Food Stamp Program: Retailer Integrity, Fraud Reduction and Penalties

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 271, 278 and 279

RIN 0584-AC46

Food Stamp Program: Retailer Integrity, Fraud Reduction and

Penalties

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: The purpose of this final rule is to implement the Food Stamp

Program retailer provisions included in the Personal Responsibility and

Work Opportunity Reconciliation Act of 1996, as well as the retailer

provision included in the Federal Agriculture Improvement and Reform

Act. This rule also contains a number of amendments to the current

regulations to streamline the regulations. Most of the provisions in

this final rule are nondiscretionary and required by law. The intent of

this rule is to strengthen integrity and eliminate fraud in the Food

Stamp Program by: ensuring that only legitimate stores participate in

the program; improving the Department's ability to monitor authorized

firms; and strengthening the penalties against firms which violate

program rules.

EFFECTIVE DATES: The amendments in this rule at Sec. 271.2,

Sec. 278.6(a), Sec. 278.6(b)(2)(i), Sec. 278.6(c), Sec. 278.8(a),

Sec. 279.7(a), and Sec. 279.10(d) were effective August 22, 1996. All

other amendments in this rule are effective June 1, 1999.

FOR FURTHER INFORMATION CONTACT: Questions regarding this final rule

should be addressed to Thomas O' Connor, Director, Benefit Redemption

Division, Food Stamp Program, Food and Nutrition Service, 3101 Park

Center Drive, Alexandria, Virginia 22302, or by telephone at (703) 305-

2418.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be not significant under

Executive Order 12866.

Executive Order 12372

The Food Stamp Program (FSP) 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.

Regulatory Flexibility Act

This final rule has been reviewed with regard to the requirements

of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Samuel

Chambers, Jr., the Administrator of the Food and Nutrition Service

(FNS), has certified that this rule does not have a significant

economic impact on a substantial number of small entities. This rule

may have an effect on a limited number of retail food stores and other

entities that are shown to be negligent in effectuating the purposes of

the FSP by committing violations or fraud in the program. However, we

do not believe this will have a significant effect on most small

businesses.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995, the

proposed rule included a notice that announced our intent to submit

revised application procedures and associated burden estimates to OMB

for approval relative to the application(s) completed by retail food

stores and meal service providers to request authorization and/or

continued authorization to participate in the FSP.

There are three application forms used by firms that wish to

participate in the program. These are the FNS-252, Food Stamp

Application For Stores; the FNS-252R, Food Stamp Program Application

for Stores-Reauthorization; and the FNS-252-2, Application to

Participate in the Food Stamp Program for Communal Dining Facility/

Others. These forms and associated burden hours have been approved by

OMB under OMB No. 0584-0008 through October 31, 1999. The revisions to

the authorization process contained in Sec. 278.1(a) of this final rule

do not impose new information collection, reporting or recordkeeping

requirements.

The existing burden estimates, as approved by OMB through October

1999, are shown on the following chart:

Affected Public: Food Retail and Wholesale Firms, Meal Service

Programs, certain types of Group Homes, Shelters, and State-contracted

Restaurants.

Estimated Number of Respondents: 68,770.

Estimated Number of Responses per respondent: 1.

Estimated Time per Response: 0.229416; rounded to .23.

Estimated Total Annual Burden: 15,777.

Approved Burden for Forms FNS-252, 252-2 and 252R

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Number of Responses per Total annual Burden hours Total annual

Title respondents respondent responses per response burden hours

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FORM FNS-252.................... 22,807 1 22,807 .4500 10,263

FORM FNS-252-2.................. 1,803 1 1,803 .2000 361

FORM FNS-252R................... 44,160 1 44,160 .1167 5,153

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Totals...................... 68,770 .............. 68,770 .23 15,777

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Executive Order 12988

This final rule has been reviewed under Executive Order 12988,

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

except as specified in the ``Effective Date'' paragraph of this

preamble. Prior to any judicial challenge to the provisions of this

rule or the application of its provisions, all applicable

administrative procedures must be exhausted. In the FSP, 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-quality control (QC) liabilities) or 7 CFR

part 283 (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.

