b'May 22, 1979\n\n79-35\n\nMEMORANDUM OPINION FOR THE DEPUTY\nATTORNEY GENERAL\nRight to Financial Privacy Act of 1978 (12 U.S.C.\n\xc2\xa7 3401)\xe2\x80\x94Banks\xe2\x80\x94Disclosure of Customer Financial\nRecords\n\nThis responds to your request for our opinion o f April 30 on the follow\xc2\xad\ning questions concerning the Right to Financial Privacy Act (A ct):1\n(1) To what extent does the Act affect the ability o f a bank\nsupervisory agency to report to the Department o f Justice viola\xc2\xad\ntions o f the law that it uncovers?\n(2) W hat kinds o f inform ation may be included as part o f the\nnotification that is explicitly permitted banks under \xc2\xa7 1113(h)(5)\n(12 U.S.C. \xc2\xa7 3413) or that may be impliedly permitted bank\nsupervisory agencies?\n(3) W hat is the interplay o f \xc2\xa7 1112 (12 U .S.C . \xc2\xa7 3412) o f the\nAct and the ability o f bank supervisory agencies to notify the\nDepartment o f possible offenses without giving notice to\ncustomers?\nThese issues arise because o f the restrictions the Act has placed on\nFederal agencies\xe2\x80\x99 access to and dissemination o f the financial records o f\nbank custom ers.2\nOur conclusions may be summarized as follows: first, a report that a\ncustomer\xe2\x80\x99s financial records may relate to a criminal offense, when based\non a summary or analysis o f the records, is itself a \xe2\x80\x9c financial record\xe2\x80\x9d\nwithin the meaning o f \xc2\xa7 1102(2); second, with the exception o f \xc2\xa7 1113(h),\n\n1 The Right to Financial Privacy Act, 12 U .S.C . \xc2\xa7 3401 et seq., was enacted as Title XI of\nthe Financial Institutions Regulatory Act o f 1978, Pub. L. No. 95-630, 92 Stat. 3697. The\nsection references in this opinion are to those in title XI.\n1 In \xc2\xa7 1101(4)\xe2\x80\x94(5) o f the A ct, a \xe2\x80\x9c custom er\xe2\x80\x9d means an individual or a partnership o f five or\nfewer individuals, who used or is using any service o f a financial institution. T he financial\nrecords o f corporations, larger partnerships, or other legal entities are not covered and access\nto such records is not affected.\n\n217\n\n\x0cthe procedures in \xc2\xa7 1112 are the only ones expressly provided for a super\xc2\xad\nvisory agency to make such a report to a law enforcement agency; third,\nnotwithstanding \xc2\xa7 1112, implied authority for a bank supervisory agency\nto make such a report exists in a narrow class o f cases, namely, possible\nviolations o f criminal statutes that are part o f the regulatory system en\xc2\xad\nforced by the supervisory agency; fourth, the report o f possible criminal\noffenses expressly permitted by \xc2\xa7\xc2\xa7 1103(c) and 1113(h)(5), and impliedly\npermitted for \xe2\x80\x9c regulatory\xe2\x80\x9d crimes, may be specific enough to permit the\nlaw enforcement agency to request the primary records but may not be so\ndetailed as to am ount to a transfer o f the substance o f the original records.\nWe are informed by your staff that the background to your request is as\nfollows. Before the enactm ent o f the A ct, a supervisory agency routinely\ninspected custom er records in the course o f examining the financial in\xc2\xad\nstitutions under its charge.3 W hen this led the agency to believe that a\nFederal offense might have been committed by the customer or others, it\nwould report to the proper Federal enforcement agency. The report would\nbegin with a summary o f the reasons for believing that an offense had\nbeen committed and would proceed with a detailed analysis o f the sup\xc2\xad\nporting customer records involved. The offenses tended to fall into two\ngroups. The first involved misuse o f authority by an officer or employee\no f the financial institution, whether or not in concert with a custom er.4\nThe second involved offenses not related to the management o f the institu\xc2\xad\ntion. We are informed that referrals by supervisory agencies o f offenses\nnot involving the financial institution were rare. Accordingly, this opinion\nwill focus on the authority o f the supervisory agencies to notify law en\xc2\xad\nforcement agencies o f offenses affecting the financial institution and the\nauthority o f the law enforcement agencies to receive such referrals.\nThe extent to which the Act affects the ability o f a bank supervisory\nagency to report violations to the Departm ent o f Justice depends on four\nfactors: the ability o f the supervisory agency to report before the Act was\npassed; the A ct\xe2\x80\x99s definition o f financial record inform ation; its restric\xc2\xad\ntions on the supervisory agencies\xe2\x80\x99 access to records, and the A ct\xe2\x80\x99s re\xc2\xad\nstrictions on their referral power.\n* Section 1101(6) o f the Act defines \xe2\x80\x9c supervisory agency\xe2\x80\x9d to mean:\nwith respect to any particular financial institution any o f the following which has statutory\nauthority to examine the financial condition or business operations o f that institution\xe2\x80\x94\n(A) the Federal Deposit Insurance C orporation;\n(B) the Federal Savings and L oan Insurance C orporation;\n(C) the Federal H om e L oan Bank Board;\n(D) the National Credit Union Adm inistration;\n(E) the Board o f G overnors o f the Federal Reserve System;\n(F) the C om ptroller o f the Currency;\n(G) the Securities and Exchange Commission;\n(H) the Secretary o f the Treasury, with respect to the Bank Secrecy Act and the\nCurrency and Foreign Transactions Reporting Act (Pub. L. N o. 91-508, title I and\nII); or\n(I) any State banking or securities departm ent or agency.\n4 See. e.g., 18 U .S.C . \xc2\xa7\xc2\xa7 656-657, 1005-1006.\n\n218\n\n\x0cThe supervisory agencies are authorized by statute to examine the af\xc2\xad\nfairs o f financial institutions under their jurisdiction.5 The examining\nfunction has included reporting to the Department o f Justice irregularities\nthat may am ount to violation o f the criminal statutes applicable to finan\xc2\xad\ncial institutions.6 These statutes were originally enacted as part o f the\nFederal regulatory system for financial institutions. Their purpose is to\nprotect the solvency and integrity o f the institutions against willful misuse\no f their funds.7 It was considered an integral part o f the supervisory agen\xc2\xad\ncies\xe2\x80\x99 duty to protect financial institutions and their depositors to inform\nthe proper law enforcement authorities o f those instances o f mismanage\xc2\xad\nment that appeared to be criminal. As stated in Cooper v. O \xe2\x80\x99Conner, 99 F.\n(2d) 135, 140 (D.C. Cir. 1938):\nBy reason o f their performance o f duties clearly assigned, the facts\nand evidence which suggest criminal conduct upon the part o f\nbank officials are revealed to such [Federal] officers. It is the duty\no f all citizens to reveal such evidence, o f which they may have\nknowledge, at the risk o f being guilty o f misprision o f felony for\nfailing to do so. In the case o f an official, his failure to act under\nsuch circumstances would in addition, constitute serious\nmalfeasance in office. In the present case, appellees were charged\nwith responsibility for the collection and conservation o f the assets\no f a bank. It would be absurd to contend that the duties o f such\nan officer\xe2\x80\x94so charged and so peculiarly aware o f facts suggesting\nthat certain persons were engaged in the spoliation o f those very\nassets\xe2\x80\x94should stop abruptly at the point where the initiation of\ncriminal proceedings became necessary to protect such assets.\nThere was no statutory restriction on their power to report offenses. See,\nBank o f America National Trust & Savings Assn. v. Douglas, 105 F. (2d)\n100, 103-104 (D.C. Cir. 1939); 29 Op. A tt\xe2\x80\x99y Gen. 555 (1912).\nWe must consider, then, the extent to which Congress has affected the\nprevious power arid duty o f the supervisory agencies to report violations\no f law to this Departm ent. The Act affects this power in three ways. First,\n\xc2\xa7\xc2\xa7 1102 and 1113 restrict the conditions under which the supervisory agen\xc2\xad\ncies may obtain access to the records in the hands o f the financial institu\xc2\xad\ntion. Second, \xc2\xa7\xc2\xa7 1112 and 1113(h) place express restrictions on\ndisseminating inform ation once access has been obtained. Third, \xc2\xa7 1101(2)\ndefines the term \xe2\x80\x9c financial record\xe2\x80\x9d broadly enough to include inform a\xc2\xad\ntion derived from the primary records.\n\n\xe2\x80\x99 See, e.g., 12 U .S.C . \xc2\xa7 481 (Com ptroller o f the Currency); 12 U .S.C . \xc2\xa7 1440 (Federal\nHom e Loan Bank Board); 12 U .S.C . \xc2\xa7 1756 (National Credit Union Adm inistration); 12\nU .S.C. \xc2\xa7 1730(m)(l) (Federal Savings and Loan Insurance Corporation); 12 U .S.C . \xc2\xa7 1820(b)\n(Federal Deposit Insurance C orporation).\n\xe2\x80\x98 See 18 U .S.C . \xc2\xa7\xc2\xa7 213, 215, 656-657, 1005-1006.\n1 See, e.g., United Slates v. Darby, 289 U .S. 224 (1933); United States v. Corbett, 215 U .S.\n233 (1909); United States v. Manderson, 511 F. (2d) 179 (5th Cir. 1975); United States v.\nWilson, 500 F. (2d) 715 (5th Cir. 1974); Weir v. United States, 92 F. (2d) 634 (7th Cir. 1937).\n\n219\n\n\x0cInitial access by a Governm ent agency to records in the hands o f a\nfinancial institution is governed by \xc2\xa7 1102. It prescribes the general re\xc2\xad\nquirement that access must be obtained through one o f the formal\nmethods set out in \xc2\xa7\xc2\xa7 1104-1108, subject to notice to the customer and to\njudicial supervision under \xc2\xa7\xc2\xa7 1109-1110. It further provides that, no t\xc2\xad\nwithstanding the general requirem ent, initial access may be obtained\nthrough the exceptions contained in \xc2\xa7\xc2\xa7 1103(c)\xe2\x80\x94\n(d), 1113, and 1114. O f\nthese, \xc2\xa7 1113(b) and (h) are relevant to the functions o f the supervisory\nagencies.\nSection 1113(b) provides:\nNothing in this title prohibits examination by or disclosure to any\nsupervisory agency o f financial records or inform ation in the ex\xc2\xad\nercise o f its supervisory, regulatory, or m onetary functions with\nrespect to a financial institution.\nThis is intended to give the supervisory agencies access to customer records\nin order to conduct examination.\nIn addition, \xc2\xa7 1113(h)(1)(A) permits a Governm ent authority to have\naccess to customer records in connection with a lawful examination, in\xc2\xad\nspection, or investigation o f the institution or o f a legal entity not a\ncustomer.* The investigating agency must certify that the investigation is\nlawful; transfer o f the primary records to another agency is restricted.\n\xc2\xa7 1113(h)(2), (4). However, under \xc2\xa7 1113(h)(5) the agency in possession\nmay notify another agency with proper jurisdiction \xe2\x80\x9c that financial records\nobtained pursuant to this subsection may relate to a potential civil,\ncriminal, or regulatory violation by a custom er,\xe2\x80\x9d and the notified agency\nmay then seek access under the procedures provided by the Act. By its\nterms, \xc2\xa7 1113(h)(1)(A) may be used as authority to examine a financial in\xc2\xad\nstitution, thereby expressly permitting a supervisory agency to notify a law\nenforcement agency under \xc2\xa7 1113(h)(5). We are informed, however, that\nthe supervisory agencies prefer to obtain access under \xc2\xa7 1113(b) in order to\navoid the certification process required by \xc2\xa7 1103(b) and\xc2\xa7 1113(h)(2).