REPORT ON INVESTIGATION OF PURCHASE OF STOCK IN(Sanitized)., BY AGENCY EMPLOYEES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP72-00310R000100280005-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: December 14, 2016
• Document Release Date: November 12, 2002
• Sequence Number: 5
• Publication Date: July 22, 1970
• Content Type: MF

Approved For Release 2002/11/21 : CIA-RDP72-0031OR0001 0280005-2 /
2 2 J U L 1970
25X1
25X1
25X1
25X1
MEMORANDUM FOR: Executive Director-Comptroller
SUBJECT . Report on investigation of Purchase of Stock In
inc., by Agency Employees
1. This memorandum contains no recosrsendations for your
approval. It is for your Information only.
2. In consultation with the Office of the General Counsel
we have concluded the investination of the nurnha s of stock by
Inc. Neither man
in a position of direct responsibility for work with 0
for a year and a half prior to the time that they acquired the
stock in December 1967, and neither has had any substantive responsi-
bilities for work with that company since then. In II case,
there were long-standing close personal relationships with the presi-
dent of the company, a factor that the Executive Order on the subject
of conflict of Interest provides should receive due consideration.
office (OIRD) because he had no responsibility for any work with the
company.
case he reported the purchase of the stock on his Statement of
Financial Interests, which was approved by the director of his
did not acquire the stock for sudden profit; he still retains
it, with a present value below the price he paid for it. In
3. It was concluded that neither man was Involved in a real
conflict of Interest, and that the issue was at most one of a border-
line "apparent conflict" under the provisions of Executive Order 11222.
Pursuant to the decisions at your meeting on 23 June with the General
Counsel and Inspector General, the case was concluded on this basis.
Both men have been informed in person and In writing of the results
of the Inquiry, with a statement that despite the results there was a
question about their judgment In making their purchases. No record
of this Incident is being made In their personnel files, but will be
retained in the records of this office.
25X1A
25X1A
25X1A
25X1A
Acting Inspector General
GROUP 1
Excluded tram axlonatic
dowagrsding and
decla:slticaiion
Approved For Release 2002/11/21 : CIA-RDP72-0031 OR000100280005-2
 Approved For Releas&2002/11/21 : CIA-RDP72-00310R ,A111rJ
SUBJECT . Purchase of Stock in
1 As you know, the purchase of stock by you 1r~
nc., was discovered in a general inquiry being made by
this office into a reported conflict of interest involving stock
offers by that company to other Agency employees. The stock was
made available on a preferential basis not available to the
general public.
25X1A
25X1A
2. My staff, in consultation with the Office of General
Counsel, has investigated the circumstances of the purchase.
Full consideration has been given the long period between your
last direct responsibility for work with Inc., your 25X1A
report of the stock holdings, and the approval o t e purchase by
the director of your office on the basis of your known responsi-
bilities. Our investigation has concluded that there was no real
conflict of interest In your case, and the stock purchase should
be considered a borderline apparent conflict, within the language
of Executive Order 11222, particularly Section 201, a copy of
which Is enclosed. The prohibitions set forth therein are tempered
to some extent in your case by the circumstances set forth above,
but a question as to your judgment In this still exists.
3. You have advised us that you disposed of your stock
several months ago. However, should you be assigned In the future
to a direct responsibility with Inc., it is suggested 25X1A
that you review the question with the Office of General Counsel at
that time.
25X1A
Attachment
(Executive Order 11222)
Acting Inspector General
GnaUP I
Excluded from actamaticl
danusrsdtn; and
deci35S1FlCthOfl
S E C R E T
Approved For Release 2002/11/21 : CIA-RDP72-00310R000100280005-2
 -UNCLASSAFIE . _ INIF""2L n d~~
r ved F e 22/ 1/21 ? CIA-RDP72--eb3 05-2
ROUTING AND RECORD SHEET
SUBJECT: (Optional)
OGC Subject; CONFLICT OF INTER
FROM:
Inspector General
EXTENSION
NO.
4
Room 2E-2
Headquarters
D
DATE
JUL 25X1
7 '19?
TO: (Officer designati
buildin
DA
TE
OFFICER'S
COMMENTS (Number each comment to show from whom
RECEIVED
FORWARDED
INITIALS
to whom. Draw a line across column after each comment.)
General Counsel
~
25X1
Room 7D-01, Headquarters
a
a S
2.
~ncxt4? i (''~ w4 i- f
o- ! i i n e i ~.s E e0 th
3.
