B-144947, MARCH 15, 1961, 40 COMP. GEN. 511

B-144947: Mar 15, 1961

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- CONCERNING GOVERNMENT NEEDS AND TO ASSIST IN DESIGNING AND MANUFACTURING PRODUCTS FOR WHICH THE MILITARY DEPARTMENTS HAVE A CURRENT OR FUTURE NEED WOULD NOT ITSELF BRING THE CONSULTANT ACTIVITIES WITHIN THE CONFLICT-OF- INTEREST RESTRICTION IN 10 U.S.C. 6112 (B). IN THE EVENT THE OFFICER IS EMPLOYED BY THE MILITARY SUPPLY COMPANY PURSUANT TO A CONTRACT OF EMPLOYMENT. A COPY OF WHICH WAS ENCLOSED. THE DUTIES WHICH HE WOULD BE EXPECTED TO PERFORM ARE AS FOLLOWS: TO ANALYZE AND COORDINATE THE EMPLOYER'S LINES OF PRODUCTS WITH CURRENT MILITARY NEEDS. WHILE IT IS STATED IN PARAGRAPH THREE OF THE CONTRACT THAT THE EMPLOYEE WILL NOT BE REQUIRED TO PERFORM ANY ACTIVITIES WHICH MIGHT BE INTERPRETED AS VIOLATING 10 U.S.C. 6112 (B) AND 18 U.S.C. 281.

B-144947, MARCH 15, 1961, 40 COMP. GEN. 511

MILITARY PERSONNEL - RETIRED - CONFLICT OF INTEREST A CONTRACT FOR THE EMPLOYMENT OF A RETIRED REGULAR MARINE CORPS OFFICER AS A CONSULTANT TO ADVISE HIS EMPLOYER--- A MILITARY SUPPLY COMPANY--- CONCERNING GOVERNMENT NEEDS AND TO ASSIST IN DESIGNING AND MANUFACTURING PRODUCTS FOR WHICH THE MILITARY DEPARTMENTS HAVE A CURRENT OR FUTURE NEED WOULD NOT ITSELF BRING THE CONSULTANT ACTIVITIES WITHIN THE CONFLICT-OF- INTEREST RESTRICTION IN 10 U.S.C. 6112 (B), WHICH PROHIBITS RECEIPT OF ANY PAYMENT FROM THE UNITED STATES DURING SUCH EMPLOYMENT, SO LONG AS THE OFFICER DOES NOT CONTACT THE NAVY OR ALLOW HIS NAME TO BE USED FOR CONTRACTS RESULTING IN SALES; HOWEVER, A PROVISION IN THE WHICH REQUIRES THE OFFICER TO VISIT MILITARY INSTALLATIONS AND OFFICIALS BRINGS INTO EXISTENCE THE APPEARANCE OF A REQUIREMENT FOR POSSIBLE SALES ACTIVITIES WITHIN THE CONFLICT-OF INTEREST STATUTE AND SHOULD BE ELIMINATED OR MODIFIED TO EXCLUDE CONTACTS WITH INSTALLATIONS AND OFFICIALS UNDER THE DEPARTMENT OF THE NAVY.

TO THE SECRETARY OF THE NAVY, MARCH 15, 1961:

BY LETTER DATED JANUARY 27, 1961, DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE SUBMISSION NO. SS-557, THE DEPUTY AND ASSISTANT JUDGE ADVOCATE GENERAL REQUESTED OUR DECISION AS TO WHETHER THE PROVISIONS OF 10 U.S.C. 6112 (B) WOULD PRECLUDE THE PAYMENT OF RETIRED PAY TO LIEUTENANT GENERAL JOHN T. SELDEN, USMC, RETIRED, IN THE EVENT THE OFFICER IS EMPLOYED BY THE MILITARY SUPPLY COMPANY PURSUANT TO A CONTRACT OF EMPLOYMENT, A COPY OF WHICH WAS ENCLOSED.

