DEPUTIES' MEETING, 20 FEBRUARY 1962
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K
Document Page Count:
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Document Creation Date:
November 11, 2016
Document Release Date:
November 4, 1998
Sequence Number:
15
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Publication Date:
February 20, 1962
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MEMO
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t*putiee' Meeting, 20 Pbbury 1962
ACTX C F O1 ANDRM J4
TO s Colonel White
Following your briefing this axaoruing on the recent ssaemorendim
issued by the President to the heads of executive departments and
agencies conoerning ponflicts of interest on the part of advisors
and consult wts to the Aoverxp ent, the Director asked that you
have Mr. $oixstvr3 aot>;tirnaee the study in this area he is presently
maklxg in ru unction with the XC. After the study is completed and
problems we may have, the Director ' would like to be further advi sed.
The Director 'saw no objection to your amending our present
regulations to &ncorporata >aontion of conaultra.nts vjA advisors,
and stated that be himself had wised with the White House the
question of any possible conflicts of interest on the part of
the Killian; Board. He noted that no r ction is required by thi.a
Agency id that zagard as the General Counsel of the White House
Is Studying that particular situation.
cc: General Counsel (Added by DD/S on 2/21/62)
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PRESIDENT ISSUES
CODE OF CONDUCT
FOR U.S. ADVISERS
White House's Memorandum
Seeks to Clarify Role of
Scientific Consultants
WOULD AVOID CONFLICT'
Government. Will Insist on
Being Told of Private
Interests of Its Aides
CIk(I. FINNEY
Special to The New York Times.
Feb.
he White House issued today
ew "standards of conduct"l
signed to prevent scientificU
t err 'Governmental positions
f r personal gain.
.t take administrative steps to hd
assure compliance with conflict-
o -interest; laws and regulations
b advisers and consultants to
t e Government.
The new rules strengthen
p esent regulations by requiring
nt informed about their pri-
v to financial interests. They
w uld also be specifically en-
jo ned against using their "in-
side information" as fiovern-
m nt advisers for "private
g in.,,
t the same time, the mem-
or ndum modifies present laws
a regulations by granting the
a isers it special exemption
U. S. ADVISERS GET
CODE OF CONDUCT
PYRGHT I
ingly into work on Government
research contracts and their use
as Government advisers present-
ed a possible violation of the
conflict-of-interest laws.
Civil-War Era Laws
As the White House noted in
is announcement, these laws,
ractice of making widespread
se of consultants and advisers.
The laws were particularly
osition or influence to help
art-time advisers and consult-I
nts proved "inconsis ent" and
onfusing, a bite House
nouncement pointed out.
ust
nterests
st
The Administration has pro-{
One of these rules specifie
sed a modernization and
that at the time of his appoint
rengthening of these laws
ment the adviser must file wit
,st year. The legislation would
the Government a statemen
t up special provisions to deal
listing his private employment
ith the problems of part-time
salary, his financial interests
nsultants and advisers.
including the names of con
The legislation was approved
cerns he serves in any capacity
the House last year and is
and the names of companies i
w pending in the Senate Ju-
which he holds any securitie
iary Committee. The Admin-
of "significant financial value.
ration is hopeful that the
During the time he serves, th
islation will be approved fi-
individual must keep this in
lly by Congress this session.
formation up to date.
In the meantime, the White
At present, it has not been
use said, "it has become nec-
the practice of Governmen
ary to resolve the uncertain-
agencies to demand such fi
s of the existing statutes and
nancial information.
reassure those who are ap-
Another of the ruules speci-
hensive that innocent con-
fies that an adviser may not
ct may be deemed wrongful."
use "inside information for
private gain
for
himself
per
fai-cilly
ention in recent months,
The
business ofalso financial ties.
my scientists have suggested iser
adv may not accept any
Lt they resign as '.consultants offer of
private employment
view of their other work. "which he has
reason to believe
'he new "standards of con is motivated by his connection
t" are particularly desirrec j with the Government, unless he
new rules were designed es-
tally for scientists..
licability of the laws and to
up strict rules for conduct
u der the conflict-of-interest gel
I First Broad Policy t th
he memora.nmrm r"nrnapntJ ca
is and Government lawyers
any person appointed as aril
sod to the Government be-I
Under anew Interpretation by
Me e Justice epartment, how-:
e er, it has been decided that;
p rt-time advisers should e;
is exem to rom the
orce of this criminal.
saute.
