O'Neill's stock holdings

Posted: Monday, March 12, 2001

The following editorial appeared in Sunday's Washington Post:

When a Treasury secretary happens also to be wealthy, as is often the case, it's hard to know what to do about conflict of interest. There is almost no way such an official can avoid taking positions that have a bearing on his financial self-interest. Current Secretary Paul O'Neill acquired about $100 million worth of Alcoa Inc. stock and stock options in the years he ran the company.

He has caused a stir by saying he won't sell it but will seek to avoid conflicts of interest through the never-convincing process of recusal. In fact, repeal of the estate tax - which he advocates as a principal spokesman for the president's tax cut plan - would likely do more in the long term to enhance his fortune than anything he could even begin to do as secretary to advance the interests of Alcoa. The one is regarded as a possible conflict of interest, the other not, when the result - the policy-maker gains from the policy - is the same.

We find his decision not to dispose of the Alcoa holdings troubling even so. We do not mean by that to challenge O'Neill's own integrity, which has been amply demonstrated over a long and admirable career. The issue isn't O'Neill; it's what should be the rule for officials generally. The suggestion is that a powerful official can safely be permitted to retain an enormous financial interest in a company whose fortunes his decisions and recommendations as to public policy are bound to affect-that he will somehow be unaffected by that interest in the carrying-out of his official duties. Our experience - and the country's - is that that's a bad bet as a general rule.

The departmental ethics officer ruled that it was okay - within the law - for O'Neill to keep the stock and rely on recusal. The message that sends seems to us too lax; it undercuts the higher standard to which many lower-level employees are, and ought to be, held. There are ways for him to dispose of the stock without tax penalty. Predecessors with comparable holdings have put them in blind trusts with instructions to sell and diversify over time or resorted to similar devices to avoid even the possible appearance that public policy was being made for the wrong reasons. That's more than the law requires, but it's the right standard - and the right example to set - nonetheless.

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