IT APPEARS THAT GENERAL SELDEN RETIRED AS AN OFFICER OF THE REGULAR MARINE CORPS ON APRIL 1, 1955. THE ENCLOSED CONTRACT CONTEMPLATES THE RETIRED OFFICER'S EMPLOYMENT IN A CIVILIAN CAPACITY OUTSIDE THE FEDERAL GOVERNMENT. THE DUTIES WHICH HE WOULD BE EXPECTED TO PERFORM ARE AS FOLLOWS: TO ANALYZE AND COORDINATE THE EMPLOYER'S LINES OF PRODUCTS WITH CURRENT MILITARY NEEDS, TO SUGGEST NEW LINES OF PRODUCT DEVELOPMENT AND UTILIZATION TO THE EMPLOYER AND, ALSO, TO PERFORM SUCH RELATED DUTIES AS THE EMPLOYER SHALL ASSIGN TO HIM. WHILE IT IS STATED IN PARAGRAPH THREE OF THE CONTRACT THAT THE EMPLOYEE WILL NOT BE REQUIRED TO PERFORM ANY ACTIVITIES WHICH MIGHT BE INTERPRETED AS VIOLATING 10 U.S.C. 6112 (B) AND 18 U.S.C. 281, PARAGRAPH FOUR STATES THAT IT IS ANTICIPATED THAT IN THE PERFORMANCE OF HIS DUTIES GENERAL SELDEN "SHALL BE REQUIRED TO VISIT VARIOUS MILITARY INSTALLATIONS, AND TO CONSULT WITH VARIOUS OFFICIALS IN ORDER TO ASCERTAIN CURRENT AND FUTURE MILITARY NEEDS AND PROBLEMS SO THAT HE CAN ADVISE EMPLOYER WITH RESPECT TO THE BEST UTILIZATION OF EMPLOYER'S CURRENT PRODUCT LINE AND TO SUGGEST NEW LINES OF POTENTIAL PRODUCT DEVELOPMENT.'

SECTION 6112 OF TITLE 10 OF THE U.S.C. PROVIDES AS FOLLOWS:

(A) AN OFFICER OF THE REGULAR NAVY OR THE REGULAR MARINE CORPS, OTHER THAN A RETIRED OFFICER, MAY NOT BE EMPLOYED BY ANY PERSON FURNISHING NAVAL SUPPLIES OR WAR MATERIALS TO THE UNITED STATES. IF SUCH AN OFFICER IS SO EMPLOYED, HE IS NOT ENTITLED TO ANY PAYMENT FROM THE UNITED STATES DURING THAT EMPLOYMENT.

(B) IF A RETIRED OFFICER OF THE REGULAR NAVY OR THE REGULAR MARINE CORPS IS ENGAGED FOR HIMSELF OR OTHERS IN SELLING, OR CONTRACTING OR NEGOTIATING TO SELL, NAVAL SUPPLIES OR WAR MATERIALS TO THE DEPARTMENT OF THE NAVY, HE IS NOT ENTITLED TO ANY PAYMENT FROM THE UNITED STATES WHILE HE IS SO ENGAGED.

SECTION 281 OF TITLE 18 OF THE CODE PROVIDES THAT RETIRED OFFICERS OF THE ARMED FORCES OF THE UNITED STATES, WHILE NOT ON ACTIVE DUTY, SHALL NOT BY REASON OF THEIR STATUS AS SUCH BE SUBJECT TO THE PROVISIONS OF THAT SECTION. HOWEVER, OUR VIEWS EXPRESSED IN THIS MATTER ARE NOT TO BE UNDERSTOOD AS RELATING TO THE POSSIBLE APPLICATION OF SECTION 281.