The White House disclosed
tl at the President had received
n General Robert F. Kenn ed
that the conflict-of-interest a
should apply_ to "intermittent
employes," such aas advisers,
onl 'moo 1 those Sys on which
i
cy are tua y ems oye y
the ~ Z}Zlent.~
Ifiinterpretation was
reached only after considerable
legal debate within the Govern-
ment. In some quarters it was
argued. that this special exemp-
tion for part-time advisers only
compounded the basic, under-
lying problem that advisers
could use their "inside informa-
tion" to assist their private em-
ployers.
The Administration sought to
meet this problem by setting up
"strict rules of behaviour" gov-
erning conduct not covered by
the conflict-of-interest laws.
M
Li
I
s
-
h
t
,
,
-
,
n
s
"
e
-
t
-
resigns from his Government
position."
The latter provision is designed
to curb the prevalent practice
of Government contractors to
hire Government advisers as
"consultants," partly because of
their advance knowledge about
the direction of Government re-
search contracts.
The new code also emphasizes
that in his Governmental ca-
pacity an adviser ms not con-
sider a.n mvolvin
usmess e tern or priva e o -
gar mza ion in w nc S as a
fmancra mteres . e is so
pro i rom giving advise
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kEW YORK TIMES, SUNDAY, FEBRUAR1 11, 1962.
CPYRGHT Text of Code for.. dviser!
Special to The New York Times.
WASHINGTON, Feb. 10--
Following id, the text of the
White House an2ou_ement to-
day of President Keri>aec y's
memorandum to all depart-
ments and agencies on the
"conflict of interest" problems
of advisers and consultants:
The President today issued
a memorandum to the heads
of all executive departments
and agencies, directing them
to take administrative steps
to assure compliance with ex-
isting statutes, rules and reg-
ulations governing conflicts
of interest problems of ad-
visers and consultants who
serve in an intermitten or
temporary capacity. This
memorandum is of particular
significance to those engaged
in advising or consulting in
I J 1
of outstanding slcieutis a and
engineers who are regularly
employed in industrial organ-
izations, universities or re-
search firms are consulted by
the Government research and
development. This has given
rise to questions concerning
inter-relationships between a
consultant's services to the
Government and private in-
terests of his own or of his
regular employer. The con-
flicts-of-interest statutes an-
tedate the widespread use of
part-time consultants and ad-
visers by the Government and
have therefore proved incon-
sistent in some instances and
confusing in others,
Legislation designed to
amend these statutes is pend-
ing in the Congress. In the
meantime, it has become nec-
essary to resolve the uncer-
tainties of the existing stat-
utes and to reassure those
who are apprehensive that in-
nocent conduct may be deemed
wrongful. The memorandum
establishes general standards
of conduct.
Code Section Cited
Included in the regulations
provided by the memorandum
are the following:
1t Section 281 of Title 18 of
the United States Code in gen-
t eral. precludes a Member of
'Congress, a department head
or other "officer or employee"
of the Government from rep-
resenting other persons be-
fore the Government depart-
merits' and agencies for
compensation. This statute,
first enacted in 1864, sought
'to prevent the exercise of U11-
due influence by members of
Congress and persons regu-
larly employed by the Govern-
ment. The. President has re-
ceived an opinion from the
Attorney General which con-
eludes that the statute applies
to all intermic,_ ..1oye~s
on ose which he
are ac ual em loy~ b the
Gaverriment. It also apples
d ring e. entire period of
their availability for Govern-
ment service to intermittent
employes whose. actual em-
ployment by the Government
comprises a substantial por-
tion of their time. A con-
sultant or adviser who spends
40 per cent or more of his
time in actual Government
employment is considered by
the memorandum issued by
the President to be employed
for a substantial. portion of
his time by the Government.
