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Department of Veterans Affairs
Office of the General Counsel
Washington DC 20420
June 18, 1993
VA District Counsel (372/02)
941 North Capital Street, N.E.
Washington, D.C 20421
SUBJ: Acceptance of gifts from VA Research Corporations.
1. Last September, we sent you a letter reviewing your opinion on
whether a VA research corporation could lawfully fund the travel of
two full-time VA physicians to attend a foreign research conference
while on annual leave. We concluded that the research corporation is
a prohibited source for purposes of the conduct regulations, and that
the payment of travel expenses for the physicians would be a
prohibited gift. We therefore concurred with your opinion that the
physicians could not accept the payment of travel expenses. However,
we have recently reconsidered this issue under the new conduct
regulations. In light of the underlying purpose of the gift
acceptance rules, and assuming that the travel is for purposes
related to approved VA research activities, see VHA Circular 10-89-99
(Sept.29, 1989), we have concluded that the acceptance of travel
support from a VA research corporation does not violate the gift
rule.
2. The ethics issue raised by your letter is whether the
acceptance of the travel support from a VA research corporation would
violate the applicable standards of conduct. This issue is
appropriately analyzed by examining the underlying purpose of the
rule against accepting gifts and by considering the nature and
purpose of the VA research corporations.
3. The unique relationship between VA and the research
corporations is demonstrated by considering the enabling statute and
the legislative history of the corporations. For example, the VA
Secretary may authorize the establishment of corporations and
prescribe regulations for governing them, 38 U.S.C. 7361(a); the sole
purpose of a corporation is to facilitate VA research, 38 U.S.C.
7362; the VA Secretary has authority to appoint a Board of Directors
for the corporation, 38 U.S.C. 7363; the corporation cannot spend
funds on research projects unless the project is approved in
accordance with procedures prescribed by the Under Secretary for
Health, 38 U.S.C. 7364; the Inspector General, the Comptroller
General and the VA Secretary all have certain accountability and
oversight authority with regard to the corporations, 38 U.S.C.
7366(a)(1)(B), 7366(a)(2) and 7366(b),(d); and finally, employees of
the research corporations are subject to Federal laws and regulations
applicable to Federal employees with respect to Conflict of Interest
in the performance of official functions.
4. The legislative history of the research corporation statute
also emphasizes the fact that the only purpose of the corporations is
to help VA better administer research funds from non-VA sources.
H.R.Report No.100-373, 100th Congress, 1st Sess., at 3-4 (1987). See
also Op.G.C. 01-91, (1-28-91)(The VA Secretary is empowered to
establish nonprofit corporations at VAMC's as flexible funding
mechanisms solely to support approved VA research projects); Op.G.C.
27-90 (4-24-90)(VA has authority to establish nonprofit research
corporations as flexible funding mechanisms for conducting approved
research in VAMC's, and any funds received by the Secretary for
research at medical centers, other than VA appropriated funds, may be
transferred to the corporation for administration). All of these
factors demonstrate that the research corporations and VA do not
maintain an "arm's length" relationship, as the sole purpose of the
VA research corporation is to facilitate VA interests.
5. The overriding purpose for the development of the conduct
regulations is set forth in Executive Order 12731, "Principles of
Ethical Conduct for Government Officers and Employees." Section 101
of this Executive order states, among other things, that the order
was promulgated to ensure that every citizen has complete confidence
in the integrity of the Federal Government. The rules pertaining to
the acceptance of gifts from prohibited sources were developed
because the interests of such entities are distinct and, in some
cases, in conflict with the interests of the Federal Government.
Their relationship with particular executive agencies, for sound
reasons of public policy, must be an objective, arm's length one. For
example, the interest of most vendors is to secure a high profit,
whereas the interest of the purchasing agency is to minimize costs.
Thus if a Federal employee accepted a gift from such an entity, this
could call into question the employee's loyalty and integrity.
6. In contrast, there is a complementary, reciprocal relationship
between the VA research corporation and the VA, as the only purpose
for the corporations' existence is to facilitate VA's mission. The VA
research corporations have neither a conflicting profit motive nor a
conflicting agenda regarding the research to be conducted. Because VA
research corporations are creatures of Federal statute that exist
solely to facilitate and further the mission of VA, we believe that
the scenario that you describe does not present the divergence of
interests between the donor corporation and the VA employee traveling
for VA research purposes that would call into question either the
employee's integrity or that of the VA. More generally, we note that
any gift offered by a corporation within its authority is, by virtue
of the limitations on that authority, necessarily a gift in
furtherance of, rather than in conflict with, the interests of VA. We
believe it would be anomalous to apply the prohibited source test to
an entity such as a VA research corporation. We therefore conclude
that under the new conduct regulations, a statutory VA research
corporation that is making a gift which is within its statutory power
is not a prohibited source.
Audley Hendricks
Assistant General Counsel
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