Crandon v. United States Boeing Company, Inc v. United States

Decision Date27 February 1990
Docket NumberNos. 88-931,88-938,s. 88-931
Citation494 U.S. 152,110 S.Ct. 997,108 L.Ed.2d 132
PartiesLawrence H. CRANDON, et al., Petitioners, v. UNITED STATES. BOEING COMPANY, INC., Petitioner, v. UNITED STATES
CourtU.S. Supreme Court
Syllabus

When the individual petitioners terminated their employment with petitioner Boeing Company to accept important positions in the Executive Branch of the Federal Government, Boeing made to each, before he became a Government employee, an unconditional lump-sum payment to mitigate the substantial loss each expected to suffer by reason of his change in employment. Subsequently, the United States filed a civil complaint in the District Court, seeking damages from Boeing and the imposition of a constructive trust on the moneys received by the individual petitioners. The complaint alleged that the payments had been made to supplement the individual petitioners' compensation as federal employees, and that they created a conflict of interest situation which induced the breach of the fiduciary duty of undivided loyalty owed by the individual petitioners to the Government, as measured by, inter alia, 18 U.S.C. § 209(a), which makes it a crime for a private party to pay, and a Government employee to receive, supplemental compensation for the employee's Government service. The court held, among other things, that § 209(a) had not been violated because the payments were made before the recipients had become Government employees and were not intended to compensate them for Government service. The Court of Appeals reversed, holding, inter alia, that employment status at the time of payment is not an element of a § 209(a) violation, and that the finding that the payments were not intended to be supplemental compensation for Government service was clearly erroneous.

Held: Section 209(a) does not apply to a severance payment that is made to encourage the payee to accept Government employment, but is made before the payee becomes a Government employee. Pp. 157-168.

(a) Section 209(a)'s text indicates that employment status is an element of the offense. Neither of its two prohibitions—the one directed to every person who "receives" any salary supplement "as compensation for his services as an officer or employee" and the other directed to every person who "pays," or makes any contribution to the salary of, "any officer or employee"—directly specifies when a payment must be made or received. However, a literal reading of the second prohibition supports the conclusion that the payee must be a Government employee at the time the payment is made, and the prohibitions appear to be coextensive in their coverage of both sides of a single transaction. Pp. 158-160.

(b) The legislative history of § 209(a), the language of §§ 209(b) and (c)—which obviously focus on certain other payments that are made while the recipient is a Government employee—and the unambiguous language covering preemployment payments that Congress used in its contemporaneous revision of other bribery and conflicts provisions indicate that Congress did not intend to change the substance of § 209(a)'s predecessor statute when it eliminated language that had unquestionably required a recipient of a payment to be a Government employee at the time the payment was made. Pp. 160-164.

(c) A literal reading of § 209(a) serves one of the conflicting policies that motivated the enactment of the statute the public interest in recruiting personnel of the highest quality and capacity—since it allows corporations to encourage qualified employees to make their special skills available to the Government. While the other policy justifications for § 209(a) concerns that the private paymaster will have an economic hold over the employee, that the payment will engender bitterness among fellow employees, and that the employee might tend to favor his former employer—are not wholly inapplicable to unconditional preemployment severance payments, they by no means are as directly implicated as they are in the cases of ongoing salary supplements. Pp. 164-168.

(d) To the extent that any ambiguity over the temporal scope of § 209(a) remains, the rule of lenity requires that it should be resolved in petitioners' favor unless and until Congress plainly states that its intent has been misconstrued. P. 168.

845 F.2d 476 (CA4 1988), reversed.

STEVENS, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, MARSHALL, and BLACKMUN, JJ., joined. SCALIA, J., filed an opinion concurring in the judgment, in which O'CONNOR and KENNEDY, JJ., joined, post, p. 168.

Phillip A. Lacovara for petitioners in No. 88-931.

Benjamin S. Sharp, Washington, D.C., for petitioner in No. 88-938.

Edwin S. Kneedler, Washington, D.C., for respondent, U.S., in both cases.