Unfunded Mandate Reform Act of 1995

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.

104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local and tribal

governments, and the private sector. Under section 202 of the UMRA, FNS

generally must prepare a written statement, including a cost-benefit

analysis, for proposed and final rules with ``Federal mandates'' that

may result in expenditures to State, local or tribal governments, in

the aggregate, or to the private sector, of $100 million or more in any

one year. When such a statement is needed for a rule, section 205 of

the UMRA generally requires FNS to identify and consider a reasonable

number of regulatory alternatives and adopt the least costly, more

cost-effective or least burdensome alternative that achieves the

objectives of the rule. This final rule contains no Federal mandates

under the regulatory provision of Title II of the UMRA for State, local

and tribal governments or the private sector of $100 million or more in

any one year. Thus, this rule is not subject to the requirements of

sections 202 and 205 of the UMRA.

Background

The Personal Responsibility and Work Opportunity Reconciliation Act

of 1996, Pub. L. 104-193, (PRWORA) was enacted on August 22, 1996, and

contained a number of provisions directly affecting the participation

of retailers, wholesalers and other entities eligible to be authorized

to participate in the FSP. All of the provisions of the law addressed

in this rulemaking were effective on the date of enactment. Five of the

provisions are nondiscretionary and were immediately implemented in the

program through an implementing memorandum issued on September 16,

1996. These five provisions are incorporated into this final rule and

they are identified as nondiscretionary in this preamble. Such

nondiscretionary provisions are statutory requirements that the

Secretary has no authority to change; therefore, such provisions or

their implementation may not be modified by public comment. PRWORA

provides discretion in the implementation of the remaining provisions

of the law, and these provisions were proposed for public comment in

the rule published on May 6, 1998. The Department encouraged all

interested parties to comment on the discretionary provisions as set

forth in the proposed rule. Four substantive comments were received

from retail trade/interest groups, WIC State administering agencies and

the headquarters of a large retail food chain. In addition, 187

identical letters referring to and expressing agreement with the

comment sent by the aforementioned retail food chain headquarters were

received.

This final rulemaking includes the following discretionary and

nondiscretionary provisions:

Revision in the definition of ``coupon''

(nondiscretionary);

Establishment of a minimum six month waiting period before

stores that initially fail to meet authorization criteria can reapply

to participate in the program (nondiscretionary), and the establishment

of longer periods of time, including permanent prohibition from

participation, which reflects the severity of the basis for the denial

of the firm's application or a firm's reauthorization in the program

(discretionary);

Authority for USDA, or its designees, to conduct

preauthorization visits to applicant firms as specified by the

Secretary (discretionary);

Authority for USDA to disqualify firms based on

inconsistent redemption data and suspicious account activity as

documented through EBT system data (nondiscretionary);

Authority to suspend the program participation of

violating firms subject to a permanent disqualification pending the

outcome of administrative or judicial review (nondiscretionary);

Authority for USDA to establish authorization periods for

the participation of retailers in the program (discretionary);

Authority to disqualify retailers who intentionally submit

falsified applications, including permanent disqualification of such

retailers (discretionary); and,

Authority to disqualify retailers that have been

disqualified by State agencies responsible for the administration of

USDA's Special Supplemental Nutrition Program for Women, Infants and

Children (WIC) (discretionary), extension of the periods for

disqualification of such FSP retailers and elimination of the FSP

administrative and judicial review rights of such retailers

(nondiscretionary).

This final rulemaking also includes a provision of the Federal

Agriculture Improvement and Reform Act, Pub. L. 104-127, (FAIR), which

provides a limitation on the mandatory permanent disqualification

actions that may be taken by USDA for retailers found to be

trafficking. Conforming and minor editorial revisions in response to

the National Performance Review Regulatory Planning and Reform

Initiative are also included in this rule.

FAIR Provision--Eligibility for Trafficking Civil Money Penalties

Section 401 of the FAIR limits mandatory permanent

disqualifications for food coupon trafficking (with no possibility of

avoiding disqualification by paying a trafficking civil money penalty)

to instances in which: (1) owners are aware of violations or

participate in the conduct of such food coupon trafficking violations

or (2) it is the second investigation in which a trafficking violation

was committed by firm management.