L~~ c~at~
ti
t
-
T C
1i h w41,Cr'`J
L1
k Q
0
01k
L'r- e.w
b.
t~ S tz tr-e
7.
.,~11~ .:S 4t
25X1
8.
der Cie `i`
9.
E
10.
11.
12.
13.
14.
15.
IDA
ST
 Approved For Releasa.2002/11/21 : CIA-RDP72-00310R0001280005-2
7 JUL 1970
25X1
25X1A
25X1A
1. As you know the purchase of stock by you froirl --J 25X1 A
Inc. was reported to me for investigation as constituting a possible
conflict of interest. The stock was made available to you on a prefer-
ential basis not available to the general public, giving rise to the
question.
2. my staff, in consultation with the Office of General Counsel,
has investigated the circumstances of the purchase. Full consideration
ha a long, personal relationship between you and officers
of inc., the time that had elapsed between your last
official responsibility for Agency transactions with the company and
the purchase, and the fact that you were at a remote location overseas
and unable to ascertain all the circumstances affecting the stock
offer to you. Our investigation has concluded that there is no real
conflict of interest In your case, and that the stock purchase by you
should be considered a borderline apparent conflict within the language
of Executive Order 11222, particularly Section 201. The prohibitions
set forth therein are tempered to some extent In your case by the cir-
cumstances set forth above, but a question as to your judgment in this
still exists.
3. While we expect no further action in this matter, so long
as you tern stock, It would seem inappropriate for the
Agency to place you in any assignment where you would be In a position
of responsibility involving F -1 Inc.
/5/ Gordon M. Stewart
cc: "Office of General Counsel
Gordon t-i. Stewart
Inspector General
GROUP t
Exclddeo from autumatic
dovfngrading aid
declassmiicatian
Approved For Release 2002/11/21 : CIA-RDP72-00310R000100280005-2
25X1A
 Approved For ReleasNk002/11/21: CIA-RDP72-0031OR0001`6 80005-2
6 July 1970
MEMORANDUM FOR THE RECORD
.SUBJECT: 1 11 nc. - Case No. 15/69
1. and I met with at 0815 this 25X1A
morning for a little over an hour. We started by reviewing the
development of our inquiry and the question that had existed as to
whether or not there had been a violation of the Criminal Statute.
This question had been resolved by a determination that this is not
a criminal matter, to be resolved instead under the provisions of
the Executive Order 11222 and the Attorney General's Memorandum. We
explained the provisions in the Executive Order that a government
employee shall receive no gift, and that made an appearance of con-
flict of interest as strongly prohibiting as a real conflict. We
told him that the question was whether or not there should be a
written reprimand.
2. 0 stated that he was astounded by the gravity of the
matter. He had not realized until our meeting last week, although
he had had occasion to reflect on it from time to time. He said
that he pointedly had never purchased stock in companies that he
knew were doing business with the Agency. He simply did not consider
in the same category. The Statutes and Executive Order
would apply to someone who does something wrong, which he believes
he has not. He said that he was overseas 10,000 miles away, and
had an offer to buy stock when went public. He knew 25X1A
the people involved, their skills and their drive, and when they
floated a stock issue to get capital he invested. As far as he is con-
cerned it was a straight, legitimate investment. He still owns the
stock, which is now priced at below the purchase price.
3. We talked about the timing of the purchase in relation to
his responsibilities. His personal file shows that he had been out
of the line of command in OSA from July 1966 until the purchase of
the stock in December 1967. He said that beyond this he felt that
he had never had anything to do withi __L even before change 25X1A
of his responsibilities in July 1966. He went on to say if he had
intended to make a killing, as the Air Force officers did, he would
CA 4i}? -
EKcludaJ trcrn 1Ni {sai;t:
S E C R E T da"'t. CHr; a";,
deNaasi' :i,fZ:3
Approved For Release 2002/11/21: CIA-RDP72-0031 OR0001 00
80005-2
 Approved For Relea 2002/11/21 : CIA-RDP72-0031OR000W0280005-2
have sold the stock; instead he kept it. So far as he is concerned it
was not a gift, but an investment; he had no idea that he did not get
the regular offering price.
