Status of National Veterans Business Development Corporation ( 2004 )

Status of National Veterans Business
Development Corporation
The National Veterans Business Development Corporation is a “Government corporation” under
5 U.S.C. § 103 and an “agency” under 31 U.S.C. § 9102.
March 19, 2004
MEMORANDUM OPINION FOR THE GENERAL COUNSEL
OFFICE OF MANAGEMENT AND BUDGET
You have asked for our opinion whether the National Veterans Business De-
velopment Corporation (“NVBDC”) is a “Government corporation” under 5
U.S.C. § 103 (2000) and an “agency” under 31 U.S.C. § 9102 (2000). We
conclude that the NVBDC comes within both statutory terms.
I.
The Veterans Entrepreneurship and Small Business Development Act of 1999,
Pub. L. No. 106-50, 113 Stat. 233, established the NVBDC as a federally char-
tered corporation and provided for it to be incorporated under the laws of the
District of Columbia. 15 U.S.C. § 657c(a) (2000). The NVBDC is “to expand the
provision of and improve access to technical assistance regarding entrepreneurship
for the Nation’s veterans” and “to assist veterans . . . with the formation and
expansion of small business concerns by working with and organizing public and
private resources.” Id. § 657c(b). To carry out these purposes, the NVBDC is,
among other things, to set up and maintain a network of information and assis-
tance centers, id. § 657c(f), and create a “Professional Certification Advisory
Board” that will devise uniform guidelines and standards for the professional
certification of members of the armed services, aiding in their transition to civilian
occupations and professions. Id. § 657c(j)(1).
The NVBDC is governed by a board of directors consisting of nine voting
members and three non-voting ex officio members. Id. § 657c(c)(1). The voting
members, not more than five of whom may be members of the same political
party, are appointed by the President, after recommendations by certain members
of Congress. Id. § 657c(c)(2). Except for some of the members first appointed, the
voting members are appointed for a term of six years. Id. § 657c(c)(6). A voting
member may not be “an officer or employee of the United States while serving as
a member of the Board of Directors or [have been an officer or employee of the
United States] during the 2-year period preceding such service.” Id. § 657c(c)(8).
The non-voting members are the Administrator of the Small Business Administra-
tion, the Secretary of Defense, and the Secretary of Veterans Affairs. Id.
§ 657c(c)(3). The voting members elect from among themselves a chairperson of
the Board of Directors to serve a term of two years. Id. § 657c(c)(5).
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Status of National Veterans Business Development Corporation
Congress authorized appropriations for the NVBDC for the first four years of
its existence, see id. § 657c(k)(1), but the NVBDC may also obtain funds from
sources other than the federal government. Under the Veterans Entrepreneurship
Act and a subsequent appropriations bill, Consolidated Appropriations Act, 2001,
Pub. L. No. 106-554, 114 Stat. 2763 (2000), Congress established certain match-
ing requirements so that the annual amount made available to the NVBDC from
the federal government will vary according to the NVBDC’s ability to secure non-
federal funding. 15 U.S.C. § 657c(k)(2). The Board of Directors must “deposit all
funds of the Corporation in federally chartered and insured depository institutions”
until the funds are spent, id. § 657c(e)(1), and the statute specifies the procedures
by which expenditures are to be approved, e.g., id. § 657c(e)(2)(A). The NVBDC
is to institute a plan for raising private funds and becoming a self-sustaining
corporation. Id. § 657c(k)(3). It must report annually to the President and Con-
gress on its “activities and accomplishments . . . for the preceding year” and on
“the efforts of Federal, State and private organizations to assist veterans in the
formation and expansion of small business concerns.” Id. § 657c(g). The NVBDC,
finally, “may use the United States mails in the same manner and under the same
conditions as the departments and agencies of the United States.” Id. § 657c(i).
At issue here is the status of the NVBDC under title 5, United States Code. The
Office of Management and Budget (“OMB”) and the Office of Personnel Man-
agement (“OPM”) have concluded that the NVBDC is a “Government corpora-
tion” under 5 U.S.C. § 103 and thus is an “Executive agency” under 5 U.S.C.
