[Federal Register Volume 63, Number 225 (Monday, November 23, 1998)]
[Rules and Regulations]
[Pages 64636-64646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31251]
=======================================================================
-----------------------------------------------------------------------
LEGAL SERVICES CORPORATION
45 CFR Parts 1606 and 1625
Termination and Debarment Procedures; Recompetition; Denial of
Refunding
AGENCY: Legal Services Corporation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule rescinds the Corporation's rule on denial of
refunding and removes it from the Code of Federal Regulations. It also
substantially revises the Corporation's rule governing the termination
of financial assistance. These revisions are intended to implement
major changes in the law governing certain actions used by the
Corporation to deal with post-award grant disputes. The termination
rule now includes new provisions authorizing the Corporation to
recompete service areas and to debar recipients for good cause from
receiving additional awards of financial assistance.
DATES: This rule is effective on December 23, 1998.
FOR FURTHER INFORMATION CONTACT: Suzanne B. Glasow, 202-336-8817.
SUPPLEMENTARY INFORMATION: The Operations and Regulations Committee
(Committee) of the Legal Services Corporation's (LSC or Corporation)
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 a proposed rule that was published in the
Federal Register for public comment at 63 FR 30440 (June 4, 1998). On
September 11, 1998, during public hearings in Chicago, Illinois, the
Committee considered public comments on the proposed rule. After making
additional revisions to the rule, the Committee recommended that the
Board adopt the rule as final, which the Board did on September 12,
1998.
This final rule is intended to implement major changes in the law
governing certain actions used by the Corporation to deal 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
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.1
Accordingly, this rule rescinds 45 CFR part 1625, the Corporation's
regulation on the denial of refunding, and removes it from the Code of
Federal Regulations as no longer consistent with applicable law.
---------------------------------------------------------------------------
\1\ It is well established that absent express statutory
language to the contrary or a showing that the applicant's statutory
or constitutional rights have been violated, pre-award applicants
for discretionary grants have no protected property interests in
receiving a grant and thus have no standing to appeal the funding
decision by the grantor. See Cappalli, Federal Grants and
Cooperative Agreements, Sec. 3.28; Stein, J., Administrative Law,
Sec. 53.02[3][a] (1998); and Legal Services Corporation of Prince
Georges County v. Ehrlich, 457 F. Supp. 1058, 1062-64 (D. Md. 1978).
---------------------------------------------------------------------------
Comments expressed concern about the effect of the removal of this
rule in the new competitive environment. The concern was that, rather
than providing a new grant to an applicant, the Corporation might use
month-to-month or short term grants within the competitive process to
avoid providing hearing rights to recipients. One comment urged the
Corporation to refrain from using repeated short term grants to
troubled programs about which it has questions about future funding as
a means to obviate the need for a due process hearing. According to the
comment, short term funding should be used only in those situations
where the Corporation fully intends to make a grant for the remainder
of the grant term once a specific identified issue is resolved.
The Board requested that the preamble clarify that short term
funding is not intended by the Corporation as a means to avoid hearing
rights. It is a means to ensure continued legal representation in a
service area when the Corporation determines no applicants in a
competitive process warrant a long term grant. This could occur for a
variety of reasons. For example, in a particular competition, one
applicant may not be viable and the other, a current recipient, may be
under investigation by the Corporation. Short term funding until the
investigation is final is warranted in such a situation. The
Corporation would not want to foreclose giving a long term grant to the
program if the investigation reveals no substantive noncompliance
issues. On the other hand, if the investigation reveals substantive
noncompliance by the recipient, the Corporation would have been
derelict in its duty if it had made a long term grant to a recipient it
had reason to believe could not provide quality legal assistance or
comply with grant terms and conditions.
Congress clearly intended the competition process to be a means for
the Corporation to ensure that the most qualified programs receive LSC
grants. Accordingly, the Corporation's competition rule provides
discretion to the Corporation to take all practical steps to ensure
continued legal assistance in a service area when the Corporation
determines no applicants are qualified for a long term grant. See
Sec. 1634.8(c). Short term grants provide one means to that end.
Nevertheless, it is not the intent of the Corporation that short term
grants be used to avoid applicable hearing rights. They should only be
used when they are warranted and appropriate, as discussed above.
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
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 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 final
rule, 45 CFR Part 1623, which implements Sec. 501(b) as it applies to
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
[[Page 64637]]
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 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.
The Corporation received three comments on the proposed rule. The
commenters generally agreed that the proposed rule represented an
appropriate implementation of statutory requirements. However, they
also raised several due process concerns and made suggestions for
clarification of the terms of certain provisions in the rule. An
analysis of the comments and the Corporation's response is set out in
the section-by-section analysis below.
