B-147879, APRIL 4, 1962, 41 COMP. GEN. 642

B-147879: Apr 4, 1962

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MILITARY PERSONNEL - RETIRED - CONTRACTING WITH GOVERNMENT - WHAT CONSTITUTES SELLING A RETIRED MARINE CORPS WARRANT OFFICER RECEIVING RETIRED PAY WHO IS EMPLOYED BY A CHEMICAL FIRM FIRST AS A DEMONSTRATOR OF LAUNDRY CHEMICALS TO NAVAL INSTALLATIONS AND LATER AS OPERATIONS MANAGER. OR WAS IGNORANT OF THE LAW. OR THAT FINANCIAL HARDSHIP WILL RESULT. 1962: REFERENCE IS MADE TO YOUR LETTER OF MARCH 2. PROVIDES AS FOLLOWS: IF A RETIRED OFFICER OF THE REGULAR NAVY OR THE REGULAR MARINE CORPS IS ENGAGED FOR HIMSELF OR OTHERS IN SELLING. HE IS NOT ENTITLED TO ANY PAYMENT FROM THE UNITED STATES WHILE HE IS SO ENGAGED. HE WAS PAID RETIRED PAY FROM THAT DATE THROUGH NOVEMBER 30. HE WAS EMPLOYED BY TRIPP CHEMICALS.

B-147879, APRIL 4, 1962, 41 COMP. GEN. 642

MILITARY PERSONNEL - RETIRED - CONTRACTING WITH GOVERNMENT - WHAT CONSTITUTES SELLING A RETIRED MARINE CORPS WARRANT OFFICER RECEIVING RETIRED PAY WHO IS EMPLOYED BY A CHEMICAL FIRM FIRST AS A DEMONSTRATOR OF LAUNDRY CHEMICALS TO NAVAL INSTALLATIONS AND LATER AS OPERATIONS MANAGER, IN WHICH CAPACITY HE DEVOTED MOST OF HIS TIME TO COMMERCIAL SALES ACTIVITIES BUT CONTINUED TO SOME EXTENT TO CONTACT NAVAL VESSELS FOR THE ULTIMATE PURPOSE OF SELLING HIS EMPLOYER'S PRODUCTS, MUST BE REGARDED AS SELLING SUPPLIES TO THE NAVY DEPARTMENT WITHIN THE MEANING OF 10 U.S.C. 6112 (B) WHICH PROHIBITS RECEIPT OF ANY PAYMENT FROM THE UNITED STATES DURING SUCH EMPLOYMENT AND DOES NOT DIFFERENTIATE BETWEEN CASES INVOLVING FREQUENT AND INFREQUENT CONTACTS WITH THE MILITARY DEPARTMENT; THEREFORE, RETIRED PAY RECEIVED DURING SUCH EMPLOYMENT MUST BE RECOVERED, AND THE FACT THAT THE MEMBER ACTED IN GOOD FAITH, OR WAS IGNORANT OF THE LAW, OR THAT FINANCIAL HARDSHIP WILL RESULT, DOES NOT PROVIDE A LEGAL BASIS FOR RETENTION OF THE ERRONEOUS PAYMENTS WHICH MAY BE RECOVERED BY DEDUCTION FROM FUTURE RETIRED PAY.

TO MAJOR JOHN A. RAPP, UNITED STATES MARINE CORPS, APRIL 4, 1962:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 2, 1962, WITH ENCLOSURES, ASSIGNED SUBMISSION NO. DO-MC-634 BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE, REQUESTING A DECISION AS TO WHETHER, IN THE CIRCUMSTANCES PRESENTED, THE PROVISIONS OF 10 U.S.C. 6112 (B) PRECLUDE THE PAYMENT OF RETIRED PAY TO CHIEF WARRANT OFFICER HOBART H. BUDLONG, U.S. MARINE CORPS, RETIRED, AFTER NOVEMBER 30, 1961, AND, IF NOT, WHETHER PAYMENT OF RETIRED PAY MAY BE MADE WITHOUT DEDUCTIONS UNDER THE ACT OF JULY 15, 1954, 68 STAT. 482, 5 U.S.C. 46D, OF THE AMOUNT OF RETIRED PAY RECEIVED FROM JANUARY 15, 1959, THROUGH NOVEMBER 30, 1961.

SECTION 6112 (B) OF TITLE 10, U.S.C. PROVIDES AS FOLLOWS:

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.