§ 105 (2000). See Letter for Yvette M. Dennis, Program Examiner, OMB, from
Charles R. Henry, President and Chief Executive Officer, NVBDC (May 19,
2003) (summarizing and replying to OMB position) (“Henry Letter”); Letter for
Phyllis Thompson, from James F. Hicks, Assistant General Counsel, OPM (Nov.
13, 2001). Private law firms retained by the NVBDC have given the contrary
opinion. Memorandum for Charles Henry, President and Chief Executive Officer,
NVBDC, from James J. McCullough, et al., Fried, Frank, Harris, Shriver &
Jacobson, Re: Applicability of 5 U.S.C. § 5373 Pay Cap to the National Veterans
Business Development Corporation (Dec. 5, 2001); Memorandum for Robert
Glassman, from Jay P. Urwitz, Hale and Dorr, Re: Authority of Corporation to
Hold Closed Directors’ Meeting (June 11, 2001); see also Memorandum for
Martin Berkowitz, Chief Financial Officer, NVBDC, from Jay Urwitz, Hale and
Dorr, Re: Inapplicability of FAR to NVBDC Procurement (Apr. 15, 2002). Also in
question is whether the NVBDC is an agency under 31 U.S.C. § 9102, which
forbids an “agency” from creating a corporation to act as an agency unless
authorized under a law. This issue is not specifically discussed in the papers that
have been provided to us.
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Opinions of the Office of Legal Counsel in Volume 28
II.
Under 5 U.S.C. § 103, “‘Government corporation’ means a corporation owned
or controlled by the Government of the United States.”1 Whether the NVBDC is a
“Government corporation” would affect whether certain personnel laws would
apply to the NVBDC.
Apart from the present dispute whether the NVBDC is a “Government corpora-
tion” under this statute, there can be little doubt that it is part of the United States
government for purposes of the Constitution. In Lebron v. National Railroad
Passenger Corp., 513 U.S. 374, 400 (1995), the Supreme Court held that “where,
as [in the case of Amtrak], the Government creates a corporation by special law,
for the furtherance of governmental objectives, and retains for itself permanent
authority to appoint a majority of the directors of that corporation, the corporation
is part of the Government for purposes of the First Amendment.” Although Lebron
dealt with a claim under the First Amendment, the Court’s decision about the
constitutional status of such a corporation cannot be confined to that particular
context. As we have previously concluded, “we can conceive of no principled
basis for distinguishing between the status of a federal entity vis-a-vis constitu-
tional obligations relating to individual rights and vis-a-vis the structural obliga-
tions that the Constitution imposes on federal entities.” The Constitutional
Separation of Powers Between the President and Congress, 20 Op. O.L.C. 124,
148 n.70 (1996) (citation omitted). Like Amtrak, the NVBDC was created by
special law to further governmental objectives, and the President appoints not just
the majority, but the entirety, of the Board of Directors.2 Like Amtrak, therefore,
the NVBDC is part of the United States government for constitutional purposes.
With respect to Amtrak, Congress had expressly provided that the corporation
was “not . . . an agency . . . or establishment of the United States Government.” 45
U.S.C. § 541 (1988) (repealed). This provision, the Supreme Court declared, was
“assuredly dispositive of Amtrak’s status as a Government entity for purposes of
matters that are within Congress’s control—for example, whether it is subject to
statutes that impose obligations or confer powers upon Government entities, such
as the Administrative Procedure Act, and the laws governing Government
procurement.” 513 U.S. at 392 (citations omitted). Here, there is no such express
disclaimer. This silence raises the question whether the NVBDC should be treated
as outside the government for statutory purposes under title 5.
1
A “‘Government controlled corporation’ does not include a corporation owned by the Govern-
ment of the United States.” Id. § 103(2). In other words, title 5 clarifies that a corporation that would
fall under the category “corporation owned by the Government of the United States” would not also
fall under the category “Government controlled corporation.” The statute does not further define these
terms.
2
The non-voting ex officio members have been appointed to their underlying offices by the Presi-
dent. 15 U.S.C. § 657c(c)(3).
