1. Armstrong v. McAlpin, 461 F. Supp. 622 (S.D. N.Y. 1978), on This case is a Securities Fraud derivative suit. Theodore Altman, a current partner in a private law firm, participated in and supervised an SEC investigation of the "Growth Fund" while he the Assistant Director of the Division of Enforcement of the SEC. During his work at the SEC, Altman rendered advise and directions; however, he was not involved with the case a day-to-day basis. The appointed Receiver in the case, Armstrong, asked Altman's firm to act as counsel in the "Growth Fund" matter. Altman disqualified himself by virtue of his former SEC involvement based on Disciplinary Rule 9-101 (B). The Gordon firm, however, accepted the offer to Armstrong. This appointment was approved by the court. issue raised in the case was whether the disqualification of one partner must be imputed to his/her entire firm. Disciplinary Rule 5-105 (D) provides that is a lawyer is required to decline employment, then no partner or associate in his firm may accept such employment. The court held that "absent an appearance of significant impropriety, a government agency could waive D.R. 5-105 (D) when satisfied that screening procedures effectively isolated the individual firm member who had previously dealt with the same matter." Therefore, the Gordon firm of which Altman was a partner, need not be disqualified as counsel for the "Growth Fund." The defendants' motion was denied. Appeal was taken from the ruling of the U.S. District Court. The Court of Appeals held that the law firm was qualified from representing the receiver of the corporation against which the SEC had sought injunctive relief, where, after the filing of an SEC complaint, the lawyer who had served on the staff of the SEC and had supervised and had direct, personal involvement in the SEC investigation of the corporation, became an associate with the law firm. (ABA Code of Professional Responsibility, Canon 9; DR2-110 (B) (3), DR5-105, DR5 -105 (D), DR9-101, DR9-101 (B); EC9-3). The case was reversed and remanded. On en banc reconsideration, the Court of Appeals held that the denial of the disqualification motion was not immediately appealable, but, under the circumstances of the case, the court reached the merits and concluded that the law firm representing the receiver would not be disqualified for employing an attorney who had previously been an assistant director of the SEC. There was no threat of the taint of the trial by the firm's continued representation of the receiver since the SEC files had been turned over to the receiver long before Altman retained the firm. Altman had been entirely screened from all participation in the case. Any possible appearance of impropriety was not a sufficient sufficient reason for a disqualification order due to the serious consequences which would have resulted from such an order. X-2 1. Armstrong v. McAlpin, continued 2. 3. 4. On petition for writ of certiorari the the United States Supreme Court, the petition was granted and the judgment was vacated. The case was remanded to the United States Court of Appeals for the Second Circuit with instructions that the appeal be dismissed. Committee for Washington's Riverfront Parks, et al. v. Thompson, This case involves the review of an Order of the D.C. Mayor's Agent to authorize construction of a "mixed use development" on the Georgetown Waterfront. The petitioners contend that the alleged procedural defects and conflicts of interest require that the Order be reversed. The issue dealing with ethics addresses whether the Mayor's Order was unlawful because of unethical conduct by some of the participants. The court found that participation on the part of a member of the law firm who represented the developer and two consultants who assisted with the preparation of the hearings on the proposed Waterfront development and who were involved in the subject matter of the proceeding while they were government employees was insufficient to establish a conflict of interest. Portions of the Ethics in Government Act of 1978, 18 U.S.C.$207 and Disciplinary Rule 9-101 (B) are discussed at some length throughout the case. The Washington Post Company v. U.S. Department of Health and Human Services, et al., 690 F.2d 252 (D.C. Cir. 1982). The Post filed a F.O.I.A. request based on information that possible conflicts of interest of scientific consultants employed by the National Cancer Institute might exist. For each consultant, the Post requested: 1. A list of his/her non-federal employment and 2. A list of organizations in which the consultant had The government claimed the information was exempt under Exemptions 4 and 6. The court held that the release of the information on Form 474 did not constitute a clearly unwarranted invasion of personal privacy under Exemption 6 of the Freedom of Information Act. The court also made the determination that the court below would have to decide if the list of financial interests was confidential under Exemption 4. U.S. v. Conlon, 481 F.Supp. 654 (D.D.C.), aff'd, 628 F.2d 150 (D.C. Cir. 1980). James Conlon, former Director of the Bureau of Engraving and Printing, was charged with violating 18 U.S.C. $208(a) by participating as a government officer in a proposal by the 4. 5. 6. U.S. v. Conlon, continued Americam Bank Note Company while he was "negotiating and had an arrangement concerning prospective employment" with the American Bank Note Company. 