June 21 (Bloomberg) -- Goldman Sachs Group Inc. Chief Executive Officer Henry Paulson, the nominee for U.S. Treasury secretary, will sell his Goldman stake as part of an agreement with the Office of Government Ethics, a White House aide said.

He owned 3.23 million Goldman shares as of March worth about $485 million today, according to regulatory filings. White House spokeswoman Dana Perino said Paulson also agreed to sell other investments, including a stake in China's largest bank. In addition, he will exercise and sell all of his options.

Paulson's financial disclosure to the ethics office, parts of which were released earlier today, lists a stake in a Goldman fund whose sole asset is shares in Industrial & Commercial Bank of China. He will divest the interest, which may have caused friction with some U.S. senators pushing sanctions against China for what they claim are unfair trade practices.

``There's nothing improper about Hank Paulson investing in a Chinese company as a private executive,'' said Damon Silvers, associate general counsel at the American Federation of Labor and Congress of Industrial Organizations in Washington. ``The secretary of the Treasury can't have a substantial interest in a Chinese national enterprise.''

President George W. Bush picked Paulson because of his expertise on China, Republicans said at the time the Goldman chief was nominated last month. The Senate Finance Committee must confirm Paulson's appointment.

Thai Ice

Wendy Paulson, his wife, will also sell any assets that present a conflict of interest, said Perino. She owns real estate investment funds that buy properties across the world, from a hotel in Dusseldorf, Germany to a Thai ice company, today's report showed.

The White House and the Senate Finance Committee declined to release Paulson's full ethics agreement. Perino said Paulson won't put his assets in a blind trust. ``Any purchase made with those assets will be made in accordance with ethics guidelines,'' she said.

Administration officials traditionally sell investments that may present a conflict of interest, or put them in a blind trust. Goldman spokesman Peter Rose declined to comment today on the disclosure and the ICBC investments.

The 294-page financial disclosure didn't say how Paulson plans to deal with his vast investments, which include hedge funds, private equity funds and real estate. Outgoing Treasury Secretary John Snow agreed to sell his holdings in railroad firm CSX Corp. to avoid conflict of interest charges.

ICBC Holding

Paulson holds up to $25 million in a Goldman fund that owns a chunk of China's ICBC. In April, a Goldman-led group bought 8.9 percent of the bank for $3.78 billion. Goldman's share amounted to $2.58 billion.

Beijing-based ICBC may raise $10 billion to $12 billion in its initial share sale in Hong Kong, which may happen as early as the third quarter of this year, bankers involved said in May.

The Office of Government Ethics declined to comment other than to point to a section of the law that bars executive branch employees from involvement in matters in which they have financial interests.

The prohibition doesn't include general policy decisions that would affect the interests of ``a large and diverse group,'' according to the provision.

Altria, McDonald's

Paulson also holds as much as $50 million in U.S. Treasury bills and notes, according to the filing. He owns up to $5 million in a hedge fund managed by Omega Advisors Inc., a New York-based group that invests in companies including Altria Group Inc., McDonald's Corp. and China Shenhua Energy Co., China's biggest coal producer.

Paulson, the highest paid chief executive on Wall Street, transferred about $100 million in Goldman shares to a charitable foundation on March 30 to donate to environmental causes.

He may sell up to $800 million of investments and use the funds to start a charity trust, the London-based Times reported on June 1, citing unidentified people at Goldman.

To contact the reporter on this story: Alison Fitzgerald in Washington Afitzgerald2@bloomberg.net Michael Forsythe in Washington at mforsythe@bloomberg.net

Last Updated: June 21, 2006 20:16 EDT