B-206101 L/M, MAY 20, 1982

B-206101 L/M, MAY 20, 1982

DIGEST: PRIVATE CITIZEN INVESTED IN 3-MONTH TREASURY BILL. INSTEAD OF PAYING INVESTOR ON DESIGNATED REDEMPTION DATE, TREASURY ERRONEOUSLY REINVESTED BILL, CAUSING FINANCIAL LOSS TO INVESTOR WHO HAD TAKEN OUT SHORT-TERM HIGH INTEREST LOAN IN ANTICIPATION OF RECEIVING PROCEEDS OF TREASURY BILL ON REDEMPTION DATE. ABSENT SPECIFIC STATUTORY AUTHORITY, THERE IS NO BASIS TO COMPENSATE INVESTOR FOR LOSS RESULTING FROM DELAY IN PAYMENT OR TO PAY INTEREST FOR THE DELAY. INVESTOR MAY WISH TO CONSIDER FILING CLAIM UNDER FEDERAL TORT CLAIMS ACT, BUT GAO IS NOT IN POSITION TO COMMENT ON MERITS OF SUCH A CLAIM. TO REP. WINN.

LARRY WINN, JR., HOUSE OF REPRESENTATIVES:

THIS IS IN RESPONSE TO YOUR REQUEST OF DECEMBER 18, 1981, FOR US TO CONSIDER A LETTER SENT TO YOU BY MARY LOUISE KNUTSON, CONCERNING THE LATE PAYMENT OF HER TREASURY BILL. THE TREASURY DEPARTMENT HAS CONCLUDED THAT IT HAS NO AUTHORITY TO COMPENSATE MS. KNUTSON FOR INTEREST LOST DUE TO THE DELAY IN PAYMENT. WE AGREE WITH TREASURY FOR THE FOLLOWING REASONS.

ON JUNE 21, 1981, MS. KNUTSON PURCHASED FROM THE DEPARTMENT OF THE TREASURY A $15,000 BOOK-ENTRY TREASURY BILL, WITH A MATURITY DATE OF SEPTEMBER 24, 1981. ASSUMING THAT SHE WOULD RECOUP THIS AMOUNT ON THE MATURITY DATE, ON SEPTEMBER 21, 1981, MS. KNUTSON PURCHASED A HOME WITH A 3-DAY "SWING LOAN" AT AN INTEREST RATE OF 20 1/2 PERCENT. ON SEPTEMBER 24 SHE RECEIVED A CHECK FOR THE DISCOUNT AMOUNT OF $538.35 ON A REINVESTED TREASURY BILL, INSTEAD OF THE $15,000 AS EXPECTED. THE BUREAU OF THE PUBLIC DEBT HAD ERRONEOUSLY REINVESTED THE $15,000 IN A NEW BILL. AFTER MS. KNUTSON POINTED OUT THIS ERROR, THE BUREAU MAILED HER A CHECK IN THE AMOUNT OF $14,461.65, WHICH SHE RECEIVED ON OCTOBER 13, 1981. NINETEEN DAYS ELAPSED BETWEEN THE MATURITY DATE ON MS. KNUTSON'S TREASURY BILL AND THE DAY SHE RECEIVED PAYMENT. CONSEQUENTLY, SHE WISHES TO RECOVER THE ADDITIONAL INTEREST INCURRED ON THE "SWING LOAN" AS A RESULT OF THE LATE PAYMENT, PLUS WHATEVER INTEREST THAT SHOULD HAVE ACCRUED ON THE ERRONEOUSLY REINVESTED BILL.

