33 C. H. Dean, Jr. CONTRACT BETWEEN TVA, STONE & WEBSTER ENGINEERING CORPORATION, AND STEMAR CORPORATION Generally the elements of criminal conspiracy include: (1) an illegal objective; (2) an agreement between two or more persons to accomplish that objective; (3) one or more overt acts in furtherance thereof; and (4) the requisite intent. United States v. Andreen, 628 F.2d 1236 (9th Cir. 1980). Of course part of any defense would be evidence of the Board's lawful objective in entering these arrangements to resolve TVA's nuclear difficulties and evidence that the Board's reasons for granting these waivers are different from those that might be attributed to the contractors or loaned employees. However, the courts also recognize that a criminal conspiracy can be based on an understanding, express or tacit, to accomplish a lawful object by unlawful means. United States v. DeLoache, 279 F. Supp. 720 (W.D. Mo. 1968). The agreements between SWEC and TVA and the Board's memorandum of understanding with Mr. White could be viewed as some evidence of the required agreement and the Board's approval of those documents as the overt act. Because no proof of intent is required for the substantive crime of violating section 208(a), K & R Eng'g Co., 616 F.2d at 472; no intent would need be shown to prove a conspiracy in this situation. United States v. Mauro, 501 F.2d 45 (2d Cir. 1974). Closely associated with the theory of conspiracy is 18 U.S.C. § 2 (1982) which makes it a criminal offense, among other things, to aid, abet, or counsel another to commit an offense against the United States. This statute, which has been used to prosecute individuals who aided and abetted the violation of another Federal conflict-ofinterest statute, United States v. Johnson, 337 F.2d 180, 196 (4th Cir. 1964), is well engrained in the law, Nye & Nissen v. United States, 336 U.S. 613, 619 (1949). In a situation involving a violation of section 208(a), it would not require proof of specific criminal intent for a successful prosecution. See United States v. Beck, 615 F.2d 441, 448-49 (7th Cir. 1980); K & R Eng'g Co., 616 F.2d at 473.11/ 11 Another theory which the Government might consider using in a criminal prosecution involving a Board member or members would urge that the 208(b) waivers constituted the 34 C. H. Dean, Jr. CONTRACT BETWEEN TVA, STONE & WEBSTER ENGINEERING CORPORATION, AND STEMAR CORPORATION Depending on the facts, parties, and posture of any particular case, a court reviewing a section 208(b) waiver determination and setting it aside as unlawful might not automatically address contracts, expenditures, and similar actions already taken pursuant to the waiver, although such actions would, of course, need to be resolved in some forum. If such actions were addressed in court, we think a court might well follow balancing principles used by courts generally in determining whether unlawful agency actions should be invalidated retroactively or only prospectively. Such principles include whether the legal question is new, whether retroactive application would advance legal policy, and whether hardship or injustice would result. See, e.g., International Union of Bricklayers & Allied Craftsmen v. Meese, 616 F. Supp. 1387 (N.D. Cal. 1985). As discussed above, in the Mississippi Valley Generating Co. case, the contract was in effect invalidated retroactively, raising the distinct possibility that actions, including payments, taken under invalid 208(b) waivers would be treated similarly. Of course, without regard to such possibilities, legal or extra-legal, we are sure it goes without saying that the Board will wish to pursue a course which is in punctilious conformity with Congress' expressed intent. As we have stated, in our opinion, this calls for revised organizational arrangements under which Mr. White, Mr. Kelly, and the other SWEC employees or employees of other companies working for TVA will not make or advise on TVA decisions or actions involving contracts with or orders or requisitions of any kind from companies with which they have a continuing relationship. RMG: WEM: HSS: LHH John B. Waters Director's Office W. F. Willis Herbert S. Sanger, Jr. 11 (cont.) giving of false certificates under 18 U.S.c. S 1018 (1982). It does not seem to us that the Board's 208(b) action was a certification, but rather a determination not covered by this statute. Mr. SIKORSKI. Now on the issue of outside counsel which was raised by Congressman Sundquist, in June the TVA Board retained Robert Strauss, senior partner in the firm of Akin, Gump, Strauss, Haver & Feld, as an outside attorney to advise them in regard to the matters discussed in your February 13 and May 5 memoranda. Did you ever talk or meet with Mr. Strauss? Mr. SANGER. Yes. Mr. SIKORSKI. When was this? Mr. SANGER. Let's see. The TVA Board and general manager met with Mr. Strauss around May 20, something like that, or maybe a little earlier; and Mr. Strauss called me by phone on two occasions; and then I met with two lawyers from his office; and subsequently I met personally with Mr. Strauss and another lawyer from that firm. Mr. SIKORSKI. In your statement you say: Strauss told me during our discussions that he and others in his law firm had read our May 5 memorandum, that he considered it an outstanding piece of legal work and fully agreed with it, that he had so advised the Board in a meeting with it and had also told them he thought I had done them a favor in sending them the memorandum, and that he also fully agreed with my view that lack of criminal intent was not a defense to a charge of violating section 208. He, and later two other members of his firm, also told me that they had only agreed to serve as independent counsel and intended only to try to put the Board's action with respect to the section 208(b) waivers in the perspective of the difficult problems which everyone agreed TVA was facing with regard to its nuclear program. Mr. SANGER. That is correct. And that is the same statement that TVA's general manager gave me in repeating to me what Strauss had told to him and the Board members. Mr. SIKORSKI. So Mr. Willis, the general manager of TVA, confirmed Mr. SANGER. He initially told me the same thing. And then when I met with Strauss, Strauss made those remarks to me. Mr. SIKORSKI. Had TVA ever hired outside counsel before? Mr. SANGER. This was a total departure for TVA. The TVA Board had never hired outside counsel. Mr. SIKORSKI. Well, how did the Board respond to the preliminary conclusions reached by Mr. Strauss? Mr. SANGER. I don't know. I didn't know