The U.S. Supreme Court last week pulled the plug on the highest-voltage power controversy of the Eisenhower era—the Dixon-Yates project. The court ruled that the U.S. need not pay damages to Dixon-Yates for cancellation in 1955 of the utility combine's contract to build a $107 million electric-generating plant to supply power for AEC's atomic project. Reason: the contract was "infected by an illegal conflict of interest." The decision threw out a U.S. Court of Claims award to Dixon-Yates of $1,867,546 for out-of-pocket costs.
The conflict of interest focused on the dual role played by Investment Banker Adolphe Wrenzell, a vice president of First Boston Corp. and "dollar-a-year" utility financing expert for the Bureau of the Budget. When Dixon-Yates was selected by the bureau to build the plant, it chose First Boston Corp. to be in charge of the financing.
Although the court noted that the Bureau of the Budget knew of Wenzell's dual role, it pointed out that this provided no exemption from the conflict-of-interest statute; Government officials cannot exempt underlings from the statute. "Wenzell's primary allegiance was to First Boston," said the court, and his loyalty to the Government only "fleeting."