b'Use of the Exchange Stabilization Fund to Provide Loans and\nCredits to Mexico\nAs part o f an international financial support package for Mexico, the President and the Treasury Sec\xc2\xad\nretary have the authority under section 10(a) of the Gold Reserve Act of 1934 to use the Treasury\nDepartment\'s Exchange Stabilization Fund to provide loans and credits to Mexico in the form\no f (i) short-term currency \xe2\x80\x9c sw aps\xe2\x80\x9d through which Mexico will borrow U.S. dollars in exchange\nfor Mexican pesos for ninety days; (ii) medium-term currency swaps through which Mexico will\nborrow U.S. dollars for up to five years; and (iii) guaranties through which the United States\nwill backup M exico\xe2\x80\x99s obligations on government securities for up to ten years.\n\nMarch 2, 1995\nM e m o r a n d u m O p in io n\nD epartm ent\n\nfor t h e\nof the\n\nG en er a l Co u n sel\n\nT rea sury\n\nOn January 31, 1995, the President proposed to use the Treasury Department\xe2\x80\x99s\nExchange Stabilization Fund (\xe2\x80\x9c ESF\xe2\x80\x9d or \xe2\x80\x9c fund\xe2\x80\x9d ) to provide $20 billion in loans\nand credits to Mexico as part of a financial support package for that country (the\n\xe2\x80\x9c support package\xe2\x80\x9d ). On February 21, 1995, the Treasury Secretary (\xe2\x80\x9c Secretary\xe2\x80\x9d )\nsigned a series of agreements with the Mexican government implementing the\nsupport package. Prior to the execution of the agreements, we orally advised your\noffice that, in our view, the President and the Secretary could use the ESF in\nthe manner contemplated by the President when he proposed the support package.\nWe also provided comments on drafts of a legal opinion, prepared by your office\nfor the Secretary, regarding such use of the ESF. This memorandum confirms\nthe oral advice we provided to your office. It also confirms that we have reviewed\nthe final version of your legal opinion, and that we concur in your conclusion\nthat the President and the Secretary have the authority to use the ESF in connec\xc2\xad\ntion with the support package. We would like to take this opportunity to set forth\nbriefly the basis for our determination that your conclusion is correct.\n\nI. Background\nA. The Support Package\nUnder the support package,1 the loans and credits to Mexico from the ESF\nwill take three forms: (i) short-term currency \xe2\x80\x9c swaps\xe2\x80\x9d through which Mexico\n1 Our understanding o f the support package is derived from the following sources, (i) public information released\nby the Treasury Department when the President proposed the support package on January 31, 1995; (ii) the Secretary\xe2\x80\x99s\ntestimony on the support package at a February 9, 1995 hearing before the House Committee on Banking and Finan\xc2\xad\ncial Services, see United States and International Response to the Mexican Financial Crisis: Hearings Before the\nHouse Comm, on Banking and Financial Services, 104th Cong. 92-97 (1995) (\xe2\x80\x9c 1995 H earings"); (iii) public\nContinued\n\n83\n\n\x0cOpinions o f the Office o f Legal Counsel m Volume 19\n\nwill borrow U.S. dollars in exchange for Mexican pesos for ninety days; (ii)\nm edium-term currency swaps through which Mexico will borrow U.S. dollars for\nup to five years; and (iii) guaranties through which the United States will backup\nM exico\xe2\x80\x99s obligations on government securities for up to ten years. The ESF loans\nand credits will supplement billions of dollars in financial assistance that will be\nprovided to Mexico by the International Monetary Fund (\xe2\x80\x9c IM F\xe2\x80\x9d ) and other\nlenders. As a whole, the support package is intended to help Mexico resolve its\nserious economic problems, which, in turn, have resulted in a significant desta\xc2\xad\nbilization of the Mexican peso and have threatened to disrupt the international\ncurrency exchange system.\nB. The E S F\nThe ESF was established by Congress in 1934 pursuant to section 10(a) o f the\nGold Reserve Act, which is now codified at 31 U.S.C. \xc2\xa75302. The ESF \xe2\x80\x9c is under\nthe exclusive control of the Secretary,\xe2\x80\x9d whose use of the fund is \xe2\x80\x9c [sjubject to\napproval by the President.\xe2\x80\x9d Id. \xc2\xa7 5302(a)(2). Initially, the statute provided that\nthe ESF was to be used \xe2\x80\x9c [f]or the purpose of stabilizing the exchange value of\nthe dollar.\xe2\x80\x9d Act of Jan. 30, 1934, ch. 6, \xc2\xa7 10(a), 48 Stat. 337, 341.2 That is no\nlonger the case. The provision governing the Secretary\xe2\x80\x99s use of the ESF now\nstates:\nConsistent with the obligations o f the Government in the Inter\xc2\xad\nnational Monetary Fund on orderly exchange arrangements and a\nstable system of exchange rates, the Secretary or an agency des\xc2\xad\nignated by the Secretary, with the approval of the President, may\ndeal in gold, foreign exchange, and other instruments of credit and\nsecurities the Secretary considers necessary. However, a loan or\ncredit to a foreign entity or government of a foreign country may\nbe made for more than 6 months in any 12-month period only if\nthe President gives Congress a written statement that unique or\nemergency circumstances require the loan or credit be for more than\n6 months.\n31 U.S.C. \xc2\xa7 5302(b).\nThe first sentence of the current provision stems from 1976 amendments to\nsection 10(a) of the Gold Reserve Act. Those amendments eliminated the require\xc2\xad\nment that the ESF be used \xe2\x80\x9c for the purpose of stabilizing the exchange value\no f the dollar,\xe2\x80\x9d and provided instead that the fund was to be used consistent with\ninformation released by the Treasury Department when the Secretary signed the agreements implementing the support\npackage on February 21, 1995; and (iv) your legal opinion for the Secretary.\n2 See also H.R. Rep. No. 73-292, at 2 (1934).\n\n84\n\n\x0cUse o f the Exchange Stabilization Fund to Provide Loans and Credits to Mexico\n\nU.S. obligations in the IMF. See Bretton Woods Agreements Act Amendments,\nPub. L. No. 94-564, 90 Stat. 2660, 2661 (1976).3 The second sentence of the\ncurrent provision stems from a 1977 amendment to section 10(a) of the Gold\nReserve Act. See Act of Oct. 28, 1977, Pub. L. No. 95-147, 91 Stat. 1227, 1229.4\nThe intention of that amendment was to ensure that longer-term lending from\nthe ESF was limited to \xe2\x80\x9c unique or exigent circumstances.\xe2\x80\x9d 5\n\nII. Statutory Analysis\nIn carrying out the support package, the Secretary will be \xe2\x80\x9c deal[ing] in gold,\nforeign exchange, and other instruments of credit and securities\xe2\x80\x9d within the\nmeaning of 31 U.S.C. \xc2\xa75302.6 The first question in the statutory analysis is\nwhether use of the ESF in connection with the support package is \xe2\x80\x9c [consistent\nwith the obligations of the Government in the International Monetary Fund on\norderly exchange arrangements and a stable system of exchange rates.\xe2\x80\x9d Id.\n\xc2\xa7 5302(b). We believe that it is. Again, the stated purpose of the support package\nis to stabilize the value of the Mexican peso and prevent disruption of international\ncurrency exchange arrangements\xe2\x80\x94 which is entirely in keeping with U.S. obliga\xc2\xad\ntions in the IMF.7 Moreover, since the statute states that the Secretary may use\nthe ESF as he \xe2\x80\x9c considers necessary,\xe2\x80\x9d it is up to the Secretary (subject to the\nPresident\xe2\x80\x99s approval) to decide when such action is consistent with U.S. obliga\xc2\xad\ntions in the IMF. The Secretary\xe2\x80\x99s decisions in that regard \xe2\x80\x9c are final.\xe2\x80\x9d Id.\n3 The 1976 amendments to section 10(a) of the Gold Reserve Act were part of a law that modified the Bretton\nWoods Agreements Act \xe2\x80\x94 the statute that implements U.S. obligations in the IMF. Congress concluded that those\nmodifications were necessary because o f an early 1970s shift in international monetary arrangements from fixed\nto variable currency exchange rates. As a result of that shift, the United States was not, in 1976, pursuing a policy\n\xe2\x80\x9c to stabilize the exchange value o f the dollar at any par value, or fixed rate.