Food Stamp Program: Disqualification Penalties for Intentional Program Violations

SUMMARY: FNS is proposing to amend Food Stamp Program regulations by

increasing the disqualification penalties for individuals who are found

guilty in a Federal, State or local court of trading or receiving food

stamp coupons (coupons) for firearms, ammunition, explosives or

controlled substances. This proposal is aimed at deterring recipient

abuse in the Food Stamp Program. This rule also proposes changes to the

procedures for establishing intentional Program violations. These

changes are based on recommendations from State agencies and the

Department's Office of the General Counsel (OGC).

DATES: Comments on this proposed rulemaking must be received by October

28, 1994 to be assured of consideration. Only written comments will be

accepted.

ADDRESSES: Comments should be submitted to James I. Porter, Supervisor,

Issuance and Accountability Section, State Administration Branch,

Program Accountability Division, Food Stamp Program, Food and Nutrition

Service, USDA, 3101 Park Center Drive, Alexandria, Virginia 22302. All

written comments will be open for public inspection during regular

business hours (8:30 am to 5:00 pm, Monday through Friday) at 3101 Park

Center Drive, Alexandria, Virginia, Room 905.

FOR FURTHER INFORMATION CONTACT: Questions regarding this proposed

rulemaking should be directed to Mr. Porter at the above address or by

telephone at (703)305-2385.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been determined to be not significant for

purposes of Executive Order 12866, and therefore has not been reviewed

by the Office of Management and Budget.

Executive Order 12372

The Food Stamp Program is listed in the Catalog of Federal Domestic

Assistance under No. 10.551. For the reasons set forth in the final

rule at 7 CFR 3015, Subpart V and related Notice (48 FR 29115, June 24,

1983), this Program is excluded from the scope of Executive Order 12372

which requires intergovernmental consultation with State and local

officials.

Executive Order 12778

This proposed rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This rule is intended to have preemptive effect

with respect to any State or local laws, regulations or policies which

conflict with its provisions or which would otherwise impede its full

implementation. This rule is not intended to have retroactive effect

unless so specified in the ``Implementation'' section of this preamble.

Prior to any judicial challenge to the provisions of this proposed rule

or the application of its provisions, all applicable administrative

procedures must be exhausted. In the Food Stamp Program the

administrative procedures are as follows: (1) For program benefit

recipients--State administrative procedures issued pursuant to 7 U.S.C.

2020(e)(10) and 7 CFR 273.15; (2) for State agencies--administrative

procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for

rules related to non-QC liabilities) or 7 CFR 275.23 (for rules related

to QC liabilities); (3) for program retailers and wholesalers--

administrative procedures issued pursuant to 7 U.S.C. 2023 set out at 7

CFR 278.8.

Regulatory Flexibility Act

This proposed rule has been reviewed with regard to the

requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354,

94 Stat. 1164, September 19, 1980). William E. Ludwig, Administrator of

the Food and Nutrition Service, has certified that this rule does not

have a significant economic impact on a substantial number of small

entities. The requirements will affect State and local agencies that

administer the Food Stamp Program by simplifying the requirements for

giving advance notice of hearing to food stamp recipients. It will also

modify the penalties applicable to individuals who engage in Program

misconduct.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

3507), the reporting and recordkeeping burden associated with this

proposed rule has been approved by the Office of Management and Budget

(OMB) under OMB number 0584-0064. The provisions of this rule do not

contain any additional reporting and/or recordkeeping requirements

subject to OMB approval.

Background

The Mickey Leland Childhood Hunger Relief Act (Pub. L. 103-66)

(Leland Act) amended the Food Stamp Act of 1977 (7 U.S.C. 2011-2021)

(the Act) in a number of ways. This rule proposes to implement the

nondiscretionary provisions of the Leland Act relating to

disqualification penalties for intentional Program violations. Other

provisions of the Leland Act are being addressed in separate rules.

