Earl Warren

“ In fact, the more evidence an agent gives of agreement with the policies of the Administration, the more responsibility he is likely to be given, and in case of a conflict of interest, the greater is the possible injury to the Government. Third, the Court of Claims relied strongly on the fact that Wenzell did not think that he was involved in a conflict-of-interest situation. How Wenzell could have thought otherwise following the admonitions of both Dixon's counsel and First Boston's counsel and his own statements in that regard is difficult to understand. ”

“ The question is whether the Government may disaffirm a contract which is infected by an illegal conflict of interest. As we have indicated, the public policy embodied in Section 434 requires nonenforcement, and this is true even though the conflict of interest was caused or condoned by high government officials. The same strong policy which prevents an administrative official from exempting his subordinates from the coverage of the statute also dictates that the actions of such an official not be construed as requiring enforcement of an illegal contract. ”

“ A key representative of the Government who has taken no oath of office, who has no tenure, and who receives no salary is just as likely to subordinate the Government's interest to his own as is a regular, fulltime compensated civil servant. This is undoubtedly why the statute applies not only to those who are 'employed' by the Government, but also to ' (w) hoever * * * acts' as an agent for the Government. ”

“ To limit the application of the statute to government agents who participate only in the final formation of a contract would permit those who have a conflict of interest to engage in the preliminary, but often crucial stages of the transaction, and then to insulate themselves from prosecution under Section 434 by withdrawing from the negotiations at the final, and often perfunctory stage of the proceedings. ”

“ Because of the respondent's assertion that an application of the statute to Wenzell will make it impossible in the future for the Government to obtain the services of private consultants on a part-time basis, we emphasize that our specific holding, on the facts before us, is that § 434 forbids a government agent from engaging in business transactions on behalf of the Government if, by virtue of his private interests, he may benefit financially from the outcome of those transactions. ”

“ Because Wenzell was a business acquaintance of both Dixon and Yates, Hughes very early in the negotiations assigned Wenzell the task of using 'such influence as he had with the private utility people to impress upon them the need for prompt action.' In the weeks that followed, Wenzell kept in constant touch with the sponsors, and frequently was the only representative of the Government at important meetings concerning the project. ”

“ The obvious purpose of the statute is to insure honesty in the Government's business dealings by preventing federal agents who have interests adverse to those of the Government from advancing their own interests at the expense of the public welfare. ”

“ On February 25, 1954, Dixon and Yates (hereinafter referred to as the sponsors) submitted their proposal to the AEC. They offered to form a new corporation (MVG) which would finance and construct generating facilities from which 600,000 kw. of electrical power would be delivered to TVA in the Memphis area for the account of the AEC. We do not think it is necessary to relate the details of the proposal. Suffice it to say that after a comprehensive joint analysis by TVA and the AEC, the Government decided that the cost estimates contained in the proposal were too high. ”

“ The person with whose activities we are primarily concerned is one Adolphe H. Wenzell, Vice President and Director of First Boston Corporation, [1] which is one of the major financial institutions in the country. At the suggestion of First Boston's Chairman, and subsequently at the request of the Bureau of the Budget, Wenzell undertook to advise the Government and act on its behalf in negotiations which culminated in a contract between the Government and the Mississippi Valley Generating Company (MVG) , the respondent herein. ”

“ Dodge replied that he was interested in having some studies made on the amount of subsidy that TVA was receiving from the Federal Government. Dodge indicated that he had not been able to find the right person to conduct these studies, and he asked Woods if he could suggest someone. Woods replied that First Boston did have a man who had worked on many utility financing transactions and who would be qualified to do the work described by Dodge. The man referred to was Wenzell. Woods promised that he would endeavor to make Wenzell's services available for the special project described by Dodge. ”

“ Lehman Brothers had previously indicated that it thought some fee should be charged, and when Woods released the press statement, representatives of Lehman Brothers were upset because they had not been consulted first. Although Dixon had heard that First Boston was contemplating not charging a fee, he did not understand that a final decision on that subject had been made. Even as late as May 5, 1955, Dixon told First Boston that he anticipated questions from the SEC regarding First Boston's fee, and he requested that First Boston give him a clear statement on the matter. ”

“ In terms of these factors, a finding of some commitment, arrangement or understanding between the prime contractor and the subcontractor should be required when the contracting officer's adverse interest arises by way of a subcontract, since only where some such arrangement exists can the officer be taken to have known that any undue benefit he confers on the prime contractor will not eventually redound to the profit of some other competing subcontractor. ”

“ The moral principle upon which the statute is based has its foundation in the Biblical admonition that no man may serve two masters, Matt. 6:24, a maxim which is especially pertinent if one of the masters happens to be economic self-interest. ”

“ Were we to decree the enforcement of such a contract, we would be affirmatively sanctioning the type of infected bargain which the statute outlaws and we would be depriving the public of the protection which Congress has conferred.
Nonenforcement of contracts made in violation of Section 434 and its predecessor statutes is not a novel remedy. On at least two occasions the Court of Claims has held that the Government could disaffirm contractual obligations arising from transactions which were prohibited by the statutory antecedent to Section 434. Rankin v. United States, supra ”

“ Williams asked McAfee whether he knew of a private power company that might be interested in building a plant to supply the AEC with as much as 450,000 kw. of generating capacity by the middle of 1957. ”

“ We make this fact known only to complete the picture and to indicate that Wenzell was continuously involved in the negotiations during his tenure with the Bureau of the Budget. It should also be noted that Hughes was aware of most of Wenzell's activities, both those which we have described and those which we have not mentioned in detail.↑ 101 Cong.Rec. 1714.↑ The other statutes are 18 U.S.C. §§ 216, 281, 283, 284, 1914, 18 U.S.C.A. §§ 216, 281, 283, 284, 1914.↑ Act of March 2, 1863, c. 67, § 8, 12 Stat. 696, 698. See H.R.Rep. No. ”