\xe2\x80\x9d H.R. Rep. No. 94-1284, at 1314 (1976). Rather, its policy was \xe2\x80\x9c to permit a wide degree o f fluctuation for the exchange value of the dollar,\nand to conduct exchange rate policy subject only to [its] obligations\xe2\x80\x9d in the IMF. Id. at 14. The modifications\nto the Bretton Woods Agreements Act authorized the U.S. to \xe2\x80\x9c accept amendments to the IMF Articles of Agreement\n. . . [that] permitted [members] to choose any . . . exchange arrangement, fixed or floating, subject to a general\nobligation to avoid exchange rate manipulation, promote orderly economic, financial, and monetary conditions, and\nfoster orderly economic growth with reasonable price stability.\xe2\x80\x9d S. Rep. No. 94-1295, at 2-3 (1976) ( \xe2\x80\x9c 1976 Senate\nBanking Comm. Report\xe2\x80\x9d ) When the ESF statute was first drafted, the dollar was pegged to a fixed rate. Therefore,\na change to the statute that corresponded with changes in U.S. and international monetary policy was required.\nSimply put, the original language from 1934 specifying that the ESF was to be used to stabilize the dollar had\nbecome \xe2\x80\x9c anachronistic\xe2\x80\x9d by 1976 H R. Rep. No. 94-1284, at 14.\n4 The amendment was originally proposed in the Senate as part o f the 1976 amendments to section 10(a). See\n1976 Senate Banking Comm. Report at 11; see abo 123 Cong. Rec. 33,219-20 (1977) (statement o f Sen. Helms)\n(introducing amendment requiring that the President notify Congress o f any use o f the ESF for loans o f greater\nthan six months, and commenting that the amendment had been proposed in connection with Senate consideration\no f the 1976 amendments).\ns 1976 Senate Banking Comm. Report at 11.\n6 The short- and medium-term swap arrangements are loans, in that Mexico will borrow dollars from the U nited\nStates in exchange for pesos. The guaranties o f M exico\xe2\x80\x99s government securities obligations essentially serve as a\nline of credit from the United States on which Mexico can draw in the event that it cannot satisfy those obligations.\n7 As your legal opinion for the Secretary notes, Article IV o f the IMF Articles o f Agreement requires the United\nStates to \xe2\x80\x9c collaborate with the [IMF] and other members to assure orderly exchange arrangements and to prom ote\na stable system o f exchange rates.\xe2\x80\x9d Members are to fulfill that obligation \xe2\x80\x9c by fostering orderly underlying econom ic\nand financial conditions and a monetary system that does not tend to produce erratic disruptions.\xe2\x80\x9d See also supra\nnote 3 (discussing 1976 modifications to federal statute that implements U.S. obligations in the IMF).\n\n85\n\n\x0cOpinions o f the Office o f Legal Counsel m Volume 19\n\n\xc2\xa7 5302(a)(2). In short, in implementing the support package, the Secretary has\nexercised the discretion that Congress has vested in him.8\nThe plain language of the statute also provides the President and the Secretary\nwith the legal authority to use the ESF for the currency swaps of up to five years\nand the guaranties of up to ten years. The statute explicitly states that loans or\ncredits with repayment terms of more than six months can be extended from the\nESF \xe2\x80\x9c if the President gives Congress a written statement that unique or emer\xc2\xad\ngency circumstances require the loan or credit be for more than 6 months.\xe2\x80\x9d Id.\n\xc2\xa7 5302(b). W hen the support package was proposed on January 31, 1995, the\nPresident announced that he had determined that the financial crisis in Mexico\nconstituted unique and emergency circumstances.9 The President made his\nannouncement in a joint statement that he issued with the congressional leadership,\nwho expressed their collective view that the use o f the ESF in connection with\nthe support package was both lawful and necessary.10\nThe authority o f the President and the Secretary to use the ESF as a source\nof loans or credits o f more than six months has been invoked once before in\nthe years since the statute was amended in 1977 to provide expressly for such\naction. That came in 1982, when President Reagan, acting in response to an earlier\ninstance o f financial turmoil in Mexico, turned to the ESF to provide loans to\nM exico with maturities of up to one year. In accordance with the statutory require\xc2\xad\nments, President Reagan notified Congress in writing on September 8, 1982, that\n8 At the February 9, 1995 hearing on the support package that was held by the House Banking and Financial\nServices Com m ittee, Representative Barr suggested that, when considering possible financial assistance to Poland\nin 1989, the Treasury Department had concluded that it was unlawful to use the ESF for purposes other than to\nstabilize the dollar. 1995 Hearings at 131. Any such conclusion would have contravened the express terms o f the\nESF statute. In any event, that is not w hat Treasury concluded in that case. Rather, Treasury said that it would\nnot be \xe2\x80\x9c im proper o r illegal\xe2\x80\x9d to use the ESF to extend a \xe2\x80\x9c bridge loan\xe2\x80\x9d to Poland if the Secretary \xe2\x80\x9c concluded\nthat such a loan would be consistent with U .S. obligations in the IMF and was necessary.\xe2\x80\x9d United States Economic\n\nPrograms fo r Poland and Hungary: Hearings and Markup on H.R. 3402 Before the House Comm, on Foreign\nAffairs, 101st C ong. 175 (1989) (\xe2\x80\x9c 1989 H earings\xe2\x80\x9d ). Treasury determined that, in the particular circumstances of\nthat case, \xe2\x80\x9c it [was] highly unlikely that such a conclusion could be justified.\xe2\x80\x9d Id. Moreover, in the absence of\na com m itm ent from the IM F, Poland had no means o f guaranteeing repayment o f any ESF loan. In Treasury\xe2\x80\x99s\nview, the use o f the ESF in such circumstances would be \xe2\x80\x9c much closer to foreign a i d \xe2\x80\x9d Id. at 149 (statement\no f W illiam E. Barreda, Deputy Assistant Secretary for Trade and Investment Policy); see also id. at 162\xe2\x80\x9463. There\xc2\xad\nfore, Treasury decided to seek legislative authorization for assistance to Poland. Id. at 148-49 (statement of Mr.\nB aireda). Here, by contrast, the IMF is playing an integral role in the support package, and the ESF loans and\ncredits will have an assured source of repayment. See discussion infra note 12.\n9 It is o u r understanding that the President will promptly provide Congress with written notice of that determination,\nas required by the ESF statute.\n10 In pertinent part, the joint statement w as as follows:\nW e agree that, in order to ensure orderly exchange arrangements and a stable system of exchange rates,\nthe U nited States should immediately use the Exchange Stabilization Fund (ESF) to provide appropriate\nfinancial assistance for Mexico. We further agree that under Title 31 o f the United States Code, Section\n5302, the President has full authority to provide this assistance. Because the situation in Mexico raises\nunique and em ergency circumstances, the required assistance to be extended will be available for a period\no f more than 6 months in any 12-month period . . . . We must act now in order to protect American\njobs, prevent an increase flow of illegal immigrants across our borders, ensure stability in this hemisphere,\nand encourage reform in emerging markets around the world. This is an important undertaking, and we\nbelieve that the risks o f inaction vastly exceed any risks associated with this action. We fully support\nthis effort, and we will work to ensure that its purposes are met.\nStatement W ith Congressional Leaden on Financial Assistance to Mexico, 1 Pub. Papers o f W illiam J. Clinton\n130(1995).