[Federal Register Volume 61, Number 148 (Wednesday, July 31, 1996)]
[Proposed Rules]
[Pages 39921-39926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19425]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 498

RIN 0960-AE41


Hearings and Appeals for Civil Monetary Penalty Cases

AGENCY: Social Security Administration (SSA).

ACTION: Proposed rule.

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SUMMARY: We propose to add new rules that would establish hearing 
procedures for the Social Security Administration's civil monetary 
penalty cases. These proposed rules would implement the provisions of 
section 1129 and section 1140 of the Social Security Act which require 
an opportunity to be heard on the record before a determination to 
impose penalties or assessments becomes final.

DATES: To be sure that your comments are considered, we must receive 
them no later than September 30, 1996.

ADDRESSES: Comments should be submitted in writing to the Social 
Security Administration, c/o Commissioner of Social Security, P.O. Box 
1585, Baltimore, MD 21235, sent by telefax to (410) 966-2830, sent by 
E-mail to ``[email protected]'' or delivered to 3-B-1 Operations 
Building, 6401 Security Boulevard, Baltimore, MD 21235, between 8:00 
a.m. and 4:30 p.m. on regular business days.
    The electronic file of this document is available on the Federal 
Bulletin Board (FBB) at 9 a.m. on the date of publication in the 
Federal Register. To download the file, modem dial (202) 512-1387. The 
FBB instructions will explain how to download the file and the fee. 
This file is in WordPerfect and will remain on the FBB during the 
comment period.

FOR FURTHER INFORMATION CONTACT: Regarding this Federal Register 
document--Henry D. Lerner, Legal Assistant, Division of Regulations and 
Rulings, Social Security Administration, 6401 Security Boulevard, 
Baltimore, MD 21235, (410) 965-1762; regarding eligibility or filing 
for benefits--our national toll-free number, 1-800-772-1213.

SUPPLEMENTARY INFORMATION:

Background

    The Social Security Administration (SSA) was established as an 
independent agency effective March 31, 1995, under Public Law 103-296, 
the Social Security Independence and Program Improvements Act of 1994 
(SSIPIA). The SSIPIA also created an independent Office of the 
Inspector General (OIG), to which the Commissioner of Social Security 
(Commissioner) delegated certain authority under the civil monetary 
penalty (CMP) provisions on June 28, 1995. However, the Commissioner 
retained the authority to conduct initial hearings and review initial 
hearing decisions related to the imposition of CMPs and assessments.
    On November 27, 1995, the OIG published a final rule at 60 FR 58225 
establishing a new part 498 in title 20 of the Code of Federal 
Regulations. This new part serves as a repository for the SSA's 
existing CMP regulations which implemented section 1140 of the Social 
Security Act (the Act). These regulations were previously located at 42 
CFR part 1003.
    In addition, the OIG published a final rule on April 24, 1996, at 
61 FR 18078 to implement SSA's new CMP authority provided under section 
206(b) of the SSIPIA, which added section 1129 to the Act, effective 
October 1, 1994. This authority allows for the imposition of penalties 
and assessments against any individual, organization, agency, or other 
entity that makes or causes to be made a false or misleading statement 
or representation of a material fact for use in determining initial or 
continuing rights to Old-Age, Survivors, and Disability Insurance or 
supplemental security income benefit payments if the person knew or 
should have known that such statement or representation is false, 
misleading, or omits a material fact.
    When published in final form, these proposed hearing regulations 
will complete the final phase of the implementation process for the 
provisions of section 1129 and section 1140 of the Act which require 
that a person be given an opportunity to be

[[Page 39922]]

heard on the record prior to a final determination to impose penalties 
or assessments.

