[Federal Register Volume 64, Number 83 (Friday, April 30, 1999)]
[Rules and Regulations]
[Pages 23165-23174]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10736]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 64, No. 83 / Friday, April 30, 1999 / Rules
and Regulations
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 271, 278 and 279
RIN 0584-AC46
Food Stamp Program: Retailer Integrity, Fraud Reduction and
Penalties
AGENCY: Food and Nutrition Service, USDA.
ACTION: Final rule.
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SUMMARY: The purpose of this final rule is to implement the Food Stamp
Program retailer provisions included in the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996, as well as the retailer
provision included in the Federal Agriculture Improvement and Reform
Act. This rule also contains a number of amendments to the current
regulations to streamline the regulations. Most of the provisions in
this final rule are nondiscretionary and required by law. The intent of
this rule is to strengthen integrity and eliminate fraud in the Food
Stamp Program by: ensuring that only legitimate stores participate in
the program; improving the Department's ability to monitor authorized
firms; and strengthening the penalties against firms which violate
program rules.
EFFECTIVE DATES: The amendments in this rule at Sec. 271.2,
Sec. 278.6(a), Sec. 278.6(b)(2)(i), Sec. 278.6(c), Sec. 278.8(a),
Sec. 279.7(a), and Sec. 279.10(d) were effective August 22, 1996. All
other amendments in this rule are effective June 1, 1999.
FOR FURTHER INFORMATION CONTACT: Questions regarding this final rule
should be addressed to Thomas O' Connor, Director, Benefit Redemption
Division, Food Stamp Program, Food and Nutrition Service, 3101 Park
Center Drive, Alexandria, Virginia 22302, or by telephone at (703) 305-
2418.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule has been determined to be not significant under
Executive Order 12866.
Executive Order 12372
The Food Stamp Program (FSP) is listed in the Catalog of Federal
Domestic Assistance under No. 10.551. For the reasons set forth in the
final rule and related notice(s) to 7 CFR Part 3015, Subpart V (48 FR
29115, June 24, 1983), this program is excluded from the scope of
Executive Order 12372, which requires intergovernmental consultation
with State and local officials.
Regulatory Flexibility Act
This final rule has been reviewed with regard to the requirements
of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Samuel
Chambers, Jr., the Administrator of the Food and Nutrition Service
(FNS), has certified that this rule does not have a significant
economic impact on a substantial number of small entities. This rule
may have an effect on a limited number of retail food stores and other
entities that are shown to be negligent in effectuating the purposes of
the FSP by committing violations or fraud in the program. However, we
do not believe this will have a significant effect on most small
businesses.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995, the
proposed rule included a notice that announced our intent to submit
revised application procedures and associated burden estimates to OMB
for approval relative to the application(s) completed by retail food
stores and meal service providers to request authorization and/or
continued authorization to participate in the FSP.
There are three application forms used by firms that wish to
participate in the program. These are the FNS-252, Food Stamp
Application For Stores; the FNS-252R, Food Stamp Program Application
for Stores-Reauthorization; and the FNS-252-2, Application to
Participate in the Food Stamp Program for Communal Dining Facility/
Others. These forms and associated burden hours have been approved by
OMB under OMB No. 0584-0008 through October 31, 1999. The revisions to
the authorization process contained in Sec. 278.1(a) of this final rule
do not impose new information collection, reporting or recordkeeping
requirements.
The existing burden estimates, as approved by OMB through October
1999, are shown on the following chart:
Affected Public: Food Retail and Wholesale Firms, Meal Service
Programs, certain types of Group Homes, Shelters, and State-contracted
Restaurants.
Estimated Number of Respondents: 68,770.
Estimated Number of Responses per respondent: 1.
Estimated Time per Response: 0.229416; rounded to .23.
Estimated Total Annual Burden: 15,777.
Approved Burden for Forms FNS-252, 252-2 and 252R
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Number of Responses per Total annual Burden hours Total annual
Title respondents respondent responses per response burden hours
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FORM FNS-252.................... 22,807 1 22,807 .4500 10,263
FORM FNS-252-2.................. 1,803 1 1,803 .2000 361
FORM FNS-252R................... 44,160 1 44,160 .1167 5,153
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Totals...................... 68,770 .............. 68,770 .23 15,777
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[[Page 23166]]
Executive Order 12988
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is intended to have preemptive effect
with respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect
except as specified in the ``Effective Date'' paragraph of this
preamble. Prior to any judicial challenge to the provisions of this
rule or the application of its provisions, all applicable
administrative procedures must be exhausted. In the FSP, the
administrative procedures are as follows: (1) for Program benefit
recipients--State administrative procedures issued pursuant to 7 U.S.C.
2020 (e)(10) and 7 CFR 273.15; (2) for State agencies--administrative
procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (
for rules related to non-quality control (QC) liabilities) or 7 CFR
part 283 (for rules related to QC liabilities); (3) for program
retailers and wholesalers--administrative procedures issued pursuant to
7 U.S.C. 2023 set out at 7 CFR 278.8.
Unfunded Mandate Reform Act of 1995
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local and tribal
governments, and the private sector. Under section 202 of the UMRA, FNS
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local or tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. When such a statement is needed for a rule, section 205 of
the UMRA generally requires FNS to identify and consider a reasonable
number of regulatory alternatives and adopt the least costly, more
cost-effective or least burdensome alternative that achieves the
objectives of the rule. This final rule contains no Federal mandates
under the regulatory provision of Title II of the UMRA for State, local
and tribal governments or the private sector of $100 million or more in
any one year. Thus, this rule is not subject to the requirements of
sections 202 and 205 of the UMRA.
Background
The Personal Responsibility and Work Opportunity Reconciliation Act
of 1996, Pub. L. 104-193, (PRWORA) was enacted on August 22, 1996, and
contained a number of provisions directly affecting the participation
of retailers, wholesalers and other entities eligible to be authorized
to participate in the FSP. All of the provisions of the law addressed
in this rulemaking were effective on the date of enactment. Five of the
provisions are nondiscretionary and were immediately implemented in the
program through an implementing memorandum issued on September 16,
1996. These five provisions are incorporated into this final rule and
they are identified as nondiscretionary in this preamble. Such
nondiscretionary provisions are statutory requirements that the
Secretary has no authority to change; therefore, such provisions or
their implementation may not be modified by public comment. PRWORA
provides discretion in the implementation of the remaining provisions
of the law, and these provisions were proposed for public comment in
the rule published on May 6, 1998. The Department encouraged all
interested parties to comment on the discretionary provisions as set
forth in the proposed rule. Four substantive comments were received
from retail trade/interest groups, WIC State administering agencies and
the headquarters of a large retail food chain. In addition, 187
identical letters referring to and expressing agreement with the
comment sent by the aforementioned retail food chain headquarters were
received.
