[Federal Register Volume 66, Number 26 (Wednesday, February 7, 2001)]
[Rules and Regulations]
[Pages 9187-9198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3168]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 308

RIN 3064-AB41


Program Fraud

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The Board of Directors of the Federal Deposit Insurance 
Corporation is implementing the Program Fraud Civil Remedies Act 
(PFCRA) of 1986 by means of a regulation. The final rule establishes 
administrative procedures to impose statutorily authorized civil 
penalties against any person who makes, submits, or presents a false, 
fictitious, or fraudulent statement or claim (in the amount of $150,000 
or less for property, services, or money) to the FDIC in connection 
with FDIC employment matters, FDIC contracting activities, and the FDIC 
Asset Purchaser Certification Program. The scope of the final rule is 
expressly limited to exclude programs and activities of the FDIC (other 
than as set forth in the preceding sentence) that are related to FDIC 
regulatory, supervision, enforcement, insurance, receivership and 
liquidation matters.

EFFECTIVE DATE: March 9, 2001.

FOR FURTHER INFORMATION CONTACT: Linda Rego, Counsel, Corporate Affairs 
Section, Legal Division, Federal Deposit Insurance Corporation, 550 
17th Street, NW, Washington, D.C. 20429, (202) 898-7048.

SUPPLEMENTARY INFORMATION:

I. The Proposed Rule

    On August 29, 2000, the FDIC Board of Directors issued for public 
comment a proposed rule that would amend 12 CFR part 308 by adding a 
new subpart T implementing PFCRA, 65 FR 52352. The FDIC did not receive 
any comment letters regarding the proposed rule. As a result, the final 
regulation mirrors the proposed rule and no substantive changes have 
been made in the regulation.

II. Background

    In October 1986, Congress enacted PFCRA \1\ to establish a new 
administrative procedure as a remedy against those who knowingly make 
small dollar false claims for up to and including $150,000 or false 
statements to certain entities of the federal government. The statute 
requires the affected entities to adopt regulations that establish 
procedures to recover penalties and assessments against persons who 
file false claims or statements subject to PFCRA. The FDIC is subject 
to the requirements of the PFCRA pursuant to the Resolution Trust 
Corporation Completion Act (Pub. L. 103-204, 107 Stat. 2369), enacted 
December 20, 1993.
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    \1\ The Program Fraud Civil Remedies Act was originally enacted 
as subtitle VI(B) of the Omnibus Budget Reconciliation Act of 1986 
(Pub. L. 99-509, 100 Stat. 1874) and is codified at 31 U.S.C. 3801 
et seq.
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    The FDIC is required by the PFCRA to promulgate the necessary rules 
and regulations to implement its provisions. To facilitate the 
implementation process and to promote uniformity in the government, an 
interagency task force was established by the President's Council on 
Integrity and Efficiency to develop model regulations for 
implementation of the PFCRA. The FDIC is adopting the model regulations 
set forth by the Council's taskforce with certain substantive changes 
necessary

[[Page 9188]]

due to the FDIC's status as an independent regulatory agency. Further, 
certain revisions have been made in order for the FDIC to comply with 
the requirement of section 722 of the Gramm-Leach-Bliley Act, Pub. L. 
106-102, title VII, 113 Stat. 1472 (Nov. 12, 1999), codified at 12 
U.S.C. 4809, for all regulations issued by the FDIC after January 1, 
2000 to be written in ``plain language.''
    The final rule applies to anyone who, with knowledge or reason to 
know, submits a false, fictitious, or fraudulent statement or claim in 
the amount of $150,000 or less for property, services, or money to the 
FDIC in connection with FDIC employment matters, contracting activities 
and the FDIC Asset Purchaser Certification Program.
    The FDIC's implementation of the PFCRA is based on Congress's 
underlying purpose in enacting the PFCRA, which was to provide federal 
agencies with an administrative remedy for ``small dollar fraud'' cases 
for which there is no other remedy because the cases are too small for 
the United States Department of Justice (DOJ) to prosecute. Absent 
DOJ's prosecution, individuals who commit small dollar frauds against 
the government would profit from their wrongdoing because most agencies 
lack independent litigating authority. PFCRA was designed to remedy 
that problem.
    The FDIC is different from most agencies because, pursuant to 12 
U.S.C. 1819(a) Fourth, the FDIC has independent litigating authority 
and may pursue legal remedies through its own attorneys. The FDIC is 
particularly independent from representation by the DOJ when it is 
enforcing statutes governing financial institutions and in its 
receivership/liquidation activities.
    Moreover, the FDIC has special administrative remedies available to 
it for the imposition of civil money penalties in cases relating to the 
FDIC's supervision and regulation of financial institutions. With 
respect to deposit insurance, since insurance coverage for financial 
institutions and deposit insurance payments to depositors are not 
federal benefit programs or federal payments for other purposes, PFCRA 
should not be applied. Furthermore, if fraud were ever to occur 
concerning the FDIC paying off a depositor of a failed financial 
institution, the FDIC would rely upon its independent litigating 
authority to bring an action in federal court to recover the precise 
amount of the insurance payment. A civil penalty procedure would not be 
particularly useful. For these reasons, FDIC's implementation of the 
PFCRA only to FDIC employment matters, FDIC contracting activities and 
the FDIC Asset Purchaser Certification Program recognizes Congress's 
intent that PFCRA provide administrative remedies for cases where the 
FDIC may have no other viable monetary remedy. The scope of the final 
rule is also limited to clearly exclude claims and statements 
pertaining to deposit insurance.
    The PFCRA provides for designated investigative and reviewing 
officials, an administrative hearing process, and an agency appeal 
procedure with limited judicial review. In accordance with these 
requirements, the FDIC's final rule provides that the Inspector General 
(IG) or a designee will act as the Investigating Official; the General 
Counsel or a designee will serve as the Reviewing Official; an 
administrative law judge provided by the Office of Financial 
Institution Adjudication will be the Presiding Officer; and the Board 
of Directors of the FDIC will act as Authority Head on appeals.
    Under the final rule, allegations of false claims and statements 
made to the FDIC in connection with FDIC employment matters and 
contracting activities, including asset sale contracting activities, 
will be investigated by the FDIC IG or designee. In cases where the IG 
concludes that a PFCRA action may be warranted, the IG will submit a 
report containing the IG's findings and conclusions to the Reviewing 
Official (the General Counsel or designee) for an evaluation of whether 
there is adequate evidence to believe that the person named in the 
report is liable under PFCRA. Upon an affirmative finding of adequate 
evidence, the Reviewing Official will send written notice to DOJ of the 
FDIC's desire to seek administrative remedies. Upon DOJ's approval for 
the FDIC to proceed with an administrative action, a complaint may be 
issued by the reviewing official and the case referred to an 
Administrative Law Judge (ALJ) for a formal hearing on the record in 
accordance with the procedures established in this final rule. The ALJ 
will issue an initial decision. An alleged wrongdoer may appeal an 
adverse decision issued by the ALJ to the Board, and then to federal 
district court.
    In addition to providing procedures for dealing with the filing of 
false claims or statements, Sec. 308.502(c) of the final rule provides 
procedures for assessing civil penalties against those doing business 
with the FDIC who intentionally fail to file declarations and/or 
certifications required by law. The provision carries out the statutory 
mandate of the so-called ``Byrd Amendment'' \2\ (31 U.S.C. 1352) that 
the failure to file a declaration and/or certification concerning 
lobbying activities which is required by that statute is punishable 
using procedures adopted pursuant to the PFCRA. The same is true for 
any affirmative false statements concerning lobbying activities.
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    \2\ The Byrd Amendment prohibits recipients of federal 
contracts, grants, loans, or cooperative agreements from using funds 
appropriated by any act for lobbying of agency officials or 
employees and members of Congress in connection with the making, 
awarding, extension, continuation, renewal, amendment or 
modification of any federal contract, grant, loan, or cooperative 
agreement. The Byrd Amendment also provides for certain disclosures, 
declarations and/or certifications concerning lobbying activities, 
in connection with federal contracts, grants, or loans, whether or 
not appropriated funds are used. These requirements apply to all 
persons who request or receive a federal contract, grant, or 
cooperative agreement valued at $100,000 or greater, and persons who 
request or receive a loan of at least $150,000.
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    The procedures are established by adding a new subpart to 12 CFR 
part 308, subpart T. The procedures set forth in subpart T apply only 
to proceedings under PFCRA or 31 U.S.C. 1352. Further, a technical 
amendment is adopted to make it clear that the Uniform Rules and 
subpart B of the Local Rules under part 308 do not apply to proceedings 
initiated under subpart T.

