[Federal Register Volume 71, Number 203 (Friday, October 20, 2006)]
[Rules and Regulations]
[Pages 61911-61921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-17545]


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CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

45 CFR Part 2554

RIN 3045-AA42


Program Fraud Civil Remedies Act

AGENCY: Corporation for National and Community Service.

ACTION: Final rule.

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SUMMARY: This final rule implements the Program Fraud Civil Remedies 
Act of 1986 (Act), which authorizes the Corporation for National and 
Community Service (Corporation) and certain other Federal agencies to 
impose, through administrative adjudication, civil penalties and 
assessments against any person who makes, submits, or presents a false, 
fictitious, or fraudulent claim or written statement to the agency. The 
regulations establish the procedures the Corporation will follow in 
implementing the provisions of the Act and specifies the hearing and 
appeal rights of persons subject to penalties and assessments under the 
Act. They also designate the Corporation's Chief Financial Officer to 
act on behalf of the Chief Executive Officer in carrying out certain 
duties and responsibilities under the regulations.

DATES: Effective Date: These regulations are effective November 20, 
2006.

FOR FURTHER INFORMATION CONTACT: Irshad Abdal-Haqq, Office of the 
General Counsel, Corporation for National and Community Service, 1201 
New York Ave. NW., Room 10600, Washington, DC 20525, Telephone: 202-
606-6675.

SUPPLEMENTARY INFORMATION:

Background

    In October 1986, Congress enacted the Program Fraud Civil Remedies 
Act, Public Law No. 99-509 (codified at 31 U.S.C. 3801-3812), to 
establish an administrative remedy against any person who makes a false 
claim or written statement to any of certain Federal agencies. In 
brief, it requires the affected Federal agencies to follow certain 
procedures in recovering penalties (up to $5,000 per claim) and 
assessments (up to double the amount falsely claimed) against persons 
who file false claims or statements for which the liability is $150,000 
or less. When the Act was enacted, the Corporation for National and 
Community Service did not exist, and the Act did not apply to the 
Corporation's predecessor agency, ACTION. However, that Act has since 
become applicable to the Corporation as a result of amendments to the 
Inspector General Act, Public Law 103-82, September 21, 1993. Those 
amendments, inter alia, added the Corporation for National and 
Community Service as an ``establishment'' under the Inspector General 
Act and, by doing so, operated to bring the Corporation within the 
provisions of the Program Fraud Civil Remedies Act.
    The Act requires each affected agency to promulgate rules and 
regulations necessary to implement its provisions. Following the Act's 
enactment, at the request of the President's Council on Integrity and 
Efficiency (PCIE) an interagency task force was established under the 
leadership of the Department of Health and Human Services to develop 
model regulations for implementation of the Act by all affected 
agencies. This action was in keeping with the stated desire of the 
Senate Governmental Affairs Committee that ``the regulations would be 
substantially uniform throughout the government'' (S. Rep. No. 99-212, 
99th Cong., 1st Sess. 12 (1985). Upon their completion, the PCIE 
recommended adoption of the model rules by all affected agencies.
    It is the policy of the Corporation to use a plain language style 
when promulgating regulations, and we have done so in this document 
without making substantive changes to the PCIE model regulations. For 
the sake of consistency, we relied, to the extent practicable, on plain 
language regulations issued by the Small Business Administration in 
1996. See 61 FR 2691, January 29, 1996.
    A more detailed discussion of the PCIE's model regulations is found 
in the promulgations of several of the agencies that adopted them 
earlier, including those of the Departments of Justice (53 FR 4034; 
February 11, 1988 and 53 FR 11645; April 8, 1988); Health and Human 
Services (52 FR 27423; July 21, 1987 and 53 FR 11656, April 8, 1988); 
and Transportation (52 FR 36968; October 2, 1987 and 53 FR 880, January 
14, 1988). Anyone desiring further explanation of the model rules is 
referred to the cited references.
    The Corporation published a proposed rule with request for comment 
in the Federal Register on February 1, 2006 (71 FR 5211). Only one 
comment was received. It expressed general support for the rule as 
written without any amendments. The commenter believes the rule holds 
individuals accountable for fraudulent activity and, as such, improves 
government operations. The commenter also believes the rule's penalty 
provisions

[[Page 61912]]

will deter fraud. Finally, the commenter expressed strong support for 
the use of plain language in drafting the rule and clearly specifying 
in the rule that due process will be provided under the rule's 
procedures. Since there were no other comments, the Corporation has 
decided to issue the final rule as proposed (subject only to minor 
typographical corrections).

Statutory and Regulatory Analysis

    Under the Act, false claims and statements subject to its 
provisions are to be investigated by an agency's investigating 
official. The results of the investigation are then reviewed by an 
agency reviewing official who determines whether there is adequate 
evidence to believe that the person named in the report is liable under 
the Act. Upon an affirmative finding of adequate evidence, the 
reviewing official sends to the Attorney General a written notice of 
the official's intent to refer the matter to a presiding officer for an 
administrative hearing. The agency institutes administrative 
proceedings against the person only if the Attorney General or the 
Attorney General's designee approves. Any penalty or assessment imposed 
under the Act may be collected by the Attorney General through the 
filing of a civil action, or by offsetting amounts, other than tax 
refunds, owed the particular party by the Federal government.
    The regulations designate the Inspector General or his or her 
designee as the agency's investigating official. They also designate 
the General Counsel as the reviewing official. Any administrative 
adjudication under the Act will be presided over by an Administrative 
Law Judge and any appeals from the Administrative Law Judge's decision 
will be decided by the Corporation's Chief Executive Officer or Chief 
Financial Officer. The regulations designate the Corporation's Chief 
Financial Officer to act on behalf of the Chief Executive Officer in 
carrying out the duties and responsibilities of the ``authority head'' 
under the regulations.