\nUnless one o f the exceptions in \xc2\xa7 1113-1114 applies, \xc2\xa7 1112 o f the Act\nprovides the mechanism for disseminating financial records obtained from\nthe acquiring agency to other agencies. U nder subsection (a), the\ntransferor agency must certify that the records are relevant to a legitimate\nlaw enforcement inquiry within the jurisdiction o f the recipient agency.\nUnder subsection (b)-(c), the transferor must notify the customer within\n14 days unless a court authorizes delayed notice.9 Subsection (d) expressly\nexcludes from the A ct\xe2\x80\x99s restrictions the exchange o f inform ation among\nsupervisory agencies.\n\n\' This m eans, in effect, a partnership o f more than five individuals or a legal person not an\nindividual. See note 2, supra.\n\' T he reasons justifying delayed notice provided by \xc2\xa7 1109(a)(3) are:\n(3) there is reason to believe th at such notice will result in\xe2\x80\x94\n(Continued)\n\n220\n\n\x0cAs reported to the House, \xc2\xa7 1112 o f the Act provided:\nNothing in this title prohibits any supervisory agency from ex\xc2\xad\nchanging examination reports or other information with another\nsupervisory agency, or from supplying information to a prosecu\xc2\xad\ntion or enforcement agency concerning a possible violation o f a\nregulation or statute administered by the supervisory agency.\n[Emphasis added.]10\nThis language would have expressly continued the existing referral prac\xc2\xad\ntices o f the supervisory agencies for offenses relating to the financial in\xc2\xad\nstitution. It was deleted when the present \xc2\xa7 1112 was introduced in an\namendment offered by Representatives Goldwater and M cKinney." The\neffect o f the am endm ent, Representative Goldwater explained, \xe2\x80\x9c is to\nforce an agency to justify beforehand its request for inform ation, leave a\npaper trail o f the transaction, and only upon court agreement not notify\nan individual.\xe2\x80\x9d 12 Representative McKinney introduced a letter from As\xc2\xad\nsistant A ttorney General Wald supporting the amendment; the letter did\nnot distinguish referrals by supervisory agencies from other interagency\ntransfers.13\nThe term \xe2\x80\x9c financial records\xe2\x80\x9d is defined by \xc2\xa7 1101(2) o f the Act to in\xc2\xad\nclude \xe2\x80\x9c an original of, a copy of, or information known to have been\nderived fro m \xe2\x80\x9d any record held by a financial institution concerning its\nrelationship with a customer. [Emphasis added.] The emphasized\nlanguage was added on the House floor in an amendment by Represent\xc2\xad\native Pattison, but is not discussed in the legislative history.14 On its face,\nit is broad enough to include both summaries o f customer records and\nanalyses o f the\' records showing that the customer may have engaged in\nany particular activity, including commission o f a crime.\nThere are several reasons for a broad reading of this language. First,\none principal purpose o f the Act was to restrict the ability o f the Govern\xc2\xad\nment to reconstruct an individual\xe2\x80\x99s affairs from his financial records.15\nDerived information and its use are at the center o f what Congress con\xc2\xad\nsidered to be the threat to privacy under prior law. Second, \xc2\xa7\xc2\xa7 1103(c)\n\n(Continued)\n(A) endangering life o r physical safety o f any person;\n(B) flight from prosecution;\n(C) destruction o f or tam pering with evidence;\n(D) intim idation o f potential witnesses; or\n(E) otherwise seriously jeopardizing an investigation or official proceeding or un\xc2\xad\nduly delaying a trial or ongoing official proceeding, to the same extent as the cir\xc2\xad\ncumstances in the preceding subparagraphs.\n10 124 C o n g r e s s i o n a l R e c o r d H. 11728 (d a ily e d ., O ct. 5, 1978).\n11 124 C o n g r e s s i o n a l R e c o r d H . 11733, 11734 (d a ily e d ., Oct. 5, 1978).\n11 124 C o n g r e s s i o n a l R e c o r d H . 11733 (d a ily e d ., Oct. 5, 1978).\n" 124 C o n g r e s s i o n a l R e c o r d H. 11734 (d a ily e d ., Oct. 5, 1978).\n14 124 C o n g r e s s i o n a l R e c o r d H . 11735 ( d a ily e d . , Oct. 5, 1978).\n11 See H. Rept. 1383, 95th C ong., 2d sess., at 33-35; 124 C o n g r e s s i o n a l R e c o r d\nH. 11731-32 (Representatives Pattison, Rousselot), 11739 (Representative Cavanaugh),\n11739 (Representatives Rousselot and Pattison), (daily ed., Oct. 5, 1978).\n\n221\n\n\x0cand 1113(h)(5) specifically permit a financial institution or a supervising\nagency to report to a law enforcement agency, in limited circumstances,\nthat financial records show a crime may have been comm itted, without\nnotifying the custom er. This express grant o f auihority would not be\nnecessary if the reports were not deemed to be disclosure o f a \xe2\x80\x9c record\xe2\x80\x9d\notherwise prohibited by the Act. Third, the Pattison am endm ent, as a\nwhole, had the purpose o f encouraging customers to seek judicial review\nand requiring agencies to justify access to records with greater particu\xc2\xad\nlarity.16 Although the scope o f the phrase \xe2\x80\x9c inform ation known to be de\xc2\xad\nrived from * * *\xe2\x80\x9d is not discussed, the phrase was enacted as part o f an\neffort to make it more difficult for the Governm ent to obtain or use finan\xc2\xad\ncial inform ation without notice to the customer.\nThe argument to the contrary is that the operation o f \xc2\xa7 1112 requires\nthat a summary or analysis, if sufficiently general, need not be considered\na \xe2\x80\x9c record.\xe2\x80\x9d Representative Goldwater explained that \xc2\xa7 1112\xe2\x80\x99s purpose\nwas to require the agency receiving the financial inform ation to justify its\nneed.17 The transferring agency is required to certify that the transfer is for\na legitimate law enforcement purpose. To do so, the receiving agency must\nbe able to explain to the transferring agency what it wants and why. This,\nin turn, requires that the transferring agency first have informed the\nreceiving agency that it has available financial information that may be\nrelevant to a legitimate law enforcement inquiry.\nThis argument, in our view, does not overcome the action o f the House\n(under \xc2\xa7 1103(c) and \xc2\xa7 1113(h)(5)) in expressly permitting reports that a\ncrime may have been committed and deleting similar express authority in\n\xc2\xa7 1112(d). These actions would have been superfluous if \'such a report,\nbased on examination and analysis o f financial records, was not itself a\nrecord. It is consistent, moreover, with the A ct\xe2\x80\x99s general purpose o f limit\xc2\xad\ning Government access to financial data to construe the statute to prevent\none agency from informing another that an individual\xe2\x80\x99s financial records\nshould make him an object o f the latter\xe2\x80\x99s agency\xe2\x80\x99s suspicions without in\xc2\xad\nforming the individual. We therefore conclude that the definition of\n\xe2\x80\x9c financial record\xe2\x80\x9d in \xc2\xa7 1102(2) includes a report that analysis o f the\nprimary records shows a custom er to have possibly committed a crime.\nThus, the statement that a custom er\xe2\x80\x99s records may relate to a Federal\ncrime, when based on examination o f those records, is itself a financial\nrecord under the Act. The Act expressly permits an agency that has ob\xc2\xad\ntained access to the primary financial records under \xc2\xa7 1113(h) to notify a\nproper law enforcement agency o f this conclusion, and it expressly permits\ntransfer o f any inform ation am ong supervisory agencies. Otherwise, the\nprocedures o f \xc2\xa7 1112(a)-(c) are the A ct\xe2\x80\x99s only explicit mechanism\n\n16 124 C o n g r e s s i o n a l R e c o r d H. 11735 (Representative Pattison) (daily ed., Oct. 5,\n1978).\n" 124 C o n g r e s s i o n a l R e c o r d H. 11733 (d a ily e d ., O ct. 5, 1978).\n\n222\n\n\x0cfor disseminating custom er record inform ation, including derivative infor\xc2\xad\nm ation, from one agency to another. The question thus becomes whether\nCongress intended a further, implicit m ethod o f transfer from the super\xc2\xad\nvisory agencies.\nAs a general m atter, the legislative history o f \xc2\xa7 1112 is clear that implicit\nexceptions to it were not intended. The House was aware that the \xe2\x80\x9c routine\nuse\xe2\x80\x9d exception to the Privacy Act, 5 U .S.C . \xc2\xa7 552a(a)(7), (b)(3), has been\nused to justify exchanges o f inform ation among Federal agencies based on\nimplicit authority. In an exchange among Representatives Rousselot, P at\xc2\xad\ntison, and Cavanaugh on this point, it was clearly stated that \xc2\xa7 1112, as\namended, contained no \xe2\x80\x9c routine use\xe2\x80\x9d exception, and that interagency\ndissemination could only be made with certification by the transferring\nagency and notice to the custom er." W ithout equally clear support de\xc2\xad\nrived from the purpose and legislative history o f the Act, we are unable to\nsay that Congress intended to preserve as implied exceptions to \xc2\xa7 1112 any\npre-enactment practices o f transferring information.\nWe believe, however, that support for implied authority to transfer in\xc2\xad\nformation can be found in the narrow circumstances in which the offense\nreported by a supervisory agency relates to the financial institution\xe2\x80\x99s\noperations. Representative Goldwater stated that his version o f \xc2\xa7 1112 did\nnot apply \xe2\x80\x9c to supervisory agencies properly conducting their responsibili\xc2\xad\nties.\xe2\x80\x9d 19 The proper conduct o f those responsibilities has long been con\xc2\xad\nsidered to include reporting criminal violations o f the banking laws to the\nlaw enforcement agencies.20 Moreover, the Right to Financial Privacy Act\nwas but one title o f 20 in an omnibus statute that was primarily concerned\nwith strengthening the powers o f the supervisory agencies and tightening\nthe restrictions on bank officers, directors, and shareholders.21 The House\nBanking, Finance, and U rban Affairs Committee relied in at least one case\non referrals from a supervisory agency to U.S. Attorneys as indications\nthat a regulatory problem existed.22 It would be anomalous to conclude\nthat a statute intended on the whole to strengthen the regulation o f finan\xc2\xad\ncial institutions was also intended to deprive the regulators o f one o f their\noldest and strongest weapons for dealing with the most serious cases of\nmanagement abuse.\nConsidering the Financial Institutions Regulatory Act as a whole, we\nconclude that Congress did not intend to prohibit a supervisory agency\nfrom reporting to the proper law enforcement agency that it has dis\xc2\xad\ncovered in a custom er\xe2\x80\x99s records evidence that a criminal statute that is part\n\n11 124 C o n g r e s s i o n a l R e c o r d H. 11739 (daily ed., O ct. 5, 1978).\n19 124 C o n g r e s s i o n a l R e c o r d H. 11733 (daily ed., O ct. 5, 1978).\n10 See p. 4, supra.\n21 See generally Pub. L. No. 95-630, Financial Institutions Regulatory and Interest Rate\nControl Act o f 1978, Titles I-1II, IV, VI-1X, 92 Stat. 3461; H. Rept. 1383, 95th C ong., 2d\nsess., at 4-22 (1978).