III. Debt Collection Improvement Act of 1996

    The Debt Collection Improvement Act of 1996 provides for the FDIC 
adjusting civil money penalties every four years in accordance with a 
formula based on the rate of inflation, which is set forth in section 5 
of 28 U.S.C. 2461, note. The final rule includes paragraph (d) to 12 
CFR 308.530, determining the amount of penalties and assessments. The 
paragraph states that civil money penalties that may be assessed for 
PFCRA violations under the subpart are subject to adjustment on a four-
year basis to account for inflation and cross-references 12 CFR 
308.132(c)(3)(xv), which sets forth the current amount of the civil 
money penalty that may be assessed. The amount of civil money penalties 
that the FDIC may access for PFCRA violations has been adjusted for 
inflation in 12 CFR 308.132(c)(3)(xv) from the statutory amount of 
$5,000 per claim or statement to an amount that is currently $5,500. A 
conforming technical amendment to 12 CFR 308.132(c)(3)(xv) is adopted, 
which changes the phrase ``$5,500 per day'' to correctly state ``$5,500 
per claim or statement.''

[[Page 9189]]

IV. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 601 et seq., the FDIC hereby certifies that the final rule will 
not have a significant economic impact on a substantial number of small 
entities.
    The FDIC has reached this conclusion because the rule imposes no 
compliance or regulatory requirements but applies only when the FDIC 
determines that a false claim has been knowingly filed and pursues a 
PFCRA action to recover penalties and assessments.

V. Paperwork Reduction Act

    No collections of information pursuant to the Paperwork Reduction 
Act (44 U.S.C. 3501 et seq.) are contained in this final rule. 
Consequently, no information has been submitted to the Office of 
Management and Budget for review.

VI. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that this final rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 
2681 (1998). No assessment or certification to the OMB and Congress is 
required.

VII. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA) (Pub. L. 104-121) provides generally for agencies to report 
rules to Congress for review. The reporting requirement is triggered 
when the FDIC issues a final rule as defined by the Administrative 
Procedure Act (APA) at 5 U.S.C. 551. Because the FDIC is issuing a 
final rule as defined by the APA, the FDIC will file the reports 
required by SBREFA. The Office of Management and Budget has determined 
that this final rule does not constitute a ``major rule'' as defined by 
SBREFA.
    For the reasons set forth in the preamble, the FDIC amends part 308 
of title 12 of chapter III of the Code of Federal Regulations as 
follows:

Lists of Subjects in 12 CFR Part 308

    Administrative practice and procedure, Banks, banking, Claims, 
Crime, Equal access to justice, Fraud, Hearing procedure, 
Investigations, Lawyers, Penalties, State nonmember banks.

PART 308--RULES OF PRACTICE AND PROCEDURE

    1. The authority citation for part 308 is revised to read as 
follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 
1817, 1818, 1820, 1828, 1829, 1829b, 1831o, 1832(c), 1884(b), 1972, 
3102, 3108(a), 3349, 3909, 4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 
78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3, and 78w; 28 U.S.C. 2461 note; 
31 U.S.C. 330, 3809, 5321; 42 U.S.C. 4012a; sec. 31001(s), Pub. L. 
104-134, 110 Stat. 1321-358.


    2. Revise Sec. 308.101(b) to read as follows:


Sec. 308.101  Scope of Local Rules.

* * * * *
    (b) Except as otherwise specifically provided, the Uniform Rules 
and subpart B of the Local Rules shall not apply to subparts D through 
T of the Local Rules.
* * * * *

    3. Revise Sec. 308.132(c)(3)(xv) to read as follows:


Sec. 308.132  Assessment of penalties.

* * * * *
    (c) * * *
    (3) * * *
    (xv) Civil money penalties assessed for false claims and statements 
pursuant to the Program Fraud Civil Remedies Act. Pursuant to the 
Program Fraud Civil Remedies Act (31 U.S.C. 3802), civil money 
penalties of not more than $5,500 per claim or statement may be 
assessed for violations involving false claims and statements.
* * * * *

    4. Add new subpart T to read as follows:

Subpart T--Program Fraud Civil Remedies and Procedures

Sec.
308.500   Basis, purpose, and scope.
308.501   Definitions.
308.502   Basis for civil penalties and assessments.
308.503   Investigations.
308.504   Review by the reviewing official.
308.505   Prerequisites for issuing a complaint.
308.506   Complaint.
308.507   Service of complaint.
308.508   Answer.
308.509   Default upon failure to file an answer.
308.510   Referral of complaint and answer to the ALJ.
308.511   Notice of hearing.
308.512   Parties to the hearing.
308.513   Separation of functions.
308.514   Ex parte contacts.
308.515   Disqualification of reviewing official or ALJ.
308.516   Rights of parties.
308.517   Authority of the ALJ.
308.518   Prehearing conferences.
308.519   Disclosure of documents.
308.520   Discovery.
308.521   Exchange of witness lists, statements, and exhibits.
308.522   Subpoenas for attendance at hearing.
308.523   Protective order.
308.524   Witness fees.
308.525   Form, filing, and service of papers.
308.526   Computation of time.
308.527   Motions.
308.528   Sanctions.
308.529   The hearing and burden of proof.
308.530   Determining the amount of penalties and assessments.
308.531   Location of hearing.
308.532   Witnesses.
308.533   Evidence.
308.534   The record.
308.535   Post-hearing briefs.
308.536   Initial decision.
308.537   Reconsideration of initial decision.
308.538   Appeal to the Board of Directors.
308.539   Stays ordered by the Department of Justice.
308.540   Stay pending appeal.
308.541   Judicial review.
308.542   Collection of civil penalties and assessments.
308.543   Right to administrative offset.
308.544   Deposit in Treasury of United States.
308.545   Compromise or settlement.
308.546   Limitations.

Subpart T--Program Fraud Civil Remedies and Procedures


Sec. 308.500  Basis, purpose, and scope.

    (a) Basis. This subpart implements the Program Fraud Civil Remedies 
Act, Pub. L. 99-509, sections 6101-6104, 100 Stat. 1874 (October 21, 
1986), codified at 31 U.S.C. 3801-3812, (PFCRA) and made applicable to 
the Federal Deposit Insurance Corporation (FDIC) by section 23 of the 
Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat. 
2369). 31 U.S.C. 3809 of the statute requires each Authority head to 
promulgate regulations necessary to implement the provisions of the 
statute.
    (b) Purpose. This subpart:
    (1) Establishes administrative procedures for imposing civil 
penalties and assessments against persons who make, submit, or present 
or cause to be made, submitted, or presented false, fictitious, or 
fraudulent claims or written statements to the FDIC or to its agents; 
and
    (2) Specifies the hearing and appeal rights of persons subject to 
allegations of liability for such penalties and assessments.
    (c) Scope. This subpart applies only to persons who make, submit, 
or present or cause to be made, submitted, or presented false, 
fictitious, or fraudulent claims or written statements to the FDIC or 
to its agents acting on behalf of the

[[Page 9190]]

FDIC in connection with FDIC employment matters, FDIC contracting 
activities, and the FDIC Asset Purchaser Certification Program. It does 
not apply to false claims or statements made in connection with 
programs (other than as set forth in the preceding sentence) related to 
the FDIC's regulatory, supervision, enforcement, insurance, 
receivership or liquidation responsibilities. The FDIC is restricting 
the scope of applicability of this subpart because other civil and 
administrative remedies are adequate to redress fraud in the areas not 
covered.


Sec. 308.501  Definitions.