Paperwork Reduction Act

    This rule contains no information collection requirements and 
therefore is not subject to the requirements of the Paperwork Reduction 
Act of 1980 (44 U.S.C. 3501 et seq.).

Executive Order 12866

    The Corporation has determined that the rule is not an 
``economically significant'' rule within the meaning of E.O. 12866 
because it is not likely to result in: (1) An annual effect on the 
economy of $100 million or more, or an adverse and material effect on a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
government or communities; (2) the creation of a serious inconsistency 
or interference with an action taken or planned by another agency; (3) 
a material alteration in the budgetary impacts of entitlement, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) the raising of novel legal or policy issues arising out 
of legal mandates, the President's priorities, or the principles set 
forth in E.O. 12866. However, this is a significant rule and has been 
reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

    As required by the Regulatory Flexibility Act of 1980 (5 U.S.C. 
605(b)), the Corporation certifies that this rule will not have a 
significant economic impact on a substantial number of small entities. 
This regulatory action will not result in (1) An annual effect on the 
economy of $100 million or more; (2) a major increase in costs or 
prices for consumers, individual industries, Federal, State, or local 
government agencies, or geographic regions; or (3) significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic and export markets. 
The rule establishes the procedural mechanism for investigating and 
adjudicating allegations of false claims or statements made against 
affected agencies. The rule, by itself, does not impose any obligations 
on entities including any entities that may fall within the definition 
of ``small entities'' as set forth in section 601(3) of the Regulatory 
Flexibility Act, or within the definition of ``small business'' as 
found in Section 3 of the Small Business Act, 15 U.S.C. 632, or within 
the Small Business Size Standards found in 13 CFR part 121. These 
obligations would not be created until an order is issued, at which 
time the person subject to the order would have a right to a hearing in 
accordance with the regulations. Therefore, the Corporation has not 
performed the initial regulatory flexibility analysis that is required 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) for major 
rules that are expected to have such results.

Unfunded Mandates

    For purposes of Title II of the Unfunded Mandates Reform Act of 
1995, 2 U.S.C. 1531-1538, as well as Executive Order 12875, this 
regulatory action does not contain any Federal mandate that may result 
in increased expenditures in either Federal, State, local, or tribal 
governments in the aggregate, or impose an annual burden exceeding $100 
million on the private sector.

Executive Order 13132, Federalism

    Executive Order 13132, Federalism, prohibits an agency from 
publishing any rule that has Federalism implications if the rule either 
imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This rule does not have any 
Federalism implications, as described above.

List of Subjects in 45 CFR Part 2554

    Claims, Fraud, Organization and function (government agencies), 
Penalties.

0
For the reasons stated in the preamble, the Corporation for National 
and Community Service adds a new part 2554 to Chapter XXV of Title 45 
of the Code of Federal Regulations to read as follows:

PART 2554--PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS

Sec.

Overview and Definitions

2554.1 Overview of regulations.
2554.2 What kind of conduct will result in program fraud 
enforcement?
2554.3 What is a claim?
2554.4 What is a statement?
2554.5 What is a false claim or statement?
2554.6 What does the phrase ``know or have reason to know'' mean?

Procedures Leading to Issuance of a Complaint

2554.7 Who investigates program fraud?
2554.8 What happens if program fraud is suspected?
2554.9 Who is the Corporation's authority head?
2554.10 When will the Corporation issue a complaint?
2554.11 What is contained in a complaint?
2554.12 How will the complaint be served?

Procedures Following Service of a Complaint

2554.13 How does a defendant respond to the complaint?
2554.14 What happens if a defendant fails to file an answer?
2554.15 What happens once an answer is filed?

Hearing Provisions

2554.16 What kind of hearing is contemplated?

[[Page 61913]]

2554.17 At the hearing, what rights do the parties have?
2554.18 What is the role of the ALJ?
2554.19 Can the reviewing official or ALJ be disqualified?
2554.20 How are issues brought to the attention of the ALJ?
2554.21 How are papers served?
2554.22 How is time computed?
2554.23 What happens during a prehearing conference?
2554.24 What rights are there to review documents?
2554.25 What type of discovery is authorized and how is it 
conducted?
2554.26 Are there limits on disclosure of documents or discovery?
2554.27 Are witness lists exchanged before the hearing?
2554.28 Can witnesses be subpoenaed?
2554.29 Who pays the costs for a subpoena?
2554.30 Are protective orders available?
2554.31 Where is the hearing held?
2554.32 How will the hearing be conducted and who has the burden of 
proof?
2554.33 How is evidence presented at the hearing?
2554.34 How is witness testimony presented?
2554.35 Will the hearing proceedings be recorded?
2554.36 Can a party informally discuss the case with the ALJ?
2554.37 Are there sanctions for misconduct?
2554.38 Are post-hearing briefs required?

Decisions and Appeals

2554.39 How is the case decided?
2554.40 How are penalty and assessment amounts determined?
2554.41 Can a party request reconsideration of the initial decision?
2554.42 When does the initial decision of the ALJ become final?
2554.43 What are the procedures for appealing the ALJ decision?
2554.44 What happens if an initial decision is appealed?
2554.45 Are there any limitations on the right to appeal to the 
authority head?
2554.46 How does the authority head dispose of an appeal?
2554.47 What judicial review is available?
2554.48 Can the administrative complaint be settled voluntarily?
2554.49 How are civil penalties and assessments collected?
2554.50 What happens to collections?
2554.51 What if the investigation indicates criminal misconduct?
2554.52 How does the Corporation protect the rights of defendants?

