[Federal Register Volume 63, Number 87 (Wednesday, May 6, 1998)]
[Proposed Rules]
[Pages 24985-24995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12038]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 63, No. 87 / Wednesday, May 6, 1998 /
Proposed Rules
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Parts 271, 278 and 279
RIN 0584-AC46
Food Stamp Program: Retailer Integrity, Fraud Reduction and
Penalties
AGENCY: Food and Nutrition Service, USDA.
ACTION: Proposed Rule
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SUMMARY: The purpose of this proposed rule is to implement the Food
Stamp Program retailer provisions included in the Personal
Responsibility and Work Opportunity Reconciliation Act (PRWORA) of
1996, as well as the retailer provision included in the Federal
Agriculture Improvement and Reform Act. While a number of amendments to
the current regulations are proposed in order to meet the objectives of
streamlining the regulations in response to the Departmental review of
the regulations, the majority of the proposed changes included in this
proposal are derived from the retailer provisions of the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996. Most of
the provisions in this proposed rule are nondiscretionary and required
by law. The intent of this rule is to strengthen integrity and
eliminate fraud in the Food Stamp Program by ensuring that only
legitimate stores participate in the program, by improving the
Department's ability to monitor authorized firms, and by strengthening
penalties against firms that violate program rules.
DATES: Comments must be received by July 6, 1998 to be assured of
consideration. Comments on the discretionary provisions identified in
this rule are encouraged. Comments will not affect implementation of
those provisions identified as nondiscretionary that are mandated by
law and over which the Secretary has no discretion.
ADDRESSES: Comments should be addressed to Suzanne Fecteau, Chief,
Redemption Management Branch, Food and Nutrition Service, 3101 Park
Center Drive, Alexandria, Virginia 22302-1594. All written comments
will be open for public inspection at the office of the Food and
Consumer Service during regular business hours (8:30 a.m. to 5 p.m.,
Monday through Friday) in Room 706, 3101 Park Center Drive, Alexandria,
Virginia.
FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking
should be addressed to Suzanne Fecteau, Chief, Redemption Management
Branch, Benefit Redemption Division, Food Stamp Program, 3101 Park
Center Drive, Alexandria, Virginia 22302, or by telephone at (703) 305-
2418.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed rule has been determined to be not significant under
Executive Order 12866 and therefore has not been reviewed by the Office
of Management and Budget.
Executive Order 12372
The Food Stamp Program is listed in the Catalog of Federal Domestic
Assistance under No. 10.551. For the reasons set forth in the final
rule and related notice(s) to 7 CFR Part 3015, Subpart V (48 FR 29115,
June 24, 1983), this program is excluded from the scope of Executive
Order 12372, which requires intergovernmental consultation with State
and local officials.
Regulatory Flexibility Act
This proposed rule has been reviewed with regard to the
requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C.
Sec. 601-612). Yvette S. Jackson, the Administrator of the Food and
Nutrition Service, has certified that this rule does not have a
significant economic impact on a substantial number of small entities.
This rule may have an effect on a limited number of retail food stores
and other entities that are shown to be negligent in effectuating the
purposes of the FSP by committing violations or fraud in the program.
However, we do not believe this will have a significant effect on most
small businesses.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995, this notice
announces our intent to submit revised application procedures and
associated burden estimates to OMB for approval relative to the
application(s) completed by retail food stores and meal service
providers to request authorization and/or continued authorization to
participate in the Food Stamp Program (FSP). We also intend to request
OMB approval of the revised estimates for 3 years.
Comments on this notice must be submitted by July 6, 1998.
Comments are invited on: (a) Whether the proposed collection of
information is necessary for the performance of the functions of the
agency, including whether the information will have practical utility;
(b) the accuracy of the agency's estimate of the burden of the proposed
collection of information including the validity of the methodology and
assumptions used; (c) ways to enhance the quality, utility and clarity
of the information to be collected; and (d) ways to minimize the burden
of the collection of information on those who are to respond, including
through the use of appropriate automated, electronic, mechanical, or
other technological collection techniques or other forms of information
technology.
Comments may be sent to Laura Oliven, Desk Officer, Office of
Information and Regulatory Affairs, Office of Management and Budget
(OMB), Washington, D.C. 20502 ( a copy may also be sent to Suzanne M.
Fecteau, Chief, Redemption Management Branch, Benefit Redemption
Division, Food and Nutrition Service, U.S. Department of Agriculture,
3101 Park Center Drive, Alexandria, Va. 22302. For further information,
or for copies of the information collection, please contact Ms. Fecteau
at the above address.)
All responses to this notice will be summarized and included in the
request for OMB approval, and will become a matter of public record.
For Further Information Contact: Suzanne M. Fecteau, (703) 305-
2418.
Title: Food Stamp Program Store Applications.
OMB Number: 0584-0008.
Type of Request: Revision of a currently approved collection.
Abstract: The Food and Nutrition Service (FNS) of the U.S.
Department of Agriculture is the Federal agency responsible for the
FSP. The Food
[[Page 24986]]
Stamp Act of 1977, as amended (the Act) (7 U.S.C. 2011-2036), requires
that the Agency determine the eligibility of firms and certain food
service organizations to accept and redeem food stamp benefits and to
monitor them for compliance and continued eligibility.
Part of FNS' responsibility is to accept applications from retail
food establishments and meal service programs that wish to participate
in the FSP, review the applications in order to determine whether or
not applicants meet eligibility requirements, and make determinations
whether to grant or deny authorization to accept and redeem food stamp
benefits. FNS is also responsible for requiring updates to application
information and reviewing that information to determine whether or not
the firms or services continue to meet eligibility requirements.
There are currently 3 application forms approved under OMB No.
0584-0008. Together these forms are used by retailers, wholesalers,
meal service providers, certain types of group homes, shelters, and
state-contracted restaurants, to apply to FNS for authorization to
participate in the FSP. Form FNS-252, Food Stamp Application For
Stores, is generally used by stores, excluding facilities which provide
meal services such as communal dining, shelters, restaurant and other
meal service programs, which are newly applying for authorization; Form
FNS-252R, Food Stamp Program Application For Stores-Reauthorization, is
used by the majority of currently authorized stores to apply for
reauthorization, excluding facilities which provide meal services such
as communal dining, shelters, restaurants and other meal service
programs; and Form FNS-252-2, Application to Participate in the Food
Stamp Program for Communal Dining Facility/Others, generally used by
communal dining and restaurant facilities and other food service
programs which are newly applying or applying for reauthorization. In a
few cases, at the discretion of the FNS field offices, some stores
would be required to complete Form FNS-252 to apply for
reauthorization. Section 9(c) of the Act provides the necessary
authorization(s) to collect the information contained in these forms.
The proposed revisions to the authorization process contained in
Sec. 278.1(a) of this proposed rule do not impose new information
collection, reporting or recordkeeping requirements. There are 3
application forms used by firm's who wish to participate in the
program. These forms and associated burden hours have been approved by
OMB under OMB No. 0584-0008 through October 31, 1999. We are proposing
to adjust the current burden estimates based on more recent data and a
technical correction to capture a change in application requirements
for private restaurants that was inadvertently omitted from the hourly
burden estimates when last submitted to OMB and an error in estimating
the average hourly burden time for Form FNS-252-2. Comments are
solicited on the adjusted burden estimates as discussed in the
following paragraphs and reflected in the summary chart at the end of
this section of the preamble.
