B-149192, JUNE 29, 1962, 41 COMP. GEN. 819

B-149192, JUNE 29, 1962, 41 COMP. GEN. 819

PERSONAL SERVICES - DETECTIVE EMPLOYMENT PROHIBITION - APPLICABILITY--- PERSONAL SERVICES - DETECTIVE EMPLOYMENT PROHIBITION - APPLICABILITY--- PERSONAL SERVICES - DETECTIVE EMPLOYMENT PROHIBITION - APPLICABILITY A CORPORATION SUBMITTING A LOW BID FOR PROTECTIVE GUARD SERVICES WHICH IS LICENSED UNDER A STATE STATUTE COVERING PRIVATE DETECTIVES BUT WHICH IS CHARTERED FOR BUSINESS ACTIVITIES RELATING TO REAL ESTATE INCLUDING MAINTENANCE, OPERATION AND PROTECTIVE SERVICES FOR TENANTS IS NOT REQUIRED TO HAVE THE BROAD LANGUAGE OF ITS CHARTER AUTHORIZING "ANY BUSINESS CALCULATED TO PROMOTE THE GENERAL INTERESTS OF THE CORPORATION" CONSTRUED AS COVERING INVESTIGATIVE OR DETECTIVE SERVICES WHICH ARE COMPLETELY FOREIGN TO THE KINDS OF BUSINESS ACTIVITY FOR WHICH THE CORPORATION'S CHARTER WAS GRANTED; THEREFORE, THE CORPORATION IS NOT CONSIDERED TO BE AUTHORIZED TO ENGAGE IN DETECTIVE WORK AND THE PROHIBITION AGAINST EMPLOYMENT OF DETECTIVE AGENCIES IN THE ACT OF MARCH 3, 1893, 5 U.S.C. 53, IS NOT A BAR TO RECEIVING AN AWARD OF A PROTECTIVE SERVICE CONTRACT. THE CERTIFICATION BY A COMPANY WHICH IS AUTHORIZED TO CONDUCT ANY INVESTIGATIVE OR DETECTIVE BUSINESS THAT IT WILL NOT ENGAGE IN SUCH ACTIVITY DURING THE TERM OF A GOVERNMENT CONTRACT WOULD NOT REMOVE THE COMPANY FROM THE SCOPE OF THE DETECTIVE EMPLOYMENT PROHIBITION IN THE ACT OF MARCH 3, 1893, 5 U.S.C. 53, THE EFFECT OF SUCH CERTIFICATION BEING NOT TO LIMIT THE COMPANY'S CORPORATE POWERS BUT MERELY TO GIVE RISE TO A BREACH OF CONTRACT IF THE CERTIFICATION WERE VIOLATED, AND THE FACT THAT THE COMPANY HAD NEVER PREVIOUSLY ACTUALLY PERFORMED INVESTIGATIVE OR DETECTIVE SERVICES IS IMMATERIAL, AND, THEREFORE, SUCH A COMPANY MAY NOT BE ENGAGED UNDER CONTRACT TO PERFORM PROTECTIVE SERVICES AT A FEDERAL INSTALLATION. A CORPORATION WHICH IS AUTHORIZED TO PROVIDE ONLY PROTECTIVE, MAINTENANCE, AND CUSTODIAL SERVICES BUT WHICH IS A WHOLLY OWNED SUBSIDIARY OF A CORPORATION DOING BUSINESS AS A DETECTIVE AGENCY WITH MUTUAL DIRECTORS AND OFFICERS WITH THAT OF THE PARENT COMPANY MAY BE REGARDED AS A SEPARATE LEGAL ENTITY, AND THE FACT THAT THE COMPANIES HAVE THE SAME OFFICERS DOES NOT PRECLUDE RECOGNITION OF THE SEPARATE IDENTITY OF THE SUBSIDIARY IF SEPARATION OF THE CORPORATE AFFAIRS IS MAINTAINED; THEREFORE, AWARD OF A CONTRACT TO THE SEPARATE CORPORATION ESTABLISHED TO PERFORM ONLY PROTECTIVE SERVICES WOULD NOT BE CONTRARY TO THE DETECTIVE EMPLOYMENT PROHIBITION IN THE ACT OF MARCH 3, 1893, 5 U.S.C. 53, WHICH WAS DESIGNED TO PROHIBIT CONTRACTS WITH DETECTIVE AGENCIES BUT NOT TO PRECLUDE EMPLOYMENT OF AN AGENCY CONCERNED SOLELY WITH PROTECTIVE SERVICES.

