[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