Expense Reimbursement in Connection with Chairman Stone's Trip to Indonesia

Opinion

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'> MEMORANDUM'FOR JoHst; GAiNE}'ssQL.`~"' ;\ - General Counsel in .F .“:.Commodity Futures Tradinq;€ommission

j Re: 'Expense-Reimbursementrin-Connection With' “1""Chairmanistone*s:rripfto'Indonesia"

) :This reponds to_your request of Angust §§ I§&Gr.for our

__ opinion on a constitutional question presented in.connection ' __

¢.with Commodity Futures Trading`Commission (CFTC) Chairman.James-‘_ ' 'M; Stone's proposed trip to-Indonesia as a consultant for the 'Harvard Institute for International Deveiopment cf Earvard Uni~w_ 'versity (Harvard). _You inform us that the trip is ts take place .during'Chairman Stone‘s vacation, and the subject of his consul~ tancy; insurance regulation, is unrelated.to his official posi“ . _ticn'as Chairman of the,CFTC. His travel and associated ex:"

_ penses on the trip are to be.reimbursed by Harvard from funds

' paid under a consultancy contract with the Finance-Ministry of the Government of lndonesia)(lndonesia). The question is whether this arrangement violates Article l, section 9, clause 8 of the Constitution, the so~called Emoluments Clause; l/ Based:on our understanding of the terms and conditions of the-consultancy,

and of the contract between Harvard and Indonesia, we conclude -that it would not. ' - ‘ ~

'Tl/ We emphasize that this opinion addresses only the constitu~,

` tional issue raised under Article I, section 9, clause 8, and does not purport to deal with any other statutory or regulatory _restrictions which may be implicated by Chairman Stone's proposed trip. We note your conclusion, referred to in your_letter of August 6 at Note 1, that Chairman Stone‘s rendering of advice to»' Indonesia on insurance regulation Would not constitute a conflict of interest under the CFTC's Code of Conduct or applicable statu-i tory law.

'VArticle;I, section 81 clause_8.provides-as'follons£'$z `

_ 'No Title of Nobility shall be granted 7by the United States: And no Person holding ' rany Office of Profit or Trust under tl:-l,e,n'x,.»_,1 §' '§shall, witho.ut the Consent of the Congress,;¢jx accept of any present, Emolument, office or` 37¢Tit1e, of any kind whatever, from any K1nq,`. ' Prince or foreign State. ' 7 . `

The purpose of this provision, _as explained in the records of `the Constitutiona1 Convention, is “to exclude corruption and foreign influence [by prohibiting] any one in office from re- ' ceiving or holding any emoluments from foreign states-" 3 .

` TFarrand,;The Records of the Federal'€onvention of 1787 327

7(1966 ed;Y`. See also 2 Farrand 389. Thus, it is "directed 7_ against every kind of influence by foreign governments upon:

` officers of the United States,Y 24 Op. Atty.7 Gen. 116,117 -{1902), unless it has been expressly consented.to7 by Congress. _ 40 Op. Atty. Gen. 513 {1947). 'S'ee 5 U. S. Ccl § 7342 Ordinarrlyp '

7-"reimbursement from a foreign government of a public officia£“

travel expenses would be considered a “present“ or' "emolument"

"o within the meaning of. 7this constitutional prohibition._Z/ The

question in this case, however, is whether the reimbursement is "from" a foreign government at a11.7 -

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‘ 2/ 3ee 58 Comp. Gen.-487 493 (1979)(const1tutiona1 prohih7ition extends to free or reduced transportation, housing a7110wances, and shipment of household goods at government expense); 49 Comp. Gen. 821 (1970)(prohibition should be given "the broadest possi-F ble scope and application"). Congress -has consented to reim- bursement by a foreign government of travel expenses.for travel 'which is "consistent with the interests'of'the`&nited.States¢f "see:$ U. S. C. § 7342(c).(1)(B){ii). The legislative his-tony of this provision indicates that the consent given is restricted

to reimbursement of expenses to official travel on behalf of the United States, see S. Rep. No. 194, 95th Cong., lst_Sess. 387 _ (1977), and we7 are informed by the Legal Adviser s Office in the State Department that the exception has cons7istent1y been sc- con~ strued. You do not suggest -- and, indeed, the facts here would not support the conclusion -- that Chairman Stone' s trip should be considered an official one for which reimbursement from a foreign government might be permitted under the-statute.

We have found no judicial opinions construing the Emcl~ am S-ts Clause in which the actual source of a *present“ or ."emolument" was at issue, _and no discussion of this issue in

'. any relevant commentary.- In the absence of any authoritative7sf`

_ Nguidance on this issue, but with the underlying purpose of the 5 ` constitutional prohibition in mind, we have.relied for ouri

f;“analysis on the terms of the contract between Harvard. and ln- _ jdonesia, and on7 the circumstances under which.the7arrangements f for the trip were made. While the time constraints indicated

fin your letter. of nugust 6 have precluded our obtaining a copy

f7of the contract, we have discussed its terms at7length with Mr._"'"""':"""7

Richard Pagett, Associate Director of the Harvard Institute for 7International Development. Mr.. Pagett also described to us the

ni7manner in which Harvard's invitation was extended to and7accepted‘" ._ by Mr. Stone. -

As we understand the relevant7facts¢ they are as follows.75.;1-°‘-'~7-"lr

`@1Harvard has for some years been a party to successive contracts _3;; 7 with the Finance Ministry of .the Government of Indonesia by which"‘7

'_y it provides expert consultants to Indonesia in a variety of speciwj17g'

fied fields relating to trade and financel Under the most re- -cent contract, effective September l 137`3, Harvard agrees to

conduct. certain training programs in lndcnesia,-and to prov1de" *""

as consultants a number of named individualsr most of them mem-"` bers of the faculty at Harvard or other universities. In addi~ _ tion, other unnamed experts~ are to be invited. from time to 7time-' 'by Harvard .to deal with particular problems relating to fiscal policy arising during the period of the contract.

