[Federal Register Volume 61, Number 80 (Wednesday, April 24, 1996)]
[Rules and Regulations]
[Pages 18078-18081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9926]



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SOCIAL SECURITY ADMINISTRATION
20 CFR Part 498

RIN 0960-AE23


Civil Monetary Penalties, Assessments and Recommended Exclusions

AGENCY: Office of the Inspector General (OIG), SSA.

ACTION: Final rule.

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SUMMARY: This final rule establishes procedures to impose civil 
monetary penalties and assessments against certain Old-Age, Survivors, 
and Disability Insurance beneficiaries, Supplemental Security Income 
recipients, third parties, physicians, medical providers, and other 
individuals and entities who make false statements or representations 
for use in determining any right to or amount of title II or title XVI 
benefits under the Social Security Act. This final rule implements the 
civil monetary penalty provisions of section 206(b) of the Social 
Security Independence and Program Improvements Act of 1994.

EFFECTIVE DATE: This final rule is effective May 24, 1996.

FOR FURTHER INFORMATION CONTACT : Judith A. Kidwell, Office of the 
Inspector General, (410) 965-9750.

SUPPLEMENTARY INFORMATION:

Background

    We published a notice of proposed rulemaking (NPRM) in the Federal 
Register on November 27, 1995, (60 FR 58305) which proposed to 
establish procedures to implement the civil monetary penalty (CMP) 
provisions of section 206(b) of the Social Security Independence and 
Program Improvements Act of 1994, Public Law 103-296, which added 
section 1129 of the Social Security Act (the Act), effective October 1, 
1994. Section 108 of Public Law 103-296 made additional conforming 
amendments to section 1129, effective March 31, 1995, to reflect the 
Social Security Administration's (SSA) new status as an independent 
agency.
    The 60-day public comment period closed on January 26, 1996. We 
received comments on the NPRM from only one commenter, a disability law 
center. The comments, our responses, and the final rule, with several 
technical changes we have made, are discussed below.
    Since we have made only technical changes, we are adopting the 
regulations as proposed.

Public Comments on the Proposed Regulations

    The commenter was concerned that the regulations were overly broad 
and that there were unaddressed problems at the SSA which would 
increase the likelihood of an overbroad application of these rules to 
claimants and their representatives. The substantive comments made by 
the commenter and our responses are summarized below.
    Comment: The commenter raised concerns that the proposed 
regulations were overbroad in defining when a person has made or caused 
to be made a statement, representation, or omission of material fact, 
inasmuch as the basis and purpose statement in Sec. 498.100 does not 
include an intent requirement.
    Response: Section 498.100 has been developed to briefly catalog the 
general types of penalty and assessment authorities that will be in 
part 498. This section is not intended to include the legally operative 
language to impose a penalty or assessment. Such language can be found 
in Secs. 498.101 through 498.132.
    Comment: The commenter expressed a concern that the definition of 
material fact at Sec. 498.101 is not limited to facts that might have 
made a difference in the eligibility decision.
    Response: The definition of ``material fact'' which appears in the 
NPRM is taken verbatim from section 1129(a)(2) of the Act.
    Comment: Although the commenter acknowledged that Sec. 498.102 
contains elements of intent, it raised a concern that the basis for 
imposition of CMPs does not adequately link misstatements and omissions 
to an intent to fraudulently obtain benefits.
    Response: Section 498.102 carefully tracks the language of section 
1129(a)(1) of the Act. In order to impose a penalty or assessment under 
Sec. 498.102, the OIG must determine that an individual knew or should 
have known that his or her statement or representation was false or 
misleading or omitted a material fact, or that the individual made the 
false or misleading statement with knowing disregard for the truth.
    Comment: The commenter recited an example of an experience to 
illustrate problems it perceived with this rule. The commenter also 
expressed concerns that: (1) The vast majority of claimants do not 
understand eligibility and reporting requirements; (2) because of staff 
reductions, access to SSA staff for information is limited; (3) the 
ability of SSA staff to completely and accurately relate program 
requirements varies widely; (4) SSA pamphlets are difficult for persons 
with learning disabilities and limited education or English skills; and 
(5) SSA record keeping is such that it is not unusual for records to be 
lost.
    Response: Many of these comments are more appropriately directed to 
the administration of SSA programs and are not within the scope of this 
rule. However, we would like to point out that section 1129 of the Act 
is directed toward those persons who defraud the SSA's programs or 
receive benefits or payments to which they are not entitled, and that 
steps have been taken to address due process concerns and ensure that 
innocent persons are not penalized.
    As required by section 1129 of the Act, the respondent will be 
notified of a proposed penalty in a manner authorized by Rule 4 of the 
Federal Rules of Civil Procedure. Additionally, except with respect to 
affirmative defenses and mitigating circumstances, the burden of 
persuasion is on the Government in CMP cases. Finally, the

