B-168735, FEB. 26, 1970

B-168735: Feb 26, 1970

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RETIRED MILITARY MEMBER WHO DESIGNED MILITARY RINGS AND PLACED THEM IN THE ORDER DEPARTMENTS OF POST EXCHANGE WHERE THEY WERE SOLD TO MILITARY MEMBERS MUST BE REGARDED AS SELLING WITHIN THE CONFLICT OF INTEREST STATUTE IN 37 U.S.C. 801 (C) AND THE FACT THAT THE RINGS WERE SHIPPED DIRECTLY TO THE PURCHASER AND PAYMENT MADE DIRECTLY TO THE MANUFACTURER DOES NOT AFFORD BASIS TO CONCLUDE THAT MEMBER WAS NOT SELLING. CASH MAN: FURTHER REFERENCE IS MADE TO YOUR CLAIM FOR REFUND OF THE AMOUNTS BEING COLLECTED FROM YOU BY THE DEPARTMENT OF THE AIR FORCE AS ERRONEOUS PAYMENTS OF RETIRED PAY FOR THE PERIOD AUGUST 1 TO NOVEMBER 25. WHILE YOU WERE EMPLOYED BY JOSTEN'S. ALSO WE HAVE RECEIVED YOUR LETTER OF JANUARY 17.

B-168735, FEB. 26, 1970

MILITARY--RETIRED PAY--CONFLICT OF INTEREST DECISION TO RETIRED AIR FORCE OFFICER CONCERNING CLAIM FOR REFUND OF ERRONEOUS PAYMENTS OF RETIRED PAY RECEIVED WHILE EMPLOYED BY FIRM SELLING TO ARMY AND AIR FORCE EXCHANGES. RETIRED MILITARY MEMBER WHO DESIGNED MILITARY RINGS AND PLACED THEM IN THE ORDER DEPARTMENTS OF POST EXCHANGE WHERE THEY WERE SOLD TO MILITARY MEMBERS MUST BE REGARDED AS SELLING WITHIN THE CONFLICT OF INTEREST STATUTE IN 37 U.S.C. 801 (C) AND THE FACT THAT THE RINGS WERE SHIPPED DIRECTLY TO THE PURCHASER AND PAYMENT MADE DIRECTLY TO THE MANUFACTURER DOES NOT AFFORD BASIS TO CONCLUDE THAT MEMBER WAS NOT SELLING. HENCE REFUND OF WITHHELD RETIRED PAY WOULD NOT BE PROPER.

TO LIEUTENANT COLONEL WILLIAM J. CASH MAN:

FURTHER REFERENCE IS MADE TO YOUR CLAIM FOR REFUND OF THE AMOUNTS BEING COLLECTED FROM YOU BY THE DEPARTMENT OF THE AIR FORCE AS ERRONEOUS PAYMENTS OF RETIRED PAY FOR THE PERIOD AUGUST 1 TO NOVEMBER 25, 1968, WHILE YOU WERE EMPLOYED BY JOSTEN'S, INC; OWATONNA, MINNESOTA 55060. ALSO WE HAVE RECEIVED YOUR LETTER OF JANUARY 17, 1970.

THE RECORD SHOWS THAT YOU WERE RETIRED FROM THE AIR FORCE ON JULY 31, 1968, AND BECAME ENTITLED TO RETIRED PAY OF $756.14 A MONTH EFFECTIVE AUGUST 1, 1968. YOU FURNISHED DD FORM 1357, STATEMENT OF EMPLOYMENT, DATED JULY 31, 1968, SHOWING THAT YOU WERE EMPLOYED BY JOSTEN'S, INC; AS A SALESMAN; THAT YOUR DUTIES WERE TO DESIGN MILITARY RINGS TO BE PRODUCED BY YOUR EMPLOYER, AND TO ACT IN THE CAPACITY OF A VENDOR SELLING RINGS TO MILITARY EXCHANGES.

IN LETTER OF SEPTEMBER 3, 1968, TO THE AIR FORCE ACCOUNTING AND FINANCE CENTER, DENVER, COLORADO, YOU STATED IN EXPLANATION OF YOUR EMPLOYMENT ACTIVITIES THAT YOU CALLED UPON CIVILIAN BUYERS AT THE ARMY AND AIR FORCE EXCHANGE AREA SUPPORT CENTERS FOR THE PURPOSE OF HAVING JOSTEN'S RINGS PLACED IN THE ORDER DEPARTMENT OF THE EXCHANGES FOR SALE TO INDIVIDUALS, AND THAT JOSTEN'S, INC. MADE NO SALES OF THEIR PRODUCTS TO THE UNITED STATES GOVERNMENT. AGAIN IN A LETTER DATED NOVEMBER 26, 1968, YOU REVIEWED YOUR ACTIVITIES IN BEHALF OF JOSTEN'S, INC; AND ON THE BASIS THAT YOU SOLD NOTHING TO THE EXCHANGES, ALL SALES BEING MADE DIRECT TO MILITARY MEMBERS THROUGH EXCHANGE SPECIAL ORDER DEPARTMENTS, YOU EXPRESS THE OPINION THAT RECOUPMENT OF YOUR RETIRED PAY WAS IMPROPER.

