[Federal Register Volume 63, Number 107 (Thursday, June 4, 1998)]
[Proposed Rules]
[Pages 30440-30446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14772]
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LEGAL SERVICES CORPORATION
45 CFR Parts 1606 and 1625
Termination and Debarment Procedures; Recompetition Denial of
Refunding
AGENCY: Legal Services Corporation.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would remove the Corporation's rule on
denial of refunding from the Code of Federal Regulations and
substantially revise the Corporation's rule governing the termination
of financial assistance. These revisions are intended to implement
major changes in the law governing how the Corporation deals with post-
award grant disputes. The proposed termination rule also adds new
provisions authorizing the Corporation to recompete service areas and
to debar recipients for good cause from receiving additional awards of
financial assistance.
DATES: Comments should be received on or before August 3, 1998.
ADDRESSES: Comments should be submitted to the Office of the General
Counsel, Legal Services Corporation, 750 First St. NE., 11th Floor,
Washington, DC 20002-4250.
FOR FURTHER INFORMATION CONTACT: Office of the General Counsel, 202-
336-8817.
SUPPLEMENTARY INFORMATION: The Operations and Regulations Committee
(Committee) of the Legal Services Corporation's (LSC) Board of
Directors (Board) met on April 5, 1998, in Phoenix, Arizona, to
consider proposed revisions to the Corporation's rules governing
procedures for the termination of funding, 45 CFR part 1606, and denial
of refunding, 45 CFR part 1625. The Committee made several changes to
the draft rule and adopted this proposed rule for publication in the
Federal Register for public comment. This proposed rule is intended to
implement major changes in the law governing how the Corporation deals
with post-award grant disputes.
Prior to 1996, LSC recipients could not be denied refunding, nor
could their funding be suspended or their grants terminated, unless the
Corporation complied with sections 1007(a)(9) and 1011 of the LSC Act,
42 U.S.C. 2996 et seq., as amended. For suspensions, the Corporation
could not suspend financial assistance unless the recipient had been
provided reasonable notice and an opportunity to show cause why the
action should not be taken. For terminations and denials of refunding,
the Corporation was required to provide the opportunity for a ``timely,
full and fair hearing'' before an independent hearing examiner.
In 1996, the Corporation implemented a system of competition for
grants that ended a recipient's right to yearly refunding. Under the
competition system, grants are now awarded for specific terms, and, at
the end of a grant term, a recipient has no right to refunding and must
reapply as a competitive applicant for a new grant. Accordingly, this
rule proposes to remove 45 CFR part 1625, the Corporation's regulation
on the denial of refunding, from the Code of Federal Regulations as no
longer consistent with applicable law.
The FY 1998 appropriations act made additional changes to the law
affecting LSC recipients' rights to continued funding. See Pub. L. 105-
119, 111 Stat. 2440 (1997). Section 504 provides authority for the
Corporation to debar a recipient from receiving future grant awards
upon a showing of good cause. Section 501(c) authorizes the Corporation
to recompete a service area when a recipient's financial assistance has
been terminated. Finally, section 501(b) of the appropriations act
[[Page 30441]]
provides that the hearing rights prescribed by sections 1007(a)(9) and
1011 are no longer applicable to the provision, denial, suspension, or
termination of financial assistance to recipients. This proposed rule
implements section 501(b) as it applies to terminations and denials of
refunding. Also in this publication of the Federal Register is a
related proposed rule, 45 CFR part 1623, which sets out new proposed
policies and procedures for the suspension of financial assistance to
recipients.
The change in the law on hearing rights does not mean that grant
recipients have no rights to a hearing before the Corporation may
terminate funding or debar a recipient. Sections 501(b) and 501(c) of
the FY 1998 appropriations act require the Corporation to provide a
recipient with ``notice and an opportunity for the recipient to be
heard'' before it can terminate a grant or debar a recipient from
future grants. In addition, constitutional due process generally
requires that a discretionary grant recipient is entitled to ``some
type of notice'' and ``some type of hearing'' before its grant funding
can be suspended or terminated during the term of the grant period.
Stein, Administrative Law at Sec. 53.05(4). However, the new law in the
appropriations act emphasizes a congressional intent to strengthen the
ability of the Corporation to ensure that recipients are in full
compliance with the LSC Act and regulations and other applicable law.
See H. Rep. No. 207, 105th. Cong., 1st Sess. 140 (1997). Accordingly,
under this proposed rule, the hearing procedures in part 1606 have been
streamlined. The changes are intended to emphasize the seriousness with
which the Corporation takes its obligation to ensure that recipients
comply with the terms of their grants and provide quality legal
assistance. At the same time, the Corporation intends that recipients
be provided notice and a fair opportunity to be heard before any
termination or debarment action is taken.