This final rulemaking includes the following discretionary and
nondiscretionary provisions:
Revision in the definition of ``coupon''
(nondiscretionary);
Establishment of a minimum six month waiting period before
stores that initially fail to meet authorization criteria can reapply
to participate in the program (nondiscretionary), and the establishment
of longer periods of time, including permanent prohibition from
participation, which reflects the severity of the basis for the denial
of the firm's application or a firm's reauthorization in the program
(discretionary);
Authority for USDA, or its designees, to conduct
preauthorization visits to applicant firms as specified by the
Secretary (discretionary);
Authority for USDA to disqualify firms based on
inconsistent redemption data and suspicious account activity as
documented through EBT system data (nondiscretionary);
Authority to suspend the program participation of
violating firms subject to a permanent disqualification pending the
outcome of administrative or judicial review (nondiscretionary);
Authority for USDA to establish authorization periods for
the participation of retailers in the program (discretionary);
Authority to disqualify retailers who intentionally submit
falsified applications, including permanent disqualification of such
retailers (discretionary); and,
Authority to disqualify retailers that have been
disqualified by State agencies responsible for the administration of
USDA's Special Supplemental Nutrition Program for Women, Infants and
Children (WIC) (discretionary), extension of the periods for
disqualification of such FSP retailers and elimination of the FSP
administrative and judicial review rights of such retailers
(nondiscretionary).
This final rulemaking also includes a provision of the Federal
Agriculture Improvement and Reform Act, Pub. L. 104-127, (FAIR), which
provides a limitation on the mandatory permanent disqualification
actions that may be taken by USDA for retailers found to be
trafficking. Conforming and minor editorial revisions in response to
the National Performance Review Regulatory Planning and Reform
Initiative are also included in this rule.
FAIR Provision--Eligibility for Trafficking Civil Money Penalties
Section 401 of the FAIR limits mandatory permanent
disqualifications for food coupon trafficking (with no possibility of
avoiding disqualification by paying a trafficking civil money penalty)
to instances in which: (1) owners are aware of violations or
participate in the conduct of such food coupon trafficking violations
or (2) it is the second investigation in which a trafficking violation
was committed by firm management.
This provision amends the current automatic ineligibility of a firm
for a civil money penalty (CMP) in lieu of permanent disqualification
if the ownership or management of the firm was aware of, approved,
benefited from or was involved in the conduct of the food coupon
trafficking violations (Sec. 278.6(i)). The FAIR amendment expands the
number of firms that may be eligible for such a CMP in lieu of
permanent disqualification. The law provides that if such a violation
represents first-time management food coupon trafficking, the firm may
be considered eligible for the imposition of a CMP, if the firm
documents that it meets all of the eligibility requirements for the CMP
as specified in Sec. 278.6 (i).
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However, the expansion of eligibility for a CMP in lieu of permanent
disqualification, as stipulated in the FAIR, does not apply to firms
where it is shown that ownership or management was involved in
trafficking in ammunition, firearms, explosives or controlled
substances.
The May 6,1998 rule proposed that the provision be applicable to
firm management in general, regardless of whether or not the same
individual manager committed trafficking violations previously. For
example, if an individual manager previously was dismissed from the
position for committing trafficking violations, but a different manager
of the same firm subsequently commits food coupon trafficking
violations, the firm would not be eligible for a second CMP in lieu of
permanent disqualification.
This provision was effective on April 4,1996, the date of enactment
of the statute. It was implemented upon the date on which FNS offices
received the implementing memorandum, and is applicable to all firms
issued a final determination letter subsequent to receipt of the
implementing memorandum by FNS offices. The implementing memorandum was
issued on September 16,1996. The amendment made to Sec. 278.6(i) of
this regulation reflects this change. Comments were invited, however,
on the proposed restriction which prohibits a CMP in lieu of permanent
disqualification the second time management personnel of a firm commit
trafficking violations, regardless of whether it was the same person in
the management position that committed the previous violation(s). No
comments were received on this issue; therefore, this provision of the
rule is finalized as proposed.
One commentor did, however, indicate that if the owner/operator or
firm management was unaware and uninvolved with the trafficking
violations, the firm should be eligible for a CMP in lieu of permanent
disqualification. Firms are currently provided this opportunity in
accordance with the Food Stamp Act of 1977, as amended (FSA), and the
criteria outlined in Sec. 278.6(i) of the regulations, and will
continue to be provided this opportunity. Therefore, it appears that
the commentor misunderstood the amendment made to the current
provision. Moreover, the Department wishes to reiterate that the
nondiscretionary provision included here expands eligibility of
participating firms for a CMP in lieu of permanent disqualification for
trafficking in the program.
Provisions of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA)
The provisions of PRWORA related to retailer participation in the
FSP represent a three-tiered approach to enhancing retailer compliance
and integrity in order to further the purposes of the FSP and to reduce
fraud in this critically important domestic food program. The
provisions greatly reinforce USDA's efforts to effectively administer
the FSP by improving the ability of the Department to screen applicant
retailers prior to authorization, to control retailer performance
subsequent to FSP authorization and to impose stiffer penalties against
those firms found to be violating the public trust by committing FSP
violations and defrauding the program. All commentors expressed
agreement with these premises.
Pre-Authorization Screening
The participation of retailers in the FSP is a privilege, not a
right. The PRWORA and the provisions of this final rulemaking will
serve to increase the Department's ability to cut off fraud and abuse
at the source by allowing more in-depth preauthorization screening of
applicant firms and verification of the qualifications and continued
eligibility of currently authorized firms to participate in the FSP.
Condition Precedent for Approval of Retail Food Stores and Wholesale
Food Concerns
Section 831 of the PRWORA provides authority for USDA, its designee
or State or local government officials designated by the Department, to
conduct preauthorization visits to selected firms. This provision also
gives discretion to the Secretary to designate such firms on the basis
of size, location and types of items sold. Amendments to Sec. 278.1(a)
of the regulation reflect the Secretary's authority to conduct such
preauthorization visits as contained in the statute.
Two comments were received on this provision. One commentor urged
that history and longevity in the FSP should also be considered when
making decisions regarding store visits. The Department agrees that
other factors, such as those suggested with regard to history and
longevity in the program, are appropriate to consider when prioritizing
the conduct of store visits. The Department agrees that such factors
will be taken into consideration when establishing store visit
priorities.
A second commentor took exception with the provision as written in
that they felt the regulation should be more prescriptive with regard
to store visit criteria. The commentor suggested that the Department
annually provide for a notice and comment rulemaking on how it intends
to implement its authority to conduct store visits.
The Department has long had the authority to visit authorized and
applicant firms in order to assess the eligibility of such firms for
authorization in the program. The Department also has the discretion to
prioritize the types of firms that will be visited based on its own
assessment of Departmental resources, as well as upon review of areas
of vulnerability in the operation of the program as defined by
management information sources. Therefore, the provisions of this final
rule with regard to the store visit provision remain as proposed.
