B-148982, JULY 11, 1962, 42 COMP. GEN. 32

B-148982: Jul 11, 1962

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REMOVED HIMSELF FROM ANY CONNECTION WITH A BID WHICH WAS THEN BEING CONSIDERED BY THE NAVY DEPARTMENT IS REGARDED AS HAVING ENGAGED IN SALES ACTIVITIES SO AS TO BE PRECLUDED FROM RECEIVING RETIRED PAY FROM THE DATE OF THE FIRST CONTRACT UNTIL THE DATE OF FINAL PAYMENT ON A CONTRACT AWARDED PRIOR TO HIS SEPARATION FROM NAVY CONTRACT ACTIVITIES. EVEN THOUGH DURING SUCH PERIOD NOT ALL OF HIS TIME WAS DEVOTED TO NAVY SALES ACTIVITIES AND IN SOME CASES HE HAD ONLY INFREQUENT CONTACTS WITH THE NAVY. 1962: REFERENCE IS MADE TO YOUR LETTER OF MAY 1. YOU STATE THAT PAYMENT OF REAR ADMIRAL DAVIDSON'S RETIRED PAY WAS DISCONTINUED EFFECTIVE APRIL 1. THE RECORD SHOWS THAT REAR ADMIRAL DAVIDSON WAS TRANSFERRED TO THE TEMPORARY DISABILITY RETIRED LIST ON MAY 1.

B-148982, JULY 11, 1962, 42 COMP. GEN. 32

MILITARY PERSONNEL - RETIRED - CONTRACTING WITH THE GOVERNMENT - PROHIBITION AFFECTING ENTIRE EMPLOYMENT A RETIRED NAVY OFFICER WHO, UPON BEING ALERTED TO THE FACT THAT HIS ACTIVITIES AS ASSISTANT MANAGER OF A RETAIL CONCERN IN SIGNING BIDS, NEGOTIATING AND DISCUSSING TERMS OF CONTRACTS WITH THE NAVY DEPARTMENT WOULD SUBJECT HIM TO THE SALES ACTIVITY PROHIBITION IN 10 U.S.C. 6112 (B), REMOVED HIMSELF FROM ANY CONNECTION WITH A BID WHICH WAS THEN BEING CONSIDERED BY THE NAVY DEPARTMENT IS REGARDED AS HAVING ENGAGED IN SALES ACTIVITIES SO AS TO BE PRECLUDED FROM RECEIVING RETIRED PAY FROM THE DATE OF THE FIRST CONTRACT UNTIL THE DATE OF FINAL PAYMENT ON A CONTRACT AWARDED PRIOR TO HIS SEPARATION FROM NAVY CONTRACT ACTIVITIES, EVEN THOUGH DURING SUCH PERIOD NOT ALL OF HIS TIME WAS DEVOTED TO NAVY SALES ACTIVITIES AND IN SOME CASES HE HAD ONLY INFREQUENT CONTACTS WITH THE NAVY.

TO M. M. ALEXANDER, DEPARTMENT OF THE NAVY, JULY 11, 1962:

REFERENCE IS MADE TO YOUR LETTER OF MAY 1, 1962, DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE SUBMISSION NO. DO-N-647, REQUESTING A DECISION AS TO WHETHER, IN THE CIRCUMSTANCES PRESENTED, THE PROVISIONS OF 10 U.S.C. 6112 (B) PROHIBIT THE PAYMENT OF RETIRED PAY TO REAR ADMIRAL WALTER B. DAVIDSON, UNITED STATES NAVY, RETIRED. YOU STATE THAT PAYMENT OF REAR ADMIRAL DAVIDSON'S RETIRED PAY WAS DISCONTINUED EFFECTIVE APRIL 1, 1962.

THE RECORD SHOWS THAT REAR ADMIRAL DAVIDSON WAS TRANSFERRED TO THE TEMPORARY DISABILITY RETIRED LIST ON MAY 1, 1956, AND TO THE PERMANENT DISABILITY RETIRED LIST ON DECEMBER 1, 1960. FOR SOME TIME HE HAS BEEN EMPLOYED BY THE WESTERN CONTRACT FURNISHERS OF SAN FRANCISCO, CALIFORNIA, A RETAIL BUSINESS CONCERN SUPPLYING FURNITURE AND FURNISHINGS FOR HOTELS, OFFICE BUILDINGS AND INDIVIDUAL HOMES. THE COMPANY HAS BEEN DOING BUSINESS WITH FEDERAL GOVERNMENT AGENCIES BY SELLING ITS LINE UNDER CONTRACTS IN RESPONSE TO BID INVITATIONS. DURING THE PERIOD FROM NOVEMBER 13, 1958, TO NOVEMBER 20, 1961, FIVE CONTRACTS AND A PURCHASE ORDER WERE AWARDED TO THE COMPANY BY SEVERAL NAVAL FACILITIES. THE BIDS WHICH RESULTED IN THREE OF THE CONTRACTS AWARDED NOVEMBER 13, 1958, MAY 19, 1959, AND FEBRUARY 28, 1961, WERE SIGNED BY ADMIRAL DAVIDSON AS ASSISTANT MANAGER OF THE COMPANY. ALSO, HE SIGNED AN AMENDMENT TO THE BID FOR THE CONTRACT AWARDED NOVEMBER 13, 1958; AND A MODIFICATION TO THE CONTRACT AWARDED MAY 19, 1959, AND UPON TELEPHONIC REQUEST BY NAVAL PERSONNEL HE SECURED CATALOGUE REFERENCES AND PREPARED SPECIFICATIONS TO BE USED BY THE GOVERNMENT IN SOLICITING BIDS FOR THE CONTRACT AWARDED FEBRUARY 28, 1961. SUBSEQUENT TO THE AWARD OF THIS LATTER CONTRACT HE ENGAGED IN A SERIES OF NEGOTIATIONS WITH THE NAVY RELATING TO DESIGN CHANGES AND PRICES OF THE SUPPLIES COVERED BY THE CONTRACT. THE MENTIONED PURCHASE ORDER DID NOT INVOLVE THE OFFICER AND PRIOR TO THE OPENING OF THE BIDS WHICH RESULTED IN A CONTRACT AWARDED THE COMPANY ON NOVEMBER 7, 1961, THE ORIGINAL FIRST PAGE OF THE COMPANY'S BID WHICH HAD BEEN SIGNED BY THE RETIRED OFFICER WAS REPLACED BY A SUBSTITUTE PAGE BEARING THE SIGNATURE OF REX O. STEVENSON, VICE PRESIDENT AND SECRETARY OF THE FIRM. ADMIRAL DAVIDSON HAD NOTHING TO DO WITH THE FIFTH CONTRACT REFERRED TO ABOVE (AWARDED NOVEMBER 20, 1961). IT IS REPORTED THAT THE THREE CONTRACTS IN WHICH THE OFFICER WAS INVOLVED WERE IN EFFECT FOR VARIOUS PERIODS BETWEEN NOVEMBER 13, 1958, AND AUGUST 21, 1961.