Hearing Process

    The Commissioner has decided to retain the Departmental Appeals 
Board (DAB) of the Department of Health and Human Services (HHS) on an 
interim basis to conduct hearings and appeals, and to issue recommended 
decisions in SSA's CMP cases. SSA intends to enter into a reimbursable 
agreement with the DAB under the Economy Act, 31 U.S.C. 1535(a).
    The Commissioner's decision was based on a number of criteria, 
including the DAB's expertise in handling CMP cases and its reputation 
for rendering decisions in an efficient and timely manner. Moreover, in 
light of the fact that the authority under section 1129 is new, this 
will give SSA the opportunity to assess the volume of CMP cases and 
projected resource requirements prior to establishing its own internal 
hearing mechanism.
    These proposed rules will require adherence to various deadlines to 
ensure the expeditious conduct of proceedings and prompt resolution of 
CMP cases. In accordance with Sec. 498.109, these proposed hearing 
regulations will provide a person, upon whom the OIG seeks to impose 
penalties and assessments, as applicable, the right to request an 
initial hearing within 60 days of notification by the OIG. As described 
in Sec. 498.202 of these proposed rules, the person's request for a 
hearing must be in writing and contain a statement of the specific 
issues and conclusions of law with which the person disagrees. These 
proposed rules also provide that a hearing request must be dismissed if 
not filed in a timely manner unless, upon a showing of good cause, an 
extension is granted to the respondent.
    Initial hearings in CMP cases will be conducted by an 
administrative law judge. At the hearing, a person will be entitled to 
be represented by counsel, to present witnesses, and to cross-examine 
witnesses.
    These proposed hearing regulations have been modeled on the HHS's 
hearing regulations which govern CMP cases for which the DAB also 
conducts hearings and appeals on behalf of the Secretary of the HHS. As 
indicated in the final rule published on April 24, 1996, we have 
reserved the issue of recommended exclusions of physicians and medical 
providers from the Medicare program at this time.

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 proposed regulations impose no new reporting or recordkeeping 
requirements requiring OMB clearance.

Regulatory Flexibility Act

    We have determined that no regulatory impact analysis is required 
for these proposed regulations. Based on our determination, the 
Commissioner certifies that these proposed regulations would not have a 
significant economic impact on a number of small business entities. 
Therefore, we have not prepared a regulatory flexibility analysis.

Effect of NPRM on Pending Actions

    Until the promulgation of final regulations, the Commissioner 
intends that these proposed regulations shall provide guidance with 
respect to the hearing and appeals process to be used in CMP cases.

(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; 96.006, 
Supplemental Security Income Program)

List of Subjects in 20 CFR Part 498

    Administrative practice and procedure, Fraud, Penalties.

    Approved: July 8, 1996.
Shirley S. Chater,
Commissioner of Social Security.

    For reasons set forth in the preamble, part 498 of chapter III of 
the Code of Federal Regulations would be amended by adding 
Secs. 498.201 through 498.223 to read as follows.

PART 498--HEARINGS AND APPEALS FOR CIVIL MONETARY PENALTY CASES

Sec.
498.201  Definitions.
498.202  Hearing before an administrative law judge.
498.203  Rights of parties.
498.204  Authority of the administrative law judge.
498.205  Ex parte contacts.
498.206  Prehearing conferences.
498.207  Discovery.
498.208  Exchange of witness lists, witness statements and exhibits.
498.209  Subpoenas for attendance at hearing.
498.210  Fees.
498.211  Form, filing and service of papers.
498.212  Computation of time.
498.213  Motions.
498.214  Sanctions.
498.215  The hearing and burden of proof.
498.216  Witnesses.
498.217  Evidence.
498.218  The record.
498.219  Post-hearing briefs.
498.220  Initial decision.
498.221  Appeal to DAB.
498.222  Final decision of the Commissioner.
498.223  Stay of initial decision.
498.224  Harmless error.

    Authority: Secs. 205(a), 205(b), 702(a)(5), 1129, and 1140 of 
the Social Security Act (42 U.S.C. 405(a), 405(b), 902(a)(5), 1320a-
8, and 1320b-10).


Sec. 498.201  Definitions.

    As used in this part--
    ALJ refers to an Administrative Law Judge of the Departmental 
Appeals Board.
    Civil monetary penalty cases refer to all proceedings arising under 
any of the statutory bases for which the Inspector General, Social 
Security Administration has been delegated authority to impose civil 
monetary penalties.
    DAB refers to the Departmental Appeals Board of the U.S. Department 
of Health and Human Services.


Sec. 498.202  Hearing before an administrative law judge.

