A-18794, AUGUST 22, 1927, 7 COMP. GEN. 136

A-18794: Aug 22, 1927

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WHICH FUNDS ARE ALLEGED TO HAVE BEEN EMBEZZLED BY HIM PRIOR TO HIS SEPARATION FROM THE SERVICE. ASSUMING THAT THE UNITED STATES WAS UNDER A DUTY TO PRESERVE THE MONEY EFFECTS OF VETERANS IN UNITED STATES VETERANS' BUREAU HOSPITALS AND THAT EMBEZZLEMENT THEREOF MAKES THE EMBEZZLER LIABLE TO THE UNITED STATES THEREFOR. THAT LIABILITY HAS BEEN DISCHARGED IN THIS INSTANCE BY THE SURETY AND THE UNITED STATES IS NOT CONCERNED WITH THE ARRANGEMENT BETWEEN THE PRINCIPAL AND THE SURETY. THE ONLY THEORY UPON WHICH A SURETY WOULD HAVE A LEGAL CLAIM FOR PAYMENT FROM THE UNITED STATES OF MONEYS DUE A DEFAULTING PRINCIPAL AS AN OFFICER OR EMPLOYEE OF THE GOVERNMENT WOULD BE THAT THE SURETY BY MAKING GOOD THE AMOUNT OF THE PRINCIPAL'S SHORTAGE WOULD BE SUBROGATED TO THE RIGHT OF THE GOVERNMENT WITH RESPECT TO ANY AMOUNT OTHERWISE DUE FROM THE GOVERNMENT TO THE PRINCIPAL.

A-18794, AUGUST 22, 1927, 7 COMP. GEN. 136

RETIREMENT DEDUCTIONS - REFUND - SUBROGATION RETIREMENT DEDUCTIONS MADE FROM THE PAY OF A CIVIL-SERVICE EMPLOYEE UNDER THE ACT OF MAY 22, 1920, 41 STAT. 619, SHOULD BE PAID TO THE EMPLOYEE UPON HIS SEPARATION FROM THE SERVICE, EVEN THOUGH A SURETY HAS PAID THE AMOUNT OF SHORTAGES UNDER THE EMPLOYEE'S BOND, THE PRINCIPLE OF SUBROGATION NOT BEING APPLICABLE TO RETIREMENT DEDUCTIONS. (DISTINGUISHED BY 7 COMP. GEN. 305.)

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE INTERIOR, AUGUST 22, 1927:

THERE HAS BEEN RECEIVED YOUR LETTER OF JUNE 8, 1927, WITH ACCOMPANYING PAPERS, REQUESTING DECISION WHETHER UNDER THE ACT OF MAY 22, 1920, 41 STAT. 619, RETIREMENT DEDUCTIONS MADE FROM THE SALARY OF EDGAR R. WILSON UP TO JANUARY 31, 1926, AS AN EMPLOYEE OF THE WAR DEPARTMENT AND OF THE UNITED STATES VETERANS' BUREAU, MAY BE PAID TO HIM WHEN A SURETY HAS PAID AN AMOUNT IN EXCESS OF THE DEDUCTIONS TO MAKE GOOD FUNDS INTRUSTED TO HIM FOR SAFEKEEPING BY PATIENTS OF THE UNITED STATES VETERANS' BUREAU, WHICH FUNDS ARE ALLEGED TO HAVE BEEN EMBEZZLED BY HIM PRIOR TO HIS SEPARATION FROM THE SERVICE.

THE ACT OF MAY 22, 1920, SUPRA, PROVIDED, GENERALLY, FOR DEDUCTION FROM THE PAY OF CIVIL-SERVICE EMPLOYEES TO CONSTITUTE A FUND FROM WHICH MIGHT BE PAID CERTAIN STIPULATED ANNUITIES AFTER THEIR RETIREMENT. SECTIONS 11 AND 14 OF SAID ACT PROVIDED AS FOLLOWS:

SEC. 11. THAT IN THE CASE OF AN EMPLOYEE IN THE CLASSIFIED CIVIL SERVICE OF THE UNITED STATES WHO SHALL BE TRANSFERRED TO AN UNCLASSIFIED POSITION, AND IN THE CASE OF ANY EMPLOYEE TO WHOM THIS ACT APPLIES WHO SHALL BECOME ABSOLUTELY SEPARATED FROM THE SERVICE BEFORE BECOMING ELIGIBLE FOR RETIREMENT ON AN ANNUITY, THE TOTAL AMOUNT OF DEDUCTIONS OF SALARY, PAY, OR COMPENSATION, WITH ACCRUED INTEREST COMPUTED AT THE RATE OF 4 PERCENTUM PER ANNUM, COMPOUNDED ON JUNE 30 OF EACH FISCAL YEAR, SHALL, UPON APPLICATION, BE RETURNED TO SUCH EMPLOYEE. * * *

SEC. 14. THAT NONE OF THE MONEYS MENTIONED IN THIS ACT SHALL BE ASSIGNABLE, EITHER IN LAW OR EQUITY, OR BE SUBJECT TO EXECUTION, LEVY, OR ATTACHMENT, GARNISHMENT, OR OTHER LEGAL PROCESS.

ASSUMING THAT THE UNITED STATES WAS UNDER A DUTY TO PRESERVE THE MONEY EFFECTS OF VETERANS IN UNITED STATES VETERANS' BUREAU HOSPITALS AND THAT EMBEZZLEMENT THEREOF MAKES THE EMBEZZLER LIABLE TO THE UNITED STATES THEREFOR, THAT LIABILITY HAS BEEN DISCHARGED IN THIS INSTANCE BY THE SURETY AND THE UNITED STATES IS NOT CONCERNED WITH THE ARRANGEMENT BETWEEN THE PRINCIPAL AND THE SURETY. THE ONLY THEORY UPON WHICH A SURETY WOULD HAVE A LEGAL CLAIM FOR PAYMENT FROM THE UNITED STATES OF MONEYS DUE A DEFAULTING PRINCIPAL AS AN OFFICER OR EMPLOYEE OF THE GOVERNMENT WOULD BE THAT THE SURETY BY MAKING GOOD THE AMOUNT OF THE PRINCIPAL'S SHORTAGE WOULD BE SUBROGATED TO THE RIGHT OF THE GOVERNMENT WITH RESPECT TO ANY AMOUNT OTHERWISE DUE FROM THE GOVERNMENT TO THE PRINCIPAL. NO SUCH RIGHT OF SUBROGATION CAN BE RECOGNIZED IN SUCH CASE AS IS HERE PRESENTED FOR THE REASON THAT UNDER THE PROVISIONS OF SECTION 14 OF THE ACT, SUPRA, THE FUNDS HERE INVOLVED ARE NOT ASSIGNABLE, EITHER IN LAW OR EQUITY, OR SUBJECT TO EXECUTION, LEVY, OR ATTACHMENT, GARNISHMENT, OR OTHER LEGAL PROCESS. ADMITTEDLY, THE UNITED STATES IS NOT INDEBTED TO THE SURETY ON ACCOUNT OF THE PAYMENT MADE BY THE SURETY TO THE UNITED STATES PURSUANT TO THE TERMS OF THE BOND. SUCH INDEBTEDNESS AS THERE MAY BE IN THE MATTER IS THAT OF WILSON TO THE SURETY AND, UNDER THE TERMS OF THE ACT OF MAY 22, 1920, SUPRA, HIS RETIREMENT DEDUCTIONS CAN NOT BE USED TO SATISFY THAT INDEBTEDNESS EITHER IN WHOLE OR IN PART.

ANSWERING YOUR QUESTION SPECIFICALLY, YOU ARE ADVISED THAT PAYMENT OF THE RETIREMENT DEDUCTIONS MADE FROM THE SALARY OF WILSON MAY BE PAID TO HIM SUBJECT TO THE RESTRICTIONS AND CONDITIONS OF THE LAW APPLICABLE THERETO, NOTWITHSTANDING ANY CLAIM THE SURETY MAY HAVE AGAINST HIM.

DECISIONS OF THIS OFFICE HERETOFORE HOLDING THAT RETIREMENT DEDUCTIONS MAY BE PAID TO A SURETY ON THE BOND OF THE FORMER EMPLOYEE UNDER THE PRINCIPLE OF SUBROGATION ONLY WILL NOT BE FOLLOWING HEREAFTER.