    Authority: Pub. L. 99-509, Secs. 6101-6104, 100 Stat. 1874 (31 
U.S.C. 3801-3812); 42 U.S.C. 12651c-12651d.

Overview and Definitions


Sec.  2554.1  Overview of regulations.

    (a) Statutory basis. This part implements the Program Fraud Civil 
Remedies Act of 1986, 31 U.S.C. 3801-3812 (``the Act''). The Act 
provides the Corporation and other federal agencies with an 
administrative remedy to impose civil penalties and assessments against 
persons making false claims and statements. The Act also provides due 
process protections to all persons who are subject to administrative 
proceedings under this part.
    (b) Possible remedies for program fraud. In addition to any other 
penalties that may be prescribed by law, a person who submits, or 
causes to be submitted, a false claim or a false statement to the 
Corporation is subject to a civil penalty of not more than $5,000 for 
each statement or claim, regardless of whether property, services, or 
money is actually delivered or paid by the Corporation. If the 
Corporation has made any payment, transferred property, or provided 
services in reliance on a false claim, the person submitting it also is 
subject to an assessment of not more than twice the amount of the false 
claim. This assessment is in lieu of damages sustained by the 
Corporation because of the false claim.


Sec.  2554.2  What kind of conduct will result in program fraud 
enforcement?

    (a) Any person who makes, or causes to be made, a false, 
fictitious, or fraudulent claim or written statement to the Corporation 
is subject to program fraud enforcement. A ``person'' means any 
individual, partnership, corporation, association, or other legal 
entity.
    (b) If more than one person makes a false claim or statement, each 
person is liable for a civil penalty. If more than one person makes a 
false claim which has induced the Corporation to make payment, an 
assessment is imposed against each person. The liability of each such 
person to pay the assessment is joint and several, that is, each is 
responsible for the entire amount.
    (c) No proof of specific intent to defraud is required to establish 
liability under this part.


Sec.  2554.3  What is a claim?

    (a) Claim means any request, demand, or submission:
    (1) Made to the Corporation for property, services, or money;
    (2) Made to a recipient of property, services, or money from the 
Corporation or to a party to a contract with the Corporation for 
property or services, or for the payment of money. This provision 
applies only when the claim is related to property, services or money 
from the Corporation or to a contract with the Corporation; or
    (3) Made to the Corporation which decreases an obligation to pay or 
account for property, services, or money.
    (b) A claim can relate to grants, loans, insurance, or other 
benefits, and includes the Corporation guaranteed loans made by 
participating lenders. A claim is made when it is received by the 
Corporation, an agent, fiscal intermediary, or other entity acting for 
the Corporation, or when it is received by the recipient of property, 
services, or money, or the party to a contract.
    (c) Each voucher, invoice, claim form, or individual request or 
demand for property, services, or money constitutes a separate claim.


Sec.  2554.4  What is a statement?

    A ``statement'' means any written representation, certification, 
affirmation, document, record, or accounting or bookkeeping entry made 
with respect to a claim or with respect to a contract, bid or proposal 
for a contract, grant, loan or other benefit from the Corporation. 
``From the Corporation'' means that the Corporation provides some 
portion of the money or property in connection with the contract, bid, 
grant, loan, or benefit, or is potentially liable to another party for 
some portion of the money or property under such contract, bid, grant, 
loan, or benefit. A statement is made, presented, or submitted to the 
Corporation when it is received by the Corporation or an agent, fiscal 
intermediary, or other entity acting for the Corporation.


Sec.  2554.5  What is a false claim or statement?

    (a) A claim submitted to the Corporation is a ``false'' claim if 
the person making the claim, or causing the claim to be made, knows or 
has reason to know that the claim:
    (1) Is false, fictitious or fraudulent;
    (2) Includes or is supported by a written statement which asserts 
or contains a material fact which is false, fictitious, or fraudulent;
    (3) Includes or is supported by a written statement which is false, 
fictitious or fraudulent because it omits a material fact that the 
person making the statement has a duty to include in the statement; or
    (4) Is for payment for the provision of property or services which 
the person has not provided as claimed.
    (b) A statement submitted to the Corporation is a false statement 
if the person making the statement, or causing the statement to be 
made, knows or has reason to know that the statement:
    (1) Asserts a material fact which is false, fictitious, or 
fraudulent; or
    (2) Is false, fictitious, or fraudulent because it omits a material 
fact that the person making the statement has a duty to include in the 
statement. In addition,

[[Page 61914]]

the statement must contain or be accompanied by an express 
certification or affirmation of the truthfulness and accuracy of the 
contents of the statement.


Sec.  2554.6  What does the phrase ``know or have reason to know'' 
mean?

    A person knows or has reason to know (that a claim or statement is 
false) if the person:
    (a) Has actual knowledge that the claim or statement is false, 
fictitious, or fraudulent; or
    (b) Acts in deliberate ignorance of the truth or falsity of the 
claim or statement; or
    (c) Acts in reckless disregard of the truth or falsity of the claim 
or statement.

Procedures Leading to Issuance of a Complaint


Sec.  2554.7  Who investigates program fraud?

    The Inspector General, or his designee, is the investigating 
official responsible for investigating allegations that a false claim 
or statement has been made. In this regard, the Inspector General has 
authority under the Program Fraud Civil Remedies Act and the Inspector 
General Act of 1978 (5 U.S.C. App. 3), as amended, to issue 
administrative subpoenas for the production of records and documents.