Section-by-Section Analysis of Part 1606
Section 1606.1 Purpose
One purpose of this 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 to meet its 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
debarred recipient enter into any future subgrant, subcontract or
similar agreement for LSC funds with another recipient for the time set
out in the debarment decision. The definition is similar to those used
in various Federal agency debarment regulations.
A definition of knowing and willful has been added to clarify one
of the criteria included to determine whether there has been a
substantial violation for the purposes of Sec. 1606.3(b)(5). See
discussion of Sec. 1606.3(b)(5) for the Corporation's interpretation
and the effect of using the term.
Paragraph (c) defines ``recipient'' as any grantee or contractor
receiving funds from the Corporation under Section 1006(a)(1)(A) of the
LSC Act, which generally refers to recipients who provide direct legal
assistance to eligible clients.
Termination. Paragraph (d) defines ``termination.'' The proposed
rule defined a termination as a permanent reduction of funding to
distinguish it from a temporary withholding of funds under a
suspension. The definitions of termination and suspension were intended
to clarify that when funds are suspended, they are returned to the
recipient at the end of the suspension period, either because the issue
has been or is in the process of being cured, or the Corporation
initiates a termination process; whereas, in a termination, it was
intended that the funds taken or withheld by the Corporation would not
be returned to the recipient at a later date.
One comment pointed out that the use of ``permanently'' in the
definition caused confusion in that the term, as applied to a partial
termination, could be interpreted as meaning that the termination
should be applied to every year of a multi-year grant period. The
proposed rule attempted to preclude such an erroneous interpretation by
including in the definition a statement that a partial termination will
affect only the recipient's current year's funding unless provided
otherwise in the termination decision. However, the commenter suggested
that the word ``permanently'' be deleted from the definition and
instead, a direct statement be added to the definition that clarifies
that funds withheld in a termination will not be restored to the
recipient. The Board agreed to include language on this point but
placed it in Sec. 1606.13(b) rather than the definition of
``termination.'' In addition, the Board deleted the word
``permanently'' from the definition of ``termination.''
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 no longer receives LSC funds
under the grant. 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.
Reprogramming. A partial termination does not affect the amount of
funding required by statute to be allocated in competition to the
affected recipient's service area. The Corporation's appropriations act
currently requires that such funding be provided to service areas based
on the census count in the area.
This statutory requirement, however, 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. According to relevant law and Corporation
policy, when funds are recovered, they may be reprogrammed and used for
similar purposes. The preamble to the proposed rule requested comments
on the use of funds recovered by the Corporation. Two comments stated
the view that recovered funds should generally stay in the same service
area following a recovery. One comment stated that the Corporation
should be required to seek another grantee or provide interim contracts
in the same service area with the recovered funds.
Applicable law allows the Corporation to reprogram appropriated
funds under certain circumstances. See Pub. L. 105-119; See Principles
of Federal Appropriations Law, United States General Accounting Office
(GAO Redbook) at 2-25. According to the
[[Page 64638]]
GAO, the authority to reprogram is implicit in an agency's fiscal
responsibilities and exists even absent express statutory authority.
Section 605 of the Corporation's FY 1998 appropriations act, permits
reprogramming but requires notice to the Corporation's congressional
oversight committees for certain types of reprogrammings.
Reprogramming is the utilization of funds within an appropriation
for purposes other than those contemplated at the time of the
appropriation; it is the shifting of funds from one object to another
within an appropriation. GAO Redbook at 6-26. However, reprogrammed
funds must be used for activities or uses within the general purposes
of the appropriation and may not be used for any purposes in violation
of any other specific limitation or prohibition. Id. at 2-25; 31 U.S.C.
Sec. 1301(a). Basic field funds are appropriated under strict
limitations and are thus generally not available for reprogramming
before they are used for grant awards. They must be used for basic
field grants, allotted to service areas according to a statutory
formula and must be awarded pursuant to the Corporation's competition
regulations. Once such grants are made, however, it is clear in the
legislative history of the Corporation's appropriations acts that the
Corporation may recover basic field funds for good cause, see, e.g.,
129 Cong. Rec. S14448 (Oct. 21, 1983), and reprogram the recovered
funds.
Because it is not feasible or practical to use the recovered funds
in exact accordance with all of the strict limitations governing their
original allocation, the Corporation may reprogram such funds for other
uses as long as the funds are used within the general purposes of the
original appropriation. For example, a recovery of basic field funds
from a recipient pursuant to a termination certainly cannot be returned
to the same grantee and there may not be another grantee in the same
service area.
