Looks Like a Conflict of Interest
Treasury Secretary Paul O’Neill says government ethics lawyers cleared his continued ownership and control of about $100 million in stock and options from Alcoa Inc., his former employer. However, other Cabinet officers, including the respected previous Treasury secretary, Robert Rubin, put their holdings in a blind trust during their public service. Given Alcoa’s multinational interests, O’Neill’s insistence on keeping the stock could easily give rise to real or apparent conflicts of interest.
Federal ethics laws do not require O’Neill to sell his Alcoa holdings, nor are we suggesting that he would use his post to benefit the company. He said he would recuse himself if a decision involving Alcoa were to come before him. But being virtuous in this key economic policymaking position affecting corporate taxes, international trade and exchange rates is harder than O’Neill may think. O’Neill, like Caesar’s wife, must be above all suspicion.
Alcoa, a $23-billion conglomerate operating around the globe, is the leading world producer of aluminum, with extensive operations in mining, refining, fabricating and recycling the metal. Its customers are aerospace companies, automobile manufacturers and rail and shipping companies often held by other governments. As Alcoa’s chief executive, O’Neill knew how to use his considerable clout in Washington. When Russia flooded the markets with cheap aluminum in the early 1990s, he spearheaded a lobbying campaign for what turned out to be one of former President Clinton’s most interventionist policies--an international agreement to limit the production of aluminum. The supply of aluminum dropped, prices went up, and Alcoa made hundreds of millions in profit.
At the Treasury, O’Neill says he would not participate in similar decisions. But he cannot avoid them. He is head of a Cabinet department that sets tax, monetary and trade policies affecting corporate bottom lines. He will deal with governments that will seek to benefit Alcoa in order to curry favor with O’Neill. Even if he did step aside, decisions would be made by those serving under him at the Treasury. The nominee for the Treasury’s No. 2 post and O’Neill’s right-hand man is Kenneth W. Dam, an Alcoa director.
The appearance of a conflict of interest is a serious problem for O’Neill, no matter how honest he may be. Rubin severed his financial ties with Goldman, Sachs & Co., his previous employer, when he joined Clinton’s White House, and O’Neill should follow that example. The credibility of U.S. economic policy is at stake.
