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HOME OWNERS' LOAN CORPORATION ACT DID NOT CONTEMPLATE

HOSPITALIZATION AND MEDICAL TREATMENT

In other words, I think what the Comptroller General had in mind when he made his report on this Group Fund Association was that there was nothing in the law, in the Home Owners' Loan Corporation Act, that contemplated hospitalization and general medical treatment of employees, that that kind of an activity was not part of the loaning activity of the Home Owners' Loan Corporation, and, therefore, it was not essential to the conduct of the affairs of the Corporation, and was not a matter which the Board could determine as being necessary, and, therefore, was a matter that did come under the laws affecting the receipt and expenditure of public moneys.

The CHAIRMAN. In other words, the provision in the law was not construed as talking about an ultra vires act outside of the laws with reference to the public moneys. If the Board proceeded beyond its authority, then these other laws step into operation.

I have no authority to speak for the Comptroller General, nor to read his mind in this respect, but that is my understanding of how he arrived at the conclusion that these statutes did prohibit just that kind of action.

Senator McCARRAN. In that respect, Mr. Chairman, I have not with me now the letter addressed to me in reply to the letter that I addressed to the Comptroller General on this subject. I will ask the leave of the chairman to have inserted in the record at this point the letter which I received from the Comptroller General bearing on that subject. The CHAIRMAN. Yes. (The letter referred to is as follows:)

GENERAL ACCOUNTING OFFICE,

Washington, December 16, 1937. Hon. PATRICK A. McCARRAN,

United States Senate. MY DEAR SENATOR: There has been received your letter of December 1, 1937, as follows:

“I am advised by Mr. Pennyman, of the Home Owners' Loan Corporation, and by others, that a voluntary association has been effected from within the membership of the employees of the Home Owners' Loan Corporation, which voluntary association is known as the Group Health Association.

"I am also advised from several sources that this voluntary association, in cooperation with the Home Owners' Loan Corporation facility has diverted, or is about to divert and use some $20,000 a year for 2 years to finance this group organization, and that on the basis of this use of public moneys, a social health organization has been set up, which organization will depend, as I understand it, on voluntary contributions from the employees of the Home Owners' Loan Corporation.

“I respectfully request information from you as to what authority of law public funds have been diverted or are being used in the institution of this voluntary association. I will appreciate your full advice on the subject.'

The only funds lawfully available to the Home Owners' Loan Corporation after June 30, 1937, were appropriated by the act of June 28, 1937 (Public, 171), as follows:

“Not to exceed $30,000,000 of the funds of the Home Owners' Loan Corporation, established by the Home Owners' Loan Act of 1933 (48 Stat. 128), shall be available during the fiscal year 1938 for administrative expenses of the Corporation, including personal services in the District of Columbia and elsewhere; travel expenses, in accordance with the Standardized Government Travel Regulations and the act of June 3, 1926, as amended (U. S. C., title 5, secs. 821-833); printing and binding; law books, books of reference, and not to exceed $500 for periodicals and newspapers; procurement of supplies, equipment, and services; maintenance, repair, and operation of motor-propelled passenger-carrying vehicles, to be used only for official purposes; typewriters, adding machines, and other labor-saving devices, including their repair and exchange; rent in the District of Columbia and elsewhere; use of the services and facilities of the Federal Home Loan Bank Board, Federal home-loan banks, and Federal Reserve banks; and all other necessary administrative expenses: Provided, That all necessary expenses (including services performed on a force account, contract.or fee basis, but not including other personal services) in connection with the acquisition, protection, operation, maintenance, improvement, or disposition of real or personal property belonging to the Corporation or in which it has an interest, shall be considered as nonadministrative expenses for the purposes hereof: Provided further, That except for the limitations in amounts hereinbefore specified, and the restrictions in respect to travel expenses, the administrative expenses and other obligations of the Corporation shall be incurred, allowed, and paid in accordance with the provisions of said Home Owners' Loan Act of 1933, as amended (U. S. C., title 12, secs. 1461-1468)."

