A-87948, AUGUST 9, 1937, 17 COMP. GEN. 123

A-87948: Aug 9, 1937

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

PURCHASES - GOVERNMENT AGENT DEALING WITH OWN FIRM - GOVERNMENT LIABILITY FOR SUPPLIES INVOLVED THE PURCHASING BY A GOVERNMENT AGENT FROM A FIRM OF WHICH HE IS A MEMBER IS A VIOLATION OF SECTION 41 OF THE FEDERAL CRIMINAL CODE. THERE WAS RECEIVED A LETTER OF JUNE 2. AS FOLLOWS: THERE IS GIVEN BELOW A COMPLETE SUMMARY OF THE FACTS RELATIVE TO CIRCUMSTANCES CONCERNING THE PAYMENTS AS MADE TO ABOVE VENDOR FOR MATERIALS FURNISHED THE CIVIL WORKS ADMINISTRATION OF NEW MEXICO. WAS APPOINTED BY THE STATE CIVIL WORKS ADMINISTRATION IN DECEMBER 1933 TO ACT AS CERTIFYING OFFICER AND APPROVING OFFICER FOR MORA COUNTY. MACARTHUR WAS WITHOUT KNOWLEDGE THAT THE CONTRACTOR AND/OR VENDOR. THE APPROVING OFFICER CERTIFYING THE ABOVE VOUCHERS IN QUESTION WAS IN CONCLUSION.

A-87948, AUGUST 9, 1937, 17 COMP. GEN. 123

PURCHASES - GOVERNMENT AGENT DEALING WITH OWN FIRM - GOVERNMENT LIABILITY FOR SUPPLIES INVOLVED THE PURCHASING BY A GOVERNMENT AGENT FROM A FIRM OF WHICH HE IS A MEMBER IS A VIOLATION OF SECTION 41 OF THE FEDERAL CRIMINAL CODE, 35 STAT. 1097, AND IMPOSES NO LEGAL OBLIGATION ON THE GOVERNMENT FOR PAYMENT OF THE SUPPLIES INVOLVED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, AUGUST 9, 1937:

IN REFERENCE TO DISALLOWANCES OF CREDIT FOR $69.67, $35, AND $304.50, PAID TO A. MACARTHUR CO. OF WAGON MOUND. N.MEX., ON VOUCHERS 3860, 4010, AND 4083, OF THE APRIL 1934 ACCOUNTS OF N. HESTERLY, DISBURSING AGENT, SYMBOL 95-127, THERE WAS RECEIVED A LETTER OF JUNE 2, 1937, FROM D. E. LOVE, UNITED STATES TREASURY STATE DISBURSING OFFICER, SANTA FE, N.MEX., AS FOLLOWS:

THERE IS GIVEN BELOW A COMPLETE SUMMARY OF THE FACTS RELATIVE TO CIRCUMSTANCES CONCERNING THE PAYMENTS AS MADE TO ABOVE VENDOR FOR MATERIALS FURNISHED THE CIVIL WORKS ADMINISTRATION OF NEW MEXICO, REQUIRED IN THE PROSECUTION OF C.W.A. PROJECTS APPROVED FOR MORA COUNTY.

MR. A. S. MACARTHUR OF WAGON MOUND, NEW MEXICO, WAS APPOINTED BY THE STATE CIVIL WORKS ADMINISTRATION IN DECEMBER 1933 TO ACT AS CERTIFYING OFFICER AND APPROVING OFFICER FOR MORA COUNTY, AND IN SUCH CAPACITY HE DID SERVE WITHOUT REMUNERATION. IT MUST BE UNDERSTOOD THAT MR. MACARTHUR WAS WITHOUT KNOWLEDGE THAT THE CONTRACTOR AND/OR VENDOR, AND THE APPROVING OFFICER CERTIFYING THE ABOVE VOUCHERS IN QUESTION WAS IN CONCLUSION, AN AGREEMENT BETWEEN THE GOVERNMENT AND AN EMPLOYEE, AND THAT PAYMENT OF A VOUCHER UNDER SUCH CIRCUMSTANCES IS CONSIDERED AS BEING UNAUTHORIZED, AND CONTRARY TO POLICY AND ALSO IN CONTRAVENTION OF SECTION 41 OF THE FEDERAL CRIMINAL CODE, 35 STATUTE 1097.

REPLY TO EXCEPTION DATED NOVEMBER 7, 1936, SUBMITTED A STATEMENT FROM MACARTHUR CO., WHEREIN STATEMENT WAS MADE THAT "ALL MERCHANDISE SOLD THE C.W.A. WERE FIRST BID ON AND THE BIDS WERE APPROVED BY THE LOCAL COMMITTEE BEFORE THE ORDER WAS GIVEN AND IN NO WAY WAS THE A. MACARTHUR CO. GIVEN THE PREFERENCE.' THEREFORE AFTER AWARD WAS MADE TO A. MACARTHUR CO. FROM SUBMISSION OF VERBAL BIDS, THE PREPARATION OF THE PURCHASE ORDER AND VOUCHER REQUIRED THE AFFIXING OF SIGNATURE OF A DESIGNATED APPROVING OFFICER AUTHORIZED TO ACT ON BEHALF OF THE FEDERAL GOVERNMENT. INASMUCH AS MR. A. S. MACARTHUR WAS ACTING IN ABSOLUTE GOOD FAITH AND IN THE INTEREST OF THE GOVERNMENT, HIS WRITTEN APPROVAL WAS AFFIXED TO THE VOUCHERS, WHICH LATER PROVED TO BE IN VIOLATION OF THIS STATUTE. IF THE LOCAL COMMITTEE OR THE APPROVING OFFICER HAD BEEN COGNIZANT OF SUCH STATUTE, PROPER STEPS WOULD HAVE BEEN TAKEN TO ACQUIRE THE CORRECT APPROVAL, AS THESE TRANSACTIONS WERE STRICTLY BONA-FIDE AND ALTOGETHER IN ACCORDANCE WITH REGULATIONS PROVIDING FOR THE PROCURING OF MATERIALS AND/OR SERVICES REQUIRED BY "PUBLIC EXIGENCY," AND FALLS WITHIN THE PROVISIONS OF THE EXECUTIVE ORDER SIGNED BY THE PRESIDENT FEB. 15, 1934, PUBLIC ACT NO. 93, 73RD CONGRESS.

