Corporation for National and Community Service.
This final rule implements the Program Fraud Civil Remedies Act of 1986 (Act), which authorizes the Corporation for National and Community Service (Corporation) and certain other Federal agencies to impose, through administrative adjudication, civil penalties and assessments against any person who makes, submits, or presents a false, fictitious, or fraudulent claim or written statement to the agency. The regulations establish the procedures the Corporation will follow in implementing the provisions of the Act and specifies the hearing and appeal rights of persons subject to penalties and assessments under the Act. They also designate the Corporation's Chief Financial Officer to act on behalf of the Chief Executive Officer in carrying out certain duties and responsibilities under the regulations.
Effective Date: These regulations are effective November 20, 2006.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Irshad Abdal-Haqq, Office of the General Counsel, Corporation for National and Community Service, 1201 New York Ave. NW., Room 10600, Washington, DC 20525, Telephone: 202-606-6675.End Further Info End Preamble Start Supplemental Information
In October 1986, Congress enacted the Program Fraud Civil Remedies Act, Public Law No. 99-509 (codified at 31 U.S.C. 3801-3812), to establish an administrative remedy against any person who makes a false claim or written statement to any of certain Federal agencies. In brief, it requires the affected Federal agencies to follow certain procedures in recovering penalties (up to $5,000 per claim) and assessments (up to double the amount falsely claimed) against persons who file false claims or statements for which the liability is $150,000 or less. When the Act was enacted, the Corporation for National and Community Service did not exist, and the Act did not apply to the Corporation's predecessor agency, ACTION. However, that Act has since become applicable to the Corporation as a result of amendments to the Inspector General Act, Public Law 103-82, September 21, 1993. Those amendments, inter alia, added the Corporation for National and Community Service as an “establishment” under the Inspector General Act and, by doing so, operated to bring the Corporation within the provisions of the Program Fraud Civil Remedies Act.
The Act requires each affected agency to promulgate rules and regulations necessary to implement its provisions. Following the Act's enactment, at the request of the President's Council on Integrity and Efficiency (PCIE) an interagency task force was established under the leadership of the Department of Health and Human Services to develop model regulations for implementation of the Act by all affected agencies. This action was in keeping with the stated desire of the Senate Governmental Affairs Committee that “the regulations would be substantially uniform throughout the government” (S. Rep. No. 99-212, 99th Cong., 1st Sess. 12 (1985). Upon their completion, the PCIE recommended adoption of the model rules by all affected agencies.
It is the policy of the Corporation to use a plain language style when promulgating regulations, and we have done so in this document without making substantive changes to the PCIE model regulations. For the sake of consistency, we relied, to the extent practicable, on plain language regulations issued by the Small Business Administration in 1996. See 61 FR 2691, January 29, 1996.
A more detailed discussion of the PCIE's model regulations is found in the promulgations of several of the agencies that adopted them earlier, including those of the Departments of Justice (53 FR 4034; February 11, 1988 and 53 FR 11645; April 8, 1988); Health and Human Services (52 FR 27423; July 21, 1987 and 53 FR 11656, April 8, 1988); and Transportation (52 FR 36968; October 2, 1987 and 53 FR 880, January 14, 1988). Anyone desiring further explanation of the model rules is referred to the cited references.
The Corporation published a proposed rule with request for comment in the Federal Register on February 1, 2006 (71 FR 5211). Only one comment was received. It expressed general support for the rule as written without any amendments. The commenter believes the rule holds individuals accountable for fraudulent activity and, as such, improves government operations. The commenter also believes the rule's penalty provisions Start Printed Page 61912will deter fraud. Finally, the commenter expressed strong support for the use of plain language in drafting the rule and clearly specifying in the rule that due process will be provided under the rule's procedures. Since there were no other comments, the Corporation has decided to issue the final rule as proposed (subject only to minor typographical corrections).
Statutory and Regulatory Analysis
Under the Act, false claims and statements subject to its provisions are to be investigated by an agency's investigating official. The results of the investigation are then reviewed by an agency reviewing official who determines whether there is adequate evidence to believe that the person named in the report is liable under the Act. Upon an affirmative finding of adequate evidence, the reviewing official sends to the Attorney General a written notice of the official's intent to refer the matter to a presiding officer for an administrative hearing. The agency institutes administrative proceedings against the person only if the Attorney General or the Attorney General's designee approves. Any penalty or assessment imposed under the Act may be collected by the Attorney General through the filing of a civil action, or by offsetting amounts, other than tax refunds, owed the particular party by the Federal government.
The regulations designate the Inspector General or his or her designee as the agency's investigating official. They also designate the General Counsel as the reviewing official. Any administrative adjudication under the Act will be presided over by an Administrative Law Judge and any appeals from the Administrative Law Judge's decision will be decided by the Corporation's Chief Executive Officer or Chief Financial Officer. The regulations designate the Corporation's Chief Financial Officer to act on behalf of the Chief Executive Officer in carrying out the duties and responsibilities of the “authority head” under the regulations.
Paperwork Reduction Act
This rule contains no information collection requirements and therefore is not subject to the requirements of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.).
Executive Order 12866
The Corporation has determined that the rule is not an “economically significant” rule within the meaning of E.O. 12866 because it is not likely to result in: (1) An annual effect on the economy of $100 million or more, or an adverse and material effect on a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal government or communities; (2) the creation of a serious inconsistency or interference with an action taken or planned by another agency; (3) a material alteration in the budgetary impacts of entitlement, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) the raising of novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in E.O. 12866. However, this is a significant rule and has been reviewed by the Office of Management and Budget.
Regulatory Flexibility Act
As required by the Regulatory Flexibility Act of 1980 (5 U.S.C. 605(b)), the Corporation certifies that this rule will not have a significant economic impact on a substantial number of small entities. This regulatory action will not result in (1) An annual effect on the economy of $100 million or more; (2) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets. The rule establishes the procedural mechanism for investigating and adjudicating allegations of false claims or statements made against affected agencies. The rule, by itself, does not impose any obligations on entities including any entities that may fall within the definition of “small entities” as set forth in section 601(3) of the Regulatory Flexibility Act, or within the definition of “small business” as found in Section 3 of the Small Business Act, 15 U.S.C. 632, or within the Small Business Size Standards found in 13 CFR part 121. These obligations would not be created until an order is issued, at which time the person subject to the order would have a right to a hearing in accordance with the regulations. Therefore, the Corporation has not performed the initial regulatory flexibility analysis that is required under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) for major rules that are expected to have such results.