2. The memorandum also
points out that a consultant
or adviser, whether he serves
the Government more or less
than 40 per cent of his time,
is barred from prosecuting or i
assisting in the prosecution of
another person's claim against
the Government during his
period of availability for Gov-
ernment service, and for two
years thereafter.
3. The memorandum dis-
qualifies any constll nt or
adviser from performing any
governmental duties ' rolvi g
t r anSAr ~gn of hnGiness
with a b tdsmess firm or nthrr
organiza w ich he is
efnplbye , or o wich 7e
iis2rders'consultant services, or
terest. Moreover, the con-
I
sultant o Thdviser ma not
ren er t advice in the
course of his overn
servi~~i,hich w3I ave a di-
rec and e ff
upon the interests o su
firm-or organiza ion. Rules of Behavior
4, The memorandum estab-
lishes strict rules of behavior
with regard to conduct not
interest statutes. No constult-
ant or adviser may use inside
information for prat` e gain
Ifs 7i msef or persons with r
whom he has family, business !I
or financial ties; nor may he
accept any offer of private
employment which he has
reason to believe is motivated
by his connection with the
Government, unless he resigns
from his Government position.
He may not use his position
to coerce, or give the appear-
ance of coercing, any other
person to provide any finan-
cial benefit to himself or to
any person with whom he has
family, business or financial
ties. And he is not to receive
or solicit gifts if lie has rea-
son to believe they would not
be made for his Government
position, or if the acceptance
of the gift would result in, or
appear to result in, the loss
of his complete independence 11
or impartiality.
5. Finally, at the time of
his appointment, the consult-
ant or adviser must, suppiyw
the department or agency
with a statement of his ri-
vate eini oymen , remunera-
tMTr-financial- interests, in-
c1u in i e names of all
businesses and other organi-
zations which he serves in
any capacity, and the names
of the companies in which he
holds security and other in-
terests having
a sgnificant
financial value. This informa-
tion must be kept current
during the time he is em-
ployed.
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c kJ
INTEREST CONFLICT
IN RESEARCH AREA
STUDIED IN NOSE
New Inquiry Turns to Heads
of Private Companies
That Serve Pentagon
QUESTIONNAIRES MAILED
Leaders of Concerns Exempt
From Federal Regulations
Queried-About Holdings
CPYsh k 'Ne. FINNEY
s lgljt New York Times.
Congressional investigating
subcommittee has begun an in-
quiry into a potential conflict-
of-interest problem that in-
volves directors of nonprofit
research corporations serving
the Defense Department.
The subcommittee of the
House Armed Services commit-
tee is seeking to determine
whether there is a potential
conflict between the privileged
advisory roles the individuals
hold as directors of Govern-
ment-sponsored corporations
and their private financial and
business interests.
In examining the nonprofit
corporations, the subcommittee
is touching upon an aspect of
the scientific conflict-of-inter-
est problem not covered by the
new "standards of. conduct" is-
sued by the White House on
Saturday.
CPYRGHT
Exempt F1roin il'e 'ulations
kihe Administration's ? new
conflict-of-interest regulations
apply only to persons serving
as advisers or consultants to
the Government, although the
nonprofit corporations serve as
research agencies of the Gov-
ernment, they have a private
status and are not subject to
the conflict - of - interest laws
and regulations.
In recent _ days, the House
ubcommittee, headed by Rep-
esentative F. Edward Hebert,
emocrat of Louisiana', has sent
ut,questionnaires to members
if the boards . of directors of
leading nonprofit
e of th_e
arch cororations created
su orte the Defense
Vdar
tmpnt- - - ,
One of the principal purposes
f the questionnaire Is to as-
ertain - the financial interests
f the directors of the nonprofit
rganizations in companies
olding military contracts. In-
luded in the questionnaire,
lade available by_i one of its
ii
you now own or have you
purchased or sold for your own
account or for the account of
others, any stocks or bonds or
securities or shares or property
of any nature, or any interest
in any corporation, organiza-
tion or entity having anv con
'ttactual rela ionshi with, +he
l
ml
itar est li h nt while a
rushee or director of this cor-
portation."
