Food Stamp Program: Forfeiture and Denial of Property Rights

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 271

Food Stamp Program: Forfeiture and Denial of Property Rights

AGENCIES: Office of Inspector General and Food and Nutrition Service,

Department of Agriculture.

ACTION: Final rule.

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SUMMARY: This rule implements section 15(g) of the Food Stamp Act of

1977, as amended by Section 124 of the Food Stamp Act Amendments of

1980, Pub. L. 96-249, which authorizes the Secretary of Agriculture to

subject to forfeiture and denial of property rights any nonfood items,

moneys, negotiable instruments, securities, or other things of value

that are furnished or intended to be furnished by any person in

exchange for food coupons, authorization cards, or other program

benefit instruments or access devices in any manner not authorized by

the Food Stamp Act or regulations issued pursuant to the Food Stamp

Act, 7 U.S.C. 2024(g). The rule establishes procedures to be followed

by the Inspector General and other Federal law enforcement officials

who conduct investigations of alleged violations of the Food Stamp Act

and who may, during the course of those investigations, acquire

property subject to forfeiture and denial of property rights.

EFFECTIVE DATE: November 10, 1994.

FOR FURTHER INFORMATION CONTACT:

Brian L. Haaser, Director, Program Investigations Division, Office of

Inspector General, United States Department of Agriculture, 14th Street

and Independence Avenue SW, Washington, DC 20250-2318. Phone: (202)

720-6701.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

This 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 and related Notice(s) to 7 CFR Part 3015, subpart V (48 FR 29115,

June 24, 1983), this program is excluded from the scope of Executive

Order 12372, which requires intergovernmental consultation with State

and local officials.

Paperwork Reduction Act

This final rule does not contain reporting or recordkeeping

requirements subject to approval by the Office of Management and Budget

under the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).

Regulatory Flexibility Act

This action has been reviewed with regard to the requirements of

the Regulatory Flexibility Act of 1980 (Pub. L. No. 96-354, 94 Stat.

1164, September 19, 1980). Charles R. Gillum, Acting Inspector General,

USDA, has certified that this rule does not have a significant economic

impact on a substantial number of small entities.

Executive Order 12778

This final 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 Effective Date paragraph of this preamble.

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

application of this rule, all applicable administrative procedures must

be exhausted. The administrative review requirements relating to

forfeiture of property pursuant to the Food Stamp Act of 1977, as

amended, are set out in this rule.

Background

This rule recognizes that the Office of Inspector General (OIG),

USDA, conducts the majority of criminal investigations that result in

Federal criminal prosecution under the Food Stamp Act; that such

investigations involve the acquisition of valuable property by

investigators in exchange for food coupons, authorization cards, or

other program benefit instruments or access devices; and that Congress

granted to USDA the power to subject such property to forfeiture. It

should be noted that the Act defines ``coupon'' to include any ``* * *

type of certificate issued pursuant to the provisions of this Act'' (7

U.S.C. 2012(d)). Thus, this rulemaking subjects to forfeiture property

offered in exchange for any program benefit instrument or access

device.

In addition to OIG, other Federal law enforcement agencies,

including the United States Secret Service and the United States Postal

Inspection Service, also conduct criminal investigations involving the

acquisition of property in exchange for food coupons, authorization

cards, or other program benefit instruments or access devices. Finally,

in some instances food coupons and other benefit instruments are

provided to other Federal law enforcement agencies for use in

investigations involving program related activities under memoranda of

understanding with OIG. This rule applies as well to seizures related

to the Act which are made by those agencies. However, this rule

specifically provides that the forfeiture provisions shall not apply to

those items exchanged during the course of internal investigations by

retail firms, investigations conducted by State and local law

enforcement agencies, or FNS Compliance Branch investigations.

For a more detailed explanation of the provisions of this rule, the

reader should refer to the preamble of the proposed rule cited below.

The proposed rule was published in the Federal Register on December

6, 1993, 58 FR 64172, with a 60 day comment period ending February 4,

1994. We received only one letter with comments. The commenter

suggested that the rule should clarify that property not acquired by

investigation is not subject to the rule, that the property belongs to

USDA and disposal must be approved by USDA, and that any moneys

obtained from sale of property or by forfeiture belongs to USDA and

shall be deposited with USDA.

We did not make any changes as a result of the comments because we

believe the rule already adequately addresses the commenter's concerns.

The provisions of 7 CFR 271.5(e)(1)(ii) of the rule state that the

forfeiture and denial of property rights provisions shall apply to

property exchanged or offered in exchange during investigations by the

Inspector General, USDA, and by other authorized Federal law

enforcement agencies. We believe this is clear enough without adding

that it does not cover other property. Section 271.5(e)(2) clearly

states that the property is deemed forfeited to USDA, and

Sec. 271.5(e)(2)(v) provides custodians guidance on property disposal

and refers to the applicable regulations which would be those of USDA

and/or GSA. Finally, while any moneys exchanged or collected are deemed

forfeited to USDA just like other property, section 7 CFR

271.5(e)(2)(vi) provides that such moneys shall be deposited into the

general fund of the United States Treasury. The moneys are deposited to

the general fund because OIG does not have the legal authority needed

to deposit them with USDA.

List of Subjects in 7 CFR Part 271

Administrative practice and procedure, Claims, Food stamps,

Penalties.

Accordingly, 7 CFR part 271 is amended as follows:

PART 271--GENERAL INFORMATION AND DEFINITIONS

1. The authority citation for part 271 continues to read as

follows:

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

2. Section 271.5 is amended by adding a new paragraph (e), as

follows:

Sec. 271.5 Coupons as obligations of the United States, crimes and

offenses, forfeiture and denial of property rights.

* * * * *

(e) Forfeiture and denial of property rights.

(1) General.