Section-by-Section Analysis
Section 1606.1 Purpose
One purpose of this proposed rule is to ensure that the Corporation
is able to terminate grants or debar recipients from receipt of future
grants in a timely and efficient manner when necessary as part of its
ongoing effort and obligation to ensure compliance by recipients with
the terms of their LSC grants or contracts. Another purpose of the rule
is to ensure that scarce LSC funds are provided to recipients who can
provide the most effective and economical legal assistance to the poor.
Finally, the rule is also intended to ensure that a recipient is
provided notice and an opportunity to be heard before it may be
debarred or before its grant may be terminated by the Corporation.
Section 1606.2 Definitions
Paragraph (a) of this section defines ``debarment'' as an action to
prohibit a recipient from receiving another grant award from the
Corporation or from entering into a future agreement with another
recipient for LSC funds. Thus, for the period of time stated in the
debarment decision, a recipient would not be permitted to participate
in future competitions for LSC grants or contracts. Nor could the
recipient enter into any future subgrant, subcontract or similar
agreement for LSC funds with another recipient. The proposed definition
is similar to those used in various Federal agency debarment
regulations.
Paragraph (b) defines ``recipient'' as any grantee or contractor
receiving funds from the Corporation under 1006(a)(1)(A) of the LSC
Act. This provision in the Act generally refers to recipients who
provide direct legal assistance to eligible clients.
Paragraph (c) defines ``termination.'' A termination is a permanent
reduction of funding, as opposed to a temporary withholding of funds
under a suspension. When funds are suspended, they are returned to the
recipient at the end of the suspension period, either because the
problem has been or is in the process of being cured, or the
Corporation initiates a termination process. In a termination, the
funds taken or withheld by the Corporation are not returned to the
recipient at a later date.
A termination may be ``in whole or in part.'' A termination ``in
whole'' means that the recipient's grant with the Corporation is
completely terminated and the recipient is no longer a grantee of the
Corporation, at least for the grant that was terminated. A partial
termination or a termination ``in part'' means that only a percentage
of the recipient's grant with the Corporation is terminated. The
recipient is still a grantee of the Corporation but receives less
funding under the grant. The definition of termination also includes
language that clarifies that partial terminations will reduce only the
amount of the recipient's current year's funding, unless the
Corporation provides otherwise in the final termination decision.
The definition is not intended to suggest that a partial
termination affects the amount of funding required by statute to be
allocated to the affected recipient's service area. The Corporation's
appropriations act requires that funding be provided to service areas
according to a prescribed formula. Pursuant to that formula, a specific
grant amount is awarded to a recipient pursuant to the Corporation's
competition process. However, this does not mean that the Corporation
cannot recover funds awarded under a grant when it sanctions a
recipient for cause. The legislative history of the funding provision
makes it clear that the Corporation may withhold or recover grant funds
for good cause. When funds are recovered, they may be reprogrammed and
used for similar purposes, according to relevant law and Corporation
policy. Comments are requested on whether substantial recoveries should
be applied to the same service areas.
Paragraphs (c) (1) through (4) clarify what is not intended to be
included within the definition of termination. Paragraph (c)(1)
provides that a reduction or rescission of a recipient's funding
required by law is not a termination for the purposes of this part. For
example, in 1995, the Corporation was required to reduce and rescind
its recipients' funding pursuant to Congressional legislation that
rescinded the amount of appropriations for Corporation grants and
required the termination of a category of recipients. Subparagraphs
(c)(2) and (c)(3) provide that a recovery of funds pursuant to
Sec. 1630.9(b) of the Corporation's regulations on costs standards and
procedures or Sec. 1628.3(c) of the Corporation's rule on fund balances
does not constitute a termination.
