Program Fraud Civil Remedies Act Regulations

Federal RegisterJan 29, 1996

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SMALL BUSINESS ADMINISTRATION

13 CFR Part 142

Program Fraud Civil Remedies Act Regulations

AGENCY: Small Business Administration.

ACTION: Final rule.

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SUMMARY: In response to President Clinton's government-wide regulatory

reform initiative, the Small Business Administration (SBA) has

completed a page-by-page, line-by-line review of all of its existing

regulations to determine which might be revised or eliminated. This

rule renumbers, reorganizes, condenses and rewrites in plain language

the existing regulation implementing the ``Program Fraud Civil Remedies

Act of 1986''. The goal of the plain language style is to eliminate

redundancies, ambiguities and cumbersome wording. The goal of the

reorganization and revision is to make this part consistent in practice

and procedure with other parts of this title and to clarify

requirements under this regulation and applicable statutes of the

United States.

EFFECTIVE DATE: This rule is effective February 28, 1996.

FOR FURTHER INFORMATION CONTACT: Cheri Wolff, Chief Counsel for General

Litigation; Office of General Counsel, at (202) 205-6643.

SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a

Memorandum to each federal agency, directing them to simplify their

regulations. In response to this directive, SBA completed a page-by-

page, line-by-line review of all of its existing regulations to

determine which might be revised or eliminated. This rule reorganizes

and rewords former provisions for clarity and user-friendliness.

Extensive renumbering was necessary for reorganization, simplification

and clarification of existing provisions. No substantive changes to

existing provisions were made.

SBA published its proposed changes to Part 142 in the Federal

comment during a thirty day comment period. Since no comments were

received, SBA has decided to issue the final rule substantially as

proposed (subject only to minor typographical corrections).

Compliance With Executive Orders 12612, 12778, and 12866, the

Regulatory Flexibility Act (5 U.S.C. 601, et seq.), and the Paperwork

Reduction Act (44 U.S.C. Ch. 35)

SBA certifies that this rule does not have a significant economic

impact on a substantial number of small entities within the meaning of

Executive Order 12866 or the Regulatory Flexibility Act, 5 U.S.C. 601,

et seq. This rule renumbers, reorganizes and rewrites the existing

regulation for clarity and ease of use. Contracting opportunities and

financial assistance for small business are not affected by this rule.

Therefore, it is not likely to have an annual economic effect of $100

million or more, result in a major increase in costs or prices, or have

a significant adverse effect on competition or the United States

economy.

For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA

certifies that this rule contains no new reporting or recordkeeping

requirements. For purposes of Executive Order 12612, SBA certifies that

this rule does not have any federalism implications warranting the

preparation of a Federalism Assessment. For purposes of Executive Order

12778, SBA certifies that this rule is drafted, to the extent

practicable, in accordance with the standards set forth in Section 2 of

that Order.

List of Subjects in 13 CFR Part 142

Administrative practice and procedure, Claims, Fraud, Penalties.

For the above reasons, SBA revises Part 142 of Title 13 of the Code

of Federal Regulations to read as follows:

PART 142--PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS

Overview and Definitions

142.1 Overview of regulations.

[[Page 2692]]

142.2 What kind of conduct will result in program fraud

enforcement?

142.3 What is a claim?

142.4 What is a statement?

142.5 What is a false claim or statement?

142.6 What does the phrase ``know or have reason to know'' mean?

Procedures Leading to Issuance of a Complaint

142.7 Who investigates program fraud?

142.8 What happens if program fraud is suspected?

142.9 When will SBA issue a complaint?

142.10 What is contained in a complaint?

142.11 How will the complaint be served?

Procedures Following Service of a Complaint

142.12 How does a defendant respond to the complaint?

142.13 What happens if a defendant fails to file an answer?

142.14 What happens once an answer is filed?

Hearing Provisions

142.15 What kind of hearing is contemplated?

142.16 At the hearing, what rights do the parties have?

142.17 What is the role of the ALJ?

142.18 Can the reviewing official or ALJ be disqualified?

142.19 How are issues brought to the attention of the ALJ?

142.20 How are papers served?

142.21 How will the hearing be conducted and who has the burden of

proof?

