B-134219, SEP. 10, 1959

B-134219, SEP. 10, 1959

TO MR. WESLEY I. DUMM:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 9, 1959, WITH ITS ENCLOSURES, REQUESTING REVIEW OF GENERAL ACCOUNTING OFFICE SETTLEMENT DATED JANUARY 15, 1959, WHICH ALLOWED YOUR CLAIM (AS REPRESENTATIVE OF THE PARTIES IN INTEREST, INCLUDING ASSOCIATED BROADCASTERS, INC.) IN THE AMOUNT OF $16,847.47 ($15,937.50 FOR RENT AND $909.97 FOR A TAX ASSESSMENT) BUT SET OFF THE ENTIRE AMOUNT ALLOWED AGAINST AN INDEBTEDNESS OF $30,118.58 FOUND DUE FROM YOU TO THE GOVERNMENT ($30,004.58 FOR TUBES AND $114 FOR RENT), LEAVING A BALANCE OF $13,271.11 DUE THE UNITED STATES AS SET OUT IN THE SETTLEMENT. SINCE YOUR CLAIM WAS ALLOWED IN FULL AND SINCE YOU CONCEDED THE CORRECTNESS OF THE GOVERNMENT'S CLAIM FOR RENT IN THE AMOUNT OF $114, THE ONLY MATTER NOW FOR CONSIDERATION IS THE QUESTION AS TO THE VALIDITY OF THE GOVERNMENT'S CLAIM AGAINST YOU IN THE AMOUNT OF $30,004.58 FOR TUBES.

MANY OF THE PERTINENT FACTS OF THE MATTER ARE SET OUT IN THE REFERRED-TO SETTLEMENT AND NEED NOT BE REPEATED HERE. BRIEFLY, IT APPEARS THAT THE RELATIONSHIP BETWEEN THE GOVERNMENT AND ASSOCIATED BROADCASTERS, INC., BEGAN THROUGH ORAL COMMITMENTS AND UNDERTAKINGS IN THE EARLY DAYS OF THE WAR EMERGENCY, BEING FIRST FORMALIZED BY CONTRACT NO. G2M-732 DATED JUNE 30, 1942, ENTERED INTO BY THE DIRECTOR OF THE OFFICE OF WAR INFORMATION AND ASSOCIATED BROADCASTERS, INC. BY THE TERMS OF THE CONTRACT, THE GOVERNMENT TRANSFERRED THE POSSESSION OF AND AUTHORIZED THE USE BY THE CONTRACTOR OF A CERTAIN 100-KILOWATT TRANSMITTER TO BE USED IN SHORT-WAVE BROADCAST STATION KWID AT SAN FRANCISCO. PARAGRAPH 2 OF THE CONTRACT PROVIDED THAT TITLE TO ALL OF THE APPARATUS, FACILITIES, EQUIPMENT, FURNITURE AND IMPROVEMENT OF STATION KWID SHOULD BE IN THE CONTRACT, SUBJECT TO CERTAIN CONDITIONS SET OUT IN PARAGRAPHS 14 AND 15 OF THE CONTRACT. AMONG OTHER PROVISIONS OF PARAGRAPH 14 IS THE FOLLOWING:

"14. UPON THE EXPIRATION OR TERMINATION OF THIS CONTRACT OR RENEWAL THEREOF, UNLESS BROADCASTER FILES A NOTICE OF INTENTION TO RETAIN WITH THE DIRECTOR, BROADCASTER SHALL TRANSFER THE TRANSMITTER TOGETHER WITH THE SAME NUMBER AND QUALITY OF SPARE PARTS AS WHEN FIRST DELIVERED TO BROADCASTER, THE ANTENNAS AND TRANSMISSION LINES,STUDIO AND OFFICE IMPROVEMENTS AND EQUIPMENT AND FURNITURE USED IN THE OPERATION OF STATION KWID PURSUANT TO THE TERMS OF THIS CONTRACT, TO THE DIRECTOR, * * *.'

FOUR SETS OF SPARE TUBES VALUED AT $39,577.12 WERE FURNISHED BY THE GOVERNMENT AT THE BEGINNING OF THE PROJECT BUT TUBES VALUED AT ONLY $9,572.54 WERE RETURNED TO THE GOVERNMENT ON MARCH 21, 1956, LEAVING A BALANCE OF $30,004.58 APPARENTLY DUE THE GOVERNMENT IN ACCORDANCE WITH THE ABOVE-QUOTED PROVISION OF PARAGRAPH 14 OF THE CONTRACT. IT IS REPORTED BY THE CENTRAL INTELLIGENCE AGENCY THAT DURING THE PERIOD FROM JANUARY 1, 1944, THROUGH JUNE 30, 1953, THE CONTRACTOR RECEIVED FROM THE GOVERNMENT A TOTAL AMOUNT OF $148,615.82 FOR TUBES BUT EXPENDED ONLY $90,245.68 AND THAT IN THE FINAL YEAR OF THE CONTRACT ENDING JUNE 30, 1953, THE CONTRACTOR RECEIVED $15,000 FOR TUBES BUT EXPENDED ONLY $399.04.

