b"August 12, 1977\n\n77=46\n\nMEMORANDUM OPINION FOR THE\nDIRECTOR OF THE OFFICE OF\nMANAGEMENT AND BUDGET\nLegal Questions Raised by the Library of Congress\nCritique of Reorganization Plan No. 1 of 1977\n\nThis is in response to the request of your Office for my opinion on\nthe legal questions raised by the Library of Congress Critique of Reor\xc2\xad\nganization Plan No. 1 of 1977. The critique raises many questions of\npolicy and discusses a number of general legal issues, but it specifically\nchallenges the legality of only a few aspects o f the plan. Our response\nis limited to those specific legal challenges. F o r the reasons that follow,\nwe do not believe that the critique\xe2\x80\x99s conclusions respecting these as\xc2\xad\npects o f the plan are warranted.\nDomestic Council Staff\nSection 1 o f the plan provides that \xe2\x80\x9cthe Domestic Council staff, is\nhereby designated the Domestic Policy S taff\xe2\x80\x99; it further provides that\n\xe2\x80\x9cthe staff shall continue to be headed by an Executive Director who\nshall be an Assistant to the President, designated by the President, as\nprovided in Section 203 o f Reorganization Plan No. 2 of 1970.\xe2\x80\x9d The\ncritique asserts that this provision violates Section 904 of the Reorgani\xc2\xad\nzation A ct of 1977, 5 U.S.C. \xc2\xa7904, by failing to provide for Senate\nconfirmation of the Executive D irector of the Domestic Policy Staff.\nSection 904 reads in pertinent part:\nA reorganization plan transmitted by the President containing pro\xc2\xad\nvisions authorized by paragraph (2) of this section may provide\nthat the head of an agency be an individual or a commission or\nboard with more than one member. In the case of an appointment\nof the head o f such an agency, the term of office may not be fixed\nat more than four years, the pay may not be at a rate in excess of\nthat found by the President to be applicable to comparable officers\nin the executive branch, and if the appointment is not to a position\n186\n\n\x0cin the competitive service, it shall be by the President, by and with\nthe advice and consent of the Senate.\nAs is readily apparent from this provision, the requirement respecting\nSenate confirmation is not made applicable to every official who has\nsome vague connection with a reorganization plan; rather, it applies\nonly \xe2\x80\x9cin the case of an appointment of the head of such an agency.\xe2\x80\x9d\nThe term \xe2\x80\x9cthe head of such an agency\xe2\x80\x9d can only refer to those officials\ndescribed in the previous sentence. The sentence allows the head of an\nagency to be an individual or a multimember board; what is more\nimportant for our purposes, however, is that it clearly contemplates an\nappointment of such officers pursuant to paragraph (2) of \xc2\xa7 904. The\nterm \xe2\x80\x9cthe head of such an agency,\xe2\x80\x9d then, refers to heads of agencies\nappointed in accordance with the provisions o f that paragraph.1\nWe do not believe that the Executive Director of the Domestic\nPolicy Staff is such an official. Paragraph (2) applies only to officials\nfor whom arrangements regarding appointment and pay must be made\n\xe2\x80\x9cby reason of a reorganization\xe2\x80\x9d [emphasis added], and we doubt that the\naction taken by the plan with respect to the Domestic Council fits\nwithin \xc2\xa7 904\xe2\x80\x99s definition of \xe2\x80\x9creorganization.\xe2\x80\x9d Section 904 defines that\nterm to \xe2\x80\x9cmean a transfer, consolidation, coordination, authorization, or\nabolition, referred to in Section 903 of this title.\xe2\x80\x9d 5 U.S.C. \xc2\xa7 902(2).\nThese terms defining \xe2\x80\x9creorganization\xe2\x80\x9d and their elaboration in section\n903 contemplate a change in the functions of an agency; but no such\nchanges are effectuated here. The functions of the staff will remain the\nsame as before; under both plan No. 1 of 1977 and plan No. 2 of 1970,\nthe staff is (by reason of the duties imposed on the Executive Director)\nto \xe2\x80\x9cperform such functions as the President may from time to time\ndirect.\xe2\x80\x9d We thus believe that the requirement of Senate confirmation is\ninapplicable here.\nThe purposes underlying the requirement of Senate confirmation\nwould also seem to support this result. It would make little sense to\nrequire Senate confirmation of an official not previously subject to this\nrequirement merely because he or she is in some way involved in a\nreorganization\xe2\x80\x94particularly where, as here, his or her functions remain\nexactly the same. Rather, the requirement appears designed to protect\ncongressional prerogatives in situations where new offices are created.\nThis intent seems apparent in Congress\xe2\x80\x99 linking the requirement of\nSenate confirmation to situations where provisions for appointment and\npay of officials are necessary\xe2\x80\x94and such provisions would be necessary\nonly where new offices are being created. The legislative history of the\npredecessor of \xc2\xa7 904 bears this out; it reveals that Congress wanted to\n' This interpretation is further supported by the fact that the provision requiring Senate\nconfirm ation w as originally included within a provision w hich is the precursor o f para\xc2\xad\ngraph (2). See R eorganization A ct o f 1945, ch. 582, \xc2\xa7 4(2) 59 Stat. 614. T h e statute was\nlater am ended to reflect its present form, A ct o f D ec. 10, 1971, Pub. L. No. 92-179, \xc2\xa73,\n85 Stat. 575, but the legislative history clearly indicates that no substantive changes w ere\nintended. See S. Rep. N o. 485, 92nd Cong., 1st sess. 4-5 (1971).\n\n187\n\n\x0cimpose restrictions on the President\xe2\x80\x99s power to reorganize \xe2\x80\x9cwith re\xc2\xad\nspect to the creation of new positions. \xe2\x80\x9d S. Rep. No. 638, 79th Cong., 1st\nSess. 6 (1945). [Emphasis added.] The plan can hardly be said to have\ncreated a new position here. It expressly states that the staff \xe2\x80\x9cshall\ncontinue to be headed by an Executive D irector\xe2\x80\x9d [emphasis added], and\nit confers no new functions on the Executive Director or the staff by\nwhich he could be regarded as having a new position.\nFinally, another aspect o f the plan supports our conclusion. Because\nall it purports to do is to change the name of the staff of the Domestic\nCouncil, the plan would appear to fall within the provisions of para\xc2\xad\ngraph (1) of \xc2\xa7 904. This paragraph allows the President to\nchange . . . the name of an agency affected by a reorganization\nand the title of its head. . . .\nBecause Congress structured \xc2\xa7 904 to require Senate confirmation only\nwith respect to officials provided for under paragraph (2), we believe it\nwould be contrary to Congress\xe2\x80\x99 intent to extend this requirement to\nsituations where only action under paragraph (1) has been taken.\nThe critique further argues that the Executive Director of the D o\xc2\xad\nmestic Council should have been required to be confirmed by the\nSenate under Reorganization Plan No. 2 of 1970. If this be so, the fact\nthat under plan No. 1 of 1977 the Executive Director would continue\nin his previous position, seems to require an adjustment to provide for\nSenate confirmation. However, the A ttorney General had ruled that the\narrangement in the plan No. 2 of 1970 did not violate provisions similar\nto those at issue here. The Attorney General relied on the fact that\nthen\xe2\x80\x94as now \xe2\x80\x94the Executive Director was to be an Asistant to the\nPresident appointed under other statutory provisions, and commented\nthat \xe2\x80\x9ccarried to its logical conclusion, this argument would require the\n\xe2\x80\x98reappointment\xe2\x80\x99 in accord with 5 U.S.C. \xc2\xa7 904(2) of any properly ap\xc2\xad\npointed officer given an additional title and duties by a reorganization\nplan.\xe2\x80\x9d 2 While there were those in Congress who took a contrary view,\nsee, e.g\xe2\x80\x9e H.R. Rep. No. 1066, 91st Cong., 2d Sess. 3-6, 56-57 (1970), the\nfact remains that Congress did not disapprove the 1970 reorganization.