This provision amends the current automatic ineligibility of a firm

for a civil money penalty (CMP) in lieu of permanent disqualification

if the ownership or management of the firm was aware of, approved,

benefited from or was involved in the conduct of the food coupon

trafficking violations (Sec. 278.6(i)). The FAIR amendment expands the

number of firms that may be eligible for such a CMP in lieu of

permanent disqualification. The law provides that if such a violation

represents first-time management food coupon trafficking, the firm may

be considered eligible for the imposition of a CMP, if the firm

documents that it meets all of the eligibility requirements for the CMP

as specified in Sec. 278.6 (i).

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However, the expansion of eligibility for a CMP in lieu of permanent

disqualification, as stipulated in the FAIR, does not apply to firms

where it is shown that ownership or management was involved in

trafficking in ammunition, firearms, explosives or controlled

substances.

The May 6,1998 rule proposed that the provision be applicable to

firm management in general, regardless of whether or not the same

individual manager committed trafficking violations previously. For

example, if an individual manager previously was dismissed from the

position for committing trafficking violations, but a different manager

of the same firm subsequently commits food coupon trafficking

violations, the firm would not be eligible for a second CMP in lieu of

permanent disqualification.

This provision was effective on April 4,1996, the date of enactment

of the statute. It was implemented upon the date on which FNS offices

received the implementing memorandum, and is applicable to all firms

issued a final determination letter subsequent to receipt of the

implementing memorandum by FNS offices. The implementing memorandum was

issued on September 16,1996. The amendment made to Sec. 278.6(i) of

this regulation reflects this change. Comments were invited, however,

on the proposed restriction which prohibits a CMP in lieu of permanent

disqualification the second time management personnel of a firm commit

trafficking violations, regardless of whether it was the same person in

the management position that committed the previous violation(s). No

comments were received on this issue; therefore, this provision of the

rule is finalized as proposed.

One commentor did, however, indicate that if the owner/operator or

firm management was unaware and uninvolved with the trafficking

violations, the firm should be eligible for a CMP in lieu of permanent

disqualification. Firms are currently provided this opportunity in

accordance with the Food Stamp Act of 1977, as amended (FSA), and the

criteria outlined in Sec. 278.6(i) of the regulations, and will

continue to be provided this opportunity. Therefore, it appears that

the commentor misunderstood the amendment made to the current

provision. Moreover, the Department wishes to reiterate that the

nondiscretionary provision included here expands eligibility of

participating firms for a CMP in lieu of permanent disqualification for

trafficking in the program.

Provisions of the Personal Responsibility and Work Opportunity

Reconciliation Act of 1996 (PRWORA)

The provisions of PRWORA related to retailer participation in the

FSP represent a three-tiered approach to enhancing retailer compliance

and integrity in order to further the purposes of the FSP and to reduce

fraud in this critically important domestic food program. The

provisions greatly reinforce USDA's efforts to effectively administer

the FSP by improving the ability of the Department to screen applicant

retailers prior to authorization, to control retailer performance

subsequent to FSP authorization and to impose stiffer penalties against

those firms found to be violating the public trust by committing FSP

violations and defrauding the program. All commentors expressed

agreement with these premises.

Pre-Authorization Screening

The participation of retailers in the FSP is a privilege, not a

right. The PRWORA and the provisions of this final rulemaking will

serve to increase the Department's ability to cut off fraud and abuse

at the source by allowing more in-depth preauthorization screening of

applicant firms and verification of the qualifications and continued

eligibility of currently authorized firms to participate in the FSP.

Condition Precedent for Approval of Retail Food Stores and Wholesale

Food Concerns

Section 831 of the PRWORA provides authority for USDA, its designee

or State or local government officials designated by the Department, to

conduct preauthorization visits to selected firms. This provision also

gives discretion to the Secretary to designate such firms on the basis

of size, location and types of items sold. Amendments to Sec. 278.1(a)

of the regulation reflect the Secretary's authority to conduct such

preauthorization visits as contained in the statute.

