Date: 1982-07-15
Speaker: GEORGE P. SHULTZ (democrat)
Chamber: S

776 Dolores Street. Stanford. Calif. DEAR MR. SHULTZ: You have asked us to examine the various actions you intend to take with respect to your financial and business interests in the event you are confirmed by the United States Senate to serve as Secretary of State. Specifically. you have asked that we give our legal opinion as to whether those actions will if taken. place you in compliance with the terms of 18 U.S.C. i 208 and 209. Section 208 prohibits certain acts of a government employee affecting a personal financial interest. Section 209 bars. with certain specific exceptions. the receipt by a government employee from a nongovenmnental source of salary. or any contribution to or supplementation of salary. as compensation for service as a government employee. If confirmed. we understand that you will take the following steps: (1) Upon your confirmation as Secretary of State. you will resign from all your positions with all the Bechtel entities as of July 7. 1982. when you went on an unpaid leave of absence from those positions. and will take retirement status. (2) You will be paid by Bechtel only such amounts as are due to you for salary and prorated bonus for your services through July 7. 1982 under preexisting salary arrangements and bonus plans. The amount of any such bonus will be determined in accordance with Bechtels established bonus plan and in a manner consistent with ihe treatment of other senior executives at Bechtel. (3) You will resign from all your directorships in nonBechtel business companies and nonprofit entities. (4) You will devest. through open market sales. all your investments in nonBechtel companies that conduct international operations. (5) Pursuant to preexisting contract terms. including evaluation formulae. all shares you own in Bechtel Group. Inc.. and Sequoia Ventures. Inc. will be repurchased by those companies. Under the same terms. shares of those two companies held in trust for your children and grandchildren will also be repurchased. (6) Pursuant to preexisting contract terms. including evaluation formulae. all your interests in Bechtelrelated oil and gas. drilling rig. and real estate limited partnership investments will be repurchased by the respective partnerships. You will also ar* range to divest yourself of your interest in a nonBechtelrelated oil and gas limited partnership investment: and (7) You will establish a qualified blind trust in conformity with the Ethics in Government Act. The trust will receive the securities you have not divested and may receive some or all of the payments due on account of the stock and limited partnership divestitures. and any bonus payable to you by Bechtel for 1981 and 1982 as described in item (2). The trustee will invest and reinvest the corpus as permitted by applicable regulations. We understand that you will retain your vested rights under Bechtels Thrift and Pension Plan and the rights. as a retired employee. for you and your wife to retain medical and life insurance benefits under Bechtels insurance program. You also will retain your positon as a tenured Professor at Stanford University. on a leave of absence without compensation basis. The steps specified in items (1). (2). (3) (4). (5) and (7) above will be taken before you are sworn in as Secretary of State. As for the disposition of your oil and gas limited partnership interests (item (6)). the contract terms concerning disposition require valuations to be made under specific procedures and at dates which may occur after the date you may be confirmed by the Senate. We understand that the valuations and payments to your blind trustee will be made as promptly as feasible and no later than six months from the date you are sworn in. We have reviewed the divestiture plan regarding these partnership interests with the Office of Government Ethics. which has given its approval to the divestiture plan. Finally. we understand that you will enter upon the record at the Department of State a formal recusal statement in which you will indicate your intention not to participate in any particular matter involving any Bechtel company or related company and to abide by the Code of Conduct of the Department of State. It is our opinion that the steps specified above will assure your full compliance. while serving as Secretary of State. with the terms of 18 U.S.C. � 208. The only connections to the Bechtel companics that you will retain will be your vested rights under the Thrift and Pension Plan. your rights to medical and life insurance benefits. and. pending complete divestiture. the rights your blind trustee will hold to receive payment for certain of your limited partnership interests. The receipt of your Thrift and Pension Plan and insurance benefits is expressly exempted from 18 U.S.C. 1 209 by subsection (bY of that section. With regard to sums that will be paid to your blind trustee for your limited part. nership interests. it is clear that those sums. which are computed according to contract terms relating to disposition of partnership interests. do not constitute a form of payment to you as compensation for your servIces as an employee of the government. Therefore. in our opinion the above arrangements are wholly consistent with and not in violation of 18 U.S.C. I 209. The Office of Government Ethics has responsibility for Interpreting the Federal conflict of interest laws and regulations. We suggest that you provide a copy of this opinion letter to the Director of that Office and to the Legal Advisor to the Department of State and request from them written confirmation that they concur with the opinions stated herein. Sincerely.