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Nominee's ties could create conflicts

In the 14 years since he left government, former CIA director Robert Gates has advised 10 different companies, assessing issues as varied as Saudi Arabian oil drilling, mutual funds performance and restaurant sales at Romano's Macaroni Grill.

But as Gates awaits Senate confirmation to serve as President Bush's secretary of defense, ethics watchdogs worry about the revolving door between government and private business that allowed Gates to align himself with defense contractors, investment houses and a global drilling company involved with Vice President Dick Cheney's former employer, Halliburton Inc.

Companies with which Gates has been affiliated have secured hefty no-bid Pentagon contracts, and "you have to wonder if these companies will continue to get around bidding requirements once Gates is secretary," said Alex Knott, political director of the Center for Public Integrity, a Washington watchdog group.

Common Cause, another nonprofit ethics watchdog, believes that Gates should take steps now to insulate himself, including placing his stock holdings - some of which he acquired in return for board service - in a blind trust to avoid conflicts with companies seeking federal work.

The Bush administration has been dogged by allegations that corporate affiliations of administration officials led to favored treatment in federal contract awards. Much of the criticism has focused on Cheney's relationship with Houston oil services giant Halliburton, a company that has secured $1.5-billion in no-bid contracts for reconstruction in Iraq. Cheney was the firm's chief executive and retained Halliburton stock when he became vice president.

Gates' affiliations

In preparation for hearings set to begin Tuesday, the armed services panel has asked Gates, now the president of Texas A&M University, to complete a standard questionnaire about his corporate affiliations and stock holdings.

Financial disclosure forms filed in recent years with the Texas Ethics Commission show that Gates juggled various corporate relationships with his job as Texas A&M president. The university last year paid him $525,000 in salary, and he nearly doubled his income through outside directorships, according to Securities and Exchange Commission documents.

Gates' personal holdings have grown since he left government, when he had no more than $165,000 in savings and retirement accounts. Now, he has $1.1-million in holdings with Fidelity Investments, as well as stock holdings in some of the companies he has served as director.

Gates' relationships with defense companies date to 1993, after he left government and 27 years in intelligence work. He joined the board of Science Applications International Corp., which does contract work for the Pentagon, CIA and other federal agencies. Gates' brief tenure came as the company weathered a Justice Department investigation into defense contract irregularities that it eventually settled for $2.5-million.

Gates later served on the advisory board for VoteHere, an electronic voting machine firm tied to SAIC, and on the boards of defense contractors TRW, now part of Northrup Grumann, and the Charles Draper Stark Laboratories of Massachusetts.

Gates' knowledge of international issues won him a place on the board of Parker Drilling Co. of Houston, a global firm with 3,000 employees and operations in 10 countries. Gates earned $52,000 in 2005 from the company.

A Parker proxy statement reports that Gates owns 12,000 shares - worth just over $115,000 at Friday's stock price - with rights to acquire 60,000 more.

Parker reports that Halliburton is a "significant customer," often leasing equipment for international projects. Parker has worked with Halliburton in a major drilling project in southern Mexico and in smaller efforts, like a rig worker training program in Russia.

Gates' largest source of outside income last year was $373,000 from Fidelity Investments of Boston, one of the world's largest investment houses. Gates' Fidelity holdings are described as "deferred compensation," according to his disclosures.

Gates said recently that he will resign from the board of Fidelity. Elected last year as chairman of the board's independent directors, Gates and his group oversee 345 mutual funds, including U.S. defense and energy stocks.

Independent directors are charged with protecting the interests of individual investors, but Fidelity spokesman Vin LaPorchio said the directors "are not involved in stock selection."

Gates also is on the board of NACCO Industries of Ohio, which has a mining division and manufactures forklift trucks and household appliances. Gates holds at least 1,000 shares of NACCO stock, according to his disclosures, worth about $149,000 on Friday.

Gates reports other fees as a board member of Brinker International, a food service company with 1,400 restaurants, including Chili's and Macaroni Grill.