142.22 How is evidence presented at the hearing?

142.23 Are there limits on disclosure of documents or discovery?

142.24 Can witnesses be subpoenaed?

142.25 Can a party or witness object to discovery?

142.26 Can a party informally discuss the case with the ALJ?

142.27 Are there sanctions for misconduct?

142.28 Where is the hearing held?

142.29 Are witness lists exchanged before the hearing?

Decisions and Appeals

142.30 How is the case decided?

142.31 Can a party request reconsideration of the initial decision?

142.32 When does the initial decision of the ALJ become final?

142.33 What are the procedures for appealing the ALJ decision?

142.34 Are there any limitations on the right to appeal to the

Administrator?

142.35 How does the Administrator dispose of an appeal?

142.36 Can I obtain judicial review?

142.37 What judicial review is available?

142.38 Can the administrative complaint be settled voluntarily?

142.39 How are civil penalties and assessments collected?

142.40 What if the investigation indicates criminal misconduct?

142.41 How does SBA protect the rights of defendants?

Authority: 15 U.S.C. 634(b); 31 U.S.C. 3803(g)(2).

Overview and Definitions

Sec. 142.1 Overview of regulations.

(a) Statutory basis. This part implements the Program Fraud Civil

Remedies Act of 1986, 31 U.S.C. 3801-3812 (``the Act''). The Act

provides SBA and other federal agencies with an administrative remedy

to impose civil penalties and assessments against persons making false

claims and statements. The Act also provides due process protections to

all persons who are subject to administrative proceedings under this

part.

(b) Possible remedies for program fraud. In addition to any other

penalty which may be prescribed by law, a person who submits, or causes

to be submitted, a false claim or a false statement to SBA is subject

to a civil penalty of not more than $5,000 for each statement or claim,

regardless of whether property, services, or money is actually

delivered or paid by SBA. If SBA has made any payment, transferred

property, or provided services in reliance on a false claim, the person

submitting it is also subject to an assessment of not more than twice

the amount of the false claim. This assessment is in lieu of damages

sustained by SBA because of the false claim.

Sec. 142.2 What kind of conduct will result in program fraud

enforcement?

(a) Any person who makes, or causes to be made, a false,

fictitious, or fraudulent claim or written statement to SBA is subject

to program fraud enforcement. A ``person'' means any individual,

partnership, corporation, association, or other legal entity.

(b) If more than one person makes a false claim or statement, each

person is liable for a civil penalty. If more than one person makes a

false claim which has induced SBA to make payment, an assessment is

imposed against each person. The liability of each such person to pay

the assessment is joint and several, that is, each is responsible for

the entire amount.

liability under this part.

Sec. 142.3 What is a claim?

(a) Claim means any request, demand, or submission:

(1) Made to SBA for property, services, or money;

(2) Made to a recipient of property, services, or money from SBA or

to a party to a contract with SBA for property or services, or for the

payment of money. This provision applies only when the claim is related

to the property, services or money from SBA or to the contract with

SBA; or

(3) Made to SBA which decreases an obligation to pay or account for

property, services, or money.

(b) A claim can relate to grants, loans, insurance, or other

benefits, and includes SBA guaranteed loans made by participating

lenders. A claim is made when it is received by SBA, an agent, fiscal

intermediary, or other entity acting for SBA, or when it is received by

the recipient of property, services, or money, or the party to the

contract.

demand for property, services, or money constitutes a separate claim.

Sec. 142.4 What is a statement?

A ``statement'' means any written representation, certification,

affirmation, document, record, or accounting or bookkeeping entry made

with respect to a claim or with respect to a contract, bid or proposal

for a contract, grant, loan or other benefit from SBA. ``From SBA''

means that SBA provides some portion of the money or property in

connection with the contract, bid, grant, loan, or benefit, or is

potentially liable to another party for some portion of the money or

property under such contract, bid, grant, loan, or benefit. A statement

is made, presented, or submitted to SBA when it is received by SBA or

an agent, fiscal intermediary, or other entity acting for SBA.