Waiting Period for Firms That Fail To Meet Authorization Criteria
Section 834 of the PRWORA amends section 9(d) of the Food Stamp Act
to require that a firm that does not qualify for authorization because
the firm fails to meet the eligibility criteria for approval be
prohibited from submitting a new application to participate in the FSP
for a minimum period of 6 months. The statute also allows the Secretary
to establish longer time periods, including a permanent prohibition
from participation, that is reflective of the severity of the basis for
the denial of the application.
Section 278.1(k) of the regulation was proposed to be revised to
include the minimum 6-month prohibition from reapplication, which
applies to those firms that are shown not to meet Criterion A or of the
eligibility requirements of the FSA, (7 U.S.C. 2012(k)) and, for co-
located wholesale/retail firms, the requirements of
Sec. 278.1(b)(1)(iv). Criteria A and B were incorporated into the
definition of ``retail food store'' in the FSA, as amended by the Food
Stamp Program Improvements Act of 1994, Pub. L. 103-225. While this
change in the definition was effective immediately upon enactment of
the law and has been implemented, a final rule incorporating this
statutory change specifically in the regulations is currently in
Departmental clearance.
As discussed in the preamble to the rule proposed on May 6,1998,
prior to the passage of PRWORA, there was no waiting period for stores
that wished to reapply to participate in the FSP after their
application was denied because the stores failed to meet basic
eligibility criteria for authorization. Such stores could adjust the
types of staple food
[[Page 23168]]
items that they offered for sale in order to meet minimal standards and
reapply immediately, and then decrease their inventory after obtaining
authorization. Such firms tend to be stores that do not effectuate the
purpose of the FSP. As proposed, this final rule provision applies to
initial applicants as well as to those firms being reviewed for the
purpose of reauthorization, or any other purpose, that are found not to
meet program eligibility requirements. At the time of initial
application and reauthorization, firms will be provided notice of this
provision. The 6-month minimum prohibition is nondiscretionary.
One commentor asserted that such waiting periods should not be
applicable to firms seeking reauthorization in the program, indicating
that the statute does not extend the authority to apply such periods to
such firms. The Department disagrees with the commentor. The waiting
periods apply to all firms that apply to participate or apply to
continue to participate in the program.
The proposed rule also included provisions to implement the
Secretary's authority to establish longer periods of time during which
a firm would be restricted from reapplying for program authorization.
Section 834 of PRWORA provides that the Secretary may establish these
time periods, including permanent denial of a firm's ability to be
authorized in the program, depending upon the severity of the reason
for the denial of such a firm's initial or subsequent application for
authorization or reauthorization. Section 278.1(b)(3) of this final
rule sets out the criteria that are to be used by FNS to make
determinations regarding reapplication restrictions against firms that
are denied authorization or reauthorization, or are otherwise withdrawn
from the program. In addition, Sec. 278.1(k) details the periods of
time for which a firm will be denied authorization in the program in
response to the criteria set out in Sec. 278.1(b)(3). These provisions
are applicable to denials of initial authorization and reauthorization
in the FSP, as well as to the continued authorization of a firm for
participation in the program.
Section 9 of the FSA provides the Secretary with the authority to
consider the business integrity and reputation of program applicants
when determining the qualifications of such applicants for
participation in the program. The business integrity of a firm is
critically important to the effective operation of the FSP.
Two comments were received on the proposed provision dealing with
the business integrity standards. These comments expressed concern that
the standards proposed in the May 6, 1998 rule were very broad. In
particular, the commentors suggested that applying business integrity
standards to non-managerial employees of participating firms was, in
essence, ``casting too wide a net'' in terms of corporate
responsibility and liability. These commentors further suggested that
the FNS proposal assumes that store owners have inexpensive, efficient
means of discovering past misconduct of non-managerial employees, which
they do not. Commentors indicated that discharging employees or not
hiring a prospective employee for a non-company, non-FSP related issue
could subject the employer to FNS penalties if the employee is kept on
board, but could lead to potential lawsuits or union problems if the
employee is discharged. Finally, commentors noted that the proposed
business integrity standards were too broad, too vague and offer too
much discretion to FNS Officers in Charge to interpret.
In response to these comments, the provisions have been revised in
this final rule. First, the standards no longer include references to
the business integrity of non-owner or non-managerial personnel.
However, the criteria in this final rulemaking still focus on the
business integrity and reputation of the ownership and management of
those firms seeking authorization or reauthorization in the program.
Fraudulent activity in the FSP or other government programs, or in
business-related activities in general, reflects on the ability of a
firm to effectuate the purposes of the FSP and abide by the rules
governing the program. The Department has refined the business
integrity criteria in this final rule and believes that the standards
included here are appropriate when assessing the business integrity of
a firm.
This rulemaking provides that a firm be permanently denied the
opportunity for reapplication if a firm is denied authorization or
reauthorization in the program on the basis of criminal convictions or
a finding of civil liability of the ownership or management of an
applicant firm for reasons that affect the business integrity of such
firms. As provided in this final rule, business integrity matters that
fall under this category include conviction or civil judgment for
offenses such as: embezzlement, theft, forgery, bribery, false
statements, receiving stolen property, false claims, or obstruction of
justice; commission of fraud in connection with obtaining, attempting
to obtain, or performing a public or private agreement or transaction;
and violation of Federal, State and/or local consumer protection laws
or other laws relating to alcohol, tobacco, firearms, controlled
substances and/or gaming licenses.
This final rule retains the proposed provision that firms removed
for administrative reasons from Federal, State or local programs shall
be prohibited from applying for the FSP during the period of removal
from such programs. Such action in the FSP would be taken, for example,
if a firm is removed from another federal program, or had their State
or local liquor or lottery license suspended.
In response to two comments received, the final rule has been
revised to refine the proposal in that firms which have administrative
findings brought against them by Federal, State or local officials that
do not give rise to removal from such programs, but for which FNS
determines a pattern exists evidencing a lack of business integrity,
shall be prohibited from applying for the FSP for one year, effective
from the date of denial in the program. The proposed rule originally
stipulated that such firms would be denied authorization in the FSP for
3 years and included violations committed by personnel of the firm.
This final rule applies this provision only if such violations are
committed by the owner, officer, or manager of a firm. Moreover, this
final rule provides that a ``pattern evidencing a lack of business
integrity'' means 3 or more instances of noncompliance with other
Federal, State or local program requirements. For example, if a firm
was fined for liquor license infractions committed by an owner, officer
or manager, and 3 such fines were imposed over a period of time, action
to suspend the firm from applying to the FSP would be taken.
The final rule retains the proposed provision that firms that
attempt to circumvent a period of disqualification, a civil money
penalty, or a fine imposed for FSP violations shall be denied the
opportunity to apply for the program for a period of 3 years.
