Opinion ID: 268421
Heading Depth: 2
Heading Rank: 3

Heading: conflict-of-interest statutes

Text: 25 Defendant urges that Acme's employment of Harold J. Lee and Charles G. Hochstuhl contravened certain provisions of the federal conflict-of-interest statutes, thereby making the contract voidable by the Government. 26 In the early stages of contract performance Acme was experiencing production problems with machines and tooling supplied by the Government under a companion facilities contract. At plaintiff's request Watervliet Arsenal ordered Harold J. Lee, a machinist lead foreman at the Arsenal, to report to Acme's Lansdale plant to assist plaintiff in its technical problems. Under his official orders Lee worked at Acme's plant from his arrival on April 20 until April 24, 1953, at government expense. The Arsenal refused Acme's request that it loan Lee's services for an additional week at government expense. Instead, Lee was given official permission to remain at the plant, advising plaintiff in an absent-without-pay status from April 27 to May 1, 1953. During this latter period he worked 96 hours, for which Acme paid him $5 per hour plus hotel expenses (compared to his government salary rate of $2.60 per hour). The amounts paid by Acme to Lee were charged against Contract 1213. Plaintiff was pleased with Lee's services and commended him to Watervliet Arsenal. Upon his return Lee filed with the Arsenal a trip report, which described the production problems he had observed and the advice he had given Acme personnel for their solution. In large part the report reflects the inexperience of Acme's personnel and their lack of necessary equipment. There is no evidence of any improper conduct on the part of plaintiff or of Lee — aside from the propriety of his being hired at all. The defendant concedes that Lee's employment by plaintiff did not affect his impartiality, a fact which is evident from the contents of his report and the effect of his testimony as a witness at the trial of this case. 27 A federal statute precluded any employee of the United States or any department or agency thereof from receiving any compensation for any services rendered    in relation to any    contract    in which the United States is a party. 62 Stat. 697. 19 During the week he received a salary from Acme, Lee was not on the Government's payroll at all. We are not concerned with the undercover activities of an employee who pretends to be working for the Government while secretly performing services for a contractor. During that week, Lee received a reasonable salary from plaintiff and performed valuable services about which the defendant was fully informed. It may well have been poor judgment for Acme to hire, or the defendant to permit the hiring of, Lee's services under this arrangement (rather than detailing Lee for an extra week to Acme's plant on the Government's payroll). The fact remains that both parties acquiesced in the arrangement so that, for one week, Lee was not working for the Government at all; in effect, he became an Acme employee. As such, the compensation which he received did not fall under the statute and the harsh sanction of forfeiture need not be considered. 28 After Contract 1213 was awarded to Acme, Charles G. Hochstuhl of Philadelphia Ordnance District was assigned to administer it, along with other contracts. As part of his duties in connection with 1213, Hochstuhl recommended changes in the delivery schedule, and journeyed to Ohio in March 1953 in the company of Acme officials to show them existing gun-manufacturing facilities. 20 He was removed from his position with the Government effective August 4, 1953,    for making material false statements and exaggerations on [his] application standard Form 57, relating to prior private employment. During his notice period, Hochstuhl looked for other work and was employed by Acme in August 1953, immediately following his release. The defendant advised Acme at the time that, for two years thereafter, Hochstuhl could not engage in negotiations with his former employer concerning Acme's contracts. 29 During the first few weeks of his employment by Acme, Hochstuhl helped Norris as a subcontract expediter. After Norris was discharged in September 1953 and replaced by Jack Epstein as superintendent of the Lansdale plant, Hochstuhl was designated Epstein's assistant. As such he was given a variety of assignments, all of them involving one form or another of paper work. He established a control system for subcontracts, prepared letters to Ordnance for signature by others, correlated plant inspections, and assisted in the preparation of requests for change orders. He had no personal contacts with government representatives in connection with plaintiff's contracts. 30 In the fall of 1953 Hochstuhl came across a number of vouchers and other cost records in the files, which related to repairs made by Acme to government-owned machines supplied under Facilities Contract 1214 (related to Contract 1213). On his own volition and in the interest of keeping adequate cost records, Hochstuhl undertook to segregate and allocate the cost records to individual machines; thereafter, as additional repairs were made to the machines, he kept a running record of them. There is no suggestion that this record was originally made for the purpose of a claim against the Government; in the fall of 1953 there was no prospect of the contract cancellation which took place in July-August 1954. In September 1954, at the direction of his superiors, Hochstuhl prepared an up-to-date record of Acme's expenditures in repairing the various government-owned machines. It was based on the data he had compiled a year earlier and had kept current in the meantime. The cost record was attached to a letter from Acme (signed by Sidney Cohen, its secretary-treasurer) to Ordnance on September 7, 1954, in which plaintiff refused to return the machines to the Government unless it gave assurance that Acme would be reimbursed for its cost of repairs. See finding 53. 31 The defendant charges that Hochstuhl's participation in the preparation of Acme's claim for reimbursement violated a penal conflict-of-interest statute, which provided that, within two years after the time when [federal] employment or service has ceased, a former government employee may not [prosecute]    any claims against the United States involving any subject matter directly connected with which such person was so employed. 62 Stat. 698. Casting aside any doubts that Hochstuhl's work for the defendant was directly connected with a claim made by Acme, we reach the question whether his services for Acme amounted to prosecution of such a claim. Hochstuhl simply compiled data on which his superiors based a claim which they presented to the Government. The basic information was first assembled by him purely as a matter of record-keeping, i. e. before there was any specific thought of a claim. Moreover, Hochstuhl's participation in the total claim process was merely clerical in nature. Other personnel in plaintiff's employ could just as readily have performed the relatively simple duties involved in compilation of costs relating to repair of machines, and his prior government service gave Hochstuhl no special knowledge or inside contacts which contributed to the undertaking in any way that we can see. There is a complete absence of evidence that Hochstuhl participated in the presentation of the claim to the Government after he had completed his assignment. On these facts, we hold that Hochstuhl's activities did not violate any conflict-of-interest statute or afford the defendant a valid basis for annulment of the contract.