B-126812, MAR. 14, 1956

TO THE HONORABLE J. GEORGE STEWARD, ARCHITECT OF THE CAPITOL:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 25, 1956, RELATIVE TO THE BONDING OF CERTAIN EMPLOYEES OF THE RESTAURANTS OF THE HOUSE OF REPRESENTATIVES.

HOUSE RESOLUTION 590, 76TH CONGRESS, AGREED TO SEPTEMBER 5, 1940, PROVIDED THAT THE MANAGEMENT OF THE HOUSE RESTAURANT AND ALL MATTERS CONNECTED THEREWITH BE PLACED UNDER THE DIRECTION OF THE ARCHITECT OF THE UNITED STATES CAPITOL AND FURTHER AUTHORIZED THE TRANSFER TO HIS JURISDICTION ALL ACCOUNTS, RECORDS, SUPPLIES, EQUIPMENT, AND ASSETS OF THE HOUSE RESTAURANT IN THE POSSESSION AND UNDER THE CONTROL OF THE COMMITTEE ON ACCOUNTS. SECTION 218 OF THE ACT OF OCTOBER 9, 1940, 54 STAT. 1056, 40 U.S.C. 174K, AUTHORIZES AND DIRECTS THE ARCHITECT OF THE CAPITOL TO CARRY INTO EFFECT FOR THE HOUSE OF REPRESENTATIVES AND TO EXERCISE THE AUTHORITIES CONTAINED IN THE HOUSE RESOLUTION 590.

IT IS REPORTED THAT IN THE OPERATION OF THE RESTAURANTS IT WAS ADMINISTRATIVELY DETERMINED THAT THE MANAGER, ACCOUNTANT, CASHIERS, AND CERTAIN OTHER EMPLOYEES (NOW TOTALING 24) SHOULD BE BONDED TO THE ARCHITECT OF THE CAPITOL. YOU ASK WHETHER THE BONDS OF THESE 24 EMPLOYEES OF THE HOUSE OF REPRESENTATIVES WHO ARE BONDED TO THE ARCHITECT OF THE CAPITOL MAY BE CONSIDERED AS FALLING WITHIN THE PROVISIONS OF PUBLIC LAW 323, 84TH CONGRESS, APPROVED AUGUST 9, 1955, AND, IF SO, WHETHER THEIR BOND PREMIUMS WHILE BONDED TO THE ARCHITECT OF THE CAPITOL MAY BE PAID FROM THE SPECIAL DEPOSIT ACCOUNT PROVIDED FOR THE OPERATION OF THE HOUSE RESTAURANTS.

PUBLIC LAW 323, 69 STAT. 6 U.S.C. 14, PROVIDES IN PERTINENT PART AS FOLLOWS:

"/A) SUBJECT TO SUBSECTION (B) OF THIS SECTION, THE HEAD OF EACH DEPARTMENT AND INDEPENDENT ESTABLISHMENT IN THE EXECUTIVE BRANCH OF THE FEDERAL GOVERNMENT SHALL OBTAIN, UNDER REGULATIONS WHICH SHALL BE PROMULGATED BY THE SECRETARY OF THE TREASURY, BLANKET, POSITION SCHEDULE, OR OTHER TYPES OF SURETY BONDS COVERING THE CIVILIAN OFFICERS AND EMPLOYEES AND MILITARY PERSONNEL OF SUCH DEPARTMENT OR INDEPENDENT ESTABLISHMENT WHO ARE REQUIRED BY LAW OR ADMINISTRATIVE RULING TO BE BONDED. THE APPROPRIATE OFFICIALS OF THE LEGISLATIVE AND JUDICIAL BRANCHES OF THE FEDERAL GOVERNMENT MAY OBTAIN ANY OR ALL OF SUCH TYPES OF SURETY BONDS COVERING SUCH OFFICERS AND EMPLOYEES UNDER THEIR RESPECTIVE JURISDICTIONS AS SUCH OFFICIALS MAY DEEM APPROPRIATE TO BE BONDED. * * * THE BOND PREMIUM MAY COVER A PERIOD NOT EXCEEDING TWO YEARS AND SHALL BE PAID FROM ANY FUNDS AVAILABLE FOR THE PAYMENT OF ADMINISTRATIVE EXPENSES AT THE TIME SUCH PREMIUM BECOMES PAYABLE.'