Sec. 142.5 What is a false claim or statement?

(a) A claim submitted to SBA is a ``false'' claim if the person

making the claim, or causing the claim to be made, knows or has reason

to know that the claim:

(1) Is false, fictitious or fraudulent;

(2) Includes or is supported by a written statement which asserts

or contains a material fact which is false, fictitious, or fraudulent;

(3) Includes or is supported by a written statement which is false,

fictitious or fraudulent because it omits a material fact that the

person making the statement has a duty to include in the statement; or

(4) Is for payment for the provision of property or services which

the person has not provided as claimed.

(b) A statement submitted to SBA is a false statement if the person

making the statement, or causing the statement to be made, knows or has

reason to know that the statement:

(1) Asserts a material fact which is false, fictitious, or

fraudulent; or

(2) Is false, fictitious, or fraudulent because it omits a material

fact that the person making the statement has a duty

[[Page 2693]]

to include in the statement. In addition, the statement must contain or

be accompanied by an express certification or affirmation of the

truthfulness and accuracy of the contents of the statement.

Sec. 142.6 What does the phrase ``know or have reason to know'' mean?

A person knows or has reason to know (that a claim or statement is

false) if the person:

(a) Has actual knowledge that the claim or statement is false,

fictitious, or fraudulent; or

(b) Acts in deliberate ignorance of the truth or falsity of the

claim or statement; or

or statement.

Procedures Leading to Issuance of a Complaint

Sec. 142.7 Who investigates program fraud?

The Inspector General, or his designee, is responsible for

investigating allegations that a false claim or statement has been

made. In this regard, the Inspector General has authority under the

Program Fraud Civil Remedies Act and the Inspector General Act of 1978

(5 U.S.C. App. 3), as amended, to issue administrative subpoenas for

the production of records and documents. The methods for serving a

subpoena are set forth in Part 101 of this chapter.

Sec. 142.8 What happens if program fraud is suspected?

(a) If the investigating official concludes that an action under

this Part is warranted, the investigating official submits a report

containing the findings and conclusions of the investigation to a

reviewing official. The reviewing official is the General Counsel or

his designee. If the reviewing official determines that the report

provides adequate evidence that a person submitted a false claim or

statement, the reviewing official transmits to the Attorney General

written notice of an intention to refer the matter for adjudication,

with a request for approval of such referral. This notice will include

the reviewing official's statements concerning:

(1) The reasons for the referral;

(2) The claims or statements upon which liability would be based;

(3) The evidence that supports liability;

(4) An estimate of the amount of money or the value of property,

services, or other benefits requested or demanded in the false claim or

statement;

(5) Any exculpatory or mitigating circumstances that may relate to

the claims or statements known by the reviewing official or the

investigating official; and

(6) The likelihood of collecting the proposed penalties and

assessments.

(b) If at any time, the Attorney General or designee requests in

writing that this administrative process be stayed, the Administrator

must stay the process immediately. The Administrator may order the

process resumed only upon receipt of the written authorization of the

Attorney General.

Sec. 142.9 When will SBA issue a complaint?

SBA will issue a complaint:

(a) If the Attorney General (or designee) approves the referral of

the allegations for adjudication; and

(b) In a case of submission of false claims, if the amount of money

or the value of property or services demanded or requested in a false

claim, or a group of related claims submitted at the same time, does

not exceed $150,000. A group of related claims submitted at the same

time includes only those claims arising from the same transaction (such

as a grant, loan, application, or contract) which are submitted

together as part of a single request, demand, or submission.

Sec. 142.10 What is contained in a complaint?

(a) A complaint is a written statement giving notice to the person

alleged to be liable under 31 U.S.C. 3802 of the specific allegations

being referred for adjudication and of the person's right to request a

hearing with respect to those allegations. The person alleged to have

made false statements or to have submitted false claims to SBA is

referred to as the ``defendant.''

