[Federal Register Volume 60, Number 227 (Monday, November 27, 1995)]
[Proposed Rules]
[Pages 58297-58304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28516]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 142
Program Fraud Civil Remedies Act Regulations
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: In response to President Clinton's government-wide regulatory
reform initiative, the Small Business Administration (SBA) has
completed a page-by-page, line-by-line review of all of its existing
regulations to determine which might be revised or eliminated. This
proposed rule would renumber, reorganize, condense and rewrite in plain
language the existing regulation implementing the program ``Fraud Civil
Remedies Act of 1986''. The goal of the plain language style is to
eliminate cumbersome wording, redundancies and ambiguities. The goal of
the reorganization and revision is to make this part consistent in
practice and procedure with other parts of this title and to clarify
requirements under this regulation and applicable statutes of the
United States.
DATES: Comments must be submitted on or before December 27, 1995.
ADDRESSES: Written comments should be addressed to David R. Kohler,
Regulatory Reform Team Leader, (142) Small Business Administration, 409
3rd Street, S.W., Suite 13, Washington, D.C. 20416.
FOR FURTHER INFORMATION CONTACT: Cheri Wolff, Chief Counsel for General
Litigation; Office of General Counsel, at (202) 205-6643.
SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a
Memorandum to each federal agency, directing them to simplify their
regulations. In response to this directive, SBA has completed a page-
by-page, line-by-line review of all of its existing regulations to
determine which might be revised or eliminated. This proposed rule
reorganizes and partially redrafts former provisions for clarity and
user-friendliness. Extensive renumbering was necessary for
[[Page 58298]]
reorganization, simplification and clarification of existing
provisions. No substantive changes to existing provisions are proposed.
Section By Section Analysis
As background, the following section by section analysis discusses
each provision of Part 142 that would be affected by this proposed
rule:
Proposed section 142.1, ``Overview of Regulations,'' corresponds to
section 142.1 of the existing part. The proposed section is revised to
reflect the intent of the revisions to this Part. Modifications to the
text are intended to eliminate confusion as to the purpose of the part
and the proposed revision as a whole, and do not represent substantive
change.
Proposed sections 142.2-142.6 correspond to the definitions found
in existing sections 142.2 and 142.3. The proposed rules would renumber
and rewrite in plain language the definitions and explanations
applicable to this Part. Duplication is avoided in this section, and
practice and procedure under this Part are made more consistent with
practice and procedure under other Parts of this title.
Proposed sections 142.7-142.8 and 142.40, correspond to existing
sections 142.4 and 142.5. The proposed rule would be renumbered and
revised. The section is condensed and rewritten in plain language.
Proposed sections 142.90 and 142.11, correspond to existing section
142.7. The proposed rule would be renumbered and revised. The sections
are condensed and rewritten in plain language.
Proposed section 142.10, corresponds to existing section 142.6. The
proposed rule would be renumbered and revised. The section is condensed
and rewritten in plain language.
Proposed section 142.12, corresponds to existing section 142.9. The
proposed rule would be renumbered and revised. The section is moved,
condensed and rewritten in plain language.
Proposed section 142.13, corresponds to existing section 142.10.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.14, corresponds to existing section 142.12.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.15, corresponds to existing section 142.13.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.16, corresponds to existing section 142.17.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.17, corresponds to existing section 142.18.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.18, corresponds to existing section 142.16.
The proposed rule would be renumbered, moved, condensed and rewritten
in plain language.
Proposed section 142.19, corresponds to existing section 142.28.
The proposed rule would be renumbered and revised. The section would be
moved, condensed and rewritten in plain language.
Proposed section 142.20, corresponds to existing sections 142.8 and
142.26. The proposed rule would be renumbered, moved, condensed and
rewritten in plain language.
Proposed section 142.21, corresponds to existing sections 142.30
and 142.35. The proposed rule would be renumbered and revised,
condensed and rewritten in plain language.
Proposed section 142.22, corresponds to existing sections 142.33
and 142.34. The proposed rule would be renumbered and revised. The
sections would be moved, condensed and rewritten in plain language.
Proposed section 142.23, corresponds to existing sections 142.20
and 142.21. The proposed rule would be renumbered, moved, condensed and
rewritten in plain language.
Proposed section 142.24, corresponds to existing sections 142.23
and 142.25. The proposed rule would be partially renumbered and
revised. The sections are condensed and rewritten in plain language.