Finally, paragraph (c)(4) provides that a reduction of funding of
less than 5 percent of a recipient's current annual level of financial
assistance does not constitute a termination. Administrative hearings
are costly and time-consuming for all parties involved. For certain
compliance problems, the Corporation may wish to utilize lesser
sanctions than suspensions and terminations. The Committee noted that
the Corporation should promulgate regulations setting out standards and
procedures for applying lesser sanctions before such actions may be
taken by the Corporation. The use of lesser sanctions is consistent
with the Corporation's rules on denials of refunding in which a denial
of refunding did not include a reduction of 10 percent or less of a
recipient's annual funding level. The notion that minor reductions do
not
[[Page 30442]]
necessarily warrant elaborate hearings has been implicit in LSC's rules
since the establishment of the Corporation and, indeed, is traceable to
the rules of LSC's antecedent organization, the Office of Economic
Opportunity (OEO) which defined a denial of refunding as a reduction of
20 percent or more of a grant. See 48 FR 54196 (Nov. 30, 1983). OEO's
denial of a hearing for cases covering funding reductions of less than
20 percent was specifically upheld. Economic Opportunity Commission of
Nassau County v. Weinberger, 524 F.2d 393 (2d Cir. 1975). Part 1618,
the Corporation's regulations on enforcement procedures, has long
provided that, in addition to the statutory defunding remedies, the
Corporation ``may take other action to enforce compliance with the
Act.'' See Sec. 1618.5(b).
The Committee specifically seeks input on the legal and practical
effects of including this provision in the rule and, if included,
whether the provision's 5 percent is the appropriate cutoff and whether
a dollar amount should also be included.
Section 1606.3 Grounds for a Termination
This section sets out the grounds for a termination. Paragraph
(a)(1) permits termination for a substantial violation by a recipient
of applicable law or the terms or conditions of its grant with the
Corporation. This provision has been carried over from the current
rule, except that the proposed provision no longer provides the
recipient with a right to take corrective action before the Corporation
may terminate its grant. A recipient that has substantially violated
the terms of its grant with the Corporation is not entitled to a second
chance as a matter of right. If the Corporation identifies a compliance
problem with a recipient that has the potential for easy correction
pursuant to a corrective action plan, the Corporation already has
discretion to require a recipient to take corrective action. In
addition, paragraph (b)(4) provides that, in determining if there has
been a substantial violation that warrants initiation of procedures
under this part, the Corporation will consider whether a recipient has
failed to take appropriate and adequate steps to cure the problem when
it became aware of a violation.
Paragraph (b) of this section proposes criteria for the Corporation
to consider to determine whether there has been a ``substantial
violation'' under paragraph (a)(2). The current rules on termination
and denial of refunding include two different undefined standards.
Terminations are undertaken for substantial violations and denial of
refunding for significant violations. There has been some confusion
over the years about the scope of the meaning of the two standards.
The proposed criteria include the consideration of whether the
violation was intentional, the importance of the restriction or
requirement violated, and whether the violation is of a serious nature
rather than merely technical or minor. The Corporation will also
consider whether the immediate problem is part of a history of
violations by the recipient and whether the recipient took appropriate
action to correct the problem when it became aware of the violation.
These criteria would permit the Corporation to take action, for
example, for a single serious violation. The fifth criterion permits
the Corporation to consider whether the violation was intentional.
Although the Committee included this criterion in the proposed rule, it
requests public comment on whether other standards would be more
appropriate; for example, whether the recipient ``knowingly and
willfully'' committed the violation.
The current rule expressly states that action will be taken against
a recipient only for a substantial violation that occurred at a time
when the law violated by the recipient was in effect. This proposed
rule deletes such language as unnecessary. Retroactive application of
law is strongly disfavored in the law, and the Corporation may not
sanction recipients for violations of a law that was not in effect at
the time of the violation. Paragraph (a)(2) includes as a ground for
termination the substantial failure of the recipient to provide high
quality, economical, and effective legal assistance. This provision is
in the current rule. Although the competition process provides another
method for making quality judgments about and weeding out recipients
that perform poorly, this provision is retained so that the Corporation
may act when necessary during the term of a grant or contract to
terminate a recipient that has substantially failed to provide high
quality, economical, and effective legal assistance. The Committee
requests public comment on what standards should be considered by the
Corporation to determine whether there has been a substantial failure
of a recipient to provide such legal assistance.
Section 1606.4 Grounds for Debarment
Section 504 of the Corporation's FY 1998 appropriations act
provides authority for the Corporation to debar a recipient from
receiving future grant awards upon a showing of good cause. Debarments
are common in the Federal government for both procurement contracts and
assistance grants. Causes for debarment range from debarments for
fraud, embezzlement, and false claims, to debarments for a Federal
grantee's longstanding unsatisfactory performance or the failure to pay
a substantial debt owed to the Federal government. Principles of
Federal Appropriations Law at 10-28, United States Government
Accounting Office (GAO); Grants Management Advisory Service at section
558 (1995).
