B-143673, AUGUST 12, 1960, 40 COMP. GEN. 95

B-143673, AUGUST 12, 1960, 40 COMP. GEN. 95

APPROPRIATIONS - AVAILABILITY - JUDGMENTS - AGAINST EMPLOYEES HANDLING TAX LITIGATION - GOVERNMENT LIABILITY DAMAGES ASSESSED BY A FEDERAL COURT AGAINST A DISTRICT DIRECTOR OF INTERNAL REVENUE SERVICE AND AN EMPLOYEE OF THE DEPARTMENT OF JUSTICE FOR AN OFFENSE IN THE HANDLING OF CERTAIN INCOME TAX LITIGATION MAY BE REGARDED AS A LIABILITY OF THE UNITED STATES IN VIEW OF THE BROAD AUTHORITY IN 26 U.S.C. 7423 (2), WHICH WAS INTENDED TO EXEMPT GOVERNMENT OFFICERS AND EMPLOYEES FROM LIABILITY FOR CIVIL DAMAGES RECOVERED AGAINST THEM IN THE PERFORMANCE OF OFFICIAL DUTY IN THE ADMINISTRATION DETERMINATION THAT THE ACTION OF BOTH EMPLOYEES WAS TAKEN IN THE PERFORMANCE OF OFFICIAL DUTIES AND PURSUANT TO ADMINISTRATIVE AUTHORIZATION AND SANCTION. ALTHOUGH THE INTERNAL REVENUE SERVICE APPROPRIATION FOR SALARIES AND EXPENSES IS NOT AVAILABLE FOR PAYMENT OF CIVIL JUDGMENTS RENDERED AGAINST TWO EMPLOYEES FOR AN OFFENSE IN THE HANDLING OF CERTAIN INCOME TAX LITIGATION IN THE ABSENCE OF SPECIFIC AUTHORITY, THE PERMANENT APPROPRIATION FOR THE PAYMENT OF JUDGMENTS RENDERED AGAINST THE UNITED STATES, ESTABLISHED UNDER 31 U.S.C. 724, MAY BE USED FOR THE PAYMENT OF THE JUDGMENTS AND, EVEN THOUGH THE JUDGMENTS WERE RENDERED AGAINST THE EMPLOYEES AND NOT AGAINST THE UNITED STATES, UNDER THE STATUTORY AUTHORITY IN 26 U.S.C. 7423 (2) FOR ASSUMPTION OF LIABILITY BY THE GOVERNMENT AND FOR PAYMENT OF SUCH JUDGMENTS, THEY MAY BE CONSIDERED AS A JUDGMENT OBLIGATION OF THE UNITED STATES.

TO THE SECRETARY OF THE TREASURY, AUGUST 12, 1960:

YOUR LETTER OF AUGUST 2, 1960, REQUESTS ADVICE ON SEVERAL QUESTIONS CONCERNING THE AVAILABILITY OF THE APPROPRIATION "1SALARIES AND EXPENSES, INTERNAL REVENUE SERVICE," FOR THE PAYMENT OF DAMAGES IMPOSED BY FEDERAL COURT ORDER ON EMIL J. NELSON, DISTRICT DIRECTOR OF INTERNAL REVENUE, MILWAUKEE, WISCONSIN, AND RICHARD M. ROBERTS, AN EMPLOYEE OF THE DEPARTMENT OF JUSTICE, TAX DIVISION, FOR AN OFFENSE COMMITTED BY THEM IN THE HANDLING OF CERTAIN INCOME TAX LITIGATION. THE AMOUNT OF THE DAMAGES WAS AWARDED BY THE COURT TO HAROLD G. AND OLLIE MAE STEINER, PARTIES TO THE LAWSUIT.

IT APPEARS FROM YOUR LETTER, WHICH WAS CONCURRED IN BY THE DEPARTMENT OF JUSTICE, AND FROM COPIES OF PERTINENT COURT ACTIONS FURNISHED TO US THAT THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WISCONSIN IN THE CASE OF HAROLD G. STEINER AND OLLIE MAE STEINER V. EMIL J. NELSON, AS DISTRICT DIRECTOR, INTERNAL REVENUE SERVICE FOR THE STATE OF WISCONSIN, NO. 56-C-140, DECIDED JULY 10, 1957, HELD THAT LEVIES AND NOTICES OF LEVY MADE IN CONNECTION WITH ALLEGED INCOME TAX DEFICIENCIES OF THE PLAINTIFFS FOR CERTAIN YEARS WERE NULL AND VOID. THE COURT ENTERED AN INJUNCTION ORDER WHICH IMPOSED CERTAIN DUTIES AND ENJOINED CERTAIN ACTIONS ON THE PART OF EMIL J. NELSON, AS DISTRICT DIRECTOR OF INTERNAL REVENUE, HIS SUCCESSORS, OFFICERS, AGENTS, AND ATTORNEYS, IN CONNECTION WITH THE MATTER. THE ORDER OF JULY 10, 1957, WAS AFFIRMED BY THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT. STEINER V. NELSON, 259 F.2D 853.