(i) Any nonfood items, moneys, negotiable instruments, securities,

or other things of value furnished or intended to be furnished by any

person in exchange for food coupons, authorization cards, or other

program benefit instruments or access devices in any manner not

authorized by the Food Stamp Act or regulations issued pursuant to the

Act, shall be subject to forfeiture and denial of property rights. Such

property is deemed forfeited to the United States Department of

Agriculture (USDA) at the time it is either exchanged or offered in

exchange.

(ii) These forfeiture and denial of property rights provisions

shall apply to property exchanged or offered in exchange during

investigations conducted by the Inspector General, USDA, and by other

authorized Federal law enforcement agencies.

(iii) These forfeiture and denial of property rights provisions

shall not apply to property exchanged or intended to be exchanged

during the course of internal investigations by retail firms, during

investigations conducted solely by State and local law enforcement

agencies and without the participation of an authorized Federal law

enforcement agency, or during compliance investigations conducted by

the Food and Nutrition Service.

(2) Custodians and their responsibilities.

(i) The Inspector General, USDA, the Inspector General's designee,

and other authorized Federal law enforcement officials shall be

custodians of property acquired during investigations.

(ii) Upon receiving property subject to forfeiture the custodian

shall:

(A) Place the property in an appropriate location for storage and

safekeeping, or

(B) Request that the General Services Administration (GSA) take

possession of the property and remove it to an appropriate location for

storage and safekeeping.

(iii) The custodian shall store property received at a location in

the judicial district where the property was acquired unless good cause

exists to store the property elsewhere.

(iv) Custodians shall not dispose of property prior to the

fulfillment of the notice requirements set out in paragraph 3, or prior

to the conclusion of any related administrative, civil, or criminal

proceeding, without reasonable cause. Reasonable cause to dispense with

notice requirements might exist, for example, where explosive materials

are being stored which may present a danger to persons or property.

(v) Custodians may dispose of any property in accordance with

applicable statutes or regulations relative to disposition. The

custodian may:

(A) Retain the property for official use;

(B) Donate the property to Federal, State, or local government

facilities such as hospitals or to any nonprofit charitable

organizations recognized as such under section 501(c)(3) of the

Internal Revenue Code; or

(C) Request that GSA take custody of the property and remove it for

disposition or sale.

(vi) Proceeds from the sale of forfeited property and any moneys

forfeited shall be used to pay all proper expenses of the proceedings

for forfeiture and sale including expenses of seizure, maintenance of

custody, transportation costs, and any recording fees. Moneys remaining

after payment of such expenses shall be deposited into the general fund

of the United States Treasury.

(3) Notice requirements.

(i) The custodian shall make reasonable efforts to notify the

actual or apparent owner(s) of or person(s) with possessory interests

in the property subject to forfeiture except for the good cause

exception if the owner cannot be notified.

(ii) The notice shall:

(A) Include a brief description of the property;

(B) Inform the actual or apparent owner(s) of or person(s) with

possessory interests in the property subject to forfeiture of the

opportunity to request an administrative review of the forfeiture;

(C) Inform the actual or apparent owner(s) of or person(s) with

possessory interests in the property subject to forfeiture of the

requirements for requesting administrative review of the forfeiture;

and

(D) State the title and address of the official to whom a request

for administrative review of the forfeiture may be addressed.

(iii) Except as provided in paragraphs (e)(3) (iv) and (v) of this

section, notice shall be given within 45 days from the date the United

States convicts, acquits, or declines to act against the person who

exchanged the property.

(iv) Notice may be delayed if it is determined that such action is

likely to endanger the safety of a law enforcement official or

compromise another ongoing criminal investigation conducted by OIG, the

United States Secret Service, the United States Postal Inspection

Service, or other authorized Federal law enforcement agency.

(v) Notice need not be given to the general public.

(4) Administrative review.

(i) The actual or apparent owner(s) of or person(s) with possessory

interests in the property shall have 30 days from the date of the

delivery of the notice of forfeiture to make a request for an

administrative review of the forfeiture.

(ii) The request shall be made in writing to the Assistant

Inspector General for Investigations, Office of Inspector General,

USDA, or to his/her designee, hereinafter referred to as the reviewing

official.

(iii) A request for an administrative review of the forfeiture of

property shall include the following:

(A) A complete description of the property, including serial

numbers, if any;

(B) Proof of the person's property interest in the property; and,

(C) The reason(s) the property should not be forfeited.

(iv) The requestor may, at the time of his/her written request for

administrative review, also request an oral hearing of the reasons the

property should not be forfeited.

(v) The burden of proof will rest upon the requestor, who shall be

required to demonstrate, by a preponderance of the evidence, that the

property should not be forfeited.

(vi) Should the administrative determination be in their favor, the

actual or apparent owner(s) of or person(s) with possessory interests

in the property subject to forfeiture may request that forfeited items

be returned or that compensation be made if the custodian has already

disposed of the property.

(vii) The reviewing official shall not remit or mitigate a

forfeiture unless the requestor:

(A) Establishes a valid, good faith property interest in the

property as owner or otherwise; and

(B) Establishes that the requestor at no time had any knowledge or

reason to believe that the property was being or would be used in

violation of the law; and

(C) Establishes that the requestor at no time had any knowledge or

reason to believe that the owner had any record or reputation for

violating laws of the United States or of any State for related crimes.

(viii) The reviewing official may postpone any decision until the

conclusion of any related administrative, civil, or criminal

proceeding.

(ix) The decision of the reviewing official as to the disposition

of the property shall be the final agency determination for purposes of

judicial review.

Done at Washington, D.C. this 28th day of September 1994.

Mike Espy,

Secretary of Agriculture.

[FR Doc. 94-25008 Filed 10-7-94; 8:45 am]

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