Crandon v. United StatesAnnotate this Case
494 U.S. 152 (1990)
U.S. Supreme Court
Crandon v. United States, 494 U.S. 152 (1990)
Crandon v. United States
Nos. 88-931, 88-938
Argued Nov. 6, 1989
Decided Feb. 27, 1990
494 U.S. 152
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FOURTH CIRCUIT
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 monies 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. 494 U. S. 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. 494 U. S. 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. 494 U. S. 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. 494 U. S. 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. 494 U. S. 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. 494 U. S. 168.
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 lump sum 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. [Footnote 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. [Footnote 2] Boeing's severance payment to Paisley amounted to $183,000. [Footnote 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. [Footnote 4] The other three individual petitioners' payments were higher than Crandon's but lower than Paisley's. [Footnote 5] Boeing paid the five departing employees a total of $485,000. [Footnote 6]
None of the five individual petitioners was a government employee at the time he received his severance payment. [Footnote 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 monies 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 violated
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. [Footnote 8]
We granted certiorari to review the Court of Appeals' construction of this important statute. 490 U.S. 1003 (1989).
At the outset, we note that Congress has not created an express civil remedy for violations of § 209(a). The Government
does not, in so many words, argue that the enactment of the statute implicitly created a damages remedy. Rather, the Government begins with the common law rule that an agent who secretly profits from a breach of a fiduciary obligation to his principal must disgorge his ill-gotten gains. It then replaces the common law definition of fiduciary obligation with the stricter standard of § 209(a), arguing that, because concealment of a payment is not an element of the statutory offense, disclosure of payments is no defense. Regardless of whether the Government's amalgamation of common law and statutory concepts describes a tenable theory of recovery, it is at least clear that the Government must prove a violation of § 209(a) to prevail in these cases. We proceed therefore to consider whether § 209(a) applies to a severance payment that is made to encourage the payee to accept government employment, but that is made before the payee becomes a government employee.
In determining the meaning of the statute, we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy. K Mart Corp. v. Cartier, Inc.,486 U. S. 281, 486 U. S. 291 (1988); Pilot Life Ins. Co. v. Dedeaux,481 U. S. 41, 481 U. S. 51 (1987). Moreover, because the governing standard is set forth in a criminal statute, it is appropriate to apply the rule of lenity in resolving any ambiguity in the ambit of the statute's coverage. To the extent that the language or history of § 209 is uncertain, this "time-honored interpretive guideline" serves to ensure both that there is fair warning of the boundaries of criminal conduct and that legislatures, not courts, define criminal liability. Liparota v. United States,471 U. S. 419, 471 U. S. 427 (1985); see also United States v. Bass,404 U. S. 336, 404 U. S. 347-348 (1971).
Section 209 is one of almost two dozen statutory provisions addressing bribery, graft, and conflicts of interest that were revised and compiled at Chapter 11 of the Criminal Code in
1962. 18 U.S.C. §§ 201-224. While some sections focus on bribes or compensation offered as a quid pro quo for government acts, and apply to persons before and after commencing government service, § 209 is a prophylactic rule that aims at the source of government employees' compensation. [Footnote 9]
Section 209(a) contains two prohibitions, neither of which directly specifies when a payment must be made or received. The first paragraph is directed to every person who "receives" any salary supplement "as compensation for his services as an officer or employee" of an executive agency of the Government. The second paragraph is directed to every person who "pays," or makes any contribution or supplement to the salary of, "any such officer or employee" under circumstances that would make the receipt of the contribution a violation of the subsection. A literal reading of the second paragraph -- particularly the use of the term "any such officer or employee" -- supports the conclusion that the payee must be a government employee at the time the payment is made. Similarly, the paragraph's additional prohibitions on one who "makes any contribution to, or in any way supplements the salary of," also refer to "any such officer or employee." Indeed, since the prohibited conduct is merely the receipt or the payment of the salary supplement, it follows that a violation of § 209(a) either is or is not committed at the time the payment is made. Despite the awkward drafting of the paragraphs, they appear to be coextensive in their coverage of both sides of a single transaction. The text of § 209(a) thus indicates that employment status is an element of the offense. [Footnote 10]
The Court of Appeals rejected this reading of the statute for two reasons. First, it noted that, prior to its codification as § 209(a) of the Criminal Code in 1962, the plain language of the predecessor statute at 18 U.S.C. § 1914 (1958 ed.) was unambiguously limited to whoever, "being a Government official or employee," received any salary. [Footnote 11] The Court of Appeals inferred that the deletion of this phrase meant that the payment no longer need occur during federal employment, and thus preemployment payments could violate § 209(a). 845 F.2d at 480. Second, it felt that the public policy underlying "§ 209 and the conflict of interest laws in general also support a broad interpretation of its coverage." Ibid. Because construction of a criminal statute must be guided by the need for fair warning, it is rare that legislative history or statutory policies will support a construction of a statute broader than that clearly warranted by the text. In this case, each of these sources indicates that our reading of the statutory language is consistent with Congressional intent.
