A-58802, FEBRUARY 11, 1935, 14 COMP. GEN. 618

A-58802: Feb 11, 1935

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ANY UNDERTAKING BY OFFICERS OF THE GOVERNMENT TO INFLUENCE EMPLOYEES DIRECTLY OR INDIRECTLY TO FURNISH SURETY BOND IN A PARTICULAR COMPANY IS AN EVASION OF THE CLEAR INTENT OF STATUTORY PROVISIONS. ANY NOTATION APPEARING ON THE REPRINTED FORMS INDICATING THAT THEY ARE APPROVED GOVERNMENT FORMS IS A MISREPRESENTATION AND IS UNAUTHORIZED. THE FORM IN QUESTION IS KNOWN AS B.A. 30. WAS PREPARED IN THE COTTON PRODUCTION SECTION OF THE AGRICULTURAL ADJUSTMENT ADMINISTRATION AND WAS APPROVED BY ALL DIVISIONS CONCERNED. AS IS SHOWN ON COPY OF THE BOND FORM AND TRANSMITTAL PAPERS AS ATTACHED HERETO. PERMISSION WAS GRANTED TO THE SEABOARD SURETY COMPANY TO REPRINT THE FORM. WITH THE UNDERSTANDING THAT THE PRINTING WAS TO BE DONE AT THEIR OWN EXPENSE AND ONLY FOR THE PURPOSE OF EXPEDITING THE PREPARATION OF THE BONDS FOR SUCH PERSONS AS DESIRED TO ARRANGE WITH THEM FOR THE NECESSARY BOND.

A-58802, FEBRUARY 11, 1935, 14 COMP. GEN. 618

SURETY BONDS - GOVERNMENT EMPLOYEES - REPRINTING GOVERNMENT FORMS BY SURETY COMPANY FOR USE IN SOLICITING BUSINESS THE STATUTORY PROVISIONS RELATING TO GIVING SURETY BONDS BY GOVERNMENT EMPLOYEES, TITLE 6, U.S.C. ANNOTATED, CONTEMPLATE THE FURNISHING OF THE BOND BY THE EMPLOYEE AT HIS OWN EXPENSE AND WITHOUT DIRECTION OR INFLUENCE FROM HIS SUPERIORS, SUBJECT ONLY TO THE REQUIREMENT THAT THE SURETY OFFERED BE AN APPROVED SURETY AND THAT THE PREMIUM CHARGED BE NOT IN EXCESS OF THAT AUTHORIZED BY THE STATUTE. ANY UNDERTAKING BY OFFICERS OF THE GOVERNMENT TO INFLUENCE EMPLOYEES DIRECTLY OR INDIRECTLY TO FURNISH SURETY BOND IN A PARTICULAR COMPANY IS AN EVASION OF THE CLEAR INTENT OF STATUTORY PROVISIONS. THE REPRINTING OF APPROVED GOVERNMENT FORMS BY SURETY COMPANIES WITH THE INCLUSION THEREIN OF THE NAME OF SUCH COMPANY TAKES AWAY THE IDENTITY OF SUCH FORMS AS APPROVED GOVERNMENT FORMS, AND ANY NOTATION APPEARING ON THE REPRINTED FORMS INDICATING THAT THEY ARE APPROVED GOVERNMENT FORMS IS A MISREPRESENTATION AND IS UNAUTHORIZED.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, FEBRUARY 11, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF DECEMBER 26, 1934, WITH INCLOSURES, AS FOLLOWS:

YOUR LETTER OF NOVEMBER 23, QUOTING TELEGRAM RECEIVED FROM THE GLENS FALLS INDEMNITY COMPANY, GLENS FALLS, NEW YORK, PROTESTING THAT THE BONDS FOR ASSISTANTS IN COTTON ADJUSTMENT EMPLOYED UNDER THE COTTON CONTROL ACT OF 1934 HAD BEEN PRINTED WITH THE NAME OF THE SEABOARD SURETY COMPANY INCORPORATED IN SAID BOND, HAS BEEN RECEIVED.