(b) The reviewing official may join in a single complaint false

claims or statements that are unrelated or were not submitted

simultaneously, regardless of the amount of money or the value of

property or services demanded or requested.

penalties, assessments, or both, against each defendant and will

include:

(1) The allegations of liability against each defendant, including

the statutory basis for liability, identification of the claims or

statements involved, and the reasons liability allegedly arises from

such claims or statements;

(2) The maximum amount of penalties and assessments for which each

defendant may be held liable;

(3) A statement that each defendant may request a hearing by filing

an answer and may be represented by a representative;

(4) Instructions for filing such an answer;

(5) A warning that failure to file an answer within 30 days of

service of the complaint will result in imposition of the maximum

amount of penalties and assessments.

(d) The reviewing official must serve any complaint on the

defendant and provide a copy to the Office of Hearings and Appeals

(OHA). If a hearing is requested, an Administrative Law Judge (ALJ)

from OHA will serve as the Presiding Officer.

Sec. 142.11 How will the complaint be served?

(a) The complaint must be served on individual defendants directly,

a partnership through a general partner, and on corporations or on

unincorporated associations through an executive officer or a director,

except that service also may be made on any person authorized by

appointment or by law to receive process for the defendant.

(b) The complaint may be served either by:

(1) Registered or certified mail (return receipt requested)

addressed to the defendant at his or her residence, usual dwelling

place, principal office or place of business; or by

(2) Personal delivery by anyone 18 years of age or older.

case of service by registered or certified mail, the date of postmark.

(d) Proof of service--

(1) When service is made by registered or certified mail, the

return postal receipt will serve as proof of service.

(2) When service is made by personal delivery, an affidavit of the

individual serving the complaint, or written acknowledgment of receipt

by the defendant or a representative, will serve as proof of service.

(e) When served with the complaint, the defendant also should be

served with a copy of this part 142 and 31 U.S.C. 3801-3812.

Procedures Following Service of a Complaint

Sec. 142.12 How does a defendant respond to the complaint?

(a) A defendant may file an answer with the reviewing official and

the Office of Hearings and Appeals within 30 days of service of the

complaint. An answer will be considered a request for an oral hearing.

(b) In the answer, a defendant--

(1) Must admit or deny each of the allegations of liability

contained in the

[[Page 2694]]

complaint (a failure to deny an allegation is considered an admission);

(2) Must state any defense on which the defendant intends to rely;

(3) May state any reasons why he or she believes the penalties,

assessments, or both should be less than the statutory maximum; and

(4) Must state the name, address, and telephone number of the

person authorized by the defendant to act as defendant's

representative, if any.

requirements set forth in paragraph (b) of this section, the defendant

may file with the reviewing official a general answer denying

liability, requesting a hearing, and requesting an extension of time in

which to file a complete answer. A general answer must be filed within

30 days of service of the complaint.

(d) If the defendant initially files a general answer requesting an

extension of time, the reviewing official must promptly file with the

ALJ the complaint, the general answer, and the request for an extension

of time.

(e) For good cause shown, the ALJ may grant the defendant up to 30

additional days within which to file an answer meeting the requirements

of paragraph (b) of this section. Such answer must be filed with OHA

and a copy must be served on the reviewing official.

Sec. 142.13 What happens if a defendant fails to file an answer?

(a) If a defendant does not file any answer within 30 days after

service of the complaint, the reviewing official will refer the

complaint to the ALJ.

(b) Once the complaint is referred, the ALJ will promptly serve on

the defendant a notice that an initial decision will be issued.

true and, if such facts establish liability under the statute, the ALJ

will issue an initial decision imposing the maximum amount of penalties

and assessments allowed under the statute.

(d) Except as otherwise provided in this section, when a defendant

fails to file a timely answer, the defendant waives any right to

further review of the penalties and assessments imposed in the initial

decision.

(e) The initial decision becomes final 30 days after it is issued.