\nWe think this fact strongly implies that Congress regarded Reorganiza\xc2\xad\ntion Plan No. 2 of 1970 as complying with existing law and congres\xc2\xad\nsional intent, because it was done with full knowledge of the objections\nto its approval. We do not believe that Reorganization Plan No. 2 of\n1970 was in violation of law, and, accordingly, there is no need to\nprovide for Senate confirmation in plan No. 1 of 1977.\nW e conclude that there is no requirement under \xc2\xa7 904 of the Reorga\xc2\xad\nnization A ct of 1977 that the position of Executive Director of the\nDomestic Policy Staff be made subject to Senate confirmation.\n1 L etter from the A ttorney G eneral to the Chairm an o f the Subcom m ittee on G overn\xc2\xad\nm ent O perations, H ouse o f Representatives, dated M ay 6, 1970.\n\n188\n\n\x0cAssistant Secretary of Commerce\nThe critique argues that the wording and intent of Section 4 of the\nplan, regarding the appointment of an Assistant Secretary of Com\xc2\xad\nmerce, is ambiguous. We disagree.\nThat section now reads:\nThere shall be in the Department of Commerce an Assistant\nSecretary for Communications and Information who shall be ap\xc2\xad\npointed by the President, by and with the advice and consent of\nthe Senate, and who shall be entitled to receive compensation at\nthe rate now or hereafter prescribed by law for Level IV of the\nExecutive Schedule.\nWhile the language \xe2\x80\x9cthere shall be . . . an Assistant Secretary\xe2\x80\x9d could\nconceivably suggest that a present Assistant Secretary is to be delegat\xc2\xad\ned new functions, we doubt that this language would be used if there\nwere such intent. Moreover, any doubt on the matter is resolved by the\nPresident\xe2\x80\x99s statement that certain functions were being \xe2\x80\x9ctransferred to a\nnew office within the Department of Commerce, headed by a new\nAssistant Secretary for Communications and Information\xe2\x80\x9d [emphasis\nadded]; the message also stated that the plan would \xe2\x80\x9ccreate\xe2\x80\x9d an Assist\xc2\xad\nant Secretary\xe2\x80\x94which implies that there is to be an Assistant Secretary\nwhere none had previously existed.\nCompliance with House of Representatives Rules\nClause 2 o f Rule XXI of the House of Representatives provides that\nno appropriations may be reported by the House Appropriations Com\xc2\xad\nmittee in any general appropriations bill for expenditures not previously\nauthorized by law. The critique notes that, if the Domestic Policy Staff\nis subsumed in the White House Office, a violation of this clause will\nresult. The reason given is that several budget accounts in the Execu\xc2\xad\ntive Office of the President\xe2\x80\x94including the White House Office\xe2\x80\x94are\nalready in violation of this clause in whole or in part.\nWe do not believe it appropriate for us to respond to this aspect of\nthe critique. If there is a violation, it is a violation of an internal rules of\nprocedure that the House of Representatives has the responsibility to\ninterpret and apply.\nJ o h n M. H a r m o n\n\nAssistant Attorney General\nOffice o f Legal Counsel\n\n189\n\n\x0c"


b'Application of the Emoluments Clause of the Constitution and\nthe Foreign Gifts and Decorations Act\nT he E m olum ents C lause o f the Constitution prohibits governm ent em ployees from accepting any sort\no f paym ent from a foreign governm ent, except w ith the consent of C ongress Congress has\nconsented to the receipt o f minimal g ifts from a foreign state, 5 U .S .C . \xc2\xa7 7342, but has not\nconsented to receipt o f com pensation for services rendered.\nT he fact that an em ployee o f the N uclear R egulatory C om m ission would be paid by an A m erican\nconsulting firm fo r services he rendered in connection w ith construction of a nuclear power plant in\nM exico w ould not, under the circum stances presented h ere, avoid the Em olum ents Clause, since\nthe M exican governm ent would be th e actual source o f the paym ent\n\nFebruary 24, 1982\nM EM ORANDUM OPINION FOR THE\nASSISTANT GENERAL COUNSEL,\nU NITED STATES NUCLEAR REGULATORY COMMISSION\nThis responds to your letter asking for an interpretation of the Emoluments\nClause of the Constitution, A rticle I, \xc2\xa7 9, cl. 8, and the Foreign Gifts and\nDecorations A ct, 5 U .S .C . \xc2\xa7 7342 (Supp. Ill 1979).\nA ccording to your letter and subsequent conversations with Nuclear Regulato\xc2\xad\nry Com m ission (NRC) staff, an employee of the NRC is seeking authorization to\nwork on his leave tim e for an Am erican consulting firm. In that capacity he would\nreview the design of a nuclear power plant being constructed in Mexico. The\nplant is being built by the M exican governm ent through its Federal Electrical\nCom m ission.\nThe A m erican consulting firm would be under contract to the Federal Elec\xc2\xad\ntrical C om m ission; that firm would com pensate the NRC employee for his\nexpenses and services. The A m erican firm has no other nuclear contracts and\nwould be relying solely on the experience of this employee in securing the\ncontract. The em ployee\xe2\x80\x99s work at NRC involves the assessment of operating\nreactors. This is the sam e job he will perform in Mexico. The consulting firm is a\nsmall firm that has three other engineers in unrelated fields. It has not been\ncreated for the purpose of securing this particular contract or. insulating the\nem ployee from the Mexican governm ent. The employee would be paid from the\nfunds received from the Mexican governm ent in connection with the proposed\ncontract, although not all of th e proceeds from the contract will go to him.\n156\n\n\x0cThe employee expects to spend from seven to ten work days on the contract.\nHe has worked previously on this project in an official capacity when he was\nmade available for a year to work on it under the auspices of the State Department\nand the International Atomic Energy Agency. As a result, when the em ployee,\ntogether with others from the NRC, circulated a proposal to act as consultants,\nthe Mexican government initiated discussions with him personally. Subsequent\nnegotiations, we understand, have been conducted through the consulting firm.\nAt the outset we note that your agency has concluded that the proposed activity\nis permissible under the NRC conflict of interest regulations governing outside\nemployment by NRC employees. 10 C.F.R. \xc2\xa7 0 .7 3 5-50 (1981). We have not\nbeen asked for our views concerning these regulations and therefore take no\nposition as to them.\nThe Foreign Gifts and Decorations Act, 5 U .S.C . \xc2\xa7 7342 (Supp. Ill 1979),\ngenerally prohibits employees from requesting or otherwise encouraging the\ntender of a gift or decoration, or from accepting or retaining a gift of more than\nminimal value. That section defines \xe2\x80\x9c g ift\xe2\x80\x9d as \xe2\x80\x9c a tangible or intangible present\n(other than a decoration) tendered by, or received from, a foreign goverment.\xe2\x80\x9d It\nseems clear that this Act only addresses itself to gratuities, rather than com pensa\xc2\xad\ntion for services actually performed, as would be the case here. We therefore\nconclude that 5 U .S.C . \xc2\xa7 7342 is not applicable to the conduct contemplated.\nThe Emoluments Clause presents more difficult problems. Article 1, \xc2\xa7 9, cl. 8\nprovides:\nNo Title of Nobility shall be granted by the United States: And\nno Person holding any Office of Profit or Trust under them, shall,\nwithout the Consent of the Congress, accept of any present,\nEmolument, Office, or Title, of any kind whatever, from any\nKing, Prince, or foreign State.