We do not collect information on the number of FSP applications
received annually. Current burden estimates associated with these 3
application forms are determined from information maintained in STARS
(Store Tracking and Redemption System) based on the total number of
currently authorized stores or the number of newly authorized stores.
The number of expected applications is divided between initial
applications from new applicants and applications for reauthorization
from currently authorized stores.
Adjustments--Re-estimates Based on More Recent Data and Corrections
For burden estimates associated with new applicants (initial
authorizations), we used the number of stores (all types) newly
authorized/approved currently estimated at 20,696; (rounded to 20,700)
based on FY 1997 year-end data from STARS and inflated this number by
10% (2,070) to capture a total of 22,770 applications expected to be
received and processed from stores annually. It is estimated that 98%
(22,315) of the 22,770 applications expected to be received would be on
Form FNS-252 and 2% (455) would be on Form FNS-252-2. Due to a
technical correction discussed later in this section of the preamble,
the number of expected applications would be further changed to reflect
an expected total of 22,347 applications using Form FNS-252 and 423
applications using Form FNS-252-2.
For burden estimates associated with applications for
reauthorization, we used the total number of stores (all types)
authorized (184,300) as of December 1997. Generally, authorized stores
are subject to reauthorization at least once every 4 years. Thus, it is
estimated that 25% (46,000) of all authorized stores would be subject
to reauthorization in any given year. Using, the number of authorized
stores as of December 1997, it is estimated that 46,000 reauthorization
applications would be expected to be received annually. Of the 46,000
reauthorization applications expected, it is estimated that 96%
(44,160) will be on Form FNS-252R, 3% (1,380) will be on Form FNS-252-
2, and 1% (460) will be on Form FNS-252.
Hourly burden time per response varies by type of application and
includes the time to review instructions, search existing data
resources, gather and copy the data needed, complete and review the
application, and submit the form and documentation to FNS. It should be
noted that the number of applicant and authorized stores has been
declining over the past few years due to several program changes, such
as changes in eligibility requirements, stronger sanctions against
violators, and implementation of Electronic Benefit Transfer systems.
These declines have resulted in a reduction in the overall number of
respondents and ultimately a reduction in the overall proposed burden
hours reflected in the following summary chart.
Currently, private restaurants applying for FSP participation in
the State-administered special restaurant program use Form FNS-252-2 to
apply for participation. This category of applicant represents about 7%
of the number of current applicants using Form FNS-252-2. Over time, it
has been determined that we need additional information from such
private restaurants to ensure that they meet necessary requirements of
operation to carry out the intent of the FSP. The additional
information needed would be captured by having these respondents,
estimated at about 32, complete Form FNS-252 rather than Form FNS-252-
2. We estimate that these restaurants will spend an estimated 10
minutes of additional burden time using the longer Form FNS-252,
however, this contributes to a negligible amount to the increase in the
average hourly burden rate reflected in the summary chart because the
number of respondents is so small. This change is a technical
correction rather than a re-estimate based on more recent data, and is
reflected in the number of initial applications expected to be received
as shown in the summary chart.
As currently approved by OMB, the hourly burden rate per response
for Form FNS-252 is 20 to 68 minutes, with the average being 27 minutes
and 10 to 20 minutes for Form FNS 252-2, with the average being 10
minutes. These hourly burden rates are not affected by the re-estimated
number of applications expected to be received or the technical
correction. However, previous estimates
[[Page 24987]]
to OMB erroneously reflected the average burden time for Form FNS-252-2
as 10 minutes. The average time is 12 minutes and this correction
appears in the proposed estimates in the summary chart.
Total number of respondents completing at least one of the 3
applications in question, taking into consideration the adjustments
discussed above, would be as follows:
FNS-252:
New authorizations.................. 22,347 (22,770 x .98 + 32)
Reauthorizations.................... 460 (184,000 x .25 x .01)
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22,807
FNS-252-2:
New authorizations.................. 434 (22,770 x .02 - 32)
Reauthorizations.................... 1,380 (184,000 x .25 x .03)
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1,803
FNS-252R:
Reauthorizations.................... 44,160 (184,000 x .25 x .01 - 1,380 - 460)
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Total Responses................... 68,770
The existing estimates, as approved by OMB through May 1999 and
shown on the following chart, reflect the total annual number of
responses as 80,613 and the annual burden hours as 18,396. The proposed
number of responses would be 68,700 with total burden hours of 15,777
hours. The net effect of the proposed burden estimates is an overall
decrease in burden hours of 2,619 hours annually.
Affected Public: Food Retail and Wholesale Firms, Meal Service
Programs, certain types of Group Homes, Shelters, and State-contracted
Restaurants.
Estimated Number of Respondents: 68,770.
Estimated Number of Responses per respondent: 1.
Estimated Time per Response: 0.229416.
Estimated Total Annual Burden: 15,777.
Summary of Proposed Burden Estimates for Forms FNS-252, 252-2 and 252R
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Number of Responses per Total annual Burden hours Total annual
Title respondents respondent responses per response burden hours
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Form FNS-252:
Existing.................... 26,431 1 26,431 .4500 11,894
Proposed.................... 22,807 1 22,807 .4500 10,263
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Difference................ -3,624 1 -3,624 .............. -1,631
Form FNS-252-2:
Existing.................... 2,592 1 2,592 .1855 481
Proposed.................... 1,803 1 1,803 .2000 361
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Difference................ -789 .............. -789 +.0145 -120
Form FNS-252R:
Existing.................... 51,590 1 51,590 .1167 6,021
Proposed.................... 44,160 1 44,160 .1167 5,153
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Difference................ -7,430 .............. -7,430 .............. -868
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Totals:
Existing.................... 80,613 .............. 80,613 .............. 18,396
Proposed.................... 68,770 .............. 68,770 .............. 15,777
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Difference................ -11,843 .............. -11,843 .............. -2,619
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Executive Order 12988
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is intended to have preemptive effect
with respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect
except as specified in the ``Effective Date'' paragraph of this
preamble. Prior to any judicial challenge to the provisions of this
rule or the application of its provisions, all applicable
administrative procedures must be exhausted. In the Food Stamp Program,
the administrative procedures are as follows: (1) for Program benefit
recipients--State administrative procedures issued pursuant to 7 U.S.C.
2020 (e)(10) and 7 CFR 273.15; (2) for State agencies--administrative
procedures issued pursuant to 7 U.S.C. Sec. 2023 set out at 7 CFR 276.7
( for rules related to non-quality control (QC) liabilities) or 7 CFR
283 (for rules related to QC liabilities); (3) for program retailers
and wholesalers-administrative procedures issued pursuant to 7 U.S.C.
2023 set out at 7 CFR 278.8.
Unfunded Mandate Reform Act of 1995
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub.L.
