b'Applicability of Government Corporation Control Act to \xe2\x80\x9c Gain\nSharing Benefit\xe2\x80\x9d Agreement\nT he G overnm ent C orporation Control A ct does not require the National A eronautics and Space\nA dm in istratio n to obtain legislative authorization before entering into a \xe2\x80\x9c gain sharing b en efit\xe2\x80\x9d\nagreem en t w ith a private corporation that grants N A SA deferred cash paym ents based on an\nincrease in the value o f the corporation\xe2\x80\x99s com m on stock.\n\nSeptember 18, 2000\nM\nN\n\nem o ran d u m\n\na t io n a l\n\nO p in io n\n\nA e r o n a u t ic s\n\nfo r\nand\n\nT h e G en era l C o u n sel\nS p a c e A d m i n is t r a t io n\n\nand\n\nTh e G en era l C oun sel\nO f f ic e\n\nof\n\nM\n\nanagem ent a nd\n\nB udget\n\nThis memorandum resolves a dispute between the National Aeronautics and\nSpace Administration ( \xe2\x80\x9c NASA\xe2\x80\x9d ) and the Office of Management and Budget\n(\xe2\x80\x9c OM B\xe2\x80\x9d ) regarding whether the proposed terms of an agreement between NASA\nand a private corporation would violate the Government Corporation Control Act\n(\xe2\x80\x9c GCCA\xe2\x80\x9d ). Specifically, we have been asked whether 31 U.S.C. \xc2\xa79102 (1994)\nrequires NASA to obtain legislative authorization before entering into a \xe2\x80\x9c gain\nsharing benefit\xe2\x80\x9d agreement with a private corporation that grants NASA deferred\ncash payments based on an increase in the value of the corporation\xe2\x80\x99s common\nstock. For the reasons explained below, we conclude that section 9102 of title\n31 does not require NASA to obtain legislative authorization in order to enter\ninto the proposed agreement.\n\nI. Background\nIn October 1999, Congress established a Space Station Commercial Develop\xc2\xad\nment Demonstration Program giving NASA authority \xe2\x80\x9c to establish a demonstra\xc2\xad\ntion regarding the commercial feasibility and economic viability of private sector\nbusiness operations involving the International Space Station.\xe2\x80\x9d Pub. L. No. 10674, \xc2\xa7434, 113 Stat. 1047, 1097 (1999). As part of this program, NASA issued\na public request for \xe2\x80\x9c entrepreneurial offers\xe2\x80\x9d in December 1999 seeking private\nsector interest in development of multi-media products and services related to the\ndevelopment of the International Space Station (\xe2\x80\x9c ISS\xe2\x80\x9d ) and the exploration of\nspace. NASA received many responsive offers and selected Dreamtime Holdings,\nInc. ( \xe2\x80\x9c Dreamtime\xe2\x80\x9d ) to enter negotiations for a collaborative agreement.\nDreamtime is a privately held Delaware corporation. NASA informs us that\nDreamtime was not formed by NASA, is not owned by any individuals directly\nor indirectly associated with NASA, and was created without any support from\n212\n\n\x0cApplicability o f Government Corporation Control Act to \xe2\x80\x9cGain Sharing B enefit\xe2\x80\x9d Agreement\n\nNASA. As part of the collaborative agreement, Dreamtime is required to negotiate\nagreements with four independent companies that will likely receive substantial\nequity positions in the corporation.\nUnder the proposed agreement, NASA and Dreamtime will each make contribu\xc2\xad\ntions as part of a collaborative commercial enterprise involving the ISS, pursuant\nto Pub. L. No. 106-74. See Agreement for Collaboration on Multi-Media Activi\xc2\xad\nties between the National Aeronautics and Space Administration and Dreamtime\nHoldings, Inc. (May 17, 2000) (the \xe2\x80\x9c Agreement\xe2\x80\x9d ). This legislation not only\nauthorizes the creation of a commercial demonstration program but also permits\nNASA to collect and retain receipts from the commercial use o f the ISS. The\nlegislative history indicates the law was intended to permit NASA to negotiate\nmarket-based levels of payment for relevant goods and services. S ee H.R. Conf.\nRep. No. 106-379, at 153 (1999) (\xe2\x80\x9c In order to encourage private investment and\nincrease economic activity in low earth orbit, NASA may negotiate for payments,\nat a value set by the private market, and retain any funds received in excess of\ncosts for re-investment in the station economic development program.