Clintons Putting Financial Assets Into Blind Trust

After questions Wednesday about money Hillary Rodham Clinton holds in a mutual fund that has invested in health-related stocks, the White House announced that the President and his wife had decided weeks ago to put their assets into a blind trust and have nearly finished the process.

“The paperwork has been completed and is at the Office of Government Ethics” for review, White House Deputy Communications Director Ricki Seidman said.

Seidman said she did not know precisely when the Clintons began preparations for the trust, only that the move has been in the works for weeks.

The Clintons have assets of roughly $1 million--government financial disclosure forms do not show the precise amount but only a range of values--much of which was tied up in Mrs. Clinton’s law firm partnership until she left the firm after the election.

Between $50,001 and $100,000 of their money is in a mutual fund run by Smith Capital Management, Inc., a Little Rock, Ark., investment company in which Mrs. Clinton has held shares since 1986. As of Dec. 31, the fund had about 13% of its $8.9-million holdings in health-related companies--ranging from a hospital to a medical equipment manufacturing company. The fund invests in small- and medium-sized companies that appear to be good prospects for rapid growth, according to its prospectus.

Mrs. Clinton’s investment and a list of the stocks were disclosed on financial forms released by the White House this week. News organizations questioned the White House Wednesday about Mrs. Clinton’s holdings.

As head of the Administration’s health care task force, Mrs. Clinton’s decisions clearly would have some potential impact on the stock of virtually any health care-related firm. Indeed, given the importance of health care to the economy, decisions on that issue would almost certainly affect the stock value of practically any firm in any industry.

But no law required Mrs. Clinton to sell her holdings or place them into a trust because she is not a government employee. Nor is it clear whether Mrs. Clinton would have had to sell her holdings even if she were a government employee.

Government ethics laws generally relate to stocks that a person can directly buy or sell, rather than those held by a third party whose actions the officeholder does not control. Mrs. Clinton’s stake in the mutual fund amounts to 0.9% of its total shares, an amount that gives her no control over its decisions on which stocks to buy or sell, White House officials noted.

Mrs. Clinton “has no control over the investments” and “the fund does not own a significant proportion of any health care concern,” Seidman said.

“If she were a government employee, we probably would have advised her to get a waiver,” she added. Federal ethics laws provide for waivers that allow an official to continue to work on policy matters that might affect their financial holdings as long as the potential conflict is disclosed to their superior officers. Several senior Administration officials have received such waivers both under Clinton and in the George Bush Administration.

Bush kept his assets in a blind trust throughout his tenure, but other senior officials in the past have resisted doing so because of the costs involved and concerns about lack of control over their money. Four years ago, for example, then-Secretary of State James A. Baker III resisted placing his holdings into a blind trust until he was forced to do so by controversy generated in part by his bureaucratic rival, White House counsel C. Boyden Gray, surrounding his investments in bank stocks.

Typically, setting up a blind trust that meets government regulations takes considerable time, involving both accounting and legal reviews and the selection of a trustee.

The Clintons did not disclose their decision to seek a blind trust to many White House aides, leading some senior White House officials to deny that a blind trust was contemplated up until only minutes before Seidman revealed that a trust was in the works.

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