THE GOVERNMENT WAS TO HAVE THE RIGHT TO EXCLUSIVE USE OF ALL OF THE TIME, FACILITIES, PERSONNEL AND RESOURCES OF STATION KWID, FOR WHICH IT AGREED TO PAY THE CONTRACTOR AT THE RATE OF $25,000 PER MONTH IN COMMUTATION OF ACTUAL OPERATING EXPENSES. THE RELATIONSHIP CONTINUED UNBROKEN UNTIL JUNE 30, 1953, UNDER SUBSEQUENT AGREEMENTS (PARTICULARLY CONTRACTS NOS. GEMOR- 344 DATED MAY 1, 1944, EFFECTIVE JANUARY 1, 1944, AND SCC-885 DATED JULY 1, 1946) AND REMOVALS OR SUPPLEMENTS THEREOF. UNDER THOSE CONTRACTS, THE CONTRACTOR RETAINED POSSESSION OF THE TRANSMITTER STATION AND ALL ACCESSORIES AT ALL TIMES THOUGH LEGAL TITLE WAS TRANSFERRED FROM THE CONTRACTOR TO THE GOVERNMENT.

ON PAGE 2 OF THE STATEMENT ACCOMPANYING YOUR LETTER OF APRIL 9, 1959, YOU STATE YOUR VIEW "THAT SUBSEQUENT TO JANUARY 1, 1944, THE CONTRACTS WERE NOT COST CONTRACTS, THAT IT WAS NOT THE INTENT OF THE PARTIES TO LIMIT PAYMENTS "TO ACTUAL EXPENDITURES AS NEARLY AS THEY COULD BE CONTEMPLATED IN ADVANCE," " AS STATED IN THE SETTLEMENT OF JANUARY 15, 1959. WE AGREE WITH YOUR CONTENTION IN THAT RESPECT. HOWEVER, THE CLAIM OF THE GOVERNMENT IS NOT BASED ON THE PREMISE THAT THE REFERRED-TO CONTRACTS WERE COST CONTRACTS AND THAT THE CONTRACTOR WAS OVERPAID. IN THE SETTLEMENT OF JANUARY 15, 1959, THERE WAS ONLY INCIDENTAL REFERENCE TO THE FACT THAT THE ESTIMATED AMOUNTS PAID TO THE CONTRACTOR FOR TUBE REPLACEMENT UNDER THOSE CONTRACTS CONSIDERABLY EXCEEDED THE ACTUAL EXPENDITURES FOR TUBES--- A FACT WHICH NOT ONLY HAS A BEARING ON THE EQUITIES OF THE MATTER BUT ALSO MAY BE REGARDED AS NEGATIVING ANY INTENTION OF THE PARTIES THAT THE CONTRACTOR SHOULD ALSO BE AUTHORIZED TO USE TUBES FROM THE TUBE COMPLEMENT WITHOUT PAYING FOR THEM AS REQUIRED BY THE ORIGINAL CONTRACT.

UPON CAREFUL RECONSIDERATION OF THE ENTIRE MATTER IN THE LIGHT OF THE RECORD HERE AVAILABLE, IT IS CONCLUDED THAT THE CONTRACTOR'S OBLIGATION UNDER THE QUOTED PROVISION HAS NOT BEEN TERMINATED OR FULFILLED. SUBSEQUENT CONTRACT OR AGREEMENT SPECIFICALLY TERMINATES THAT OBLIGATION OR STATES THAT IS IS REGARDED AS FULFILLED. THE SUBSEQUENT CONTRACTS WERE ESSENTIALLY CONTINUATIONS OF THE ORIGINAL CONTRACT. IT APPEARS THAT THE CONTRACTOR RETAINED POSSESSION OF THE RADIO STATION AND THE APPURTENANT PROPERTY THROUGHOUT THE PERIODS OF THE VARIOUS CONTRACTS. MOREOVER, EVEN IF THE SUBSEQUENT CONTRACTS WERE NOT REGARDED AS CONTINUATIONS OF THE ORIGINAL CONTRACT, THERE STILL WOULD BE NO PROPER BASIS FOR REGARDING THE OBLIGATIONS OF THE ORIGINAL CONTRACT AS TERMINATED OR FULFILLED IN THE ABSENCE OF A SPECIFIC PROVISION OR DEFINITE SHOWING TO THAT EFFECT.

