As has been noted under 1.11:680, above, section 209 overlaps section 203 to some degree, for both provisions prohibit payment to and receipt of compensation by government personnel, the critical difference being that under section 209 the prohibited compensation is for services rendered to the government and under section 203 if is for services to others. It may deserve mention that there is also some overlap with certain of the prohibitions in 18 USC § 201, which addresses bribery of public officials. See United States v. Jackson, 850 F. Supp. 1481, 1495 (D. Kan. 1994) (explaining that section 209 differs from sections 201(b)(1) and 201(c) in the element of requiring that the payment be made as compensation for services as a government employee).
"Special Government employees" (described under 1.11:600, above), and government employees serving without compensation, are excepted from the prohibition by section 209(c); see Exchange National Bank of Chicago v. Abramson, 295 F. Supp. 87, 90 (D. Minn. 1969); OGE Informal Advisory Opinion 84 x 13 (June 15, 1984) Also exempted are participants in a bona fide pension, retirement, group life, health or accident insurance, profitsharing, stock bonus, or other employee welfare or benefit plan, maintained by a former employer (section 209(b)); payment of relocation expenses incidental to certain executive exchange or fellowship programs (section 209(e)); and certain payments to injured employees made by a nonprofit organization qualified under § 501(c)(3) of the Internal Revenue Code (section 209(f)).
As the Supreme Court has observed, the prohibition in section 209(a) rests on three basic concerns:
First, the outside payor has a hold on the employee deriving from his ability to cut off one of the employee’s economic lifelines. Second, the employee may tend to favor his outside payor even though no direct pressure is put on him to do so. And, third, because of these real risks, the arrangement has a generally unwholesome appearance that breeds suspicion and bitterness among fellow employees and other observers.
Crandon v. United States, 494 U.S. 152, 165 (1990) (quoting, with approval, Association of the Bar of the City of New York, Conflict of Interest and Federal Service 211 (1960) ). These three concerns are balanced against a weighty opposing consideration: "Such regulation, while setting the highest moral standards, must not impair the ability of the Government to recruit personnel of the highest quality and capacity." Id. at 166 (quoting President Kennedy).
A variety of circumstances can raise issues under section 209(a). Acceptance of money for a speech given in an official capacity would clearly violate section 209. See OGE Informal Advisory Opinion 94 x 14 (July 15, 1994); see also 5 CFR § 2635.807(a)(prohibiting receipt of compensation from any source other than the government for teaching, speaking or writing "that relates to the employee’s official duties." OGE Informal Advisory Opinion 88 x 12 (July 27, 1988) held that a research fellowship offered by a college to eligible recipients regardless of whether they were government employees, and specifically intended "not to diminish or replace the [recipient’s] usual or expected compensation," would be forbidden to a government employee by section 209. OGE Informal Advisory Opinion 92 x 6 (February 25, 1992) asserted that section 209 would be violated if union officials who were also government employees, and who spent 100% of their duty time on union activities in accordance with an agreement between the agency and the union, were also compensated by the union for the time so spent.
Various kinds of profit-making activities engaged in "on the side" by government employees that exploit their positions as such have been held to violate section 209. Thus, in United States v. Moore, 765 F. Supp. 1251 (E.D. Va. 1991) the defendant was a civilian employee of the Navy, an engineer with expertise in circuit breaker electrical contacts and related components, who also had a 49% interest in a company that made such products and sold them to the Navy. He had not disclosed that interest to the Navy, and he had helped the company get several contracts for such products from the Navy. He had received $100,000 in dividends from the company. He pled guilty to a criminal information charging him with a violation of section 209(a) and then was sued by the government for recovery of the $100,000 that he had thus received, one count alleging a violation of section 209(a) and a second count a violation of section 208. The Court held that he was collaterally estopped by his plea to the criminal charge from denying that he had committed a breach of his fiduciary duty to the government, albeit not from contesting the amount owed by reason of the breach.
In Jordan v. Axicon Systems, Inc., 351 F.Supp. 1134 (DDC 1972), aff’d, 489 F.2d 1272 (DC Cir. 1974) a former government employee brought suit against a private employer seeking damages for breach of an employment agreement under which, while in government (as chief of the Tire Branch of the Department of Transportation’s National Highway Traffic Safety Administration), he promoted computers to tire companies in connection with newly enacted tire safety legislation. The court held the contract to be unenforceable as contrary to Executive Order 11222 and in clear violation of sections 208 and 209 of the Act.