\n\xe2\x80\x9c H. Rept. 1383, 95th C ong., 2d sess., at 13 (1978).\n\n223\n\n\x0co f its regulatory system has been violated. Such reports are an integral part\no f the process o f regulating financial institutions, and they further the\nregulatory agencies\xe2\x80\x99 primary mission o f protecting the soundness o f these\ninstitutions. Notwithstanding \xc2\xa7 1112, the supervisory agencies have im\xc2\xad\nplicit authority to inform the proper law enforcement agency that their in\xc2\xad\nspection o f customer records shows that an individual may have violated a\npriminal statute governing the management o f financial institutions they\nregulate.\nWe must, however, point out that the contrary argument is strongly\ngrounded on the language and legislative history o f the Act. We cannot\nsay with certainty that the courts would not conclude that a supervisory\nagency that has obtained access under \xc2\xa7 1113(b) must give notice under\n\xc2\xa71112 even when reporting evidence o f a crime relating to the manage\xc2\xad\nment o f the institution. Furtherm ore, we are not aware o f anything in the\nlanguage or legislative history o f the Act that would lead to the conclusion\nthat supervisory agencies have implied authority to report that crimes\nunrelated to their supervisory function may have been committed on the\nbasis o f an analysis o f a custom er\xe2\x80\x99s financial records.\nThe next question is the scope o f the inform ation that may be included\nin a report to a law enforcement agency under \xc2\xa7 1103(c) or \xc2\xa7 1113(h)(5), or\nin a report under the supervisory agencies\xe2\x80\x99 implied authority. These provi\xc2\xad\nsions permit notice to be given so that the law enforcement agency may\nthen seek access to the records under the formal provisions o f the Act,\nwhich require customer notice.\nThe permissible scope o f referral therefore lies somewhere between two\npoles. On the one hand, a report cannot be so detailed as to effectively\nsubstitute for access to the records themselves. This would permit the for\xc2\xad\nmal access procedures to be bypassed.23 On the other hand, the report\nmust be sufficiently detailed in order to inform the law enforcement\nagency that reasonable grounds exist to believe that an individual has vio\xc2\xad\nlated the law. Since the referral provisions contem plate access under the\nAct, it would be reasonable to identify the records and provide an explana\xc2\xad\ntion in sufficient detail to permit the law enforcement agency to support a\nformal proceeding for access. This requires a written statement giving a\n\xe2\x80\x9c demonstrable reason\xe2\x80\x9d to believe that the records are relevant to a\nlegitimate law enforcement inquiry.24 While the legislative history is silent\non the am ount o f detail that must be provided, the language of \xc2\xa7 1110(c)\nclearly contem plates a factual showing beyond mere conclusions. We sug\xc2\xad\ngest that this middle ground would be occupied by a description o f the pat\xc2\xad\ntern o f transactions shown in the custom er records that does not discuss\n\n21 Indeed, \xc2\xa7 1113(h)(4) explicitly forbids transfer except to facilitate investigation o f the in\xc2\xad\nstitution or a legal entity not a customer.\nAct, \xc2\xa7 1110(bMc).\n\n224\n\n\x0cparticular, identifiable transactions, coupled with the supervisory agency\xe2\x80\x99s\nanalysis of why this may relate to a potential violation.\nM ary C. L aw ton\n\nDeputy Assistant A ttorney General\nOffice o f Legal Counsel\n\n225\n\n\x0c'


b'Assertion of Constitutionally Based Privilege Over\nReagan Administration Records\nIt is legally permissible for President Bush to assert constitutionally based privilege in concurrence with\nformer President Reagan\xe2\x80\x99s assertion of constitutionally based privilege over certain Reagan Administration documents that are otherwise required to be released by the National Archives and Records\nAdministration under the Presidential Records Act.\n\nJanuary 12, 2004\n\nLETTER OPINION FOR THE COUNSEL TO THE PRESIDENT\nYou have requested my advice as to whether it is legally permissible for the\nPresident to assert constitutionally based privilege with respect to certain Reagan\nAdministration documents that are otherwise required to be released by the\nNational Archives and Records Administration (\xe2\x80\x9cNARA\xe2\x80\x9d) under the Presidential\nRecords Act (\xe2\x80\x9cPRA\xe2\x80\x9d), 44 U.S.C. \xc2\xa7\xc2\xa7 2201\xe2\x80\x932207 (2000). Former President Reagan\nhas asserted constitutionally based privilege with respect to eleven documents.\nUnder the applicable executive order, there is a strong presumption that the\nincumbent President will concur in the assertion of constitutionally based privilege\nby a former President. See Exec. Order No. 13233, \xc2\xa7 4, 3 C.F.R. 815, 817 (2002)\n(\xe2\x80\x9cAbsent compelling circumstances, the incumbent President will concur in the\nprivilege decision of the former President\xe2\x80\x9d). Thus, the specific legal question\npresented to me is whether it would be legally permissible for the President to\nassert constitutionally based privilege in concurrence with former President\nReagan\xe2\x80\x99s assertion.\nThe documents subject to former President Reagan\xe2\x80\x99s assertion are all internal\nWhite House deliberative documents either addressed to the President or other\nsenior White House officials or recording deliberations involving the President or\nother senior White House officials, except for one deliberative memorandum from\nthe Attorney General to the President. They all were prepared in connection with\npresidential decisionmaking. The documents fall squarely within the scope of the\npresidential communications privilege. See generally United States v. Nixon, 418\nU.S. 683, 705\xe2\x80\x9313 (1974); Nixon v. Adm\xe2\x80\x99r of Gen. Servs., 433 U.S. 425, 446\xe2\x80\x9355\n(1977). The Supreme Court has recognized\nthe necessity for protection of the public interest in candid, objective,\nand even blunt or harsh opinions in Presidential decisionmaking.\nA President and those who assist him must be free to explore alternatives in the process of shaping policies and making decisions and to\ndo so in a way many would be unwilling to express except privately.\nThese are the considerations justifying a presumptive privilege for\nPresidential communications. The privilege is fundamental to the\n\n1\n\n\x0cOpinions of the Office of Legal Counsel in Volume 28\n\noperation of Government and inextricably rooted in the separation of\npowers under the Constitution.\nUnited States v. Nixon, 418 U.S. at 708. The presidential communications privilege is not limited to advice and other communications made directly to the\nPresident. The privilege also applies to other communications made in the course\nof presidential decisionmaking, such as deliberative comments made within the\nWhite House or communicated to White House staff in connection with the\npreparation of advice to the President. The Supreme Court has recognized that the\nprivilege covers \xe2\x80\x9ccommunications between high Government officials and those\nwho advise and assist them in the performance of their manifold duties.\xe2\x80\x9d Id. at\n705. See also In re Sealed Case, 121 F.3d 729, 757 (D.C. Cir. 1997) (the privilege\n\xe2\x80\x9cextends to cover communications which do not themselves directly engage the\nPresident, provided the communications are either authored or received in\nresponse to a solicitation by presidential advisers in the course of gathering\ninformation and preparing recommendations on official matters for presentation to\nthe President\xe2\x80\x9d). The Supreme Court has stated that \xe2\x80\x9cthe importance of this\nconfidentiality is too plain to require further discussion.\xe2\x80\x9d United States v. Nixon,\n418 U.S. at 705.\nIn addition to being subject to the presidential communications privilege, these\ndeliberative and predecisional documents are also subject to the government-wide\ndeliberative process component of the President\xe2\x80\x99s constitutionally based privileges. See generally Confidentiality of the Attorney General\xe2\x80\x99s Communications in\nCounseling the President, 6 Op. O.L.C. 481, 484\xe2\x80\x9390 (1982); Congressional\nRequests for Confidential Executive Branch Information, 13 Op. O.L.C. 153, 154\xe2\x80\x93\n57 (1989). Counsel for former President Reagan also relied on the attorney-client\nprivilege and the attorney work-product doctrine in support of the former President\xe2\x80\x99s privilege assertion. See Letter for Gary M. Stern, General Counsel, NARA,\nfrom John A. Mintz at 2 (Jan. 8, 2004). There is no need to consider the applicability of those privileges in light of the applicability of the presidential communications and deliberative process privileges.\nFinally, the fact that these documents are from a prior presidential administration and date from the 1980s does not preclude the assertion of privilege. The\nSupreme Court has held that \xe2\x80\x9cthe privilege survives the individual President\xe2\x80\x99s\ntenure.\xe2\x80\x9d Nixon v. Adm\xe2\x80\x99r, 433 U.S. at 449 (quoting Solicitor General\xe2\x80\x99s Brief at 33).\nThe Court expressly adopted the Solicitor General\xe2\x80\x99s rationale:\nThis Court held in United States v. Nixon . . . that the privilege is\nnecessary to provide the confidentiality required for the President\xe2\x80\x99s\nconduct of office. Unless he can give his advisers some assurance of\nconfidentiality, a President could not expect to receive the full and\nfrank submissions of facts and opinions upon which effective discharge of his duties depends. The confidentiality necessary to this\n\n2\n\n\x0cAssertion of Privilege Over Reagan Administration Records\n\nexchange cannot be measured by the few months or years between\nthe submission of the information and the end of the President\xe2\x80\x99s tenure; the privilege is not for the benefit of the President as an individual, but for the benefit of the Republic.\nId. at 448\xe2\x80\x9349 (quoting Solicitor General\xe2\x80\x99s Brief at 33) (emphasis added).\nThe documents that are subject to the privilege claim are not being sought by a\ncoordinate branch of the government. Therefore, I do not believe there is a need to\nconsider whether any asserted justification for disclosure might outweigh the\nPresident\xe2\x80\x99s constitutionally based interest in the confidentiality of deliberations\nrelating to presidential decisions. However, even if a court were to conclude that\nassertions of constitutionally based privileges in connection with NARA releases\nunder the PRA are subject to a balancing test, I believe that the court would find\nthat the confidentiality interests underlying the assertion of privilege with respect\nto these candid, highly deliberative presidential decisionmaking documents\noutweigh Congress\xe2\x80\x99s generalized interests, in enacting the PRA, in providing for\npublic release of presidential records.\nIn conclusion, it is my opinion that it is legally permissible for the President to\nassert constitutionally based privilege in these circumstances.\nJACK L. GOLDSMITH III\nAssistant Attorney General\nOffice of Legal Counsel\n\n3\n\n\x0c'


