Document: 364 U.S. 520 81 S.Ct. 294 5 L.Ed.2d 268 UNITED STATES, Petitioner,v.MISSISSIPPI VALLEY GENERATING CO., etc. No. 26. Argued Oct. 19, 1960. Decided Jan. 9, 1961. Rehearing Denied March 20, See 365 855, 798. [Syllabus from pages 520-522 intentionally omitted] Sol. Gen. Mr. J. Lee Rankin, Washington, D.C., for petitioner.521 Messrs. John T. Cahill and William C. Chanler, New York City, respondent. Justice WARREN delivered the opinion of Court. 1 We granted certiorari to review decision Court Claims because conflict-of-interest problem presented by this case has a far-reaching significance in area public employment involves fundamental questions relating standards conduct which should govern those who represent Government its business dealings. 2 The person with whose activities we are primarily concerned is one Adolphe H. Wenzell, Vice President Director First Boston Corporation,1 major financial institutions country. At suggestion Boston's Chairman, subsequently at request Bureau Budget, Wenzell undertook advise act on behalf negotiations culminated contract between Mississippi Valley Generating Company (MVG), respondent herein. called construction operation $100,000,000 steam power plant Memphis, Tennessee, area. Ultimately, was supply 600,000 kw. electrical energy use Atomic Energy Commission (AEC). Before constructed, but after had taken some steps toward performing contract, AEC, governmental contracting agency, canceled be generated proposed no longer needed. then sued sums it expended connection contract. 3 defended several grounds, ground that unenforceable due an illegal conflict interest part Wenzell. Specifically, contended time Wenzell's Government, apparent likely benefit, as developed, fact, did here question; officer Boston, therefore 'directly or indirectly' interested he, agent helped negotiate; he consequently violated federal statute, 18 U.S.C. § 434, U.S.C.A. 434;2 his tainted whole transaction rendered unenforceable. 4 A sharply divided rejected all Government's defenses awarded damages sum $1,867,545.56.3 175 F.Supp. 505. Because view take question, will not necessary us determine validity other raised court below, important though they may be.4 With regard defense, there appear two legal principles involved: (1) Did constitute violation 434; (2) if so, does fact alone preclude enforcing contract? For reasons shall set forth detail think error both these must answered affirmative. I. 6 outcome depends largely upon evaluation rather detailed statement facts order understand fully nature place them their proper context. voluminous evidence heard trial commissioner. Based commissioner's report briefs arguments counsel, made very extensive findings cover approximately 200 transcript record. Fortunately consider original evidence, since parties have agreed rely Claims's findings, also conclude sufficient dispose issues presented. However, noted our reliance making independent determination conclusions inferences drawn them. United States v. E. Du Pont De Nemours & Co., 353 586, 598, 77 872, 879, 1057; Great Atlantic Pacific Tea Co. Supermarket Equipment Corp., 340 147, 153—154, 71 127, 130—131, 95 L.Ed. 162. 7 First. outset, appropriate discuss, general way, origin question led ultimate agreement. story begins early days 1953. Almost immediately assuming office, Eisenhower announced intention revise approach question. In first State Union Message, February 2, 1953, indicated encourage either private enterprise local communities provide power-generating sources partnership Federal Government. Consonant policy, Joseph M. Dodge, decided fall 1953 eliminate Tennessee Authority's (TVA) budget fiscal year 1955 funds used steam-generating Fulton, Tennessee. TVA served commercial, industrial, domestic needs City Memphis environs. When Gordon Clapp, General Manager TVA, learned Dodge's decision, informed persons working Budget provision Fulton were eliminated TVA's budget, would position amount being supplied AEC reduced so available meet growing demands customers. As result began drafting President's message effect relieve commitments efforts direction proved unsuccessful, possibility reconsidered. 8 On December Dodge met office Lewis Strauss, Chairman Walter Williams, AEC. said hoped avoid further expenditures plants, thought investigate reducing consumption TVA-generated industry 450,000 additional Paducah, Kentucky, installation 1957. inquired whether plan outlined him feasible, Williams replied could answer until consulted W. McAfee, Electric Energy, Inc., utility company previously entered into long-term contracts similar described Dodge. 