    (a) A party under any criteria specified in Secs. 498.100 through 
498.132 may request a hearing before an ALJ.
    (b) In civil monetary penalty cases, the parties to a hearing will 
consist of the respondent and the Inspector General.
    (c) The request for a hearing must be:
    (1) In writing and signed by the respondent or by the respondent's 
attorney; and
    (2) Filed within 60 days after the notice is received by the 
respondent or upon a showing of good cause, the time permitted by an 
ALJ as provided in accordance with Sec. 498.109.
    (d) The request for a hearing shall contain a statement as to the:
    (1) Specific issues or findings of fact and conclusions of law in 
the notice letter with which the respondent disagrees; and
    (2) Basis for the respondent's contention that the specific issues 
or findings and conclusions were incorrect.
    (e) For purposes of this section, the date of receipt of the notice 
letter will be presumed to be five days after the date of such notice, 
unless there is a reasonable showing to the contrary.

[[Page 39923]]

    (f) The ALJ shall dismiss a hearing request where:
    (1) The respondent's hearing request is not filed in a timely 
manner and the respondent fails to demonstrate good cause for such 
failure;
    (2) The respondent withdraws or abandons respondent's request for a 
hearing; or
    (3) The respondent's hearing request fails to raise any issue which 
may properly be addressed in a hearing.


Sec. 498.203  Rights of parties.

    (a) Except as otherwise limited by this part, all parties may:
    (1) Be accompanied, represented, and advised by an attorney;
    (2) Participate in any conference held by the ALJ;
    (3) Conduct discovery of documents as permitted by this part;
    (4) Agree to stipulations of fact or law which will be made part of 
the record;
    (5) Present evidence relevant to the issues at the hearing;
    (6) Present and cross-examine witnesses;
    (7) Present oral 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.
    (b) Fees for any services performed on behalf of a party by an 
attorney are not subject to the provisions of section 206 of title II 
of the Social Security Act, which authorizes the Commissioner to 
specify or limit these fees.


Sec. 498.204  Authority of the administrative law judge.

    (a) The ALJ will 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 at 
hearings and the production of documents at or in relation to hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of documentary discovery as 
permitted by this part;
    (8) Regulate the course of the hearing and the conduct of 
representatives, parties, and witnesses;
    (9) Examine witnesses;
    (10) Receive, exclude, or limit evidence;
    (11) 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; and
    (13) Conduct any conference or argument in person, or by telephone 
upon agreement of the parties.
    (c) The ALJ does not have the authority to:
    (1) Find invalid or refuse to follow Federal statutes or 
regulations, or delegations of authority from the Commissioner;
    (2) Enter an order in the nature of a directed verdict;
    (3) Compel settlement negotiations;
    (4) Enjoin any act of the Commissioner or the Inspector General; or
    (5) Review the exercise of discretion by the Office of the 
Inspector General to seek to impose a civil monetary penalty or 
assessment under Secs. 498.100 through 498.132.


Sec. 498.205  Ex parte contacts.

    No party or person (except employees of the ALJ's office) will 
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 
provision does not prohibit a person or party from inquiring about the 
status of a case or asking routine questions concerning administrative 
functions or procedures.


Sec. 498.206  Prehearing conferences.

    (a) The ALJ will schedule at least one prehearing conference, and 
may schedule additional prehearing conferences as appropriate, upon 
reasonable notice to the parties.
    (b) The ALJ may use prehearing conferences to address 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 as to the contents and 
authenticity of documents and deadlines for challenges, if any, to the 
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 appearance at a 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) The time and place for the hearing and dates for the exchange 
of witness lists and of proposed exhibits;
    (8) Discovery of documents as permitted by this part;
    (9) Such other matters as may tend to encourage the fair, just, and 
expeditious disposition of the proceedings; and
    (10) Potential settlement of the case.
    (c) The ALJ shall issue an order containing the matters agreed upon 
by the parties or ordered by the ALJ at a prehearing conference.


Sec. 498.207  Discovery.

    (a) For the purpose of inspection and copying, a party may make a 
request to another party for production of documents which are relevant 
and material to the issues before the ALJ.
    (b) Any other form of discovery, such as requests for admissions, 
written interrogatories and depositions, is not authorized.
    (c) For the purpose of this section, the term documents includes 
information, reports, answers, records, accounts, papers, memos, notes 
and other data and documentary evidence. Nothing contained in this 
section will be interpreted to require the creation of a document, 
except that requested data stored in an electronic data storage system 
will be produced in a form accessible to the requesting party.
    (d)(1) A party who has been served with a request for production of 
documents may file a motion for a protective order. The motion for 
protective order shall describe the document or class of documents to 
be protected, specify which of the grounds in Sec. 498.207(d)(2) are 
being asserted, and explain how those grounds apply.
    (2) The ALJ may grant a motion for a protective order if he or she 
finds that the discovery sought:
    (i) Is unduly costly or burdensome;
    (ii) Will unduly delay the proceeding; or
    (iii) Seeks privileged information.
    (3) The burden of showing that discovery should be allowed is on 
the party seeking discovery.