INASMUCH AS SECTION 41 OF THE FEDERAL CRIMINAL CODE, 35 STATUTE 1097, DOES NOT PROHIBIT AN EMPLOYEE FROM CONTRACTING WITH THE GOVERNMENT, PROVIDED SAID EMPLOYEE DOES NOT ACT AS AGENT FOR THE GOVERNMENT IN NEGOTIATION, AND IN VIEW OF THE FACT THAT IN ACCORDANCE WITH THE EXECUTIVE ORDER OF FEB. 15, 1934, THE CERTIFYING OFFICER BECOMES THE RESPONSIBLE OFFICER FOR ITEMS APPEARING ON THE VOUCHER, WE SUBMIT HEREWITH PROPERLY EXECUTED VOUCHERS TO SUPPLANT, AND TO BE USED AS CORRECTLY CERTIFIED VOUCHERS COVERING THE PAYMENTS IN QUESTION FOR THE DELIVERY OF MATERIALS MADE BY A. MACARTHUR COMPANY.

IN VIEW OF THE FACTS RELATED HEREIN, AND WITH SUBMISSION OF CORRECTLY CERTIFIED VOUCHERS SIGNED OFFICIALLY BY A DESIGNATED AND APPOINTED CERTIFYING AND APPROVING OFFICER FOR THE CIVIL WORKS ADMINISTRATION FOR NEW MEXICO, IT IS RESPECTFULLY REQUESTED THAT A REVIEW OF THIS CASE BE MADE TO THE END THAT CLEARANCE WILL BE OBTAINED FOR THESE EXCEPTIONS TAKEN IN MY ACCOUNT.

IT APPEARS THAT A. S. MACARTHUR, A MEMBER OF THE FIRM OF A. MACARTHUR CO., PROCURED FROM HIS COMPANY THE SUPPLIES PAID FOR ON THE INVOLVED VOUCHERS, AFTER INFORMAL BIDS HAD BEEN RECEIVED, ON PURCHASE ORDERS EVIDENCING THE INFORMAL AGREEMENT SIGNED BY HIMSELF AS PURCHASING AGENT FOR THE CIVIL WORKS ADMINISTRATION. IT APPEARS ALSO THAT HE SIGNED THE ADMINISTRATIVE CERTIFICATE ON THE PURCHASE VOUCHERS. CREDIT FOR THE PAYMENTS WAS DISALLOWED FOR THE REASON THAT THE PURCHASES WERE MADE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 41 OF THE FEDERAL CRIMINAL CODE, 35 STAT. 1097, AS FOLLOWS:

NO OFFICER OR AGENT OF ANY CORPORATION, JOINT STOCK COMPANY, OR ASSOCIATION, AND NO MEMBER OR AGENT OF ANY FIRM, OR PERSON DIRECTLY OR INDIRECTLY INTERESTED IN THE PECUNIARY PROFITS OR CONTRACTS OF SUCH CORPORATION, JOINT STOCK COMPANY, ASSOCIATION, OR FIRM, SHALL BE EMPLOYED OR SHALL ACT AS AN OFFICER OR AGENT OF THE UNITED STATES FOR THE TRANSACTION OF BUSINESS WITH SUCH CORPORATION, JOINT STOCK COMPANY, ASSOCIATION, OR FIRM. * * *

THE PROHIBITION CONTAINED IN SAID STATUTE IS AGAINST THE EMPLOYMENT AS A CONTRACTING OFFICER OF THE GOVERNMENT OF ANY PERSON WHO IS AN OFFICER OR AGENT OF ANY CORPORATION, JOINT STOCK COMPANY, ASSOCIATION, OR FIRM, WITH WHICH A CONTRACT IS TO BE MADE OR WHO DIRECTLY OR INDIRECTLY IS INTERESTED IN THE PECUNIARY PROFITS OR CONTRACTS OF SUCH CORPORATION, ETC. THE STATUTE SPECIFICALLY COVERS THE CASE OF A CONTRACTING OFFICER DEALING DIRECTLY WITH HIS FIRM, AS IN THIS INSTANCE, AND THE PURCHASES AS MADE CANNOT BE REGARDED AS IMPOSING ANY LEGAL OBLIGATION ON THE GOVERNMENT. THE VOUCHERS NOW SUBMITTED TO SUPPLANT THE ORIGINAL VOUCHERS, AND TO BE USED AS CORRECTLY CERTIFIED VOUCHERS COVERING THE PAYMENT IN QUESTION DO NOT MEET THE LEGAL REQUIREMENTS OF THE SITUATION.

THE DISALLOWANCE OF CREDIT FOR THE PAYMENTS IN QUESTION MUST BE AND IS SUSTAINED.