# Mississippi Valley Generating Co. v. United States

> United States Court of Claims · July 15, 1959 · 175 F. Supp. 505

URL: https://www.frixlaw.com/law-library/cases/9611202

## Case

- **Full name:** MISSISSIPPI VALLEY GENERATING CO., on Its Own Behalf and to the Use of Others v. UNITED STATES
- **Court:** United States Court of Claims
- **Decided:** July 15, 1959
- **Citations:** 175 F. Supp. 505; 147 Ct. Cl. 1; 1959 U.S. Ct. Cl. LEXIS 116
- **Precedential status:** Published
- **Opinion:** Dissent by Jones
- **Judges:** Madden, Bryan, Reed, Jones
- **Cited by:** 4 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Reversed on other grounds by United States v. Mississippi Valley Generating Co., 364 U.S. 520 (1961).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9611202

## Opinion text

JONES, Chief Judge
(dissenting).
I agree with the dissenting opinion of ■Justice REED, but would add the following :
I would further emphasize the fact that the invalidity of the Power Contract does not rest upon the showing that it was entered into in bad faith, or corruptly, or for the purpose of perpetrating a fraud upon the Government. Nor do we have a criminal prosecution in which it is incumbent upon the defendant to establish criminal intent.
Rather, the issue is based on a principle older than this country itself, that no man who works for the Government may at the same time transact business with an entity in which, directly or indirectly, he has a pecuniary interest. The maxim that a servant cannot faithfully serve two masters is an ancient one and is grounded on the frailties of human nature. The warning it carries is proven each day by experience. Where loyalty is divided, the devotion and singleness of purpose demanded of its fulfillment is missing. The maxim has special significance for the Government because of the high standards of ethical conduct which it exacts from its employees.
For many years Congress has been concerned with the possible evils resulting from a compromise of this fealty by Government employees. To guard against the damaging effects of fraud in its various forms — by striking at one of its prolific sources — Congress as early as 1862 enacted a “conflict of interest” statute. 12 Stat. 577 . To make certain that it covered any agent of the Government, Congress amended the law on February 25, 1863. 12 Stat. 696 . Since that time this law has undergone little modification. The policy it sanctions is one seeking to remove the temptation to violate the trust relationship of Government service. Michigan Steel Box Co. v. United States, 49 Ct.Cl. 421 ; Rankin v. United States, 98 Ct.Cl. 357 . The legislation is thus directed at a temptation to commit wrong. Not the fait accompli.
The application of the statute is not defeated by a failure to establish deliberate fraud or corruption on the part of the servant who feels, or might feel, the nudge of interests adverse to those of the Government. Indeed, the contract may be disaffirmed without a showing that the Government suffered actual damages as a result of the activities of the employee concerned. The purpose of the statute, broadly phrased to curb evasion, is to prohibit the transaction of Government business by its employee with a business *532 entity in whose profits or contracts he has a pecuniary interest whether it be direct or indirect. 17
Did the activities of Adolphe H. Wenzell fall within the terms of 18 U.S.C. § 434 ? I think so. To me it is inescapable in the light of the undisputed facts in this case that Wenzell was employed to act and did act as an agent of the United States for the transaction of business with the Dixon-Yates group, the business being the prospective contract between the Government and the entity to be organized by the sponsors for that purpose.
The assertion that the numerous activities conducted by Wenzell to facilitate the contract sought by the sponsors were not the acts of an “agent of the United States for the transaction of business” does not comport with the facts. The record discloses what occurred in some but not in all the meetings and telephone calls between Wenzell and the Dixon-Yates group. At least we know that he procured and furnished to the Budget Bureau and to the sponsors information on the probable cost of interest on money to be borrowed by the plaintiff. Early in the inception of the project and before the sponsors’ first proposal was submitted, it was well recognized by the officers of the Government, by the sponsors, and by Wenzell as well, that the interest rate on money borrowed by the utility company with whom the Government would contract would be an important element in the total cost to be paid by the Government. Findings 47 and 57. Therefore, the very matter to which much of Wenzell’s effort was devoted was not only a part of the business being transacted with the Government but a vital element in it.
The majority seems to believe that the “interest” of Wenzell in the contract of the sponsoring group was so remote that it would not justify the invalidation of the Power Contract, but I view the facts differently. It must be remembered that Wenzell was not drafted by the Government. On the contrary, his employment' as a consultant for the Budget Bureau was a direct outgrowth of the telephone calls made by the chairman of the board of directors of First Boston to Dodge and the resulting conference between the two men on May 11, 1953. Finding 24.
There is not the slightest doubt that the Dixon-Yates group was fully cognizant of the dual position of Wenzell. In fact, they were disturbed about it to the extent that they .suggested that he resign in writing, but he did not do so, and they also knew that he continued to have an interest in the program. Could they have been more interested in avoiding the appearance of evil rather than the evil itself?
When large projects are involved there is always a tremendous drive for the privilege of handling and financing. It is highly competitive as it should be in a free economy. But this very fact makes it all the more important that the Government permit no unfair advantage as between competitors. They should all be on the same dead level of equality. This is an added reason for not permitting any interested party’s serving in a dual capacity.
It is argued that Wenzell had no connection with the performance contract, but only with the financing. But they are as closely linked as the law of supply and demand. Very few one-hundred-million-dollar contracts can be performed without financing, and the financing of a large contract is an immensely profitable undertaking. Does anyone doubt that First Boston and Wenzell expected to finance the contract, and that Dixon-Yates expected them to do so?
Because of First Boston’s experience in arranging for the financing of the project for the Ohio Valley Electric Corporation, the sponsors were well aware that if a contract resulted from their proposals, there was a strong probability that First Boston would be employed tó *533 handle the financing, and we may infer from the facts and circumstances in the record that this probability was equally well known to First Boston and Wenzell.
As a vice president of First Boston, he was entitled to a bonus on the business he brought to the firm and was greatly interested in a successful and expeditious closing of the Dixon-Yates contract, not only because of the fee First Boston would earn as financial agent but also because of the prestige it would gain in handling a transaction of such magnitude. While the record does not show that he served as a consultant in the Budget Bureau after April 3, 1954, he stayed long enough to learn that the sponsors’ revised cost estimates were being favorably viewed by the Government.and that a new proposal based on the revised figures would receive serious consideration. In addition, he did not regard his services with the Government as terminated until April 10, 1954, by which time the sponsors had drafted the second proposal and permitted him to review the provision in which he was most interested — the provision relating to interest rates on money to be borrowed by plaintiff.
The representatives of the sponsors were not novices in the handling of the proposed project with the Government. They were experienced businessmen who dealt in big figures and knew their way around. Clearly they were aware of the tremendous advantages of having a “friend on the inside.” Otherwise, it is difficult to understand why they consulted Wenzell so frequently.
Finally, the argument that Wenzell’s services with the Budget Bureau had no influence whatever in the retainer of First Boston as financial agent is, it seems to me, completely refuted by the statement of the chairman of the board of First Boston. He declared that the firm’s decision not to charge the sponsors a fee was dictated by the fact that the retainer of First Boston by the sponsors had resulted directly from his conversation with Dodge in IVtay 1953, when Wenzell’s services were offered to the Budget Bureau. Finding 117.
In the conclusion reached by the majority, considerable reliance is placed on the Administration's unflinching and hurried insistence upon a contract with a private utility company; the diligence with which Wenzell pursued his duties in the Budget Bureau; the sponsors’ awareness of Wenzell’s duality and the disclosure of this situation to the Budget Bureau; Wenzell’s departure before the actual drafting of the contract began, and the fairness of the resulting Power Contract.
This conclusion of the majority seems to stem from an understandable desire to avoid a harsh result in this ease, but the difficulty I find with the majority decision is that the policy so clearly expressed in 18 U.S.C. § 434 leaves no room for equitable considerations. To my mind, the policy means that in a situation such as that revealed in this case, the tendency or likelihood of a disadvantage to the Government invalidates the Power Contract. I cannot join in chipping out exceptions to a policy so force-ably laid down by Congress nor agree that the conflict of interest statute means little when it says much. If that policy is to be narrowed or limited by exceptions, it is the function of Congress and not of this court to spell out such limitations and exceptions.
FINDINGS OF FACT
The court, having considered the evidence, the report of Trial Commissioner Wilson Cowen, and the briefs and argument of counsel, makes findings of fact as follows:
CONTENTS
I. The Contract
A. General.................. 1-9
B. Performance by Plaintiff .. 10-17
C. Termination of the Contract 18-21
Findings
*534 II. The Conflict of Interest Defense
A. Eisenhower Administration’s Power Policy ■ in 1953 and 1954 .............................. 22-23
B. Wenzell’s Work in Budget Bureau in 1953 ....... 24-35
C. Development of Plan to Secure Power From Private Sources in Lieu of TVA Fulton Plant.......... 36-44
D. Preparation, Submission, and Review of Sponsors’ Proposals, and Wenzell’s Activities in Connection Therewith ................................. 45-106
E. Retainer of First Boston and the Decision as to its Fee ........................................ 107-128
F. The Decision to Negotiate a Contract on the Basis of the April 10 Proposal..................... 129-132
G. The Negotiation of the Power Contract.......... 133-136
III. The Replacement Defense............................. 137-164
IV. The Waiver Defense.................................. 165-173
V. The Public Utility Holding Company Act Defense........ 174-189
VI. Lack of Regulatory Approvals Defense.................. 190-203
VII. Lack of Mutuality Defense............................ 204
VIII. Damages
A. General ...................................... 205-207,
B. Mitigation of Damages ........................ 208-209
C. The Claim of Dickmann-Pickens-Bond Construction Co......................................... 210
D. The Claim of Jackson Life Insurance Company .... 211
E. The Claim of J. A. Jones Construction Company .. 212
F. The Claim of Pandick Press, Inc................. 213
G. The Claim of Reid & Priest.................... 214
H. The Claim of House, Moses & Holmes............ 215
I. The Claim of Arthur Andersen & Co............. 216 -
J. The Claim of Middle South Utilities, Inc......... 217
K The Claim of The Southern Company............ 218
L. The Claim of the Arkansas Power & Light Company 219
M. The Claims of The First National City Bank of New York and of White & Case................ 220
N. The Claim of Mississippi Valley Generating Company ...................................... 221
(a) Payment to Ebasco on 1954 Billing...... 222-228
(b) Ebasco, as Agent for MVG............ 229
(c) MVG-Charges ........................ 230
O. The Claim of Ebasco Services Incorporated...... 231
P. The Claims of Cahill-Gordon, Winthrop-Stimson, Willkie-Owen, and Milbank-Tweed............ 232
(a) The Claim of Cahill, Gordon, Reindel & Ohl................................ 233-235
(b) The Claim of Winthrop, Stimson, Putnam & Roberts.......................... 236-238
(c) The Claim of Willkie, Owen, Farr, Gallagher & Walton ..................... 239-240
(d) The Claim of Milbank, Tweed, Hope & Hadley............................. 241-242
(e) Reasonableness of the Attorneys’ Fees ... 243-245
Q. Post-Petition Claims .......................... 246
*535 I. The Contract
A. General
1. Plaintiff herein is Mississippi Valley Generating Company (hereinafter called MVG), a corporation organized under the laws of the State of Arkansas. Seventy-nine percent of the issued and outstanding stock of MVG is owned by Middle South Utilities, Inc. (hereinafter called Middle South), and the remaining 21 percent is owned by The Southern Company (hereinafter called Southern). Middle South and Southern are sometimes hereinafter referred to as the sponsors.
2. This suit was brought by MVG on behalf of itself and for the use of and benefit of 24 parties referred to as use-plaintiffs. The suit is based upon a contract, hereinafter called the Power Contract, entered into between MVG and defendant, acting through the Atomic Energy Commission (hereinafter called AE C), under which MVG agreed to construct and operate a steam electric generating station and related facilities at West Memphis, Arkansas. The Power Contract and certain supplemental agreements were duly executed and delivered on November 11, 1954. The contract and annexed interpretative and explanatory document were received in evidence as plaintiff’s exhibits 2-8, 11, and 15. These exhibits and all other exhibits referred to herein are by such references incorporated in these findings.