Sec.  2554.8  What happens if program fraud is suspected?

    (a) If the investigating official concludes that an action under 
this Part is warranted, the investigating official submits a report 
containing the findings and conclusions of the investigation to a 
reviewing official. The reviewing official is the General Counsel or 
his or her designee. If the reviewing official determines that the 
report provides adequate evidence that a person submitted a false claim 
or statement, the reviewing official transmits to the Attorney General 
written notice of an intention to refer the matter for adjudication, 
with a request for approval of such referral. This notice will include 
the reviewing official's statements concerning:
    (1) The reasons for the referral;
    (2) The claims or statements upon which liability would be based;
    (3) The evidence that supports liability;
    (4) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in the false claim or 
statement;
    (5) 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.
    (b) If at any time, the Attorney General or his or her designee 
requests in writing that this administrative process be stayed, the 
authority head, as identified in Sec.  2554.9 of this Part, must stay 
the process immediately. The authority head may order the process 
resumed only upon receipt of the written authorization of the Attorney 
General.


Sec.  2554.9  Who is the Corporation's authority head?

    The Corporation's ``authority head'' is the Chief Executive Officer 
or his or her designee. For purposes of this Part, the Corporation's 
Chief Financial Officer is designated to act on behalf of the Chief 
Executive Officer.


Sec.  2554.10  When will the Corporation issue a complaint?

    The Corporation will issue a complaint:
    (a) If the Attorney General (or designee) approves the referral of 
the allegations for adjudication; and
    (b) In a case of submission of false claims, if the amount of money 
or the value of property or services demanded or requested in a false 
claim, or a group of related claims submitted at the same time, does 
not exceed $150,000. ``A group of related claims submitted at the same 
time'' includes only those claims arising from the same transaction 
(such as a grant, loan, application, or contract) which are submitted 
together as part of a single request, demand, or submission.


Sec.  2554.11  What is contained in a complaint?

    (a) A complaint is a written statement giving notice to the person 
alleged to be liable under 31 U.S.C. 3802 of the specific allegations 
being referred for adjudication and of the person's right to request a 
hearing with respect to those allegations. The person alleged to have 
made false statements or to have submitted false claims to the 
Corporation is referred to as the ``defendant.''
    (b) The reviewing official may join in a single complaint, false 
claims or statements that are unrelated, or that were not submitted 
simultaneously, regardless of the amount of money or the value of 
property or services demanded or requested.
    (c) The complaint will state that the Corporation seeks to impose 
civil penalties, assessments, or both, against each defendant and will 
include:
    (1) The allegations of liability against each defendant, including 
the statutory basis for liability, identification of the claims or 
statements involved, and the reasons liability allegedly arises from 
such claims or statements;
    (2) The maximum amount of penalties and assessments for which each 
defendant may be held liable;
    (3) A statement that each defendant may request a hearing by filing 
an answer and may be represented by a representative;
    (4) Instructions for filing such an answer;
    (5) A warning that failure to file an answer within 30 days of 
service of the complaint will result in imposition of the maximum 
amount of penalties and assessments.
    (d) The reviewing official must serve any complaint on the 
defendant and, if a hearing is requested by the defendant, provide a 
copy to the Administrative Law Judge (ALJ) assigned to the case.


Sec.  2554.12  How will the complaint be served?

    (a) The complaint must be served on individual defendants directly, 
a partnership through a general partner, and on corporations or on 
unincorporated associations through an executive officer or a director, 
except that service also may be made on any person authorized by 
appointment or by law to receive process for the defendant.
    (b) The complaint may be served either by:
    (1) Registered or certified mail (return receipt requested) 
addressed to the defendant at his or her residence, usual dwelling 
place, principal office or place of business; or by
    (2) Personal delivery by anyone 18 years of age or older.
    (c) The date of service is the date of personal delivery or, in the 
case of service by registered or certified mail, the date of postmark.
    (d) Proof of service--
    (1) When service is made by registered or certified mail, the 
return postal receipt will serve as proof of service.
    (2) When service is made by personal delivery, an affidavit of the 
individual serving the complaint, or written acknowledgment of receipt 
by the defendant or a representative, will serve as proof of service.
    (e) When served with the complaint, the defendant also should be 
served with a copy of this Part 2554 and 31 U.S.C. 3801-3812.

[[Page 61915]]

Procedures Following Service of a Complaint


Sec.  2554.13  How does a defendant respond to the complaint?

    (a) A defendant may file an answer with the reviewing official 
within 30 days of service of the complaint. An answer will be 
considered a request for an oral hearing.
    (b) In the answer, a defendant--
    (1) Must admit or deny each of the allegations of liability 
contained in the complaint (a failure to deny an allegation is 
considered an admission);
    (2) Must state any defense on which the defendant intends to rely;
    (3) May state any reasons why he or she believes the penalties, 
assessments, or both 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 which meets the 
requirements set forth in paragraph (b) of this section, the defendant 
may file with the reviewing official a general answer denying 
liability, requesting a hearing, and requesting an extension of time in 
which to file a complete answer. A general answer must be filed within 
30 days of service of the complaint.
    (d) If the defendant initially files a general answer requesting an 
extension of time, the reviewing official must promptly file with the 
ALJ the complaint, the general answer, and the request for an extension 
of time.
    (e) 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. Such answer must be filed with the 
ALJ and a copy must be served on the reviewing official.


Sec.  2554.14  What happens if a defendant fails to file an answer?