b'Application of 18 U.S.C. \xc2\xa7 203 to Former Employee\xe2\x80\x99s\nReceipt of Attorney\xe2\x80\x99s Fees in Qui Tam Action\nTitle 18, section 203, U.S. Code, would not bar a former federal employee from sharing in attorney\xe2\x80\x99s\nfees in a qui tam action, provided that those fees, calculated under the lodestar formula, are prorated\nsuch that the former employee does not receive any fees attributable to his time in the government.\n\nFebruary 28, 2002\n\nMEMORANDUM OPINION FOR THE\nDEPUTY GENERAL COUNSEL AND DESIGNATED AGENCY ETHICS OFFICIAL\nEXECUTIVE BRANCH DEPARTMENT *\nYou have asked for our opinion whether, under 18 U.S.C. \xc2\xa7 203 (1994), a\nformer federal employee may share, on a prorated basis, in fees awarded to his\nfirm for representational services in a qui tam action that was pending both during\nperiods in which he was working for the federal government and during a period\nin which he was working for his firm. See Letter for Daniel Koffsky, Acting\nAssistant Attorney General, Office of Legal Counsel, from Deputy General\nCounsel, Executive Branch Department, Re: Request for Written Opinion on\nFormer Employee\xe2\x80\x99s Receipt of Attorney\xe2\x80\x99s Fees (June 6, 2001) (\xe2\x80\x9cDepartment\nLetter\xe2\x80\x9d). We conclude that, subject to the conditions set out below, the statute\nwould not bar his receiving a prorated share of attorney\xe2\x80\x99s fees that are calculated\nunder the lodestar method. 1\nI. Background\nA former employee of your agency is now a member of a law firm that represents relators in a qui tam action. The United States intervened in the action and\nsettled it in April 2000, Department Letter at 1; see 31 U.S.C. \xc2\xa7 3730(b)(2) (1994);\nand the relators have petitioned the court for an award of attorney\xe2\x80\x99s fees to be paid\nby the defendant to the law firm. Id. \xc2\xa7 3730(d); see United States ex rel. Virani v.\nJerry M. Lewis Truck Parts & Equip., Inc., 89 F.3d 574, 578 (9th Cir. 1996). The\npetition seeks \xe2\x80\x9clodestar\xe2\x80\x9d fees calculated as \xe2\x80\x9cthe product of reasonable hours times\n\n*\nEditor\xe2\x80\x99s Note: We are not identifying in the published version of this opinion the Executive\nBranch department that employed the individual who is the subject of the opinion.\n1\nAs you suggest, see Department Letter at 3, 18 U.S.C. \xc2\xa7 205 (1994 & Supp. II 1996) would not be\nimplicated by the former employee\xe2\x80\x99s receipt of fees now, because that provision applies only to current\nfederal employees. See Application of 18 U.S.C. \xc2\xa7 205 to Communications Between the National\nAssociation of Assistant United States Attorneys and the Department of Justice, 18 Op. O.L.C. 212\n(1994).\n\n10\n\n227-329 VOL_26_PROOF.pdf 20\n\n10/22/12 11:13 AM\n\n\x0cApplication of 18 U.S.C. \xc2\xa7 203 to Former Employee\xe2\x80\x99s Receipt of Attorney\xe2\x80\x99s Fees\n\na reasonable rate.\xe2\x80\x9d 2 See Pennsylvania v. Delaware Valley Citizens\xe2\x80\x99 Council for\nClean Air, 478 U.S. 546, 565 (1986) (defining \xe2\x80\x9clodestar\xe2\x80\x9d); see also City of\nBurlington v. Dague, 505 U.S. 557, 560-61, 562, 565 (1992) (distinguishing fees\ncalculated under the lodestar method from \xe2\x80\x9ccertain\xe2\x80\x9d fees, which are \xe2\x80\x9cpayable\nwithout regard to the outcome of the suit,\xe2\x80\x9d and from fees under \xe2\x80\x9cthe contingent-fee\nmodel,\xe2\x80\x9d which \xe2\x80\x9cwould make the fee . . . a percentage of the value of the relief\nawarded in the primary action\xe2\x80\x9d).\nThe former employee worked for the federal government during two separate\nperiods when his current firm was working on the qui tam case. It was during the\nfirst of these periods, in November 1995, that the firm entered the case. The\nformer employee left federal employment in June 1997 and worked for the firm\nfrom July 1997 until December 1999, during which time he took part in the firm\xe2\x80\x99s\nefforts in the case. After a second period of federal employment from December\n1999 until January 2001, he returned to the firm. Department Letter at 1. The fee\npetition covers the firm\xe2\x80\x99s work from November 1995 through April 2000. The\nformer employee seeks to share in the fees awarded, under a formula designed to\nidentify the proportion of the fees attributable to the time he was not employed by\nthe federal government:\nHe is seeking only his partnership share of the fees attributable to the\nactual hours worked by the law firm during the 2\xc2\xbd-year period in\nwhich he was not in Federal service. For example, if the law firm\nworked 100 hours in total on the case, 25 hours of which occurred\nduring that 2\xc2\xbd-year period, the Employee would receive only his\npartnership share of the attorneys\xe2\x80\x99 fees attributable to the 25 hours.\nDepartment Letter at 4.\nThis formula is designed to comply with 18 U.S.C. \xc2\xa7 203(a), which, among\nother things, subjects to criminal penalties anyone who,\notherwise than as provided by law for the proper discharge of official\nduties, directly or indirectly\xe2\x80\x94\n(1) demands, seeks, receives, accepts, or agrees to receive or accept\nany compensation for any representational services, as agent or\nattorney or otherwise, rendered or to be rendered either personally or\nby another\xe2\x80\x94\n***\n2\nHere, the firm has sought an upward adjustment through a multiplier of the lodestar. Our opinion\nshould not be read as addressing the former employee\xe2\x80\x99s receipt of a share in any such adjustment,\nshould the court grant it.\n\n11\n\n227-329 VOL_26_PROOF.pdf 21\n\n10/22/12 11:13 AM\n\n\x0cOpinions of the Office of Legal Counsel in Volume 26\n\n(B) at a time when such person is an officer or employee . . . of\nthe United States in the executive . . . branch of the Government,\nor in any agency of the United States,\nin relation to any proceeding, application, request for a ruling or other determination, contract, claim, controversy, charge, accusation,\narrest, or other particular matter in which the United States is a party\nor has a direct and substantial interest, before any department, agency, court, court-martial, officer, or any civil, military, or naval commission.\nII. Discussion\nAs your letter notes, section 203, at the least, forbids the former employee from\nsharing in fees covering the firm\xe2\x80\x99s work performed while the former employee\nwas in the federal government. Department Letter at 2. The United States was a\nparty to the qui tam case, and section 203 reaches payments for representational\nservices, whether performed personally or by another, in such a matter. Further,\nsection 203 extends to compensation received after an employee leaves federal\nservice, if the payment is for representational services performed during the period\nof federal employment: \xe2\x80\x9c18 U.S.C. \xc2\xa7 203 prohibits a former government employee\nfrom receiving any share of a fee earned by others for work they performed\n[before an agency or court] at the time he was a federal employee. This section\nrequires a law firm which a former government lawyer joins to ensure that the\nlawyer does not receive any share of the firm\xe2\x80\x99s fee attributable to work it performed [before such a forum] at the time the lawyer was with the Federal Government.\xe2\x80\x9d Memorandum for Lovida H. Coleman, Jr., Special Assistant to the\nDeputy Attorney General, from Leon Ulman, Deputy Assistant Attorney General,\nOffice of Legal Counsel, Re: Application of Ethics Act Restrictions to United\nStates Trustees and Supervisors of Trustees at 5 (July 5, 1979). See also Memorandum, Re: Statutory and Ethical Restrictions on Former Non-Legal Government\nOfficers and Employees of the White House Staff at 5 (Feb. 10, 1971) (\xe2\x80\x9cThe\nsection makes it unlawful for a former official to share in any fees received by the\nfirm for services in a matter covered by the statute and performed by the firm at\nany time during the period of his government employment.\xe2\x80\x9d); H.R. Rep. No. 87748, at 20 (1961) (section 203 corrects the omission of the predecessor statute,\nwhich did not cover post-employment receipt of compensation for services\nrendered during the period of government employment).\nThe question here is whether, under the proposed formula for prorating an\naward of attorney\xe2\x80\x99s fees calculated under the lodestar method, the former employee would be receiving compensation for services that were rendered at a time\nwhen he was a federal employee. We have not previously addressed the applica-\n\n12\n\n227-329 VOL_26_PROOF.pdf 22\n\n10/22/12 11:13 AM\n\n\x0cApplication of 18 U.S.C. \xc2\xa7 203 to Former Employee\xe2\x80\x99s Receipt of Attorney\xe2\x80\x99s Fees\n\ntion of section 203 in circumstances where a fee would be calculated under the\nlodestar method and would cover some periods during which a former employee\nworked in the federal government and some periods during which he did not. We\nmust decide whether to follow, in this context, the usual interpretation of section\n203\xe2\x80\x99s application to awards under the contingent fee model. Under that interpretation, for example, it has been \xe2\x80\x9cthe longstanding view of the Office of Legal Counsel\nthat \xc2\xa7 203 prohibits an individual entering government employment from maintaining a contingent interest in fees recoverable in a proceeding involving the United\nStates.\xe2\x80\x9d Application of 18 U.S.C. \xc2\xa7 203 to Maintenance of Contingent Interest in\nExpenses Recoverable in Litigation Against the United States, 22 Op. O.L.C. 1, 2\n(1998) (\xe2\x80\x9c1998 Opinion); see also Office of Government Ethics, Compensation\nArrangements for Former Federal Government Employees and 18 U.S.C. \xc2\xa7 203,\nInformal Advisory Op. 93x31 (Oct. 26, 1993), available at http://www.oge.gov/\nOGE-Advisories/Legal-Advisories/Legal-Advisories/ (last visited Aug. 4, 2012)\n(applying interpretation to receipt of contingency fee by former employee). We\nobserved in the 1998 Opinion that \xe2\x80\x9cthe rationale underlying this longstanding\ninterpretation has never been articulated with clarity\xe2\x80\x9d but that \xe2\x80\x9c[a] rule against\nretaining a contingent interest in fees reflects that a contingent fee covers the entire\nrepresentation up to the payment, the amount remains uncertain until then, and the\nfee thus compensates, in part, for representational services performed after the\nemployee began working for the United States.\xe2\x80\x9d 22 Op. O.L.C. at 2 n.2. If fees under\nthe lodestar method are like fees under the contingent fee model, each dollar of\nlodestar fees might be seen as compensating for the entire representation, including\n(in a case like the present one) that part of the representation when the former\nemployee was with the federal government. In that event, section 203 would bar a\nformer employee from receiving any part of the lodestar award.