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JGR/PIC (Presidential Inaugural Committee) Audit Letter
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JGR/PIC (Presidential Inaugural Committee) Audit Letter
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: JGR/PIC (Presidential Inaugural
Committee) Audit Letter
Box: 38
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
National Archives Catalogue: https://catalog.archives.gov/
THE WHITE HOUSE
WASHINGTON
October 21, 1985
Dear Mr. Gill:
Thank you for your letter requesting information on the
donation of surplus funds from the Presidential Inaugural
Fund to various charities, including Child Find, Inc., of
New Paltz, New York. You inquired how much money Child Find
received, and how Child Find was selected as a recipient.
The Committee for the 50th American Presidential Inaugural
decided not to release information about the specific
amounts donated to each of the 23 charities that shared some
$2 million of surplus inaugural funds. (One million dollars
of the surplus was paid to the United States Treasury to
reduce the national debt.) The funds involved are private
funds, and it was felt that releasing information about
specific amounts might be misinterpreted as indicating that
some of the charities were worthier or more deserving of
support than others.
The charities chosen to receive surplus inaugural funds were
chosen as good examples of charitable activity that should
be encouraged and could possibly be duplicated elsewhere
across the country. The recipients were selected to repre-
sent all geographic areas of the country, as well as a
diversity of types of charitable organizations and activities.
I hope the foregoing 1S helpful.
Sincerely,
Orig. signed by FFF
Fred F. Fielding
Counsel to the President
Mr. John E. Gill
President, Children's Rights
of New York, Inc.
19 Maple Avenue
Stony Brook, NY 11790
FFF:JGR:aea 10/21/85
bcc: FFFielding/JGRoberts/Subj/Chron
THE WHITE HOUSE
WASHINGTON
November 12, 1985
MEMORANDUM FOR THE FILE
FROM:
JOHN G. ROBERTS Del
SUBJECT:
PIC Counsels Meeting
Today from approximately 10:15-10:45 a.m. Mr. Fielding met
in his office with Robert Barker, Pierre LaForce, and John
Roberts, concerning the PIC Counsel's letter to the audi-
tors. Mr. Fielding began the discussion by noting his
concern over the lapse of insurance coverage, which occurred
on November 1 and which Mr. Barker advised Mr. Fielding of
by letter dated November 6. Mr. Barker noted that Fred Hale
made that decision, without consultation. Mr. Fielding
suggested noting the facts concerning the lapse of insurance
coverage in the audit letter; Messrs. Barker and LaForce
agreed that this was a good idea.
Mr. Barker noted that PIC had some $250,000 left in the
bank, $50,000 of which would probably be given to the
Building Sciences Museum at the request of John Rogers. Mr.
Barker expressed the view that the remainder should be kept
by PIC and not disbursed. Mr. Fielding questioned whether
Fred Hale was under a fiduciary obligation to invest this
sum prudently; Mr. LaForce stated he probably was (though no
shareholders existed to challenge whatever Hale did) and
that Hale was in fact investing the sum prudently (in money
market funds).
Mr. Barker noted that Fred Hale was preparing the final tax
return, and that PIC would file for exemption from D.C.
taxes on investment earnings and that the exemption would be
granted. Tom Moran, according to Mr. Barker, issued an
opinion to that effect. Mr. Fielding asked if he should -
sign the letter to the auditors, and both Mr. Barker and Mr.
LaForce recommended that he do SO. Mr. Fielding noted that
he was signing in reliance on the representations of Messrs.
Barker and LaForce, who were familiar with the substance of
the matters discussed in the letter.
CC: Fred F. Fielding
THE WHITE HOUSE
WASHINGTON
November 12, 1985
MEMORANDUM FOR THE FILE
FROM:
JOHN G. ROBERTS JJB
SUBJECT:
PIC Counsels Meeting
Today from approximately 10:15-10:45 a.m. Mr. Fielding met
in his office with Robert Barker, Pierre LaForce, and John
Roberts, concerning the PIC Counsel's letter to the audi-
tors. Mr. Fielding began the discussion by noting his
concern over the lapse of insurance coverage, which occurred
on November 1 and which Mr. Barker advised Mr. Fielding of
by letter dated November 6. Mr. Barker noted that Fred Hale
made that decision, without consultation. Mr. Fielding
suggested noting the facts concerning the lapse of insurance
coverage in the audit letter; Messrs. Barker and LaForce
agreed that this was a good idea.
Mr. Barker noted that PIC had some $250,000 left in the
bank, $50,000 of which would probably be given to the
Building Sciences Museum at the request of John Rogers. Mr.
Barker expressed the view that the remainder should be kept
by PIC and not disbursed. Mr. Fielding questioned whether
Fred Hale was under a fiduciary obligation to invest this
sum prudently; Mr. LaForce stated he probably was (though no
shareholders existed to challenge whatever Hale did) and
that Hale was in fact investing the sum prudently (in money
market funds).
Mr. Barker noted that Fred Hale was preparing the final tax
return, and that PIC would file for exemption from D.C.
taxes on investment earnings and that the exemption would be
granted. Tom Moran, according to Mr. Barker, issued an
opinion to that effect. Mr. Fielding asked if he should
sign the letter to the auditors, and both Mr. Barker and Mr.
LaForce recommended that he do SO. Mr. Fielding noted that
he was signing in reliance on the representations of Messrs.
Barker and LaForce, who were familiar with the substance of
the matters discussed in the letter.
CC: Fred F. Fielding
THE WHITE HOUSE
WASHINGTON
November 8, 1985
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS JOR
SUBJECT:
PIC - Audit Letter
Bob Barker has sent you a draft of a letter for your signature
as General Counsel to PIC, to be sent to the PIC auditors.
I understand a meeting has been set for 10:00 a.m., Tuesday,
November 12, to discuss the letter.
The draft, which has been approved by Barker, LaForce, Hale,
and Soll, discusses the pending and potential claims known
to PIC. I have no way of independently assessing the
accuracy or the comprehensiveness of the factual information
in the letter. We are aware of some of the details of the
Taste of America/Arata Exposition dispute, which appears to
be accurately described in the letter. We are also aware of
some of the details of the AFTRA complaint. The draft
letter notes that the discrimination charge filed with the
EEOC and referred to the D.C. Office of Human Rights is
"dormant." You will recall that a decision was made not to
take any affirmative action to close out the charge, since
neither the complainants nor the Office of Human Rights are
pressing it.
Barker also raises the question of continued insurance
coverage. Barker's letter, dated November 6, states that
insurance coverage "will expire" on November 1, 1985.
Coverage is on a "claims made" basis, so PIC officers and
directors are exposed. PIC's insurance brokers recommended
continuation of coverage, but this recommendation was not
followed.
