FORD'S TOUGHEST WEEK

Suddenly Gerald Ford ran into his toughest week of the presidential campaign--and perhaps of his entire political career. For a month Ford has been closing fast on Jimmy Carter. But now the President was struck by a series of setbacks that were remarkable even in this mercurial year, marked by flip-flops at the podiums and in the polls. Amid the flood of blunders and bad news, there were also reports that revived questions about the President's probity in the past. Some of the charges were both old and minor, but even his supporters feared that unless Ford was able to make a clear and quick refutation, he would be seriously damaged.

As Ford was besieged on every side, Carter's camp worked overtime to take advantage of the situation. Nobody has ever accused Carter of lacking an instinct for the jugular, and he displayed it clearly throughout the week. For the first time since Labor Day, the Democratic candidate was scoring points with the voters, as he crisscrossed the country and hit hard at Ford at every stop. In his attacks, Carter was so aggressive that it was possible he would provoke a sympathetic backlash for Ford--if the allegations about him were shown to be untrue or grossly overblown. But for the moment, the President gave the Democrats plenty to criticize:

> Ford's grasp of foreign policy and even his mere competence were called into question during his debate with Carter when he insisted that the Soviet Union does not dominate Eastern Europe.

> His ability to manage economic policy--and his hopes of going into the election with a nicely improving economy--Were challenged by the news that in September wholesale prices jumped at about an 11% annual rate, the steepest rise in eleven months, and that unemployment declined only a hair, to 7.8% (see ECONOMY & BUSINESS).

> His leadership capacity was again being debated because of his hesitation in firing Agriculture Secretary Earl Butz for making an obscene, racist remark.

> His straight-arrow reputation came under suspicion because of reports, confirmed by the White House, that in 1972 he had drawn on his political campaign funds to pay for clothing and plane tickets. The amounts were relatively small and, in the case of the plane tickets, quickly paid back to his campaign fund. But Ford had violated Congress's Code of Official Conduct, which states that "a member shall keep his campaign funds separate from his personal funds" and "shall expend no funds from his campaign account not attributable to bona fide campaign purpose." Such separations can be difficult and ambiguous, as any taxpayer knows who has dealt with (and perhaps fudged) the line between personal and business expenses.

Further, Watergate Special Prosecutor Charles Ruff, who is investigating Ford's use of his congressional campaign money, last week brought a witness to testify before a Washington grand jury. The witness was Jesse Calhoon, president of the National Marine Engineers Beneficial Association, one of the two maritime unions that contributed to Ford's campaign funds when he was a Congressman but more recently broke with him.

Democrats were euphoric about the President's mounting political misfortunes. Crowed Carter's issues coordinator, Stuart Eizenstat: "If there is to be a turning point in this election, I think this week may very well have been just that." Carter has lately seemed more at ease after revising his scheduling system so that he works shorter hours and suffers less from fatigue. He has also become more forceful on the stump. According to a survey by TIME correspondents, Carter already holds a comfortable lead in electoral votes, with 273 v. Ford's 113.

Sensing Ford's vulnerability, Carter kept up the offensive. To the cheers of delighted audiences, he slashed at Ford for his failure to replace some old-line Nixon officials ("Ford has not changed the Nixon Administration"). Most of all, Carter challenged Ford to explain his income tax "discrepancies" and what he meant by saying that the people of Eastern Europe are not under Soviet domination. "Mr. Ford is hiding from the American people," charged Carter. "I call upon the American people to force Ford to tell the truth." "My God," moaned one newsman, "Ford is bleeding from every pore and Carter is going after more blood."

Of all Ford's problems, Republicans in Washington were particularly depressed over the whiff of possible scandal in his handling of campaign finances as a Congressman. Earlier this year, acting on the orders of Special Prosecutor Ruff, teams of FBI agents had combed through Ford's campaign financial records in Grand Rapids from 1964 through the present time, and reportedly found nothing. But last week, an informer in Washington slipped a confidential and highly sensitive document to two pairs of investigative reporters: the Wall

Street Journal's Jerry Landauer and Christopher A. Evans and the Washington Post's Carl Bernstein and Bob Woodward.

