is placed in jeopardy when he gives it, unless he has been exempted from the coverage of the statute.

Mr. FOUNTAIN. Particularly if his advice may in any way consciously or unconsciously influence your final judgment.

Dr. BRIGHT. Again I point out this advice did not occur until I had divested of the stock.

Mr. NAUGHTON. You still had 50 shares.

Dr. BRIGHT. Yes. If the argument is whether 50 shares is significant, why

Mr. FOUNTAIN. I think, in an argument of this kind, those who make the decisions, these are not easy decisions to make, and if you carry this thing as far as some people might technically carry it, a taxpayer shouldn't vote on people to hold office because he has an interest in paying taxes, and a Congressman has no business voting on tax bills because it will affect his own pocketbook.

But I do think these laws were designed to avoid the possibility of people taking advantage of situations in which they have a personal financial interest. And I don't think it involves altogether the monetary ownership in the company. I think it takes into account the total relationship of the individual, where was he, what are his potentials. For instance, whether or not he plans to go back with the company, things of that kind, in connection with any advice he gives. They are all factors. Of course, there are others I haven't mentioned that if your attorneys were giving you an opinion they would probably

consider.

All we are doing is checking to find out just what did transpire. It was brought to our attention somewhat as it was brought to your attention.

Mr. Naughton, do you have other questions?

Mr. NAUGHTON. Yes. I think the thrust of the conflict-of-interest statute is to proscribe not only evil, but any conduct which would give the appearance of evil.

Mr. Howe. I would agree with that.

Mr. NAUGHTON. That is stated quite clearly in the Mississippi Valley case, which occurred in connection with the rather famous DixonYates contract a few years back. Had you heard about that case, Commissioner?

Mr. Howe. I have heard of the Dixon-Yates contract, but I don't know the details of the case. We operate on a smaller scale.

Mr. NAUGHTON. I am not so sure about that; $4 billion a year is rather large.

Mr. Howe. I honestly don't know the details of the case.

Mr. NAUGHTON. The reason I bring that up, I wonder if your lawyers have given any consideration to whether or not any grant which resulted in a financial benefit to Westinghouse, as presumably the proposed Shawano grant would do if approved-in view of Dr. Bright's participation in this matter might be invalid as contrary to public policy. This was just about what was ruled in the Mississippi Valley case. One of the companies there had expended something like $3 million preparing to carry out a contract. As it happened, a man who was a consultant, who had nothing to do with the final decision and had no authority to make it, had given advice on the project. If it were

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awarded, there was a possibility his consulting firm might receive a contract to handle financing of the project. The Supreme Court ruled that was a sufficient conflict of interest to invalidate the contract and the company was unable to get back the money spent for preliminary expenses. So it would seem to me if this proposal is approved and Westinghouse benefits from it, the question will be raised whether or not there may be an invalidity because of the activities of Dr. Bright. Mr. Howe. We of course will have this question examined by our attorneys prior to any ruling on the award of this contract.

(The following statement was subsequently supplied by the Office of General Counsel, Department of Health, Education, and Welfare :)

The "Dixon-Yates" principle that contracts which are tainted by conflict of interest may be set aside has been incorporated in section 218 of the conflict of interest statute, P.L. 87-849, 18 U.S.C. 218. However, no contract has yet been let for this project. It is our understanding that the Office of Education will consider the extent of Dr. Bright's involvement, as revealed through the hearings and investigation by the Office of Education, before determining the course of action it will take with respect to the proposed contract.

Mr. NAUGHTON. Switching to another area of the conflict of interest question, Commissioner, could you enlighten us on the circumstances of Charles Kettering's appointment to the Advisory Committee on Supplementary Centers and Services?

Mr. Howe. There are no elaborate circumstances. As a person interested in education, he was invited to serve on what we call the title III committee. We tend to maintain on these committees a cross section of people, some from business, some from education, some from the foundations and various other nonprofit enterprises, and people from public life. Mr. Kettering was invited to serve and agreed to and did. I don't know what you mean by "the circumstances." It was that sort of thing. Maybe you could tell me what you have in mind. Mr. NAUGHTON. Who selected Mr. Kettering?