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Status of National Veterans Business Development Corporation
A corporation that is within the United States government for the purposes of
our fundamental law is, in the ordinary sense of the word, a “Government
corporation”—the phrase used in title 5. Although the opinion in Lebron does not
state that, if a corporation is part of the United States government for constitution-
al purposes, it must also be considered an agency of the United States unless
Congress (as in the case of Amtrak) expressly provides otherwise, we believe that
when Congress has created a corporation after the decision in Lebron—as it has
here—and, through the corporation’s structure and purpose, has placed it within
the government for constitutional purposes, there is a strong presumption that the
corporation is also part of the government for purposes of title 5, which deals with
the internal organization of federal government agencies. “We may presume ‘that
our elected representatives, like other citizens, know the law . . . .’” Dir., Ofc. of
Workers’ Comp. Progs. v. Perini North River Assocs., 459 U.S. 297, 319 (1983)
(quoting Cannon v. Univ. of Chicago, 441 U.S. 677, 696-97 (1979)). See also
Edelman v. Lynchburg Coll., 535 U.S. 106, 117 (2002) (“Congress being pre-
sumed to have known of this settled judicial treatment”). It is anomalous for a
corporation to be part of the government under the Constitution, but not to be a
“Government corporation” under statute; and it is reasonable to expect that, where
such an anomaly is to be created, Congress would convey its intent to do so by an
express statement or, perhaps, by clear implication.3
Here, the statute, far from making such an express statement or raising such a
clear implication, exhibits additional features suggesting that, even apart from the
characteristics on which Lebron relied, the NVBDC is owned or controlled by the
United States government.4 The NVBDC receives federal appropriations, cf. Irwin,
3
In view of Lebron, the statutory status of corporations like the NVBDC cannot be dictated by the
treatment of entities that Congress did not create “by special law, for the furtherance of governmental
objectives,” see Forsham v. Harris, 445 U.S. 169 (1980) (privately formed entity, University Group
Diabetes Program); Gilmore v. Dep’t of Energy, 4 F. Supp. 2d 912 (N.D. Cal. 1998) (Sandia Laborato-
ries not created by act of Congress); cf. United States v. Orleans, 425 U.S. 807, 816 (1976) (employees
of federal contractors not covered by Federal Tort Claims Act), or of entities a majority of whose
directors are not appointed by the government, see Irwin Mem’l Blood Bank of San Fran. Med. Soc’y v.
Am. Nat’l Red Cross, 640 F.2d 1051 (9th Cir. 1981) (analyzing Red Cross, a majority of whose board
members are not appointed by the government); cf. Pearl v. United States, 230 F.2d 243 (10th Cir.
1956) (court finds that the Civil Air Patrol (“CAP”) is not part of the United States government for the
Federal Tort Claims Act; at the time of the decision, although not mentioned by the court, the CAP
Board was self-perpetuating and not appointed by the government (see 60 Stat. 346 (1946)). Similarly,
the status of the NVBDC cannot be determined by the treatment of those entities that have specifically
been identified in statute as not being agencies of the United States. See Ralis v. RFE/RL, Inc., 770
F.2d 1121 (D.C. Cir. 1985) (statute says that Radio Free Europe is not an agency of the United States).
4
The cases from courts of appeals cited in the text relate to the definition in title 5 that applies to
the Freedom of Information Act, 5 U.S.C. § 552(f)(1) (2000) (“FOIA”). There, the definition of “agen-
cy” reaches “any executive department, military department, Government corporation, Government
controlled corporation, or other establishment in the executive branch of the Government (including the
Executive Office of the President), or any independent regulatory agency.” Id. The terms “Government
corporation” and “Government controlled corporation” are defined at 5 U.S.C. § 103 “[f]or the purpose
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Opinions of the Office of Legal Counsel in Volume 28
640 F.2d at 1056 (Red Cross receives no federal appropriations), and is federally
chartered, see Rocap v. Indiek, 539 F.2d 174, 180 (D.C. Cir. 1976) (federal charter
is one indicator of federal control). It must file an annual report with Congress,
“describing [among other things] the activities and accomplishments of the
[NVBDC] for the preceding year.” 15 U.S.C. § 657c(g); see Rocap, 539 F.2d at180 n.12 (requirement of annual report to Congress is one indicator of federal
control). Congress also has regulated various aspects of the NVBDC’s day-to-day
fiscal operations. Congress has specified where the NVBDC may deposit its funds.
