When CIA Director William J. Casey agreed reluctantly to put his financial holdings in a blind trust, he joined a group of wealthy Reagan Cabinet members in sensitive posts who have access to secret government information that could influence their investments.
Although Casey had resisted setting up a blind trust, six of the 17 officials with Cabinet rank in the administration, as well as President Reagan and Vice President Bush, have put their financial holdings into such trusts to shield themselves from possible conflicts of interest.
A blind trust is designed to conceal from these officials all or part of their investments to prevent the officials from using inside information to enrich their portfolios or making official decisions for personal gain.
However, a blind trust is not required by law, nor is it an all-purpose protection against conflict of interest. Some members of the Reagan Cabinet don't have enough wealth to justify setting up a blind trust. Others have investments so isolated from their duties that a blind trust isn't needed.
For example, Office of Management and Budget Director David A. Stockman receives detailed inside information about government fiscal trends. But Stockman is one of the least wealthy members of the Reagan Cabinet, holding only an interest in his family's grape-harvesting business in St. Joseph, Mich. In such a case, a blind trust would give him no additional protection against conflict of interest, according to government ethics officials.
By contrast, Treasury Secretary Donald T. Regan, a former Wall Street executive, has access to extensive information about domestic and international financial markets and trends. Regan put his securities into a blind trust, according to his disclosure records.
So did Secretary of State George P. Shultz upon leaving his job as president of Bechtel Group Inc., the international construction and engineering company.
But Education Secretary T.H. Bell did not create a blind trust for his Utah real estate holdings, apparently because they pose no conflict with his official duties.
Agriculture Secretary John R. Block has farm holdings in four Illinois counties, but instead of placing them into a blind trust, he agreed upon taking office to a detailed plan to prevent conflict of interest. Among other things, Block agreed not to seek any additional Agriculture Department loans or participate in any federal price support programs, such as the payment-in-kind program, while serving as secretary.
Among Reagan's top four White House aides, only one, chief of staff James A. Baker III, a wealthy Houston lawyer, set up a blind trust.
The 1978 Ethics in Government Act gave top officials several different options to avoid possible conflicts of interest. In addition to a blind trust, they can choose to divest those financial holdings that pose a problem, or, if the investments are small, they can seek a waiver.
They can also recuse themselves voluntarily in advance from any duties or decisions that would create a possible conflict, or set up an internal screening process to shield themselves.
When they choose a blind trust, the officials turn over their stocks, bonds and other financial holdings to a trustee to manage. They are generally prohibited from communicating with the trustee, and the trustee's communications to them also are limited.
"We always say it is a black box in which the officeholder can't see in and the trustee can't communicate out," said David R. Scott, chief counsel of the Office of Government Ethics, which supervises compliance with the law.
Not all blind trusts are totally blind. Some Cabinet members have trusts that only gradually become "blind" as their original holdings are sold, while other blind trusts instantly conceal all the assets.
While some Cabinet officers have clear and visible duties, Casey holds a unique position because of the secrecy surrounding his position and the potentially valuable intelligence information to which he has access.
Casey, a former chairman of the Securities and Exchange Commission, did not put his securities in a blind trust when he entered the administration as CIA director, although two of his predecessors, Bush and Stansfield Turner, both put their holdings in blind trusts.
Casey said government ethics officials told him at the time it wasn't necessary.
In 1981, after Casey sold $600,000 in oil company stocks, a special screening panel of two senior CIA officials was established to review his transactions against unwitting conflicts of interest.
According to Ernest Mayerfeld, the CIA's ethics official, the screening mechanism was "triggered" only once in a case in which Casey might have had a conflict. Casey decided to sell the stock in question so he could participate in a CIA decision concerning a company that was not identified.
Last summer, Casey bought and sold millions of dollars in stocks and other securities. Casey has said that he was diversifying his portfolio by selling his holdings in Capital Cities Communications and buying stocks and bonds.
Casey also said that his stock trading has been left in the hands of a personal investment adviser who had "full discretion" to manage his investments "without consultation with me."
However, this arrangement did not qualify as an official blind trust, which must be sanctioned by the Office of Government Ethics.
Under pressure from Sen. Carl Levin (D-Mich.), Casey agreed recently to set up such a blind trust, saying he wanted to "avoid future questions and misunderstandings."
Turner, President Carter's CIA director, said he set up the blind trust at the urging of the White House. "I thought it was a good thing," he said. Turner added that he wanted "to have the appearance of Caesar's wife" because he took over the CIA during a period in which it had been under intense criticism.
Turner said that, "In the normal run of events I did not come across information that I found significant for investment purposes." But he said "whether I could have found it is another matter."
Casey, in agreeing to set up a blind trust, contended that "only a very small portion" of executive branch officials and members of Congress have set up blind trusts.
Of the 17 Cabinet-level officials in the administration, not including the president and vice president, Casey becomes the seventh to establish a blind trust. The others are Shultz, Regan, Attorney General William French Smith, Secretary of Commerce Malcolm Baldrige, trade representative William E. Brock and Health and Human Services Secretary Margaret M. Heckler.
This group includes some of the wealthiest officials in the Reagan government, but not all.
Housing and Urban Development Secretary Samuel R. Pierce Jr. has a portfolio of blue-chip stocks, according to his financial disclosure statement, but HUD officials said Pierce was not required to set up a blind trust because his duties do not conflict with any of his investments.
Likewise, Transportation Secretary Elizabeth Hanford Dole has extensive investments in bank certificates of deposit, according to her financial disclosure report, but apparently decided not to put them in a blind trust since there is little possibility they would conflict with her official duties.
Dole did promise to recuse herself from any decisions that would have a "direct and predictable" effect on the state of Kansas, which her husband, Sen. Robert J. Dole, represents.
Block, in addition to abstaining from federal farm programs while serving as secretary, agreed to stay out of his farm operations; to recuse himself from any department decision affecting the Illinois counties where he has farm holdings, and to limit his rate of return on his farm operations to 8 percent a year, but not to exceed the amounts he received in earlier years.
Defense Secretary Caspar W. Weinberger does not have a blind trust, but the Senate Armed Services Committee has a "standing policy" that requires all top Pentagon officials to sell holdings in any company that does more than $10,000 in business with the Defense Department.
The Carter White House urged Cabinet members and top presidential appointees with possible conflicts to set up blind trusts, but Reagan, who made it a point of recruiting self-made industrialists and entrepreneurs to his Cabinet, has left it largely to individual discretion.
J. Jackson Walter, president of the National Academy of Public Administration and former director of the Office of Goverment Ethics, faulted the White House for this approach.
Walter said the Reagan administration should have established a uniform policy on blind trusts at the outset "so you don't get in the awkward position that one secretary should have a blind trust and another secretary" is not required to.