[Federal Register Volume 64, Number 248 (Tuesday, December 28, 1999)]
[Rules and Regulations]
[Pages 72501-72522]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33461]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Federal Housing Enterprise Oversight
12 CFR Part 1780
RIN 2550-AA04
Rules of Practice and Procedure
AGENCY: Office of Federal Housing Enterprise Oversight, HUD.
ACTION: Final rule.
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SUMMARY: The Office of Federal Housing Enterprise Oversight (OFHEO) is
issuing a final rule that establishes the rules of procedure to be
followed when OFHEO conducts hearings on the record and rules of
practice before OFHEO. The rule implements the provisions of title XIII
of the Housing and Community Development Act of 1992, known as the
Federal Housing Enterprises Financial Safety and Soundness Act of 1992,
regarding hearings on the record in certain enforcement actions against
the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, or directors or executive officers of the
Enterprises. The rule provides OFHEO personnel, the Enterprises, the
Enterprises' directors and executive officers, and other interested
parties with the guidance necessary to prepare for and participate in
such hearings.
EFFECTIVE DATE: January 27, 2000.
FOR FURTHER INFORMATION CONTACT: David A. Felt, Associate General
Counsel, Office of Federal Housing Enterprise Oversight, 1700 G Street,
NW., Fourth Floor, Washington, DC 20552, telephone (202) 414-3829 (not
a toll-free number). The telephone number for the Telecommunications
Device for the Deaf is: (800) 877-8339.
SUPPLEMENTARY INFORMATION: The Supplementary Information is organized
according to this table of contents:
I. Background
II. Comments on the Proposed Rules of Practice and Procedures
III. Synopsis of the Final Rule
IV. Regulatory Impact
I. Background
Title XIII of the Housing and Community Development Act of 1992,
Pub. L. No. 102-550, known as the Federal Housing Enterprises Financial
[[Page 72502]]
Safety and Soundness Act of 1992 (1992 Act), established OFHEO as an
independent office within the Department of Housing and Urban
Development (HUD) to ensure that the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) (collectively, the Enterprises) are capitalized
adequately and operated in a safe and sound manner. Subsection 1313(b)
of the 1992 Act refers to certain authorities that the Director of
OFHEO (Director) may exercise exclusive of the Secretary of HUD
(Secretary) \1\ and other authorities that are subject to review and
approval by the Secretary.\2\ The Secretary's roles, duties, and
responsibilities may be delegated to the Director. Among the exclusive
authorities of the director is the authority to issue regulations to
carry out the duties of the Director under Subtitle C of the Act.\3\
Prior to issuing a cease-and-desist order, OFHEO must conduct hearings
on the record and provide the subjects of the order with notice and the
opportunity to participate in such hearings.\4\ Prior to imposing civil
money penalties, OFHEO must provide notice and the opportunity for a
hearing to the persons subject to the penalties.\5\ This final rule
provides the rules of practice and procedure that will be applied in
these hearings and any other hearings on the record that may be
conducted by the Director.
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\1\ 12 U.S.C. 4513(b).
\2\ Any determinations, actions or functions of the Director
that are not referred to in subsection 1313(b) are subject to the
review and approval of the Secretary. 1992 Act, section 1313(c) (12
U.S.C. 4513(c)).
\3\ 1992 Act, section 1313(b) (12 U.S.C. 4513(b)).
\4\ 1992 Act, section 1371 (12 U.S.C. 4631).
\5\ 1992 Act, section 1376 (12 U.S.C. 4636).
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Fannie Mae and Freddie Mac are Government-sponsored enterprises
with important public purposes. These purposes include providing
liquidity to the residential mortgage market and increasing the
availability of mortgage credit benefiting low- and moderate-income
families, rural areas, central cities, and areas that are underserved
by lending institutions. The Enterprises engage in two principal
businesses: investing in residential mortgages and guaranteeing
residential mortgage securities. The securities they guarantee and the
debt instruments they issue are not backed by the full faith and credit
of the United States.\6\ Despite the absence of such Federal backing,
prices of Enterprise debt securities reflect a market perception that
the U.S. Government has a strong interest in preventing a default by
either Enterprise. This perception principally arises from the public
purposes of the Enterprises, their Federal charters, their potential
access to a U.S. Treasury line of credit and the statutory exemptions
of their debt and mortgage-backed securities from otherwise mandatory
investor protection provisions.\7\ This perception is bolstered by
concern that the insolvency of either Enterprise would have serious
consequences for the nation's housing markets and financial system.
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\6\ Federal Home Loan Mortgage Corporation act, sections 301(4)
and 306(h)(2), (12 U.S.C. 1451 note (b)(3)-(4), 12 U.S.C.
1455(h)(2)); Federal National Mortgage Association Charter Act,
sections 301(4) and 304(b) (12 U.S.C. 1716(3)-(4), 12 U.S.C.
1719(b)); and 1992 Act, section 1302(4) (12 U.S.C. 4501(4)).
\7\ See, e.g., 12 U.S.C. 24 (authorizing unlimited investment by
national banks in obligations of, or issued by, the Enterprises); 12
U.S.C. 1455(g), 1719(d) and 1723c (exempting Enterprise securities
from oversight from Federal regulators); 15 U.S.C. 77r-l(a)
(preempting State law that would treat Enterprise securities
differently from obligations of the United States for investment
purposes); and 15 U.S.C. 77r-l(c) (exempting Enterprise securities
from State securities laws).
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On September 24, 1998 (63 FR 51031), OFHEO published a Notice of
Proposed Rulemaking (NPR) that included proposed Rules of Practice and
Procedure. The NPR proposed rules of procedure for hearings on the
record before OFHEO and rules of practice governing individuals who
practice before OFHEO. The comment period closed December 23, 1998.
OFHEO received comments from each Enterprise in response to the
proposed rulemaking. A discussion of those comments follows.
II. Comments on the Proposed Rules of Practice and Procedure
General Comments
Fannie Mae fully supported OFHEO's efforts to formalize the rules
of practice and procedure governing the conduct of hearings on the
record. Fannie Mae stated its belief that any such hearing in the
future would occur only in the most extraordinary of circumstances and
emphasized its commitment to working with OFHEO in a good faith,
constructive relationship. Fannie Mae offered various comments and
recommended a number of changes that Fannie Mae asserts would make the
rules more consistent with the Administrative Procedure Act (APA) \8\
and with the practices in place at the Federal banking agencies.
Although, as explained below, OFHEO does not share the view that
anything in the proposed rule was inconsistent with the APA, OFHEO
found that some of the recommended changes added clarity to the rule
and has incorporated them. Each of the recommendations is discussed in
detail below.
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\8\ 5 U.S.C. 500-559.
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Freddie Mac expected that administrative enforcement proceedings
would occur rarely, if ever, and that OFHEO would not consider
initiating such a proceeding until both sides have sought cooperatively
to resolve the matters at issue through alternative means. Freddie Mac
stated that if OFHEO were to initiate a hearing on the record, the
rules of practice and procedure should conform with OFHEO's statutory
enforcement authority and be suited to the potential issues and parties
to such a proceeding. In this regard, Freddie Mac recommended a number
of changes that would, in its view, improve the rules by fostering
early resolution, streamlining the provisions addressing sanctions to
limit sanctions against individuals to those necessary to conduct an
adjudicatory hearing or related proceedings, and ensuring fairness and
due process. As explained below, OFHEO has considered each of these
recommendations and, in response to some of them, has made changes in
the final rule.
Utilize Pre-Filing Submissions To Foster Early Resolution
Freddie Mac's comments encouraged OFHEO to adopt a procedure that
would allow a potential respondent to submit a written statement of its
position, prior to filing a formal notice of charges. Freddie Mac felt
that a prior submission could provide the agency with additional facts,
allow prompt and early correction of any miscommunication and point out
weaknesses in the agency's preliminary position. In these and other
ways, Freddie Mac suggests, the submission would assist OFHEO in making
a well-reasoned decision about whether to pursue an alternative
resolution or initiate a formal enforcement action. Freddie Mac cited a
statement by the Securities and Exchange Commission (SEC) as an example
of successful use of such prior submissions, which that agency has used
for more than 20 years to help determine whether to file or otherwise
initiate a formal proceeding.\9\
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\9\ Securities Act Release No. 5310, 38 FR 5457, Mar. 1, 1973.
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OFHEO shares Freddie Mac's desire to foster early resolution of
enforcement matters and to ensure well-reasoned decision-making in
determining whether to pursue formal enforcement actions. OFHEO has
reviewed the cited SEC release and the practices of other
[[Page 72503]]
agencies. None of those agencies has published a regulation providing
for submissions prior to a notice of charges. OFHEO will permit persons
involved in an investigation to present a statement to OFHEO setting
forth their interests and position. However, OFHEO cannot put itself in
a position where, as a result of the establishment of formal procedural
requirements, it would lose its ability to respond timely to actionable
activities or conditions. Accordingly, OFHEO will not include among its
procedural regulations a requirement that OFHEO obtain or solicit views
or statements from persons against which notices of charges are soon to
be issued.
Section 1780.1 Scope
Fannie Mae recommended that the term ``director of any Enterprise''
at Sec. 1780.1(b) be defined in order to ``clarify that the term
`directors' means members of the board of directors.'' The term, as
used in this section of the final rule, refers to sections 1371 and
1376 of the 1992 Act and is intended to have the same meaning as the
same term in the Act. Accordingly, OFHEO found it unnecessary to define
the term in the final rule.
Freddie Mac recommended that Sec. 1780.1 be amended to list civil
money penalty hearings under section 102 of the Flood Disaster
Protection Act of 1973, as amended, 42 U.S.C. 4012a, among the hearings
subject to the regulation. Although, as Freddie Mac noted, such
hearings would be covered by the catchall provision in the section,
OFHEO has incorporated the recommended change to make that coverage
explicit.
Section 1780.3 Definitions
Both Enterprises commented about proposed Sec. 1780.3(h), which
defined the term ``presiding officer'' to be ``an administrative law
judge or any other person designated by the Director to conduct a
hearing.'' Fannie Mae recommended that OFHEO specify that only an ALJ
should be permitted to conduct administrative hearings. Fannie Mae
included a description of the administrative law judge (ALJ) program
and opined that the APA does not contemplate that an agency head
appoint ``any person'' to preside over hearings conducted on the
record. Fannie Mae stated that the rule does ``not set forth any
justification for OFHEO's departure from the commonly understood rules
of the APA or from the practice of other safety and soundness
regulators.'' Fannie Mae asserts that allowing persons other than ALJs
to preside over hearings under the APA is inconsistent with accepted
APA principles and with the uniform practice of the Federal banking
agencies and HUD.
The use of the term ``any other person'' in Sec. 1780.3(h) of the
proposed rules was not intended to suggest that the Director might
ignore the APA or other applicable law in appointing presiding
officers. It was intended as a recognition that the APA includes
exceptions to the general rule that the agency (in the case of boards
or commissions), the agency head or an ALJ shall preside at a
hearing.\10\ For example, the regulations of the United States Office
of Personnel Management relating to ALJs also allow temporary
appointment of qualified Federal annuitants, described as ``senior
administrative law judges'' under certain circumstances.\11\ However,
in addressing Fannie Mae's comment, OFHEO has modified the language
permitting persons other than ALJs to act as presiding officers, as
discussed below.
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\10\ 12 U.S.C. 556(a).
\11\ 5 CFR 930.216.
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The use of the term ``any other person'' was not intended to imply
that the circumstances that would require these other types of
presiding officers are likely to occur in OFHEO enforcement
proceedings. Neither was it intended to take a legal position that
OFHEO did not consider its hearings to be governed by the APA or other
applicable laws (such as those listed at Sec. 1780.1). However, because
these rules are intended to have broad applicability to any hearings
that are required to be on the record, including any that might be
added by future legislation, OFHEO chose to provide maximum flexibility
under whatever law is applicable, now or in the future. To clarify this
point, OFHEO has replaced the phrase ``designated by the Director''
with ``appointed by the Director under applicable law.''
OFHEO agrees that the practice of the agencies cited by Fannie Mae
is to utilize ALJs. That would generally be OFHEO's practice also.
However, in drafting the definition of presiding officer, OFHEO looked
to the Uniform Rules of the Federal bank and thrift regulators. The
Uniform Rules, which use the term ``administrative law judge'' where
the OFHEO rules use ``presiding officer,'' define ``administrative law
judge'' to mean ``one who presides at an administrative hearing under
authority set forth at 5 U.S.C. 556.'' As explained above, that person
or body of persons need not always be an administrative law judge.
OFHEO has followed the same general approach, allowing for persons
other than an administrative law judge to preside, but only where they
can be appointed under applicable law.
Freddie Mac recommended that, to help ensure the fairness and
impartiality of administrative proceedings, the rule be changed to
insert the word ``neutral'' to describe the ALJ or other person. OFHEO
concurs with the Enterprises that any presiding officer should be
impartial and fair. However, OFHEO disagrees with Freddie Mac that
adding the word ``neutral'' to the regulation would further this goal.
The provisions of the APA that govern selection of presiding officers
and the conduct of hearings apply to proceedings under this final rule
and are sufficient to insure impartiality and fairness.
Sections 1780.5 Authority of the Presiding Officer and 1780.6 Public
Hearings
Each Enterprise commented that Sec. 1780.6(c) should be modified to
allow any party to request that documents be filed under seal. Fannie
Mae explained its view that confidentiality goes to the heart of the
fairness of a hearing and that allowing an agency, but not the other
parties, to file confidential documents is unfair. Freddie Mac also
felt that a change to allow all parties to request that a document be
filed under seal was necessary to ensure fairness to all parties.
OFHEO concurs with the need to ensure confidentiality of some
documents and testimony in adjudicatory proceedings and agrees that all
parties should be able to request confidentiality. Moreover, OFHEO
believes that the authority to order documents to be filed under seal
is among the inherent powers of the presiding officer under Sec. 1780.5
to conduct a hearing and to rule on motions or procedural matters.
However, in response to the comments, OFHEO has included some
additional language in the final rule. This language, which is drawn
from the Uniform Rules of the Federal financial institution regulatory
agencies, emphasizes the authority of the presiding officer to maintain
confidentiality of documents where appropriate. Specifically,
Sec. 1780.5(b)(5) now includes expressly the authority to issue
protective orders and Sec. 1780.5(b)(15) now includes expressly the
authority to establish time, place and manner limitations on the
attendance of the public and the media for any public hearing. These
changes clarify that the presiding officer may issue a protective order
to maintain
[[Page 72504]]
confidentiality of documents a party seeks to file or is required to
disclose in discovery. Further, these changes make explicit the
authority of the presiding officer to maintain confidentiality of those
documents by excluding the public from portions of a hearing where
those documents may be introduced or discussed.
Section 1780.10 Service of Papers
The Enterprises each commented upon proposed Sec. 1780.10. Freddie
Mac recommended that OFHEO customize the language of this section to
the Enterprises by requiring service by OFHEO upon the Enterprises or
other respondents at a designated office within each Enterprise.