Sec. 498.208  Exchange of witness lists, witness statements and 
exhibits.

    (a) At least 15 days before the hearing, the parties shall 
exchange:
    (1) Witness lists;
    (2) Copies of prior written statements of proposed witnesses; and
    (3) Copies of proposed hearing exhibits, including copies of any 
written statements that the party intends to offer in lieu of live 
testimony in accordance with Sec. 498.216.
    (b)(1) Failure to comply with the requirements of paragraph (a) of 
this

[[Page 39924]]

section may result in the exclusion of evidence or testimony upon the 
objection of the opposing party.
    (2) When an objection is entered, the ALJ shall determine whether 
good cause justified the failure to timely exchange the information 
listed under paragraph (a) of this section. If good cause is not found, 
the ALJ shall exclude from the party's case-in-chief:
    (i) The testimony of any witness whose name does not appear on the 
witness list, and
    (ii) Any exhibit not provided to the opposing party as specified in 
paragraph (a) of this section.
    (3) If the ALJ finds that good cause exists, the ALJ shall 
determine whether the admission of such evidence would cause 
substantial prejudice to the objecting party due to the failure to 
comply with paragraph (a) of this section. If the ALJ finds no 
substantial prejudice, the evidence may be admitted.
    (4) If the ALJ finds substantial prejudice, the ALJ may exclude the 
evidence, or at his or her discretion, may postpone the hearing for 
such time as is necessary for the objecting party to prepare and 
respond to the evidence.
    (c) Unless a party objects by the deadline set by the ALJ's 
prehearing order pursuant to Sec. 498.206 (b)(3) and (c), documents 
exchanged in accordance with paragraph (a) of this section will be 
deemed authentic for the purpose of admissibility at the hearing.


Sec. 498.209  Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual, whose appearance and testimony are relevant and material to 
the presentation of a party's case at a hearing, may make a motion 
requesting the ALJ to issue a subpoena.
    (b) A subpoena requiring the attendance of an individual may also 
require the individual to produce evidence at the hearing in accordance 
with Sec. 498.207.
    (c) A party seeking a subpoena will file a written motion not less 
than 30 days before the date fixed for the hearing, unless otherwise 
allowed by the ALJ for good cause shown. Such request will:
    (1) Specify any evidence to be produced;
    (2) Designate the witness(es); and
    (3) Describe the address and location with sufficient particularity 
to permit such witness(es) to be found.
    (d) Within 20 days after the written motion requesting issuance of 
a subpoena is served, any party may file an opposition or other 
response.
    (e) If the motion requesting issuance of a subpoena is granted, the 
party seeking the subpoena will serve the subpoena by delivery to the 
individual named, or by certified mail addressed to such individual at 
his or her last dwelling place or principal place of business.
    (f) The subpoena will specify the time and place at which the 
witness is to appear and any evidence the witness is to produce.
    (g) The individual to whom the subpoena is directed may file with 
the ALJ a motion to quash the subpoena within 10 days after service.
    (h) When a subpoena is served by a respondent on a particular 
individual or particular office of the Office of the Inspector General, 
the OIG may comply by designating any of its representatives to appear 
and testify.
    (i) In the case of contumacy by, or refusal to obey a subpoena duly 
served upon any person, the exclusive remedy is specified in section 
205(e) of the Social Security Act (42 U.S.C. 405(e)).


Sec. 498.210  Fees.

    The party requesting a subpoena will 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 will accompany the subpoena when served, 
except that when a subpoena is issued on behalf of the Inspector 
General, a check for witness fees and mileage need not accompany the 
subpoena.


Sec. 498.211  Form, filing and service of papers.

