Applicability of 18 U.S.C. § 281 to Selling Activities of Retired Military Officers ( 1981 )

Applicability of 18 U.S.C. § 281 to Selling Activities of
Retired Military Officers
Section 281 o f T itle 18, United States Code, which prohibits certain representational
activities by federal employees, is presently in force as applied to retired officers o f the
arm ed forces, and in appropriate cases a violation could warrant criminal prosecution
by the D epartm ent o f Justice.
T he prohibitions o f the first paragraph o f §281 apply only to retired officers on active
duty, but under its second paragraph inactive retired officers are also prohibited from
engaging in certain selling activities.
T he prohibition in the second paragraph of § 281 was intended generally to prevent
retired officers from being in a position to exert their influence in the procurement
process of the military department in which they once served, and applies to represen­
tational activities in connection with the sale o f services as well as the sale of goods.
H ow ever, its prohibition does not extend to a situation in which the retired officer can
fairly be said to be representing only himself and no one else as a seller.
November 30, 1981
MEMORANDUM OPINION FOR THE CHIEF,
LITIGATION DIVISION, O FFICE OF TH E
JU D G E ADVOCATE GENERAL O F THE ARMY
This responds to your request that we clarify the position of the
Department of Justice on several issues relating to the interpretation
and enforcement of 18 U.S.C. § 281. In particular, you ask (1) whether
and under what circumstances the Department of Justice would pros­
ecute an alleged violation of § 281; (2) whether that statute’s prohibi­
tions apply only to retired officers on active duty or to those not on
active duty as well, and (3) whether we regard its prohibitions as
extending to the sale of services as well as the sale of goods.
Section 281 reads as follows:
Whoever, being a Member of or Delegate to Congress,
or a Resident Commissioner, either before or after he has
qualified, or the head of a department, or other officer or
employee of the United States or any department or
agency thereof, directly or indirectly receives or agrees to
receive, any compensation for any services rendered or to
be rendered, either by himself or another, in relation to
any proceeding, contract, claim, controversy, charge, ac­
cusation, arrest, or other matter in which the United
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States is a party or directly or indirectly interested, before
any department, agency, court martial, officer, or any
civil, military, or naval commission, shall be fined not
more than $10,000 or imprisoned not more than two
years, or both; and shall be incapable of holding any
office of honor, trust, or profit under the United States.
Retired officers of the armed forces of the United
States, while not on active duty, shall not by reason of
their status as such be subject to the provisions of this
section. Nothing herein shall be construed to allow any
retired officer to represent any person in the sale of any­
thing to the Government through the department in
whose service he holds a retired status.
This section shall not apply to any person because of
his membership in the National Guard of the District of
Columbia nor to any person specially excepted by Act of
Congress.
In 1962, as part of the general revision and recodification of the laws
relating to conflicts of interest, this provision was repealed “except as
[it] may apply to retired officers of the armed forces of the United
States.” Pub. L. No. 87-849, § 2, 76 Stat. 1119, 1126. As you note, there
has been considerable controversy over exactly how this statute “may
apply” to retired military officers.
The response to the first of your questions is contained in a letter
from D. Lowell Jensen, Assistant Attorney General, Criminal Division,
to Senator Strom Thurmond, Chairman, Committee on the Judiciary,
July 7, 1981. Responding to Senator Thurmond’s request for comments
on a proposal to repeal § 281 and its companion statute 18 U.S.C. § 283,
the Assistant Attorney General stated that “we believe the two statutes
are presently in force and properly denote federal crimes.” He also
stated that while “prosecution would not ordinarily be undertaken . . .
in the absence of evidence of venal conduct” and while “most of the
matters involving these statutes can be effectively dealt with administra­
tively,” nonetheless “an aggravated case could warrant criminal pros­
ecution . . . .”
Your second question is whether the prohibitions of § 281 are limited
to retired officers on active duty or whether they are applicable as well
to retired officers not on active duty. We believe that the prohibitions
of the first paragraph of §281 apply in full force only to active duty
retired officers, but that under its second paragraph inactive retired
officers are also prohibited from engaging in certain activities.
In 1939, the Court of Appeals for the District of Columbia held that
all retired military officers, whether or not on active duty, are “offi­
cers” of the United States and subject to all conflicts laws from which
they have not been exempted. See Morgenthau v. Barrett, 108 F.2d 481361
(D.C. Cir. 1939), cert, denied, 309 U.S. 672 (1940). The following year,
in response to the holding in the Barrett case, Congress added the
second paragraph to §281 to effect this exemption for retired officers
not on active duty. The first sentence of the paragraph exempted
inactive retired officers from the full force of the first paragraph.