The predecessor of § 209(a) was enacted in 1917 as an amendment to the Bureau of Education's legislative appropriation, and provided that "no Government official or employee shall receive any salary in connection with his services" from a non-Government source. [Footnote 12] The phrase "being a
Government official or employee" did not appear until 1948, when the provision was transferred from 5 U.S.C. § 66 to 18 U.S.C. § 1914 in the reorganization of Title 18. [Footnote 13] As the Court of Appeals recognized, this wording of § 1914 unquestionably required a recipient of a payment to be a government employee at the time the payment was made. This
reading neither changed the original scope of the statute nor engendered any controversy; in the entire period between 1917 and 1962, criticism focused instead on the vagueness of the reference to payments made "in connection with" the employee's service. [Footnote 14] The fact that the legislative history of § 209(a) explains the narrowing consequence of the elimination of these words, but is silent on the reason for eliminating "being a Government official or employee," is inconsistent with the view that Congress intended the latter change to broaden the coverage of the section. [Footnote 15] The Senate and House Judiciary Committees and the Attorney General all maintained that § 209(a) made no substantive change in the law. Rather, the deletion of "Government official or employee" and use of the phrase "officer or employee of the executive
branch" seemed only to enhance clarity and consistency with the other new conflicts statutes. [Footnote 16]
We attach greater significance to two other changes that Congress made when it revised the bribery and conflict laws in 1962. In § 201, it added language extending the prohibition against bribery of a public official to a "person who has been selected to be a public official," which it defined as "any person who has been nominated or appointed to be a public official, or has been officially informed he will be so nominated or appointed." [Footnote 17] In § 203, which prohibits outside compensation for the performance of public service, Congress expressly covered advance requests or offers of compensation for services to be "rendered . . . at a time when [the recipient] is an officer or employee of the United States." [Footnote 18] In both of these provisions, Congress used unambiguous language to cover preemployment payments; the absence of comparable language in § 209(a) indicates that Congress did
not intend to broaden the preexisting coverage of that provision.
Further evidence confirming that § 209(a) requires employment status at the time of payment is found in paragraphs (b) and (c) of § 209. [Footnote 19] The former expressly authorizes federal employees to continue to receive payments from a bona fide pension, health, or other benefit plan maintained by a former employer, and the latter makes § 209 inapplicable to certain types of government employees. Both of the provisions obviously focus on payments that are made while the recipient is a government employee. The addition of these two exemptions in 1962, like the careful draftsmanship of §§ 201 and 203, is consistent with Attorney General Kennedy's contemporaneous opinion that § 209(a) did not change the substance of the former 18 U.S.C. § 1914. See n. 14, supra.
Congress appropriately enacts prophylactic rules that are intended to prevent even the appearance of wrongdoing and that may apply to conduct that has caused no actual injury to the United States. Section 209(a) is such a rule. Legislation designed to prohibit and to avoid potential conflicts of interest in the performance of governmental service is supported by the legitimate interest in maintaining the public's
confidence in the integrity of the federal service. [Footnote 20] Neither good faith, nor full disclosure, nor exemplary performance of public office will excuse the making or receipt of a prohibited payment. It is nevertheless appropriate, in a case that raises questions about the scope of the prohibition, to identify the specific policies that the provision serves as well as those that counsel against reading it too broadly. See Offshore Logistics, Inc. v. Tallentire,477 U. S. 207 (1986).
A special committee on the federal conflict of interest laws of the Association of the Bar of the City of New York prepared a scholarly report in 1960 that the Government and the petitioners agree accurately describes the policies implemented by § 209(a). The report stated:
"The rule is really a special case of the general injunction against serving two masters. Three basic concerns underlie this rule prohibiting two payrolls and two paymasters for the same employee on the same job. First, the outside payor has a hold on the employee deriving from his ability to cut off one of the employee's economic lifelines. Second, the employee may tend to favor his outside payor even though no direct pressure is put on him to do so. And third, because of these real risks, the arrangement has a generally unwholesome appearance that breeds suspicion and bitterness among fellow employees and other observers. The public interpretation is apt to be that if an outside party is paying a government employee and is not paying him for past services, he must be paying him for some current services to the payor during a time when his services are supposed to be devoted to the government."