(f) If, at any time before an initial decision becomes final, a

defendant files a motion with the ALJ asking that the case be reopened

and describing the extraordinary circumstances that prevented the

defendant from filing an answer, the initial decision will be stayed

until the ALJ makes a decision on the motion. The reviewing official

may respond to the motion.

(g) If, in his motion to reopen, a defendant demonstrates

extraordinary circumstances excusing his failure to file a timely

answer, the ALJ will withdraw the initial decision, and grant the

defendant an opportunity to answer the complaint.

(h) A decision by the ALJ to deny a defendant's motion to reopen a

case is not subject to review or reconsideration.

Sec. 142.14 What happens once an answer is filed?

(a) When the reviewing official receives an answer, he must file

concurrently, the complaint and the answer with the ALJ, along with a

designation of an SBA representative.

(b) When the ALJ receives the complaint and the answer, the ALJ

will promptly serve a notice of oral hearing upon the defendant and the

representative for SBA, in the same manner as the complaint, service of

which is described in Sec. 142.11. The notice of oral hearing must be

served within six years of the date on which the claim or statement is

made.

(1) The tentative time, place and nature of the hearing;

(2) The legal authority and jurisdiction under which the hearing is

to be held;

(3) The matters of fact and law to be asserted;

(4) A description of the procedures for the conduct of the hearing;

(5) The name, address, and telephone number of the defendant's

representative and the representative for SBA; and

(6) Such other matters as the ALJ deems appropriate.

Hearing Provisions

Sec. 142.15 What kind of hearing is contemplated?

The hearing is a formal proceeding conducted by the ALJ during

which a defendant will have the opportunity to cross-examine witnesses,

present testimony, and dispute liability.

Sec. 142.16 At the hearing, what rights do the parties have?

(a) The parties to the hearing shall be the defendant and SBA.

Pursuant to 31 U.S.C. 3730(c)(5), a private plaintiff in an action

under the False Claims Act may participate in the hearing to the extent

authorized by the provisions of that Act.

(b) Each party has the right to:

(1) Be represented by a representative;

(2) Request a pre-hearing conference and participate in any

conference held by the ALJ;

(3) Conduct discovery;

(4) Agree to stipulations of fact or law which will be made a part

of the record;

(5) Present evidence relevant to the issues at the hearing;

(6) Present and cross-examine witnesses;

(7) Present arguments at the hearing as permitted by the ALJ; and

(8) Submit written briefs and proposed findings of fact and

conclusions of law after the hearing, as permitted by the ALJ.

Sec. 142.17 What is the role of the ALJ?

An ALJ from OHA serves as the Presiding Officer at all hearings,

with authority as set forth in Sec. 134.218(b) of this chapter.

Sec. 142.18 Can the reviewing official or ALJ be disqualified?

(a) A reviewing official or an ALJ may disqualify himself or

herself at any time.

(b) Upon motion of any party, the reviewing official or ALJ may be

disqualified as follows:

(1) The motion must be supported by an affidavit containing

specific facts establishing that personal bias or other reason for

disqualification exists, including the time and circumstances of the

discovery of such facts;

(2) The motion must be filed promptly after discovery of the

grounds for disqualification, or the objection will be deemed waived;

and

(3) The party, or representative of record, must certify in writing

that the motion is made in good faith.

official, the ALJ will halt the proceedings until resolving the matter

of disqualification. If the ALJ determines that the reviewing official

is disqualified, the ALJ will dismiss the complaint without prejudice.

If the ALJ disqualifies himself or herself, the case will be promptly

reassigned to another ALJ.

Sec. 142.19 How are issues brought to the attention of the ALJ?

All applications to the ALJ for an order or ruling are made by

motion, stating the relief sought, the authority relied upon, and the

facts alleged. Procedures for filing motions under this section are

governed by Sec. 134.211 of this chapter.

Sec. 142.20 How are papers served?