that the TVA Board was going to retain Strauss until after they did and Strauss himself called me. At times the TVA Board would say that nothing was being accomplished, but I really don't know the TVA Board's reaction. Mr. SIKORSKI. Did they hire another outside counsel? Mr. SANGER. They subsequently hired Joe Swidler to advise them personally, was my understanding. Mr. SIKORSKI. Was it because they were displeased with the work of Strauss's firm? Mr. SANGER. It is my understanding that Strauss hadn't given them any advice saying they had no complicity or there was no problems, so that was my understanding. Mr. SIKORSKI. When did you originally decide to step down? Mr. SANGER. I realized sometime in July-Bill Mason and I had had a six months' course on one statute, you know. As you know from law school, you learn all about contracts or some other broad subject in a semester. Well, we had had practically two semesters on that two-paragraph statute that you read. And after we gave this advice there was no question that our relationship with the TVA Board deteriorated badly. We were giving advice that, you know, there is some kind of Navy phrase that I recently learned from all the Navy people around TVA about giving advice up. Unfortunately, I wasn't in the Navy and I didn't learn that principle. But we gave advice that affected people over our head, and the situation deteriorated. So I suggested to the Board that I would leave voluntarily. I suggested that in my leaving voluntarily I should not be penalized because of the advice we gave. The Board chairman, Charles Dean, said: No, Herb, you have been a good general counsel. You can do this job better than anyone else. And besides, you are sort of like the guy in the circus that gets shot out of the cannon. You know, we can't do without you. Mr. SIKORSKI. That was somewhat prophetic. Mr. SANGER. Yes, sir. So I went ahead and kind of like-I had been with TVA a long time. And you know, you sort of naively think that things will work out. They didn't work out. And after the Board retained Swidler, Dean came to my office and said: Herb, I lied to you. I want you to leave. I want you to resign, and Johnny Waters agrees with me. And I said, fine, I will do that but I want to leave under the same terms. I don't think I should be penalized in any way because my leaving is related to the advice we gave on the Ethics Act. Dean said that, Herb, the position you have taken puts you in a position of not being able to defend he, Dean, or Waters. And we had some discussion that my job was to defend TVA and his job as a Board member was to enforce the ethics requirements, too. And I didn't really think there was any kind of conflict. But there was no need for that sort of discussion. Mr. SIKORSKI. It was only after you had raised your desire to leave that they had communicated their desire, first, to have you stay on in some capacity; second, to leave under very attractive terms similar to those that had been negotiated for Mr. Parris, who had been general manager- Mr. SANGER. No, he was manager of nuclear power. Mr. SIKORSKI. Before White came in. You negotiated, and then after it was clear you were leaving, you wanted to leave, they wanted you to leave, that they expressed repeatedly that they didn't want any association with this 208 conflict-of-interest issue. Mr. SANGER. They made it clear to me that in leaving we ought to have some sort of press release that recognized this was a joint understanding and that trying to be sure that there as no impression created that it was related to the advice I had given on the ethics issue. Mr. SIKORSKI. Mr. Mason, you weren't privy to these conversations, but I am asking. Did Mr. Sanger relate to you what was going on on these issues? Mr. MASON. Yes. Mr. Sanger and I daily, many times a day, discussed all of the matters. Mr. SIKORSKI. Even his departure? Mr. MASON. Yes. Mr. SIKORSKI. And what he told you during this time confirms what he just told us here? Mr. MASON. That is what he told me. I was present at times when he was talking to representatives of the Office of Government Ethics as the events were occurring, and they can confirm the same thing. Mr. SIKORSKI. Then all of a sudden allegations were made that questioned your integrity. Mr. SANGER. Yes. Mr. SIKORSKI. I think they have been very lengthily dealt with in your statement and summarized in good fashion by Mr. Mason. But my concern is the use of the Inspector General in this process. First of all, he returned his copy of your February 13th memorandum, saying that it was for information purposes. Secondly, he received a copy of the May 5th memorandum as well, is that correct? Mr. SANGER. He was sent a copy, yes. Mr. SIKORSKI. Then he showed up later on investigating you. You have summarized the allegations raised against you: that somehow you shared some information with Mr. Parris, that you argue was not confidential and never had been treated as such; secondly, that you did so under the direction of the general manager. Mr. SANGER. Who had previously told him about it. Mr. SIKORSKI. The general manager had previously told Mr. Parris about it, in the context of keeping Mr. Parris on in some kind of fashion after Mr. White came on board and assumed Mr. Parris' previous responsibilities. Mr. SANGER. If the chairman please, I want it understood I am not faulting Mr. Willis for doing that. I think there was an entirely proper use. Mr. SIKORSKI. No. I understand that. Then the second allegation and the third allegation raised by the IG deal with your role as one of the Board's three designees on a seven-member Retirement Board: three from the Board, three elected by the employees of the beneficiaries of that program, and the seventh selected by those six. Mr. SANGER. That is correct. Mr. SIKORSKI. You had been on the board for some years―― Mr. SIKORSKI. Eleven years, and then all of a sudden Mr. Zigrossi shows up and wants all the documents of that Retirement Board, is that correct? Mr. SANGER. That is correct. Mr. SIKORSKI. The Retirement Board said: We are going to hire outside counsel to assist us in responding to this request. You supported that? Mr. SANGER. I was one of the people—it was a unanimous vote by the Retirement System Board. As chairman, the TVA Board credited me with pushing the issue. As chairman, I was the spokesman. I was the principal spokesman when we went and discussed it with the TVA Board. Mr. SIKORSKI. You argue extensively why that was appropriate, with full precedent involving even Mr. Swidler earlier. That is the second charge. |