    (a) Form. (1) Unless the ALJ directs the parties to do otherwise, 
documents filed with the ALJ will include an original and two copies.
    (2) Every document filed in the proceeding will contain a caption 
setting forth the title of the action, the case number, and a 
designation of the pleading or paper.
    (3) Every document will be signed by, and will contain the address 
and telephone number of the party or the person on whose behalf the 
document was filed, or his or her representative.
    (4) Documents are considered filed when they are mailed.
    (b) Service. A party filing a document with the ALJ will, at the 
time of filing, serve a copy of such document on every other party. 
Service upon any party of any document will be made by delivering a 
copy, or placing a copy of the document in the United States mail, 
postage prepaid and addressed, or with a private delivery service, to 
the party's last known address. When a party is represented by an 
attorney, service will be made upon such attorney. Proof of service 
should accompany any document filed with the ALJ.
    (c) Proof of service. A certificate of the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, will be proof of service.


Sec. 498.212  Computation of time.

    (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 7 days, 
intermediate Saturdays, Sundays and legal holidays observed by the 
Federal Government will be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional 5 days will be added to the time permitted for any 
response. This paragraph does not apply to requests for hearing under 
Sec. 498.202.


Sec. 498.213  Motions.

    (a) An application to the ALJ for an order or ruling will be by 
motion. Motions will:
    (1) State the relief sought, the authority relied upon and the 
facts alleged; and
    (2) Be filed with the ALJ and served on all other parties.
    (b) Except for motions made during a prehearing conference or at a 
hearing, all motions will be in writing.
    (c) Within 10 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 or deny a written motion before the time 
for filing responses has expired, except upon consent of the parties or 
following a hearing on the motion.
    (e) The ALJ will make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.
    (f) There is no right to appeal to the DAB any interlocutory ruling 
by the ALJ.


Sec. 498.214   Sanctions.

    (a) The ALJ may sanction a person, including any party or attorney, 
for:
    (1) Failing to comply with an order or procedure;
    (2) Failing to defend an action; or

[[Page 39925]]

    (3) Misconduct that interferes with the speedy, orderly or fair 
conduct of the hearing.
    (b) Such sanctions will reasonably relate to the severity and 
nature of the failure or misconduct. Such sanction may include--
    (1) In the case of refusal to provide or permit discovery under the 
terms of this part, drawing negative factual inferences or treating 
such refusal as an admission by deeming the matter, or certain facts, 
to be established;
    (2) Prohibiting a party from introducing certain evidence or 
otherwise supporting a particular claim or defense;
    (3) Striking pleadings, in whole or in part;
    (4) Staying the proceedings;
    (5) Dismissal of the action; or
    (6) Entering a decision by default.
    (c) In addition to the sanctions listed in paragraph (b)of this 
section, the ALJ may:
    (1) Order the party or attorney to pay attorney's fees and other 
costs caused by the failure or misconduct; or
    (2) Refuse to consider any motion or other action that is not filed 
in a timely manner.
    (d) In civil monetary penalty cases commenced under section 1129 of 
the Act, the ALJ may also order the party or attorney who has engaged 
in any of the acts described in paragraph (a) of this section to pay 
attorney's fees and other costs caused by the failure or misconduct.


Sec. 498.215  The hearing and burden of proof.

    (a) The ALJ will conduct a hearing on the record in order to 
determine whether the respondent should be found liable under this 
part.
    (b) In civil monetary penalty cases under Secs. 498.100 through 
498.132:
    (1) The respondent has the burden of going forward and the burden 
of persuasion with respect to affirmative defenses and any mitigating 
circumstances; and
    (2) The Inspector General has the burden of going forward and the 
burden of persuasion with respect to all other issues.
    (c) The burden of persuasion will be judged by a preponderance of 
the evidence.
    (d) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause.
    (e)(1) A hearing under this part is not limited to specific items 
and information set forth in the notice letter to the respondent. 
Subject to the 15-day requirement under Sec. 498.208, additional items 
or information may be introduced by either party during its case-in-
chief, unless such information or items are inadmissible under 
Sec. 498.217.
    (2) After both parties have presented their cases, evidence may be 
admitted on rebuttal as to those issues presented in the case-in-chief, 
even if not previously exchanged in accordance with Sec. 498.208.


