Food Stamp Program: Disqualification Penalties for Intentional Program Violations

SUMMARY: This rule finalizes a proposed rulemaking published on August

29, 1994. It amends Food Stamp Program regulations to implement section

13942 of the Mickey Leland Hunger Relief Act, which increases the

disqualification penalties for individuals who are found guilty in a

Federal, State or local court of trading or receiving food stamp

coupons for firearms, ammunition, explosives or controlled substances.

This rule also implements a change which makes it easier for a State

agency to conduct an administrative disqualification hearing by

eliminating the proof of receipt requirement. In addition, this rule

clarifies the Department's policy on the imposition of disqualification

periods for intentional Program violations. Finally, this rule

eliminates two model forms used in administrative disqualification

hearings.

DATES: This rule is effective October 23, 1995, except that 7 CFR

273.16(b) is effective retroactive to September 1, 1994.

FOR FURTHER INFORMATION CONTACT: James I. Porter, Supervisor, Issuance

and Accountability Section, State Administration Branch, Program

Accountability Division, Food Stamp Program, Food and Consumer Service,

USDA, 3101 Park Center Drive, Alexandria, Virginia 22302, (703) 305-

2385.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final 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 part 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 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 ``Implementation'' section of this preamble.

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

the application of its provisions, all applicable administrative

procedures must be exhausted.

Regulatory Flexibility Act

This final 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 Consumer 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

final 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

On August 29, 1994, the Department published a proposed rule at 59

FR 44343 to implement section 13942 of the Mickey Leland Childhood

Hunger Relief Act (Pub. L. 103-66) (Leland Act). Section 13942 of the

Leland Act amended the Food Stamp Act of 1977 (7 U.S.C. 2011-2032) (the

Act) to increase the disqualification penalties for certain types of

intentional Program violations. In addition, the proposed rule included

regulatory changes with regard to the delivery of administrative

disqualification hearing notices and the initiation of disqualification

periods for intentional Program violations. The proposed rule also

included regulatory changes to eliminate two model forms used in

administrative disqualification hearings.

The Department received nine comment letters which addressed

provisions of the proposed rule. All of the commenters were State

agencies. The Food and Consumer Service has given careful consideration

to all comments received. The major concerns of the commenters are

discussed below. For additional information on the provisions discussed

in this rule, the reader should refer to the preamble of the proposed

rule at 59 FR 44343-46.

Increased Disqualification Penalties for Intentional Program

Violations

Section 13942 of 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 food stamp coupons. This

section of 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 food stamp coupons. Of the nine comment

[[Page 43514]]

letters received, two commenters specifically supported this provision

of the proposed rule. However, some commenters had concerns on the

applicability of the increased penalties.

Two commenters were concerned about the applicability of the

increased penalties to deferred adjudications. The proposed rule would

have applied the increased penalties in cases with deferred

adjudication if a finding of culpability has been made. The first

commenter felt that some deferred adjudications should not be subjected

to the increased penalties and that specific criteria should be

established for having deferred adjudications result in the same

increased penalties as would apply to an adjudication by a court. The

second commenter felt that the finding of culpability clause would

require State agencies to conduct a difficult and costly analysis of

the court order or terms of the deferred adjudication. The Department

recognizes that there are complexities involved in making the proper

determination of whether a finding of culpability exists. However,

given the fact that the standard penalties are applied in instances of

deferred adjudication, the Department believes the increased penalties

should also be imposed when applicable in cases of deferred

adjudication. Therefore, the Department has retained 7 CFR 273.16(b)(4)

of the final rule, as proposed.

One commenter requested clarification as to whether the penalties

applied to non-recipients as well as recipients. Section 6(b)(1) of the

Act refers to any ``person'' and not ``recipient'' in its discussion of

applying disqualification penalties. The Act also provides that

penalties apply to ``further participation in the Program.'' The

language in the proposed rule at Sec. 273.16(b)(1), which discusses the

application of the penalties, is consistent with the Act in that it

uses ``individual'' and not ``recipient'' or ``household member.'' The

disqualification penalties apply to any individual found to have

committed an intentional Program violation regardless of whether he/she

is a recipient. The provision in Sec. 273.16(a)(1) states that the

disqualification shall take effect in such cases immediately after the

individual applies and is found eligible to participate in the Program.

One commenter recommended a revision to the proposed rule at

Sec. 273.16(b)(5) to clarify the Department's intent. The commenter

suggested using the phrase `` * * * fails to impose a disqualification

or a disqualification period * * * '' instead of `` * * * fails to

impose a disqualification period * * * '' as proposed in

Sec. 273.16(b)(5). The reason for the suggested change, according to

the commenter, is because questions have arisen regarding the

Department's intent on whether a disqualification period should be

imposed if the court finds that the intentional Program violation was

committed but does not specify in the court order whether there should

be a disqualification. The Department's longstanding position on this

issue is to have the appropriate disqualification period imposed by the

State agency unless it is expressly forbidden by the court or a

different disqualification period is specified in the court order.

