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Veterans Administration
Office of General Counsel
Washington, DC 20420
O.G.C. Adv. 34-91
September 23, 1991
SUBJECT: Employees Compensation - Possible Violation of 18 U.S.C.
209(a)
ISSUES PRESENTED:
A. Does a Department of Veterans Affairs (VA) employee's receipt
of funds from his/her VA superior and/or a State university for their
Federal duties violate a Federal law (18 U.S.C. 209 (1988)) which
bars outside compensation for official duties, where such funds are
from a Federal grant made to, and administered by, the university?
B. Does an employee who receives outside payment for performance
of official duties own those earnings?
DISCUSSION:
1. This issue arises from the following facts: A part-time VA
Research Pharmacologist, who is also appointed to a position at the
State university, recruited a full-time Research Chemist to VA
Medical Center, Baltimore. The Research Chemist, hired at GS-11,
complained that her salary was not as high as was promised. The
Research Pharmacologist initially gave the Research Chemist
approximately $500 from his personal funds. Later, the Research
Pharmacologist had the State university pay the Research Chemist
$4,090.83 in 29 payments during the period April 1989 to April 1990,
even though the Research Chemist had no duties for the university.
The source of the funds is a Federal grant to the university which is
maintained in a separate account for the university in the State
treasury. Only the Research Pharmacologist, a universally official,
may authorize payment from the account. During an administrative
inquiry, the Research Pharmacologist described the $500 payment as a
gift and later, as a loan. No effort has been made to repay any
funds. You request our opinion on whether the payments violate
Federal law prohibiting payments to Federal employees for official
services "except as may be contributed out of the treasury of any
State." 18 U.S.C. 209(a). As discussed below, we believe the payments
violated section 20q(a).
Section 209(a)
2. Section 209(a) prohibits any VA employee from receiving "any
salary, or any contribution to or supplementation of salary, as
compensation for his services as an... employee of the... the United
States Government... from any source other than the Government of the
United States, except as may be contributed out of the treasury of
any State." A person making such payments also violates the law. Id.
3. Initially, we note that the Research Pharmacologist's direct
payment from his personal funds of $500 clearly violates section
209(a). The circumstances surrounding the payment would determine
whether the payment violated section 209(a). Informal Advisory
Letters and Memoranda and Formal Opinions, U.S. Office of Government
Ethics (1979-1988), 81 x 16(1). The facts here show that the Research
Chemist sought greater recompense than her GS-11 salary. The funds
paid to her by the Research Pharmacologist were designed to satisfy
her complaints about her salary. The initial payment of $500 was
followed by the arrangement for the salary supplements from the State
university. Although the Research Pharmacologist has described the
payment as a loan (and as a gift), he does not expect the $500 to be
repaid. Independently of the payments directly from the university,
the $500 payment could not be from a State treasury. Under these
circumstances, we believe the $500 payment was made and received in
violation of section 209(a).
4. As to the payments from the university grant held in the State
treasury, we have found no case presenting the precise issue of
whether funds paid by a State university from a Federal grant held in
that institution's control constitute funds from a State treasury
under section 209(a). Funds paid to a State entity generally become
the funds of that entity, and, when expended, represent expenditures
by that entity rather than the Federal Government. See, e.g., 14 Comp.Gen. 917 (1935). Consequently, the university's payment of
salary supplements to the Research Chemist represents payments by the
State university, not the Federal government. Thus, the question
becomes whether the funds paid by the university represent payments
"contributed from the Treasury of a State" within the meaning of
section 209(a).
5. Our research shows that the term "treasury of a State" or
"State treasury", its variant, refers to "monies in the [State]
treasury... in the custody and control of the State Treasurer.
Opinion of the Justices, Del.Supra, 315 A.2d 580 (1974)." Wilmington
Medical Center, Inc., v. Bradford, A.2d 1338, 1349 (Del.1978)
(receipt of bond funds by independent State agency without
appropriation does not violate State constitution). Moreover, the
Supreme Court of Nebraska has discussed the nature of funds in the
general "State treasury," as opposed to funds used by a State
university system, at length: "The expenditure of the general funds
of the State [i.e. "the state treasury"] is under the control of the
Legislature [which]... make[s] the appropriations necessary for the
operation of state government. The restriction upon money to be drawn
from the [state] treasury has reference generally to funds of the
state that may be used to defray the general expenses of government.
Funds of the university, which are not derived from taxation, have a
different status... The regents of the [state] university under the
[state] law are the proper persons and the only persons who may
expend this money, and it can be used for no other purpose... They
are trust funds.. and are not available to the Legislature for
general governmental purposes [Board of Regents of the university of
Nebraska v. Exon, 256 N.W.2d 333-334 (1977)].
Accord: Petition of the Board of Public Buildings, 363 S.W.2d 598,
607 (S.Ct.1962) ("public money" held by State institutions need not
pass through State Treasury). Accordingly, we conclude that a
well-recognized distinction exists in law between funds held in, or
derived from, a "State treasury" and those otherwise coming into the
possession, and for the use, of a State Institution, particularly a
State university which may obtain grant or other funds for a
particular use. Also see, In re Estate of Biris, 173 N.E.2d 107, 108
(Ohio 1961) ("Money... does not enter the State Treasury... until
such money is... paid into the State Treasury to the credit of the
General Revenue Fund").
