United States v. Mississippi Valley Generating Co.

*567 Mr. Justice Harlan,

whom Mr. Justice Whittaker and Mr. Justice Stewart join,

dissenting.

In a ease like this controlling legal issues are apt to become blurred under the urge of vindicating a public policy whose importance no one will dispute. However, we sit here not as a committee on general business ethics, but as a court enforcing a specific piece of legislation.

While I am bound to say that the Government’s defense to this claim for out-of-pocket expenses incurred in a matter that the Government was once anxious to explore, is far from ingratiating, 1 I must agree with the Court that Wenzell’s government role in connection with the Mississippi Valley contract, though in the view of the Court of Claims it was quite peripheral, was sufficient to constitute him one who “acts as an officer or agent of the United States” within the meaning of 18 U. S. C. § 434 , 2 and that if he was personally “indirectly interested” in that contract via First Boston the case must go for the *568 Government. But in light of the findings of the Court of Claims I cannot agree that Wenzell was so interested, within the contemplation of § 434. In my opinion this Court’s contrary conclusion rests upon too loose a view of the controlling statutory phrase.

Referring to the period of Wenzell’s governmental service, the Court of Claims concluded:

“There is not a shadow of evidence that it [First Boston] had any agreement or commitment, written or oral, formal or informal, contingent or otherwise that, in the event that the proposal [of the Dixon-Yates group] which was in preparation when Wen-zell’s Government employment ended should result in negotiations which should, in the course of events, result in a contract, First Boston would be given the opportunity to earn a commission by selling the bonds of the corporation [Mississippi Valley] which would be formed to sign and perform the contract. The evidence is perfectly plain that there was no such agreement or understanding.” 175 F. Supp., at 518.

I do not understand the Court to take issue with this conclusion or with any of the findings of the Hearing Examiner on which it was based. It could not well do so,' cf. Commissioner v. Duberstein, 363 U. S. 278 ; nor does the Government ask this. Rather, the Court finds the prohibited “indirect interest” to consist of Wenzell’s expectation in the probability that First Boston, by virtue of its reputation in the field of private power financing and its having previously arranged the financing for a similar project, would eventually share in the financing of this venture.

I do not believe that such a probability alone gives rise to a contaminating interest under § 434. The fact that the probability eventuated into actuality after Wenzell’s *569 government service terminated can hardly be relevant, for what the Court, under its view of the statute, correctly says as to the immateriality of First Boston’s later waiver of commissions must surely also work in reverse. Whether or not a prohibited interest exists must be determined as of the period during which an individual is acting for the Government. And when the asserted interest arises “indirectly” by way of a subcontract, its existence can, in my opinion, only be found in some commitment, arrangement, or understanding obtaining at that time between the prime contractor and subcontractor. 3 I believe this latter proposition is supported by persuasive considerations.

First. It fits the language of § 434, whereas the Court’s view does not. The statute does not speak of the disqualifying factors in terms of expectations or probabilities, but imports a precise standard, that is, a present status or pecuniary interest arising from some existing relationship with the business entity contracting with the Government. Certainly this is true as to an “officer,” “agent,” or “member” of the contracting enterprise. It is equally true of one disqualified by reason of “being . . . directly . . . interested in the pecuniary profits or contracts” of such an entity. I can see no reason why it should not also be true as to one “indirectly” so interested, requiring in this instance proof of some then-existing arrangement between Mississippi Valley and First Boston. I do not mean to suggest that such an arrangement must be evidenced by a formal agreement, for of course any sort of tacit understanding or “gentlemen’s agreement” will suffice. But here the Court of Claims has expressly found against the existence of any such thing.

*570 Second. The view which I take of the matter also fits the purposes of § 434. The policy and rationale of the statute are clear: an individual who negotiates business for the Government should not be exposed to the temptation which might be created by a loyalty divided between the interest of the Government and his own self-interest; the risk that the Government will not be left with the best possible transaction is too great. In terms of these factors, a finding of some commitment, arrangement or understanding between the prime contractor and the subcontractor should be required when the contracting officer’s adverse interest arises by way of a subcontract, since only where some such arrangement exists can the officer be taken to have known that any undue benefit he confers on the prime contractor will not eventually redound to the profit of some other competing subcontractor.