An examination has been made of the records of the Home Owners' Loan Corporation, to determine in general the relationship of the corporation with the Group Health Association, Inc., formed and incorporated under the laws of the District of Columbia for the purpose of furnishing medical and hospital service to the employees of the corporation and other civil employees of the executive branch of the United States Government. Following is a list of all official documents examined, copies of which are attached, marked "Exhibits (a) to (p):

(a) Opinion, dated December 23, 1936, and memorandum, dated December 28, 1936, by Horace Russell, general counsel, Home Owners' Loan Corporation, on the legal authority of the corporation to aid its employees in the development of medical and hospital service.

(b) Memorandum, dated March 1, 1937, by R. R. Zimmerman, submitting proposed plan of Group Health Association, Inc., prepared by R. V. Rickcord, of The Twentieth Century Fund, Inc.

(c) Excerpt from minutes of a meeting of the board of directors of the Home Owners' Loan Corporation of March 2, 1937, regarding plan propc sed by Mr. Rickcord.

(d) Letter of March 11, 1937, by the general counsel of the Home Owners' Loan Corporation, submitting proposed resolution to the board, authorizing a contract between the corporation and the Group Health Association, Inc.

(e) Resolution, dated March 17, 1937, adopted by the board of directors of the Home Owners' Loan Corporation, approving form of contract and authorizing chairman of board to execute same on behalf of the Corporation.

(f) Certified copy of contract, dated March 22, 1937, entered into between the corporation and the Group Health Association, Inc., under which the corporation agreed to pay to the association $40,000 over a period of 2 years, in consideration of certain medical benefits to its employees to be derived therefrom.

(g) Excerpts from minutes of a meeting of the board of directors of the Home Owners' Loan Corporation, dated March 22, 1937, nominating two trustees to the Group Health Association, Inc., pursuant to paragraph 4 of the contract dated March 22, 1937.

(h) Resolution, dated June 4, 1937, adopted by the board of directors of the corporation, approving bylaws of the Group Health Association, Inc.

(i) Resolution, dated June 7, 1937, adopted by the board of directors of the corporation, authorizing deduction to be made on corporation pay rolls from salaries due employees who have executed assignment to the Group Health Association, Inc., for such medical service to be rendered to them by the association.

(1) Resolution, dated August 10, 1937, adopted by the board of directors of the corporation authorizing a cash advancement of $15,000 to the association, to be deducted from second-year payments provided for in the contract of March 22, 1937, to make possible certain contemplated economies in the repair and lease of building and purchase of professional and scientific equipment, also that the corporation will make available to the association such governmental facilities to purchase supplies and equipment at Government contract rates, repayment therefor to be made from such cash advancement granted to the association under the above-stated contract and this resolution.

(k) Resolution, dated September 9, 1937, adopted by the board of directors, authorizing an additional $5,000 cash advancement to the association in lieu of the second-year payments to be made by the corporation under contract of March 22, 1937.

(1) Excerpt from minutes of a meeting of the board of directors of the corporation, dated October 1, 1937, pertaining to the appointment of a committee to draft letter on a plan for group medical service for employees of the board and agencies under its supervision.

(m) Letter, dated November 16, 1937, to the Federal Home Loan Bank Board, by Assistant Secretary H. R. Townsend, submitting amended bylaws for approval by the board.

(n) Bylaws of Group Health Association, Inc., as revised on October 25, 1937, and approved by the board of directors of the corporation on November 19, 1937.

(0) Assignment of pay form. Upon execution of this form the employee directs the corporation to make semimonthly deductions from his pay for dues, which amounts are to be paid over to the Group Health Association, Inc.

(p) Form of application for membership in the Group Health Association, Inc.

The foregoing list covers all the important documents pertaining to the formation of the association, except the articles of incorporation filed in the office of the recorder of deeds of the District of Columbia.

Pursuant to article 5 of the agreement of March 22, 1937, as amended by resolutions of August 10, 1937, and September 9, 1937, adopted by the board of directors of the Home Owners' Loan Corporation, there has been advanced to the Group Health Association, Inc., cash in the amount of $30,000 which is recorded in the books of the corporation as “Prepaid expense. Following is a record of transfers of such funds under appropriation symbol and title “899,900, Expenses, general, working fund”:

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In addition to the foregoing the corporation has purchased on behalf of the association certain supplies and equipment in the sum of $7,357.65, the net amount of which is reflected on the books of the corporation as "Accounts receivable," representing the following transactions which are set out in detail as an indication of probable administrative costs:

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1 Purchases made through the Procurement Division, Treasury Department.