THE FORM IN QUESTION IS KNOWN AS B.A. 30, AND WAS PREPARED IN THE COTTON PRODUCTION SECTION OF THE AGRICULTURAL ADJUSTMENT ADMINISTRATION AND WAS APPROVED BY ALL DIVISIONS CONCERNED, AS IS SHOWN ON COPY OF THE BOND FORM AND TRANSMITTAL PAPERS AS ATTACHED HERETO. THIS BOND FORM DID NOT CARRYTHE NAME OF ANY PARTICULAR INDEMNITY COMPANY, BUT PERMISSION WAS GRANTED TO THE SEABOARD SURETY COMPANY TO REPRINT THE FORM, INCLUDING THE NAME, WITH THE UNDERSTANDING THAT THE PRINTING WAS TO BE DONE AT THEIR OWN EXPENSE AND ONLY FOR THE PURPOSE OF EXPEDITING THE PREPARATION OF THE BONDS FOR SUCH PERSONS AS DESIRED TO ARRANGE WITH THEM FOR THE NECESSARY BOND.

ONE COPY OF THIS FORM WAS SUBMITTED TO THE REPRESENTATIVE OF EACH OF THE BONDING COMPANIES MAKING REQUEST FOR THE SAME THROUGH THEIR LOCAL REPRESENTATIVES. THE COMPANIES TO WHOM SUBMITTED INCLUDE GLENS FALLS COMPANY, GLENS FALLS, NEW YORK; THE AMERICAN INDEMNITY COMPANY OF GALVESTON, TEXAS; THE UNITED STATES GUARANTY COMPANY OF NEW YORK; THE UNITED STATES FIDELITY AND GUARANTY COMPANY OF BALTIMORE, MARYLAND; THE FIDELITY AND DEPOSIT COMPANY OF BALTIMORE, MARYLAND; THE NEW AMSTERDAM CASUALTY COMPANY OF BALTIMORE, MARYLAND; AND POSSIBLY OTHERS. COPY OF A LETTER ADDRESSED TO HORACE F. CLARK AND SON, LOCAL AGENTS OF THE GLENS FALLS INDEMNITY COMPANY, TRANSMITTING THIS FORM IS ATTACHED HERETO. SIMILAR LETTERS WERE ADDRESSED TO THE OTHER COMPANIES.

THE COMPANIES INTERESTED WERE ASKED TO SUBMIT AN ANNUAL RATE ON THE PROPOSED BOND TO BE WRITTEN FOR $5,000, AND TO INDICATE ALSO THE MINIMUM EARNED PREMIUM THAT WOULD BE RETAINED IN EVENT THE BOND WAS CANCELED BEFORE THE EXPIRATION OF A 12-MONTH PERIOD. IN THIS CORRESPONDENCE AND ALSO IN DISCUSSION WITH THE LOCAL AGENCIES IT WAS SUGGESTED THAT THE DEPARTMENT WOULD BE WILLING TO APPROVE A RATE OF $1.35 PER THOUSAND, WHICH WAS THE ESTABLISHED RATE AT WHICH BONDS WERE BEING ISSUED IN BEHALF OF EMPLOYEES OF THE FARM CREDIT ADMINISTRATION WHO WERE CHARGED WITH RESPONSIBILITIES EVEN GREATER THAN THOSE INCUMBENT UPON THE ASSISTANTS IN COTTON ADJUSTMENT.

IN THEIR EAGERNESS TO GET THIS BUSINESS, HORACE F. CLARK AND SON, REPRESENTING THE GLENS FALLS COMPANY, SECURED THE NAMES OF THE APPOINTED ASSISTANTS IN COTTON ADJUSTMENT AND MAILED A CIRCULAR LETTER TO EACH, SOLICITING THEIR BUSINESS, OFFERING TO WRITE THE BOND FOR $1.35 PER THOUSAND. THIS LETTER WAS MAILED BEFORE THE BOND FORM WAS FINALLY APPROVED AND BEFORE IT WAS SUBMITTED TO COMPETING COMPANIES. COPY OF THIS LETTER AND THEIR APPLICATION IS ATTACHED HERETO.