\xe2\x80\x9d ). Pursuant\nto the agreement, the parties will share use of high definition television equipment\nprovided by Dreamtime, and NASA will provide access to and accommodations\nfor Dreamtime\xe2\x80\x99s television equipment and services on the Space Shuttle, on the\nISS, and at various NASA locations. Dreamtime will use the equipment and access\nto produce images for its commercial distribution, with special emphasis on the\nInternet. NASA will receive rights to use the images for agency purposes,\nincluding public affairs, scientific and engineering needs, research and develop\xc2\xad\nment, and various missions and operations. In addition, the parties agree to\ncollaborate on the development of educational products and documentary program\xc2\xad\nming, with the goal of increasing public awareness of the ISS and its related\nprograms. To assist in the development of these products and programs, NASA\nwill make its still, film, and video archives available to Dreamtime for digitization\nand enhancement. The proposed agreement has a seven-year term with an option\nfor a five-year extension. NASA informs us that, according to current estimates,\nits contributions to the endeavor would be worth approximately $38 million, and\nDreamtime\xe2\x80\x99s contribution would be $100 million over the term of the agreement.\nDreamtime has offered to provide a gain-sharing benefit (\xe2\x80\x9c GSB\xe2\x80\x9d ) to NASA\nas financial remuneration. Article II of the Agreement sets forth the terms o f the\nGSB arrangement, which permits NASA to receive a monetary benefit from the\nsuccess of the endeavor. In exchange for its collaboration, NASA would receive\na contractual right to cash payments based on the appreciation of Dreamtime\xe2\x80\x99s\nstock. The GSB tracks the fluctuation in value of an amount of stock equal to\ntwenty-five percent of the initial capitalization of the corporation with some subse\xc2\xad\nquent adjustments, and the right to payment vests at a rate of twenty-five percent\nper year for four years with certain time restrictions. The GSB is not transferable\nby NASA, except that it may be transferred to an ISS-related non-governmental\n213\n\n\x0cOpinions o f the O ffice o f Legal Counsel in Volume 24\n\norganization, if such an organization is ultimately established. See Agreement, art.\nII; Letter for Randolph D. Moss, Acting Assistant Attorney General, Office of\nLegal Counsel, from Edward A. Frankie, General Counsel, National Aeronautics\nand Space Administration (May 12, 2000) (\xe2\x80\x9c NASA Letter # \\ \xe2\x80\x9d ), encl. 2.\nOMB takes the position that the proposed GSB provision would run afoul of\nthe GCCA because NASA would be \xe2\x80\x9c establishing] or acquiring]\xe2\x80\x9d a corporation\nto \xe2\x80\x9c act as an agency\xe2\x80\x9d without specific authorization by law. Letter for Daniel\nKoffsky, Acting Deputy Assistant Attorney General, Office of Legal Counsel,\nfrom Robert G. Damus, General Counsel, Office of Management and Budget at\n1 (May 26, 2000) ( \xe2\x80\x9c OMB Letter\xe2\x80\x9d ). NASA disagrees, arguing that the agency\nplayed no role in the establishment of Dreamtime and that the payment of a GSB\ncash award based on Dreamtime\xe2\x80\x99s stock performance does not amount to acquisi\xc2\xad\ntion of the corporation. See NASA Letter #1; Letter for Randolph D. Moss, Acting\nAssistant Attorney General, Office of Legal Counsel, from Edward A. Frankie,\nGeneral Counsel, National Aeronautics and Space Administration (June 8, 2000)\n(\xe2\x80\x9c NASA Letter # 2 \xe2\x80\x9d ). Furthermore, NASA argues that Dreamtime is a private\ncompany engaged in a collaborative commercial endeavor and does not \xe2\x80\x9c act as\nan agency\xe2\x80\x9d within the meaning o f the GCCA. NASA Letter #1, at 4. Our Office\nhas been asked to resolve this dispute.\n\nII. Discussion\nThe dispute between OMB and NASA centers on section 304(a) of the GCCA,\ncodified at 31 U.S.C. \xc2\xa79102 (1994). Section 9102 of title 31 provides that \xe2\x80\x9c [a]n\nagency may establish or acquire a corporation to act as an agency only by or\nunder a law o f the United States specifically authorizing the action.