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Although the agreement of March 22, 1937, provided for an advancement from public funds of $40,000 payable over a period of 2 years, at a rate of $20,000 per year, to aid in the organization and establishment of the Group Health Association, Inc., the records show that a total of $37,357.65 has been advanced and expended by the corporation as of December 4, 1937. Actual operations of the Group Health Association, Inc., did not begin, however, until November 1, 1937. In this connection it was learned that the emergency rooms of the corporation are still being maintained (an activity similar to those maintained in most departments and establishments, which are of doubtful legality) and that physical supervision of the rooms was taken over by the Group Health Association, Inc., on December 1, 1937, although the four nurses employed are carried on the rolls of the corporation. It is stated by officials of the corporation that the formation of the association and the authorized advancement of public funds to it were to relieve the corporation of the expense of operating and maintaining the emergency room, estimated by the comptroller of the corporation to cost approximately $20,000. However, the general counsel, subsequently, informally voiced an opinion that such costs would not exceed $7,000 per year.

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Under date of December 23, 1936, the general counsel of the Home Owners' Loan Corporation rendered an opinion (exhibit (a)), holding that the funds of the Home Owners' Loan Corporation, the Federal Home Loan Bank Board, and the Federal Savings and Loan Insurance Corporation were available to pay reasonable expenses in connection with the organization and operation of a medical service for the general benefit of employees, and also for expenses in connection with the operation of a credit union operated for the general benefit and relief of employees.

The opinion is apparently based on the theory that the above-named corporations have implied powers to incur expenses, payable from public funds, for the general benefit and relief of employees, the implication being based on the provisions of section 19 of the Federal Home Loan Bank Act, 47 Stat. 737, which provides:

“The board shall have power to select, employ, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary for the performance of its duties under this act without regard to the provisions of other laws applicable to the employment or compensation of officers, employees, attorneys, and agents of the United States. No such officer, employee, attorney, or agent shall be paid compensation at a rate in excess of the rate provided in the case of members of the board. The board shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government; and shall determine its necessary expenditures under this act and the manner in which they shall be incurred, allowed, and paid. and section 4 (j) of the Home Owners' Loan Act of 1933, 48 Stat. 131, as amended, which provides:

“The Corporation shall have power to select, employ, and fix the compensation of such officers, employees, attorneys, or agents as shall be necessary for the performance of its duties under this act, without regard to the provisions of other laws applicable to the employment or compensation of officers, employees, attorneys, or agents of the United States. No such officer, employee, attorney, or agent shall be paid compensation at a rate in excess of the rate provided by law in the case of the members of the Board. The Corporation shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government, and shall determine its necessary expenditures under this act and the manner in which they shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds. The Corporation shall pay such proportion of the salary and expenses of the members of the Board and of its officers and employees as the Board may determine to be equitable, and may use the facilities of Federal home loan banks, upon making reasonable compensation therefor as determined by the Board."

It thus appears that the Congress limited the expenditures by the corporations to “necessary expenditures under this Act”, as both provisions, supra, contain those words.

Specific legislation has been enacted by the Congress from time to time for the welfare of Federal employees, both civil and military, such as retirement laws, pensions laws, and laws for relief of employees injured in line of duty. The enactment of such laws negatives the implication of such powers from general statutory provisions controlling other activities of the Government.

Over 500 of the employees of the corporations here involved have authorized deductions to be made from their salaries for dues, which amounts are to be paid over to the Group Health Association, Inc. In this connection attention is invited to section 3477, Revised Statutes, as amended, section 203, title 31, of the United States Code, which provides:

“Assignments of claims void: All transfers and assignments made of any claim upon the United States, or of any part or share thereof, or interest therein, whether absolute or conditional, and whatever may be the consideration therefor, and all powers of attorney, orders, or other authorities for receiving payment of any such claim, or of any part or share thereof, shall be absolutely null and void, unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuing of a warrant for the payment thereof. Such transfers, assignments, and powers of attorney, must recite the warrant for payment, and must be acknowledged by the person making them, before an officer having authority to take acknowledgments of deeds, and shall be certified by the officer; and it must appear by the certificate that the officer, at the time of the acknowledgment, read and fully explained the transfer, assignment, or warrant of attorney to the

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