Further, this rulemaking at Sec. 278.1(b)(3)(iv) retains the
provision of the proposed rule that firms in which violations of the
FSP have been administratively and/or judicially established but a
sanction has not been served, shall be denied the opportunity to apply
for the program for a period of time equivalent to the appropriate
sanction period that should have been served. This provision would
apply, for
[[Page 23169]]
example, when a firm goes out of business prior to FNS' sanctioning the
firm for FSP violations that were uncovered prior to its going out of
business. If the same owner seeks authorization for a different store,
such a store would not be immediately authorized in the FSP and would
be subject to a waiting period equivalent to the period of time that
the previously-investigated firm under that ownership would have been
disqualified. This waiting period would be applicable whether or not
the previously-investigated firm was authorized in the FSP or was an
unauthorized firm found to be violating the FSP.
This provision also applies to persons who are owners or officers
of multi-unit firms, as well as managers who are employed by the owner
of a multi-unit firm. If an owner or officer of a multi-unit firm
personally committed FSP violations at one unit of a multi-unit firm,
and a sanction was not served, this rule finalizes that an applicant
firm under that same ownership would be denied authorization for a
period of time that should have been served for the previously
committed violations. Moreover, as currently provided in the FSP
regulations, the authorization of other units of such multi-unit firms
may be withdrawn in response to violations of the FSP by ownership.
If management personnel of such multi-unit firms commit
sanctionable violations at more than one location, this would indicate
that such actions are reflective of the overall operating practice of
the firm, thus indicating a lack of business integrity on the part of
ownership. If such violations occur and an appropriate penalty was not
served, the applicant firm will be denied or restricted from applying
for authorization in the FSP for the period of time that should have
been served by the firm for violations committed at these other
locations under the same ownership. The period would be equivalent to
the longest sanction period that would have been served for the most
serious of violations committed by any one of the associated firms.
Finally, this final rule modifies the proposed rule with regard to
other evidence reflecting on business integrity. One commentor believed
that the provision as proposed was very broad. Therefore, this final
rule refines the provision by stipulating that a one year period of
denial in the program would result from the commission of any other
offense (other than convictions, judgments, removal or patterns of
noncompliance) which: (1) Reflects negatively on the business integrity
or business honesty of the owners, officers or managers of a firm; and
(2) seriously and directly affects the present responsibility of a
person.
The proposal also made an editorial change, unrelated to PRWORA's
provisions, to conform the language of Sec. 278.1(k), Denying
authorization and Sec. 278.1(l), Withdrawing authorization. A further
editorial change was made to Sec. 278.1(m) so as to conform this
section with Sec. 278.1(k) and Sec. 278.1(l). These revisions do not
result in any substantive change in the program, but simply clarify the
intent that the provisions are applicable to both denials and
withdrawals in the program. In addition, language was added in
Sec. 278.1(k) and Sec. 278.1(l) of this rule to reflect the current
prohibition against participation in the program as specified in the
current rule at Sec. 278.6(f)(4), which prohibits authorization for
participation of firms that have outstanding transfer of ownership
civil money penalties owed to FNS. This final rule implements these
changes as proposed.
Authority To Establish Authorization Periods
Section 832 of PRWORA provides authority for the Secretary to
establish specific time periods during which a firm may be authorized
to accept food stamps. The intent of this provision is to eliminate the
current open-ended authorization of firms in the program.
It was proposed that no firm be assigned an authorization period
for participation in the FSP for longer than five years. Moreover, the
proposal provided that the FNS Officer in Charge may assign a lesser
period of authorization, depending on the circumstances of the
particular firm.
Two comments were received on this proposed provision. One
commentor favored the provision, while the second disagreed in general
with the proposed five year maximum authorization period, particularly
with regard to firms that are longstanding participants in the program.
In addition, this commentor voiced concerns with providing general
discretion to FNS Officers in Charge to authorize firms for less than
the five year period on the basis of undefined circumstances
surrounding a firm's participation or approval in the program.
The final rule has been revised to comply with the intent of the
statute that authorization periods be specified in the program. The
Department agrees with the comment discussed above, and, therefore,
this final rule provides that all firms will be authorized for a
maximum period of five years. This final rule does not provide FNS
Officers in Charge the discretion to authorize firms for lesser periods
of time.
The Department believes that the five year authorization period is
reasonable and necessary for the effective administration of the
program. Moreover, the specification of an authorization period in no
way precludes FNS from periodically requesting information from a firm
or concern for purposes of reauthorization in the program or from
withdrawing or terminating the authorization of a firm in accordance
with program regulations. The Department will develop administrative
procedures to ensure that, prior to the time of expiration of a firm's
authorization period, the firm is provided with authorization materials
and given the opportunity to submit such materials and information to
enable FNS to evaluate the firm's qualifications for continued
participation in the FSP. This provision is included in Sec. 278.1(j)
of the regulation.
Post-Authorization Controls and Stiffer Penalties in the Program
Retailers that abuse the privilege of authorization in the FSP will
have that privilege revoked. The PRWORA includes a number of
significant tools that will enhance the Department's ability to enforce
the effectiveness of the FSP and the monitoring of retailers.
Authority To Suspend Stores Violating Program Requirements Pending
Administrative and Judicial Review
Section 845 of PRWORA amends section 14 of the FSA to require that
a permanent disqualification of a firm from the FSP be effective from
the date of the firm's receipt of the notice of disqualification. The
PRWORA also provides that if such an administrative action by FNS is
reversed through administrative or judicial review, the Secretary is
not liable for the value of any revenues lost by the firm during such a
disqualification period. This nondiscretionary provision was effective
upon the date of enactment of the law, and affects firms that are
subject to permanent disqualification for trafficking in the program,
as well as those firms subject to permanent disqualification for having
been sanctioned twice before for violations of the program. These
changes are found at Sec. 278.6(b) of the final rule. Editorial
revisions have also been made to Secs. 278.8(a), 279.7(a) and
279.10(d). Since this provision is nondiscretionary, its implementation
cannot be affected by public comment.
It is important to note that the statute specifically refers only
to permanent
[[Page 23170]]
disqualification actions. Therefore, firms which request and are found
to be eligible for a civil money penalty in lieu of permanent
disqualification for trafficking are not affected by the immediate
suspension requirement of the statute. Further, such firms would not be
expected to pay the civil money penalty pending appeal and may continue
to participate in the program pending appeal. One commentor agreed with
the Department's assertion that immediate disqualification refers only
to those firms not eligible for a civil money penalty in lieu of
permanent disqualification, but pointed out that the preamble
discussion in the proposed rule was not reflected in the regulatory
language itself. In response to this comment, the language at
Secs. 278.6(b)(2)(i) and 278.6(c) has been clarified to account for
this.