List of Stocks Sought
If the answer is in the af-
firmative, " -the respondent is
-asked to list the securities held,
state when purchased or sold
and name the dealer handling
the transaction.
Lawyers _ serving on the
bo Zd" directors are asked to
say whether they or their law
firms represent any contractors
doing business with the Defense
Department.
A covering letter points out
that the subcommittee is "con-
Continued u o- 4, Column 3
HUUSI UffiT OPENS
CONFLICTS STUD
Continued From Page 1, .Col. 1
corned with the cost, efficien-
cy and effectiveness of these
'_lationships." But in an al-
.dslon to the conflict-of-inter-
est problem, the letter also
states that the subcommittee
,is seeking to determine "wheth-
er existing laws, if any, cover
such, activities as may be dis-
closed by the Inquiry."
The nonprofit corporations, gic"planning, for the -Air Air Force.
It employs more thin 850 per-
which have sprung up In in-[
creasing Au, numbers in the past
decade, have an, unusual privi-
legd status in their relation-
shi with;the Government.
They, we're, set, up. primaril
i ons of the civil service.
erform Varied Services
The employes are exempt
from the legislation, such as
conflict-of-interest laws, apply-
ing to Government officials.
However, these corporations
perform many functions that
RK TIMES, T
of directors, the subcommittee
is partly concerned about pos-
sible stock speculation. It is
also Interested in the possibility
that some of the directors may
be in" a position to assist corn-
r"'-
p l a e connections in
ontain-
Ing contracts.
Among the groups' receiving
the subcommittee questionnaires
were the board of directors of
two of the lar east nonnrofit
corporation- wor ink g-. for the
r orce-the Rand Cor or -
tion of :Santa omca, alif.,
the M~ r.~. Corporation of
=s
s.
Bedford,M
s
.
The Rand Corporation was set
up in 1946 to do' long=range
scientific, military ' and strate-
sons and received $13,868,000
from the Defense.. Department
in the last fiscal' year.
The Mitre Corporation, which
has 'close working relationships
with ,the Massachusetts Insti-
tut,e of Technology,-was estab-
lislledin'1958 to supervise elec-
tronic research projects for the
Air Force. It, received $22,844,-
000 from. the Defense Depart-
ment in the last fiscal ' year.
The directors of the two cor-
porations are drawn from in-
dustrial concerns, unlyersities,
public utilities, and large law
firms.. Chairman of the board
would normally be carried . out of the Rand Corporation is Dr.
by Government research Frank Stanton, president of the
agencies. Columbia Broadcasting System.
Among other things, they do Oharrles__a _Goolidge, a Boston
view research proposals and
provide over-all technical man-
agement of research' projects
awarded to industry.
As was pointed out in a re-
port last year by the House
mittee, this "intimate and prix
ministration, is chairman of-the
board of trustees of the Mitre
Corporation.
The potential conflict-of-in-'
terest problem confronting thel
nonprofit corporations has been)
recognized by. officials of the,
Aeros aac , Cor oration of El
egS undo, Calif., This corpora-
tion was established In ' 1960 to
~ provide technical management
ot-mleresL . projsjem. for the Air Force's Ballistic
S y an monitors of Missile Division.
military programs, the officials Among the regulations adopt-
and employes of these corpora ed by the corporation .was a
tions are in aposition to ob provision that a 'trustee would
by e e ense epartment.
Furthermore, the recommen-
dations of the nonprofit groups
on. research projects can be in-
fluential in determining which
companies will get the con-
tracts.
The subcommittee earlier had
erests _ in any ? company doing
Pledged To Secrecy
-j Each trustee was also en-
joined from taking part in any
each trustee is pledged. not to
make'available to any company
IormaLlun Uui.MI.mua~ a, caul~I
of 'his Aeros lk "positi h '
nonprcpit group!,
visors and cons
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CPYRGHT
Scientists and the Government
memorandum clarifying and strengthening the
rules governing possible conflicts of interests
among part-time advisers or consultants to the
Government. The chief, group. thee President had
in mind consists` of the, many scientists whose
main employment is -with a private. corporation,
research institute or university,, but who also
help advise theGovernment. Since the advice
these part-time scientific -advisers give influences
decisions totaling many billions of dollars an-
nually, it is clear that there are possibilities of
abuse and conflict of interest where a given indi-
vidual ?wears both a governmental and a private
hat during different portions of a week. And
rumor has suggested that some persons in ?these
situations have used their Government connec-
tion 1 to enrich themselves and their private
employers.