\nA threshold question is presented as to whether the NRC employee is a \xe2\x80\x9c Person\nholding any Office of Profit or Trust\xe2\x80\x9d under the United States. We understand that\nhe is not employed in a supervisory capacity. In past opinions, this Office seems\nto have assumed without discussion that the only persons covered by the Emolu\xc2\xad\nments Clause were those holding an \xe2\x80\x9c Office\xe2\x80\x9d in the sense used in the Appoint\xc2\xad\nments Clause, Article II, \xc2\xa7 2, cl. 2. We so stated in a letter from Deputy Assistant\nAttorney General Ulman to the General Counsel of your agency on July 26,\n1976. It is not clear, however, that the words \xe2\x80\x9c any Office of Profit or T rust,\xe2\x80\x9d as\nused in the Emoluments Clause, should be limited to persons considered \xe2\x80\x9c Of\xc2\xad\nficers\xe2\x80\x9d under the Appointments Clause. Both the language and the purpose of the\ntwo provisions are significantly different.\nThe latter finds its roots in separation of powers principles. The Supreme Court\nhas said that \xe2\x80\x9c any appointee exercising significant authority pursuant to the laws\nof the United States\xe2\x80\x9d is an officer under the Appointments Clause and must be\nappointed in the manner prescribed by that Article. Employees are \xe2\x80\x9c lesser\nfunctionaries\xe2\x80\x9d subordinate to officers. Buckley v. Valeo, 424 U .S. 1, 126 & n.\n162 (1976). See generally 424 U .S. at 124\xe2\x80\x94137. The Emoluments Clause, on the\n157\n\n\x0cother hand, is designed \xe2\x80\x9c to exclude corruption and foreign influence.\xe2\x80\x9d 3 M.\nFarrand, The Records c f the Federal Convention c fl7 8 7 , 327 (Gov. Randolph at\nthe V irginia C onvention) (rev. ed. 1937, 1966 reprint). Even though the Framers\nmay have had the exam ple of high officials such as \xe2\x80\x9c foreign M inisters\xe2\x80\x9d in mind\nwhen discussing the clause, 2 id. 389, its policy would appear to be just as\nim portant as applied to subordinates. The problem o f divided loyalties can arise\nat any level. This may be particularly true in a field where, as here, secrecy is\npervasive.\nIt is presum ably for this reason that Congress, in enacting the Foreign Gifts\nand D ecorations A ct, assumed without discussion that under the Emoluments\nClause its consent was necessary for any employee to accept a gift from a foreign\ngovernm ent. 5 U .S .C . \xc2\xa7 7342(a). E .g ., H .R . Rep. No. 2052, 89th C ong., 2d\nSess. (1966). Although the view of Congress is not, by itself, conclusive, we are\npersuaded that the interpretation suggestion by the Foreign Gifts and Decorations\nAct is appropriate here. It is not necessary therefore for us to decide whether the\nNRC em ployee in this case m ust be considered an officer in the Appointments\nClause sense.\nThe next issue presented under the Em olum ents Clause is whether the payment\nin this case is \xe2\x80\x9c from any King, Prince, or foreign State.\xe2\x80\x9d As noted, Congress has\nconsented only to the receipt of m inim al gifts from any foreign state as provided\nby 5 U .S .C . \xc2\xa7 7342. Therefore, any other em olum ent stands forbidden unless\nthe conclusion can be reached that the paym ent is not \xe2\x80\x9c from \xe2\x80\x9d a foreign govern\xc2\xad\nm ent at all. We m ust thus decide whether payment through the consulting firm, in\neffect, shields the employee from payment by the Mexican government.\nThe question of w hen a foreign government, as opposed to an intermediary, is\nthe actual source of a gift or paym ent has, as far as we know, only been discussed\nin w riting once before. In 1980, this Office noted that no relevant opinion or\ncom m entary addressed this issue. We considered a proposed contract under\nw hich a large university provided expert consultants to a foreign government.\nThe foreign governm ent had no control over the selection of the experts and their\npaym ent and in the years in which the consulting relationship has been in effect,\nhad never sought to influence the selection of experts. These matters were within\nthe discretion of the university. This Office concluded therefore that the payment\no f an individual consultant could not be said to be \xe2\x80\x9c from \xe2\x80\x9d a foreign government.\nIn the present case, the retention of the NRC employee by the consulting firm\nappears to be the principal reason for selection of the consulting firm by the\nM exican governm ent. He is the firm \xe2\x80\x99s sole source of expertise and was, at least in\npart, selected because of prior experience gained while working on the same\nproject in an official capacity. A s we understand the situation, it seems clear that\nultim ate control, including selection of personnel, remains with the Mexican\ngovernm ent. It is difficult to state what the outer limits of our earlier opinion may\nbe. Each situation m ust, of course, be judged on its facts. Under the circum \xc2\xad\nstances presented here, however, we cannot conclude that the interposition of the\n158\n\n\x0cAmerican corporation relieves the NRC employee of the obligations imposed by\nthe Emoluments Clause.\nRo bert B . S\n\nhanks\n\nDeputy Assistant Attorney General\nOffice cf Legal Counsel\n\n\x0c'


b'Presidential Appointment of the Board of Directors\nof Radio Free Europe/Radio Liberty, Inc.\nStatute conditio n in g further funding o f R adio Free Europe/R adio Liberty, Inc. on the President\xe2\x80\x99s\nselection o f its B oard o f Directors w ould not underm ine the public purposes of this nonprofit\nco rp o ratio n , and it is therefore unlikely that the D elaw are courts would strike it down under that\nsta te\xe2\x80\x99s laws.\n\nAugust 31, 1982\nMEMORANDUM OPINION FOR THE CHAIRPERSON, BOARD FOR\nINTERNATIONAL BROADCASTING\nThis responds to your request of July 12, 1982, for our opinion whether\nDelaware law would prohibit a proposed amendment to the certificate of incor\xc2\xad\nporation of Radio Free Europe/Radio Liberty, Inc. (RFE/RL) and confirms the\noral advice I gave you on this subject in July. RFE/RL is a nonprofit company\nincorporated under Delaware law with a private Board of Directors. The Board\nfor International Broadcasting Authorization Act for Fiscal Years 1982 and 1983,\nPub. L. No. 9 7 -2 4 1 ,9 6 Stat. 273,295 (1982), which was signed last week by the\nPresident, requires RFE/RL, if it is to receive any future federal funding, to\namend its certificate of incorporation so that its Board of Directors would be\nselected by the President of the United States, with the advice and consent of the\nSenate. For the reasons set forth in detail below, we believe that it is unlikely that\nthe Delaware courts would strike down such an amendment to RFE/RL\xe2\x80\x99s certifi\xc2\xad\ncate of incorporation.\n\nI. Background\nAlthough RFE/RL is a private corporation, it currently receives over 99\npercent of its operating funds from congressional appropriations\' and is subject to\nnumerous federal restrictions on its operations as a condition for this funding.\nThis unusual hybrid of private and public control is largely an historical artifact.\nOver 30 years ago the Office o f Policy Coordination, and later the Central\nIntelligence Agency (CIA), established and secretly funded two separate, non\xc2\xad\nprofit corporations, Radio Free Europe and Radio Liberty, which were the\n\n1 According to your letter, its current budget request is for more than $95 million, although private contributions\nhave never exceeded $200,000 per annum since 1975.\n\n512\n\n\x0chistorical antecedents of RFE/RL.2 In 1973, after Congress had by legislation\ndirected that all connections between the CIA and the two corporations termi\xc2\xad\nnate, Congress created the Board for International Broadcasting (BIB) to oversee\nthe funding and operation of these two radio stations. See Pub. L. No. 93-129,87\nStat. 456 (1973), 22 U.S.C. \xc2\xa7\xc2\xa7 2871-2879. Subsequently, Radio Free Europe\nand Radio Liberty merged to become RFE/RL, over which the BIB retained\nfunding and oversight authority.\nAs provided in the 1973 Act, as amended, the BIB is composed of five\nmembers appointed by the President with the advice and consent of the Senate.\nThe BIB has general authority to assure that RFE/RL is operated efficiently and\nconsistently with the broad foreign policy objectives of the government. See 22\nU.S.C. \xc2\xa7 2873 (1981). Pursuant to this authority, the BIB has promulgated\nregulations which make RFE/RL \xe2\x80\x9c responsible for assuring compliance of its\noperations with the policy guidelines\xe2\x80\x9d established by the BIB and which provide\nfor any remedial action the BIB determines is necessary because of violations of\nthese guidelines. 