\xe2\x80\x9d We conclude\nthat, under the proposed GSB agreement, NASA would not \xe2\x80\x9c establish or acquire\xe2\x80\x9d\nDreamtime and Dreamtime would not \xe2\x80\x9c act as an agency\xe2\x80\x9d within the meaning\nof 31 U.S.C. \xc2\xa79102.\' Accordingly, authorizing legislation for the agreement is\nnot required under the GCCA. W e offer no view on the policy implications of\nthe proposed financial arrangement between NASA and Dreamtime.\n\n1 In the last ten years, we have provided a detailed analysis o f GCCA issues on two occasions The more recent\no f these was a request for advice from the N ational Endowment for the Arts ( \xe2\x80\x9c NEA\xe2\x80\x9d ) concerning whether the\nNEA could create a separate nonprofit organization as a fundraising auxiliary to the agency. Letter for Karen\nC hnstensen, General Counsel, National Endowment for the Arts, from Richard L. Shiffnn, Deputy Assistant Attorney\nG eneral, O ffice o f Legal Counsel (Oct. 30, 1995). The earlier opinion concerned the creation of a corporation by\nemployees o f the Small Business Administration ( \xe2\x80\x9c SBA\xe2\x80\x9d ) to liquidate the assets of a failed SBA investment com\xc2\xad\npany M emorandum for Susan S. Engeleiter, A dministrator, Small Business Administration, from J. Michael Luttig,\nActing Assistant A ttorney G eneral, Office o f Legal Counsel, Re: Government Corporation Control Act (June 6,\n1990) These two opinions provide the framework for our analysis o f the present question\n\n214\n\n\x0cApplicability o f Government Corporation Control Act to \xe2\x80\x98\xe2\x80\x98Gain Sharing Benefit\xe2\x80\x9d Agreement\n\nA.\nFirst, we consider whether NASA\xe2\x80\x99s proposed GSB arrangement with Dreamtime\nwould constitute the establishment or acquisition of a corporation. OMB argues\nthat the GSB provision amounts to an acquisition of the company under the GCCA\nbecause the GSB is designed to track the value of twenty-five percent of the initial\ncapitalization of the company. According to OMB, the GSB is \xe2\x80\x9c a right substan\xc2\xad\ntially equivalent in all material respects to ownership of non-voting common\nstock\xe2\x80\x9d and should be treated as stock ownership. OMB Letter at 2. In addition,\nOMB contends that NASA establish ed Dreamtime within the meaning of section\n9102 because \xe2\x80\x9c it is not clear that the corporation would or could exist in the\nform contemplated absent the agreement with NASA, nor is it clear that the\nresulting entity would have any reality as an ongoing enterprise without NASA.\xe2\x80\x9d\nId. at 3.\nWe believe that, under the contemplated agreement, NASA would neither\nacquire nor establish the corporation. In our opinion for the National Endowment\nfor the Arts (\xe2\x80\x9c NEA\xe2\x80\x9d ), although we ultimately concluded that the NEA could\nnot create a nonprofit organization to serve as a fundraising auxiliary to the agency\nwithout specific congressional authorization, we repeated our prior advice that \xe2\x80\x9c an\nagency probably cannot be said, within the meaning of the statute, to have estab\xc2\xad\nlished or acquired a corporation to act as an agency unless the government holds\nan ownership interest or exercises legal control.\xe2\x80\x9d Letter for Karen Christensen,\nGeneral Counsel, National Endowment for the Arts, from Richard L. Shiffrin,\nDeputy Assistant Attorney General, Office of Legal Counsel at 1 (Oct. 30, 1995)\n(\xe2\x80\x9c NEA Opinion\xe2\x80\x9d ). We also warned that the ambiguity in the term \xe2\x80\x9c establish\xe2\x80\x9d\nsuggested that \xe2\x80\x94 even where there is no such ownership or control \xe2\x80\x94 an agency\nshould avoid excessive government involvement in the formation or operation of\na corporation in the absence of a law authorizing the agency to do so. Id. We\nnoted that\nthe Endowment must maintain a distance between itself and any\noutside organization that may be created to raise funds. Not only\nmust the Endowment not own or control the corporation, but the\ncorporation must be free to adopt and change its charter and by\xc2\xad\nlaws to the same extent as any other non-government corporation.