MR. BUDLONG RETIRED FROM THE REGULAR MARINE CORPS AS A CHIEF WARRANT OFFICER, FEBRUARY 1, 1957. HE WAS PAID RETIRED PAY FROM THAT DATE THROUGH NOVEMBER 30, 1961. ON JANUARY 14, 1959, HE WAS EMPLOYED BY TRIPP CHEMICALS, INC., GREENVILLE, NORTH CAROLINA, GIVEN A SHORT PERIOD OF TRAINING AND SUBSEQUENT TO FEBRUARY 1, 1959, HE BEGAN TO CONTACT NAVAL ACTIVITIES FOR HIS EMPLOYER.

BY LETTER OF DECEMBER 8, 1961, FROM THE COMMANDANT, MARINE CORPS, MR. BUDLONG WAS ADVISED THAT HIS PRIVATE EMPLOYMENT MIGHT AFFECT HIS RIGHT TO RETIRED PAY AND HE WAS REQUESTED TO SUBMIT A NOTARIZED STATEMENT SHOWING THE COMMENCEMENT OF HIS EMPLOYMENT WITH TRIPP CHEMICALS, INC., HIS POSITION TITLE, AND A COMPLETE AND DETAILED DESCRIPTION OF HIS DUTIES, TOGETHER WITH A DESCRIPTION OF HIS CONTACTS WITH THE SERVICES IN THE DEPARTMENT OF DEFENSE AND A LIST OF THE OFFICERS AND BRANCHES OF THE SERVICES CONTACTED. IN LETTER OF DECEMBER 18, 1961, MR. BUDLONG STATED HE COMMENCED HIS DUTIES WITH TRIPP CHEMICALS ON JANUARY 15, 1959; THAT HIS DUTIES WERE TO VISIT INDIVIDUAL NAVAL VESSELS AND DEMONSTRATE LAUNDRY CHEMICALS IN SHIPS' LAUNDRIES; THAT IN THE DISCHARGE OF THOSE DUTIES HE CONTACTED SHIP SUPPLY OFFICERS, SHIP STORE OFFICERS, CHIEFS AND PETTY OFFICERS WHO WERE IN CHARGE OF SHIPS' LAUNDRIES; AND THAT SUBSEQUENT TO RECEIPT OF OUR DECISION OF MARCH 15, 1961, B-144947 (40 COMP. GEN. 511), HE TURNED HIS ATTENTION TO COMMERCIAL ACTIVITIES AND SINCE THEN HAS ONLY CONTACTED NAVAL VESSELS WHEN CALLED UPON BY SUCH VESSELS, IN WHICH CASE ONLY TECHNICAL ASSISTANCE WAS GIVEN. IN RESPONSE TO A FURTHER INQUIRY FROM THE MARINE CORPS IN THE MATTER, MR. BUDLONG STATED IN HIS LETTER OF JANUARY 14, 1962, THAT HE CEASED TO CONTACT NAVAL VESSELS IN A SALES CAPACITY COMMENCING NOVEMBER 28, 1960, AND THAT SINCE NOVEMBER 15, 1960, HE HAD BEEN DISTRICT MANAGER FOR TRIPP CHEMICALS, INC., AND HAD DEVOTED HIS SALES CONTACTS EXCLUSIVELY TO CIVILIAN LAUNDRY PLANTS,"DELEGATING TO THE COMPANY CIVILIAN SALESMEN THE RESPONSIBILITY OF CONTACTING AND SERVICING THE VESSELS IN THE DISTRICT UNDER MY SUPERVISION.' HE STATED FURTHER THAT SINCE APRIL 15, 1961, HE HAS NOT BEEN ENGAGED IN CONTACTING OR NEGOTIATING WITH NAVAL VESSELS FOR THE PURPOSE OF SELLING ANY PRODUCT OF HIS COMPANY, BUT SINCE THAT DATE HIS CONTACTS WITH "VESSELS," NAMELY THE U.S.S. HAVEN, AH-12, AT LONG BEACH, CALIFORNIA, HAVE BEEN FOR THE PURPOSE OF REPLACING PADS AND COVERS ON FLATWORK IRONER EQUIPMENT, TO SERVICE EQUIPMENT PREVIOUSLY INSTALLED AND TO EXPLAIN THE PROCESS TO INTERESTED PERSONNEL.