Justice STEVENS delivered the opinion of the Court.

In 1981 and 1982, five executives of The Boeing Company, Inc. (Boeing), resigned or took early retirement to accept important positions in the Executive Branch of the Federal Government. Upon termination of employment by Boeing, and shortly before formation of an employment relationship with the Government, Boeing made a lumpsum payment to each in an amount that was intended to mitigate the substantial financial loss each employee expected to suffer by reason of his change in employment. The question we must decide is whether these payments violated a provision of the Criminal Code that prohibits private parties from paying, and Government employees from receiving, supplemental compensation for the employee's Government service.1

The essential facts are not disputed. Each employee resigned because he planned to accept a specific federal position. These shifts required forgoing the higher salaries that each employee would have earned at Boeing and also severing all financial connection with the company. Thus, petitioner Paisley, who took early retirement to become Assistant Secretary of the Navy for Research, Engineering and Systems—an office that requires confirmation by the United States Senate estimated that the financial cost to him of separating from Boeing would be approximately $825,000, including approximately $77,000 in lost stock options and $250,000 in lost retirement benefits.2 Boeing's severance payment to Paisley amounted to $183,000.3 The comparable estimate of petitioner Crandon, who resigned to become a computer scientist for the North Atlantic Treaty Organization, was $150,000; his severance payment was $40,000.4 The other three individual petitioners' payments were higher than Crandon's but lower than Paisley's.5 Boeing paid the five departing employees a total of $485,000.6

None of the five individual petitioners was a Government employee at the time he received his severance payment.7 Moreover, each payment was made unconditionally. None of the employees promised to return to Boeing at a later date nor did Boeing make any commitment to rehire them. After entering Government service, none of the individual petitioners provided Boeing with any favored treatment or, indeed, participated in any source selection or procurement decision that affected Boeing. It is stipulated that all five were competent and faithful Government servants. Apart from the fact of the payments themselves, there is no charge in this case of any misconduct by any of the petitioners.

In 1986 the United States filed a civil complaint alleging that the payments had been made "to supplement each individual defendant's compensation as a federal employee" and that they "created a conflict of interest situation which induced the breach of the fiduciary duty of undivided loyalty [which] each individual defendant owed to the United States, as measured by 18 U.S.C. § 209 and/or the common law." App. 12. The complaint sought relief from Boeing in the aggregate amount of the payments made and the imposition of a constructive trust on the moneys received by each of the individual petitioners.

After a full trial, the District Court ruled against the Government on several alternative grounds. 653 F.Supp. 1381 (ED Va.1987). First, it held that § 209(a) had not been vio- lated because the payments were made before the recipients had become Government employees and were not intended to compensate them for Government service. Second, it held that there was no violation of any fiduciary standard of conduct established by common-law principles of agency because the payments were disclosed to responsible Government officials and because they did not "tend to subvert the loyalty of the individual defendants to the United States government." Id., at 1387. Finally, the District Court concluded that the payments "created neither the appearance of nor an actual conflict of interest," and that the Government had not been injured by the payments and was therefore not, in any event, entitled to recover damages. Ibid.

A divided panel of the Court of Appeals reversed. 845 F.2d 476 (CA4 1988). It held that employment status at the time of payment is not an element of a § 209(a) violation and that the District Court's finding that the payments were not intended to be supplemental compensation for services as employees of the United States was clearly erroneous. Id., at 480. It further held that the prophylactic character of the conflict of interest laws made it unnecessary for the Government to prove any actual injury and that the defendants' disclosure of the payments did not constitute a defense to an action for their recovery. It therefore concluded that both the individual defendants and Boeing were liable, "although double recovery by the government is not permitted." Id., at 482.8

We granted certiorari to review the Court of Appeals' construction of this important statute. 490 U.S. 1003, 109 S.Ct. 1636, 104 L.Ed.2d 152 (1989).

I

At the outset, we note that Congress has not created an express civil remedy for violations of § 209(a). The Govern- ment does not, in so many...

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