\nFurthermore, no officials of the Endowment should serve on the\nboard of the non-profit corporation.\nId. at 2. We acknowledged that the Endowment could have some involvement\nwith the corporation without running afoul of the GCCA. For instance, it could\nencourage private parties to form a corporation, and it could make suggestions\nabout the substance of the corporate charter or by-laws. We further concluded\n\n215\n\n\x0cOpinions of the Office o f Legal Counsel in Volume 24\n\nthat \xe2\x80\x9c [t]he Endowment could also take part in joint activities with the corpora\xc2\xad\ntion,\xe2\x80\x9d so long as the NEA officials \xe2\x80\x9c act at all times in the interests of the United\nStates, rather than the corporation.\xe2\x80\x9d Id. at 3.\nWe continue to believe, as we noted in our NEA Opinion, that an agency cannot\nbe said to a cqu ire a corporation unless it \xe2\x80\x9c holds an ownership interest or exercises\nlegal control.\xe2\x80\x9d NASA does not hold such an interest or exercise such control\nwith respect to Dreamtime. It merely holds a contractual right to cash payments\nthat are determined by reference to the value of the corporation\xe2\x80\x99s stock. NASA\ndoes not own stock or any other equity interest and, to our knowledge, has no\nrepresentative on the corporation\xe2\x80\x99s Board of Directors. Even if the economic or\nmarket value of NASA\xe2\x80\x99s contractual right is substantially equivalent to the value\nof non-voting stock, NASA is not a Dreamtime stockholder and cannot be said\nto have ownership or control in the company.\nFurthermore, we do not believe that NASA can be said to have established,\ncrea ted , or o rg a n ize d Dreamtime within the meaning of the GCCA.2 As we noted\nin the NEA Opinion, the relevant question is whether NASA has excessive\ninvolvement in the formation or operation of the corporation, even in the absence\nof legal ownership or control.3 W e have been informed that Dreamtime was cre\xc2\xad\nated by private investors who have no direct or indirect association with NASA\nand that Dreamtime was formed without any support or encouragement from\nNASA. Dreamtime adopted its by-laws and charter without any input from NASA,\nand remains free to make its own business decisions and to change its by-laws\nand charter as appropriate without interference or approval by NASA. Neither\nNASA\xe2\x80\x99s collaboration with Dreamtime since the latter\xe2\x80\x99s creation nor the fact that\nDreamtime\xe2\x80\x99s ultimate success is dependent upon that collaboration is evidence\nof any government involvement in the company\xe2\x80\x99s formation or operation. Indeed,\nwe specifically noted in our NEA Opinion that agencies remain free under the\nGCCA to participate in joint activities with private corporations, so long as the\nagency acts exclusively in the interest of the United States.\nW e do not find support for OM B\xe2\x80\x99s position on these questions in the legislative\nhistory o f the GCCA, which reveals that the law\xe2\x80\x99s intent was to stop agencies\n2 As originally enacted, section 304(a) of th e Act stated that \xe2\x80\x9c [n]o corporation shall be created, organized, or\nacquired hereafter by any officer or agency of th e Federal Government or by any Government corporation for the\npurpose o f acting as an agency or instrumentality o f the United States,\xe2\x80\x9d except as specifically authorized by statute.\nGCCA, Pub L. No. 79-248, ch 557, 59 Stat. 597, 602 (1945) When section 304(a) was recodified in 1982, the\nphrase \xe2\x80\x9c created, organized, or acquired\xe2\x80\x9d was changed to \xe2\x80\x9c establish or acquire,\xe2\x80\x9d but Congress stated that the changes\nshould not be interpreted as substantive. Pub. L. N o. 97-258, \xc2\xa74(a), 96 Stat 877, 1067 (1982).