Appearances Count in Conflicts of Interest

As the Washington press has occupied itself looking for conflicts of interest in the Enron scandal, another possible ethical issue--this one involving Environmental Protection Agency head Christine Todd Whitman--has gone largely unnoticed.

EPA national ombudsman Robert J. Martin has accused Whitman of trying to muzzle him at the very time he is challenging an EPA agreement beneficial to a primary backer of Whitman’s husband’s venture capital firm. Congress is likely to hold hearings on the controversy in the coming weeks.

In a Jan. 10 lawsuit in the U.S. District Court for the District of Columbia, Martin, the EPA’s public interest advocate, complained that Whitman reassigned him in an attempt to eliminate his independence within the agency. Martin alleges that Whitman’s action stems from his opposition to a pending agreement regarding a Superfund site in Denver. The site is owned by Citigroup, which in 1995 spun off and today remains a principal investor in John Whitman’s company, Sycamore Ventures. Citigroup was also John Whitman’s employer from 1972 to 1987, and he and his wife own as much as $250,000 in Citigroup stock.

The agreement between the EPA and Citigroup--which was reached before Whitman arrived at the agency--would limit the financial titan’s liability for cleaning up the Shattuck Chemical Co. Superfund site to $7.2 million. EPA scientists have estimated the full price at $22 to $35 million. Martin has separately concluded that a proper cleanup of the Shattuck site, which contains a 15-foot mound of radioactive soil and is located within blocks of homes and parks and within range of the local drinking supply, would cost as much as $100 million. Limiting Citigroup’s liability to $7.2 million could therefore transfer up to $93 million of the cleanup’s cost to taxpayers.

The position of ombudsman was created in 1984 to help mediate community concerns over Superfund sites. The ombudsman does not have decision-making authority but acts as a kind of complaints department--investigating issues raised by citizens, local governments or companies dissatisfied with the EPA bureaucracy and, when appropriate, advocating alternatives. In the Shattuck case, Martin wanted to hold public hearings on the cleanup agreement and testify before the federal judge who must approve or reject it. He was prohibited from traveling to Denver by Gary Johnson, the EPA’s assistant inspector general, who would become his boss under the reassignment proposed by Whitman.

Lawmakers on Capitol Hill, including Republican Sens. Wayne Allard of Colorado and Michael D. Crapo and Larry E. Craig of Idaho, oppose the reassignment, fearing for Martin’s independence. The senators, along with a bipartisan group in the House of Representatives, urged Whitman to delay the move until congressional hearings could be held. Instead, she tried to transfer Martin over the Christmas recess.

Now the reassignment has been delayed. U.S. District Judge Richard W. Roberts has issued a temporary restraining order in response to Martin’s lawsuit that keeps the ombudsman in his job until Feb. 26 (when a fuller hearing will take place). The additional time gives Senate and House members an opportunity to hold hearings, where Whitman will no doubt be asked to explain her actions.

EPA spokesman Joe Martyak denies any wrongdoing: “The conflict of interest being proposed here simply doesn’t exist, because she’s been up front about what her involvement is with Citigroup.” The terms of the EPA-Citigroup deal were first reached in December 2000, before Whitman even took office, says Martyak, and her reassignment of the ombudsman is a “totally separate decision” that will actually give him greater independence.

“I would add that she set a very high standard for ethical responsibility in the state of New Jersey,” says Martyak. “The way she ran her administration there is just the way she’s doing things here at the EPA.”

But that is hardly reassuring. As New Jersey’s governor, Whitman abolished the environmental prosecutor’s office as well as the public advocate’s office. She slashed enforcement budgets in favor of corporate “self-audits,” a voluntary approach that lets companies grade their own performance. It was all in the name of declaring New Jersey “open for business,” as a Whitman slogan put it.

One firm that benefited from that business-friendly climate was Mail.com, an Internet company in which John Whitman held a 10% stake and on whose board of directors he served. Mail.com won a $1.6 million grant from the New Jersey Commerce and Economic Growth Commission in November 1999.

Gov. Whitman denied having done anything unethical, noting that in the current era of two-career households, such situations were not uncommon. She did, however acknowledge that the situation “certainly raises an issue that I think we’re going to have to come to grips with.”

Whitman’s recent actions suggest she still hasn’t “come to grips” with the issue, that she has failed to grasp a crucial concept for public officials: It’s not just the conflict of interest that matters but the appearance of a conflict.

We can’t know if Whitman’s reassignment of the ombudsman was intended to remove him from the Shattuck case. But the timing is striking: She is muzzling Martin at the moment his actions could interrupt a settlement extremely favorable to Citigroup. The ombudsman has produced no evidence that Whitman intervened in order to benefit the corporation. But the appearance of a conflict should prompt her to stay at arm’s length from anything having to do with the settlement--including reassigning the deal’s chief critic.

Which points to the broader issues raised by Whitman’s case. Like top officials in all three branches of government, Whitman is a very wealthy person with financial interests in a range of fields affected by government actions. Unless we want to bar such persons from government service outright, the nation must devise more meaningful protections for the public interest.

The federal Office of Government Ethics currently stipulates a two-step process: an official must declare his or her financial interests and shun “substantial participation” in decisions affecting them. Whitman has listed her interests, and her spokesman attests that she has also avoided participation in forbidden matters. But she should go further.

An official at the Office of Government Ethics points out that a Cabinet secretary who wishes to go beyond the minimum standard can issue a formal recusal letter, directing staff to isolate the secretary from issues of personal financial sensitivity. Even better, said the official, is for a secretary to put all financial holdings into a blind trust, as Vice President Dick Cheney and Treasury Secretary Paul H. O’Neill have done. Whitman has done neither of these things.

Meanwhile, how Whitman conducts herself over the next month will help decide whether the Bush administration, already having to distance itself from the Enron scandal, will face a second conflict-of-interest scandal. And both controversies illuminate a larger question: Is ours a government of, by and for the people? Or of, by and for the corporations?