Sec. 498.216  Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing will be given orally by witnesses under oath or 
affirmation.
    (b) At the discretion of the ALJ, testimony (other than expert 
testimony) may be admitted in the form of a written statement. Any such 
written statement must be provided to all other parties along with the 
last known address of such witness, in a manner that 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 will be exchanged as provided in Sec. 498.208.
    (c) The ALJ will exercise reasonable control over the mode and 
order of witness direct and cross examination and evidence presentation 
so as to:
    (1) Make the examination and presentation effective for the 
ascertainment of the truth;
    (2) Avoid repetition or needless waste of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ may order witnesses excluded so that they cannot hear 
the testimony of other witnesses. This 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 as 
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 
engaged in assisting the attorney for the Inspector General.


Sec. 498.217  Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ will not be bound by 
the Federal Rules of Evidence, but may be guided by them in ruling on 
the admissibility of evidence.
    (c) 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.
    (d) Although relevant, evidence must be excluded if it is 
privileged under Federal law, unless the privilege is waived by a 
party.
    (e) Evidence concerning offers of compromise or settlement made in 
this action will be inadmissible to the extent provided in Rule 408 of 
the Federal Rules of Evidence.
    (f)(1) Evidence of crimes, wrongs or acts other than those at issue 
in the instant case is admissible in order to show motive, opportunity, 
intent, knowledge, preparation, identity, lack of mistake, or existence 
of a scheme.
    (2) Such evidence is admissible regardless of whether the crimes, 
wrongs or acts occurred during the statute of limitations period 
applicable to the acts which constitute the basis for liability in the 
case, and regardless of whether they were referenced in the IG's notice 
sent in accordance with Sec. 498.109.
    (g) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence as to those issues raised in the parties' case-in-chief.
    (h) All documents and other evidence offered or taken for the 
record will be open to examination by all parties, unless otherwise 
ordered by the ALJ for good cause.


Sec. 498.218  The record.

    (a) The hearing shall be recorded and transcribed. Transcripts may 
be obtained following the hearing from the ALJ.
    (b) 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.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by any person, unless otherwise ordered by the ALJ for 
good cause.


Sec. 498.219  Post-hearing briefs.

    (a) Any party may file a post-hearing brief.
    (b) The ALJ may require the parties to file post-hearing briefs and 
may permit the parties to file reply briefs.
    (c) The ALJ will fix the time for filing briefs, which is not to 
exceed 60 days from the date the parties receive the transcript of the 
hearing or, if applicable, the stipulated record.
    (d) The parties' briefs may be accompanied by proposed findings of 
fact and conclusions of law.


Sec. 498.220  Initial decision.

    (a) The ALJ will issue an initial decision, based only on the 
record, which will contain findings of fact and conclusions of law.

[[Page 39926]]

    (b) The ALJ may affirm, deny, increase, or reduce the penalties or 
assessments proposed by the Inspector General.
    (c) The ALJ will issue the initial decision to all parties within 
60 days after the time for submission of post-hearing briefs or reply 
briefs, if permitted, has expired. The decision will be accompanied by 
a statement describing the right of any party to file a notice of 
appeal with the DAB and instructions for now to file such appeal. If 
the ALJ cannot issue an initial decision within the 60 days, the ALJ 
will notify the parties of the reason for the delay and will set a new 
deadline.
    (d) Unless an appeal or request for extension pursuant to 
Sec. 498.221(a) is filed with the DAB, the initial decision of the ALJ 
becomes final and binding on the parties 30 days after the ALJ serves 
the parties with a copy of the decision. If service is by mail, the 
date of service will be deemed to be five days from the date of 
mailing.


Sec. 498.221  Appeal to DAB.