TO JOHN MUNICK, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, JUNE 29, 1962:

BY LETTER OF JUNE 14, 1962, YOU REQUESTED AN ADVANCE DECISION AS TO WHETHER A CONTRACT COULD PROPERLY BE AWARDED UNDER THE FOLLOWING CIRCUMSTANCES TO MIDWEST BUILDING SERVICES, INC., THE LOWEST BIDDER ON INVITATION FOR BIDS L-2221, AND ADDENDUM, COVERING PROTECTIVE GUARD SERVICES AT LANGLEY RESEARCH CENTER, LANGLEY STATION, FOR THE PERIOD JULY 2, 1962, THROUGH JUNE 30, 1963.

THE INVITATION FOR BIDS REFERRED TO THE ACT OF MARCH 3, 1893, 27 STAT. 591, 5 U.S.C. 53, WHICH PROVIDES THAT:

NO EMPLOYEE OF THE PINKERTON DETECTIVE AGENCY, OR SIMILAR AGENCY, SHALL BE EMPLOYED IN ANY GOVERNMENT SERVICE OR BY ANY OFFICER OF THE DISTRICT OF COLUMBIA.

THE INVITATION ALSO REQUIRED EACH BIDDER TO SIGN, AND MIDWEST DID SIGN, A CERTIFICATE THAT:

* * * THE FIRM OR INDIVIDUAL SUBMITTING THIS BID IS NOT A DETECTIVE AGENCY WITHIN THE MEANING OF SUCH ACT, DOING WORK CUSTOMARILY PERFORMED BY A DETECTIVE AGENCY OR IF A CORPORATION, EMPOWERED BY ITS CHARTER TO DO SUCH WORK, AND WILL NOT DURING THE PERIOD OF THE CONTRACT BID UPON OR ENGAGE IN ANY OPERATION MAKING THE BIDDER INELIGIBLE TO PERFORM BY REASON OF THE PROVISIONS OF THE ACT OF MARCH 3, 1893 (CITATIONS).

THE COMPANY IS A MINNESOTA CORPORATION LICENSED UNDER SECTIONS 326.331 TO 326.339 OF THE MINNESOTA STATUTES, COVERING PRIVATE DETECTIVES. PERTINENT PROVISIONS OF THESE STATUTES ARE AS FOLLOWS:

326.331 PRIVATE DETECTIVES: LICENSES. NO PERSON SHALL ENGAGE IN THE BUSINESS OF PRIVATE DETECTIVE OR INVESTIGATOR FOR FEE OR REWARD UNLESS PREVIOUSLY LICENSED AS HEREIN PROVIDED. * * *

326.33 INFORMATION AND MATERIAL ACCOMPANYING APPLICATION.

(4) A DULY ACKNOWLEDGED CERTIFICATE EVIDENCING THE FACT THAT AT LEAST ONE OF THE PERSONS SIGNING THE APPLICATION HAS BEEN REGULARLY EMPLOYED AS A DETECTIVE OR HAS BEEN A MEMBER OF THE UNITED STATES GOVERNMENT INVESTIGATIVE SERVICE, A SHERIFF OR MEMBER OF A CITY POLICE DEPARTMENT OF A RANK OR GRADE HIGHER THAN THAT OF PATROLMAN, OR EQUIVALENT OCCUPATION, FOR A PERIOD OF NOT LESS THAN THREE YEARS.

326.338 PRIVATE DETECTIVE DEFINED. PERSONS WHO FOR FEE OR REWARD OR ANY CONSIDERATION SHALL ENGAGE IN THE BUSINESS OF INVESTIGATORS OR OF WATCH, GUARD OR PATROL AGENCY. * * *

THE ARTICLES OF INCORPORATION OF MIDWEST BUILDING SERVICES, INC., LISTS AS ITS PURPOSES VIRTUALLY ALL PHASES OF BUSINESS ACTIVITY RELATED TO REAL ESTATE, BOTH IMPROVED AND UNIMPROVED. ONE OF THESE PURPOSES IS:

TO ESTABLISH, CARRY ON, CONDUCT, MAINTAIN, OPERATE AND MANAGE ONE OR MORE PLACES OF BUSINESS FOR PROVIDING WATCHMAN, FIREMEN, GUARDS, AND ATTENDANTS FOR HEATING PLANTS OF EVERY CHARACTER AND DESCRIPTION UNDER CONTRACT WITH OWNERS, TENANTS AND LESSEES OF BUILDINGS, STRUCTURES OR OTHER IMPROVEMENTS ON REAL PROPERTY.