SECTION 801 (C) OF TITLE 37, U.S.C. PROVIDES AS FOLLOWS:

"PAYMENT MAY NOT BE MADE FROM ANY APPROPRIATION, FOR A PERIOD OF THREE YEARS AFTER HIS NAME IS PLACED ON THAT LIST, TO AN OFFICER ON A RETIRED LIST OF THE REGULAR ARMY, THE REGULAR NAVY, THE REGULAR AIR FORCE, THE REGULAR MARINE CORPS, THE REGULAR COAST GUARD, THE ENVIRONMENTAL SCIENCE SERVICES ADMINISTRATION, OR THE PUBLIC HEALTH SERVICE, WHO IS ENGAGED FOR HIMSELF OR OTHERS IN SELLING, OR CONTRACTING OR NEGOTIATING TO SELL, SUPPLIES OR WAR MATERIALS TO AN AGENCY OF THE DEPARTMENT OF DEFENSE, THE COAST GUARD, THE ENVIRONMENTAL SCIENCE SERVICES ADMINISTRATION, OR THE PUBLIC HEALTH SERVICE. * * *"

THE TERM "SELLING, OR CONTRACTING OR NEGOTIATING TO SELL" CONTAINED IN THE STATUTE HAS BEEN VIEWED AS INCLUDING VIRTUALLY ALL ACTIVITIES SURROUNDING THE SELLING PROCESS AND IS DEFINED IN PARAGRAPH I.C.2 OF INCLOSURE 3-C, DEPARTMENT OF DEFENSE DIRECTIVE 5500.7 DATED AUGUST 8, 1967, TO MEAN:

"A. SIGNING A BID, PROPOSAL, OR CONTRACT;

"B. NEGOTIATING A CONTRACT;

"C. CONTACTING AN OFFICER OR EMPLOYEE OF ANY OF THE FOREGOING DEPARTMENTS OR AGENCIES FOR THE PURPOSE OF:

"(1) OBTAINING OR NEGOTIATING CONTRACTS,

"(2) NEGOTIATING OR DISCUSSING CHANGES IN SPECIFICATIONS, PRICE, COST ALLOWANCES, OR OTHER TERMS OF A CONTRACT, OR

"(3) SETTLING DISPUTES CONCERNING PERFORMANCE OF A CONTRACT, OR

"D. ANY OTHER LIAISON ACTIVITY WITH A VIEW TOWARD THE ULTIMATE CONSUMMATION OF A SALE ALTHOUGH THE ACTUAL CONTRACT THEREFOR IS SUBSEQUENTLY NEGOTIATED BY ANOTHER PERSON."

37 U.S.C. 801 (C) HAS BEEN CLASSIFIED AS ONE OF THE GROUP OF SO CALLED CONFLICT OF INTEREST STATUTES. 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. IT SEEMS APPARENT THAT SUCH STATUTES ARE INTENDED TO APPLY IN ANY CASE REASONABLY WITHIN THEIR SCOPE WHERE THE MISCHIEF AT WHICH THEY ARE AIMED COULD ARISE.

IF YOU WERE EMPLOYED BY JOSTEN'S, INC; AS A SALESMAN TO SELL RINGS TO THE MILITARY EXCHANGES YOU CLEARLY CAME WITHIN THE PROVISIONS OF THE STATUTE AND YOU ARE NOT ENTITLED TO RETIRED PAY DURING THE PERIOD YOU WERE SO EMPLOYED. AND, NOTWITHSTANDING THE USE OF THE EXCHANGE SPECIAL ORDER PROCEDURES IN CONNECTION WITH THE SALE OF THE RINGS THIS APPEARS, IN SUBSTANCE, TO HAVE BEEN THE CASE.

THE EXCHANGE SERVICES OPERATING POLICIES ARE SET OUT IN ARMY REGULATION 60-20, AIR FORCE REGULATION 147-14. CHAPTER 4 OF THOSE REGULATIONS, RELATING TO SALES OPERATIONS AND PROCUREMENT PROVIDES IN PARAGRAPH 4-6 (C) THAT:

"EXCHANGES (IN CONUS) WILL NOT OBTAIN BY SPECIAL ORDER ANY MERCHANDISE NOT INCLUDED IN THE LIST OF AUTHORIZED RESALE ITEMS IN APPENDIX B. INDIVIDUAL ORDERS MAY BE PLACED BY AUTHORIZED PATRONS AT A CUSTOMER SERVICE DESK WHEN IT IS NOT PRACTICABLE OR CONVENIENT TO STOCK AN AUTHORIZED ITEM BECAUSE OF ITS LIMITED DESIRABILITY, ITS BULK, OR ITS DIVERSITY OF SIZE OR STYLES. THESE INDIVIDUAL ORDERS WILL CARRY THE MARKUP PRESCRIBED FOR THE MERCHANDISE WHEN CARRIED IN STOCK."

THE NATURE OF YOUR PRODUCT AND THE DIVERSITY OF SIZES INVOLVED WOULD ALMOST SEEM TO REQUIRE THAT THE EXCHANGES HANDLE IT UNDER THAT PROCEDURE. IN SUCH CIRCUMSTANCES AND IN THE ABSENCE OF A JUDICIAL DECISION TO THE CONTRARY, THE FACT THAT THE RINGS MAY HAVE BEEN SHIPPED DIRECTLY TO THE PURCHASER AND PAYMENT MADE DIRECTLY TO MANUFACTURER, DOES NOT AFFORD A SUFFICIENT BASIS FOR A CONCLUSION BY US THAT YOU WERE NOT ENGAGING IN SALES ACTIVITIES WITHIN THE SCOPE OF THE LAW AND REGULATIONS.

ACCORDINGLY, YOUR CLAIM FOR REFUND OF THE AMOUNTS BEING COLLECTED FROM YOU MUST BE DISALLOWED.