104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local and tribal
governments, and the private sector. Under section 202 of the UMRA, FNS
generally must prepare a written statement, including a cost-benefit
[[Page 24988]]
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local or tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
one year. When such a statement is needed for a rule, section 205 of
the UMRA generally requires FNS to identify and consider a reasonable
number of regulatory alternatives and adopt the least costly, more
cost-effective or least burdensome alternative that achieves the
objectives of the rule. This proposed rule contains no Federal mandates
under the regulatory provision of Title II of the UMRA for State, local
and tribal governments or the private sector of $100 million or more in
any one year. Thus, this rule is not subject to the requirements of
sections 202 and 205 of the UMRA.
Background
Pub. L. 104-193, the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) was enacted on August 22,1996, and
contains a number of provisions directly affecting the participation of
retailers, wholesalers and other entities eligible to be authorized to
participate in the Food Stamp Program (FSP). All of the provisions of
the law addressed in this rulemaking were effective on the date of
enactment. Five of the provisions are nondiscretionary and were
immediately implemented in the program through an implementing
memorandum issued on September 16, 1996. While these five provisions
are incorporated into this proposed rule, they are identified as
nondiscretionary in this preamble. Such nondiscretionary provisions are
statutory requirements that the Secretary has no authority to change;
therefore, such provisions or their implementation cannot be modified
by public comment. The PRWORA provides discretion in the implementation
of the remaining provisions of the law, and these provisions are being
proposed for public comment in this proposed rulemaking. The Department
encourages all interested parties to comment on the discretionary
provisions as set forth in this proposed rule.
The PRWORA and this proposed rulemaking include the following
discretionary and nondiscretionary provisions:
Revision in the definition of ``coupon''
(nondiscretionary);
Establishment of a minimum six month waiting period before
stores that initially fail to meet authorization criteria can reapply
to participate in the program (nondiscretionary), and the establishment
of longer periods of time, including permanent prohibition from
participation, which reflects the severity of the basis for the denial
of the firm's application or a firm's reauthorization in the program
(discretionary);
Requirement that USDA, or its designees, conduct
preauthorization visits to applicant firms as specified by the
Secretary (discretionary);
Authority for USDA to disqualify firms based on
inconsistent redemption data and suspicious account activity as
documented through EBT system data (nondiscretionary);
Authority to suspend the program participation of
violating firms subject to a permanent disqualification pending the
outcome of administrative or judicial review (nondiscretionary);
Authority for USDA to establish authorization periods for
the participation of retailers in the program (discretionary);
Authority to disqualify retailers who intentionally submit
falsified applications, including permanent disqualification of such
retailers (discretionary); and
Authority to disqualify retailers that have been
disqualified by State agencies responsible for the administration of
USDA's Special Supplemental Nutrition Program for Women, Infants and
Children (WIC) (discretionary), extension of the periods for
disqualification of such FSP retailers and elimination of the FSP
administrative and judicial review rights of such retailers
(nondiscretionary).
This proposed rulemaking also includes a provision of the Federal
Agriculture Improvement and Reform Act (FAIR), Pub.L. 104-127, which
provides a limitation on the mandatory permanent disqualification
actions that may be taken by USDA for retailers found to be
trafficking. Conforming and minor editorial revisions in response to
the National Performance Review Regulatory Planning and Reform
Initiative are also included in this rule.
FAIR Provision--Eligibility for Trafficking Civil Money Penalties
Section 401 of the FAIR limits mandatory permanent
disqualifications for food coupon trafficking (with no possibility of
avoiding disqualification by paying a trafficking civil money penalty)
to instances in which (1) owners are aware of violations or participate
in the conduct of such food coupon trafficking violations or (2) it is
the second investigation in which a trafficking violation was committed
by firm management.
This provision amends the current automatic ineligibility of a firm
for a civil money penalty (CMP) in lieu of permanent disqualification
if the ownership or management of the firm was aware of, approved,
benefited from or was involved in the conduct of the food coupon
trafficking violations (Sec. 278.6(i)). The FAIR amendment expands the
number of firms that may be eligible for such a CMP in lieu of
permanent disqualification. The law provides that if such a violation
represents first-time management food coupon trafficking, the firm may
be considered eligible for the imposition of a CMP, if the firm
documents that it meets all of the eligibility requirements for the CMP
as specified in Sec. 278.6 (i).
This rulemaking proposes that the provision be applicable to firm
management in general, regardless of whether or not the same individual
manager committed trafficking violations previously. For example, if an
individual manager previously was dismissed from the position for
committing trafficking violations, but a different manager of the same
firm subsequently commits food coupon trafficking violations, the firm
would not be eligible for a second CMP in lieu of permanent
disqualification. However, the expansion of eligibility for a CMP in
lieu of permanent disqualification as stipulated in the FAIR does not
apply to firms where it is shown that ownership or management was
involved in trafficking in ammunition, firearms, explosives or
controlled substances.
This provision was effective on April 4,1996, the date of enactment
of the statute. It was implemented upon the date on which Food and
Nutrition Service (FNS) offices received the implementing memorandum,
and is applicable to all firms issued a final determination letter
subsequent to receipt of the implementing memorandum by FNS offices.
The implementing memorandum was issued on September 16, 1996. The
amendment to Sec. 278.6(i) of this proposed regulation reflects this
change. Comments are invited, however, on the proposed restriction
which prohibits a CMP in lieu of permanent disqualification the second
time management personnel of a firm commit trafficking violations,
regardless of whether it was the same person in the management position
that committed the previous violation(s).
Provisions of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA)
The provisions of the PRWORA related to retailer participation in
the FSP represent a three-tiered approach to
[[Page 24989]]
enhancing retailer compliance and integrity in order to further the
purposes of the FSP and to reduce fraud in this critically important
domestic food program. The provisions greatly reinforce USDA's efforts
to effectively administer the FSP by improving the ability of the
Department to screen applicant retailers prior to authorization, to
control retailer performance subsequent to FSP authorization and to
impose stiffer penalties against those firms found to be violating the
public trust by committing FSP violations and defrauding the program.
Pre-Authorization Screening
The participation of retailers in the FSP is a privilege, not a
right. The PRWORA and the provisions of this proposed rulemaking will
serve to increase the Department's ability to cut off fraud and abuse
at the source by allowing more in-depth pre-authorization screening of
applicant firms and verification of the qualifications and continued
eligibility of currently authorized firms to participate in the FSP.
Condition Precedent for Approval of Retail Food Stores and Wholesale
Food Concerns
Section 831 of the PRWORA provides authority for USDA, its designee
or State or local government officials designated by the Department, to
conduct preauthorization visits to selected firms, and provides
discretion to the Secretary to designate such firms on the basis of
size, location and types of items sold. Amendments to Sec. 278.1(a) of
the regulation reflect the Secretary's authority to conduct such
preauthorization visits as contained in the statute. It is anticipated
that firm types subject to preauthorization visits will be determined
by the FNS on an annual basis, as priorities and resources permit.
Waiting Period for Firms That Fail To Meet Authorization Criteria
Section 834 of the PRWORA amends section 9(d) of the Food Stamp Act
to require that a firm that does not qualify for authorization because
the firm fails to meet the eligibility criteria for approval be
prohibited from submitting a new application to participate in the FSP
for a minimum period of 6 months. The statute also allows the Secretary
to establish longer time periods, including a permanent prohibition
from participation, that is reflective of the severity of the basis for
the denial of the application.