ID #
CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
progral
0 . OUTGOING
H * INTERNAL
w5
I - INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent:
Robert W. Barker
2)
Mt Mall Report
User Codes: (A)
(B)
(C)
Subject:
PIC - audit Letter
(include
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency (Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
CUHolland
ORIGINATOR
85/11/06
/ /
Referral Note:
CUAT18
D 85,11,07
585111108
Referral Note:
/ /
/ /
I
-
Referral Note:
/ /
/ /
I
Referral Note:
/ /
/ /
-
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A Appropriate Action
I - Info Copy Only/No Action Necessary
A Answered
C Completed
C Comment/Recommendation
R Direct Reply w/Copy
B - Non-Special Referral
S Suspended
D Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
WILKINSON, BARKER, KNAUER & QUINN
LAW OFFICES
1735 NEW YORK AVENUE. N.W.
WASHINGTON, D. C. 20006
ERNEST L WILKINSON
LUD ASHLEY. P.C
(1899-1978)
PATRICIA L. BROWN
GLEN A. WILKINSON
(202) 783-414
OF COUNSEL
(1911-1985)
L. ANDREW TOLLIN
ROBERT W. BARKER
ROSEL H. HYDE
CABLE:"WILBAR
KENNETH E. SATTEN
F. THOMAS MORAN
EARL R STANLEY
KENNETH D. PATRICH
PAUL S. QUINN
TELEX: (710) 822-9349
LUISA L. LANCETT
LEON T. KNAUER
CHRISTINE V, SIMPSON
RICHARD ANTHONY BAENEN
PIERRE J. LAFORCE
TELECOPIER: (202) 833-2360
GORDON C. COFFMAN
MICHAEL A. FORSCEY
November 6, 1985
HAND DELIVER
Fred F. Fielding, Esq.
Counsel to the President
The White House
Washington, D.C. 20500
Re: PIC - Audit Letter
Dear Fred:
A number of loose items continue to filter to Pete
LaForce, Tom Moran and myself for final disposition.
The most recent issue which needs prompt resolution
is a proposed opinion letter to the auditors.
Enclosed herewith is a draft letter which has been
reviewed by Pete LaForce and myself, as well as by Fred Hale and
Bruce Soll. I forward it to you for appropriate action.
In his letter of October 31 to me, Fred Hale says that
the pressing concern for the attorneys' audit letter lies with
the auditors. They remain hesitant in issuing an qualified opinion
which they would issue without our letter. He says he has in-
structed Peat, Marwick & Mitchell to issue an opinion with or
without the attorneys' audit letter, if the attorneys' letter
is not promptly forthcoming. Accordingly, we should resolve this
matter promptly.
If you desire to sit down with Pete and me to review
this or any other matters pending from the Inauguration, we should
be happy to do so. In any event, I wish you would advise me of
your action on the proposed audit letter. There remain open
questions of insurance coverage not mentioned in the draft of
audit letter. In this letter to me, Fred Hale indicates that
as of November 1, 1985 coverage on the insurance program furnished
by Johnson & Higgins will expire. The only policy that will remain
in effect until May 1, 1986 is workmen's compensation. Since
Fred F. Fielding, Esq.
November 6, 1985
Page Two
the coverage of directors and officers liability and corporate
reimbursement was on a "claims made" basis instead of a "claims
occurring" basis, the officers and directors remain uncovered.
I enclose herewith a copy of a letter to Lee Graves from Johnson
& Higgins. I assume that Fred Hale has the authority to make
these policy decisions.
Please give me a call if you want to sit down on this.
Fred Hale has asked to be advised on our decision and action in
connection with the attorneys' audit letter.
Sincerely Ball yours,
Robert W. Barker
Enclosure
CC: Mr. Fred Hale
(date
October 22, 1985
THE COMMITTEE
FOR THE
50TH AMERICAN
PRESIDE NTIAL
NAI GURAL
Peat, Marwick, Mitchell & Co.
ashington. D (
1990 K Street, N.W.
20599
Washington, D. C. 20006
202 433-7140
Re: Committee for the 50th American
GENERAL COUNSEI
Presidential Inaugural
Fred F Fielding
DEPUTY GENERAL COUNSEL
Gentlemen:
Robert W Barker
ASST GENERAL COUNSEI
You have requested that we furnish you
Pierre J LaForce
with certain information in connection with your
STAFF COUNSEL
examination of the accounts of the Committee for
Charles G Bakaly
the 50th American Presidential Inaugural, a Dis-
Pamela Fennell
Kemp P Harshman
trict of Columbia nonprofit corporation, for the
Charles G Sabo
period ending
As General Counsel
Bruce Soll
for the Committee I advise you as follows in con-
ECAI COORDINATOR
nection with your inquiry.
NAUGURALI BALIS
Gani Redmon
Subject to the last paragraph of this
EXECUTIVE ASST
letter, this is to advise you that neither I, nor
Dianna Holland
any of the lawyers over whom I exercise general
ADMINISTRATIVE ASST
legal supervision as General Counsel, have given
IZA Wilcox
substantive attention to, or represented the Com-
EGAL COMMITTEE
mittee in connection with, material loss contin-
Robert W Barker
Chairman
gencies coming within the scope of Clause (a) of
Paragraph 5 of the Statement of Policy referred to
Donald C Alexander
in' the last paragraph of this letter, except as
Howell E Begle Jr
follows:
Diane Burkley
Roger A Clark
Gordon C Coffman
1. Taste of America. This organization
Armand P D'Amato
staged an "authorized" (not "official") event in
John R Erickson
connection with the Inauguration. It has submitted
Edward Forgotson
a claim totaling $70,000.00. It alleges that it is
tonathan B Hill
due compensation for certain catering functions,
Thomas Moran
and it also seeks damages for losses it claims to
R Marc Nuttle
have suffered as a result of the Committee's
Anne O'Connell
failure to include promotional literature in a
George Pantos
Robert A Peavy
Committee mailing and for alleged Committee-caused
Inward M Prince
interference with its functions. The claim was
Ronald E Robertson
first submitted on January 29, 1985. Subsequently,
Milton A Rudin
after discussions with Taste of America's principal
Timothy Ryan
and other investigation, Committee officials deter-
2 Carter Saunders
mined that the claim was without merit. Taste of
3 John Williams
America has threatened legal action, but, to date,
no suit has been filed. Counsel for the Committee
is without sufficient information to determine
Peat, Marwick, Mitchel & Co.
October 22, 1985
Page 2
whether suit will be filed, and, if so, what the possibility of
success would be.
In a related matter, one of Taste of America's sup-
pliers, Arata Expositions, has filed a suit in the Superior Court
for the District of Columbia, claiming $22,393.60 for goods fur-
nished to Taste of America at its Inaugural function. The suit
purports to treat Taste of America as part of the Committee.
However, the Committee is not properly named in the complaint,
nor has service of process been made on it. Counsel for the
Committee and counsel for Taste of America have both advised
counsel for Arata that Taste of America is not affiliated with
the Committee. It is unknown at this time what course of action
will be taken by Arata. Counsel for the Committee has notified
Taste of America that it intends to seek indemnification for any
liability or costs arising as a result of the Arata suit.
2. National Union Fire Insurance Company. A claim has
been made by National Union for an additional auto insurance
premium of $25,000. National Union provided the insurance
coverage for the Committee's motor vehicles. National Union
claims that the Committee utilized a significantly greater number
of vehicles than originally represented, thereby increasing the
liability insurance exposure of National Union and, accordingly,
that it is entitled to an additional premium. The Committee
rejected this claim in early 1985, shortly after it was made. No
further communication has been received from National Union.
However, Johnson & Higgins, the insurance broker which handled
the Committee's insurance, recently wrote the Committee con-
cerning this claim.
3. Brumfield-Gallagher, Inc. By letter dated
March 11, 1985, this marketing organization made a claim for
$46,828.00 in unrealized commissions, alleging that negligence
and inefficiency in the handling of telephone order sales had
resulted in significantly reduced commissionable sales. The
Committee promptly rejected this claim. Since then, the Com-
mittee has heard nothing further from this complainant. Based on
present information, it does not appear that any suit will be
filed in this matter.