Two comments were received on this provision. One commentor urged

that history and longevity in the FSP should also be considered when

making decisions regarding store visits. The Department agrees that

other factors, such as those suggested with regard to history and

longevity in the program, are appropriate to consider when prioritizing

the conduct of store visits. The Department agrees that such factors

will be taken into consideration when establishing store visit

priorities.

A second commentor took exception with the provision as written in

that they felt the regulation should be more prescriptive with regard

to store visit criteria. The commentor suggested that the Department

annually provide for a notice and comment rulemaking on how it intends

to implement its authority to conduct store visits.

The Department has long had the authority to visit authorized and

applicant firms in order to assess the eligibility of such firms for

authorization in the program. The Department also has the discretion to

prioritize the types of firms that will be visited based on its own

assessment of Departmental resources, as well as upon review of areas

of vulnerability in the operation of the program as defined by

management information sources. Therefore, the provisions of this final

rule with regard to the store visit provision remain as proposed.

Waiting Period for Firms That Fail To Meet Authorization Criteria

Section 834 of the PRWORA amends section 9(d) of the Food Stamp Act

to require that a firm that does not qualify for authorization because

the firm fails to meet the eligibility criteria for approval be

prohibited from submitting a new application to participate in the FSP

for a minimum period of 6 months. The statute also allows the Secretary

to establish longer time periods, including a permanent prohibition

from participation, that is reflective of the severity of the basis for

the denial of the application.

Section 278.1(k) of the regulation was proposed to be revised to

include the minimum 6-month prohibition from reapplication, which

applies to those firms that are shown not to meet Criterion A or of the

eligibility requirements of the FSA, (7 U.S.C. 2012(k)) and, for co-

located wholesale/retail firms, the requirements of

Sec. 278.1(b)(1)(iv). Criteria A and B were incorporated into the

definition of ``retail food store'' in the FSA, as amended by the Food

Stamp Program Improvements Act of 1994, Pub. L. 103-225. While this

change in the definition was effective immediately upon enactment of

the law and has been implemented, a final rule incorporating this

statutory change specifically in the regulations is currently in

Departmental clearance.

As discussed in the preamble to the rule proposed on May 6,1998,

prior to the passage of PRWORA, there was no waiting period for stores

that wished to reapply to participate in the FSP after their

application was denied because the stores failed to meet basic

eligibility criteria for authorization. Such stores could adjust the

types of staple food

[[Page 23168]]

items that they offered for sale in order to meet minimal standards and

reapply immediately, and then decrease their inventory after obtaining

authorization. Such firms tend to be stores that do not effectuate the

purpose of the FSP. As proposed, this final rule provision applies to

initial applicants as well as to those firms being reviewed for the

purpose of reauthorization, or any other purpose, that are found not to

meet program eligibility requirements. At the time of initial

application and reauthorization, firms will be provided notice of this

provision. The 6-month minimum prohibition is nondiscretionary.

One commentor asserted that such waiting periods should not be

applicable to firms seeking reauthorization in the program, indicating

that the statute does not extend the authority to apply such periods to

such firms. The Department disagrees with the commentor. The waiting

periods apply to all firms that apply to participate or apply to

continue to participate in the program.

The proposed rule also included provisions to implement the

Secretary's authority to establish longer periods of time during which

a firm would be restricted from reapplying for program authorization.

Section 834 of PRWORA provides that the Secretary may establish these

time periods, including permanent denial of a firm's ability to be

authorized in the program, depending upon the severity of the reason

for the denial of such a firm's initial or subsequent application for

authorization or reauthorization. Section 278.1(b)(3) of this final

rule sets out the criteria that are to be used by FNS to make

determinations regarding reapplication restrictions against firms that

are denied authorization or reauthorization, or are otherwise withdrawn

from the program. In addition, Sec. 278.1(k) details the periods of

time for which a firm will be denied authorization in the program in

response to the criteria set out in Sec. 278.1(b)(3). These provisions

are applicable to denials of initial authorization and reauthorization

in the FSP, as well as to the continued authorization of a firm for

participation in the program.