15 U.S.C. § 657c(e)(1). Laying out procedures that must take place before those
funds may be spent, Congress has required that expenditures be for “purposes that
are . . . approved by the Board of Directors by a recorded vote with a quorum
present,” id. § 657c(e)(2)(A); has limited the Board to the purposes set forth in the
statute, id. § 657c(e)(2)(B); and has specified that a quorum consists of five voting
members, id. § 657c(c)(11).5 The NVBDC is specifically allowed to solicit and
receive funds from private and governmental sources, id. § 657c(d)(8), and “[t]o
accept voluntary and uncompensated services,” id. § 657c(d)(10)—permissions
that may be designed to overcome the usual rules of appropriations law forbidding
federal government agencies from augmenting their appropriations, see Payment
of Expenses Associated with Travel by the President and Vice President, 6 Op.
O.L.C. 214, 216 (1982); see also General Accounting Office, Principles of
Federal Appropriations Law 6-103 (2d ed. 1992). Finally, the NVBDC’s purposes
specifically include assisting veterans in dealing with federal agencies, including
particularly the three agencies (the Small Business Administration, the Department
of Defense, and the Department of Veterans Affairs) whose heads are non-voting
ex officio members of the Board of Directors and thus in a position to influence
how the NVBDC carries out its responsibilities. 15 U.S.C. § 657c(b)(2), (c)(3); see
id. § 657c(c)(1) (NVBDC’s management is “vested in a Board of Directors com-
posed of nine voting members and three nonvoting ex officio members”).
Perhaps the strongest textual argument on the other side is that the NVBDC
“may use the United States mails in the same manner and under the same condi-
tions as the departments and agencies of the United States.” 15 U.S.C. § 657c(i). A
“Government corporation” under 5 U.S.C. § 103 is also a “Executive agency”
under 5 U.S.C. § 105, and the statutory formulation about use of the mails, by not
referring to “the other departments and agencies of the United States,” could be
read to suggest that the NVBDC is not such an “agenc[y]” and thus not a “Gov-
ernment corporation.” This argument, however, cannot carry much weight.
Although statutes applicable to “Executive agencies” typically would use the
“other departments and agencies of the United States” language, it is not unprece-
of this title,” and the understanding of those terms reflected in the FOIA cases is therefore relevant to
the present question.
5
It is left to the directors to “prescribe the manner in which the obligations of the [NVBDC] may
be incurred and in which its expenses shall be allowed and paid.” 15 U.S.C. § 657c(c)(10).
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Status of National Veterans Business Development Corporation
dented for the word “other” to be omitted in such statutes. See 12 U.S.C.
§ 1422b(a)(4) (2000) (the Federal Home Loan Bank Board may “use the United
States mails in the same manner and under the same conditions as a department or
agency of the United States”); 25 U.S.C. § 2706(b)(5) (2000) (the National Indian
Gaming Commission “may use the United States mail in the same manner and
under the same conditions as any department or agency of the United States”). The
language here is a reasonably apt way to ensure that the Postal Service will treat
the NVBDC in the same manner as entities that unquestionably are federal
agencies, and we would not draw any inference from any slight imprecision in the
phrasing. Other factors that could weigh against the NVBDC’s being a govern-
ment corporation are that, in addition to having a federal charter, it is incorporated
in the District of Columbia, cf. Ehm v. Nat’l R.R. Passenger Corp., 732 F.2d 1250,
1255 (5th Cir. 1984) (in a case decided before Lebron, the court relies in part on
the fact that Amtrak is only “nonfederally-chartered”), and that its directors, for
statutory purposes, are not federal officers or employees, see id. (Amtrak’s officers
and employees are not federal employees). Nevertheless, that Congress made the
NVBDC generally subject to the corporation law of the District of Columbia
means little, because the NVBDC also has a federal charter; and the exemption of
its directors from the usual restrictions binding federal employees is not incon-
sistent with the conclusion that the entity itself is a government corporation.6
One final argument against our conclusion, advanced by the NVBDC’s Presi-
dent, is that the statute directs the NVBDC to “institute and implement a plan to
raise private funds and become a self-sustaining corporation,” 15 U.S.C.