9 After meeting, arranged meeting occurred 8, asked McAfee knew might building much generating capacity middle stated difficult do job, make inquiries about matter. Later, 14, wrote letter indicating group investors formed requested. Bureau's continuing progress plan, copy McAfee's requested sent F. McCandless, Assistant Review Bureau. 10 Sometime prior Edgar Dixon, Middle South Utilities, seeking source Paducah 23, Dixon came Strauss' Kenneth D. Nichols, been selected succeed purpose discuss having companies build near relieving there. Shortly concluded, McCardless inform what transpired meeting. next day, 24, Rowland Hughes, stating helpful continue interests reaching firm agreement Paducah. 11 January 4, 1954, expressed doubts suggested He wiser reduce numerous municipalities power, arrange neighboring buy received letter, held present McCandless. speaking certain reluctance negotiations. pointed out purchased more utilities lieu already cost greater less possible delays location reserve power. apparently eager enter contract; engineering point view, poor site new plant; needed area, better location. McCandless pursue matter length McAfee. 12 Pursuant request, representatives clear presure discussion turned constructing than directly agency. government preferred pay even actual delivery TVA. It finally prepare study factors pertaining 13 became located lost project far removed pool interested. proceeded own draft initial proposal. During period preparing proposal, kept close contact officials, especially scope associations discussed below. 14 Eugene A. Yates, Board Southern Company, holding company. Dixon's calling persuade Yates join plant. day notified Hughes Nichols venture. 15 25, (hereinafter referred sponsors) submitted proposal They offered form corporation (MVG) finance construct facilities account relate details Suffice say comprehensive joint analysis estimates contained too high. showed over seven million dollars per cost. sponsors' another Francis L. Adams, Chief Power, Power Commission. Adams confirmed figures higher reasonable estimate costs sponsors require. 16 By unacceptable Therefore, worked 26 April 1, agreeable This second ultimately 12, 1954. An intensive again Although specifically indicate wherein differed first, liking, analysts basis negotiation final memorandum reporting results recommending authorized instruct June 16, attempt consummate based generally terms 17 July 7, concluded signing November 11, represented 'competent aggressive staff negotiators.'5 slightly different within effective 17, 1955, preliminary performance contract,6 terminated interim municipal plant, thereby obviating need terminate months followed, attempted agree mutually acceptable terminating protracted congressional debate concerning propriety Bureau, advised that, advice reached conclusion obligation recognized suit initiated. 19 Second. Having sketched background litigation, now description role played negotiations, well affiliation assertion interest. 20 actually antedates any earlier association bearing concerned, advert briefly phase activities. May George Woods, latter's Budget. Woods Administration's newly policy participation activities, services himself way help achieve objective. studies subsidy receiving able find right studies, suggest someone. man many financing transactions qualified work promised endeavor special time, vice president directors. inception 1934 before predecessor 1923. owned stock although wife's name. 21 Upon returning York, conferred executives Boston. willingness none men objection. 15, serve part-time consultant spending week Washington completed. receive compensation given $10 subsistence plus transportation expenses. understood neither resign nor relinquish regular salary yearly bonus brought firm. 22 task estimating September four privy vast quantity data, confidential, files. favorable technical operations, internal accounting systems revised service expanded. unsolicited recommendations future areas plants expansion facilities. read surprised see included recommendations, Subsequently, severed expressly admonished confidential document shown one. 23 shortly commenced agove-described Dixon. 