4. oted that prior to leaving the Agency in 1960,
had come to OGC for advice on conflict of interest. OGC had
written him a letter on 11 July 1960 on this subject. In June 1963,
when Oreturned to the Agency from kept the Deputy Director of OSA 25X1A
wrote a letter saying that Iad kept is clearances and had
continued to work for OSA on some matters. 0 said that some time 25X1A
had passed since then but as he recalls it the OGC advice had been he
could not tell his commercial employer what he knew about Agency re-
quirements, and that he could not represent the company in sales or
neotiations for a certain interval of time. He did keep his clearances,
as, 0 was involved in the satellite business and was providing people
for the project. His work had to do with purchasing, contract administra-
tion, support, materiel, all those things very much like a regular Log
job in the Agency. He did not use his knowledge and did not participate
in negotiations and sales. CIA had its own contract officer and engineers
that could inspect, and the auditors also reviewed the records.
for 0 knew where to go for business andi 25MA
had no contribution to make in that respect. He advised on how many
people they should carry on their administrative rolls, the balance of-
qualifications in those people, the kinds of records they should keep;;
and questions of security clearances for the Department of Defense.
At that time, was thinking about business with Wright
Patterson, Eastman Kodak, Baird Atomic, and Lockheed. He got no com-
pensation or fees, and none were mentioned. asked if he felt 25X1A
there was any conflict between his role as an employee and his 25X1A
advice in formation of a new competitor. He did not reply directly, say-
ing it was personal, over drinks, etc.
6. I I asked about whose name had m u 25X1A
from time to time during our inquiry. =~Jsald he first met MIA
in 1955 or 1956.0 was in the Navy at the time, assigned
liaison with the U-2 Project. There was an arrangement for the technical
exchange of developments in the U- m so that other DoD work would
not duplicate that already done. retired from the Nav probably 2 5X1A
in the fall of 1963. He wanted to do consultant work and intro- 25X1A
duced him to the law firm with which he was associated and they set him
up in business and gave him advice. as offices in Virginia to 25X1A
this date. When 0 approached asking that he represent II 2 6X1A
Approved For Release 2002/11/21 : CIA-RDP72-0031 OR000100280005-2
5. At the time
 Approved For Relehet 2002/11/21 : CIA-RDP72-0031 OR00 280005-2
in the Washington area, referred him to since he ffll
I I could not do this work. is not too sure what does,
feeling that he has consulted on management as well as sales. e s id
that it is no accident that he is in the Agency; he had been doing well
at a responsible job in private business and returned because he liked
the Agency. A mere $1600 investment would not cause him to change his
judgment in any matters that would come before him. As it is, he made
an investment that he hoped would have better results than it has.
8. Q said that if this was going to end in a reprimand he
would want to have a bill of particulars and an opportunity to reply.
We told him that we would report to the Inspector General and the
General Counsel and get a decision so this question could be handled,
if necessary, prior to his departure. He now plans to leave on Wednesday.
Approved For Release 2002/11/21 : dI FfDl371-0T031OR000100280005-2
25X1A
 _ C _
A
^ U NCLASS.Ifl D iNTEr %
r0ved F PR
ROUTING AND RECORD SHEET
SUBJECT: (Optional)
OGC Subject: CONFLICT OF INTERESI
FROM:
EXTENSION
NO.
DATE
9 .1111y 1970
TO: (Officer
building) OFFICER'S
INITIALS
RECEIVED FORWARDED
COMMENTS (Number each comment to show from whom
to whom. Draw a line across column after each comment.)
$X-
D-01
Typed - not read by SDB.
_
, _
7
2.
/1cp
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
--.Ada~.m - is W PL
QAAQM
111 F94 12'
-1-P RID7 9--
j(\
~M
FORM 610 USEDITIONSUS
A -A?
SECRET F-1 CONFIDENTIAL F-1 USE ONLY ^ UNCLASSIFIED
 Approved For Releage002/11/21 : CIA-RDP72-00310R0001 280005-2
2 July 1970
MEMORANDUM FOR THE RECORD
1. and I met with
from 0930 to about 1130, to discuss his role in the -
stock purchase.
2. We started by showing him a copy of the 17 June 1969 news
story about purchase by Air Force evaluators of stock,
and the teletype report by the West Coast security officer naming
I I as Agency employe hom an offer was made.
we also a copies o the IG letter to while he was in
(dated 14 July 1969) and his reply (dated 3 October 1969). I re-
minded him of the terms of his permission to engage in the practice
of law (his application in October 1963, after returning to the
Agency), and asked about the portion of his letter that I had under-
stood to state that.he had not only given help to, I in
its formative period (when he was employed by I I, u also after
returning to the Agency. He said that the reference to his visit to
I I at which time he "reviewed 0 products, activities
and proposals" referred to his work as an Agency employee, and not
his assistance tol He said his visits were in connec-
tion with OSA work, but that OSA never did have contracts with the
company, although ORD did. He never helped Mark Systems after re-
turning to the Agency.