The Board determined that the Corporation should have discretion to
determine the best use of recovered funds and not be required to use
them for activities it determines are fiscally or programmatically
unsound, as long as the Corporation's actions are consistent with the
law on reprogramming. The Corporation's current policies provide for
reprogramming discretion and are consistent with applicable law as
discussed above. The LSC Board's Consolidated Operating Budget
Guidelines provide authority variously to the Board and the LSC
President to reprogram or reallocate recovered funds for basic field
purposes, such as when, pursuant to the competition process, a new
recipient replaces another recipient as the recipient of the LSC grant
for a particular service area, or when there is a need for emergency
relief to particular grantees due to flood or fire damage. To implement
this policy, the Board added a provision in Sec. 1606.13 stating that
funds recovered by the Corporation pursuant to a termination shall be
used in the same service area from which they were recovered or will be
reprogrammed by the Corporation for basic field purposes.
Actions that do not constitute a ``termination.'' Paragraph
(d)(2)(i) through (d)(2)(v) clarify what is not intended to be included
within the definition of termination. Paragraph (d)(2)(i) 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 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.
Paragraphs (d)(2)(ii) and (d)(2)(iii) provide that a recovery of
funds pursuant to Sec. 1628.3(c) of the Corporation's rule on fund
balances or Sec. 1630.9(b) of the Corporations's regulations on costs
standards and procedures do not constitute a termination. The Board
added another provision to the list that was not included in the
proposed rule to clarify that a withholding of funds pursuant to the
Corporation's Private Attorney Involvement rule at 45 CFR Part 1614 is
not a termination. See Sec. 1606.2(d)(2)(iv).
Lesser Sanctions. Finally, paragraph (d)(2)(v) 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.
The preamble to the proposed rule explained that administrative
hearings are costly and time-consuming for all parties involved and,
for certain compliance issues, the Corporation may wish to utilize
sanctions less drastic than suspensions or termination, such as less
than 5% funding reductions, hereinafter referred to as ``lesser
sanctions.'' A policy to utilize lesser sanctions has been implicit in
the Corporation's regulations since the early days of the Corporation
as indicated in 45 CFR Parts 1618 (in addition to defunding actions,
the Corporation may take other actions) and Part 1625 (a denial of
refunding does not include a reduction of less than 10% of annualized
funding).
The preamble to the proposed rule stated the policy preferred by
the Committee that the Corporation should promulgate regulations
setting out standards and procedures for applying lesser sanctions
before such actions could be taken by the Corporation. One comment
expressed agreement with this policy. No change has been made to the
policy in the final rule; however, the Board decided to state the
policy in the text of the rule by including a provision that states
that no lesser sanction shall be imposed except in accordance with
regulations promulgated by the Corporation. See Sec. 1606.2(c)(2)(v).
One comment also recommended including a statement in the rule that
a lesser reduction of funding should be treated as a dissallowed cost
under Part 1630. The Board did not agree. Part 1630 is already
available to the Corporation when an action falls within its terms but
a questioned cost action is limited to recovering costs identified as
specific disallowed expenditures and does not provide authority to
impose a fine, for example.
The preamble to the proposed rule asked for comments on whether 5%
was the appropriate cutoff to distinguish between a termination and a
lesser sanction or whether a dollar amount was appropriate. Two
comments stated that a 5% reduction for a large grantee would
constitute a substantial reduction of funding and urged the Corporation
to adopt a cutoff of 5% or $25,000, whichever is less. Part of the
concern of the commenters was that large amounts of funds would be
taken from grantees without any due process hearings.
The Board did not agree that 5% is too high a cutoff for large
grantees or that the rule should include a dollar amount as a cutoff.
It is difficult to state a dollar amount that would be equitable to all
recipients, because of the varying sizes of the services areas and the
grant amounts provided to recipients. In addition, the 5% was
determined to be a level that would not cripple a program but would be
sufficient to get the program's attention.
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.
Criteria for substantial violation. Paragraph (b) of this section
includes the criteria the Corporation will consider to determine
whether there has been a substantial violation under paragraph (a)(2).
The prior rules on
[[Page 64639]]
termination and denial of refunding included two different undefined
standards. Terminations were undertaken for substantial violations and
a 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 rule set forth five criteria. One comment criticized
certain of the criteria as too vague to be consistent with the
fundamental precepts of due process and another comment indicated that
the rule attempted to define unclear terms with other unclear terms.
One criterion in the proposed rule was ``the importance and number of
restrictions or requirements violated.'' One comment suggested deleting
this criterion.
In response to the comment the Board revised the criterion in part.