The grounds for debarment of an LSC grantee implement section
501(c) of the Corporation's appropriations act and are set out in
paragraph (b) of this section. They include a termination of a
recipient for violations of Federal law related to the use of Federal
funds, such as law on fraud, bribery, or false claims against the
government; or substantial violations by a recipient of the terms of
its grant with the Corporation. Also, similar to Federal practice,
recipients may also be debarred for knowingly entering into any
subgrant or similar agreement with an entity debarred by the
Corporation.
Section 1606.4(a)(5) permits the Corporation to debar a recipient
if the recipient seeks judicial review of an agency action taken under
any Federally-funded program for which the recipient receives Federal
funds and applies regardless of the source of funding used by the
recipient for the litigation. This provision applies when the recipient
files a lawsuit on behalf of the recipient and the lawsuit is related
to a program for which the recipient receives Federal funds. It does
not apply when the recipient files a lawsuit on behalf of a client of
the recipient which seeks judicial review of an agency action that
affected the client.
Section 1606.5 Termination and Debarment Procedures
This section states the due process requirement that, before a
recipient's grant or contract may be terminated or a recipient may be
debarred, it will be provided notice and an opportunity to be heard
according to the procedures in this part.
Section 1606.6 Proposed Decision
This section sets out the requirements for providing notice to the
recipient of the Corporation's proposed decision to terminate a
recipient's funding or to debar a recipient. Under this section the
Corporation may simultaneously take action to terminate and debar a
recipient in the same proceeding.
[[Page 30443]]
The notice of the proposed decision is required by paragraph (a) of
this section to be in writing and must provide the grounds for
termination or debarment in a manner sufficiently detailed to inform
the recipient of the charges against it, the legal and factual bases of
the charges, and the proposed sanctions. Paragraph (b) requires that
the recipient be told of its right to request an informal conference
and a hearing. Paragraph (c) sets out the circumstances when a proposed
decision becomes final.
Section 1606.7 Informal Conference
This section is generally the same as Sec. 1606.5 in the current
rule, but has been renumbered and restructured for clarity and ease of
use. It allows the Corporation and recipient to have an informal
conference to either resolve the matter at issue through compromise or
settlement or to narrow the issues and share information so that any
subsequent hearing might be rendered shorter or less complicated.
Language in the current rule stating that the preliminary conference
may be adjourned for deliberation or consultation is proposed to be
deleted as unnecessary. Nothing in this section requires that the
conference must be completed under any particular time frame and,
indeed, the language in this section emphasizes the informality of the
conference, thus providing the Corporation a large measure of
discretion in determining how the conference will be conducted.
This proposed rule has also eliminated the provisions providing a
right for the recipient or the Corporation to request a pre-hearing
conference. The intent is to simplify and shorten the hearing
procedures available for terminations. The informal conference section
already provides an opportunity for the parties in the dispute to
narrow and define issues and to determine whether compromise or
settlement is possible.
Section 1606.8 Hearing
This section delineates the procedures for the due process hearing
that will be provided to a recipient before it may be debarred or
before its grant may be terminated. It has been simplified from the
process in the current rule by deleting unnecessary provisions and
provisions permitting third party participation in the hearing. The
deletion is not intended to mean that third parties may never
participate in a hearing. However, the proposed rule would no longer
provide a recipient with the right to demand such participation.
Paragraph (c) provides for an impartial hearing officer who will be
appointed by the President or designee. Reference to a designee is
included because, occasionally, the President may be disqualified from
choosing a hearing officer. Delegation would be appropriate, for
example, if the President has had prior involvement in the matter under
consideration.
Under the current rule, which was promulgated to implement section
1011 of the LSC Act, an independent hearing examiner was required to
preside over the hearing. The independent hearing examiner was required
to be someone who was not employed by the Corporation or who did not
perform duties within the Corporation. Because section 1011 no longer
applies to hearing procedures under this part, recipients no longer
have a right to an independent hearing examiner.
Constitutional due process, however, requires that, before funding
for a recipient of Federal grants may be terminated during the grant
term, the recipient must be provided a hearing before an impartial
decision maker. Stein, Administrative Law at Sec. 53.05(4). An
impartial decision maker may be an employee of the Corporation as long
as that employee has not prejudged the adjudicative facts and has no
pecuniary interest or personal bias in the decision. Id.; Spokane
County Legal Services v. Legal Services Corporation, 614 F. 2d 662,
667-668 (9th Cir. 1980). See also, M. Asinow, When the Curtain Falls:
Separation of Functions in the Federal Administrative Agencies, 81
Columbia Law Review 759, 782 (1981). In order to ensure against such
prejudgment, this rule requires that a hearing officer be a person who
has not been involved in the pending action.