\n\n86\n\n\x0cUse o f the Exchange Stabilization Fund to Provide Loans and Credits to Mexico\n\nhe had determined on August 24, 1982, that unique and exigent circumstances\nrequired that the ESF loan to Mexico have repayment terms in excess of six\nmonths.11 It is true that no prior precedents under the ESF involved loans or\ncredits of maturity lengths and dollar amounts comparable to those at issue in\nthe support package.12 That said, such use of the ESF is clearly authorized by\nthe language of the statute.\nWe find it telling that when Congress was considering what eventually became\nthe 1977 amendment to section 10(a) of the Gold Reserve Act, it apparently gave\nsome thought to restricting use of the ESF to short-term lending exclusively so\nthat the ESF would not compete with the IM F\xe2\x80\x94 which was seen as the primary\nvehicle for longer-term lending. In fact, a question to that effect was posed to\na Treasury Department official during the course of a Senate Banking Committee\nhearing that explored, among other things, the relationship between lending under\nthe ESF and lending under the IM F.13 In response, the Treasury official stated:\n[A] statutory requirement that [the ESF] be used for short-term\nlending exclusively would not be appropriate and would unneces\xc2\xad\nsarily impair U.S. flexibility, especially in unforeseen cir\xc2\xad\ncumstances, in implementing our international monetary policy\n. . . . [I]t is conceivable that, in some instances, use of the ESF\nfor a somewhat more extended period may be necessary. External\nfactors (such as natural disasters, trade embargoes, unforeseen eco\xc2\xad\nnomic developments . . .) may lead a country which has obtained\na short-term credit from the ESF to seek an extension of that credit.\nIt is also conceivable that political assassination or other unantici\xc2\xad\npated catastrophic event might justify a longer extension of credit,\nand the possibility of ESF operations in such cases should not be\nexcluded. In none of these cases would the ESF compete with the\nIMF, and in all of these cases it well may be in the U.S. interests\nto provide somewhat more extended ESF financing.14\nThat sentiment carried the day, and ultimately found its way into the statute\nthrough the 1977 amendment. The report of the Senate Banking Committee on\nwhat turned out to be that amendment puts its succinctly:\n11 See Letter for Thomas P. O \xe2\x80\x99Neill, Jr., Speaker o f the House o f Representatives, from President Ronald Reagan\n(Sept. 8, 1982), reprinted in 1989 Hearings at 161-62.\n12 It is our understanding, however, that other critical elements o f the loans and credits to M exico in connection\nwith the support package\xe2\x80\x94 in particular, the structure o f the agreements and the existence o f an assured source\no f repayment\xe2\x80\x94 are ftiliy consistent with past practice under the ESF.\n13 Amendments o f the Bretton Woods Agreements Act: Hearing Before the Subcomm. on International Finance\no f the Senate Comm, on Banking, Housing and Urban Affairs, 94th Cong. 157 (1976).\n14Id. at 158 (statement o f Edwin H. Yeo, Al, Under Secretary for Monetary Affairs, Department o f the Treasury).\n\n87\n\n\x0cOpinions o f the Office o f Legal Counsel in Volume 19\n\nThe Committee recognizes that there may be circumstances where\nlonger-term ESF credits may be necessary, and the amendment pro\xc2\xad\nvides for that possibility. But the Committee intends, and the\namendment expressly provides, that such longer-term financing be\nprovided only where there are unique or exigent circumstances. As\nindicated by Treasury, these would include natural disasters, trade\nembargoes, unforeseen economic developments abroad, political\nassassinations, or other catastrophic events. In none of these cases\nshould the ESF compete with the IMF, however, and every effort\nshould be made to bring all medium and longer-term financing\nwithin the framework o f the IMF or other appropriate multi-lateral\nfacilities.15\nThe Mexican economic crisis would appear to be a prime example of the type\no f unique or exigent circumstances that the Senate Banking Committee had in\nmind when crafting the 1977 amendment: according to some observers, M exico\xe2\x80\x99s\nfinancial troubles were exacerbated by the shocking assassinations in 1994 of two\nkey Mexican political leaders and the unanticipated strife in the Chiapas region\nof M exico.16 Furthermore, the support package appears to honor the Committee\xe2\x80\x99s\nadmonition that longer-term use of the ESF not \xe2\x80\x9c compete\xe2\x80\x9d with the IMF. It is\nour understanding that the loans and credits from the ESF complement the\nsubstantial financial assistance that the IMF and other lenders are furnishing to\nM exico. Indeed, the Treasury Department has worked closely with the IMF in\nfashioning the support package.\nFinally, it is worth noting that Congress plays an important oversight role with\nrespect to use by the President and the Secretary o f the ESF for loans of more\nthan six months. As the Senate Banking Committee described Congress\xe2\x80\x99s function,\n\xe2\x80\x9c [t]he requirement that the President report to the Congress on any such longerterm financing will provide the Congress with an opportunity to scrutinize such\nlonger-term ESF credits and take appropriate steps to insure that they are con\xc2\xad\nsistent with U.S. interests and U.S. obligations under the IM F.\xe2\x80\x9d 17 In that role,\nCongress has, over the years, considered various proposals to cabin the authority\no f the President and the Secretary under the ESF statute. Those proposals have\n15 1976 Senate Banking Comm. Report at 11 (footnote omitted). H ie Committee echoed that theme elsewhere\nin the report:\n[The] amendment would not bar the U nited States from making longer-term credits to foreign countries\nfor exchange market intervention, but it would insure that such longer-term credits are not extended unless\nthe President finds that unique or exigent circumstances exist, such as the unavailability o f IM F or other\ninternational financial resources for th at purpose. By helping to keep ESF financing short-term in nature,\nthe amendment would help insure consistency between use o f the ESF and U.S. obligations as a member\no f the IMF. Id. at 17-18.\n16 See Henry A. Kissinger, Aiding Mexico is Not Just Economics\xe2\x80\x94 It\'s National Security, L.A. Times, Jan. 29,\n1995, at M2; Tod Robberson, Mexico\'s Meltdown, Wash. Post, Jan. 8, 1995, at A24; see also Time, Jan. 9, 1995,\nat 44.\n17 Senate Banking Comm. Report at 11.\n\n88\n\n\x0cUse o f the Exchange Stabilization Fund to Provide Loans and Credits to Mexico\n\nbeen repeatedly rejected, however.18 This history reflects the judgment of Con\xc2\xad\ngress that the President and the Secretary should retain the flexibility to use the\nESF, as they consider necessary, to respond promptly to sudden and unexpected\ninternational financial crises that undermine the global currency exchange system\nand jeopardize vital U.S. economic interests.19\nWALTER DELLINGER\nAssistant Attorney General\nOffice o f Legal Counsel\n\n,8 For example, in 1984, then-Representative (and now Senator) Brown introduced legislation that he said was\ndesigned to restore the ESF to its original purpose, and thereby prevent the ESF from being used as a \xe2\x80\x9c slush fund\nto bail out American banks" that make bad loans abroad. See Exchange Stabilization Fund and Argentina: Hearings\nBefore the Subcomm. on International Trade Investment and Monetary Policy o f the House Comm . on Banking.\nFinance and Urban Affairs, 98th Cong. 129 (1984) (statement o f Rep. Brown). Other members o f the House took\nissue with the premises underlying Representative Brow n\xe2\x80\x99s proposal. See id. at 135-36 (statement o f Rep. Neal);\nid. at 138-39 (statement of Rep. Leach); id. at 156-57 (statement o f Rep. Barnard). In the end. Congress did not\nact on the proposal. Similarly, in 1990, a House Committee held a hearing that was intended, among other things,\nto probe whether the ESF had been used \xe2\x80\x9c to circumvent the appropriations process" through which financial assist\xc2\xad\nance to foreign countries is normally tendered. See Review o f Treasury Department\'s Conduct o f International Finan\xc2\xad\ncial Policy: Hearing Before the House Comm, on Banking, Finance and Urban Affairs, JOlst Cong. 2 (1990) (state\xc2\xad\nment o f Rep. Gonzalez) ( \xe2\x80\x9c 1990 H earings"). There loo, the hearing produced no changes to the authority o f the\nPresident and the Secretary under the ESF statute.