ON PAGES 5 AND 6 OF THE STATEMENT TRANSMITTED WITH YOUR LETTER OF APRIL 9, 1959, IT IS STATED:

"OUR DOCUMENTATION, AS SUPPORTED BY A GOVERNMENT AUDIT AS OF JUNE 30TH, 1943, DEMONSTRATES THAT UP TO THAT DATE AMOUNTS PAID TO ASSOCIATED HAD EXCEEDED EXPENDITURES BY ASSOCIATED BY $69,541.06, WHICH AMOUNT WAS VOLUNTARILY RETURNED BY ASSOCIATED TO THE GOVERNMENT. THIS AMOUNT INCLUDED AN ITEM OF $13,242.98 WHICH REPRESENTED THE DIFFERENCE BETWEEN THE ORIGINAL VALUE OF THE TUBES ON HAND AND THOSE ON HAND AS OF JUNE 30, 1943. IN OTHER WORDS, ASSOCIATED RETURNED THE MONEY WHICH WOULD HAVE BEEN SPENT TO MAINTAIN THE ORIGINAL TUBE COMPLEMENT HAD IT BEEN CONCLUDED TO MAINTAIN SUCH A COMPLEMENT. THE RECORD INCLUDES DOCUMENTATION OF MANY TYPES POINTING OUT THE WASTEFUL NATURE OF THE ORIGINAL TUBE COMPLEMENT, THE INABILITY TO REPLACE CERTAIN TUBES BECAUSE OF PRIORITIES, AND A LETTER FROM THE CHIEF OF BROADCASTING AT THE TIME ACKNOWLEDGING THE NECESSITY FOR THE REDUCTION IN THE TUBE COMPLEMENT. NOT ONLY FROM ASSOCIATED'S RECORDS BUT FROM THE GOVERNMENT'S RECORDS IT SHOULD BE SELF-EVIDENT THAT UP TO JUNE 30, 1943, ASSOCIATED RETURNED TO THE GOVERNMENT VOLUNTARILY THE AMOUNT OF MONEY, NAMELY $13,242.98, WHICH IT HAD RECEIVED FOR THE TUBE PURCHASES AND WHICH IT HAD NOT EXPENDED FOR THE REASONS SET FORTH ABOVE. IT FOLLOWS THAT SECTION 14 OF GSMA 732 AS OF JUNE 30, 1943, HAD BEEN FULLY SATISFIED, FOR THE VERY SIMPLE REASON THAT ASSOCIATED DID IN FACT RETURN TO THE GOVERNMENT THE DIFFERENCE BETWEEN THE VALUE OF THE ORIGINAL TUBE COMPLEMENT AND THE VALUE OF THE COMPLEMENT AS OF JUNE 30, 1943.'

IF THE QUOTED STATEMENTS MEAN THAT THE CONTRACTOR REFUNDED THE AMOUNT OF THE OVERPAYMENTS WHICH THE GOVERNMENT HAD MADE TO IT FOR PURCHASING TUBES, SUCH REFUND COULD HAVE NO RELATION TO THE TUBES USED FROM THE ORIGINAL TUBE COMPLEMENT. IT SEEMS CLEAR THAT MERE REFUND OF ANY AMOUNT OVERPAID TO THE CONTRACTOR BY THE GOVERNMENT COULD NOT PROPERLY BE REGARDED AS AFFECTING THE OBLIGATION TO ACCOUNT FOR THE ORIGINAL TUBE COMPLEMENT ALTHOUGH THAT TUBE COMPLEMENT WAS GRADUALLY REDUCED FOR THE REASONS STATED IN THE ABOVE QUOTATION FROM YOUR STATEMENT ACCOMPANYING YOUR LETTER OF APRIL 9, 1959. IT IS OUR UNDERSTANDING THAT IN THE PERIODIC NEGOTIATIONS RESULTING IN THE DETERMINATION OF THE COMPENSATION TO BE PAID BY THE UNITED STATES FOR THE ENSUING PERIODS AN ESTIMATED SUM FOR TUBE REPLACEMENT WAS ALWAYS INCLUDED. THE GOVERNMENT WELL MAY HAVE AGREED TO DEPLETION OF THE TUBE COMPLEMENT--- ESPECIALLY IN VIEW OF THE PRIORITY REGULATIONS--- AND YET NOT HAVE ABANDONED ITS RIGHT TO THE VALUE OF THE TUBES.

IF THE QUOTED STATEMENTS MEAN THAT THE CONTRACTOR ACTUALLY PAID $13,242.98 FOR TUBES USED FROM THE TUBE COMPLEMENT, THERE IS NOT FOUND ANY SATISFACTORY EVIDENCE THAT ANY PAYMENT MADE BY THE CONTRACTOR IN FACT WAS APPLICABLE TO TUBES USED FROM THE TUBE EQUIPMENT.