18 U.S.C. $208 (a) prohibits a federal employee from participating in official actions that affect a person or an organization in which the employee has a financial interest. Section 208(b), however, clarifies that insubstantial interests are to be exempted. The court held that by using a narrow construction of 18 U.S.C. $208 (a) which is specified as the Congressional intent of the Act, the statutory term "negotiating" which Conlon was accused, required allegations of specific negotiating acts with his prospective employer. The term "arrangement" between Conlon and the American Bank Note Company required specific bilateral arrangements or acts of arrangement. The accusations were dealt with in a cursory fashion cursory fashion in the indictment. in the indictment. In essence, the fact that the indictment in this this case alleged the existence of an "arrangement" and that Conlon was "negotiating" was not sufficient to state a violation of 18 U.S.C. $208(a). In the prosecution of three counts of false declarations before the Grand Jury and one count of conflict of interest, the United States District Court entered a judgment dismissing all of the four counts and the Government appealed. The Court of Appeals held that: (1) it was not necessary to require pleadings of "specific acts of negotiating" or "specific bilateral arrangements or acts of arranging" in order to save the federal conflict of interest statute from vagueness, and (2) the indictment, which charged that, during particular periods, the defendant, while employed in the executive branch, participated in the decision concerning the proposal of the company with which he was negotiating and with which he had an arrangement concerning prospective employment, was adequate to charge a violation of the federal conflict of interest statute. U.S. v. Hansen, Cr. No. 83-00075 (D.D.C. June 13, 1983). This District Court decision held that 18 U.S.c. $1001 applies to false statements made on a financial disclosure report that was filed pursuant to the Ethics in Government Act of 1978. Currently, this case is pending in the Court of Appeals for the D.C. Circuit. U.S. v. Irons, 640 F.2d 872 (7th Cir. 1981). Louis Irons, an Education Program Officer for the Department of Health, Education and Welfare was accused of personally and substantially participating in contracts between HEW and Advance Photo and Sounds, a company which he had personal financial interest. Irons was accused of instituting the delivery of equipment to be made pursuant to a contract and the receipt of money under the contract for such equipment. Such participation constituted a violation of the federal conflict of interest law which states that participation through ". . decision, approval, disapproval, recommendation, the rendering of advice, or otherwise. "in contracts involves a conflict of interest. (18 U.S.C. $208 (a)). The District Court found Irons guilty. On appeal, the issue was whether the acts of "causing delivery to be made of equipment" and "receiving payment of monies for such equipment" were properly charged under the language of the statute as acts of proscribed participation in a contract involving a conflict of interest. The court determined that they were. The court refused to adopt a narrow interpretation of 18 U.S.C. $208 because it would distort Congressional intent. The court found that the "or otherwise" language of $208 included acts which execute or carry to completion a contract or matter as to which the acts of rendering advice or making recommendations are specifically proscribed. The Court of Appeals affirmed the findings of the District Court. The Court of Appeals found that the defendant's acts of causing delivery of equipment to be made pursuant contract and of receiving payment of monies under the tract for such equipment, constituted participation in the contract, for purposes of the statute proscribing participation through "decision, approval, disapproval, recommendation, the rendering of advice, or otherwise" in contracts involving conflict of interest. The case is affirmed. 7. U.S. v. Mississippi Valley Generating Company, etc., 364 U.S. 520 (1961). This case presents a conflict-of-interest problem that has farreaching significance in the area of public employment. It involves fundamental questions that relate to the standards of conduct that govern those who represent the Government in its business dealings. Adolphe Wenzell, Vice-President and Director of First Boston Corporation and Special Consultant to the Bureau of the Budget, undertook to advise the Government and act on its behalf in negotiations which culminated in a contract between the Government and the Mississippi Valley Generating Company. The contract called for the construction and operation by the Mississippi Generating Company of a $100,000,000. steam power plant in the Memphis, Tenn. area. The plant was to supply electrical energy for the use of the Atomic Energy Commission (AEC) After the respondent had taken some steps to perform the contract, the AEC canceled the contract because the power was no longer needed. Respondent sued the Government in the Court of Claims for the amount it had expended on the contract. The Court of Claims awarded damages to the respondent. The Supreme Court granted cert. with regard to the conflict-of-interest questions. The issues were whether the activities of Wenzell violated 18 U.S.C. $434 and if so, did that fact alone preclude the respondent from enforcing the contract. Both of these questions were answered affirmatively. The Supreme Court reversed the judgment below and remanded the case to the Court of Claims. |