BY LETTER DATED FEBRUARY 2, 1962, THE COMMANDANT OF THE MARINE CORPS, AFTER POINTING OUT TO MR. BUDLONG CERTAIN UNRESPONSIVE AND INCONSISTENT STATEMENTS HE MADE CONCERNING HIS EMPLOYMENT ACTIVITIES WITH TRIPP CHEMICALS, CONCLUDED THAT MR. BUDLONG'S ACTIVITIES CAME WITHIN THE RETIRED PAY PAYMENT RESTRICTION IMPOSED BY 10 U.S.C. 6112 (B) AND THAT HE WAS NOT ENTITLED TO RETIRED PAY FOR THE PERIOD OF JANUARY 15, 1959, TO MAY 15, 1961, APPARENTLY THE DATE NOTICE OF OUR DECISION OF MARCH 15, 1961, WAS RECEIVED BY THE MEMBER. SUBSEQUENTLY, IN ACCORDANCE WITH DEPARTMENT OF DEFENSE DIRECTIVE 5500.7, MR. BUDLONG SUBMITTED ANOTHER STATEMENT OF EMPLOYMENT DATED MARCH 1, 1962, IN WHICH HE DESCRIBED HIS POSITION TITLE AS SALESMAN AND STATED HIS DUTIES INVOLVED DEVELOPING CIVILIAN COMMERCIAL SALES, CONTROLLING INVENTORY, ARRANGING FOR PURCHASE OF REPLACEMENT INVENTORY AND ACTING AS OFFICE MANAGER. IN CONNECTION WITH THOSE DUTIES, HE STATES THAT HE IS RESTRICTED BY HIS COMPANY FROM ENGAGING IN ANY SALES ACTIVITIES INVOLVING NAVAL SHIPS OR SHORE INSTALLATIONS.

ALSO, HONORABLE HERBERT C. BONNER, MEMBER OF CONGRESS, HAS FORWARDED TO US A RESUME BY MR. R. J. STELL, PRESIDENT, TRIPP CHEMICALS, INC., OF MR. BUDLONG'S EMPLOYMENT AND DUTIES WITH THAT FIRM. MR. STELL CONFIRMS, GENERALLY, MR. BUDLONG'S STATEMENTS THAT HE WAS ACTIVELY SELLING TO NAVAL SHIPS IN THE SAN DIEGO, CALIFORNIA, AREA FOR A PERIOD FROM FEBRUARY 1, 1959, UNTIL NOVEMBER 1, 1960, WHEN HE WAS PROMOTED TO OPERATIONS MANAGER. MR. STELL ADMITS THAT PRIOR TO NOVEMBER 1, 1960, MR. BUDLONG WAS ENGAGED IN ACTIVITIES WHICH INCLUDED SELLING TO THE NAVY AND ADVISES THAT HIS NEW DUTIES AS OPERATIONS MANAGER WERE TO CONTROL INVENTORIES, SELL TO COMMERCIAL LAUNDRIES AND DRY CLEANING FIRMS, AND PERFORM OTHER OFFICE DUTIES. MR. STELL STATES FURTHER THAT ON NOVEMBER 1, 1960, MR. BUDLONG WAS GIVEN ORDERS NOT TO CONTACT NAVY SHIPS BUT TO DEVOTE ALL HIS EFFORTS TO THE COMMERCIAL TRADE AND TO HIS FUNCTIONS AS OPERATIONS MANAGER. REVIEWING MR. BUDLONG'S CONTACTS WITH NAVY SHIPS SUBSEQUENT TO NOVEMBER 1, 1960, MR. STELL STATES IN PART THAT:

IN ALL, HOWEVER, HOW MUCH OF MR. BUDLONG'S TIME WAS DEVOTED TO THIS DIRECT SALES EFFORT IN THE PERIOD FROM NOVEMBER 1, 1960 TO DECEMBER, 1961.

MR. BUDLONG ESTIMATES 1 PERCENT OR LESS:

FROM ALL REPORTS SENT INTO THIS OFFICE, IT IS EQUALLY CLEAR THAT MR. BUDLONG SPENT NO MORE THAN 1 PERCENT OF HIS TIME ABOARD SHIP IN DIRECT SELLING ACTIVITY, EVEN INCLUDING THOSE CONTACTS MADE AT THE REQUEST OF THE SHIPS THEMSELVES.