4. AFTRA Complaint. A controversy arose between the
Committee's production company, Jani Productions, and the unions
representing artists and performers concerning a recruitment
advertisement run by Jani Productions. The unions claim that the
ad was anti-union and discriminatory. By agreement dated
January 14, 1985, Jani Productions and the unions entered into a
settlement of this dispute. However, a complaint was filed with
the Equal Employment Opportunity Commission charging the
Peat, Marwick, Mitche. & Co.
October 22, 1985
Page 3
Committee with discrimination in connection with the Jani Produc-
tions ad. Pursuant to law, the complaint was referred to the
District of Columbia Office of Human Rights where it has laid
dormant. The Committee has not been contacted by the District of
Columbia Office of Human Rights, nor has the complainant sought
further action. In view of the foregoing, it would appear that
no further action will be taken.
5. Insurance Claims. A number of miscellaneous claims
have been filed against the Committee with respect to which there
is insurance coverage. As of July 19, 1985, the insurance
adjuster handling these claims reported that there remained five
open claims. These are described below:
a. Claim #005751. Claimant -- David Messing.
$3,268.60 paid and AIAC continues to have an
open reserve of $1,500 for automobile bodily
injury.
b. Claim #005737. Claimant -- Mayflower Cab
Company. File remains open with an auto PD
reserve of $600 and an auto BI reserve of
$1,000. Although nothing has been paid on
this claim, the claimant is represented by
attorney, and AIAC is in the process of in-
vestigating.
C. Claim #006896. Claimant -- Carol Slate.
Claimant indicates she caught her heel on
carpet and fell. Medical bills total $400.00.
Open reserve of $1,500. Claim is still being
investigated.
d.
Claim #006059. Claimant -- Tammy Moline.
Claimant presented a claim for the loss of an
earring. She indicated that she was struck in
the head when decorations fell and this caused
her to lose an earring. Claim has been
denied. Open reserve carried of $1,000.
e.
Claim #005891. Claimant -- [not supplied].
Auto related claim. Open reserve $5,000.
Insured's driver not supplied.
Further, this is to advise you that we are unaware of
any unasserted claims or assessments.
The information set forth herein is as of October 22,
1985 except as otherwise noted, and we disclaim any undertaking
to advise you of changes which thereafter may be brought to my
Peat, Marwick, Mitche - & Co.
October 22, 1985
Page 4
attention or to the attention of the lawyers over whom I exercise
general legal supervision.
This response is limited by, and in accordance with, the
ABA Statement of Policy Regarding Lawyers' Responses to Auditors'
Requests for Information (December 1975) ; without limiting the
generality of the foregoing, the limitations set forth in such
Statement on the scope and use of this response (Paragraphs 2 and
7) are specifically incorporated herein by reference, and any
description herein of any "loss contingencies" is qualified in
its entirety by Paragraph 5 of the Statement and the accompanying
Commentary (which is an integral part of the Statement).
Yours truly,
Fred F. Fielding
General Counsel
FINNIGE
RATION OF
OF
PRESIDENT
1985
THE COMMITTEE
FOR THE
50TH AMERICAN
October 31, 1985
PRESIDENTIAL
INAUGURAL
1019 19th Street, N.W.
Suite 1000
Washington, D.C. 20036
202/872-1985
Mr. Robert W. Barker
Wilkinson, Barker, Knauer & Quinn
Law Offices
1735 New York Avenue, N.W.
Washington, D.C. 20006
Re: Committee for the 50th American Presidentia
Inaugural Committee - Audit Letter
Dear Bob:
Your audit letter of October 22, 1985 has been reviewed and I find no
substitive changes in the status of Items 1 through 5. In regard to
the automobile insurance premium discussed in Item 2. the Committee
has taken a firm position with Johnson & Higgins that no part of the
additional premium is due or will be paid by the Committee. Johnson &
Higgins has taken no action at this time.
The concern with "pressing" for an attorney's audit letter lies with
Pete, Marwick, Mitchel & Company. They remain hesitant in issuing a
qualified opinion to the Committee. I have instructed Pete, Marwick
to issue an opinion, with or without an attorney's audit letter, if
the audit letter is not immediately forthcoming.
Futher, I wish to bring to your attention that as of November 1, 1985
coverage on the insurance program furnished by Johnson & Higgins will
expire. Enclosed is a copy of captioned instructions given, through
Mr. Lee Graves, to Johnson & Higgins and their response. The renewal
premiums offered by Johnson & Higgins are not reasonable and therefore
it is not cost effective to continue this coverage. The only policy
that will remain in effect, until May 1, 1986, is workmens compensation.
Please, keep me posted on the status of the attorney's audit letter SO
my office may coordinate it with Pete, Marwick in the issuance of the
audit opinion.
Sincerely,
Frederick G. Hale
encl: 2
FGH/ef
Atlanta
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Birmingham
Adelaide
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Driver
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OF WASHINGTON. D.C.. INC
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Miam
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Business Established New York 1845
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Bantings
New York
Boguts
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INSURANCE BROKERS-AVERAGE ADJUSTERS
Call
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Parts
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Portiand
ACTUARIES-EMPLOYEE BENEFIT PLAN CONSULTANTS
Tehras
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Telex Number 904310
2021 K STREET. N.W.
Answerback KERODEN WSH
SUITE 215
WASHINGTON. D.C. 20006
202-775-1900
October 25, 1985
Mr. Lee Graves
Committe for the 50th American Presidential Inaugural
c/o
Hale, McKenzie & Company
1019 19th Street, N.W.
Suite 1000
Washington, D.C. 20006
Dear Lee:
INSURANCE PROGRAM for COMMITTEE FOR THE 50th AMERICAN PRESIDENTIAL INAUGURAL
We wish to confirm your instructions for the captioned, per our telephone
conversation of this afternoon.
1) Directors and Officers Liability and Corporate Reimbursement
This coverage expires November 1, 1985. As this is a "claims made"
coverage (in lieu of "occurrence" basis coverage), we have requested
the National Union underwriter to consider both an annual renewal
of this coverage as well as a "discovery period" (e.g., coverage
for claims made during the discovery period, but only as respects
acts commited prior to November 1, 1985). The underwriter has responded
that a discovery period of November 1, 1985 to November 1, 1986
would likely cost in the range of $20,000 to $25,000.
You have advised us that you do not desire this coverage, due to cost
considerations. We will therefore not pursue this coverage with the
underwriters. However, we have enclosed several copies of renewal
applications should you change your decision. (We do recommend re-
consideration as this first annual renewal period is a "ripe period"
for claims, as we discussed.)
JOHNSON & HIGGINS
Mr. Lee Graves
Page 2
October 25, 1985
2) Comprehensive General Liability/ Automobile Liability
You have instructed us to not renew this coverage.
Please note that as long as activities are performed by, or on behalf
of, the Committee, a third-party liability exposure exists for the
Committee, whether such liability be direct or "vicarious". We
therefore recommend consideration of one of the following:
a) Renewal of this insurance.
b) Obtaining coverage for the interest of the Committee under
the insurance of another. If, as you have indicated, all
activities of the Committee are being performed by Hale,
McKenzie & Co., consideration should be given to naming
the Committee as an Additional Named Insured on the
Hale, McKenzie & Co. insurances.