The document was a 13-page Internal Revenue Service summary of its audit of Ford's personal and political finances from 1967 through 1972; the audit was made as part of the Senate's confirmation hearings after Ford was selected by Richard Nixon to succeed Spiro Agnew. The identity of the informer still is not known (to disclose audit information is a misdemeanor). According to the Washington Post, he is a Carter supporter who gained access to the audit during Ford's vice-presidential confirmation hearings. The Post said that the man insisted he was acting on his own and without prompting from the Democratic camp.

Shortly before the confirmation hearings in November 1973, the audit was made available to the Senate Rules Committee, and his finances were also intensively investigated by the FBI. Ford was given a completely clean bill of fiscal health in the hearings. Speaking of last week's publication of the audit and the debate over Ford's finances, Michigan Republican Senator Robert Griffin, a member of the Rules Committee, said: "If that's all there is, I'll be pleased." But the audit does show that Ford on at least two occasions dipped into campaign funds for personal use.

The first occurred on Nov. 30, 1972, when he wrote a check for $1,167 against his Gerald R. Ford Fifth District Account at the Union Bank and Trust Co. in Grand Rapids. That account, into which Ford's campaign contributions and honorariums for speeches were deposited, was supposed to be used only for campaign and political purposes. However, the money was spent for air tickets for his family and himself to fly from Washington to their Vail, Colo., vacation retreat for Christmas. Ford paid the money back into the Fifth District account by writing a check, dated Dec. 16, against his personal checking account with the House of Representatives' sergeant at arms, who provides free banking services for members. That account, however, was overdrawn by $1,763.87, so that the new check put him $2,930.87 into the red.

Somewhere along the line, a friendly soul--or perhaps Ford himself--evidently held on to the check until he was able to get his personal account back into balance. Not until Jan. 11, 1973, did the check clear the Federal Reserve Bank of Richmond, which processes checks for Washington-area banks. Thus, Ford had the personal use of campaign funds for some six weeks.

The second instance: In 1972 checks totaling $871.44 were written against the Fifth District Account for clothing that was worn by Betty and Ford. He believed that the clothing constituted a legitimate political expense, since he and Betty bought their new togs to use at the 1972 G.O.P. convention, when Ford appeared on national television to introduce Nixon's Cabinet. The IRS ruled that the outlay was not a legitimate campaign expense and he was assessed--and paid--$435.77 in additional taxes.

FBI agents have been looking into the books of a Grand Rapids advertising agency, Insight, Inc., which handled Ford's congressional election drives in 1970 and 1972. Indeed, agency executives explained that they really caused the trouble about the clothing purchases because they urged Ford to modernize his mode of dress. Says one of them, Jeff B. Davis: "We wanted to put him in brighter colors and suits with wider lapels that had a more modern look." Adds Davis: "At the time, we were also representing a clothing store, so we picked out a wardrobe for him, and as a matter of course, the store billed us." Then Davis billed Ford's campaign account. Concedes a chagrined Davis: "We were babes in the woods."

An astonishing aspect of Ford's audit was what he did not spend. The IRS inspectors concluded that in 1972 he used only $225 of his private money for personal expenses--or $4.33 per week. The audit states that when informed of that figure, Ford expressed surprise. As an explanation, his aides maintain that he did not have to spend much. For example, as an important Congressman, he was usually the guest at luncheons; when he was not, he lunched in his office on cottage cheese and grapefruit juice.

The IRS audit accepted Ford's story about his spending habits. According to the Washington Post, the audit, however, did note that in 1972 Ford paid most of his day-to-day living expenses from checks drawn on a bank account funded by honorariums from speeches, reimbursements for travel and some political contributions. The bank account was the Fifth District one, and the IRS assertion only buttressed the impression that Ford did not fully live up to the House ethics requirement of maintaining a strict separation between private and political funds. The overall impression that emerges from the audit is one of a rushed and overworked man who was occasionally somewhat strapped, and dipped into his political account for needed cash without intending to cornmit any offense or jeopardize his reputation. (On his $49,500 annual salary, Ford was then putting two of his four children through college and maintaining three homes--in Alexandria, Va., Grand Rapids, Mich., and Vail, Colo.)