Therefore, the Department is including in the final rule the

clarification to 7 CFR 273.16(b)(5) suggested by the commenter.

In addition to changes reflected in the final rule because of the

comments received regarding this provision, the Department is revising

a paragraph in the regulations for clarification purposes. This

paragraph discusses the treatment of disqualifications which occurred

prior to the implementation of the disqualification periods set forth

in a February 15, 1983 rulemaking (48 FR 6836). The final rule provides

clarification in 7 CFR 273.16(b)(6) and 7 CFR 273.16(i)(5) by referring

to the actual implementation date (April 1, 1983) of the provision

contained in the February 15, 1983 rulemaking instead of making

reference to the paragraph containing the penalties. The change has no

substantive effect and is for purposes of clarification only.

Advance Notice of Administrative Disqualification Hearings

The Department proposed giving State agencies the option to deliver

advance notices of administrative disqualification hearings via first

class mail. The current regulations at 7 CFR 273.16(e)(3)(i) require

that, if notices are mailed, they must be sent via certified mail--

return receipt requested, and proof of receipt must be obtained. The

proposed rule essentially eliminates the proof of receipt requirement.

Of the nine comment letters received, six commenters specifically

supported this provision of the proposed rule. However, some commenters

had concerns regarding its applicability.

One commenter supported this proposal as a State agency option,

rather than a requirement, citing that flexibility is necessary because

of differences between State agencies in Program administration. The

proposed rule would, in fact, make it an option by stating that, if

mailed, the notice would be sent either via first class or certified

mail-return receipt requested. The Department is keeping this as an

option in the final rule.

One commenter suggested that the Department add a qualifier to

specify that returned first class mail constitutes failure to provide

advance notice of an administrative disqualification hearing. In this

manner, the commenter felt that the rule would be clear that the

hearing would be canceled in such an event. The current regulations at

7 CFR 273.16(e)(4) state that if the affected individual ``* * * cannot

be located * * * the hearing shall be conducted without the household

member being represented.'' This is not being changed in the final

rule.

The Department proposed to make non-receipt of an advance notice a

good cause criterion under 7 CFR 273.16(e)(4). Under the proposal, 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. The

Department received a comment concerning the issue of what constituted

a ``showing of non- receipt'' of the hearing notice in order to request

a new hearing. The Department has determined that the circumstances in

which non-receipt constitutes a good cause should be left up to each

State agency to decide. This is being done to increase the degree of

State agency flexibility in this area. However, each State agency's

policy regarding the required circumstances shall be consistently

applied within the State agency. This is reflected in 7 CFR

273.16(e)(3)(ii) in the final rule.

The Department also received three comments concerning the issue of

what is considered ``timely fashion'' for individuals to show non-

receipt of an advance notice. Two commenters stated that ``timely

fashion'' needs to be defined. One commenter was concerned about the

relevance to the current regulations at 7 CFR 273.16(e)(4) which state

that the household has 10 days from the date of the scheduled hearing

to present reasons indicating good cause for failure to appear at the

hearing. The commenter suggested that the existing 10-day limit for

presenting good cause be eliminated. The Department feels that the

existing 10- day limit should remain intact for circumstances in which

the individual is claiming good cause based upon circumstances other

than non-receipt of the notice of the hearing. However, because mailing

the hearing decision acts as a notice to the recipient of what

occurred, the Department has determined that it is more meaningful to

define ``timely

[[Page 43515]]

fashion'' for a good cause claim of non-receipt of the notice of

hearing as being within 30 days after the date of the written notice of

the hearing decision. This is reflected in 7 CFR 273.16(e)(4) in the

final rule.

Imposition of Disqualification Penalties

The proposed rule clarifies 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 Food Stamp

Program would have his/her disqualification period begin immediately

after applying for and becoming eligible to receive benefits. This

clarification became necessary because the use of the word

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

``immediately'' in the Act, became a cause of confusion which led to

some court suits.

Of the nine comments received for this proposed rule, two

commenters specifically supported this proposal. However, two other

commenters had concerns regarding its applicability.

The first commenter stated that ``immediately'' should be

interpreted to signify that the disqualification period begins once the

appropriate State agency staff becomes aware that the individual to be

disqualified has returned to the Program. The commenter further stated

that this is a problem if the State agency is not promptly notified by

the court of the decision. While the Department recognizes that

disqualifying individuals may require coordination among various

agencies within the State, the Department feels that allowing the

disqualification to be delayed simply because the appropriate

individuals within the State agencies are unaware of its existence is

unfair to the individual being disqualified.

The second commenter suggested a wording change in

Sec. 273.16(a)(1) of the proposed rule. The commenter recommended

changing ``nonparticipants,'' in the last sentence of this section, to

``persons not eligible to participate in the Program.'' The reason for

the suggestion, according to the commenter, is for consistency

purposes. The Department concurs that a wording change is necessary for

clarification purposes. However, the Department feels that the change

suggested by the commenter needs to be expanded. The basis for this is

that the commenter's wording may suggest that the decision on the

timing of the disqualification when the intentional Program violation

determination is made is based on whether the individual is eligible to

participate. This implies that an eligibility determination must be

completed at the time the intentional Program violation determination

is rendered. This is not the Department's intent. The wording used in 7

CFR 273.16(a)(1) in the final rule, ``* * * persons not currently

certified to participate in the Program * * *,'' accurately describes

the Department's intent because there is no implication of a test of

eligibility.