3) Fidelity
We will advise of the cost of a renewal of this coverage.
4) Property Insurance
You have instructed us to not renew this coverage.
5) Accidental Death and Dismemberment Insurance
You have instructed us to not renew this coverage.
Should you decide to pursue an extension of coverage under the Directors and
Officers Liability insurance, please return a completed and signed application
and the additional data requested in Item 6 of the application (as appropriate)
prior to the November 1 expiration date.
Thank you.
Very truly yours,
William L. McBurnie
Vice President
CC: Mr. Paolo Carega
In IIIT 11/6 11/4
PEAT
Peat. Marwick. Mitchell & Co.
Certified Public Accountants
MARWICK
1990 K Street, N.W.
11/7
Washington, D.C. 20006
202-223-9525
October 29, 1985
Mr. Fred F. Fielding, Esquire
General Counsel
Committee for the 50th American
Presidential Inaugural
The White House
Washington, D.C. 20500
Dear Mr. Fielding:
Please find enclosed a copy of the March 11, 1985 letter written by
Mr. Frederick G. Hale, requesting certain information relating to the
audit of the Presidential Inaugural financial statements. We would
appreciate having your response as soon as possible so WE can issue
our accountant's report.
Mr. Hale informed me this morning that Mr. Barker has prepared a response
and is circulating it for review.
Very $ truly yours,
S. Joseph Bruno, Partner
SJB:sld
Enclosure
CC: Frederick G. Hale
INAUGU
PRESIDENT
1985
THE COMMITTEE
March 11, 1985
FOR THE
50TH AMERICAN
PRESIDENTIAL
INAUGURAL
Washington D.C
20599
Fred F. Fielding, Esquire
202/433-7100
General Counsel
Committee for the 50th
American Presidential Inaugural
The White House
Washington, DC 20500
Dear Fred:
Our auditors are performing an examination of our financial statements.
Please furnish to them the information requested below involving matters
as to which vou have been engaged and to which you have devoted substan-
tive attention on behalf of the Committee for the 50th American
Presidential Inaugural (Committee) in the form of legal consultation or
representation. Please provide the information requested below taking
into consideration matters that existed at February 28, 1985 and for the
period from that date to the date of your response. Your response
should be sent to our auditors, Peat, Marwick, Mitchell & Co.
1990 K Street, N.W.
Washington, D.C. 20001
Pending or Threatened Litigation
(excluding unasserted claims and assessments)
Please furnish to our auditors a list of all litigation, claims, and
assessments (excluding unasserted claims and assessments) considered bv
Management to be mutual. Information regarding each case should
include:
1. The nature of the litigation,
2. The progress of the case to date,
3. How management is responding or intends to respond to the
litigation; e.g. to contest the case vigorously or to seek
out-of-court settlement, and
4. An evaluation of the likelihood of an unfavorable outcome
and an estimate, if one can be made, of the amount or
range or potential loss.
Free F. Fielding
March H, 1985
Page 2:of:2
Unasserted Claims and Assessments
Please furnish a list of all unasserted claims and assessments
considered by the Committee to be probable of assertion and, if
asserted, to have at least a reasonable possibility of an unfavorable
outcome. Information regarding each case should include:
1. The nature of the matter,
2. How management intends to respond if the claim is
asserted, and
3. The possible exposure if the claim is asserted.
We understand that whenever. in the course of performing legal services
for us with respect to a matter recognized to involve an unasserted
claim or assessment which TFV call for financial statement disclosure,
you have formed a professional conclusion that we should disclose or
consider disclosing such possible claim or assessment, as a matter of
professional responsibility to US you will so advise US and will consult
with us concerning the question of such disclosure and the applicable
requirements of Statement of Financial Accounting Standards No. 5.
Please specifically confirm to our auditors that our understanding is
correct.
We have assured our auditors that your list of unassented claims and
assessments includes all such claims and assessments that you have
advised us are probable of assertion and must be disclosed in accordance
with Statement of Financial Accounting Standards No. 5.
Other Matters
Please identify the nature and reasons for anv limitation on your
response. The scheduled completion date of the auditors' examination is
such that you should send your letter to Peat, Marwick, Mitchell & Co.,
on or about March 15, 1985.
Verv truly yours,
-Trid
Frederick G. Hale
Chief Financial Officer
cc: Bruce Soll
11/12 = FFF, Baha, LaFore, JLR
PIC andit letter and winner camage
his Hule make deving not to continue AM fait reverse
No condition
FFF: rain in undit letter ? PL: enerything in letter
is covered. B: adding at with be 20ml idea.
B: $250 K in bank Regus request for anoth $50 K for
Bely museum.
FFF: newores about any 1 this ? PL: withing this been
mutel
FFF: advise of laping of in coverage.
B: arting antibil PL corum.
Roy Hale the fate tax return. norm prepaing associated for D.C.
too examption for carrings on invitute
keep corporation in exiteme.
FOP: biding dats to int ? PL: Itale climing this
Be: D.C. that AFTNA claim as dead.
Dr. eth - basis of my of pc and BB.
file this nl new just
to file and &
THE WHITE HOUSE
WASHINGTON
November 13, 1985
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS DDR
SUBJECT:
Arata Expositions Inc. V. Presidential
Inaugural Committee -- "A Taste of
America"
Charles E. Wilson, counsel for Arata Expositions, has served
John Liftin with the summons and complaint in his suit
against the Presidential Inaugural Committee -- A Taste of
America. You will recall that Lifton was registered agent
for the 1981 Inaugural Committee. Wilson served Lifton,
apparently assuming he was also agent for the 1985 commit-
tee, by certified mail/return receipt, pursuant to Rule
4 (c) (3) of the District of Columbia Superior Court Rules.
Roger Clark, counsel for Lifton, was kind enough to forward
the summons and complaint to you, rather than simply returning
it to Wilson.
Bob Barker and Bruce Soll have been handling all of this
litigation. I recommend sending the correspondence to them
for appropriate handling. I do not think we need to respond
to Clark, and certainly do not recommend a reply from this
office to Wilson.
Attachment
THE WHITE HOUSE
WASHINGTON
November 15, 1985
Dear Roger:
Thank you for sending along the complaint and summons that
counsel for Arata Expositions attempted to serve on John
Liftin, 1L the mistaken belief that Mr. Liftin was an agent
for the 1985 Inaugural Committee. The 1985 Inaugural
Committee has not yet been served in this action, but it
appears that Arata is pressing a claim against Taste of
America, and 15 including the Inaugural Committee in the
belief that Taste of America is part of or otherwise
affiliated with the Inaugural Committee. Both Taste of
America and the Inaugural Committee agree this is not the
case.
Should you or Mr. Liftin receive any other papers from
counsel for Arata, I would simply return them to him and
advise him that Mr. Liftin is not an agent for the 1985
Inaugural Committee.
Thank you for your assistance.
Sincerely,
Orig. signed by FFF
Fred F. Fielding
Counsel to the President
Roger A. Clark, Esquire
Rogers & Wells
1737 H Street, N.W.
Washington, DC 20006
FFF:JGR:aea 11/15/85
bcc: FFFielding
JGRoberts
Subj
Chron
THE WHITE HOUSE
WASHINGTON
November 13, 1985
MEMORANDUM FOR ROBERT W. BARKER, ESQUIRE
WILKINSON, BARKER, KNAUER & QUINN
BRUCE SOLL, ESQUIRE
MICHAEL K. DEAVER & ASSOCIATES, INC.