Section 278.1(k) of the regulation is proposed to be revised to
include the minimum 6-month prohibition from reapplication, which
applies to those firms that are shown to not meet Criterion A or
Criterion B of the eligibility requirements of the Food Stamp Act, (7
U.S.C. 2012(k)) and, for co-located wholesale/retail firms, the
requirements of Sec. 278.1(b)(1)(iv). Criteria A and B were
incorporated into the definition of ``retail food store'' in the Food
Stamp Act, as amended by the Pub. L. 103-225, the Food Stamp Program
Improvements Act of 1994. While this change in the definition was
effective immediately upon enactment of the law and has been
implemented, a proposed rule incorporating this statutory change
specifically in the regulations is currently in Departmental clearance.
Currently, there is no waiting period for stores that wish to
reapply to participate in the FSP after their application is denied
because the stores fail to meet basic eligibility criteria for
authorization. Such stores can adjust the types of staple food items
that they offer for sale in order to meet minimal standards and reapply
immediately, and then decrease their inventory after obtaining
authorization. Such firms tend to be stores that do not effectuate the
purpose of the FSP. The implementation of the 6-month waiting period
will reduce the number of firms that temporarily stock minimum
requirements of food items solely for the purpose of becoming
authorized in the program and then engage in food stamp trafficking as
their primary business. This provision applies to initial applicants as
well as to those firms being reviewed for the purpose of
reauthorization, or any other purpose, that are found not to meet
program eligibility requirements. At the time of initial application
and reauthorization, firms will be provided notice of this provision.
This 6-month prohibition is nondiscretionary.
This rulemaking also proposes to implement the Secretary's
authority to establish longer periods of time during which a firm would
be restricted from reapplying for program authorization. Section 834 of
the PRWORA provides that the Secretary may establish such time
restrictions, up to a permanent denial, of a firm's ability to reapply
for program authorization depending upon the severity of the reason for
the denial of such a firm's initial application or subsequent
application for authorization or reauthorization. Section 278.1(b)(3)
sets out the criteria discussed below that are proposed to be used by
FNS to make determinations regarding reapplication restrictions against
firms that are denied authorization or reauthorization, or are
otherwise withdrawn from the program. Section 278.1(k) details the
proposed periods of time for which a firm will be denied authorization
in the program in response to the criteria set out in Sec. 278.1(b)(3).
It is proposed that these provisions be applicable to denials of
initial authorization and reauthorization in the FSP, as well as to the
continued authorization of a firm for participation in the program.
Section 9 of the Food Stamp Act, as amended, provides the Secretary
with the authority to consider the business integrity and reputation of
program applicants when determining the qualifications of such
applicants for participation in the program. The business integrity of
a firm is critically important to the effective operation of the FSP.
Therefore, the criteria in this proposed rulemaking focus on the
business integrity and reputation of the ownership, management and
other personnel of those firms seeking authorization or reauthorization
in the program. Fraudulent activity in the FSP or other government
programs, or in business-related activities in general, reflects on the
ability of a firm to effectuate the purposes of the FSP and abide by
the rules governing the program. Therefore, this rulemaking proposes
that a firm be permanently denied the opportunity for reapplication if
a firm is denied authorization or reauthorization in the program on the
basis of criminal convictions or a finding of civil liability of the
ownership or management of an applicant firm for reasons that affect
the business integrity of such firms. If personnel of the firm have
been criminally convicted or found civilly liable for reasons related
to business integrity, the firm will be denied the opportunity for
reapplication to the program for as long as that person is employed by
the firm. Examples of such business integrity matters include
conviction or civil liability for offenses such as insurance fraud, tax
fraud, and embezzlement.
In addition, this proposal stipulates that firms that have been
removed from other federal, State or local government programs shall be
prohibited from applying for the FSP during the period of removal from
such programs. Such action in the FSP would be taken, for example, if a
firm is removed from the WIC Program, or had their State or local
liquor or lottery license suspended.
It is also proposed that firms for which it is found that an
attempt has been made to circumvent a period of disqualification, a
civil money penalty
[[Page 24990]]
or a fine imposed for FSP violations, or firms for which evidence
exists of prior violative behavior which is not related to the FSP,
shall be denied the opportunity to apply for the program for a period
of 3 years. For example, a firm fined for lottery or liquor license
infractions, but not removed from the State or local program through
suspension, would be restricted from participation in the FSP for 3
years, commencing from the effective date of the FSP denial.
Further, this rulemaking proposes that firms in which violations of
the program have been committed but a sanction has not been served,
shall be denied the opportunity to apply for the program for a period
of time equivalent to the appropriate sanction period that should have
been served. This provision would apply, for example, when a firm goes
out of business prior to FNS' sanctioning the firm for FSP violations
that were uncovered prior to its going out of business. If the same
owner seeks authorization for a different store, such a store would not
be immediately authorized in the FSP and would be subject to a waiting
period equivalent to the period of time that the previously
investigated firm under that ownership would have been disqualified.
This waiting period would be applicable whether or not the previously
investigated firm was authorized in the FSP or was an unauthorized firm
found to be violating the FSP.
This provision also applies to persons who are owners or officers
of multi-unit firms, as well as management and personnel who are
employed by the owner of a multi-unit firm. If an owner or officer of a
multi-unit firm personally committed FSP violations at one unit of a
multi-unit firm, and a sanction was not served, it is proposed that an
applicant firm under that same ownership would be denied authorization
for a period of time that should have been served for the previously
committed violations. Moreover, as currently provided in the FSP
regulations, the authorization of other units of such multi-unit firms
may be withdrawn in response to violations of the FSP by ownership.
If management or personnel of such multi-unit firms commit
sanctionable violations at more than one location, this would indicate
that such actions are reflective of the overall operating practice of
the firm, thus indicating a lack of business integrity on the part of
ownership. If such violations occur and an appropriate penalty was not
served, the applicant firm will be denied or restricted from applying
for authorization in the FSP for the period of time that should have
been served by the firm for violations committed at these other
locations under the same ownership. The period would be equivalent to
the longest sanction period that would have been served for the most
serious of violations committed by any one of the associated firms.
Finally, it is proposed that firms for which any other evidence
exists that negatively impacts on the business integrity or reputation
of the firm shall be denied the opportunity to apply for authorization
in the FSP for one year from the effective date of the denial. Firms
adversely affected by any such actions would be entitled to appeal
rights provided by section 14 of the Food Stamp Act.
This proposal also makes an editorial change unrelated to the
PRWORA provisions to conform the language of Sec. 278.1(k), Denying
authorization. and Sec. 278.1(l), Withdrawing authorization. An
additional editorial change is also being made to Sec. 278.1(m) so as
to conform this section with Sec. 278.1(k) and Sec. 278.1(l). These
revisions do not result in any substantive change in the program, but
simply clarify the intent that the provisions are applicable to both
denials and withdrawals in the program. In addition, language is
proposed to be added in Sec. 278.1(k) and Sec. 278.1(l) that reflects
the current prohibition against participation in the program as
specified in the current rule at Sec. 278.6(f)(4), which prohibits
authorization for participation of firms that have outstanding transfer
of ownership civil money penalties owed to FNS.
