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Hagel plans to shed some holdings

Jan. 29, 2013 - 01:14PM   |   Last Updated: Jan. 29, 2013 - 01:14PM  |  
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WASHINGTON — Secretary of Defense nominee Chuck Hagel has told Pentagon officials he plans to divest some of his financial holdings and resign from several corporate boards and public interest groups to avoid potential conflicts of interest if he wins Senate confirmation.

Hagel told Defense Department officials in a letter last week that he would resign his corporate board post at Chevron Corp. and shed investments in the energy firm, a major government contractor. He would also cut ties and investments with the McCarthy Group LLC, an Omaha-based private equity firm.

A new personal financial disclosure filed with the Office of Government Ethics lists Hagel's assets at between $2.8 million and $6 million, according to an Associated Press analysis. Hagel made earnings of more than $1 million last year, including director's fees at Deutsche Bank, Zurich Insurance Group and Corsair Capital. Hagel said he would also server ties to those firms.

Hagel's Pentagon nomination has run into heavy fire from conservatives and Republicans who question whether he is sufficiently supportive of Israel. They also question his support for reductions in the nuclear arsenal. Some of his wide-ranging corporate and activist roles have also drawn criticism that his decision-making could be swayed by prior relationships. Hagel's letter to defense officials indicates he is willing to sell off possible conflict holdings and end his directorships to mute those concerns, but would still retain the ability to make his own investments.

In a letter sent last week to Robert Taylor, the Pentagon's acting general counsel, Hagel said that if he wins the defense post, he and his wife would not "invest in any company identified as a Department of Defense contractor or any other entity that would create a conflict of interest with my government duties." Hagel also pledged that if any firm that he has holdings in wins a defense contract, he would sell off those investments.

Some nominees for top government positions place their holdings in federally approved blind trusts so that they have no direct role in private investments during their tenure. There is no mention of the use of a blind trust in Hagel's letter.

Sen. John Kerry, President Barack Obama's pick for secretary of state, has holdings worth more than $184 million, and is also not using a blind trust. Most of Kerry's investments are made through family trusts, which limit his direct involvement but are not as segregated as blind trusts qualified by the Office of Government Ethics.

In his letter, Hagel said he would not participate in any decision that "has a direct and predictable effect on my financial interests" and would request a waiver from the ethics office if he planned any move that could affect him financially.

Hagel's decision to sever his dealings and investments with Chevron were clearly dictated by the firm's extensive dealings with the Pentagon. According to government figures, Chevron received more than $500 million in defense contracts in 2012, ranking 78th among the department's largest corporate beneficiaries.

Hagel joined Chevron's board of directors in 2010 and made $116,000 in fees in 2012. He also has Chevron common stock worth between $100,000 and $250,000 according to his disclosure.

Activists from both the left and right have questioned Chevron's recent involvement with repressive governments, including its plans to develop natural gas reserves in Turkmenistan and its pipeline work in Burma.

One conservative non-profit interest group, the American Future Fund, took aim at Hagel's relationship with Chevron, asking in an attack ad: "How can Chuck Hagel run the Pentagon with so many ethical questions about his own record?"

That broadside came before Hagel's letter outlining his divestment plans. The Senate Armed Services Committee also has some of the most stringent rules for nominees for senior civilian positions in the Defense Department. And Hagel's plans for divesting his holdings were also expected to undergo careful vetting by lawyers and ethics experts at the OGE, Defense and the White House.

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