FROM:
FRED F. FIELDING Orig. signed by FFF
COUNSEL TO THE PRESIDENT
SUBJECT:
Arata Expositions Inc. V. Presidential
Inaugural Committee -- "A Taste of
America"
As you will see from the attached, counsel for Arata
Expositions has attempted to serve the Presidential
Inaugural Committee -- A Taste of America by serving the
agent for the 1981 Inaugural Committee. I am forwarding
this correspondence to you for appropriate handling.
Attachment
FFF: JGR:aea 11/13/85
cc: FFFielding
JGRoberts
Subj
Chron
THE WHITE HOUSE
WASHINGTON
November 13, 1985
MEMORANDUM FOR ROBERT K. BARKER, ESQUIRE
WILKINSON, BARKER, KNAUER & QUINN
BRUCE SOLL, ESQUIRE
MICHAEL K. DEAVER & ASSOCIATES, INC.
FROM:
FRED F. FIELDING
COUNSEL TO THE PRESIDENT
SUBJECT:
Arata Expositions Inc. v. Presidential
Inaugural Committee -- "A Taste of
America"
As you will see from the attached, counsel for Arata
Expositions has attempted to serve the Presidential
Inaugural Committee -- A Taste of America by serving the
agent for the 1981 Inaugural Committee. I am forwarding
this correspondence to you for appropriate handling.
Attachment
FFF: JGR:aea 11/13/85
CC: FFFielding
JGRoberts
Subj
Chron
359747
ID #
CU
WHITE HOUSE
J2002
CORRESPONDENCE TRACKING WORKSHEET
0 - OUTGOING
H - INTERNAL
T.R.J
I - INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent:
Roger clark
MI Mall Report
User Codes: (A)
(B)
(C)
Subject: arata Exposilions , The V. Presedential
Insuqure Committee - n a taste af
america"
ROUTE TO:
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DISPOSITION
Tracking
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of
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CUNOLL
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/ /
Referral Note:
CUAT 18
D 85,11112
585111,25
Referral Note:
a
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Referral Note:
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I
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I
Referral Note:
ACTION CODES:
DISPOSITION CODES:
-
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I - Info Copy Only/No Action Necessary
A Answered
0 Completed
C Comment/Recommendation
R Direct Reply w/Copy
B . Non-Special Referral
S Suspended
D Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
AWDs
Completion Date - Date of Outgoing
Comments:
326070cu; 337806cu; 334355cu
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
200 PARK AVENUE
NEW YORK N.Y. 10166
Rogers & Wells
47. AVENUE HOCHE
75008-PARIS, FRANCE
TELEPHONE (212) 878-8000
TELEPHONE 763.11.00
INTERNATIONAL TELEX 234493
DOMESTIC TELEX 710-581-219
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LOS ANGELES. CALIFORNIA 90012
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TELEPHONE (203) 869-6533
"USLAW"LONDON
November 7, 1985
359747
Cu
The Honorable
Fred F. Fielding
Counsel to The President
The White House
Room 2, West Wing
1600 Pennsylvania Avenue, N.W.
Washington, D.C. 20500
Dear Fred:
Enclosed is a Complaint and Summons against the
Presidential Inaugural Committee which was served on my
former partner, John Liftin, who was the registered agent for
the Presidential Inaugural Committee which we set up for the
1981 Inauguration. The Complaint apparently relates to your
1985 Inauguration Committee's activities, so I assume that
you will see to it that the matter is taken care of. Warm
regards.
Sincerely,
Roger Niv Clark
Enclosure
Nov 06,85 17:19 QUADREX SECURITIES CORPORATION FAX # (212) 888-9804
P.02
LAW OFFICES
MCCARTHY, WILSON 8 ETHRIDGE
104 SOUTH WASHINGTON STREET
ROCKVILLE, MARYLAND 20850
(300 762-7770
JOSEPH 5. McCARTHY 0918-1983
G. CLIFTON PATTERSON. III
CHARLES I WILSON IR
THOMAS PATRICK RYAN
PAUL H. RTHRIDGE
November 4, 1985
DAVID LEE RUTLAND
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Mr. John M. Lifton
Quadrex Securities Corp.
500 Park Avenue
New York, New York 10022
Re: Arata Expositions, Inc., Plaintiff V.
Presidential Inaugural Committee - "A
Taste of America", Defendant, CA No.
2412-85
Dear Mr. Lifton:
You are hereby notified as agent that suit has
been filed against Presidential Inaugural Committee, A
Taste of America by Arata Expositions, Inc., in the
Superior Court of the District of Columbia, CA No.
2412-85. Attached is a copy of the Complaint as well
as a Summons which is served upon you by virtue of your
receipt of this letter and the attached material. This
service is in accordance with Rule 4 (c) (3) of the Civil
Rules of the Superior Court of the District of Columbia.
It will be appreciated if you will make arrangements
for the filing of the necessary responsive pleading in your
behalf.
Very truly yours,
Charles E
Charles E. Wilson, Jr.
CEWjr/cjm
Enclosure
Nov 06, 85 17:19 QUADREX SECURITIES CORPORATION FAX # (212) 888-9804
P.03
CA Form 1
Superior Court of the District of Columbia
CIVIL DIVISION
500 Indiana Avenue, N.W.
Telephone: 727-1790
ARATA EXPOSITIONS, INC.
Plaintiff
Civil Action File No. 2412-85
VS.
PRESIDENTIAL INAUGURAL COMMITTEE
A TASTE OF AMERICA
Defendant
Serve: John M. Liftin
1737 H Street, N.W.
Washington, DC 20006
SUMMONS
To the above named Defendant:
You are hereby summoned and required to serve an Answer to the attached Complaint,
either personally or through an attorney, within twenty (20) days after service of this summons
upon you, exclusive of the day of service. A copy of the Answer must be mailed to the attorney
for the party plaintiff who is suing you. The attorney's name and address appear below. If
plaintiff has no attorney, a copy of the Answer must be mailed to the plaintiff at the address stated
on this Summons.
You are also required to file the Answer with the Court either before service or within five
(5) days after you have served it. The Answer must be filed in Room JM 220 at 500 Indiana Ave-
nue, N.W. between 9:00 a.m. and 4:00 p.m., Mondays through Fridays or between 9:00 a.m. and
12:00 Noon on Saturdays, but not on Sundays or holidays.
IMPORTANT: IF YOU FAIL TO SERVE AND FILE AN ANSWER WITHIN THE
TIME STATED ABOVE, OF IF, AFTER YOU ANSWER, YOU FAIL TO APPEAR AT ANY
TIME THE COURT NOTIFIES YOU TO DO SO, A JUDGMENT BY DEFAULT MAY
BE ENTERED AGAINST YOU FOR THE MONEY DAMAGES OR OTHER RELIEF DE-
MANDED IN THE COMPLAINT. IF THIS OCCURS, YOUR WAGES MAY BE ATTACHED
OR WITHHELD OR PERSONAL PROPERTY OR REAL ESTATE YOU OWN MAY BE
TAKEN AND SOLD TO PAY THE JUDGMENT. IF YOU INTEND TO OPPOSE THIS AC-
TION, DO NOT FAIL TO ANSWER WITHIN THE REQUIRED TIME.