    (a) If a defendant does not file any answer within 30 days after 
service of the complaint, the reviewing official will refer the 
complaint to the ALJ.
    (b) Once the complaint is referred, the ALJ will promptly serve on 
the defendant a notice that an initial decision will be issued.
    (c) The ALJ will assume the facts alleged in the complaint to be 
true and, if such facts establish liability under the statute, 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, when a defendant 
fails to file a timely answer, the defendant waives any right to 
further review of the penalties and assessments imposed in the initial 
decision.
    (e) The initial decision becomes final 30 days after it is issued.
    (f) If, at any time before an initial decision becomes final, a 
defendant files a motion with the ALJ asking that the case be reopened 
and describing the extraordinary circumstances that prevented the 
defendant from filing an answer, the initial decision will be stayed 
until the ALJ makes a decision on the motion. The reviewing official 
may respond to the motion.
    (g) If, in his motion to reopen, a defendant demonstrates 
extraordinary circumstances excusing his failure to file a timely 
answer, the ALJ will withdraw the initial decision, and grant the 
defendant an opportunity to answer the complaint.
    (h) A decision by the ALJ to deny a defendant's motion to reopen a 
case is not subject to review or reconsideration.
    (i) The defendant may appeal to the authority head the decision 
denying a motion to reopen by filing a notice of appeal with the 
authority head within 15 days after the ALJ denies the motion. The 
timely filing of a notice of appeal shall stay the initial decision 
until the authority head decides the issue.
    (j) If the defendant files a timely notice of appeal with the 
authority head, the ALJ shall forward the record of the proceeding to 
the authority head.
    (k) The authority head shall decide expeditiously whether 
extraordinary circumstances excuse the defendant's failure to file a 
timely answer based solely on the record before the ALJ.
    (l) If the authority head decides that extraordinary circumstances 
excused the defendant's failure to file a timely answer, the authority 
head shall remand the case to the ALJ with instructions to grant the 
defendant an opportunity to answer.
    (m) If the authority head decides that the defendant's failure to 
file a timely answer is not excused, the authority head shall reinstate 
the initial decision of the ALJ, which shall become final and binding 
upon the parties 30 days after the authority head issues such decision.


Sec.  2554.15  What happens once an answer is filed?

    (a) When the reviewing official receives an answer, he must file 
concurrently, the complaint and the answer with the ALJ, along with a 
designation of a Corporation representative.
    (b) When the ALJ receives the complaint and the answer, the ALJ 
will promptly serve a notice of oral hearing upon the defendant and the 
representative for the Corporation, in the same manner as the 
complaint, service of which is described in Sec.  2554.12. The notice 
of oral hearing must be served within six years of the date on which 
the claim or statement is made.
    (c) The notice must include:
    (1) The tentative time, place and 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 defendant's 
representative and the representative for the Corporation; and
    (6) Such other matters as the ALJ deems appropriate.
    (d) The six-year statute of limitation may be extended by agreement 
of the parties.

Hearing Provisions


Sec.  2554.16  What kind of hearing is contemplated?

    The hearing is a formal proceeding conducted by the ALJ during 
which a defendant will have the opportunity to cross-examine witnesses, 
present testimony, and dispute liability.


Sec.  2554.17  At the hearing, what rights do the parties have?

    (a) The parties to the hearing shall be the defendant and the 
Corporation. Pursuant to 31 U.S.C. 3730(c)(5), a private plaintiff in 
an action under the False Claims Act may participate in the hearing to 
the extent authorized by the provisions of that Act.
    (b) Each party has the right to:
    (1) Be represented by a representative;
    (2) Request a pre-hearing conference and participate in any 
conference held by the ALJ;
    (3) Conduct discovery;
    (4) Agree to stipulations of fact or law which will be made a part 
of the record;
    (5) Present evidence relevant to the issues at the hearing;
    (6) Present and cross-examine witnesses;
    (7) Present arguments at the hearing as permitted by the ALJ; and
    (8) Submit written briefs and proposed findings of fact and 
conclusions of law after the hearing, as permitted by the ALJ.


Sec.  2554.18  What is the role of the ALJ?

    An ALJ retained by the Corporation serves as the presiding officer 
at all hearings.

[[Page 61916]]

    (a) The ALJ shall 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;
    (12) Upon motion of a party, decide cases, in whole or in part, by 
summary judgment where there is no disputed issue of material fact;
    (13) Conduct any conference, argument, or hearing on motions in 
person or by telephone; and
    (14) Exercise such other authority as is necessary to carry out the 
responsibilities of the ALJ under this part.
    (c) The ALJ does not have the authority to find Federal statutes or 
regulations invalid.


Sec.  2554.19  Can the reviewing official or ALJ be disqualified?

    (a) A reviewing official or an ALJ may disqualify himself or 
herself at any time.
    (b) Upon motion of any party, the reviewing official or ALJ may be 
disqualified as follows:
    (1) The motion must be supported by an affidavit containing 
specific facts establishing that personal bias or other reason for 
disqualification exists, including the time and circumstances of the 
discovery of such facts;
    (2) The motion must be filed promptly after discovery of the 
grounds for disqualification, or the objection will be deemed waived; 
and
    (3) The party, or representative of record, must certify in writing 
that the motion is made in good faith.
    (c) Once a motion has been filed to disqualify the reviewing 
official, the ALJ will halt the proceedings until resolving the matter 
of disqualification. If the ALJ determines that the reviewing official 
is disqualified, the ALJ will dismiss the complaint without prejudice. 
If the ALJ disqualifies himself or herself, the case will be promptly 
reassigned to another ALJ.


Sec.  2554.20  How are issues brought to the attention of the ALJ?