THE DEPARTMENT WAS ADVISED BY THE WASHINGTON OFFICE OF BONDING COMPANIES THAT IT WOULD BE NECESSARY TO SUBMIT THE FORM TO THE TOWNER RATING BUREAU OF NEW YORK BEFORE THEY COULD GUARANTEE A RATE AND THE DEPARTMENT WAS ADVISED BY THE TOWNER RATING BUREAU THAT THE RATE ON THESE BONDS WOULD BE $5.00 PER THOUSAND. UPON RECEIPT OF THIS COMMUNICATION, A REPRESENTATIVE OF THE TOWNER RATING BUREAU IN NEW YORK CITY WAS CALLED OVER THE LONG DISTANCE TELEPHONE AND ADVISED THAT THE $5.00 RATE WAS NOT SATISFACTORY AS COMPARED TO THE RATE BEING PAID FOR BONDS FURNISHED BY EMPLOYEES OF THE FARM CREDIT ADMINISTRATION WHICH, AS STATED ABOVE, WAS $1.35 PER THOUSAND, AND THEY WERE RESPECTFULLY ASKED TO RECONSIDER THEIR DECISION AND IF POSSIBLE DEVELOP A BETTER RATE. IN REPLY TO THIS THEY ADDRESSED A LETTER TO THE DEPARTMENT ADVISING THAT THE $5.00 RATE COULD NOT BE REDUCED.

THE SEABOARD SURETY COMPANY, THROUGH THEIR REPRESENTATIVE IN WASHINGTON AND BALTIMORE, SUBMITTED A RATE OF $3.00 PER THOUSAND, AND THIS BEING THE BEST RATE THAT COULD BE SECURED IN OPEN COMPETITION THEY WERE ADVISED THAT THEY MIGHT SOLICIT BUSINESS FROM THE VARIOUS EMPLOYEES KNOWN AS ASSISTANTS IN COTTON ADJUSTMENT. THEY ASKED PERMISSION TO PRINT THE BOND FORM AT THEIR OWN EXPENSE, BUT BEFORE GRANTING THEM PERMISSION TO DO THIS, THE ADVICE OF THE PUBLIC PRINTER WAS ASKED AS TO WHETHER OR NOT A REPRINT OF A PUBLIC DOCUMENT WAS PERMISSIBLE, AND THE DEPARTMENT WAS INFORMALLY ADVISED THAT THERE WAS NO RESTRICTION ON REPRINTING IN EVENT THE FORM NUMBER AND ALL OTHER NECESSARY DATA WERE INCLUDED.

IN ORDER TO PROTECT THE DEPARTMENT AGAINST CHARGE OF DISCRIMINATION, A LETTER WAS SENT TO EACH ASSISTANT IN COTTON ADJUSTMENT ADVISING THEMFULLY AS TO THE NEGOTIATIONS CARRIED ON BETWEEN THE DEPARTMENT AND BONDING COMPANIES WITH REFERENCE TO THE BOND REQUIRED OF THEM; ALSO, THE RATE THAT HAD BEEN OFFERED BY THE SEABOARD SURETY COMPANY. THIS LETTER CONTAINED THE FOLLOWING PARAGRAPH: ,ALL BONDS IN ORDER TO BE ACCEPTABLE TO THE GOVERNMENT MUST BE WRITTEN BY AN APPROVED COMPANY AND EXECUTED BY AN OFFICER OF SAID COMPANY WHOSE AUTHORITY TO PERFORM THIS FUNCTION HAS BEEN PROPERLY CERTIFIED TO THE GOVERNMENT. YOU ARE NOT REQUIRED TO PURCHASE YOUR BOND FROM THE SEABOARD SURETY COMPANY AND IF YOU DESIRE TO DO SO, YOU MAY FURNISH BOND ON THIS APPROVED FORM FROM ANY OTHER APPROVED BONDING COMPANY. UP TO THE PRESENT MOMENT, HOWEVER, THIS IS THE ONLY COMPANY THAT HAS OFFERED TO WRITE THIS BOND AT THE RATE OF $3.00 PER THOUSAND.'