Mr. Howe. I don't know the answer to that. Let me talk about process here. You say "selected." You are talking about a process, really. Our committees all differ in the sense that some are appointed by me, some are appointed by the Secretary, some are appointed by the President. This particular committee is appointed by the Secretary. What we typically do is seek a variety of nominations from wide sources. We get many from the Congress. We get nominations to these committees from the world of education. We get them sometimes just independently, without our seeking them, from business leaders and other people. And we maintain kind of a bank of names for purposes of selecting people to be on committees. Usually I will consult with the program people most directly involved about how a committee is working, about the kind of additional skills and interests they need on the committee to make it a more effective operation and, in this kind of a case, I will recommend the name of a person to the Secretary for appointment.

So, I am sure I recommended Mr. Kettering. I don't recall how his name flowed to me, but I am sure that I took responsibility for recommending him. I have known him personally prior to that recommendation. I first met him out in Aspen, Colo., at a conference at the Humanities Center a number of years ago.

(NOTE. The correspondence relating to the Kettering appointment was subsequently supplied, and appears in app. 13, p. 218.)

Mr. NAUGHTON. Mr. Kettering is associated with the Kettering Foundation, am I correct, and was at the time of his appointment? Mr. Howe. He was at the time of his appointment; he is no longer. Mr. NAUGHTON. Isn't he still a trustee?

Mr. Howe. Trustee, but he is not an employee any more.

Mr. NAUGHTON. He's an overseer, would you say?

Dr. ESTES. No; he is a trustee. He was vice president of the operating organization before.

Mr. Howe. He was a full-time employee. Now he is just on the board.

Mr. NAUGHTON. And the Kettering Foundation is engaged in fairly extensive activities in the field of education, are they not?

Mr. Howe. They have been increasingly so in recent years. Actually this was one of Mr. Kettering's interests, to extend the operations of the Foundation in education.

Mr. NAUGHTON. We discussed at some length, a couple of months ago, this series of seminars in Hawaii, which were cosponsored with the Kettering Foundation. In addition to that, they also have a sort of consortium of 36 schools, do they not, all of which applied for title III grants, the IDEA schools, I believe they are called?

Mr. Howe. I am not sure of the numbers, nor do I know if we call these schools the IDEA schools. There is a separate organization called IDEA, sponsored by Kettering. I believe that organization was in touch with a number of schools about presenting grant proposals to the Office of Education. Isn't that correct?

Dr. ESTES. That is correct. Actually we have about 500 projects that we would call model innovative or exemplary projects. It so happens that the Kettering Foundation, as a number of other foundations, is funding educational projects. I would simply add that I believe the Kettering Foundation input is $2 to $4 million in this kind of activity in a $25 billion industry. So whether or not this is substantial, I guess would be open to question.

Mr. NAUGHTON. What is the input of the Office of Education to programs in which the Kettering Foundation is interested, as compared with this $2 million? As I recall the 36 schools applied for grants which totaled about $2 million, and then there was a couple of hundred thousand dollars for the Hawaiian conference, of Federal funds. Mr. FOUNTAIN. Funds for demonstration schools?

Mr. NAUGHTON. IDEA demonstration schools, yes.

Mr. Howe. I don't know how to answer that question about the Office of Education inputs into such schools, because you have to define the terms there. A lot of those schools are receiving considerable funding under title I of the Elementary and Secondary Education Act. If you add up all of that, in addition to what they might have had under what you would describe as, say, discretionary funding, which is a different category really-they have a right to that funding under the title I formula-1 assume you would come to a considerable amount of money. So if you would tell us what you would like to know about them, we will get the information.

Mr. NAUGHTON. I am thinking primarily of title III grants for innovative educational activities, which is the field of concentration, I believe, of IDEA.

Mr. HowE. We can supply that information for the record, and I think that will be more accurate.

(The following statement was subsequently supplied:)

OFFICE OF EDUCATION INVOLVEMENT WITH THE KETTERING FOUNDATION

1. Thirty-six title III, ESEA demonstration school project proposals were submitted by local school districts. These proposals totals $2,002,400. Twenty proposals were approved by the Office of Education for a total cost of $995,600. The approved projects provide grants to the local school districts for operation of the program. The Kettering Foundation will provide advice and assistance in the operation of the demonstration school programs.

2. Eight title III project proposals were submitted by local school districts for conferences on innovation. The total cost of these proposals was $200,000, of which three projects were approved for a cost of $75,000. The local school districts proposed to subcontract with the Kettering Foundation for part of the operation of the conferences.