For purposes of Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, as well as Executive Order 12875, this regulatory action does not contain any Federal mandate that may result in increased expenditures in either Federal, State, local, or tribal governments in the aggregate, or impose an annual burden exceeding $100 million on the private sector.
Executive Order 13132, Federalism
Executive Order 13132, Federalism, prohibits an agency from publishing any rule that has Federalism implications if the rule either imposes substantial direct compliance costs on State and local governments and is not required by statute, or the rule preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule does not have any Federalism implications, as described above.Start List of Subjects
List of Subjects in 45 CFR Part 2554End List of Subjects Start Amendment Part
For the reasons stated in the preamble, the Corporation for National and Community Service adds a new part 2554 to Chapter XXV of Title 45 of the Code of Federal Regulations to read as follows:End Amendment Part Start Part
PART 2554—PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS
- Overview of regulations.
- What kind of conduct will result in program fraud enforcement?
- What is a claim?
- What is a statement?
- What is a false claim or statement?
- What does the phrase “know or have reason to know” mean?
- Who investigates program fraud?
- What happens if program fraud is suspected?
- Who is the Corporation's authority head?
- When will the Corporation issue a complaint?
- What is contained in a complaint?
- How will the complaint be served?
- How does a defendant respond to the complaint?
- What happens if a defendant fails to file an answer?
- What happens once an answer is filed?
- What kind of hearing is contemplated?Start Printed Page 61913
- At the hearing, what rights do the parties have?
- What is the role of the ALJ?
- Can the reviewing official or ALJ be disqualified?
- How are issues brought to the attention of the ALJ?
- How are papers served?
- How is time computed?
- What happens during a prehearing conference?
- What rights are there to review documents?
- What type of discovery is authorized and how is it conducted?
- Are there limits on disclosure of documents or discovery?
- Are witness lists exchanged before the hearing?
- Can witnesses be subpoenaed?
- Who pays the costs for a subpoena?
- Are protective orders available?
- Where is the hearing held?
- How will the hearing be conducted and who has the burden of proof?
- How is evidence presented at the hearing?
- How is witness testimony presented?
- Will the hearing proceedings be recorded?
- Can a party informally discuss the case with the ALJ?
- Are there sanctions for misconduct?
- Are post-hearing briefs required?
- How is the case decided?
- How are penalty and assessment amounts determined?
- Can a party request reconsideration of the initial decision?
- When does the initial decision of the ALJ become final?
- What are the procedures for appealing the ALJ decision?
- What happens if an initial decision is appealed?
- Are there any limitations on the right to appeal to the authority head?
- How does the authority head dispose of an appeal?
- What judicial review is available?
- Can the administrative complaint be settled voluntarily?
- How are civil penalties and assessments collected?
- What happens to collections?
- What if the investigation indicates criminal misconduct?
- How does the Corporation protect the rights of defendants?
Overview and Definitions
(a) Statutory basis. This part implements the Program Fraud Civil Remedies Act of 1986, 31 U.S.C. 3801-3812 (“the Act”). The Act provides the Corporation and other federal agencies with an administrative remedy to impose civil penalties and assessments against persons making false claims and statements. The Act also provides due process protections to all persons who are subject to administrative proceedings under this part.
(b) Possible remedies for program fraud. In addition to any other penalties that may be prescribed by law, a person who submits, or causes to be submitted, a false claim or a false statement to the Corporation is subject to a civil penalty of not more than $5,000 for each statement or claim, regardless of whether property, services, or money is actually delivered or paid by the Corporation. If the Corporation has made any payment, transferred property, or provided services in reliance on a false claim, the person submitting it also is subject to an assessment of not more than twice the amount of the false claim. This assessment is in lieu of damages sustained by the Corporation because of the false claim.
(a) Any person who makes, or causes to be made, a false, fictitious, or fraudulent claim or written statement to the Corporation is subject to program fraud enforcement. A “person” means any individual, partnership, corporation, association, or other legal entity.
(b) If more than one person makes a false claim or statement, each person is liable for a civil penalty. If more than one person makes a false claim which has induced the Corporation to make payment, an assessment is imposed against each person. The liability of each such person to pay the assessment is joint and several, that is, each is responsible for the entire amount.
(c) No proof of specific intent to defraud is required to establish liability under this part.
(a) Claim means any request, demand, or submission:
(1) Made to the Corporation for property, services, or money;
(2) Made to a recipient of property, services, or money from the Corporation or to a party to a contract with the Corporation for property or services, or for the payment of money. This provision applies only when the claim is related to property, services or money from the Corporation or to a contract with the Corporation; or
(3) Made to the Corporation which decreases an obligation to pay or account for property, services, or money.
(b) A claim can relate to grants, loans, insurance, or other benefits, and includes the Corporation guaranteed loans made by participating lenders. A claim is made when it is received by the Corporation, an agent, fiscal intermediary, or other entity acting for the Corporation, or when it is received by the recipient of property, services, or money, or the party to a contract.
(c) Each voucher, invoice, claim form, or individual request or demand for property, services, or money constitutes a separate claim.
A “statement” means any written representation, certification, affirmation, document, record, or accounting or bookkeeping entry made with respect to a claim or with respect to a contract, bid or proposal for a contract, grant, loan or other benefit from the Corporation. “From the Corporation” means that the Corporation provides some portion of the money or property in connection with the contract, bid, grant, loan, or benefit, or is potentially liable to another party for some portion of the money or property under such contract, bid, grant, loan, or benefit. A statement is made, presented, or submitted to the Corporation when it is received by the Corporation or an agent, fiscal intermediary, or other entity acting for the Corporation.
