B-148882, MAY 29, 1962, 41 COMP. GEN. 784

B-148882: May 29, 1962

Additional Materials:

Contact:

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

 

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

WILL HAVE OVERALL RESPONSIBILITY FOR SALES BUT WILL NOT ENGAGE IN ANY SALES ACTIVITIES OR INITIATE ANY CONTRACTS WITH SUCH DEPARTMENTS. 1962: REFERENCE IS MADE TO LETTER OF MAY 16. THE VIEWS EXPRESSED HEREIN ARE NOT TO BE REGARDED AS RELATING TO THE POSSIBLE APPLICATION OF SECTION 281 OF TITLE 18 OF THE CODE TO THIS CASE AND WE DO NOT UNDERSTAND DEPARTMENT OF DEFENSE DIRECTIVE NO. 5500.7 AS IMPOSING ANY RESTRICTIONS ON RETIRED PAY NOT CONTEMPLATED BY THE STATUTORY PROVISIONS ON WHICH IT IS BASED. THE MAXSON ELECTRONICS DIVISION CONTRACTS WITH THE DEPARTMENT OF DEFENSE AND OTHER GOVERNMENT AGENCIES FOR THE DEVELOPMENT AND SALE OF VARIOUS TYPES OF ELECTRICAL AND HYDRAULIC SYSTEMS AND EQUIPMENT AND THE JOB DESCRIPTION SUBMITTED BY GENERAL HAYS PROVIDES THAT AS PRESIDENT HE WILL BE RESPONSIBLE FOR PLANNING.

B-148882, MAY 29, 1962, 41 COMP. GEN. 784

MILITARY PERSONNEL - RETIRED - CONTRACTING WITH GOVERNMENT - WHAT CONSTITUTES SELLING A RETIRED ARMY OFFICER WHO, AS PRESIDENT OF AN ELECTRONICS FIRM WHICH SELLS SUPPLIES TO THE MILITARY DEPARTMENTS, WILL HAVE OVERALL RESPONSIBILITY FOR SALES BUT WILL NOT ENGAGE IN ANY SALES ACTIVITIES OR INITIATE ANY CONTRACTS WITH SUCH DEPARTMENTS, WHICH INVOLVE ANY OF THE CONTRACTING ACTIVITIES ENUMERATED IN DEPARTMENT OF DEFENSE DIRECTIVE NO. 5500.7, WOULD NOT, SOLELY BY VIRTUE OF HIS POSITION, BE CONSIDERED AS ENGAGED IN SALES ACTIVITIES WITHIN THE PURVIEW OF 5 U.S.C. 59C, WHICH PRECLUDES ANY PAYMENT FOR 2 YEARS AFTER RETIREMENT TO RETIRED OFFICERS WHO SELL SUPPLIES OR WAR MATERIALS TO THE MILITARY DEPARTMENTS; HOWEVER, SHOULD THE OFFICER WITHIN SUCH PERIOD MAKE AGENCY CONTACTS FOR THE CONTRACT PURPOSES RESTRICTED BY THE DIRECTIVE OR ENGAGE IN ANY SELLING ACTIVITIES, HE WOULD NOT BE ENTITLED TO RETIRED PAY FOR THE PERIOD INVOLVED.

TO THE SECRETARY OF DEFENSE, MAY 29, 1962:

REFERENCE IS MADE TO LETTER OF MAY 16, 1962, FROM THE ASSISTANT SECRETARY OF DEFENSE ( COMPTROLLER) REQUESTING A DECISION AS TO WHETHER THE CONFLICT -OF-INTEREST STATUTES, SUCH AS 5 U.S.C. 59C, WOULD PRECLUDE THE PAYMENT OF RETIRED PAY TO BRIGADIER GENERAL CHARLES S. HAYS, U.S. ARMY, IF, UPON HIS RETIREMENT MAY 31, 1962, HE ACCEPTS THE POSITION OF PRESIDENT OF THE MAXSON ELECTRONICS DIVISION, W. L. MAXSON CORPORATION, NEW YORK, NEW YORK.

THE ASSISTANT SECRETARY'S LETTER ALSO REFERS TO SECTION 281, TITLE 18, U.S.C. A CRIMINAL STATUTE, AND TO DEPARTMENT OF DEFENSE DIRECTIVE NO. 5500.7, DATED DECEMBER 12, 1961, ON THE SUBJECT OF STANDARDS OF CONDUCT REQUIRED OF MILITARY PERSONNEL IN POSSIBLE CONFLICT-OF-INTEREST SITUATIONS. SINCE, HOWEVER, THE FEDERAL CRIMINAL STATUTES COME UNDER THE JURISDICTION OF THE DEPARTMENT OF JUSTICE AND NOT OF OUR OFFICE, THE VIEWS EXPRESSED HEREIN ARE NOT TO BE REGARDED AS RELATING TO THE POSSIBLE APPLICATION OF SECTION 281 OF TITLE 18 OF THE CODE TO THIS CASE AND WE DO NOT UNDERSTAND DEPARTMENT OF DEFENSE DIRECTIVE NO. 5500.7 AS IMPOSING ANY RESTRICTIONS ON RETIRED PAY NOT CONTEMPLATED BY THE STATUTORY PROVISIONS ON WHICH IT IS BASED.