This rule proposes to implement the disqualification penalties for

individuals who are found guilty in a Federal, State or local court of

trading or receiving coupons for firearms, ammunition, explosives or

controlled substances. This rule also proposes regulatory changes with

regard to the delivery of administrative disqualification hearing

notices and the initiation of disqualification periods for intentional

Program violations. In addition, this rule proposes to eliminate two

model forms referred to under 7 CFR 273.16 of the current regulations.

I. Disqualification Penalties for Intentional Program Violations

An intentional Program violation is defined in 7 CFR 273.16(c) as,

``having intentionally (1) Made a false or misleading statement or

misrepresented, concealed or withheld facts or, (2) committed any act

that constitutes a violation of the Food Stamp Act, the Food Stamp

Program Regulations, or any State statute relating to the use,

presentation, transfer, acquisition, receipt, or possession of food

stamp coupons or ATP's [Authorization to Participate cards].'' As

reflected by current regulations at 7 CFR 273.16(b), Section 6(b)(1) of

the Act (7 U.S.C. Sec. 2015 (b)(1)) establishes a graduated system of

intentional Program violation disqualification penalties. Under this

system, individuals receive a mandatory disqualification of 6 months

for the first offense or 12 months for the second offense, and a

permanent disqualification for the third offense. Under the current

regulations, there is no distinction in penalties for different types

of conduct which result in an intentional Program violation finding.

The Leland Act changes this. It amends Section 6(b)(1) of the Act

to increase the penalties for intentional Program violations which

involve certain egregious conduct. Specifically, the Leland Act

requires that an individual be disqualified for 12 months for a first

finding by a court, and permanently for a second finding by a court

that the person has either traded or received controlled substances

using coupons. The Leland Act also requires that an individual be

permanently disqualified for the first finding by a court that the

individual has either traded or received firearms, ammunition, or

explosives using coupons. Accordingly, the Department proposes to amend

7 CFR 273.16 by revising paragraph (b) to include the new penalties.

The Department is also proposing to make conforming amendments to 7 CFR

273.16(e)(3)(i)(F) and 7 CFR 273.16(h)(1)(ii)(c). The applicability of

the new penalties to the Disqualified Recipient Subsystem under 7 CFR

273.16(i) will be addressed in a different rulemaking.

The language being proposed in Sec. 273.16(b) states that the new

penalties will apply to applicable violations involving the use of

``coupons.'' In addition to violations involving traditional paper

coupons, the Department believes that the increased penalties also

apply to violations involving trafficking in alternative benefit

issuance systems such as electronic benefit transfer (EBT). Current

regulations at 7 CFR 271.2 define a ``coupon'' as ``any coupon, stamp,

access device or type of certification provided * * * for the purchase

of eligible food.'' Since alternative forms of benefit issuance

systems, such as EBT, are included in this definition, providing

additional language in Sec. 273.16(b) of the proposed rule regarding

this issue and the extent of applicability is unnecessary.

Current regulations at 7 CFR 273.2(b)(ii) and 7 CFR 273.16(d)

require that the disqualification penalties be included on the Food

Stamp Program application form. In order to satisfy this requirement,

the Department issued an implementation memorandum on March 16, 1994,

requiring that State agencies are to modify the application to reflect

the new penalties by the September 1, 1994 implementation date.

In preparing this proposed rule, the Department considered whether

the increased penalties apply to violations settled by deferred

adjudications. A deferred adjudication, as specified in 7 CFR 273.16(h)

of the current regulations, is when a determination of guilt by a court

is deferred subject to the accused individual meeting the terms of an

agreement with a prosecutor or of a court order. The statutory language

provides for the increased penalties to take effect where there is an

actual court finding that the intentional Program violation involved

trading firearms, ammunition, explosives or controlled substances for

coupons. Accordingly, the increased penalties will be applied under

this rule in cases of deferred adjudication where the court makes such

a finding. We note that the statute does not speak of a ``conviction''

but rather of a ``finding by a Federal, State or local court.'' Since

court rules generally require a finding of culpability in jurisdictions

where deferred adjudication procedures are used, the Department

believes the increased penalties would apply if such a finding has been

made, even though the final adjudication is deferred. If, for any

reason, final adjudication is deferred and no finding of culpability is

made by the court, the increased administrative penalties would not

apply until such a finding is made or final adjudication is reached.