AS THE TREASURY DEPARTMENT INDICATED IN ITS NOVEMBER 20, 1981, LETTER TO YOU, THE UNITED STATES IS NOT LIABLE FOR INTEREST ON ITS UNPAID ACCOUNTS UNLESS THE PAYMENT OF INTEREST IS SPECIFICALLY PROVIDED FOR IN CONTRACT OR AUTHORIZED BY STATUTE. THIS PRINCIPLE HAS BEEN RECOGNIZED IN NUMEROUS DECISIONS OF THE SUPREME COURT AS WELL AS THE COMPTROLLER GENERAL. SEE, FOR EXAMPLE, UNITED STATES V. THAYER WEST POINT HOTEL CO., 329 U.S. 585 (1947); 58 COMP.GEN. 5 (1978). IN THE ABSENCE OF STATUTORY AUTHORIZATION, THE UNITED STATES IS LIABLE FOR INTEREST ONLY IF IT HAS AFFIRMATIVELY AND UNAMBIGUOUSLY CONTRACTED TO PAY INTEREST. UNITED STATES V. THAYER WEST POINT HOTEL CO., SUPRA AT 590. WHERE THERE IS NO CONTRACT, A STATUTE ALLOWING INTEREST MUST EXPRESSLY AND SPECIFICALLY SET FORTH THE INTENTION OF CONGRESS THAT INTEREST BE PAID.

THE SECOND LIBERTY BOND ACT OF 1917, AS AMENDED, 31 U.S.C. SEC. 754 (1976), AUTHORIZES THE SECRETARY OF THE TREASURY TO ISSUE TREASURY BILLS "ON A DISCOUNT BASIS AND PAYABLE AT MATURITY WITHOUT INTEREST." THESE BILLS ARE OFFERED ON A COMPETITIVE BASIS UNDER SUCH REGULATIONS AND UPON SUCH TERMS AND CONDITIONS AS THE SECRETARY OF THE TREASURY MAY PRESCRIBE. ID. BASED ON THE STATUTE, IT APPEARS THAT, IN THE ABSENCE OF A SEPARATE CONTRACT BY TREASURY BINDING ITSELF TO PAY INTEREST, NO BASIS EXISTS FOR PAYING INTEREST TO MS. KNUTSON. THEREFORE, MS. KNUTSON IS NOT ENTITLED TO ANY ADDITIONAL COMPENSATION AS A RESULT OF THE ERRONEOUSLY REINVESTED TREASURY BILL.

IN ADDITION, WITH REGARD TO THE LOSSES MS. KNUTSON INCURRED ON THE "SWING LOAN," SHE MAKES A CLAIM WHICH IS CONTEMPLATED IN THE LAW OF CONTRACTS AS CONSEQUENTIAL DAMAGES. SUCH A CLAIM, HOWEVER, IS CREATED PURSUANT TO A BREACH OF CONTRACT. MS. KNUTSON'S RIGHTS ARE CREATED BY STATUTE AND REGULATIONS WITH SUCH TERMS AND CONDITIONS AS THE SECRETARY MAY PRESCRIBE. SINCE THE STATUTE AND REGULATIONS DO NOT PROVIDE CONSEQUENTIAL DAMAGES TO INVESTORS THAT RECEIVE LATE PAYMENTS, NO RIGHT TO SUCH DAMAGES EXISTS.

IT IS UNFORTUNATE THAT MS. KNUTSON INCURRED A LOSS BECAUSE OF THE LATE PAYMENT OF HER TREASURY BILL. HOWEVER, CONSIDERATIONS OF EQUITY, INCLUDING DELAYS IN PAYMENT, ARE NOT SUFFICIENT TO AUTHORIZE THE PAYMENT OF INTEREST WHERE IT IS OTHERWISE NOT AUTHORIZED. SEE, E.G., ECONOMY PLUMBING AND HEATING CO. V. UNITED STATES, 470 F.2D 585, 594 (CT.CL. 1972).

THEREFORE, FOR THE REASONS STATED, WE MUST CONCLUDE THAT TREASURY HAS NO AUTHORITY TO COMPENSATE MS. KNUTSON FOR THE LATE PAYMENT OF HER TREASURY BILL. AS YOU REQUESTED, WE ARE RETURNING THE RELEVANT CORRESPONDENCE.