If you wish to talk to a lawyer and feel that you cannot afford to pay a fee to a lawyer,
promptly contact one of the offices of the Legal Aid Society (NA-8-1161) or the Neighborhood
Legal Services (628-9161) for help or come to Room JM 220 at 500 Indiana Avenue, N.W. for more
information concerning places where you may ask for such help.
THOMAS A. DUCKENFIELD
Clerk of the Court
Charles E. Wilson, Jr. #14076
Name of Plaintiff's Attorney
McCarthy, Wilson & Ethridge
100 South Washington Street
Address Rockville, MD 20850
(301) 762-7770
Date: October 21, 1985
Telephone
PUEDE OBTENERSE COPIAS DE ESTE FORMULARIO EN ESPANOL EN EL TRIBUNAL SUPERIOR DEL
DISTRITO DE COLUMBIA, 500 INDIANA AVENUE, N.W., SALA JM 220
YOU MAY OBTAIN A COPY OF THIS FORM IN SPANISH AT THE SUPERIOR COURT OF D.C., 500 INDIANA
AVENUE, N.W., ROOM JM 220
Nov 06,85 17:20 QUADREX SECURITIES CORPORATION FAX # (212) 888-9804
P.04
IN THE SUPERIOR COURT FOR THE DISTRICT OF COLUMBIA
ARATA EXPOSITIONS, INC.
:
649 Lofstrand Lane
Rockville, Maryland 20850
:
Plaintiff
:
vs.
: CA No.
PRESIDENTIAL INAUGURAL COMMITTEE
:
A TASTE OF AMERICA
:
Serve: William C. Anton, Chairman
P. O. Box 50036
Washington, D. C. 20004-0036 :
Defendant
:
COMPLAINT
(Debt)
The plaintiff, Arata Expositions, Inc., by and through
its attorney, Charles E. Wilson, Jr., sues the defendant,
Presidential Inaugural Committee, A Taste of America, (PIC),
and, as cause of action, states:
1. That jurisdiction of this Court is founded on D. C.
Code $11-921.
-
2. That on or about January 18 - - 20, 1985, the plaintiff,
Arata Expositions, Inc. provided goods and services to the
defendant, PIC, in connection with the Presidential Inaugural
celebration known as A Taste of America.
3. That pursuant to an invoice evidencing the services
rendered by the plaintiff, the defendant has paid certain
sums in relation thereto and in partial satisfaction of its
obligation.
4. That despite demand made on the defendant by the
plaintiff for the additional sums owed, the defendant, PIC,
has refused to make any further payment towards the remaining
balance to the plaintiff, Arata Expositions, Inc. in the
amount of Twenty-Two Thousand Three Hundred Ninety Three
Dollars and Sixty Cents ($22,393.60).
Nov 06, 85 17:21 QUADREX SECURITIES CORPORATION FAX # (212) 888-9804
P.05
I
- 2 -
WHEREFORE, the plaintiff, Arata Expositions, Inc.,
demands judgment against the defendant, PIC, in the amount
of Twenty-Two Thousand, Three Hundred and Ninety-Three
Dollars and Sixty Cents ($22,393.60), plus interests and costs
including reasonable attorney's fees.
McCARTHY, WILSON & ETHRIDGE
By:
Charles E. Wilson, Jr. #14076
104 South Washington Street
Rockville, Maryland 20850
(301) 762-7770
Attorneys for Plaintiff
THE WHITE HOUSE
WASHINGTON
11/15
TO:
FFF
FROM: John G. Roberts, Jr.
FYI
COMMENT
ACTION
AS REQUESTED - I THOUGHT
IT NOT INADVISABLE TO
GIVE CLARK A LITTLE IDEA
OF WHAT THE SUIT IS
ABOUT
THE WHITE HOUSE
WASHINGTON
Ada
November 13, 1985
MEMORANDUM FOR FRED F. FIELDING
FROM:
JOHN G. ROBERTS DDR
SUBJECT:
Arata Expositions Inc. V. Presidential
Inaugural Committee -- "A Taste of
America"
Charles E. Wilson, counsel for Arata Expositions, has served
John Liftin with the summons and complaint in his suit
against the Presidential Inaugural Committee -- A Taste of
America. You will recall that Lifton was registered agent
for the 1981 Inaugural Committee. Wilson served Lifton,
apparently assuming he was also agent for the 1985 commit-
tee, by certified mail/return receipt, pursuant to Rule
4 (c) (3) of the District of Columbia Superior Court Rules.
Roger Clark, counsel for Lifton, was kind enough to forward
the summons and complaint to you, rather than simply returning
it to Wilson.
Bob Barker and Bruce Soll have been handling all of this
litigation. I recommend sending the correspondence to them
for appropriate handling. I do not think we need to respond
to Clark, and certainly do not recommend a reply from this
office to Wilson.
Attachment
Note to Clark Ms
THE WHITE HOUSE
WASHINGTON
November 15, 1985
Dear Roger:
Thank you for sending along the complaint and summons that
counsel for Arata Expositions attempted to serve on John
Liftin, 1L the mistaken belief that Mr. Liftin was an agent
for the 1985 Inaugural Committee. The 1985 Inaugural
Committee has not yet been served in this action, but it
appears that Arata is pressing a claim against Taste of
America, and 15 including the Inaugural Committee in the
belief that Taste of America is part of or otherwise
affiliated with the Inaugural Committee. Both Taste of
America and the Inaugural Committee agree this is not the
case.
Should you or Mr. Liftin receive any other papers from
counsel for Arata, I would simply return them to him and
advise him that Mr. Liftin is not an agent for the 1985
Inaugural Committee.
Thank you for your assistance.
Sincerely,
Fred F. Fielding
Counsel to the President
Roger A. Clark, Esquire
Rogers & Wells
1737 H Street, N.W.
Washington, DC 20006
FFF: JGR:aea 11/15/85
bcc: FFFielding
JGRoberts
Subj
Chron
THE WHITE HOUSE
WASHINGTON
November 15, 1985
MEMORANDUM FOR FRED P. FIELDING
FROM:
JOHN G. ROBERTS JZR
SUBJECT:
PIC Directors Resolution Approving $50,000
Disbursement to the National Building Museum
John Rogers has asked you to review a proposed PIC directors
resolution approving the disbursement of $50,000 to the
National Building Museum. Rogers serves on both the PIC
board and the Museum board, so the proposed transaction
presents a classic conflict of interest for Rogers. I asked
our intern Andrew Richner to research D.C. law on this
subject (both PIC and the Museum are D.C. nonprofit corpor-
ations); a copy of his memorandum is attached.
The issue was most fully considered in Stern V. Lucy Webb
Hayes National Training School for Deaconesses and Missionaries,
381 F. Supp. 1003 (D.D.C. 1974), which ruled that the
interested director should (1) fully disclose to the other
directors his conflict of interest, and (2) refrain from
voting on the issue. This proposed transaction may go
forward, but Rogers should not sign the resolution, and the
resolution should state that his position on the Museum
board is known to the signing directors. Such explicit
written disclosure is apparently not strictly required, but,
in my view, is desirable to avoid any evidentiary questions
concerning the fact or adequacy of the required disclosure.