Proposed section 142.25, corresponds to existing section 142.24.
The proposed rule would be revised, condensed and rewritten in plain
language.
Proposed section 142.26, corresponds to existing section 142.15.
The proposed rule would be renumbered, moved, condensed and rewritten
in plain language.
Proposed section 142.27, corresponds to existing section 142.29.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.28, corresponds to existing section 142.32.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.29, corresponds to existing section 142.22.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.30, corresponds to existing section 142.37.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.31, corresponds to existing section 142.38.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed sections 142.32 through 142.36, correspond to existing
subsections of section 142.39. The proposed rule would be renumbered
and revised. The old section is broken into separate subgroups and then
rewritten in plain language.
Proposed section 142.37, corresponds to existing section 142.42.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.38, corresponds to existing section 142.46.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Proposed section 142.39, corresponds to existing sections 142.43
and 142.44. The proposed rule would be renumbered and revised. The
sections are moved, condensed and rewritten in plain language.
Proposed section 142.40, corresponds to existing sections 142.4 and
142.5. The proposed rule would be renumbered and revised. The sections
are moved, condensed and rewritten in plain language.
Proposed section 142.41, corresponds to existing section 142.14.
The proposed rule would be renumbered and revised. The section is
moved, condensed and rewritten in plain language.
Existing sections 142.2, 142.11, 142.19, 142.31, 142.36, 142.40,
142.45 and 142.47 are deleted in their current form as duplicative and
confusing.
Compliance With Executive Orders 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork
Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this proposed rule would not have a significant
economic impact on a substantial number of small entities within the
meaning of Executive Order 12866 or the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. This rule would renumber, reorganize and rewrite
the existing regulation for clarity and ease of use. Contracting
opportunities and financial assistance for small business would not be
affected by this proposed rule. Therefore, it is
[[Page 58299]]
not likely to have an annual economic effect of $100 million or more,
result in a major increase in costs or prices, or have a significant
adverse effect on competition or the United States economy.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this proposed rule, if adopted in final form, would
contain no new reporting or record keeping requirements.
For purposes of Executive Order 12612, SBA certifies that this rule
would not have any federalism implications warranting the preparation
of a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 142
Administrative practice and procedure; Claims; Fraud; Penalties.
For the above reasons, SBA proposes to revise Part 142 of Title 13
of the Code of Federal Regulations as follows:
PART 142--PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS
Overview and Definitions
142.1 Overview of regulations.
142.2 What kind of conduct will result in program fraud
enforcement?
142.3 What is a claim?
142.4 What is a statement?
142.5 What is a false claim or statement?
142.6 What does the phrase ``know or have reason to know'' mean?
Procedures Leading to Issuance of a Complaint
142.7 Who investigates program fraud?
142.8 What happens if program fraud is suspected?
142.9 When will SBA issue a complaint?
142.10 What is contained in a complaint?
142.11 How will the complaint be served?
Procedures Following Service of a Complaint
142.12 How does a defendant respond to a complaint?
142.13 What happens if the defendant fails to file an answer?
142.14 What happens once an answer is filed?
Hearing Provisions
142.15 What kind of hearing is contemplated?
142.16 At the hearing, what rights do the parties have?
142.17 What is the responsibility and authority of the ALJ?
142.18 Can the reviewing official or the ALJ be disqualified?
142.19 How are issues brought to the attention of the ALJ?
142.20 How are papers served?
142.21 How will the hearing be conducted and who has the burden of
proof?
142.22 How is evidence presented at the hearing?
142.23 Are there limits on disclosure of documents or discovery?
142.24 Can witnesses be subpoenaed?
142.25 Can a party or witness object to discovery?
142.26 Can a party informally discuss the case with the ALJ?
142.27 Are there sanctions for misconduct?
142.28 Where is the hearing held?
142.29 Are witness lists exchanged before the hearing?
Decisions and Appeals
142.30 How is the case decided?
142.31 Can a party request reconsideration of the initial decision?
142.32 When does the initial decision of the ALJ become final?
142.33 What are the procedures for appealing the ALJ decision?
142.34 Are there any limitations on the right to appeal to the
Administrator?