[[Page 18079]]

SSA plans to go beyond the requirements of the statute to ensure due 
process with respect to the CMP process. The statute requires only that 
a person be given ``an opportunity for the determination to be made on 
the record after a hearing at which the person is entitled to be 
represented by counsel, to present witnesses, and to cross-examine 
witnesses against the person.'' The SSA intends to enter into an 
agreement with the Departmental Appeals Board (DAB) of the U.S. 
Department of Health and Human Services to conduct the hearings in 
these cases because of the DAB's expertise with CMP cases involving 
Medicare and Medicaid fraud over a period of more than 10 years. SSA 
plans to include an appeal to the appellate division of the DAB in the 
administrative review process which will provide an additional 
opportunity for the respondent to address legal issues before being 
required to litigate in federal court.
    Comment: The commenter expressed concerns that the imposition of 
CMP magnifies the dilemma of the sometimes competing duties of zealous 
representation, client confidentiality, and candor towards the 
tribunal. The commenter opines that the rule will: (1) Interfere with 
the obligation of advocates to determine the relevance or evidentiary 
value of information being considered for admission for the record; (2) 
require representatives to determine what is a material fact and what 
is opinion; and (3) magnify the dilemma of competing duties of 
representation, client confidentiality and candor towards the tribunal.
    Response: As acknowledged by the commenter, attorneys and 
paralegals supervised by attorneys are bound by federal and state codes 
of professional conduct. We do not believe that ``zealous 
representation'' would ever include knowingly assisting in presenting 
or supplying false information to the SSA in order to obtain benefits 
or payments for a client.
    Comment: The commenter indicated that representatives should not be 
required to submit potentially prejudicial reports or face CMP without 
the availability of an enforceable subpoena for the report writer.
    Response: The Inspector General (IG) has the authority under the 
Inspector General Act of 1978, as amended, to obtain such information 
through the issuance of subpoenas during a fraud investigation 
involving the SSA's programs or operations. Additional subpoena 
authority exists at sections 205(d) and 1129(i) of the Act.
    Comment: The commenter expressed concerns that Sec. 498.109 does 
not allow for a showing of good cause for a late request for a hearing, 
and suggested that the OIG should send a second notice by certified 
mail.
    Response: The SSA's proposed hearing regulations which will be 
published in the Federal Register in the near future will give the 
administrative law judge the authority to grant a late request for a 
hearing upon a showing of good cause. We have revised Sec. 498.109 of 
this final rule to reflect this good cause exception.

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and have determined that these rules do not meet the criteria for a 
significant regulatory action under Executive Order 12866. Thus, they 
are not subject to OMB review.

Paperwork Reduction Act

    These regulations impose no new reporting or record keeping 
requirements requiring OMB clearance.

Regulatory Flexibility Act

    We have determined that no regulatory impact analysis is required 
for these final regulations. While the penalties and assessments which 
the IG could impose as a result of section 1129 of the Act and these 
regulations might have a slight impact on small entities, we do not 
anticipate that a substantial number of these small entities will be 
significantly affected by this rulemaking. Based on our determination, 
the IG certifies that these regulations will not have a significant 
economic impact on a substantial number of small business entities. Any 
impact on small businesses would primarily be a result of the 
legislation rather than these regulations. Therefore, we have not 
prepared a regulatory flexibility analysis.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social 
Security-Disability Insurance; 96.002, Social Security-Retirement 
Insurance; 96.004, Social Security-Survivors Insurance; and 96.006, 
Supplemental Security Income Program)

List of Subjects in 20 CFR Part 498

    Administrative practice and procedure, Fraud, and Penalties.

    Approved: April 16, 1996.
David C. Williams,
Inspector General.

    For the reasons set out in the preamble, part 498 of chapter III of 
title 20 of the Code of Federal Regulations is amended as set forth 
below:

PART 498--CIVIL MONETARY PENALTIES, ASSESSMENTS AND RECOMMENDED 
EXCLUSIONS

    1. The authority citation for part 498 is revised to read as 
follows:

    Authority: Secs. 702(a)(5), 1129, and 1140 of the Social 
Security Act (42 U.S.C. 902(a)(5), 1320a-8, and 1320b-10).