Authority To Establish Authorization Periods
Section 832 of the PRWORA provides authority for the Secretary to
establish specific periods of time during which a firm may be
authorized to accept food stamps. The intent of this provision is to
eliminate the current open-ended authorization of firms in the program.
Further, it is intended to protect the integrity of the FSP by
requiring a firm to re-apply periodically for continued participation
and thereby ensuring that only legitimate and eligible firms are
authorized to accept FSP benefits.
It is proposed that no firm be assigned an authorization period for
participation in the FSP for longer than 5 years. Moreover, the FNS
Officer in Charge may assign a lesser period of authorization,
depending on the circumstances. Such circumstances may include the fact
that a store is a new firm with unknown sales history, an additional
outlet of a chain grocery store with an inconsistent FSP compliance
record or a firm that only minimally meets the eligibility criteria for
participation in the FSP.
The Department believes that the five year maximum authorization
period, after which a firm is required to apply to be reauthorized in
the program, is reasonable and necessary for the effective
administration of the program, and will ensure that the eligibility of
all firms are routinely and periodically reviewed.
The specification of an authorization period in no way precludes
FNS from periodically requesting information from a firm or concern for
purposes of reauthorization in the program or from withdrawing or
terminating the authorization of a firm in accordance with program
regulations. The Department will develop administrative procedures to
ensure that, prior to the time of expiration of a firm's authorization
period, the firm will be provided with reauthorization materials and be
given the opportunity to submit such materials and information to
enable FNS to evaluate the firm's qualifications for continued
participation in the FSP. This proposal is included in Sec. 278.1(j) of
the regulation.
Post-Authorization Controls and Stiffer Penalties in the Program
Retailers that abuse the privilege of authorization in the FSP will
have that privilege revoked. The PRWORA includes a number of
significant tools that will enhance the Department's ability to enforce
the effectiveness of the FSP and the monitoring of retailers.
Authority to Suspend Stores Violating Program Requirements Pending
Administrative and Judicial Review
Section 845 of the PRWORA amends section 14 of the Food Stamp Act
to require that a permanent disqualification of a firm from the FSP be
effective from the date of the firm's receipt of the notice of
disqualification. The PRWORA also provides that if such an
administrative action by FNS is reversed through administrative or
judicial review, the Secretary is not liable for the value of any
revenues lost by the firm during such a disqualification period. This
provision is nondiscretionary and was effective upon the date of
enactment of the law. This provision pertains to firms that are subject
to permanent disqualification for trafficking in the program, as well
as to those firms subject to permanent disqualification for having been
sanctioned twice before for violations of the program. Changes
reflecting this
[[Page 24991]]
provision of the law have been made at Sec. 278.6(b). Editorial
revisions have also been made to Sec. 278.8(a), Sec. 279.7(a) and
Sec. 279.10(d). Since this provision is nondiscretionary, its
implementation cannot be affected by public comment. It is important to
note that the statute specifically refers only to permanent
disqualification actions. Therefore, firms that request and are found
to be eligible for a civil money penalty in lieu of permanent
disqualification for trafficking are not affected by the immediate
suspension requirement of the statute nor would such firms be expected
to pay the civil money penalty pending appeal and may continue to
participate in the program pending appeal.
Investigations
Section 278.6(a) of the regulation is proposed to be amended in
accordance with section 841 of the PRWORA to make an editorial change
that stipulates that findings of program violations and the subsequent
suspension or disqualification of a firm may be made based on evidence
established through on-site investigations, inconsistent redemption
data, or evidence obtained through a transaction report under an
electronic benefit transfer system. This supports current practice in
the program and the current authority provided to the Secretary to
enforce program compliance. The provision is nondiscretionary.
Disqualification of Retailers Disqualified From the WIC Program
Section 843 of the PRWORA amends section 12 of the Food Stamp Act
to require the Secretary to develop standards by which firms
disqualified from the Special Supplemental Nutrition Program for Women,
Infants and Children (WIC) are to be reciprocally disqualified from
participation in the FSP. Currently, FSP regulations provide for the
withdrawal of such firms from the FSP in response to WIC
disqualification action. Such withdrawals must run for a concurrent
period of time. This has proven to be problematic in that it is
sometimes difficult for the Food Stamp withdrawal action to catch up to
the WIC disqualification, particularly if the WIC disqualification is
for a 6 month period or less. Under the current regulations, a firm has
the right to appeal the Food Stamp action, and often, by the time the
firm has appealed the FSP withdrawal, the WIC disqualification period
is ending. Thus, the impact of reciprocal withdrawal is not
significant. The change in the law provides that the FSP
disqualification period (1) shall be for the same period of time as the
WIC disqualification period; (2) may run consecutive to the WIC
disqualification; and (3) shall not be subject to FSP administrative or
judicial review. These provisions of the statute are nondiscretionary.
In addition, the law stipulates that the Secretary establish
criteria for such reciprocal disqualification actions. Current
regulations set forth the types of WIC violations that will result in
withdrawal of a firm from participation in the FSP.
The Department proposes to retain these same criteria, with some
editorial changes to ensure that trafficking violations are fully
covered in the listed violations. The WIC violations included here,
therefore, represent very serious violations of the WIC Program that
are comparable to serious violations of the FSP. These violations best
represent the potential risk of violations of a similar nature being
committed by unscrupulous firms in the FSP, thus necessitating
reciprocal FSP action to protect the integrity of the FSP. The
Department solicits comments on the reciprocal disqualification
standards set out in Sec. 278.6(e)(8).
Conforming changes to restrict those firms subject to reciprocal
disqualification from eligibility for FSP administrative and judicial
review are made to Sec. 278.6(n), Sec. 278.8(a), Sec. 279.3(a)(2) and
Sec. 279.10(a) of this regulation. The changes made to these sections
are nondiscretionary and will not be affected by public comment.
Disqualification of Retailers Who Intentionally Submit Falsified
Applications
Section 842 of the PRWORA amends section 12(b) of the Food Stamp
Act to authorize the Secretary to disqualify, including permanently
disqualify, participating retailers who knowingly submit applications
that contain false information about substantive issues. This proposed
rule proposes to subject a firm to permanent disqualification if it is
found that false information directly related to the eligibility of the
firm for authorization is knowingly submitted on the application. In
addition, this rule proposes that in cases in which any false
information is knowingly submitted that would impact on the ability of
FNS to monitor and identify potentially violative firms, the firm shall
be disqualified for three years.
This proposed rule outlines examples of the type of information
that would be considered ``substantive'' for the purpose of determining
eligibility, as well as the type of information that is considered to
be substantive from a monitoring standpoint. These examples, however,
are not inclusive of all of the information that, if fraudulently
submitted, may result in disqualification of a firm.
This rule also proposes to deny authorization of any such firm
which is found to have knowingly submitted such false information on
the application at the time of initial application processing. It is
proposed that such firms be denied for the same period of time for
which they would be disqualified under Sec. 278.6(e). The Department
encourages comments on this discretionary provision.
List of Subjects
7 CFR Part 271
Administrative practice and procedure, Food stamps, Grant
programs--social programs.
7 CFR Part 278
Administrative practice and procedure, Banks, banking, Claims, Food
stamps, Groceries--retail, Groceries, General line--wholesaler,
Penalties.