Freddie Mac suggested that language in the rule that allows service by
delivery to a person of suitable age and discretion at the physical
location where the individual resides or works was unnecessary, because
service of all such individuals could be made at the designated office
of the appropriate Enterprise. Freddie Mac further recommended that
OFHEO designate a hearing clerk to receive and log in papers in
situations where a presiding officer has not yet been assigned. Fannie
Mae asked that OFHEO clarify proposed Sec. 1780.10(f), asserting that
the following language was confusing: ``Failure to make proof of
service shall not affect the validity of service. The presiding officer
may allow the proof to be amended or supplied, unless to do so would
result in material prejudice to a party.'' Fannie Mae asked why it was
necessary to supply proof of service at all if failure to do so does
not affect validity of service.
OFHEO does not believe it necessary to adopt the service rules
recommended by Freddie Mac. OFHEO retains discretion to determine how
best to serve a notice of charges against an Enterprise under
particular circumstances. After initial service, OFHEO anticipates that
counsel for the Enterprise would enter an appearance and service of all
documents would be upon counsel. With respect to service upon
individuals against whom charges are brought, the service rules are
tailored to make reasonably certain that the individual receives notice
of the documents served. OFHEO's enforcement authorities are not
limited to current Enterprise employees and the service rules must
reach all possible recipients of documents in an enforcement action,
including those who might seek to avoid service. Moreover, OFHEO does
not wish to preclude service by various reasonable means should
circumstances require it. Therefore, OFHEO has not modified the
language in the final rule to allow the Enterprises to designate a
particular office for service upon the Enterprise and individuals.
OFHEO finds it unnecessary to specify by rule an individual or an
office within OFHEO for service or filing of documents related to a
hearing. In enforcement proceedings, the Director will be represented
by enforcement counsel upon whom service may be made. If a presiding
officer is not named in the notice of charges, an appropriate address
for filing of an answer to the notice will be provided in the notice.
OFHEO concurs with Fannie Mae that Sec. 1780.10(f) of the proposed
rules could be clarified. The final rule, therefore, makes clear that a
party may contest service only by claiming that actual service was not
made. The term ``proof of service'' is used to mean an affidavit by a
nonattorney or a declaration of counsel, filed and served with the
pleading or other document, stating when and by what means the document
was served. Such an affidavit or declaration establishes prima facie
that service was made and shifts the burden to a party contesting
service to come forward with evidence that service did not occur. The
failure of a party to include a proof of service with the document
would not alone be sufficient to prove lack of service or cause the
filing of such a document to be ineffective. Service could, if
necessary, be proven by other means. However, a proof of service must
be filed before the presiding officer can take action upon a filing,
such as a motion, that seeks such action. This rule prevents action
being taken without notice being provided to the nonmoving parties.
Section 1780.15 OFHEO's Right To Conduct Examinations
Freddie Mac recommended that Sec. 1780.15 be revised to provide
that OFHEO's examination authority not be used for after-the-fact
gathering of evidence to support a notice of charges that has already
been issued. Freddie Mac stated that the Director must have reasonable
cause to believe that grounds exist for initiating an action by the
time the Director serves the notice.
OFHEO decided not to accept Freddie Mac's recommendation to modify
Sec. 1780.15 for a number of reasons. First, it would be inappropriate
and unprecedented for a Federal financial institution regulatory agency
to prevent itself from using the most recent factual information
available. The language in Sec. 1780.15 is drawn directly from the
Uniform Rules of the bank and thrift regulators and reflects normal
examination and enforcement practices. As a matter of practice, Federal
financial institution regulatory agencies generally do not issue
notices of charges until a supporting factual record is adequately
developed. In this regard, OFHEO would be no different from these other
regulatory agencies. However, OFHEO does not consider it unfair or
improper to allow relevant information to be introduced at hearing that
may have come to light from an examination conducted after the notice
of charges. Any such information would be available to all parties
through discovery. OFHEO's rules anticipate that additional facts may
come to light during the prehearing phase and the rules allow for
liberal amendments to notices of charges and answers to reflect those
newly discovered facts.
Further, because the purpose of cease and desist orders is largely
remedial, it is especially important in fashioning such an order that
the presiding officer and the Director understand any steps an
Enterprise may have undertaken (or not undertaken) to deal with the
problems at issue since the filing of the notice of charges. Current
practices at an Enterprise could also be relevant in determining the
appropriateness and size of civil money penalties. Examinations are an
important means of providing current information.
OFHEO is also concerned that any rule that limits the use of
current examination findings at hearing could tend to chill the
examination process. Examiners might be reluctant to examine areas at
issue in the hearing out of concern that their work might raise issues
about whether facts introduced at hearing were discovered after service
of the notice of charges. The result could be that OFHEO would be
hindered in its ability to examine those areas that were experiencing
the worst problems at the Enterprise.
Finally, a rule such as Freddie Mac suggests would require
discovery and collateral hearings to determine the source of much of
OFHEO's evidence. In OFHEO's view, such collateral proceedings would be
inappropriate, because the proper issue is whether parties have had
sufficient time to consider new evidence, not whether OFHEO obtained it
in an examination after a notice of charges was filed. Further, the
appropriate remedy in the event that there has been insufficient time
is to extend the hearing date, not to exclude the evidence.
[[Page 72505]]
Section 1780.20 Commencement of Proceeding and Contents of Notice of
Charges
Fannie Mae and Freddie Mac each recommended that OFHEO modify
Sec. 1780.20(b) to delete the proposed language requiring the notice of
charges to state ``the matters of fact or law showing that OFHEO is
entitled to relief'' and replace it with a requirement that the notice
of charges include ``a statement of the facts constituting the alleged
conduct or violation.'' Fannie Mae stated that the recommended
language, which is drawn directly from the 1992 Act, 12 U.S.C. 4631(c),
would require greater specificity in the initial notice, ensure more
fairness, and better enable the respondent to answer the charges.
OFHEO decided not to modify the language of Sec. 1780.20(b). This
NPR language is virtually identical to the Uniform Rules of the Federal
bank and thrift regulators.\12\ The governing statute for those
regulatory agencies, 12 U.S.C. 1818(b)(1), uses language identical in
relevant part to that of the 1992 Act. OFHEO intends its procedures in
regard to notices of charges to be the same as those of the Federal
bank and thrift regulators and, accordingly, is utilizing the same
language to describe the requirements for those notices.
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\12\ See 12 CFR 19.18(b)(2).
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Further, OFHEO does not understand the language of Sec. 1780.20(b)
to be narrower than the statutory language. The regulatory language
merely clarifies a level of specificity that is adequate to meet the
statutory requirement. The notice of charges is not intended to provide
a full and complete factual explication of the case against a
respondent. Respondents may use discovery to obtain additional details.
The notice of charges is intended simply to place respondents on notice
of the nature of the charges against them, with sufficient specificity
to allow them to prepare an answer and frame discovery requests. More
complex and technical pleading requirements would, in OFHEO's view, add
unnecessary and inefficient burden to the hearing process.
Fannie Mae recommended that Sec. 1780.20(d) be amended to include
language from section 1373(a)(2) of the 1992 Act (12 U.S.C. 4633(a)(2))
that requires hearings on cease and desist orders to be fixed for a
date not earlier than 30 days nor later than 60 days after service of
notice of charges. OFHEO disagrees with this recommendation. Like the
Uniform Rules, OFHEO's rule covers proceedings that arise under various
statutory provisions. It is not the purpose of this rule to catalogue
the requirements of all these statutes. It would also be inappropriate,
and potentially misleading, to include the requirements of only one.The
language of Sec. 1780.20(d) is virtually identical to that of the
Uniform Rules. That language does not negate section 1373(a)(2) of the
1992 Act any more than the Uniform Rules negate identical requirements
in 12 U.S.C. 1818(b)(1), which govern cease and desist proceedings
involving banks and thrifts.
Section 1780.22 Amended Pleadings
Fannie Mae recommended that certain language from the Uniform Rules
be added to the second sentence in Sec. 1780.22(b). However, OFHEO
modified the language of the Uniform Rules \13\ by splitting one long
sentence into two sentences. No language from the Uniform Rules has
been dropped in this modification. OFHEO did not intend to change the
meaning of the Uniform Rules, but to clarify that the presiding officer
will admit evidence freely if it will assist in the adjudication of the
merits and will not prejudice an objecting party's action or defense on
the merits.
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\13\ See 12 CFR 19.20(b).
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Accordingly, OFHEO found it unnecessary to change the language in
the proposed rule.
Section 1780.26 Discovery
Both Enterprises recommended that OFHEO modify the rule to provide
for interrogatories and discovery depositions, in addition to document
discovery. Freddie Mac pointed out that there is a split among the
regulations of the Federal financial institution regulatory agencies on
the availability of these discovery tools. Fannie Mae believes that
discovery depositions of experts and factual witnesses would promote
efficiency in any hearing, improve fact finding and lead to earlier
resolution of complex matters.
OFHEO recognizes that some regulatory agencies allow for discovery
depositions and interrogatories and some do not. The experiences of the
Office of the Comptroller of the Currency (OCC), the Office of Thrift
Supervision (OTS) and the Board of Governors of the Federal Reserve
System (Board of Governors) led those agencies to find that discovery
depositions served a useful purpose by promoting fact finding and
encouraging settlements. However, even at those agencies, discovery
depositions are limited to witnesses that have factual, direct and
personal knowledge of matters at issue and expert witnesses. The
Federal Deposit Insurance Corporation (FDIC) and the National Credit
Union Administration (NCUA) determined that the interests of
respondents in further pretrial disclosure were satisfied by the
availability of extensive document discovery that complements the
document intensive nature of those agencies' proceedings.\14\
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\14\ See 56 FR 37969, Aug. 9, 1991.
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OFHEO considered carefully the scope of discovery that would be
permitted under its regulations. OFHEO has determined that broad
document discovery should be permitted, but has recognized that there
is no constitutional right to prehearing discovery, including
deposition discovery, in Federal administrative proceedings.\15\
Further, the APA contains no provisions for prehearing discovery, and
the discovery provisions of the Federal Rules of Civil Procedure are
inapplicable to administrative proceedings.\16\ Instead, each agency
determines the extent of discovery to which a party in an
administrative hearing is entitled.\17\
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\15\ Sims v. National Transportation Safety Board, 662 F.2d 668,
671 (10th Cir. 1981); P.S.C. Resources, Inc. v. N.L.R.B., 576 F.2d
380, 386 (1st Cir. 1978); Silverman v. Commodity Futures Trading
Comm., 549 F.2d 28, 33 (7th Cir. 1977).
\16\ Kenwich Petrochemicals, Inc. v. N.L.R.B., 893 F.2d 1468,
1484 (3d Cir. 1990); N.L.R.B. v. Valley Mold Co., Inc., 503 F.2d
693, 695 (6th Cir. 1976); Frillette v. Kimberlin, 508 F.2d 205 (3d
Cir. 1974) cert. denied, 421 U.S. 980 (1975).
\17\ McClelland v. Andrus, 606 F.2d 1278, 1285 (D.C. Cir. 1979).
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OFHEO's regulations strike a balance between the due process
interest of respondents in obtaining pretrial disclosure, including
discovery depositions, and OFHEO's need for swift adjudication while
preserving its limited resources. Further, OFHEO believes that, like
the FDIC and the NCUA, its enforcement actions generally would be
document-intensive and that respondents could, therefore, obtain
sufficient discovery through document requests.
Section 1780.28 Document Subpoenas to Nonparties
Fannie Mae commented that Sec. 1780.28(a)(3) gives too much
discretion to the presiding officer to refuse to issue or to modify a
document subpoena. That provision governs applications for subpoenas
that do not set forth a valid basis for the issuance of a subpoena or
that request subpoenas with terms that are unreasonable, oppressive,
excessive in scope, or unduly burdensome. If presented with such an
application, the presiding
[[Page 72506]]
officer may refuse to issue the subpoena or may issue it in a modified
form upon such conditions ``as may be determined by the presiding
officer.'' Fannie Mae preferred the language of the Uniform Rules,
which is virtually identical except that, in lieu of the quoted
language, they state ``as may be consistent with the Uniform Rules.''
In a subsequent telephone conversation initiated by OFHEO to seek
clarification of this comment, Fannie Mae explained that it hoped that
OFHEO rules could go farther than the Uniform Rules and provide more
specific standards governing the modification of or refusal to issue
subpoenas.
OFHEO declines to modify the language. Although OFHEO does not
intend any meaning different from the Uniform Rules, OFHEO does not
find a general reference to the practice and procedure rules to be
helpful. Any ruling by the presiding officer should be consistent with
the practice and procedure rules. The wording chosen by OFHEO clarifies
that the presiding officer has discretion under the rule to make
modifications to a subpoena and to place conditions upon its issuance.
The language in the rule does not grant unlimited discretion to the
presiding officer, but conditions action upon a determination that no
valid basis for the subpoena has been set forth or that the terms of
the subpoena are unreasonable, oppressive, excessive in scope or unduly
burdensome. To OFHEO's knowledge this language has not led to
unreasonable suppression of discovery requests in hearings conducted by
other Federal financial institution regulatory agencies. For these
reasons, OFHEO sees no need to add additional conditions or
requirements to guide the rulings of presiding officers.
Section 1780.30 Interlocutory Review
Fannie Mae commented that the sentence in Sec. 1780.30(c) that
expressly allows the presiding officer to indicate an opinion about the
appropriateness of interlocutory review is highly prejudicial. Fannie
Mae stated that it is equivalent to allowing a trial court to express
an opinion to an appellate court on the arguments of a party that
brings an interlocutory appeal during a trial. Fannie Mae asserted that
the Federal financial institution regulatory agencies and HUD do not
allow presiding officers to comment upon the appropriateness of
interlocutory review.
OFHEO finds nothing prejudicial about allowing the presiding
officer to comment upon whether a motion for interlocutory appeal meets
the standards for such review. Except in a very narrow class of
interlocutory appeals,\18\ interlocutory appeals are available in the
Federal courts (and most State courts): (1) only at the discretion of
the appellate court and (2) only if the trial judge is of the opinion
that such an appeal is appropriate \19\ and so certifies in an
order.\20\ The purpose of this requirement is to prevent piecemeal
review of actions. OFHEO's rules do not go this far, but merely allow
the presiding officer to opine as to whether an interlocutory appeal is
appropriate. Unlike in the Federal courts, parties are free to request
interlocutory review even if the presiding officer believes the review
would not be appropriate.
---------------------------------------------------------------------------
\18\ 28 U.S.C. 1292(a).
\19\ 28 U.S.C. 1292(b).
\20\ Fed. R. Civ. P. 5(a).
---------------------------------------------------------------------------
OFHEO disagrees with Fannie Mae's view that the Uniform Rules
prohibit an administrative law judge from opining upon the
appropriateness of a motion for interlocutory review. Nothing in those
rules can be read to prohibit such an opinion. As in OFHEO's rules,
under the Uniform Rules, parties file their motions and responses for
interlocutory review with the ALJ, who ``refers'' them to the agency
head. The ALJ may use this referral as an opportunity to state views
upon whether particular issues merit that review.
It is important to distinguish between the presiding officer's
opining on the appealability of a matter and opining on its merits.