\n19 As a senior Treasury Department official in the Reagan and Bush Administrations articulated the issue:\nGlobalization o f the world economy and financial markets has changed the nature and scope o f strains\non the balance o f payments adjustment process. There is more latitude for exchange rates to fluctuate,\nand indebtedness problems have arisen with serious implications for world financial markets. The ESF\n. . . is the U.S. Government\xe2\x80\x99s only instrument providing the means for a rapid and flexible response to\ninternational financial disruption which can impact adversely on the U.S. economy. The ESF provides\na powerful and flexible means for the Secretary o f the Treasury, with the approval of the President, to\nsupport our obligations in the IMF, especially those concerning orderly exchange arrangements and a stable\nsystem o f exchange rates.\n1990 Hearings at 4 (statement o f David C. Mulford, Under Secretary for International Affairs).\n\n89\n\n\x0c'


b'Presidential Authority to Settle Claims of\nthe Hostages and Their Families\nT he President may agree to a settlement with Iran w hereby any tort claims of the\nhostages and their families against Iran would be extinguished, without w orking a\ntaking for a public purpose within the Just Compensation Clause o f the Fifth Am end\xc2\xad\nment. This conclusion is reinforced by the difficulty of identifying loss to the hostages\nand their families as a result o f a claims settlement effected to secure their release, and\nthe unlikelihood o f their being able to recover in tort against Iran in any event in light\no f the noncommercial tort provision in the Foreign Sovereign Immunities Act, 28\nU.S.C. \xc2\xa7 1605(a)(5).\n\nOctober 14, 1980\nMEMORANDUM OPINION FOR THE ATTORNEY GENERAL\nThis responds to your request for our views on the authority of the\nPresident, pursuant to a general settlement of the present controversy\nwith Iran that effects the release of the hostages, to extinguish tort\nclaims the hostages and their families may wish to assert against the\ngovernment of Iran. Our memorandum to you of September 16, 1980,\nregarding presidential authority to settle the Iranian crisis explores the\nPresident\xe2\x80\x99s claims settlement authority in detail. [See p. 248 supra.]\nRather than repeat that discussion here, we will advert to its conclu\xc2\xad\nsions insofar as they affect the present discussion. We conclude here\nthat the President has authority to extinguish the claims of the hostages\nand their families.\nThe President\xe2\x80\x99s authority over claims of our nationals against foreign\ngovernments is well summarized in Restatement (Second) of Foreign\nRelations Law of the United States \xc2\xa7 213 (1965):\nThe President may waive or settle a claim against a for\xc2\xad\neign state based on the responsibility of the foreign state\nfor an injury to a United States national, without the\nconsent of such national.\nPresidents have often exercised this power to espouse and settle the\nclaims of our citizens; these claims have often included tort claims for\npersonal injury or death. See id., Reporter\xe2\x80\x99s note to \xc2\xa7 212.\nOur earlier memorandum concluded that an exercise of this presiden\xc2\xad\ntial authority to settle a claim for less than face value would not\nconstitute a taking of private property within the meaning of the Just\nCompensation Clause of the Fifth Amendment to the Constitution.\n286\n\n\x0cNevertheless, we noted the existence of dicta to the contrary in two\nCourt of Claims decisions, principally Gray v. United States, 21 Ct. Cl.\n340 (1886). Those dicta suggested that if the President settles a claim\nfor less than \xe2\x80\x9cvalue\xe2\x80\x9d for unrelated foreign policy purposes, a taking of\nproperty for public use occurs. Whatever the current vitality of the\nGray dicta, the question at hand is distinguishable, because these claims\nare held by persons whose benefit is a prime purpose of the Administra\xc2\xad\ntion\xe2\x80\x99s negotiations to settle the crisis\xe2\x80\x94the hostages themselves and their\nfamilies. When a settlement is reached, no court will be in a position to\ndetermine whether release could have been secured without settlement\nor extinction of the tort claims in return.\nThe foregoing conclusion regarding the difficulty of identifying loss\nto the hostages and their families as a result of a claims settlement is\nreinforced by analysis of their prospects for tort recovery absent an\nagreement. For several reasons, it seems unlikely that they could re\xc2\xad\ncover damages against the government of Iran in court. First, the\nForeign Sovereign Immunities Act, 28 U.S.C. \xc2\xa7 1605(a)(5), only allows\nthe courts to award tort damages \xe2\x80\x9cagainst a foreign state for personal\ninjury or death, . . . occurring in the United States.\xe2\x80\x9d Torts to the\nhostages have not occurred in the United States. Regarding claims by\ntheir families for such torts as intentional infliction of emotional dis\xc2\xad\ntress, it could be argued that the statute is ambiguous regarding\nwhether it is enough for the injury to occur here even if the wrong\ndoes not. The Act\xe2\x80\x99s legislative history, however, emphasizes that the\nimmunity of foreign states for their \xe2\x80\x9cpublic\xe2\x80\x9d acts as opposed to \xe2\x80\x9ccom\xc2\xad\nmercial or private\xe2\x80\x9d acts is to be maintained, and that the exception for\ntorts in the United States \xe2\x80\x9cis directed primarily at the problem of traffic\naccidents,\xe2\x80\x9d suggesting that actionable wrongs must occur here. H.R.\nRep. No. 1487, 94th Cong., 2d Sess. 7, 20 (1976). Thus it seems unlikely\nthat the hostage families could recover against Iran in American courts.\nMorever, tort claimants cannot reach any Iranian assets in the United\nStates without a license from the government because of the blocking\norder, and our earlier memorandum makes it clear that access to\nblocked assets cannot be a matter of legal right. Finally, if the hostages\nand their families were to resort to a foreign forum in which Iranian\nassets might be found, they would discover that doctrines of sovereign\nimmunity of a foreign state are general in international law.\nWe also note that Congress is currently considering a bill (H.R. 7085)\nthat would provide hostages and their families a variety of benefits in\ncompensation for their travail.* If these benefits may fairly be viewed\nas compensation for the loss of their tort claims, it would be even more\ndifficult to conclude that any constitutional taking has occurred.\n*N\n\no t i :.:\n\nThe bill cited was eventually enacted as Pub. L.\n\n287\n\nN o.\n\n96-449, 94 Stat. 1967 (1980). Ed.\n\n\x0cRecognition of the prospect of a claims settlement in the legislative\nhistory would be helpful in this regard.\nJohn M . H arm on\n\nAssistant Attorney General\nOffice of Legal Counsel\n\n288\n\n\x0c'