18, confer assist call talents knowledge theretofore him, commercial great value during privately Memphis. told exploratory chief responsibility undertaken Again, sever so. 1948, 1949, talked render companies. attend forthcoming 'Hughes emphasized speed project,' 'to such influence people impress prompt action matter.' 24 went afternoon Strauss. Strauss acquainted scheduled impressed necessity action. following representative when saw 25 prearranged, attended only come unescorted. 'On volition without consulting * (Government) took Paul Miller, assistant buying department.' lasted hours drift above. begin investigating feasibility type desired talk Tony Seal Ebasco, serviced projects. returned but, left, 'requested stay touch associates development particularly up real money project.' 21, Seal. happened instructed project. 27, former making. 'Wenzell (Seal's) all-important borrowed plant.' 27 transpored meetings flew together evening. flight, 'asked personal favor ascertain rates current market OVEC project.'7 5, obtain information found acquired colleagues engrafted refinements onto calculations. Then, gave computed. 28 dropped search support quarters. One whom sought assistance Yates. known years, present. scheduled, indicated, 29 trip drafted giving money. conformed oral stationery signed Two later, reference money, paragraph follows: 30 'We assurances responsible specialists expressing belief arrangements can consummated under existing conditions, offer conditioned consummation.' 'responsible specialists' relied data 31 participate completing Powell Robinson, sales department. completed function assumed total His reaction costs, down York. arrived continued. out, unable members, despite insight problem, still remained uncertainty. member AEC—TVA made. Immediately 32 discussed, try submit conveyed Duncan Linsley, Executive Committee, sponsors. confirm reliable cost-of-money 33 participated analysis. addition made, Commission, above, adopted. 34 hotel room replying unfavorable clearly demonstrate changes handwriting. never 35 While analysis, estimates. 3, Adams' once tht undertake line most recent prove acceptable. 'He refine figures.' last preparation dated 10, reconfirmed '(t)his proposal.' like advice. 36 formal 1954; however, felt relationship ended date show telephone regarding late conversation date. tendered written resignation; merely stopped Bureau.8 37 Third. perfectly arose Those concern duality themselves. Around Daniel James, apprehension employee 'James project, consideration experience James employed situation created ask handle advocates 'make taint illegality' attached later spoke 'embarrassment' retained agent. superiors situation. 38 followed duality. alluded probable developed give draft, instrumentality obtaining figure sponsors, same cause criticism against embarrassment Administration, charged while improperly Boston.' exaggerating nevertheless 39 Coggeshall, Coggeshall Sullivan Cromwell, consulted. Arthur Dean, partner handled business, leaving town, Raben, law 26, Raben engaged 'Raben forthwith writing. accepted financing, board directors wanted accept and, charge fee. Finally, keep developments matter, including handling telephoned 40 conversation, danger dual position, resign, do. occasion, describing uneasiness coworkers colleague 'was 'working sides street' get serious trouble. actions attributable lack familiarity restrictions applicable employees compared practices business.' occasion 'he awkward problem. 'Dodge likelihood future, finish quickly possible.' 41 meantime, counsel immediately. yet resigned, why permitted fears 42 latter resigned. assured process doing Dean promptly writing.' Dean's continued, Consequently, resigned cease submitted. 43 Fourth. relates retention among confirming costs. discarded hat, resumed president. 'expected resulted from' 44 About executive Lehman Brothers, investment banking firm, Brothers thereupon wished considered probably good idea associated cool Brothers' participation, consult it. 45 wish share withdraw want alone, willing associate 'on conditions dominant authority senior respect advertising division fees.' importance. prestige kind. 46 Thereafter, debt financing. Brothers. direct placement $93,000,000 worth bonds $27,000,000 unsecured notes. approved, 'that fee agents 60 percent advertising.' 