A revised resolution with cover memorandum is attached for
your review and, with respect to the cover memorandum, your
signature.
Attachment
CC: Andrew Richner
THE WHITE HOUSE
WASHINGTON
November 14, 1985
MEMORANDUM FOR JOHN G. ROBERTS
FROM:
ANDREW RICHNER ACR
SUBJECT:
Director Conflict of Interest --- The
Committee for the 50th American Presidential
Inaugural and the National Building Museum
FACTS
The Committee for the 50th American Presidential Inaugural
("PIC") and the National Building Museum (the "Museum") are
to be engaged in a transaction whereby PIC will appropriate
$50,000 to the Museum. Both entities are incorporated in
the District of Columbia under the District of Columbia
Nonprofit Corporation Act. John Rogers is presently serving
as a director on the boards of both corporations.
QUESTION PRESENTED
To what extent may Rogers, as an interested director, be
involved in the transaction pursuant to District of Columbia
law?
SHORT ANSWER
Rogers should not vote at or attend PIC's board meeting at
which the resolution granting the funds will be approved.
Rogers should make full disclosure of his interest in the
Museum, perhaps including a written declaration to that
effect. Rogers should not attempt to influence or communi-
cate with the other board members regarding the matter.
DISCUSSION
District of Columbia statutory provisions and, particularly,
the Nonprofit Corporation Act do not directly address the
matter of director conflict of interest. However, common
law in the District and in other jurisdictions seems to be
fairly well established and offers some standards to which
Rogers should attempt to comply.
I. Fiduciary Duty
As a member of PIC's board of directors, Rogers has a duty
of undivided loyalty to the corporation. A conflict of
- 2 -
interest arises, however, because he also has a fiduciary
relationship with the Museum and his interested actions on
the board of one corporation may act to the detriment of the
other. While not absolutely prohibited under District of
Columbia law, any transaction between the two entities "will
be subjected to the closest scrutiny to determine whether or
not the duty of loyalty has been violated." Stern V. Lucy
Webb Hayes National Training School for Deaconesses and
Missionaries, 381 F. Supp. 1003, 1014 (D.D.C. 1974) (citing
Blankenship V. Boyle, 447 F. 2d 1280 (D.C. Cir. 1971);
Mayflower Hotel Stockholders Protective Committee V. Mayflower
Hotel Corp., 193 F.2d 666 (D.C. Cir. 1951). Although trustees
may be found guilty of a breach of trust even for mere
negligence, corporate directors and fiduciaries of charita-
ble corporations "are generally only required to show
'entire fairness' to the corporation and 'full disclosure'
of the potential conflict of interest to the Board." Stern,
381 F. Supp. at 1014 (quoting Mayflower Hotel, 193 F. 2d at
671).
A. Disclosure and Actions Influencing Corporate Decision
A court will usually inquire into the role of a common
director in approving the transaction. "[A] director should
not only disclose his interlocking responsibilities but also
refrain from voting on or otherwise influencing a corporate
decision to transact business with a company in which he has
a significant interest or control." Stern, 381 F. Supp. at
1014 (citing Gilbert V. McLeod Infirmary, 64 S.E.2d 524
(S.C. 1951)
In Stern the District Court held that "a director
of a
charitable hospital organized under the Nonprofit Corpor-
ation Act of the District of Columbia (D.C. Code § 29-1001
et seq. ) is in default of his fiduciary duty if he
knowingly permitted the hospital to enter into a business
transaction with
any corporation
in which he
held a
position as
director
without having previously informed
the persons charged with approving that transaction of his
interest or position and of any significant reasons, unknown
to or not fully appreciated by such persons, why the trans-
action might not be in the best interest of the hospital
"
Stern, 381 F. Supp. at 1015. Furthermore, the court found
that it was improper for the defendant corporate fiduciary
to have "actively participated in or voted in favor of a
decision by the Board of any committee or subcommittee
thereof to transact business with any corporation in
which he then held a position as
director
"
Stern, 381
F. Supp. at 1003. Obviously, the extent to which a director
discloses his interest and involves himself in the trans-
action effects a court's determination of whether the
director has breached his fiduciary duty.
- 3 -
B. Fairness
Most courts agree that transactions between corporations
having interlocking directorates are not necessarily void or
ever voidable but that the corporate fiduciaries who would
maintain them have the burden of proof to show "'entire
fairness' to the corporation." Stern, 381 F. Supp. at 1014
(quoting Mayflower Hotel, 193 F.2d at 671) ; See also Everett
V. Phillips, 43 N.E.2d 841 (N.Y. 1942) (holding contract
between two corporations with common directors not voidable
on that ground alone). In fact, "if the interested fidu-
ciary makes full disclosure to the board of directors, and
the transaction is authorized by the board, on the basis of
the required quorum and vote, the transaction usually would
be properly authorized, but with the burden of sustaining
the transaction possibly on its proponents." H. Henn, Laws
of Corporations 638 (1983) (footnote omitted). cf. Globe
Woolen Co. V. Utica Gas & Electric Co., 121 N.E. 278 (N.Y.
1918) (refusal to vote by fiduciary with conflicting interest
held to give to transaction form and presumption of propriety,
but transaction held unfair and voidable by corporation).
Thus, if the interested director can show that the trans-
action is objectively fair, the transaction will almost
certainly be upheld. See Murphy V. Washington American
League Baseball Club, Inc., 324 F.2d 394 (D.C. Cir. 1963) ;
but cf. Voss Oil Co. V. Voss, 367 P.2d 977, 979 (Wyo.
1962) ("one of the tests of 'fairness' in transactions of
this kind is whether there has been a full disclosure").
C. Quorum Requirements
Statutory provisions and case law in many jurisdictions
provide that directors with conflicting interests cannot
count toward a quorum and vote. See, e.g., Weiss Medical
Complex, Limited V. Kim, 408 N.W. 2d 959 (Ill. 1980) (absent
disinterested director quorum and vote, transaction
voidable) ; David V. Health Development Co., 558 P.2d 594
(Utah 1976) (interested director may not count toward quorum
or vote) i but see ABA-ALI Model Business Corp. Act § 41.
* Section 41 provides:
Director Conflicts of Interest. No contract or other
transaction between a corporation and one or more of its
directors of any other corporation, firm, association or
entity in which one or more of its directors are directors
or officers or are financially interested, shall be either
void or voidable because of such relationship or interest or
because such director or directors are present at the
meeting of the board of directors or a committee thereof
- 4 -
District of Columbia law is not entirely clear on this point
due to the District's failure to adopt the Model Act provision,
but the courts have indicated that the interested director's
role in the board decision will be taken into account. See
discussion supra and Stern at 1014-15 (interested director
should not take affirmative action to approve transaction).
Indeed, a court may consider the presence of the interested
director at the board meeting to be a breach of fiduciary
duty, even if his presence is needed for a quorum.
II. Recommendations
Although the District has not adopted the applicable Model
Act provisions, it appears that the courts apply the same
principles as found in the Act with respect to the issue of
interlocking directorates. For this reason, I recommend
that, at minimum, Mr. Rogers attempt to act in accordance
with Section 41. Thus, Rogers should completely disclose
and make known to the other members of PIC's board the fact
that he is a director of the National Building Museum. This
disclosure may be put in writing for evidentiary reasons,
although I have found no case which discusses the relative
merits of a written disclosure.