It is the Department's intent in this proposed rule to allow the

inclusion of the increased penalties in signed deferred adjudication

agreements in exactly the same manner that the existing penalties are

currently included in such agreements. Accordingly, the Department

proposes to amend 7 CFR 273.16 by revising paragraph (b) to specify

that the increased penalties shall also apply to signed deferred

adjudication agreements. We encourage comments on this proposed

amendment. The Department is also proposing to make a conforming

amendment to 7 CFR 273.16(h)(1)(ii)(C).

As opposed to deferred adjudication, since there is no formal

involvement or inclusion of a Federal, state or local court process in

the administrative disqualification hearing system, the Department is

proposing that the increased penalties not apply to intentional Program

violations determined as a result of an administrative disqualification

hearing or a signed waiver of the right to an administrative

disqualification hearing.

The second sentence in paragraph (b) of 7 CFR 273.16 in the current

regulations concerns the treatment of disqualifications which occurred

prior to the implementation of the current disqualification penalties.

The Department is proposing to amend paragraph (b) by breaking this

sentence out into its own paragraph, paragraph (6) in Sec. 273.16(b) of

the proposed rule, and specifying which penalties apply to this policy.

The Department is also proposing to make a conforming amendment to 7

CFR 273.16(i)(5). There is no intent on the part of the Department to

change the effect of this provision as it applies to the existing

penalties. This specific revision is being proposed solely to provide

clarification.

Regarding the application of the new penalties for trading or

receiving coupons for firearms, ammunition, explosives or controlled

substances, the increased penalties apply to court findings which occur

subsequent to the effective date of Section 13942 of the Leland Act--

September 1, 1994--as reflected in a new paragraph Sec. 273.16(b)(7) in

the proposed rule.

The third sentence in 7 CFR 273.16(b) in the current regulations

discusses the disqualification procedure if a disqualification period

is not imposed by the court. The current procedure requires the State

agency to impose the appropriate penalty unless it is contrary to the

court order. The Department is proposing to retain this policy and to

apply it to the proposed increased penalties. Accordingly, the

Department is proposing to amend the existing provision to include the

increased penalties. In keeping with the proposed reorganization of 7

CFR 273.16(b), the provision is also being separated into its own

paragraph, Sec. 273.16(b)(5).

In addition, the Department is proposing to retain its current

policy in 7 CFR 273.16(b) regarding the disqualification of the

individual as opposed to the entire household. The Department is also

proposing to retain its current policy in 7 CFR 273.16(b) that the

household, and not just the individual, is responsible for repayment of

the debt. However, the Department is proposing to break these policies

out into their own respective paragraphs, Sec. 273.16(b)(8) and (9) of

the proposed rule.

The current regulations at 7 CFR 273.16(b) include some of the

claim establishment and collection procedures for intentional Program

violations. As this subject is covered in greater detail in 7 CFR

273.18 of the current regulations, the Department is proposing to

eliminate repetition by amending 7 CFR 273.16(b) to remove the specific

procedures and replace it with Sec. 273.16(b)(9) which states that all

claims should be established and collected in accordance with the

procedures set forth in 7 CFR 273.18 in the current regulations. The

procedures for establishing and collecting intentional Program

violations found in 7 CFR 273.18 of the current regulations are not

affected by this proposed rule.

II. Advance Notice of Administrative Disqualification Hearings

Under the current regulations at 7 CFR 273.16(e)(3), ``proof of

receipt'' of a written advance notice must be obtained prior to

conducting a scheduled administrative disqualification hearing. State

agencies have found this requirement to be burdensome, costly and

inconsistent with other Federal programs they administer. Regular mail

service is an inexpensive and efficient mechanism to provide notice

that an individual's rights are being affected. In addition, the Texas

Department of Human Services is currently operating under a

Departmental waiver which allows the State agency to conduct

disqualification hearings without obtaining proof of receipt of the

advance notice. Data collected from the State agency revealed that only

four recipients, out of a total of 3,931 administrative

disqualification hearing notices mailed from November 1992 to September

1993, subsequently claimed that their respective notices were never

received. Therefore, in an effort to increase Program efficiency while

lowering administrative costs, the Department is proposing to amend 7

CFR 273.16(e)(3) to allow State agencies the option of delivering these

advance notices via first class mail. In addition, the Department is

proposing to eliminate the proof of receipt requirement where the State

agency elects an alternative method of delivery.