Except for service of a complaint or a notice of hearing under

Sec. 142.11 and Sec. 142.14(b) respectively, service of papers must be

made as prescribed by Sec. 134.204 of this chapter.

[[Page 2695]]

Sec. 142.21 How will the hearing be conducted and who has the burden

of proof?

(a) The ALJ conducts a hearing in order to determine whether a

defendant is liable for a civil penalty, assessment, or both and, if

so, the appropriate amount of the civil penalty and/or assessment. The

hearing will be recorded and transcribed, and the transcript of

testimony, exhibits admitted at the hearing, and all papers and

requests filed in the proceeding constitute the record for a decision

by the ALJ.

(b) SBA must prove a defendant's liability and any aggravating

factors by a preponderance of the evidence.

mitigating factors by a preponderance of the evidence.

(d) The hearing will be open to the public unless otherwise ordered

by the ALJ for good cause shown.

Sec. 142.22 How is evidence presented at the hearing?

(a) Witnesses at the hearing must testify orally under oath or

affirmation unless otherwise ordered by the ALJ. At the discretion of

the ALJ, testimony may be admitted in the form of a written statement

or deposition, a copy of which must be provided to all other parties,

along with the last known address of the witness, in a manner which

allows sufficient time for other parties to subpoena the witness for

cross-examination at the hearing.

(b) The ALJ determines the admissibility of evidence in accordance

with Sec. 134.223 (a) and (b) of this chapter.

Sec. 142.23 Are there limits on disclosure of documents or discovery?

(a) Upon written request to the reviewing official, the defendant

may review all non-privileged, relevant and material documents, records

and other material related to the allegations contained in the

complaint. After paying SBA a reasonable fee for duplication, the

defendant may obtain a copy of the records described.

(b) Upon written request to the reviewing official, the defendant

may obtain a copy of all exculpatory information in the possession of

the reviewing official or investigating official relating to the

allegations in the complaint. If the document would otherwise be

privileged, only the portion of the document containing exculpatory

information must be disclosed. As used in this section, the term

``information'' does not include legal materials such as statutes or

case law obtained through legal research.

official is not discoverable under any circumstances.

(d) Other discovery is available only as ordered by the ALJ and

includes only those methods of discovery allowed by Sec. 134.213 of

this chapter.

Sec. 142.24 Can witnesses be subpoenaed?

A party seeking the appearance and testimony of any individual or

the production of documents or records at a hearing may request in

writing that the ALJ issue a subpoena. Any such request must be filed

with the ALJ not less than 15 days before the scheduled hearing date

unless otherwise allowed by the ALJ for good cause. A subpoena shall be

issued by the ALJ in the manner specified by Sec. 134.214 of this

chapter.

Sec. 142.25 Can a party or witness object to discovery?

Any party or prospective witness may file a motion to quash a

subpoena or to limit discovery or the disclosure of evidence. Motions

to limit discovery or to object to the disclosure of evidence are

governed by Sec. 134.213 of this chapter. Motions to limit or quash

subpoenas are governed by Sec. 134.214(d) of this chapter.

Sec. 142.26 Can a party informally discuss the case with the ALJ?

No. Such discussions are forbidden as ex parte communications with

the ALJ as set forth in Sec. 134.220 of this chapter. This does not

prohibit a party from communicating with other employees of OHA to

inquire about the status of a case or to ask routine questions

concerning administrative functions and procedures.

Sec. 142.27 Are there sanctions for misconduct?

The ALJ may sanction a party or representative, as set forth in

Sec. 134.219 of this chapter.

Sec. 142.28 Where is the hearing held?

The ALJ will hold the hearing in any judicial district of the

United States:

(a) In which the defendant resides or transacts business; or

(b) In which the claim or statement on which liability is based was

made, presented or submitted to SBA; or

Sec. 142.29 Are witness lists exchanged before the hearing?

(a) At least 15 days before the hearing or at such other time as

ordered by the ALJ, the parties must exchange witness lists and copies

of proposed hearing exhibits, including copies of any written

statements or transcripts of deposition testimony that the party

intends to offer in lieu of live testimony.