Reference to the ``importance'' of the restriction or requirement was
taken out as too vague to be useful but the reference to the number of
restrictions or requirements violated was retained. How many violations
occurred is important to determine the scope of noncompliance and the
scope of noncompliance would help determine whether a partial or full
termination would be appropriate.
Although not always the case, the number of violations may be
distinguished from a pattern of noncompliance in Sec. 1606.3(b)(3), in
that a pattern of noncompliance refers to a habit of noncompliance over
a period of time while a number of violations may occur as the result
of an action taken in one particular case or during a short period of
time.
Another criterion in the proposed rule was ``the seriousness of the
violation.'' Two comments challenged this standard as too vague. The
Board agreed and replaced it with a consideration of ``whether the
violation represents an instance of noncompliance with a substantive
statutory or regulatory restriction or requirement, rather than an
instance of noncompliance with a non-substantive technical or
procedural requirement.'' Recipients should refer to the list of
statutory restrictions and requirements listed in Sec. 1610.2(a) and
(b) which generally constitute substantive restrictions and
requirements while a failure to meet a deadline to submit a report
would be a non-substantive requirement.
Another criterion addressed by the comments was ``whether the
violation was intentional.'' The proposed rule specifically asked for
comments on whether this was the appropriate standard and, based on
comments, the Board changed the standard to ``knowing and willful'' and
included a definition of the term in the rule. It was felt that a
definition was necessary because research indicated that there are many
variances to the definitions of ``willful and knowing.'' Knowing and
willful is defined in the rule to mean that the recipient had actual
knowledge of the fact that its action or failure to take a required
action would constitute a violation and, despite such knowledge,
undertook or failed to undertake the action. An example of an
application of this standard would be the following. If a recipient has
been provided a copy of the Corporation's eligibility regulation which
requires that the recipient execute a retainer agreement with each
client who receives legal assistance from the recipient and the
recipient consistently fails to execute retainer agreements for its
clients, then the failure to comply would be knowing and willful. A
recipient cannot claim lack of knowledge because its management failed
to read the LSC grant requirements and restrictions or properly train
recipient staff. Recipients are presumed to have read and agreed to the
requirements and restrictions when they sign the terms of the grant
awards. On the other hand, if the recipient takes an action where there
is arguably insufficient guidance in a rule and the recipient took
action based on a good faith interpretation of the rule, and the
Corporation subsequently determines the recipient's action to be a
violation, it would be reasonable to find that the action was not
knowing and willful. When in doubt whether an action may be a
violation, recipients should seek guidance from the Corporation prior
to taking such an action.
The Corporation will also consider whether the instance of
noncompliance is part of a pattern of practice by the recipient and
whether the recipient took appropriate action to correct the problem
when it became aware of the violation.
Finally, the application of the criteria in this final rule to a
particular set of circumstances would permit the Corporation to take
action for a single violation or a number of violations.
Retroactive application. The prior rule expressly stated that
action would 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 final 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.
Violations by staff. Finally, one comment urged that language
should be added distinguishing between a violation committed by a
member of the recipient's management or board and a violation by a
staff member without the knowledge of the board or management. The
Board did not agree. The distinction is already implicated in both the
fourth and fifth criteria which consider the knowledge of the recipient
of the action and the extent to which the recipient took action to cure
a problem upon its discovery. However, the recipient has a
responsibility to ensure that its staff are fully informed of and act
in accordance with the LSC grant requirements and restrictions.
Criteria for a Substantial Failure. 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 was in the prior rule. Although the Corporation's competition
process provides another method for making quality judgments about and
eliminating recipients that perform poorly, this provision has been
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 preamble to the proposed rule asked for comments on what
criteria should be considered for determining ``a substantial
failure.'' One comment suggested that, at a minimum, the Corporation
should clarify the meaning of ``generally accepted professional
standards'' by including references to specific standards, such as the
ABA Standards for Providers of Civil Legal Assistance (ABA
Standards''), LSC's Performance Measures or other appropriate
indicators of quality legal services. Another comment, on the other
hand, not only opposed using ``generally accepted professional
standards,'' because the term is too vague, it also stated that it
would be inappropriate to rely on the ABA Standards because they are
somewhat outdated and are aspirational and not intended to state the
minimum expectations of a quality program. Thus, it would be
inappropriate to rely on the standards as a basis to deny funding to a
provider.