The Corporation has the burden of proof under the current rule.
This proposed section places the burden on the recipient. It is the
intent of these procedures that the Corporation not make a prejudgment
before the hearing. Rather, when it has reason to believe that grounds
exist for a termination or debarment, it issues a proposed decision and
the recipient then has the burden to show why the Corporation should
not take the action it proposes. The Committee has asked for comments
on whether the language in this proposed rule adequately reflects that
intent. The change is also intended to reflect the emphasis in current
law on strengthening the Corporation's ability to sanction recipients
and to recompete service areas. See H. Rep. No. 207, 105th Cong., 1st
Sess. 140 (1997).
Section 1606.9 Recommended Decision
Only minor changes have been made to this section, which sets out
the requirements for the recommended decision issued by the hearing
officer.
Section 1606.10 Final Decision
Mostly technical revisions are made to this section, which
delineates the process by which a party to the termination proceeding
may request a review of the recommended decision by the President.
Language has been added, however, requiring that the President's review
be based solely on the record of the hearing below and any additional
submissions requested by the President. A decision by the President is
a final decision.
Section 1606.11 Qualifications on Hearing Procedures
It is the intent of this section to clarify that, if a recipient
has already been provided a termination hearing on the underlying
grounds for the debarment, the recipient is not due a second
termination hearing under this part. Rather, the recipient will be
given a brief review process set out in paragraph (b) of this section.
In many cases, the Corporation may utilize the procedure delineated in
paragraph (a) of this section, which permits the Corporation to
simultaneously take action to terminate and debar a recipient within
the same hearing procedure. In any debarment action where the recipient
has not already been provided a termination hearing, the recipient will
be provided the same hearing procedures set out in this rule for
terminations.
Paragraph (d) permits the Corporation to reverse a debarment
decision if there has been a reversal of the conviction or civil
judgment upon which the debarment was based, new material evidence has
been discovered, there has been a bona fide change in the ownership or
management of the recipient, the causes for the debarment have been
eliminated, or for other reasons the Corporation finds appropriate.
This paragraph is patterned after Federal debarment regulations. See,
e.g., 29 CFR 1471.320. Paragraph (d)(2) takes account of reversals of
convictions for violations of Federal law under part 1640.
Section 1606.12 Time and Waiver
With two exceptions, this paragraph is essentially the same as in
the current rule. Paragraph (b) in the current rule is deleted in this
proposed rule, because it implemented a time limit to the proceedings
required under law that no
[[Page 30444]]
longer has effect. Also, paragraph (c) in the current rule is not
included, because it provides for the waiver or modification of any
provision in this part. Such a sweeping waiver provision has the
potential to undo the due process rights of recipients that are
required under the Constitution. The rule already provides sufficient
discretion and flexibility.
Section 1606.13 Interim Funding
This section requires the Corporation to continue funding the
recipient at its current level until the termination proceeding set out
in this part is completed. This is consistent with the current rule and
the due process requirement that funding not be terminated until a fair
hearing has been provided.
Paragraph (b) provides that a failure of the Corporation to meet a
time requirement does not preclude the Corporation from terminating
funding or debarring a recipient from receiving additional funding. See
Brock v. Pierce County, 476 U.S. 253 (1986).
Section 1606.14 Recompetition
This section replaces the section in the current rule on
termination funding. Section 501(c) of Public Law 105-119 authorizes
the Corporation to recompete a service area when a recipient's
financial assistance has been terminated after notice and an
opportunity to be heard. Accordingly, this section authorizes the
Corporation to recompete any service area where a final decision has
been made under this part to terminate in whole a recipient's grant for
any service area. It also provides that until a new recipient has been
awarded a grant for the service area pursuant to the competition
process, the Corporation shall take all practical steps to ensure the
continued provision of legal assistance in the service area pursuant to
Sec. 1634.11 of the Corporation's rule on competition procedures.
List of Subjects in 45 CFR Part 1606
Administrative practice and procedures, Legal services.
For reasons set out in the preamble, LSC proposes to revise 45 CFR
part 1606 to read as follows:
PART 1606--TERMINATION AND DEBARMENT PROCEDURES; RECOMPETITION
Sec.