Model Forms

The proposed rule would eliminate reference to the Food and

Consumer Service providing two model forms currently used in the

administrative disqualification hearing process. Most State agencies

have designed their own State-specific forms based on regulatory

requirements, thus reducing the effectiveness of and need for these

models. No comments were received regarding this proposal. As part of

an ongoing effort to do away with unnecessary Federal forms while

affording State agencies maximum flexibility, the Department will no

longer be providing these model forms.

Implementation

No comments were received on the implementation dates. The

provision relating to the increased penalties at 7 CFR 273.16(b) is

effective and was to be implemented no later than 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 requiring notice of the enhanced

intentional Program violation disqualification penalties to be included

on the Food Stamp application form by September 1, 1994.

The remaining provisions are effective and must be implemented

October 23, 1995.

List of Subjects

7 CFR Part 272

Alaska, Civil rights, Food stamps, Grant programs--social programs,

Penalties, Reporting and recordkeeping requirements, Social security,

Students.

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.

Accordingly, 7 CFR parts 272 and 273 are amended as follows:

1. The authority citation of Parts 272 and 273 continues to read as

follows:

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

2. In Sec. 272.1, a new paragraph(g)(142) is added to read as

follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(142) Amendment No. 357. The provisions of Amendment No. 357 are

effective and must be implemented as follows:

(i) The provision relating to the increased penalties at 7 CFR

273.16(b) is effective and must be implemented retroactive to September

1, 1994. This includes providing notification of the increased

penalties on the application form.

(ii) The remaining provisions are effective and must be implemented

October 23, 1995.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

3. In Sec. 273.16:

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

b. Paragraph (b) is revised;

c. Paragraph (e)(3) is revised;

d. The next to last sentence of paragraph (e)(4) is removed, and

two sentences are added in its place;

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

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

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

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

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

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

k. 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) * * * For those persons not

currently certified to participate in the Program at the time of the

administrative disqualification or court decision, the disqualification

period 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

[[Page 43516]]

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 or a

disqualification period for any intentional Program violation, the

State agency shall impose the appropriate disqualification penalty

specified in paragraphs (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 April 1, 1983 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) The State agency shall provide

written notice to the individual suspected of committing an intentional

Program violation at least 30 days in advance of the date a

disqualification hearing initiated by the State agency has been

scheduled. 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 the notice is sent using

first class mail and is returned as undeliverable, the hearing may

still be held.

(ii) If no proof of receipt is obtained, a timely (as defined in

paragraph (e)(4) of this section) showing of nonreceipt by the

individual due to circumstances specified by the State agency shall be

considered good cause for not appearing at the hearing. Each State

agency shall establish the circumstances in which non-receipt

constitutes good cause for failure to appear. Such circumstances shall

be consistent throughout the State agency.

(iii) The notice shall contain at a minimum:

(A) The date, time, and place of the hearing;

(B) The charge(s) against the individual;

(C) A summary of the evidence, and how and where the evidence can

be examined;

(D) A warning that the decision will be based solely on information

provided by the State agency if the individual fails to appear at the

hearing;

(E) A statement that the individual or representative will, upon

receipt of the notice, have 10 days from the date of the scheduled

hearing to present good cause for failure to appear in order to receive

a new hearing;

(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;

(G) A listing of the individual's rights as contained in

Sec. 273.15(p);

(H) A statement that the hearing does not preclude the State or

Federal Government from prosecuting the individual for the intentional

Program violation in a civil or criminal court action, or from

collecting any overissuance(s); and

(I) If there is an individual or organization available that

provides free legal representation, the notice shall advise the

affected individual of the availability of the service.

(iv) A copy of the State agency's published hearing procedures

shall be attached to the 30-day advance notice or the advance notice

shall inform the individual of his/her right to obtain a copy of the

State agency's published hearing procedures upon request.

(v) Each State agency shall develop an advance notice form which

contains the information required by this section.

(4) Scheduling of hearing. * * * In instances where good cause for

failure to appear is based upon a showing of nonreceipt of the hearing

notice as specified in paragraph (e)(3)(ii) of this section, the

household member has 30 days after the date of the written notice of

the hearing decision to claim good cause for failure to appear. In all

other instances, the household member has 10 days from the date of the

scheduled hearing to present reasons indicating a good cause for

failure to appear. * * *

* * * * *

(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

[[Page 43517]]

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 April 1, 1983 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 15, 1995.

George A. Braley,

Acting Administrator, Food and Consumer Service.

[FR Doc. 95-20687 Filed 8-21-95; 8:45 am]

BILLING CODE 3410-30-U