142.35 How does the Administrator dispose of an appeal?
142.36 Can I obtain judicial review?
142.37 What judicial review is available?
142.38 Can the administrative complaint be settled voluntarily?
142.39 How are civil penalties and assessments collected?
142.40 What if the investigation indicates criminal misconduct?
142.41 How does SBA protect the rights of defendants?
Authority: 15 U.S.C. 634(b), 31 U.S.C. 3803(g)(2).
Overview amd Definitions
Sec. 142.1 Overview of regulations.
(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 SBA 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
penalty which may be prescribed by law, a person who submits, or causes
to be submitted, a false claim or a false statement to SBA 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 SBA. If SBA has made any payment, transferred
property, or provided services in reliance on a false claim, the person
submitting it is also subject to an assessment of not more than twice
the amount of the false claim. This assessment is in lieu of damages
sustained by SBA because of the false claim.
Sec. 142.2 What kind of conduct will result in program fraud
enforcement?
(a) Any person who makes, or causes to be made, a false,
fictitious, or fraudulent claim or written statement to SBA 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 SBA to make payment, an assessment is
imposed against each person. The liability of each such person to pay
the assessment is joint and several.
(c) No proof of specific intent to defraud is required to establish
liability under this Part.
Sec. 142.3 What is a claim?
(a) Claim means any request, demand, or submission--
(1) Made to SBA for property, services, or money;
(2) Made to a recipient of property, services, or money from SBA or
to a party to a contract with SBA for property or services, or for the
payment of money. This provision applies only when the claim is related
to the property, services or money from SBA or to the contract with
SBA; or
(3) Made to SBA 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 SBA guaranteed loans made by participating
lenders. A claim is made when it is received by SBA, an agent, fiscal
intermediary, or other entity acting for SBA, or when it is received by
the recipient of property, services, or money, or the party to the
contract.
(c) Each voucher, invoice, claim form, or individual request or
demand for property, services, or money constitutes a separate claim.
Sec. 142.4 What is a statement?
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 SBA. SBA must provide
some portion of the money or property in connection with the contract,
bid, grant, loan, or benefit, or be potentially liable to another party
for any portion of the money or property under such contract, loan,
grant, or
[[Page 58300]]
benefit. A statement is made, presented, or submitted to SBA when it is
received by SBA or an agent, fiscal intermediary, or other entity
acting for SBA.
Sec. 142.5 What is a false claim or statement?
(a) A claim submitted to SBA 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 SBA 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, the statement must contain or be accompanied by
an express certification or affirmation of the truthfulness and
accuracy of the contents of the statement.
Sec. 142.6 What does the phrase ``know or have reason to know'' mean?
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
Sec. 142.7 Who investigates program fraud?
Allegations that a false claim or statement has been made are
investigated by the Inspector General, or his designee. As the
investigating official, the Inspector General, or his designee, has
authority under the Program Fraud Civil Remedies Act and the Inspector
General Act of 1978, as amended, to issue administrative subpoenas for
the production of records and documents. The methods for serving a
subpoena are set forth in Part 101 of this title.
Sec. 142.8 What happens if program fraud is suspected?
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 designee. If, based on the report of the investigating official,
the reviewing official determines there is adequate evidence to believe
that a person submitted a false claim or statement under this Part, the
reviewing official transmits to the Attorney General a written notice
of the reviewing official's intention to refer the matter for
adjudication. This notice will include the reviewing official's
statements concerning:
(a) The reasons for the referral;
(b) The claims or statements upon which liability would be based;
(c) The evidence that supports liability;
(d) 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;
(e) Any exculpatory or mitigating circumstances that may relate to
the claims or statements known by the reviewing official or the
investigating official; and
(f) The likelihood of collecting the proposed penalties and
assessments.
Sec. 142.9 When will SBA issue a complaint?
SBA will issue a complaint:
(a) If the Attorney General or his designee approves the referral
of the allegations for adjudication and,
(b) In a case of submission of false claims, 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
simultaneously as part of a single request, demand, or submission.
Sec. 142.10 What is contained in a complaint?
(a) A complaint is notice to the person alleged to be liable under
31 U.S.C. 3802 of the specific allegations being referred for
adjudication and 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 SBA is referred to as the
defendant.