(a) A claim submitted to the Corporation is a “false” claim if the person making the claim, or causing the claim to be made, knows or has reason to know that the claim:
(1) Is false, fictitious or fraudulent;
(2) Includes or is supported by a written statement which asserts or contains a material fact which is false, fictitious, or fraudulent;
(3) Includes or is supported by a written statement which is false, fictitious or fraudulent because it omits a material fact that the person making the statement has a duty to include in the statement; or
(4) Is for payment for the provision of property or services which the person has not provided as claimed.
(b) A statement submitted to the Corporation is a false statement if the person making the statement, or causing the statement to be made, knows or has reason to know that the statement:
(1) Asserts a material fact which is false, fictitious, or fraudulent; or
(2) Is false, fictitious, or fraudulent because it omits a material fact that the person making the statement has a duty to include in the statement. In addition, Start Printed Page 61914the statement must contain or be accompanied by an express certification or affirmation of the truthfulness and accuracy of the contents of the statement.
A person knows or has reason to know (that a claim or statement is false) if the person:
(a) Has actual knowledge that the claim or statement is false, fictitious, or fraudulent; or
(b) Acts in deliberate ignorance of the truth or falsity of the claim or statement; or
(c) Acts in reckless disregard of the truth or falsity of the claim or statement.
Procedures Leading to Issuance of a Complaint
The Inspector General, or his designee, is the investigating official responsible for investigating allegations that a false claim or statement has been made. In this regard, the Inspector General has authority under the Program Fraud Civil Remedies Act and the Inspector General Act of 1978 (5 U.S.C. App. 3), as amended, to issue administrative subpoenas for the production of records and documents.
(a) If the investigating official concludes that an action under this Part is warranted, the investigating official submits a report containing the findings and conclusions of the investigation to a reviewing official. The reviewing official is the General Counsel or his or her designee. If the reviewing official determines that the report provides adequate evidence that a person submitted a false claim or statement, the reviewing official transmits to the Attorney General written notice of an intention to refer the matter for adjudication, with a request for approval of such referral. This notice will include the reviewing official's statements concerning:
(1) The reasons for the referral;
(2) The claims or statements upon which liability would be based;
(3) The evidence that supports liability;
(4) An estimate of the amount of money or the value of property, services, or other benefits requested or demanded in the false claim or statement;
(5) Any exculpatory or mitigating circumstances that may relate to the claims or statements known by the reviewing official or the investigating official; and
(6) A statement that there is a reasonable prospect of collecting an appropriate amount of penalties and assessments.
(b) If at any time, the Attorney General or his or her designee requests in writing that this administrative process be stayed, the authority head, as identified in § 2554.9 of this Part, must stay the process immediately. The authority head may order the process resumed only upon receipt of the written authorization of the Attorney General.
The Corporation's “authority head” is the Chief Executive Officer or his or her designee. For purposes of this Part, the Corporation's Chief Financial Officer is designated to act on behalf of the Chief Executive Officer.
The Corporation will issue a complaint:
(a) If the Attorney General (or designee) approves the referral of the allegations for adjudication; and
(b) In a case of submission of false claims, if the amount of money or the value of property or services demanded or requested in a false claim, or a group of related claims submitted at the same time, does not exceed $150,000. “A group of related claims submitted at the same time” includes only those claims arising from the same transaction (such as a grant, loan, application, or contract) which are submitted together as part of a single request, demand, or submission.
(a) A complaint is a written statement giving notice to the person alleged to be liable under 31 U.S.C. 3802 of the specific allegations being referred for adjudication and of the person's right to request a hearing with respect to those allegations. The person alleged to have made false statements or to have submitted false claims to the Corporation is referred to as the “defendant.”
(b) The reviewing official may join in a single complaint, false claims or statements that are unrelated, or that were not submitted simultaneously, regardless of the amount of money or the value of property or services demanded or requested.
(c) The complaint will state that the Corporation seeks to impose civil penalties, assessments, or both, against each defendant and will include:
(1) The allegations of liability against each defendant, including the statutory basis for liability, identification of the claims or statements involved, and the reasons liability allegedly arises from such claims or statements;
(2) The maximum amount of penalties and assessments for which each defendant may be held liable;
(3) A statement that each defendant may request a hearing by filing an answer and may be represented by a representative;
(4) Instructions for filing such an answer;
(5) A warning that failure to file an answer within 30 days of service of the complaint will result in imposition of the maximum amount of penalties and assessments.
(d) The reviewing official must serve any complaint on the defendant and, if a hearing is requested by the defendant, provide a copy to the Administrative Law Judge (ALJ) assigned to the case.
(a) The complaint must be served on individual defendants directly, a partnership through a general partner, and on corporations or on unincorporated associations through an executive officer or a director, except that service also may be made on any person authorized by appointment or by law to receive process for the defendant.
(b) The complaint may be served either by:
(1) Registered or certified mail (return receipt requested) addressed to the defendant at his or her residence, usual dwelling place, principal office or place of business; or by
(2) Personal delivery by anyone 18 years of age or older.
(c) The date of service is the date of personal delivery or, in the case of service by registered or certified mail, the date of postmark.
(d) Proof of service—
(1) When service is made by registered or certified mail, the return postal receipt will serve as proof of service.
(2) When service is made by personal delivery, an affidavit of the individual serving the complaint, or written acknowledgment of receipt by the defendant or a representative, will serve as proof of service.
(e) When served with the complaint, the defendant also should be served with a copy of this Part 2554 and 31 U.S.C. 3801-3812.Start Printed Page 61915
Procedures Following Service of a Complaint
(a) A defendant may file an answer with the reviewing official within 30 days of service of the complaint. An answer will be considered a request for an oral hearing.
(b) In the answer, a defendant—
(1) Must admit or deny each of the allegations of liability contained in the complaint (a failure to deny an allegation is considered an admission);
(2) Must state any defense on which the defendant intends to rely;
(3) May state any reasons why he or she believes the penalties, assessments, or both should be less than the statutory maximum; and
(4) Must state the name, address, and telephone number of the person authorized by the defendant to act as defendant's representative, if any.
(c) If the defendant is unable to file an answer which meets the requirements set forth in paragraph (b) of this section, the defendant may file with the reviewing official a general answer denying liability, requesting a hearing, and requesting an extension of time in which to file a complete answer. A general answer must be filed within 30 days of service of the complaint.
