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Casey Misunderstood Blind-Trust Rules, Ethics Office Says

March 28, 1985

WASHINGTON (AP) _ The head of the Office of Government Ethics said Thursday that CIA Director William J. Casey and his lawyers misunderstood the rules of his blind trust when they excluded his stock in Capital Cities Communications, a media conglomerate planning a takeover of ABC.

Casey did not put his Capital Cities stock into a blind trust when he established one for most of his other investments in 1983. A spokesmen for Casey said that was because government ethics regulations do not permit such trusts to include a stock that is more than 20 percent of a person’s entire holdings.

But David H. Martin, director of the government ethics office, said his office is authorized to grant exceptions to that exclusion rule and can permit the Capital Cities stock to be placed in Casey’s blind trust.

″At the time the trust was set up, I truly think ... Mr. Casey and his lawyers were under the impression that indeed there was no exception available to them on the Capital Cities stock,″ Martin said in a telephone interview.

″In fact, we could have made an exception at that time, had they applied,″ Martin added. ″They didn’t, apparently because they misunderstood they could not, that that asset was not eligible for the blind trust.″

Casey said late Wednesday that he is willing to place the shares in the trust. CIA spokeswoman Kathy Pherson said Thursday that the director has sent a letter to his personal attorney who handled the blind trust, Leonard Silverstein, authorizing him to take the steps needed to have the stock moved into the trust.

Silverstein did not immediately return a reporter’s telephone call seeking comment.

Martin said the office probably will grant an exception and allow the stock to go into the trust.

Ms. Pherson said she did not know the exact number of shares Casey holds and could not confirm reports that he holds 34,755 shares. That amount would be worth more than $7 million.

Casey’s latest financial disclosure form, dated May 15, 1984, states that his Capital Cities stock is worth more than $250,000 and that his wife’s holdings were valued at between $100,001 and $250,000.

Casey established the blind trust in October 1983 while under pressure from Congress because of his stock dealings while CIA director.

Asked if Casey or his lawyers misunderstood the blind trust, Ms. Pherson said, ″All I know is he had asked his attorney to work out the transfer of securities to a blind trust.″

She quoted a letter Casey wrote in August 1983 to Sen. Barry Goldwater, R- Ariz., then chairman of the Senate Intelligence Committee: ″The Office of Government Ethics has advised my attorney informally that my holdings in Capital Cities Communications do not meet the diversification requirements and I will therefore hold them outside the trust.″

Martin said regulations of his office under the Ethics in Government Act set a limit of 20 percent in any one block of stock for such a blind trust in order to assure diversification and that the securities are readily marketable.

If a person’s portfolio is dominated on by one stock, he said, ″you don’t want a blind trust. You want a recusal.″ That means, he said, that the person would excuse himself from any consideration or action on dealings with that company in the course of his government job.

Linda Gustitus, minority staff director of the Senate Government Affairs subcommittee on oversight of government management, which handles ethics matters, said the 20 percent requirement was to ensure the ″blindness″ of the trust.

If an official had a blind trust that was heavily weighted by one company, she said, he would be aware of the significance of that holding, since trustees do not necessarily sell all stock put in the trust.

″You’d still be subject to a possible conflict of interest because even if it’s in the trust, you’d know it may still be there, and you’d know the signficance of it,″ the Senate aide said.

Under the exception Casey may obtain, she said, he would still have to excuse himself from any agency dealings with Capital Cities.

Martin declined to comment when asked if the holding of such stock by Casey could present an appearance of a conflict of interest, of if the Capital Cities takeover of ABC would pose a conflict or appearance of one.

The CIA under Casey last November filed an unprecedented complaint with the Federal Communications Commission contending that an ABC news report involving the intelligence agency was deliberately biased. The FCC rejected the complaint, and the CIA this year asked the commission to take another look at the matter.

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