47 Since retainer ever signed, pinpoint retained. believed procedures 48 Some services. committee tentatively formally adopted October 'The Woods' handle, flowed Administration designed obviate TVA.' 49 announcement fee; decision. date, Senator Lister Hill Alabama speech criticizing emphasizing interest.9 released press charged, statement, upset first. contemplating charging fee, subject Even anticipated SEC response 'Dixon unusual precedent history 50 Despite agreements approval, agreements, anyone connected learn 1955. acting 'there (December 1954) serving supplying II. 51 recitation facts, touches matters concerned. delineate turns, specify collateral pertinent simultaneous constituted interest; questions, matters: 52 relative merits versus development; desire corporate advance policies Administration; 53 (3) so-called 'dollar-a-year' men, industry, labor, sciences; 54 reasonableness unreasonableness negotiated, issue case, burden establish loss. 55 determining proscription Section focus attention initially origin, purpose, statute. 434 penal statutes prohibit officials engaging inimical best public.10 restatement statute 1863 disclosure House Committee scandalous corruption job procure materials armies Civil War.11 re-enacted occasions,12 broad prohibition throughout years. 56 obvious insure honesty dealings preventing adverse advancing expense welfare. Chemical Foundation, 272 131. moral principle foundation Biblical admonition masters, Matt. 6:24, maxim masters happens economic self-interest. salutary Congress speaks terms. limited application highest echelons service, entities negotiate class transactions. Nor statute's restricted provisos exceptions, true statutes.13 Rather, applies, exception, 'whoever' indirectly pecuniary profits contracts' entity transacts 'as States.' 57 significant, think, elements crime loss suffered defendant's omission indicates establishes objective standard conduct, whenever fails accordance standard, guilty violating regardless positive corruption. thus directed dishonor, tempts dishonor. embodies recognition impairment impartial judgment occur well-meaning affected transact To extent, therefore, happened. attempts prevent honest succumbing temptation relationships fraught temptation.14 Rankin States, 98 Ct.Cl. 357. 58 recognizing broad, absolute terms, argues interpret laying prophylactic rule ignores consequences proscribed time-honored canon narrowly construed. But 'given fair meaning accord evident intent Congress.' Raynor, 302 540, 552, 353, 359, 82 413; Rainwater 356 590, 593, 78 946, 949, 966; Corbett, 215 233, 242, 81, 84, 173. language, convinced intended rigid which, analyzing each statutory prohibition, 59 acted 'officer Judged test, recited above key crucial acquaintance assigned using 'such action.' weeks constant frequently intragovernmental analyses; vital proposals; urged rejected; advisor really expediter. (Wenzell), doubt, overall events person, did, suppose, expedite formulation exact page 514. Considering formative multimillion dollar unrealistic 'agent' apply. suggests 'agent States' '(he) oath office; tenure; salary, except subsistence; duties consultative, occasional temporary prescribed statute; presidents draw company.' surely, cannot determinative tenure, receives just subordinate regular, fulltime compensated civil servant. undoubtedly applies 'employed' '(w)hoever acts' Government.15 addition, relevant characterizes 'occasional temporary.' active participant erroneous characterize architect respondent's misplaced. representing diminished consultancy. interest, truly anomalous adopt creates operates remove coverage ignore 61 contends 'the disagree. sign binding terminal agreement, nevertheless, remote tenuous Far tenuous, based. demonstrate, dealt 'allimportant If factors. found: 'It entire price produced sold *. always contemplated reflected largest component charge.' importance proposals borrow rate specified divorced submission negotiated vacuum. energy, framework guidelines And additions proposal,' '(i)n 62 unrealistically assesses series disconnected contrary, continuous course closely interrelated interconnected. stages quite fruition '(w)hile itself nothing work, decisive refusal stage war limit formation permit engage preliminary, often transaction, insulate themselves prosecution withdrawing final, perfunctory proceedings. possibly evasion 63 fell lower least, indirect attempting obtain. That Boston; shared year, firm; upon, substantial probability funancing, hired secure project; profit kind future; profit-sharer expect benefit 64 urges mere hope culminate belie assertion. reputation expertise virtue previous utilized OVEC. expectation baseless demonstrated seemed retained, criticized 'improperly 'forthwith premised realization stood chance outset 'substantial possibility' said: 65 'There was, course, capital realized, experienced firms arranging enterprises, got contract.' 