3. The Power Contract resulted from the following:
(a) On April 10, 1954, Middle South and Southern submitted to the AEC a proposal wherein the sponsors agreed to organize a new corporation (MVG), which would construct and operate the plant and other facilities in accordance with the terms of the proposal. For Middle South the proposal was signed by its president, Edgar H. Dixon, and for Southern by J. M. Barry, chairman of Southern’s executive committee;
(b) on June 30, 1954, AEC wrote the sponsors that the proposal constituted a satisfactory basis for the negotiation of a definitive contract and that AEC was ready to begin negotiations; and
(c) on July 7, 1954, the parties began negotiations which terminated with the signing of the Power Contract on November 11, 1954.
4. Middle South is a public utility holding company which owned 100 percent of the stock of the Arkansas Power & Light Company, Louisiana Power & Light Company, and Mississippi Power & Light Company, and approximately 96 percent of the common stock of New Orleans Public Service Company. Dixon was a director of each of these four subsidiaries of Middle South, and he also became president of MVG when it was organized.
Southern is a public utility holding company which owned 100 percent of the stock of Alabama Power Company, Georgia Power Company, Mississippi Power Company, and Gulf Power Company. Eugene A. Yates, at all times material to this action, was chairman of the board of directors of Southern.
5. Section 8.22 of the Power Contract provided in part as follows:
“Effective Date: The effective date of this contract shall be the latest of the following: (a) the date when this contract is executed and delivered by the parties hereto; (b) the date when item (3) of Section 8.15 shall be delivered to the Company; (c) the date when item (4) of Section 8.15 shall be delivered to the Company; or (d) the date on which the time shall have elapsed during which the contract must remain on file with the Joint Committee on Atomic Energy pursuant to Section 164 of the Atomic Energy Act of 1954 or the date when said Joint Committee shall have waived such requirement as provided in said Section.”
6. Items (3) and (4) of Section 8.15 of the Power Contract, referred to in section 8.22, provided as follows:
*536 “The obligations of the parties hereunder shall be subject to the following:
* * * * * *
“(3) the receipt by the Company of an opinion of the General Counsel to the AEC to the effect that the AEC has power and authority to execute this contract and the undertakings herein described and to obligate the United States of America for all payments which may be required to be made by the AEC to the Company pursuant to any of the provisions hereof, and that the persons executing and delivering this contract on behalf of the AEC have full power and authority to do so; and
“(4) the receipt by the Company of an opinion of the Comptroller General of the United States to the effect that the AEC has power and authority to enter into this contract and to obligate the United States of America for all payments which may be required to be made by the AEC to the Company pursuant to any of the provisions hereof, and that the AEC has authority to pay cancellation costs under this contract out of any funds now or hereafter appropriated to it by Congress.”
7. (a) The opinion of the General Counsel to the AEC dated November 11, 1954, was rendered and delivered to plaintiff.
(b) On November 13, 1954, the Joint Committee on Atomic Energy adopted a resolution waiving the 30-day period specified in Section 164 of the Atomic Energy Act of 1954. However, as is more fully set forth in findings under the heading of “The Waiver Defense”, the Joint Committee on Atomic Energy adopted a resolution on January-28, 1955, revoking the waiver.
(e) The opinion of the Comptroller General of the United States was embodied in two opinion letters dated October 5, 1954 and December 13, 1954, respectively, and copies of these were delivered to plaintiff. The second letter was delivered on December 17, 1954.
8. Since December 17, 1954, the date of the delivery of the second opinion of the Comptroller General, was the last of the dates specified in section 8.22, the Power Contract became effective on December 17, 1954.
9. Because of the time which had elapsed prior to the execution of the Power Contract, a letter agreement was. entered into between MVG and defendant on November 11, 1954, stating that if by February 15, 1955, the effective date of the contract had not occurred as provided in section 8.22 and valid regulatory approvals necessary in connection with the issuance of MVG’s capital stock had not then been obtained, either MVG or the United States might terminate the Power Contract by written notice without liability of either party to the other. By an exchange of correspondence during the period from February 11 to February 28, 1955, it was agreed that those provisions of section 8.22 of the Power Contract that were covered by the letter agreement had been satisfied and that the Power Contract was effective. As a result, the letter agreement was no longer operative.
B. Performance by Plaintiff
10. Subsection 1 of section 8.15 of the Power Contract provided that the obligations of the parties would be subject to the receipt by plaintiff of regulatory approvals in form and substance satisfactory to it and necessary to enable it to perform its obligations under the contract or necessary to enable plaintiff to issue its equity and debt capital. On November 17, 1954, six days after the execution of the Power Contract, plaintiff filed with the Securities and Exchange Commission (hereinafter called SEC) an application for approval of MVG’s equity financing. On February 9, 1955, after extended hearings in which there was. vigorous opposition to plaintiff’s application, the SEC entered an order authorizing plaintiff to issue and sell to the sponsors capital stock in the amount of $5,-500,000. On March 14, 1955, this order of the SEC was appealed to the Court of Appeals for the District of Columbia, as. *537 more fully described herein under the heading of “Lack of Regulatory Approvals Defense.”
On April 22, 1955, plaintiff filed an application with SEC for permission to issue and sell bonds and to make bank loans. As of July 11, 1955, when defendant notified plaintiff that the Government proposed to terminate the contract, testimony had been closed in this proceeding before the SEC, plaintiff’s proposed findings having been filed on June 20, 1955. In the hearing, plaintiff encountered ¡strong opposition from the same parties who had opposed its application in the •equity proceedings and had taken the appeal to the Court of Appeals. The issues raised by the opposition were substantially the same in both proceedings, and in view of the SEC order in the ■equity proceeding, plaintiff could reasonably expect favorable action from SEC on its application to sell bonds and make bank loans. However, because of the •opposition encountered and the appeal referred to, it was also apparent that there would be some delay, to an extent not ascertainable, before authority would be finally granted to plaintiff to issue and sell its debt obligations.
11. The condition of subsection 2 of section 8.15 of the Power Contract was the execution and performance by institutional investors and banks of contracts and commitments providing for the sale to such investors of plaintiff’s debt capital in a form satisfactory to plaintiff. Bond purchase and bank loan agreements in a form satisfactory to plaintiff had been entered into with insurance companies and banks before the Power Contract was terminated. Plaintiff advised AEC of this action and sent it copies of the bond purchase and loan agreements.
12. Both the bond purchase agreement and the bank credit agreement required that, at the time of each borrowing thereunder, an opinion of counsel be furnished to the effect that plaintiff had “obtained all orders, certificates, approvals, authorizations or consents of the Securities and Exchange Commission” to enable it to issue and sell bonds, or to borrow money and issue notes, as the case might be, and that “such orders, certificates, approvals, authorizations and consents are valid and are in full force and effect, the times (if any) prescribed by statutes or regulations for appeals therefrom or rehearings thereon have elapsed and none of them are the subject of any pending attack on appeal or by direct proceedings or otherwise * * *
13. Under date of June 14, 1955, Ebasco Services Incorporated (hereinafter called Ebasco), the architect-engineer employed by plaintiff to design the power plant and act as construction manager, estimated that plaintiff’s cash requirements would be $6,175,000 by December 31, 1955. It was also estimated that these cash requirements would increase rapidly each month thereafter and that by the end of June 1956, plaintiff’s total cash requirements would amount to $27,575,000.
14. If plaintiff had exhausted the equity capital of $5,500,000 before the debt proceedings had been favorably concluded, it would have been necessary for plaintiff to discontinue work on the project unless (a) it could have persuaded the banks and insurance companies to waive the requirements of valid SEC approval of the debt financing, or (b) obtained temporary bank loans until approval was secured. However, both the appeal on the equity financing and the SEC debt proceedings became moot when defendant terminated the contract. The record affords no basis for making an accurate determination as to when the debt proceedings would have been favorably concluded. A finding that plaintiff would have had or that it would not have had funds available for the construction of the plant after the date of termination, would be speculative. Plaintiff did not encounter any problem of lack of funds before the contract was terminated. Of the $5,500,000 of capital stock which the SEC had authorized plaintiff to issue and sell, plaintiff had actually issued and sold to the sponsors stock in the amount of $1,100,000. By the date the contract was terminated, plaintiff had *538 large outstanding commitments, but it had actually spent less than one-half of the $1,100,000.
15. Although all of the regulatory approvals required under the terms of the Power Contract had not been obtained by plaintiff as of the date of termination, the evidence shows that from the date the Power Contract was signed and until it was terminated, plaintiff was diligent in its efforts to obtain all of the required regulatory approvals.
16. Before the negotiations on the contract began, the defendant had made it clear to plaintiff that the proposed power to be generated at the new plant would be needed by the fall of 1957, and during the negotiations, plaintiff was told that the first of the three units of the power plant was to be in operation within 32 months after the effective date of the contract.
In section 2.01 of the Power Contract, plaintiff agreed to use its best efforts to have the three generating units of the power plant ready for commercial operation not later than 32, 34, and 36 months, respectively, after the effective date of the contract. In view of the defendant’s express need for the power by the fall of 1957, and in order to meet the target dates which were known long before the Power Contract was signed, the sponsors and plaintiff began activities looking toward performance of plaintiff’s obligation under what eventually became section 2.01 of the Power Contract months before that document was executed. These early activities included taking options on land which was to be the site of the plant, primary engineering work, the preparation of a schedule of construction activities, and some exploratory work on the site.
By the end of 1954, plaintiff, through Ebaseo, had made limited commitments for many of the items of equipment needed and for a construction office and warehouse.
In the early part of 1955, a construction office was opened at the site and major construction was started on June 1, 1955. By the time the contract was terminated, three of the basic construction contracts had been let and many of the purchase orders had been issued.
The record as a whole shows that at the time the Power Contract was terminated plaintiff had used its best efforts to comply with the obligation set forth in section 2.01 of the Power Contract.
17. Aside from sections 2.01 and 8.15 (covered by preceding findings), there were a number of provisions in the Power Contract and in the interpretative memorandum annexed thereto which imposed affirmative obligations upon plaintiff. The defendant offered no evidence that plaintiff had failed to perform any of the obligations set forth in these provisions. The undisputed evidence establishes that at the time the defendant terminated the contract, plaintiff had performed such obligations imposed upon it by the contract in all instances where performance was timely, or that it was proceeding diligently toward performance.
C. Termination of the Contract
18. Near the end of June 1955, plaintiff learned that the President of the United States had requested the Director of the Bureau of the Budget to confer with AEC and the Tennessee Valley Authority (hereinafter called the TVA) to determine whether to cancel the Power Contract because of the decision of the city of Memphis to construct its own electric generating facility, thereby relieving TVA of the obligation to furnish Memphis with power.
19. On July 11, 1955, at about 5 p. m., plaintiff was advised by telephone by the Chairman of AEC that the President of the United States had decided to order termination of the contract. On August 1, 1955, the oral notice was confirmed in a letter from AEC to plaintiff. The letter expressed the hope that it would be possible for the parties to agree on a mutually acceptable basis for bringing the contract to an end.
20. On July 12, 1955, representatives of plaintiff met with the President of the United States, and thereafter there was *539 a series of meetings with' representatives of AEC. In compliance with a request from AEC, plaintiff supplied estimates of termination costs as of June 30, September 30, and December 31, 1955. During these meetings there were discussions about plaintiff’s commitments to third parties and as to steps that could be taken to minimize the outstanding claims. Plaintiff also worked with AEC in attempting to settle some of the smaller claims. However, the representatives of AEC were unable to give plaintiff any specific instructions on actions that should be taken in connection with the termination of the contract. The AEC representatives stated that they had not received any directive regarding the matter. The post-termination discussions were broken off by AEC in October 1955, and on November 23, 1955, AEC wrote plaintiff that upon the advice of its counsel, it had concluded that the contract was not an obligation which could be recognized by the Government.