    (a) All applications to the ALJ for an order or ruling shall be by 
motion. Motions shall state the relief sought, the authority relied 
upon, and the facts alleged, and shall be filed with the ALJ and served 
on all other parties.
    (b) Except for motions made during a prehearing conference or at 
the hearing, all motions shall 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 such other 
time as may be fixed by the ALJ, any party may file a response to such 
motion.
    (d) The ALJ may not grant 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 shall make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.


Sec.  2554.21  How are papers served?

    (a) Form. (1) Documents filed with the ALJ shall include an 
original and two copies.
    (2) Every pleading and paper filed in the proceeding shall 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 shall be signed by, and shall 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. 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 shall 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.  2554.12 shall 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 shall be made upon 
such representative in lieu of the actual party.
    (c) Proof of service. A certificate of the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, shall be proof of service.


Sec.  2554.22  How is time computed?

    (a) In computing any period of time under this part or in an order 
issued thereunder, the time begins with the day following the act, 
event, or default, and includes the last day of the period, unless it 
is a Saturday, Sunday, or legal holiday observed by the Federal 
government, in which event it includes the next business day.
    (b) When the period of time allowed is less than seven days, 
intermediate Saturdays, Sundays, and legal holidays observed by the 
Federal government shall be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional five days will be added to the time permitted for 
any response.


Sec.  2554.23  What happens during a prehearing conference?

    (a) The ALJ may schedule prehearing conferences as appropriate.
    (b) Upon the motion of any party, the ALJ shall 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 pleadings, 
including the need for a more definite statement;
    (3) Stipulations and admissions of fact or as to the contents and 
authenticity of documents;
    (4) Whether the parties can agree to submission of the case on a 
stipulated record;
    (5) Whether a party chooses to waive appearances at an oral hearing 
and to submit only documentary evidence (subject to the objection of 
other parties) and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits;
    (8) Discovery;
    (9) The time 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.

[[Page 61917]]

Sec.  2554.24  What rights are there to review 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.  2554.8 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.  2554.8 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.  2554.13.


Sec.  2554.25  What type of discovery is authorized and how is it 
conducted?

    (a) The following types of discovery are authorized:
    (1) Requests for production of documents for inspection and 
copying;
    (2) Requests for admissions 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 Sec. Sec.  2554.27 and 
2554.28, the term ``documents'' includes information, documents, 
reports, answers, records, accounts, papers, and other data and 
documentary evidence. Nothing contained herein shall 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 shall regulate the timing 
of discovery.
    (d) Motions for discovery. (1) A party seeking discovery may file a 
motion with the ALJ. Such a motion shall be accompanied by a copy of 
the requested discovery, or in the case of depositions, a summary of 
the scope of the proposed deposition.
    (2) Within ten days of service, a party may file an opposition to 
the motion and/or a motion for protective order as provided in Sec.  
2554.30.
    (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.  2554.30.
    (e) Depositions. (1) If a motion for deposition is granted, the ALJ 
shall issue a subpoena for the deponent, which may require the deponent 
to produce documents. The subpoena shall specify the time and place at 
which the deposition will be held.
    (2) The party seeking to depose shall serve the subpoena in the 
manner prescribed in Sec.  2554.12.
    (3) The deponent may file with the ALJ a motion to quash the 
subpoena or a motion for a protective order within ten days of service.
    (4) The party seeking to depose shall provide for the taking of a 
verbatim transcript of the deposition, which it shall make available to 
all other parties for inspection and copying.
    (f) Each party shall bear its own costs of discovery.


Sec.  2554.26  Are there limits on disclosure of documents or 
discovery?

    (a) Upon written request to the reviewing official, the defendant 
may review all non-privileged, relevant and material documents, records 
and other material related to the allegations contained in the 
complaint. After paying the Corporation a reasonable fee for 
duplication, the defendant may obtain a copy of the records described.
    (b) Upon written request to the reviewing official, the defendant 
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. If the document would otherwise be 
privileged, only the portion of the document containing exculpatory 
information must be disclosed. As used in this section, the term 
``information'' does not include legal materials such as statutes or 
case law obtained through legal research.
    (c) The notice sent to the Attorney General from the reviewing 
official is not discoverable under any circumstances.
    (d) Other discovery is available only as ordered by the ALJ and 
includes only those methods of discovery allowed by Sec.  2554.25.


Sec.  2554.27  Are witness lists exchanged before the hearing?

    (a) At least 15 days before the hearing or at such other time as 
ordered by the ALJ, the parties must exchange witness lists and copies 
of proposed hearing exhibits, including copies of any written 
statements or transcripts of deposition testimony that the party 
intends to offer in lieu of live testimony.
    (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 an opposing party unless the ALJ finds 
good cause for the omission or concludes that there is no prejudice to 
the objecting party.
    (c) Unless a party objects within the time set by the ALJ, 
documents exchanged in accordance with this section are deemed to be 
authentic for the purpose of admissibility at the hearing.


Sec.  2554.28  Can witnesses be subpoenaed?

    (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 shall file a written request 
therefore not less than 15 days before the date fixed for the hearing 
unless otherwise allowed by the ALJ for good cause shown. Such request 
shall specify any documents to be produced and shall designate the 
witnesses and describe the address and location thereof with sufficient 
particularity to permit such witnesses to be found.
    (d) The subpoena shall specify the time and place at which the 
witness is to appear and any documents the witness is to produce.
    (e) The party seeking the subpoena shall serve it in the manner 
prescribed in Sec.  2554.12. 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 ten days after 
service or on or before the time specified in the subpoena for 
compliance if it is less than ten days after service.

[[Page 61918]]

Sec.  2554.29  Who pays the costs for a subpoena?