In addition, the commentor requested clarification as to how the
period between receipt of the notice of immediate disqualification and
the 10-day period for a firm to submit a request and documentation for
a trafficking CMP is handled. The immediate disqualification pending
appeal is effective upon the date of receipt of the determination
letter by the firm. The current regulations at Sec. 278.6(b)(1) provide
that, prior to such a determination, the firm receives a letter of
charges to which it may respond. It is at that time, subsequent to
receipt of the charge letter, that the firm would be indicating whether
or not it desires a CMP in lieu of permanent disqualification and would
submit documentation in support of such a request. If it is determined
that the firm is eligible for a trafficking CMP, the determination
letter that follows would acknowledge that the firm has requested and
documented its eligibility for a trafficking CMP, and thus could
continue to participate in the program pending any appeal of the
trafficking finding itself. However, once the determination is made
that the firm is not eligible for a CMP in lieu of trafficking, the
firm receives a determination letter that indicates the firm has been
found to be ineligible for a CMP in lieu of permanent disqualification
for trafficking and that the permanent disqualification is effective
upon receipt of the determination letter. The firm, while disqualified,
is eligible to appeal the determination. However, in those cases, the
disqualification action cannot be held pending appeal because the firm
has been permanently disqualified.
Investigations
Section 278.6(a) of the regulation was proposed to be amended in
accordance with section 841 of PRWORA to make an editorial change
stipulating that findings of program violations and the subsequent
suspension or disqualification of a firm may be made based on evidence
established through on-site investigations, inconsistent redemption
data, or evidence obtained through a transaction report under an
electronic benefit transfer system. This editorial change supports
current program practice and USDA authority to enforce program
compliance. The provision is nondiscretionary and is finalized in this
rule.
Disqualification of Retailers Disqualified From the WIC Program
Section 843 of PRWORA amends section 12 of the FSA to require the
Secretary to develop standards by which firms disqualified from the
Special Supplemental Nutrition Program for Women, Infants and Children
(WIC) are to be reciprocally disqualified from participation in the
FSP. Currently, the regulations provide for the withdrawal of such
firms from the FSP in response to WIC disqualification action. Such
withdrawals must run for a concurrent period of time. This has proven
to be problematic in that it is sometimes difficult for the Food Stamp
withdrawal action to catch up to the WIC disqualification, particularly
if the WIC disqualification is for a 6 month period or less. Under the
current regulations, a firm has the right to appeal the FSP action, and
often, by the time the firm has appealed the FSP withdrawal, the WIC
disqualification period is ending.
The change in the law provides that the FSP disqualification period
(1) shall be for the same period of time as the WIC disqualification
period; (2) may run consecutive to the WIC disqualification; and (3)
shall not be subject to FSP administrative or judicial review. These
provisions of the statute are nondiscretionary and are finalized in
this rule.
In addition, the law stipulates that the Secretary establish
criteria for such reciprocal disqualification actions. Current
regulations at Sec. 278.1(o) set forth the types of WIC violations that
will result in withdrawal of a firm from participation in the FSP. The
Department proposed to retain these same criteria, now found at
Sec. 278.6(e)(8), with some editorial changes to ensure that
trafficking violations are fully covered in the listed violations. The
WIC violations included here, therefore, represent very serious
violations of the WIC Program that are comparable to serious violations
of the FSP. These violations best represent the potential risk of
violations of a similar nature being committed by unscrupulous firms in
the FSP, thus necessitating reciprocal FSP action to protect the
integrity of the FSP.
The Department solicited comments on the reciprocal
disqualification standards set out in Sec. 278.6(e)(8). One comment was
received on these specific provisions. The commentor indicated concern
that some WIC State agencies may be misinterpreting the standards set
forth in the regulation, and that without the opportunity to appeal to
the FSP to dispute such misinterpretations, the firm's reciprocal
disqualification would be erroneous. Section 12(g) of the FSA does not
allow a firm to appeal a reciprocal disqualification action taken by
FNS. Editorial changes to this final rule have been made to conform to
the language of the WIC program final rule, which provides some
clarification to WIC State agencies. In addition, the preamble to that
rule provides WIC State agencies with further clarification regarding
WIC Program sanctions and guidance to assist those State agencies in
appropriately classifying WIC Program violations.
Conforming changes to restrict those firms subject to reciprocal
disqualification from eligibility for FSP administrative and judicial
review are made to Sec. 278.6(n), Sec. 278.8(a), Sec. 279.3(a)(2) and
Sec. 279.10(a) of this regulation. The changes made to these sections
are nondiscretionary and are not subject to public comment.
Disqualification of Retailers Who Intentionally Submit Falsified
Applications
Section 842 of the PRWORA amends section 12(b) of the FSA to
authorize the Secretary to disqualify, including permanently
disqualify, participating retailers who knowingly submit applications
that contain false information about substantive issues. The May 6,
1998 rule proposed to permanently disqualify a firm if it is found that
false information directly related to the firm's eligibility for
authorization is knowingly submitted on the application. In addition,
the rule proposed that in cases in which any false information is
knowingly submitted that would impact on the ability of FNS to monitor
and identify potentially violative firms, the firm shall be
disqualified for three years.
The proposed rule outlined examples of the type of information that
would be considered ``substantive'' for the purpose of determining
eligibility, as
[[Page 23171]]
well as the type of information that is considered to be substantive
from a monitoring standpoint. These examples, however, are not
inclusive of all of the information that, if fraudulently submitted,
may result in disqualification of a firm.
The rule also proposed to deny authorization of any such firm which
is found to have knowingly submitted false information on the
application at the time of initial application processing. It was
proposed that such firms be denied for the same period of time for
which they would be disqualified under Sec. 278.6(e). The Department
encouraged comments on this discretionary provision; however, no
comments were received. Therefore, the revisions as proposed are
finalized in Sec. 278.6(e) and Sec. 278.1(k) of this rule.
List of Subjects
7 CFR Part 271
Administrative practice and procedure, Food stamps, Grant
programs--social programs.
7 CFR Part 278
Administrative practice and procedure, Banks, banking, Claims, Food
stamps, Groceries--retail, Groceries, General line--wholesaler,
Penalties.
7 CFR Part 279
Administrative practice and procedure, Food stamps, Groceries--
retail, Groceries, General line--wholesaler.
Accordingly, 7 CFR Parts 271, 278 and 279 are amended as follows:
1. The authority citation for parts 271, 278 and 279 continues to
read as follows:
Authority: 7 U.S.C. 2011-2032.
PART 271--GENERAL INFORMATION AND DEFINITIONS
2. In Sec. 271.2, the definition of ``coupon'' is revised to read
as follows:
Sec. 271.2 Definitions.
* * * * *
Coupon means any coupon, stamp, type of certificate, authorization
card, cash or check issued in lieu of a coupon, or access device,
including an electronic benefit transfer card or personal
identification number issued pursuant to the provisions of the Food
Stamp Act of 1977, as amended, for the purchase of eligible food.