Association of the
Bar of the City of New York, Conflict of Interest and Federal Service 211 (1960).
It is noteworthy that this report characterized the relevant rule as one "prohibiting two payrolls and two paymasters for the same employee on the same job." At least two of the three policy justifications for the rule -- the concern that the private paymaster will have an economic hold over the employee and the concern about bitterness among fellow employees -- apply to ongoing payments but have little or no application to an unconditional preemployment severance payment. Of course, the concern that the employee might tend to favor his former employer would be enhanced by a generous payment, but the absence of any ongoing relationship may mitigate that concern, particularly if other rules disqualify the employee from participating in any matter involving a former employer. Thus, although the policy justifications for § 209(a) 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.
An important countervailing consideration also cannot be ignored. As President Kennedy recognized in 1961 when he sent his message to Congress calling for a wholesale revision of the conflict of interest laws:
"Such regulation, while setting the highest moral standards, must not impair the ability of the Government to recruit personnel of the highest quality and capacity. Today's Government needs men and women with a broad range of experience, knowledge, and ability. It needs increasing numbers of people with top-flight executive talent. It needs hundreds of occasional and intermittent consultants and part-time experts to help deal with problems of increasing complexity and technical difficulty. In short, we need to draw upon America's entire reservoir of talent and skill to help conduct
our generation's most important business -- the public business."
Message from the President of the United States Relative to Ethical Conduct in the Government, H.R. Doc. No. 145, 87th Cong., 1st Sess., 2 (1961). The President described some of the statutes that were then on the books as wholly inadequate, while others "create[d] wholly unnecessary obstacles to recruiting qualified people for Government service." Id. at 3.
Attorney General Kennedy commented on this same concern in his memorandum on the 1962 legislation. After explaining that one of the "main purposes of the new legislation" was
"to help the Government obtain the temporary or intermittent services of persons with special knowledge and skills whose principle employment is outside the Government,"
he predicted that the new legislation would "lead to a significant expansion of the pool of talent on which the departments and agencies can draw for their special needs." [Footnote 21] The substantive additions of § 209(b) and § 209(c) to allow continuing participation in pension and benefits plans and to exempt certain employees from the prohibitions of § 209(a) is wholly consistent with the Attorney General's outlook. In contrast, an expansion of § 209(a) to encompass preemployment payments would run counter to this interest. [Footnote 22]
The severance payments made to the petitioners in this case have a somewhat nebulous character. On the one hand, as the Government correctly argues, they give rise to a possible appearance of impropriety that is certainly one of the concerns
of § 209(a). On the other hand, allowing corporations to encourage qualified employees to make their special skills available to the Government serves the public interest identified by both the President and the Attorney General when § 209(a) was enacted. It is not our function to express either approval or disapproval of this kind of unconditional severance payment. We note only that a literal reading of the statute -- which places a pre-Government service severance payment outside of the coverage of § 209(a) -- is consistent with one of the policies that motivated the enactment of the statute. Because the language Congress used in § 209(a) is thus in "harmony with what is thought to be the spirit and purpose of the act," this case presents none of the "rare and exceptional circumstances" that may justify a departure from statutory language. Crooks v. Harrelson,282 U. S. 55, 282 U. S. 59-60 (1930); accord, Rubin v. United States,449 U. S. 424, 449 U. S. 430 (1981).
Finally, as we have already observed, we are construing a criminal statute, and are therefore bound to consider application of the rule of lenity. To the extent that any ambiguity over the temporal scope of § 209(a) remains, it should be resolved in petitioners' favor unless and until Congress plainly states that we have misconstrued its intent.
The judgment of the Court of Appeals is accordingly reversed.
It is so ordered.
"Salary of Government officials and employees payable only by United States"
"(a) Whoever receives any salary, or any contribution to or supplementation of salary, as compensation for his services as an officer or employee of the executive branch of the United States Government, of any independent agency of the United States, or of the District of Columbia, from any source other than the Government of the United States, except as may be contributed out of the treasury of any State, county, or municipality; or"
"Whoever, whether an individual, partnership, association, corporation, or other organization pays, or makes any contribution to, or in any way supplements the salary of, any such officer or employee under circumstances which would make its receipt a violation of this subsection -- "
"Shall be fined not more than $5,000 or imprisoned not more than one year, or both."
18 U.S.C. § 209(a) (enacted as Act of Oct. 23, 1962, Pub.L. 87-849, § 1(a), 76 Stat. 1125).
Joint Stipulations of Uncontested Facts