AS TO THE FUTURE DUTIES OF MR. BUDLONG, MR. STELL STATES IN PART THAT:

ON FEBRUARY 1, I REVIEWED WITH MR. BUDLONG HIS PRESENT JOB RESPONSIBILITIES. THESE COMPLETELY EXCLUDE NAVY SELLING ACTIVITIES. THEY ALSO EXCLUDE ANY DIRECT SALES SUPERVISION OVER THE OTHER TWO MEN ON THE COAST. AS INDICATED ABOVE, ONLY ONE PERCENT OF MR. BUDLONG'S TIME SINCE NOVEMBER 1, 1960, HAD BEEN DEVOTED TO CONTACTS ABOARD NAVY SHIPS. THIS HAS NOW BEEN ELIMINATED ENTIRELY. MR. BUDLONG IS TO FUNCTION, IN RELATION TO THE OTHER TWO MEN, MERELY AS ADMINISTRATIVE AND OPERATIONS MANAGER. THESE TWO MEN WILL CONTINUE TO REPORT TO ME AS SALES MANAGER.

MR. STELL STATES THAT MR. BUDLONG WAS UNAWARE OF THE PERMANENT NAVY SALES RESTRICTIONS UNTIL THE STATUTE IMPOSING SUCH RESTRICTIONS WAS BROUGHT TO HIS ATTENTION BY PUBLICITY IN NEWSPAPERS IN EARLY 1960 AND LATER BY NOTIFICATION FROM THE MARINE CORPS RECEIVED ON OR ABOUT MAY 17, 1961. IS INDICATED THAT MR. BUDLONG BELIEVED THAT HE WAS SUBJECT ONLY TO THE RESTRICTION IN SECTION 59C OF TITLE 5 OF THE U.S.C. WHICH PROHIBITS THE PAYMENT OF RETIRED PAY, UNDER CERTAIN CIRCUMSTANCES, TO RETIRED REGULAR OFFICERS OF ALL THE SERVICES FOR A PERIOD OF 2 YEARS AFTER RETIREMENT. THIS STATEMENT, HOWEVER, IS NOT SUPPORTED BY THE RECORDS, MR. BUDLONG ON JANUARY 23, 1957, SHORTLY BEFORE HIS RETIREMENT, HAVING EXECUTED A RETIRED PAY DATA FORM WHERE HE CERTIFIED AS FOLLOWS:

B. (NOT APPLICABLE TO RESERVE OFFICERS)

I CERTIFY THAT FOR A PERIOD OF TWO YEARS AFTER RETIREMENT I WILL NOT, EITHER FOR MYSELF OR FOR OTHERS, ENGAGE IN THE SELLING OF, CONTRACTING FOR THE SALE OF, OR NEGOTIATING FOR THE SALE OF TO ANY AGENCY OF THE DEPARTMENT OF DEFENSE, COAST GUARD, THE COAST AND GEODETIC SURVEY, AND THE PUBLIC HEALTH SERVICE, ANY SUPPLIES OR WAR MATERIALS. ( ACT OF AUGUST 7, 1953.)

C. ( NOT APPLICABLE TO RESERVE OFFICERS)

I FURTHER CERTIFY THAT I WILL NOT FOR MYSELF OR FOR OTHERS, AT ANY TIME, ENGAGE IN THE SELLING OF, CONTRACTING FOR THE SALE OF, OR NEGOTIATING FOR THE SALE OF, TO THE NAVY OR THE NAVY DEPARTMENT, ANY NAVAL SUPPLIES OR WAR MATERIALS. ( ACT OF JUNE 10, 1896, AS AMENDED.)

THE ACT OF JUNE 10, 1896, AS AMENDED, REFERRED TO IN THE CERTIFICATE, IS NOW CODIFIED IN 10 U.S.C. 6112 (B). BY MAKING REFERENCE TO THIS CERTIFICATE WHICH MR. BUDLONG SIGNED IN JANUARY 1957 WE DO NOT MEAN TO IMPLY THAT THE LEGALITY OF THE PAYMENTS OF RETIRED PAY MADE TO HIM DEPENDS ON ANY ACTION OR INACTION ON THE PART OF THE NAVY DEPARTMENT OR THE MARINE CORPS WITH RESPECT TO NOTIFYING HIM OF THE EXISTENCE OF 10 U.S.C. 6112 (B) OR EXPLAINING TO HIM THE SCOPE AND APPLICATION OF THAT LAW.