Ford's other financial problem concerned Special Prosecutor Ruffs investigation into contributions from two maritime unions, the Marine Engineers Beneficial Association and the Seafarers International Union, both of which are among the highest political spenders in U.S. labor. They are anxious to win political support in order to gain special subsidies and other protection for American vessels that otherwise would be competed off the seas by lower-cost foreign shipping. Maritime unions contributed to Ford's congressional campaigns, but they turned against him after 1974 when he vetoed a potentially inflationary bill that would have required 20% of all imported oil to be carried in U.S. ships. This year the maritime unions gave their support to Carter.

A federal investigation has been under way for three years into allegations, by a former National Maritime Union official turned informer, that his union paid regular stipends of about $2,000 a month to a number of friendly Congressmen, including Ford during the 1960s when he was House minority leader. The witness said that he paid the money to an intermediary, who turned it over to legislators; the intermediary denies it. Attorney General Edward Levi told TIME: "The department has found no substantiation for the charges ... Ruff is aware of them." An IRS report on the investigation was sent to Justice Department officials just as Ford became Vice President in 1973, but they discounted it because of the low credibility of the informer. Ruff began to probe into the matter after he was tipped to the existence of the report by several sources, including an aide to a Democratic Congressman. Asked by TIME about these charges last week, Ford's chief of staff, Richard Cheney, said, "The charge is so outlandish and preposterous and also false that it doesn't merit comment."

As part of the special prosecutor's investigation of Ford's use of previous campaign funds, Ruff last week also interrogated the Marine Engineers' union president, Calhoon, before a Washington grand jury. Ruff was most likely engaged in a prosecutorial practice known as "freezing testimony." This procedure puts a witness's sworn testimony into the record for possible later reference. Calhoon's responses before the grand jury may well have indicated Ford's innocence; if so, Ruff was nevertheless correctly carrying out his mandate by asking the questions in the forum.

The ironic--and potentially tragic --effect of Ruffs punctilious performance of his duties was to leave the President possibly accused in the eyes of the public, with no certainty that all the accusations can be resolved in the few weeks before the election. Grand jury members and prosecutors are sworn to secrecy. Ruff cannot discuss any aspects of his investigation until it is completed. By removing the office of the special prosecutor from any political influence and making him responsible only to the charter under which he operates, Congress in effect required Ruff to continue to investigate even though the allegations might have seemed to be shaky and he undoubtedly knew that his probe would affect the elections.

Ford's week of misadventures and buffeting left his campaign aides confused and rattled; at times late in the week, the President looked particularly grim. Said a campaign official: "We recognize that something has to be done, and fast, but what that something is, nobody seems to know." Vice President Nelson Rockefeller was being primed to lead a counterattack against Carter this week in hopes of putting the Democrat again on the defensive. The G.O.P. plan is for Rocky to hammer away at Carter's finances, raising questions about his campaign contributors and the tax records of his family-held peanut farm and warehouse. Some of Ford's advisers recommended that Republicans should point to Carter's use of tax benefits, notably the tax credit on capital improvements in his business, which allowed him to pay only 13% of his income in federal income taxes last year, v. Ford's 38%.

The President and his aides knew that this strategy would be only a delaying action, that ultimately Ford would have to answer reporters' questions about the financial charges. But what more could he say? His aides had already explained his spending for the trip to Vail and the clothing in 1972. As for the maritime unions investigation, only Ruff could declare the President's innocence.

In a way, the President was being victimized by a post-Watergate zealotry for total exposure of the affairs of public servants, and by the public's seeming insistence that they live up to standards that few other men meet. Though a breach of House ethics, the President's use of campaign funds seemed a rather modest offense. As for the maritime unions investigation, no accusers had been publicly identified, no formal charges had been leveled.

It would be tragic if the investigations stretch out inconclusively until Nov. 2 and cast a pall of suspicion over the election. Yet there have been so many surprises in Campaign '76 that next week could bring some new blunder or fresh disclosure, tossing the contest once again topsy-turvy. No doubt Candidate Ford has been badly set back, but, given the nature of this election, the winner could turn out to be the man who makes the second-to-last goof.

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