After extensive discussion, the Board revised Sec. 1606.3(a)(2) to
include reference to Sec. 1634(a)(2) which lists a criterion used by
the Corporation to select a grantee under its competition process. This
criterion includes consideration of the quality, feasibility and cost-
effectiveness of a recipient's
[[Page 64640]]
legal services delivery and delivery approach in relation to the
Corporation's Performance Criteria and the American Bar Association's
Standards for Providers of Civil Legal Services to the Poor. This
ground for terminating funding complements the competition process by
providing another method for acting on judgments regarding recipients
that perform badly. Unlike its use in the competition process where the
Corporation would choose the best among competitors, its use in this
rule requires a showing that the recipient has substantially failed to
meet the standards. The Board did not agree that the reference to
``generally accepted professional standards'' is too vague to meet due
process requirements. The term has a well understood meaning that can
be determined by reference to the various audit, accounting or other
performance guidelines to which LSC recipients are subject.
Opportunity to cure. The prior rule required that a recipient be
given notice of a violation by the Corporation and an opportunity to
take effective corrective action before the Corporation initiated a
termination action. The proposed rule eliminated a recipient's right to
take corrective action, but left it within the discretion of the
Corporation to permit the recipient an opportunity to cure the problem.
The comments urged the Corporation to provide some opportunity or a
recipient to take corrective action before terminating a grant. One
comment urged that, absent unusual circumstances, a decision to
terminate a grant should only be made after a recipient has been made
aware of problems through such actions as investigations or questioned
cost proceedings, has been given ample time to correct the problem and
has failed to take the necessary corrective action.
The Board decided to retain the language of the proposed rule which
leaves it within the discretion of the Corporation whether to give a
recipient an opportunity to cure. The legislative intent underlying
Sections 501(b) and (c) of the Corporation's FY 1998 appropriations act
was to enable the Corporation to streamline its due process procedures
in order to ensure that recipients are in full compliance with LSC
grant requirements and restrictions. To provide an opportunity to cure
in all instances would slow down the process and tie the Corporation's
hands when there is a need to act more quickly. A recipient that has
substantially violated the terms of its grant is not entitled to a
second chance as a matter of right. Nevertheless, nothing in this rule
prohibits the Corporation from giving a recipient an opportunity to
cure before acting to terminate. If the Corporation identifies a
problem where there is potential for easy correction pursuant to a
corrective action plan, the Corporation has discretion to work with the
recipient to resolve the matter. In addition, one of the factors
considered by the Corporation when determining whether there is a
substantial violation is whether the recipient, upon learning of the
violation, took prompt corrective action.
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 fraud, embezzlement,
and false claims, to 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 Sec. 558 (1995).
This section implements Section 501(c) of the Corporation's
appropriations act and sets out the grounds for debarment in paragraph
(b). The grounds include a prior termination of a recipient for
violations of Federal law related to the use of Federal funds, such as
Federal 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. Clarifying
revisions were made to this provision.
Section 1606.4(a)(5), which implements Section 504(c)(5) of the
Corporation's appropriations act, 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, 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.
Comments on this ground for debarment expressed serious concerns
about the constitutionality of the rule's interpretation of the
provision. In response to comments and the legal analysis set out
below, the Board revised this ground for debarment to be consistent
with constitutional and other applicable law.
It is well-settled in law that Congress has authority to immunize
agency decision-making from judicial review, as long as the intent is
clear in the law. Where judicial review is precluded, a court has no
jurisdiction to hear a dispute over an agency action. Nevertheless,
courts are not thereby precluded from conducting a limited review to
consider whether the agency acted ultra vires, that is, outside of its
statutory limits, or violated the Constitution. Schneider v. United
States, 27 F. 3d 1327, 1332 (8th Cir. 1994); Carlin v. McKean, 823 F.2d
620, 622 (DC Cir. 1987); Morazsan v. United States, 852 F. 2d 1469,
1477 (7th Cir. 1988). See also Magana-Pizano v. INS, 1998 WL 550111,
152 F.3d 1213 (9th Cir. 1998).
This law is reflected in the final rule which now provides that
recipients will be subject to debarment for seeking judicial review of
any agency action under any of their Federally-funded programs, except
for limited constitutional or ultra vires claims.
Comments also suggested that the language setting out this ground
for a debarment be revised for clarity. The Board agreed and the
language has been revised.
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, the recipient will be provided notice and an opportunity to
be heard according to the procedures in this part.
Section 1606.6 Preliminary Determination
This section sets out the requirements for providing notice to the
recipient of the Corporation's preliminary determination 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.
The term proposed decision used in this section in the proposed
rule has been changed to preliminary
[[Page 64641]]
determination to be consistent with changes made to the burden of proof
provisions, as discussed below.
Paragraph (a) of this section requires that the notice of the
preliminary determination be in writing and that it 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 in
which a preliminary determination becomes final.