21. From the date the Power Contract was executed until the letter of November 23, 1955, no representative of the defendant had indicated to plaintiff that it had failed in any way to discharge its obligations under the contract. However, at the meetings between plaintiff and the AEC after the contract had been terminated, AEC reserved the question of whether the contract was invalid because of a conflict of interest. This is the basis of one of defendant’s affirmative defenses, the facts regarding which are set forth under the heading “Conflict of Interest Defense.”
II. The Conflict of Interest Defense. 1
A. Eisenhower Administration’s Power Policy in 1953 and 195k
22. It was the basic Eisenhower Administration policy on power during 1953 and 1954 that the Government would seek to have either private enterprise or local communities provide power generating sources in partnership with the Government. This, policy was first announced in the President’s State of the Union Message of February 2, 1953.
23. In accordance with the Administration policy and in furtherance of its objective to reduce the budget, Joseph M. Dodge, Director of the Bureau of the Budget, eliminated from the TVA budget for the fiscal year 1955 a request for funds for the construction by TVA at Fulton, Tennessee, of a steam generating plant which was to serve the commercial, industrial, and domestic power needs of the city of Memphis and its environs. TVA’s request for a similar appropriation in the budget for the fiscal year 1953 had been disallowed by the Truman Administration, but it had been included in the budget for the 1954 fiscal year, which President Truman left with Congress when the Eisenhower Administration took office. In March 1953 during his review of the then pending budget, Dodge disallowed the request for the fiscal year 1954. In the spring of 1953 and again in 1954, efforts to add an appropriation for the TVA Fulton plant were defeated in Congress.
B. Wenzell’s Work in Budget Bureau in 1953
24. Through three telephone calls he made early in May 1953, George D. Woods, chairman of the board of directors of First Boston Corporation, obtained an appointment with Dodge on May 11, 1953. First Boston is and was one of the leading investment banking concerns in the country. It underwrites security issues for both private and governmental entities. When the two men met in Washington, D. C., on the afternoon of May 11, Woods stated that he had read the published announcements of the Administration’s policy of reducing the Government’s participation in business ■ activities, that he was wholeheartedly in accord with the policy, and that if there was anything which he or his firm could do to further the policy, they were ready and willing to be of service and assistance. Dodge, who had *540 not been in office very long, w,as interested in having some power studies made, particularly for the purpose of ascertaining the subsidy the Government was providing to TVA. He had not been able to find the individual he thought appropriate to make the study and asked Woods for a suggestion, stating that the Bureau needed the services of a man who had worked on utility financing transactions and was experienced in accounting and money costs. Woods replied that First Boston had such a man, Adolphe H. Wenzell, an engineer who had worked on many utility financing transactions and was qualified for the undertaking. Woods agreed to ascertain if Wenzell could be made available.
25. Upon his return to New York Woods discussed the matter with Wenzell and found that he was willing to undertake the assignment. Woods also talked with his principal associates, James Coggeshall, Jr., president of First Boston, and Duncan Linsley, chairman of the corporation’s executive committee, and learned that they had no objection to Wenzell’s services being made available to the Bureau. Thereupon, Woods telephoned Dodge .and made arrangements for Wenzell to meet Dodge on May 15, 1953.
At the time, Wenzell was one of 40 vice presidents of First Boston and one of its numerous directors. He had been employed by First Boston since its inception in 1934 and had been with its predecessor since 1923. Wenzell was an engineer, specializing in utility matters and serving in the buying department of the corporation. This department was concerned with investigations and negotiations leading up to an undertaking by First Boston to underwrite securities. His entire business life and experience had been devoted to this type of work. At times, he supervised and personally conducted investigations of utility properties and the soundness of the management for the purpose of obtaining information that would enable First Boston to determine whether it should be identified with any financing for the company under investigation. He was regarded as an expert in this field.
26. Pursuant to the arrangements made, Wenzell met Dodge in the latter’s office in Washington on May 15, 1953. Dodge talked with Wenzell about ‘his experience, background, and the nature of the work to be done. From this and from a preliminary investigation he had made, Dodge was satisfied that Wenzell could perform the desired service. Accordingly, it was agreed that Wenzell would act as a consultant to the Bureau of the Budget on a part-time basis, spending one or two days a week in Washington at the Bureau, and then returning to First Boston’s office in New York City to resume his work there. Wenzell was to serve without compensation, but it was agreed that he would be paid $10 per day in lieu of subsistence and that his necessary transportation expenses would be paid by the Government through the use of transportation requests which were furnished to him for that purpose. It was understood that he would not sever his connection with First Boston and that he would continue to receive his regular salary from it.
Dodge instructed Wenzell to make a commercial, financial analysis of TVA, including a summary of its development and a comparison of its accounting and financial practices with those of privately owned utility companies — all with the ultimate objective of estimating the amount and showing the sources of the-Government’s subsidy to TVA. Dodge emphasized that he did not want an audit, an engineering examination, or a survey of TVA properties.
27. TVA is a very large supplier of electrical energy to the AEG. However, the.AEC also purchases huge amounts of energy from private suppliers. One of these suppliers is the Ohio Valley Electric Corporation (hereinafter designated as OVEC), composed of a group of private utilities which, in 1952, contracted with AEC to supply it with 1,800,000 kw. at Portsmouth, Ohio. This is one of the largest generating plants in the world, and a large amount of financing was re *541 quired by the utilities that banded together to carry out this undertaking.
First Boston was employed by OVEC to arrange for this financing, consisting of directly placing the securities of OV EC with large institutional investors. It did so, and received a fee of $150,000 for its services, plus $20,000 for expenses.
The OVEC transaction was substantially completed in 1952, but in 1953, when Wenzell was first employed by the Budget Bureau, First Boston was performing some services in connection with the OVEC project.
28. Wenzell began work in the Bureau on May 20, 1953, and was introduced to the staff of the Resources and Civil Works Division, which handles the budget and legislative work relating to the Departments of Agriculture and Interior, the Federal Power Commission, TVA, and other agencies. Dodge had told Wenzell that he was to use TVA reports as the basic documents for the study, but the staff of the Resources and Civil Works Division was instructed to provide him with any additional information he needed for that purpose.
29. Wenzell completed his assignment and submitted his report to Dodge about September 20, 1953. Between May 20, 1953, and the date the report was delivered, he made 11 trips to Washington and spent 29 days in the Bureau. On his first trip from New York on May 20, 1953, First Boston paid his transportation expenses, but the Government paid such expenses thereafter. During this period, he received $10 per diem from the Government for subsistence. He also submitted supplemental vouchers to First Boston for his subsistence expenses, and these were duly paid.
30. In the course of Wenzell’s study, a considerable volume of written and printed data was made available to him by the Bureau staff. The material included TVA annual reports, General Accounting Office reports of TVA audits, TVA financial statements, material presented to the Bureau by TVA in justification of its budgets, a report on TVA’s proposed electric generating plant at Fulton, a statement of tax equivalents paid by TVA, and the like. He also had discussions with one or more members of the staff on the financial status of TVA.
31. On August 31, 1953, Wenzell met with members of the Bureau staff and discussed generally his conclusions on his study of TVA operations. His comments regarding TVA operations were favorable but he stated that, in his opinion, not enough of TVA’s hydroelectric power costs were charged to power. He also expressed concern about any further expansion of TVA’s service area.
While he worked at the Bureau during this period, Wenzell was assigned an office next to that of Rowland R. Hughes, the Assistant Director of the Bureau of the Budget. Before Wenzell’s report was completed, he showed it to Hughes, who made several suggestions regarding it.
32. Wenzell’s report consisted of a concise summary of TVA operations, a comparison of its power system operations with those of private power companies, and a statement of the fiscal problems to be faced if future power requirements in the area were to be supplied by TVA. His report, in evidence as defendant’s exhibit 10, was accompanied by his conclusions and recommendations, including the following:
(a) the electric generating capacity and annual power output of TVA is the largest in the country;
(b) the original purpose and program of the TVA, i. e., the hydro development of the Tennessee River Basin, was nearing its end;
(c) since 1951, TVA had been changing from a predominantly hydroelectric operation to a steam electric operation, because of the completion of the unified steam development program and a tremendous increase in the demands for power caused by TVA’s efforts to supply a large portion of AEC’s requirements;
(d) in addition to costs that properly belong to navigation and flood control, TVA had allocated an additional substantial portion of the cost of multiple-use *542 facilities to navigation and flood control, whereas these costs should have been allocated to power operations;
(e) a comparison of the assets and revenues used by TVA for calculating payments made by it in lieu of general or local taxes with similar assets and revenues of 14 adjacent private power companies showed that TVA paid only 50 percent as much general and local taxes as the private companies;
(f) on the basis of the true costs to the Government of long-term money, the deficiency in the earnings of the power division of TVA for the year ended April 30, 1953, was a substantial sum; this sum was a Government subsidy.
Among the alternative suggestions for future power supply to the TVA service areas were the following:
(a) the municipalities or cooperatives by themselves, or as a group, should have the right to construct steam plants to supply their expected load growth;
(b) the need for additional power in the area could be supplied by wholesale steam generating companies, which would sell the power to TVA under long-term contracts, and TVA would then distribute the power through its transmission network in the area;
(c) municipalities and cooperatives around the periphery of the service area could be served by adjacent power companies, but this idea was contrary to public utility practice and policy.
He also wrote that in order for TVA to escape the dilemma of being primarily interested in navigation and flood control' on one hand and being forced into the steam power business on the other, TVA should retain ownership and control of all of the multiple-use dams and other navigation and flood-control facilities but the balance of its power system assets should be transferred to a fully tax-paying corporation, the entire capitalization of which, in the first instance, would be owned by the Government. The new corporation would purchase the entire output of power at the dams at a price which would include equivalent local taxes, interest at a rate equal to the cost of long-term Government money, and amortization of cost over a long period of time. All future capital requirements for expansion would be obtained through the sale to the public of regular corporate security issues without any kind of Government guarantee, and a definite program would be established to liquidate all of the Government-owned securities by sale to the public. In his report, Wenzell concluded that the adoption of this plan would accomplish the objective of getting the Government out of the subsidized power business without surrendering any measure of control over navigation and flood control in the Tennessee River Basin.
33. When Wenzell’s report was delivered to him, Dodge went over it briefly but did not read it carefully until later. Dodge never adopted or used any of the recommendations made in the report, nor did he consult Wenzell on any policy matters connected with the budget. Since he had not requested Wenzell to include recommendations in his report, Dodge was surprised to see them and they did not impress him. Wenzell’s recommendations were not a factor in the policy decision, later communicated by Dodge to Strauss, that the AEC should enter into a contract with the utility companies.
On October 19, 1953, Dodge wrote Wenzell, expressing appreciation for the work Wenzell had done and stating that the report “was an extremely valuable contribution, not only for the material contained in it but its use as a foundation for further studies in consideration of the same subject.” The letter also stated that the report “has been examined by two important individuals whose reaction to your work equal my own.” The individuals referred to were President Eisenhower and Ex-President Hoover, who were given copies of Wenzell’s report.
34. Neither the Chairman of AEC, its General Manager, nor its Deputy General Manager, who was responsible in AEC for the discussion and development of data that led to the decision to *543 negotiate the Power Contract and who headed the AEC group in negotiating the contract, had seen or were aware of Wenzell’s report until four months or more after the date of the execution of the Power Contract.
35. When he handed his report to Dodge, Wenzell asked permission to retain a copy. Dodge agreed that since Wenzell was the author, he could have a copy on the condition that it would not be shown to anyone else since it was a confidential Bureau document. However, in the fall of 1953, after Wenzell had completed his assignment and had resumed his regular work in First Boston, Woods asked Wenzell for a copy of the report made to Dodge. Wenzell gave his copy to Woods, who read it over the weekend and returned it with the comment that Wenzell had done a good job. Neither Wenzell nor Woods received permission from anyone in the Bureau for Woods to read the report.