22 C.F.R. \xc2\xa7 1300.6(c)-(f). The Chairperson of the BIB may\nalso veto any nomination made by the RFE/RL nominating committee for a\nposition as an officer of RFE/RL, and, under the by-laws of RFE/RL, as a new\ndirector.3 Finally, the regulations require that RFE/RL obtain the approval of the\nBIB before it amends its certificate of incorporation. See 22 C.F.R. \xc2\xa7 1300.13(c).\nThese overlapping lines of authority have resulted in continuing disagreements\nbetween the BIB and the Board of Directors of RFE/RL over the goals and\noperation of RFE/RL. The Board of International Broadcasting Authorization\nAct for Fiscal Years 1982 and 1983 would resolve these conflicts by granting the\nBIB absolute authority over RFE/RL. Under \xc2\xa7 403(a) of the Act, RFE/RL is\nrequired, as a condition for future funding from the BIB, to amend its certificate\nof incorporation so that the members of the BIB serve as RFE/RL\xe2\x80\x99s Board of\nDirectors.4 Since the Board of Directors of RFE/RL are also the members of\nRFE/RL, see RFE/RL, Inc., By-laws, \xc2\xa7 2.1, this would give the BIB complete\ncontrol of the corporation. Moreover, the Board of Directors of RFE/RL would be\nappointed by the President of the United States and would be removable by the\nPresident at his pleasure.\nIn response to this legislation, RFE/RL solicited an opinion from its Delaware\ncounsel whether Delaware law would permit the continued incorporation of\nRFE/RL were this amendment to RFE/RL\xe2\x80\x99s certificate of incorporation to be\nadopted. You have provided us with a copy of that opinion. See Opinion of Potter,\n2 Radio Free Europe, Inc. was incorporated under New York law, while Radio Liberty Committee, Inc. was\nincorporated under Delaware law\n3 The regulations provide that the Chairperson shall serve as an ex officio member of the Board of Directors and as\na voting member of the nominating com m itteeforthe nomination of officers.See 22C F R . \xc2\xa7 1300.9(b). Becauseall\nnominations must receive the unanimous consent of the members of the nominating committee before they may be\npresented to the Board of Directors, the Chairperson can veto any nomination for an officer\'s position in the\ncorporation. The by-laws of RFE/RL also provide that the Chairperson of the BIB shall serve as a voting member of\nthe nominating committee for all purposes, thereby permitting him to veto any nomination for director as well. See\nRFE/RL, Inc , By-laws, \xc2\xa7 3.l3.1(b)(i)\n4 The Act would also increase the number of BIB members to ten, nine of whom would be appointed by the\nPresident The tenth member, who would serve ex officio without voting rights, would be the chief executive officer\nof RFE/RL. See Pub. L. No. 97-241, 96 Stat. 273, 296 (1982).\n\n513\n\n\x0cAnderson and Carroon, dated May 28, 1982 (Delaware opinion). The Delaware\nopinion states that it is a \xe2\x80\x9c fundamental concept\xe2\x80\x9d of nonprofit corporation law that\ndirectors or members of nonprofit corporations may not delegate to outsiders\nthose duties that lie at the heart o f the management of the corporation. Since the\nselection of a corporation\xe2\x80\x99s directors is one of the most important decisions\nregarding the operation of the corporation, the Delaware opinion concludes that\nDelaware law does not permit the directors of a nonprofit corporation to be chosen\nby the \xe2\x80\x9c holder of an office,\xe2\x80\x9d such as the President of the United States, \xe2\x80\x9c who is\nneither associated with nor interested in the operations of the corporation and\nwhose decision[s] would be governed by considerations different from and\npotentially adverse to the best interests of the corporation.\xe2\x80\x9d Delaware opinion\nat 5.\nII. Dtelegatnoim of Corporate DecnsDoms\nThe analysis in the Delaware opinion is based on the traditional doctrine\nrestricting directors of for-profit corporations from delegating management deci\xc2\xad\nsions to outsiders. See Del. Code Ann. tit. 8, \xc2\xa7 141(a)(1974). Under the\nDelaware opinion\xe2\x80\x99s reasoning, the Delaware courts would extend this doctrine to\nprohibit the directors of RFE/RL, a nonprofit corporation, from delegating the\nselection of new directors to the President of the United States. As the Delaware\nopinion recognizes, however, the organization of and laws governing nonprofit\ncorporations are different from those governing for-profit corporations. The\nDelaware General Corporation law, which regulates nonprofit corporations as\nwell as for-profit corporations, specifically states that the certificate of incorpora\xc2\xad\ntion of a nonstock corporation \xe2\x80\x9c may . . . provide that the business and affairs of\nthe corporation shall be managed in a manner different from that provided in this\nsection.\xe2\x80\x9d Del. Code Ann. tit. 8, \xc2\xa7 141 (j). The Delaware General Corporation law\nalso provides that the certificate o f incorporation of a nonstock corporation may\nalter the general rule that each member shall have one vote. Del. Code Ann. tit. 8,\n\xc2\xa7 215. Thus, nonprofit corporations have greater latitude under Delaware law in\ntheir organizational structure than for-profit corporations, although the absence\nof relevant case law leaves unclear what limits the Delaware courts would\nultimately place on the organization of nonprofit corporations in a particular\ncontext. Accordingly, in reviewing the proposed amendment, we will examine\nthe underlying purpose of the restriction on managerial delegations and attempt\nto assess how the Delaware courts would apply this restriction to a nonprofit\ncorporation like RFE/RL. We will then consider the relevance of the two cases\nrelied on in the Delaware opinion.\nA. D elegation c f M anagerial D ecisions in a For-Profit Corporation\n\nThe restriction on the delegation of managerial decisions is derived from Del.\nCode Ann. tit. 8, \xc2\xa7 141(a), which states that \xe2\x80\x9c [t]he business and affairs of every\ncorporation organized under this chapter shall be managed by a board of direc\xc2\xad\n\n514\n\n\x0ctors, except as may be otherwise provided in the other provisions in this chapter\nor in its certificate of incorporation.\xe2\x80\x9d By providing that a separate group such as\nthe directors manage the corporation, the section furthers two objectives. First, it\nassures that the business affairs of the corporation are not managed by the equity\nowners of the corporation. See Abercrombie v. Davies, 123 A .2d 893, 899 (Del.\nCh. 1956), rev\xe2\x80\x99d on other grounds, 130 A .2d 338 (Del. 1957).\nSecond, the provision assures that the group which manages the corporation,\nthe directors, is nevertheless responsible and accountable to the stockholders.\nThis would not be true if an outsider were delegated management duties. In this\nregard, the directors are the agents of the stockholders and owe a fiduciary duty to\nexercise their best judgment in coordinating the affairs of the corporation. See\ngenerally 2 W. Fletcher, Cyclopedia of the Law of Private Corporations,\n\xc2\xa7\xc2\xa7 295-296 (rev. perm. ed. 1982). If an outsider or a stockholder were to run the\nmanagement affairs of the corporation, that person would be acting without the\nauthority of the stockholders and therefore would necessarily be undermining the\ndirectors\xe2\x80\x99 \xe2\x80\x9c duty to use their own best judgment on management matters.\xe2\x80\x9d\nAbercrombie v. D avies, 123 A.2d at 899. See generally Clarke M emorial\nCollege v. Monaghan Land C o ., 257 A .2d 234 (Del. 1969); Lehrman v. Cohen,\n222 A.2d 800 (Del. 1966).\nThis section, however, does not require that directors make all corporate\ndecisions. It obviously would not preclude the stockholders as a group from\nselecting the directors. The selection and removal of directors is not a manage\xc2\xad\nment decision which must be made by the directors themselves, but a right\nnormally vested in the equity owners of a corporation to choose the management.