Section 1606.7 Informal Conference
This section is generally the same as Sec. 1606.5 in the prior
rule, but has been renumbered and restructured for clarity. It allows
the Corporation and recipient to have an informal conference either to
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 proposed rule dropped language from the prior rule
stating that the preliminary conference may be adjourned for
deliberation or consultation. One comment urged the Corporation to
return the adjournment language to the rule stating that adjournments
can be of great importance to a recipient that has learned of
allegations during the conference that require further investigation
before a response can be formulated.
The deletion of the adjournment language was not intended to
preclude an adjournment if one is deemed appropriate by the
Corporation. It was 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. Accordingly, the Board did not revise the proposed rule to
include adjournment as a matter of right.
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. The prior process has been
simplified by deleting provisions permitting third party participation
in the hearing and other unnecessary provisions. 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.
Impartial hearing officer. 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 prior 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. 2
---------------------------------------------------------------------------
\2\ Section 501(b) of the Corporation's FY 1998 appropriations
act provides that Section 1011 of the LSC Act is no longer
applicable to the provision, denial, suspension, or termination of
financial assistance to recipients. Section 1011 has provided
recipients with a right to an independent hearing examiner since
1977.
---------------------------------------------------------------------------
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). 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.
Comments expressed concern about the elimination of the recipient's
right to have an independent hearing examiner, who was required to be a
person not employed by the Corporation. Noting that LSC staff is
substantially smaller than it has been in previous years, comments
stated that there may often be no staff available that would qualify as
an impartial hearing officer. One comment suggested that the rule
should explicitly state that, in such a case, a person outside of the
Corporation could be appointed to preside over the hearing. Two
comments urged the Corporation to go beyond what is required by law to
provide recipients with a right to an independent hearing examiner.
The Board did not agree that the Corporation should provide a right
to an independent hearing examiner in the rule. The rule already
permits the Corporation to use an outside hearing officer because it
states that the hearing officer ``may'' be an employee of the
Corporation. There is also nothing in the rule that requires that the
President must first determine if any employee of the Corporation is
available before designating an outside person. To require an outside
hearing examiner would suggest that the Corporation has ignored the
statutory changes adopted by Congress. It is the view of the
Corporation that the hearing procedures in the final rule comply with
the requirements of due process, in part because it permits the
Corporation to appoint a person not employed by the Corporation when
necessary to ensure that the hearing officer is impartial.
Open hearings. Comments on paragraph (f) of this section urged that
the hearing proceedings should not be closed to the public except for
extraordinary circumstances. The standard for closing a meeting in the
prior and proposed rules was ``for good cause and the interests of
justice.'' In addition, the proposed rule provided that a decision to
close a hearing would be made by an impartial hearing officer. One
comment viewed this standard as too broad and subject to abuse, but
provided no practical or factual reasons why the standard should be
higher. The Board made no revisions to this paragraph since experience
has not indicated any problems with the current standard.
Burden of proof. The Corporation had the burden of proof under the
prior rule. Section 1606.8(l) of the proposed rule placed the entire
burden of proof on the recipient. Comments urged the Corporation to
place the burden on the Corporation. Comments also pointed out that
various statements on the burden in
[[Page 64642]]
the preamble and the text appeared to be inconsistent with other
provisions of the text of the proposed rule. While Sec. 1606.8(l) put
the burden on the recipient, the grounds for debarment required the
Corporation to show ``good cause'' before it could debar a recipient,
suggesting that the Corporation at least has the initial burden of
proof.
The Board decided to revise the rule to place the initial burden on
the Corporation to show it has grounds for initiating a termination or
debarment action in order to ensure that an action by the Corporation
would be based on sufficient evidence to establish grounds for the
action. The burden would then shift and the recipient would have to
show by a preponderance of evidence on the record that its funds should
not be terminated or that it should not be debarred based on the
alleged grounds. Shifting the burden in this manner is consistent with
the emphasis in current law on strengthening the Corporation's ability
to sanction recipients and recompete service areas, see H. Rep. No.
207, 105th Cong., 1st Sess. 140 (1997) and the statutory language that
authorizes the Corporation to debar a recipient upon a showing of
``good cause.''
The Board made other revisions to the rule to be consistent with
the change to the burden of proof. As noted above, the term ``proposed
decision'' was changed to ``preliminary determination.'' The change in
this term means that, based on the evidence before it, the Corporation
has made an initial determination that it has grounds to take action
against the recipient. It does not mean that the recipient could not
have a fair hearing because the Corporation has already made up its
mind. It simply means that the Corporation employee designated to bring
such actions has made a preliminary decision that grounds exist for
taking the action. The recipient will have the opportunity to rebut the
evidence before an impartial hearing officer who was not involved in
making the preliminary decision and to present any legal, factual or
equitable arguments it wishes to state its case. The recipient could
also appeal the hearing officer's decision to the President of the
Corporation.