__ As under its previous contracts with Harvard, Indonesia _. .agrees. to pay specified amounts to Harvard in semiannual install-`_

`7 ments to defray Harvard's costs in administering the program and

compensating its experts, At the conclusion cf the contract .7, 7'pe7riod, some two years hence, an accounting.will be made to de~ _“ termine what,: if any, additional sums are due Harvard ~- or re» coverable by Indonesia. ln the meantime, Harvard disburses funds _`-in a discretionary manner in fulfilling its obligations to In» "donesia under the contract.'7 7 ~

Mr. Pagett has informed us that during all of the.years n

in which Harvard has had this contractual cons.ultancy relation~in“i

ship with Indonesia, that government has never sought to inn fluence Harvard' s selection of consultantst either before or after an invitation has been extended. The individuals named _7 as consultants in the present contract were chosen unilaterally ` 'by Harvard, and agreed to by Indonesia as part of the overall ¢7 contract. With respect to any additional consultants not named.¢

the contract, such as Chairman Stone, Hareard7has complete

ix_d1seretion 1n the selection. The. contract g1ves Indonesia no.

veto power over11Harvard's choice; indeed, the present contract

` 7 does not contain even the clause appearing 1a 1ts predecessor ___j ~~eontracts committing Harvard to give "due considerat1on” to ,~*"

17 Indonesia.‘ s wis7hes in this regard.

1 The terms and conditions of a consultancy are arranged ;7eXclusive ly between Harvard and thoseit invites. to he consul- '7tants, and are memorialized. in a separate agreement.between

"-hHarvard and each individual consultant._ In7Cha1rman Stone* s

_ case, this agreement is represented by Mr. Pagett' s letter to

' him of Ju7ly 11,1980, outlining the amount end manner of err ,tpense reimbursement. As is the usual case¢ his expenses are to Ffbe reimbursed to him directly by Harvar_d. t'~7_.-

The circnmstances of Chairman Stone s invitatioc'froml ` Harvard were also described to us by Mr.7 Pagett.7 Scmetime in _7~ .the Spring of this year, the Indonesian Finance Ministry re-f'*"

-;quested assistance from Harvard in dealing with a.nnmber 071

- questions which had arisen relating- to insurance regulation and 17

` .investment. Harvard approached several. faculty members at its 7”»

lschool of Business, who declined an interest in taking on the -"

V;*`consultancy themselves, but recommended that Chairman Stone, ai f

_former faculty member at Harvard and Massachnsetts State In** surance Commissioner, be considered. Other experts in the 7 field of insurance. seconded this recommendation.. Harvard then contacted Chairman Stone, offering him the cons7ultancy with an . honorarium and expense reimbursement. He agreed to accept the invitation and offer. of expense reimbursement, but declined the _honorarium. His consultancy is to last about.two weeks, and was arranged so that it would take place during his -vacation.'. 7jUpon acceptance, Harvard for the first time.informed Indonesia

'7 that Chairman Stone was the expert it had chosen. 3/

' 3/ According to Mr. Pagett, Chairman Stone may be the first `U. S. official to be invited to serve as a consultant7in this _ _ program. Apparently, under the impression that an official in~' ~' 7vitation from the Indonesian Government would have to he extended ' 1a erder to permit his trip, officials at Harvard suggested to' the Indonesian Finance Ministry that a letter .be sent directly to the United States Government indicating Indonesia s desire to have Chairman Stone' s services as a consultant- This letter,- addressed7to the American hmbassador in Jakarta, requested that

(Footnote1cont*d on p; 51

7 of any additional information that would sugges7t seme. con- y conclusion, the reimbursement offered Chairman Stone for

_- travel expenses in connection with the Harvard.consultaucy `7cannot be said to be “from“ a. foreign government With1n the

"f¢mean1ng of Article I, section 9, clause 8. His acceptance of

aj reimbursement would not the1efore implica-te that provisicn.

§§ We might note 7that we have. discussed the arrangements ‘-for'Cha1rman Stone' s proposed trip with the Legal ndvI.ser s

--1; OEfice at the State Department. That. Office informs us that

“in analogous si.tuations invo.lving reimbursement for unofficial

f1 foreign travel 7by U. S. officials a. key .consideration in deter“ - mining its propriety has been- the degree of control which the

;foreign government retains over the selection and payment cf

Assuming the above fa.cts to be accurate§ _and7in the abinv \' -"

'individual participants. Since, as appears to be the case here}7-§'

the foreign government neither controls- ncr even influences the 7 selection and payment of consultants,_the Emolnments Clause is 7n0t implicated. -‘ 7

`Sincerely, Leon Ulman

_ Deputy Assistant Attorney General Office of Legal Counsel

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'§/ (Footnote7 Cont'd from p. 4)

Chairman Stone be "released" to perform the co nsultancy, and promised the payment of air fare and per diem.expense “by the VGovernment of Indonesia." This latter conclusory characterizes tion of the source of Chairman Stone' s reimbursement must be measured against. the strong countervailing evidence that cone trol of the funds for reimbursement is entirely in Harvardfs

hands, and that payment will in fact be made from Harvard die rectly to Chairman Stone.