Revolving Door Corporate Executives
Revolving doors through which corporate executives glide effortlessly between private sector employment and government jobs and back again seem to be a fixture of every national Administration. Neither the Democratic nor Republican Administrations are immune from the practice which blurs the distinctions between the interests of corporate
America and the broader concerns of the public at large. Former Secretary of Treasury Robert Rubin, a star player on the roster of the outgoing Clinton Administration, is a perfect example of how thoroughly and profitably the personnel and interests of large international financial institutions and the federal government are meshed. Mr. Rubin moved into government as Treasury Secretary in 1995, leaving the co-chairmanship of Goldman Sachs, one of the nation’s leading investment firms. In the summer of 1999, he went through the revolving door again, leaving government to return to the upper echelons of finance, this time as part of the three-person leadership team at Citicorp, the giant banking, insurance and securities conglomerate.
A number of ethics laws have been enacted to lessen the possibility for conflicts of interest when former government employees return to the corporate sector. Most employees are barred from contacting their former agency in behalf of others for one year after they leave government. In the case of senior employees, like Mr. Rubin, a Presidential Executive Order extends the prohibition to five years.
Questions about just how vigorously these ethics laws are enforced came up recently concerning the role of Mr. Rubin in the passage of the far-reaching Financial Modernization Act of 1999. The New York Times
quoted Mr. Rubin, who drafted and promoted the bill while Treasury Secretary, as saying that he had a role in the final compromise which led to the passage of the bill after he left office and while he was in negotiations for his job with Citigroup the major beneficiary of the legislation. In fact, Mr. Rubin’s job was announced four days after the compromise was accomplished.
Mr. Rubin was obviously regarded as a major catch by Citicorp. In fact, during just the two months of his employment in 1999, Mr. Rubin received $21.4 million in salary and stock options a livable wage even
by Wall Street standards.
When the bill was reaching final passage, Mr. Rubin was also serving as Chairman of the Local Initiatives Support Corporation (LISC), a leading community development group with a direct interest in the legislation. A contact on behalf of LISC would have been a breach of ethics as would an approach for Citicorp.
In addition to the reports in the Times, the Wall Street Journal said Mr. Rubin acknowledged that he had “some conversations” with respect to matters relating to the Community Reinvestment Act (CRA). The article quoted Mr. Rubin as “confirming” that he spoke with his successor, Treasury Secretary Lawrence Summers.
After these stories appeared, several consumer and community organizations and I wrote Stephen Potts, Director of the Office of Government Ethics asking for an investigation of Mr. Rubin’s post-employment conduct as it related to the financial legislation. In short, were the news stories about Mr. Rubin’s role accurate? That letter set off a series of near-comical non-replies that eventually stretched from the Ethics Office to the Inspector General of the Treasury Department to the Public Integrity Section of the Justice
Department andback. None of the agencies wanted to provide us with straight answers or provide any factual basis for failing to pursue the case. It was classic “pass the buck” and “please don’t ask me” answers out of the bureaucrats’ survival manual. No one wanted to be caught answering specific ethics questions about a former Cabinet officer of a sitting Administration.
Mr. Potts, chief of the government-wide Ethics Office even went so far as to plead that his was “not an investigatory agency” and, therefore, could not take up the case. This despite the fact of the office’s own published regulations which state “…the director may initiate proceedings under this section for the purpose of making a finding as to whether there has been…a violation.” After five single-spaced pages devoted primarily to renditions of various ethics statutes, Mr. Potts told us he thought it would be best for us to ask the Treasury Inspector General or the Justice Department about ethics, not the Office of Government Ethics.
All this might be dismissed as simply one more case of timid bureaucrats who see no career-advancing potential in challenging high officials in government, including high former officials. But, there is much more at stake. With corporate interests and big campaign donors dominating so much of government decision-making, it is important that ethics laws be vigorously enforced if public confidence is to be maintained in our
Dropping the issue without full public disclosure of the investigation and exposition of the findings casts serious doubt on the efficacy of government ethics laws and could have a negative impact on compliance by government employees of lesser rank than Mr. Rubin.
The Republican Party which is assuming the Presidency this monthhas had much to say about ethics during the terms of the Clinton Administration. It will be interesting to see whether the incoming Administration will take steps to strengthen the ethics machinery in a manner that will keep the lobbyists and the corporate influence peddlers at least a arms length from the decision-makers in the Cabinet and in the agencies.
President Bush should take immediate steps to put strong public interest Inspectors General in office in all departments, and to beef up the Justice Department’s public integrity section. It is time to prove that Republican rhetoric about ethics wasn’t just another political ploy to be dropped when the inaugural bunting comes down.