b'Supersession by the Ethics in Government Act\nof Other Financial Disclosure Requirements\nS ectio n 207(c) o f th e E th ic s in G o v e rn m e n t A c t has su p ersed ed th e p ublic financial\nre p o rtin g req u irem en ts o f fo u r e n v iro n m e n ta l law s a d o p te d b efo re its passage.\n\nApril 11, 1980\nMEM ORANDUM OPINION FOR TH E DEPUTY G EN ER A L\nCOUNSEL, EN VIRO N M EN TA L PROTECTION AGENCY\nThis is in response to your request for our opinion on the question\nwhether \xc2\xa7 207(c) of the Ethics in Government Act (Ethics Act), 5\nU.S.C. App., has eliminated the public financial reporting requirements\nof the following statutory provisions: \xc2\xa7 26(e) of the Toxic Substances\nControl Act, 15 U.S.C. 2625(e); \xc2\xa7 1007 of the-Solid Waste Disposal\nAct, 42 U.S.C. \xc2\xa76906; \xc2\xa7318 of the Clean Air Act, 42 U.S.C. \xc2\xa77618,\nand \xc2\xa7 12 of the Environmental Research, Development and Demonstra\xc2\xad\ntion Authorization Act of 1978, P.L. 95-155, 91 Stat. 1263. These\nstatutory requirements are substantially similar in their language and\neffect, and all were adopted by Congress before the passage of the\nEthics Act. They oblige policymaking officials who work in their\nrespective areas of application to report certain personal financial inter\xc2\xad\nests for public disclosure and they authorize criminal prosecution for a\nfailure to comply.\nSection 207(c) of the Ethics Act reads as follows in pertinent part:\nThe provisions of this title requiring the reporting of\ninformation shall supersede any general requirement under\nany other provision of law or regulation with respect to\nthe reporting of information required for purposes of pre\xc2\xad\nventing conflicts of interest or apparent conflicts of\ninterest.\nFor the reasons advanced below, we have concluded that \xc2\xa7 207(c)\nhas displaced the four cited provisions of law and brought the provi\xc2\xad\nsions of Title II of the Ethics Act into play in their stead.\nThe language of \xc2\xa7 207(c) lays down only two prerequisites for the\nsupersession by Title II of a statutory or regulatory reporting require\xc2\xad\nment. The first is that a \xe2\x80\x9cgeneral\xe2\x80\x9d requirement must be involved and\nthe second is that the requirement be aimed at real or apparent conflicts\n566\n\n\x0cof interest. Applying these prerequisites in reverse order, we first join\nin your conclusion, derived in part from legislative history, that the\nsubject statutory provisions were indeed intended to prevent conflicts\nof interest. As for the other prerequisite, since each statutory reporting\nprovision is applicable to the occupants of positions in your Agency\nthat are categorized by the provision in general terms (\xc2\xa7 26(e) of the\nToxic Substances Control Act is also applicable in the Department of\nHealth, Education and Welfare), each in our opinion is unquestionably\na general requirement within the meaning of \xc2\xa7 207(c). Cf. H.R. Rep.\nNo. 95-642, Part 1, 95th Cong., 1st Sess., p. 51 (1977), where the\nCommittee on Post Office and Civil Service cited the financial report\xc2\xad\ning system created for employees of the Department of Energy by P.L.\n95-91, \xc2\xa7\xc2\xa7 603 and 604, 42 U.S.C. \xc2\xa7\xc2\xa7 7213 and 7214, as an example of a\nrequirement intended for supersession by what is now \xc2\xa7 207(c) of the\nEthics Act.\nIt should be noted also that our answer to your inquiry is strongly\nsupported by the obvious congressional purpose of establishing uniform\nfinancial reporting requirements and procedures throughout the Execu\xc2\xad\ntive Branch by means of \xc2\xa7 207(c).\nTo repeat, we are of the opinion that \xc2\xa7 207(c) has made a dead letter\nof the four financial reporting enactments you called to our attention\nand has made Title II of the Ethics Act operative in their stead.\nJ o h n M. H a r m o n\n\nAssistant Attorney General\nOffice o f Legal Counsel\n\n567\n\n\x0c'


b'Federal Agencies Use of Volunteer Services\nProvided by Individuals and Organizations\nUnder Proposed Legislation\nProposed legislation authorizing federal agencies to accept voluntary services from individuals\nand non-profit organizations would present potential conflicts with statutory requirements\nthat certain activities must be conducted by government employees authorized to act on\nbehalf o f the United States.\nT he perform ance o f services for federal agencies by volunteers raises especially significant\nconcerns in term s o f federal conflict o f interest laws. Although voluntary service legislation\nm ay exem pt volunteers from the coverage of those laws, the use of volunteers to perform\ngovernm ent services could raise the very opportunities for self-dealing and abuse of position\nthat the conflict o f interest laws are intended to prevent.\n\nAugust 23, 1985\nM\n\nem o ran d um\n\nO\n\np in io n for t h e\n\nO f f ic e\n\nA c t in g A\n\nof\n\ns s is t a n t\n\nA ttorney G eneral,\n\nL e g a l P o l ic y\n\nThis memorandum provides the comments of the Office of Legal Counsel on\nH.R. 1993, the \xe2\x80\x9cVolunteering in Government Act of 1985.\xe2\x80\x9d This proposed\nlegislation would authorize federal agencies to accept the volunteer services of\nindividuals and non-profit organizations to carry out certain activities of such\nagencies, notwithstanding the Anti-Deficiency Act, 31 U.S.C. \xc2\xa7 1342. H.R.\n1993, \xc2\xa7 4(a)(1).1 Use of unpaid volunteers would be without regard to the\nprovisions o f title 5, United States Code, governing appointments in the com\xc2\xad\npetitive service. Id.2 The bill further provides that volunteers shall not be\nconsidered officers or employees of the federal government nor subjected to\nany provision of law relating to federal employment, except that volunteers\nshall be considered federal employees for purposes o f tort claims and workers\xe2\x80\x99\ncompensation. Id., \xc2\xa7 4(b)(1), (2).\nThis Office supports the concept of voluntary government service. However,\nwe believe that several legal questions must be resolved before we can recom\xc2\xad\nmend that the Administration endorse this proposed legislation. In our view,\n1 The A nti-D eficiency Act provides: \xe2\x80\x9cAn o ffice r or em ployee o f the U nited States G overnment o r o f the\nD istrict o f C olum bia governm ent may not accept voluntary services for either governm ent or employ\npersonal serv ices exceeding that authorized b y law except for em ergencies involving the safety of hum an life\no r the protection o f p roperty.\xe2\x80\x9d 31 U.S.C. \xc2\xa7 1342. This prohibition has been interpreted to perm it the\nacceptance o f volunteers under certain circum stances. See 30 Op. A tt\xe2\x80\x99y G en. 51, 52 (1938).\n2 H .R. 1993 apparently w ould also override the principle that individuals may not w aive a salary for which\nC ongress has set a m inim um . S ee, e.g., G lavey v United S ta tes, 182 U.S. 595 (1901*) M ost federal positions\na re covered by the G eneral Salary Schedule. S e e 5 U.S.C. \xc2\xa7\xc2\xa7 5101-5115. Although this fixed salary schedule\nactually exem pts persons w ho serve \xe2\x80\x9cw ithout com pensation," id. \xc2\xa7 5 102(c>( 13), the policy underlying the\nschedules has been read to counsel against th e use o f volunteers to accom plish tasks that would ordinarily be\nperform ed by em ployees covered by the schedule.\n\n74\n\n\x0ccertain government activities may not be suitable or lawful for volunteers to\nperform. In addition, H.R. 1993 appears to exempt volunteers from the federal\nconflict o f interest statutes. As we discuss below, such an exemption could\nfrustrate the purpose of those statutes in many instances.\nFirst, there are numerous activities that must be conducted by government\nemployees authorized to act on behalf of the United States. We doubt, for\nexample, as a constitutional matter, whether an individual who is not a govern\xc2\xad\nment employee could undertake a federal criminal prosecution, sign a contract\non behalf o f the United States government, or take personnel actions regarding\nother federal employees. See generally Buckley v. Valeo, 424 U.S. 1, 118-43\n(1976) (per curiam). In addition, there are various statutory restrictions. For\nexample, access to agency records by non-employees would be restricted by\nthe Privacy Act. See 5 U.S.C. \xc2\xa7 552a(b)(l) (permitting disclosure of certain\nagency records to \xe2\x80\x9cofficers and employees\xe2\x80\x9d having a need for the record in the\nperformance of their duties). The government employment status of volunteers\nis a significant factor in their ability to participate in government matters.