\n3 A recent C om ptroller General opinion echoes this understanding of the phrase \xe2\x80\x9c establish or acquire\xe2\x80\x9d in the\nGCCA In a 1998 opinion, the Comptroller G eneral held that the Federal Communication Commission\xe2\x80\x99s role in\nforming two nonprofit corporations to administer certain functions o f its universal service programs violated the\nGCCA \xe2\x80\x9c In our view, the Control Act prohibits an agency from creating or causing creation of a corporation to\ncarry out governm ent programs without explicit statutory authorization \xe2\x80\x9d M atter of the Honorable Ted Stevens,\nB -278,820, 1998 W L 465124, at *4 (C.G. Feb. 10, 1998) (Emphasis added.). The opinions and legal interpretations\nof the General Accounting Office and the Comptroller General often provide helpful guidance on appropriations\nmatters and related issues. However, they are not binding upon departments, agencies, or officers of the Executive\nBranch See Bow sher v. Synar, 478 U.S. 714, 727\xe2\x80\x9432 (1986)\n\n216\n\n\x0cApplicability o f Government Corporation Control Act to \xe2\x80\x9cGain Sharing Benefit" Agreement\n\nfrom creating instrumentalities of the United States Government under state or\nlocal law and to bring corporate agencies performing government functions under\ncongressional oversight and control. The GCCA was the product of a lengthy\ncongressional inquiry into agency practice of creating private corporations to con\xc2\xad\nduct government business. In August 1944, the Joint Committee on the Reduction\nof Nonessential Federal Expenditures released a comprehensive report about such\ncorporations. S. Doc. No. 78-227 (1944) (\xe2\x80\x9c Joint Committee Report\xe2\x80\x9d ). The Joint\nCommittee Report recommended a variety of legislative measures, and in 1945\nCongress acted on those recommendations to pass the GCCA, Pub. L. No. 7 9 248, ch. 557, 59 Stat. 597 (1945). Most of the Act\xe2\x80\x99s provisions were designed\nto regulate or facilitate congressional oversight of the financial transactions of\ncertain enumerated \xe2\x80\x9c wholly owned\xe2\x80\x9d and \xe2\x80\x9c mixed-ownership\xe2\x80\x9d government cor\xc2\xad\nporations, but section 304 concerned the creation of corporations to act as govern\xc2\xad\nment agencies.\nThe Senate Committee report accompanying the bill stated:\nIt does not seem desirable to continue any longer this anomalous\nsituation in which an instrumentality of the Federal Government\nis technically a creature of a State or local government. Moreover,\nsome of these corporations were chartered without specific\nauthority of Congress. The bill provides that no wholly owned\nGovernment corporation created by or under the laws of any State,\nTerritory, or possession of the United States or any political sub\xc2\xad\ndivision thereof, or under the laws of the District of Columbia, shall\ncontinue as an agency or instrumentality of the United States after\nJune 30, 1948 . . . . It further provides that no corporation shall\nbe created, organized, or acquired hereafter by any officer or\nagency of the Federal Government or by any Government corpora\xc2\xad\ntion for the purpose of acting as an agency or instrumentality of\nthe United States, except by act of Congress or pursuant to an act\nof Congress specifically authorizing such action.\nS. Rep. No. 79-694, at 13-14 (1945); a cc o rd H.R. Rep. No. 79-856, at 11 (1945).\nIn passing this legislation, Congress was focused on agencies that formed private\ncorporations to perform government functions, thus removing those functions from\neffective congressional oversight. Neither the language of the statute nor the legis\xc2\xad\nlative history supports the theory that Congress was concerned with financial\nagreements between government agencies and the private corporations with which\nthey do business that involve no government formation, ownership, or control\nof the private corporation.