* * * * *
PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD
CONCERNS AND INSURED FINANCIAL INSTITUTIONS
3. In Sec. 278.1:
a. Paragraph (a) is revised;
b. Paragraph (b)(3) is revised;
c. Paragraph (j) is revised;
d. Paragraph (k) is amended by revising the first sentence of
paragraph (k)(2) and redesignating the paragraph (k)(2) as paragraph
(k)(7), and adding new paragraphs (k)(2), (k)(3), (k)(4), (k)(5) and
(k)(6);
e. Paragraph (l) is amended by redesignating paragraphs (l)(1)(iii)
through (l)(1)(v) as (l)(1)(v) through (l)(1)(vii), respectively,
revising newly redesignated paragraph (l)(1)(vi), and adding new
paragraphs (l)(1)(iii) and (l)(1)(iv);
f. The introductory text of paragraph (m) is revised;
g. Paragraph (o) is removed, and paragraphs (p) through (t) are
redesignated as paragraphs (o) through (s), respectively; and
h. Newly redesignated paragraph (o) is revised and newly
redesignated paragraph (q) is amended by removing references to (r)(2),
(r)(3), (r)(1)(ii), (r)(1)(i), (r)(1)(iv), (r)(2)(ii), (r)(2)(iv),
(r)(3)(iv) and (r), wherever they appear, and adding in their place
references to (q)(2), (q)(3), (q)(1)(ii), (q)(1)(i), (q)(1)(iv),
(q)(2)(ii), (q)(2)(iv), (q)(3)(iv) and (q), respectively.
The revisions and additions read as follows:
Sec. 278.1 Approval of retail food stores and wholesale food concerns.
(a) Application. Any firm desiring to participate or continue to be
authorized in the program shall file an application as prescribed by
FNS. Such an application shall contain information which will permit a
determination to be made as to whether such an applicant qualifies, or
continues to qualify, for authorization under the provisions of the
program. FNS may require that a retail food store or wholesale food
concern be visited to confirm eligibility for program participation
prior to such store or concern being authorized or reauthorized in the
program. Required visits shall be conducted by an authorized employee
of the Department, a designee of the Secretary, or an official of the
State or local government designated by the Secretary. FNS shall deny
or approve the application, or request additional information from the
applicant firm, within 30 days of receipt of the initial application.
(b) Determination of authorization. * * *
(3) The business integrity and reputation of the applicant. FNS
shall deny the authorization of any firm from participation in the
program for a period of time as specified in paragraph (k) of this
section based on consideration of information regarding the business
integrity and reputation of the firm as follows:
(i) Conviction of or civil judgment against the owners, officers or
managers of the firm for:
(A) Commission of fraud or a criminal offense in connection with
obtaining, attempting to obtain, or performing a public or private
agreement or transaction;
(B) Commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false statements,
receiving stolen property, making false claims, or obstruction of
justice; or
(C) Violation of Federal, State and/or local consumer protection
laws or other laws relating to alcohol, tobacco, firearms, controlled
substances, and/or gaming licenses;
(ii) Administrative findings by Federal, State or local officials
that do not give rise to a conviction or civil judgment but for which a
firm is removed from such a program, or the firm is not removed from
the program but FNS determines a pattern exists (3 or more instances)
evidencing a lack of business integrity on the part of the owners,
officers or managers of the firm;
(iii) Evidence of an attempt by the firm to circumvent a period of
disqualification, a civil money penalty or fine imposed for violations
of the Food Stamp Act and program regulations;
(iv) Previous Food Stamp Program violations administratively and/or
judicially established as having been committed by owners, officers, or
managers of the firm for which a sanction had not been previously
imposed and satisfied;
(v) Evidence of prior Food Stamp Program violations personally
committed by the owner(s) or the officer(s) of the firm at one or more
units of a multi-unit firm, or evidence of prior Food Stamp Program
violations committed by management at other units of multi-unit firms
which would indicate a lack of business integrity on the part of
ownership and for which sanctions had not been previously imposed and
satisfied; or
(vi) Commission of any other offense indicating a lack of business
integrity or business honesty of owners, officers or managers of the
firm that seriously and
[[Page 23172]]
directly affects the present responsibility of a person.
* * * * *
(j) Authorization. Upon approval, FNS shall issue a nontransferable
authorization card to the firm. The authorization card shall be valid
only for the time period for which the firm is authorized to accept and
redeem food stamp benefits. The authorization card shall be retained by
the firm until such time as the authorization period has ended,
authorization in the program is superseded, or the card is surrendered
or revoked as provided in this part. All firms will be authorized in
the program for a period of 5 years. The specification of an
authorization period in no way precludes FNS from periodically
requesting information from a firm for purposes of reauthorization in
the program or from withdrawing or terminating the authorization of a
firm in accordance with this part.
(k) Denying authorization. * * *
(2) The firm has failed to meet the eligibility requirements for
authorization under Criterion A or Criterion B, as specified in the
Food Stamp Act of 1977, as amended; or, for co-located wholesale/retail
firms, the firm fails to meet the requirements of paragraph (b)(1)(iv)
of this section. Any firm that has been denied authorization on these
bases shall not be eligible to submit a new application for
authorization in the program for a minimum period of six months from
the effective date of the denial;
(3) The firm has been found to lack the necessary business
integrity and reputation to further the purposes of the program. Such
firms shall be denied authorization in the program for the following
period of time:
(i) Firms for which records of criminal conviction or civil
judgment exist that reflect on the business integrity of owners,
officers, or managers as stipulated in Sec. 278.1(b)(3)(i) shall be
denied authorization permanently;
(ii) Firms which have been officially removed from other Federal,
State or local government programs through administrative action shall
be denied for a period equivalent to the period of removal from any
such programs; or, if the firm is not removed from the program, but FNS
determines a pattern (3 or more instances) exists evidencing a lack of
business integrity on the part of the owners, officers or managers of
the firm, such firm shall be denied for a one year period effective
from the date of denial;
(iii) Firms for which evidence exists of an attempt to circumvent a
period of disqualification, a civil money penalty, or fine imposed for
violations of the Food Stamp Act of 1977, as amended, and program
regulations shall be denied for a period of three years from the
effective date of denial;
(iv) Firms for which evidence exists of prior Food Stamp Program
violations by owners, officers, or managers of the firm for which a
sanction had not been previously imposed and satisfied shall be denied
for a period of time equivalent to the appropriate disqualification
period for such previous violations, effective from the date of denial;
(v) Firms for which evidence exists of prior Food Stamp Program
violations at other units of multi-unit firms as specified in
Sec. 278.1(b)(3)(v) for which a sanction had not been previously
imposed and satisfied shall be denied for a period of time equivalent
to the appropriate disqualification period for such previous
violations, effective from the date of denial;
(vi) Firms for which any other evidence exists which reflects
negatively on the business integrity or business honesty of the owners,
officers or managers of the firm as specified in Sec. 278.1(b)(3)(vi)
shall be denied for a period of one year from the effective date of
denial;
(4) The firm has filed an application that contains false or
misleading information about a substantive matter, as specified in
Sec. 278.6(e). Such firms shall be denied authorization for the periods
specified in Sec. 278.6(e)(1) or Sec. 278.6(e)(3);
(5) The firm's participation in the program will not further the
purposes of the program;
(6) The firm has been found to be circumventing a period of
disqualification or a civil money penalty through a purported transfer
of ownership;
(7) The firm has failed to pay in full any fiscal claim assessed
against the firm under Sec. 278.7, any fines assessed under
Secs. 278.6(l) or 278.6(m), or a transfer of ownership civil money
penalty assessed under Sec. 278.6(f). * * *
(l) Withdrawing authorization. (1) * * *
(iii) The firm fails to meet the requirements for eligibility under
Criterion A or B, as specified in the Food Stamp Act of 1977, as
amended, or, for co-located wholesale/retail firms, the firm fails to
meet the requirements of paragraph (b)(1)(iv) of this section, for the
time period specified in paragraph (k)(2) of this section;
(iv) The firm fails to maintain the necessary business integrity to
further the purposes of the program, as specified in paragraph (b)(3)
of this section. Such firms shall be withdrawn for lack of business
integrity for periods of time in accordance with those stipulated in
paragraph (k)(3) of this section for specific business integrity
findings;
* * * * *
(vi) The firm has failed to pay in full any fiscal claim assessed
against the firm under Sec. 278.7 or any fines assessed under
Secs. 278.6(l) or 278.6(m) or a transfer of ownership civil money
penalty assessed under Sec. 278.6(f); or
* * * * *
(m) Refusal to accept correspondence or to respond to inquiries.