(b) The reviewing official may join in a single complaint false
claims or statements that are unrelated or 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 SBA is seeking to impose civil
penalties, assessments, or both, against the persons named in the
complaint and will also include:
(1) The allegations of liability against the defendant, including
the statutory basis for liability, identification of the claims or
statements that are the basis for the alleged liability, and the
reasons liability allegedly arises from such claims or statements;
(2) The maximum amount of penalties and assessments requested and
for which the defendant may be held liable;
(3) A statement of a defendant's rights to request a hearing by
filing an answer and to be represented by an attorney;
(4) Instructions for filing an answer to request a hearing;
(5) A statement that failure of a defendant to file an answer
within 30 days of service of the complaint will result in the
imposition of the maximum amount of penalties and assessments.
(d) The reviewing official will serve a complaint on the defendant
and provide a copy to the Office of Hearings and Appeals (OHA). If a
hearing is requested, an Administrative Law Judge (ALJ) from OHA will
serve as the Presiding Officer.
Sec. 142.11 How will the complaint be served?
(a) The complaint must be served on a person alleged to be liable,
or to a general partner of a partnership alleged to be liable, or to an
executive officer or a director of a corporation or unincorporated
association alleged to be liable, or to a person authorized by
appointment or by law to receive process for the person named in the
complaint.
(b) Service of a complaint may be effected by either of the
following means:
(1) By mail. The complaint must be addressed to the Defendant at
his or her residence or usual dwelling place, principal office or place
of business, and must be sent by registered or certified mail (return
receipt requested).
(2) By personal delivery.
(c) The complaint may be served by anyone 18 years of age or older.
(d) Service is complete when made in accordance with the preceding
provisions.
[[Page 58301]]
(e) 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.
(f) Proof of service--
(1) When service is by registered or certified mail, the return
postal receipt will serve as proof of service.
(2) When service is by personal delivery, an affidavit of the
individual serving the complaint or written acknowledgment of receipt
by the individual actually served or the defendant or a representative
will serve as proof of service.
(g) At the same time the reviewing official serves the complaint,
the defendant will be served with a copy of this Part and 31 U.S.C.
Secs. 3801-3812.
Procedures Following Service of a Complaint
Sec. 142.12 How does a defendant respond to the complaint?
(a) A defendant may request a hearing by filing an answer with the
reviewing official and the Office of Hearings and Appeals within 30
days of service of the complaint. An answer will be considered a
request for a 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 the defendant contends that 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
and requesting a hearing. In addition, the general answer may include a
request for 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 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 OHA
and a copy must be served on the reviewing official.
Sec. 142.13 What happens if a defendant fails to file an answer?
(a) If a defendant does not file an answer within 30 days after
service of the complaint, the reviewing official may 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 stating that extraordinary circumstances prevented the defendant
from filing an answer, the initial decision is 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.
Sec. 142.14 What happens once an answer is filed?
(a) When the reviewing official receives an answer, he must file
the complaint and the answer with the ALJ, along with a designation of
a representative.
(b) When the ALJ receives the complaint and the answer, the ALJ
will promptly serve a notice of hearing upon the defendant and the
representative for SBA. The notice of hearing is served in the same
manner as the complaint, service of which is described in Sec. 142.11.
(c) The notice shall 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 SBA; and
(6) Such other matters as the ALJ deems appropriate.
Hearing Provisions
Sec. 142.15 What kind of hearing is contemplated?
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 argue that he is not liable for the imposition
of civil penalties, assessments, or both.
Sec. 142.16 At the hearing, what rights do the parties have?
(a) The parties to the hearing shall be the defendant and SBA.
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.
Sec. 142.17 What is the responsibility and authority of the ALJ?
The Presiding Officer at the hearings described herein and in 31
U.S.C. Sec. 3803(d)(2)(B), is an Administrative Law Judge (ALJ). The
ALJ has the authority set forth in Sec. 134.218(b) of this Title.
Sec. 142.18 Can the reviewing official or ALJ be disqualified?
(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 in a
particular case may be disqualified provided that:
[[Page 58302]]
(1) The motion is supported by an affidavit containing specific
facts that support the party's belief that personal bias or other
reason for disqualification exists, including the time and
circumstances of the party's discovery of such facts;
(2) The motion and affidavit are promptly filed when the party
discovers grounds for disqualification, or such objection will be
deemed waived; and
(3) The party, or representative of record, certifies in writing
that the motion is made in good faith.