(d) If the defendant initially files a general answer requesting an extension of time, the reviewing official must promptly file with the ALJ the complaint, the general answer, and the request for an extension of time.
(e) For good cause shown, the ALJ may grant the defendant up to 30 additional days within which to file an answer meeting the requirements of paragraph (b) of this section. Such answer must be filed with the ALJ and a copy must be served on the reviewing official.
(a) If a defendant does not file any answer within 30 days after service of the complaint, the reviewing official will refer the complaint to the ALJ.
(b) Once the complaint is referred, the ALJ will promptly serve on the defendant a notice that an initial decision will be issued.
(c) The ALJ will assume the facts alleged in the complaint to be true and, if such facts establish liability under the statute, the ALJ will issue an initial decision imposing the maximum amount of penalties and assessments allowed under the statute.
(d) Except as otherwise provided in this section, when a defendant fails to file a timely answer, the defendant waives any right to further review of the penalties and assessments imposed in the initial decision.
(e) The initial decision becomes final 30 days after it is issued.
(f) If, at any time before an initial decision becomes final, a defendant files a motion with the ALJ asking that the case be reopened and describing the extraordinary circumstances that prevented the defendant from filing an answer, the initial decision will be stayed until the ALJ makes a decision on the motion. The reviewing official may respond to the motion.
(g) If, in his motion to reopen, a defendant demonstrates extraordinary circumstances excusing his failure to file a timely answer, the ALJ will withdraw the initial decision, and grant the defendant an opportunity to answer the complaint.
(h) A decision by the ALJ to deny a defendant's motion to reopen a case is not subject to review or reconsideration.
(i) The defendant may appeal to the authority head the decision denying a motion to reopen by filing a notice of appeal with the authority head within 15 days after the ALJ denies the motion. The timely filing of a notice of appeal shall stay the initial decision until the authority head decides the issue.
(j) If the defendant files a timely notice of appeal with the authority head, the ALJ shall forward the record of the proceeding to the authority head.
(k) The authority head shall decide expeditiously whether extraordinary circumstances excuse the defendant's failure to file a timely answer based solely on the record before the ALJ.
(l) If the authority head decides that extraordinary circumstances excused the defendant's failure to file a timely answer, the authority head shall remand the case to the ALJ with instructions to grant the defendant an opportunity to answer.
(m) If the authority head decides that the defendant's failure to file a timely answer is not excused, the authority head shall reinstate the initial decision of the ALJ, which shall become final and binding upon the parties 30 days after the authority head issues such decision.
(a) When the reviewing official receives an answer, he must file concurrently, the complaint and the answer with the ALJ, along with a designation of a Corporation representative.
(b) When the ALJ receives the complaint and the answer, the ALJ will promptly serve a notice of oral hearing upon the defendant and the representative for the Corporation, in the same manner as the complaint, service of which is described in § 2554.12. The notice of oral hearing must be served within six years of the date on which the claim or statement is made.
(c) The notice must include:
(1) The tentative time, place and nature of the hearing;
(2) The legal authority and jurisdiction under which the hearing is to be held;
(3) The matters of fact and law to be asserted;
(4) A description of the procedures for the conduct of the hearing;
(5) The name, address, and telephone number of the defendant's representative and the representative for the Corporation; and
(6) Such other matters as the ALJ deems appropriate.
(d) The six-year statute of limitation may be extended by agreement of the parties.
The hearing is a formal proceeding conducted by the ALJ during which a defendant will have the opportunity to cross-examine witnesses, present testimony, and dispute liability.
(a) The parties to the hearing shall be the defendant and the Corporation. Pursuant to 31 U.S.C. 3730(c)(5), a private plaintiff in an action under the False Claims Act may participate in the hearing to the extent authorized by the provisions of that Act.
(b) Each party has the right to:
(1) Be represented by a representative;
(2) Request a pre-hearing conference and participate in any conference held by the ALJ;
(3) Conduct discovery;
(4) Agree to stipulations of fact or law which will be made a part of the record;
(5) Present evidence relevant to the issues at the hearing;
(6) Present and cross-examine witnesses;
(7) Present arguments at the hearing as permitted by the ALJ; and
(8) Submit written briefs and proposed findings of fact and conclusions of law after the hearing, as permitted by the ALJ.
An ALJ retained by the Corporation serves as the presiding officer at all hearings.Start Printed Page 61916
(a) The ALJ shall conduct a fair and impartial hearing, avoid delay, maintain order, and assure that a record of the proceeding is made.
(b) The ALJ has the authority to—
(1) Set and change the date, time, and place of the hearing upon reasonable notice to the parties;
(2) Continue or recess the hearing in whole or in part for a reasonable period of time;
(3) Hold conferences to identify or simplify the issues, or to consider other matters that may aid in the expeditious disposition of the proceeding;
(4) Administer oaths and affirmations;
(5) Issue subpoenas requiring the attendance of witnesses and the production of documents at depositions or at hearings;
(6) Rule on motions and other procedural matters;
(7) Regulate the scope and timing of discovery;
(8) Regulate the course of the hearing and the conduct of representatives and parties;
(9) Examine witnesses;
(10) Receive, rule on, exclude, or limit evidence;
(11) Upon motion of a party, take official notice of facts;
(12) Upon motion of a party, decide cases, in whole or in part, by summary judgment where there is no disputed issue of material fact;
(13) Conduct any conference, argument, or hearing on motions in person or by telephone; and
(14) Exercise such other authority as is necessary to carry out the responsibilities of the ALJ under this part.
(c) The ALJ does not have the authority to find Federal statutes or regulations invalid.
(a) A reviewing official or an ALJ may disqualify himself or herself at any time.
(b) Upon motion of any party, the reviewing official or ALJ may be disqualified as follows:
(1) The motion must be supported by an affidavit containing specific facts establishing that personal bias or other reason for disqualification exists, including the time and circumstances of the discovery of such facts;
(2) The motion must be filed promptly after discovery of the grounds for disqualification, or the objection will be deemed waived; and
(3) The party, or representative of record, must certify in writing that the motion is made in good faith.