    2. Section 498.100 is amended by revising paragraphs (a) and (b) 
introductory text and adding paragraph (b)(1) to read as follows:


Sec. 498.100   Basis and purpose.

    (a) Basis. This part implements sections 1129 and 1140 of the 
Social Security Act (42 U.S.C. 1320a-8 and 1320b-10).
    (b) Purpose. This part provides for the imposition of civil 
monetary penalties and assessments, as applicable, against persons 
who--
    (1) Make or cause to be made false statements or representations, 
or omissions of material fact for use in determining any right to or 
amount of benefits under title II or benefits or payments under title 
XVI of the Social Security Act; or
* * * * *
    3. Section 498.101 is amended by adding the following definitions 
and revising the definition of ``Respondent'' to read as follows:


Sec. 498.101   Definitions.

* * * * *
    Assessment means the amount described in Sec. 498.104, and includes 
the plural of that term.
* * * * *
    Material fact means a fact which the Commissioner of Social 
Security may consider in evaluating whether an applicant is entitled to 
benefits under title II or eligible for benefits or payments under 
title XVI of the Social Security Act.
* * * * *
    Respondent means the person upon whom the Commissioner or the 
Inspector General has imposed, or intends to impose, a penalty and 
assessment, as applicable.
* * * * *
    4. Section 498.102 is amended by revising the section heading and 
adding paragraph (a) to read as follows:


Sec. 498.102   Basis for civil monetary penalties and assessments.

    (a) The Office of the Inspector General may impose a penalty and 
assessment, as applicable, against any person whom it determines in 
accordance with this part--
    (1) Has made, or caused to be made, a statement or representation 
of a

[[Page 18080]]

material fact for use in determining any initial or continuing right to 
or amount of:
    (i) Monthly insurance benefits under title II of the Social 
Security Act; or
    (ii) Benefits or payments under title XVI of the Social Security 
Act; and
    (2)(i) Knew, or should have known, that the statement or 
representation--
    (A) Was false or misleading; or
    (B) Omitted a material fact; or
    (ii) Made such statement with knowing disregard for the truth.
* * * * *
    5. Section 498.103 is amended by adding paragraph (a) to read as 
follows:
* * * * *


Sec. 498.103  Amount of penalty.

    (a) Under Sec. 498.102(a), the Office of the Inspector General may 
impose a penalty of not more than $5,000 for each false statement or 
representation.
* * * * *
    6. Section 498.104 is added to read as follows:


Sec. 498.104  Amount of assessment.

    A person subject to a penalty determined under Sec. 498.102(a) may 
be subject, in addition, to an assessment of not more than twice the 
amount of benefits or payments paid as a result of the statement or 
representation which was the basis for the penalty. An assessment is in 
lieu of damages sustained by the United States because of such 
statement or representation.
    7. Section 498.106 is amended by revising the section heading and 
adding paragraph (a) to read as follows:


Sec. 498.106  Determinations regarding the amount or scope of penalties 
and assessments.

    (a) In determining the amount or scope of any penalty and 
assessment, as applicable, in accordance with Secs. 498.103(a) and 
498.104, the Office of the Inspector General will take into account:
    (1) The nature of the statements and representations referred to in 
Sec. 498.102(a) and the circumstances under which they occurred;
    (2) The degree of culpability of the person committing the offense;
    (3) The history of prior offenses of the person committing the 
offense;
    (4) The financial condition of the person committing the offense; 
and
    (5) Such other matters as justice may require.
* * * * *
    8. Section 498.108 is revised to read as follows:


Sec. 498.108  Penalty and assessment not exclusive.

    Penalties and assessments, as applicable, imposed under this part 
are in addition to any other penalties prescribed by law.
    9. Section 498.109 is revised to read as follows:


Sec. 498.109  Notice of proposed determination.

    (a) If the Office of the Inspector General seeks to impose a 
penalty and assessment, as applicable, it will serve written notice of 
the intent to take such action. The notice will include:
    (1) Reference to the statutory basis for the proposed penalty and 
assessment, as applicable;
    (2) A description of the false statements, representations, and 
incidents, as applicable, with respect to which the penalty and 
assessment, as applicable, are proposed;
    (3) The amount of the proposed penalty and assessment, as 
applicable;
    (4) Any circumstances described in Sec. 498.106 that were 
considered when determining the amount of the proposed penalty and 
assessment, as applicable; and
    (5) Instructions for responding to the notice, including
    (i) A specific statement of respondent's right to a hearing; and
    (ii) A statement that failure to request a hearing within 60 days 
permits the imposition of the proposed penalty and assessment, as 
applicable, without right of appeal.
    (b) Any person upon whom the Office of the Inspector General has 
proposed the imposition of a penalty and assessment, as applicable, may 
request a hearing on such proposed penalty and assessment.
    (c) If the respondent fails to exercise the respondent's right to a 
hearing within the time permitted under this section, and does not 
demonstrate good cause for such failure before an administrative law 
judge, any penalty and assessment, as applicable, becomes final.
    10. Section 498.110 is revised to read as follows:


Sec. 498.110  Failure to request a hearing.