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. A reference to the informal conference in paragraph (b) was
deleted when an objection was raised to including discussions or
documents of the informal conference in the hearing record. Including
such discussions and documents would mean that offers of settlement,
conditional admissions and other information could then be included in
the findings of fact. This is not consistent with standard procedures
for settlement conferences and would risk undercutting the ability of
parties to negotiate and discuss matters informally in order to avoid a
full hearing.
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.
Additional submissions and administrative record. The rule requires
that the recommended decision contain findings of significant and
relevant facts and state the reasons for the decision. It also requires
that all findings of fact be based solely on the record of the hearing
or on matters of which official notice was taken. When the recommended
decision is appealed to the President, or in a separate debarment
proceeding, the rule permits additional submissions to supplement the
record.
Comments pointed out that recipients should be able to respond to
any additional submissions, especially if such submissions become part
of the administrative record. The Board agreed and added additional
language to do so in Paragraph (c) in this section. A similar revision
was also made to Paragraph (c)(2) in Sec. 1606.11 which includes
qualifications to the hearing procedures.
Section 1606.11 Qualifications on Hearing Procedures
The primary intent of this section is 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
full termination hearing under this part. Rather, the recipient will be
given a brief review process set out in paragraph (c) of this section.
In many cases, the Corporation may utilize the procedure delineated in
paragraph (b) of this section, which permits the Corporation to take
action simultaneously to terminate and debar a recipient within the
same hearing procedure.
One comment noted that provision was not made in this section for
circumstances where a debarment action is not based on a prior
termination and suggests that the Corporation clarify in the rule that,
where debarment is not based on a prior termination hearing, the
recipient will receive the full hearing procedures provided for
termination actions. Because this was the intent of the proposed rule,
the Board revised the rule by adding a new paragraph (a) which provides
that the full hearing rights set out in this rule apply to any
debarment or termination actions unless the action is based on a prior
termination. Thus, 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 Sec. 1471.320.
One comment suggested that a similar reversal provision should also
be included in the rule for terminations. The Board did not agree. If a
debarment decision is reversed, it permits the recipient to take part
in the next competition. However, if a termination is reversed, the
funds may no longer be available to return to the recipient. Either the
funds may have been reprogrammed or a new recipient may have been
awarded the grant for the applicable service area. The Corporation
should not bind itself by regulation to a commitment it might not have
the means to keep.
Section 1606.12 Time and Waiver
With two exceptions, paragraph (a) is essentially the same as in
the prior rule. Paragraph (b) in the prior rule has been deleted in
this rule because it implemented a time limit to the proceedings
required under law that no longer has effect. Also, paragraph (c) in
the prior 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
[[Page 64643]]
Constitution. The rule already provides sufficient discretion and
flexibility.
The only change made to this section from the proposed rule is the
addition of paragraph (b) which is moved from Sec. 1606.13 in the
proposed rule. 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 1606.13 Interim and Termination Funding; Preprogramming
Paragraph (a) of 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 prior rule and the due process requirement that funding not be
terminated until a fair hearing has been provided. It also assures the
continuance of service to clients in the affected service area.
Paragraph (b) clarifies that when a recipient's funds are
terminated, the recipient loses all rights to the terminated funds. See
discussion on definition of termination.
Paragraph (c) was not in the proposed rule and has been added in
response to a comment that recommended that the rule explicitly provide
for termination funding when the Corporation terminates financial
assistance to a recipient in whole. Termination funding is contemplated
for some circumstances in Sec. 1606.14 which provides that after a
termination, until a new recipient is awarded a grant, the Corporation
shall take all practical steps to ensure the continued provision of
legal assistance in the service area. This could include termination
funding so that the outgoing recipient could finish or transfer pending
cases. Transitional funding is also contemplated in the competition
rule in Sec. 1634.10 and in the rule on cost standards and procedures
in Sec. 1630.5(b)(1).
Paragraph (d) is also new and has been added in response to
comments. It provides that funds recovered pursuant to a termination
will be used in the same service area from which they are recovered or
will be reprogrammed by the Corporation for basic field purposes. See
discussion of reprogramming in discussion of Sec. 1606.2.
Section 1606.14 Recompetition
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 Parts 1606 and 1625
Administrative practice and procedures, Legal services.
For reasons set out in the preamble, LSC revises 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 Preliminary determination.
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 and termination funding; reprogramming.
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) Knowing and willful means that the recipient had actual
knowledge of the fact that its action or lack thereof constituted a
violation and despite such knowledge, undertook or failed to undertake
the action.