6. Applying that distinction between "State treasury" and other
funds held by a State institution in this case, we conclude that the
grant funds at issue here were not from the "State treasury." The
funds paid to the VA Research Chemist were from a Federal grant
controlled by the State university. They were not controlled by the
State treasurer. The funds were segregated for the university's use.
Only university officials could authorize use of the funds and then
only for grant purposes. See Exon, supra. Under these circumstances,
we believe that the grant used to pay the Research Chemist was not
"contributed from the Treasury of any State" within the meaning of
Section 209(a). Accordingly, we conclude the funds received by the
Research Chemist were not "contributed from the Treasury of any
State" within the meaning of section 209(a) and that receipt of those
funds violated section 209(a).
7. We recognize that the University of Maryland is established
under State law, receives appropriations from the State and is
subject to other State laws concerning the conduct of State agencies.
See generally, e.g., Md. Educ.Code Ann. 12.105 (1989). However, the
law provides the university with "all the powers of a Maryland
corporation which are not expressly limited by law" and authority to
"apply for, accept, and spend any gift or grant from the Federal
Government, any foundation, or any other person." Id. section
12-104(d). Courts in at least one State have recognized that a
university's receipt of funds under these circumstances does not
represent receipt of funds by the (indecipherable) in its sovereign
capacity and are not subject to strictures otherwise applicable to
State funds. Exon, supra, at 333-334. As stated by one court, these
institutions, although they are instrumentalities of the State," are
not the State itself nor does the State act through them in its
sovereign capacity, and... their funds are not essentially 'state
money." Public Buildings, supra, at 607. Thus, the university's
status as a State institution or instrumentality of Maryland does not
affect our conclusion that funds were not "contributed from the
Treasury of any State" within, the meaning of section 209(a).
Recovery of Funds
8. Whether or not section 209(a) has been violated, VA should
recover funds paid by the University to the Research Chemist. The
Comptroller General has specifically held, based on well-recognized
principals of law, that funds paid to a public employee for his
official duties, even if not in violation of criminal law, "should be
considered as received for the account and benefit of the Government
and consequently should be collected from the officer [or employee]
and covered into the Treasury." 32 Comp. Gen. 454 (1953): accord 29 Comp.Gen. 163 (1949); cf. 67
Comp.Gen. 457 (1988) (salary
overpayments to Federal employees in violation of law recoverable
against the employees). In the 1953 case, a Naval Reservist had
received pay and allowances from a municipal hospital during Naval
Reserve duty at the hospital. He challenged the determination that
the funds paid by the hospital represented a debt to the Government.
The Comptroller found that the Naval Reservist had not violated a
bare against outside pay for Government service, then 18 U.S.C. 1914,
because the hospital paid him funds from a municipal treasury.
However, the Comptroller noted that, in private employment, "it is
well established that earnings of an employee in excess of his
regular compensation gained in the course of, or in connection with
his services belong to his employer." 32 Comp.
Gen. at 455 (citations omitted). Similarly, in public employment,
"a public office is a public trust and... the holder thereof may not
use it directly or indirectly for a personal profit." Id. at 455
(citations omitted). Thus, the funds paid by the municipal hospital
were determined to be owed by the officer to the Government.
9. Further, VA has an obligation to "take aggressive action, on a
timely basis with effective follow-up, to collect all claims for
money or property arising from its activities." 38 C.F.R. 1.910.
Accordingly, we believe that sufficient authority exists to establish
and collect a debt against the Research Chemist for the amount that
was paid by the university.
VA Regulations
10. We note that, although your concern is limited to issues
arising under section 209(a), the Research Chemist also violated
regulations prescribing standards of conduct by using her public
office for private gain. 38 C.F.R. 0.735-10(b)(1). The facts
available indicate that she used her Federal position to obtain the
additional compensation from the university.
Referral
11. Finally, the Secretary has a duty to refer allegations of
criminal conduct by VA employees to the Attorney General. 28 U.S.C.
535(b). Final determination as to whether the evidence warrants a
prosecution is a matter solely for their determination. 38 C.F.R.
1.56O(c) (1990). The Inspector General is responsible for making
"such investigations... to the administration of the [VA's] programs
and operations... as are in the judgment of the Inspector General,
necessary or desirable." 5 U.S.C. 6(a)(2) (1988). Accordingly, we
suggest that you coordinate with the Inspector General the referral
of this matter to the United States Attorney's office.
Held:
A. A VA employee's receipt of Federal grant funds paid by a State
university where grant funds were subject to control of the
university and not paid into the State Treasury as part of its
general revenues, for the employee's Federal duties violates 18 U.S.C, 209(a) which bars supplements to Federal salary. Such conduct
must be referred to the Department of Justice.
D. Outside payments to a Federal employee for his Government
service are paid to the employee for the benefit of the government
and should be recovered from the employee.
VETERANS ADMINISTRATION GENERAL COUNSEL
O.G.C. Adv. 34-91
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