(c) Once a motion has been filed to disqualify the reviewing official, the ALJ will halt the proceedings until resolving the matter of disqualification. If the ALJ determines that the reviewing official is disqualified, the ALJ will dismiss the complaint without prejudice. If the ALJ disqualifies himself or herself, the case will be promptly reassigned to another ALJ.
(a) All applications to the ALJ for an order or ruling shall be by motion. Motions shall state the relief sought, the authority relied upon, and the facts alleged, and shall be filed with the ALJ and served on all other parties.
(b) Except for motions made during a prehearing conference or at the hearing, all motions shall be in writing. The ALJ may require that oral motions be reduced to writing.
(c) Within 15 days after a written motion is served, or such other time as may be fixed by the ALJ, any party may file a response to such motion.
(d) The ALJ may not grant a written motion before the time for filing responses thereto has expired, except upon consent of the parties or following a hearing on the motion, but may overrule or deny such motion without awaiting a response.
(e) The ALJ shall make a reasonable effort to dispose of all outstanding motions prior to the beginning of the hearing.
(a) Form. (1) Documents filed with the ALJ shall include an original and two copies.
(2) Every pleading and paper filed in the proceeding shall contain a caption setting forth the title of the action, the case number assigned by the ALJ, and a designation of the paper (e.g., motion to quash subpoena).
(3) Every pleading and paper shall be signed by, and shall contain the address and telephone number of the party or the person on whose behalf the paper was filed, or his or her representative.
(4) Papers are considered filed when they are mailed. Date of mailing may be established by a certificate from the party or its representative or by proof that the document was sent by certified or registered mail.
(b) Service. A party filing a document with the ALJ shall at the time of filing, serve a copy of such document on every other party. Service upon any party of any document other than those required to be served as prescribed in § 2554.12 shall be made by delivering a copy or by placing a copy of the document in the United States mail, postage prepaid and addressed, to the party's last known address. When a party is represented by a representative, service shall be made upon such representative in lieu of the actual party.
(c) Proof of service. A certificate of the individual serving the document by personal delivery or by mail, setting forth the manner of service, shall be proof of service.
(a) In computing any period of time under this part or in an order issued thereunder, the time begins with the day following the act, event, or default, and includes the last day of the period, unless it is a Saturday, Sunday, or legal holiday observed by the Federal government, in which event it includes the next business day.
(b) When the period of time allowed is less than seven days, intermediate Saturdays, Sundays, and legal holidays observed by the Federal government shall be excluded from the computation.
(c) Where a document has been served or issued by placing it in the mail, an additional five days will be added to the time permitted for any response.
(a) The ALJ may schedule prehearing conferences as appropriate.
(b) Upon the motion of any party, the ALJ shall schedule at least one prehearing conference at a reasonable time in advance of the hearing.
(c) The ALJ may use prehearing conferences to discuss the following:
(1) Simplification of the issues;
(2) The necessity or desirability of amendments to the pleadings, including the need for a more definite statement;
(3) Stipulations and admissions of fact or as to the contents and authenticity of documents;
(4) Whether the parties can agree to submission of the case on a stipulated record;
(5) Whether a party chooses to waive appearances at an oral hearing and to submit only documentary evidence (subject to the objection of other parties) and written argument;
(6) Limitation of the number of witnesses;
(7) Scheduling dates for the exchange of witness lists and of proposed exhibits;
(9) The time and place for the hearing; and
(10) Such other matters as may tend to expedite the fair and just disposition of the proceedings.
(d) The ALJ may issue an order containing all matters agreed upon by the parties or ordered by the ALJ at a prehearing conference.
(a) Upon written request to the reviewing official, the defendant may review any relevant and material documents, transcripts, records, and other materials that relate to the allegations set out in the complaint and upon which the findings and conclusions of the investigating official under § 2554.8 are based, unless such documents are subject to a privilege under Federal law. Upon payment of fees for duplication, the defendant may obtain copies of such documents.
(b) Upon written request to the reviewing official, the defendant also may obtain a copy of all exculpatory information in the possession of the reviewing official or investigating official relating to the allegations in the complaint, even if it is contained in a document that would otherwise be privileged. If the document would otherwise be privileged, only that portion containing exculpatory information must be disclosed.
(c) The notice sent to the Attorney General from the reviewing official as described in § 2554.8 is not discoverable under any circumstances.
(d) The defendant may file a motion to compel disclosure of the documents subject to the provisions of this section. Such a motion may only be filed with the ALJ following the filing of an answer pursuant to § 2554.13.
(a) The following types of discovery are authorized:
(1) Requests for production of documents for inspection and copying;
(2) Requests for admissions of the authenticity of any relevant document or of the truth of any relevant fact;
(3) Written interrogatories; and
(b) For the purpose of this section and §§ 2554.27 and 2554.28, the term “documents” includes information, documents, reports, answers, records, accounts, papers, and other data and documentary evidence. Nothing contained herein shall be interpreted to require the creation of a document.
(c) Unless mutually agreed to by the parties, discovery is available only as ordered by the ALJ. The ALJ shall regulate the timing of discovery.
(d) Motions for discovery. (1) A party seeking discovery may file a motion with the ALJ. Such a motion shall be accompanied by a copy of the requested discovery, or in the case of depositions, a summary of the scope of the proposed deposition.
(2) Within ten days of service, a party may file an opposition to the motion and/or a motion for protective order as provided in § 2554.30.
(3) The ALJ may grant a motion for discovery only if he or she finds that the discovery sought—
(i) Is necessary for the expeditious, fair, and reasonable consideration of the issues;
(ii) Is not unduly costly or burdensome;
(iii) Will not unduly delay the proceeding; and
(iv) Does not seek privileged information.
(4) The burden of showing that discovery should be allowed is on the party seeking discovery.
(5) The ALJ may grant discovery subject to a protective order under § 2554.30.
(e) Depositions. (1) If a motion for deposition is granted, the ALJ shall issue a subpoena for the deponent, which may require the deponent to produce documents. The subpoena shall specify the time and place at which the deposition will be held.
(2) The party seeking to depose shall serve the subpoena in the manner prescribed in § 2554.12.
(3) The deponent may file with the ALJ a motion to quash the subpoena or a motion for a protective order within ten days of service.