THE ARTICLES OF INCORPORATION NEITHER SPECIFICALLY AUTHORIZES NOR PROHIBITS THE CONDUCT OF INVESTIGATIVE OR DETECTIVE SERVICES. BUT THE LAST PURPOSE STATED THEREIN AUTHORIZES THE COMPANY:

TO CARRY ON ANY BUSINESS WHATSOEVER WHICH THE CORPORATION MAY DEEM PROPER AND EXPEDIENT IN CONNECTION WITH ANY OF THE FOREGOING PURPOSES, OR WHICH MAY BE CALCULATED TO PROMOTE THE GENERAL INTERESTS OF THE CORPORATION * *

ON THE BASIS THAT MIDWEST HAS A PRIVATE DETECTIVE LICENSE FROM THE STATE OF MINNESOTA AND IS APPARENTLY AUTHORIZED TO CARRY ON ANY DETECTIVE BUSINESS IT DESIRES UNDER ITS LICENSE AND THE PROVISIONS OF THE LAST QUOTED PARAGRAPH, YOU RAISE THE QUESTION AS TO WHETHER OUR DECISION OF JULY 14, 1961, B-146293, IS FOR APPLICATION. IN THAT DECISION WE HELD, WITH RESPECT TO A CORPORATION WHICH DID NOT ENGAGE IN DETECTIVE WORK BUT WHICH WAS EMPOWERED UNDER ITS ARTICLES OF INCORPORATION ,TO OPERATE AND CONDUCT A PRIVATE DETECTIVE AGENCY," WHICH WAS LICENSED TO ENGAGE IN PRIVATE DETECTIVE BUSINESS UNDER A PENNSYLVANIA STATUTE SIMILAR TO THE MINNESOTA STATUTE HERE INVOLVED, AND WHICH LISTED ITSELF IN THE TELEPHONE DIRECTORY AS A DETECTIVE AGENCY, THAT:

* * * THE LOW BIDDER'S ACTUAL "PERFORMANCE" UNDER THE LICENSE GRANTED IT PURSUANT TO THE PENNSYLVANIA PRIVATE DETECTIVE ACT OF 1953 IS NOT THE CRITERION BY WHICH ITS STATUS AS A DETECTIVE AGENCY MUST BE TESTED. IT IS RATHER, WE THINK, THE NATURE OF THE FUNCTIONS WHICH IT MAY PERFORM UNDER SUCH LICENSE WHICH DETERMINES ITS STATUS AS A DETECTIVE AGENCY. WHILE IT IS PROBABLY TRUE, AS STATED BY MR. DENNIS, THAT WORLD INDUSTRIAL SECURITY, INC., HAS HERETOFORE BEEN ENGAGED EXCLUSIVELY IN THE BUSINESS OF PROVIDING INDUSTRIAL SECURITY SERVICES, INCLUDING UNIFORMED GUARD AND CARRIER SERVICES, IT APPEARS ALSO TO BE TRUE THAT THAT CONCERN MAY AT ANY TIME EXERCISE THE POWER GRANTED BY ITS LICENSE TO FURNISH INVESTIGATIVE SERVICES, AND HAS IN FACT HELD ITSELF OUT AS DETECTIVE AGENCY.

YOUR REQUEST FOR ADVANCE DECISION IS ADDRESSED TO THE FOLLOWING SPECIFIC QUESTIONS:

SHOULD THE HOLDING IN COMPTROLLER GENERAL DECISION B-146293 BE DISTINGUISHED FROM THE INSTANT CASE BECAUSE IN THE CASE CONSIDERED IN THE DECISION THERE WAS AN EXPRESS CORPORATE POWER "TO OPERATE AND CONDUCT A PRIVATE DETECTIVE AGENCY" WHILE IN THE INSTANT CASE THE POWER, IF IT EXISTS, RESIDES IN AN OMNIBUS PROVISION?

SHOULD COMPTROLLER GENERAL DECISION B-146293 BE DISTINGUISHED BECAUSE THE APPARENT LOW BIDDER HAS NEVER, IN FACT, BEEN A DETECTIVE AGENCY IN THE PAST, AND IN ITS CERTIFICATION IN THE INVITATION FOR BIDS HAS CONTRACTUALLY LIMITED ITS CORPORATE POWERS BY AGREEING IT "WILL NOT, DURING THE PERIOD OF THE CONTRACT, BID UPON OR ENGAGE IN ANY OPERATION MAKING THE BIDDER INELIGIBLE TO PERFORM BY REASON OF THE PROVISIONS OF THE ACT OF MARCH 3, 1893 (27 STAT. 591, 5 U.S.C. 53/? "

