Undersecretary nominee at State Department returns to revolving door

For those seeking an example of the revolving door between government and the private sector at the State Department, one need look no further than President Obama’s recent nominee for the position of undersecretary for political affairs.

Wendy Sherman worked as assistant secretary for legislative affairs at the State Department early in the Clinton administration, leaving to run the charitable arm of mortgage giant Fannie Mae before rejoining the department as counselor to Secretary of State Madeleine K. Albright.

Now, after overseeing Mr. Obama’s transition team at the State Department, Ms. Sherman helps run a big international consulting firm with offices around the world. Her recent roster of clients has included major corporate heavyweights such as Coca-Cola Co., Wal-Mart Stores Inc. and the U.S. Chamber of Commerce.

But she is poised to leave that job to join the State Department again, taking its No. 3 post and resigning from the Albright Stonebridge Group, where she works alongside Ms. Albright.

Such a career trajectory is hardly unusual in Washington, but under ethics rules imposed by Mr. Obama, who campaigned against the revolving door between government and special interests, she will have to recuse herself for two years from specific matters involving Albright Stonebridge and her clients.

The list of clients on Ms. Sherman’s ethics form numbers nearly two dozen, including several companies such as Dow Chemical Co. that directly lobbied the State Department in recent years.

Ms. Sherman never lobbied for any of her clients. She is not a lobbyist, nor is the Albright Stonebridge Group registered to lobby Congress or federal agencies. But several of her clients — including Delta Air Lines Inc., Dow Chemical and the Chamber of Commerce — have employed their own lobbyists or hired others to lobby the State Department in recent years.

Under Mr. Obama’s ethics rules, any specific issues involving Ms. Sherman’s former clients should be off limits in her new State Department job.

Clients

One client listed on Ms. Sherman’s ethics form, London-based Diageo PLC, one of the world’s largest producers of alcoholic beverages, recently agreed to pay $16 million to the Securities and Exchange Commission to settle charges of widespread violations of the Foreign Corrupt Practices Act.

The SEC announced last month that the case stemmed from more than six years of improper payments by Diageo to government officials in India, Thailand and South Korea. Without admitting or denying the findings, the company agreed to the settlement.

According to lobbying disclosure forms, Wal-Mart, another recent client of Ms. Sherman’s, recently lobbied the State Department on currency exchange rates and textile enforcement matters. Dow Chemical, also a client, lobbied State Department officials on issues involving market access in China and Thailand, as well as Middle East investment policy.

Ms. Sherman consulted for Delta Air Lines, which lobbied the State Department on carbon emissions issues and on international air services rights. Coca-Cola lobbied the State Department on issues including excise taxes in Pakistan and Thailand, records show.

The Albright Stonebridge Group and Ms. Sherman declined to comment, but a White House spokesman said Ms. Sherman would abide by Mr. Obama’s ethics rules and did not indicate whether she would require a waiver from those regulations.

“Ms. Sherman will be recused for two years from participating personally or substantially in any particular matter that involves the Albright Stonebridge Group or any clients that she served,” National Security Council spokesman Tommy Vietor said.

According to Ms. Sherman’s ethics forms, the Albright Stonebridge Group also owns Stonebridge Advisors, “a wholly foreign-owned enterprise in China to facilitate doing business in China.” Albright Stonebridge also is a minority owner of Albright Capital Management, an investment firm.

Other clients listed on Ms. Sherman’s ethics form include PricewaterhouseCoopers LLP, First Solar Inc., Hilton Worldwide and the Pew Global Attitudes Project. Atlanta-based Coca Cola is listed as a client, as is Coca Cola Beverages Shanghai Co. Ltd. in China.

Exit terms

Ms. Sherman plans to sell off her interests in Albright Stonebridge Group when she joins the government. It’s not unprecedented for nominees, Democrats and Republicans alike, to continue to receive payouts through deferred compensation, retirement packages or selling off assets in companies, with the payments continuing after they have joined the government.

For example, Solomon B. Watson IV, former chief legal officer at the New York Times, was due at least $1 million in deferred compensation from the newspaper after his nomination by Mr. Obama as general counsel for the Army, according to his disclosure forms.

George Madison was due $1.6 million from TIAA-CREF, where he worked as general counsel, after accepting an offer from the Obama administration to become the top legal officer for the Treasury Department in 2009, records show.

Treasury Secretary Paul H. O’Neill and Energy Secretary Samuel W. Bodeman during the George W. Bush administration had hefty exit packages from their old employers when they entered government, according to news reports at the time. Dick Cheney continued getting deferred compensation from defense contractor Halliburton after he left the company to become vice president under Mr. Bush.

Mr. Vietor said that when Ms. Sherman sells her interest in the firm before joining the State Department, she will be paid through “a mix of cash and a promissory note.” But it’s not clear based on Ms. Sherman’s ethics forms exactly how much of the money will be paid through an IOU, or even precisely when she will get paid.

One ethics watchdog called for more disclosure.

“The intent of ethics disclosures is to provide the public with information about actual and apparent conflicts of interest,” said Scott Amey, general counsel for the nonpartisan Project On Government Oversight. “The lack of details about the interest, the payout and the timing are concerning, given Ms. Sherman’s nomination and her work for the Albright Stonebridge Group and as a consultant.”

Mr. Vietor said the promissory note will be a “fixed debt obligation of Albright Stonebridge Group and will specify the date by which the amount must be paid.”

“The note and any payments will not be conditional upon the earning or financial circumstances of Albright Stonebridge Group, or upon any benchmark, return or other condition,” Mr. Vietor said. “Ms. Sherman will, of course, be recused from participating personally or substantially in any particular matter that has a direct and predictable effect on the ability or willingness of Albright Stonebridge to pay the note.”

The White House announcement of Ms. Sherman’s nomination, which is pending Senate approval, stated she is vice chairwoman of Albright Stonebridge Group and was a founding member of the firm in 2001. In addition, the White House said she was appointed in 2008 by congressional leaders to the Commission on the Prevention of Weapons of Mass Destruction, Proliferation and Terrorism. She also has served on the U.S. Defense Policy Board since 2009.

According to the State Department website, the undersecretary for political affairs is the third highest ranking job in the department, serving as the day-to-day manager of regional and bilateral policy issues and overseeing bureaus for Africa, East Asia and the Pacific, Europe, the Near East, South and Central Asia, the Western Hemisphere, international organizations and international narcotics and law enforcement.