§ 657c(k)(3); that the NVBDC cannot carry out its plans to meet this directive if it
is subject to the rules applicable to a government corporation, Henry Letter at 2;
and that, as a result, the NVBDC’s “being designated a Government agency is
clearly inconsistent with the intent of Congress,” id. The statute, however, reveals
no judgment by Congress about the feasibility of any particular business plan or
about whether the NVBDC’s current plan (or something close to it) would be
essential to privatization, and an inconsistency between that plan and our conclu-
sion does not, therefore, show that our conclusion is unfounded. Furthermore, that
an entity is to be a self-sustaining corporation would not, in itself, mean that the
entity is outside the government for statutory purposes. The Federal Deposit
6
Under title 31, Congress subjects “Government corporations,” as specially defined in 31 U.S.C.
§ 9101 (2000), to various financial controls. The special definition consists of a listing of corporations
as either “mixed ownership” or “wholly owned” by the government. When Congress created the
NVBDC, it did not add it to either list. The separate definition at 5 U.S.C. § 103 is independent of the
definition in 31 U.S.C. § 9101, and the treatment in that section of title 31 by no means dictates the
coverage under title 5. See Ehm, 732 F.2d at 1255 (“There is no statutory nexus between this definition
[in title 31] and the definition that pertains and is expressly confined to Title 5.”); cf. Rainwater v.
United States, 356 U.S. 590, 591-92 (1958) (coverage of Commodity Credit Corporation by the
Government Corporation Control Act is relevant to whether the Corporation is part of the government
for purposes of the False Claims Act, which had no separate definition).
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Opinions of the Office of Legal Counsel in Volume 28
Insurance Corporation (“FDIC”), for example, is a self-sustaining entity, funded
through premiums for deposit insurance. See, e.g., 12 U.S.C. § 1815(d) (2000). It
is nonetheless part of the federal government for many statutory, as well as
constitutional, purposes. See, e.g., Stone v. FDIC, 179 F.3d 1368, 1375 (Fed. Cir.
1999) (citing provisions of title 5, the court states that an FDIC employee “was a
civil service employee who could not be dismissed except for cause or unaccepta-
ble performance”); see also Dockery v. FDIC, 64 M.S.P.R. 458, 460, 462 (1994)
(FDIC is a government-controlled corporation, although not an “agency” under the
“specialized meaning under 5 U.S.C. § 5102”).
III.
Under 31 U.S.C. § 9102, which is a provision of the Government Corporation
Control Act, “[a]n agency may establish or acquire a corporation to act as an
agency only by or under a law of the United States specifically authorizing the
action.” We believe that the NVBDC is an “agency” that, under this provision, is
barred from “establish[ing] or acquir[ing] a corporation to act as an agency” unless
it has specific statutory authority to do so.
Although we have not previously analyzed the scope of the term “agency” as it
defines the entities ordinarily barred from establishing or acquiring corporations
under 31 U.S.C. § 9102, we have considered the meaning of the term as it appears
the second time in the provision (“to act as an agency”), and, under the usual
canons of construction, we believe that this word should receive the same meaning
in both places. The “presumption that a given term is used to mean the same thing
throughout a statute” is “surely at its most vigorous when a term is repeated within
a given sentence.” Brown v. Gardner, 513 U.S. 115, 118 (1994).
