Is It Worth the Price?

A new Ethics in Government law takes its toll

The wealthy entrepreneur had made a fortune in the electronics businesses of Northern California's "Silicon Valley." In his mid-40s, possessing a proven record of management, he seemed the very model of a Reagan top appointee. As he sat in the drab Washington office of E. Pendleton James, the President-elect's personnel director, visions of the sub-Cabinet danced in his head.

"Pen, what's the deal with conflicts?" the man asked. "You know I have a lot of money in a lot of companies." James told him about the 62-page Ethics in Government Act of 1978 and said: "Come back and talk to me when you feel comfortable." The man never returned. Laments James: "He got on a plane for San Francisco that afternoon."

That is only one of many stories being told by the Reagan transition team. They are the first to form an Administration under the new law, and they complain that its strictures have discouraged many capable citizens. Among them:

> The bright, young Citicorp executive who was offered the job of Deputy Energy Secretary. But his family has interests in oil wells, and the law defines "family holdings" rather broadly. The executive is still at Citicorp.

> A senior vice president of a FORTUNE 500 firm in Ohio who was up for a job as Under Secretary of the Interior. Yet the "revolving door" provisions of the new act, which restrict a person's dealings with Government after he leaves office--in some cases for life--would have prevented him from becoming his company's president. He decided to stay in Ohio.

> The successful New York businessman in his 60s who was being considered for a high-level job in the Administration. When he was told about the new requirements for detailed financial disclosure, he withdrew his name, saying: "Nobody knows how wealthy I am! I don't even want my children to know."

The act is the latest of a long line of rules promulgated since Congress, in 1863, first made it illegal for officials to make decisions that might affect their own financial interests. The 1978 act puts real teeth into that idea, requiring a more detailed disclosure of assets and thus opening up a broad range of hitherto ignored potential conflicts. In addition, the new law makes it much harder for officials to dump their holdings into a blind trust. Under that arrangement, a trustee exercises control over the assets, theoretically shielding the officeholder from conflicts of interest. Yet these devices tended to be what former Senator Abe Ribicoff called "blind trusts with 20/20 vision." The official often knew what he held.

Under the new law, the trusts cannot be top-heavy with stocks that relate to the official's job. Commerce Secretary Malcolm Baldrige, for instance, is selling his stock in Scovill Inc., the manufacturing conglomerate he headed. But others are using complex disqualification agreements to avoid such drastic sales. Donald Regan, the new Treasury Secretary, has promised to disqualify himself somehow from matters that might affect his holdings in Merrill Lynch, the brokerage firm he formerly headed. Reagan's choice for Labor Secretary, Raymond Donovan, says he will not make decisions affecting the New Jersey construction companies in which he will continue to have interests.

Some public servants dislike the act intensely. Says former Treasury Secretary William Simon: "It is just ridiculous. We're going to end up with nothing but academics and neuters." Says Citicorp Chairman Walter Wriston, also once considered as a possible Treasury Secretary: "Had the people present at our Constitutional Convention been obliged to pass the conflict-of-interest test, it is doubtful that many of them could have got through the door."

Nobody, of course, argues with the intent of the law. Even wealthy Republicans have long been willing to disclose and divest as required by previous rules. Nelson Rockefeller went through a detailed financial disclosure when he became Vice President in 1974, and General Motors President Charles Wilson sold his GM stock before becoming Eisenhower's Defense Secretary in 1953.

Nor has the new law fulfilled the direst predictions of its critics. A Washington Post story last week reported that many departing Carter officials are having no trouble finding firms willing to quadruple their salaries in order to tap their expertise, despite the revolving-door strictures, which went into effect in 1979. The Reagan team, too, has found that for Cabinet appointees the prestige outweighs the financial burdens. The only person known to have refused a top job solely because of a potential conflict was Clifford Hansen, Reagan's first choice for Interior Secretary, whose family holds grazing rights on federal lands. Such a conflict would have been forbidden, justifiably, even under previous rules.

But the new law, as well as spartan salary scales for top federal jobs, has clearly slowed the appointment process at the sub-Cabinet level. Fred Fielding, the transition's conflict-of-interest counsel, proposes modifications, such as requiring an appointee to disclose the nature of each of his assets without having to specify the exact amount of those over $10,000. Says he: "It is conflicts, not wealth, that the public is concerned with." He also suggests that financial disclosure be made only to congressional committees, not to the public.

Common Cause President David Cohen disagrees: "Public disclosure forced the law to be taken seriously. The Reagan people are using inconvenience as an excuse to change the law." Adds Deputy White House Counsel Michael Cardoza: "The law works. It protects the President from scandal, and Reagan should welcome that." Both sides may soon have a chance to air their arguments: Malcolm Wallop, chairman of the Senate Ethics Committee, hopes to hold hearings on the law. "We've got to weigh the abuses against the loss," says Wallop. "Maybe there's some middle ground." qed

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