IN OUR DECISION OF NOVEMBER 9, 1959, 39 COMP. GEN. 366, WE SAID THAT SECTION 6112 (B) OF TITLE 10 OF THE CODE HAS BEEN CLASSIFIED AS ONE OF THE GROUP OF SO-CALLED CONFLICT-OF-INTEREST STATUTES AND THAT THE ESSENTIAL PURPOSES OF SUCH STATUTES ARE TO SAFEGUARD THE INTEGRITY OF PUBLIC ADMINISTRATION AND TO PREVENT GOVERNMENT OFFICIALS FROM USING THEIR POSITIONS AND INFLUENCE FOR PERSONAL GAIN. WE EXPRESSED THE BELIEF THAT CONGRESS INTENDED SUCH STATUTES TO APPLY IN ANY CASE REASONABLY WITHIN THE SCOPE OF THE STATUTES WHEREIN THE MISCHIEF AT WHICH THEY ARE AIMED COULD ARISE. CF. 39 COMP. GEN. 751, 753.

IN OUR DECISION DATED JANUARY 6, 1959, 38 COMP. GEN. 470, WE HELD THAT ANY ACTIVITY CALCULATED TO INDUCE THE PURCHASE OF SUPPLIES AND WAR MATERIALS BY THE NAVY DEPARTMENT MUST BE CONSIDERED AS COMING WITHIN THE SCOPE OF 10 U.S.C. 6112 (B), EVEN THOUGH NO ACTUAL SALE OR CONTRACT MAY BE MADE. TO LIMIT THE APPLICATION OF THE STATUTE TO OFFICERS WHO PARTICIPATE ONLY IN THE FINAL FORMATION OF A CONTRACT WOULD PERMIT THOSE WHO HAVE A CONFLICT OF INTEREST TO ENGAGE IN THE PRELIMINARY, BUT OFTEN THE CRUCIAL STAGES OF A TRANSACTION, AND THEN TO INSULATE THEMSELVES FROM THE STATUTE BY WITHDRAWING FROM THE NEGOTIATIONS AT THE FINAL AND OFTEN PERFUNCTORY STAGE OF THE PROCEEDINGS. SEE UNITED STATES V. MISSISSIPPI VALLEY GENERATING CO., 364 U.S. 520.

IN SEASTROM V. UNITED STATES, CT.1CL. NO. 220-57, DECIDED NOVEMBER 4, 1959, THE STATEMENT OF EMPLOYMENT FURNISHED THE NAVY SHOWED THAT SEASTROM WAS ENGAGED IN THE DEMONSTRATION OF DRUGS MANUFACTURED BY HIS EMPLOYER, AND THAT HE DEMONSTRATED AND EXPLAINED THE PRODUCTS TO VARIOUS NAVAL FACILITIES. CONCERNING THAT ACTIVITY THE COURT OF CLAIMS SAID:

* * * CERTAINLY HIS DEMONSTRATION OR EXPLANATION OF THE DRUGS COULD ONLY BE AIMED AT EVENTUAL SALES BY THE COMPANY. WE CANNOT CONCEIVE OF ANY COMPANY ENGAGED IN A PROFIT-MAKING ENTERPRISE THAT WOULD SEND A PAID REPRESENTATIVE IN THE FIELD OF DEMONSTRATION WITHOUT THE THOUGHT OF FUTURE SALES. THUS THE ONLY LOGICAL CONCLUSION IN THIS CASE IS THAT THE PLAINTIFF'S WORK, IF NOT ACTUALLY PROCURING A SIGNED ORDER, WAS ALL IN AN EFFORT TO INCREASE SALES AND WHEN HIS ACTIVITIES INCLUDED VISITS TO NAVAL FACILITIES HE CAME UNDER THE RESTRICTIONS OF THE SALES ACT, SUPRA.

THE COURT CONCLUDED THAT SEASTROM "IS A RETIRED OFFICER WHO ENGAGED IN A FORM OF SELLING TO THE NAVY.'

