Personal liability for wrongful expenditure of government funds

This post discusses a specific Guam law that allows a taxpayer lawsuit against an Executive Branch employee who has expended government funds "contrary to law". Such action, if successful, holds the employee personally liable for the mis-spent funds, which are to be collected by the Attorney General for return to the Guam treasury. The taxpayer gets satisfaction and payment of legal fees.

But prior to discussing this law, it is worth pointing out a prior post dealing with similar liability.

On May 16, 2010, I shared a news item about JAMES WEED et al. vs BACHNER COMPANY INC., and BOWERS INVESTMENT COMPANY, an Alaska Supreme Court Opinion (No. 6475 - May 14, 2010; see, Weed v. Bachner Company Inc. sp-6475, 230 P3d 697. Note that the link in the original post has expired. There is a recent link to the opinion here, but it may also expire in time: it's reliability is touch and go).

The Alaska Supreme Court framed the question:

This case presents a single, discrete question: Are the procurement officials entitled to absolute or qualified immunity for allegedly tortious conduct arising out of actions they took in the course of the bid evaluation process? ... If the immunity is qualified, Bachner will be able to proceed with its claims that the procurement officers acted maliciously and in bad faith.

The Court then explained its reasoning:

We also agree with Bachner that an important purpose of the bidding process is to create transparency in the states procurement system, and to avoid awarding contracts based on improper considerations, and that this purpose weighs in favor of applying qualified immunity to procurement officers. Finally, we conclude that the highly restricted nature of a procurement officers discretion also makes this factor weigh in favor of qualified immunity.

Unlike the governor's function in supervising his or her subordinates which requires that the governor's discretion and judgment remain largely unfettered the role of a procurement officer in selecting bids involves a brand of discretion that is extraordinarily limited: Procurement officers are only allowed to consider those factors that the Procurement Code specifically lays out. We conclude that these statutory limitations on the officials' discretion also weigh in favor of qualified immunity.

The Court held that, under common law principles, procurement officials do not have absolute immunity but only qualified immunity:

This is not a situation where unfettered discretion is crucial to the best interests of the public; indeed, the procurement officers discretion is designed to be highly restricted. ... Thus, we conclude that, in defending against common law claims arising out of actions taken in the bidding process, procurement officers are entitled only to qualified immunity.

We take this opportunity to reiterate that qualified immunity still provides the officials with substantial protection from liability. Qualified immunity protects an official who has merely acted negligently, and it might even protect an official for liability arising out of a knowing violation where that official lacked the requisite degree of bad faith. The standard is similar to he one our legislature has articulated in the punitive damages context:

For an official with qualified immunity to be held liable, his conduct must have been outrageous or evidenced reckless indifference to the interest of another person.

Guam's law expressly does away with the question of immunity. It makes dealing with government money a fiduciary obligation, not simply an administrative discretion:

"Any officer, agent, contractor, or employee of the Executive Branch of the government of Guam who is charged with or assumes responsibility for the certification of availability of funds or the spending of money belonging to the territory of Guam, including the Governor and Lt. Governor of Guam, stands in a fiduciary relationship to the people of Guam in regard to the management of public money." (§ 7102.)

The law is found in 5 GCA §, Chapter 7, entitled "Enforcement of Proper Government Spending". The operative language is found in § 7103:

"Any taxpayer who is a resident of Guam shall have standing to sue the government of Guam and any officer, agent, contractor, or employee of the Executive Branch of the government of Guam for the purpose of enjoining any officer, agent, contractor, or employee of the Executive Branch of the government of Guam from expending money without proper appropriation, without proper authority, illegally, or contrary to law, and to obtain a personal judgment in the courts of Guam against such officers, agents, contractors, or employees of the government of Guam and in favor of the Government of Guam for the return to the Government of Guam of any money which has been expended without proper appropriation, without proper authority, illegally, or contrary to law."

It may have happened, but I am not aware of any action taken by any taxpayer to use this section in the context of alleged violations of procurement law, ... until now:



The ability to bring action under § 7103 can be particularly satisfying, and simple, when the government chooses to ratify an illegally procured contract. (See this post.) When the government ratifies a contract illegally procured, the protesting bidder has a bittersweet victory. He has proven the illegal act, but he nevertheless has no chance to get the contract.

He could, however, get some degree of vindication under this law. And, in bringing the action, unlike other instances, he would not have to prove illegal behavior since that would have already been a necessary finding before the ratification remedy is applied. That finding should be collateral estoppel in any § 7103 action. In that case, although he is not made whole economically, he can at least have the satisfaction of knowing that those responsible for denying his contract illegally will pay the price.


Follow Up:

DOE Settles Taxpayer Lawsuit With IBSS; Admits Improper Renewal of Copier Contract