THE BUSINESS OF WRITING BONDS FOR ASSISTANTS IN COTTON ADJUSTMENT HAS NOT BEEN CONFINED EXCLUSIVELY TO THE SEABOARD SURETY COMPANY, BUT HAS BEEN PARTICIPATED IN BY THE ST. PAUL MERCURY COMPANY, THROUGH THEIR AGENCIES AT BRYAN AND HOUSTON, TEXAS, WHO HAVE WRITTEN THE BOND AT THE RATE OF $3.00 PER THOUSAND UNDER THE SAME TERMS AS OFFERED BY THE SEABOARD SURETY COMPANY; ALSO THE GLENS FALLS INDEMNITY COMPANY, UNITED STATES FIDELITY AND GUARANTY COMPANY, AND THE MARYLAND CASUALTY COMPANY HAVE PARTICIPATED, THE LATTER THREE HAVING CHARGED THE ASSISTANTS AT THE RATE OF $5.00 PER THOUSAND.

YOU WILL NOTE THAT THE BOND FORM AS ORIGINALLY PREPARED PROVIDED FOR A BOND IN THE SUM OF $5,000. LATER IT WAS DECIDED THAT A BOND FOR $3,500 WOULD BE SUFFICIENT.

FROM THE RECORDS SUBMITTED AND OTHER RECORDS AVAILABLE IN THE DEPARTMENT, IT IS APPARENT THE OFFICIALS OF THE DEPARTMENT CARRIED ON THESE NEGOTIATIONS IN A PROPER MANNER AND WERE ENTIRELY JUSTIFIED IN THEIR EFFORTS TO SECURE THE LOWER RATE FOR THE BENEFIT OF THESE EMPLOYEES REQUIRED TO FURNISH BOND, AND THAT THERE WAS NO DISCRIMINATION, AS THE APPROVED FORM WAS AVAILABLE TO ALL COMPANIES INTERESTED. IT IS QUITE REASONABLE TO ASSUME THAT THE EMPLOYEES WOULD AVAIL THEMSELVES OF THE SERVICE OF THE COMPANY OFFERING THE BEST RATE, AND THIS ACCOUNTS FOR THE SEABOARD SURETY COMPANY SECURING THE BULK OF THE BUSINESS.

THE STATUTORY PROVISIONS COVERING THE MATTER OF FURNISHING BONDS REQUIRED FROM GOVERNMENT OFFICERS AND EMPLOYEES ARE SET OUT IN TITLE 6 OF THE U.S.C. ANNOTATED. THE PERTINENT REQUIREMENTS ARE THAT SURETY COMPANIES FURNISHING BONDS SHALL BE APPROVED BY THE SECRETARY OF THE TREASURY AND RECEIVE HIS AUTHORIZATION BEFORE BEING ACCEPTED AS SURETIES; THAT THE PREMIUM CHARGED BY SUCH COMPANIES SHALL NOT BE MORE THAN 35 PERCENT IN EXCESS OF THE RATE OF PREMIUM CHARGED FOR A LIKE BOND DURING THE CALENDAR YEAR 1908; THAT THE UNITED STATES SHALL NOT PAY ANY PART OF THE PREMIUM OR OTHER COST OF FURNISHING THE BOND AND THAT NO OFFICER OR PERSON HAVING THE APPROVAL OF ANY BOND SHALL EXACT THAT IT SHALL BE FURNISHED BY A GUARANTEE COMPANY OR BY ANY PARTICULAR GUARANTEE COMPANY. THE CLEAR INTENT OF THE LAW IS THAT THOSE COMPANIES WHICH ARE QUALIFIED SHALL HAVE EQUAL OPPORTUNITY TO WRITE SUCH BONDS, AND THOSE FROM WHOM THEY ARE REQUIRED SHALL BE LEFT FREE TO SELECT THEIR OWN SURETY (FROM THOSE THAT ARE QUALIFIED) WITHOUT DIRECTION FROM THEIR SUPERIORS, AND TO OBTAIN SUCH PREMIUM RATES AS MAY BE AVAILABLE TO THEM NOT IN EXCESS OF THE RATES AUTHORIZED BY THE STATUTE.