\nSee, e.g ., Campbells v. Loew\xe2\x80\x99s, 134 A .2d 852, 857 (Del. Ch. 1957). Similarly,\nthis section would not prohibit stockholders from selling their stock to individu\xc2\xad\nals who were previously outside the firm, or, subject to the requirements of\nDelaware\xe2\x80\x99s voting trust statute, delegating their choice of directors to outsiders\nwhile retaining their equity interest in the firm. See Del. Code Ann. tit. 8, \xc2\xa7 218.\nSee generally Adams v. Clearance Corp., 121 A .2d 302 (Del. 1956); Ringling\nBros. v. Ringling, 53 A.2d 441 (Del. 1947). Finally, under the modem view,\n\xc2\xa7 141(a) would not prohibit the directors from delegating most management\ndecisions to outsiders when specifically authorized by the stockholders in an\namendment in the certificate of incorporation. See Lehrman v. Cohen, 222 A .2d\nat 808. In such a case, the principal (the stockholders) has expressly authorized\nthe agent (the directors) to delegate his authority. See 2 W. Fletcher, Cyclopedia\nof the Law of Private Corporations, \xc2\xa7 496 (rev. perm. ed. 1982).\nB. Delegation c f Decisions in Nonprofit Corporations\n\nApplication of \xc2\xa7 141(a) to a nonprofit corporation is complicated because the\nprovision is intended largely to regulate the operation of a for-profit corporation\ncomprised of equity stockholders and a separate board of directors. A nonprofit\ncorporation such as RFE/RL, however, has no stockholders. It is managed and\ncontrolled by a self-perpetuating Board of Directors charged with furthering the\n515\n\n\x0cpublic goals in its certificate of incorporation. In light of these differences, we\nbelieve that the proposed amendment to RFE/RL\xe2\x80\x99s certificate of incorporation\nwould not violate \xc2\xa7 141(a) as that provision would be applied to nonprofit\ncorporations.\nFirst, it is important to recognize that the proposed amendment would not\ndelegate a management decision from the directors of the corporation, but rather\nwould delegate the selection of who may make the management decisions. At\nleast with respect to for-profit corporations, however, \xc2\xa7 141 (a) is intended to limit\nonly the delegation of management decisions, not the selection of management.\nUnder the proposed amendment, the directors of RFE/RL still would have\nauthority over the management o f the business affairs of the corporation. They\nmerely could be replaced if the President were dissatisfied with their decisions or\nperformance, just as the directors of many for-profit corporations can be replaced\nby the stockholders. SeeEverettv. Transnation D eve I. Corp., 267 A .2d 627 (Del.\nCh. 1970).5\nSecond, delegating the selection of directors to a person outside a nonprofit\ncorporation raises different issues than directors delegating management deci\xc2\xad\nsions to outsiders in a for-profit corporation. A director is prohibited from\ndelegating a management decision to an outsider largely because this would\nallow a person not selected by the stockholders, for whom the corporation is run,\nto manage its business affairs. In effect, it takes control of the corporation away\nfrom the stockholders. A nonprofit corporation, however, is operated to pursue\nthe public objectives in its certificate of incorporation. Delegating the selection of\ndirectors to an outsider in a nonprofit corporation such as RFE/RL does not\nremove control of the corporation from the group in whose interest it is operated.\nRather, in the case of RFE/RL, it merely transfers control from a selfperpetuating Board of Directors, each of whom also holds another institutional\nposition, to a person who technically does not hold an institutional position in\nRFE/RL.\nFinally, in the unusual facts o f this case, placing control of RFE/RL in the\nhands of the President is as likely to protect the public goals of RFE/RL as\nselection by an internal self-perpetuating Board. For all practical purposes, the\nPresident is an insider for purposes of selecting the directors of RFE/RL. The\nPresident has prime responsibility for formulating the foreign policy of the\nUnited States and is specifically charged by statute with selecting directors of the\nBIB \xe2\x80\x9c distinguished in the fields o f foreign policy or mass communications.\xe2\x80\x9d See\n22 U .S.C . \xc2\xa7 2872(b)(2).6 He is \xe2\x80\x9c chief executive officer\xe2\x80\x9d of the \xe2\x80\x9c organization\xe2\x80\x9d\nwhich supplies essentially all of RFE/RL\xe2\x80\x99s funds. Moreover, if the Delaware\ncourts refused to uphold the change, RFE/RL might very well cease to exist, at\nleast as incorporated in Delaware. Finally, the existing certificate of incorpora\xc2\xad\ntion, which the Delaware opinion does not suggest violates Delaware law, already\ngives the President significant control over the operation of RFE/RL through the\n5 The distinction between management and th e selection of management is inherent in \xc2\xa7 141(a), at least in the\ncontext o f for-profit corporations. See Abercrombie v. Davies, 123 A 2d at 899.\n6 Under the proposed amendment, no more than five members of the Board may be of the same political party.\n\n516\n\n\x0cregulations of the BIB, whose members he selects. Indeed, the BIB itself\npresently exercises, as pointed out above, veto power over the selection of the\nmembership of the Board of Directors, a power that the Delaware opinion does\nnot suggest to be inconsistent with Delaware corporation law.\nIn addition, we note that nonprofit corporations incorporated in other states\nhave directors chosen by public officials. Many state-related universities in the\nCommonwealth of Pennsylvania, which are incorporated under its nonprofit\ncorporation law, have a percentage of their trustees selected by the governor\npursuant to state law.7 Similarly, members of the Board of Directors of the\nNational Science Foundation, incorporated under federal law,8are chosen by the\nPresident. Thus, selection of the directors by an elected official does not neces\xc2\xad\nsarily, or in our view, even presumptively, undermine the public purposes of a\nnonprofit organization.\nOf course, it can be argued that the President may not be as sensitive to the\njournalistic independence of RFE/RL as would be the private Board. Whatever\npolicy arguments might be made in favor of an autonomous board, we doubt that\nthe Delaware courts would hold this independence to be a requirement for\nRFE/RL to retain its corporate status under Delaware law. Not only are there\nmany advantages to presidential selection, as described above, but selection by\nthe existing Board does not assure to any greater degree that the public goals of\nthe corporation will be faithfully pursued. Unlike equity stockholders in a forprofit corporation, the directors of a nonprofit corporation have no financial\nincentive to make decisions to further the stated goals of the corporation. As the\nSenate report on the Board for International Broadcasting Authorization Act for\nFiscal Years 1982 and 1983 observes of RFE/RL\xe2\x80\x99s Board, it is a \xe2\x80\x9c self-appointed,\nlargely self-perpetuating board of private directors.\xe2\x80\x9d S . Rep. No. 7 1 ,97th C ong.,\n1st Sess. 31 (1981). For all of these reasons, we believe that transferring authority\nover selection of directors from the members to the President does not undermine\nthe public goals of RFE/RL, and therefore that it is unlikely that the Delaware\ncourts would find that it violates \xc2\xa7 141(a).\n\nIII. Case Law\nFinally, we note that the two cases relied on by the Delaware opinion for its\nconclusion are clearly distinguishable because in both cases the delegation raised\na substantial possibility that the public goals of the nonprofit corporation would\nbe undermined.