(c) Recipient means any grantee or contractor receiving financial
assistance from the Corporation under section 1006(a)(1)(A) of the LSC
Act.
(d)(1) Termination means that a recipient's level of financial
assistance under its grant or contract with the Corporation will be
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;
(iv) A withholding of funds pursuant to the Corporation's Private
Attorney Involvement rule at 45 CFR Part 1614; or
(v) A reduction of funding of less than 5 percent of a recipient's
current annual level of financial assistance imposed by the Corporation
in accordance with regulations promulgated by the Corporation. No such
reduction shall be imposed except in accordance with regulations
promulgated by the Corporation.
[[Page 64644]]
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, and the violation occurred less than 5 years prior to the
date the recipient receives notice of the violation pursuant to
Sec. 1606.6(a); 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, including 45 CFR 1634.9(a)(2),
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 number of restrictions or requirements violated;
(2) Whether the violation represents an instance of noncompliance
with a substantive statutory or regulatory restriction or requirement,
rather than an instance of noncompliance with a non-substantive
technical or procedural requirement;
(3) The extent to which the violation is part of a pattern of
noncompliance with LSC requirements or restrictions;
(4) The extent to which the recipient failed to take action to cure
the violation when it became aware of the violation; and
(5) Whether the violation was knowing and willful.
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.
(b) As used in paragraph (a) of this section, ``good cause'' means:
(1) A termination of financial assistance to the recipient pursuant
to part 1640 of this chapter;
(2) A 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:
(i) A subgrant, subcontract, or other similar agreement with an
entity debarred by the Corporation during the period of debarment if so
precluded by the terms of the debarment; or
(ii) An agreement for professional services with an IPA debarred by
the Corporation during the period of debarment if so precluded by the
terms of the debarment; or
(5) The filing of a lawsuit by a recipient, provided that the
lawsuit:
(i) Was filed on behalf of the recipient as plaintiff, rather than
on behalf of a client of the recipient;
(ii) Named the Corporation, or any agency or employee of a Federal,
State, or local government as a defendant;
(iii) Seeks judicial review of an action by the Corporation or such
government agency that affects the recipient's status as a recipient of
Federal funding, except for a lawsuit that seeks review of whether the
Corporation or agency acted outside of its statutory authority or
violated the recipient's constitutional rights; 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 Preliminary determination.
(a) When the Corporation has made a preliminary determination 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 to 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 an informal conference or a
hearing within the time prescribed in Sec. 1606.7(a) or Sec. 1606.8(a),
the preliminary 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
preliminary 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 preliminary determination 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
[[Page 64645]]
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 the recipient at no cost.
(l) The Corporation shall have the initial burden to show grounds
for a termination or debarment. The burden of persuasion shall then
shift to the recipient to show by a preponderance of evidence on the
record that its funds should not be terminated or that it should not be
disbarred.
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 hearing or on matters of which official
notice was taken.
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. A recipient shall be given a copy of
and an opportunity to respond to any additional submissions made to the
President. All submissions and responses made to the President shall
become part of the administrative record.
(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) Except as modified by paragraph (c) of this section, the
hearing rights set out in Secs. 1606.6 through 1606.10 shall apply to
any action to debar a recipient or to terminate a recipient's funding.
(b) 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.
(c) If the Corporation does not simultaneously take action to debar
and terminate a recipient under paragraph (b) 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, as described in
Sec. 1606.8(c), 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. The recipient shall be given a copy of and an opportunity to
respond to any additional submissions made to the hearing officer. All
submissions and responses made to the hearing officer shall become part
of the administrative record.
(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).
(d) 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.
(e) 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.
(a) 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:
(1) By the designated employee who issued the preliminary decision
until a hearing officer has been appointed;
(2) By the hearing officer, until the recommended decision has been
issued;
(3) By the President at any time.
(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.
[[Page 64646]]
Sec. 1606.13 Interim and termination funding; reprogramming.
(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) After a final decision has been made to terminate a recipient's
grant or contract, the recipient loses all rights to the terminated
funds.
(c) After a final decision has been made to terminate a recipient's
grant or contract, the Corporation may authorize termination funding if
necessary to enable the recipient to close or transfer current matters
in a manner consistent with the recipient's professional
responsibilities to its present clients.
(d) Funds recovered by the Corporation pursuant to a termination
shall be used in the same service area from which they were recovered
or will be reallocated by the Corporation for basic field purposes.
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 removed and reserved.
Dated: November 18, 1998.
Victor M. Fortuno,
General Counsel.
[FR Doc. 98-31251 Filed 11-20-98; 8:45 am]
BILLING CODE 7050-01-P