THE MAXSON ELECTRONICS DIVISION CONTRACTS WITH THE DEPARTMENT OF DEFENSE AND OTHER GOVERNMENT AGENCIES FOR THE DEVELOPMENT AND SALE OF VARIOUS TYPES OF ELECTRICAL AND HYDRAULIC SYSTEMS AND EQUIPMENT AND THE JOB DESCRIPTION SUBMITTED BY GENERAL HAYS PROVIDES THAT AS PRESIDENT HE WILL BE RESPONSIBLE FOR PLANNING, ORGANIZING, DIRECTING, AND COORDINATING ALL ACTIVITIES OF THE MAXSON ELECTRONICS DIVISION, A COMPLETELY AUTONOMOUS OPERATING ENTITY, TOWARD THE END OF MAINTAINING PROFITABLE OPERATIONS AND FURNISHING A SATISFACTORY PRODUCT TO THE CUSTOMER, ON TIME, AND AT A REASONABLE COST. THE JOB DESCRIPTION FURTHER PROVIDES THAT INASMUCH AS THE VICE PRESIDENT IN CHARGE OF SALES WILL REPORT TO THE PRESIDENT OF THE DIVISION, SALES EXPERIENCE IS NOT A REQUIREMENT OF THE OFFICE AND NO SALES EFFORT BY THE PRESIDENT WILL BE REQUIRED, AND THAT ANY CUSTOMER CONTACTS WILL BE LIMITED TO NONSALES ACTIVITIES SUCH AS PERFORMANCE AND PROGRESS REVIEWS.

SECTION 59C OF TITLE 5, U.S.C. PROVIDES AS FOLLOWS:

NO PAYMENT SHALL BE MADE FROM APPROPRIATIONS IN ANY ACT TO ANY OFFICER ON THE RETIRED LISTS OF THE REGULAR ARMY, REGULAR NAVY, REGULAR MARINE CORPS, REGULAR AIR FORCE, REGULAR COAST GUARD, COAST AND GEODETIC SURVEY, AND PUBLIC HEALTH SERVICE FOR A PERIOD OF TWO YEARS AFTER RETIREMENT WHO FOR HIMSELF OR FOR OTHERS IS ENGAGED IN THE SELLING OF OR CONTRACTING FOR THE SALE OF OR NEGOTIATING FOR THE SALE OF TO ANY AGENCY OF THE DEPARTMENT OF DEFENSE, THE COAST GUARD, THE COAST AND GEODETIC SURVEY, AND THE PUBLIC HEALTH SERVICE ANY SUPPLIES OR WAR MATERIALS.

THOSE STATUTORY PROVISIONS AND THE SUBSTANTIALLY IDENTICAL PROVISIONS CONTAINED IN 10 U.S.C. 6112 (B) HAVE BEEN CONSTRUED BY OUR OFFICE, THE COURT OF CLAIMS, AND THE ADMINISTRATIVE DEPARTMENTS AS NOT LIMITED TO DIRECT SALES, NEGOTIATING, OR CONTRACTING, BUT AS INCLUDING VIRTUALLY ANY ACTIVITY SURROUNDING THE SELLING PROCESS. SEE GENERALLY, 39 COMP. GEN. 366; SEASTROM V. UNITED STATES. 147 CT. CL. 453; B 141322, JULY 1, 1960, AND MAY 31, 1961. THE PURPOSE AND APPLICATION OF SUCH STATUTES ARE CLEARLY AND CONCISELY SET OUT IN PARAGRAPH VI.B., DEPARTMENT OF DEFENSE DIRECTIVE 5500.7, AS FOLLOWS:

SELLING OR CONTRACTING FOR SALE

NO REGULAR RETIRED OFFICER OF THE ARMED FORCES WILL SELL, CONTRACT FOR THE SALE OF, OR NEGOTIATE FOR THE SALE OF ANYTHING TO THE MILITARY DEPARTMENT IN WHICH HE HAS RETIRED STATUS IN VIOLATION OF APPLICABLE STATUTORY RESTRICTIONS. RETIRED PAY OF A REGULAR RETIRED OFFICER IS SUBJECT TO FORFEITURE DURING ANY PERIOD WITHIN TWO YEARS OF HIS RETIREMENT IF HE SELLS FOR HIMSELF OR ANOTHER ANY SUPPLIES OR WAR MATERIALS TO THE DEPARTMENT OF DEFENSE, COAST GUARD, COAST AND GEODETIC SURVEY, OR THE PUBLIC HEALTH SERVICE. FOR THE PURPOSE OF THIS SECTION, SELLING MEANS (1) SIGNING A BID, PROPOSAL, OR CONTRACT, (2) NEGOTIATING A CONTRACT, OR (3) CONTACTING AN OFFICER OR EMPLOYEE OF THE DEPARTMENT OF DEFENSE FOR THE PURPOSE OF (I) OBTAINING OR NEGOTIATING CONTRACTS, (II) NEGOTIATING OR DISCUSSING CHANGES IN SPECIFICATIONS, PRICE, COST ALLOWANCES, OR OTHER TERMS OF A CONTRACT, OR (III) SETTLING DISPUTES CONCERNING PERFORMANCE OF A CONTRACT, (4) ANY OTHER LIAISON ACTIVITY WITH A VIEW TOWARD THE ULTIMATE CONSUMMATION OF A SALE EVEN THOUGH THE ACTUAL CONTRACT THEREFOR IS SUBSEQUENTLY NEGOTIATED BY ANOTHER PERSON. HOWEVER, IT IS NOT THE INTENT OF THIS DIRECTIVE TO PRECLUDE A RETIRED OFFICER FROM ACCEPTING EMPLOYMENT WITH PRIVATE INDUSTRY SOLELY BECAUSE HIS EMPLOYER IS A CONTRACTOR WITH THE GOVERNMENT.

THE STATUTES, HOWEVER, APPLY TO THE OFFICERS CONCERNED ONLY WHILE THEY ARE "ENGAGED" IN SELLING, ETC., AND AS INDICATED IN THE LAST SENTENCE OF THE ABOVE QUOTATION PRIVATE EMPLOYMENTS WHICH DO NOT INVOLVE SOME ACTUAL SALES ACTIVITY HAVE NOT BEEN VIEWED AS AFFECTING THE OFFICERS' RIGHTS TO RETIRED PAY. 40 COMP. GEN. 511; B-141322, SUPRA; 41 COMP. GEN. 642. THIS REGARD, TO CONSTRUE THE STATUTE AS APPLICABLE TO PRIVATE EMPLOYMENTS ON THE BASIS OF EXECUTIVE AND ADMINISTRATIVE RESPONSIBILITY ALONE WOULD OPERATE TO DEFEAT TO SOME EXTENT THE INTENT OF CONGRESS TO PERMIT A RETIRED REGULAR OFFICER TO ACCEPT ANY PRIVATE EMPLOYMENT IN WHICH THE OFFICER IS NOT ENGAGED IN SALES ACTIVITIES.

IT APPEARS FROM THE RECORD BEFORE US THAT, WHILE GENERAL HAYS AS PRESIDENT OF THE MAXSON ELECTRONICS DIVISION WILL HAVE OVERALL ADMINISTRATIVE RESPONSIBILITY FOR THE SALES DEPARTMENT, HE WILL NOT BE REQUIRED TO ENGAGE IN ANY ACTUAL SALES ACTIVITIES OR TO INITIATE ANY CONTACTS WITH ANY OF THE AGENCIES SPECIFIED IN SECTION 59C, AND THAT ANY CUSTOMER CONTACTS WHICH HE MAY HAVE WITH SUCH AGENCIES WILL NOT INVOLVE ANY OF THE ACTIVITIES ENUMERATED IN PARAGRAPH VI.B. OF DEPARTMENT OF DEFENSE DIRECTIVE NO. 5500.7.

ACCORDINGLY, ON THE BASIS OF OUR UNDERSTANDING OF THE FUNCTIONS AND DUTIES OF THE POSITION OF PRESIDENT OF THE MAXSON ELECTRONICS DIVISION AS SET OUT ABOVE, GENERAL HAYS WOULD NOT, SOLELY BY VIRTUE OF HIS EMPLOYMENT IN THAT CAPACITY, BE ENGAGED IN SALES ACTIVITIES WITHIN THE PURVIEW OF THE PROVISIONS OF 5 U.S.C. 59C. HOWEVER, SHOULD HE CONTACT ANY OF THE AGENCIES CONCERNED DURING THE PRESCRIBED 2-YEAR PERIOD FOR ANY OF THE PURPOSES ENUMERATED IN THE ABOVE-QUOTED PROVISIONS OF DEPARTMENT OF DEFENSE DIRECTIVE NO. 5500.7, OR SHOULD HE DO ANYTHING ELSE DURING THAT 2- YEAR PERIOD WHICH IS WITHIN THE SCOPE OF SELLING AS CONTEMPLATED BY THAT DIRECTIVE, HE WOULD NOT BE ENTITLED TO RETIRED PAY FOR THE PERIOD OF TIME INVOLVED. 40 COMP. GEN. 511, SUPRA. ..END :