C. Development of Plan to Secure Power From Private Sources in Lieu of TVA Fulton Plant
36. As previously stated, the Budget Bureau had decided in the fall of 1953 not to include any provision in the budget for the fiscal year 1955 for the TVA projected steam plant at Fulton Tennessee. The reasons for this decision, as subsequently stated by Hughes (defendant’s exhibit 88), were:
(a) It was imprudent to embark upon a construction program requiring expenditures of one hundred million tax dollars in fiscal years 1955, 1956 and 1957 at a time when government borrowing was verging on the debt limit;
(b) both the Senate and House of Representatives, in considering TVA appropriation bills in the previous session of the Congress, had rejected amendments to provide funds for starting construction of the Fulton steam plant, and
(c) there was pressing need to explore the far-reaching implications of a Federal policy of spending Federal tax dollars for Federal steam plants to meet the power needs of this particular region and, if decided upon, to explore the impact of such a policy throughout other regions of America.
In a discussion with congressional leaders, Dodge had been told that if á request for funds for construction of the TVA plant in Fulton should be included in the budget, the request would not be approved by Congress.
When Gordon Clapp, the General Manager of TVA, learned of the decision during the fall of 1953, he informed representatives of the Bureau of the Budget that if provision for the Fulton plant was eliminated from TVA’s budget, TVA would take the position that the power then being furnished by TVA to AEC should be reduced so that a like amount of power would be available to TVA to meet the growing needs of its other customers. TVA was then under a firm contract with AEC to supply its Paducah, Kentucky, installation substantially the entire output of TVA’s generating plant at Sha./nee, Kentucky, near Paducah. TVA was also supplying a large block of power to the AEC installation at Oak Ridge, about 360 miles east of West Memphis, Arkansas. As a result, the Bureau of the Budget began drafting a statement for the President’s budget message to the effect that an attempt would be made to relieve TVA of some of its power load to AEC and that if this did not prove to be practicable or successful, the matter of the construction by TVA of a plant at Fulton would be reconsidered.
37. On December 2, 1953, Dodge met in his office with Lewis I. Strauss, Chairman of the AEC, and Walter J. Williams, then AEC’s General Manager. Dodge stated that it was desirable to avoid capital expenditures for new TVA steam generating capacity and that the Budget Bureau had considered that this objective could be accomplished by having AEC contract with private industry to construct a plant that would supply 450,-000 kw. of additional power for AEC at its Paducah, Kentucky, installation by 1957, and by having AEC release a like amount of power which TVA was then *544 supplying to it so that the released power would be available for TVA’s other requirements. Dodge referred to Electric Energy, Inc. (hereinafter called EEI) and OVEC, two different groups of private utility companies which had previously entered into long-term power contracts with AEC to build steam generating stations and to supply power to AEC at its installations in Paducah, Kentucky, and Portsmouth, Ohio. Dodge inquired whether the plan outlined by him would be feasible, whereupon Williams stated that the answer to the question would require discussions with J. W. McAfee, president of Union Electric Company and also president of EEI.
After the meeting, Williams arranged to meet McAfee, who had been helpful in arranging for the construction by EEI of a plant at Joppa, which was then being-completed to furnish AEC power at its Paducah installation. When McAfee met with Williams on December 8, 1953, Williams asked whether EEI or some similar corporation would be interested in building a plant to supply AEC with as much as 450,000 kw. of generating capacity by the middle of 1957. McAfee stated that it would be difficult for EEI to add generating capacity at Joppa and suggested either a plant upstream from Cairo but downstream from the Joppa plant, or a plant near the town of Shawnee. He agreed to make some inquiries about the matter. Later, on December 14, 1953, Williams telephoned McAfee, requesting that the latter write the AEC and indicate his interest in furnishing the generating capacity mentioned on December 8. On December 14, 1953, McAfee wrote the requested letter, stating that he thought a group of private investors could be formed to supply AEC the amount of power requested at its Paducah project upon substantially the same rates and terms as provided for in the contract between AEC and EEI. Williams had earlier cautioned McAfee to make only general inquiries and not to disclose the particular project under discussion. Accordingly, in his letter, McAfee stated ■that when he received more specific information he would be in a position to discuss the project with financial institutions and prospective members of a managing group so that more definite information could be supplied.
A copy of McAfee’s letter was sent to William F. McCandless, Assistant Director for Budget Review in the Budget Bureau, who had been told of the meeting with McAfee and had requested a copy of the letter in order that he might show it to Dodge. The Budget Bureau’s interest in any proposal which might be submitted by McAfee’s group was twofold: first, the Bureau was concerned with relieving the burden on the budget of the large capital outlay required for building additional facilities for TVA; second, in such a transaction, the Budget Bureau acts as the Administration’s mechanism to make certain that the project is defensible. Dodge realized that the Budget Bureau would later be called upon by both the White Hhouse and a congressional committee to give an opinion about the project.
38. On December 17, 1953, Hughes met with Gordon R. Clapp, Chairman of the Board of TVA, and with members of the staffs of the Budget Bureau and TVA. At this meeting, Clapp was informed that no money would be included in the 1955 budget to provide new steam plants for TVA but that arrangements were being made to reduce by the fall of 1957 existing TVA commitments to AEC by some 450,000 kw., thus providing TVA with power for reasonable growth in industrial, municipal, and cooperative loads through 1957. At Clapp’s request, it was agreed that an attempt would be made to relieve TVA of a minimum of 500,000 kw. and that this amount would be increased to 600,000 kw. if possible. Clapp was told that if negotiations for furnishing the AEC load requirements from other sources were not consummated, the question of starting additional generating units in the TVA area would be reconsidered. On the following day, December 18, 1953, the statements made to Clapp were confirmed in a letter sent to hinfby Dodge.
*545 ■ After December 17, 1953, Dodge delegated responsibility for carrying on the project to Hughes, and thereafter Dodge’s connection with the matter became less and less frequent. He resigned on April 15, 1954, and was succeeded by Hughes.
39. Sometime prior to December 14, 1953, Dixon learned from McAfee that AEC might be seeking an additional source of power in the Paducah area. Dixon was interested in the information for two reasons: (1) the potential sale of electric power, and (2) his feeling that his company should make a contribution to the effort of supplying the electric power needs of the Government through investor-owned power companies rather than through publicly-owned power companies.
On December 23, 1953, Dixon met in Strauss’ office with Williams, Strauss, and Kenneth D. Nichols, who had been selected to succeed Williams as General Manager of AEC when the latter resigned on January 31, 1954. The purpose of the meeting was a discussion about having private utility companies build additional generating capacity near Paducah for the purpose of relieving TVA of its commitments to AEC there. There was also a discussion about the power situation in the Tennessee area, and there were maps. indicating the power loads and utility plants in that area. Dixon referred to and produced a copy of a letter which Mississippi Power & Light Company, one of the subsidiaries of Middle South, had written to TVA under date of October 15, 1953, proposing to supply to TVA for a term of 20 years a block of 450,000 kw. of power in lieu of the construction by TVA of its proposed Fulton plant, and for that purpose to construct near Memphis a plant which would deliver the power to TVA at the Tennessee State line.
On the same day, Williams telephoned McCandless at the Budget Bureau to inform the latter about the meeting. On the next day, Williams sent McCandless a copy of the letter which had been left by Dixon.
40. On December 24, 1953, Hughes, as Acting Director of the Budget Bureau, wrote to Strauss, stating that the Bureau understood that as a result of preliminary conversations between AEC and private interests, arrangements could probably be worked out to supply AEC at Paducah with 500,000 (and possibly up to 600,000) kw. more of electric power from non-Federal sources than AEC was1 then scheduled to receive by 1957 and that these arrangements would relieve TVA of its previous commitments to AEC in like amounts, freeing such power for normal load growths in the TVA area. He also stated that the TVA budget would be based on that expectation, but that if satisfactory arrangements could not be developed to provide such power for AEC installations from private sources, reconsideration would be given to TVA’s request for appropriations to build additional power facilities. Hughes’ letter expressed the understanding that the arrangements he referred to related solely to existing firm commitments for permanent power between TVA and AEC. The letter stated that it would be helpful if AEC would proceed with the negotiations with a view to reaching a firm agreement with private interests to supply the amount of power stated above by not later than the fall of 1957. Hughes requested that the Bureau be kept currently informed regarding the negotiations, because of the necessity of submitting supplemental appropriations to Congress during the following spring in the event the arrangements mentioned were not consummated.
41. On the basis of the opinion expressed in McAfee’s letter of December 14, 1953, the section of the President’s budget message relating to TVA was formulated and later released. In the message, which was delivered to Congress on January 21, 1954, the President stated as follows with respect to additional power plants for TVA:
“Although no appropriations are included in the 1955 budget for new power generation units by the Tennessee Valley Authority, expendí *546 tures will increase for continuation of construction of power plants presently underway, and for operation of power plants after they are completed. Expenses for operation of flood control, navigation, and fertilizer facilities will continue at about the 1954 level. Expenditures for power and fertilizer operations are more than offset by the income from sales. In order to provide, with appropriate operating reserves, for reasonable growth in industrial, municipal, and cooperative power loads in the area through the calendar year 1957, arrangements are being made to reduce, by the fall of 1957, existing commitments of the Tennessee Valley Authority to the Atomic Energy Commission by 500,000 to 600,000 kilowatts. This would release the equivalent amount of Tennessee Valley Authority generating capacity to meet increased load requirements of other consumers in the power system and at the same time eliminate the need for appropriating funds from the Treasury to finance additional generating units. In the event, however, that negotiations for furnishing these load requirements for the Atomic Energy Commission from other sources are not consummated as contemplated or new defense loads develop, the question of starting additional generating units by the Tennessee Valley Authority will be reconsidered.”
42. On January 4, 1954, McAfee wrote Williams, stating that since their discussion in Washington, McAfee was impressed with the necessity of considering other alternatives. He suggested the following, in order of priority, as a means of relieving the Federal budget of avoidable capital expenditures in the TVA area: (1) that TVA no longer assume full responsibility for supplying the needs of municipalities, and as existing contracts expire, that the municipalities which needed a greater supply of power than was available from TVA, be obliged to purchase power from others or construct municipal power plants; (2) that TVA arrange with neighboring power companies to buy power from them, and (3) the plan under discussion, i. e., a contract between AEC and private industry to supply power to AEC at Paducah.
Strauss was notified of the receipt of the letter, copies of it were distributed in AEC, and it was discussed in that agency.
43. On January 14, 1954, Hughes and McCandless attended a meeting in Strauss’ office with Strauss, Williams, and Nichols. Reference was made to the two letters from McAfee and to the proposal which Mississippi Power & Light Company had submitted to TVA on October 15, 1953. Nichols pointed out to Hughes and McCandless' that if AEC purchased more power from private utilities in lieu of the power being furnished by TVA under firm contracts-with AEC, the cost to AEC would be greater and the supply less certain because of possible delays in the construction of the plant and the location of reserve power. He stated that McAfee was not eager to enter into such contract and that from an engineering point of view, Paducah was not the proper location for the new power plant, because if the AEC’s needs there were reduced, it would be difficult and expensive to use the surplus power elsewhere. Finally, he suggested that if the power was needed in the Memphis area, it would be better for the city of Memphis or for TVA to enter into a power contract with private utilities to construct a plant in that area along the lines that had been suggested by Dixon and McAfee.
McCandless requested that the AEG pursue the matter further with McAfee.
After the meeting in Strauss’ office, Williams arranged for McAfee and Dixon to attend a meeting in Strauss’' office on Wednesday, January 20, 1954.
44. There is no evidence that Dixon,, McAfee, or any representative of defendant had any contact with Wenzel! during the period from November 1,. 1953 to January 14, 1954. Neither Me *547 Afee nor Dixon knew of the report Wenzell made in September 1953.