66 (Wenzell) company, logic circumstances, made.' 515. (Emphasis added.) 67 'logic circumstances' placed ambivalent aimed. entrusted negotiation. affect fortunes subconsciously tempted ingratiate accede demands, concessions placing ambiguous situation, failed honor prescribes. 68 temptations whereby sacrificed interests. Once again, takes facts. how transaction. fulfilling role, occasions, favored detriment example, concurred easily specific items estimates; vigorously enough; acceptance reason another, approved. deal exclusively realm conjecture. disclose instances preoccupied TVA-AEC available, planned rebuttal defending helping attack performed 'personal favor' around constructed submitting officers confirmed, constantly forefront picture.16 surprising choose policy.' primary allegiance loyalty fleeting finished one; promise arrangement approval. true, asserts, adversely way. irrelevant preventive nature; lays entering singleness required statute.17 69 mention cited First, below intimate expected understanding absence determinative. seeks avoid. shown. Second, stressed goal coincided exempt gives given, injury Third, strongly involved How otherwise admonitions statements understand. conflict, irrelevant. shown, objective, subjective, little moment immediate True is, cantracting 1954 'Wenzell, event, approval suffice Neither empowered contrary bestow seen fit authorize. conferring high-level administrators. agent's appreciate might, protect mistakes, connivance, agents. consistently properly claim exemption conflict-of-inteest simply discern conflict. Ewert Bluejacket, 259 129, 442, 858; Prosser Finn, 208 67, 225, 392. 70 thrust unjust apply case. agree. evil endangers fabric democratic society, democracy faith govern, bound shattered high appointees arouse suspicions malfeasance seriousness naturally breadth cope evil. Against background, seems duality, aroused observers, aware negotiations; writing'; submitted; do; literal demonstrated. light equitable considerations impossible consultants basis, emphasize holding, us, forbids if, interests, financially 72 determined renders invalidation prohibition. implies enforced arises circumstances lead enforcement offend essential enactment. E.g., Miller Ammon, 145 421, 884, 759; Bank Owens, Pet. 527, 508; Williston, Contracts (rev. ed. 1938), 1763. inquiry sanction nonenforcement consistent effectuating embodied 434. 73 corrupting influences bear conducting protection accorded disaffirmed sole remedy criminal agent, suggests, forced complying sort prevent. Were decree affirmatively sanctioning infected bargain outlaws depriving conferred. 74 Nonenforcement novel remedy. least occasions disaffirm contractual obligations arising prohibited antecedent supra; Curved Electrotype Plate 258. Michigan Steel Box 421. appears abandoned precedents, instead Muschany 324 49, 89 744. difficulty distinguishing instant land National Defense Act 1940, Stat. 712, out-side purview statutes. unlike involve understandable enforced.18 75 overly harsh enforce controlled wrongdoing. wrong considerations. punishing broken law, guarantee integrity lie undetectable beneath surface conceived Cf. Crocker 240 74, 80 245, 247, 248, 533. inherent detecting requires unenforceable, party ostensibly entirely innocent. Hazelton Sheckells, 202 71, 79, 567, 568, 939. seem harsh, here,19 dictated manifested Judge Jones' leaves narrowed spell limitations exceptions.' 533 (dissenting opinion). 76 concluding entitled bad relying caused Of bargain.20 supra, 66—67, 451. us. nonenforcement, condoned officials. strong prevents administrative official exempting subordinates dictates construed requiring contract.21 extend full decreed enacting 434.22 reversed remanded proceedings opinion. 79 Reversed remanded. HARLAN, WHITTAKER STEWART join, dissenting. controlling apt become blurred urge vindicating dispute. sit ethics, piece legislation. I am defense our-of-pocket expenses incurred anxious explore, ingratiating,1 peripheral, 'acts 434,2 personally 'indirectly interested' via go interested, contemplation my Court's rests loose phrase. 83 Referring concluded: 84 shadow (First Boston) commitment, oral, informal, contingent event (of Dixon-Yates group) should, events, opportunity earn commission selling (Mississippi Valley) perform plain understanding.' 