    For purposes of this subpart:
    (a) Administrative Law Judge (ALJ) means the presiding officer 
appointed by the Office of Financial Institution Adjudication pursuant 
to 12 U.S.C. 1818 note and 5 U.S.C. 3105.
    (b) Authority means the Federal Deposit Insurance Corporation 
(FDIC).
    (c) Authority head or Board means the Board of Directors of the 
FDIC, which is herein designated by the Chairman of the FDIC to serve 
as head of the FDIC for PFCRA matters.
    (d) Benefit means, in the context of ``statement'' as defined in 31 
U.S.C. 3801(a)(9), any financial assistance received from the FDIC that 
amounts to $150,000 or less. The term does not include the FDIC's 
deposit insurance program.
    (e) Claim means any request, demand, or submission:
    (1) Made to the FDIC for property, services, or money (including 
money representing grants, loans, insurance, or benefits);
    (2) Made to a recipient of property, services, or money from the 
FDIC or to a party to a contract with the FDIC;
    (i) For property or services if the United States:
    (A) Provided such property or services;
    (B) Provided any portion of the funds for the purchase of such 
property or services; or
    (C) Will reimburse such recipient or party for the purchase of such 
property or services;
    (ii) For the payment of money (including money representing grants, 
loans, insurance, or benefits) if the United States:
    (A) Provided any portion of the money requested or demanded; or
    (B) Will reimburse such recipient or party for any portion of the 
money paid on such request or demand; or
    (3) Made to the FDIC that has the effect of decreasing an 
obligation to pay or account for property, services, or money.
    (f) Complaint means the administrative complaint served by the 
reviewing official on the defendant under Sec. 308.506 of this subpart.
    (g) Corporation means the Federal Deposit Insurance Corporation.
    (h) Defendant means any person alleged in a complaint under 
Sec. 308.506 of this subpart to be liable for a civil penalty or 
assessment under Sec. 308.502 of this subpart.
    (i) Government means the United States Government.
    (j) Individual means a natural person.
    (k) Initial decision means the written decision of the ALJ required 
by Sec. 308.509 or Sec. 308.536 of this subpart, and includes a revised 
initial decision issued following a remand or a motion for 
consideration.
    (l) Investigating official means the Inspector General of the FDIC, 
or an officer or employee of the Inspector General designated by the 
Inspector General. The investigating official must serve in a position 
that has a rate of basic pay under the pay scale utilized by the FDIC 
that is equal to or greater than 120 percent of the minimum rate of 
basic pay for grade 15 under the federal government's General Schedule.
    (m) Knows or has reason to know, means that a person, with respect 
to a claim or statement:
    (1) Has actual knowledge that the claim or statement is false, 
fictitious, or fraudulent;
    (2) Acts in deliberate ignorance of the truth or falsity of the 
claim or statement; or
    (3) Acts in reckless disregard of the truth or falsity of the claim 
or statement.
    (n) Makes, wherever it appears, includes the terms ``presents'', 
``submits'', and ``causes to be made, presented, or submitted.'' As the 
context requires, ``making'' or ``made'' likewise includes the 
corresponding forms of such terms.
    (o) Person means any individual, partnership, corporation, 
association, or private organization, and includes the plural of that 
term.
    (p) Representative means an attorney, who is a member in good 
standing of the bar of any state, territory, or possession of the 
United States or of the District of Columbia or the Commonwealth of 
Puerto Rico, and designated by a party in writing.
    (q) Reviewing official means the General Counsel of the FDIC or his 
designee who is:
    (1) Not subject to supervision by, or required to report to, the 
investigating official;
    (2) Not employed in the organizational unit of the FDIC in which 
the investigating official is employed; and
    (3) Serving in a position that has a rate of basic pay under the 
pay scale utilized by the FDIC that is equal to or greater than 120 
percent of the minimum rate of basic pay for grade 15 under the federal 
government's General Schedule.
    (r) Statement means any representation, certification, affirmation, 
document, record, or accounting or bookkeeping entry made:
    (1) With respect to a claim or to obtain the approval or payment of 
a claim (including relating to eligibility to make a claim); or
    (2) With respect to (including relating to eligibility for):
    (i) A contract with, or a bid or proposal for a contract with; or
    (ii) A grant, loan, or benefit received, directly or indirectly, 
from the FDIC, or any state, political subdivision of a state, or other 
party, if the United States government provides any portion of the 
money or property under such contract or for such grant, loan, or 
benefit, or if the government will reimburse such state, political 
subdivision, or party for any portion of the money or property under 
such contract or for such grant, loan, or benefit.


Sec. 308.502  Basis for civil penalties and assessments.

    (a) Claims. (1) A person who makes a false, fictitious, or 
fraudulent claim to the FDIC is subject to a civil penalty of up to 
$5,000 per claim. A claim is false, fictitious, or fraudulent if the 
person making the claim knows, or has reason to know, that:
    (i) The claim is false, fictitious, or fraudulent; or
    (ii) The claim includes, or is supported by, a written statement 
that asserts a material fact which is false, fictitious or fraudulent; 
or
    (iii) The claim includes, or is supported by, a written statement 
that:
    (A) Omits a material fact; and
    (B) Is false, fictitious, or fraudulent as a result of that 
omission; and
    (C) Is a statement in which the person making the statement has a 
duty to include the material fact; or
    (iv) The claim seeks payment for providing property or services 
that the person has not provided as claimed.
    (2) Each voucher, invoice, claim form, or other individual request 
or demand for property, services, or money constitutes a separate 
claim.
    (3) A claim will be considered made to the FDIC, recipient, or 
party when the claim is actually made to an agent, fiscal intermediary, 
or other entity, including any state or political subdivision thereof, 
acting for or on behalf of the FDIC, recipient, or party.

[[Page 9191]]

    (4) Each claim for property, services, or money that constitutes 
any one of the elements in paragraph (a)(1) of this section is subject 
to a civil penalty regardless of whether the property, services, or 
money is actually delivered or paid.
    (5) If the FDIC has made any payment (including transferred 
property or provided services) on a claim, a person subject to a civil 
penalty under paragraph (a)(1) of this section will also be subject to 
an assessment of not more than twice the amount of such claim (or 
portion of the claim) that is determined to constitute a false, 
fictitious, or fraudulent claim under paragraph (a)(1) of this section. 
The assessment will be in lieu of damages sustained by the FDIC because 
of the claims.
    (6) The amount of any penalty assessed under paragraph (a)(1) of 
this section will be adjusted for inflation in accordance with 
Sec. 308.132(c)(3)(xv) of this part.
    (7) The penalty specified in paragraph (a)(1) of this section is in 
addition to any other remedy allowable by law.
    (b) Statements. (1) A person who submits to the FDIC a false, 
fictitious or fraudulent statement is subject to a civil penalty of up 
to $5,000 per statement. A statement is false, fictitious or fraudulent 
if the person submitting the statement to the FDIC knows, or has reason 
to know, that:
    (i) The statement asserts a material fact which is false, 
fictitious, or fraudulent; or
    (ii) The statement omits a material fact that the person making the 
statement has a duty to include in the statement; and
    (iii) The statement contains or is accompanied by an express 
certification or affirmation of the truthfulness and accuracy of the 
contents of the statement.
    (2) Each written representation, certification, or affirmation 
constitutes a separate statement.
    (3) A statement will be considered made to the FDIC when the 
statement is actually made to an agent, fiscal intermediary, or other 
entity, including any state or political subdivision thereof, acting 
for or on behalf of the FDIC.
    (4) The amount of any penalty assessed under paragraph (a)(1) of 
this section will be adjusted for inflation in accordance with 
Sec. 308.132(c)(3)(xv) of this part.
    (5) The penalty specified in paragraph (a)(1) of this section is in 
addition to any other remedy allowable by law.
    (c) Failure to file declaration/certification. Where, as a 
prerequisite to conducting business with the FDIC, a person is required 
by law to file one or more declarations and/or certifications, and the 
person intentionally fails to file such declaration/certification, the 
person will be subject to the civil penalties as prescribed by this 
subpart.
    (d) Intent. No proof of specific intent to defraud is required to 
establish liability under this section.
    (e) Liability. (1) In any case in which it is determined that more 
than one person is liable for making a claim or statement under this 
section, each such person may be held jointly and severally liable for 
a civil penalty under this section.
    (2) In any case in which it is determined that more than one person 
is liable for making a claim under this section on which the FDIC has 
made payment (including transferred property or provided services), an 
assessment may be imposed against any such person or jointly and 
severally against any combination of such persons.