\nSecond, we are particularly concerned about the application of the conflict of\ninterest provisions of Title 18 to volunteers under this bill. Section 4 of the bill\nprovides that volunteers shall not be deemed to be federal employees except for\npurposes o f tort liability and workers\xe2\x80\x99 compensation. One effect of \xc2\xa7 4 would\nbe to exempt volunteers from the criminal laws and existing agency regulations\ndealing with employee conduct, in particular the conflict of interest laws.3 The\nuse of non-employee volunteers, however, could raise precisely the sort of\nopportunity for self-dealing and abuse of governmental position that the fed\xc2\xad\neral conflict of interest laws are intended to prevent.\nWe believe that Congress should expressly limit the use of volunteers to\npositions regarding which employee conduct rules have less significance or\nprovide for adherence to conflict of interest principles. We would urge that the\napplication of conflict of interest provisions be made explicit. In addition,\nCongress should address the extent to which volunteers from non-profit organi\xc2\xad\nzations, see H.R. 1993, \xc2\xa7 4(a)(2), must conform to conflict of interest laws, and\nwhether H.R. 1993 prohibits an agency from imposing its own restrictions on\nthe use o f volunteers or from making them subject to the agency\xe2\x80\x99s own\nstandards o f conduct.4 Congress should clarify H.R. 1993 in these and other\nrespects before the Administration takes a position in support of this legislation.\nR a lph W . T arr\n\nActing Assistant Attorney General\nOffice o f Legal Counsel\n3 C urrently, volunteers w ho perform governm ent functions generally are considered to be \xe2\x80\x9cem ployees\xe2\x80\x9d of\nthe governm ent for purposes o f the conflict o f interest laws. See Federal Personnel M anual, Appendix C;\nM emorandum from J. Jackson W alter, D irector, O ffice o f G overnm ent Ethics, to Heads o f D epartm ents and\nA gencies o f the Executive Branch, Re: \xe2\x80\x9cMembers o f Federal A dvisory C om m ittees and the C onflict o f\nInterest S tatutes\xe2\x80\x9d (July 19, 1982). This bill appears specifically crafted to change this view o f volunteers.\n4 As the bill is now drafted, we w ould not interpret it to prohibit an agency from im posing its own\nrestrictions on the use o f volunteers or from making them subject to the agency\xe2\x80\x99s own standards o f conduct.\n\n75\n\n\x0c'


b'March 22, 1977\n\n78-76 MEMORANDUM OPINION FOR THE COUNSEL\nTO THE PRESIDENT\nThe White House Office\xe2\x80\x94Expenditure of Appropriated\nFunds\xe2\x80\x94Handling Mail for Members of the President\xe2\x80\x99s\nFamily\nThis is in response to your request for our views on whether the White House\nis authorized to pay the costs of processing mail addressed to members of the\nPresident\xe2\x80\x99s family other than Mrs. Carter. We understand that staff salaries and\nrelated costs of handling Mrs. Carter\xe2\x80\x99s mail are paid out of funds appropriated\nfor the White House Office.\nIt is our opinion that White House Office funds may be used for handling\nmail addressed by the general public to members of the family who reside in the\nWhite House, and perhaps for the President\xe2\x80\x99s son who does not live in the\nWhite House and the President\xe2\x80\x99s mother as well.\nFunds appropriated for the White House Office may be used for salaries and\nother \xe2\x80\x9c necessary\xe2\x80\x9d expenses of that Office. Expenses are thought to be\nnecessary if they are reasonably related to the general governmental functions\nfor which the funds were appropriated. 52 Comp. Gen. 504 (1973); 50 Comp.\nGen. 534 (1971). It seems reasonable to conclude that mail sent to members of\nthe President\xe2\x80\x99s family because of their relationship to the President should be\nanswered in order to respond to the writers\xe2\x80\x99 concerns and to demonstrate that\nthe White House and the First Family\xe2\x80\x94who are in a sense representatives of\nthe President\xe2\x80\x94are interested in them. In our view, this function is appropri\xc2\xad\nately related to the operation of the White House.\nThe nexus between the regular governmental functions of the White House\nOffice and its handling of mail of the President\xe2\x80\x99s family is particularly strong\nfor those family members who reside in the White House, because they are\npresumably more closely identified in the public\xe2\x80\x99s mind with the President\xe2\x80\x99s\nofficial duties. The White House Office appropriation is available to assist the\nPresident in performing those duties, traditionally including matters relating to\nthe President\xe2\x80\x99s household. Therefore, that appropriation does, in our view,\n343\n\n\x0creasonably cover the expenses of handling mail of members of the household.*\nIt is presumably on this basis that the costs of handling Mrs. Carter\xe2\x80\x99s mail are\npaid from Government funds, and we see no reason to distinguish other\nmembers of the President\xe2\x80\x99s household in this regard. We note, too, that it is\nmuch the same rationale that permits the expenditure of Government funds for\nofficial travel by members of the President\xe2\x80\x99s family.\nThe nexus to the official operations of the White House Office would appear\nto be less direct when the family members involved are not part of the\nPresident\xe2\x80\x99s household in the White House. However, in our view, since such\nfamily members receive mail because of their relationship to the President and\nare perceived to be acting on his behalf to a degree when they reply to the\nletters, the processing of their mail is also sufficiently related to the purposes\nfor which funds are appropriated to the White House Office to permit those\nfunds to be used in this fashion.\nJo h n M . H a r m o n\n\nActing Assistant Attorney General\nOffice of Legal Counsel\n\n\xe2\x80\xa2W e believe that on this same theory, Mrs. Carter may assign a member of her staff, paid out of\nWhite House Office appropriations, to be responsible for scheduling the affairs of other members of\nthe family who reside in the White House.\n\n\x0c'


b'May 11, 1979\n\n79-30\n\nMEMORANDUM OPINION FOR THE\nGENERAL COUNSEL, FEDERAL MINE\nSAFETY AND HEALTH REVIEW\nCOMMISSION\nTax Returns\xe2\x80\x94Disclosure (26 U.S.C. \xc2\xa7 6103; 18\nU.S.C. \xc2\xa7 1905)\n\nThis responds to your request for our opinion whether the Federal Mine\nSafety and Health Review Commission (Commission) is prohibited by 26\nU.S.C. \xc2\xa7\xc2\xa7 6103, 7213, 7217 (1976), or by 18 U.S.C. \xc2\xa7 1905 (1976), from\npublishing, in an opinion or an order, financial inform ation about a mine\noperator derived from a copy o f an income tax return produced and sub\xc2\xad\nmitted as evidence by the operator and entered o f record in a proceeding\nwithin the Commission\xe2\x80\x99s jurisdiction. We find no such prohibition in the\nstatutory provisions cited. Neither will such a publication subject the\nCommissioners to civil or criminal liability under either the title 26 provi\xc2\xad\nsions or \xc2\xa7 1905 o f title 18 o f the United States Code.\nI. Title 26\nSection 6103 o f title 26 makes tax returns and tax return information\nconfidential. It prohibits an officer o r employee o f the United States from\ndisclosing any return or return inform ation \xe2\x80\x9c obtained by him in any m an\xc2\xad\nner in connection with his service as such an officer or an employee or\notherwise,\xe2\x80\x9d except as authorized by title 26. Complementary provisions,\n26 U.S.C. \xc2\xa7\xc2\xa7 7213 and 7217, subject officers and employees who disclose\ninformation or docum ents made confidential by \xc2\xa7 6103 to criminal and\ncivil liability, except as to disclosures authorized by title 26.\nIt is im portant to note that \xc2\xa7\xc2\xa7 7213 and 7217 are restricted in their appli\xc2\xad\ncation to the disclosure o f \xe2\x80\x9c any return or return inform ation (ay defined in\nsection 6103(b)).