25X1A
25X1A
25X1A
25X1A
25X1A
. 25X1A
3. I Isaid that he was in OSA's 25X1A
I I which had to do with budget. He knew work, and 25X1A
of Air Force work with the company, but technical decisions would not
be by him but by the Engineering and Technical Staff of OSA. He
said that on his visits a couple of things "maybe made sense," and
he would carry the news to the Engineering Staff, and it could inquire
and make evaluations, making recommendations.
4.; We touched on the problem of real and apparent conflict
of interest, as it affected the present situation. said that
25X1A
he knew of knowledgeable people in the Agency who had stock with
Eastman Kodak. He couldn't see the difference between that sort of
thing and his holding with noted the
S E C R E T
Approved For Release 2002/11/21 : CIA-RDP72-00310R0001002
p ~i'Eurlldil
V.Yoxod U314
old
aectassliic3ti_,_?r,..
 Approved For Relea6ai002/11/21 : CIA-RDP72-00310R0001f 80005-2
difference between purchase of stock from a large and established
company, and participating in the establishment of a company and tak-
ing stock at a special offer later., 0 asked about the form of 25X1A
the offer of the stock. was at first uncertain of when he
received the offer, finally deciding that he received it in a letter
from II addressed to him at l . He believes that he re- 25X1A
ceived the letter the latter part of November; the report of the
West Coasy officer shows that the stock was bought by a
friend in name on the first day the stock was on the market,
7 December. He recalls the letter from stating that they were 25X1A
finally going public -- "a limited public offering" -- and saying
that he could get some of the stock if he wished. He said he still
has the stock; it is now at about 6, while he got it at 8. He has
been away and simply has not been in a position to follow it; if it doesn't
improve soon he will probably sell it.
spoke further about OSA's contractual relationships
with F3_~ I His recollection is that OSA had no contracts during
the period 1963, when he returned to the Agency, and 1967, when he
finally was transferred from OSA. I Iwould 25X1A
have been in charge of, this, and to the best of his recollection there
may have been only one purchase, one piece of equipment at about
6. At one time approached 0 about representa- - 25X1A
tion in Washington. He replied tat neither he, nor the law firm
with which he had been authoriz d , could touch it. He
put in touch but doesn't know whether 25X1A
they hired him or not. tioned to us by the
DDS&T when we met with him, and list of stock pur- 25X1A
chasers in the Washington area show substantial purchases by a F1 25X1A
7. Revie familiarity with the Agency, he said that
it dated back to when Ii was on IDEALIST. He knew lI 2 5X1A
of course, at where they worked on cameras for satellites. When
went to his new company, I I, he knew plenty about 25X1A
A enc projects, people and systems. On occasion he would speak to
about it. 0 says he has no qualms about this relationship.
There was no improper relationship; at all times he acted within the
limits of his Agency job. If he had been interested in a killing, he
would have sold the stock, instead of hanging on to it as it went down.
_ 2 _
S E C R E T
Approved For Release 2002/11/21 : CIA-RDP72-00310R000100280005-2
'VA
 Approved For Relea9 1002/11/21 : CIA-RDP72-00310R0001 80005-2
S E C R E T
known
8.
him
Expanding on his relationship with 0, he said he has
since 1965
h
A
, w
en heas with AQUATONE. was
ffij
with
working on cameras. They had known one another, but first
really got to know one another well when
if
wanted to take his
2 5X1A
w
e with him on an inspection trip in
had to deny per-
25X1A
Mission n, d d
e
en ent
ld b
p
cou
e taken.
went t
6
0 i
S=
o
n 19
0
2~ ~~!
was the head of engineering, and =
was head of administra-
i
25 1A
t
on (which involved finance, purchasin
personnel). They became clo
friends during that period. When
se
left in 1962 it fell to
25X1A
0 to hand him his final A
aa
~
d
f his new company,
-
E~
n
elped 0 form
turne t
h
A
j?)(4A
d
o t
e
gency in 1963,
an
during the period 1963-67 (when was with OSA) they were
25X1A
still f
also cl
riends. There was a normal working relationship, but they were
ose friends. At one point I
ro
id
d i
25X1A
p
v
e
n his will that
h
ould be the foster parent of his children, if some-
25X1A
Ing
appened to 0 and his wife. They have seen each other only
once since 1967, a year ago in Ma , when IO was in Washington, they
h
d b
25X1A
a
reakfast together. I
(about a new building at
I
also in Washington in August 1968
and they spoke by telephone
but
had no personal contact.