In our fullest discussion of the meaning of “agency” in 31 U.S.C. § 9102, we
concluded that a corporation established by employees of the Small Business
Administration to liquidate the assets of a failed company would be acting as an
“agency.” Memorandum for Susan S. Engeleiter, Administrator, Small Business
Administration, from J. Michael Luttig, Acting Assistant Attorney General, Office
of Legal Counsel, Re: Government Corporation Control Act at 8 (June 6, 1990)
(“1990 Opinion”). We noted that, in title 31, the term “agency” is defined to mean
“a department, agency, or instrumentality of the United States Government.” 31
U.S.C. § 101 (2000). Applying this definition to the words in section 9102, we
observed that “[i]n common usage, an instrumentality is a thing through which a
person or entity acts” and that “[t]he term implies both that the thing is controlled
by another actor and that the thing is or may be deliberately used to accomplish
the actor’s objectives.” 1990 Opinion at 8 (footnote omitted). After reviewing the
legislative history of the Government Corporation Control Act and judicial
decisions about whether, in other contexts, entities were federal instrumentalities,
we stated that “the test for government instrumentality status varies depending on
the specific factual context and the purpose for which the determination is being
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Status of National Veterans Business Development Corporation
made”; that “[r]elevant factors include whether the entity was created by the
government, the extent of government control over its operations, the source of the
entity’s funding, the purposes for which it was created, and the functions it
performs”; and that “[s]ince the purpose of the Government Corporation Control
Act was to assert greater federal dominion over the financial affairs of entities
controlling federal funds, the source of the entity’s funding is more important here
than it might be in other contexts.” Id. at 11, 12. Under this test, we determined
that the corporation at issue acted as an “agency” within the meaning of the
statute.
In 2000, we affirmed this approach. We wrote that “[s]ubsequent federal case
law, as well as an opinion of the Comptroller General, supports this analytical
framework,” although we also acknowledged that these authorities “appear[ed] to
recognize somewhat greater flexibility[, that is, a somewhat narrower understand-
ing of ‘agency,’] tha[n] we ha[d] endorsed.” Applicability of Government Corpo-
ration Control Act to “Gain Sharing Benefit” Arrangement, 24 Op. O.L.C. 212,
219 (2000) (“2000 Opinion”). We noted that, in Varicon Int’l v. OPM, 934
F. Supp. 440 (D.D.C. 1996), a federal district court “[r]elying on Lebron . . .
applied a similar multi-factor test to conclude that [a company performing
background checks for the Office of Personnel Management] did not act as an
agency” under 31 U.S.C. § 9102. 2000 Opinion, 24 Op. O.L.C. at 219. In that
case, the entity in question was a private company owned by its employees, who
were not employed by the United States; the United States had no control over the
company’s board, management, or employees, except as provided in contract; the
United States did not own company stock; the United States could not appoint
members of the board; and the United States provided no financial assistance,
except insofar as it paid for services that the company performed under contract.
934 F. Supp. at 447. We further noted that the Comptroller General “applied simi-
lar criteria,” under which instrumentalities of the United States include “‘compo-
nent parts of the federal government which are vested, by law, with the authority
to act on behalf of the United States, or to fulfill some statutory mission of the
federal government.’” 2000 Opinion, 24 Op. O.L.C. at 220 (quoting In re the
Honorable David Pryor, 71 Comp. Gen. 155, 158 (1992)). See also In re the
Honorable Ted Stevens, B-278,820 (Comp. Gen. Feb. 10. 1998).7
Following the approach of our opinions, as established in 1990 and affirmed in
2000, we believe that the NVBDC is an “agency” under 31 U.S.C. § 9102. The
NVBDC was “created by the government,” 1990 Opinion at 11, and is “to perform
functions on behalf and for the benefit of the United States,” id. at 13. As dis-
cussed above, the government also exercises a considerable degree of control over
7
As we stated in 2000, “[t]he opinions and legal interpretations of the General Accounting Office
and the Comptroller General often provide helpful guidance on appropriations matters and related
issues,” but “are not binding upon departments, agencies, or officers of the executive branch.” 2000
Opinion, 24 Op. O.L.C. at 216 n.3 (citing Bowsher v. Synar, 478 U.S. 714, 727-32 (1986)).
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the NVBDC. The President appoints the entire Board of Directors, and high-level
federal officials serve on the Board, albeit as non-voting members, and thus have a
direct role in the NVBDC’s management. The United States, moreover, regulates
the NVBDC’s fiscal operations, as outlined above. Finally, the “source of the
entity’s funding is more important here than it might be in other contexts,” 1990
Opinion at 12, and the NVBDC receives federal appropriations, even as it seeks to
develop private sources of funds. We therefore conclude that the NVBDC is an
“agency” subject to the statutory bar in section 9102 against establishing or
acquiring a corporation without specific statutory authority.
M. EDWARD WHELAN III
Principal Deputy Assistant Attorney General
Office of Legal Counsel
78