Sec. 308.503  Investigations.

    (a) If an investigating official concludes that a subpoena pursuant 
to the authority conferred by 31 U.S.C. 3804(a) is warranted:
    (1) The subpoena will identify the person to whom it is addressed 
and the authority under which the subpoena is issued and will identify 
the records or documents sought;
    (2) The investigating official may designate a person to act on his 
or her behalf to receive the documents sought; and
    (3) The person receiving such subpoena will be required to provide 
the investigating official or the person designated to receive the 
documents a certification that the documents sought have been produced, 
or that such documents are not available, and the reasons therefor, or 
that such documents, suitably identified, have been withheld based upon 
the assertion of an identified privilege.
    (b) If the investigating official concludes that an action under 
the PFCRA may be warranted, the investigating official will submit a 
report containing the findings and conclusions of such investigation to 
the reviewing official.
    (c) Nothing in this section will preclude or limit an investigating 
official's discretion to refer allegations directly to the United 
States Department of Justice (DOJ) for suit under the False Claims Act 
(31 U.S.C. 3729 et seq.) or other civil relief, or to preclude or limit 
the investigating official's discretion to defer or postpone a report 
or referral to the reviewing official to avoid interference with a 
criminal investigation or prosecution.
    (d) Nothing in this section modifies any responsibility of an 
investigating official to report violations of criminal law to the 
Attorney General.


Sec. 308.504  Review by the reviewing official.

    (a) If, based on the report of the investigating official under 
Sec. 308.503(b) of this subpart, the reviewing official determines that 
there is adequate evidence to believe that a person is liable under 
Sec. 308.502 of this subpart, the reviewing official will transmit to 
the Attorney General a written notice of the reviewing official's 
intention to issue a complaint under Sec. 308.506 of this subpart.
    (b) Such notice will include:
    (1) A statement of the reviewing official's reasons for issuing a 
complaint;
    (2) A statement specifying the evidence that supports the 
allegations of liability;
    (3) A description of the claims or statements upon which the 
allegations of liability are based;
    (4) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in violation of 
Sec. 308.502 of this subpart;
    (5) A statement of any exculpatory or mitigating circumstances that 
may relate to the claims or statements known by the reviewing official 
or the investigating official; and
    (6) A statement that there is a reasonable prospect of collecting 
an appropriate amount of penalties and assessments. Such a statement 
may be based upon information then known, or upon an absence of any 
information indicating that the person may be unable to pay such 
amount.


Sec. 308.505  Prerequisites for issuing a complaint.

    (a) The reviewing official may issue a complaint under Sec. 308.506 
of this subpart only if:
    (1) The DOJ approves the issuance of a complaint in a written 
statement described in 31 U.S.C. 3803(b)(1); and
    (2) In the case of allegations of liability under Sec. 308.502(a) 
of this subpart with respect to a claim (or a group of related claims 
submitted at the same time as defined in paragraph (b) of this section) 
the reviewing official determines that the amount of money or the value 
of property or services demanded or requested does not exceed $150,000.
    (b) For the purposes of this section, a group of related claims 
submitted at the same time will include only those

[[Page 9192]]

claims arising from the same transaction (e.g., grant, loan, 
application, or contract) that are submitted simultaneously as part of 
a single request, demand, or submission.
    (c) Nothing in this section will be construed to limit the 
reviewing official's authority to join in a single complaint against a 
person claims that are unrelated or were not submitted simultaneously, 
regardless of the amount of money, or the value of property or 
services, demanded or requested.


Sec. 308.506  Complaint.

    (a) On or after the date the DOJ approves the issuance of a 
complaint in accordance with 31 U.S.C. 3803(b)(1), the reviewing 
official may serve a complaint on the defendant, as provided in 
Sec. 308.507 of this subpart.
    (b) The complaint will state:
    (1) The allegations of liability against the defendant, including 
the statutory basis for liability, or identification of the claims or 
statements that are the basis for the alleged liability, and the 
reasons why liability allegedly arises from such claims or statements;
    (2) The maximum amount of penalties and assessments for which the 
defendant may be held liable;
    (3) Instructions for filing an answer and to request a hearing, 
including a specific statement of the defendant's right to request a 
hearing by filing an answer and to be represented by a representative; 
and
    (4) That failure to file an answer within 30 days of service of the 
complaint will result in the imposition of the maximum amount of 
penalties and assessments without right to appeal, as provided in 
Sec. 308.509 of this subpart.
    (c) At the same time the reviewing official serves the complaint, 
he or she will provide the defendant with a copy of this subpart.


Sec. 308.507  Service of complaint.

    (a) Service of a complaint will be made by certified or registered 
mail or by delivery in any manner authorized by rule 4(c) of the 
Federal Rules of Civil Procedure (28 U.S.C. App.). Service is complete 
upon receipt.
    (b) Proof of service, stating the name and address of the person on 
whom the complaint was served, and the manner and date of service, may 
be made by:
    (1) Affidavit of the individual serving the complaint by delivery;
    (2) A United States Postal Service return receipt card 
acknowledging receipt; or
    (3) Written acknowledgment of receipt by the defendant or his or 
her representative.


Sec. 308.508  Answer.

    (a) The defendant may request a hearing by filing an answer with 
the reviewing official within 30 days of service of the complaint. An 
answer will be deemed to be a request for hearing.
    (b) In the answer, the defendant:
    (1) Must admit or deny each of the allegations of liability made in 
the complaint;
    (2) Must state any defense on which the defendant intends to rely;
    (3) May state any reasons why the defendant contends that the 
penalties and assessments should be less than the statutory maximum; 
and
    (4) Must state the name, address, and telephone number of the 
person authorized by the defendant to act as defendant's 
representative, if any.
    (c) If the defendant is unable to file an answer meeting the 
requirements of paragraph (b) of this section within the time provided:
    (1) The defendant may, before the expiration of 30 days from 
service of the complaint, file with the reviewing official a general 
answer denying liability and requesting a hearing, and a request for an 
extension of time within which to file an answer meeting the 
requirements of paragraph (b) of this section.
    (2) The reviewing official will file promptly with the ALJ the 
complaint, the general answer denying liability, and the request for an 
extension of time as provided in Sec. 308.510 of this subpart.
    (3) For good cause shown, the ALJ may grant the defendant up to 30 
additional days within which to file an answer meeting the requirements 
of paragraph (b) of this section.


Sec. 308.509  Default upon failure to file an answer.

    (a) If the defendant does not file an answer within the time 
prescribed in Sec. 308.508(a) of this subpart, the reviewing official 
may refer the complaint to the ALJ.
    (b) Upon the referral of the complaint, the ALJ will promptly serve 
on defendant in the manner prescribed in Sec. 308.507 of this subpart, 
a notice that an initial decision will be issued under this section.
    (c) If the defendant fails to answer, the ALJ will assume the facts 
alleged in the complaint to be true, and, if such facts establish 
liability under Sec. 308.502 of this subpart, the ALJ will issue an 
initial decision imposing the maximum amount of penalties and 
assessments allowed under the statute.
    (d) Except as otherwise provided in this section, by failing to 
file a timely answer, the defendant waives any right to further review 
of the penalties and assessments imposed under paragraph (c) of this 
section, and the initial decision will become final and binding upon 
the parties 30 days after it is issued.
    (e) If, before such an initial decision becomes final, the 
defendant files a motion with the ALJ seeking to reopen on the grounds 
that extraordinary circumstances prevented the defendant from filing an 
answer, the initial decision will be stayed pending the ALJ's decision 
on the motion.
    (f) If, in the motion to reopen under paragraph (e) of this 
section, the defendant can demonstrate extraordinary circumstances 
excusing the failure to file a timely answer, the ALJ will withdraw the 
initial decision in paragraph (c) of this section, if such a decision 
has been issued, and will grant the defendant an opportunity to answer 
the complaint.
    (g) A decision of the ALJ denying a defendant's motion to reopen 
under paragraph (e) of this section is not subject to reconsideration 
under Sec. 308.537 of this subpart.
    (h) The decision denying the motion to reopen under paragraph (e) 
of this section may be appealed by the defendant to the Board by filing 
a notice of appeal with the Board within 15 days after the ALJ denies 
the motion. The timely filing of a notice of appeal will stay the 
initial decision until the Board decides the issue.
    (i) If the defendant files a timely notice of appeal with the 
Board, the ALJ will forward the record of the proceeding to the Board.
    (j) The Board will decide whether extraordinary circumstances 
excuse the defendant's failure to file a timely answer based solely on 
the record before the ALJ.
    (k) If the Board decides that extraordinary circumstances excuse 
the defendant's failure to file a timely answer, the Board will remand 
the case to the ALJ with instructions to grant the defendant an 
opportunity to answer.
    (l) If the Board decides that the defendant's failure to file a 
timely answer is not excused, the Board will reinstate the initial 
decision of the ALJ, which will become final and binding upon the 
parties 30 days after the Board issues such decision.