\nWe do not believe that this treatment of contingent fees should be extended to\nlodestar awards. Under the contingent fee model, because the fee is for the whole\nrepresentation, no part of the fee is assigned to any particular time. By contrast,\nunder the lodestar model, the fees are segregated by time. The value of work\nduring any particular period is fixed, according to the hours worked, multiplied by\nthe reasonable rate. A lawyer who receives only fees generated during the time he\nwas not with the government thus does not receive \xe2\x80\x9cany compensation for any\nrepresentational services, as agent or attorney or otherwise, rendered or to be\nrendered either personally or by another . . . at a time when such person is an\nofficer or employee\xe2\x80\x9d of the United States. 18 U.S.C. \xc2\xa7 203(a).\nTo be sure, without the work that took place here during the time of the\nemployee\xe2\x80\x99s service in the federal government, the qui tam action would not have\nsucceeded, and it might therefore be argued that, in receiving a portion of the\nfirm\xe2\x80\x99s fees, the employee necessarily would be compensated for representational\nservices performed during that time. But our 1998 Opinion, which examined\nreimbursement for expenses in contingent cases, concluded that the statutory\n\n13\n\n227-329 VOL_26_PROOF.pdf 23\n\n10/22/12 11:13 AM\n\n\x0cOpinions of the Office of Legal Counsel in Volume 26\n\nlanguage \xe2\x80\x9ccompensation for representational services\xe2\x80\x9d would not support such an\nargument:\n[T]he use of the word \xe2\x80\x9cfor\xe2\x80\x9d makes clear that \xc2\xa7 203 embodies an element of exchange . . . . [T]he fact that a government officer or\nemployee receives a monetary payment or something else of value\nwill not alone trigger a violation of \xc2\xa7 203. Nor is it sufficient that an\nofficer or employee receives something of value because a representational service occurred during his or her government tenure. The\nprovision requires that the officer or employee receive something of\nvalue in exchange for the representational services performed on the\nclient\xe2\x80\x99s behalf during the officer\xe2\x80\x99s or employee\xe2\x80\x99s government tenure.\n22 Op. O.L.C. at 3 (emphasis added).3 Here, under the same reasoning, the hours\nworked by others while the employee was with the government were necessary to\nthe successful outcome resulting in the firm\xe2\x80\x99s entitlement to receive any fees, but\nthat fact means only that the former employee would receive fees because of work\ndone while he was a federal employee, not that he would receive a share of fees\npaid in exchange for that work.\nIn the 1998 Opinion, we noted that the interpretation of section 203 as applicable to contingent fees was \xe2\x80\x9cconsistent with a view of \xc2\xa7 203 as primarily seeking to\nprevent the actual or apparent influence of an officer or employee over a proceeding involving the government by virtue of the individual\xe2\x80\x99s pecuniary interest in the\nproceeding\xe2\x80\x99s outcome.\xe2\x80\x9d 22 Op. O.L.C. at 2 n.2 (citation omitted). In that opinion,\nwe concluded that the statute did not reach a contingent arrangement for the\nrecovery of expenses, as opposed to fees, but we conceded that, to the extent the\nstatute\xe2\x80\x99s purpose was to guard against the influence that might be exercised by a\ngovernment employee with an interest in a proceeding, the statute arguably should\nreceive a broader interpretation than we were giving it. There, as here, it could\nhave been said that \xe2\x80\x9cthe official\xe2\x80\x99s incentive to influence the outcome of a proceeding, the danger that an adjudicator would be affected by the knowledge that the\nofficial possesses an interest in the proceeding\xe2\x80\x99s outcome, or the possibility that\nthe interest would cause the official to be biased in other government matters,\xe2\x80\x9d id.\nat 6, would be just as strong as in the paradigm case of a contingent fee for\nservices. Nevertheless, we did not find ourselves \xe2\x80\x9cfree to interpret \xc2\xa7 203 without\nregard for its textual boundaries.\xe2\x80\x9d Id.\nOur analysis here rests on the critical assumptions that the fees in question will\nbe awarded under the lodestar method, see United States ex rel. John Doe I v.\nPennsylvania Blue Shield, 54 F. Supp.2d 410, 414 (M.D. Pa. 1999) (applying\n\n3\nWe made the additional argument that the repayment of expenses was not \xe2\x80\x9ccompensation\xe2\x80\x9d for\n\xe2\x80\x9crepresentational services\xe2\x80\x9d under the statute. 1998 Opinion at 3.\n\n14\n\n227-329 VOL_26_PROOF.pdf 24\n\n10/22/12 11:13 AM\n\n\x0cApplication of 18 U.S.C. \xc2\xa7 203 to Former Employee\xe2\x80\x99s Receipt of Attorney\xe2\x80\x99s Fees\n\nmethod to fee calculation in qui tam action), and that the lodestar amount will not\nbe enhanced or otherwise adjusted (e.g., based on the special value of services\nprovided by the firm when the former employee was working for the federal\ngovernment) in ways that render our analysis inapplicable. Moreover, the details\nof the formula in the present case for computing the former employee\xe2\x80\x99s share,\nwhich we do not know, could raise issues under section 203. The formula, as\ndescribed in general terms by your letter, is based on the firm\xe2\x80\x99s hours devoted to\nthe case while the former employee worked there, divided by the firm\xe2\x80\x99s total hours\nin the whole case. However, unless the formula takes account of the other factor in\nthe lodestar calculation\xe2\x80\x94the billing rates on which the fee award is based\xe2\x80\x94this\ncalculation may not completely separate the fees attributable to the time that the\nformer employee was in the government from the other fees in the case. Particular\nperiods may be tied to higher or lower payments for the same hours, to the extent\nreasonable billing rates for those hours differ. A similar attribution problem might\narise if the court disallows inclusion in the lodestar amount of a number of billed\nhours but fails to make clear for which periods those hours were billed.\nM. EDWARD WHELAN III\nPrincipal Deputy Assistant Attorney General\nOffice of Legal Counsel\n\n15\n\n227-329 VOL_26_PROOF.pdf 25\n\n10/22/12 11:13 AM\n\n\x0c'


b'October 6 , 1978\n\n78-55\n\nMEMORANDUM OPINION FOR THE ASSISTANT\nATTORNEY GENERAL, ANTITRUST DIVISION\nThe President\xe2\x80\x94 Authority to Participate in\nInternational Negotiations\xe2\x80\x94 Trade Act of 1974\n(19 U .S.C . \xc2\xa7 2101)\xe2\x80\x94 Participation in ProducerConsumer Fora\n\nYou have requested our views on two questions presented by the State\nDepartment\xe2\x80\x99s participation in \xe2\x80\x9c producer-consumer fora\xe2\x80\x9d and certain other\ninternational negotiations aimed at stabilizing international commodity mar\xc2\xad\nkets. The first question is whether the President, through the Secretary of State,\nhas authority to participate in such negotiations absent statutory authorization.\nThe second question is whether the Trade Act of 1974 (See 19 U.S.C. \xc2\xa7 2101 et\nseq.) authorizes or permits such participation.\nIt is our opinion (1) that the President has constitutional authority to\nparticipate in negotiations of this kind through the Secretary of State, and (2)\nthat the Trade Act of 1974 does not prohibit such participation. We should add,\nhowever, that the question of the President\xe2\x80\x99s authority in that regard is quite\ndistinct from the question whether any agreement or recommendation accepted\nby the President or the Secretary of State would have any effect under the law\nof the United States. We understand that your principal concern is with the\nimpact of these agreements under the antitrust laws. Because there is consider\xc2\xad\nable uncertainty regarding the legal effect of naked executive agreements\ngenerally, legislation prescribing this impact may be desirable as a matter of\npolicy.\n\nI. The Background\nThe facts are as follows: A producer-consumer forum (PCF) is an\nintergovernmental body convened for the purpose of making recommendations\nor agreements concerning international trade in particular commodity markets.\nRepresentatives of private industry are in attendance, but their official role is\nlimited to rendering advice to Government delegates. Recommendations or\n227\n\n\x0cagreements reached at a PCF are made by and among the government delegates\nand are submitted for implementation to each member government. Member\ngovernments and private parties within member countries are not bound by\nthese recommendations or agreements. Whenever a government agrees with a\nPCF recommendation, it may take informal, nonmandatory action to imple\xc2\xad\nment the recommendation. This action would normally be directed at the\naffected industry within that country. Formal implementation by treaty or\nlegislation is uncommon. As a matter of practice, the United States takes no\nsteps, either formal or informal, to implement PCF recommendations or\nagreements within the United States.\n\nII. The Constitutional Issue\nSince the founding of our Nation the President and his representatives have\nengaged in negotiations with representatives of foreign countries over matters\nof national and international concern. Many of these negotiations have\nproduced formal or informal agreements, and many have never been submitted\nto the Senate for approval under the treaty clause or to the full Congress for\nimplementation or approval by statute or joint resolution. See L. Henkin,\nForeign Affairs and the Constitution 173 (Foundation Press 1972).\nThe legal status of executive agreements that have not been authorized or\napproved by Congress or by the Senate under the treaty clause is a subject of\nconsiderable complexity, but we think there can be no real argument over the\nthreshold issue: The President and his representatives have authority to engage\nin international negotiations on any subject that has bearing on the national\ninterest, even in the absence of prior statutory authorization. The source of this\nnegotiating authority is the Constitution itself. Negotiation is a necessary part\nof the process by which foreign relations are conducted, and the power to\nconduct foreign relations is given to the President by the Constitution.1 ,\nThe real question in any given case is whether and to what extent the\nPresident\xe2\x80\x99s action in negotiating or concluding an international agreement\naffects the law of the United States, the legal obligations or powers of the\nUnited States, or the rights of its citizens or other persons subject to Federal\nlaw. In the absence of prior statutory authorization, the answer to this question\nturns in large part upon the procedures that are followed after an international\nagreement has been concluded. If the agreement is submitted to the Senate for\n\'In d eed , quite apart from the question o f authorization, we think it doubtful that the President\xe2\x80\x99s\npow er to negotiate with foreign governm ents over subjects o f national concern can ever be subject\nto unqualified restriction by statute. The President can m ake treaties on virtually any subject, and\ntreaties can supplant prior statutes. See, Cook v. United States 288 U .S . 