(Section 41 cont'd from page 3)
which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for
such purpose, if:
(a) the fact of such relationship or interest disclosed
or known to the board of directors or committee which
authorizes, approves or ratifies the contract or transaction
by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors;
or
(b) the fact of such relationship or interest is
disclosed or known to the shareholders entitled to vote and
they authorize, approve or ratify such contract or
transaction by vote or written consent; or
(c) the contract or transaction is fair and reasonable
to the corporation.
Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the
board of directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction.
- 5 -
In light of the lack of definitive case and statutory law in
the District of Columbia on the issue of whether an
interested director may be counted toward a quorum, I also
recommend that Mr. Rogers abstain from attending the meeting
at which the vote approving the resolution will take place.
In the absence of contrary provisions in the Articles of
Incorporation or the Bylaws, one must defer to District of
Columbia statutory law that provides that a majority of
directors is a quorum for the transaction of business.
Therefore, the other two members of the PIC board may carry
out the transaction notwithstanding Rogers's absence.
Additionally, Mr. Rogers should not communicate with or in
any way attempt to influence the other board members regarding
this matter.
Finally, the board members should consider the equity of the
transaction with respect to both corporations. Out of an
abundance of caution, these recommendations are suggested
and should be viewed as an attempt to eliminate the possibility
for any claims of impropriety.
THE WHITE HOUSE
WASHINGTON
November 15, 1985
MEMORANDUM FOR MICHAEL K. DEAVER
RONALD E. WALKER
JOHN F. W. ROGERS
Orig. signed by FFF
FROM:
FRED F. FIELDING
SUBJECT:
PIC Directors Resolution Approving $50,000
Disbursement to the National Building Museum
I was recently asked to review a proposed PIC directors
resolution authorizing the disbursement of $50,000 to the
National Building Museum. PIC director John F. W. Rogers
serves or the Museum board as well, and, under D.C. law,
should abstain from voting on this resolution. D.C. law
also requires that the fact of Rogers's conflict of interest
on this issue be fully disclosed to the disinterested
directors. I have revised the proposed resolution accordingly.
Attachment
FFF: JGR:aea 11/15/85
CC: FFFielding
JGRoberts
Subj
Chron
ADOPTION OF RESOLUTION BY WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
THE COMMITTEE FOR THE
50TH AMERICAN PRESIDENTIAL INAUGURAL
The undersigned, being directors of The Committee for the
50th American Presidential Inaugural ("Committee") and
believing their actions to be in the best interests of
Committee, do hereby adopt by written consent the following
resolution as the action of the Board of Directors of
Committee pursuant to the laws of the District of Columbia:
RESOLVED, that Committee, a District of Columbia nonprofit
corporation, shall, and hereby does agree to disburse
$50,000.00 (fifty thousand dollars) in a check payable to
the National Building Museum, a privately funded cultural
institution dedicated to commemorating and encouraging the
American building arts.
FURTHERMORE, it is understood that the National Building
Museum will be notified that their receipt of funds is
contingent upon their representation that they presently
possess a determination letter as to their 501 (c) (3) status
and that they will immediately forward a copy of same to
Committee.
This action is taken with full knowledge that abstaining
director John F. W. Rogers also serves on the Board of
Trustees of the National Building Museum.
DATED: November , 1985
Michael K. Deaver
Ronald H. Walker
ADOPTION OF RESOLUTION BY WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
THE COMMITTEE FOR THE
50TH AMERICAN PRESIDENTIAL INAUGURAL
The undersigned, being directors of The Committee for the
50th American Presidential Inaugural ("Committee") and
believing their actions to be in the best interests of
Committee, do hereby adopt by written consent the following
resolution as the action of the Board of Directors of
Committee pursuant to the laws of the District of Columbia:
RESOLVED, that Committee, a District of Columbia nonprofit
corporation, shall, and hereby does agree to disburse
$50,000.00 (fifty thousand dollars) in a check payable to
the National Building Museum, a privately funded cultural
institution dedicated to commemorating and encouraging the
American building arts.
FURTHERMORE, it is understood that the National Building
Museum will be notified that their receipt of funds is
contingent upon their representation that they presently
possess a determination letter as to their 501 (c) (3) status
and that they will immediately forward a copy of same to
Committee.
This action is taken with full knowledge that abstaining
director John F. W. Rogers also serves on the Board of
Trustees of the National Building Museum.
DATED: November # 1985
Michael K. Deaver
Ronald H. Walker
THE WHITE HOUSE
WASHINGTON
November 15, 1985
MEMORANDUM FOR MICHAEL K. DEAVER
RONALD E. WALKER
JOHN F. W. ROGERS
FROM:
FRED F. FIELDING
SUBJECT:
PIC Directors Resolution Approving $50,000
Disbursement to the National Building Museum
I was recently asked to review a proposed PIC directors
resolution authorizing the disbursement of $50,000 to the
National Building Museum. PIC director John F. W. Rogers
serves on the Museum board as well, and, under D.C. law,
should abstain from voting on this resolution. D.C. law
also requires that the fact of Rogers's conflict of interest
on this issue be fully disclosed to the disinterested
directors. I have revised the proposed resolution accordingly.
Attachment
FFF:JGR:aea 11/15/85
CC: FFFielding
JGRoberts
Subj
Chron
JV
ID #.
359664 CU
WHITE HOUSE
PROB
CORRESPONDENCE TRACKING WORKSHEET
0 - OUTGOING
1
H INTERNAL
I * INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent:
John Rogers
MI Mail Report
User Codes: (A)
(B)
(C)
Subject: 50th am. pres Inaugural resalution
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
CUHOLL
ORIGINATOR
85,11,07X
/ /
Referral Note:
CLAT 18
1
85/11/08
PY
585111118
Referral Note:
/ /
/ /
Referral Note:
/ /
/ /
I
Referral Note:
/ /
/ /
Referral Note:
ACTION CODES:
DISPOSITION CODES:
-
A Appropriate Action
I Info Copy Only/No Action Necessary
A Answered
C Completed
C Comment/Recommendation
R Direct Reply w/Copy
B Non-Special Referral
S Suspended
D Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
ADOPTION OF RESOLUTION BY WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
THE COMMITTEE FOR THE
50TH AMERICAN PRESIDENTIAL INAUGURAL
The undersigned, being all of the directors of The Committee for
the 50th American Presidential Inaugural ("Committee") and
believing their actions to be in the best interests of Committee,
do hereby unanimously adopt by written consent the following
resolution as the action of the Board of Directors of Committee
pursuant to the laws of the District of Columbia:
RESOLVED, that Committee, a District of Columbia nonprofit
corporation, shall, and hereby does agree to disburse $50,000.00
(fifty thousand dollars) in a check payable to the National
Building Museum, a privately funded cultural institution
dedicated to commemorating and encouraging the American building
arts.
FURTHERMORE, it is understood that the National Building Museum
will be notified that their receipt of funds is contingent upon
their representation that they presently possess a determination
letter as to their 501 (c) (3) status and that they will
immediately forward a copy of same to Committee.
DATED: November , 1985
Michael K. Deaver
Ronald H. Walker
-
John F. W. Rogers
OF
THE TREASURY THE
359664 cu
1789
Dianer,
November 7, 1985
Can you please have 73 review this
to make sine its legally (sie) O.K.
I will take it Around And get the
signitures
Thanks
Alin Foyr