Sec. 308.510  Referral of complaint and answer to the ALJ.

    Upon receipt of an answer, the reviewing official will file the 
complaint and answer with the ALJ. The reviewing official will include 
the name, address, and telephone number of a representative of the 
Corporation.

[[Page 9193]]

Sec. 308.511  Notice of hearing.

    (a) When the ALJ receives the complaint and answer, the ALJ will 
promptly serve a notice of hearing upon the defendant in the manner 
prescribed by Sec. 308.507 of this subpart. At the same time, the ALJ 
will send a copy of such notice to the representative of the 
Corporation.
    (b) The notice will include:
    (1) The tentative time, date, and place, and the nature of the 
hearing;
    (2) The legal authority and jurisdiction under which the hearing is 
to be held;
    (3) The matters of fact and law to be asserted;
    (4) A description of the procedures for the conduct of the hearing;
    (5) The name, address, and telephone number of the representative 
of the Corporation and of the defendant, if any; and
    (6) Other matters as the ALJ deems appropriate.


Sec. 308.512  Parties to the hearing.

    (a) The parties to the hearing will be the defendant and the 
Corporation.
    (b) Pursuant to the False Claims Act (31 U.S.C. 3730(c)(5)), a 
private plaintiff under the False Claims Act may participate in these 
proceedings to the extent authorized by the provisions of that Act.


Sec. 308.513  Separation of functions.

    (a) The investigating official, the reviewing official, and any 
employee or agent of the FDIC who takes part in investigating, 
preparing, or presenting a particular case may not, in such case or a 
factually related case:
    (1) Participate in the hearing as the ALJ;
    (2) Participate or advise in the initial decision or the review of 
the initial decision by the Board, except as a witness or a 
representative in public proceedings; or
    (3) Make the collection of penalties and assessments under 31 
U.S.C. 3806.
    (b) The ALJ will not be responsible to, or subject to the 
supervision or direction of, the investigating official or the 
reviewing official.
    (c) Except as provided in paragraph (a) of this section, the 
representative for the FDIC will be an attorney employed in the FDIC's 
Legal Division; however, the representative of the FDIC may not 
participate or advise in the review of the initial decision by the 
Board.


Sec. 308.514  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. 308.515  Disqualification of reviewing official or ALJ.

    (a) A reviewing official or ALJ in a particular case may disqualify 
himself or herself at any time.
    (b) A party may file with the ALJ a motion for disqualification of 
a reviewing official or an ALJ. An affidavit alleging conflict of 
interest or other reason for disqualification must accompany the 
motion.
    (c) Such motion and affidavit must be filed promptly upon the 
party's discovery of reasons requiring disqualification, or such 
objections will be deemed waived.
    (d) Such affidavit must state specific facts that support the 
party's belief that personal bias or other reason for disqualification 
exists and the time and circumstances of the party's discovery of such 
facts. The representative of record must certify that the affidavit is 
made in good faith and this certification must accompany the affidavit.
    (e) Upon the filing of such a motion and affidavit, the ALJ will 
proceed no further in the case until he or she resolves the matter of 
disqualification in accordance with paragraph (f) of this section.
    (f)(1) If the ALJ determines that a reviewing official is 
disqualified, the ALJ will dismiss the complaint without prejudice.
    (2) If the ALJ disqualifies himself or herself, the case will be 
reassigned promptly to another ALJ.
    (3) If the ALJ denies a motion to disqualify, the Board may 
determine the matter only as part of the Board's review of the initial 
decision upon appeal, if any.


Sec. 308.516  Rights of parties.

    Except as otherwise limited by this subpart, all parties may:
    (a) Be accompanied, represented, and advised by a representative;
    (b) Participate in any conference held by the ALJ;
    (c) Conduct discovery;
    (d) Agree to stipulations of fact or law which will be made part of 
the record;
    (e) Present evidence relevant to the issues at the hearing;
    (f) Present and cross-examine witnesses;
    (g) Present oral arguments at the hearing as permitted by the ALJ; 
and
    (h) Submit written briefs and proposed findings of fact and 
conclusions of law.


Sec. 308.517  Authority of the ALJ.

    (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 and the 
production of documents at depositions or at hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of discovery;
    (8) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude, or limit evidence;
    (11) Upon motion of a party, take official notice of facts, decide 
cases, in whole or in part, by summary judgment where there is no 
disputed issue of material fact;
    (12) Conduct any conference, argument, or hearing on motions in 
person or by telephone; and
    (13) Exercise such other authority as is necessary to carry out the 
responsibilities of the ALJ under this subpart.
    (c) The ALJ does not have the authority to make any determinations 
regarding the validity of federal statutes or regulations or of 
directives, rules, resolutions, policies, orders or other such general 
pronouncements issued by the Corporation.


Sec. 308.518  Prehearing conferences.

    (a) The ALJ may schedule prehearing conferences as appropriate.
    (b) Upon the motion of any party, the ALJ will schedule at least 
one prehearing conference at a reasonable time in advance of the 
hearing.
    (c) The ALJ may use prehearing conferences to discuss the 
following:
    (1) Simplification of the issues;
    (2) The necessity or desirability of amendments to the pleading, 
including the need for a more definite statement;
    (3) Stipulations and admissions of fact as to the contents and 
authenticity of documents;
    (4) Whether the parties can agree to submission of the case on a 
stipulated record;

[[Page 9194]]

    (5) Whether a party chooses (subject to the objection of other 
parties) to waive appearance at an oral hearing and to submit only 
documentary evidence and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits;
    (8) Discovery;
    (9) The time, date, and place for the hearing; and
    (10) Such other matters as may tend to expedite the fair and just 
disposition of the proceedings.
    (d) The ALJ may issue an order containing all matters agreed upon 
by the parties or ordered by the ALJ at a prehearing conference.


Sec. 308.519  Disclosure of documents.

    (a) Upon written request to the reviewing official, the defendant 
may review any relevant and material documents, transcripts, records, 
and other materials that relate to the allegations set out in the 
complaint and upon which the findings and conclusions of the 
investigating official under Sec. 308.503(b) of this subpart are based, 
unless such documents are subject to a privilege under federal law. 
Upon payment of fees for duplication, the defendant may obtain copies 
of such documents.
    (b) Upon written request to the reviewing official, the defendant 
also may obtain a copy of all exculpatory information in the possession 
of the reviewing official or investigating official relating to the 
allegations in the complaint, even if it is contained in a document 
that would otherwise be privileged. If the document would otherwise be 
privileged, only that portion containing exculpatory information must 
be disclosed.
    (c) The notice sent to the Attorney General from the reviewing 
official as described in Sec. 308.504 of this subpart is not 
discoverable under any circumstances.
    (d) The defendant may file a motion to compel disclosure of the 
documents subject to the provisions of this section. Such a motion may 
only be filed with the ALJ following the filing of an answer pursuant 
to Sec. 308.508 of this subpart.


Sec. 308.520  Discovery.

