WASHINGTON -- Two members of President Clinton's new national security team failed to sell energy stock holdings when first advised by White House lawyers that the stocks raised the appearance of a conflict of interest, the White House said yesterday.
National Security Adviser Anthony Lake, whom Clinton has named to head the CIA, sold $300,000 worth of stock in four energy companies in mid-1995 -- more than two years after being urged to do so, the president acknowledged.
Lake's deputy, Samuel Berger, whom Clinton has tapped to succeed Lake, failed for more than a year to sell about $90,000 worth of Amoco stock after being alerted to a potential conflict in 1994, White House spokesman Mike McCurry said last night.
As officials confirmed a Justice Department inquiry into Lake's finances, Clinton pledged yesterday to fight for the nominee.
The president, asked by a reporter if Lake's nomination was in trouble and whether he would "go to the mat" to defend his appointee, replied, "No, and yes."
"The [White House] counsel's office and others reviewed the facts as they have been presented -- and I believe they have been accurately presented in the press," Clinton said.
"We believe that it is not a disqualification" for Lake.
The Lake investments in question were Exxon, Mobil, Duke Power and Teco Energy stocks.
After Clinton responded to questions about Lake, McCurry disclosed a similar financial problem involving Berger.
A trade lawyer by profession, Berger "forgot" to follow a White House attorney's recommendation that he sell 1,500 shares
Amoco stock, McCurry said. Like Lake, Berger was alerted anew by the lawyers in June 1995 and, also like Lake, promptly sold the stock.
"Given the integrity of both individuals, we consider this an oversight and the president did not consider this to be disqualifying," McCurry said.
The potential conflict for both men arises from their influential role in setting U.S. policy toward the Middle East and other energy-producing regions, thus the possibility that their actions could affect the value of their holdings.
Lake was urged by a White House lawyer in 1993 to sell about $300,000 worth of stock in the energy companies because it might constitute a conflict with his position as national security adviser, according to a source familiar with the transaction.
But after instructing his secretary to forward the lawyer's memo to his broker, he did not follow up with an explicit instruction that the stock be sold, according to the source. And the broker never received the memo, the source said.
Only when he was again advised to sell by White House lawyers in 1995 did Lake do so, according to the source and White House officials.
Berger's new position is not subject to Senate confirmation. But Lake's appointment must first be voted on by the Senate Intelligence Committee and then approved by the full Senate.
Over the past decade, CIA directors have come under some of the closest scrutiny ever given to presidential nominees, and Lake's appointment promises to be no exception.
Even before the latest disclosures over Lake's finances, Senate Intelligence Committee Chairman Arlen Specter said he had "grave reservations" about Lake because of his role in the White House's secret, tacit approval of Iranian arms shipments to the Bosnian Muslims at the height of the Balkan war.
Two days ago the intelligence panel's deputy chairman, Democratic Sen. Bob Kerrey of Nebraska, questioned whether Lake, who helped formulate policy during Clinton's first term, could now deliver objective analysis to the president.
But Kerrey rushed to defend Lake yesterday amid the new controversy over the nominee's finances, saying that Lake had told him the matter was "an administrative oversight."
"I have great confidence in Mr. Lake's word and in his ability to be a highly effective CIA director," Kerrey said.
As Lake's defenders explain it, the problem stemmed from poor communication with Lake's secretary and stock broker and inattention by Lake and his wife, Antonia, to their finances.
After getting the White House lawyer's memo suggesting the stock sale, Lake wrote a note to his secretary, Wilma Hall, asking her to send a copy to his broker, Larry Walsky, and adding, "I'll then call him." Hall, however, failed to send the memo to Walsky, according to the source familiar with Lake's transactions. Hall declined to comment.
In September 1993, Lake received a certificate of divestiture from the White House counsel's office, confirming for Lake that the stocks had been sold when in fact they hadn't. It was unclear what the White House used as a basis for preparing the certificate.
As a result of miscommunication with Walsky, some of Lake's holdings were put into his wife's name, but not all the energy holdings that had been questioned.
Lake signed his 1994 financial disclosure form without knowing that it showed he continued to own the energy stocks, according to the source.
McCurry argued that the $24,000 profit Lake earned by continuing to hold onto the energy stocks was less than he would have gained had he sold them in 1993 and put the money into a passbook savings account.
Pub Date: 12/13/96