Parties seeking interlocutory review are appealing from a matter on
which the presiding officer has ruled and, presumably, placed an
opinion on the record. Section 1780.30(c) provides the Director
discretion to consider the matter prior to the review of the entire
hearing if (1) the ruling involves a controlling question of law or
policy as to which substantial grounds exist for a difference of
opinion, (2) immediate review of the ruling may materially advance the
ultimate termination of the proceeding, (3) subsequent modification of
the ruling at the conclusion of the proceeding would be an inadequate
remedy, or (4) subsequent modification of the ruling would cause
unusual delay or expense. The presiding official is in an excellent
position to advise the Director on whether these grounds for
interlocutory review are met and it is no more prejudicial to allow him
to express an opinion than for judges in the courts to do so. The fact
that a presiding officer has decided an issue against a particular
party does not mean that the presiding officer will feel that the issue
does not warrant interlocutory review. Where a novel legal issue is
involved or a final decision on the matter could clearly expedite the
resolution of the entire case, the presiding officer could have a
strong interest in supporting interlocutory review.
Fannie Mae also requested that the text of Sec. 1780.30(c) be
clarified to indicate that a party opposing a motion for interlocutory
review may file a response to such a motion. In OFHEO's view, such
clarification is unnecessary, because Sec. 1780.25(d), which governs
motions generally, applies. Section 1780.25(d) provides for responses
to all motions, except as otherwise provided. Section 1780.30 does not
contain an exception to Sec. 1780.25(d).
Section 1780.50 Conduct of Hearings
Freddie Mac commented that OFHEO should include a reference to
either the 1992 Act or, more generally, to applicable law in the rules
for conduct of hearings in Sec. 1780.50. Freddie Mac observed that laws
other than the APA may govern the conduct of hearings under the rules.
OFHEO concurs with this comment and has therefore added a reference
to ``other applicable law'' at Sec. 1780.50(a).
Subpart D--General Comments
Both Enterprises provided detailed comments regarding subpart D--
Rules of Practice Before the Office of Federal Housing Enterprise
Oversight. This subpart contains rules governing practice by parties or
their representatives before OFHEO. These rules include sanctions that
may be imposed in the course of an adjudicatory proceeding and censure,
suspension, and disbarment proceedings that may be brought against
individual practitioners.
Fannie Mae recognized and supported OFHEO's need to conduct orderly
hearings on the record. However, Fannie Mae felt that most of the
provisions of subpart D are outside the scope of OFHEO's authority to
conduct orderly hearings on the record. In addition, Fannie Mae
commented that many provisions were vague and confusing and that OFHEO
had not provided any ``legal explanation'' for this subpart. For these
reasons, Fannie Mae believes that subpart D ``is fraught with potential
for abuse and misunderstanding.'' Fannie Mae requested that OFHEO
clarify the scope of the subpart's applicability, provide specific
definitions for certain unspecified terms in the subpart and provide an
analysis of the statutory justification for the provisions in the
subpart, in particular those that do not relate to enforcement
proceedings under the 1992 Act. Fannie Mae believed that ``virtually
any conduct'' could be characterized by a presiding officer as
[[Page 72507]]
``contemptuous'' and that a presiding officer could find any sanction
``appropriate'' under this regulation.
Freddie Mac stated that the presiding officer must be able to
maintain order to accomplish the purposes of an adjudicatory hearing
and related proceedings. Freddie Mac agreed with the subpart in the
sense that the existence of sanctions would be helpful to accomplishing
those purposes. However, Freddie Mac stated that the scope of the
subpart should be limited to adjudicatory hearings and related
proceedings and to conduct by the parties and their representatives in
those hearings. Freddie Mac also recommended that lack of competence be
eliminated as a ground for sanctions and that the definition of
``practice before OFHEO'' be deleted.
Fannie Mae's comment suggests that OFHEO may lack authority to
issue rules governing practice beyond those necessary to control the
conduct of adjudicatory proceedings. OFHEO disagrees. OFHEO has an
interest in ensuring that individuals that it permits to represent the
interests of others before it can do so ethically and competently. The
authority to do so is incident to the authority of any agency to
control its internal operations, to insure that issues that must be
resolved by the agency are presented competently, that facts and law
are represented accurately, and that persons purporting to represent
others have appropriate authority. Further, OFHEO has chosen to allow
persons to practice before it who are not attorneys or other licensed
professionals subject to professional codes of conduct. Particularly as
to such individuals, who could not be referred to a licensing authority
for sanctions, OFHEO needs a means to ensure that their conduct and
competence meets normal professional standards.
OFHEO does not share the view of the Enterprises that the rules of
practice are too vague and too broad. OFHEO based its rules of practice
on those of the other Federal financial institution regulatory
agencies. Sections 1780.72 and 1780.73, which govern appearance and
practice in adjudicatory proceedings and conflicts of interest, are
modeled upon the Uniform Rules. The Enterprises raised no objection to
these sections. However, the Uniform Rules do not address expressly the
subjects of sanctions ordered in the course of a hearing or of censure,
suspension and disbarment. Each of the Federal financial institution
regulatory agencies that is subject to the Uniform Rules found it
necessary to address these subjects in separate Local Rules. Most of
these rules are similar to Secs. 1780.74 and 1780.75 of OFHEO's rules
of practice.\21\ Likewise, the Local Rules of most of these regulators
define the term ``practice,'' which OFHEO defines at Sec. 1780.71.\22\
---------------------------------------------------------------------------
\21\ Rules of practice for these agencies are found at 12 CFR
19.190-19.201 (OCC); 12 CFR 263.90-263.99 (Board of Governors); 12
CRF 308.108-308.109 (FDIC); 12 CFR 513.1-513.7 (OTS); 12 CFR 747.302
(NCUA--limited to certain suspension and prohibition proceedings).
\22\ 12 CFR 19.191(a) (OCC); 12 CFR 263.92(b)(1) (Board of
Governors); 12 CFR 308.109(e) (FDIC); 12 CFR 513.2(e) (OTS). NCUA
does not define ``practice'' in its regulations.
---------------------------------------------------------------------------
Although it is difficult to draw bright lines to describe what
conduct is contemptuous and what level of competence is sufficient,
OFHEO believes that the rule provides sufficient guidance in these
areas. If it should be necessary to impose sanctions under subpart D,
OFHEO will look to case law and the practices of other Federal
agencies, as well as any of OFHEO's own precedents that may exist, in
determining the appropriateness of particular sanctions.
Section 1780.70 Scope
Freddie Mac recommended that OFHEO limit the scope of subpart D to
practice in adjudicatory proceedings. Fannie Mae likewise commented
that parts of subpart D are outside the scope of OFHEO's authority to
conduct orderly hearings on the record. Freddie Mac suggested deleting
the phrase ``any other matters connected with presentations to OFHEO
relating to a client's or other principal's rights, privileges, or
liabilities'' in describing the scope of the subpart. Freddie Mac also
commented that the rules lack a bright line to determine what matters
are covered by subpart D.
OFHEO disagrees that its rules of practice should be more limited.
The quoted language is typical of that used by other Federal financial
institution regulatory agencies to describe the scope of their practice
rules.\23\ OFHEO chose the language in recognition of the fact that
counsel and other professionals frequently represent clients before
regulatory agencies in numerous types of matters. These matters include
rulemakings, investigations, and review of executive compensation
matters. OFHEO has an interest in insuring that the individuals with
whom it deals on such matters, in addition to formal adjudications,
meet minimal professional standards of competency and conduct.
Moreover, the conduct of individuals in these other types of
proceedings is relevant to their fitness to practice before OFHEO in
formal adjudications. Accordingly, OFHEO has not changed the scope of
subpart D. Although a ``bright line'' test, such as limiting the scope
to adjudications, might be simpler to administer, it would be, in
OFHEO's view, too narrow and rigid. Therefore, OFHEO prefers to define
the scope more broadly, to encompass various types of matters and
various types of representation.
---------------------------------------------------------------------------
\23\ See 12 CFR 19.190 (OCC); 12 CFR 263.90, 253.92(b)(1) (Board
of Governors); 12 CFR 513.1 (OTS).
---------------------------------------------------------------------------
Section 1780.71 Definitions
Freddie Mac stated that ``the expansive definition of `practice
before OFHEO' contained in Subpart D * * * is unclear.'' This statement
was made in the context of Freddie Mac's broader comment that the scope
of subpart D is overbroad and unclear and that the NPR ``fails to
address the potential problems that this expanded scope is best suited
to address.'' Freddie Mac suggested that OFHEO may seek to test every
presenter for the presence of adequate qualifications or subject every
presenter to potential sanctions based upon his character. Freddie Mac
states that such a process ``would serve no useful purpose and could
tend to impair what has been an open cooperative working relationship
between Freddie Mac and OFHEO.''
OFHEO likewise seeks open, cooperative working relationships with
the Enterprises, but does not interpret subpart D in a way that would
impair such relationships. It is not OFHEO's intention to require
everyone who conducts a presentation to OFHEO personnel to demonstrate
adequate qualifications. Rather, OFHEO intends to apply its practice
regulations in a manner similar to the practices of other Federal
financial institution regulatory agencies. Accordingly, OFHEO has made
no changes to Sec. 1780.71.
Section 1780.74 Sanctions
Fannie Mae stated that the conduct and sanctions specified in
proposed Sec. 1780.75(g) appeared redundant to similar conduct and
sanctions in proposed Sec. 1780.74. The provisions are not intended to
be redundant. Proposed Sec. 1780.75(g) specified that representatives
or individuals representing themselves who engage in contemptuous
conduct could be summarily suspended from a proceeding or subjected to
any other appropriate sanction. By contrast, proposed Sec. 1780.74
provided for sanctions that would be imposed after a hearing. However,
OFHEO found that the two provisions were better placed in the same
section, because they dealt with sanctions imposed by a presiding
[[Page 72508]]
officer during the course of an adjudicatory proceeding. Therefore, in
response to the comment, OFHEO has clarified the purposes of the two
provisions by combining them, incorporating the language from
Sec. 1780.75(g) into Secs. 1780.74(a)(1) and 1780.74(d).
Fannie Mae recommended that the summary procedure be eliminated
altogether and Freddie Mac recommended that any summary sanction occur
only after a written finding by the presiding officer that the
particular sanction is necessary. OFHEO believes that the authority to
expel individuals summarily from a hearing is inherent in and necessary
to the role and duties of presiding officer. Contemptuous conduct may
undermine the ability of the presiding officer to conduct a hearing. To
be effective, a presiding officer must have the ability to sanction
immediately anyone who engages in such conduct. Section 1780.74(d),
therefore, makes explicit an authority that is implicit in any event.
Requiring prior written findings by a presiding officer is inconsistent
with this type of authority, because these sanctions ordinarily would
be imposed immediately upon the occurrence of the contemptuous conduct.
Moreover, written findings may be unnecessary because hearings
ordinarily would be transcribed.
Section 1780.75 Censure, Suspension, Disbarment and Reinstatement
Freddie Mac recommended that OFHEO eliminate character and
incompetence as grounds for censure, suspension or disbarment. Freddie
Mac commented further that OFHEO should limit the scope of Sec. 1780.75
to adjudicatory hearings and related proceedings and to conduct by the
parties and their representatives in those hearings. Freddie Mac
explained:
As drafted, Sec. 1780.75 of the Proposed Rules would provide for
censure, suspension or disbarment of an individual based on a wide
variety of failings or prior conduct without any showing that the
underlying failing or conduct had resulted in, or would be likely to
result in, any adverse impact to an OFHEO adjudicatory hearing or
related proceeding. As such, it goes well beyond the disciplinary
authority that is a necessary incident to the authority to conduct
adjudicatory hearings and related proceedings (unnecessary sanctions
are simply punishment), and the exercise of that authority would
likely create a substantial burden [on] the proceedings and OFHEO.
OFHEO disagrees with Freddie Mac that character and prior conduct
of an individual is not relevant to that person's fitness to practice.
OFHEO has a major interest in ensuring that individuals who represent
others before it are honest and competent and have proper authority.
Moreover, as explained above, ``practice'' before OFHEO encompasses
more than appearances in adjudicatory proceedings. OFHEO can see no
reason to limit sanctions to conduct that impacts a specific
adjudicatory proceeding, as suggested by Freddie Mac. OFHEO should not
be required to review the same issues each time an individual whose
conduct warrants a suspension or disbarment appears. For these reasons,
OFHEO has chosen the approach of most other Federal financial
institution regulatory agencies and adopted a procedure that allows
persons who appear before OFHEO to be censured, suspended or disbarred.
Freddie Mac agreed with OFHEO that individuals appearing in an
adjudicatory hearing or related proceedings should be competent.
However Freddie Mac recommended that OFHEO rely upon the qualifications
requirements in Sec. 1780.72 to ensure competency, rather than allowing
incompetent representatives to be sanctioned. OFHEO has not accepted
this recommendation, because that section provides no effective means
to regulate the competence of individuals who appear. Section 1780.72
is intended primarily to ensure that individuals purporting to
represent other persons before OFHEO have the requisite authority. It
includes no requirement that representatives be competent nor any means
to deal with representatives who are incompetent.
Freddie Mac also argues that sanctions such as censure, suspension
and disbarment ``could effectively impose punishment beyond that
authorized by Congress for [violations of an Enterprise charter, the
1992 Act or any other law or regulation governing Enterprise
operations].'' According to Freddie Mac, because Congress gave OFHEO
authority to bring civil money penalties only against directors and
executive officers, OFHEO lacks authority to levy sanctions upon other
individuals. Under this theory, preventing an individual from practice
before OFHEO amounts to ``severe substantive punishment'' that goes
beyond actions necessary to control a particular hearing.
OFHEO disagrees with this interpretation of the 1992 Act. Incident
to the authority to manage its operations, any Federal agency has the
inherent authority to regulate reasonably the authority, qualifications
and competence of individuals who represent other persons before the
agency. As to adjudicatory proceedings involving individuals
representing themselves, the authority to maintain order and integrity
in those proceedings is inherent in the agency and the presiding
officer. This authority necessarily includes the authority to levy
appropriate sanctions. There is no legal basis to assert that these
authorities may only be used on a case by case basis. If the evidence
is sufficient to convince the Director that an individual should be
suspended from practice for a period of time or disbarred permanently
from appearing before OFHEO, the Director has the same inherent
authority to prevent that individual from practicing before OFHEO on
future matters as to suspend the individual from a current proceeding.
III. Synopsis of the Final Rule
The 1992 Act \24\ requires OFHEO to conduct its hearings pertaining
to cease-and-desist orders and civil money penalties in accordance with
the APA.\25\ Thus, the rules of practice and procedure supplement the
APA provisions governing agency adjudications and include provisions
unique to OFHEO's mission. These rules apply not only to enforcement
hearings, but also to any other adjudication required by statute to be
determined by the Director on the record after opportunity for hearing.
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\24\ 1992 Act, section 1373(a)(3) (42 U.S.C. 4633(a)(3)).
\25\ 5 U.S.C. 500-559.
---------------------------------------------------------------------------
The final rule includes provisions relating to prehearing
procedures and activities, the conduct of the hearing itself, and the
qualifications and disciplinary rules for practice before OFHEO. The
rule establishes that hearings are open to the public unless the
Director determines that a public hearing would be contrary to the
public interest. The disciplinary rules of practice in subpart D apply
not only to adjudicatory hearings under the APA, but also to all
matters that involve representation of others before OFHEO. The rules
also define important terms and describe the authority of the Director
and the presiding officer.