    (a) The following types of discovery are authorized:
    (1) Requests for production of documents for inspection and 
copying;
    (2) Requests for admission of the authenticity of any relevant 
document or of the truth of any relevant fact;
    (3) Written interrogatories; and
    (4) Depositions.
    (b) For the purpose of this section and Secs. 308.521 and 308.522 
of this subpart, the term documents includes information, documents, 
reports, answers, records, accounts, papers, and other data or 
documentary evidence. Nothing contained in this subpart will be 
interpreted to require the creation of a document.
    (c) Unless mutually agreed to by the parties, discovery is 
available only as ordered by the ALJ. The ALJ will regulate the timing 
of discovery.
    (d) Motions for discovery. (1) A party seeking discovery may file a 
motion with the ALJ and a copy of the requested discovery, or in the 
case of depositions, a summary of the scope of the proposed deposition, 
must accompany such motions.
    (2) Within 10 days of service, a party may file an opposition to 
the motion and/or a motion for protective order as provided in 
Sec. 308.523 of this subpart.
    (3) The ALJ may grant a motion for discovery only if he or she 
finds that the discovery sought:
    (i) Is necessary for the expeditious, fair, and reasonable 
consideration of the issues;
    (ii) Is not unduly costly or burdensome;
    (iii) Will not unduly delay the proceeding; and
    (iv) Does not seek privileged information.
    (4) The burden of showing that discovery should be allowed is on 
the party seeking discovery.
    (5) The ALJ may grant discovery subject to a protective order under 
Sec. 308.523 of this subpart.
    (e) Dispositions. (1) If a motion for deposition is granted, the 
ALJ will issue a subpoena for the deponent, which may require the 
deponent to produce documents. The subpoena will specify the time, 
date, and place at which the deposition will be held.
    (2) The party seeking to depose must serve the subpoena in the 
manner prescribed in Sec. 308.507 of this subpart.
    (3) The deponent may file with the ALJ a motion to quash the 
subpoena or a motion for a protective order within 10 days of service.
    (4) The party seeking to depose must provide for the taking of a 
verbatim transcript of the deposition, and must make the transcript 
available to all other parties for inspection and copying.
    (f) Each party must bear its own costs of discovery.


Sec. 308.521  Exchange of witness lists, statements, and exhibits.

    (a) At least 15 days before the hearing or at such other time as 
may be ordered by the ALJ, the parties must exchange witness lists, 
copies of prior statements of proposed witnesses, and 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. 308.532(b) of this subpart. At the time such documents are 
exchanged, any party that intends to rely on the transcript of 
deposition testimony in lieu of live testimony at the hearing, if 
permitted by the ALJ, must provide each party with a copy of the 
specific pages of the transcript it intends to introduce into evidence.
    (b) If a party objects, the ALJ will not admit into evidence the 
testimony of any witness whose name does not appear on the witness list 
or any exhibit not provided to the opposing party as provided in 
paragraph (a) of this section unless the ALJ finds good cause for the 
failure or that there is no prejudice to the objecting party.
    (c) Unless another party objects within the time set by the ALJ, 
documents exchanged in accordance with paragraph (a) of this section 
will be deemed to be authentic for the purpose of admissibility at the 
hearing.


Sec. 308.522  Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual at the hearing may request that the ALJ issue a subpoena.
    (b) A subpoena requiring the attendance and testimony of an 
individual may also require the individual to produce documents at the 
hearing.
    (c) A party seeking a subpoena must file a written request not less 
than 15 days before the date fixed for the hearing unless otherwise 
allowed by the ALJ for good cause shown. Such request must specify any 
documents to be produced and must designate the witnesses and describe 
the address and location thereof with sufficient particularity to 
permit such witnesses to be found.
    (d) The subpoena must specify the time, date, and place at which 
the witness is to appear and any documents the witness is to produce.
    (e) The party seeking the subpoena must serve it in the manner 
prescribed in Sec. 308.507 of this subpart. A subpoena on a party or 
upon an individual under the control of a party may be served by first 
class mail.
    (f) A party or the individual to whom the subpoena is directed may 
file with the ALJ a motion to quash the subpoena within 10 days after 
service or on or before the time specified in the

[[Page 9195]]

subpoena for compliance if it is less than 10 days after service.


Sec. 308.523  Protective order.

    (a) A party or a prospective witness or deponent may file a motion 
for a protective order with respect to discovery sought by an opposing 
party or with respect to the hearing, seeking to limit the availability 
or disclosure of evidence.
    (b) In issuing a protective order, the ALJ may make any order which 
justice requires to protect a party or person from annoyance, 
embarrassment, oppression, or undue burden or expense, including one or 
more of the following:
    (1) That the discovery will not be conducted;
    (2) That the discovery will be conducted only on specified terms 
and conditions, including a designation of the time or place;
    (3) That the discovery will be conducted only through a method of 
discovery other than that requested;
    (4) That certain matters not be inquired into, or that the scope of 
discovery be limited to certain matters;
    (5) That discovery be conducted with no one present except persons 
designated by the ALJ;
    (6) That the contents of discovery or evidence be sealed or 
otherwise kept confidential;
    (7) That a deposition after being sealed be opened only by order of 
the ALJ;
    (8) That a trade secret or other confidential research, 
development, commercial information, or facts pertaining to any 
criminal investigation, proceeding, or other administrative 
investigation not be disclosed or be disclosed only in a designated 
way; or
    (9) That the parties simultaneously file specified documents or 
information enclosed in sealed envelopes to be opened as directed by 
the ALJ.


Sec. 308.524  Witness fees.

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


Sec. 308.525  Form, filing, and service of papers.

    (a) Form. (1) Documents filed with the ALJ must include an original 
and two copies.
    (2) Every pleading and paper filed in the proceeding must contain a 
caption setting forth the title of the action, the case number assigned 
by the ALJ, and a designation of the paper (e.g., motion to quash 
subpoena).
    (3) Every pleading and paper must be signed by, and must contain 
the address and telephone number of the party or the person on whose 
behalf the paper was filed, or his or her representative.
    (4) Papers are considered filed when they are mailed by certified 
or registered mail. Date of mailing may be established by a certificate 
from the party or its representative or by proof that the document was 
sent by certified or registered mail.
    (b) Service. A party filing a document with the ALJ must, at the 
time of filing, serve a copy of such document on every other party. 
Service upon any party of any document other than those required to be 
served as prescribed in Sec. 308.507 of this subpart must be made by 
delivering a copy or by placing a copy of the document in the United 
States mail, postage prepaid, and addressed to the party's last known 
address. When a party is represented by a representative, service must 
be made upon such representative in lieu of the actual party. The ALJ 
may authorize facsimile transmission as an acceptable form of service.
    (c) Proof of service. A certificate by the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, will be proof of service.


Sec. 308.526  Computation of time.

    (a) In computing any period of time under this subpart 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.


Sec. 308.527  Motions.

    (a) Any application to the ALJ for an order or ruling must be by 
motion. Motions must state the relief sought, the authority relied 
upon, and the facts alleged, and must be filed with the ALJ and served 
on all other parties. Motions may include, without limitation, motions 
for summary judgment.
    (b) Except for motions made during a prehearing conference or at 
the hearing, all motions must be in writing. The ALJ may require that 
oral motions be reduced to writing.
    (c) Within 15 days after a written motion is served, or any other 
time as may be fixed by the ALJ, any party may file a response to such 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing responses thereto has expired, except upon consent of the 
parties or following a hearing on the motion, but may overrule or deny 
such motion without awaiting a response.
    (e) The ALJ will make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.


Sec. 308.528  Sanctions.