\xe2\x80\x9d [Emphasis added.] A nd, o f course, the confidentiality\nrule of \xc2\xa7 6103 itself applies only to returns and return inform ation that are\nwithin the relevant statutory definitions o f those terms. Crucial to\n201\n\n\x0cour consideration is that a return, as defined by \xc2\xa7 6103(b)(1), is \xe2\x80\x9c any tax\nor inform ation return * * * which is filed with the Secretary [of the\nTreasury]\xe2\x80\x9d and that the term \xe2\x80\x9c return inform ation\xe2\x80\x9d means \xe2\x80\x9c a taxpayer\xe2\x80\x99s\nidentity * * * or any other data, received by, recorded by, prepared by,\nfurnished to, or collected by the Secretary. \xe2\x80\x9d \xc2\xa7 6103(b)(2). [Emphasis\nadded.] Thus, the confidentiality rule and the civil and criminal liability\nprovisions o f titlfe 26, even read most broadly, apply only when there is a\nnexus between the inform ation disclosed and information that has been in\nthe possession o f the Secretary o f the Treasury. The requisite nexus is ab\xc2\xad\nsent when, as with the inform ation that the Commission proposes to\npublish, the source docum ent is one that has never been within the custody\nor control o f the Secretary.\nIt is immaterial that a layman might view the source docum ent as an\nincome tax return. It is also immaterial that the docum ent is a copy (pro\xc2\xad\nduced by the taxpayer) o f a return that actually was filed with the Secre\xc2\xad\ntary. Section 6103 and its com plementary provisions protect the confiden\xc2\xad\ntiality o f inform ation filed with or collected or generated by the Secretary\no f the Treasury in connecton with his administration o f the tax system and\ninform ation so filed, collected, or generated that has been distributed\nunder the authority o f \xc2\xa7 6103. By its terms it does not and was not in\xc2\xad\ntended to shield from disclosure a tax return, or inform ation derived from\na tax return, produced by the taxpayer and given voluntarily to the\nGovernm ent in a proceeding unconnected with the administration o f the\ntax laws. Such a docum ent (even if a copy o f a return actually filed) and\nsuch inform ation cannot reasonably be said to have been \xe2\x80\x9c filed with\xe2\x80\x9d or\n\xe2\x80\x9c received by, recorded by, prepared by, furnished to, or collected by\xe2\x80\x9d the\nSecretary o f the Treasury.\nO ur conclusion, stated simply, is that \xc2\xa7 6103 and \xc2\xa7\xc2\xa7 7213 and 7217 of\ntitle 26 are inapplicable to the issue o f the disclosure o f financial inform a\xc2\xad\ntion derived from a copy o f an income tax return produced by the taxpayer\nand voluntarily filed as evidence in an administrative proceeding.\nII. 18 U .S.C . \xc2\xa7 1905\nSection 1905 provides:\nW hoever, being an officer or employee o f the United States or of\nany departm ent or agency thereof, publishes, divulges, discloses,\nor makes known in any m anner or to any extent not authorized\nby law any inform ation coming to him in the course o f his em\xc2\xad\nployment or official duties or by reason o f any examination or\ninvestigation made by, or return, report or record made to or\nfiled with, such departm ent or agency or officer or employee\nthereof, which inform ation concerns or relates to the trade\nsecrets, processes, operations, style o f work, or apparatus, or to\nthe identity, confidential statistical data, am ount or source of\nany income, profits, losses, or expenditures o f any person,\n202\n\n\x0cfirm, partnership, corporation, or association; or permits any in\xc2\xad\ncome return or copy thereof or any book containing any abstract\nor particulars thereof to be seen or examined by any person ex\xc2\xad\ncept as provided by law; shall be fined not more than $1,000, or\nimprisoned not more than one year, or both; and shall be re\xc2\xad\nmoved from office or employment.\nYou have informed us that the Commission proposes to publish in its\nopinion inform ation derived from an income tax return.\' M oreover, the\ninformation to be published includes, inter alia, the gross income o f the\noperator company for 1 year and the total compensation paid by the com \xc2\xad\npany to three o f its officers in 2 different years. Such inform ation would\nappear to be within the scope o f inform ation protected from disclosure by\n\xc2\xa7 1905.2 It, however, prohibits only disclosures made \xe2\x80\x9c in any m anner or to\nan extent not authorized by law.\xe2\x80\x9d Thus, its bar is not absolute.\nThe Attorney General has opined that, as used in \xc2\xa7 1905, the phrase \xe2\x80\x9c au\xc2\xad\nthorized by law\xe2\x80\x9d does not require that an otherwise prohibited disclosure be\nspecifically authorized by law. \xe2\x80\x9c [I]t is sufficient if the activity is \xe2\x80\x98authorized\nin a general way by law\xe2\x80\x99 \xe2\x80\x9d (citation omitted). This includes an authorization\nthat is reasonably implied. 41 Op. A tt\xe2\x80\x99y Gen. 166, 169 (1953).\nThere is no statute that specifically authorizes the Commission to\npublish, in its opinions or orders, inform ation within the scope o f the pro\xc2\xad\nhibitions o f \xc2\xa7 1905. However, the Commission is a quasi-judicial body\nwith the authority both to hold hearings in the first instance and to review\ndecisions made by its administrative law judges. 30 U .S.C . \xc2\xa7 823 (1978\nSupp.). As is normally the case with such bodies, its decisions, whether in\xc2\xad\nitial or appellate, must be based upon the record as well as the law. See 30\nU.S.C. \xc2\xa7\xc2\xa7 823(d)(2)(C), 815 (c)(2) and (d) (1978 Supp.). It is authorized\nand directed to make findings o f fact, id., which must be sustained on\njudicial review if supported by substantial evidence. 30 U.S.C. \xc2\xa7 816(a)(1)\n(1978 Supp.). Thus, the Commisison is, we believe, authorized by clear\nimplication o f law to include in its opinions and orders a recitation of\nevidence in the record upon which its findings and legal conclusions are\n\n1 As used in \xc2\xa7 1905, \xe2\x80\x9c income retu rn " is not limited, as it is in 26 U .S.C . \xc2\xa7 6103 (1976), to\nreturns filed with the Secretary o f the Treasury.\n2 An argument can be made that the intended scope o f \xc2\xa7 1905 is not as broad as its\nlanguage would indicate. For an articulation o f this argum ent, see D. Clem ent, \xe2\x80\x9c Rights of\nSubmitters to Prevent Agency Disclosure of Confidential Business Inform ation: The Reverse\nFreedom o f Inform ation Act Law suit,\xe2\x80\x9d 55 Tex. L.R. 587, 602-617 (1977). In connection\nwith the Clement article see, Muniz v. Hoffman, 422 U .S. 454 (1975). We need not here\ndelimit the scope o f \xc2\xa7 1905 since we conclude that, even if the inform ation that the Com mis\xc2\xad\nsion proposes to publish is within the intended scope, disclosure in an opinion o f the C om \xc2\xad\nmission is nevertheless permissible.\n\n203\n\n\x0care based. This is sufficient authorization by law, within the meaning of\n\xc2\xa7 1905, to allow the Commission to publish in its opinions and orders\nevidence of record that would otherwise be protected from disclosure.\nJo h n M. H arm on\n\nAssistant A ttorney General\nOffice o f Legal Counsel\n\n204\n\n\x0c'