IT MUST BE APPARENT THAT THE LETTER OF AUGUST 31, 1934, SIGNED BY THE CHIEF, COTTON PRODUCTION SECTION, COMMODITIES DIVISION, AND THE DIRECTOR OF EXTENSION, AND ADDRESSED TO ASSISTANTS IN COTTON ADJUSTMENT, IS QUITE OUT OF HARMONY WITH THE PURPOSE OF THE STATUTES TO THE EXTENT THAT IT LEAVES THE RECIPIENT UNDER THE IMPRESSION THAT THE GOVERNMENT HAS MADE ARRANGEMENTS WITH THE SEABOARD SURETY COMPANY TO WRITE THE BONDS. THE LETTER FURTHER INFORMS THE ASSISTANT THAT HE WILL RECEIVE FORMS FROM THE SEABOARD SURETY COMPANY AND REQUESTS HIM TO "HAVE THESE CAREFULLY EXECUTED AND MAIL THE SAME WITH A POST-OFFICE MONEY ORDER IN FAVOR OF THE SEABOARD SURETY COMPANY.' THIS IS, AT LEAST, A SUGGESTION THAT HE FURNISH THE SEABOARD SURETY COMPANY AS HIS SURETY. WHILE THE LATTER, IN A SUBSEQUENT PARAGRAPH, INFORMS THE EMPLOYEE THAT HE IS NOT REQUIRED TO PURCHASE HIS BOND FROM THE SEABOARD SURETY COMPANY, AND THAT IF HE DESIRES HE MAY FURNISH BOND FROM ANY OTHER APPROVED BONDING COMPANY, NO OTHER BONDING COMPANY WAS MENTIONED IN THE LETTER, AND THE REPEATED REFERENCES TO THE SEABOARD SURETY COMPANY CLEARLY GIVE THE IMPRESSION THAT THAT COMPANY IS THE COMPANY DESIRED AS SURETY BY THE DEPARTMENT.

SUCH IMPRESSION WOULD BE CONFIRMED IN THE MIND OF THE EMPLOYEE WHEN THE APPLICATION AND BOND FORM WERE RECEIVED BEARING THE NOTATION THAT IT WAS A GOVERNMENT FORM AND HAVING THE NAME OF THE SEABOARD SURETY COMPANY PRINTED IN THE BODY OF THE BOND. BY THE ADMINISTRATIVE COURSE THUS PURSUED, THERE WAS UNDOUBTEDLY A DISTINCT ADVANTAGE ACCORDED THE SEABOARD SURETY COMPANY OVER COMPETITORS.

IT MAY BE STATED FURTHER THAT THERE WAS NO AUTHORITY OF LAW FOR ADVISING THE SEABOARD SURETY COMPANY THAT IT COULD REPRINT AN APPROVED GOVERNMENT FORM WITH THE NAME OF THE COMPANY PRINTED IN THE BODY THEREOF. THIS ADDITION TOOK AWAY FROM THE PRINTED FORM ITS IDENTITY AS AN APPROVED GOVERNMENT FORM, AND ANY NOTATION APPEARING ON THE REPRINTED FORM INDICATING THAT IT WAS AN APPROVED GOVERNMENT FORM WAS UNAUTHORIZED AND A MISREPRESENTATION BECAUSE THE APPROVED FORM DID NOT CONTAIN THE NAME OF SAID SURETY COMPANY--- PRINTED THEREON OR OTHERWISE.

IT IS FURTHER NOTED THAT THE LETTER TO THE EMPLOYEE STATED THAT IN ORDER TO SECURE THE LOWER RATE "IT HAS BEEN AGREED THAT NO REFUND WILL BE MADE IN EVENT THE BOND IS CANCELED BEFORE EXPIRATION OF THE TWELVE MONTHS.' DOES NOT APPEAR THAT SUCH A SUGGESTION WAS MADE TO THE OTHER COMPANIES IN ORDER TO INDUCE REDUCTION IN THEIR RATES. EVEN LOWER RATES MIGHT HAVE BEEN SECURED THEREBY, BUT HOWEVER THAT MAY BE, IT WAS OUT OF HARMONY WITH THE LAW TO ACCORD THE SEABOARD SURETY COMPANY THE SPECIAL ADVANTAGES IT ENJOYED AS A RESULT OF THE ADMINISTRATIVE ACTION APPEARING THROUGHOUT THE MATTER.