(4) The party seeking to depose shall provide for the taking of a verbatim transcript of the deposition, which it shall make available to all other parties for inspection and copying.
(f) Each party shall bear its own costs of discovery.
(a) Upon written request to the reviewing official, the defendant may review all non-privileged, relevant and material documents, records and other material related to the allegations contained in the complaint. After paying the Corporation a reasonable fee for duplication, the defendant may obtain a copy of the records described.
(b) Upon written request to the reviewing official, the defendant may obtain a copy of all exculpatory information in the possession of the reviewing official or investigating official relating to the allegations in the complaint. If the document would otherwise be privileged, only the portion of the document containing exculpatory information must be disclosed. As used in this section, the term “information” does not include legal materials such as statutes or case law obtained through legal research.
(c) The notice sent to the Attorney General from the reviewing official is not discoverable under any circumstances.
(d) Other discovery is available only as ordered by the ALJ and includes only those methods of discovery allowed by § 2554.25.
(a) At least 15 days before the hearing or at such other time as ordered by the ALJ, the parties must exchange witness lists and copies of proposed hearing exhibits, including copies of any written statements or transcripts of deposition testimony that the party intends to offer in lieu of live testimony.
(b) If a party objects, the ALJ will not admit into evidence the testimony of any witness whose name does not appear on the witness list or any exhibit not provided to an opposing party unless the ALJ finds good cause for the omission or concludes that there is no prejudice to the objecting party.
(c) Unless a party objects within the time set by the ALJ, documents exchanged in accordance with this section are deemed to be authentic for the purpose of admissibility at the hearing.
(a) A party wishing to procure the appearance and testimony of any individual at the hearing may request that the ALJ issue a subpoena.
(b) A subpoena requiring the attendance and testimony of an individual may also require the individual to produce documents at the hearing.
(c) A party seeking a subpoena shall file a written request therefore not less than 15 days before the date fixed for the hearing unless otherwise allowed by the ALJ for good cause shown. Such request shall specify any documents to be produced and shall designate the witnesses and describe the address and location thereof with sufficient particularity to permit such witnesses to be found.
(d) The subpoena shall specify the time and place at which the witness is to appear and any documents the witness is to produce.
(e) The party seeking the subpoena shall serve it in the manner prescribed in § 2554.12. A subpoena on a party or upon an individual under the control of a party may be served by first class mail.
(f) A party or the individual to whom the subpoena is directed may file with the ALJ a motion to quash the subpoena within ten days after service or on or before the time specified in the subpoena for compliance if it is less than ten days after service.
The party requesting a subpoena shall pay the cost of the fees and mileage of any witness subpoenaed in the amounts that would be payable to a witness in a proceeding in United States District Court. A check for witness fees and mileage shall accompany the subpoena when served, except that when a subpoena is issued on behalf of the authority, a check for witness fees and mileage need not accompany the subpoena.
(a) A party or a prospective witness or deponent may file a motion for a protective order with respect to discovery sought by an opposing party or with respect to the hearing, seeking to limit the availability or disclosure of evidence.
(b) In issuing a protective order, the ALJ may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following:
(1) That the discovery not be had;
(2) That the discovery may be had only on specified terms and conditions, including a designation of the time or place;
(3) That the discovery may be had only through a method of discovery other than that requested;
(4) That certain matters not be inquired into, or that the scope of discovery be limited to certain matters;
(5) That discovery be conducted with no one present except persons designated by the ALJ;
(6) That the contents of discovery or evidence be sealed;
(7) That a deposition after being sealed be opened only by order of the ALJ;
(8) That a trade secret or other confidential research, development, commercial information, or facts pertaining to any criminal investigation, proceeding, or other administrative investigation not be disclosed or be disclosed only in a designated way; or
(9) That the parties simultaneously file specified documents or information enclosed in sealed envelopes to be opened as directed by the ALJ.
The ALJ will hold the hearing in any judicial district of the United States:
(a) In which the defendant resides or transacts business; or
(b) In which the claim or statement on which liability is based was made, presented or submitted to the Corporation; or
(c) As agreed upon by the defendant and the ALJ.
(a) The ALJ conducts a hearing in order to determine whether a defendant is liable for a civil penalty, assessment, or both and, if so, the appropriate amount of the civil penalty and/or assessment. The hearing will be recorded and transcribed, and the transcript of testimony, exhibits admitted at the hearing, and all papers and requests filed in the proceeding constitute the record for a decision by the ALJ.
(b) The Corporation must prove a defendant's liability and any aggravating factors by a preponderance of the evidence.
(c) A defendant must prove any affirmative defenses and any mitigating factors by a preponderance of the evidence.
(d) The hearing will be open to the public unless otherwise ordered by the ALJ for good cause shown.
(a) The ALJ shall determine the admissibility of evidence.
(b) Except as provided in this part, the ALJ shall not be bound by the Federal Rules of Evidence. However, the ALJ may apply the Federal Rules of Evidence where appropriate, e.g., to exclude unreliable evidence.
(c) The ALJ shall exclude irrelevant and immaterial evidence.
(d) Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or by considerations of undue delay or needless presentation of cumulative evidence.
(e) Although relevant, evidence may be excluded if it is privileged under Federal law.
(f) Evidence concerning offers of compromise or settlement shall be inadmissible to the extent provided in Rule 408 of the Federal Rules of Evidence.
(g) The ALJ shall permit the parties to introduce rebuttal witnesses and evidence.
(a) Except as provided in paragraph (b) of this section, testimony at the hearing shall be given orally by witnesses under oath or affirmation.
(b) At the discretion of the ALJ, testimony may be admitted in the form of a written statement or deposition. Any such written statement must be provided to all other parties along with the last known address of such witness, in a manner which allows sufficient time for other parties to subpoena such witness for cross-examination at the hearing. Prior written statements of witnesses proposed to testify at the hearing and deposition transcripts shall be exchanged as provided in § 2554.27(a).
(c) The ALJ shall exercise reasonable control over the mode and order of interrogating witnesses and presenting evidence so as to:
(1) Make the interrogation and presentation effective for the ascertainment of the truth;
(2) Avoid needless consumption of time; and
(3) Protect witnesses from harassment or undue embarrassment.