WE DO NOT PERCEIVE MUCH DIFFERENCE ESSENTIALLY BETWEEN DEMONSTRATIONS OF PRODUCTS FOR SALE AND CONTACTS MADE FOR THE PURPOSE OF DETERMINING THE REQUIREMENTS OF THE NAVY FOR PRODUCTS WHICH AN EMPLOYER MAY DESIRE TO MANUFACTURE FOR THE NAVY. DISCUSSIONS HELD IN SUCH CONTACTS MAY FORM THE VERY FOUNDATION UPON WHICH THE FINAL CONTRACT IS BASED, PARTICULARLY, WHEN NEGOTIATED CONTRACTS CONSTITUTE A HIGH PERCENTAGE OF NAVY PROCUREMENT VOLUME. THE STATUTE IS DIRECTED NOT ONLY AT FAVORITISM, BUT AT CONDUCT THAT TEMPTS FAVORITISM. A NOT UNLIKELY RESULT OF SUCH CONTACTS BY A HIGH RANKING RETIRED OFFICER IS THE AWARD OF NAVY CONTRACTS, EVEN THOUGH THE RETIRED OFFICER DOES NOT PARTICIPATE IN THE CONTRACT NEGOTIATIONS. WHERE A CONTACT ULTIMATELY RIPENS INTO A CONTRACT, IT CANNOT BE REALISTICALLY SAID THAT THE CONTACT AND SUBSEQUENT EVENTS WERE NOT INTERRELATED AND INTERCONNECTED.

AS WE UNDERSTAND THE PROPOSED CONTRACT, GENERAL SELDEN WILL BE EMPLOYED TO ADVISE HIS EMPLOYER ABOUT GOVERNMENT NEEDS AND ASSIST HIM IN DESIGNING AND MANUFACTURING PRODUCTS FOR WHICH THE MILITARY DEPARTMENTS HAVE A CURRENT OR FUTURE NEED. SO LONG AS HE DOES NOT CONTACT THE NAVY CONCERNING SUCH MATTERS, WE SEE NO REASON TO QUESTION HIS CONSULTANT ACTIVITIES. WITH PARAGRAPH FOUR IN THE CONTRACT, HOWEVER, THERE EXISTS THE APPEARANCE OF A REQUIREMENT FOR POSSIBLE "SALES" ACTIVITIES, NOTWITHSTANDING THE EXPRESS DISCLAIMER OF SUCH ACTIVITIES IN PARAGRAPH THREE, AND THEREFORE WE CANNOT ANSWER YOUR QUESTION IN THE NEGATIVE UNLESS PARAGRAPH FOUR IS MODIFIED OR ELIMINATED FROM THE CONTRACT.

IF PARAGRAPH FOUR IS ELIMINATED FROM THE CONTRACT, OR MODIFIED SO AS TO EXCLUDE INSTALLATIONS AND OFFICIALS UNDER THE DEPARTMENT OF THE NAVY FROM THE "MILITARY INSTALLATIONS" TO BE VISITED AND THE "OFFICIALS" TO BE CONSULTED, IT IS OUR VIEW THAT EXECUTION OF THE CONTRACT BY GENERAL SELDEN WOULD NOT IN ITSELF BRING HIM INTO THE AREA COVERED BY 10 U.S.C. 6112 (B). THAT DOES NOT MEAN THAT HE WOULD NOT BE SUBJECT TO THE STATUTE IF HE ACTUALLY CONTACTS THE NAVY ABOUT HIS EMPLOYER'S PRODUCTS OR ALLOWS HIS NAME TO BE USED AS A KEY TO OPEN THE DOOR TO NAVY PROCUREMENT OFFICES FOR HIS EMPLOYER'S SALESMEN. IN OTHER WORDS, GENERAL SELDEN COULD GIVE RISE TO THE QUESTION OF WHETHER HE IS SUBJECT TO THE STATUTE IF HE IN FACT CONTACTS THE NAVY IN THE COURSE OF HIS EMPLOYMENT EVEN THOUGH PARAGRAPH FOUR IS ELIMINATED OR MODIFIED.