(c) Once such a motion has been filed to disqualify the reviewing
official, the ALJ will halt the proceedings until the matter of
disqualification is resolved. 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.
Sec. 142.19 How are issues brought to the attention of the ALJ?
Any application to the ALJ for an order or ruling is by motion.
Motions must state the relief sought, the authority relied upon, and
the facts alleged. Procedures for filing motions under this section are
governed by section 134.211 of this Title.
Sec. 142.20 How are papers served?
Except for service of a complaint or a notice of hearing under
section 142.11 and section 142.14(b) respectively, service of all
papers is made by the manner prescribed by section 134.204 of this
Title.
Sec. 142.21 How will the hearing be conducted and who has the burden
of proof?
(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 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) SBA 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.
Sec. 142.22 How is evidence presented at the hearing?
(a) Witnesses at the hearing must testify orally under oath or
affirmation unless otherwise ordered by the ALJ. At the discretion of
the ALJ, testimony may be admitted in the form of a written statement
or deposition, a copy of which must be provided to all other parties,
along with the last known address of the witness, in a manner which
allows sufficient time for other parties to subpoena the witness for
cross-examination at the hearing.
(b) The ALJ determines the admissibility of evidence in accordance
with Sec. 134.223 (a) and (b).
Sec. 142.23 Are there limits on disclosure of documents or 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 SBA 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 section 134.213(c)
of this Title.
Sec. 142.24 Can witnesses be subpoenaed?
A party wishing to procure the appearance and testimony of any
individual and/or documents and records at the hearing may request that
the ALJ issue a subpoena. A written request for a subpoena must be
filed with the ALJ not less than 15 days before the scheduled hearing
date unless otherwise allowed by the ALJ for good cause. A subpoena
shall be issued by the Presiding Officer, in the manner specified by
section 134.214 of this Title.
Sec. 142.25 Can a party or witness object to discovery?
A party or prospective witness may file a motion to quash a
subpoena or to limit discovery or the disclosure of evidence. Motions
to limit discovery or to object to the disclosure of evidence are
governed by Sec. 134.213 (d) and (e) of this title. Motions to limit or
quash subpoenas are governed by Sec. 134.214(d) of this Title.
Sec. 142.26 Can a party informally discuss the case with the ALJ?
No. The proscription against and rules concerning ex parte
communications with the ALJ are set forth in section 134.220 of this
Title. This provision does not prohibit a party from communicating with
any other employee of OHA solely for the purpose of inquiring about the
status of a case or asking routine questions concerning administrative
functions and procedures.
Sec. 142.27 Are there sanctions for misconduct?
The ALJ may sanction a person, including any party or
representative, pursuant to the rules set forth at section 134.219 of
this Title.
Sec. 142.28 Where is the hearing held?
The hearing is held 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 SBA; or
(c) As agreed upon by the defendant and the ALJ.
Sec. 142.29 Are witness lists exchanged before the hearing?
(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 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.
[[Page 58303]]
Decisions and Appeals
Sec. 142.30 How is the case decided?
(a) The ALJ issues an initial decision based only on the record,
which will contain findings of fact, conclusions of law, and the amount
of any penalties and assessments imposed.
(b) The ALJ serves the initial decision on all parties within 90
days after close of the hearing or after the time for submission of any
post-hearing briefs, if permitted has expired. If the ALJ fails to meet
this deadline, he or she shall promptly notify the parties of the
reason for the delay 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
Administrator.
Sec. 142.31 Can a party request reconsideration of the initial
decision?
(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 set forth each matter claimed
to have been erroneously decided and the nature of the alleged errors.
The motion must be accompanied by a supporting brief.
(c) Any response to a motion for reconsideration must be filed
within 20 days of receipt of the motion for reconsideration.
(d) The ALJ disposes 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.
Sec. 142.32 When does the initial decision of the ALJ become final?
(a) The initial decision of the ALJ becomes the final decision of
SBA, 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 SBA Administrator, as set forth in Sec. 142.33.
(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 SBA 30 days
after the order is issued, unless a defendant adjudged to have
submitted a false claim or statement timely appeals to the
Administrator, as set forth in Sec. 142.33, within 30 days of the ALJ's
order.
Sec. 142.33 What are the procedures for appealing the ALJ decision?
(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
Administrator, at any time within the 30 day period following the
issuance of an initial decision. At the same time, a copy of the notice
of appeal must be served on all parties and the ALJ.