The need-for the President's memorandum tes-
tifies eloquently to the new and sharply. more
important position now occupied by scientists in
our national life. Even as recently as two decades
ago, the scientist was thought of primarily as a
sort of absent-minded professor who, puttered
around in an obscure laboratory studying'things
that could hardly interest practical men.. Today
every.business man and every scientist. knows
that ;the most practical thing in the` world may
o a new scientific, principle which could revo-
lutionize war,,promote space travel or lead to the
ure of ' a major ailment. Scientists today, in
short,' are an elite whose findings have prb-
oundly revolutionized the world and are con-
-inuing.to transform it.
Useful. as the President's' memorandum is, it
s clearly but , a stop-gap. The real problem 'is
that the Government cannot employ full time all
he scientists it needs to make all the many com-.
p ex scien i is decisions that must bemade One
reason is.the .absolute shortage of top-notch sci-
entists, a shortage which afflicts both Govern-
meet and private industry. Another :.reason is
that'present, salary regulations put Government
agencies at a decided disadvantage In competing
for able scientists against' non-Governmental in-
stitutions. A step that badly. needs taking is to
increase the Government's competitive power in
this area by permitting substantial increases in
the salaries the Government can offer high scien-
tific talent.
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CPYRGHT
AMN
Consultant
`Caidlicts'
Press
memorandum yesterday estab-
lishirig general standards of
conduct.to prevent" conflict of
interest - problems among part-
time, "advisers and consultants.
Among other :things, the
rules bar such ;consultants or
advisers from using inside in-
formation for. personal gain
and require the listing of se-
curity-holdings and other fi-
nancial interests.
The memorandum, addressed
to the heads; of all. depart-
ments and agencies, directed
administrative steps to assure
compliance with existing laws
and regulations.
The White House announce-
ment said it is "of particular
Present law precludes mem-
bers of Congress, department
heads and other Government
employes from representing
other persons for compensa-
tion "before Federal __-depart
mentsand agencies.
The White House- said At-
torney.General Robert F. Ken-
nedy has ruled that this stat-
ute applies to all part-time
employes on days when they
are actually employed by the
Government and also during
bility fpr Gov rnmen
when their actual employment
comprises a :, substantial por-
tion of their time.
The presidential memo-
randum ruled'7'that the "sub-
stantial portion" :'provision
should apply to any consult-
ant'-Or or adviser who spends 40
per. cent or. more of his time
Yin actual Government employ-
ment i
All consultants~aand advis-
ers are barred from prosecut-
ing another: ?~persons claim
against the Goverment until
two years after they quit; and
from handling or giving advice
on any Government matters
involving their employers, cli-
ents or firms in which they
have financial interests.
Other regulations cover the
acceptance of gifts` or the
taking of new jobs which
might result from their con-
nections with the.' Govern- l
ment.
Finally, the memorandum
-stipulates that a consultant,
or adviser, :at the time of his I
appointment, must supply the
department or agency with. a1
statement of his private em-I
ployment, his pay, financial
interests, security holdings,
and any. other interests having
a significant"' f value.
This information must be
kept current during the time
of his employment.
significance to those engaged
in advising or consulting in
research and development on
a part-time basis."
The-statement noted that
the Government, in trying to
solve research and develop-
ment problems, calls on the
talents of ?:"hundreds of out
standing scientists and engi?
neers who are regularly em-
ployed in industrial organiza-
tions, universities or research
firms . .
"This has given rise to ques-
tions concerning interrelation-
ships between a consultant's
services to the Government
and private interests of his
own or of his I regular em-
ployer."
g Cited
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