\nThe first case, In re Osteopathic Hospital Association c f Delaware, 191 A .2d\n333 (Del. Ch.), a ffd , 195 A .2d 759 (Del. 1963), dealt with an unusual nonprofit\ncorporation\xe2\x80\x94 the Osteopathic Hospital Association of Delaware. The associa\xc2\xad\ntion\xe2\x80\x99s by-laws allowed only osteopathic physicians to be general members of the\n7 See Mooney v. Temple University, 292 A .2d 3 95,399-400 ( f t 1972) (describing selection of university trustees\nby Governor)\n8 See National Science Foundation Act of 1950, Pub. L No. 81-507, \xc2\xa7 4, 64 Stat. 149, 150, as amended, 42\nU S C . \xc2\xa7 1863.\n\n517\n\n\x0cAssociation, although the members could elect laypersons to serve on the Board\nof Trustees. As it turned out, a majority of the Board was made up of laypersons.\nBecause the Board had authority to amend the by-laws, it voted to make all the\ntrustees members of the Association. The chancery court struck down the\namendment on the ground that \xe2\x80\x9c a change of so fundamental a character in the\nstructure of this rather unique organization could not validly be carried into effect\nby the unilateral action of the trustees taken here,\xe2\x80\x9d but rather must be achieved by\nsubmitting the issue to the members as an amendment to the certificate of\nincorporation. See 191 A .2d at 336. The Supreme Court of Delaware subse\xc2\xad\nquently affirmed for the same reasons. See 195 A.2d 759.\nIn re Osteopathic Hospital Association is distinguishable on two grounds.\nFirst, the chancery court only held that a fundamental change such as this must be\nachieved through an amendment to the certificate of incorporation ratified by the\nmembers. See 191 A .2d at 338. The court did not hold that the members could\nnot give lay trustees the authority to make decisions on membership.9 Had the\nmembers specifically amended the certificate of incorporation to allow the\ntrustees to make this decision, as the members of RFE/RL would amend its\ncertificate of incorporation to permit presidential selection, the amendment\nwould, we believe, have been upheld under the court\xe2\x80\x99s analysis.\nSecond, the chancery court specifically relied on the fact that the delegation\npresented a \xe2\x80\x9c real\xe2\x80\x9d \xe2\x80\x9c possibility of abuse.\xe2\x80\x9d 191 A.2d at 336. Because the\nOsteopathic Hospital Association was a professional association, there was a\ndivergence of interests between the lay board and the professional osteopathic\nmembers. Thus, the amendment \xe2\x80\x9c seriously impaired a valuable right of these\n[association] members under circumstances suggesting opposition by at least a\nmajority of such \xe2\x80\x98members.\xe2\x80\x99 \xe2\x80\x9d Id. at 338. In contrast, RFE/RL does not serve any\nprivate membership interests which would be seriously undermined by presiden\xc2\xad\ntial selection. It is specifically charged with \xe2\x80\x9c engag[ing] in independent, profes\xc2\xad\nsionally competent, responsible broadcast journalism, and shall thereby promote\nthe right of freedom of opinion and expression . . . .\xe2\x80\x9d RFE/RL, Inc., Articles of\nIncorporation at 2. The President stands in a far different position from the\npotentially self-serving lay board in In re Osteopathic Hospital Association.\nThe second decision on which the Delaware opinion relies, Chapin v. Benw ood Foundation, Inc., 402 A .2d 1205 (Del. Ch. 1979), a ff d sub. nom.\nHarrison v. Chapin, 415 A.2d 1068 (Del. 1980) (per curiam), involved a\nchallenge to a voting agreement among the trustees of the Benwood Foundation.\nTwo of the four members of the Board of Trustees of Benwood were officers of the\nThomas Corporation. The stock o f the Thomas Corporation was the sole asset of\nthe Foundation. The two other Board members were directors of a Tennessee\nbank with which the Thomas Corporation had close dealings. The trustees\nentered into an agreement whereby each trustee would select his own successor,\nor, in the event he should fail to name a successor, the directors of the institution\n9 In affirming the chancery court, (he Supreme Court of Delaware found that the members had \xe2\x80\x9c retained for\nthemselves under the 1955 by-laws . ultimate control over the Board of Trustees on the question of who would be\nadmitted into the Association " 195 A 2d at 7 64-65 (footnote omitted).\n\n518\n\n\x0cwith which he was associated would pick his successor. The arrangement was\nintended to maintain a balance between the officers of the company, who would\nbe most knowledgeable regarding the value of the Foundation\xe2\x80\x99s only asset, and\nthe bank directors, who would possess an independent perspective on its finan\xc2\xad\ncial affairs. The arrangement continued in operation through several changes in\nthe Board. After the Thomas stock was sold, however, three of the trustees agreed\nto abolish the procedure because the original rationale supporting it had ceased to\nexist. The agreement was subsequently challenged in court.\nThe chancery court struck down the agreement on the ground that it con\xc2\xad\nstituted an improper delegation of the duties of trustees. It gave two reasons in\nsupport of the decision. First, the justification for this delegation\xe2\x80\x94 to keep an\neven split of the institutional backgrounds of the trustees on the Board\xe2\x80\x94 had\nended, and therefore there was no continued need for the arrangement. Second,\nthe ratification of this plan by all of the trustees (who were also the \xe2\x80\x9c members\xe2\x80\x9d of\nthe Benwood Corporation) did not render the agreement valid. Because the\ntrustees were not stockholders with an equity interest in the corporation, the court\nreasoned that they could not sanction this fundamental change in the operation of\nthe corporation.\nIt is possible to interpret certain language in the opinion of the chancery court\nin Chapin as prohibiting any delegation of corporate responsibility by a nonprofit\ncorporation. We believe, however, that the decision should be limited to its\nfacts\xe2\x80\x94 that is, a situation in which there is no indication that the delegation would\nserve the public goals of the nonprofit corporation.10 In this regard, we note that\nthe Supreme Court of Delaware affirmed the chancery court solely on the ground\nthat there was no longer any justification for the agreement, and expressly refused\nto reach \xe2\x80\x9c the other matters argued by counsel.\xe2\x80\x9d 415 A.2d at 1069.\n\nIV. Conclusion\nWe believe that there is no absolute prohibition against members of nonprofit\ncorporations delegating decisions to individuals who do not hold office within the\nfirm. While there may be restrictions on such delegation in individual cases, the\ndelegation proposed in this case would be as likely to protect the public goals of\nRFE/RL as selection by a self-perpetuating Board of Directors. Finally, the cases\nrelied on in the Delaware opinion are distinguishable. Accordingly, in our view, it\nis unlikely that the Delaware courts would strike down the proposed amendment.\nL a r r y L . S im m s\n\nDeputy Assistant Attorney General\nOffice of Legal Counsel\n\n10 In its conclusion, the chancery court emphasized that the directors\xe2\x80\x99 agreement could lead to abuse. \xe2\x80\x9c To commit\nthemselves in advance\xe2\x80\x94 perhaps years in advance\xe2\x80\x94 to fill a particular Board vacancy with a certain named person\nregardless of the circumstances that may exist at the time that the vacancy occurs, is not the type of agreement that\nthis court should enforce . . .\xe2\x80\x9d 402 A .2d at 1211.\n\n519\n\n\x0c'