    (a) The ALJ may sanction a person, including any party or 
representative for:
    (1) Failing to comply with an order, rule, or procedure governing 
the proceeding;
    (2) Failing to prosecute or defend an action; or
    (3) Engaging in other misconduct that interferes with the speedy, 
orderly, or fair conduct of the hearing.
    (b) Any such sanction, including but not limited to, those listed 
in paragraphs (c), (d), and (e) of this section, must reasonably relate 
to the severity and nature of the failure or misconduct.
    (c) When a party fails to comply with an order, including an order 
for taking a deposition, the production of evidence within the party's 
control, or a request for admission, the ALJ may:
    (1) Draw an inference in favor of the requesting party with regard 
to the information sought;
    (2) In the case of requests for admission, deem each matter of 
which an admission is requested to be admitted;
    (3) Prohibit the party failing to comply with such order from 
introducing evidence concerning, or otherwise relying upon, testimony 
relating to the information sought; and
    (4) Strike any part of the related pleading or other submissions of 
the party failing to comply with such request.
    (d) If a party fails to prosecute or defend an action under this 
subpart commenced by service of a notice of hearing, the ALJ may 
dismiss the action or may issue an initial decision imposing penalties 
and assessments.
    (e) The ALJ may refuse to consider any motion, request, response, 
brief, or

[[Page 9196]]

other document which is not filed in a timely fashion.


Sec. 308.529  The hearing and burden of proof.

    (a) The ALJ will conduct a hearing on the record in order to 
determine whether the defendant is liable for a civil penalty or 
assessment under Sec. 308.502 of this subpart, and, if so, the 
appropriate amount of any such civil penalty or assessment considering 
any aggravating or mitigating factors.
    (b) The FDIC must prove defendant's liability and any aggravating 
factors by a preponderance of the evidence.
    (c) The defendant must prove any affirmative defenses and any 
mitigating factors by a preponderance of the evidence.
    (d) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause shown.


Sec. 308.530  Determining the amount of penalties and assessments.

    (a) In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the Board, upon appeal, should evaluate any 
circumstances that mitigate or aggravate the violation and should 
articulate in their opinions the reasons that support the penalties and 
assessments they impose. Because of the intangible costs of fraud, the 
expense of investigating such conduct, and the need to deter others who 
might be similarly tempted, ordinarily double damages and a significant 
civil penalty should be imposed.
    (b) Although not exhaustive, the following factors are among those 
that may influence the ALJ and the Board in determining the amount of 
penalties and assessments to impose with respect to the misconduct 
(i.e., the false, fictitious, or fraudulent claims or statement) 
charged in the complaint:
    (1) The number of false, fictitious, or fraudulent claims or 
statements;
    (2) The time period over which such claims or statements were made;
    (3) The degree of the defendant's culpability with respect to the 
misconduct;
    (4) The amount of money or the value of the property, services, or 
benefit falsely claimed;
    (5) The value of the government's actual loss as a result of the 
misconduct, including foreseeable consequential damages and the costs 
of investigation;
    (6) The relationship of the amount imposed as civil penalties to 
the amount of the government's loss;
    (7) The potential or actual impact of the misconduct upon national 
defense, public health or safety, or public confidence in the 
management of government programs and operations, including 
particularly the impact on the intended beneficiaries of such programs;
    (8) Whether the defendant has engaged in a pattern of the same or 
similar misconduct;
    (9) Whether the defendant attempted to conceal the misconduct;
    (10) The degree to which the defendant has involved others in the 
misconduct or in concealing it;
    (11) Where the misconduct of employees or agents is imputed to the 
defendant, the extent to which the defendant's practices fostered or 
attempted to preclude such misconduct;
    (12) Whether the defendant cooperated in or obstructed an 
investigation of the misconduct;
    (13) Whether the defendant assisted in identifying and prosecuting 
other wrongdoers;
    (14) The complexity of the program or transaction, and the degree 
of the defendant's sophistication with respect to it, including the 
extent of the defendant's prior participation in the program or in a 
similar transaction;
    (15) Whether the defendant has been found, in any criminal, civil, 
or administrative proceeding to have engaged in similar misconduct or 
to have dealt dishonestly with the Government of the United States or 
of a state, directly or indirectly; and
    (16) The need to deter the defendant and others from engaging in 
the same or similar misconduct.
    (c) Nothing in this section will be construed to limit the ALJ or 
the Board from considering any other factors that in any given case may 
mitigate or aggravate the offense for which penalties and assessments 
are imposed.
    (d) Civil money penalties that are assessed pursuant to this 
subpart are subject to adjustment on a four-year basis to account for 
inflation as required by section 4 of the Federal Civil Penalties 
Inflation Adjustment Act of 1990, as amended (codified at 28 U.S.C. 
2461, note) (see also 12 CFR 308.132(c)(3)(xv)).


Sec. 308.531  Location of hearing.

    (a) The hearing may be held:
    (1) In any judicial district of the United States in which the 
defendant resides or transacts business;
    (2) In any judicial district of the United States in which the 
claim or statement at issue was made; or
    (3) In such other place as may be agreed upon by the defendant and 
the ALJ.
    (b) Each party will have the opportunity to present argument with 
respect to the location of the hearing.
    (c) The hearing will be held at the place and at the time ordered 
by the ALJ.


Sec. 308.532  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 may be admitted in the 
form of a written statement or deposition. The party offering a written 
statement must provide all other parties with a copy of the written 
statement along with the last known address of the witness. Sufficient 
time must be allowed for other parties to subpoena the witness for 
cross-examination at the hearing. Prior written statements and 
deposition transcripts of witnesses identified to testify at the 
hearing must be exchanged as provided in Sec. 308.521(a) of this 
subpart.
    (c) The ALJ will exercise reasonable control over the mode and 
order of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the 
ascertainment of the truth;
    (2) Avoid needless consumption of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ will permit the parties to conduct such cross-
examination as may be required for a full and true disclosure of the 
facts.
    (e) At the discretion of the ALJ, a witness may be cross-examined 
on matters relevant to the proceeding without regard to the scope of 
his or her direct examination. To the extent permitted by the ALJ, 
cross-examination on matters outside the scope of direct examination 
will be conducted in the manner of direct examination and may proceed 
by leading questions only if the witness is a hostile witness, an 
adverse party, or a witness identified with an adverse party.
    (f) Upon motion of any party, the ALJ will order witnesses excluded 
so that they cannot hear the testimony of other witnesses. This rule 
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 by 
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 
employed by the Corporation engaged in assisting the representative for 
the Corporation.

[[Page 9197]]

Sec. 308.533  Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this subpart, the ALJ will not be bound 
by the Federal Rules of Evidence (28 U.S.C. App.). However, the ALJ may 
apply the Federal Rules of Evidence where appropriate, e.g., to exclude 
unreliable evidence.
    (c) The ALJ will exclude irrelevant and immaterial evidence.
    (d) 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.
    (e) Although relevant, evidence may be excluded if it is privileged 
under federal law.
    (f) Evidence concerning offers of compromise or settlement will be 
inadmissible to the extent provided in rule 408 of the Federal Rules of 
Evidence.
    (g) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence.
    (h) All documents and other evidence offered or taken for the 
record must be open to examination by all parties, unless otherwise 
ordered by the ALJ pursuant to Sec. 308.523 of this subpart.


Sec. 308.534  The record.

    (a) The hearing will be recorded by audio or videotape and 
transcribed. Transcripts may be obtained following the hearing from the 
ALJ at a cost not to exceed the actual cost of duplication.
    (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 and the 
Board.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by anyone, unless otherwise ordered by the ALJ pursuant 
to Sec. 308.523 of this subpart.


Sec. 308.535  Post-hearing briefs.

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ will fix the 
time for filing such briefs, not to exceed 60 days from the date the 
parties receive the transcript of the hearing or, if applicable, the 
stipulated record. Such briefs may be accompanied by proposed findings 
of fact and conclusions of law. The ALJ may permit the parties to file 
reply briefs.


Sec. 308.536  Initial decision.