Under subparts A, B, and C of this part, the Director commences the
hearing process by issuing and serving a notice of charges on a
respondent. A presiding officer, appointed by the Director, presides
over the course of the hearing from the time of the appointment until
the presiding officer files a recommended decision and order, along
with the hearing record, with the Director for a final decision. During
the course of the hearing, the
[[Page 72509]]
presiding officer controls virtually all aspects of the proceeding. The
presiding officer: determines the hearing schedule; presides over any
prehearing conferences; rules on motions, discovery, and evidentiary
issues; and ensures that the proceeding is fair, equitable, and
impartial. The presiding officer does not, however, have the authority
to make a ruling that disposes of the proceeding. Only the Director has
the authority to dismiss the proceeding or to make a final
determination of the merits of the proceeding.
Under this rule, the parties to the proceeding have the right to
present evidence and witnesses at the hearing and to examine and cross-
examine the witnesses. At the completion of the hearing, the parties
may submit proposed findings of fact and conclusions of law and a
proposed order. The presiding officer then submits the complete record
to the Director for consideration and action. The record includes the
presiding officer's recommended decision, recommended findings of fact
and conclusions of law, and proposed order. The record also includes
all prehearing and hearing transcripts, exhibits, rulings, motions,
briefs and memoranda, and all supporting papers filed in connection
with the hearing. The Director shall issue a final ruling within 90
days of the date the Director serves notice on the parties that the
record is complete and the case has been submitted for final decision.
Subpart D of this rule contains rules governing practice by parties
or their representatives before OFHEO. This subpart addresses the
imposition of sanctions by the presiding officer or the Director
against parties or their representatives in an adjudicatory proceeding
under this part. This subpart also covers other disciplinary
sanctions--censure, suspension or disbarment--against individuals who
appear before OFHEO in a representational capacity either in an
adjudicatory proceeding under part 1780 or in any other matters
connected with presentations to OFHEO relating to a client's or other
principal's rights, privileges, or liabilities. This representation
includes, but is not limited to, the practice of attorneys and
accountants. Employees of OFHEO are not subject to disciplinary
proceedings under this subpart.
The final rule incorporates certain changes from the proposed
regulation. Section 1780.1 has been modified to include, among the
examples of proceedings covered by the rule, civil money penalty
assessment proceedings under section 102 of the Flood Disaster
Protection Act of 1973. The definition of ``presiding officer'' at
Sec. 1780.3(h) has been clarified in response to a comment discussed
above. Section 1780.5 has been modified to list among the express
authorities of the presiding officer, the authority to issue protective
orders and regulate public and media access to hearings. Section
1780.10(f) has been modified to clarify the purpose of a proof of
service declaration or affidavit. Section 1780.50 was modified to
clarify that hearings would be conducted not only in accordance with
the APA, but also any other applicable law. Section 1780.74 was
modified to incorporate the provisions of Sec. 1780.75(g) and to
clarify that the presiding officer may decide what notice and responses
are appropriate where sanctions are at issue in an adjudicatory
proceeding. Slight modifications were made to the language of
Sec. 1780.75(a) to clarify which individuals may be subject to
sanctions under the section. Section 1780.75(g) was deleted and its
provisions incorporated into Sec. 1780.74. In addition, the final rule
includes a number of minor corrections that create no substantive
change in the rule.
IV. Regulatory Impact
Executive Order 13132, Federalism
Executive Order 13132 requires that Executive departments and
agencies identify regulatory actions that have significant federalism
implications. ``Federalism implications'' is defined to specify
regulations or actions that have substantial, direct effects on the
States, on the relationship between the national Government and the
States, or on the distribution of power and responsibilities between
Federal and State Government. OFHEO has determined that this final rule
has no federalism implications that warrant the preparation of a
Federalism Assessment in accordance with Executive Order 13132.
Executive Order 12866, Regulatory Planning and Review
OFHEO has determined that this final rule is not a significant
regulatory action as such term is defined in Executive Order 12866, has
so indicated to the Office of Management and Budget (OMB) and was not
notified by OMB that the rule must be reviewed by OMB.
Executive Order 12988, Civil Justice Reform
Executive Order 12988 sets forth guidelines to promote the just and
efficient resolution of civil claims and to reduce the risk of
litigation to the Federal Government. This final rule meets the
applicable standards of sections 3(a) and 3(b) of Executive Order
12988.
Unfunded Mandates Reform Act of 1995
This rule does not include a Federal mandate that may result in the
expenditure by State, local and tribal governments, in the aggregate,
or by the private sector, of $100,000,000 or more (adjusted annually
for inflation) in any one year. Consequently, the final rule does not
warrant the preparation of an assessment statement in accordance with
the Unfunded Mandates Reform Act of 1995.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities must include a regulatory flexibility analysis
describing the rule's impact on small entities. Such an analysis need
not be undertaken if the agency head certifies that the rule will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b).
OFHEO has considered the impacts of the rule under the Regulatory
Flexibility Act. The rule does not have a significant economic impact
on a substantial number of small entities, because it is applicable
only to the Enterprises, which are not small entities. Therefore,
OFHEO's General Counsel, acting under delegated authority, has
certified that the rule would not have a significant economic impact on
a substantial number of small entities.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) requires
that regulations involving the collection of information receive
clearance from OMB. This rule contains no such collection of
information requiring OMB approval under the Paperwork Reduction Act.
Consequently, no information has been submitted to OMB for review.
List of Subjects in 12 CFR Part 1780
Administrative practice and procedure, Penalties.
Accordingly, for the reasons set forth in the preamble, OFHEO is
amending 12 CFR part 1780 as follows:
PART 1780--RULES OF PRACTICE AND PROCEDURE
1. Revise the heading for part 1780 to read as set forth above.
2. Revise the authority citation for part 1780 to read as follows:
[[Page 72510]]
Authority: 12 U.S.C. 4513, 4631-4641.
Subpart E also issued under 28 U.S.C. 2461 note.
Subpart E--[Amended]
3. Redesignate Secs. 1780.70 and 1780.71 as Secs. 1780.80 and
1780.81, respectively.
4. Add subparts A through D to part 1780 to read as follows:
Subpart A--General Rules
Sec.
1780.1 Scope.
1780.2 Rules of construction.
1780.3 Definitions.
1780.4 Authority of the Director.
1780.5 Authority of the presiding officer.
1780.6 Public hearings.
1780.7 Good faith certification.
1780.8 Ex parte communications.
1780.9 Filing of papers.
1780.10 Service of papers.
1780.11 Computing time.
1780.12 Change of time limits.
1780.13 Witness fees and expenses.
1780.14 Opportunity for informal settlement.
1780.15 OFHEO's right to conduct examination.
1780.16 Collateral attacks on adjudicatory proceeding.
Subpart B--Prehearing Proceedings
1780.20 Commencement of proceeding and contents of notice of
charges.
1780.21 Answer.
1780.22 Amended pleadings.
1780.23 Failure to appear.
1780.24 Consolidation and severance of actions.
1780.25 Motions.
1780.26 Discovery.
1780.27 Request for document discovery from parties.
1780.28 Document subpoenas to nonparties.
1780.29 Deposition of witness unavailable for hearing.
1780.30 Interlocutory review.
1780.31 Summary disposition.
1780.32 Partial summary disposition.
1780.33 Scheduling and prehearing conferences.
1780.34 Prehearing submissions.
1780.35 Hearing subpoenas.
Subpart C--Hearing and Posthearing Proceedings
1780.50 Conduct of hearings.
1780.51 Evidence.
1780.52 Post hearing filings.
1780.53 Recommended decision and filing of record.
1780.54 Exceptions to recommended decision.
1780.55 Review by Director.
1780.56 Exhaustion of administrative remedies.
1780.57 Stays pending judicial review.
Subpart D--Rules of Practice Before the Office of Federal Housing
Enterprise Oversight
1780.70 Scope.
1780.71 Definitions.
1780.72 Appearance and practice in adjudicatory proceedings.
1780.73 Conflicts of interest.
1780.74 Sanctions.
1780.75 Censure, suspension, disbarment and reinstatement.
Subpart A--General Rules
Sec. 1780.1 Scope.
This subpart prescribes rules of practice and procedure applicable
to the following adjudicatory proceedings:
(a) Cease and desist proceedings under sections 1371 and 1373,
title XIII of the Housing and Community Development Act of 1992, Pub.
L. No. 102-550, known as the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (1992 Act) (12 U.S.C. 4631, 4633).
(b) Civil money penalty assessment proceedings against the Federal
National Mortgage Association, the Federal Home Loan Mortgage
Corporation (collectively, the Enterprises), or any executive officer
or director of any Enterprise under sections 1373 and 1376 of the 1992
Act (12 U.S.C. 4633, 4636).
(c) Civil money penalty assessment proceedings under section 102 of
the Flood Disaster Protection Act of 1973, as amended, 42 U.S.C. 4012a.
(d) All other adjudications required by statute to be determined on
the record after opportunity for hearing, except to the extent
otherwise provided in the regulations specifically governing such an
adjudication.
Sec. 1780.2 Rules of construction.
For purposes of this part--
(a) Any term in the singular includes the plural and the plural
includes the singular, if such use would be appropriate;
(b) Any use of a masculine, feminine, or neuter gender encompasses
all three, if such use would be appropriate; and
(c) Unless the context requires otherwise, a party's representative
of record, if any, may, on behalf of that party, take any action
required to be taken by the party.
Sec. 1780.3 Definitions.
For purposes of this part, unless explicitly stated to the
contrary--
(a) Adjudicatory proceeding means a proceeding conducted pursuant
to these rules and leading to the formulation of a final order other
than a regulation;
(b) Decisional employee means any member of the Director's or the
presiding officer's staff who has not engaged in an investigative or
prosecutorial role in a proceeding and who may assist the Director or
the presiding officer, respectively, in preparing orders, recommended
decisions, decisions and other documents under this subpart.
(c) Director means the Director of OFHEO.
(d) Enterprise means the Federal National Mortgage Association and
any affiliate thereof and the Federal Home Loan Mortgage Corporation
and any affiliate thereof.
(e) OFHEO means the Office of Federal Housing Enterprise Oversight
of the Department of Housing and Urban Development.
(f) Party means OFHEO and any person named as a party in any
notice.
(g) Person means an individual, sole proprietor, partnership,
corporation, unincorporated association, trust, joint venture, pool,
syndicate, agency, or other entity or organization.
(h) Presiding officer means an administrative law judge or any
other person appointed by the Director under applicable law to conduct
a hearing.
(i) Representative of record means an individual who is authorized
to represent a person or is representing himself and who has filed a
notice of appearance in accordance with Sec. 1780.72.
(j) Respondent means any party other than OFHEO.
(k) Violation includes any action (alone or with another or others)
for or toward causing, bringing about, participating in, counseling, or
aiding or abetting a violation.
(l) The 1992 Act is title XIII of the Housing and Community
Development Act of 1992, Pub. L. No. 102-550, known as the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992 (1992
Act) (12 U.S.C. 4501-4641).
Sec. 1780.4 Authority of the Director.
The Director may, at any time during the pendency of a proceeding,
perform, direct the performance of, or waive performance of any act
that could be done or ordered by the presiding officer.
Sec. 1780.5 Authority of the presiding officer.
(a) General rule. All proceedings governed by this subpart shall be
conducted in accordance with the provisions of 5 U.S.C. chapter 5. The
presiding officer shall have complete charge of the hearing, conduct a
fair and impartial hearing, avoid unnecessary delay and assure that a
record of the proceeding is made.
(b) Powers. The presiding officer shall have all powers necessary
to conduct the proceeding in accordance with paragraph (a) of this
section and 5 U.S.C. 556(c). The presiding officer is authorized to--
[[Page 72511]]
(1) Set and change the date, time and place of the hearing upon
reasonable notice to the parties;
(2) Continue or recess the hearing in whole or in part for a
reasonable period of time;
(3) Hold conferences to identify or simplify the issues, or to
consider other matters that may aid in the expeditious disposition of
the proceeding;
(4) Administer oaths and affirmations;
(5) Issue subpoenas, subpoenas duces tecum, and protective orders,
as authorized by this part, and to revoke, quash, or modify such
subpoenas;
(6) Take and preserve testimony under oath;
(7) Rule on motions and other procedural matters appropriate in an
adjudicatory proceeding, except that only the Director shall have the
power to grant any motion to dismiss the proceeding or make a final
determination of the merits of the proceeding;
(8) Regulate the scope and timing of discovery;
(9) Regulate the course of the hearing and the conduct of
representatives and parties;
(10) Examine witnesses;
(11) Receive, exclude, limit, or otherwise rule on evidence;
(12) Upon motion of a party, take official notice of facts;
(13) Recuse himself upon motion made by a party or on his own
motion;
(14) Prepare and present to the Director a recommended decision as
provided in this part;
(15) To establish time, place and manner limitations on the
attendance of the public and the media for any public hearing; and
(16) Do all other things necessary and appropriate to discharge the
duties of a presiding officer.
Sec. 1780.6 Public hearings.
(a) General rule. All hearings shall be open to the public, unless
the Director, in his discretion, determines that holding an open
hearing would be contrary to the public interest. The Director may make
such determination sua sponte at any time by written notice to all
parties.
(b) Motion for closed hearing. Within 20 days of service of the
notice of charges, any party may file with the presiding officer a
motion for a private hearing and any party may file a pleading in reply
to the motion. The presiding officer shall forward the motion and any
reply, together with a recommended decision on the motion, to the
Director, who shall make a final determination. Such motions and
replies are governed by Sec. 1780.25.
(c) Filing documents under seal. OFHEO's counsel of record, in his
discretion, may file any document or part of a document under seal if
such counsel makes a written determination that disclosure of the
document would be contrary to the public interest. The presiding
officer shall take all appropriate steps to preserve the
confidentiality of such documents or parts thereof, including closing
portions of the hearing to the public.
Sec. 1780.7 Good faith certification.
(a) General requirement. Every filing or submission of record
following the issuance of a notice by the Director shall be signed by
at least one representative of record in his individual name and shall
state that representative's address and telephone number and the names,
addresses and telephone numbers of all other representatives of record
for the person making the filing or submission.
(b) Effect of signature. (1) By signing a document, the
representative of record or party certifies that--
(i) The representative of record or party has read the filing or
submission of record;
(ii) To the best of his knowledge, information and belief formed
after reasonable inquiry, the filing or submission of record is well-
grounded in fact and is warranted by existing law or a good faith,
nonfrivolous argument for the extension, modification, or reversal of
existing law; and
(iii) The filing or submission of record is not made for any
improper purpose, such as to harass or to cause unnecessary delay or
needless increase in the cost of litigation.
(2) If a filing or submission of record is not signed, the
presiding officer shall strike the filing or submission of record,
unless it is signed promptly after the omission is called to the
attention of the pleader or movant.
(c) Effect of making oral motion or argument. The act of making any
oral motion or oral argument by any representative or party shall
constitute a certification that to the best of his knowledge,
information, and belief, formed after reasonable inquiry, his
statements are well-grounded in fact and are warranted by existing law
or a good faith, nonfrivolous argument for the extension, modification,
or reversal of existing law and are not made for any improper purpose,
such as to harass or to cause unnecessary delay or needless increase in
the cost of litigation.
