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UNITED STATES v. MEDICO INDUSTRIES

March 28, 1985

UNITED STATES OF AMERICA, PLAINTIFF,
v.
MEDICO INDUSTRIES, INC., DEFENDANT.



The opinion of the court was delivered by: Getzendanner, District Judge:

MEMORANDUM OPINION AND ORDER

This is a civil action brought by the United States of America for declaratory judgment under 28 U.S.C. § 2201. Specifically, the United States alleges that Edward F. Hill, a former government employee, violated the conflict of interest prohibition contained in 18 U.S.C. § 207 by representing Medico in negotiating a contract on which Medico is currently pressing a claim for equitable adjustments before the Armed Services Board of Contract Appeals (ASBCA). The government therefore seeks to declare the contract void and unenforceable. The facts are undisputed and the matter is currently before the court on the cross-motions of both parties for summary judgment. For the reasons stated below, the court enters judgment for the plaintiff.

Facts

Hill was a contracting officer for the United States Army Munitions Command (ARMCOM) from 1967 until his resignation in August 1973. On May 31, 1973, Hill was the contracting officer for two government contracts, (Nos. DAAA09-72C-0055 and DAAA09-73-C-0259), awarded to defendant Medico Industries, Inc. for the manufacture and delivery of M49A3 60mm projectiles. Hill was also the contract officer for Contract No. DAAA09-73-C-0115, under which the government agreed to purchase a different quantity of M49A3 60mm projectiles from Airport Machining Corporation. On both of these contracts, Hill was assisted by Mrs. Donna Freels.

When Hill left the government in August 1973, he formed a consulting firm offering consulting services and claims preparation assistance for contractors who deal with the government. Sometime shortly thereafter, Medico and its subcontractor, National Extruded Metal Products Co. (NEMPCO), retained Hill to prepare their requests for Extraordinary Relief in connection with Contract Nos. 0259 and 0055. (Defendant's Response 66 to Plaintiff's First Set of Requests for Admissions). Hill consulted with both Medico and NEMPCO and aided them in preparing requests for relief which were presented to the government in September and October of 1973.

In December 1973, before the deliveries for contract 0259 were completed, Hill assisted Medico in preparing an unsolicited proposal for further production of M49A3 projectiles in response to Invitation for Bid DAAA09-73-B-0149. (Plaintiff's Appendix, p. 7). As explained in the proposal, Medico was concerned by the adverse financial impact of a break in production between Contract 0259 and a new contract, and therefore submitted an unsolicited proposal. Medico was also aware of an urgent government need for 60 mm projectiles due to the Vietnam war effort and shortages caused by repeated defaults on the part of Airport Machining Corporation, which had entered bankruptcy in June 1973. (Defendant's Response 89 to Plaintiff's First Set of Admissions; Hill Deposition p. 122-23). The December 1973 proposal incorporated all terms and conditions of contract 0259 except where expressly revised.

During late December 1973 and January 1974, Hill negotiated the Medico proposal by telephone with Freels, his former subordinate, and with Marv Jothen, the successor contracting officer. (Hill Dep. 124-25). They discussed matters such as quantities, monthly rates, and equipment availability. Hill was the chief spokesman on behalf of Medico in all areas except delivery schedules. (Hill Dep. 125-26). Throughout these negotiations, Hill was careful to avoid all discussion of the existing contract.

On January 23, 1974, the Government terminated for default its contract with Airport Machining Corporation. On January 31, 1974, Medico was awarded a portion of Airport Machining's terminated requirements. As evidenced by the initial proposal and the minutes of a January 29, 1974 ARMCOM Board of Awards meeting, the government considered Medico's request as a new contract proposal. However, due to the time and costs which would be incurred in drafting a new contract, the procurement was executed as a Modification (P0002) to the already existing contract. (Defendant's Exhibit G). The Modification was for 1,815,000 projectiles at a unit price different from that of Contract 0259, with deliveries to begin on June 30, 1974.

Throughout the period of the negotiations over the Modification, Medico was still making deliveries on Contract 0259. The final deliveries under that original contract were made on February 5, 1974.*fn1

On June 14, 1974, Hill wrote a letter to the Commanding General of the Army Armament Command explaining Hill's new employment and soliciting the General's opinion regarding possible conflicts of interest in the Medico transactions. The government never responded.

On November 25, 1974, Medico filed with the government a claim, amended February 20, 1975, requesting equitable adjustment for additional costs incurred in the performance of its obligations under the Modification. This claim, which Hill helped prepare, alleged that the government specifications, identical to those contained in Contracts No. 0055 and 0259, were defective, in breach of the government's implied warranty, and commercially impracticable to produce. The claim listed Vertex Consultants, Hill's company, as Medico's representative. On June 10, 1977, the government denied Medico's claim and Medico appealed that denial to the Armed Services Board of Contract Appeals. This suit followed sometime thereafter.

Conflict of Interest Under § 207

The chief question for resolution is whether Hill violated the conflict of interest provisions of 18 U.S.C. § 207 in representing Medico with respect to a Modification P0002. The applicable statutory provision in effect at the time of the events underlying this lawsuit*fn2 reads as follows:

  Whoever, having been an officer or employee of the
  executive branch of the United States
  Government . . . after his employment has ceased,
  knowingly acts as agent or attorney for anyone
  other than the United States in connection with any
  judicial or other proceeding, application, request
  for a ruling or other determination, contract,
  claim, controversy, charge, accusation, arrest, or
  other particular matter involving a specific party
  or parties in which the United States is a party or
  ...

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