DEPUTIES' MEETING, 20 FEBRUARY 1962

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CIA-RDP65-00005R000200020015-5
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RIPPUB
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K
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6
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November 11, 2016
Document Release Date: 
November 4, 1998
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15
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Publication Date: 
February 20, 1962
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MEMO
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.Approved For Release 999/09/07 : CIA-RDP65 00005.ROA.0200020015-5 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) Approved For Release 1999/09/07 :-CIA-RDP65-00005R000200020015-5 Approved For Release 1999/09/07 : CIA-RDP65-00005RO 04pQ l5 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 Approved For Release 1999/09/07 : fIA-RDP65-00005R000200020015-5 r Approved For Release 1999/09/07 : CIA-RDP65-00005R000200020015-5 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. Approved For Release 1999/09/07 : CIA-RDP65-00005R000200020015-5 ApprpvTd F~r~ReIease 1999/09/07 : CIA-Rnp5=000n_5RO0 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 Approved For Release 1999/09/07 : CIA-RDP65-00005R000200020015-5 Approved For Release 1999/09/07 : CIA-RDP65-00005R006200020015-5 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. Approved For Release 1999/09/07 : CIA-RDP65-00005R000200020015-5 Approved For Release 1969/09/07 : CIA-RDP65-00005RO0d200020015-5 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 Approved For Release 1999/09/07 : CIA-RDP65-00005R000200020015-5