    (a) The ALJ will issue an initial decision based only on the 
record, which will contain findings of fact, conclusions of law, and 
the amount of any penalties and assessments imposed.
    (b) The findings of fact will include a finding on each of the 
following issues:
    (1) Whether the claims or statements identified in the complaint, 
or any portions of such claims or statements, violate Sec. 308.502 of 
this subpart; and
    (2) If the person is liable for penalties or assessments, the 
appropriate amount of any such penalties or assessments considering any 
mitigating or aggravating factors that he or she finds in the case, 
such as those described in Sec. 308.530 of this subpart.
    (c) The ALJ will promptly serve the initial decision on all parties 
within 90 days after the time for submission of post-hearing briefs and 
reply briefs (if permitted) has expired. The ALJ will at the same time 
serve all parties with a statement describing the right of any 
defendant determined to be liable for a civil penalty or assessment to 
file a motion for reconsideration with the ALJ or a notice of appeal 
with the Board. If the ALJ fails to meet the deadline contained in this 
paragraph, he or she will notify the parties of the reason for the 
delay and will set a new deadline.
    (d) Unless the initial decision of the ALJ is timely appealed to 
the Board, or a motion for reconsideration of the initial decision is 
timely filed, the initial decision will constitute the final decision 
of the Board and will be final and binding on the parties 30 days after 
it is issued by the ALJ.


Sec. 308.537  Reconsideration of initial decision.

    (a) Except as provided in paragraph (d) of this section, any party 
may file a motion for reconsideration of the initial decision within 20 
days of receipt of the initial decision. If service is made by mail, 
receipt will be presumed to be 5 days from the date of mailing in the 
absence of proof to the contrary.
    (b) Every motion for reconsideration must set forth the matters 
claimed to have been erroneously decided and the nature of the alleged 
errors. The motion must be accompanied by a supporting brief.
    (c) Responses to the motions will be allowed only upon order of the 
ALJ.
    (d) No party may file a motion for reconsideration of an initial 
decision that has been revised in response to a previous motion for 
reconsideration.
    (e) The ALJ may dispose of a motion for reconsideration by denying 
it or by issuing a revised initial decision.
    (f) If the ALJ denies a motion for reconsideration, the initial 
decision will constitute the final decision of the FDIC and will be 
final and binding on all parties 30 days after the ALJ denies the 
motion, unless the final decision is timely appealed to the Board in 
accordance with Sec. 308.538 of this subpart.
    (g) If the ALJ issues a revised initial decision, that decision 
will constitute the final decision of the FDIC and will be final and 
binding on the parties 30 days after it is issued, unless it is timely 
appealed to the Board in accordance with Sec. 308.538 of this subpart.


Sec. 308.538  Appeal to the Board of Directors.

    (a) Any defendant who has filed a timely answer and who is 
determined in an initial decision to be liable for a civil penalty or 
assessment may appeal such decision to the Board by filing a notice of 
appeal with the Board in accordance with this section.
    (b)(1) No notice of appeal may be filed until the time period for 
filing a motion for reconsideration under Sec. 308.537 of this subpart 
has expired.
    (2) If a motion for reconsideration is timely filed, a notice of 
appeal must be filed within 30 days after the ALJ denies the motion or 
issues a revised initial decision, whichever applies.
    (3) If no motion for reconsideration is timely filed, a notice of 
appeal must be filed within 30 days after the ALJ issues the initial 
decision.
    (4) The Board may extend the initial 30-day period for an 
additional 30 days if the defendant files with the Board a request for 
an extension within the initial 30-day period and shows good cause.
    (c) If the defendant files a timely notice of appeal with the 
Board, the ALJ will forward the record of the proceeding to the Board.
    (d) A notice of appeal will be accompanied by a written brief 
specifying exceptions to the initial decision and reasons supporting 
the exceptions.
    (e) The representative for the Corporation may file a brief in 
opposition to exceptions within 30 days of receiving the notice of 
appeal and accompanying brief.
    (f) There is no right to appear personally before the Board.
    (g) There is no right to appeal any interlocutory ruling by the 
ALJ.
    (h) In reviewing the initial decision, the Board will not consider 
any objection that was not raised before the ALJ unless a demonstration 
is made of extraordinary circumstances causing the failure to raise the 
objection.
    (i) If any party demonstrates to the satisfaction of the Board that 
additional

[[Page 9198]]

evidence not presented at such hearing is material and that there were 
reasonable grounds for the failure to present such evidence at such 
hearing, the Board will remand the matter to the ALJ for consideration 
of such additional evidence.
    (j) The Board may affirm, reduce, reverse, compromise, remand, or 
settle any penalty or assessment determined by the ALJ in any initial 
decision.
    (k) The Board will promptly serve each party to the appeal with a 
copy of the decision of the Board and a statement describing the right 
of any person determined to be liable for a penalty or an assessment to 
seek judicial review.
    (l) Unless a petition for review is filed as provided in 31 U.S.C. 
3805 after a defendant has exhausted all administrative remedies under 
this subpart and within 60 days after the date on which the Board 
serves the defendant with a copy of the Board's decision, a 
determination that a defendant is liable under Sec. 308.502 of this 
subpart is final and is not subject to judicial review.


Sec. 308.539  Stays ordered by the Department of Justice.

    If at any time the Attorney General or an Assistant Attorney 
General designated by the Attorney General transmits to the Board a 
written finding that continuation of the administrative process 
described in this subpart with respect to a claim or statement may 
adversely affect any pending or potential criminal or civil action 
related to such claim or statement, the Board will stay the process 
immediately. The Board may order the process resumed only upon receipt 
of the written authorization of the Attorney General.


Sec. 308.540  Stay pending appeal.

    (a) An initial decision is stayed automatically pending disposition 
of a motion for reconsideration or of an appeal to the Board.
    (b) No administrative stay is available following a final decision 
of the Board.


Sec. 308.541  Judicial review.

    Section 3805 of Title 31, United States Code, authorizes judicial 
review by an appropriate United States District Court of a final 
decision of the Board imposing penalties or assessments under this 
subpart and specifies the procedures for such review.


Sec. 308.542  Collection of civil penalties and assessments.

    Sections 3806 and 3808(b) of Title 31, United States Code, 
authorize actions for collection of civil penalties and assessments 
imposed under this subpart and specify the procedures for such actions.


Sec. 308.543  Right to administrative offset.

    The amount of any penalty or assessment which has become final, or 
for which a judgment has been entered under Sec. 308.541 or 
Sec. 308.542 of this subpart, or any amount agreed upon in a compromise 
or settlement under Sec. 308.545 of this subpart, may be collected by 
administrative offset under 31 U.S.C. 3716, except that an 
administrative offset may not be made under this section against a 
refund of an overpayment of federal taxes, then or later owing by the 
United States to the defendant.


Sec. 308.544  Deposit in Treasury of United States.

    All amounts collected pursuant to this subpart will be deposited as 
miscellaneous receipts in the Treasury of the United States, except as 
provided in 31 U.S.C. 3806(g).


Sec. 308.545  Compromise or settlement.

    (a) Parties may make offers of compromise or settlement at any 
time.
    (b) The reviewing official has the exclusive authority to 
compromise or settle a case under this subpart at any time after the 
date on which the reviewing official is permitted to issue a complaint 
and before the date on which the ALJ issues an initial decision.
    (c) The Board has exclusive authority to compromise or settle a 
case under this subpart any time after the date on which the ALJ issues 
an initial decision, except during the pendency of any review under 
Sec. 308.541 of this subpart or during the pendency of any action to 
collect penalties and assessments under Sec. 308.542 of this subpart.
    (d) The Attorney General has exclusive authority to compromise or 
settle a case under this subpart during the pendency of any review 
under Sec. 308.541 of this subpart or of any action to recover 
penalties and assessments under 31 U.S.C. 3806.
    (e) The investigating official may recommend settlement terms to 
the reviewing official, the Board, or the Attorney General, as 
appropriate. The reviewing official may recommend settlement terms to 
the Board, or the Attorney General, as appropriate.
    (f) Any compromise or settlement must be in writing.


Sec. 308.546  Limitations.

    (a) The notice of hearing with respect to a claim or statement will 
be served in the manner specified in Sec. 308.507 of this subpart 
within 6 years after the date on which such claim or statement is made.
    (b) If the defendant fails to file a timely answer, service of 
notice under Sec. 308.509(b) of this subpart will be deemed a notice of 
a hearing for purposes of this section.
    (c) The statute of limitations may be extended by agreement of the 
parties.

    By order of the Board of Directors.

    Dated at Washington, DC, this 19th day of January, 2001.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 01-3168 Filed 2-6-01; 8:45 am]
BILLING CODE 6714-01-P