Sec. 1780.8 Ex parte communications.
(a) Definition. (1) Ex parte communication means any material oral
or written communication relevant to the merits of an adjudicatory
proceeding that was neither on the record nor on reasonable prior
notice to all parties that takes place between--
(i) An interested person outside OFHEO (including the person's
representative); and
(ii) The presiding officer handling that proceeding, the Director,
a decisional employee assigned to that proceeding, or any other person
who is or may reasonably be expected to be involved in the decisional
process.
(2) A communication that does not concern the merits of an
adjudicatory proceeding, such as a request for status of the
proceeding, does not constitute an ex parte communication.
(b) Prohibition of ex parte communications. From the time the
notice commencing the proceeding is issued by the Director until the
date that the Director issues his final decision pursuant to
Sec. 1780.55, no person referred to in paragraph (a)(1)(i) of this
section shall knowingly make or cause to be made an ex parte
communication. The Director, presiding officer, or a decisional
employee shall not knowingly make or cause to be made an ex parte
communication.
(c) Procedure upon occurrence of ex parte communication. If an ex
parte communication is received by any person identified in paragraph
(a) of this section, that person shall cause all such written
communications (or, if the communication is oral, a memorandum stating
the substance of the communication) to be placed on the record of the
proceeding and served on all parties. All parties to the proceeding
shall have an opportunity, within ten days of receipt of service of the
ex parte communication, to file responses thereto and to recommend any
sanctions, in accordance with paragraph (d) of this section, that they
believe to be appropriate under the circumstances.
(d) Sanctions. Any party or representative for a party who makes an
ex parte communication, or who encourages or solicits another to make
any such communication, may be subject to any appropriate sanction or
sanctions imposed by the Director or the presiding officer, including,
but not limited to, exclusion from the proceedings and an adverse
ruling on the issue that is the subject of the prohibited
communication.
(e) Consultations by presiding officer. Except to the extent
required for the disposition of ex parte matters as authorized by law,
the presiding officer may not consult a person or party on any matter
relevant to the merits of the adjudication, unless on notice and
opportunity for all parties to participate.
[[Page 72512]]
(f) Separation of functions. An employee or agent engaged in the
performance of investigative or prosecuting functions for OFHEO in a
case may not, in that or a factually related case, participate or
advise in the decision, recommended decision, or Director review under
Sec. 1780.55 of the recommended decision, except as witness or counsel
in public proceedings.
Sec. 1780.9 Filing of papers.
(a) Filing. Any papers required to be filed shall be addressed to
the presiding officer and filed with OFHEO, 1700 G Street, NW., Fourth
Floor, Washington, DC 20552.
(b) Manner of filing. Unless otherwise specified by the Director or
the presiding officer, filing shall be accomplished by:
(1) Personal service;
(2) Delivery to the U.S. Postal Service or to a reliable commercial
delivery service for same day or overnight delivery;
(3) Mailing by first class, registered, or certified mail; or
(4) Transmission by electronic media, only if expressly authorized
by and upon any conditions specified by the Director or the presiding
officer. All papers filed by electronic media shall also concurrently
be filed in accordance with paragraph (c) of this section.
(c) Formal requirements as to papers filed. (1) Form. All papers
must set forth the name, address and telephone number of the
representative or party making the filing and must be accompanied by a
certification setting forth when and how service has been made on all
other parties. All papers filed must be double-spaced and printed or
typewritten on 8\1/2\ x 11-inch paper and must be clear and legible.
(2) Signature. All papers must be dated and signed as provided in
Sec. 1780.7.
(3) Caption. All papers filed must include at the head thereof, or
on a title page, the name of OFHEO and of the filing party, the title
and docket number of the proceeding and the subject of the particular
paper.
(4) Number of copies. Unless otherwise specified by the Director or
the presiding officer, an original and one copy of all documents and
papers shall be filed, except that only one copy of transcripts of
testimony and exhibits shall be filed.
Sec. 1780.10 Service of papers.
(a) By the parties. Except as otherwise provided, a party filing
papers or serving a subpoena shall serve a copy upon the representative
of record for each party to the proceeding so represented and upon any
party not so represented.
(b) Method of service. Except as provided in paragraphs (c)(2) and
(d) of this section, a serving party shall use one or more of the
following methods of service:
(1) Personal service;
(2) Delivery to the U.S. Postal Service or to a reliable commercial
delivery service for same day or overnight delivery;
(3) Mailing by first class, registered, or certified mail; or
(4) Transmission by electronic media, only if the parties mutually
agree. Any papers served by electronic media shall also concurrently be
served in accordance with the requirements of Sec. 1780.9(c).
(c) By the Director or the presiding officer. (1) All papers
required to be served by the Director or the presiding officer upon a
party who has appeared in the proceeding in accordance with
Sec. 1780.72 shall be served by any means specified in paragraph (b) of
this section.
(2) If a notice of appearance has not been filed in the proceeding
for a party in accordance with Sec. 1780.72, the Director or the
presiding officer shall make service upon the party by any of the
following methods:
(i) By personal service;
(ii) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where
the individual resides or works;
(iii) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or
to any other agent authorized by appointment or by law to receive
service and, if the agent is one authorized by statute to receive
service and the statute so requires, by also mailing a copy to the
party;
(iv) By registered or certified mail addressed to the person's last
known address; or
(v) By any other method reasonably calculated to give actual
notice.
(d) Subpoenas. Service of a subpoena may be made:
(1) By personal service;
(2) If the person to be served is an individual, by delivery to a
person of suitable age and discretion at the physical location where
the individual resides or works;
(3) If the person to be served is a corporation or other
association, by delivery to an officer, managing or general agent, or
to any other agent authorized by appointment or by law to receive
service and, if the agent is one authorized by statute to receive
service and the statute so requires, by also mailing a copy to the
party; or
(4) By registered or certified mail addressed to the person's last
known address; or
(5) By any other method reasonably calculated to give actual
notice.
(e) Area of service. Service in any State, commonwealth,
possession, territory of the United States or the District of Columbia
on any person doing business in any State, commonwealth, possession,
territory of the United States or the District of Columbia, or on any
person as otherwise permitted by law, is effective without regard to
the place where the hearing is held.
(f) Proof of service. Proof of service of papers filed by a party
shall be filed before action is taken thereon. The proof of service,
which shall serve as prima facie evidence of the fact and date of
service, shall show the date and manner of service and may be by
written acknowledgment of service, by declaration of the person making
service, or by certificate of a representative of record. However,
failure to file proof of service contemporaneously with the papers
shall not affect the validity of actual service. The presiding officer
may allow the proof to be amended or supplied, unless to do so would
result in material prejudice to a party.
Sec. 1780.11 Computing time.
(a) General rule. In computing any period of time prescribed or
allowed by this subpart, the date of the act or event that commences
the designated period of time is not included. The last day so computed
is included unless it is a Saturday, Sunday, or Federal holiday. When
the last day is a Saturday, Sunday or Federal holiday, the period shall
run until the end of the next day that is not a Saturday, Sunday, or
Federal holiday. Intermediate Saturdays, Sundays and Federal holidays
are included in the computation of time. However, when the time period
within which an act is to be performed is 10 days or less, not
including any additional time allowed for in paragraph (c) of this
section, intermediate Saturdays, Sundays and Federal holidays are not
included.
(b) When papers are deemed to be filed or served. (1) Filing and
service are deemed to be effective--
(i) In the case of personal service or same day reliable commercial
delivery service, upon actual service;
(ii) In the case of U.S. Postal Service or reliable commercial
overnight delivery service, or first class, registered, or certified
mail, upon
[[Page 72513]]
deposit in or delivery to an appropriate point of collection; or
(iii) In the case of transmission by electronic media, as specified
by the authority receiving the filing in the case of filing, and as
agreed among the parties in the case of service.
(2) The effective filing and service dates specified in paragraph
(b)(1) of this section may be modified by the Director or the presiding
officer in the case of filing or by agreement of the parties in the
case of service.
(c) Calculation of time for service and filing of responsive
papers. Whenever a time limit is measured by a prescribed period from
the service of any notice or paper, the applicable time limits shall be
calculated as follows:
(1) If service was made by first class, registered, or certified
mail, or by delivery to the U.S. Postal Service for longer than
overnight delivery service, add three calendar days to the prescribed
period for the responsive filing.
(2) If service was made by U.S. Postal Service or reliable
commercial overnight delivery service, add 1 calendar day to the
prescribed period for the responsive filing.
(3) If service was made by electronic media transmission, add one
calendar day to the prescribed period for the responsive filing, unless
otherwise determined by the Director or the presiding officer in the
case of filing, or by agreement among the parties in the case of
service.
Sec. 1780.12 Change of time limits.
Except as otherwise provided by law, the presiding officer may, for
good cause shown, extend the time limits prescribed above or prescribed
by any notice or order issued in the proceedings. After the referral of
the case to the Director pursuant to Sec. 1780.53, the Director may
grant extensions of the time limits for good cause shown. Extensions
may be granted on the motion of a party after notice and opportunity to
respond is afforded all nonmoving parties, or on the Director's or the
presiding officer's own motion.
Sec. 1780.13 Witness fees and expenses.
Witnesses (other than parties) subpoenaed for testimony or
depositions shall be paid the same fees for attendance and mileage as
are paid in the United States district courts in proceedings in which
the United States is a party, provided that, in the case of a discovery
subpoena addressed to a party, no witness fees or mileage shall be
paid. Fees for witnesses shall be tendered in advance by the party
requesting the subpoena, except that fees and mileage need not be
tendered in advance where OFHEO is the party requesting the subpoena.
OFHEO shall not be required to pay any fees to or expenses of any
witness not subpoenaed by OFHEO.
Sec. 1780.14 Opportunity for informal settlement.
Any respondent may, at any time in the proceeding, unilaterally
submit to OFHEO's counsel of record written offers or proposals for
settlement of a proceeding without prejudice to the rights of any of
the parties. No such offer or proposal shall be made to any OFHEO
representative other than OFHEO's counsel of record. Submission of a
written settlement offer does not provide a basis for adjourning or
otherwise delaying all or any portion of a proceeding under this part.
No settlement offer or proposal, or any subsequent negotiation or
resolution, is admissible as evidence in any proceeding.
Sec. 1780.15 OFHEO's right to conduct examination.
Nothing contained in this part limits in any manner the right of
OFHEO to conduct any examination, inspection, or visitation of any
Enterprise or affiliate, or the right of OFHEO to conduct or continue
any form of investigation authorized by law.
Sec. 1780.16 Collateral attacks on adjudicatory proceeding.
If an interlocutory appeal or collateral attack is brought in any
court concerning all or any part of an adjudicatory proceeding, the
challenged adjudicatory proceeding shall continue without regard to the
pendency of that court proceeding. No default or other failure to act
as directed in the adjudicatory proceeding within the times prescribed
in this subpart shall be excused based on the pendency before any court
of any interlocutory appeal or collateral attack.
Subpart B--Prehearing Proceedings
Sec. 1780.20 Commencement of proceeding and contents of notice of
charges.
Proceedings under this subpart are commenced by the issuance of a
notice of charges by the Director, which must be served upon the
respondent. Such notice shall state all of the following:
(a) The legal authority for the proceeding and for OFHEO's
jurisdiction over the proceeding;
(b) A statement of the matters of fact or law showing that OFHEO is
entitled to relief;
(c) A proposed order or prayer for an order granting the requested
relief;
(d) The time, place and nature of the hearing;
(e) The time within which to file an answer;
(f) The time within which to request a hearing; and
(g) The address for filing the answer and/or request for a hearing.
Sec. 1780.21 Answer.
(a) When. Unless otherwise specified by the Director in the notice,
respondent shall file an answer within 20 days of service of the
notice.
(b) Content of answer. An answer must respond specifically to each
paragraph or allegation of fact contained in the notice and must admit,
deny, or state that the party lacks sufficient information to admit or
deny each allegation of fact. A statement of lack of information has
the effect of a denial. Denials must fairly meet the substance of each
allegation of fact denied; general denials are not permitted. When a
respondent denies part of an allegation, that part must be denied and
the remainder specifically admitted. Any allegation of fact in the
notice that is not denied in the answer is deemed admitted for purposes
of the proceeding. A respondent is not required to respond to the
portion of a notice that constitutes the prayer for relief or proposed
order. The answer must set forth affirmative defenses, if any, asserted
by the respondent.
(c) Default. Failure of a respondent to file an answer required by
this section within the time provided constitutes a waiver of such
respondent's right to appear and contest the allegations in the notice.
If no timely answer is filed, OFHEO's counsel of record may file a
motion for entry of an order of default. Upon a finding that no good
cause has been shown for the failure to file a timely answer, the
presiding officer shall file with the Director a recommended decision
containing the findings and the relief sought in the notice. Any final
order issued by the Director based upon a respondent's failure to
answer is deemed to be an order issued upon consent.
Sec. 1780.22 Amended pleadings.
(a) Amendments. The notice or answer may be amended or supplemented
at any stage of the proceeding. The respondent must answer an amended
notice within the time remaining for the respondent's answer to the
original notice, or within ten days after service of the amended
notice, whichever period is longer,
[[Page 72514]]
unless the Director or presiding officer orders otherwise for good
cause shown.
(b) Amendments to conform to the evidence. When issues not raised
in the notice or answer are tried at the hearing by express or implied
consent of the parties, they will be treated in all respects as if they
had been raised in the notice or answer, and no formal amendments are
required. If evidence is objected to at the hearing on the ground that
it is not within the issues raised by the notice or answer, the
presiding officer may admit the evidence when admission is likely to
assist in adjudicating the merits of the action. The presiding officer
will do so freely when the determination of the merits of the action is
served thereby and the objecting party fails to satisfy the presiding
officer that the admission of such evidence would unfairly prejudice
that party's action or defense upon the merits. The presiding officer
may grant a continuance to enable the objecting party to meet such
evidence.
Sec. 1780.23 Failure to appear.
Failure of a respondent to appear in person at the hearing or by a
duly authorized representative constitutes a waiver of respondent's
right to a hearing and is deemed an admission of the facts as alleged
and consent to the relief sought in the notice. Without further
proceedings or notice to the respondent, the presiding officer shall
file with the Director a recommended decision containing the findings
and the relief sought in the notice.
Sec. 1780.24 Consolidation and severance of actions.
(a) Consolidation. On the motion of any party, or on the presiding
officer's own motion, the presiding officer may consolidate, for some
or all purposes, any two or more proceedings, if each such proceeding
involves or arises out of the same transaction, occurrence or series of
transactions or occurrences, or involves at least one common respondent
or a material common question of law or fact, unless such consolidation
would cause unreasonable delay or injustice. In the event of
consolidation under this section, appropriate adjustment to the
prehearing schedule must be made to avoid unnecessary expense,
inconvenience, or delay.
(b) Severance. The presiding officer may, upon the motion of any
party, sever the proceeding for separate resolution of the matter as to
any respondent only if the presiding officer finds that undue prejudice
or injustice to the moving party would result from not severing the
proceeding and such undue prejudice or injustice would outweigh the
interests of judicial economy and expedition in the complete and final
resolution of the proceeding.