IT ALSO APPEARS THAT AS A RESULT OF THE FAILURE OF EMIL J. NELSON TO COMPLY WITH THE PROVISIONS OF THE COURT'S ORDER DATED JULY 10, 1957, AND THE ACTIVITIES ON THE PART OF RICHARD M. ROBERTS INCIDENT TO THE LITIGATION, THE DISTRICT COURT IN AN ACTION DATED MAY 12, 1959, FOUND BOTH PARTIES GUILTY OF CIVIL CONTEMPT AND ORDERED THEM TO PAY DAMAGES IN THE AMOUNT OF $400 EACH, THE TOTAL SUM TO BE PAID TO THE STEINERS. THE COURT'S ACTION WAS AFFIRMED ON APPEAL BY THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT. EMIL J. NELSON AND RICHARD M. ROBERTS V. HAROLD G. STEINER AND OLLIE MAE STEINER, NO. 12805, DECIDED JUNE 29, 1960.

YOU STATE THAT ISSUANCE OF MANDATE BY THE COURT OF APPEALS IN THIS CASE HAS BEEN STAYED UNTIL AUGUST 18, 1960, AND THAT THE DEPARTMENT OF JUSTICE HAS UNDER CONSIDERATION WHETHER TO PETITION THE UNITED STATES SUPREME COURT FOR A WRIT OF CERTIORARI. ALSO, THAT UNLESS SUCH ACTION IS TAKEN, OR A FURTHER STAY OF MANDATE IS SECURED, PAYMENT OF THE DAMAGES ASSESSED AGAINST THE EMPLOYEES WILL BE REQUIRED ON AUGUST 18, OR VERY SHORTLY THEREAFTER. YOU POINT OUT THAT IN THE EVENT PAYMENT IS NOT MADE TO THE STEINERS ON THE DATE SPECIFIED, THE EMPLOYEES MAY BE SUBJECT TO ADDITIONAL CONTEMPT ACTION.

THE QUESTIONS PRESENTED IN YOUR LETTER ARE AS FOLLOWS:

A) MAY PAYMENT OF THE DAMAGES ASSESSED IN THIS CASE AGAINST MR. EMIL NELSON BE MADE UNDER THE PROVISIONS OF 26 U.S.C. 7423 (2), WHEN AND IF MANDATE FOR PAYMENT IS ISSUED?

B) MAY PAYMENT OF THE DAMAGES ASSESSED IN THIS CASE AGAINST MR. RICHARD M. ROBERTS BE MADE UNDER THE PROVISIONS OF 26 U.S.C. 7423 (2), WHEN AND IF MANDATE FOR PAYMENT IS ISSUED?

2) IF YOUR ANSWER TO EITHER QUESTION NO. A OR QUESTION B IS IN THE AFFIRMATIVE, IS IT PROPER TO MAKE PAYMENT OF THE DAMAGES ASSESSED AGAINST EITHER OR BOTH OF THE DEFENDANTS, FROM THE APPROPRIATION "1SALARIES AND EXPENSES, INTERNAL REVENUE SERVICE," FOR THE FISCAL YEAR IN WHICH MANDATE IS ISSUED? IF NOT, FROM WHAT APPROPRIATION/S) SHOULD SUCH PAYMENT/S) BE MADE?

3) ASSUMING THAT 26 U.S.C. 7423 (2) IS DETERMINED BY YOU TO BE APPLICABLE TO EITHER OR BOTH OF THE DEFENDANTS IN THIS CASE, AND EITHER OR BOTH OF THE SAID DEFENDANTS SHOULD PAY, FROM PERSONAL FUNDS, THE DAMAGES ASSESSED AGAINST HIM, MAY HE THEN BE REIMBURSED FOR SUCH PAYMENT, OR MUST THE PAYMENT OF THE DAMAGES BE MADE DIRECTLY BY THE GOVERNMENT TO THE STEINTER?

SECTION 7423 (2), TITLE 26, U.S.C. CITED IN YOUR LETTER, AUTHORIZED THE SECRETARY OF THE TREASURY OR HIS DELEGATE, SUBJECT TO REGULATIONS PRESCRIBED BY THE SECRETARY OR HIS DELEGATE, TO REPAY "ALL DAMAGES AND COSTS RECOVERED AGAINST ANY OFFICER OR EMPLOYEE OF THE UNITED STATES IN ANY SUIT BROUGHT AGAINST HIM BY REASON OF ANYTHING DONE IN THE DUE PERFORMANCE OF HIS OFFICIAL DUTY UNDER THIS TITLE.' THIS STATUTE CLEARLY WAS INTENDED TO EXEMPT ANY GOVERNMENT OFFICER OR EMPLOYEE FROM LIABILITY FOR CIVIL DAMAGES RECOVERED AGAINST HIM IN THE PERFORMANCE OF OFFICIAL DUTY IN RELATION TO THE GENERAL MATTERS CONCERNING ADMINISTRATION OF THE INTERNAL REVENUE LAWS. SEE POWELL V. ROTHENSIES, 86 F.1SUPP. 701, AFFIRMED 183 F.2D 774, AND COOPER V. O-CONNOR, 99 F.2D 135.