ON THE QUESTION OF WHETHER THE UNITED STATES IS REQUIRED TO BE THE OBLIGEE ON THE BONDS COVERED BY THE ACT, THE LAW IS SILENT. REFERENCE TO THE LEGISLATIVE HISTORY DISCLOSES NO INDICATION WHATSOEVER THAT THE CONGRESS CONSIDERED OR CONTEMPLATED A SITUATION WHERE OTHER THAN THE GOVERNMENT WOULD BE THE OBLIGEE. HOWEVER, SENATE REPORT NO. 827, 84TH CONGRESS, ACCOMPANYING H.R. 4778, CONTAINS THE FOLLOWING LANGUAGE IN THE LAST SENTENCE IN THE PENULTIMATE PARAGRAPH ON PAGE 2:

"* * * THE COST OF THE PREMIUMS SHOULD BE BORNE BY THE GOVERNMENT SINCE IT RECEIVES THE BENEFITS OF FINANCIAL PROTECTION AND OF THE RESULTING DETERRENT EFFECT.'

THIS STATEMENTS SHOWS THAT THE ASSUMPTION OF RESPONSIBILITY FOR THE COST OF THE BONDS BY THE GOVERNMENT WAS JUSTIFIED ON THE BASIS THAT THE GOVERNMENT RECEIVES THE BENEFIT OF THE FINANCIAL PROTECTION AFFORDED THEREBY. HENCE, IT IS INDICATIVE OF THE LEGISLATIVE INTENT THAT THE PAYMENT OF PREMIUMS ON BONDS BY THE UNITED STATES WAS TO COVER ONLY BONDS WHICH BENEFIT THE GOVERNMENT. WITH RESPECT TO THE OFFICERS AND EMPLOYEES IN THE EXECUTIVE BRANCH OF THE GOVERNMENT, ATTENTION IS INVITED TO THE FOLLOWING PROVISIONS IN TREASURY DEPARTMENT CIRCULAR NO. 969 DATED NOVEMBER 1, 1955:

"SEC. 266.7 BOND OBLIGEE AND CONDITIONS. (A) EACH BOND SHALL RUN SOLELY IN FAVOR OF THE UNITED STATES AS OBLIGEE, EXCEPT WHERE A SPECIFIC STATUTORY PROVISION REQUIRES THAT THE BOND SHALL RUN IN FAVOR OF THE UNITED STATES AND AN ADDITIONAL OBLIGEE OR IN FAVOR OF AN OBLIGEE OTHER THAN THE UNITED STATES. * * *"

BONDS WHICH RUN TO INDIVIDUALS AS OBLIGEES RATHER THAN THE UNITED STATES ARE NOT FOR THE BENEFIT OR PROTECTION OF THE UNITED STATES AND THERE SEEMS NO BASIS FOR THE GOVERNMENT TO PAY PREMIUMS FOR SUCH BONDS. THEREFORE, SINCE THE BONDS OF THE 24 EMPLOYEES REFERRED TO IN YOUR LETTER ARE FOR THE BENEFIT AND PROTECTION OF THE ARCHITECT OF THE CAPITOL, YOU ARE ADVISED THAT THE BONDS MAY NOT BE CONSIDERED AS FALLING WITHIN THE PROVISIONS OF PUBLIC LAW 323 ABOVE.

HOWEVER, SINCE THE 24 INDIVIDUALS ARE REQUIRED TO BE BONDED BY ADMINISTRATIVE DECISION, SHOULD BE THE BONDS OF THESE INDIVIDUALS BE CHANGED TO NAME THE UNITED STATES AS OBLIGEE, THEIR PREMIUMS WOULD BE PROPERLY PAYABLE FROM THE SPECIAL DEPOSIT ACCOUNT PROVIDED FOR THE OPERATION OF THE HOUSE RESTAURANTS.