D. Preparation, Submission, and Review of Sponsors’ Proposals, and Wenzell’s Activities in Connection Therewith
45. About the middle of January 1954, Hughes suggested to Dodge the advisability of requesting Wenzell to again assist the Bureau, because of Wenzell’s study of TVA and his knowledge of commercial transactions. By that time, the Administration had decided that AEC should proceed to make a contract with private utility companies and that the TVA plant at Fulton would not be built. Dodge authorized Wenzell’s return and thereafter, when Wenzell was working at the Bureau, Dodge saw little of him until March 1954.
The Bureau was concerned that any proposal which it considered met its fiscal standards, namely (1) that the cost of the power to be contracted for by AEC would be reasonable in relation to the cost of other power used by AEC, and (2) that the cost of power under any proposal could be reconciled with the estimated cost of power from the proposed TVA Fulton plant, taking into account the cost of interest and taxes paid by the private companies. Wenzell was to assist the Bureau again as a part-time consultant during the exploratory discussions on the project, particularly with respect to the probable interest cost of any financing plans that might be discussed. His work was to be in the technical area of comparative costs.
46. In response to a telephone call made by Hughes on January 14, Wenzell met Hughes in Washington on January 18, 1954. Hughes told Wenzell that the Government had decided to have a private power company construct a large .steam generating plant near Paducah, Kentucky, to supply approximately 600,-000 kw. of power to the AEC in substitution for a like amount of power then 'being supplied to AEC by TVA in the same location. Hughes showed him a paragraph in the President’s budget message reflecting the decision that had been made (finding 41); stated that meetings had already been held with the utility executives during the month of December, and said that another meeting at the AEC had been arranged for January 20 with Dixon and McAfee. Hughes emphasized the need for great speed on the project, and after learning that Wenzell knew both Dixon and McAfee, Hughes asked Wenzell to attend the meeting and to use such influence as he had with the private utility people to impress upon them the need for prompt action on the matter.
Wenzell had met Dixon about 1943. In 1948 or 1949, he had talked to Dixon in connection with services that First Boston proposed to render to Arkansas-Missouri Utilities Company, a customer of Arkansas Power & Light Company, one of Middle South’s subsidiaries.
On the same day (January 18, 1954), Hughes made an appointment by telephone for Wenzell to see Strauss in order that Wenzell could learn further particulars about the meeting to be held on January 20. No mention was made at the time about the cost of interest rates involved in financing the project.
47. During the afternoon of January 18, 1954, Wenzell went to the AEC building and had a very brief meeting with Strauss. All visitors at AEC were required to sign a “Visitor’s Registration” card which contained a space for the name and address of the visitor and his “Organization”. On that occasion and on each occasion thereafter when Wenzell visited the AEC, he specified his address as “100 Broadway, N. Y. City”, which was the address of the offices of First Boston, and inserted “First Boston Corp.” in the space specified for the organization. Wenzell did this to provide information as to where he could usually be found by anyone looking for him.
Wenzell told Strauss that he was there at the request of Hughes and was trying to get some background of the program and plan. Strauss had never met Wenzell before, and there is a conflict in the testimony of Wenzell and Strauss as to *548 whether Wenzell stated he was connected with the Bureau of the Budget. The greater weight of the evidence shows that Hughes told Strauss that Wenzell was a banker connected with the First Boston Corporation as an officer or a partner, and that Strauss was to acquaint Wenzell with the background and purpose of the meeting to be held on January 20, 1954. Strauss assumed that Wenzell was to attend the meeting to advise all concerned on matters within his competence. Strauss was aware that the cost of money, i. e., the interest rate on the securities which might be issued by the private utility companies, was an important element in the total cost to the Government of any facilities that might be constructed. Strauss stated that the AEC was trying to move forward rapidly with the program that Hughes had outlined to Wenzell. Strauss also emphasized that it was important that the private utility companies give serious consideration to the matter to be discussed and that it be handled without delay. Wenzell told Strauss that he was a vice president of First Boston, and Strauss stated that he was familiar with that firm. It was then arranged that Wenzell would discuss the matter the following day with Williams. Wenzell returned to New York City that evening.
48. On January 19, 1954, Dixon received a telephone call at his New York office from Wenzell who stated that he would be present at the meeting on January 20 as a representative of the Bureau of the Budget and that Dixon should not be surprised to see him there.
49. Pursuant to the arrangements previously made, Wenzell returned to Washington from New York on January 19 to see Williams at AEC. On his own volition and without consulting any representative of the defendant or of First Boston, Wenzell took with him Paul Miller, an assistant in First Boston’s buying department. Miller had participated actively in the financing of the OVEC project in which First Boston had acted as financial agent for OVEC. Wenzell thought that it was inevitable that various questions relating to financing an enterprise such as the OVEC project would arise at the January 20 meeting and that it would be desirable to have an expert available to answer such questions.
At the AEC building, Miller registered as representing First Boston, as did Wenzell. Wenzell and Miller met with Williams and Cook of the AEC, and were advised by Williams of the discussions that had previously been held with Dixon and McAfee. Cook was present, because he had been designated as the official who was to be responsible for looking after the project for AEC after Williams’ resignation, which occurred on January 31, 1954. There was no discussion about financing, and there is no evidence of any statements made by either Wenzell or Miller. Cook and Williams were told that Wenzell was a consultant to the Bureau of the Budget, but Cook did not know until later that Wenzell was also an officer of First Boston. Wenzell and Miller remained overnight in Washington.
50. On the morning of January 20, Wenzell and Miller first met with Hughes and then went to the AEC to attend the scheduled meeting, which was delayed until afternoon because of McAfee’s late arrival. At AEC Wenzell and Miller had a general discussion about the proposed project with Williams. At 3 p. m. the meeting convened. In addition to Wenzell and Miller, it was attended by Mc-Afee and Dixon, and by Williams, Cook, MacKenzie, and Sapirie of AEC. Strauss was present for a few minutes. Wenzell was the only representative of the Budget Bureau at the meeting. Miller was not a representative of any Government agency but, as earlier stated, had come to Washington at Wenzell’s request.
51. The proposal that had been discussed before the meeting was the construction of additional facilities in the Paducah area to supply power to AEC as a substitute for power then being furnished by TVA to AEC at Paducah, so that AEC could release a like amount of power to TVA for use by its other eon *549 sumers. McAfee and Dixon stated that they were ready and willing to do anything possible, without regard to profit, to help with the problem of furnishing power. Thereupon, there was much discussion about the wisdom of constructing a new plant near Paducah where so much power generation was already concentrated. It was pointed out that if the AEC cancelled its existing contracts at Paducah or reduced its power consumption there, there would be great difficulty in marketing the tremendous oversupply of power in that area.
It was made plain that the purpose of the power plant to be constructed was not to satisfy any increased need of the AEC but to relieve TVA’s need in the Memphis area, and this led to a discussion of the possibility of building the plant near Memphis to produce power for delivery to TVA. Since the AEC had no projects in the Memphis area and required no power there, a question arose as to whether AEC should act as the contracting agency with the private utility companies, as had originally been proposed by the Government. It was stated that AEC would contract and pay for the power but that it would be physically delivered to TVA, and that the effect of this would be to release an equivalent amount of power which TVA was supplying to AEC at Paducah. Dixon stated that he thought it would be a much better plan to have TVA contract directly for the proposed new plant instead of having AEC act as contracting party. No questions were raised regarding the details of financing the proposed plant, and there is no evidence that Miller made any statements or suggestions at the meeting.
After the meeting at the AEC had adjourned, there was a conference shortly thereafter in Hughes’ office in the Budget Bureau in accordance with arrangements that Williams had made. The conference was essentially a continuation of the meeting at the AEC. In attendance were MacKenzie, Cook, Williams, McAfee, Dixon, Wenzell, Miller, McCandless, and Hughes. McAfee and Dixon reiterated their desire to be of assistance but again expressed their concern about the location of another plant at the Paducah area, pointing out that such a plant would require additional transmission lines for both TVA and the private utilities at considerable additional costs and that the area was geographically unsuitable for future distribution and use of the power in the event AEC’s needs were reduced.
Dixon stated that Middle South’s utility system had previously made proposals to furnish TVA 450,000 kw. in the Memphis area and was ready to do so at any time at whatever cost the Federal Power Commission deemed fair. It was finally decided that Dixon would prepare a study of the cost factors pertaining to the construction by his company of a power plant that could generate 450,000 to 600,-000 kw. of power across the river from Memphis in the territory of Middle South.
Hughes indicated that probably the AEC could contract for the construction of a plant in the Memphis area, but both Dixon and McAfee thought this was an awkward way of handling the matter. After the utility company executives had argued this point somewhat, Hughes informed them that the decision as to which agency would be the contracting party would be made by the Government.
The evidence shows that from December 2, 1953 (the date on which Dodge first discussed the proposed project with Strauss), until the Power Contract was signed, the defendant never changed its decision that the AEC was to be the contracting agency for the generating plant. However, the meeting in Hughes’ office on January 20, 1954, was the first occasion when the Government requested the utility company executives to consider the construction of the proposed power plant in the Memphis area rather than at Paducah.
52. There is no evidence of any statements by Wenzell at either of the January 20 meetings. Miller said nothing at the first meeting, but at the meeting in Hughes’ office, he pointed out that a heavy concentration of power in the Paducah area and the possibility of a de *550 crease in AEC’s need there might affect the prospects of obtaining money for the construction of the proposed plant.
53. On the morning of January 20, 1954, Wenzell told Dixon that during the previous summer he had made a confidential study for the Budget Bureau in Washington and had been recalled by the Bureau. He also told Dixon that he was attending the January 20 meeting as a representative of the Budget Bureau rather than as a First Boston man. At that time, Dixon did not understand what Wenzell’s assignment in the Bureau of the Budget was nor was he told the precise nature of Wenzell’s work.
At the close of the meeting in Hughes’ office, Dixon stated that he would begin some investigations of the kind mentioned at the meeting. Since Dixon expected to be absent from New York for a few days, it was agreed that Wenzell would meet with Tony Seal of Ebasco, which performed engineering services for Dixon’s companies. Wenzell was to inform Seal about what was contemplated in order to expedite the matter.
On the evening of January 20, 1954, Wenzell and Miller returned to New York. Their transportation and other expenses of the trip from New York to Washington and return were defrayed by First Boston.
54. Wenzell did not return to Washington until February 4, 1954, but on January 21, 1954, he met with Seal pursuant to. the arrangements made on January 20. Wenzell related to Seal the substance of the discussions that had been held in Washington and advised him to get busy on an exhaustive study of the proposed project. There was no discussion of finances at the time.
The meeting with Seal and subsequent meetings which Wenzell had in New York until about March 15, 1954, with representatives of the utility companies were held either at the request or with the knowledge of Hughes, to whom Wenzell frequently telephoned from New York.
55. On January 27, 1954, Seal and Paul Canaday, who was a vice president and director of Middle South, came to Wenzell’s office at First Boston. Canaday and Seal were attempting to formulate a plan for the project. Wenzell stated that he was at their service as a representative of the Bureau of the Budget on the all-important matter of the cost of interest on money that would be borrowed to finance the construction of the plant. It was well known that the cost of money played an important part in the cost of the entire project and in the price at which the energy could be produced and sold.
During the period of Wenzell’s services with the Budget Bureau, which began in January 1954 and ended April 3, 1954, Wenzell was advising Hughes as well as Dixon and his associates on the cost of money. Hughes had requested Wenzell to stay in touch with Dixon and his associates on the development of a proposal and particularly to help point up the real cost of money to be used in financing the project. The object was to obtain the best rate possible and to get a figure which would not only be used by Dixon but would be known to the Bureau so that both would be talking about one and the same factor.
On January 29, 1954, Hughes telephoned to Wenzell in New York City to find out what had occurred in the meetings that Wenzell had had with Canaday and Seal.
56. On February 3,1954, Wenzell met again with Canaday and Seal who were working on a proposal. The evidence does not show what the parties said or did. At that time, it was too early to discuss the details involved in financing the project.