b'Application of 31 U.S.C. \xc2\xa7 3302(b) to Settlement of Suit\nBrought by the United States\nThe requirem ent in 31 U.S.C. \xc2\xa7 3302(b) that money received for the Government be deposited in\nthe U nited States Treasury does not apply in a case in which the United States asserted no\nclaim for money dam ages or penalties, and will receive no money from a health care program\nm anaged for private plaintiffs.\n\nFebruary 18, 1983\nM\n\nem orandum\n\nO\n\np in io n f o r t h e\n\nS e c t io n , L and\n\nand\n\nN\n\nC h ie f , E n v ir o n m e n t a l E n f o r c e m e n t\natural\n\nR e s o u r c e s D iv is io n\n\nYou have requested the views of this Office regarding the proposed settle\xc2\xad\nment in United States v. Olin Corp., a civil action now pending in the District\nCourt for the Northern District of Alabama. The action was brought for\nequitable relief, including an injunction ordering remedial action, and for\nrecovery of costs and expenses as a result of the unlawful discharge by Olin of\nDDT into the waters of the United States and into a federal wildlife refuge. The\nfirst amended complaint alleged causes of action based upon the Refuse Act, 33\nU.S.C. 407; the Resource Conservation and Recovery Act, 42 U.S.C. 6973a;\nthe Clean Water Act, 33 U.S.C. \xc2\xa7 1364; the Comprehensive Environmental\nResponse, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C.\n\xc2\xa7 9606; the common law of nuisance; and restitution.\nWith regard to the CERCLA count in particular, the complaint alleged that\n\xe2\x80\x9c[t]here is or may be an imminent and substantial endangerment to the public\nhealth or the environment because of the actual or threatened release of\nhazardous substances from the [defendant\xe2\x80\x99s] chemical plant site and drainage\nditch.\xe2\x80\x9d On the basis of this and the other allegations, the complaint prayed for\nentry of a mandatory permanent injunction requiring, among other things, that\nOlin restore the environment in the vicinity of its chemical plant. The prayer\nfor relief also included a requirement that Olin assure the performance of\ncomprehensive health studies on the residents living in the vicinity of its plant\nand long-term monitoring of their health. The Government sought no monetary\ndamages or penalties.\nA number of private plaintiffs brought separate actions against Olin. Al\xc2\xad\nthough the cases were never consolidated with the Government\xe2\x80\x99s action, one\nsettlement was proposed in satisfaction of all claims. On December 16, 1982,\nthe court set forth the terms on which all parties had tentatively agreed to settle\nthe litigation. The private damages claims would be settled for a total of $24\n36\n\n\x0cmillion, to be paid by Olin over a period of five years. In satisfaction of the\nGovernment\xe2\x80\x99s claim relating to health care, the proposed settlement provides\nthat out of each annual payment to the private plaintiffs, $1 million would be\npaid into a trust fund established and managed to provide medical monitoring\nand assistance to all claimants over a period of ten years. The proposed\nsettlement further provides that \xe2\x80\x9c[t]he details of the program will be established\nby the federal government and the plaintiffs;\xe2\x80\x9d that \xe2\x80\x9c[a]ny impasse will be\nresolved in favor of the federal government position;\xe2\x80\x9d and that \xe2\x80\x9c[a]ny money\nleft in the fund at the end of 10 years will be returned to the settling plaintiffs.\xe2\x80\x9d\nFinally, the proposed settlement provides that medical monitoring would be\navailable to any person in the immediate area of Traina, Alabama, near Olin\xe2\x80\x99s\nchemical plant, upon that person\xe2\x80\x99s executing a full release to the United States\nand to Olin.\nYou have asked whether the proposed settlement is consistent with 31\nU.S.C. \xc2\xa7 3302(b) (former \xc2\xa7 484),1 which provides:\nAn official or agent of the Government receiving money for the\nGovernment from any source shall deposit the money in the\nTreasury as soon as practicable without deduction for any charge\nor claim.\nThis Office has previously considered the effect of 31 U.S.C. \xc2\xa7 484,2 the\npredecessor to \xc2\xa7 3302(b), in the context of a settlement in In the Matter o f\nSteuart Transportation Co., a civil action brought by the United States and the\nState of Virginia following an oil spill in the Chesapeake Bay. In that case, each\nplaintiff sought damages for the death of waterfowl, statutory penalties, and\ncleanup costs. The settlement provided that Steuart Transportation would pay\ndamages of $115,000, which would be donated to a waterfowl preservation\norganization designated jointly by the State of Virginia and the Department of\nthe Interior. In 1980, this Office concluded that Federal participation in accept\xc2\xad\ning and directing the payment would violate 31 U.S.C. \xc2\xa7 484. We reasoned that\nunder the facts of that case, it could not be concluded that the money was not\n\xe2\x80\x9creceived\xe2\x80\x9d or that it was not received \xe2\x80\x9cfor the use of the United States\xe2\x80\x9d on the\ntheory that it was received in trust for the people of Virginia and the citizens of\nthe United States. \xe2\x80\x9cEffect of 31 U.S.C. \xc2\xa7 484 on the Settlement Authority of the\nAttorney General,\xe2\x80\x9d 4B Op. O.L.C. 684 (1980).3\n1 By Pub. L. No. 97 -2 5 8 , 96 Stat. 877 (1982), C ongress enacted Title 31, U nited States Code, into law.\nFormer \xc2\xa7 484 was codified as \xc2\xa7 3302(b).\n2 Form er \xc2\xa7 484 provided in pertinent part*\nThe gross am ount o f all m oneys from w hatever source shall be paid by the officer or agent\nreceiving the same into the Treasury, at as early a day as practicable, w ithout any abatem ent or\ndeduction on account o f salary, fees, costs, charges, expenses, or claim of any description\nw h a tev e r.. . .\nNo substantive change was intended by the enactm ent o f form er \xc2\xa7 484 as \xc2\xa7 3302(b). See Pub. L. No. 9 7 -2 5 8 ,\n\xc2\xa7 4, 96 Stat. 877, 948 (1982); H.R. Rep. No. 9 7 -7 5 1 , 97th Cong., 2d Sess. 2 (1982).\n3 The relevant language under current \xc2\xa7 3302(b) is \xe2\x80\x9cre c eiv [e d ]. . . for the G overnm ent.\xe2\x80\x9d T he House R eport\naccom panying the bill indicates that the change was made \xe2\x80\x9c to elim inate unnecessary w ords.\xe2\x80\x9d H.R. Rep. No.\n97-651, supra, at 98. N o substantive change w as intended. See supra note 2.\n\n37\n\n\x0cIn our view, the proposed settlement in the Olin case presents no problem\nunder \xc2\xa7 3302(b). Because the Government asserted no claim for money dam\xc2\xad\nages or penalties, we do not believe that any portion of the $24 million is\nappropriately viewed as \xe2\x80\x9creceiv[ed] . . . for the Government\xe2\x80\x9d within the\nmeaning of \xc2\xa7 3302(b). The entitlement to the funds belongs solely to the\nprivate plaintiffs who asserted monetary claims against Olin. The Government\xe2\x80\x99s\nspecific request that the court earmark $5 million of the $24 million general\nsettlement to be used in satisfaction of its health-care claim does not change the\nentitlement to or receipt of the funds. The proposed settlement, in fact, specifi\xc2\xad\ncally reflects that any money remaining in the trust fund at the end of ten years\nwill be returned to the settling private plaintiffs.\nThe Government\xe2\x80\x99s prayer for a health care remedy would undoubtedly have\nentailed a financial cost to Olin, but the monetary expenditure required of a\ndefendant in order to comply with a court injunction does not constitute money\nreceived for the Government by an official or agent of the Government. Section\n3302(b) is a statutory aid to the control by Congress over public expenditures,\ncommitted to the Legislative Branch by Article I, \xc2\xa7 8, cl. 1 of the Constitution.\nThe earliest version of the statute was proposed to curb unlimited discretion\npreviously enjoyed by the Executive to take deductions from revenue collec\xc2\xad\ntions. According to the bill\xe2\x80\x99s sponsor, the provision required that all money\nreceived as revenue be paid into the Treasury and thereafter be expended only\nupon appropriation by Congress. See 18 Cong. Globe 46364 (1848) (remarks of\nRep. McKay). An equitable remedy obtained by the Government in litigation,\nalbeit one with financial cost to the defendant, is simply not within the purview\nof \xc2\xa7 3302, either by its terms or its purpose.\nSimilarly, we do not believe that federal participation in working out the\ndetails of the health care program implicates the restrictions of \xc2\xa7 3302(b). This\nparticipation is not appropriately equated with the designation of the waterfowl\npreservation organization that was at issue in Steuart Transportation Co.\nBecause no money is received by the Government as a result of the settlement,\nno Government money is redirected or expended simply by the Government\xe2\x80\x99s\nparticipation in the administration of the health care program.\nRa lph W . T arr\n\nDeputy Assistant Attorney General\nOffice o f Legal Counsel\n\n38\n\n\x0c'