Not all receipt or payment of money to or for the benefit of a government employee is prohibited; the payment must be made in compensation for government service Thus, in United States v. Muntain, 610 F.2d 964 (DC Cir. 1979), an official in the Department of Housing and Urban Development was charged with violation of section 209 for having received $800 from a labor union as reimbursement for travel expenses of his wife and himself on a charter tour trip to Ireland organized by the union. The official was on leave at the time, and the Court concluded that "the payment to Muntain was for services having nothing to do with HUD business or with any responsibilities Muntain may have had to the Government as an employee of the United States." Id. at 970. OGE Informal Advisory Opinion 93 x 21 (August 30, 1993) held that contributions to a legal defense fund for an employee facing administrative disciplinary charges would not violate section 209 because they would not constitute compensation for services as an employee of the United States. The Opinion relied on Crandon, supra, in reading the statutory prohibition narrowly, and overruled the earlier OGE Informal Advisory Opinion 85 x 19 (December 12, 1985), which had come to the opposite conclusion in the analysis of payments from a legal defense fund.
OGE Informal Advisory Opinion 92 x 7 (February 26, 1992) held that section 209 does not prohibit bestowal on or receipt by a government employee of an award (in this case a "Regents’ Distinguished Alumnus Award" or an "Alumni Achievement Award") that consists solely of a certificate, with no associated monetary stipend. Even if there is a cash element, the Opinion asserts, the prohibition does not apply to an award for public service or other meritorious service that is bona fide, i.e., is not intended to compensate for government service.
17 Op. Off. Legal Counsel No. 3 (1993) held that a government employee/inventor who assigns his rights in an invention to the United States and accepts the government’s payment of amounts tied to the resulting royalties, pursuant to the Federal Technology Transfer Act of 1986. 15 U.S.C. §§ 1501-34, may continue to work on the invention without violating section 209. (The Opinion also addressed section 208, and is discussed more fully under 1.11:695, above.)
OGE Informal Advisory Opinion 87 x 11 (Sept. 9, 1987) held that a "President’s Discretionary Fund," established in honor of a university’s former president now serving as a Commissioner of a government agency, and endowed by a corporation on whose board of directors he had served, does not violate section 209: "Even if money for the establishment of this honorary fund were to be viewed as compensation to the employee, it would not run afoul of [section 209] because . . . it is in recognition of the employee’s past services . . . and is not related to his recent appointment to the Commission."
5 Op. Off. Legal Counsel 126 (1981) held that payment by a private foundation of legal fees incurred in connection with Senate confirmation hearings of a Cabinet member was not a violation of section 209, since the legal services provided served a legitimate governmental function, cognizable under the Presidential Transition Act.
Payments to Persons Entering Government Service
A number of the authorities applying section 209
address payments of various sorts made by private entities to employees who
are departing for government employment. These are likely to be of particular
interest to lawyers entering government service, and to law firms
that
they leave in order to do so: for example, the firm may have an interest in
encouraging a young lawyer to spend some time in government; also,
a withdrawing law firm partner will typically receive from the firm various
sums that might raise questions under section 209. In this connection, too,
a
central issue is whether the payment in question is intended o supplement
the government employee’s salary. Also of critical importance is the issue
of when
the payment or payments are made, in relation to the recipient’s
status as a government employee.
2 Op. Off. Legal Counsel 267 (1978) held that the employer of a White House Fellow could not, consistently with section 209, reimburse her for the cost of temporary living quarters in Washington while she and her husband maintained a home elsewhere. "The payment of a Government employee’s living expenses due to his Government service is a classic example of a supplementation of Government salary prohibited by section 209." Id. at 267-68. Also held to be impermissible were the employer’s paying the White House Fellow’s moving expenses to Washington and the accrual during the Fellow’s leave of vacation time and sick leave. On the other hand, 5 Op. Off. Legal Counsel 150 (1981) held that payment of moving expenses to a university faculty member going into the Department of Justice was not a violation of section 209 where the payment was made pursuant to the university’s "Professional Development Program," akin to a sabbatical program, and was not designed or administered to favor federal employment over other forms of professional development leave. 6 Op. Off. Legal Counsel 224 (1982) held that an employer could rent an employee’s house during the employee’s participation in the President’s Executive Exchange Program, so long as it paid no more than the market price and actually used the house or at least excluded the employee from using it, but that section 209 would prohibit an arrangement under which the property would not be used at all, or the employee would continue to have use of the property, because this would mean that the employer was subsidizing the employee’s government service.