102 (1933). W e think it\nfollows that Congress could not m ake it unlawful for the President to conclude treaties on particular\nsubjects (even on subjects within the legislative jurisdiction o f C ongress), or to participate in the\nantecedent negotiations. M oreover, we think it doubtful that C ongress could make the legality o f a\nparticular negotiation depend upon the subm ission o f any resulting agreem ent to the Congress or to\nthe Senate under the treaty clause. See. United Stales v. Curtiss-Wright Export Corp., 299 U .S.\n304, 319 (1936) (C ongress "p o w e rle ss\xe2\x80\x9d to invade field o f international negotiation).\n\n228\n\n\x0capproval under the treaty clause, it becomes a law of the United States upon the\napproval of two-thirds of the Senators present; and, as a matter of municipal\nlaw, it then has the same force and effect as an act of Congress if it is\nself-executing. If the agreement is submitted to the full Congress and is\napproved by joint resolution or is implemented by statute, it is likewise entitled\nto the force and effect of an act of Congress to the extent of the approval or\nimplementation.\nFinally, if the agreement is approved neither by the Senate (as a treaty) nor\nby the Congress (through joint resolution or statute), it may yet have some legal\neffect, depending on the subject matter, see, United States v. Belmont, 301\nU.S. 324 (1937). But here we encounter a series of problems for which, as\nProfessor Henkin has said, there is no real legal solution. As a matter of\ndomestic law the legal effect of a naked executive agreement is uncertain. On\nthe negative side, in one of the few cases on this subject the Fourth Circuit held\nthat in the face of a valid, conflicting statute a naked executive agreement can\nhave no force or effect as a law or obligation of the United States. United States\nv. Guy W. Capps, Inc. 204 F. (2d) 655 (4th Cir. 1953) (Parker, J.), a jf d on\nother grounds, 348 U.S. 296 (1955).\nThe agreements or recommendations made as a result of the negotiations\nconducted in a PCF do not purport to be self-executing or binding on the parties\nthemselves or on the private participants. The participating governments are\nfree to take whatever action they wish to implement the recommendations or\nagreements. The United States generally takes no action, formal or informal, to\nimplement them. In accordance with the principles we have just described, we\nthink that the President, through the Secretary of State and his representatives,\nhas constitutional authority to participate in PCF negotiations. The fact that the\nPresident does not elect to submit the ensuing agreements to the Senate or the\nCongress for approval does not in our judgment deprive him of such\nnegotiating authority.2 Under both the agreements and the Constitution, the\nPresident is free to decide what implementing action, if any, he will take. The\nlegal effect of these agreements or actions taken pursuant to them upon public\nor private rights or liabilities under the antitrust laws will depend largely on\nthose laws. To the extent that this impact is determined by the status of these\nagreements as laws or obligations of the United States, we think there is\nsubstantial doubt that agreements of this kind can be regarded as laws or\nobligations of the United States absent implementing legislation or approval\nunder the treaty clause.\n\n2W e are supported in this conclusion by Consumers Union o f U .S., Inc. v. Kissinger, 506 F. (2d)\n136 (D .C . Cir. 1974), which is very nearly in point. W e express no opinion on the question\nwhether any "ag reem en t\xe2\x80\x9d concluded pursuant to PCF negotiations is an "international agreem ent\xe2\x80\x9d\nin the Case Act sense. See I U .S .C . \xc2\xa7 112b.\n\n229\n\n\x0cIII. The Statutory Issue\nYou asked whether the Trade Act of 1974 authorizes or permits the President\nto participate in PCFs through the Secretary of State. Since we have already\nconcluded that the Constitution provides a source of negotiating authority, this\nquestion is significant only if Congress, by enacting the Trade Act of 1974,\npreempted the field and provided, through legislation, the exclusive means by\nwhich negotiations of this kind may be conducted.\nAs noted above, we believe that there may be a constitutional limitation on\nthe power of Congress to restrict the power of the President to negotiate with\nforeign governments over matters of national concern. For that reason alone,\nwe would be very reluctant to construe an act of Congress as an attempt to\ndictate in advance either the mode of an international negotiation or the criteria\nfor ultimate agreement. The legal force of a particular international agreement\nmay depend upon the presence or absence of congressional authorization; but,\nas a matter of constitutional principle, the President must be free to negotiate\nagreements in his conduct of foreign affairs and to subject them to ratification\nor legislative implementation if he wishes them to have a desired force or effect\nunder our law.\nIn any case, we do not construe the Trade Act of 1974 as an attempt to\nprevent the President from engaging in informal, nonbinding negotiations such\nas those involved in a PCF. The Act provides a mechanism for negotiation and\nadministrative action with respect to many trade-related questions, including\nthe ones dealt with in PCFs. In addition, the Act gives the President powers that\nhe clearly would not have in the absence of some congressional authorization\n(see, e .g ., 19 U.S.C. \xc2\xa7 2253) (power to increase duties on imported articles\ncausing serious competitive injury to domestic industry). It is plain that if the\nPresident wishes to exercise the specific powers conferred by the Act, he must\ndo so pursuant to the procedures and in accordance with the standards\nprescribed in the Act. But we find no intent to restrict Presidential participation\nin international negotiations leading to recommendations which do not bind the\nUnited States and do not purport to have the force and effect of law. See,\nConsumers Union o f U.S. Inc. v. Kissinger, supra.\nLarry A. Ham m ond\n\nDeputy Assistant Attorney General\nOffice o f Legal Counsel\n\n230\n\n\x0c'


b'Term of the Commissioner of Internal Revenue\nUnder 26 U.S.C. \xc2\xa7 7803, the five-year term of the Commissioner of Internal Revenue runs from the\ndate of appointment and is not calculated from the expiration of his predecessor\xe2\x80\x99s term.\n\nDecember 4, 2007\n\nMEMORANDUM OPINION FOR THE COUNSEL TO THE PRESIDENT\nThe term of the Commissioner of Internal Revenue is set by 26 U.S.C. \xc2\xa7 7803\n(2000), which provides in relevant part that the Commissioner \xe2\x80\x9cshall be appointed\nby the President, by and with the advice and consent of the Senate, to a 5-yearterm.\xe2\x80\x9d Id. \xc2\xa7 7803(a)(1)(A). You have asked whether the term of the person\nappointed to serve a full term as Commissioner (rather than to fill a vacancy\noccurring before the expiration of a predecessor\xe2\x80\x99s term) runs from the date of\nappointment or from the expiration of the predecessor\xe2\x80\x99s term. We conclude that\nsection 7803(a)(1)(A) provides that the term runs from the date of appointment. *\n\xe2\x80\x9cAs Attorney General Brewster explained more than a century ago, \xe2\x80\x98[t]here are\ntwo kinds of official terms.\xe2\x80\x99\xe2\x80\x9d United States v. Wilson, 290 F.3d 347, 353 (D.C.\nCir. 2002) (quoting Commissioners of the District of Columbia, 17 Op. Att\xe2\x80\x99y Gen.\n476, 476 (1882) (\xe2\x80\x9cD.C. Commissioners\xe2\x80\x9d)). The first type refers to a period of\npersonal service. In that case, \xe2\x80\x9cthe term is appurtenant to the person,\xe2\x80\x9d id. (quoting\n17 Op. Att\xe2\x80\x99y Gen. at 476), and the term runs from the official\xe2\x80\x99s date of appointment. Accordingly, a person appointed to serve a fixed term of years would be\nable to serve the full term before it expired. The second type refers to a \xe2\x80\x9cfixed slot\nof time to which individual appointees are assigned.\xe2\x80\x9d Id. (emphasis in original).\nSuch a term \xe2\x80\x9cruns with the calendar,\xe2\x80\x9d id., in fixed increments from the expiration\nof the predecessor\xe2\x80\x99s term. Such a term of office would expire a given number of\nyears after the expiration of the predecessor\xe2\x80\x99s term, regardless of when the person\nwas appointed to the position.\nSection 7803(a) establishes the office of the Commissioner of Internal Revenue\nand sets its term. It provides, in relevant part:\n(1) Appointment.\n(A) In general. There shall be in the Department of the Treasury a\nCommissioner of Internal Revenue who shall be appointed by the\nPresident, by and with the advice and consent of the Senate, to a\n*\nEditor\xe2\x80\x99s Note: After this opinion was issued, Congress amended 26 U.S.C. \xc2\xa7 7803(a)(1) to alter\nthe Commissioner\xe2\x80\x99s term by providing that \xe2\x80\x9c[t]he term of the Commissioner of Internal Revenue shall\nbe a 5-year term, beginning with a term to commence on November 13, 1997. Each subsequent term\nshall begin on the day after the date on which the previous term expires.\xe2\x80\x9d Pub. L. No. 110-176, \xc2\xa7 1(a),\n121 Stat. 2532 (2008).\n\n254\n\n\x0cTerm of the Commissioner of Internal Revenue\n\n5-year term. Such appointment shall be made from individuals\nwho, among other qualifications, have a demonstrated ability in\nmanagement.\n(B) Vacancy. Any individual appointed to fill a vacancy in the position of Commissioner occurring before the expiration of the\nterm for which such individual\xe2\x80\x99s predecessor was appointed shall\nbe appointed only for the remainder of that term.\n(C) Removal. The Commissioner may be removed at the will of\nthe President.\n(D) Reappointment. The Commissioner may be appointed to more\nthan one 5-year term.\nSection 7803(a) explicitly provides that any individual appointed to fill a vacancy occurring before the expiration of the predecessor\xe2\x80\x99s term \xe2\x80\x9cshall be appointed only for the remainder of that term,\xe2\x80\x9d id. \xc2\xa7 7803(a)(1)(B), making clear that the\nterm of a person appointed to fill a predecessor\xe2\x80\x99s unexpired term \xe2\x80\x9cruns with the\ncalendar.\xe2\x80\x9d Wilson, 290 F.3d at 353. The statute is silent, however, about the\nstarting point of the term of a person appointed after the predecessor\xe2\x80\x99s term\nexpired (i.e., the term of a person who is not appointed to fill an unexpired term).\nThe presumption is that \xe2\x80\x9cwhen a statute provides for an appointee to serve a\nterm of years, the specified time of service begins with the appointment.\xe2\x80\x9d Term of\na Member of the Mississippi River Commission, 23 Op. O.L.C. 123, 123 (1999)\n(\xe2\x80\x9cMississippi River Commission\xe2\x80\x9d); 63C Am. Jur. 2d Public Officers and Employees \xc2\xa7 143 (1997). To depart from that rule requires \xe2\x80\x9csome apt expression of\n[legislative] intent.\xe2\x80\x9d D.C. Commissioners, 17 Op. Att\xe2\x80\x99y Gen. at 477. Here, the\nlegislative history strongly reinforces the presumption that the term runs from the\ndate of appointment. The conference report on the legislation specifically states\nthat \xe2\x80\x9c[t]he Commissioner is appointed to a 5-year term, beginning with the date of\nappointment.