3. The Kettering Foundation (IDEA) currently has a research contract with the Office of Education designed to evaluate the demonstration school program. The Office of Education portion of the cost of the project for fiscal year 1967 was slated at approximately $240,000. The Kettering Foundation proposed to contribute an additional $177,000.

Mr. FOUNTAIN. As I understand it, the Kettering Foundation has as one of its divisions a division called the Institute for Development of Educational Activities, referred to as IDEA. And they have become very actively involved in innovative education, and as a part of its activity in the field of education, I understand the foundation does sponsor a demonstration schools program. And some 36 demonstration schools have been recruited by the foundation for the 1967 school year. It is also my understanding, on the basis of information which we have, that each of the 36 IDEA demonstration schools requested a title III grant for the purpose of carrying out objectives of the Kettering program. The total amount of these funds was in the neighborhood of $2 million; is that correct, Dr. Estes?

Dr. ESTES. Somewhere in that neighborhood.

Mr. FOUNTAIN. As I understand it, the title III advisory committee, on which Mr. Kettering serves, recommended approval of all grant applications by IDEA schools except in those cases where disapproval was recommended by the State educational agency concerned. Mr. Kettering, as a member of the advisory committee, asked to be excused from the voting on the approval of these applications. Dr. ESTES. That is correct.

Mr. FOUNTAIN. I think probably you want to ask questions as to whether or not this disassociation avoided the possibility of their still being a conflict of interest.

Mr. NAUGHTON. I think we are speaking in terms here of an actual situation, not in terms of the coverage of the statute. I don't want this to be interpreted as criticism personally of Mr. Kettering. He did disassociate himself from considering these. The question is, "Can anyone who is associated with an organization so actively engaged in the educational field and so much involved in making applications for title III grants, serve objectively on a committee whose responsibility it is to make a recommendation on each and every grant application which is proposed?" Now granted that Mr. Kettering disassociated himself from this proposal, but could his associates on the advisory committee, would they be influenced by the

fact that they knew these 36 projects were projects in which Mr. Kettering was undoubtedly interested? Could he objectively evaluate other projects which may have been worthy, but would be an entirely different approach from that of the Kettering Foundation?

In other words, here is a man who I am sure is a very dedicated

man

Mr. FOUNTAIN. I think he is dealing with subject of appearances

now.

Mr. NAUGHTON. He is a wealthy man, and it is not a question of financial interest.

Mr. Howe. Nor is it a question of financial interest of the foundation, who is giving away money,

Mr. NAUGHTON. But they are taking it in, some of it, from the Office of Education.

Mr. Howe. The schools are taking it in.

Mr. NAUGHTON. So is the foundation.

Mr. HowE. Only as a vehicle for transmission of expenditures for certain purposes, but the foundation is not receiving funds from the Office of Education for discretionary investment.

But let me make a general statement on that point. You will find we have here a situation very much like the one the chairman was referring to a moment ago, when he talked about NIH and some of the problems he has looked at there. You have a situation in education in which your leadership people, whom you will select for committee service, are very, very likely to have interests of one sort or another in the activities of an agency as comprehensive as the U.S. Office of Education. And the same would be true of many of the other advisory committees we have, besides the title III committee. So that what you are basically depending on in advisory committees is, first, the stature of the people you have, secondly, their discretion, and thirdly, their willingness to exempt themselves from specific situations if there is a direct involvement. There is no issue of conflict of interest in terms of financial gain and this sort of thing. There is quite properly, as both of you suggest, a problem of appearances.

It seems to me Mr. Kettering recognized that problem of appearances when he formally, in this meeting, withdrew himself from this situation. I don't think that there is any issue at all about other persons on a committee being influenced by his presence in wanting to approve projects simply because they happened to know he had an interest in them. If you were to try to operate the committee structure that we have, and must have, in order to stay in connection with the world of education, on a basis that would leave out of that committee structure any person who had any interest in the concerns that we are trying to invest in for public purposes in education, you would have to get a lot of people who didn't know anything about the business to advise you. And this just wouldn't work.

So, again, we fall back on the stature of the people we are concerned with, on their willingness to stay clear of issues in which they could conceivably be thought of as directly involved, and that was indeed the case with Mr. Kettering. In terms of that foundation supporting IDEA, and IDEA engaging in activities with local school districts, which encouraged those local districts to make application to us, this