IN A LETTER DATED MARCH 26, 1962, TO THE NAVY, ADMIRAL DAVIDSON EXPLAINED THAT HE HAD EFFECTED A SUBSTITUTION OF THE SIGNATURE OF MR. STEVENSON FOR HIS SIGNATURE ON THE BID SUBMITTED IN CONNECTION WITH THE CONTRACT AWARDED NOVEMBER 7, 1961, BECAUSE IT HAD BEEN BROUGHT TO HIS ATTENTION THAT A NEW DIRECTIVE DECLARED THAT A RETIRED OFFICER WHO DID NO MORE THAN SIGN A BID WAS SELLING TO THE NAVY FOR PURPOSES OF 10 U.S.C. 6112 (B). AS INDICATED ABOVE THERE IS NO REPORT OF ANY ACTIVITY BY ADMIRAL DAVIDSON AFTER NOVEMBER 7, 1961, FOR THE PURPOSE OF SELLING SUPPLIES TO THE NAVY AND IN AFFIDAVITS DATED MAY 11, 1962, ADMIRAL DAVIDSON AND REX. O. STEVENSON AVER THAT ALL CONTRACTS BETWEEN THE WESTERN CONTRACT FURNISHERS AND THE UNITED STATES NAVY WITH WHICH ADMIRAL DAVIDSON HAD ANY CONNECTION, REAL OR APPARENT, HAVE BEEN CONCLUDED AND THAT HIS DUTIES AND SERVICES WITH THAT COMPANY HAVE BEEN COMPLETELY SEPARATED AND DIVORCED FROM ANY CONNECTION WITH U.S. NAVY CONTRACTS.

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

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.

THOSE STATUTORY PROVISIONS AND THE SUBSTANTIALLY IDENTICAL PROVISIONS 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; GEORGE H. 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.

THERE CAN BE LITTLE DOUBT THAT ADMIRAL DAVIDSON WAS ENGAGED DURING THE PERIOD FROM NOVEMBER 13, 1958, TO SOMETIME AFTER FEBRUARY 28,1961, IN SIGNING BIDS, NEGOTIATING OR DISCUSSING CHANGES IN SPECIFICATIONS, PRICES, COST ALLOWANCES, OR OTHER TERMS OF A CONTRACT AND SETTLING DISPUTES CONCERNING THE PERFORMANCE OF A CONTRACT WITHIN THE CONTEMPLATION OF THAT DEFINITION. IN VIEW, HOWEVER, OF HIS IMMEDIATE ACTION TO REMOVE HIMSELF FROM ANY CONNECTION WITH THE CONTRACT AWARDED NOVEMBER 7, 1961, UPON BEING ALERTED TO THE FACT THAT HIS BID ACTIVITIES COULD SUBJECT HIM TO THE PROVISIONS OF 10 U.S.C. 6112 (B), AND HIS CONDUCT FOLLOWING THAT ACTION, WE DO NOT BELIEVE HE IS TO BE VIEWED AS ENGAGED IN SALES ACTIVITIES FOR PURPOSES OF THE STATUTE AFTER THE DATE OF FINAL PAYMENT ON THE CONTRACT AWARDED FEBRUARY 28, 1961, REPORTEDLY AUGUST 21, 1961. ACCORDINGLY, IT IS CONCLUDED THAT HE WAS NOT ENTITLED TO THE RETIRED PAY PAID TO HIM FOR ANY PART OF THE PERIOD FROM NOVEMBER 13, 1958, TO AUGUST 21, 1961. WHILE NOT ALL OF ADMIRAL DAVIDSON'S TIME WAS DEVOTED TO HIS NAVY SALES ACTIVITIES DURING SUCH PERIOD, THE STATUTE MAKES NO DISTINCTION BETWEEN CASES INVOLVING FREQUENT CONTACTS WITH THE NAVY AND CASES INVOLVING INFREQUENT CONTACTS WITH THE NAVY AND THE PROHIBITION OF THE STATUTE HAS BEEN VIEWED AS REMAINING IN EFFECT DURING THE PERIOD OF THE CONTRACTS WHICH RESULT FROM THE PROSCRIBED SALES ACTIVITIES. SEE 39 COMP. GEN. 366 AND 41 COMP. GEN. 642.