1606.1 Purpose.
1606.2 Definitions.
1606.3 Grounds for a termination.
1606.4 Grounds for debarment.
1606.5 Termination and debarment procedures.
1606.6 Proposed decision.
1606.7 Informal conference.
1606.8 Hearing.
1606.9 Recommended decision.
1606.10 Final decision.
1606.11 Qualifications on hearing procedures.
1606.12 Time and waiver.
1606.13 Interim funding.
1606.14 Recompetition.
Authority: 42 U.S.C. 2996e (b)(1) and 2996f(a)(3); Pub. L. 105-
119, 111 Stat. 2440, Secs. 501(b) and (c) and 504; Pub. L. 104-134,
110 Stat. 1321.
Sec. 1606.1 Purpose.
The purpose of this rule is to:
(a) Ensure that the Corporation is able to take timely action to
deal with incidents of substantial noncompliance by recipients with a
provision of the LSC Act, the Corporation's appropriations act or other
law applicable to LSC funds, a Corporation rule, regulation, guideline
or instruction, or the terms and conditions of the recipient's grant or
contract with the Corporation;
(b) Provide timely and fair due process procedures when the
Corporation has made a preliminary decision to terminate a recipient's
LSC grant or contract, or to debar a recipient from receiving future
LSC awards of financial assistance; and
(c) Ensure that scarce funds are provided to recipients who can
provide the most effective and economical legal assistance to eligible
clients.
Sec. 1606.2 Definitions.
For the purposes of this part:
(a) Debarment means an action taken by the Corporation to exclude a
recipient from receiving an additional award of financial assistance
from the Corporation or from receiving additional LSC funds from
another recipient of the Corporation pursuant to a subgrant,
subcontract or similar agreement, for the period of time stated in the
final debarment decision.
(b) Recipient means any grantee or contractor receiving financial
assistance from the Corporation under section 1006(a)(1)(A) of the LSC
Act.
(c)(1) Termination means that a recipient's level of financial
assistance under its grant or contract with the Corporation will be
permanently reduced in whole or in part prior to the expiration of the
term of a recipient's current grant or contract. A partial termination
will affect only the recipient's current year's funding, unless the
Corporation provides otherwise in the final termination decision.
(2) A termination does not include:
(i) A reduction of funding required by law, including a reduction
in or rescission of the Corporation's appropriation that is apportioned
among all recipients of the same class in proportion to their current
level of funding;
(ii) A reduction or deduction of LSC support for a recipient under
the Corporation's fund balance regulation at 45 CFR part 1628;
(iii) A recovery of disallowed costs under the Corporation's
regulation on costs standards and procedures at 45 CFR part 1630; or
(iv) A reduction of funding of less than 5 percent of a recipient's
current annual level of financial assistance imposed by the Corporation
as a lesser sanction.
Sec. 1606.3 Grounds for a termination.
(a) A grant or contract may be terminated when:
(1) There has been a substantial violation by the recipient of a
provision of the LSC Act, the Corporation's appropriations act or other
law applicable to LSC funds, or Corporation rule, regulation, guideline
or instruction, or a term or condition of the recipient's grant or
contract; or
(2) There has been a substantial failure by the recipient to
provide high quality, economical, and effective legal assistance, as
measured by generally accepted professional standards, the provisions
of the LSC Act, or a rule, regulation or guidance issued by the
Corporation.
(b) A determination of whether there has been a substantial
violation for the purposes of paragraph (a)(1) of this section will be
based on consideration of the following criteria:
(1) The importance and number of restrictions or requirements
violated;
(2) The seriousness of the violation;
(3) The extent to which the violation is part of a pattern;
(4) The extent to which the recipient has failed to take action to
cure the violation when it became aware of a violation; and
(5) Whether the violation was intentional.
(c) Paragraph (a)(1) of this section is not applicable to any
violation that occurred more than 5 years prior to the date the
recipient receives notice of the violation pursuant to Sec. 1606.6(a).
Sec. 1606.4 Grounds for debarment.
(a) The Corporation may debar a recipient, on a showing of good
cause, from receiving an additional award of financial assistance from
the Corporation.
[[Page 30445]]
(b) As used in paragraph (a) of this section, ``good cause''
includes:
(1) Termination of financial assistance of the recipient pursuant
to part 1640 of this chapter;
(2) Termination of financial assistance in whole of the most recent
grant of financial assistance;
(3) The substantial violation by the recipient of the restrictions
delineated in Sec. 1610.2(a) and (b) of this chapter, provided that the
violation occurred within 5 years prior to the receipt of the debarment
notice by the recipient;
(4) Knowing entry by the recipient into a subgrant, subcontract, or
other similar agreement with an entity debarred by the Corporation; or
(5) The filing of a lawsuit by a recipient, provided that the
lawsuit:
(i) Was filed on behalf of the recipient;
(ii) Was related to a program for which the recipient receives
Federal funds;
(iii) Named the Corporation, or any agency or employee of a
Federal, State, or local government as a defendant; and
(iv) Was initiated after the effective date of this rule.