57. On February 4, 1954, Wenzell returned to Washington to see Hughes in order to bring Hughes up to date on what had occurred during Wenzell’s New York meetings with Dixon’s associates. Although the evidence on the matter is not clear, it appears that Dixon was in Hughes’ office on the same day and engaged Hughes and Wenzell in a conversation about the cost of money for the project. Dixon and Wenzell returned to *551 New York on the same day by plane. Wenzell inquired about the status of the work of Dixon’s organization in the preparation of a proposal, and there was some discussion about the cost of money and about Wenzell’s responsibility in furnishing information about this phase of the matter. Dixon then asked Wenzell to do him a personal favor and ascertain the opinion of First Boston on what the interest rates in the then current money market would be for financing a project similar to the OVEC project.
58. On February 5, 1954, a meeting arranged by Wenzell was held in his office. Besides Wenzell, Harter and Cannon, vice presidents of First Boston’s sales department, and Miller were present. Since Harter and Cannon were in touch with the securities markets, Wenzell asked for their best judgment on the interest rates that would have to be paid for funds borrowed to finance the construction of a plant similar to OVEC, taking into account three hypothetical bases of corporate capitalization, i. e., (1) a high debt ratio of from 90 to 95 percent of debt to total capital, (2) an intermediate ratio of from 75 percent debt to total capital, and (3) a ratio of 50 percent debt and 50 percent equity. It was assumed that the total cost of the plant would be about 90 million dollars. After careful consideration of the problem, Wenzell was told that money could be obtained on the three hypothetical bases at the following respective interest rates: (1) 3% percent, (2) 3% percent, and (3) 3%, percent. Wenzell could have obtained this information from other sources, but he was acquainted with the First Boston executives and considered that First Boston was one of the best and most reliable sources, if not the best source, of such information.
Wenzell did not indicate why he wanted the information from Harter or Cannon, nor what was to be done with the figures supplied by them.
Later, during the same day, Wenzell had a telephone conversation with Dixon and advised him about the results of the meeting.
59. On February 8, 1954, Wenzell went to Washington to report to Hughes the results of the meeting held on February 5 at First Boston on the cost of money. Hughes requested that further studies be made on other forms of capitalization and on different periods for repayment of the debt. Hughes stated that the Government could not contract for power for a longer period than 25 years, but he wanted information on amortization of the debt for a longer period of time so that a portion of the debt would be outstanding after the expiration of the contract with the Government.
During the day, Dixon and Canaday met with Wenzell and also with E. J. Donnelly of the Bureau of the Budget in Wenzell’s office in the Bureau. Donnelly was the principal budget examiner for the TVA, the Canal Zone, and other agencies. In 1953, when Wenzell was engaged in his study of the TVA, he had obtained most of the data used in preparing his report from Donnelly. Also, Donnelly mailed Wenzell additional information regarding TVA on January 22, 1954. In the room at the time, there were a number of documents relating to TVA, of which some were published and some were not available to the public. At the meeting, those present particularly looked at and used the monthly financial statements which were prepared by TVA for its own purposes. The Budget Bureau was furnished a copy each month, but the documents were not available to the public. There was a general discussion on the various costs incurred by TVA, such as generation, transmission, and other costs set forth in the financial statements. Wenzell asked Donnelly to supply certain additional information relating to the cost of power to TVA, the quantity and cost of power TVA purchased from private industry, and TVA’s cost of distribution.
At Hughes’ suggestion, Wenzell went to a meeting on the same day in Nichols’ office at the AEC, where Dixon, Canaday, and Seal were also present. Dixon reiterated his previous statement that, the project was being approached in an *552 awkward manner, but that he would do his best to prepare a proposal in accordance with instructions given by the Bureau of the Budget.
60. On Wednesday, February 10, 1954, Wenzell had another meeting at First Boston with Cannon, Harter, and Miller to obtain some further information on interest costs in relation to the longer period of amortization which Hughes had mentioned to Wenzell on February 8. The discussion was concerned with a capitalization based upon a ratio of 80 percent debt and 20 percent equity. On the assumption that the total amount borrowed would be 120 million dollars, that it would be amortized over a 40-year period, that the AEC contract would run for 25 years, and that 75 percent of the debt would be paid off at the expiration of the contract, the conclusion was reached that the loan could be made ■on the basis of an interest rate of 3% percent.
During the same afternoon, Hughes phoned Wenzell, and later Wenzell and Seal had a telephone conversation. It was Wenzell’s recollection that he probably gave both Hughes and Seal a report of the results of the meeting at First Boston.
61. On or about February 14, 1954, Wenzell attended a meeting in Dixon’s office where Dixon, Canaday, and Seal were present. Canaday and Dixon had been working on figures and had reached the point where they tried out the application of interest rates. Wenzell gave them the information on interest rates that he had previously obtained from First Boston, and they made some tentative calculations on the basis of those rates. Hughes had impressed upon Wenzell the necessity for speed on the project, and Wenzell was interested in seeing that work on the proposal was proceeding.
On February 15, Hughes again telephoned to Wenzell in New York to discuss the project. Hughes was aware that Wenzell had attended the meeting in Dixon’s office as a consultant of the Budget Bureau. On the same day, there was a telephone conversation between Wenzell in New York and Dixon in Pittsburgh, but there is no evidence as to what was discussed.
62. About the middle of February 1954, Dixon asked Paul Hallingby, then assistant to Dixon as president of Middle South, to give his opinion as to whether a proposed power plant could be financed through the issuance of securities based upon a debt ratio of 95 percent debt to 5 percent equity as in the OVEC project and, if so, what the cost of the debt money would be. Hallingby made inquiries of several investment bankers and officers of institutional investors (other than First Boston), who were well apprised of the state of the bond market, and then informed Dixon that debt financing could be obtained at an interest rate of about 3% percent on an assumed debt structure like that of OVEC.
63. When McAfee learned at the meeting of January 20, 1954, that the defendant was considering the erection of the proposed power plant in the Memphis area, he lost interest in the matter because the location was far removed from the pool area of the companies in which he was interested. On January 22, 1954, he left for the Orient and was out of the country for nearly two months.
About February 16, 1954, Dixon met Ralph Moody, an officer of Union Electric Company, in Pittsburgh to discuss the question of whether Union Electric would join with Middle South in making a proposal to the AEC for the proposed plant in the Memphis area. Dixon then learned that Union Electric had no interest in the matter because the location was outside its pool area. However, Moody wrote McAfee, who replied that he had not changed his mind and that his company would not participate in the construction of a plant in the Memphis area. Moody advised Nichols of McAfee’s decision on February 19, 1954.
Sometime prior to February 18, Dixon informed Wenzell that Union Electric was no longer interested in the project,, and Wenzell promptly relayed this information to Hughes.
*553 64. About February 18, 1954, Wenzell learned from Dixon that he was to attend a meeting the following day in the offices of Southern in New York City in an effort to persuade that company to join in the venture.
In a telephone conversation prior to the meeting, Hughes requested Wenzell to attend as representative of the Budget Bureau. When Hughes learned that Mc-Afee’s company had decided not to participate in the venture, Hughes was disturbed because he felt that if only one company had to carry the entire responsibility, there was a chance that no proposal would be made to AEC.
65. At the meeting held on February 19, 1954, in the offices of Southern, Dixon, Canaday, and Seal were present as representatives of Middle South. Southern officers who attended included Yates, James M. Barry, chairman of the executive committee, the company’s senior engineer, its senior accountant, and its senior counsel.
First Boston had done a considerable amount of financing for the subsidiaries of Southern, and Wenzell had known Yates for many years. However, the meeting of February 19 was the first occasion at which Wenzell had ever met with or talked to Yates concerning the project. Wenzell was told by Yates that he had been to see Hughes a few days prior to the meeting and that the Georgia Power Company, one of Southern’s operating subsidiaries, had previously written TVA offering to sell a substantial block of power. At the close of the meeting, Yates gave Wenzell copies of the correspondence relating to the offer made to TVA.
During the meeting, Dixon made an earnest plea for Southern to join Middle South in the proposed venture and stated that Middle South had done sufficient preparatory work to determine that a proposal could be submitted to the Government. There was little or no discussion about financing the project. Except for Wenzell’s conversation with Yates regarding the latter’s earlier meeting with Hughes, there is no evidence of what Wenzell said or did at the meeting. On the same day, Wenzell advised Hughes by telephone of what had occurred at the meeting. Hughes stated that he was pleased to hear that Dixon was trying to get another partner. About February 20, 1954, Southern decided to join in the venture, and Yates notified Hughes and Nichols of this decision the same day.
66. On February 19, 1954, Wenzell left on a trip for Denver and did not again engage in any activities relating to the project until February 23,1954, when he met Hughes and Dixon at the Budget Bureau.
Beginning on February 1, 1954, Canaday and Seal had been making a number of calculations which were used in the preparation of the proposal submitted by Middle South and Southern to AEC on February 25, 1954. The actual drafting of the proposal did not begin until February 20 after Southern had agreed to join the venture. Wenzell did not participate in the drafting of the proposal.
At the February 23 meeting Dixon showed Hughes a copy of an early draft of the proposal. About noon on the same day, Dixon and Yates met in the AEC with Nichols. McCandless and Wenzell were also present as representatives of the Bureau of the Budget. The purpose of the meeting was to review the tentative draft of the proposal with Nichols to ascertain whether it contained sufficient information for AEC’s consideration.
67. While he was in Washington on February 23, 1954, Wenzell drafted an opinion letter which he showed to both Dixon and Hughes. The letter read as follows:
“Draft — 2/24/54
“Letterhead of the First Boston Corporation
“Mr. E. H. Dixon,
“President, Middle South Utilities, Inc.
2 Rector Street, New York 6, N. Y.
“Dear Mr. Dixon: You have furnished us with a copy of the proposal of Middle South Utilities, Inc, and *554 The Southern Company addressed to the Atomic Energy Commission dated-for the sale to the AEC of 600,000 kw of electric power through the creation of a new generating company which would undertake the construction of the necessary facilities. You have advised us that you estimate the capital requirements of the new company for facilities and working capital at around $120,000,000, which you propose to finance on the basis of approximately 95% debt and 5'% common stock equity. The equity, to be paid in, is to be $6,000,000 and is to be owned by Middle South Utilities, Inc. and The Southern Company, either directly or by their operating subsidiaries and, possibly, by other utility companies. You have also advised that you want to arrange for up to $130,000,000 of debt capital in order that you may have some cushion for contingencies.
“You have asked us to advise you as to the cost of such debt securities on the basis of the 25 year power contract with the AEC outlined in said proposal supplemented by a (30 year) power contract between the proposed generating company and the utility companies owning the common stock equity under which these companies will agree to take or pay for sufficient power to service the debt securities to the extent that sales to the AEC or to others may not be sufficient to do so, first mortgage bonds not exceeding $130,000,-000, having a maturity of 30 years (beyond the completion date of the new plant, estimated to be approximately 36 months) and amortized through a level debt service type of sinking fund (which will retire 75% of the bonds by the end of 25 years after the facilities are completed and 100% by maturity).
“It is our opinion that under the foregoing circumstances, and under existing market conditions, such debt securities can be sold by the corporation to institutions at an interest cost not to exceed 3%% per annum.
“It is understood that bond proceeds will be taken down over the period of construction of the facilities estimated to be approximately three years and that a standby charge of —% per annum for the unused portion of the $130,000,000 total will accrue starting-.
“Very truly yours,
“The First Boston Corporation,
“By---”
Although Wenzell prepared the draft in Washington on the 23rd, his recollection was that it was typed and dated when he returned to his New York office on the following day.
The draft of the proposal which Dixon and Yates had available for the meetings of February 23 contained, in the following paragraph, the only reference to the cost of money:
“We have received assurances from responsible financial specialists expressing the belief that financial arrangements can be consummated on the basis which we have used in making this proposal and under existing market conditions, and our offer is conditioned upon such consummation.”