Here, for instance, it was found below that Mississippi Valley “a month after Wenzell’s Government employment had terminated . . . felt perfectly free to give the bond-selling business to whomever it pleased.” 175 F. Supp., at 518. Hence if Wenzell did in fact confer some undue benefit on Mississippi during the term of his government service (although none is suggested), he must have known that he was conferring that benefit at large, and that if First Boston later were to share in it this would only be the consequence of its having successfully competed against other investment bankers with similar qualifications. Furthermore, where the government officer’s eventual indirect participation in the contract which he has negotiated (by hypothesis improperly) depends on the chance of competition after he has lost the leverage which his position gave, then it would be subject to the additional hazard that although the contractor has received a boon at his hands, all the subcontractor receives is such a normal subcontract as he might have had in any case.

*571 Third. The Court’s interpretation of § 434 introduces unnecessary and undesirable uncertainties into the statute. Instead of presenting the individual concerned or the trier of fact with a definite standard for determining whether a disqualifying interest of this kind is present— the existence vel non of a commitment or undertaking between the primary and secondary contractors — the question is left at large. The opinion in this case indeed highlights the matter. For after apparently agreeing that a “mere hope” that First Boston might share in the financing of the power contract would not be enough, the Court goes on to describe that eventuality in a variety of ways — that there was “a substantial probability” of it; that it was “probable”; that “it seemed likely”; that it “stood a good chance” of coming to pass; and that it might simply follow from the “ 'logic of circumstances’ ” as a “ ‘substantial possibility.’ ”

Such uncertainty, inherent in the Court’s view of the statute, is bound to cause future confusion in an area where the line of demarcation should be clear cut. As time goes on it will face many conscientious persons with the kind of close and subtle niceties which, as every judge and lawyer knows, often attend a matter of possible disqualification. Such illusive factors should not be imported into a statute governing the conduct primarily of laymen serving the Government.

Fourth. I think there is affirmative ground in the pattern of conflict-of-interest legislation for not attributing to Congress the purpose which the Court here does. The statute in question is the most general conflict-of-interest enactment, but there are other provisions of law, as well as federal regulations, which also deal with the subject. Particularly 5 U. S. C. § 99 and 18 U. S. C. § 284 indicate a different approach to the problem. The two statutes disqualify former officers and employees of governmental agencies or departments for a period of two years from *572 prosecuting or aiding in any way in the prosecution of a claim which had been pending at the time of their employment. A similar approach is suggested by this Court’s Rule 7 which prohibits clerks and secretaries from practicing before this Court for a period of two years after leaving the Court, and from participating in any way in a case which was before the Court during the term of their employment. Cf. Canon 36 of the Canons of Professional Ethics of the American Bar Association.

The interpretation which the Court today gives 18 U. S. C. § 434 , if it is to be taken as more than a disposition of this particular controversy, will go a long way to assimilating that statute in practical effect to the absolute disqualification type of provision, for certainly where criminal sanctions are involved no prudent man will risk later acquiring an interest in a contract which he helped to negotiate during a previous term of government employment. Whether such a rigid rule, of a kind traditional in the legal profession, should also be regarded as one of general morality in the public service may, of course, well be debated. However, Congress did not, in my view, enact this precept into law in the present statute, and where it has enacted this policy it has done so with a clarity and precision which I feel the present reading of § 434 lacks.

I would affirm.

Wenzell's superiors in the Government were fully aware of his connection with First Boston and of the possibility that First Boston might later figure in the financing of the contemplated private power project; and with such knowledge they affirmatively acquiesced, and indeed encouraged, his continuing in his consultative role. The power contract, which the Government recognizes was the product of hard bargaining and implicitly concedes was fair, was eventually terminated only because the Government had lost interest in it. The defense of illegality was raised for the first time in this suit, and only after a political storm had arisen over the public versus private power issue. Nevertheless I think the Court is right in considering that all these factors are rendered immaterial by the statute in question.

Ҥ 434. Interested persons acting as Government agents.

“Whoever, being an officer, agent or member of, or directly or indirectly interested in the pecuniary profits or contracts of any corporation, joint-stock company, or association, or of any firm or partnership, or other business entity, is employed or acts as an officer or agent of the United States for the transaction of business with such business entity, shall be fined not more than $2,000 or imprisoned not more than two years, or both.”

Whether absence of knowledge of such an arrangement on the part of the individual concerned would be a defense is a matter not presented by this case.