FNS may withdraw or deny the authorization of any firm which:
* * * * *
(o) Applications containing false information. The filing of any
application containing false or misleading information may result in
the denial of approval for participation in the program, as specified
in paragraph (k) of this section, or disqualification of a firm from
participation in the program, as specified in Sec. 278.6, and may
subject the firm and persons responsible to civil or criminal action.
* * * * *
4. In Sec. 278.6:
a. Paragraph (a) is revised;
b. Paragraph (b)(1) is amended by adding one new sentence to the
end of the paragraph;
c. Paragraph (b)(2)(i) is amended by adding three new sentences to
the end of the paragraph;
d. Paragraph (c) is amended by adding four new sentences to the end
of the paragraph;
e. Paragraph (e) is amended by adding new paragraphs (e)(1)(iii),
(e)(3)(vi) and (e)(8);
f. Paragraph (i) is amended by removing the first sentence of
Criterion 4 and adding three new sentences in its place, and by
removing the words ``or management'' in paragraph (i)(1)(v); and
g. Paragraph (n) is revised.
The revisions and additions read as follows:
Sec. 278.6 Disqualification of retail food stores and wholesale food
concerns, and imposition of civil money penalties in lieu of
disqualifications.
(a) Authority to disqualify or subject to a civil money penalty.
FNS may disqualify any authorized retail food store or authorized
wholesale food concern from further participation in the program if the
firm fails to comply with the Food Stamp Act of 1977, as amended, or
this part. Such disqualification shall result from a
[[Page 23173]]
finding of a violation on the basis of evidence that may include facts
established through on-site investigations, inconsistent redemption
data, evidence obtained through a transaction report under an
electronic benefit transfer system, or the disqualification of a firm
from the Special Supplemental Nutrition Program for Women, Infants and
Children (WIC), as specified in paragraph (e)(8) of this section.
Disqualification shall be for a period of 6 months to 5 years for the
firm's first sanction; for period of 12 months to 10 years for a firm's
second sanction; and disqualification shall be permanent for a
disqualification based on paragraph (e)(1) of this section. Any firm
which has been disqualified and which wishes to be reinstated at the
end of the period of disqualification, or at any later time, shall file
a new application under Sec. 278.1 so that FNS may determine whether
reauthorization is appropriate. The application may be filed no earlier
than 10 days before the end of the period of disqualification. FNS may,
in lieu of a disqualification, subject a firm to a civil money penalty
of up to $10,000 for each violation if FNS determines that a
disqualification would cause hardship to participating households. FNS
may impose a civil money penalty of up to $20,000 for each violation in
lieu of a permanent disqualification for trafficking, as defined in
Sec. 271.2 of this chapter, in accordance with the provisions of
paragraphs (i) and (j) of this section.
(b) Charge letter. (1) * * * In the case of a firm for which action
is taken in accordance with paragraph (e)(8) of this section, the
charge letter shall inform such firm that the disqualification action
is not subject to administrative or judicial review, as specified in
paragraph (e)(8) of this section.
(2) Charge letter for trafficking. (i) * * * The charge letter
shall also advise the firm that the permanent disqualification shall be
effective immediately upon the date of receipt of the notice of
determination, regardless of whether a request for review is filed in
accordance with Sec. 279.5 of this chapter. If the disqualification is
reversed through administrative or judicial review, the Secretary shall
not be liable for the value of any sales lost during the
disqualification period. Firms that request and are determined eligible
for a civil money penalty in lieu of permanent disqualification for
trafficking may continue to participate in the program pending review
and shall not be required to pay the civil money penalty pending appeal
of the trafficking determination action.
* * * * *
(c) * * * In the case of a firm subject to permanent
disqualification under paragraph (e)(1) of this section, the
determination shall inform such a firm that action to permanently
disqualify the firm shall be effective immediately upon the date of
receipt of the notice of determination from FNS, regardless of whether
a request for review is filed in accordance with Sec. 279.5 of this
chapter. If the disqualification is reversed through administrative or
judicial review, the Secretary shall not be liable for the value of any
sales lost during the disqualification period. Firms that request and
are determined eligible to a civil money penalty in lieu of permanent
disqualification for trafficking may continue to participate in the
program pending review and shall not be required to pay the civil money
penalty pending appeal of the trafficking determination action. In the
case of a firm for which action is taken in accordance with paragraph
(e)(8) of this section, the determination notice shall inform such firm
that the disqualification action is not subject to administrative or
judicial review, as specified in paragraph (e)(8) of this section.
* * * * *
(e) Penalties. * * *
(1) * * *
(iii) It is determined that personnel of the firm knowingly
submitted information on the application that contains false
information of a substantive nature that could affect the eligibility
of the firm for authorization in the program, such as, but not limited
to, information related to:
(A) Eligibility requirements under Sec. 278.1(b), (c), (d), (e),
(f), (g) and (h);
(B) Staple food stock;
(C) Annual gross sales for firms seeking to qualify for
authorization under Criterion B as specified in the Food Stamp Act of
1977, as amended;
(D) Annual staple food sales;
(E) Total annual gross retail food sales for firms seeking
authorization as co-located wholesale/retail firms;
(F) Ownership of the firm;
(G) Employer Identification Numbers and Social Security Numbers;
(H) Food Stamp Program history, business practices, business
ethics, WIC disqualification or authorization status, when the store
did (or will) open for business under the current ownership, business,
health or other licenses, and whether or not the firm is a retail and
wholesale firm operating at the same location; or
(I) Any other information of a substantive nature that could affect
the eligibility of a firm.