7 CFR Part 279
Administrative practice and procedure, Food stamps, Groceries--
retail, Groceries, General line--wholesaler.
Accordingly, 7 CFR parts 271, 278 and 279 are proposed to be
amended as follows:
1. The authority citation for parts 271, 278 and 279 continues to
read as follows:
Authority:
7 U.S.C. 2011-2032.
PART 271--GENERAL INFORMATION AND DEFINITIONS
2. In Sec. 271.2, the definition of ``coupon'' is revised to read
as follows:
Sec. 271.2 Definitions.
* * * * *
Coupon means any coupon, stamp, type of certificate, authorization
card, cash or check issued in lieu of a coupon, or access device,
including an electronic benefit transfer card or personal
identification number issued pursuant to the provisions of the Food
Stamp Act of 1977, as amended, for the purchase of eligible food.
* * * * *
PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD
CONCERNS AND INSURED FINANCIAL INSTITUTIONS
3. In Sec. 278.1:
[[Page 24992]]
a. Paragraph (a) is revised;
b. Paragraph (b)(3) is revised;
c. Paragraph (j) is revised;
d. Paragraph (k) is amended by revising the first sentence of
paragraph (k)(2) and redesignating the paragraph (k)(2) as paragraph
(k)(7), and adding new paragraphs (k)(2), (k)(3), (k)(4), (k)(5) and
(k)(6);
e. Paragraph (l) is amended by redesignating paragraphs (l)(1)(iii)
through (l)(1)(v) as (l)(1)(v) through (l)(1)(vii), respectively,
revising newly redesignated paragraph (l)(1)(vi), and adding new
paragraphs (l)(1)(iii) and (l)(1)(iv);
f. The introductory text of paragraph (m) is revised;
g. Paragraph (o) is removed, and paragraphs (p) through (u) are
redesignated as paragraphs (o) through (t), respectively; and
h. Newly redesignated paragraph (o) is revised and newly
redesignated paragraph (q) is amended by removing references to (r)(2),
(r)(3), (r)(1)(ii), (r)(1)(i), (r)(2)(ii), (r)(2)(iv), (r)(3)(iv) and
(r), wherever they appear, and adding in their place references to
(q)(2), (q)(3), (q)(1)(ii), (q)(1)(i), (q)(2)(ii), (q)(2)(iv),
(q)(3)(iv) and (q), respectively.
The revisions and additions read as follows:
Sec. 278.1 Approval of retail food stores and wholesale food concerns.
(a) Application. Any firm desiring to participate or continue to be
authorized in the program shall file an application as prescribed by
FNS. Such an application shall contain information which will permit a
determination to be made as to whether such an applicant qualifies, or
continues to qualify, for authorization under the provisions of the
program. FNS may require that a retail food store or wholesale food
concern be visited to confirm eligibility for program participation
prior to such store or concern being authorized or reauthorized in the
program. FNS shall determine, based on factors that include size,
location, and types of items sold, which stores or concerns shall be
visited. Required visits shall be conducted by an authorized employee
of the Department, a designee of the Secretary, or an official of the
State or local government designated by the Secretary. FNS shall deny
or approve the application, or request additional information from the
applicant firm, within 30 days of receipt of the initial application.
(b) Determination of authorization. * * *
(3) The business integrity and reputation of the applicant. FNS
shall deny the authorization of any firm from participation in the
program for a period of time as specified in paragraph (k) of this
section based on consideration of information regarding the business
integrity and reputation of the firm as follows:
(i) Criminal conviction records reflecting on the business
integrity of owners, officers, managers, or other personnel of the
applicant firm;
(ii) Judicial determinations in civil litigation adversely
reflecting on the business integrity of owners, officers, managers or
other personnel of the applicant firm;
(iii) Official records of removal of the applicant firm from other
Federal, State or local government programs;
(iv) Evidence of an attempt by the applicant firm to circumvent a
period of disqualification, a civil money penalty or fine imposed for
violations of the Food Stamp Act and program regulations;
(v) Evidence (other than a record of a civil or criminal
conviction) of prior fraudulent behavior of owners, officers, managers,
or other personnel of the applicant firm that is not Food Stamp Program
related for which a Food Stamp Program sanction had not been previously
imposed and satisfied;
(vi) Previous Food Stamp Program violations by owners, officers,
managers, or other personnel of the applicant firm for which a sanction
had not been previously imposed and satisfied;
(vii) Evidence of prior Food Stamp Program violations personally
committed by the owner(s) or the officer(s) of the firm at one or more
units of a multi-unit firm, or evidence of prior Food Stamp Program
violations committed by management or other personnel at other units of
multi-unit firms which would indicate a lack of business integrity on
the part of ownership and for which sanctions had not been previously
imposed and satisfied; or
(viii) Any other evidence adversely reflecting on the business
integrity or reputation of the applicant firm.
* * * * *
(j) Authorization. Upon approval, FNS shall issue a nontransferable
authorization card to the firm. The authorization card shall be valid
only for the time period for which the firm is authorized to accept and
redeem coupons under the program. The authorization card shall be
retained by the firm until such time as the authorization period has
ended, authorization in the program is superseded, or the card is
surrendered or revoked as provided in this part. No firm may be
assigned an authorization period in the program of longer than 5 years;
however, the FNS Officer in Charge may assign a lesser period for
authorization of a firm, depending on the circumstances of such firm.
The specification of an authorization period in no way precludes FNS
from periodically requesting information from a firm or concern for
purposes of reauthorization in the program or from withdrawing or
terminating the authorization of a firm in accordance with this part.