CONCERNING THE FIRST QUESTION, THE BASIC ISSUE WHICH MUST BE RESOLVED IS WHETHER MIDWEST IS EMPOWERED BY ITS ARTICLES OF INCORPORATION TO ENGAGE IN INVESTIGATIVE OR DETECTIVE WORK IN THE ORDINARY SENSE OF THOSE TERMS AS OPPOSED TO THEIR MEANING AS INCLUSIVE OF WATCH, GUARD OR PATROL SERVICES UNDER THE MINNESOTA STATUTES. FOR IF THE COMPANY IS AUTHORIZED TO CONDUCT ANY INVESTIGATIVE OR DETECTIVE BUSINESS, WE CAN SEE NO BASIS FOR DISTINGUISHING THIS CASE FROM THE ONE CONSIDERED IN THE DECISION REFERRED TO. THE ONLY BASIS UPON WHICH AN AFFIRMATIVE ANSWER TO THIS BASIC QUESTION MIGHT BE DEDUCED IS THAT INVESTIGATIVE OR DETECTIVE SERVICES ARE EMBRACED WITHIN THE BROAD LANGUAGE QUOTED ABOVE AUTHORIZING THE CORPORATION TO CARRY ON ANY BUSINESS "CALCULATED TO PROMOTE THE GENERAL INTERESTS OF THE CORPORATION.' HOWEVER, READING THE COMPANY'S CHARTER AS A WHOLE AND CONSIDERING THE SCOPE OF THE PURPOSES ENUMERATED THEREIN, WE ARE OF THE OPINION THAT, WHILE PROTECTIVE SERVICES OF THE NATURE COVERED BY THE CONTEMPLATED CONTRACT ARE COVERED BY THE LANGUAGE REFERRED TO, IT IS NOT REASONABLE TO CONSTRUE SUCH LANGUAGE AS COVERING INVESTIGATIVE OR DETECTIVE SERVICES WHICH ARE COMPLETELY FOREIGN TO THE KINDS OF BUSINESS ACTIVITY FOR WHICH THE COMPANY'S CHARTER WAS GRANTED. SEE GENERALLY CHAPTER 42 OF FLETCHER CYCLOPEDIA CORPORATIONS, PERMANENT EDITION, VOL. 7, SEC. 3633-3653, PARTICULARLY, SEC. 3642, AND CASES CITED THEREIN.

SINCE MIDWEST, THUS, IS NOT CONSIDERED AUTHORIZED TO ENGAGE IN THE TYPE OF BUSINESS ACTIVITY TOWARD WHICH THE ACT OF 1893 IS DIRECTED, THE DECISION CITED IS NOT FOR APPLICATION AND THE STATUTE IS NOT A BAR TO AWARD OF A CONTRACT TO MIDWEST BUILDING SERVICES, INC. WHILE NOT NECESSARY TO THE CONCLUSION REACHED HEREIN, IT MAY BE STATED, REGARDING THE SECOND QUESTION, THAT CERTIFICATION BY A COMPANY AUTHORIZED TO CONDUCT ANY INVESTIGATIVE OR DETECTIVE BUSINESS THAT IT WILL NOT ENGAGE IN SUCH ACTIVITY DURING THE TERM OF A GOVERNMENT CONTRACT WOULD NOT SERVE TO REMOVE THE COMPANY FROM THE EXCLUSION LAID DOWN IN B-146293. SUCH A CERTIFICATION WOULD NOT, IN FACT, LIMIT THE COMPANY'S CORPORATE POWERS BUT WOULD MERELY GIVE RISE TO A BREACH OF CONTRACT IF THE CERTIFICATION WERE VIOLATED. AND THE FACT THAT THE CORPORATION HAD NEVER PREVIOUSLY ACTUALLY PERFORMED INVESTIGATIVE OR DETECTIVE SERVICES, IS AS STATED IN THE CITED DECISION, IMMATERIAL.

THE QUESTIONS PRESENTED ARE ANSWERED ACCORDINGLY.

YOUR LETTER ALSO PRESENTS TWO OTHER QUESTIONS RELATING TO THE SECOND AND THIRD LOW BIDS RECEIVED IN RESPONSE TO THE INVITATION FOR BIDS:

IS A CORPORATION, NOT LICENSED AS A DETECTIVE AGENCY NOR EMPOWERED BY ITS CHARTER TO DO INVESTIGATIVE OR DETECTIVE WORK, INELIGIBLE BECAUSE OF THE STATUTORY PROHIBITION OF THE ACT OF MARCH 3, 1893, TO RECEIVE A FEDERAL AGENCY CONTRACT FOR GUARD SERVICES BECAUSE IT IS A WHOLLY-OWNED SUBSIDIARY OF A DETECTIVE AGENCY?