(d) The ALJ shall permit the parties to conduct such cross-examination as may be required for a full and true disclosure of the facts.
(e) At the discretion of the ALJ, a witness may be cross-examined on matters relevant to the proceeding without regard to the scope of his or her direct examination. To the extent permitted by the ALJ, cross-examination on matters outside the scope of direct examination shall be conducted in the manner of direct examination and may proceed by leading questions only if the witness is a hostile witness, an adverse party, or a witness identified with an adverse party.
(f) Upon motion of any party, the ALJ shall order witnesses excluded so that they cannot hear the testimony of other witnesses. This rule does not authorize exclusion of—
(1) A party who is an individual;
(2) In the case of a party that is not an individual, an officer or employee of the party appearing for the entity pro se or designated by the party's representative; or
(3) An individual whose presence is shown by a party to be essential to the presentation of its case, including an individual employed by the Government engaged in assisting the representative for the Government.
The hearing will be recorded and transcribed. Transcripts may be obtained following the hearing from the ALJ at a cost not to exceed the actual cost of duplication. The transcript of testimony, exhibits and other evidence admitted at the hearing, and all papers and requests filed in the proceeding constitute the record for the decision by the ALJ and the authority head. The Start Printed Page 61919record may be inspected and copied (upon payment of a reasonable fee) by anyone, unless otherwise ordered by the ALJ pursuant to § 2554.30.
No. Such discussions are forbidden as “ex parte communications” with the ALJ. No party or person (except employees of the ALJ's office) shall communicate in any way with the ALJ on any matter at issue in a case, unless on notice and opportunity for all parties to participate.
This does not prohibit a person or party from inquiring about the status of a case or asking routine questions concerning administrative functions or procedures.
(a) The ALJ may sanction a person, including any party or representative for—
(1) Failing to comply with an order, rule, or procedure governing the proceeding;
(2) Failing to prosecute or defend an action; or
(3) Engaging in other misconduct that interferes with the speedy, orderly, or fair conduct of the hearing.
(b) Any such sanction, including but not limited to those listed in paragraphs (c), (d), and (e) of this section, shall reasonably relate to the severity and nature of the failure or misconduct.
(c) When a party fails to comply with an order, including an order for taking a deposition, the production of evidence within the party's control, or a request for admission, the ALJ may—
(1) Draw an inference in favor of the requesting party with regard to the information sought;
(2) In the case of requests for admission, deem each matter of which an admission is requested to be admitted;
(3) Prohibit the party failing to comply with such order from introducing evidence concerning, or otherwise relying upon testimony relating to the information sought; and
(4) Strike any part of the pleadings or other submissions of the party failing to comply with such request.
(d) If a party fails to prosecute or defend an action under this part commenced by service of a notice of hearing, the ALJ may dismiss the action or may issue an initial decision imposing penalties and assessments.
(e) The ALJ may refuse to consider any motion, request, response, brief or other document which is not filed in a timely fashion.
The ALJ may require the parties to file post-hearing briefs. In any event, any party may file a post-hearing brief. The ALJ shall fix the time for filing such briefs, not to exceed 60 days from the date the parties receive the transcript of the hearing or, if applicable, the stipulated record. Such briefs may be accompanied by proposed findings of fact and conclusions of law. The ALJ may permit the parties to file reply briefs.
Decisions and Appeals
(a) The ALJ will issue an initial decision based only on the record. It will contain findings of fact, conclusions of law, and the amount of any penalties and assessments imposed.
(b) The ALJ will serve the initial decision on all parties within 90 days after close of the hearing or expiration of any allowed time for submission of post-hearing briefs. If the ALJ fails to meet this deadline, he or she shall promptly notify the parties of the reason for the delay and set a new deadline.
(c) The findings of fact must include a finding on each of the following issues:
(1) Whether any one or more of the claims or statements identified in the complaint violate this part; and
(2) If the defendant is liable for penalties or assessments, the appropriate amount of any such penalties or assessments, considering any mitigating or aggravating factors.
(d) The initial decision will include a description of the right of a defendant found liable for a civil penalty or assessment to file a motion for reconsideration with the ALJ or a notice of appeal with the authority head.
(a) In determining an appropriate amount of civil penalties and assessments, the ALJ and the authority head, upon appeal, should evaluate any circumstances that mitigate or aggravate the violation and should articulate in their opinions the reasons that support the penalties and assessments they impose. Because of the intangible costs of fraud, the expense of investigating such conduct, and the need to deter others who might be similarly tempted, ordinarily double damages and a significant civil penalty should be imposed.
(b) Although not exhaustive, the following factors are among those that may influence that ALJ and the authority head in determining the amount of penalties and assessments to impose with respect to the misconduct (i.e., the false, fictitious, or fraudulent claims or statements) charged in the complaint:
(1) The number of false, fictitious, or fraudulent claims or statements;
(2) The time period over which such claims or statements were made;
(3) The degree of the defendant's culpability with respect to the misconduct;
(4) The amount of money or the value of the property, services, or benefit falsely claimed;
(5) The value of the Government's actual loss as a result of the misconduct, including foreseeable consequential damages and the costs of investigation;
(6) The relationship of the amount imposed as civil penalties to the amount of the Government's loss;
(7) The potential or actual impact of the misconduct upon national defense, public health or safety, or public confidence in the management of Government programs and operations, including particularly the impact on the intended beneficiaries of such programs;
(8) Whether the defendant has engaged in a pattern of the same or similar misconduct;
(9) Whether the defendant attempted to conceal the misconduct;
(10) The degree to which the defendant has involved others in the misconduct or in concealing it;
(11) Where the misconduct of employees or agents is imputed to the defendant, the extent to which the defendant's practices fostered or attempted to preclude such misconduct;
(12) Whether the defendant cooperated in or obstructed an investigation of the misconduct;
(13) Whether the defendant assisted in identifying and prosecuting other wrongdoers;
(14) The complexity of the program or transaction, and the degree of the defendant's sophistication with respect to it, including the extent of the defendant's prior participation in the program or in similar transactions;
(15) Whether the defendant has been found, in any criminal, civil, or administrative proceeding to have engaged in similar misconduct or to have dealt dishonestly with the Government of the United States or of a State, directly or indirectly; and
(16) The need to deter the defendant and others from engaging in the same or similar misconduct.