(c) If another party files a timely motion for reconsideration with
the ALJ, the defendant's appeal will not be considered until the motion
for reconsideration has been resolved.
(d) If a motion for reconsideration is timely filed, a notice of
appeal may be filed at any time within the 30-day period following the
ALJ's denial of the motion for reconsideration or issuance of a revised
initial decision, whichever applies.
(e) A notice of appeal must be supported by a written brief
specifying the reasons why the defendant believes the initial decision
should be reversed or modified.
(f) SBA'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) The Administrator may extend the initial 30-day period for not
more than an additional 30 days if the defendant files a request for an
extension within the initial 30-day period and shows good cause.
(h) If a defendant timely files a notice of appeal, and the time
for filing motions for reconsideration has expired, the ALJ forwards
the record of the proceeding to the Administrator.
Sec. 142.34 Are there any limitations on the right to appeal to the
Administrator?
(a) A defendant has no right to appear personally, or through a
representative, before the Administrator.
(b) There is no right to appeal any interlocutory ruling by the
ALJ.
(c) The Administrator 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
Administrator that extraordinary circumstances prevented the
presentation of evidence at the hearing, and that the additional
evidence is material, the Administrator will remand the matter to the
ALJ for consideration of the additional evidence.
Sec. 142.35 How does the Administrator dispose of an appeal?
(a) The Administrator 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 Administrator 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.
Sec. 142.36 Can I obtain judicial review?
If the initial decision is appealed, the decision of the
Administrator is the final decision of SBA and is not subject to
judicial review unless the defendant files a petition for judicial
review within 60 days after the date on which the Administrator serves
the defendant with a copy of the final decision.
Sec. 142.37 What judicial review is available?
31 U.S.C. Sec. 3805 authorizes judicial review of the final SBA
decision imposing penalties or assessments hereunder, by the
appropriate United States District Court and specifies the procedures
for such review. If a defendant fails to file a judicial petition for
review in a timely fashion, the final SBA decision is no longer subject
to judicial review.
Sec. 142.38 Can the administrative complaint be settled voluntarily?
(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 a case under this Part at any time after the date
on which the reviewing official is permitted to issue a complaint and
before the date on which the ALJ issues an initial decision.
(c) The Administrator has exclusive authority to compromise or
settle a case under this Part at any time after the date on which the
ALJ issues an initial
[[Page 58304]]
decision and before the initiation of any judicial review or any action
to collect the penalties and assessments.
(d) The Attorney General has exclusive authority to compromise a
case under this Part while any judicial review or any action to recover
penalties and assessments are pending.
(e) The investigating official may recommend settlement terms for
the reviewing official, the Administrator, or the Attorney General, as
appropriate. The reviewing official may recommend settlement terms to
the Administrator or the Attorney General, as appropriate.
Sec. 142.39 How are civil penalties and assessments collected?
31 U.S.C. 3806 and 3808(b) authorize the Attorney General to bring
actions for collection of civil penalties and assessments imposed under
this Part and specify the procedures for such actions. Actions to
collect civil penalties and assessments may include administrative
offset under 31 U.S.C. 3716. The penalties and assessments may not,
however, be administratively offset against an overpayment of federal
taxes (then or later owed) to the defendant by the United States.
Sec. 142.40 What if the investigation indicates criminal misconduct?
(a) This Part does not preclude or limit an investigating
official's discretion to:
(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;
(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 SBA employees
report suspected violations of criminal law to the SBA Office of
Inspector General or to the Attorney General.
Sec. 142.41 How does SBA protect the rights of defendants?
The procedures implemented in this Part completely separate the
functions of the investigating official, reviewing official, and the
ALJ. In accordance with 31 U.S.C. Sec. 3801, each of these officials
fall under a separate organizational authority. Moreover, except for
the purposes of settlement, the investigating official, reviewing
official, and any employee or agent of SBA who takes part in
investigating, preparing, or presenting a particular case may not in
such case, or a factually related case, participate or advise in the
initial decision or the review of the initial decision by the
Administrator, except as a witness or a representative in public
proceedings. 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 SBA may be
employed in the offices of either the investigating official or the
reviewing official.
Dated: November 11, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-28516 Filed 11-24-95; 8:45 am]
BILLING CODE 8025-01-P