(k) Denying authorization. * * *
(2) The firm has failed to meet the eligibility requirements for
authorization under Criterion A or Criterion B, as specified in the
Food Stamp Act of 1977, as amended; or, for co-located wholesale/retail
firms, the firm fails to meet the requirements of paragraph (b)(1)(iv)
of this section. Any firm that has been denied authorization on these
bases shall not be eligible to submit a new application for
authorization in the program for a minimum period of six months from
the effective date of the denial;
(3) The firm has been found to lack the necessary business
integrity and reputation to further the purposes of the program. Such
firms shall be denied authorization in the program for the following
period of time:
(i) Firms for which criminal conviction records reflecting on the
business integrity of owners, officers, or managers exist shall be
denied authorization permanently; firms for which such records exist
with regard to other personnel employed by the firm shall be denied for
as long as such person continues to be employed by the firm;
(ii) Firms for which judicial determinations in civil litigation
adversely reflecting on the business integrity of owners, officers or
managers of the firm have been made shall be denied authorization
permanently; firms for which such determinations have been made with
regard to other personnel employed by the firm shall be denied
authorization for as long as such person continues to be employed by
the firm;
(iii) Firms which have been officially removed from other Federal,
State or local government programs shall be denied for a period
equivalent to the period of removal from any such programs;
(iv) Firms for which evidence exists of an attempt to circumvent a
period of disqualification, a civil money penalty or fine imposed for
violations of the Food Stamp Act and program regulations shall be
denied for a period
[[Page 24993]]
of three years from the effective date of denial;
(v) Firms for which evidence exists of prior fraudulent behavior of
owners, officers, or managers of the firm which is not Food Stamp
Program related and for which a Food Stamp Program sanction had not
been previously imposed and satisfied shall be denied for a period of
three years from the effective date of denial; firms for which such
fraudulent behavior was committed by personnel employed by the firm
shall be denied authorization for as long as such person continues to
be employed by the firm;
(vi) Firms for which evidence exists of prior Food Stamp Program
violations by owners, officers, managers, or other personnel of the
firm for which a sanction had not been previously imposed and satisfied
shall be denied for a period of time equivalent to the appropriate
disqualification period for such previous violations, effective from
the date of denial;
(vii) Firms for which evidence exists of prior Food Stamp Program
violations at other units of multi-unit firms for which a sanction had
not been previously imposed and satisfied shall be denied for a period
of time equivalent to the appropriate disqualification period for such
previous violations, effective from the date of denial;
(viii) Firms for which any other evidence exists which reflects
negatively on the business integrity or reputation of the applicant
firm shall be denied for a period of one year from the effective date
of denial;
(4) The firm has filed an application that contains false or
misleading information about a substantive matter, as specified in
Sec. 278.6(e). Such firms shall be denied authorization for the periods
specified in Sec. 278.6(e)(1) or Sec. 278.6(e)(3);
(5) The firm's participation in the program will not further the
purposes of the program;
(6) The firm has been found to be circumventing a period of
disqualification or a civil money penalty through a purported transfer
of ownership;
(7) The firm has failed to pay in full any fiscal claim assessed
against the firm under Sec. 278.7, any fines assessed under
Sec. 278.6(l) or Sec. 278.6(m), or a transfer of ownership civil money
penalty assessed under Sec. 278.6(f). * * *
(l) Withdrawing authorization. (1) * * *
(iii) The firm fails to meet the requirements for eligibility under
Criterion A or Criterion B, as specified in the Food Stamp Act of 1977,
as amended, or, for co-located wholesale/retail firms, the firm fails
to meet the requirements of paragraph (b)(1)(iv) of this section, for
the time period specified in paragraph (k)(2) of this section;
(iv) The firm fails to maintain the necessary business integrity to
further the purposes of the program, as specified in paragraph (b)(3)
of this section. Such firms shall be withdrawn for lack of business
integrity for periods of time in accordance with those stipulated in
paragraph (k)(3) of this section for specific business integrity
findings;
* * * * *
(vi) The firm has failed to pay in full any fiscal claim assessed
against the firm under Sec. 278.7 or any fines assessed under
Sec. 278.6(l) or Sec. 278.6(m) or a transfer of ownership civil money
penalty assessed under Sec. 278.6(f) or
* * * * *
(m) Refusal to accept correspondence or to respond to inquiries.
FNS may withdraw or deny the authorization of any firm which:
* * * * *
(o) Applications containing false information. The filing of any
application containing false or misleading information may result in
the denial of approval for participation in the program, as specified
in paragraph (k) of this section, or disqualification of a firm from
participation in the program, as specified in Sec. 278.6, and may
subject the firm and persons responsible to civil or criminal action.
* * * * *
4. In Section 278.6:
a. Paragraph (a) is revised;
b. Paragraph (b)(1) is amended by adding one new sentence to the
end of the paragraph;
c. Paragraph (b)(2)(i) is amended by adding two new sentences to
the end of the paragraph;
d. Paragraph (c) is amended by adding three new sentences to the
end of the paragraph;
e. Paragraph (e) is amended by adding new paragraphs (e)(1)(iii),
(e)(3)(vi) and (e)(8);
f. Paragraph (i) is amended by removing the first sentence of
Criterion 4 and adding three new sentences in its place, and by
removing the words ``or management'' in paragraph (i)(1)(v); and
g. Paragraph (n) is revised.
The revisions and additions read as follows:
Sec. 278.6 Disqualification of retail food stores and wholesale food
concerns, and imposition of civil money penalties in lieu of
disqualifications.
(a) Authority to disqualify or subject to a civil money penalty.
FNS may disqualify any authorized retail food store or authorized
wholesale food concern from further participation in the program if the
firm fails to comply with the Food Stamp Act or this part. Such
disqualification shall result from a finding of a violation on the
basis of evidence that may include facts established through on-site
investigations, inconsistent redemption data, evidence obtained through
a transaction report under an electronic benefit transfer system, or
the disqualification of a firm from the Special Supplemental Nutrition
Program for Women, Infants and Children (WIC), as specified in
paragraph (e)(8) of this section. Disqualification shall be for a
period of 6 months to 5 years for the firm's first sanction; for period
of 12 months to 10 years for a firm's second sanction; and
disqualification shall be permanent for a disqualification based on
paragraph (e)(1) of this section. Any firm which has been disqualified
and which wishes to be reinstated at the end of the period of
disqualification or at any later time shall file a new application
under Sec. 278.1 so that FNS may determine whether reauthorization is
appropriate. The application may be filed no earlier than 10 days
before the end of the period of disqualification. FNS may, in lieu of a
disqualification, subject a firm to a civil money penalty of up to
$10,000 for each violation if FNS determines that a disqualification
would cause hardship to participating households. FNS may impose a
civil money penalty of up to $20,000 for each violation in lieu of a
permanent disqualification for trafficking, as defined in Sec. 271.2 of
this chapter, in accordance with the provisions of paragraphs (i) and
(j) of this section.
(b) Charge letter. (1) * * * In the case of a firm for which action
is taken in accordance with paragraph (e)(8) of this section, the
charge letter shall inform such firm that the disqualification action
is not subject to administrative or judicial review, as specified in
paragraph (e)(8) of this section.
(2) Charge letter for trafficking. (i) * * * The charge letter
shall also advise the firm that the permanent disqualification shall be
effective immediately upon the date of receipt of the notice of
determination, regardless of whether a request for review is filed in
accordance with Sec. 279.5 of this chapter. If the disqualification is
[[Page 24994]]
reversed through administrative or judicial review, the Secretary shall
not be liable for the value of any sales lost during the
disqualification period.
* * * * *
(c) * * * In the case of a firm subject to permanent
disqualification under paragraph (e)(1) of this section, the
determination shall inform such a firm that action to permanently
disqualify the firm shall be effective immediately upon the date of
receipt of the notice of determination from FNS, regardless of whether
a request for review is filed in accordance with Sec. 279.5 of this
chapter. If the disqualification is reversed through administrative or
judicial review, the Secretary shall not be liable for the value of any
sales lost during the disqualification period. In the case of a firm
for which action is taken in accordance with paragraph (e)(8) of this
section, the determination notice shall inform such firm that the
disqualification action is not subject to administrative or judicial
review, as specified in paragraph (e)(8) of this section.
* * * * *
(e) Penalties. * * *
(1) * * *
(iii) It is determined that personnel of the firm knowingly
submitted information on the application that contains false
information of a substantive nature that could affect the eligibility
of the firm for authorization in the program, such as, but not limited
to, information related to:
(A) Eligibility requirements under
Sec. 278.1(b),(c),(d),(e),(f),(g) and (h);
(B) Staple food stock;
(C) Annual gross sales for firms seeking to qualify for
authorization under Criterion B as specified in the Food Stamp Act, as
amended;
(D) Annual staple food sales;
(E) Total annual gross retail food sales for firms seeking
authorization as co-located wholesale/retail firms;
(F) Ownership of the firm;
(G) Employer Identification Numbers and Social Security Numbers;
(H) Food Stamp Program history, business practices, business
ethics, WIC disqualification or authorization status, when the store
did (or will) open for business under the current ownership, business,
health or other licenses, and whether or not the firm is a retail and
wholesale firm operating at the same location; or
(I) Any other information of a substantive nature that could affect
the eligibility of a firm.