\nIndeed, it is worth noting that the legislative history of the statute authorizing\nNASA to carry out this very program \xe2\x80\x94 the International Space Station Commer\xc2\xad\n217\n\n\x0cOpinions of the Office o f Legal Counsel in Volume 24\n\ncial Development Demonstration Program \xe2\x80\x94 suggests that Congress sought to\nencourage collaborative commercial ventures in which NASA\xe2\x80\x99s compensation was\nset by reference to market value. The House Conference Report stated that \xe2\x80\x9c the\nconferees have included bill language establishing a demonstration program\nintended to test the feasibility o f commercial ventures using the station, and\nwhether or not it is possible to operate the station in accordance with business\npractices. In order to encourage private investment and increase economic activity\nin low earth orbit, NASA may negotiate for payments, at a value set by the private\nmarket, and retain any funds received in excess of costs for re-investment in the\nstation economic development program.\xe2\x80\x9d H.R. Conf. Rep. No. 106-379, at 152\xe2\x80\x94\n53 (1999). The GSB provision is a market-based payment agreement. While the\nGSB arrangement may be novel, and perhaps has some risk associated with it,\nCongress apparently contemplated the economic implications of setting payments\nat a value dictated by the private market before authorizing the program. For the\nreasons discussed above, we conclude that NASA\xe2\x80\x99s proposed GSB agreement with\nDreamtime does not constitute the establishment or acquisition of a corporation\nwithin the meaning of 31 U.S.C. \xc2\xa7 9102.\nB.\nEven if there were some doubt as to whether the proposed GSB provision d id\nconstitute the acquisition or establishment of Dreamtime for purposes of the Act,\ncongressional authorization would only be required if NASA established or\nacquired Dreamtime to a c t as an agen cy. Based on our understanding of the pro\xc2\xad\nposed arrangement between NASA and Dreamtime, we do not believe that\nDreamtime would act as an agency within the meaning of 31 U.S.C. \xc2\xa7 9102.\nIn a 1990 opinion, we considered whether the Small Business Administration\xe2\x80\x99s\n(\xe2\x80\x9c SBA\xe2\x80\x9d ) creation of a corporation under Delaware law to liquidate the assets\nof a failed Small Business Investment Company licensed by the SBA after it was\nappointed to serve as a receiver constituted the establishment of a corporation\nto a c t a s an agen cy. Memorandum for Susan S. Engeleiter, Administrator, Small\nBusiness Administration, from J. Michael Luttig, Acting Assistant Attorney Gen\xc2\xad\neral, Office of Legal Counsel, R e: G overnm ent C orporation C ontrol A c t (June\n6, 1990) ( \xe2\x80\x9c SBA Opinion\xe2\x80\x9d ). An \xe2\x80\x9c agency\xe2\x80\x9d is defined as \xe2\x80\x9c a department, agency,\nor instrumentality of the United States Government.\xe2\x80\x9d 31 U.S.C. \xc2\xa7 101 (1994).\nReferring to this definition, we concluded that the corporation formed by the SBA\nacted as an instrumentality of the government under the GCCA. Our analysis first\nconsidered the commonly understood meaning of the term instrumentality and the\nlegislative history of section 304:\nIn common usage, an instrumentality is a thing through which a\nperson or entity acts. The term implies both [1] that the thing is\n218\n\n\x0cApplicability o f Government Corporation Control Act to \xe2\x80\x9cGain Sharing Benefit \xe2\x80\x9d Agreement\n\ncontrolled by another actor and [2] that the thing is or may be delib\xc2\xad\nerately used to accomplish the actor\xe2\x80\x99s objectives. This common\nsense definition is supported by section 304(b) of the Act and its\nlegislative history. As noted previously, section 304(b) required any\nwholly owned government corporation chartered under state or\nlocal law to discontinue service \xe2\x80\x9c as an agency or instrumentality\nof the United States\xe2\x80\x9d and to liquidate after June 30, 1948, unless\nreincorporated by Congress. That section was aimed at 18 specific\ncorporations chartered under state or local law that had been identi\xc2\xad\nfied by the [Joint Commission Report]. . . . The language of sec\xc2\xad\ntion 304(b) shows, and the legislative history confirms, that Con\xc2\xad\ngress viewed these 18 corporations as instrumentalities of the fed\xc2\xad\neral government. . . . Consistent with the commonly accepted\nmeaning of \xe2\x80\x9c instrumentality,\xe2\x80\x9d each of these corporations was\nwholly owned by the United States, and thus subject to its control,\nand each was established or acquired to perform one or more tasks\non the government\xe2\x80\x99s behalf or for its benefit.