Ferrone v. Department of Labor

Decision Date28 July 1986
Docket NumberNo. 86-696,86-696
Citation797 F.2d 962
PartiesFred FERRONE, Petitioner v. DEPARTMENT OF LABOR, Respondent. Appeal
CourtU.S. Court of Appeals — Federal Circuit

John Carney, Solerwitz & Leeds, Mineola, N.Y., for petitioner.

Terrence S. Hartman, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., for respondent. With him on brief, were Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director and M. Susan Burnett. Michael J. Ward, Jr., Dept. of Labor, Washington, D.C., of counsel.

Before MARKEY, Chief Judge, NICHOLS, Senior Circuit Judge, and BISSELL, Circuit Judge.

NICHOLS, Senior Circuit Judge.

The respondent says this case is unique, and we agree, but it is likely of repetition. Petitioner, Fred Ferrone, formerly a criminal investigator for the Department of Labor (DOL), petitions from an initial decision of a Merit Systems Protection Board (MSPB or board) presiding official, sustaining an agency decision to remove him. The board refused to review it, making it final, 29 M.S.P.R. 185. The sustained ground was refusal to obey a lawful order of his superior to divest himself of an outside contract they viewed as creating a conflict of interest, contrary to an applicable regulation, 29 C.F.R. Sec. 0.735-4. Ferrone believed, and still believes, the contract is a private and personal matter, for which reason he refused to divest. We agree with the DOL and the board and therefore affirm.

I

The case is regrettable, depriving the United States of a successful and valuable investigator on account of a dispute over a contract that never should have arisen.

Ferrone and a partner, Wesley Walker, were investigators attached to the staff of the DOL Inspector General, a body created in 1978. In 1979 they commenced an investigation of labor racketeering at the Fulton Fish Market, New York City, at first unaided, but enlisting, as the case developed, the support of other federal agencies, notably the IRS, as well as the New York City police, all under the direction of Assistant United States Attorney Daniel Bookin, who has certified to the magnificent job done by Ferrone and Walker. By the close of 1983, racketeering at the Market was ended, 48 indictments had been obtained, with 44 convictions and 24 sentences. Especially long terms for the heads of the "mob" were obtained. Commendations and awards from Congress and from the press poured in on Ferrone and Walker, and the DOL welcomed newspaper publicity doing its agents ample justice, especially in view of the newness of the investigative unit. Many of our petitioners in MSPB cases are underachievers, here we have a striking example of the reverse.

In early 1984, writer Nathan Adams did a "Feature Condensation" about the case for Reader's Digest, which eventually appeared in the September 1984 issue under the title Two Against the Mob. There is no question of the propriety of Ferrone's conduct in assisting with this, as well as prior press stories. It is not seriously challenged that Ferrone and Walker first talked to Reader's Digest on instructions from above.

The contract in question is dated January 27, 1984, and the parties to it were Ferrone and Reader's Digest Entertainment, Inc. (RDE) a wholly owned subsidiary of Reader's Digest. A similar contract was made with Walker, but he divested as ordered and remains on the DOL payroll.

The contract is in three parts. The first is a letter agreement by which in consideration of payment of $2,000, Ferrone grants RDE an exclusive option to purchase Ferrone's motion picture, television, and allied rights in and to your verbal life story, including all portions thereof pertaining to your investigation of racketeering at the Fulton Fish Market (the "Story") * * *.

The option could be exercised at any time before February 1, 1985, and could be extended another year on payment of another $2,000 which in fact was paid. By paragraph 4, Ferrone represented and warranted that he was--

the sole and exclusive owner throughout the world of the Rights and have the right to grant the Rights exclusively to us [i.e., to RDE].

By paragraph 8 he agreed he would not, during the original option term or any extension thereof,

tell the Story or any part thereof or share same with any person other than us and our representatives.

By paragraph 9 he agreed that RDE might prepare manuscripts, treatments, etc., utilizing the Story, and also agreed

to consult with our designated representatives concerning the Story, to answer such representatives' questions, and generally to cooperate in the preparation of all written * * *.

The second part of the contract, the "Assignment," was activated in the event RDE exercised its option. It called for payment to Ferrone of $50,000 for a theatrical feature motion picture and other sums for other uses. Ferrone again represented he was sole owner of the Story, and he assigned all rights therein. He agreed to furnish "technical assistance" on terms to be negotiated, but RDE would have "complete control." The third part of the contract is called "Release," and it appears meant to release any possible liability for invasion of privacy.

Under date of February 2, 1984, the Office of the Inspector General issued a directive that any (of its own) employees then engaged or planning to become engaged in "outside employment, business, professional or other such activities" should apply for clearance if he had not already done so. A form for application was provided. Ferrone did not so apply.

An effort was made to show that the media, including RDE, already knew all they needed to know about the case, and the main interest was in Ferrone's private life. The presiding official made no finding as to this, and it would appear the contract itself, drafted by RDE, is the best evidence of what RDE wanted and expected to gain.

The evidence of Richard Ross, Ferrone's immediate superior, and of Ferrone himself, conflicted as to whether a practice existed of informal oral clearance of outside employment and, if so, whether Ross, properly informed, actually granted for this contract an oral clearance. Ferrone testified Ross said it was time Ferrone got something for himself out of all this and he hoped Ferrone had hired a lawyer to protect his interest. The presiding official gave Ferrone the benefit of the doubt as to these facts.

The Inspector General later got wind of the contracts and assigned other and independent agents to investigate. The facts were thus brought out. It appears that the new team had to obtain copies of the contracts from RDE by subpoena. The two agents were asked or directed to divest. Walker eventually did so, but Ferrone refused and still refuses. The presiding official found, and it is not denied, that the agency "went more than the last mile" to achieve some sort of accommodation, but that was not possible. On November 6, 1984, the Deputy Inspector General ordered Ferrone to divest by the close of business November 9. This he again refused, referring to his wife and family and writing--

It is my belief that my dealings with [RDE] are both a personal and a private matter.

I do not believe there is any conflict of interest or any violation of the Code of Conduct or OPM Regulations * * * the United States Government is going far beyond the scope of their authority and invading our personal lives.

The notice of proposed removal followed, giving two reasons, (1) breach of the Code of Conduct, creating a conflict of interest, and (2) the November 9 refusal to obey a lawful order. The Inspector General's decision sustained both grounds, but the presiding official of MSPB sustained the second only, so the first may be considered out of the case.

There was testimony that there existed an agency grievance procedure that Ferrone could have invoked, so disobedience of the order as a mode of testing was called unnecessary.

II

The government seems to argue here that, given the availability of the grievance procedure, the order should have been obeyed, even if illegal. The authority this court relies on is Bigelow v. Department of Health and Human Services, 750 F.2d 962 (Fed.Cir.1984) which excepts the case of an order illegal on its face. Mr. Ferrone clearly believes that the order he disobeyed was illegal. If it was perfectly proper, as we hold it was, that disposes of the illegality defense without the need to consider the somewhat speculative and inadequately briefed issue of whether the grievance procedure could have been relied...

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