Sec. 1606.5 Termination and debarment procedures.
Before a recipient's grant or contract may be terminated or a
recipient may be debarred, the recipient will be provided notice and an
opportunity to be heard as set out in this part.
Sec. 1606.6 Proposed decision.
(a) When the Corporation has made a proposed decision that a
recipient's grant or contract should be terminated and/or that a
recipient should be debarred, the Corporation employee who has been
designated by the President as the person to bring such actions
(hereinafter referred to as the ``designated employee'') shall issue a
written notice upon the recipient and the Chairperson of the
recipient's governing body. The notice shall:
(1) State the grounds for the proposed action;
(2) Identify, with reasonable specificity, any facts or documents
relied upon as justification for the proposed action;
(3) Inform the recipient of the proposed sanctions.
(4) Advise the recipient of its right to request:
(i) An informal conference under Sec. 1606.7; and
(ii) A hearing under Sec. 1606.8; and
(5) Inform the recipient of its right to receive interim funding
pursuant to Sec. 1606.13.
(b) If the recipient does not request review within the time
prescribed in Sec. 1606.7(a) or Sec. 1606.8(a), the proposed
determination shall become final.
Sec. 1606.7 Informal conference.
(a) A recipient may submit a request for an informal conference
within 30 days of its receipt of the proposed decision.
(b) Within 5 days of receipt of the request, the designated
employee shall notify the recipient of the time and place the
conference will be held.
(c) The designated employee shall conduct the informal conference.
(d) At the informal conference, the designated employee and the
recipient shall both have an opportunity to state their case, seek to
narrow the issues, and explore the possibilities of settlement or
compromise.
(e) The designated employee may modify, withdraw, or affirm the
proposed determination in writing, a copy of which shall be provided to
the recipient within 10 days of the conclusion of the informal
conference.
Sec. 1606.8 Hearing.
(a) The recipient may make written request for a hearing within 30
days of its receipt of the proposed decision or within 15 days of
receipt of the written determination issued by the designated employee
after the conclusion of the informal conference.
(b) Within 10 days after receipt of a request for a hearing, the
Corporation shall notify the recipient in writing of the date, time and
place of the hearing and the names of the hearing officer and of the
attorney who will represent the Corporation. The time, date and
location of the hearing may be changed upon agreement of the
Corporation and the recipient.
(c) A hearing officer shall be appointed by the President or
designee and may be an employee of the Corporation. The hearing officer
shall not have been involved in the current termination or debarment
action and the President or designee shall determine that the person is
qualified to preside over the hearing as an impartial decision maker.
An impartial decision maker is a person who has not formed a
prejudgment on the case and does not have a pecuniary interest or
personal bias in the outcome of the proceeding.
(d) The hearing shall be scheduled to commence at the earliest
appropriate date, ordinarily not later than 30 days after the notice
required by paragraph (b) of this section.
(e) The hearing officer shall preside over and conduct a full and
fair hearing, avoid delay, maintain order, and insure that a record
sufficient for full disclosure of the facts and issues is maintained.
(f) The hearing shall be open to the public unless, for good cause
and the interests of justice, the hearing officer determines otherwise.
(g) The Corporation and the recipient shall be entitled to be
represented by counsel or by another person.
(h) At the hearing, the Corporation and the recipient each may
present its case by oral or documentary evidence, conduct examination
and cross-examination of witnesses, examine any documents submitted,
and submit rebuttal evidence.
(i) The hearing officer shall not be bound by the technical rules
of evidence and may make any procedural or evidentiary ruling that may
help to insure full disclosure of the facts, to maintain order, or to
avoid delay. Irrelevant, immaterial, repetitious or unduly prejudicial
matter may be excluded.
(j) Official notice may be taken of published policies, rules,
regulations, guidelines, and instructions of the Corporation, of any
matter of which judicial notice may be taken in a Federal court, or of
any other matter whose existence, authenticity, or accuracy is not open
to serious question.
(k) A stenographic or electronic record shall be made in a manner
determined by the hearing officer, and a copy shall be made available
to a party upon payment of its cost.
(l) The recipient shall have the burden of proof in the hearing
under this section.
Sec. 1606.9 Recommended decision.
(a) Within 20 calendar days after the conclusion of the hearing,
the hearing officer shall issue a written recommended decision which
may:
(1) Terminate financial assistance to the recipient as of a
specific date; or
(2) Continue the recipient's current grant or contract, subject to
any modification or condition that may be deemed necessary on the basis
of information adduced at the hearing; and/or
(3) Debar the recipient from receiving an additional award of
financial assistance from the Corporation.