* * * * *
(3) * * *
(vi) Personnel of the firm knowingly submitted information on the
application that contained false information of a substantive nature
related to the ability of FNS to monitor compliance of the firm with
FSP requirements, such as, but not limited to, information related to:
(A) Annual eligible retail food sales;
(B) Store location and store address and mailing address;
(C) Financial institution information; or
(D) Store name, type of ownership, number of cash registers, and
non-food inventory and services.
* * * * *
(8) FNS shall disqualify from the Food Stamp Program any firm which
is disqualified from the WIC Program:
(i) Based in whole or in part on any act which constitutes a
violation of that program's regulation and which is shown to constitute
a misdemeanor or felony violation of law, or for any of the following
specific program violations:
(A) A pattern of claiming reimbursement for the sale of an amount
of a specific food item which exceeds the store's documented inventory
of that food item for a specified period of time;
(B) Exchanging WIC food instruments for cash, credit or
consideration other than eligible food; or the exchange of firearms,
ammunition, explosives or controlled substances, as defined in section
802 of title 21 of the United States Code, for food instruments;
(C) A pattern of receiving, transacting and/or redeeming WIC food
instruments outside of authorized channels;
(D) A pattern of exchanging non-food items for a WIC food
instrument;
(E) A pattern of charging WIC customers more for food than non-WIC
customers or charging WIC customers more than the current shelf price;
or
(F) A pattern of charging for food items not received by the WIC
customer or for foods provided in excess of those listed on the food
instrument.
(ii) FNS shall not disqualify a firm from the Food Stamp Program on
the basis of a WIC disqualification unless:
(A) Prior to the time prescribed for securing administrative review
of the WIC disqualification action, the firm was provided individual
and specific notice that it could be disqualified from the Food Stamp
Program based on the WIC violations committed by the firm;
(B) A signed and dated copy of such notice is provided to FNS by
the WIC administering agency; and
[[Page 23174]]
(C) A determination is made in accordance with paragraph (a) of
this section that such action will not cause a hardship for
participating Food Stamp households.
(iii) Such a Food Stamp disqualification:
(A) Shall be for the same length of time as the WIC
disqualification;
(B) May begin at a later date than the WIC disqualification; and
(C) Shall not be subject to administrative or judicial review under
the Food Stamp Program.
* * * * *
(i) Criteria for eligibility for a civil money penalty in lieu of
permanent disqualification for trafficking. * * *
Criterion 4. Firm ownership was not aware of, did not approve,
did not benefit from, or was not in any way involved in the conduct
or approval of trafficking violations; or it is only the first
occasion in which a member of firm management was aware of,
approved, benefited from, or was involved in the conduct of any
trafficking violations by the firm. Upon the second occasion of
trafficking involvement by any member of firm management uncovered
during a subsequent investigation, a firm shall not be eligible for
a civil money penalty in lieu of permanent disqualification.
Notwithstanding the above provision, if trafficking violations
consisted of the sale of firearms, ammunition, explosives or
controlled substances, as defined in 21 U.S.C. Sec. 802, and such
trafficking was conducted by the ownership or management of the
firm, the firm shall not be eligible for a civil money penalty in
lieu of permanent disqualification.* * *
* * * * *
(n) Review of determination. The determination of FNS shall be
final and not subject to further administrative or judicial review
unless a written request for review is filed within the period stated
in Sec. 279.5 of this chapter.
Notwithstanding the above, any FNS determination made on the basis
of paragraph (e)(8) of this section shall not be subject to further
administrative or judicial review.
* * * * *
5. In Sec. 278.8, paragraph (a) is revised to read as follows:
Sec. 278.8 Administrative review--retail food stores and wholesale
food concerns.
(a) Requesting review. A food retailer or wholesale food concern
aggrieved by administrative action under Secs. 278.1, 278.6 or 278.7
may, within the period stated in Sec. 279.5 of this chapter, file a
written request for review of the administrative action with the review
officer. However, disqualification actions taken against firms in
accordance with Sec. 278.6(e)(8) shall not be subject to administrative
or judicial review. On receipt of the request for review, the
questioned administrative action shall be stayed pending disposition of
the request for review by the review officer, except in the case of a
permanent disqualification as specified in Sec. 278.6(e)(1). A
disqualification for failure to pay a civil money penalty shall not be
subject to administrative review.
* * * * *
PART 279--ADMINISTRATIVE AND JUDICIAL REVIEW--FOOD RETAILERS AND
FOOD WHOLESALERS
6. In Sec. 279.3, paragraph (a)(2) is revised to read as follows:
Sec. 279.3 Authority and jurisdiction.
(a) Jurisdiction. * * *
(2) Imposition of a fine under Secs. 278.6(l) or 278.6(m) of this
chapter or disqualification from participation in the program or
imposition of a civil money penalty under Sec. 278.6 of this chapter,
except for disqualification actions imposed under Sec. 278.6(e)(8) of
this chapter;
* * * * *
7. In Sec. 279.7, paragraph (a) is amended to add two new sentences
after the first sentence to read as follows:
Sec. 279.7 Action upon receipt of a request for review.
(a) Holding action. * * * However, in cases of permanent
disqualification under Sec. 278.6(e)(1) of this chapter, the
administrative action shall not be held in abeyance pending such a
review determination. If the disqualification is reversed through
administrative or judicial review, the Secretary shall not be held
liable for the value of any sales lost during the disqualification
period. * * *
* * * * *
8. In Sec. 279.10, the first sentence of paragraph (a) and
paragraph (d) are revised to read as follows:
Sec. 279.10 Judicial review.
(a) Filing for judicial review. Except for firms disqualified from
the program in accordance with Sec. 278.6(e)(8) of this chapter, a firm
aggrieved by the determination of the administrative review officer may
obtain judicial review of the determination by filing a complaint
against the United States in the U.S. district court for the district
in which the owner resides or is engaged in business, or in any court
of record of the State having competent jurisdiction. * * *
* * * * *
(d) Stay of action. During the pendency of any judicial review, or
any appeal therefrom, the administrative action under review shall
remain in force unless the firm makes a timely application to the court
and after hearing thereon, the court stays the administrative action
after a showing that irreparable injury will occur absent a stay and
that the firm is likely to prevail on the merits of the case. However,
permanent disqualification actions taken in accordance with
Sec. 278.6(e)(1) of this chapter shall not be subject to such a stay of
administrative action. If the disqualification action is reversed
through administrative or judicial review, the Secretary shall not be
liable for the value of any sales lost during the disqualification
period.
Dated: April 21, 1999.
Samuel Chambers, Jr.,
Administrator, Food and Nutrition Service.
[FR Doc. 99-10736 Filed 4-29-99; 8:45 am]
BILLING CODE 3410-30-P