\xe2\x80\x9d H.R. Conf. Rep. No. 105-599, at 207 (emphasis added), reprinted in\n1998 U.S.C.C.A.N. 288, 302. 1\nThat understanding is further confirmed by practice under section 7803. The\nonly IRS Commissioner appointed since the 1998 enactment of the relevant\nprovisions was nominated, confirmed, and appointed for a full five-year term.\nMark Everson was nominated on January 22, 2003, for \xe2\x80\x9ca term of five years, vice\n1\nSignificantly, this language appears in a section of the House conference report explaining the\ngeneral operation of section 7803. In a separate passage, the report also discusses the conferees\xe2\x80\x99\nunderstanding of the bill\xe2\x80\x99s application to the incumbent, then-Commissioner Charles O. Rossotti. See\nH.R. Conf. Rep. No. 105-599, at 207, reprinted in 1998 U.S.C.C.A.N. at 302 (\xe2\x80\x9cThe provision relating\nto the 5-year term of office applies to the Commissioner in office on the date of enactment. This 5-year\nterm runs from the date of appointment.\xe2\x80\x9d).\n\n255\n\n\x0cOpinions of the Office of Legal Counsel in Volume 31\n\nCharles Rossotti,\xe2\x80\x9d who was appointed Commissioner on November 13, 1997, and\nleft office after a five-year term on November 12, 2002. 149 Cong. Rec. 1621 (Jan.\n22, 2003). Mr. Everson\xe2\x80\x99s nomination was reported out by the Senate Committee\non Finance with the recommendation that he be confirmed \xe2\x80\x9cfor a term of five\nyears.\xe2\x80\x9d 149 Cong. Rec. 8235 (Apr. 2, 2003). The Senate confirmed Mr. Everson as\nCommissioner on May 1, 2003, \xe2\x80\x9cfor a term of five years,\xe2\x80\x9d 149 Cong. Rec. 10,391\n(May 1, 2003), and he was appointed on May 5, 2003, for a five-year term. That\nhistory indicates that the Senate Committee on Finance, the Senate, and the\nPresident all understood section 7803 to provide that Commissioner Everson\nwould commence serving a full five-year term upon his appointment on May 5,\n2003. Had section 7803 been understood to create a term that ran from the\nexpiration of his predecessor\xe2\x80\x99s term, Mr. Everson instead would have been\nconfirmed and appointed to serve a term of approximately four and a half years,\nexpiring November 12, 2007. 2\nThis reading of section 7803 is strongly supported by practice under similar\nstatutes. The language and structure of 12 U.S.C. \xc2\xa7 1462a (2006), governing the\nappointment of the Director of the Office of Thrift Supervision, is nearly identical\nto that of section 7803. Like section 7803, it provides that \xe2\x80\x9c[t]he Director shall be\nappointed for a term of 5 years,\xe2\x80\x9d and, like section 7803, it provides that a person\nappointed to fill \xe2\x80\x9c[a] vacancy in the position of Director which occurs before the\nexpiration of the term . . . shall be appointed only for the remainder of such term.\xe2\x80\x9d\nId. \xc2\xa7 1462a(c)(2), (3)(A). The first Director appointed under that provision after its\nenactment in 1989, Timothy Ryan, was confirmed \xe2\x80\x9cfor a term of 5 years.\xe2\x80\x9d 136\n2\n\nA confirmation for a term commencing on appointment typically states that it is \xe2\x80\x9cfor a term of x\nyears,\xe2\x80\x9d while one for a term running from the date a predecessor\xe2\x80\x99s term expired typically specifies the\ndate on which the term shall be deemed to have commenced or its date of expiration. Compare, e.g.,\n137 Cong. Rec. 33,978 (Nov. 22, 1991) (confirmation of Reggie Barnett Walton and Emmet Gael\nSullivan as judges, each for \xe2\x80\x9cthe term of 15 years\xe2\x80\x9d); id. (confirmation of Ernest Wilson Williams to be\nU.S. Attorney \xe2\x80\x9cfor the term of 4 years\xe2\x80\x9d), with id. (confirmation of Lawrence B. Lindsey to be a member\nof the Board of Governors of the Federal Reserve System \xe2\x80\x9cfor the unexpired term of 14 years from\nFebruary 1, 1986\xe2\x80\x9d); id. (confirmation of H. Edward Quick, Jr. to be Commissioner of the Postal Rate\nCommission \xe2\x80\x9cfor the term expiring November 22, 1996\xe2\x80\x9d); id. (confirmation of Trevor Alexander\nMcClurg Potter and Scott E. Thomas to the Federal Election Commission, each \xe2\x80\x9cfor a term expiring\nApril 30, 1997\xe2\x80\x9d); id. (confirmation of Karen Borlaug Phillips to be member of the Interstate Commerce\nCommission \xe2\x80\x9cfor a term expiring December 31, 1996\xe2\x80\x9d). This practice was observed around the time\nMr. Everson was confirmed as Commissioner. On the day of Mr. Everson\xe2\x80\x99s confirmation, Lawrence\nMohr, Jr., and Sharon Falkenheimer were confirmed for staggered terms on the Board of Regents for\nthe Uniformed Services University of the Health Sciences, see 10 U.S.C. \xc2\xa7 2113(b) (2000), for terms\nexpiring June 20, 2003 and June 20, 2007, respectively, see 149 Cong. Rec. 10,379 (May 1, 2003), and\nthe Senate Judiciary Committee recommended confirmation of Adam Noel Torres to be U.S. Marshal\n(whose term runs from the date of appointment, see Farley v. United States, 139 F. Supp. 757, 757 (Ct.\nCl. 1956)), \xe2\x80\x9cfor the term of four years.\xe2\x80\x9d 149 Cong. Rec. 10,345 (May 1, 2003). See also, e.g., 149\nCong. Rec. 12,944 (May 22, 2003) (confirmation of Mark Moki Hanohano to serve as U.S. Marshal\n\xe2\x80\x9cfor a term of four years,\xe2\x80\x9d and confirmation of Michael E. Horowitz and Ricardo H. Hinojosa to\nstaggered terms on the United States Sentencing Commission, see 28 U.S.C. \xc2\xa7 992(a) (2000), each \xe2\x80\x9cfor\na term expiring October 31, 2007\xe2\x80\x9d).\n\n256\n\n\x0cTerm of the Commissioner of Internal Revenue\n\nCong. Rec. 6816 (Apr. 4, 1990). The second, Ellen Seidman, was nominated on\nFebruary 6, 1997, well after the expiration of her predecessor\xe2\x80\x99s term. Nonetheless,\nshe was confirmed on October 23, 1997, \xe2\x80\x9cfor a term of five years.\xe2\x80\x9d 143 Cong.\nRec. 22,800 (Oct. 23, 1997); see also 143 Cong. Rec. 1685 (Feb. 6, 1997)\n(reporting nomination of \xe2\x80\x9cEllen Seidman, of the District of Columbia, to be\nDirector of the Office of Thrift Supervision for a term of 5 years, vice Timothy\nRyan, resigned\xe2\x80\x9d); 143 Cong. Rec. 21,728 (Oct. 8, 1997) (reported from Senate\nBanking, Housing, and Urban Affairs Committee with recommendation for\nconfirmation \xe2\x80\x9cfor a term of five years\xe2\x80\x9d). When Ms. Seidman resigned before the\nend of her term, her successor, James Gilleran, was appointed \xe2\x80\x9cfor the remainder\nof the term expiring October 23, 2002,\xe2\x80\x9d 147 Cong. Rec. 23,145 (Nov. 28, 2001),\nconfirming that Ms. Seidman\xe2\x80\x99s term ran from the date of her appointment and not\nfrom the date her predecessor\xe2\x80\x99s term expired. See also 147 Cong. Rec. 23,146\n(Nov. 28, 2001); 147 Cong. Rec. 22,996 (Nov. 27, 2001) (Seidman nomination\nreported out of Committee); 147 Cong. Rec. 16,338 (Sept. 4, 2001) (nomination).\nThe nomination and confirmation of John M. Reich to be Director underscore the\nunderstanding of the Senate and the President. On May 25, 2005, President Bush\noriginally nominated Mr. Reich \xe2\x80\x9cfor a term expiring October 23, 2007, vice James\nGilleran, term expired,\xe2\x80\x9d 151 Cong. Rec. 11,191 (May 25, 2005), which would\nhave reflected the understanding that Mr. Reich\xe2\x80\x99s term would run from the\nexpiration of his predecessor\xe2\x80\x99s term. On June 6, 2005, the President withdrew that\nnomination and replaced it with a nomination for a full five-year term as Director.\n151 Cong. Rec. 11,673, 11,674 (June 6, 2005). On July 28, 2005, Mr. Reich\xe2\x80\x99s\nnomination was reported out of Committee with a recommendation that he be\nconfirmed \xe2\x80\x9cfor a term of five years,\xe2\x80\x9d 151 Cong. Rec. 18,975 (July 28, 2005). The\nfollowing day, the Senate unanimously confirmed Mr. Reich \xe2\x80\x9cto be Director of the\nOffice of Thrift Supervision for a term of five years.\xe2\x80\x9d 151 Cong. Rec. 19,328,\n19,338 (July 29, 2005).\nSimilar provisions for the Administrator of the Saint Lawrence Seaway Development Corporation, 33 U.S.C. \xc2\xa7 982(a) (2000), 3 and for the Special Counsel,\n5 U.S.C. \xc2\xa7 1211(b) (2000), 4 have been subject to the same consistent practice:\npersons filling a vacancy occurring before the expiration of their predecessor\xe2\x80\x99s\nterm serve out that term, but others serve a full term beginning on the date of their\nappointment. See Morton Rosenberg & Henry B. Hogue, Cong. Research Serv.,\n\n3\n\nSection 982 provides, \xe2\x80\x9c[t]he management of the corporation shall be vested in an Administrator\nwho shall be appointed by the President, by and with the advice and consent of the Senate, for a term of\nseven years. Any Administrator appointed to fill a vacancy in that position prior to the expiration of the\nterm for which his predecessor was appointed shall be appointed for the remainder of such term.\xe2\x80\x9d\n4\nSection 1211(b) provides, in relevant part, \xe2\x80\x9c[t]he Special Counsel shall be appointed by the\nPresident, by and with the advice and consent of the Senate, for a term of 5 years. . . . A special\nCounsel appointed to fill a vacancy occurring before the end of a term of office of the Special\nCounsel\xe2\x80\x99s predecessor serves for the remainder of the term.\xe2\x80\x9d\n\n257\n\n\x0cOpinions of the Office of Legal Counsel in Volume 31\n\nTerm of Office of the Commissioner of Internal Revenue at CRS-5 (Sept. 12,\n2007). 5\nThis consistent practice under a variety of similarly worded statutes strongly\nsupports the understanding that Congress intended section 7803 to create a fiveyear term that runs from the date of appointment. Congress is presumed to be\naware of consistent administrative practice when it legislates. See, e.g., Lorillard v.\nPons, 434 U.S. 575, 580\xe2\x80\x9381 (1978). By employing language that was subject to an\nestablished interpretation, Congress is presumed to have intended that interpretation to be given to the language of section 7803. See Comm\xe2\x80\x99r v. Keystone Consol.\nIndus., Inc., 508 U.S. 152, 159 (1993). As the D.C. Circuit wrote in the context of\ndetermining the term of appointments, \xe2\x80\x9cCongress is presumed to preserve, not\nabrogate, the background understandings against which it legislates. \xe2\x80\x98[L]ongstanding practices\xe2\x80\x99 of the Executive Branch can \xe2\x80\x98place[] a \xe2\x80\x9cgloss\xe2\x80\x9d on Congress\xe2\x80\x99s\naction in enacting\xe2\x80\x99 a particular provision. Here the consistent treatment of\nappointments by the Executive Branch provides such a \xe2\x80\x98gloss.\xe2\x80\x99\xe2\x80\x9d Wilson, 290 F.3d\nat 356 (quoting Ass\xe2\x80\x99n of Civilian Technicians v. FLRA, 269 F.3d 1119, 1122 (D.C.\nCir. 2001) (citations omitted)). Indeed, in the present case, the support from\npractice is even stronger, because that practice encompasses action not only of the\nExecutive Branch, but also of the Senate, in its role of giving advice and consent\nto nominations.