Opinion ID: 723739
Heading Depth: 3
Heading Rank: 2

Heading: Does an institution act as a financial agent when it

Text: 30 establishes individual accounts? 31 Treasury next relies on the raison d'etre for the EBT program: the need to establish electronically-accessible accounts for benefit recipients who do not already have such accounts. Treasury argues that, unlike the direct deposit program, in which the recipient of public monies has already set up his own electronically-accessible account, the nature of the EBT program demands that the EBT contractor establish an individual recipient's account. Because, according to elementary principles of agency law, Treasury cannot create an agency relationship between two other parties, Treasury contends that the EBT contractor must act as the financial agent of Treasury in setting up an individual's account. 32 Treasury, however, mistakes its role in the EBT program. Treasury does not create an agency relationship between the institution and the individual recipient; rather, [319 U.S.App.D.C. 436] Treasury arranges for such a relationship on behalf of the individual EBT recipient. Numerous statements by Treasury in the IEI and elsewhere in the record confirm that Treasury must obtain the consent, either explicitly or implicitly, from an individual recipient before it may seek an EBT account for that recipient at a particular institution. This consent then empowers Treasury to arrange an EBT account for the individual in the institution and at the terms Treasury thinks best. Treasury thus plays the role of an intermediary between the institution and a particular benefits recipient by inducing the institution to provide an EBT account to the recipient. That the institution agrees to provide this service to the individual recipient because of the inducements offered by Treasury does not transform the institution into an agent of Treasury, but rather simply encourages the institution to become an agent of the individual according to the terms of the IEI. 33 The general principles of agency law, when considered in light of Treasury's established practice of not requiring an institution receiving a direct deposit to be a financial agent of the government, verify this result. According to the RESTATEMENT (SECOND) OF AGENCY, [a]n agent may be authorized to appoint another person to perform for the principal an act which the agent is authorized to ... have performed. § 5 cmt. a (1958). Assuming, as seems apparent, that Treasury is an agent of the individual recipient when Treasury selects which institution will create the individual EBT account, see id. at § 1, the issue becomes whether the institution Treasury selects for the individual is to be an agent only of that individual (the original principal) or will also serve as an agent of Treasury. According to the RESTATEMENT, if the institution selected by Treasury is, after being selected, not to be the representative of [Treasury] but is to act solely on account of the principal, then the institution is an agent only of the original principal. Id. at § 5 cmt. a. In this case, two distinct observations illustrate that the institution selected by Treasury to hold the individual's account cannot be deemed Treasury's financial agent as a result of banking services rendered to Treasury. 34 First, the institution must be the financial agent of only the individual because the institution focuses on its relationship with the individual in all financial matters. The institution ascribes the EBT account it creates for the individual to the ownership of that individual, and gives only that individual access to funds in the account. The institution then maintains the account for the individual in response to the individual's withdrawals and deposits. Id. The institution also charges the individual, not Treasury, any monthly or additional fees associated with the EBT account. 35 Second, the institution cannot need to be a financial agent of the government once it has been selected as the party that will administer the individual's EBT account because, as previously discussed, once an EBT account is established, EBT is no different from other forms of EFT. See supra part II.B.1. As Treasury explicitly refuses to treat an institution as a public depositary (or financial agent) simply because, for example, it handles paychecks electronically sent to federal employees through direct deposit, see, e.g., 31 C.F.R. § 210.7(g), we must, in the absence of some reason to think otherwise, similarly conclude that an institution participating in an EBT program does not act as an agent of Treasury when it handles benefit payments to its EBT accounts. 36 Nor does case law compel us to think that an IEI was warranted. Treasury argues that the Federal Circuit's decision in United States v. Citizens & Southern National Bank, 889 F.2d 1067 (Fed.Cir.1989), substantiates Treasury's claim that it may avoid typical procurement rules as long as it does not actually purchase goods or services. In this case, however, Treasury neither acts as a principal to the institution it selects to administer the EBT program nor delegates to this institution some of the sovereign functions that the government itself would otherwise perform, as Citizens & Southern National Bank suggests are characteristics of any proper use of Treasury's power to appoint financial agents. Id. at 1069. Because the EBT contractor does not disburse public funds or engage in some other sovereign [319 U.S.App.D.C. 437] function, we find that the rationale underlying Citizens & Southern National Bank in fact supports our decision that Treasury did not need to appoint a financial agent through an IEI process in this case. Although that court did imply that CICA or FAR applies to Treasury only when it is acting as a commercial purchaser of goods and services, id., that court simply did not foresee a decision by Treasury, such as the one made here, to designate a party a financial agent even though it has expressly declined to name as financial agents others that perform similar tasks. Otherwise, the precedent cited by Treasury is not apposite.