(c) Nothing in this section shall be construed to limit the ALJ or the authority head from considering any other factors that in any given case may mitigate or aggravate the offense for Start Printed Page 61920which penalties and assessments are imposed.
(a) Any party may file a motion for reconsideration of the initial decision with the ALJ within 20 days of receipt of the initial decision. If the initial decision was served by mail, there is a rebuttable presumption that the initial decision was received by the party 5 days from the date of mailing.
(b) A motion for reconsideration must be accompanied by a supporting brief and must describe specifically each allegedly erroneous decision.
(c) Any response to a motion for reconsideration will only be allowed if it is requested by the ALJ.
(d) The ALJ will dispose of a motion for reconsideration by denying it or by issuing a revised initial decision.
(e) If the ALJ issues a revised initial decision upon motion of a party, that party may not file another motion for reconsideration.
(a) The initial decision of the ALJ becomes the final decision of the Corporation, and shall be binding on all parties 30 days after it is issued, unless any party timely files a motion for reconsideration or any defendant adjudged to have submitted a false claim or statement timely appeals to the Corporation's authority head, as set forth in § 2554.43.
(b) If the ALJ disposes of a motion for reconsideration by denying it or by issuing a revised initial decision, the ALJ's order on the motion for reconsideration becomes the final decision of the Corporation 30 days after the order is issued, unless a defendant adjudged to have submitted a false claim or statement timely appeals to the authority head, within 30 days of the ALJ's order, as set forth in § 2554.43.
(a) Any defendant who submits a timely answer and is found liable for a civil penalty or assessment in an initial decision may appeal the decision.
(b) The defendant may file a notice of appeal with the authority head within 30 days following issuance of the initial decision, serving a copy of the notice of appeal on all parties and the ALJ. The authority head may extend this deadline for up to an additional 30 days if an extension request is filed within the initial 30-day period and shows good cause.
(c) The defendant's appeal will not be considered until all timely motions for reconsideration have been resolved.
(d) If a timely motion for reconsideration is denied, a notice of appeal may be filed within 30 days following such denial or issuance of a revised initial decision, whichever applies.
(e) A notice of appeal must be supported by a written brief specifying why the initial decision should be reversed or modified.
(f) The Corporation's representative may file a brief in opposition to the notice of appeal within 30 days of receiving the defendant's notice of appeal and supporting brief.
(g) If a defendant timely files a notice of appeal, and the time for filing motions for reconsideration has expired, the ALJ will forward the record of the proceeding to the authority head.
(a) An initial decision is stayed automatically pending disposition of a motion for reconsideration or of an appeal to the authority head.
(b) No administrative stay is available following a final decision of the authority head.
(a) A defendant has no right to appear personally, or through a representative, before the authority head.
(b) There is no right to appeal any interlocutory ruling.
(c) The authority head will not consider any objection or evidence that was not raised before the ALJ unless the defendant demonstrates that the failure to object was caused by extraordinary circumstances. If the appealing defendant demonstrates to the satisfaction of the authority head that extraordinary circumstances prevented the presentation of evidence at the hearing, and that the additional evidence is material, the authority head may remand the matter to the ALJ for consideration of the additional evidence.
(a) The authority head may affirm, reduce, reverse, compromise, remand, or settle any penalty or assessment imposed by the ALJ in the initial decision or reconsideration decision.
(b) The authority head will promptly serve each party to the appeal and the ALJ with a copy of his or her decision. This decision must contain a statement describing the right of any person, against whom a penalty or assessment has been made, to seek judicial review.
31 U.S.C. 3805 authorizes judicial review by the appropriate United States District Court of any final Corporation decision imposing penalties or assessments, and specifies the procedures for such review. To obtain judicial review, a defendant must file a petition with the appropriate court in a timely manner.
(a) Parties may make offers of compromise or settlement at any time. Any compromise or settlement must be in writing.
(b) The reviewing official has the exclusive authority to compromise or settle the case from the date on which the reviewing official is permitted to issue a complaint until the ALJ issues an initial decision.
(c) The authority head has exclusive authority to compromise or settle the case from the date of the ALJ's initial decision until initiation of any judicial review or any action to collect the penalties and assessments.
(d) The Attorney General has exclusive authority to compromise or settle the case while any judicial review or any action to recover penalties and assessments is pending.
(e) The investigating official may recommend settlement terms to the reviewing official, the authority head, or the Attorney General, as appropriate. The reviewing official may recommend settlement terms to the authority head or the Attorney General, as appropriate.
Section 3806 and 3808(b) of title 31, United States Code, authorize actions for collection of civil penalties and assessments imposed under this Part and specify the procedures for such actions.
All amounts collected pursuant to this part shall be deposited as miscellaneous receipts in the Treasury of the United States, except as provided in 31 U.S.C. 3806(g).
(a) Any investigating official may:
(1) Refer allegations of criminal misconduct directly to the Department of Justice for prosecution or for suit under the False Claims Act or other civil proceeding;Start Printed Page 61921
(2) Defer or postpone a report or referral to the reviewing official to avoid interference with a criminal investigation or prosecution; or
(3) Issue subpoenas under other statutory authority.
(b) Nothing in this part limits the requirement that the Corporation employees report suspected violations of criminal law to the Corporation's Office of Inspector General or to the Attorney General.
These procedures separate the functions of the investigating official, reviewing official, and the ALJ, each of whom report to a separate organizational authority in accordance with 31 U.S.C. 3801. Except for purposes of settlement, or as a witness or a representative in public proceedings, no investigating official, reviewing official, or Corporation employee or agent who helps investigate, prepare, or present a case may (in such case, or a factually related case) participate in the initial decision or the review of the initial decision by the authority head. This separation of functions and organization is designed to assure the independence and impartiality of each government official during every stage of the proceeding. The representative for the Corporation may be employed in the offices of either the investigating official or the reviewing official.
Dated: October 13, 2006.
Frank R. Trinity,
[FR Doc. E6-17545 Filed 10-19-06; 8:45 am]
BILLING CODE 6050-28-P