In order to safeguard the rights of recipients who may be affected

by this proposed rule, the Department is proposing to make a claim of

non-receipt of an advance notice, unless proof of receipt was obtained

by the State agency, a good cause criterion under 7 CFR 273.16(e)(4).

If the household member shows non-receipt of the notice in a timely

fashion, any previous decision determined in absentia would no longer

remain valid and the State agency would conduct a new hearing. We are

especially interested in receiving comments on this proposal.

III. Imposition of Disqualification Penalties

Section 6(b)(1) of the Act (7 U.S.C. 2015(b)(1)) states that an

individual who has been found to have committed an intentional Program

violation shall ``immediately'' become ineligible for further

participation in the Food Stamp Program for the length of the

disqualification period. However, the language currently used in

paragraphs (a), (e), (f), (g) and (h) of 7 CFR 273.16 specifies that,

if the individual is not participating in the Program at the time the

disqualification is to begin, the disqualification period is to be

``postponed'' until the individual applies for and is determined

eligible to receive Program benefits. The Department found that the use

of the word ``postponed'' in the current regulations, when compared to

``immediately'' in the Act, may be the cause of confusion which has

recently led to some court suits. There is concern because an exacting

interpretation of ``immediately'' would result in the disqualification

period beginning at once for the specified length of time regardless of

whether the individual is eligible to participate in the Program. Under

this interpretation, the worst offenders, those who concealed steady

employment and large amounts of income in order to obtain food stamps,

are unlikely to be penalized at all since their level of income and/or

resources, once discovered, would prevent them from participating in

the Program during the period of time covered by the disqualification

penalty. Since the legislative intent (Senate Report No. 128, 97th

Congress, 1st Session, pages 54 and 55) is to strengthen the laws

applying to Program violators, the Department strongly believes that

allowing individuals to escape without penalty is contrary to this

intent. In addition, the Department feels that the concept expressed in

the Act of becoming ineligible for further participation, to which an

immediate disqualification period applies, implies that an individual

is either participating or has been determined eligible to participate.

It simply defies common sense to have periods of disqualification run

concurrently with periods of ineligibility.

Therefore, the Department is proposing to clarify existing

regulations at 7 CFR 273.16(a), (e), (f), (g) and (h) by stating that

an individual disqualified while not currently participating in the

Program would have his/her disqualification period begin immediately

after applying for and becoming eligible to receive benefits.

The Department is also proposing to make an additional revision to

paragraphs (a), (e), (f), (g) and (h) in 7 CFR 273.16 by replacing

``participating'' with ``certified to participate'' where reference is

made to the imposition of the disqualification period. This is being

proposed to clarify the Department's position regarding the timing of

the imposition of disqualification penalties in instances such as when

an individual is found eligible for the Program but technically does

not ``participate'' by failing to redeem an intermediary document such

as an authorization to participate card (ATP). The proposed rule makes

clear the Department's position that the State agency should begin the

disqualification period against an individual provided that

individual's household is certified to participate in the Program

regardless of whether an ATP or similar document has been redeemed.