,
9. I Ispoke about the July and October correspondence be-
tween the Inspector General and him. He said that it was given him to
read by the but that he didn't take a copy with him. He
went back t d answered it. He thought it did not reach
the conflict of interest laws, and pointed how a comparison could be
made between the prohibition of a government employee taking a gift,
with an offer tied to a favor, and the questions raised by a stock offer,
in which the price was not the one available to the general public. He
mentioned the considerations of investigation, which would involve the
FBI (which was not being done at this point), and the Attorney General's
opinion which made an appearance of conflict of interest, a gift, as
forbidden as a real conflict of interest, even if 'no favor is given or
asked in return. He noted that Carl Duckett, in describing 25X1A
position in OSA, had said that he was involved in policy making d de-
cision m He then asked if Orecommended 1 _j to OSA 2 6X1A
people. replied in the negative, saying that "that sort of
representation was unnecessary. The people in OSA knew as well as I
did -- key people, technical people, engineering people, knew them
backwards and forwards." 0 gave an example of what he would do,
-3-
S E C R E T
Approved For Release 2002/11/21 : CIA-RDP72-0031 OR000100280005-2
him right away, but could not account for the lapse of time between
July and October.
 Approved For Relea 2002/11/21 : CIA-RDP72-00310R000IW80005-2
citing a process involving real time processing in the field. He called
it to the attention of who would check into it. His
feeling was that if something like this came to his attention he would
call it to the attention of the technical people; after that they didn't
need his hel better than he its value. In this context he
mentioned as a long-time hand in the field, who knew
from HYCO ays.
25X1A
I1. I oted that had served as Acting Deputy and 25X1A
Acting Director of OSA on occasion. said that this was on current 25X1A
matters only; he had no approval authority. In any event, during that
time every contract went to for approval. 25X1A
12. said that'he visited two times a 25X1A
year. He never took a trip to the Wes oast tor alone. 25X1A
If he was on the coast he would drop by for lunch an oo at the stuff
they had. There were other companies in the area, at the Stanford in-
dustrial park and in Los Angeles. There were some 75 com-
panies in all at that time and was treated no differently, 25X1A
except they got no contracts (in fact OSA is recorded with contracts,
but they seem to be for ORD and the Navy).
13. 0 plans are to leave for a week's leave in Ohio and
then a week on the West Coast. He had planned to leave Monday but
doesn't seem to be moving quickly enough to make it. He plans to leave
the West. Coast for his next assignment in poke to him
about another meeting, and after he lef nd I agreed on
an early Monday morning meeting.
S E C R E T
Approved For Release 2002/11/21 : CIA-RDP72-0031OR000100280005-2
X1A
25X1A
 Approved For Release 2002/11/21 : CIA-RDP72-0031OR00WO280005-2
16 June 1970
Subject
1. has concluded that many questions about
this case are unanswered, and that many other questions need to be
asked. He has suggested the possibility of ascertaining the action
taken by the Air Force towards the officers who took 25X1A
stock under the special offer. He also suggests that we raise with
the FBI the question of such information as its investigation may
have developed.
2. We have gone about as far as we can within the limita-
tions on our inquiries into such matters as this. Unless we turn to
the Air Force and FBI, as suggested by we will have
to conclude the case on the basis of the information we now have. It
is suggested that serious consideration be given ug-
25X1A
25X1A
25X1A
Office of Inspector General
Approved For Release 2002/11/21 : CIA-RDP72-0031 OR000100280005-2
 I realize bought 125X1
0
January 1968, but felt this summar
adequate for the purposes.
o&/(f,
ROUTING AND RECORD SHEET
SUBJECT: (Optional)
FROM:
OIG
EXTENSION
NO.
2E-24, Headquarters
DATE 2 2
X1
JUL 1970 25X1
TO: (Officer designation, room number, and
building)
DATE
OFFICER'S
COMMENTS (Number each comment to show from whom
RE
CEIED
FORWARDED
INITIALS
to whom. Draw a line across column after each comment.)
1.
OGC
OGC Subject: CONFLICT OF
Attention:
INTEREST
2. /D-01, Headquarters
Gary,
3.
4.
?
5.
/j,Gi~ f
7.
8.
/moo
9.
/
`/ Y
10.
lH
'ot4
11.
CAI-
12.
J Gam'"r25X1
13.
14.
15.
INItKN
SECRET CONFIDENTIAL U
SE ONLY
^ ^ USE ONLY
AL F
M2/11/21 0
SECRET