OT(?)
Ron,
You should also write your Senator asking they pressure O'Neil to divest, it looks Bad:
InsightMag.com
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The $100 Million Misunderstanding
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By John Berlau
Berlau@insightmag.com
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Although most of Bush’s Cabinet members are complying with the president’s order to rid themselves of any and all financial conflicts of interest, there may be some holdouts.
Eight years ago the Clinton administration promised the “most ethical administration in history,” a line that on reflection seems to have come from a Jay Leno monologue.
To demonstrate how seriously his administration would take ethical issues, one of Clinton’s first actions was to announce that for five years after leaving government, no former public official would be allowed to lobby the government. Eight years later, with all the Clintonistas about to leave government and look for employment, Clinton quietly dropped the ban. So much for the centerpiece of his ethical “reforms.”
Now a new administration has arrived promising to restore honor and integrity to the White House. How is it doing?
To the credit of the president, all indications are that this White House is making ethics a priority. But there appear to be inconsistencies in the standards for top officials.
“Each employee of the White House has signed an ethics agreement,” a White House spokeswoman says. “We’re all required to go to a briefing that’s put on by the Office of Government Ethics, and they talk to us a lot about financial conflicts of interest, as well as gifts-received policies. In addition, the White House Counsel’s Office goes to each of the individual offices, like the Press Office, to make a presentation. They then ask, ‘What questions do you have?’ ”
To help draw up his ethics policies, President Bush brought in as an associate counsel Robert Cobb, a lawyer who for nearly a decade was a civil servant at the Office of Government Ethics, an independent agency. Then, on his first day in office, the new president issued an executive order outlining “standards of official conduct” for all executive-branch employees. “Public service is a public trust,” the Bush order declared, and “everyone who enters into public service for the United States has a duty to the American people to maintain the highest standards of integrity in government.”
One of the most prominent standards raised in the Bush order is that “employees shall not hold financial interests that conflict with the conscientious performance of duty.” But some think the refusal of Treasury Secretary Paul O’Neill to sell his huge holdings in the company he used to run may put him in conflict with this policy.
In contrast to other administration officials recruited from the corporate world by Bush and Vice President Richard Cheney, O’Neill plans to keep his $100 million in stock and options in Alcoa, the giant aluminum company he served as chairman and chief executive officer (CEO). O’Neill explains that he simply will recuse himself from any decision that might affect Alcoa. Defenders say most of Treasury’s actions probably will not have a direct impact on the company.
“There’s no direct dealing with the financial markets in an aluminum company,” says C. Boyden Gray, White House counsel to former president George H.W. Bush and a partner at the law firm Wilmer, Cutler & Pickering. “Were he at the trade-rep’s office, where you would have trade problems, or EPA [Environmental Protection Agency], where environmental issues come up all the time, or the Department of Energy, where the price of electricity is very important for aluminum smelting, there would have been a different result. But Treasury won’t have any direct role, and he’ll just have to be careful not to get involved by accident in some way in any one of those decisions.”
But critics note that Treasury deals with a broad range of policies that could impact a company as big as Alcoa. For instance, it has a big say in trade agreements and tax issues. And, as if anyone could forget, the IRS is one of the many law-enforcement agencies under the control of the treasury secretary.
“The problem is that, because Alcoa’s such a big company, it raises the specter that when you deal with Alcoa you’re dealing with the treasury secretary, especially on the international scene,” says Tom Fitton, president of Judicial Watch, an ethics watchdog group that was one of the Clinton administration’s fiercest critics. “This man controls the comptroller of the currency, Customs, Financial Crimes and Enforcement, all sorts of things. If Alcoa’s as big as it says it is, of course it would be impacted. He would be an ineffective treasury secretary if he had to recuse himself from every decision that would impact Alcoa.”
Fitton acknowledges it may be a financial sacrifice for O’Neill to unload his shares all at once but notes that this is a price corporate executives frequently have paid to serve in the Cabinet. “I don’t want to deprive Mr. O’Neill unnecessarily of the benefits of his work for Alcoa, but the fact is he decided to join the Cabinet of the president of the United States,” Fitton says. “Such a decision leads to questions like this, and he’s got to be prepared to take a financial hit if necessary. If he isn’t, then he shouldn’t be secretary.”