\nIt might be argued that Congress\xe2\x80\x99s provision in section 7803(a)(1)(B) for filling\na vacancy before the term expires suggests that every appointment as Commissioner must run with the calendar from the expiration of the predecessor\xe2\x80\x99s term,\nand that otherwise, the provision for filling a vacancy to an unexpired term would\nserve no purpose. We disagree. Although the specific purpose of section\n7803(a)(1)(B) is not apparent from the legislative history, the provision would\nserve a valuable function even if Commissioners appointed after the expiration of\n\n5\nSee, e.g., 152 Cong. Rec. 21,648 (Sept. 29, 2006) (Collister Johnson, Jr., confirmed as Administrator\nof the Saint Lawrence Seaway Development Corporation \xe2\x80\x9cfor a term of seven years\xe2\x80\x9d after expiration of\npredecessor\xe2\x80\x99s term); 145 Cong. Rec. 15,349 (July 1, 1999) (Albert S. Jacquez confirmed as Administrator\n\xe2\x80\x9cfor a term of seven years\xe2\x80\x9d after expiration of predecessor\xe2\x80\x99s term); 141 Cong. Rec. 38,466 (Dec. 22, 1995)\n(Gail Clements McDonald confirmed for the remainder of \xe2\x80\x9cthe term expiring March 20, 1998,\xe2\x80\x9d after\nStanford E. Parris resigned four years into his seven-year term); 137 Cong. Rec. 6949 (Mar. 20, 1991)\n(Stanford E. Parris confirmed as Administrator for a term of 7 years after expiration of predecessor\xe2\x80\x99s\nterm); 149 Cong. Rec. 32,306 (Dec. 9, 2003) (Scott J. Bloch confirmed to be Special Counsel \xe2\x80\x9cfor the term\nof five years\xe2\x80\x9d after expiration of predecessor\xe2\x80\x99s term); 144 Cong. Rec. 5946 (Apr. 2, 1998) (Elaine D.\nKaplan confirmed to be Special Counsel \xe2\x80\x9cfor the term of five years\xe2\x80\x9d after expiration of predecessor\xe2\x80\x99s\nterm); 137 Cong. Rec. 33,978 (Nov. 22, 1991) (Kathleen Day Koch confirmed to be Special Counsel \xe2\x80\x9cfor\nthe term of 5 years\xe2\x80\x9d after expiration of predecessor\xe2\x80\x99s term); 132 Cong. Rec. 21,412 (Aug. 13, 1986) (Mary\nF. Wieseman confirmed to be Special Counsel \xe2\x80\x9cfor a term of 5 years\xe2\x80\x9d after expiration of predecessor\xe2\x80\x99s\nterm); 128 Cong. Rec. 25,930 (Sept. 29, 1982) (K. William O\xe2\x80\x99Connor confirmed to be Special Counsel\n\xe2\x80\x9cfor the remainder of the term expiring June 3, 1986,\xe2\x80\x9d after Alex Kozinski resigned one year into five-year\nterm); 127 Cong. Rec. 11,147 (June 2, 1981) (Alex Kozinski confirmed to be Special Counsel \xe2\x80\x9cfor a term\nof 5 years\xe2\x80\x9d).\n\n258\n\n\x0cTerm of the Commissioner of Internal Revenue\n\na predecessor\xe2\x80\x99s term served a full five years from the date of appointment. The\nprovision serves to prevent an outgoing President from extending the duration of\nhis appointments by installing a new Commissioner immediately before leaving\noffice.\nUnited States v. Wilson does not support a contrary reading of section 7803.\nThere, the D.C. Circuit held that the term of a member of the United States\nCommission on Civil Rights began and ended on fixed dates based on the\nstaggered terms of initial commissioners, rather than running from the date of\nappointment of the individual member. 290 F.3d at 355. But the court\xe2\x80\x99s conclusion\nin that case relied critically on the fact that Congress clearly intended for the\nmembers of the Commission, who were subject to statutory removal restrictions,\nsee id. at 350, to serve staggered terms. That is a recognized exception to the\ngeneral rule that a term in office runs from the date of appointment, because the\nterms of multi-member commissions with staggered terms are presumed to run\nfrom the expiration of the predecessor\xe2\x80\x99s term to preserve staggering. See Mississippi River Commission, 23 Op. O.L.C. at 123. Moreover, the court emphasized\nthat the \xe2\x80\x9crelevant practices of the Executive Branch which presumably informed\nCongress\xe2\x80\x99s\xe2\x80\x9d understanding, as well as the \xe2\x80\x9cpolicy ramifications\xe2\x80\x9d of maintaining\nstaggered terms, both supported the conclusion that the terms ran from the\nexpiration of the predecessors\xe2\x80\x99 terms. 290 F.3d at 354. Here, by contrast, there is\nno indication that the term of the Commissioner of Internal Revenue (who\nstatutorily is subject to \xe2\x80\x9cremov[al] at the will of the President,\xe2\x80\x9d see 26 U.S.C.\n\xc2\xa7 7803(a)(1)(C)), is to be staggered. 6 And whereas the court in Wilson emphasized\nthat it was \xe2\x80\x9cthe common practice of the Executive Branch in making appointments\nto staggered boards and commissions\xe2\x80\x9d for terms to run \xe2\x80\x9cfrom the expiration of\ntheir predecessors\xe2\x80\x99 term,\xe2\x80\x9d 290 F.3d at 354\xe2\x80\x9355, here\xe2\x80\x94outside the context of a\nmulti-member board with staggered terms\xe2\x80\x94the consistent practice of both the\n6\nNor do we believe that the term of the Commissioner, because of his service on the Internal\nRevenue Service Oversight Board (\xe2\x80\x9cBoard\xe2\x80\x9d), see 26 U.S.C. \xc2\xa7 7802(b)(1)(C), is staggered to fit into the\nappointment regime for that body such that his term as Commissioner would run with the calendar. Six\nmembers of the Board are appointed by the President with the Senate\xe2\x80\x99s advice and consent to serve\nterms that the statute explicitly requires to be staggered. See id. \xc2\xa7 7802(b)(2)(B). Both the Secretary of\nthe Treasury (or the Deputy Secretary, if designated by the Secretary) and the Commissioner are\nmembers but, unlike the other members, they have no terms on the Board, staggered or otherwise. See\nid. \xc2\xa7 7802(b)(1)(B), (b)(2)(B). Moreover, the provision requiring staggering is explicitly limited to the\nsix other members. See id. \xc2\xa7 7802(b)(2)(B). See generally Russello v. United States, 464 U.S. 16, 23\n(1983) (\xe2\x80\x9c[W]here Congress includes particular language in one section of a statute but omits it in\nanother section of the same Act, it is generally presumed that Congress acts intentionally and purposely\nin the disparate inclusion or exclusion.\xe2\x80\x9d) (internal quotation marks omitted). Significantly, when\nmembers of the Board are confirmed, they are confirmed for terms expiring on specific dates. See, e.g.,\n151 Cong. Rec. S2874 (daily ed. Mar. 16, 2005) (confirmation of Raymond Thomas Wagner, Jr., to\nBoard \xe2\x80\x9cfor a term expiring September 14, 2009\xe2\x80\x9d); 150 Cong. Rec. S8791 (daily ed. July 22, 2004)\n(confirmation of Charles L. Kolbe to Board \xe2\x80\x9cfor the remainder of the term expiring September 14,\n2004\xe2\x80\x9d); see also 150 Cong. Rec. S8473 (daily ed. July 20, 2004) (Senate Committee on Finance\nrecommending confirmation of Paul Jones to Board \xe2\x80\x9cfor a term expiring September 14, 2008\xe2\x80\x9d).\n\n259\n\n\x0cOpinions of the Office of Legal Counsel in Volume 31\n\nExecutive Branch and Congress under similar statutes is that the term of officials\nwhose predecessor\xe2\x80\x99s term expired runs from the date of appointment.\nNor does Wilson reject that idea that Congress could intend for a Commissioner\nto serve a full term if he was appointed after the expiration of his predecessor\xe2\x80\x99s\nterm, but serve only a partial term if he was appointed to fill the unexpired term of\nhis predecessor. Under the circumstances of that case, the court rejected the idea\nthat the single phrase \xe2\x80\x9cthe term of office of each member of the Commission\xe2\x80\x9d had\n\xe2\x80\x9ctwo different meanings for two distinct classes of commissioner.\xe2\x80\x9d Id. at 356.\nUnder the interpretation rejected by the court, \xe2\x80\x9cwhen an appointee\xe2\x80\x99s predecessor\nhad served out her full term, but there was a delay in the nomination of the new\nappointee, that new appointee could permissibly serve less than a full six years,\xe2\x80\x9d\nbut \xe2\x80\x9cwhen the appointee is replacing a predecessor who had failed to serve out a\nfull term, . . . the new appointee should serve a new, full six years from the date of\nher appointment.\xe2\x80\x9d Id. at 355. The court commented that \xe2\x80\x9c[w]e have difficulty\nbelieving that Congress sub silentio created two different tracks.\xe2\x80\x9d Id. But our\nreading would not result in a \xe2\x80\x9ctwo-track\xe2\x80\x9d system; every \xe2\x80\x9cterm,\xe2\x80\x9d as that word is\nused in the statute, would be a five-year term running from the appointment of\nCommissioners succeeding a predecessor\xe2\x80\x99s expired term. That is true whether the\nperson is appointed to serve a full term or appointed to fill a vacancy in an\nunexpired term. 7 In any event, Wilson only addressed whether such a distinction\nshould be drawn where Congress had not explicitly spoken to the issue. But here,\nCongress did not act sub silentio. The legislative history explicitly states that the\nCommissioner \xe2\x80\x9cis appointed to a 5-year term, beginning with the date of appointment.\xe2\x80\x9d H.R. Conf. Rep. No. 105-599, at 207 (emphasis added), reprinted in 1998\nU.S.C.C.A.N. at 302. Particularly in light of consistent practice under several\nsimilarly worded statutes, nothing in Wilson suggests that the Commissioner\xe2\x80\x99s\nterm must run from the date a predecessor\xe2\x80\x99s term expired.\nWe are aware that a memorandum prepared by staffers of the Congressional\nResearch Service has concluded that, \xe2\x80\x9c[w]hile the matter is not free from doubt, it\nis likely that a reviewing court would hold that Congress intended to establish a\ncontinuous tenure design for the Office of Commissioner\xe2\x80\x9d under which each\nCommissioner\xe2\x80\x99s tenure would be based on five-year increments from the end of\nCommissioner Rossotti\xe2\x80\x99s term as Commissioner. Term of Office of the Commissioner of Internal Revenue at CRS-15. We do not find that analysis persuasive.\nFirst, it disregards relevant legislative history. The memorandum does not discuss\nor even acknowledge the portion of the House Conference Report explicitly stating\nthat the term of the IRS Commissioner runs from appointment. See id. at CRS-10\n7\nThus, for example, a nominee to fill the remainder of Commissioner Everson\xe2\x80\x99s five-year term\nwould be able to serve until May 4, 2008, five years from the date of Commissioner Everson\xe2\x80\x99s\nappointment. But if the same person were then reappointed to a new term, he would serve \xe2\x80\x9ca 5-year\nterm\xe2\x80\x9d from the date of his reappointment. In both instances, the \xe2\x80\x9cterm\xe2\x80\x9d would be a five-year term\nrunning from the appointment of a Commissioner succeeding a predecessor\xe2\x80\x99s expired term.\n\n260\n\n\x0cTerm of the Commissioner of Internal Revenue\n\nto CRS-12. That legislative history is unambiguous and cannot be reconciled with\nthe view taken in the CRS memorandum. Second, the memorandum notes the\nsubstantial practice that accords with, and supports, the view of the statute that we\ntake here, see id. at CRS-4 to CRS-5; however, instead of giving weight to that\npractice, as cases like Wilson require, see 290 F.3d at 356, the memorandum\nsimply dismisses the practice as contrary to the authors\xe2\x80\x99 reading of the statutory\nlanguage in the abstract. Contrary to the memorandum, we believe that the\npractice of both the Executive Branch and the Senate, in its role of giving advice\nand consent, tends to establish the correct reading of the statute.\nJOHN P. ELWOOD\nDeputy Assistant Attorney General\nOffice of Legal Counsel\n\n261\n\n\x0c'