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LAWRENCE H. CRANDON v. UNITED STATES BOEING COMPANY

SUPREME COURT OF THE UNITED STATES Nos. 88-931, 88-938 110 S. Ct. 997, 494 U.S. 152, 108 L. Ed. 2d 132, 58 U.S.L.W. 4234, 1990.SCT.41171 <http://www.versuslaw.com> *fn* decided: February 27, 1990. LAWRENCE H. CRANDON, ET AL., PETITIONERSv.UNITED STATES BOEING COMPANY, INC., PETITIONERv.UNITED STATES ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT. Philip A. Lacovara argued the cause for petitioners in No. 88-931. With him on the briefs were William R. Stein, Gerard F. Treanor, Jr., Robert Plotkin, and E. Lawrence Barcella. Benjamin S. Sharp argued the cause for petitioner in No. 88-938. With him on the briefs were Hilary Harp, Robert S. Bennett, and Alan Kriegel. Edwin S. Kneedler argued the cause for the United States. With him on the brief were Solicitor General Starr, Acting Assistant Attorney General Schiffer, Deputy Solicitor General Wallace, Michael F. Hertz, and Douglas Letter. 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. Author: Stevens


ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT.

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.

Author: Stevens

 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.*fn1

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.*fn2 Boeing's severance payment to Paisley amounted to $183,000.*fn3 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.*fn4 The other three individual petitioners' payments were higher than Crandon's but lower than Paisley's.*fn5 Boeing paid the five departing employees a total of $485,000.*fn6 None of the five individual petitioners was a Government employee at the time he received his severance payment.*fn7 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 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.*fn8

We granted certiorari to review the Court of Appeals' construction of this important statute. 490 U.S. 1003 (1989).

I

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, 291 (1988); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 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, 427 (1985); see also United States v. Bass, 404 U.S. 336, 347-348 (1971).

II

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 . 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.*fn9

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.*fn10 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.*fn11 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.

III

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.*fn12 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.*fn13 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.*fn14 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.*fn15 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.*fn16

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."*fn17 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."*fn18 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 pre-existing coverage of that provision.

Further evidence confirming that § 209(a) requires employment status at the time of payment is found in subsections (b) and (c) of § 209.*fn19 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.

IV

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.*fn20 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 ...


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