Sec. 1780.25 Motions.
(a) In writing. (1) Except as otherwise provided herein, an
application or request for an order or ruling must be made by written
motion.
(2) All written motions must state with particularity the relief
sought and must be accompanied by a proposed order.
(3) No oral argument may be held on written motions except as
otherwise directed by the presiding officer. Written memoranda, briefs,
affidavits, or other relevant material or documents may be filed in
support of or in opposition to a motion.
(b) Oral motions. A motion may be made orally on the record unless
the presiding officer directs that such motion be reduced to writing.
(c) Filing of motions. Motions must be filed with the presiding
officer, except that following the filing of a recommended decision,
motions must be filed with the Director.
(d) Responses. (1) Except as otherwise provided herein, any party
may file a written response to a motion within ten days after service
of any written motion, or within such other period of time as may be
established by the presiding officer or the Director. The presiding
officer shall not rule on any oral or written motion before each party
has had an opportunity to file a response.
(2) The failure of a party to oppose a written motion or an oral
motion made on the record is deemed a consent by that party to the
entry of an order substantially in the form of the order accompanying
the motion.
(e) Dilatory motions. Frivolous, dilatory, or repetitive motions
are prohibited. The filing of such motions may form the basis for
sanctions.
(f) Dispositive motions. Dispositive motions are governed by
Secs. 1780.31 and 1780.32.
Sec. 1780.26 Discovery.
(a) Limits on discovery. Subject to the limitations set out in
paragraphs (b), (d), and (e) of this section, a party to a proceeding
under this subpart may obtain document discovery by serving a written
request to produce documents. For purposes of a request to produce
documents, the term ``documents'' may be defined to include drawings,
graphs, charts, photographs, recordings, data stored in electronic
form, and other data compilations from which information can be
obtained or translated, if necessary, by the parties through detection
devices into reasonably usable form, as well as written material of all
kinds.
(b) Relevance. A party may obtain document discovery regarding any
matter not privileged that has material relevance to the merits of the
pending action. Any request to produce documents that calls for
irrelevant material, that is unreasonable, oppressive, excessive in
scope, unduly burdensome, or repetitive of previous requests, or that
seeks to obtain privileged documents will be denied or modified. A
request is unreasonable, oppressive, excessive in scope, or unduly
burdensome if, among other things, it fails to include justifiable
limitations on the time period covered and the geographic locations to
be searched, the time provided to respond in the request is inadequate,
or the request calls for copies of documents to be delivered to the
requesting party and fails to include the requestor's written agreement
to pay in advance for the copying, in accordance with Sec. 1780.27.
(c) Forms of discovery. Discovery shall be limited to requests for
production of documents for inspection and copying. No other form of
discovery shall be allowed. Discovery by use of interrogatories is not
permitted. This paragraph shall not be interpreted to require the
creation of a document.
(d) Privileged matter. Privileged documents are not discoverable.
Privileges include the attorney-client privilege, work-product
privilege, any government's or government agency's deliberative process
privilege and any other privileges provided by the Constitution, any
applicable act of Congress, or the principles of common law.
(e) Time limits. All discovery, including all responses to
discovery requests, shall be completed at least 20 days prior to the
date scheduled for the commencement of the hearing. No exception to
this time limit shall be permitted, unless the presiding officer finds
on the record that good cause exists for waiving the requirements of
this paragraph.
Sec. 1780.27 Request for document discovery from parties.
(a) General rule. Any party may serve on any other party a request
to produce for inspection any discoverable documents that are in the
possession, custody, or control of the party upon whom the request is
served. Copies of the request shall be served on all other parties. The
request must identify the documents to be produced either by individual
item or by category and must
[[Page 72515]]
describe each item and category with reasonable particularity.
Documents must be produced as they are kept in the usual course of
business or they shall be labeled and organized to correspond with the
categories in the request.
(b) Production or copying. The request must specify a reasonable
time, place and manner for production and performing any related acts.
In lieu of inspecting the documents, the requesting party may specify
that all or some of the responsive documents be copied and the copies
delivered to the requesting party. If copying of fewer than 250 pages
is requested, the party to whom the request is addressed shall bear the
cost of copying and shipping charges. If a party requests more than 250
pages of copying, the requesting party shall pay for copying and
shipping charges. Copying charges are at the current rate per page
imposed by OFHEO at Sec. 1710.22(b)(2) of this chapter for requests for
documents filed under the Freedom of Information Act, 12 U.S.C. 552.
The party to whom the request is addressed may require payment in
advance before producing the documents.
(c) Obligation to update responses. A party who has responded to a
discovery request is not required to supplement the response, unless:
(1) The responding party learns that in some material respect the
information disclosed is incomplete or incorrect, and
(2) The additional or corrective information has not otherwise been
made known to the other parties during the discovery process or in
writing.
(d) Motions to strike or limit discovery requests. (1) Any party
that objects to a discovery request may, within ten days of being
served with such request, file a motion in accordance with the
provisions of Sec. 1780.25 to strike or otherwise limit the request. If
an objection is made to only a portion of an item or category in a
request, the objection shall specify that portion. Any objections not
made in accordance with this paragraph and Sec. 1780.25 are waived.
(2) The party who served the request that is the subject of a
motion to strike or limit may file a written response within five days
of service of the motion. No other party may file a response.
(e) Privilege. At the time other documents are produced, all
documents withheld on the grounds of privilege must be reasonably
identified, together with a statement of the basis for the assertion of
privilege. When similar documents that are protected by deliberative
process, attorney work-product, or attorney-client privilege are
voluminous, these documents may be identified by category instead of by
individual document. The presiding officer has discretion to determine
when the identification by category is insufficient.
(f) Motions to compel production. (1) If a party withholds any
documents as privileged or fails to comply fully with a discovery
request, the requesting party may, within ten days of the assertion of
privilege or of the time the failure to comply becomes known to the
requesting party, file a motion in accordance with the provisions of
Sec. 1780.25 for the issuance of a subpoena compelling production.
(2) The party who asserted the privilege or failed to comply with
the request may, within five days of service of a motion for the
issuance of a subpoena compelling production, file a written response
to the motion. No other party may file a response.
(g) Ruling on motions. After the time for filing responses to
motions pursuant to this section has expired, the presiding officer
shall rule promptly on all such motions. If the presiding officer
determines that a discovery request or any of its terms calls for
irrelevant material, is unreasonable, oppressive, excessive in scope,
unduly burdensome, or repetitive of previous requests, or seeks to
obtain privileged documents, he may deny or modify the request and may
issue appropriate protective orders, upon such conditions as justice
may require. The pendency of a motion to strike or limit discovery or
to compel production shall not be a basis for staying or continuing the
proceeding, unless otherwise ordered by the presiding officer.
Notwithstanding any other provision in this part, the presiding officer
may not release, or order a party to produce, documents withheld on
grounds of privilege if the party has stated to the presiding officer
its intention to file a timely motion for interlocutory review of the
presiding officer's order to produce the documents, until the motion
for interlocutory review has been decided.
(h) Enforcing discovery subpoenas. If the presiding officer issues
a subpoena compelling production of documents by a party, the
subpoenaing party may, in the event of noncompliance and to the extent
authorized by applicable law, apply to any appropriate United States
district court for an order requiring compliance with the subpoena. A
party's right to seek court enforcement of a subpoena shall not in any
manner limit the sanctions that may be imposed by the presiding officer
against a party who fails to produce or induces another to fail to
produce subpoenaed documents.
Sec. 1780.28 Document subpoenas to nonparties.
(a) General rules. (1) Any party may apply to the presiding officer
for the issuance of a document discovery subpoena addressed to any
person who is not a party to the proceeding. The application must
contain a proposed document subpoena and a brief statement showing the
general relevance and reasonableness of the scope of documents sought.
The subpoenaing party shall specify a reasonable time, place, and
manner for production in response to the subpoena.
(2) A party shall only apply for a document subpoena under this
section within the time period during which such party could serve a
discovery request under Sec. 1780.27. The party obtaining the document
subpoena is responsible for serving it on the subpoenaed person and for
serving copies on all parties. Document subpoenas may be served in any
State, territory, or possession of the United States, the District of
Columbia, or as otherwise provided by law.
(3) The presiding officer shall issue promptly any document
subpoena applied for under this section; except that, if the presiding
officer determines that the application does not set forth a valid
basis for the issuance of the subpoena, or that any of its terms are
unreasonable, oppressive, excessive in scope, or unduly burdensome, he
may refuse to issue the subpoena or may issue it in a modified form
upon such conditions as may be determined by the presiding officer.
(b) Motion to quash or modify. (1) Any person to whom a document
subpoena is directed may file a motion to quash or modify such
subpoena, accompanied by a statement of the basis for quashing or
modifying the subpoena. The movant shall serve the motion on all
parties and any party may respond to such motion within ten days of
service of the motion.
(2) Any motion to quash or modify a document subpoena must be filed
on the same basis, including the assertion of privilege, upon which a
party could object to a discovery request under Sec. 1780.27 and during
the same time limits during which such an objection could be filed.
(c) Enforcing document subpoenas. If a subpoenaed person fails to
comply with any subpoena issued pursuant to this section or any order
of the presiding officer that directs compliance with all or any
portion of a document subpoena, the subpoenaing party or any other
[[Page 72516]]
aggrieved party may, to the extent authorized by applicable law, apply
to an appropriate United States district court for an order requiring
compliance with the subpoena. A party's right to seek court enforcement
of a document subpoena shall in no way limit the sanctions that may be
imposed by the presiding officer on a party who induces a failure to
comply with subpoenas issued under this section.
Sec. 1780.29 Deposition of witness unavailable for hearing.
(a) General rules. (1) If a witness will not be available for the
hearing, a party desiring to preserve that witness' testimony for the
record may apply in accordance with the procedures set forth in
paragraph (a)(2) of this section to the presiding officer for the
issuance of a subpoena, including a subpoena duces tecum, requiring the
attendance of the witness at a deposition. The presiding officer may
issue a deposition subpoena under this section upon a showing that--
(i) The witness will be unable to attend or may be prevented from
attending the hearing because of age, sickness, or infirmity, or will
be otherwise unavailable;
(ii) The witness' unavailability was not produced or caused by the
subpoenaing party;
(iii) The testimony is reasonably expected to be material; and
(iv) Taking the deposition will not result in any undue burden to
any other party and will not cause undue delay of the proceeding.
(2) The application must contain a proposed deposition subpoena and
a brief statement of the reasons for the issuance of the subpoena. The
subpoena must name the witness whose deposition is to be taken and
specify the time and place for taking the deposition. A deposition
subpoena may require the witness to be deposed anywhere within the
United States and its possessions and territories in which that witness
resides or has a regular place of employment or such other convenient
place as the presiding officer shall fix.
(3) Subpoenas must be issued promptly upon request, unless the
presiding officer determines that the request fails to set forth a
valid basis under this section for its issuance. Before making a
determination that there is no valid basis for issuing the subpoena,
the presiding officer shall require a written response from the party
requesting the subpoena or require attendance at a conference to
determine whether there is a valid basis upon which to issue the
requested subpoena.
(4) The party obtaining a deposition subpoena is responsible for
serving it on the witness and for serving copies on all parties. Unless
the presiding officer orders otherwise, no deposition under this
section shall be taken on fewer than 10 days' notice to the witness and
all parties. Deposition subpoenas may be served anywhere within the
United States or its possessions or territories on any person doing
business anywhere within the United States or its possessions or
territories, or as otherwise permitted by law.
(b) Objections to deposition subpoenas. (1) The witness and any
party who has not had an opportunity to oppose a deposition subpoena
issued under this section may file a motion under Sec. 1780.25 with the
presiding officer to quash or modify the subpoena prior to the time for
compliance specified in the subpoena, but not more than 10 days after
service of the subpoena.
(2) A statement of the basis for the motion to quash or modify a
subpoena issued under this section must accompany the motion. The
motion must be served on all parties.
(c) Procedure upon deposition. (1) Each witness testifying pursuant
to a deposition subpoena must be duly sworn and each party shall have
the right to examine the witness. Objections to questions or documents
must be in short form, stating the grounds for the objection. Failure
to object to questions or documents is not deemed a waiver except where
the ground for objection might have been avoided if the objection had
been presented timely. All questions, answers and objections must be
recorded.
(2) Any party may move before the presiding officer for an order
compelling the witness to answer any questions the witness has refused
to answer or submit any evidence that, during the deposition, the
witness has refused to submit.
(3) The deposition must be subscribed by the witness, unless the
parties and the witness, by stipulation, have waived the signing, or
the witness is ill, cannot be found, or has refused to sign. If the
deposition is not subscribed by the witness, the court reporter taking
the deposition shall certify that the transcript is a true and complete
transcript of the deposition.
(d) Enforcing subpoenas. If a subpoenaed person fails to comply
with any subpoena issued pursuant to this section or with any order of
the presiding officer made upon motion under paragraph (c)(2) of this
section, the subpoenaing party or other aggrieved party may, to the
extent authorized by applicable law, apply to an appropriate United
States district court for an order requiring compliance with the
portions of the subpoena that the presiding officer has ordered
enforced. A party's right to seek court enforcement of a deposition
subpoena in no way limits the sanctions that may be imposed by the
presiding officer on a party who fails to comply with or induces a
failure to comply with a subpoena issued under this section.
Sec. 1780.30 Interlocutory review.
(a) General rule. The Director may review a ruling of the presiding
officer prior to the certification of the record to the Director only
in accordance with the procedures set forth in this section.
(b) Scope of review. The Director may exercise interlocutory review
of a ruling of the presiding officer if the Director finds that--
(1) The ruling involves a controlling question of law or policy as
to which substantial grounds exist for a difference of opinion;
(2) Immediate review of the ruling may materially advance the
ultimate termination of the proceeding;
(3) Subsequent modification of the ruling at the conclusion of the
proceeding would be an inadequate remedy; or
(4) Subsequent modification of the ruling would cause unusual delay
or expense.
(c) Procedure. Any motion for interlocutory review shall be filed
by a party with the presiding officer within ten days of his ruling.
Upon the expiration of the time for filing all responses, the presiding
officer shall refer the matter to the Director for final disposition.
In referring the matter to the Director, the presiding officer may
indicate agreement or disagreement with the asserted grounds for
interlocutory review of the ruling in question.
(d) Suspension of proceeding. Neither a request for interlocutory
review nor any disposition of such a request by the Director under this
section suspends or stays the proceeding unless otherwise ordered by
the presiding officer or the Director.
Sec. 1780.31 Summary disposition.
(a) In general. The presiding officer shall recommend that the
Director issue a final order granting a motion for summary disposition
if the undisputed pleaded facts, admissions, affidavits, stipulations,
documentary evidence, matters as to which official notice may be taken
and any other evidentiary materials properly submitted in
[[Page 72517]]
connection with a motion for summary disposition show that--
(1) There is no genuine issue as to any material fact; and
(2) The movant is entitled to a decision in its favor as a matter
of law.