b'M ay 24, 1977\n\n77-28\n\nMEMORANDUM OPINION FOR THE\nASSISTANT ATTORNEY GENERAL, CIVIL\nRIGHTS DIVISION\nStandards of Conduct\xe2\x80\x94Application Pursuant to 28\nCFR \xc2\xa7 45.735-9(c)\n\nThis is in response to your request for our evaluation of Mr. A \xe2\x80\x99s\nsecond application for leave to argue a civil rights case for private\nplaintiffs.\nBefore coming to the Department, Mr. A was counsel for the plain\xc2\xad\ntiffs under the auspices o f a private nonprofit organization concerned\nwith civil rights policy and litigation. The United States is not a party\nto the case, and the Department has not appeared as amicus or other\xc2\xad\nwise.\nThe matter is governed by the Departm ent\xe2\x80\x99s Standards of Conduct,\n28 C FR \xc2\xa7 45.735-9(a), which provide that:\nNo professional employee shall engage in the private practice of\nhis profession, including the practice of law, except as may be\nauthorized by or under paragraph (c) or (e) of this section.\nParagraph (c) provides that the Associate Attorney G en eral1 may\nmake specific exceptions to paragraph (a) in \xe2\x80\x9cunusual circumstances.\xe2\x80\x9d\nApplications under paragraph (c) must be transmitted through the ap\xc2\xad\nplicant\xe2\x80\x99s superior.2 Also relevant is 28 C FR \xc2\xa7 45.735-9(d), which pro\xc2\xad\nhibits employees from engaging in off-duty employment which would\ninterfere with the performance of their official duties, create actual or\napparent conflicts of interest, or reflect adversely on the Department.\nFrom the attached documents, we understand that the case in ques\xc2\xad\ntion is a class action, filed in May 1973, which alleged hiring discrimi\xc2\xad\nnation by the local police and fire departments in violation of 42 U.S.C.\n\xc2\xa7\xc2\xa7 1981 and 1983. In January 1975 the district court found that the\npolice department had engaged in racial discrimination and ordered\naffirmative relief, including allocation of new hires by race. The deci\xc2\xad\nsion was affirmed by the circuit court in June 1976. In May of that\nyear, the fire department case was settled by a consent decree provid1 F o rm erly the D eputy A ttorney G eneral.\n3 28 C F R \xc2\xa7 45.735(e), which governs participation in legal aid program s for the indi\xc2\xad\ngent, does not apply to this m atter.\n\n116\n\n\x0cing for similar relief. However, in October 1976 the circuit court\nvacated its decision and remanded the police department case to the\ndistrict court for rehearing in the light of Washington v. Davis, 426 U.S.\n229 (1976).\nMr. A entered on duty on January 31, 1977. Insofar as we are aware,\nhe could have delayed coming to the Department until he had briefed\nand argued the case. Instead, on December 26, 1976, he requested leave\nfrom the then head of the Civil Rights Division and the then Deputy\nAttorney General, pursuant to \xc2\xa7 45.735-9(c), to brief and argue the case\non rehearing after he came to the Department.\nIn substance, Mr. A alleged that under Davis the district court would\nhave to consider the factual issue of the police department\xe2\x80\x99s discrimina\xc2\xad\ntory intent, and that he was uniquely qualified to argue this issue. In\nsupport of the request, Mr. A stated that he had been lead counsel from\nthe inception of the case, that his replacement was unfamiliar with the\nfactual background, that local counsel was not expert in the legal issues\ninvolved, that no transcript had been made because the district court\npreferred to videotape the testimony, and that he had already drafted a\nsubstantial portion of the brief. Mr. A asserted that his familiarity with\nthe case, his trial notes, and his legal skills were of critical importance\nto the successful presentation of the police department case. He also\nstated that he would disclaim any connection with the United States\nGovernment and would receive no compensation for his efforts.\nOn January 31, 1977, the Acting Deputy Attorney General ruled that\nin the light of the \xe2\x80\x9cunusual circumstances,\xe2\x80\x9d Mr. A might assist in the\npreparation of plaintiffs\xe2\x80\x99 brief but could not participate in any way in\noral argument. Moreover, his ruling was subject to the conditions that\nMr. A \xe2\x80\x99s efforts not interfere with his official duties, that he receive no\ncompensation, and that his work for the private, nonprofit organization\nwould create neither an actual nor apparent conflict of interest, as\nrequired by 28 CFR \xc2\xa7 45.735-9(d). Mr. A prepared and signed plain\xc2\xad\ntiffs\xe2\x80\x99 brief, in which he stated that he was not acting in his official\ncapacity and that his participation did not represent the Department or\nthe United States. The brief was filed on March 21, 1977. The case is\nready for argument, but argument has not yet been scheduled.\nThe Department has already ruled that Mr. A\xe2\x80\x99s involvement in the\ncase was a sufficiently \xe2\x80\x9cunusual circumstance\xe2\x80\x9d under 28 CFR \xc2\xa7 45.7359(c) to permit him to commit his time and effort to the brief and to\nidentify himself with it. The immediate question here is whether a\ndistinction should be drawn between preparing and signing the brief\nand participating in oral argument.\nThe ruling of the Acting Deputy Attorney General does not discuss\nthe distinction between the two. The Executive Assistant to the Asso\xc2\xad\nciate Attorney General informs us that it is the Department\xe2\x80\x99s policy not\nto allow its attorneys to practice in the Federal courts. He says that an\nexception was made for Mr. A to finish the brief because he had\n117\n\n\x0calready done substantial w ork on it and there did not appear to be time\nfor his successor to become sufficiently familiar with the case before\nthe brief was due. This was not true of oral argument, which had not\nyet been set.\nThe possible impact on the Department if Mr. A argues the case is\nthreefold. First, a portion of his time and energy will be absorbed.\nSecond, there is a risk th at the Department will be identified with\nplaintiffs\xe2\x80\x99 position in the public mind, despite any disclaimer by Mr. A.\nThird, he will continue his professional association with the private\norganization, which is one that interests itself in litigation related to his\nofficial duties. See 28 CFR \xc2\xa7 47.735-9(d).\nThe hardship to Mr. A\xe2\x80\x99s former clients if he does not argue their case\nis substantially less than if he had not prepared the brief. His replace\xc2\xad\nment has had more time to familiarize himself with the case, and it\nshould be possible to reduce the videotaped testimony to a transcript.\nOral argument has not yet been scheduled. Moreover, as shown by the\ntiming o f his initial request, Mr. A knew before he came to the Depart\xc2\xad\nment that its regulations forbade outside professional employment. He\nand his clients have had at least 4 months to arrange their affairs\naccordingly. In the light o f these facts, we do not believe that there is\nsufficient reason to allow M r. A. to continue his private practice while\na Government employee.\nIn conclusion, the responsibility for ruling on Mr. A \xe2\x80\x99s request lies in\nthe first instance with the Assistant Attorney General for the Civil\nRights Division and ultimately with the Associate Attorney General. In\nour opinion, the unusual circumstances that were found to justify Mr.\nA \xe2\x80\x99s appearance on the brief arose during the short time between his\nentry on duty and the due date of the brief. Because these circum\xc2\xad\nstances no longer exist, ou r evaluation is that it would not be unduly\nharsh to deny Mr. A leave to argue the case, although that decision is\nnot ours.\nL\n\neon\n\nU\n\nlm a n\n\nDeputy Assistant Attorney General\nOffice o f Legal Counsel\n\n118\n\n\x0c'