The above-quoted statement was inserted in the proposal in reliance on the oral information previously given by Wenzell to Dixon as the opinion of First Boston that the project could be financed on the basis described in finding 60. Dixon had suggested to Wenzell that it would be desirable to have First Boston’s oral opinion set forth in a letter, and this suggestion led Wenzell to prepare the draft. On February 23, when the sponsors’ tentative proposal was shown to Hughes, he was told that the above-quoted statement was based on First Boston’s oral opinion on interest costs, and that a draft of a letter from First Boston, confirming the oral opinion, was being prepared.
*555 As previously stated, the cost of money was an important factor in the total cost of the project, and Hughes had requested Wenzell to make sure that the interest rate to be used by the sponsors in their proposal would be the best figure obtainable, under a capitalization based on a high ratio of debt to equity and with the debt payable over a long period of time. The draft prepared by Wenzell on February 23 was not formally executed by First Boston, but if it had been signed and sent by First Boston, it would have substantiated the oral opinion previously obtained by Wenzell from First Boston and conveyed to Hughes and Dixon.
68. Sometime in the week prior to February 27, 1954, Dixon and his counsel, Daniel James, had a discussion about Wenzell’s activities. James felt that if it became necessary to finance the project, First Boston would receive first consideration as financial agent because of its experience on the OVEC project. Therefore, James told Dixon that since Wenzell was an officer of First Boston and was also employed by the Budget Bureau, a difficult situation might be created if Dixon should subsequently ask First Boston to handle the financing of the project. James said it was apparent that the project was developing into a public versus private power fight and that it would be unwise to give the opposition anything which could be used as the basis for an attack. James did not consider that a conflict of interest was involved but thought the sponsors could not afford a situation where the opposition might make it appear that there was a taint of illegality. James advised that Dixon mention the matter to Wenzell with the suggestion that Wenzell might want to speak to his own counsel and to the Budget Bureau about it.
In accordance with the advice received from his attorney, Dixon spoke to Wenzell about the matter in Washington on February 23, 1954. The record does not clearly show what he said to Wenzell, but in substance he asked whether Wenzel] had considered the possibility that criticism and embarrassment might result from the fact that Wenzell, as an officer of First Boston, had been doing special work on a project for the Bureau of the' Budget, if it later developed that First Boston should be employed to handle the financing of the same project. He suggested that Wenzell discuss the situation-with the Bureau of the Budget and with his counsel.
69. On the same day (February 23)',-Wenzell told Hughes that there were certain implications that might flow from Wenzell’s interest opinion draft; th&i the sponsors were submitting to the Government a proposal which was based upon an interest rate that was accurately described in Wenzell’s draft; that the interest rate mentioned in Wenzell’s draft was “a very tight figure”, which Wenzell had given to the sponsors because it was desirable to get an accurate figure with the expectation that the financing could be obtained at the rate mentioned. He further stated that First Boston was the source of the information in this draft and that if market conditions changed for the worse, the sponsors could use the draft as a moral commitment by First Boston, obligating it to arrange for the financing at the interest rates stated. He then pointed out to Hughes that if it later developed that First Boston should be asked to handle the financing for the sponsors and should give them a letter similar to Wenzell’s draft, the facts that he had been the instrumentality for obtaining the interest figure from First Boston, had given the figure to the sponsors, and had used the same figure in his draft could cause criticism against and embarrassment to the Administration, in that it could be charged that he, as a First Boston officer and while employed as a special consultant to the Bureau of the Budget, had improperly used his position in the Bureau to obtain business for First Boston. Although Wenzell spoke to Hughes about embarrassment to the Administration, the record as a whole shows that he was concerned that he might be getting into a position of duality which could be embarrassing to him and to First Boston as well. In the conversa *556 tion, Wenzell suggested that Hughes discuss the subject with his political advisers. Hughes replied that Wenzell was exaggerating the importance of the matter, but advised Wenzell to report the situation to his principals in First Boston, to explore the question with counsel, and then to talk with Dodge about the matter.
70. Wenzell returned to New York on February 23 and, after he arrived at his office in the evening, he discussed the problem referred to in the preceding finding with Coggeshall, president of First Boston. In a general way, Coggeshall knew that Wenzell had been doing some work with the Budget Bureau, but he had no direct responsibility for Wenzell’s activities. However, since Woods was abroad, Wenzell briefly related his conversation with Hughes to Coggeshall, who felt that the situation was of such importance that Wenzell should obtain advice from First Boston’s counsel, Sullivan & Cromwell. Coggeshall thereupon called Arthur Dean, the partner in the firm who generally handled First Boston’s business, stating that Wenzell had been working as a consultant to the Bureau of the Budget; that certain problems had arisen, and that Wenzell wanted to talk with Dean or one of the partners in the firm. Since Dean was leaving the city, it was arranged that Wenzell would see Raben, another partner in the firm, on February 26, 1954.
71. On February 25, 1954, Middle South and Southern submitted to the AEC a proposal which was signed respectively by Dixon and Yates, whereby they agreed to form a new corporation which would finance and construct generating facilities from which 600,000 kw. of electric power would be delivered to TVA at the Tennessee line for the account of AEC. The sponsors proposed that the new corporation enter into a contract with AEC for a term of 25 years under which the power would be furnished upon payment of a base capacity charge of $9,626,000 per annum, plus an energy charge which was to be subject to adjustment, plus reimbursement of State, Federal, and local taxes to be paid by the new corporation. The proposal stated that the contract would provide that AEC would make arrangements with TVA for the receipt by it and the delivery to AEC in kind of the power and energy to be supplied by the new company. The proposal is in evidence as defendant’s exhibit 23 and is made a part hereof.
72. On February 26, 1954, Wenzell conferred with Raben of Sullivan & Cromwell. Wenzell related that his work as a consultant with the Bureau of the Budget had been finished in the fall of 1953, but that he was called back to the Bureau again the following January for a brief period to do what he could to expedite the submission of a proposal by some private utility companies, and that his current role with the Bureau was substantially finished. Wenzell then showed Raben a copy of the sponsors’ proposal and the draft of his February 24 interest opinion letter. He explained that, in his capacity as consultant to the Bureau of the Budget, he had obtained information from First Boston as to the interest rates on the financing of the project and had passed the same information on to Dixon and to the Bureau of the Budget. He then asked whether Raben saw any objection to First Boston’s signing a formal opinion letter along the lines of Wenzell’s February 24 draft. Raben replied that the question was purely academic since, in point of fact, Wenzell had already supplied the information to the Bureau and to Dixon, and the letter would amount to no more than confirmation of the oral information.
Wenzell stated that the sponsors’ proposal had not been accepted by the Government and that if a proposal should be accepted, many months might elapse before that occurred. He also informed Raben that First Boston had not been employed to handle the financing by any of the parties interested in the proposal. He then inquired whether any problems would arise if it developed in the future that a proposal was accepted by the Government and First Boston was requested to arrange for the sale of the debt se *557 curities. Thereupon,' Raben advised Wenzell that he should terminate his relationship as consultant with the Budget Bureau forthwith and in writing. He also advised that if the proposal was later accepted and First Boston was requested to handle the financing, the board of directors of First Boston should consider whether they wanted to accept the business and, if so, whether they should charge a fee. Finally, he told Wenzell that he should keep Dodge and Hughes informed about any developments in the matter, including any decision which First Boston might later make as to handling the financing of the project.
On the same day Raben telephoned to Dean, who was in Washington, D. C., at the time, to get a confirmation of the advice given to Wenzell. Dean confirmed the advice Raben had given Wenzell in all respects and further stated that he did not see any problem of a conflict of interest, but that there was a question of policy for First Boston to consider. He felt that since Wenzell had served as a consultant to the Budget Bureau, First Boston might well handle the financing as a matter of public service and not accept any fee. He also stated that First Boston should keep Hughes and Dodge informed on whatever decision was made.
As will hereinafter appear, Wenzell did not resign immediately, nor did he ever submit a written resignation to the Bureau of the Budget. He continued to act as a consultant to the Bureau until April 3, 1954.
73. After the AEC received the sponsors’ proposal of February 25, AEC asked the Budget Bureau for its views. On February 26, Hughes introduced Canaday, Seal, and Barry, representing the sponsors, to Carl H. Schwartz, Chief of the Resources and Civil Works Division of the Budget Bureau. Hughes stated that the sponsors’ representatives would be available to answer questions, and told Schwartz that he wanted a memorandum containing an analysis of the proposal made and delivered by March 2, 1954.
During the discussion which followed, the Bureau staff submitted several questions, including an inquiry as to how the power, which was to be delivered to the AEC at Memphis, would serve AEC’s needs at Paducah. In reply, Seal drew a sketch, indicating that the power would move into the Memphis area where it would be used by TVA and would release power supplied from other parts of the TVA system, so that the power thus released could flow into the Paducah- area for use by AEC.
After the meeting with the sponsors’ representatives, the Bureau staff com tinued its analysis of the proposal throughout the weekend, when it was apparent that sufficient information was not available to submit the financial comparison that was desired. Accordingly, on Monday, March 1, Schwartz telephoned Hughes, who was in New York. Hughes said that Wenzell would be in Washington that day and would see Schwartz.
The members of the AEC staff also began a review of the sponsors’ proposal of February 25. On February 27, 1954, Cook telephoned Dixon, learned that the base capacity charge in the proposal had been computed on the basis of an interest cost of 3% percent on funds to be borrowed, and obtained some information regarding the proposed energy charge. During the conversation, it was arranged that Dixon would send Seal to Washington on the following Monday (March 1) to go over the figures with AEC.
74. Wenzell had not participated in the initial reviews of the proposal by either the AEC or the Budget Bureau staffs, but on March 1, he arrived at the Budget Bureau and was present at a meeting of the staff, which was engaged in completing the review of the proposal and in the preparation of the memorandum to be sent to Hughes. Wenzell brought with him Powell Robinson, an assistant vice president of First,. Boston’s sales department, who attended the meeting. Robinson did not attend as an official or consultant of any Government *558 agency. He made no statement or suggestion during the time he was present.
By the time this meeting was held, Wenzell had completed his assignment in the Bureau as to the cost of money for financing the project. Therefore, his function as a consultant to the Bureau during the period from March 1 until April 8, 1954, when he ceased to serve as a consultant, related principally to the total cost of the project. He took the position that the estimates of costs in the February 25 proposal were too high.
Cook either attended the March 1 meeting at the Bureau or furnished the Bureau staff with the results of his analysis, showing that the project would cost the Government about four million dollars per year more than the AEC was then paying TVA for power furnished by it at Shawnee and that the additional costs were due to increases in construction costs and to taxes. Although Wenzell had participated in the discussion relating to the financial aspects of the proposal, certain questions arose about power engineering, and he stated that he was not qualified to answer such questions. He therefore telephoned Seal and arranged for the latter to meet with the group on the following day. As stated, Cook had previously made arrangements with Dixon for Seal to come to Washington on March 1 to discuss the proposal further with representatives of AEC.
75. On Tuesday, March 2, a meeting in the Budget Bureau was attended by three members of the staff, by Wenzell, and by Seal. McCandless and Schwartz were present from time to time. Seal was shown a copy of the preliminary draft of the analysis prepared by the Bureau staff and was asked a number of questions regarding the basis on which certain estimated costs in the proposal had been computed and about engineering details involved in the transmission and delivery of power from the proposed new plant. In general, the questions propounded by the Bureau staff indicated the staff’s opinion that the sponsors’ costs were high as compared with costs of power supplied by TVA for AEC at the Shawnee plant. Seal supplied as much information as he could but stated that the proposal had been hastily put together. Seal left about noon and conferred with Cook and Meyer of AEC, pursuant to arrangements Cook had made.
After a further discussion by the Bureau staff, a new memorandum was prepared and delivered by McCandless to Hughes at his home that evening. The memorandum stated that in its review, the Bureau staff had conferred with representatives of the sponsors, had briefly discussed the proposal with Cook, and had had the benefit of discussing it at considerable length with Wenzell. It was stated, however, that sufficient information had not been obtained for a refined comparative cost analysis and that active participation by TVA would be required for such an analysis. The memorandum concluded with the statement:
“We believe that the rates involved are sufficiently close that negotiations should be entered into by the parties concerned.”