518. 85 Hearing Examiner cf. Commissioner Internal Revenue Duberstein, 363 278, 1190, 1218; this. finds 'indirect interest' consist field eventually 86 believe rise contaminating eventuated actuality hardly relevant, Court, correctly says immateriality waiver commissions surely reverse. Whether exists individual asserted 'indirectly' subcontract, existence can, opinion, arrangement, prime contractor subcontractor.3 proposition supported persuasive 87 fits language whereas not. speak disqualifying expectations probabilities, imports precise status Certainly 'officer,' 'agent,' 'member' enterprise. equally disqualified 'being entity. instance proof then-existing mean evidenced tacit 'gentlemen's agreement' suffice. thing. 88 purposes rationale clear: negotiates exposed self-interest; risk left great. factors, finding subcontractor officer's where undue confers redound competing subcontractor. Here, instance, 'a month free bond-selling whomever pleased.' Hence term (although suggested), large, consequence successfully competed bankers qualifications. Furthermore, eventual (by hypothesis improperly) competition leverage gave, hazard boon hands, normal subcontract 90 interpretation introduces unnecessary undesirable uncertainties Instead presenting trier definite present—the vel non commitment undertaking secondary contractors—the large. indeed highlights agreeing 'mere hope' enough, goes describe eventuality variety ways—that probability' it; 'probable'; 'it likely'; 'stood chance' coming pass; follow "logic circumstances" "substantial possibility." 91 Such uncertainty, confusion demarcation cut. face conscientious subtle niceties every judge lawyer knows, disqualification. illusive imported governing laymen 92 affirmative pattern legislation attributing does. enactment, provisions regulations, subject. Particularly 99, 284, disqualify agencies departments years prosecuting aiding pending employment. Rule U.S.C.A., prohibits clerks secretaries practicing participating Canon Canons Professional Ethics American Bar Association. 93 today disposition particular controversy, long assimilating practical disqualification provisions, certainly sanctions prudent acquiring rule, traditional profession, regarded morality may, debated. not, enact precept enacted done clarity precision feel reading lacks. 94 affirm. positions various individuals named occurred. reads 'Whoever, officer, of, corporation, joint-stock association, partnership, entity, acts fined $2,000 imprisoned both.' There opinions court. principal Madden Claims, joined Judges Laramore Bryan, District sitting assignment. Bryan concurring Reed (retired), assignment, dissenting Jones, Claims. Jones separate dissent. were: 2011 et seq., Joint manner Act; Public Utility Holding 1935, seq. (4) obtained regulatory approvals (5) void mutuality. Any quoted material Claims' fact. consisted taking options letting basic contracts. stands Ohio Corporation, composed 1952, contracted Portsmouth, Ohio, installation. Portsmouth large arrangements. rehearsal necessarily omitted inconsequential conversations complete picture continuously tenure mentioned detail. 101 Cong.Rec. 1714. §§ 216, 281, 283, 1914, 1914. 1863, c. 696, 698. H.R.Rep. 37th Cong., 2d Sess., Appendix. R.S. 1783; 1909, 321, 41, 1097; 703. See, e.g., 431—433, 431—433; 13, 13c, 13c. ably 439: inhibiting occupies fiduciary relations antagonistic involving trust sometimes rest sound justified authoritative declaration masters; considering human with, stop violations relations, includes removal violate . .' evils flow 939, objection tendency, inquire done. improper hidden, appear.' Oscanyan Arms 103 261, 275, 539; Tool Norris, Wall. 45, 55, 868. Irregular Branch Op.Atty.Gen. 168, 289, 294; Op.Atty.Gen.No.64. negotiating sessions predominance. determination, render, make. subsequent, unilateral forego cases respondent, S.Ct., 131; Architects Building Corp. 368, distinguishable courts emanated enforced. naive implied. almost refusing continually fortified remembered virtually insisted precluded or, scrutinized closely. enforceable, recovery quantum valebat decreed. tangible benefits party. 81—82, order. acquiesced, encouraged, consultative role. recognizes product hard bargaining implicitly concedes fair, illegality suit, political storm arisen issue. Nevertheless immaterial '§ Interested

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