IV. Model Forms

The current regulations at 7 CFR 273.16(e) make two references to

FNS providing model forms for adaptation by State agencies. The first

model form, referred to in 7 CFR 273.16(e)(3)(iii), is for providing

advance notice of an administrative disqualification hearing. The

second form, referred to in 7 CFR 273.16(e)(9)(iii), provides a model

for notifying individuals of administrative action taken in their

administrative disqualification hearing. The primary purpose for

furnishing these forms was to assist State agencies with the initial

implementation of the current regulations when they were originally

published in 1983. Since that time, most State agencies have designed

their own State-specific forms based on regulatory requirements, thus

reducing the effectiveness of and need for these models. As part of an

ongoing effort to do away with unnecessary Federal forms while

affording State agencies maximum flexibility, the Department is

proposing to eliminate these model forms by deleting the sentences in 7

CFR 273.16(e)(3)(iii) and 7 CFR 273.16(e)(9)(iii) which make reference

to the forms. However, FNS will continue to provide State agencies with

guidance and assistance for form development or changes to forms

necessitated by revisions to the regulations.

Implementation

Section 13971 of the Leland Act sets effective dates for the

various provisions of the law. Section 13971(6)(4) provides that the

provision in Section 13942, which amends Section 6(b) of the Act (7

U.S.C. 2015(b)(1)) to enhance certain intentional Program violation

disqualification penalties, is effective and shall be implemented on

September 1, 1994. Current regulations at 7 CFR 273.2(b)(ii) and 7 CFR

273.16(d) require that the notice of disqualification penalties be

included on the Food Stamp application form. Therefore, the Department,

on March 16, 1994, issued an implementation memorandum stating that

notice of the enhanced intentional Program violation disqualification

penalties is to be included on the Food Stamp application form by

September 1, 1994.

List of Subjects in 7 CFR Part 273

Administrative practice and procedure, Aliens, Claims, Food Stamps,

Fraud, Grant programs--social programs, Penalties, Reporting and

recordkeeping requirements, Social security, Students.

For the reasons set out in the preamble, 7 CFR Part 273 is proposed

to be amended as follows:

1. The authority citation for Part 273 continues to read as

follows:

Authority: 7 U.S.C. 2011-2032.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

2. In Sec. 273.16:

a. The last sentence of paragraph (a)(1) is revised;

b. Paragraph (b) is revised;

c. The second sentence of the introductory text of paragraph

(e)(3)(i) is removed, and four new sentences are added in its place;

d. Paragraph (e)(3)(i)(F) is revised;

e. The last sentence of paragraph (e)(3)(iii) is removed;

f. Paragraph (e)(8)(iii) is revised;

g. The last sentence of paragraph (e)(9)(iii) is removed;

h. Paragraph (f)(2)(iii) is revised;

i. Paragraph (g)(2)(ii) is revised;

j. Paragraph (h)(1)(ii)(C) is revised;

k. Paragraph (h)(2)(ii) is revised; and

l. The second sentence of paragraph (i)(5) is revised.

The revisions and additions read as follows:

Sec. 273.16 Disqualification for intentional Program violation.

(a) Administrative responsibility. (1) * * * The disqualification

period for nonparticipants at the time of the administrative

disqualification or court decision shall take effect immediately after

the individual applies for and is determined eligible for Program

benefits.

* * * * *

(b) Disqualification penalties. (1) Individuals found to have

committed an intentional Program violation either through an

administrative disqualification hearing or by a Federal, State or local

court, or who have signed either a waiver of right to an administrative

disqualification hearing or a disqualification consent agreement in

cases referred for prosecution, shall be ineligible to participate in

the Program:

(i) For a period of six months for the first intentional Program

violation, except as provided under paragraphs (b)(2) and (b)(3) of

this section;

(ii) For a period of twelve months upon the second occasion of any

intentional Program violation, except as provided in paragraphs (b)(2)

and (b)(3) of this section; and

(iii) Permanently for the third occasion of any intentional Program

violation.

(2) Individuals found by a Federal, State or local court to have

used or received coupons in a transaction involving the sale of a

controlled substance (as defined in section 102 of the Controlled

Substances Act (21 U.S.C. 802)) shall be ineligible to participate in

the Program:

(i) For a period of twelve months upon the first occasion of such

violation; and

(ii) Permanently upon the second occasion of such violation.

(3) Individuals found by a Federal, State or local court to have

used or received coupons in a transaction involving the sale of

firearms, ammunition or explosives shall be permanently ineligible to

participate in the Program upon the first occasion of such violation.