Interestingly, in documents O’Neill submitted to the Senate Finance Committee, he promised to divest his “full interest” in certain mutual funds, limited partnerships and even General Motors to avoid conflicts of interest. Insight made several calls to O’Neill’s office, seeking answers to questions such as why General Motors would be a potential conflict but a $100 million holding in Alcoa wouldn’t. At press time, none of those phone calls had been returned.
O’Neill’s actions stand in dramatic contrast to those of Cheney, who was CEO of Halliburton Corp., a huge oil-services company, before Bush selected him as his choice for vice president. Cheney sold his stock in Halliburton and turned over his unvested options to an independent administrator to give the proceeds to charity.
O’Neill’s actions also differ from those of another member of the Bush Cabinet who has been scrupulously careful to avoid even appearances of conflicts. Nearly 25 years after serving as defense secretary in Gerald Ford’s administration, Donald H. Rumsfeld received a surprise phone call late in December from President-elect Bush asking him to return to the top job at the Pentagon and oversee restoration of the U.S. military. After leaving government, Rumsfeld had served as CEO of G.D. Searle & Co., the pharmaceutical giant and on important corporate boards. When Searle was acquired by Monsanto Corp. in 1985, his holdings there were liquidated. But when nominated he still had a complex portfolio, to say the least, and set out immediately to sell everything that might conflict with his new job.
Rumsfeld’s friends say he spent somewhere between $200,000 and $1 million in legal and accounting fees just to disclose his holdings and identify what should be sold to avoid conflicts. A longtime financial adviser to Rumsfeld who spoke with Insight would not confirm a total cost but says, “There were a number of law firms involved and thousands of hours spent on this.”
According to the financial professional, “Rumsfeld felt it was important to be in a position to be confirmed on the date the president was sworn in as a member of the president’s national-security team. There was a sense of urgency.”
The new defense secretary divested not only stocks that were defense-related but also investment funds that held such stocks, even though he had no control over what companies those funds might buy or sell. He even sold his interest of between $1 million and $5 million in Compass LLP, a limited investment partnership that does not tell its customers what it invests in. It was not clear that he was required to sell this, but the scrupulous Rumsfeld refused to leave even the slightest appearance of conflict.
“Compass could invest in defense contractors or not, and since we cannot pierce their shield to see what they’re investing in, they’ve got to go,” the financial adviser says. “The consensus of the parties was that because the underlying assets could not be discerned, it was prudent to divest this asset.”
Secretary of Commerce Don Evans also came from the corporate world, having worked his way up to chief executive of the oil-exploration company Tom Brown Inc., where he began as a worker on an oil rig. “He plans to divest himself of all stocks that could pose a conflict of interest,” his spokesman Jim Dyke tells Insight. Evans currently is in the process of completely divesting his stock and options in Tom Brown, says Dyke.
Avoiding potential conflicts always is a challenge for people who were successful in the private sector before going into high levels of government. For the Bush administration, it was particularly so because of the time crunch resulting from the delay in determining the presidential winner and because so many of Bush’s choices were experienced managers from corporate America.
Bush, himself, has had his investments in a blind trust since being elected governor of Texas in 1994. After he was elected president his holdings were “moved from just a blind trust to a federal, qualified diversified trust,” a White House spokeswoman tells Insight.
The lawyerly Clintons, by contrast, didn’t have their blind trust set up for more than six months after taking office. And, during this time, an Arkansas-based limited partnership owned by Hillary Rodham Clinton profited from selling pharmaceutical stocks short even as she was bashing the pharmaceutical companies for opposing her national health-care plan. “There is no set of rules in the world that will keep a potential miscreant from getting around them,” points out Alvin Felzenberg, director of the Heritage Foundation’s Mandate for Leadership 2000 and a senior official in the administration of President Bush’s father.
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