(b) Filing of motions and responses. (1) Any party who believes
there is no genuine issue of material fact to be determined and that
such party is entitled to a decision as a matter of law may move at any
time for summary disposition in its favor of all or any part of the
proceeding. Any party, within 20 days after service of such motion or
within such time period as allowed by the presiding officer, may file a
response to such motion.
(2) A motion for summary disposition must be accompanied by a
statement of material facts as to which the movant contends there is no
genuine issue. Such motion must be supported by documentary evidence,
which may take the form of admissions in pleadings, stipulations,
written interrogatory responses, depositions, investigatory
depositions, transcripts, affidavits and any other evidentiary
materials that the movant contends support its position. The motion
must also be accompanied by a brief containing the points and
authorities in support of the contention of the movant. Any party
opposing a motion for summary disposition must file a statement setting
forth those material facts as to which such party contends a genuine
dispute exists. Such opposition must be supported by evidence of the
same type as that submitted with the motion for summary disposition and
a brief containing the points and authorities in support of the
contention that summary disposition would be inappropriate.
(c) Hearing on motion. At the request of any party or on his own
motion, the presiding officer may hear oral argument on the motion for
summary disposition.
(d) Decision on motion. Following receipt of a motion for summary
disposition and all responses thereto, the presiding officer shall
determine whether the movant is entitled to summary disposition. If the
presiding officer determines that summary disposition is warranted, the
presiding officer shall submit a recommended decision to that effect to
the Director, under Sec. 1780.53. If the presiding officer finds that
the moving party is not entitled to summary disposition, the presiding
officer shall make a ruling denying the motion.
Sec. 1780.32 Partial summary disposition.
If the presiding officer determines that a party is entitled to
summary disposition as to certain claims only, he shall defer
submitting a recommended decision to the Director as to those claims. A
hearing on the remaining issues must be ordered. Those claims for which
the presiding officer has determined that summary disposition is
warranted will be addressed in the recommended decision filed at the
conclusion of the hearing.
Sec. 1780.33 Scheduling and prehearing conferences.
(a) Scheduling conference. Within 30 days of service of the notice
or order commencing a proceeding or such other time as the parties may
agree, the presiding officer shall direct representatives for all
parties to meet with him in person at a specified time and place prior
to the hearing or to confer by telephone for the purpose of scheduling
the course and conduct of the proceeding. This meeting or telephone
conference is called a ``scheduling conference.'' The identification of
potential witnesses, the time for and manner of discovery and the
exchange of any prehearing materials including witness lists,
statements of issues, stipulations, exhibits and any other materials
may also be determined at the scheduling conference.
(b) Prehearing conferences. The presiding officer may, in addition
to the scheduling conference, on his own motion or at the request of
any party, direct representatives for the parties to meet with him (in
person or by telephone) at a prehearing conference to address any or
all of the following:
(1) Simplification and clarification of the issues;
(2) Stipulations, admissions of fact and the contents, authenticity
and admissibility into evidence of documents;
(3) Matters of which official notice may be taken;
(4) Limitation of the number of witnesses;
(5) Summary disposition of any or all issues;
(6) Resolution of discovery issues or disputes;
(7) Amendments to pleadings; and
(8) Such other matters as may aid in the orderly disposition of the
proceeding.
(c) Transcript. The presiding officer, in his discretion, may
require that a scheduling or prehearing conference be recorded by a
court reporter. A transcript of the conference and any materials filed,
including orders, becomes part of the record of the proceeding. A party
may obtain a copy of the transcript at such party's expense.
(d) Scheduling or prehearing orders. Within a reasonable time
following the conclusion of the scheduling conference or any prehearing
conference, the presiding officer shall serve on each party an order
setting forth any agreements reached and any procedural determinations
made.
Sec. 1780.34 Prehearing submissions.
(a) Within the time set by the presiding officer, but in no case
later than 10 days before the start of the hearing, each party shall
serve on every other party the serving party's--
(1) Prehearing statement;
(2) Final list of witnesses to be called to testify at the hearing,
including name and address of each witness and a short summary of the
expected testimony of each witness;
(3) List of the exhibits to be introduced at the hearing along with
a copy of each exhibit; and
(4) Stipulations of fact, if any.
(b) Effect of failure to comply. No witness may testify and no
exhibits may be introduced at the hearing if such witness or exhibit is
not listed in the prehearing submissions pursuant to paragraph (a) of
this section, except for good cause shown.
Sec. 1780.35 Hearing subpoenas.
(a) Issuance. (1) Upon application of a party showing general
relevance and reasonableness of scope of the testimony or other
evidence sought, the presiding officer may issue a subpoena or a
subpoena duces tecum requiring the attendance of a witness at the
hearing or the production of documentary or physical evidence at such
hearing. The application for a hearing subpoena must also contain a
proposed subpoena specifying the attendance of a witness or the
production of evidence from any State, commonwealth, possession,
territory of the United States, or the District of Columbia, or as
otherwise provided by law at any designated place where the hearing is
being conducted. The party making the application shall serve a copy of
the application and the proposed subpoena on every other party.
(2) A party may apply for a hearing subpoena at any time before the
commencement of or during a hearing. During a hearing, a party may make
an application for a subpoena orally on the record before the presiding
officer.
(3) The presiding officer shall promptly issue any hearing subpoena
applied for under this section; except that, if the presiding officer
determines that the application does not set forth a valid basis for
the issuance of the subpoena, or that any of its terms are
[[Page 72518]]
unreasonable, oppressive, excessive in scope, or unduly burdensome, he
may refuse to issue the subpoena or may issue the subpoena in a
modified form upon any conditions consistent with this subpart. Upon
issuance by the presiding officer, the party making the application
shall serve the subpoena on the person named in the subpoena and on
each party.
(b) Motion to quash or modify. (1) Any person to whom a hearing
subpoena is directed or any party may file a motion to quash or modify
such subpoena, accompanied by a statement of the basis for quashing or
modifying the subpoena. The movant must serve the motion on each party
and on the person named in the subpoena. Any party may respond to the
motion within ten days of service of the motion.
(2) Any motion to quash or modify a hearing subpoena must be filed
prior to the time specified in the subpoena for compliance, but no more
than 10 days after the date of service of the subpoena upon the movant.
(c) Enforcing subpoenas. If a subpoenaed person fails to comply
with any subpoena issued pursuant to this section or any order of the
presiding officer that directs compliance with all or any portion of a
hearing subpoena, the subpoenaing party or any other aggrieved party
may seek enforcement of the subpoena pursuant to Sec. 1780.28(c). A
party's right to seek court enforcement of a hearing subpoena shall in
no way limit the sanctions that may be imposed by the presiding officer
on a party who induces a failure to comply with subpoenas issued under
this section.
Subpart C--Hearing and Posthearing Proceedings
Sec. 1780.50 Conduct of hearings.
(a) General rules. (1) Hearings shall be conducted in accordance
with 5 U.S.C. chapter 5 and other applicable law and so as to provide a
fair and expeditious presentation of the relevant disputed issues.
Except as limited by this subpart, each party has the right to present
its case or defense by oral and documentary evidence and to conduct
such cross examination as may be required for full disclosure of the
facts.
(2) Order of hearing. OFHEO's counsel of record shall present its
case-in-chief first, unless otherwise ordered by the presiding officer
or unless otherwise expressly specified by law or regulation. OFHEO's
counsel of record shall be the first party to present an opening
statement and a closing statement and may make a rebuttal statement
after the respondent's closing statement. If there are multiple
respondents, respondents may agree among themselves as to their order
or presentation of their cases, but if they do not agree, the presiding
officer shall fix the order.
(3) Examination of witnesses. Only one representative for each
party may conduct an examination of a witness, except that in the case
of extensive direct examination, the presiding officer may permit more
than one representative for the party presenting the witness to conduct
the examination. A party may have one representative conduct the direct
examination and another representative conduct re-direct examination of
a witness, or may have one representative conduct the cross examination
of a witness and another representative conduct the re-cross
examination of a witness.
(4) Stipulations. Unless the presiding officer directs otherwise,
all documents that the parties have stipulated as admissible shall be
admitted into evidence upon commencement of the hearing.
(b) Transcript. The hearing shall be recorded and transcribed. The
transcript shall be made available to any party upon payment of the
cost thereof. The presiding officer shall have authority to order the
record corrected, either upon motion to correct, upon stipulation of
the parties, or following notice to the parties upon the presiding
officer's own motion.
Sec. 1780.51 Evidence.
(a) Admissibility. (1) Except as is otherwise set forth in this
section, relevant, material and reliable evidence that is not unduly
repetitive is admissible to the fullest extent authorized by the
Administrative Procedure Act and other applicable law.
(2) Evidence that would be admissible under the Federal Rules of
Evidence is admissible in a proceeding conducted pursuant to this
subpart.
(3) Evidence that would be inadmissible under the Federal Rules of
Evidence may not be deemed or ruled to be inadmissible in a proceeding
conducted pursuant to this subpart if such evidence is relevant,
material, reliable and not unduly repetitive.
(b) Official notice. (1) Official notice may be taken of any
material fact that may be judicially noticed by a United States
district court and any material information in the official public
records of any Federal or State government agency.
(2) All matters officially noticed by the presiding officer or the
Director shall appear on the record.
(3) If official notice is requested of any material fact, the
parties, upon timely request, shall be afforded an opportunity to
object.
(c) Documents. (1) A duplicate copy of a document is admissible to
the same extent as the original, unless a genuine issue is raised as to
whether the copy is in some material respect not a true and legible
copy of the original.
(2) Subject to the requirements of paragraph (a)(1) of this
section, any document, including a report of examination, oversight
activity, inspection, or visitation, prepared by OFHEO or by another
Federal or State financial institutions regulatory agency is admissible
either with or without a sponsoring witness.
(3) Witnesses may use existing or newly created charts, exhibits,
calendars, calculations, outlines, or other graphic material to
summarize, illustrate, or simplify the presentation of testimony. Such
materials may, subject to the presiding officer's discretion, be used
with or without being admitted into evidence.
(d) Objections. (1) Objections to the admissibility of evidence
must be timely made and rulings on all objections must appear in the
record.
(2) When an objection to a question or line of questioning is
sustained, the examining representative of record may make a specific
proffer on the record of what he expected to prove by the expected
testimony of the witness. The proffer may be by representation of the
representative or by direct interrogation of the witness.
(3) The presiding officer shall retain rejected exhibits,
adequately marked for identification, for the record and transmit such
exhibits to the Director.
(4) Failure to object to admission of evidence or to any ruling
constitutes a waiver of the objection.
(e) Stipulations. The parties may stipulate as to any relevant
matters of fact or the authentication of any relevant documents. Such
stipulations must be received in evidence at a hearing and are binding
on the parties with respect to the matters therein stipulated.
(f) Depositions of unavailable witnesses. (1) If a witness is
unavailable to testify at a hearing and that witness has testified in a
deposition in accordance with Sec. 1780.29, a party may offer as
evidence all or any part of the transcript of the deposition, including
deposition exhibits, if any.
(2) Such deposition transcript is admissible to the same extent
that testimony would have been admissible had that person testified at
the hearing, provided that if a witness refused to answer proper
questions during the
[[Page 72519]]
depositions, the presiding officer may, on that basis, limit the
admissibility of the deposition in any manner that justice requires.
(3) Only those portions of a deposition received in evidence at the
hearing constitute a part of the record.
Sec. 1780.52 Post hearing filings.
(a) Proposed findings and conclusions and supporting briefs. (1)
Using the same method of service for each party, the presiding officer
shall serve notice upon each party that the certified transcript,
together with all hearing exhibits and exhibits introduced but not
admitted into evidence at the hearing, has been filed. Any party may
file with the presiding officer proposed findings of fact, proposed
conclusions of law and a proposed order within 30 days after the
parties have received notice that the transcript has been filed with
the presiding officer, unless otherwise ordered by the presiding
officer.
(2) Proposed findings and conclusions must be supported by citation
to any relevant authorities and by page references to any relevant
portions of the record. A posthearing brief may be filed in support of
proposed findings and conclusions, either as part of the same document
or in a separate document.
(3) Any party is deemed to have waived any issue not raised in
proposed findings or conclusions timely filed by that party.
(b) Reply briefs. Reply briefs may be filed within 15 days after
the date on which the parties' proposed findings and conclusions and
proposed order are due. Reply briefs must be limited strictly to
responding to new matters, issues, or arguments raised in another
party's papers. A party who has not filed proposed findings of fact and
conclusions of law or a posthearing brief may not file a reply brief.
(c) Simultaneous filing required. The presiding officer shall not
order the filing by any party of any brief or reply brief supporting
proposed findings and conclusions in advance of the other party's
filing of its brief.
Sec. 1780.53 Recommended decision and filing of record.
(a) Filing of recommended decision and record. Within 45 days after
expiration of the time allowed for filing reply briefs under
Sec. 1780.52(b), the presiding officer shall file with and certify to
the Director, for decision, the record of the proceeding. The record
must include the presiding officer's recommended decision, recommended
findings of fact and conclusions of law, and proposed order; all
prehearing and hearing transcripts, exhibits and rulings; and the
motions, briefs, memoranda and other supporting papers filed in
connection with the hearing. The presiding officer shall serve upon
each party the recommended decision, recommended findings and
conclusions, and proposed order.
(b) Filing of index. At the same time the presiding officer files
with and certifies to the Director, for final determination, the record
of the proceeding, the presiding officer shall furnish to the Director
a certified index of the entire record of the proceeding. The certified
index shall include, at a minimum, an entry for each paper, document or
motion filed with the presiding officer in the proceeding, the date of
the filing, and the identity of the filer. The certified index shall
also include an exhibit index containing, at a minimum, an entry
consisting of exhibit number and title or description for: Each exhibit
introduced and admitted into evidence at the hearing; each exhibit
introduced but not admitted into evidence at the hearing; each exhibit
introduced and admitted into evidence after the completion of the
hearing; and each exhibit introduced but not admitted into evidence
after the completion of the hearing.
Sec. 1780.54 Exceptions to recommended decision.
(a) Filing exceptions. Within 30 days after service of the
recommended decision, recommended findings and conclusions, and
proposed order under Sec. 1780.53, a party may file with the Director
written exceptions to the presiding officer's recommended decision,
recommended findings and conclusions, or proposed order; to the
admission or exclusion of evidence; or to the failure of the presiding
officer to make a ruling proposed by a party. A supporting brief may be
filed at the time the exceptions are filed, either as part of the same
document or in a separate document.
(b) Effect of failure to file or raise exceptions. (1) Failure of a
party to file exceptions to those matters specified in paragraph (a) of
this section within the time prescribed is deemed a waiver of objection
thereto.
(2) No exception need be considered by the Director if the party
taking exception had an opportunity to raise the same objection, issue,
or argument before the presiding officer and failed to do so.
(c) Contents. (1) All exceptions and briefs in support of such
exceptions must be confined to the particular matters in or omissions
from the presiding officer's recommendations to which that party takes
exception.
(2) All exceptions and briefs in support of exceptions must set
forth page or paragraph references to the specific parts of the
presiding officer's recommendations to which exception is taken, the
page or paragraph references to those portions of the record relied
upon to support each exception and the legal authority relied upon to
support each exception. Exceptions and briefs in support shall not
exceed a total of 30 pages, except by leave of the Director on motion.
