Stiff Sentence

By Amy Wilentz

It was a moving tribute to a man who has retained his friends if not his reputation. Dozens of supporters from the military, corporate and political elite pleaded for leniency. "I don't know of another man living in this country who has been as dedicated, patriotic and such a willing and constant servant to our Government and our Constitution," Senator Barry Goldwater of Arizona said in a letter. "I have always found him to be honest and forthright," wrote former President Gerald Ford.

The testimonials were for naught. In one of the stiffest penalties ever imposed in an insider trading case, a federal judge last week sentenced former Deputy Secretary of Defense Paul Thayer, 65, to four years in prison (the maximum sentence is five years) and ordered him to pay a $5,000 fine. Co- Defendant Billy Bob Harris, a Dallas stockbroker, received the same sentence. Both men had pleaded guilty last March to charges that they had obstructed justice by lying to Securities and Exchange Commission officials who were investigating whether Thayer, then the chairman of LTV Corp. and a director of Allied Corp. and Anheuser-Busch Cos., had passed inside information to Harris and others about future mergers and acquisitions.

"I have destroyed a life of achievement based on trust and integrity," the silver-haired Thayer told Judge Charles R. Richey before the sentence was announced. "The last two years have been a living nightmare. I don't like myself as well as I used to." After hearing the punishment, Thayer's wife and daughter leaned over to embrace him. Thayer was to begin serving his term this week at a minimum security prison camp in Big Spring, Texas.

Defense Lawyer Robert B. Fiske Jr. argued that the letters on Thayer's behalf showed that his criminal conduct was "an aberration." From September 1981 to September 1982, according to the SEC complaint, Thayer passed information that made $1.9 million in illegal profits for a close-knit circle of Thayer's and Harris' friends. Though Thayer did not pocket any profits from the tips he handed out, one who did benefit was Sandra Ryno, 39, a former LTV receptionist with whom Thayer had a "private personal relationship." Ryno agreed to cooperate with the Government's investigation and was given immunity. Meanwhile the SEC is pursuing a civil case against two others allegedly involved in the scheme: William Mathis, the former New York Jets running back who is now an Atlanta stockbroker, and Malcolm Davis, a convicted gambler.

The day before their appearance in federal court, Thayer and Harris, along with a Texas banker, Gayle Schroder, agreed to pay more than $1 million to settle the SEC suit against them--one of the largest settlements in the commission's history. Thayer paid $555,000 of the total, roughly equal to the illegal gains of his friends. "He has made more than full restitution," said Fiske. Although the SEC failed to get Thayer and the others to pay back profits made by more remote beneficiaries who might have got secondhand tips from the inner circle, securities experts say that the case has set legal precedents. "This establishes a principle that the SEC has asserted for some time," says Washington Securities Lawyer John Olson. "The tipper is liable for the profits of tippees."

Fiske called his client's crime "a foolish mistake." But the prosecution saw it differently. "Mr. Thayer probably had more money at the time than everybody in this courtroom combined," said Assistant U.S. Attorney Charles H. Roistacher. Thayer did what he did, Roistacher insisted, because "he thought he could get away with it."

Richey said he had considered Thayer's reputation a mitigating factor in the case, but he added that the court would not "hang a medal on the lapel of your coat for the breach of trust, for the false statements . . . and the obstruction of justice you have engaged in in recent years." Lawyers for Harris and Thayer asked that they be given community service in lieu of hard time. But Richey said a stiff sentence was needed "to maintain the integrity of our sacred system of justice."

With reporting by Anne Constable/Washington