The High Price Of Chutzpah

The word "chutzpah" has gotten positively trendy lately, thanks to Joe Lieberman's nomination. But if you're looking for examples of chutzpah--a Yiddish word usually mistranslated as "daring" that actually means "gall" or "cheek"--don't look at Lieberman, or at Al Gore for picking him. Instead, look at Dick Cheney, Lieberman's Republican counterpart. And while you're at it, take a peek at Jon Corzine, the Democratic senatorial candidate from New Jersey. Why? Because the conservative Cheney and liberal Corzine both want to serve in high-elected office without clearing up potential conflict-of-interest problems by making a clean break with potentially profitable investments.

Let me explain. Cheney, the former chairman of Halliburton, the big oil-services company, took early retirement Wednesday, taking lots of Halliburton stock and stock options with him. Halliburton stock tends to move in tandem with energy prices, because higher oil and natural-gas prices are good for Halliburton's business. The potential conflict is obvious.

People have made a fuss about Halliburton's giving Cheney 400,000 options and 140,000 shares that he would have had to forfeit in a normal early retirement. But that going-away present was relatively modest, as such things go. The real problem is the personal financial stake Cheney now has in high energy prices. He owns 229,000 shares of Halliburton outright, and has options to buy 1.16 million shares at prices ranging from $21 to $54.50. Total value of the whole package at Halliburton's closing price Friday: about $37 million.

Cheney, an honorable man, has said that if he's elected, he'll sell his Halliburton stock before taking office. But he hasn't said what he'll do with his options. Dirk Vande Beek, Cheney's spokesman, says Cheney "will do whatever he needs to do to avoid any conflict of interest," but won't be specific. Even if Cheney does the right thing by cashing in his options and putting the profits into a blind trust, some 233,334 of the options--representing $3.4 million of Cheney's $36.9 million stake--can't be exercised before Cheney becomes vice president if his ticket wins. Halliburton won't let him sell or transfer those options because, it says, it doesn't want "to take any sort of special actions that would be accorded to just one individual." Cheney won't say what he'll do with them. If he becomes vice president while still owning the options, he's got a big stake in Halliburton's stock price. Ethics law states that a "disqualifying financial interest" exists whenever any decision by an executive-branch official could have a "direct or predictable effect" on his or her assets. Even if Cheney could transfer the options to a blind trust, which isn't clear, you can't stick an elephant into a bag with a bunch of smaller animals and not know it's there.

You can see why Cheney isn't rushing out to liquidate his Halliburton holdings--it would trigger a huge tax bill, which would be money down the drain for him if the Democrats prevail in November. Let's see what happens when the Democrats start to demonize him.

Which brings us to Corzine, the former cohead of Goldman Sachs who bought the Democratic New Jersey Senate nomination by spending an unprecedented $34 million in the primary. Corzine refuses to make his tax returns public, saying that showing the results of some of his personal investments would breach a confidentiality agreement with his former Goldman partners. "He'd make disclosure if it were not for that agreement," says his spokesman, Tom Shea. Pardon my skepticism, but I think it's likely that Corzine has stakes in some ventures that wouldn't sit well with many voters. Such as companies that have fired hundreds of people or reneged on their debts or polluted. Senate rules will force him to disclose or divest these holdings if he wins. What will he do then? "I'll get back to you on that," said Shea. He didn't.

The model of how to deal with such conflicts is Robert Rubin, who quit Goldman to become Treasury secretary. Rubin converted his Goldman stake from ownership to debt. That way he was a lender, not an equity holder. Then he bought an insurance policy, undoubtedly expensive, to protect his principal. That way he had nothing to gain if Goldman did well and nothing to lose if it went down the tubes.

Please understand that I don't think people should take a vow of poverty to serve in public office. It's a question of greed and degree. Cheney's family won't need food stamps if he walks away from his 233,334 unexercisable options or signs a contract to donate any profits from them to charity. Corzine, who's worth maybe $500 million, could afford to sell his investment stakes, pay his taxes and solve his supposed confidentiality problems. Instead, Cheney and Corzine want to eat their cake and have it too. Where I come from, we call that chutzpah. And it's not a compliment.