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Lessons in ethics from Dick Cheney

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

Hardly a month goes by without some politician's private interests coming under scrutiny in the media. They should learn from Dick Cheney.

In 2003, as the re-election campaign of George W Bush was heating up, his main challenger, the redoubtable John Kerry, said the following in an election ad: “As vice president, Dick Cheney received $2 million from Halliburton. Halliburton got billions in no bid contracts in Iraq. Dick Cheney got $2 million. What did we get?

You mean, besides lies about Cheney’s actual ties to the company while vice president?

I raise this example in light of the scandal that is brewing over General Siphiwe Nyanda’s security services firm, in which he retains a 50% stake though having resigned as director. According to the Mail & Guardian, he failed to declare to Parliament that this firm had landed big contracts with Gauteng provincial government and several government-owned transport firms, including Transnet. It is under an even darker cloud because of fraud allegations against its CEO and Nyanda’s business partner, Sylvester Sithole, and alleged irregularities in the award of the Transnet contract.

If Nyanda had simply sold his stake upon taking office, none of this would have happened.

Other cabinet ministers are no less involved in private business. Most notable is probably Tokyo Sexwale, the minister of human settlements, whose long list of interests includes several property-related investments. However, most other ministers have at least a handful of interests, many of them in obscure holding companies or investment vehicles.

Almost all state that they have declared their interests to Parliament, as required by the Executive Members’ Ethics Act number 82 of 1998, and that they have resigned any positions in which they might have operational involvement with the firm(s) in question.

Some of the declared interests are clearly small family businesses. It would be churlish to challenge anyone over a beadwork project or a poultry farm.

In many cases, however, the decisions ministers take as public officials could materially affect the well-being of the companies in which they own shares, leading to personal profits or losses.

What makes ministers think that merely resigning their directorships removes the conflicts of interest which the Ethics Act forbids? It is between their executive positions in the government and their financial interests that the conflict lies, not just in being able to sign for both parties to a contract.

I don’t propose to challenge in detail each alleged case of conflict of interest. Such things are better left to full-time investigative reporters. However, claiming, as Nyanda has done, that the media is merely conducting witch hunts out of political motive is both disingenuous and besides the point.

Politicians will do this all on their own. Cope, the DA, and the ID have been falling over each other in the rush to challenge conflicts of interest like those of which Nyanda stands accused.

Perhaps our cabinet should learn from Dick Cheney. Before his appointment, he had been the CEO of Halliburton, which provides various services useful to a military force that’s doing military things in faraway places. This connection raised suspicions among neutrals, and had his political opponents salivating. They painted him as a corrupt self-enricher.

The truth, however, is instructive. He took important steps to distance himself from his former interests when he became vice president. So when the Kerry campaign launched the advert quoted above, Cheney could respond immediately, as follows.

It is true that he received $2 million in deferred compensation, though fully $1.6 million of that had been received before he became vice president, and while he was still Halliburton’s CEO.

Immediately, it was clear that Kerry simply lied. Unless you think nobody who has ever worked for compensation should ever serve in political office, you cannot deny someone the right to earn a salary.

This leaves about $400 000 which he did receive “as vice president”, which legally amounts to “financial ties”. To deal with this, he insulated it from any influence he might have in that position by insuring it. It was his due, but there was a risk that it might go unpaid should Halliburton go bankrupt. Preventing a bankruptcy might give Cheney a motive to influence government actions in favour of Halliburton. The insurance removed this motive. No matter what happened to Halliburton’s profit or loss, it could not affect in any way the compensation Cheney was still (legitimately) owed.

Then there were the stock options, which the Kerry campaign soon latched onto. These had been part of his compensation, but had not yet reached maturity, and could not therefore be exercised. Realising that it would be used against him if his executive decisions in government could influence the value of these options, he took steps to ring-fence them. He signed an irrevocable legal agreement to cede them to charity. As a result, he could neither gain nor lose.

His measures were equivalent, in terms of his motives regarding Halliburton, to no longer having any interest in the company at all. The company’s success or failure could in no way affect his personal wealth.

He complied, in every respect, with the requirement of having no “financial interest” in Halliburton, as the term is defined in US law: “The term financial interest means the potential for gain or loss to the employee… as a result of governmental action on the particular matter.”

It is notable that Cheney wasn’t, in fact, required to do any of these things. His office (like those of the US president, all members of Congress, and federal judges) is exempt from the usual conflict-of-interest laws that apply to executive-branch civil servants. And even if Cheney wasn’t exempt, he could have legally avoided conflicts merely by recusing himself from matters involving his interests.

Yet, he took all these measures, because he well knew that the political opposition, and the media that sympathised with them, would hound him. They wouldn’t be satisfied with only vague claims that he might one day corrupt his office out of… who knows, some sense of loyalty to former colleagues, perhaps.

So while the attack dogs continued to claim that he personally benefited from Halliburton’s government contracts, he was in a better-than-usual position to deny it, having gone way beyond even the legal requirements in this regard. His defence had been prepared long before the trouble struck, and it was both legally and politically watertight. Anyone who thought he was going to get impeached over Halliburton was drinking partisan Kool-Aid.

Our cabinet ministers, by contrast, appear to do the bare minimum. They declare their interests, and that’s it. They have no Cheney defence. But they should do.

Nobody expects them to forfeit their private property. However, they should be isolating themselves from conflicts of interest. That means they – and their family trusts – must be required to sell private interests in private companies. If they cannot do that because of contracts such as Cheney faced with his deferred compensation and unvested stock-options, they must take similar measures to ring-fence such benefits, so they no longer depend on government actions.

Public officials should not only have no other income, as the Ethics Act requires, but should own no investments that can be influenced by their decisions. Cash deposits are fine. So are pension funds, unit trusts, or index trackers, provided they fall outside the purview of the official (such as a mining index for the minerals and energy minister, or a property unit trust for the housing minister). Shares in individual companies, even if they’re family businesses, are not fine. Ever. They’re political trouble. They stink.

Just get rid of them. Keep the proceeds, of course. Nobody expects a ministerial family to become poorer because of their public service. But they should not stand to personally gain or lose from anything they do as government officials. Because even if they’re clean as a whistle, the allegations will come.

They should be in a position, like Cheney, to face down their accusers as political partisans, instead of having to retreat into a smelly weasel hole with a “no comment” sign outside.


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