However, the second sentence of the paragraph limited the scope of
this exemption, so that a retired officer not on active duty was left
subject to a narrowly defined prohibition: he was forbidden to “repre­
sent any person in the sale o f anything to the Government through the
department in whose service he holds a retired status.” 1
This reading of the text o f § 28 l ’s second paragraph is supported by
the legislative history of the 1940 amendments. See H.R. Rep. No. 2330,
76th Cong., 3d Sess. 1 (1940) (hereafter 1940 House Report) (second
sentence “intended to continue the prohibition against the sale of any­
thing to a department by an officer formerly actively connected with
that department.”). See also H.R. Rep. No. 748, 87th Cong., 1st Sess.
10-11 (1961). And, every court which has dealt with the statute has
concurred in this interpretation of its reach. United States v. Gillilan,
288 F.2d 796 (2d Cir. 1961), cert, denied sub nom. Apex Distributing Co.
v. United States, 368 U.S. 821 (1961); Taussig v. McNamara, 219 F.
Supp. 757 (D.D.C. 1963), cert, denied, 379 U.S. 834 (1964). See also
Field v. Brown, 610 F.2d 981 (D.C. Cir. 1979), cert, denied, 446 U.S. 939(1980).
The status of active duty retired personnel was unaffected by the
1940 amendment, and they remained subject to all of the prohibitions of
the first paragraph of § 281.
As previously noted, §281 was repealed in 1962 “except as [it] may
apply to retired officers of the armed forces of the United States.” 76
Stat. at 1126. By its terms, this partial repeal left an active duty retired
officer subject to all of the prohibitions of the first paragraph of § 281,
and an inactive retired officer subject to the second paragraph’s bar
against selling back to the department in which he had served. At the
same time, Congress expressly exempted inactive retired officers from
the provision which replaced § 281. See 18 U.S.C. § 206. The legislative
history of the 1962 revision makes clear that Congress believed the
status of inactive officers was not affected by the new law. See H.R.
Rep. No. 748, 87th Cong., 1st Sess. 10-11 (1961).2 Accordingly, retired
1 Section 283 is similarly structured, and a similar analysis can be applied to determine who is
covered by it and w hat activities it prohibits.
8 T he cited portion o f the House report states:
T he problems involved in the peculiar status o f retired officers of the Armed Forces
while not on active duty are of a complexity that requires further specialized study for
solution. The committee therefore determined to omit this class of persons from the
bill. Accordingly, the bill provides (sec. 206) that sections 203 and 205 shall not apply
to a retired officer of the armed forces of the United States while not on active duty.
W hat is more, the bill does not repeal present section 281 o r 283 insofar as they may
apply to such retired officers. In consequence, the present legal status o f this group is
wholly unaffected by the .bill
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officers not on active duty remain subject to the limited prohibition
contained in the second paragraph of § 281. Active duty retired officers
are now somewhat anomalously subject to the virtually identical prohi­
bitions of both the old and new versions of the law.
Your third question is whether § 281 prohibits the sale of services as
well as the sale of goods and, if it does, whether it would preclude a
retired officer’s contracting with the Army for his own services. Taking
the latter part of your question first, this Department has consistently
taken the position that § 281 does not extend to a situation in which a
retired officer “represents” only himself and no one else as a seller,
whether the sale involves goods or services. This conclusion is implicit
in the substantive prohibition of §281, which bars the receipt of com­
pensation for services rendered. See also United States v. Gillilan, 288
F.2d at 797, a criminal prosecution involving §281, where Judge
Learned Hand noted that a violation of the statute would occur if the
retired officer “is representing someone else” in the sale of anything to
his own former department.
We recognize that this distinction between representing only oneself
and representing others as well is not always easy to maintain. This is
highlighted by your hypothetical questions about services provided by
a corporation in which the retired officer is a shareholder. The answer
in each case depends on the facts; that is, whether the officer can fairly
be said to be representing only himself, or is representing someone else
besides or in addition to himself. As a rule of thumb, we would counsel
retired officers to avoid representing corporations in any such selling
situations.
A more difficult problem is presented by the question whether the
second paragraph of § 281 is intended to reach the sale of services at
all. Several years ago, responding to a request from the Acting General
Counsel of the Department of Defense, this Office left open the ques­
tion, citing “a sharp division of opinion” within the Department of
Justice on the matter. See letter from Robert G. Dixon, Jr., Assistant
Attorney General, Office of Legal Counsel, to L. Niederlehner, Janu­
ary 21, 1974. That division of opinion no longer exists. While the
question is not entirely free from doubt, we believe that the second
sentence of the second paragraph of §281 should be interpreted to
prohibit a retired officer’s representing some other party in connection
with a contract for the sale of services as well as one for the sale of
goods.'