b'Cost of Living Allowances for\nEmployees on Pay Retention\nThe Office of Personnel Management is required by its own regulations to base cost-of-living allowances for employees receiving retained pay on their higher retained rate of pay,\nrather than on the maximum rate of the grade.\n\nMarch 24, 1989\nM emorandum O pin io n for th e G eneral C ounsel\nO ffice of P ersonnel M anagem ent\n\nThis is in response to your request of April 18, 1988, for the opinion of\nthis office concerning cost-of-living allowance (\xe2\x80\x9cCOLA\xe2\x80\x9d) computations\nfor certain employees who are on pay retention. For the reasons below,\nwe agree with the conclusion reached by your Office that employees on\npay retention are entitled to have their COLA computed on the basis of\ntheir higher retained rate of pay, rather than on the maximum pay rate of\nthe grade of the position to which the employee was reduced.\nWe begin by observing that the provision of COLAs to certain eligible\ngovernment employees is authorized by 5 U.S.C. \xc2\xa7 5941. That statute pro\xc2\xad\nvides, in relevant part:\n(a) Appropriations or funds available to an Executive\nagency ... for pay of employees stationed outside the con\xc2\xad\ntinental United States or in Alaska whose rates of basic pay\nare fixed by statute, are available for allowances to these\nemployees.\nThe purpose of the allowance is to compensate employees subject to high\nliving costs and difficult environmental conditions. The allowance, howev\xc2\xad\ner, \xe2\x80\x9cmay not exceed 25 percent of the rate of basic pay.\xe2\x80\x9d 5 U.S.C. \xc2\xa7 5941.\nResponsibility for the actual manner of its calculation and payment is left\nto the President. \xe2\x80\x9cExcept as otherwise specifically authorized by statute,\nthe allowance is paid only in accordance with regulations prescribed by the\nPresident establishing the rates and defining the area, groups of positions,\nand classes of employees to which each rate applies.\xe2\x80\x9d Id. The President has\ndelegated his responsibility under this statute to the Office of Personnel\nManagement (\xe2\x80\x9cOPM\xe2\x80\x9d). Exec. Order No. 10000, 3 C.F.R. 792 (1943-1948).\n88\n\n\x0cPursuant to its authority, OPM has promulgated regulations, codified at\n5 C.F.R. pt. 591, Subpart B, which provide for the award of COLAs. The\nmost important provision is section 591.210, which states that \xe2\x80\x9c[t]he\nallowance and differential authorized for each location shall be convert\xc2\xad\ned to an hourly rate, based on the employee\xe2\x80\x99s basic rate of pay, and shall\nbe paid only for those hours during which the employee receives basic\npay\xe2\x80\x9d (emphasis added). Because agency rules and regulations that imple\xc2\xad\nment statutory discretion have the force of law, OPM must comply with\nits own regulations, or amend them. See United States v. Mersky, 361 U.S.\n431, 438 (1960). Thus, OPM is legally required to calculate employee\nCOLAs on the basis of their \xe2\x80\x9cbasic rate of pay.\xe2\x80\x9d It is plain that OPM\xe2\x80\x99s reg\xc2\xad\nulation is within the ambit of discretion provided by section 5941. Indeed,\nsupport for OPM\xe2\x80\x99s determination that COLAs should be based on an\nemployee\xe2\x80\x99s rate of basic pay can be drawn from section 5941 itself, which\nsets the ceiling for COLAs in terms of basic pay.1 Given the clear obliga\xc2\xad\ntion to base COLAs on the employee\xe2\x80\x99s \xe2\x80\x9cbasic rate of pay,\xe2\x80\x9d we turn then to\nthe determination of what the \xe2\x80\x9cbasic rate of pay\xe2\x80\x9d is for an employee\nreceiving retained pay under 5 U.S.C. \xc2\xa7 5363.\nWe believe that OPM is required under its own regulations to calculate\nthe COLAs for such employees in this manner because of the definition\nof basic rate of pay contained in OPM\xe2\x80\x99s regulations, which, as we dis\xc2\xad\ncussed previously, OPM is obliged to obey. In 5 C.F.R. \xc2\xa7 591.201(i) the\nphrase \xe2\x80\x9crate of basic pay\xe2\x80\x9d is defined to mean \xe2\x80\x9cthe rate of pay fixed by\nstatute for the position held by an individual, before any deductions and\nexclusive of additional pay of any kind, such as overtime pay, night dif\xc2\xad\nferential, extra pay for work on holidays, or allowances and differen\xc2\xad\ntials.\xe2\x80\x9d Using this definition, we believe it is clear that the retained rate of\npay received by eligible employees pursuant to 5 U.S.C. \xc2\xa7 5363 is indeed\nthe \xe2\x80\x9crate of pay fixed by statute for the position held by (that employee).\xe2\x80\x9d\n5 C.F.R. \xc2\xa7 591.201(i). As a result, we are compelled to conclude that the\nretained rate of pay received by certain eligible employees constitutes\ntheir \xe2\x80\x9cbasic rate of pay\xe2\x80\x9d for the purpose of calculating COLAs. Moreover,\nretained pay is not of the same nature as the types of additional pay\nexcluded from the definition of \xe2\x80\x9crate of basic pay.\xe2\x80\x9d Unlike the \xe2\x80\x9caddition\xc2\xad\nal pay\xe2\x80\x9d described in section 591.201(i), which all have to do with the tim\xc2\xad\ning, locale or amount of work being performed in the current job,\nretained pay reflects the employee\xe2\x80\x99s past work experience, and does not\nin any way reflect the work being done in the current position. Therefore,\nwe believe that OPM must, pursuant to section 591.210(a) and the defin\xc2\xad\nition of \xe2\x80\x9crate of basic pay\xe2\x80\x9d found in section 591.201(i), compute eligible\nemployees\xe2\x80\x99 COLAs on their higher retained pay rate.\n1 We need not address whether it would be appropriate under section 5941 to choose a base line other\nthan the rate of basic pay by which to calculate COLAs.\n89\n\n\x0cFinally, 5 U.S.C. \xc2\xa7 5363, the provision which defines the manner in\nwhich pay retention is calculated, makes clear this amount is a form of\nbasic pay. This section provides in relevant part:\n(a) Any employee \xe2\x80\x94 [eligible for pay retention]\nis entitled to basic pay at a rate equal to (A) the employee\xe2\x80\x99s\nallowable former rate of basic pay, plus (B) 50 percent of\nthe amount of each increase in the maximum rate of basic\npay payable for the grade of the employee\xe2\x80\x99s position imme\xc2\xad\ndiately after such reduction in pay if such allowable former\nrate exceeds such maximum rate for such grade.\n(emphasis added). Thus, under this statute, the higher retained rate of\npay received by certain eligible employees does constitute \xe2\x80\x9cbasic pay.\xe2\x80\x9d\nIn sum, we agree with the conclusion reached by the Office of General\nCounsel that OPM is obligated to compute the COLAs for employees\nreceiving retained pay on their higher retained rate of pay, rather than on\nthe maximum rate of the grade.2 Whatever discretion section 5941 con\xc2\xad\nfers with respect to the awarding of COLAs, the regulations promulgated\nto implement that statute require that OPM compute COLAs \xe2\x80\x9cbased on\nthe employee\xe2\x80\x99s basic rate of pay.\xe2\x80\x9d For employees receiving retained pay,\ntheir \xe2\x80\x9cbasic pay\xe2\x80\x9d is their rate of retained pay.\nJOHN O. McGINNIS\nDeputy Assistant Attorney General\nOffice of Legal Counsel\n2 We have reviewed the contrary opinions of the Comptroller General on this matter and find them\nunpersuasive In an unpublished opinion, B-175124, 1976 WL 10210 at *2 (C.G. June 2, 1976), which served\nas the basis for at least one later opinion, the Comptroller General found that COLAs must be \xe2\x80\x9ccomputed\non basis of the rate of pay fixed by statute for the position held, rather than on basis of saved salary." The\nonly justification offered for this result was that 5 C.FR. \xc2\xa7 591.202 authorized COLAs as a percent of the\n\xe2\x80\x9crate of basic pay.\xe2\x80\x9d While the regulations do provide that COLAs are to be calculated as a percent of \xe2\x80\x9cbasic\npay," the Comptroller General\xe2\x80\x99s opinion does not address the central question of whether an employees\nretained rate of pay is in fact basic pay As we observed previously, however, the retained rate of pay pro\xc2\xad\nvided by section 5363 is in fact the rate of basic pay fixed by statute for certain eligible employees A more\nrecent opinion of the Comptroller General, which reaches the same result as the 1976 opinion, does little\nmore than cite the earlier opinion to justify its conclusion that COLAs authorized by section 5941 are to\nbe computed on the basic rate of pay for the grade, rather than on the employee\xe2\x80\x99s full retained pay rate.\nSee B-206028, 1982 WL 27659 (C.G Dec 14, 1982) (unpublished). Because this opinion does not add to the\nanalysis of the 1976 opinion, we believe it should be similarly disregarded as failing to analyze the central\nquestion: whether retained pay constitutes basic pay. Finally, we note that because the Comptroller\nGeneral is an officer of the legislative branch, Bowsher v. Synar, 478 U S 714, 727-32 (1986), the execu\xc2\xad\ntive branch is not bound by the Comptroller General\xe2\x80\x99s legal opinions.\n\n90\n\n\x0c'