(b) The recommended decision shall contain findings of the
significant and relevant facts and shall state the reasons for the
decision. Findings of fact shall be based solely on the record of, and
the evidence adduced at, the informal conference and the hearing or on
matters of which official notice was taken.
[[Page 30446]]
Sec. 1606.10 Final decision.
(a) If neither the Corporation nor the recipient requests review by
the President, a recommended decision shall become final 10 calendar
days after receipt by the recipient.
(b) The recipient or the Corporation may seek review by the
President of a recommended decision. A request shall be made in writing
within 10 days after receipt of the recommended decision by the party
seeking review and shall state in detail the reasons for seeking
review.
(c) The President's review shall be based solely on the information
in the administrative record of the termination or debarment
proceedings and any additional submissions, either oral or in writing,
that the President may request.
(d) As soon as practicable after receipt of the request for review
of a recommended decision, but not later than 30 days after the request
for review, the President may adopt, modify, or reverse the recommended
decision, or direct further consideration of the matter. In the event
of modification or reversal, the President's decision shall conform to
the requirements of Sec. 1606.9(b).
(e) The President's decision shall become final upon receipt by the
recipient.
Sec. 1606.11 Qualifications on hearing procedures.
(a) The Corporation may simultaneously take action to debar and
terminate a recipient within the same hearing procedure that is set out
in Secs. 1606.6 through 1606.10 of this part. In such a case, the same
hearing officer shall oversee both the termination and debarment
actions.
(b) If the Corporation does not simultaneously take action to debar
and terminate a recipient under paragraph (a) of this section and
initiates a debarment action based on a prior termination under
Sec. 1606.4(b) (1) or (2), the hearing procedures set out in
Sec. 1606.6 through 1606.10 shall not apply. Instead:
(1) The President shall appoint a hearing officer to review the
matter and make a written recommended decision on debarment.
(2) The hearing officer's recommendation shall be based solely on
the information in the administrative record of the termination
proceedings providing grounds for the debarment and any additional
submissions, either oral or in writing, that the hearing officer may
request.
(3) If neither party appeals the hearing officer's recommendation
within 10 days of receipt of the recommended decision, the decision
shall become final.
(4) Either party may appeal the recommended decision to the
President who shall review the matter and issue a final written
decision pursuant to Sec. 1606.9(b).
(c) All final debarment decisions shall state the effective date of
the debarment and the period of debarment, which shall be commensurate
with the seriousness of the cause for debarment but shall not be for
longer than 6 years.
(d) The Corporation may reverse a debarment decision upon request
for the following reasons:
(1) Newly discovered material evidence;
(2) Reversal of the conviction or civil judgment upon which the
debarment was based;
(3) Bona fide change in ownership or management of a recipient;
(4) Elimination of other causes for which the debarment was
imposed; or
(5) Other reasons the Corporation deems appropriate.
Sec. 1606.12 Time and waiver.
Except for the 6-year time limit for debarments in Sec. 1606.11(c),
any period of time provided in these rules may, upon good cause shown
and determined, be extended:
(a) By the designated employee who issued the proposed decision
until a hearing officer has been appointed;
(b) By the hearing officer, until the recommended decision has been
issued;
(c) By the President at any time.
Sec. 1606.13 Interim funding.
(a) Pending the completion of termination proceedings under this
part, the Corporation shall provide the recipient with the level of
financial assistance provided for under its current grant or contract
with the Corporation.
(b) Failure by the Corporation to meet a time requirement of this
part does not preclude the Corporation from terminating a recipient's
grant or contract with the Corporation.
Sec. 1606.14 Recompetition.
After a final decision has been issued by the Corporation
terminating financial assistance to a recipient in whole for any
service area, the Corporation shall implement a new competitive bidding
process for the affected service area. Until a new recipient has been
awarded a grant pursuant to such process, the Corporation shall take
all practical steps to ensure the continued provision of legal
assistance in the service area pursuant to Sec. 1634.11.
PART 1625--[REMOVED AND RESERVED]
For the reasons set out in the preamble, and under the authority of
42 U.S.C. 2996g(e), 45 CFR part 1625 is proposed to be removed and
reserved.
Dated: May 29, 1998.
Victor M. Fortuno,
General Counsel.
[FR Doc. 98-14772 Filed 6-3-98; 8:45 am]
BILLING CODE 7050-01-P