\nSBA Opinion at 8-9 (numbers added). Second, we examined the use of the term\n\xe2\x80\x9c instrumentality\xe2\x80\x9d in other legal contexts and developed a list of four factors to\nconsider in deciding whether a corporation is a government instrumentality: (1)\nwhether the entity was created by the government; (2) the extent of government\ncontrol over its operations; (3) the source of the entity\xe2\x80\x99s funding; and (4) the\npurposes for which it was created and the functions it performs.4 Id. at 11-13.\nSubsequent federal case law, as well as an opinion by the Comptroller General,\nsupports this analytical framework, and indeed, appears to recognize somewhat\ngreater flexibility than we have endorsed. In Varicon International v. OPM , 934\nF. Supp. 440 (D.D.C. 1996), the district court considered whether the Office of\nPersonnel Management violated the GCCA when it created a private company,\nthe United States Investigations Service ( \xe2\x80\x9c USIS\xe2\x80\x9d ), to perform background inves\xc2\xad\ntigations previously completed by the agency. Relying on Lebron v. N ational R.R.\nP a ssen ger C orp., 513 U.S. 374 (1995), in which the Supreme Court considered\nwhether the National Railroad Passenger Corporation was an agency or instrumen\xc2\xad\ntality of the government for purposes of individual rights guaranteed by the Con\xc2\xad\nstitution, the district court applied a similar multi-factor test to conclude that USIS\ndid not act as an agency under 31 U.S.C. \xc2\xa7 9102:\nThe record currently before the court indicates that USIS is a pri\xc2\xad\nvate company owned by its employees . . . ; none of the USIS\n4 We also noted that the factors would vary in importance depending upon the particular statute or doctnne being\napplied\' \xe2\x80\x9c Since the purpose o f the Government Corporation Control Act was to assert greater federal dominion\nover the financial affairs o f entities controlling federal funds, the source of the entity\xe2\x80\x99s funding is more important\nhere than it might be in other contexts.\xe2\x80\x9d SBA Opinion at 12\n\n219\n\n\x0cOpinions o f the Office o f Legal Counsel in Volume 24\n\nemployees will be employed in any manner or in any capacity by\nthe government; the government will have no control over the USIS\nboard of directors, management, or employees, except as provided\nfor in the contract; the government will not own or have any rights\nor obligations to own any USIS stock; the government will have\nno right or ability to appoint members of the USIS board of direc\xc2\xad\ntors; and, the government has no obligation to or intention to make\npayments to or otherwise financially assist USIS except as provided\nunder the contract in payment for service performed under the con\xc2\xad\ntract. . . . [I]t is the court\xe2\x80\x99s conclusion that USIS appears to be\na private corporation which was awarded a government contract,\nand not a corporation which is acting as a federal agency.\n934 F. Supp. at 447. Furthermore, in a 1992 opinion concerning the applicability\nof the GCCA to the creation of Federally Funded Research and Development Cen\xc2\xad\nters, the Comptroller General applied similar criteria, observing that \xe2\x80\x9c \xe2\x80\x98agents or\ninstrumentalities of the United States\xe2\x80\x99 are component parts of the federal govern\xc2\xad\nment which are vested, by law, with the authority to act on behalf of the United\nStates, or to fulfill some statutory mission of the federal government.\xe2\x80\x9d Matter\nof the Honorable David Pryor, 71 Comp. Gen. 155, 158 (1992).