* * * * *
(3) * * *
(vi) Personnel of the firm knowingly submitted information on the
application that contained false information of a substantive nature
related to the ability of FNS to monitor compliance of the firm with
FSP requirements, such as, but not limited to, information related to:
(A) Annual eligible retail food sales;
(B) Store location and store address and mailing address;
(C) Financial institution information; or
(D) Store name, type of ownership, number of cash registers, and
non-food inventory and services.
* * * * *
(8) FNS shall disqualify from the Food Stamp Program any firm which
is disqualified from the WIC Program:
(i) Based in whole or in part on any act which constitutes a
violation of that program's regulation and which is shown to constitute
a misdemeanor or felony violation of law, or for any of the following
specific program violations:
(A) Claiming reimbursement for the sale of an amount of a specific
food item which exceeds the store's documented inventory of that food
item for a specified period of time;
(B) Exchanging WIC food instruments for cash, credit or
consideration other than eligible food; or the exchange of firearms,
ammunition, explosives or controlled substances, as defined in section
802 of title 21 of the United States Code, for food instruments;
(C) Receiving, transacting and/or redeeming WIC food instruments
outside of authorized channels;
(D) Accepting WIC food instruments from unauthorized persons;
(E) Exchanging non-food items for a WIC food instrument;
(F) Charging WIC customers more for food than non-WIC customers or
charging WIC customers more than the current shelf price; or
(G) Charging for food items not received by the WIC customer or for
foods provided in excess of those listed on the food instrument.
(ii) FNS shall not disqualify a firm from the Food Stamp Program on
the basis of a WIC disqualification unless:
(A) Prior to the time prescribed for securing administrative review
of the WIC disqualification action, the firm was provided individual
and specific notice that it could be disqualified from the Food Stamp
Program based on the WIC violations committed by the firm;
(B) A signed and dated copy of such notice is provided to FNS by
the WIC administering agency; and
(C) A determination is made in accordance with Sec. 278.6(a) that
such action will not cause a hardship for participating Food Stamp
households.
(iii) Such a Food Stamp disqualification:
(A) Shall be for the same length of time as the WIC
disqualification;
(B) May begin at a later date than the WIC disqualification; and
(C) Shall not be subject to administrative or judicial review under
the Food Stamp Program.
* * * * *
(i) Criteria for eligibility for a civil money penalty in lieu of
permanent disqualification for trafficking. * * *
Criterion 4. Firm ownership was not aware of, did not approve,
did not benefit from, or was not in any way involved in the conduct
or approval of trafficking violations; or it is only the first
occasion in which a member of firm management was aware of,
approved, benefited from, or was involved in the conduct of any
trafficking violations by the firm. Upon the second occasion of
trafficking involvement by any member of firm management uncovered
during a subsequent investigation, a firm shall not be eligible for
a civil money penalty in lieu of permanent disqualification.
Notwithstanding the above provision, if trafficking violations
consisted of the sale of firearms, ammunition, explosives or
controlled substances, as defined in 21 U.S.C. 802, and such
trafficking was conducted by the ownership or management of the
firm, the firm shall not be eligible for a civil money penalty in
lieu of permanent disqualification.
* * * * *
(n) Review of determination. The determination of FNS shall be
final and not subject to further administrative or judicial review
unless a written request for review is filed within the period stated
in Sec. 279.5. Notwithstanding the aforementioned, any FNS
determination made on the basis of paragraph (e)(8) of this section
shall not be subject to further administrative or judicial review.
* * * * *
5. In Sec. 278.8, paragraph (a) is revised to read as follows:
Sec. 278.8 Administrative review--retail food stores and wholesale
food concerns.
(a) Requesting review. A food retailer or wholesale food concern
aggrieved by administrative action under Sec. 278.1, Sec. 278.6 or
Sec. 278.7 may, within the period stated in Sec. 279.5 of this chapter,
file a written request for review of the administrative action with the
review officer, except that disqualification actions taken against
firms in accordance with Sec. 278.6(e)(8) shall not be subject to
administrative or judicial review. On receipt of the request for
review, the questioned administrative action shall be stayed pending
disposition of the request for review by the review officer, except in
the case of a permanent disqualification as
[[Page 24995]]
specified in Sec. 278.6(e)(1). A disqualification for failure to pay a
civil money penalty shall not be subject to administrative review.
* * * * *
PART 279--ADMINISTRATIVE AND JUDICIAL REVIEW--FOOD RETAILERS AND
FOOD WHOLESALERS
6. In Sec. 279.3, paragraph (a)(2) is revised to read as follows:
Sec. 279.3 Authority and jurisdiction.
(a) Jurisdiction. * * *
(2) Imposition of a fine under Sec. 278.6(l) of this chapter or
Sec. 278.6 (m) of this chapter or disqualification from participation
in the program or imposition of a civil money penalty under Sec. 278.6
of this chapter, except for disqualification actions imposed under
Sec. 278.6(e)(8) of this chapter;
* * * * *
7. In Sec. 279.7, paragraph (a) is amended to add two new sentences
after the first sentence to read as follows:
Sec. 279.7 Action upon receipt of a request for review.
(a) Holding action. * * * However, in cases of permanent
disqualification under Sec. 278.6(e)(1) of this chapter, such
administrative action shall not be held in abeyance pending such a
review determination. If the disqualification is reversed through
administrative or judicial review, the Secretary shall not be held
liable for the value of any sales lost during the disqualification
period. * * *
* * * * *
8. In Sec. 279.10, the first sentence of paragraph (a) and
paragraph (d) are revised to read as follows:
Sec. 279.10 Judicial review.
(a) Filing for judicial review. Except for firms disqualified from
the program in accordance with Sec. 278.6(e)(8) of this chapter, a firm
aggrieved by the determination of the food stamp review officer may
obtain judicial review of the determination by filing a complaint
against the United States in the U.S. district court for the district
in which the owner resides or is engaged in business, or in any court
of record of the State having competent jurisdiction. * * *
* * * * *
(d) Stay of action. During the pendency of any judicial review, or
any appeal therefrom, the administrative action under review shall
remain in force unless the firm makes a timely application to the court
and after hearing thereon, the court stays the administrative action
after a showing that irreparable injury will occur absent a stay and
that the firm is likely to prevail on the merits of the case. However,
permanent disqualification actions taken in accordance with
Sec. 278.6(e)(1) of this chapter shall not be subject to such a stay of
administrative action. If the disqualification action is reversed
through administrative or judicial review, the Secretary shall not be
liable for the value of any sales lost during the disqualification
period.
Dated: April 24, 1990.
Yvette S. Jackson,
Administrator, Food and Nutrition Service.
[FR Doc. 98-12038 Filed 5-5-98; 8:45 am]
BILLING CODE 3410-30-U