WITH RESPECT TO THE PERIOD FROM JUNE 30, 1943, TO JANUARY 1, 1944, IT APPEARS THAT THE OPERATION WAS ON A COST BASIS. SEE PAGE 5 OF EXHIBIT A TRANSMITTED WITH YOUR LETTER OF APRIL 9, 1959. ON THAT PAGE IN THE FOLLOWING QUOTATION FROM PAGE 14 OF YOUR STATEMENT OF OCTOBER 10, 958:

" "AGREEMENT DATED OCTOBER 1, 1943 SIGNED BY ELMER DAVIS AND W. I. DUMM, EVIDENCING AGREEMENT THAT ASSOCIATED WAS TO BE PAID REASONABLE COSTS INCURRED BY IT IN PERFORMING SERVICES TO THE OFFICE OF WAR INFORMATION FOR THE SIX MONTHS PERIOD FROM JULY 1, 1943 TO DECEMBER 31, 1943.' (REFER B- 17)

" "A LETTER DATED DECEMBER 4, 1943 FROM THE ASSISTANT DIRECTOR FOR MANAGEMENT, OFFICE OF WAR INFORMATION, PROPOSING A MONTHLY RATE OF $24,335.00 PER CALENDAR MONTH FOR THE PERIOD JULY 1, 1943 TO DECEMBER 31, 1943. THIS MONTHLY AMOUNT WAS ARRIVED AT FOLLOWING A GOVERNMENT AUDIT. IT WILL BE SHOWN SUBSEQUENTLY THAT THE SUM ALLOWED DID NOT INCLUDE AMOUNTS FOR TUBE REPLACEMENT BUT MERELY REFLECTED ACTUAL EXPENDITURE FOR TUBES BY ASSOCIATED. IT SHOULD BE NOTED FURTHERMORE THAT THE SUM ALLOWED DID NOT INCLUDE ANY SUM AT ALL FOR TUBES FOR THE MONTH OF DECEMBER. OWI WAS TO PURCHASE ANY TUBES NECESSARY DURING THAT MONTH.' (REFER B-18)" THERE HAS NOT BEEN FOUND ANY SATISFACTORY SHOWING THAT DURING THAT PERIOD THE CONTRACTOR USED TUBES FROM THE TUBE COMPLEMENT OR THAT PAYMENT WAS NOT MADE BY THE GOVERNMENT FOR SUCH TUBES USED, IF ANY, AS A PART OF THE COST OF OPERATION.

SUMMARIZING, UNDER THE ABOVE-QUOTED PROVISION OF PARAGRAPH 14 OF THE ORIGINAL CONTRACT NO. GEMA-732, THE GOVERNMENT WAS ENTITLED TO RECEIVE UPON THE EXPIRATION OR TERMINATION OR RENEWAL OF THE CONTRACT "THE SAME NUMBER AND QUALITY OF SPARE PARTS AS WHEN FIRST DELIVERED TO BROADCASTER.' THE FILE DOES NOT SHOW THAT THAT PROVISION WAS OVERFULFILLED OR TERMINATED. THE SUBSEQUENT CONTRACTS APPEAR TO HAVE BEEN IN EFFECT RENEWALS OF THE ORIGINAL CONTRACT AND THE CONTRACTOR REMAINED IN POSSESSION OF THE TRANSMITTOR AND ACCESSORIES, INCLUDING THE TUBE COMPLEMENT, CONTINUOUSLY THROUGHOUT THE TERMS OF ALL OF THE CONTRACTS. SUCH A SITUATION THERE IS APPLICABLE THE LEGAL PRINCIPLE THAT NO OFFICER OR AGENT OF THE GOVERNMENT HAS THE AUTHORITY TO GIVE AWAY OR SURRENDER ANY RIGHT VESTED IN OR ACQUIRED BY THE GOVERNMENT UNDER A CONTRACT. SEE UNITED STATES V. AMERICAN SALES COMPANY, 27 F.2D 389, AFFIRMED 32 F.2D 31, CERTIORARI DENIED 280 U.S. 574.

FOR THE REASONS ABOVE INDICATED, THE SETTLEMENT OF JANUARY 15, 1959,APPEARS CORRECT AND HEREBY IS SUSTAINED. THEREFORE, IT IS REQUESTED THAT YOU MAKE PAYMENT OF THE BALANCE OF $13,271.11 STATED IN THE SETTLEMENT ANY CHECK, DRAFT OR MONEY ORDER TO BE MADE PAYABLE TO THE UNITED STATES AND TRANSMITTED TO CLAIMS DIVISION, U.S. GENERAL ACCOUNTING OFFICE, BOX 2610, WASHINGTON 13, D.C. ..END :