the White House. No one questioned why Continental would commit itself to selling 150 million bu. to Russia without some assurance that the Agriculture Department would protect its price by raising the export subsidy--as it later did. Because of the amount of money involved, Continental apparently risked heavy losses without such assurance.

Moreover, advance knowledge of the impending sale would have given Continental an enormous potential for gain. The company, knowing it could not lose, could have speculated heavily in wheat futures. Its officials could have quietly instructed their agents to buy all the wheat they could at the low prices then in effect, but hold off their subsidy payment claims until the export subsidy rose. The subcommittee's small staff had gathered no evidence that Continental had done any such thing--but no one thought to ask Palmby about it. Earlier, Purcell's subcommittee had allowed Agriculture Secretary Earl Butz to avoid any discussion of specific market transactions concerning wheat on the ground that confidential trade secrets were involved. Butz admitted, after previous denials, that one of his aides had tipped off six large export companies about an impending change in subsidy policy.

Purcell's gingerly approach apparently stems from the fact that he faces a tough re-election fight in Texas and is not sure how his constituents view the issue. The ineptness of his probe has taken some steam out of other congressional groups interested in examining the deal. A subcommittee of the House Government Operations Committee, with far more expertise, has been waiting to dig deeper into the potential conflict-of-interest situation.

Other examinations into the wheat deal are still in progress, however. Vice President Spiro Agnew last week announced that the FBI was investigating whether any large U.S. exporters had made illegal profits in the deal. That surprising concession led newsmen to check the FBI, where they were told no such probe had been directed. One day later, the FBI did get such an order from the Justice Department, creating a debate over whether this was done only because Agnew had mistakenly said it was under way or whether Agnew had merely misunderstood the timing. The Commodity Exchange Administration, an arm of the Agriculture Department, has launched a study of the Kansas City Board of Trade, which deals in the kind of wheat sold in greatest bulk to Russia, to see if exporters have been placing heavy orders late in a trading day to boost the following day's wheat export subsidy. The General Accounting Office is also looking into the activities of both the Agriculture Department and the big traders in the deal.

Whether there was any illegal or unethical conduct is yet to be determined. There is general agreement, however, that the Russians made a shrewd deal, demonstrating intimate knowledge of the capitalistic U.S. market. They got themselves out of a serious grain shortage at bargain prices. The U.S., in return, found a new market for its grain, which will help decrease its balance of payments deficit. Most wheat farmers should benefit in the long run from the higher prices. One byproduct of the wheat and corn sales to the Russians, however, is that they will feed inflation in the U.S., particularly in pressures on the price of bread, pork and beef.

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