The language of the second paragraph of § 281 has been said to be
ambiguous with respect to whether representational activity in connec­
tion with service contracts was intended to be prohibited. On the one
hand, the phrase “sale of anything” can reasonably be interpreted
literally to include the sale of services as well as the sale of goods. On
the other hand, at common law a “sale” does not include a sale of
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services. See, e.g., Five Per Cent Cases, 110 U.S. 471, 478 (1884). When
read in the context of § 281 as a whole, we think the literal interpreta­
tion, with the emphasis on “anything,” more persuasive. The substan­
tive prohibition of the first paragraph of § 281 bars any services ren­
dered in connection with any matter in which the United States “is a
party or directly or indirectly interested,” including contracts for the
sale of services. The prohibition of the second paragraph is more
narrowly drawn to apply only to sales activities, and then only those
made through the officer’s own former department. The policy served
by this more narrow prohibition is to prevent retired officers from
being in a position to exert their influence in the procurement process
of the military department in which they once served. We can think of
no sensible reason why it should be applied selectively depending upon
the nature of the contract involved. The narrower interpretation would
apply to a contract for the purchase of equipment, but not to a contract
for maintenance service on that equipment—an anomalous result.
This literal reading of the text of the statute finds support in its
legislative history. The 1940 legislative action which added the second
paragraph to § 281 was prompted by the broad reading given the
predecessor of § 281 by the Court of Appeals for the District of Colum­
bia in Barrett, supra, 108 F.2d 481. In that case a retired Army officer
practicing law in New York sued unsuccessfully to gain admission to
practice before the Department of the Treasury. In denying his petition
on grounds that the activity would constitute a crime, the court of
appeals expressed its opinion that the policy behind the law, and
common sense, would dictate an opposite result:
Much, we think, may be said in reason and common sense
in favor of petitioner’s application. To us it seems a far
cry to attribute to a former captain in the military service,
twenty years removed from that service, whose activities
are wholly separated from military life, ability to exert a
sinister influence in some matter pending in one of the
departments of government. But this, for whatever it may
be worth, must be addressed to the legislature and not to
the courts.
108 F.2d at 484. The following year the House Committee on Military
Affairs reported out legislation intended to meet the concerns expressed
by the court of appeals. See 1940 House Report at 3. At the same time,
the Committee recognized that it would be unwise to lift the bar of
§ 281 entirely, and so added an amendment in the form of a proviso to
its broad exemption for retired military officers not on active duty.
Under this proviso, the substantive prohibition of § 281 would continue
to apply to a retired military officer only in connection with “the sale
of anything” to his own former department.
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The proviso was explained in the House report in the following
terms:
The amendment adopted by the committee is intended
to continue the prohibition against the sale of anything to
a department by an officer formerly actively connected
with that department. It applies only to representation in
the actual sale of goods, and does not apply to employ­
ment and the other activities of any corporation or other
person such as manufacturing.
1940 House Report at 1. We recognize that the reference in the second
sentence quoted above to “the actual sale of goods” could be and has
been construed as expressive of an intention to apply the substantive
prohibition of § 281 only to a particular class of selling activity. See,
e.g., Navy Judge Advocate General’s Reference Guide to Employment
Activities of Retired Naval Personnel, June 1969, at 28. However, the
statement of what the amendment does not apply to (“employment and
the other activities of any corporation . . . such as manufacturing”)
indicates that the House Committee intended to distinguish selling ac­
tivities generally (which it intended to prohibit) from other kinds of
activities barred by the first paragraph (which it did not). In other
words, we believe that a construction of the word “only” in this
sentence to refer to “representation” and not to “the actual sale of
goods” is more consistent with the history and purpose of the statute.
This reading better effectuates the purpose of the proviso to prevent
retired military officers from exerting their influence in the procure­
ment process of the military department in which they once served.
An interpretation of § 281 to cover service contracts is supported by
a comparison with its nearest civil analogue, § 801(c) of Title 37. The
latter statute denies retired pay to a retired regular officer who is
engaged in selling “supplies or war materials” to any agency of the
Department of Defense, the Coast Guard, the Environmental Science
Services Administration, or the Public Health Service. A predecessor
of this civil statute was in existence in 1940 when § 281 was amended to
prohibit representation “in the sale of anything.” 3 Had Congress in­
tended to confine the meaning of “anything” in § 281 to tangible goods,
we think it would have so stated.
We are not troubled by the lack of parallelism in the two statutes in
this respect, since their respective scopes differ in several other ways.
For example, unlike § 281, § 801(c) prohibits self-representation. Section
801(c) also reaches selling activities involving agencies other than the
military department in which the retired officer formerly served.
3 See § 9 of the A ct o f July 22, 1935, 49 Stat. 490 (prohibiting payment o f retired pay to any retired
officer of the Navy or Marine Corps who for himself or others engages in selling “ naval supplies or
war material” to the Navy).
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In light of this Department’s now uniform position on the question of
the continued vitality of §281, there would appear to be no need to
respond to your final question respecting the authority of the military
departments, independent o f §281, to promulgate regulations prohibit­
ing retired officers from selling to their former departments.
The Department’s Criminal Division has reviewed and concurs in the
statements and conclusions contained in this letter.
T heodore B. O l s o n
Assistant Attorney General
Office o f Legal Counsel
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