IN VIEW OF THE BROAD PROVISIONS OF THE STATUTE AND THE ADMINISTRATIVE DETERMINATION STATED IN YOUR LETTER THAT THE "ACTION OF BOTH DEFENDANTS WAS TAKEN IN THE DUE PERFORMANCE OF THEIR OFFICIAL DUTIES UNDER TITLE 26, U.S.C. IN CONNECTION WITH THE TAX CASE OF HAROLD G. AND OLLIE MAE STEINER; MR. NELSON IN HIS OFFICIAL CAPACITY AS DISTRICT DIRECTOR, AND MR. ROBERTS PURSUANT TO AUTHORIZATION AND SANCTION OF THE COMMISSIONER OF INTERNAL REVENUE BY LETTER DATED FEBRUARY 17, 1959," IT REASONABLY APPEARS THAT LIABILITY FOR PAYMENT OF THE JUDGMENTS RENDERED AGAINST MESSRS. NELSON AND ROBERTS MAY BE ASSUMED BY THE UNITED STATES UNDER THE TERMS OF THIS STATUTE. PARTS A AND B OF YOUR FIRST QUESTION, THEREFORE, ARE ANSWERED IN THE AFFIRMATIVE.

WITH REFERENCE TO THE SOURCE OF FUNDS AVAILABLE FOR PAYMENT OF THE JUDGMENTS, IT IS WELL SETTLED THAT THE APPROPRIATIONS OR FUNDS PROVIDED FOR REGULAR GOVERNMENTAL OPERATIONS OR ACTIVITIES, OUT OF WHICH A CAUSE OF ACTION ARISES, ARE NOT AVAILABLE TO PAY JUDGMENTS OF COURTS IN THE ABSENCE OF SPECIFIC AUTHORITY THEREFOR. SEE 34 COMP. GEN. 221; 15 ID. 933; 2 ID. 821. THE APPROPRIATION ,1SALARIES AND EXPENSES, INTERNAL REVENUE SERVICE" CONTAINS NO PROVISION FOR THE PAYMENT OF JUDGMENTS, AND WE ARE AWARE OF NO OTHER PROVISION OF LAW WHICH WOULD SO AUTHORIZE ITS USE. HENCE, THIS APPROPRIATION IS NOT PROPERLY CHARGEABLE WITH SUCH EXPENSES.

HOWEVER, UNDER THE TERMS OF 31 U.S.C. 724A, THE CONGRESS HAS ESTABLISHED A PERMANENT APPROPRIATION FOR THE PAYMENT, NOT OTHERWISE PROVIDED FOR, OF JUDGMENTS (NOT IN EXCESS OF $100,000) RENDERED BY THE DISTRICT COURTS AND THE COURT OF CLAIMS AGAINST THE UNITED STATES WHICH HAVE BECOME FINAL. WHILE THE JUDGMENTS ENTERED AGAINST MESSRS. NELSON AND ROBERTS ARE NOT JUDGMENTS RENDERED AGAINST THE UNITED STATES, THE AUTHORITY PROVISIONS QUOTED ABOVE FOR ASSUMPTION OF LIABILITY AND FOR PAYMENT BY THE UNITED STATES OF SUCH JUDGMENTS MAY, FOR PRACTICAL PURPOSES, BE CONSIDERED AS CONVERTING THE JUDGMENTS INTO A JUDGMENT OBLIGATION OF THE UNITED STATES PROPERLY PAYABLE FROM THE PERMANENT APPROPRIATION PROVIDED THEREFOR.

ACCORDINGLY, AND IN ANSWER TO YOUR SECOND QUESTION, YOU ARE ADVISED THAT IF AND WHEN IT BECOMES NECESSARY FOR THE UNITED STATES TO PAY THE JUDGMENTS ENTERED AGAINST MESSRS. NELSON AND ROBERTS PAYMENT MAY BE MADE FROM THE APPROPRIATION PROVIDED BY 31 U.S.C. 724A. THIS LETTER SHOULD BE CITED IN ANY FUTURE CORRESPONDENCE WITH OUR OFFICE RELATIVE TO PAYMENT OF THE JUDGMENTS.

REGARDING YOUR FINAL QUESTION, IT MAY BE STATED THAT IT IS IMMATERIAL, UNDER THE TERMS OF 26 U.S.C. 7423 (2), WHETHER PAYMENT OF THE JUDGMENTS BY THE UNITED STATES BE MADE DIRECTLY TO THE STEINERS OR AS A REIMBURSEMENT TO MESSRS. NELSON AND ROBERTS UPON DUE SATISFACTION OF THE JUDGMENTS BY THEM.