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


Sec.  2554.30  Are protective orders available?

    (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 not be had;
    (2) That the discovery may be had only on specified terms and 
conditions, including a designation of the time or place;
    (3) That the discovery may be had 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;
    (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.  2554.31  Where is the hearing held?

    The ALJ will hold the hearing in any judicial district of the 
United States:
    (a) In which the defendant resides or transacts business; or
    (b) In which the claim or statement on which liability is based was 
made, presented or submitted to the Corporation; or
    (c) As agreed upon by the defendant and the ALJ.


Sec.  2554.32  How will the hearing be conducted and who has the burden 
of proof?

    (a) The ALJ conducts a hearing in order to determine whether a 
defendant is liable for a civil penalty, assessment, or both and, if 
so, the appropriate amount of the civil penalty and/or assessment. The 
hearing will be recorded and transcribed, and the transcript of 
testimony, exhibits admitted at the hearing, and all papers and 
requests filed in the proceeding constitute the record for a decision 
by the ALJ.
    (b) The Corporation must prove a defendant's liability and any 
aggravating factors by a preponderance of the evidence.
    (c) A 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.  2554.33  How is evidence presented at the hearing?

    (a) The ALJ shall determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ shall not be bound by 
the Federal Rules of Evidence. However, the ALJ may apply the Federal 
Rules of Evidence where appropriate, e.g., to exclude unreliable 
evidence.
    (c) The ALJ shall 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 shall be 
inadmissible to the extent provided in Rule 408 of the Federal Rules of 
Evidence.
    (g) The ALJ shall permit the parties to introduce rebuttal 
witnesses and evidence.


Sec.  2554.34  How is witness testimony presented?

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing shall 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. Any such written statement 
must be provided to all other parties along with the last known address 
of such witness, in a manner which allows sufficient time for other 
parties to subpoena such witness for cross-examination at the hearing. 
Prior written statements of witnesses proposed to testify at the 
hearing and deposition transcripts shall be exchanged as provided in 
Sec.  2554.27(a).
    (c) The ALJ shall 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 shall 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 
shall 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 shall 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 Government engaged in assisting the representative for 
the Government.


Sec.  2554.35  Will the hearing proceedings be recorded?

    The hearing will be recorded and transcribed. Transcripts may be 
obtained following the hearing from the ALJ at a cost not to exceed the 
actual cost of duplication. 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 authority head. The

[[Page 61919]]

record may be inspected and copied (upon payment of a reasonable fee) 
by anyone, unless otherwise ordered by the ALJ pursuant to Sec.  
2554.30.


Sec.  2554.36  Can a party informally discuss the case with the ALJ?

    No. Such discussions are forbidden as ``ex parte communications'' 
with the ALJ. No party or person (except employees of the ALJ's office) 
shall 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 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.  2554.37  Are there sanctions for misconduct?

    (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, shall 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 pleadings 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 
part 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 other document which is not filed in a timely fashion.


Sec.  2554.38  Are post-hearing briefs required?

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ shall 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.

Decisions and Appeals


Sec.  2554.39  How is the case decided?

    (a) The ALJ will issue an initial decision based only on the 
record. It will contain findings of fact, conclusions of law, and the 
amount of any penalties and assessments imposed.
    (b) The ALJ will serve the initial decision on all parties within 
90 days after close of the hearing or expiration of any allowed time 
for submission of post-hearing briefs. If the ALJ fails to meet this 
deadline, he or she shall promptly notify the parties of the reason for 
the delay and set a new deadline.
    (c) The findings of fact must include a finding on each of the 
following issues:
    (1) Whether any one or more of the claims or statements identified 
in the complaint violate this part; and
    (2) If the defendant is liable for penalties or assessments, the 
appropriate amount of any such penalties or assessments, considering 
any mitigating or aggravating factors.
    (d) The initial decision will include a description of the right of 
a defendant found liable for a civil penalty or assessment to file a 
motion for reconsideration with the ALJ or a notice of appeal with the 
authority head.


Sec.  2554.40  How are penalty and assessment amounts determined?

    (a) In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the authority head, 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 that ALJ and the authority head in determining the 
amount of penalties and assessments to impose with respect to the 
misconduct (i.e., the false, fictitious, or fraudulent claims or 
statements) 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 
similar transactions;
    (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 shall be construed to limit the ALJ or 
the authority head from considering any other factors that in any given 
case may mitigate or aggravate the offense for

[[Page 61920]]

which penalties and assessments are imposed.


Sec.  2554.41  Can a party request reconsideration of the initial 
decision?

    (a) Any party may file a motion for reconsideration of the initial 
decision with the ALJ within 20 days of receipt of the initial 
decision. If the initial decision was served by mail, there is a 
rebuttable presumption that the initial decision was received by the 
party 5 days from the date of mailing.
    (b) A motion for reconsideration must be accompanied by a 
supporting brief and must describe specifically each allegedly 
erroneous decision.
    (c) Any response to a motion for reconsideration will only be 
allowed if it is requested by the ALJ.
    (d) The ALJ will dispose of a motion for reconsideration by denying 
it or by issuing a revised initial decision.
    (e) If the ALJ issues a revised initial decision upon motion of a 
party, that party may not file another motion for reconsideration.


Sec.  2554.42  When does the initial decision of the ALJ become final?