    If the respondent does not request a hearing within the time 
prescribed by Sec. 498.109(a), the Office of the Inspector General may 
seek the proposed penalty and assessment, as applicable, or any less 
severe penalty and assessment. The Office of the Inspector General 
shall notify the respondent by certified mail, return receipt 
requested, of any penalty and assessment, as applicable, that has been 
imposed and of the means by which the respondent may satisfy the amount 
owed.
    11. Section 498.114 is added to read as follows:


Sec. 498.114  Collateral estoppel.

    In a proceeding under section 1129 of the Social Security Act 
that--
    (a) Is against a person who has been convicted (whether upon a 
verdict after trial or upon a plea of guilty or nolo contendere) of a 
Federal or State crime charging fraud or false statements; and
    (b) Involves the same transactions as in the criminal action, the 
person is estopped from denying the essential elements of the criminal 
offense.
    12. Section 498.127 is revised to read as follows:


Sec. 498.127  Judicial review.

    Sections 1129 and 1140 of the Social Security Act authorize 
judicial review of any penalty and assessment, as applicable, that has 
become final. Judicial review may be sought by a respondent only in 
regard to a penalty and assessment, as applicable, with respect to 
which the respondent requested a hearing, unless the failure or neglect 
to urge such objection is excused by the court because of extraordinary 
circumstances.
    13. Section 498.128 is amended by revising the section heading, 
paragraph (a), and adding paragraphs (b), (d), and (e) to read as 
follows:


Sec. 498.128  Collection of penalty and assessment.

    (a) Once a determination has become final, collection of any 
penalty and assessment, as applicable, will be the responsibility of 
the Commissioner or his or her designee.
    (b) In cases brought under section 1129 of the Social Security Act, 
a penalty and assessment, as applicable, imposed under this part may be 
compromised by the Commissioner or his or her designee, and may be 
recovered in a civil action brought in the United States District Court 
for the district where the statement or representation referred to in 
Sec. 498.102(a) was made, or where the respondent resides.
* * * * *
    (d) As specifically provided under the Social Security Act, in 
cases brought under section 1129 of the Social Security Act, the amount 
of a penalty and assessment, as applicable, when finally determined, or 
the amount agreed upon in compromise, may also be deducted from:
    (1) Monthly title II or title XVI payments, notwithstanding section 
207 of the Social Security Act as made

[[Page 18081]]

applicable to title XVI by section 1631(d)(1) of the Social Security 
Act;
    (2) A tax refund to which a person is entitled to after notice to 
the Secretary of the Treasury under 31 U.S.C. Sec. 3720A;
    (3) By authorities provided under the Debt Collection Act of 1982, 
as amended, 31 U.S.C. 3711, to the extent applicable to debts arising 
under the Social Security Act; or
    (4) Any combination of the foregoing.
    (e) Matters that were raised or that could have been raised in a 
hearing before an administrative law judge or in an appeal to the 
United States Court of Appeals under sections 1129 or 1140 of the 
Social Security Act may not be raised as a defense in a civil action by 
the United States to collect a penalty and assessment, as applicable, 
under this part.
    14. Section 498.129 is added to read as follows:


Sec. 498.129  Notice to other agencies.

    As provided in section 1129 of the Social Security Act, when a 
determination to impose a penalty and assessment, as applicable, with 
respect to a physician or medical provider becomes final, the Office of 
the Inspector General will notify the Secretary of the final 
determination and the reasons therefore.
    15. Section 498.132 is revised to read as follows:


Sec. 498.132  Limitations.

    The Office of the Inspector General may initiate a proceeding in 
accordance with Sec. 498.109(a) to determine whether to impose a 
penalty and assessment, as applicable--
    (a) In cases brought under section 1129 of the Social Security Act, 
after receiving authorization from the Attorney General pursuant to 
procedures agreed upon by the Inspector General and the Attorney 
General; and
    (b) Within 6 years from the date on which the violation was 
committed.

[FR Doc. 96-9926 Filed 4-23-96; 8:45 am]
BILLING CODE 4190-29-P