IS A CORPORATION LIMITED UNDER ITS CHARTER TO THE PURPOSE OF PROVIDING PROTECTIVE, MAINTENANCE AND CUSTODIAL SERVICES AND EXPRESSLY PROHIBITED FROM ENGAGING IN THE BUSINESS OF FURNISHING DETECTIVES OR DETECTIVE SERVICES INELIGIBLE BECAUSE OF THE STATUTORY PROHIBITION OF THE ACT OF MARCH 3, 1893, TO RECEIVE A FEDERAL AGENCY CONTRACT FOR GUARD SERVICES BECAUSE THE STOCK OF SUCH CORPORATION IS OWNED BY THE SAME INDIVIDUALS WHO OWN STOCK IN A DETECTIVE AGENCY?

IN ADDITION TO THE FACTORS COVERED IN THE FIRST QUESTION ITSELF, YOU POINT OUT THAT THE WHOLLY OWNED SUBSIDIARY INVOLVED AND ITS PARENT COMPANY HAVE MUTUAL DIRECTORS AND OFFICERS AND THAT THE CHAIRMAN OF THE BOARD OF THE PARENT COMPANY IS THE PRESIDENT OF THE SUBSIDIARY.

ALTHOUGH, IN VIEW OF THE CONCLUSION REACHED HEREIN THAT AWARD TO THE LOW BIDDER, MIDWEST BUILDING SERVICES, INC., IS NOT PRECLUDED, ANSWERS TO THESE QUESTIONS ARE NOT NOW REQUIRED, WE HAVE BEEN INFORMALLY ADVISED IT IS HIGHLY PROBABLE THAT THE ANSWERS WILL BE REQUIRED IN CONNECTION WITH OTHER SOLICITATIONS FOR BIDS FOR THE FURNISHING OF GUARD SERVICES.

THE DOCTRINE OF THE SEPARATE LEGAL ENTITY OF THE CORPORATION IS, OF COURSE, WELL RECOGNIZED. 13 AM.JUR., CORPORATIONS SEC. 6. ALTHOUGH CORPORATE ENTITIES MAY BE DISREGARDED WHERE THEY ARE MADE THE IMPLEMENT OF AVOIDING A CLEAR LEGISLATIVE PURPOSE, THEY WILL NOT BE DISREGARDED WHERE THOSE IN CONTROL HAVE DELIBERATELY ADOPTED THE CORPORATE FORM IN ORDER TO SECURE ITS ADVANTAGES AND WHERE NO VIOLENCE IS DONE TO THE LEGISLATIVE PURPOSE BY TREATING THE CORPORATE ENTITY AS A SEPARATE LEGAL PERSON. SCHENLEY DISTILLERS CORP. V. UNITED STATES, 326 U.S. 432. NOR WOULD THE IDENTITY OF CORPORATE OFFICERS BETWEEN THE OLD AND NEW CORPORATIONS REQUIRE THAT THE CORPORATE ENTITY OF THE NEW CORPORATION BE DISREGARDED IF SEPARATION OF CORPORATE AFFAIRS WERE MAINTAINED. ANNOTATION, 102 ALR 1054. AND AS INDICATED IN DECISIONS AT 38 COMP. GEN. 881; 26 ID. 303; AND 8 ID. 89, THE LEGISLATIVE PURPOSE OF THE ACT OF MARCH 3, 1893, IS TO PROHIBIT CONTRACTS WITH OR APPOINTMENTS OF INDIVIDUAL EMPLOYEES OF DETECTIVE AGENCIES OR CONTRACTS WITH A DETECTIVE AGENCY FOR ANY PURPOSE; BUT NOT THE EMPLOYMENT OF AN AGENCY CONCERNED SOLELY WITH PROTECTIVE SERVICES.

ACCORDINGLY, THE AWARD OF A CONTRACT TO A SEPARATE CORPORATION ESTABLISHED WITH AUTHORITY TO PERFORM ONLY PROTECTIVE SERVICES WOULD APPEAR TO DO NO VIOLENCE TO THE PURPOSE OF THE ACT; AND WE WOULD NOT OBJECT ON THE BASIS OF THE CITED STATUTORY PROVISION TO ANY GOVERNMENT CONTRACT AWARDED A COMPANY UNDER THE CONDITIONS RELATING TO THE SECOND AND THIRD LOW BIDS AS SET FORTH IN THE ABOVE QUESTIONS.