(4) The penalties in paragraphs (b)(2) and (b)(3) of this section

shall also apply in cases of deferred adjudication as described in

paragraph (h) of this section where the court makes a finding that the

individual engaged in the conduct described in paragraph (b)(2) or

(b)(3) of this section.

(5) If a court fails to impose a disqualification period for any

intentional Program violation, the State agency shall impose the

appropriate disqualification penalty specified in paragraph (b)(1),

(b)(2) or (b)(3) of this section unless it is contrary to the court

order.

(6) One or more intentional Program violations which occurred prior

to the State agency's implementation of the disqualification periods

specified in paragraphs (b)(1)(i), (b)(1)(ii) or (b)(1)(iii) of this

section shall be considered as only one previous disqualification when

determining the appropriate penalty to impose in a case under

consideration.

(7) Regardless of when an action taken by an individual which

caused an intentional Program violation occurred, the disqualification

periods specified in paragraphs (b)(2) and (b)(3) of this section shall

apply to any case in which the court makes the requisite finding on or

after September 1, 1994.

(8) State agencies shall disqualify only the individual found to

have committed the intentional Program violation, or who signed the

waiver of the right to an administrative disqualification hearing or

disqualification consent agreement in cases referred for prosecution,

and not the entire household.

(9) Even though only the individual is disqualified, the household,

as defined in Sec. 273.1, is responsible for making restitution for the

amount of any overpayment. All intentional Program violation claims

shall be established and collected in accordance with the procedures

set forth in Sec. 273.18.

* * * * *

(e) Disqualification hearings. * * *

(3) Advance notice of hearing. (i) * * * If mailed, the notice

shall be sent either first class mail or certified mail- return receipt

requested. The notice may also be provided by any other reliable

method. If no proof of receipt is obtained, a showing of non-receipt by

the household member shall be considered good cause for not appearing

at the hearing. The notice shall contain at a minimum:

* * * * *

(F) A warning that a determination of intentional Program violation

will result in disqualification periods as determined by paragraph (b)

of this section, and a statement of which penalty the State agency

believes is applicable to the case scheduled for a hearing;

* * * * *

(8) Imposition of disqualification penalties. * * *

(iii) If the individual is not certified to participate in the

Program at the time the disqualification period is to begin, the period

shall take effect immediately after the individual applies for and is

determined eligible for benefits.

* * * * *

(f) Waived hearings. * * *

(2) Imposition of disqualification penalties. * * *

(iii) If the individual is not certified to participate in the

Program at the time the disqualification period is to begin, the period

shall take effect immediately after the individual applies for and is

determined eligible for benefits.

* * * * *

(g) Court Referrals. * * *

(2) Imposition of disqualification penalties. * * *

(ii) If the individual is not certified to participate in the

Program at the time the disqualification period is to begin, the period

shall take effect immediately after the individual applies for and is

determined eligible for benefits.

* * * * *

(h) Deferred adjudication. * * *

(1) Advance notification. * * *

(ii) * * *

(C) A warning that the disqualification periods for intentional

Program violations under the Food Stamp Program are as specified in

paragraph (b) of this section, and a statement of which penalty will be

imposed as a result of the accused individual having consented to

disqualification.

* * * * *

(2) Imposition of disqualification penalties. * * *

(ii) If the individual is not certified to participate in the

Program at the time the disqualification period is to begin, the period

shall take effect immediately after the individual applies for and is

determined eligible for benefits.

* * * * *

(i) Reporting requirements. * * *

(5) * * * However, one or more intentional Program violations which

occurred prior to the State agency's implementation of the

disqualification periods specified in paragraph (b)(1) of this section

shall be considered as only one previous disqualification when

determining the appropriate penalty to impose in a case under

consideration, regardless of where the disqualification(s) took place.

* * *

* * * * *

Dated: August 24, 1994.

William E. Ludwig,

Administrator, Food and Nutrition Service.

[FR Doc. 94-21245 Filed 8-26-94; 8:45 am]

BILLING CODE 3410-30-U