(b) If a party objects, the ALJ will not admit into evidence the

testimony of any witness whose name does not appear on the witness list

or any exhibit not provided to an opposing party unless the ALJ finds

good cause for the omission or concludes that there is no prejudice to

the objecting party.

documents exchanged in accordance with this section are deemed to be

authentic for the purpose of admissibility at the hearing.

Decisions and Appeals

Sec. 142.30 How is the case decided?

(a) The ALJ will issue an initial decision based only on the

record. It will contain findings of fact, conclusions of law, and the

amount of any penalties and assessments imposed.

(b) The ALJ will serve the initial decision on all parties within

90 days after close of the hearing or expiration of any allowed time

for submission of post-hearing briefs. If the ALJ fails to meet this

deadline, he or she shall promptly notify the parties of the reason for

the delay and set a new deadline.

following issues:

(1) Whether any one or more of the claims or statements identified

in the complaint violate this part; and

(2) If the defendant is liable for penalties or assessments, the

appropriate amount of any such penalties or assessments, considering

any mitigating or aggravating factors.

(d) The initial decision will include a description of the right of

a defendant found liable for a civil penalty or assessment to file a

motion for reconsideration with the ALJ or a notice of appeal with the

Administrator.

Sec. 142.31 Can a party request reconsideration of the initial

decision?

(a) Any party may file a motion for reconsideration of the initial

decision with the ALJ within 20 days of receipt of the initial

decision. If the initial decision was served by mail, there is a

rebuttable presumption that the initial decision was received by the

party 5 days from the date of mailing.

(b) A motion for reconsideration must be accompanied by a

supporting brief and must describe specifically each allegedly

erroneous decision.

within 20 days of receipt of such motion.

[[Page 2696]]

(d) The ALJ will dispose of a motion for reconsideration by denying

it or by issuing a revised initial decision.

(e) If the ALJ issues a revised initial decision upon motion of a

party, that party may not file another motion for reconsideration.

Sec. 142.32 When does the initial decision of the ALJ become final?

(a) The initial decision of the ALJ becomes the final decision of

SBA, and shall be binding on all parties 30 days after it is issued,

unless any party timely files a motion for reconsideration or any

defendant adjudged to have submitted a false claim or statement timely

appeals to the SBA Administrator, as set forth in Sec. 142.33.

(b) If the ALJ disposes of a motion for reconsideration by denying

it or by issuing a revised initial decision, the ALJ's order on the

motion for reconsideration becomes the final decision of SBA 30 days

after the order is issued, unless a defendant adjudged to have

submitted a false claim or statement timely appeals to the

Administrator, within 30 days of the ALJ's order, as set forth in

Sec. 142.33.

Sec. 142.33 What are the procedures for appealing the ALJ decision?

(a) Any defendant who submits a timely answer and is found liable

for a civil penalty or assessment in an initial decision may appeal the

decision.

(b) The defendant may file a notice of appeal with the

Administrator within 30 days following issuance of the initial

decision, serving a copy of the notice of appeal on all parties and the

ALJ. The Administrator may extend this deadline for up to thirty

additional days if an extension request is filed within the initial 30

day period and shows good cause.

motions for reconsideration have been resolved.

(d) If a timely motion for reconsideration is denied, a notice of

appeal may be filed within 30 days following such denial or issuance of

a revised initial decision, whichever applies.

(e) A notice of appeal must be supported by a written brief

specifying why the initial decision should be reversed or modified.

(f) SBA's representative may file a brief in opposition to the

notice of appeal within 30 days of receiving the defendant's notice of

appeal and supporting brief.

(g) If a defendant timely files a notice of appeal, and the time

for filing motions for reconsideration has expired, the ALJ will

forward the record of the proceeding to the Administrator.

Sec. 142.34 Are there any limitations on the right to appeal to the

Administrator?

(a) A defendant has no right to appear personally, or through a

representative, before the Administrator.