    (a) Any party may appeal the decision of the ALJ to the DAB by 
filing a notice of appeal with the DAB within 30 days of the date of 
service of the initial decision. The DAB may extend the initial 30-day 
period for a period of time not to exceed 30 days if a party files with 
the DAB a request for an extension within the initial 30-day period and 
shows good cause.
    (b) If a party files a timely notice of appeal with the DAB, the 
ALJ will forward the record of the proceeding to the DAB.
    (c) A notice of appeal will be accompanied by a written brief 
specifying exceptions to the initial decision and reasons supporting 
the exceptions, and identifying which finding of fact and conclusions 
of law the party is taking exception to. Any party may file a brief in 
opposition to exceptions, which may raise any relevant issue not 
addressed in the exceptions, within 30 days of receiving the notice of 
appeal and accompanying brief. The DAB may permit the parties to file 
reply briefs.
    (d) There is no right to appear personally before the DAB, or to 
appeal to the DAB any interlocutory ruling by the ALJ.
    (e) No party or person (except employees of the DAB) will 
communicate in any way with members of the DAB on any matter at issue 
in a case, unless on notice and opportunity for all parties to 
participate. This provision does not prohibit a person or party from 
inquiring about the status of a case or asking routine questions 
concerning administrative functions or procedures.
    (f) The DAB will not consider any issue not raised in the parties' 
briefs, nor any issue in the briefs that could have been, but was not, 
raised before the ALJ.
    (g) If any party demonstrates to the satisfaction of the DAB that 
additional evidence not presented at such hearing is relevant and 
material and that there were reasonable grounds for the failure to 
adduce such evidence at such hearing, the DAB may remand the matter to 
the ALJ for consideration of such additional evidence.
    (h) The DAB may remand a case to an ALJ for further proceedings, or 
may issue a recommended decision to decline review or affirm, increase, 
reduce, or reverse any penalty or assessment determined by the ALJ.
    (i) When the DAB reviews a case, it will limit its review to 
whether the ALJ's initial decision is supported by substantial evidence 
on the whole record or contained error of law.
    (j) Within 60 days after the time for submission of briefs or, if 
permitted, reply briefs has expired, the DAB will issue to each party 
to the appeal and to the Commissioner a copy of the DAB's recommended 
decision and a statement describing the right of any respondent who is 
found liable to seek judicial review upon a final determination.


Sec. 498.222  Final decision of the Commissioner.

    (a) Except with respect to any penalty or assessment remanded to 
the ALJ, the DAB's recommended decision, including a recommended 
decision to decline review of the initial decision, shall become the 
final decision of the Commissioner 60 days after the date on which the 
DAB serves the parties to the appeal and the Commissioner with a copy 
of the recommended decision, unless the Commissioner reverses or 
modifies the DAB's recommended decision within that 60-day period. If 
the Commissioner reverses or modifies the DAB's recommended decision, 
the Commissioner's decision is final and binding on the parties. If 
service is by mail, the date of service will be deemed to be five days 
from the date of mailing.
    (b) There shall be no right to personally appear before or submit 
additional evidence, pleadings or briefs to the Commissioner.
    (c)(1) Any petition for judicial review must be filed within 60 
days after the parties are served with a copy of the final decision. If 
service is by mail, the date of service will be deemed to be five days 
from the date of mailing.
    (2) In compliance with 28 U.S.C. 2112(a), a copy of any petition 
for judicial review filed in any U.S. Court of Appeals challenging a 
final action of the Commissioner will be sent by certified mail, return 
receipt requested, to the SSA General Counsel. The petition copy will 
be time-stamped by the clerk of the court when the original is filed 
with the court.
    (3) If the SSA General Counsel receives two or more petitions 
within 10 days after the DAB issues its decision, the General Counsel 
will notify the U.S. Judicial Panel on Multidistrict Litigation of any 
petitions that were received within the 10-day period.


Sec. 498.223  Stay of initial decision.

    (a) The filing of a respondent's request for review by the DAB will 
automatically stay the effective date of the ALJ's decision.
    (b)(1) After issuance of the final decision, the respondent may 
file a request for stay of the effective date of any penalty or 
assessment with the ALJ. The request must be accompanied by a copy of 
the notice of appeal filed with the Federal court. The filing of such a 
request will automatically act to stay the effective date of the 
penalty or assessment until such time as the ALJ rules upon the 
request.
    (2) The ALJ may not grant a respondent's request for stay of any 
penalty or assessment unless the respondent posts a bond or provides 
other adequate security.
    (3) The ALJ will rule upon a respondent's request for stay within 
10 days of receipt.


Sec. 498.224  Harmless error.

    No error in either the admission or the exclusion of evidence, and 
no error or defect in any ruling or order or in any act done or omitted 
by the ALJ or by any of the parties is ground for vacating, modifying 
or otherwise disturbing an otherwise appropriate ruling or order or 
act, unless refusal to take such action appears to the ALJ or the DAB 
to be inconsistent with substantial justice. The ALJ and the DAB at 
every stage of the proceeding will disregard any error or defect in the 
proceeding that does not affect the substantial rights of the parties.
[FR Doc. 96-19425 Filed 7-30-96; 8:45 am]
BILLING CODE 4190-29-P