(3) One reply brief may be submitted by each party within ten days
of service of exceptions and briefs in support of exceptions. Reply
briefs shall not exceed 15 pages, except by leave of the Director on
motion.
Sec. 1780.55 Review by Director.
(a) Notice of submission to the Director. When the Director
determines that the record in the proceeding is complete, the Director
shall serve notice upon the parties that the proceeding has been
submitted to the Director for final decision.
(b) Oral argument before the Director. Upon the initiative of the
Director or on the written request of any party filed with the Director
within the time for filing exceptions under Sec. 1780.54, the Director
may order and hear oral argument on the recommended findings,
conclusions, decision and order of the presiding officer. A written
request by a party must show good cause for oral argument and state
reasons why arguments cannot be presented adequately in writing. A
denial of a request for oral argument may be set forth in the
Director's final decision. Oral argument before the Director must be
transcribed.
(c) Director's final decision. (1) Decisional employees may advise
and assist the Director in the consideration and disposition of the
case. The final decision of the Director will be based upon review of
the entire record of the proceeding, except that the Director may limit
the issues to be reviewed to those findings and conclusions to which
opposing arguments or exceptions have been filed by the parties.
(2) The Director shall render a final decision and issue an
appropriate order within 90 days after notification of the parties that
the case has been submitted for final decision, unless the Director
orders that the action or any aspect thereof be remanded to the
presiding officer for further proceedings. Copies of the final decision
and order of the Director shall be served upon each party
[[Page 72520]]
to the proceeding and upon other persons required by statute.
Sec. 1780.56 Exhaustion of administrative remedies.
To exhaust administrative remedies as to any issue on which a party
disagrees with the presiding officer's recommendations, a party must
file exceptions with the Director under Sec. 1780.54. A party must
exhaust administrative remedies as a precondition to seeking judicial
review of any decision issued under this subpart.
Sec. 1780.57 Stays pending judicial review.
The commencement of proceedings for judicial review of a final
decision and order of the Director may not, unless specifically ordered
by the Director or a reviewing court, operate as a stay of any order
issued by the Director. The Director may, in his discretion and on such
terms as he finds just, stay the effectiveness of all or any part of an
order of the Director pending a final decision on a petition for review
of that order.
Subpart D--Rules of Practice Before the Office of Federal Housing
Enterprise Oversight
Sec. 1780.70 Scope.
This subpart contains rules governing practice by parties or their
representatives before OFHEO.
This subpart addresses the imposition of sanctions by the presiding
officer or the Director against parties or their representatives in an
adjudicatory proceeding under this part. This subpart also covers other
disciplinary sanctions--censure, suspension or disbarment--against
individuals who appear before OFHEO in a representational capacity
either in an adjudicatory proceeding under this part or in any other
matters connected with presentations to OFHEO relating to a client's or
other principal's rights, privileges, or liabilities. This
representation includes, but is not limited to, the practice of
attorneys and accountants. Employees of OFHEO are not subject to
disciplinary proceedings under this subpart.
Sec. 1780.71 Definitions.
Practice before OFHEO for the purposes of this subpart, includes,
but is not limited to, transacting any business with OFHEO as counsel,
representative or agent for any other person, unless the Director
orders otherwise. Practice before OFHEO also includes the preparation
of any statement, opinion, or other paper by a counsel, representative
or agent that is filed with OFHEO in any certification, notification,
application, report, or other document, with the consent of such
counsel, representative or agent. Practice before OFHEO does not
include work prepared for an Enterprise solely at the request of the
Enterprise for use in the ordinary course of its business.
Sec. 1780.72 Appearance and practice in adjudicatory proceedings.
(a) Appearance before OFHEO or a presiding officer. (1) By
attorneys. A party may be represented by an attorney who is a member in
good standing of the bar of the highest court of any State,
commonwealth, possession, territory of the United States, or the
District of Columbia and who is not currently suspended or disbarred
from practice before OFHEO.
(2) By nonattorneys. An individual may appear on his own behalf. A
member of a partnership may represent the partnership and a duly
authorized officer, director, employee, or other agent of any
corporation or other entity not specifically listed herein may
represent such corporation or other entity; provided that such officer,
director, employee, or other agent is not currently suspended or
disbarred from practice before OFHEO. A duly authorized officer or
employee of any Government unit, agency, or authority may represent
that unit, agency, or authority.
(b) Notice of appearance. Any person appearing in a representative
capacity on behalf of a party, including OFHEO, shall execute and file
a notice of appearance with the presiding officer at or before the time
such person submits papers or otherwise appears on behalf of a party in
the adjudicatory proceeding. Such notice of appearance shall include a
written declaration that the individual is currently qualified as
provided in paragraphs (a)(1) or (a)(2) of this section and is
authorized to represent the particular party. By filing a notice of
appearance on behalf of a party in an adjudicatory proceeding, the
representative thereby agrees and represents that he is authorized to
accept service on behalf of the represented party and that, in the
event of withdrawal from representation, he or she will, if required by
the presiding officer, continue to accept service until a new
representative has filed a notice of appearance or until the
represented party indicates that he or she will proceed on a pro se
basis. Unless the representative filing the notice is an attorney, the
notice of appearance shall also be executed by the person represented
or, if the person is not an individual, by the chief executive officer,
or duly authorized officer of that person.
Sec. 1780.73 Conflicts of interest.
(a) Conflict of interest in representation. No representative shall
represent another person in an adjudicatory proceeding if it reasonably
appears that such representation may be limited materially by that
representative's responsibilities to a third person or by that
representative's own interests. The presiding officer may take
corrective measures at any stage of a proceeding to cure a conflict of
interest in representation, including the issuance of an order limiting
the scope of representation or disqualifying an individual from
appearing in a representative capacity for the duration of the
proceeding.
(b) Certification and waiver. If any person appearing as counsel or
other representative represents two or more parties to an adjudicatory
proceeding or also represents a nonparty on a matter relevant to an
issue in the proceeding, that representative must certify in writing at
the time of filing the notice of appearance required by Sec. 1780.72--
(1) That the representative has personally and fully discussed the
possibility of conflicts of interest with each such party and nonparty;
(2) That each such party and nonparty waives any right it might
otherwise have had to assert any known conflicts of interest or to
assert any non-material conflicts of interest during the course of the
proceeding.
Sec. 1780.74 Sanctions.
(a) General rule. Appropriate sanctions may be imposed during the
course of any proceeding when any party or representative of record has
acted or failed to act in a manner required by applicable statute,
regulation, or order, and that act or failure to act--
(1) Constitutes contemptuous conduct. Contemptuous conduct includes
dilatory, obstructionist, egregious, contumacious, unethical, or other
improper conduct at any phase of any adjudicatory proceeding;
(2) Has caused some other party material and substantive injury,
including, but not limited to, incurring expenses including attorney's
fees or experiencing prejudicial delay;
(3) Is a clear and unexcused violation of an applicable statute,
regulation, or order; or
(4) Has delayed the proceeding unduly.
(b) Sanctions. Sanctions that may be imposed include, but are not
limited to, any one or more of the following:
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(1) Issuing an order against a party;
(2) Rejecting or striking any testimony or documentary evidence
offered, or other papers filed, by the party;
(3) Precluding the party from contesting specific issues or
findings;
(4) Precluding the party from offering certain evidence or from
challenging or contesting certain evidence offered by another party;
(5) Precluding the party from making a late filing or conditioning
a late filing on any terms that are just;
(6) Assessing reasonable expenses, including attorney's fees,
incurred by any other party as a result of the improper action or
failure to act.
(c) Procedure for imposition of sanctions. (1) The presiding
officer, on the motion of any party, or on his own motion, and after
such notice and responses as may be directed by the presiding officer,
may impose any sanction authorized by this section. The presiding
officer shall submit to the Director for final ruling any sanction that
would result in a final order that terminates the case on the merits or
is otherwise dispositive of the case.
(2) Except as provided in paragraph (d) of this section, no
sanction authorized by this section, other than refusing to accept late
papers, shall be imposed without prior notice to all parties and an
opportunity for any representative or party against whom sanctions
would be imposed to be heard. The presiding officer shall determine and
direct the appropriate notice and form for such opportunity to be
heard. The opportunity to be heard may be limited to an opportunity to
respond verbally immediately after the act or inaction in question is
noted by the presiding officer.
(3) For purposes of interlocutory review, motions for the
imposition of sanctions by any party and the imposition of sanctions
shall be treated the same as motions for any other ruling by the
presiding officer.
(4) Nothing in this section shall be read to preclude the presiding
officer or the Director from taking any other action or imposing any
other restriction or sanction authorized by any applicable statute or
regulation.
(d) Sanctions for contemptuous conduct. If, during the course of
any proceeding, a presiding officer finds any representative or any
individual representing himself to have engaged in contemptuous
conduct, the presiding officer may summarily suspend that individual
from participating in that or any related proceeding or impose any
other appropriate sanction.
Sec. 1780.75 Censure, suspension, disbarment and reinstatement.
(a) Discretionary censure, suspension and disbarment. (1) The
Director may censure any individual who practices or attempts to
practice before OFHEO or suspend or revoke the privilege to appear or
practice before OFHEO of such individual if, after notice of and
opportunity for hearing in the matter, that individual is found by the
Director--
(i) Not to possess the requisite qualifications or competence to
represent others;
(ii) To be seriously lacking in character or integrity or to have
engaged in material unethical or improper professional conduct;
(iii) To have caused unfair and material injury or prejudice to
another party, such as prejudicial delay or unnecessary expenses
including attorney's fees;
(iv) To have engaged in, or aided and abetted, a material and
knowing violation of the 1992 Act, the Federal Home Loan Mortgage
Corporation Act, the Federal National Mortgage Association Charter Act
or the rules or regulations issued under those statutes or any other
law or regulation governing Enterprise operations;
(v) To have engaged in contemptuous conduct before OFHEO;
(vi) With intent to defraud in any manner, to have willfully and
knowingly deceived, misled, or threatened any client or prospective
client; or
(vii) Within the last 10 years, to have been convicted of an
offense involving moral turpitude, dishonesty or breach of trust, if
the conviction has not been reversed on appeal. A conviction within the
meaning of this paragraph shall be deemed to have occurred when the
convicting court enters its judgment or order, regardless of whether an
appeal is pending or could be taken and includes a judgment or an order
on a plea of nolo contendere or on consent, regardless of whether a
violation is admitted in the consent.
(2) Suspension or revocation on the grounds set forth in paragraphs
(a)(1) (ii), (iii), (iv), (v), (vi) and (vii) of this section shall
only be ordered upon a further finding that the individual's conduct or
character was sufficiently egregious as to justify suspension or
revocation. Suspension or disbarment under this paragraph shall
continue until the applicant has been reinstated by the Director for
good cause shown or until, in the case of a suspension, the suspension
period has expired.
(3) If the final order against the respondent is for censure, the
individual may be permitted to practice before OFHEO, but such
individual's future representations may be subject to conditions
designed to promote high standards of conduct. If a written letter of
censure is issued, a copy will be maintained in OFHEO's files.
(b) Mandatory suspension and disbarment. (1) Any counsel who has
been and remains suspended or disbarred by a court of the United States
or of any State, commonwealth, possession, territory of the United
States or the District of Columbia; any accountant or other licensed
expert whose license to practice has been revoked in any State,
commonwealth, possession, territory of the United States or the
District of Columbia; any person who has been and remains suspended or
barred from practice before the Department of Housing and Urban
Development, the Office of the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the National
Credit Union Administration, the Federal Housing Finance Board, the
Farm Credit Administration, the Securities and Exchange Commission, or
the Commodity Futures Trading Commission is also suspended
automatically from appearing or practicing before OFHEO. A disbarment
or suspension within the meaning of this paragraph shall be deemed to
have occurred when the disbarring or suspending agency or tribunal
enters its judgment or order, regardless of whether an appeal is
pending or could be taken and regardless of whether a violation is
admitted in the consent.
(2) A suspension or disbarment from practice before OFHEO under
paragraph (b)(1) of this section shall continue until the person
suspended or disbarred is reinstated under paragraph (d)(2) of this
section.
(c) Notices to be filed. (1) Any individual appearing or practicing
before OFHEO who is the subject of an order, judgment, decree, or
finding of the types set forth in paragraph (b)(1) of this section
shall file promptly with the Director a copy thereof, together with any
related opinion or statement of the agency or tribunal involved.
(2) Any individual appearing or practicing before OFHEO who is or
within the last 10 years has been convicted of a felony or of a
misdemeanor that resulted in a sentence of prison term or in a fine or
restitution order totaling more than $5,000 shall file a notice
promptly with the Director. The notice shall include a copy of the
order imposing the sentence or fine,
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together with any related opinion or statement of the court involved.
(d) Reinstatement. (1) Unless otherwise ordered by the Director, an
application for reinstatement for good cause may be made in writing by
a person suspended or disbarred under paragraph (a)(1) of this section
at any time more than three years after the effective date of the
suspension or disbarment and, thereafter, at any time more than one
year after the person's most recent application for reinstatement. An
applicant for reinstatement under this paragraph (d)(1) may, in the
Director's sole discretion, be afforded a hearing.
(2) An application for reinstatement for good cause by any person
suspended or disbarred under paragraph (b)(1) of this section may be
filed at any time, but not less than 1 year after the applicant's most
recent application. An applicant for reinstatement for good cause under
this paragraph (d)(2) may, in the Director's sole discretion, be
afforded a hearing. However, if all the grounds for suspension or
disbarment under paragraph (b)(1) of this section have been removed by
a reversal of the order of suspension or disbarment or by termination
of the underlying suspension or disbarment, any person suspended or
disbarred under paragraph (b)(1) of this section may apply immediately
for reinstatement and shall be reinstated by OFHEO upon written
application notifying OFHEO that the grounds have been removed.
(e) Conferences. (1) General. Counsel for OFHEO may confer with a
proposed respondent concerning allegations of misconduct or other
grounds for censure, disbarment or suspension, regardless of whether a
proceeding for censure, disbarment or suspension has been commenced. If
a conference results in a stipulation in connection with a proceeding
in which the individual is the respondent, the stipulation may be
entered in the record at the request of either party to the proceeding.
(2) Resignation or voluntary suspension. In order to avoid the
institution of or a decision in a disbarment or suspension proceeding,
a person who practices before OFHEO may consent to censure, suspension
or disbarment from practice. At the discretion of the Director, the
individual may be censured, suspended or disbarred in accordance with
the consent offered.
(f) Hearings under this section. Hearings conducted under this
section shall be conducted in substantially the same manner as other
hearings under this part, provided that in proceedings to terminate an
existing OFHEO suspension or disbarment order, the person seeking the
termination of the order shall bear the burden of going forward with an
application and with proof and that the Director may, in the Director's
sole discretion, direct that any proceeding to terminate an existing
suspension or disbarment by OFHEO be limited to written submissions.
All hearings held under this section shall be closed to the public
unless the Director, on the Director's own motion or upon the request
of a party, otherwise directs.
Dated: December 21, 1999.
Armando Falcon, Jr.,
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 99-33461 Filed 12-27-99; 8:45 am]
BILLING CODE 4220-01-P