SINCE MR. BUDLONG'S ACTIVITIES, INCLUDING HIS DEMONSTRATIONS IN HIS CAPACITY OF TECHNICAL REPRESENTATIVE, OBVIOUSLY WERE AND ARE DESIGNED TO PROMOTE THE SALE OF LAUNDRY CHEMICALS OF HIS COMPANY, THERE SEEMS TO BE LITTLE DOUBT THAT PRIOR TO HIS DESIGNATION AS OPERATIONS MANAGER ( NOVEMBER 1, 1960) HE WAS SUBJECT TO THE PROVISIONS OF THE QUOTED STATUTE DURING THE PERIOD FEBRUARY 1, 1959, TO OCTOBER 31, 1960. SEE IN THAT CONNECTION THE CASE OF GEORGE H. SEASTROM V. UNITED STATES. 147 CT.CL. 453, WHEREIN THE COURT HELD THAT PLAINTIFF'S EMPLOYMENT AS A DEMONSTRATOR OF DRUGS TO NAVAL ACTIVITIES SUBJECTED HIM TO THE RETIRED PAY PAYMENT RESTRICTION IMPOSED BY 10 U.S.C. 6112 (B). ALSO, WHILE DURING THE PERIOD NOVEMBER 1, 1960, THROUGH DECEMBER 1961, MR. BUDLONG, IN HIS CAPACITY AS OPERATIONS MANAGER, MAY HAVE DEVOTED THE GREAT MAJORITY OF HIS TIME TO COMMERCIAL SALES ACTIVITIES, THE BUSINESS IN WHICH HE WAS CONTINUOUSLY ENGAGED WAS THE SALE OF LAUNDRY CHEMICALS TO BOTH NAVAL AND CIVILIAN CUSTOMERS AND HE CONTINUED TO SOME EXTENT TO CONTACT NAVAL VESSELS FOR THE ULTIMATE PURPOSE OF SELLING HIS EMPLOYER'S PRODUCTS. IN SUCH CIRCUMSTANCES THE FACT THAT ONLY A SMALL AMOUNT OF HIS TIME WAS DEVOTED TO CONTACTING NAVAL ACTIVITIES DOES NOT LEGALLY JUSTIFY A CONCLUSION BY US THAT HE WAS DOING NOTHING WITHIN THE SCOPE OF THE STATUTE FOR WHICH RETIRED PAY IS TO BE WITHHELD. THE STATUTORY RESTRICTION IS APPLICABLE TO SELLING TO THE NAVY AND THE STATUTE MAKES NO DISTINCTION BETWEEN CASES INVOLVING FREQUENT CONTACTS WITH THE NAVY AND CASES INVOLVING INFREQUENT CONTACTS WITH THE NAVY.

SINCE ON FEBRUARY 1, 1962, MR. STELL EXCLUDED NAVY SALES ACTIVITIES FROM MR. BUDLONG'S JOB RESPONSIBILITIES AND SINCE THE LATTER'S STATEMENT OF EMPLOYMENT DATED MARCH 1, 1962, AFFIRMS THAT FACT, IT WOULD APPEAR THAT THE DUTIES PERFORMED BY HIM COMMENCING FEBRUARY 1, 1962, WOULD NOT SUBJECT HIM TO THE RETIRED PAY PAYMENT PROHIBITION OF 10 U.S.C. 6112 (B) AND THAT HE IS ENTITLED TO RETIRED PAY COMMENCING THAT DATE, UNLESS, OF COURSE, HE CONTINUES TO CONTACT AND VISIT NAVAL ACTIVITIES IN HIS CAPACITY AS AN EMPLOYEE OF THE TRIPP CHEMICALS, INC. AS TO THE PERIOD FEBRUARY 1, 1959, TO JANUARY 31, 1962, HOWEVER, WE MUST CONCLUDE, ON THE BASIS OF THE RECORD BEFORE US, THAT MR. BUDLONG WAS ENGAGED IN ACTIVITIES OF THE TYPE CONTEMPLATED BY 10 U.S.C. 6112 (B). ACCORDINGLY, HE WAS NOT ENTITLED TO ANY OF THE RETIRED PAY PAID TO HIM FOR ANY OF THE PERIOD AFTER JANUARY 31, 1959, AND PRIOR TO FEBRUARY 1, 1962. THE FACT THAT MR. BUDLONG ACTED IN GOOD FAITH, OR WAS IGNORANT OF THE LAW, OR THAT FINANCIAL HARDSHIP WILL RESULT, PROVIDES NO LEGAL BASIS FOR PERMITTING HIM TO RETAIN THE ERRONEOUS RETIRED PAY PAYMENTS, AND STEPS SHOULD BE TAKEN TO EFFECT RECOVERY OF THE AMOUNT OVERPAID HIM BY DEDUCTIONS FROM HIS FUTURE RETIRED PAY, AS REQUIRED BY THE ACT OF JULY 15, 1954, 68 STAT. 482, 5 U.S.C. 46D.