    (a) The initial decision of the ALJ becomes the final decision of 
the Corporation, and shall be binding on all parties 30 days after it 
is issued, unless any party timely files a motion for reconsideration 
or any defendant adjudged to have submitted a false claim or statement 
timely appeals to the Corporation's authority head, as set forth in 
Sec.  2554.43.
    (b) If the ALJ disposes of a motion for reconsideration by denying 
it or by issuing a revised initial decision, the ALJ's order on the 
motion for reconsideration becomes the final decision of the 
Corporation 30 days after the order is issued, unless a defendant 
adjudged to have submitted a false claim or statement timely appeals to 
the authority head, within 30 days of the ALJ's order, as set forth in 
Sec.  2554.43.


Sec.  2554.43  What are the procedures for appealing the ALJ decision?

    (a) Any defendant who submits a timely answer and is found liable 
for a civil penalty or assessment in an initial decision may appeal the 
decision.
    (b) The defendant may file a notice of appeal with the authority 
head within 30 days following issuance of the initial decision, serving 
a copy of the notice of appeal on all parties and the ALJ. The 
authority head may extend this deadline for up to an additional 30 days 
if an extension request is filed within the initial 30-day period and 
shows good cause.
    (c) The defendant's appeal will not be considered until all timely 
motions for reconsideration have been resolved.
    (d) If a timely motion for reconsideration is denied, a notice of 
appeal may be filed within 30 days following such denial or issuance of 
a revised initial decision, whichever applies.
    (e) A notice of appeal must be supported by a written brief 
specifying why the initial decision should be reversed or modified.
    (f) The Corporation's representative may file a brief in opposition 
to the notice of appeal within 30 days of receiving the defendant's 
notice of appeal and supporting brief.
    (g) If a defendant timely files a notice of appeal, and the time 
for filing motions for reconsideration has expired, the ALJ will 
forward the record of the proceeding to the authority head.


Sec.  2554.44  What happens if an initial decision is appealed?

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


Sec.  2554.45  Are there any limitations on the right to appeal to the 
authority head?

    (a) A defendant has no right to appear personally, or through a 
representative, before the authority head.
    (b) There is no right to appeal any interlocutory ruling.
    (c) The authority head will not consider any objection or evidence 
that was not raised before the ALJ unless the defendant demonstrates 
that the failure to object was caused by extraordinary circumstances. 
If the appealing defendant demonstrates to the satisfaction of the 
authority head that extraordinary circumstances prevented the 
presentation of evidence at the hearing, and that the additional 
evidence is material, the authority head may remand the matter to the 
ALJ for consideration of the additional evidence.


Sec.  2554.46  How does the authority head dispose of an appeal?

    (a) The authority head may affirm, reduce, reverse, compromise, 
remand, or settle any penalty or assessment imposed by the ALJ in the 
initial decision or reconsideration decision.
    (b) The authority head will promptly serve each party to the appeal 
and the ALJ with a copy of his or her decision. This decision must 
contain a statement describing the right of any person, against whom a 
penalty or assessment has been made, to seek judicial review.


Sec.  2554.47  What judicial review is available?

    31 U.S.C. 3805 authorizes judicial review by the appropriate United 
States District Court of any final Corporation decision imposing 
penalties or assessments, and specifies the procedures for such review. 
To obtain judicial review, a defendant must file a petition with the 
appropriate court in a timely manner.


Sec.  2554.48  Can the administrative complaint be settled voluntarily?

    (a) Parties may make offers of compromise or settlement at any 
time. Any compromise or settlement must be in writing.
    (b) The reviewing official has the exclusive authority to 
compromise or settle the case from the date on which the reviewing 
official is permitted to issue a complaint until the ALJ issues an 
initial decision.
    (c) The authority head has exclusive authority to compromise or 
settle the case from the date of the ALJ's initial decision until 
initiation of any judicial review or any action to collect the 
penalties and assessments.
    (d) The Attorney General has exclusive authority to compromise or 
settle the case while any judicial review or any action to recover 
penalties and assessments is pending.
    (e) The investigating official may recommend settlement terms to 
the reviewing official, the authority head, or the Attorney General, as 
appropriate. The reviewing official may recommend settlement terms to 
the authority head or the Attorney General, as appropriate.


Sec.  2554.49  How are civil penalties and assessments collected?

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


Sec.  2554.50  What happens to collections?

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


Sec.  2554.51  What if the investigation indicates criminal misconduct?

    (a) Any investigating official may:
    (1) Refer allegations of criminal misconduct directly to the 
Department of Justice for prosecution or for suit under the False 
Claims Act or other civil proceeding;

[[Page 61921]]

    (2) Defer or postpone a report or referral to the reviewing 
official to avoid interference with a criminal investigation or 
prosecution; or
    (3) Issue subpoenas under other statutory authority.
    (b) Nothing in this part limits the requirement that the 
Corporation employees report suspected violations of criminal law to 
the Corporation's Office of Inspector General or to the Attorney 
General.


Sec.  2554.52  How does the Corporation protect the rights of 
defendants?

    These procedures separate the functions of the investigating 
official, reviewing official, and the ALJ, each of whom report to a 
separate organizational authority in accordance with 31 U.S.C. 3801. 
Except for purposes of settlement, or as a witness or a representative 
in public proceedings, no investigating official, reviewing official, 
or Corporation employee or agent who helps investigate, prepare, or 
present a case may (in such case, or a factually related case) 
participate in the initial decision or the review of the initial 
decision by the authority head. This separation of functions and 
organization is designed to assure the independence and impartiality of 
each government official during every stage of the proceeding. The 
representative for the Corporation may be employed in the offices of 
either the investigating official or the reviewing official.

    Dated: October 13, 2006.
Frank R. Trinity,
General Counsel.
[FR Doc. E6-17545 Filed 10-19-06; 8:45 am]
BILLING CODE 6050-28-P