Crandon, supra, the only Supreme Court decision construing section 209, interpreted it narrowly, to require that the payment be made while the recipient is in government, and not before (or, by implication) after government service. There, the Court addressed a challenge to a compensation plan under which The Boeing Company had provided lump sum severance packages for five employees who were leaving Boeing to enter government service. The payments had been made prior to the commencement of their government responsibilities, but had been in amounts that were "intended to mitigate the substantial financial loss each employee expected to suffer by reason of his change in employment." Id. at 154. Each of the payments had been made unconditionally: "None of the employees promised to return to Boeing at a later date nor did Boeing make any commitment to rehire them." Id. at 156. Although section 209 is a criminal statute and at that time entailed no provision for enforcement by civil proceedings, this was a civil suit, in which the government asserted a "common law" claim, seeking as relief from Boeing the aggregate amount of the payments made and, with respect to the individual recipients of the payments, the imposition of a constructive trust upon the moneys received. (The provision for civil relief for violation of the several prohibitions of the Act, in section 216, was enacted shortly before the Court’s decision in Crandon.) The District Court had dismissed the complaint, holding that section 209(a) did not apply because the payments were made before the recipients became government employees and that the payments were not intended to compensate them for government service. The Court of Appeals reversed, holding that employment status of the recipients at the time the payments were made was not an element of a violation of section 209, and that the purpose of supplementing their compensation as government employment brought the matter within the prohibition of that provision. United States v. Boeing Co., Inc., 845 F.2d 476 (4th Cir. 1988). The Supreme Court reversed again, holding, in an opinion by Justice Stevens, that although section 209(a) was ambiguously worded, it was properly construed as prohibiting only payments made or received, respectively, at a time when the recipient was an employee of the government. 494 U.S. at 159. The Court observed that
At least two of the three policy justifications for the rule—the concern that the private paymaster will have an economic hold over the employee and the concern about bitterness among fellow employees—apply to ongoing payments but have little or no application to an unconditional preemployment severance payment.Id. at 166. As to the third such consideration,
Of course, the concern that the employee might tend to favor his former employer would be enhanced by a generous payment, but the absence of any ongoing relationship may mitigate that concern, particularly if other rules disqualify the employee from participating in any matter involving a former employer. Thus, although the policy justifications for § 209(a) are not wholly inapplicable to unconditional preemployment severance payments, they by no means are as directly implicated as they are in the cases of ongoing salary supplements.Id. Justice Scalia, in a concurring opinion joined by Justices O’Connor and Kennedy, agreed that the government had failed to prove a violation of section 209(a) but for quite different reasons. He disagreed with the majority’s view that payments made before or after the term of federal employment are necessarily excluded from that provision’s prohibition, but argued that the prohibition applies only to supplementation of salary, and not, despite much contrary authority in the form of opinions of the OLC and opinions and regulations promulgated by OGE (as well as some court decisions), to compensation of any other kind; that salary means periodic payments, and thus the prohibition does not apply to lump sum payments, whenever and for whatever purpose made, id at 168-184 (with the possible exception of payments whose amounts were computed "on the basis of so much per month or so much per year that each recipient promised to serve," id . at 183).
Crandon effectively overruled some prior authority that looked only to the nature of the payments made, and not to the time when they were made, in relation to the period of government service. See. e.g., OGE Informal Advisory Opinion 89 x 8 (June 30, 1989) (refusing to approve a severance package that would provide an employee leaving for a two year stint in the government with three lump sum payments made at six month intervals upon her return to the company; the fact that the payments were to be much more generous than the employer’s usual hiring bonuses indicated that their real purpose was to supplement the employee’s government salary). Insofar as prior authority examined the purpose and effect of payments made and received during government service, however, that authority remains valid. See, e.g., OGE Informal Advisory Opinion 85 x 11 (Aug. 23, 1985), disapproving a severance arrangement under which a prospective nominee to a Senate-confirmed position who was chairman of the board of a corporation and planned to return to that position would receive two payments "for past services" at a year’s interval (and evidently during his government service): "[T]he inference can be drawn that availing oneself [of] the several available benefit plans of the company coupled with an intent to return creates, in effect, a leave of absence situation where the severance arrangement is used simply to supplement Federal salary. A true severance payment would occur at the end of [the individual’s] service to the corporation." Id.
An OGE opinion that does not address the point of timing of the payments but presumably remains authoritative with respect to the determination of whether the payments had a proper purpose is OGE Informal Advisory Opinion 84 x 12 (June 14, 1984) which approved a payment made by a law firm to a partner who withdrew to accept a presidential appointment. The firm’s partnership agreement provided for a minimum payment for withdrawing partners, but also allowed for larger payments to partners who had made "extraordinary contributions" to the firm. In this instance, such a larger payment was involved. After evaluating the firm’s practice in ten previous cases, OGE concluded that the payment in this instance was in line with firm’s past practice after "carefully weighing the indicia of intent as represented by the prior personnel practices of [the] law firm; the nature, size and stated purpose of the payment; and the expressed nature of the services [the attorney] performed while in the employ of the law firm." Id.
Thus, the practical result of Crandon, so far as lawyers and law firms are concerned, appears to be that at least as section 209 now stands, a law firm can, consistently with that provision, make to a lawyer departing the firm for government a severance payment that is calculated to cushion the financial sacrifice entailed by government service, or promise a bonus similarly calculated upon the lawyer’s return from government, provided that payment is actually made before the government service commences, (in the first case) or after it has been completed (in the second). (It might nonetheless be sensible to secure a confirming opinion from OGE before launching on such a course.) If, however, any portion of the severance payment is to be disbursed during the lawyer’s government service, then it must be justified as an entitlement wholly unrelated to that government service.