\nThe factual context of the creation and operation of Dreamtime, when measured\nagainst the commonly understood meaning of the term \xe2\x80\x9c instrumentality\xe2\x80\x9d and the\nfour-part test set forth in our SBA Opinion, leads to the conclusion that Dreamtime\nwas not established or acquired to act as an agency under 31 U.S.C. \xc2\xa79102. First,\nas we discussed above, Dreamtime was created by private individuals who are\nnot associated with NASA. While it is true that Dreamtime was formed in\nresponse to NASA\xe2\x80\x99s published notice of its intent to enter collaborative ISS\ncommercial agreements with private business partners, the corporation was created\nwithout the support or encouragement of the agency. Second, NASA owns no\npart of Dreamtime and exercises no control over its operations. Dreamtime is\nowned by private shareholders and, as we understand it, no government employees\nserve on the company\xe2\x80\x99s Board of Directors. NASA Letter #1, at 4. Third,\nDreamtime is funded by private sources, not funds drawn from the federal\nTreasury or other federal assets. S ee Agreement, art. IV (\xe2\x80\x9c NASA will not provide\nany appropriated funds to Dreamtime under this Agreement.\xe2\x80\x9d ).\nThe final factor\xe2\x80\x94 the purposes for which Dreamtime was created and the func\xc2\xad\ntions it performs \xe2\x80\x94 is the most complicated to apply here. Our SBA Opinion stated\nthat the corporation created by the SBA amounted to a government instrumentality\nbecause it \xe2\x80\x98\xe2\x80\x98was created to benefit SBA and to assist the agency in accomplishing\nits goals. No private entities profit from [the corporation\xe2\x80\x99s] operations except per\xc2\xad\nhaps indirectly, as paid contractors of the corporation.\xe2\x80\x9d SBA Opinion at 13. At\nfirst blush, Dreamtime seems to be similarly situated because the corporation was\n220\n\n\x0cApplicability o f Government Corporation Control Act to "Gain Sharing Benefit" Agreement\n\ncreated specifically in response to statutory authorization for the Space Station\nCommercial Development Demonstration Program, and the access to high defini\xc2\xad\ntion television that Dreamtime provides will, in fact, assist NASA in accom\xc2\xad\nplishing its statutory mission of space exploration. However, Dreamtime was not\nformed for NASA\xe2\x80\x99s exclusive benefit, nor to carry out any statutory function dele\xc2\xad\ngated to the agency by Congress. While the collaborative agreement is designed\nto benefit both Dreamtime and NASA, Dreamtime has its own stake in the\narrangement \xe2\x80\x94 the production of high definition television images for its commer\xc2\xad\ncial use on the Internet and elsewhere. This is entirely separate from NASA\xe2\x80\x99s\npurpose in entering the agreement, which includes the right to use the images\nfor NASA public affairs, scientific and engineering concerns, research and\ndevelopment, and missions and operations. Since Dreamtime is not owned, con\xc2\xad\ntrolled, or funded by NASA or any other government agency, and it does not\nperform any statutory functions assigned to NASA, we conclude that the corpora\xc2\xad\ntion was not established to act as an instrumentality of the United States govern\xc2\xad\nment.5\n\nm . Conclusion\nThe GCCA does not require NASA to obtain legislative authorization to enter\nan agreement to receive a GSB in the form of cash payments based on the value\nof a percentage of Dreamtime\xe2\x80\x99s stock. The GSB does not constitute stock owner\xc2\xad\nship, and it does not give NASA any control over the corporation. Furthermore,\nNASA cannot be said to have established Dreamtime within the meaning of 31\nU.S.C. \xc2\xa79102. Even if the GSB agreement were found to constitute establishment\nor acquisition of Dreamtime by NASA, the GCCA would not be implicated\nbecause Dreamtime could not be said to \xe2\x80\x9c act as an agency\xe2\x80\x9d under the GCCA.\nRANDOLPH D. MOSS\nA ssistan t A ttorn ey G en eral\nOffice o f Legal Counsel\n\n5This conclusion is further supported by article XIII of the Agreement, which states that \xe2\x80\x9c [ajlthough this Agree\xc2\xad\nment reflects a decision on the part of the Parties to enter into a multi-media collaboration, the Parties are independent\nof each other, and nothing herein will be deemed to create any legal partnership, joint venture, or association between\nthe Parties \xe2\x80\x9d\n\n221\n\n\x0c'