(b) There is no right to appeal any interlocutory ruling.

that was not raised before the ALJ unless the defendant demonstrates

that the failure to object was caused by extraordinary circumstances.

If the appealing defendant demonstrates to the satisfaction of the

Administrator that extraordinary circumstances prevented the

presentation of evidence at the hearing, and that the additional

evidence is material, the Administrator may remand the matter to the

ALJ for consideration of the additional evidence.

Sec. 142.35 How does the Administrator dispose of an appeal?

(a) The Administrator may affirm, reduce, reverse, compromise,

remand, or settle any penalty or assessment imposed by the ALJ in the

initial decision or reconsideration decision.

(b) The Administrator will promptly serve each party to the appeal

and the ALJ with a copy of his or her decision. This decision must

contain a statement describing the right of any person, against whom a

penalty or assessment has been made, to seek judicial review.

Sec. 142.36 Can I obtain judicial review?

If the initial decision is appealed, the decision of the

Administrator is the final decision of SBA and is not subject to

judicial review unless the defendant files a petition for judicial

review within 60 days after the Administrator serves the defendant with

a copy of the final decision.

Sec. 142.37 What judicial review is available?

31 U.S.C. 3805 authorizes judicial review by the appropriate United

States District Court of any final SBA decision imposing penalties or

assessments, and specifies the procedures for such review. To obtain

judicial review, a defendant must file a petition in a timely fashion.

Sec. 142.38 Can the administrative complaint be settled voluntarily?

(a)

(a) Parties may make offers of compromise or settlement at any

time. Any compromise or settlement must be in writing.

(b) The reviewing official has the exclusive authority to

compromise or settle the case from the date on which the reviewing

official is permitted to issue a complaint until the ALJ issues an

initial decision.

settle the case from the date of the ALJ's initial decision until

initiation of any judicial review or any action to collect the

penalties and assessments.

(d) The Attorney General has exclusive authority to compromise or

settle the case while any judicial review or any action to recover

penalties and assessments is pending.

(e) The investigating official may recommend settlement terms to

the reviewing official, the Administrator, or the Attorney General, as

appropriate. The reviewing official may recommend settlement terms to

the Administrator or the Attorney General, as appropriate.

Sec. 142.39 How are civil penalties and assessments collected?

31 U.S.C. 3806 and 3808(b) authorize the Attorney General to bring

specific actions for collection of such civil penalties and assessments

including administrative offset under 31 U.S.C. 3716. The penalties and

assessments may not, however, be administratively offset against an

overpayment of federal taxes (then or later owed) to the defendant by

the United States.

Sec. 142.40 What if the investigation indicates criminal misconduct?

(a) Any investigating official may:

(1) Refer allegations of criminal misconduct directly to the

Department of Justice for prosecution or for suit under the False

Claims Act or other civil proceeding;

(2) Defer or postpone a report or referral to the reviewing

official to avoid interference with a criminal investigation or

prosecution; or

(3) Issue subpoenas under other statutory authority.

(b) Nothing in this part limits the requirement that SBA employees

report suspected violations of criminal law to the SBA Office of

Inspector General or to the Attorney General.

Sec. 142.41 How does SBA protect the rights of defendants?

These procedures separate the functions of the investigating

official, reviewing official, and the ALJ, each of whom report to a

separate organizational authority in accordance with 31 U.S.C. 3801.

Except for purposes of settlement, or as a witness or a representative

in public proceedings, no investigating official, reviewing official,

or SBA employee or agent who helps investigate, prepare, or present a

case may (in such case, or a factually related case) participate in the

initial decision or the review of the initial decision by the

Administrator.

[[Page 2697]]

This separation of functions and organization is designed to assure the

independence and impartiality of each government official during every

stage of the proceeding. The representative for SBA may be employed in

the offices of either the investigating official or the reviewing

official.

Dated: January 22, 1996.

John T. Spotila,

Acting Administrator.

[FR Doc. 96-1349 Filed 1-26 -96; 8:45 am]

BILLING CODE 8025-01-P

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.