After the meeting ended, Wenzell went to Seal’s office in Washington, stated that the Bureau memorandum had been finished, and that Clapp of TVA and Nichols of AEC were to meet with Hughes again on March 3 for further intra-Government discussions.
76. On or about the period of the March 1-2 meetings held in the Bureau, Wenzell had conversations with several members of the staff and expressed concern regarding his situation. On one occasion, Donnelly, who had worked with and supplied Wenzell much of the data used for Wenzell’s September 1953 report, told Wenzell that he was “working both sides of the street” and was likely to get in serious trouble. He suggested that Wenzell’s actions were attributable to his lack of familiarity with the restrictions applicable to Government employees as compared with practices in private business. Donnelly also mentioned the matter to Schwartz, his division chief, but never talked to either Dodge or Hughes about it.
*559 While at luncheon with Pilcher and Grahl of the Bureau staff on March 2, Wenzell remarked that he felt that he was in an awkward position in connection with his work on the sponsor’s proposal. There was no further mention of the matter at the time, but Grahl learned that Wenzell was an employee of First Boston, a concern which might be interested in financing the project. Grahl repeated Wenzell’s statement to Schuldt, his section chief, and asked whether there was a possibility of a conflict of interest in the situation. Grahl stated that so far as he knew, no conflict of interest existed.
At about the same time, Wenzell also talked to McCandless who knew that Wenzell was an officer of First Boston. Wenzell mentioned that he was somewhat concerned about his situation and intended to speak to Dodge about it. There was no further discussion, but Wenzell later told McCandless that Wenzell had held a very satisfactory conversation with Dodge on the subject of Wenzell’s concern.
77. On March 2, 1954, Yates wrote the directors of Southern a confidential memorandum, summarizing the proposal of February 25 and stating that he had made several trips to Washington to talk with representatives of AEC and the Budget Bureau. In the memorandum, Yates further pointed out that after the meetings in Washington and after discussions with representatives of Middle South, Southern had decided to join in the venture. There was also a statement in the memorandum to the effect that First Boston had advised Middle South and Southern that the sponsors’ bonds in the amount of $114,000,000 and bearing interest at 3y2 percent could be sold to insurance companies under the current market conditions. This statement was based on the information Dixon had obtained from Wenzell and passed on to Yates before the proposal of February 25 was submitted.
78. Sometime after James and Dixon had discussed the problems that might arise by reason of Wenzell’s activities in the Budget Bureau and the possibility that First Boston might participate in the financing of the project, Dixon had told James that someone in First Boston had stated that the question of Wenzell’s activities would be presented to Dean of Sullivan & Cromwell. On February 27,1954, James spoke briefly to Dean and learned that he was functioning on the problem. During the next week, Dixon informed James that First Boston’s counsel had advised Wenzell to resign his position with the Budget Bureau at once.
Sometime later in March 1954, when' Dixon and James called on Hughes in Washington on another matter relating to the project, James raised the question of Wenzell’s duality with Hughes. Although James had understood that Wenzell was going to resign, he had learned that Wenzell was occasionally taking part in meetings of the Budget Bureau and James wanted to know why Wenzell was continuing to act as a consultant to the Bureau. Therefore, James pointed out the problem to Hughes in about the same language James had used in his conversation with Dixon during the week prior to February 27, 1954 (finding 68). Hughes made no comment on the matter.
79. Sometime after February 26, 1954, when Raben, with Dean’s concurrence, had advised Wenzell to resign promptly as a consultant to the Budget Bureau, Dean told Coggeshall that this advice had been given to Wenzell. Coggeshall did not inquire whether Wenzell had resigned but simply assumed that Wenzell had accepted the advice and submitted his resignation.
On March 3, 1954, Dean inquired of Raben whether Wenzell had resigned. On the same day, Raben telephoned Wenzell and learned that Wenzell had not resigned but was in the process of doing so. Also, on March 3, 1954, Dean talked by telephone with Wenzell, advising him to resign promptly and in writing. At Dean’s suggestion, Raben again telephoned Wenzell on March 10, 1954, and •found that Wenzell had not then resigned. However, from the statement Wenzell made, Raben decided that Wen *560 zell’s decision to resign was an accomplished fact and that the resignation would be submitted momentarily. Consequently, Raben took no further action on the matter.
80. On March 3, 1954, Hughes held a meeting which was attended by Nichols and Clapp and by various members, of the TVA, AEC, and Budget Bureau staffs. After a discussion of the general outline of the sponsors’ proposal of February 25, it was agreed that AEC and TVA would make a joint analysis of the proposal. Since the Budget Bureau wished to be kept advised of the progress made on this analysis, Pilcher and Grahl of the Bureau were designated to represent it at the TVA-AEC meetings.
Also on March 3, 1954, Strauss wrote Dodge in response to a letter sent by Hughes on September 24, 1953. Strauss’ reply contained AEC’s analysis of the sponsors’ proposal of February 25 and stated that AEC had conducted negotiations with the sponsors with the understanding that the purpose of the project would be to relieve TVA of its previous commitments to AEC for the amount of power to be supplied by the private companies and to free that amount of power for normal load growth in the TVA power area. Strauss pointed out that AEC had a firm contract with TVA for the supply of power and that if higher costs to AEC resulted from a cancellation of the contract between AEC and TVA, such higher costs would have to be justified on the basis of advantages to AEC or overall advantages to the United States and that higher executive authority or Congress should make that determination. He concluded the letter with statements that the AEC was divided upon the advisability of using its contractual authority in the manner that had been proposed and that higher authority would presumably determine what course of action would be in the best interests of the Government.
81. On March 4, Cook sent a teletype to Dixon and Seal requesting information needed by AEC for a further analysis of the February 25 proposal. Since Dixon was out of town, Seal prepared the answers to a portion of the questions, obtained information for answering the remainder from a telephone conversation with Dixon, and then prepared a memorandum which he delivered to Cook at the AEC on March 5, 1954.
82. About March 5, 1954, Schwartz and McCandless decided that the Budget Bureau needed the services of a power engineer to assist in the analysis of the proposal. In the afternoon of that day, they spoke to Hughes and suggested that an engineer from either the Bonneville Power Administration or the Federal Power Commission be obtained for that purpose. At the same time, they told Hughes that Wenzell was becoming a little uneasy about his relationship with the Budget Bureau in connection with the proposal. Hughes indicated that he was familiar with Wenzell’s feelings.
83. From the evening of March 2 until the morning of March 9, 1954, Wenzell was in New York. During this period he had the following telephone conversations in addition to the calls he-received from Dean and Raben:
March 3 — with Hughes and Schwartz in Washington;
March 3 — with Canaday in Florida;
March 4 — two telephone conversations with Seal;
March 5 — three conversations with Hughes, Yates, and Seal, each of whom was in Washington;
March 8 — with Yates;
March 9 — in the morning with Dixon.
Except for the fact that these telephone conversations related in some way to the project, there is no evidence as to what was said in any of them.
84. On March 9, 1954, Pilcher and Grahl of the Budget Bureau met with Meyer and Sapirie of AEC and Kampmeier of TVA to review the draft of the AEC-TVA analysis of the sponsors’ proposal of February 25. Wenzell was not present.
After the meeting at AEC, Grahl and Pilcher returned to the Budget Bureau, *561 where they attended a meeting at which Belcher, McCandless, Donnelly, and Wenzell were present. Wenzell had arrived in Washington in the early afternoon. Grahl supplied copies of the draft of the AEC-TVA analysis and orally summarized it. The analysis showed that the proposal would cost seven or eight million dollars more per year than the estimated cost of the proposed TVA plant at Fulton. It was the opinion of all present that the estimates of costs in the proposal were too high and that an attempt should be made to persuade the sponsors to submit a proposal more favorable to the Government. Wenzell was asked to talk to Seal to determine whether the sponsors would submit a better proposal. Sometime later, Wenzell told Seal that the cost estimates in the February 25 proposal were too high.
85. While he was at the Bureau on March 9, Wenzell called on Dodge and stated that he was concerned that if the sponsors submitted a satisfactory proposal and if there was a financing problem connected with the proposal, whether First Boston would be barred from participating in the financing'because Wenzell had been employed as a consultant to the Bureau. Dodge had had little or no contact with Wenzell during the preceding two months. Dodge thought that Wenzell was referring to the possibility of First Boston’s participating in an underwriting syndicate with a number of other companies. At that time, there was no proposal that could be used for a basis of negotiation, and Dodge felt that there would be a long period of negotiations and that many preliminary approvals would have tó be obtained before the question of financing would arise. However, Dodge told Wenzell that if there was any likelihood that First Boston might participate in any financing which developed in the future, Wenzell should finish his work with the Bureau as quickly as possible. Wenzell replied that he would terminate his work in the Bureau soon. He also said that if anything later developed that would involve First Boston in the financing and if there should be a question of a fee or compensation in connection therewith, he would see that the matter was referred to the Bureau for its prior approval. He added that this promise would also apply to the release of any publicity regarding the handling of the financing.
During the same conversation Wenzell briefly referred to and discussed the overall costs on which the sponsors’ proposal was based. Wenzell stated that he was not qualified to advise the Bureau on the matter of overall costs and suggested that Dodge make arrangements to obtain the services of Francis L. Adams, Chief of the Bureau of Power, Federal Power Commission. Dodge agreed to talk to the Chairman of the Federal Power Commission to see if Adams was available for such an assignment. Wenzell returned to New York on the evening of March 9.
86. On March 10, 1954, Dixon and Yates, along with several representatives of Middle South and Southern, met in Dixon’s office to begin preliminary work on a memorandum of understanding between the two companies in connection with their joint proposal. Dixon and Yates had to leave the meeting to attend a conference that day with Linsley, chairman of First Boston’s executive committee, in the latter’s office, and the memorandum of understanding was completed in their absence.
Wenzell was present in Linsley’s office with Dixon and Yates during the discussion. Dixon was well acquainted with Linsley and had frequently asked for Linsley’s opinion on security issues and the condition of the money market. Wenzell arranged the meeting, because Dixon wanted to make certain that the information given to him by Wenzell represented the opinion of some First Boston official like Linsley. Although interest rates may have been mentioned in the discussion, it was concerned chiefly with the current condition of the financial market as related to the financing of an OVEC type of project. No specific financing plan was discussed.
*562 Prior to the meeting Linsley had never talked about any matters relating to the project with Wenzell, nor had Linsley known that Middle South and Southern had submitted a proposal to the AEC. It was not until April 12, 1954, that Linsley learned of Wenzell’s interest opinion draft of February 24, 1954.
87. On March 10, 1954, McCandless telephoned Wenzell, and on the following day Wenzell had a telephone conversation with Seal.
In the afternoon of March 11, 1954, Wenzell returned to Washington to attend another meeting of the Budget Bureau staff. Those present talked about the joint AEC-TVA analysis of the sponsors’ proposal, the high costs included in the proposal, and the desirability of lowering the costs. Prior to the meeting, Pilcher and Grahl had attended a session at the AEC for the review of another analysis prepared by the staffs of AEC and TVA.
At the Bureau meeting, it was decided that the AEC should ask the sponsors to review the draft of the TVA-AEC analysis of the proposal and that someone from AEC should arrange for Seal to submit more information on the sponsors’ cost figures.
As a result of the meeting in the Bureau, Cook telephoned Dixon on March 12, stating that the Government’s analysis of the proposal showed that there was quite a disparity in the costs set forth in the proposal as compared with an estimate of what it would cost TVA to provide an equivalent capacity at the Fulton site. Cook stated that the principal elements of the cost difference were the capital costs used in the demand charge and the sponsors’ use of the TVA formula for computing the energy charge. Dixon repl

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9611202. Public record. Not legal advice.