Section 9 of the FSA provides the Secretary with the authority to

consider the business integrity and reputation of program applicants

when determining the qualifications of such applicants for

participation in the program. The business integrity of a firm is

critically important to the effective operation of the FSP.

Two comments were received on the proposed provision dealing with

the business integrity standards. These comments expressed concern that

the standards proposed in the May 6, 1998 rule were very broad. In

particular, the commentors suggested that applying business integrity

standards to non-managerial employees of participating firms was, in

essence, ``casting too wide a net'' in terms of corporate

responsibility and liability. These commentors further suggested that

the FNS proposal assumes that store owners have inexpensive, efficient

means of discovering past misconduct of non-managerial employees, which

they do not. Commentors indicated that discharging employees or not

hiring a prospective employee for a non-company, non-FSP related issue

could subject the employer to FNS penalties if the employee is kept on

board, but could lead to potential lawsuits or union problems if the

employee is discharged. Finally, commentors noted that the proposed

business integrity standards were too broad, too vague and offer too

much discretion to FNS Officers in Charge to interpret.

In response to these comments, the provisions have been revised in

this final rule. First, the standards no longer include references to

the business integrity of non-owner or non-managerial personnel.

However, the criteria in this final rulemaking still focus on the

business integrity and reputation of the ownership and management of

those firms seeking authorization or reauthorization in the program.

Fraudulent activity in the FSP or other government programs, or in

business-related activities in general, reflects on the ability of a

firm to effectuate the purposes of the FSP and abide by the rules

governing the program. The Department has refined the business

integrity criteria in this final rule and believes that the standards

included here are appropriate when assessing the business integrity of

a firm.

This rulemaking provides that a firm be permanently denied the

opportunity for reapplication if a firm is denied authorization or

reauthorization in the program on the basis of criminal convictions or

a finding of civil liability of the ownership or management of an

applicant firm for reasons that affect the business integrity of such

firms. As provided in this final rule, business integrity matters that

fall under this category include conviction or civil judgment for

offenses such as: embezzlement, theft, forgery, bribery, false

statements, receiving stolen property, false claims, or obstruction of

justice; commission of fraud in connection with obtaining, attempting

to obtain, or performing a public or private agreement or transaction;

and violation of Federal, State and/or local consumer protection laws

or other laws relating to alcohol, tobacco, firearms, controlled

substances and/or gaming licenses.

This final rule retains the proposed provision that firms removed

for administrative reasons from Federal, State or local programs shall

be prohibited from applying for the FSP during the period of removal

from such programs. Such action in the FSP would be taken, for example,

if a firm is removed from another federal program, or had their State

or local liquor or lottery license suspended.

In response to two comments received, the final rule has been

revised to refine the proposal in that firms which have administrative

findings brought against them by Federal, State or local officials that

do not give rise to removal from such programs, but for which FNS

determines a pattern exists evidencing a lack of business integrity,

shall be prohibited from applying for the FSP for one year, effective

from the date of denial in the program. The proposed rule originally

stipulated that such firms would be denied authorization in the FSP for

3 years and included violations committed by personnel of the firm.

This final rule applies this provision only if such violations are

committed by the owner, officer, or manager of a firm. Moreover, this

final rule provides that a ``pattern evidencing a lack of business

integrity'' means 3 or more instances of noncompliance with other

Federal, State or local program requirements. For example, if a firm

was fined for liquor license infractions committed by an owner, officer

or manager, and 3 such fines were imposed over a period of time, action

to suspend the firm from applying to the FSP would be taken.

The final rule retains the proposed provision that firms that

attempt to circumvent a period of disqualification, a civil money

penalty, or a fine imposed for FSP violations shall be denied the

opportunity to apply for the program for a period of 3 years.

Further, this rulemaking at Sec. 278.1(b)(3)(iv) retains the

provision of the proposed rule that firms in which violations of the

FSP have been administratively and/or judicially established but a

sanction has not been served, shall be denied the opportunity to apply

for the program for a period of time equivalent to the appropriate

sanction period that should have been served. This provision would

apply, for

[[Page 23169]]

example, when a firm goes out of business prior to FNS' sanctioning the

firm for FSP violations that were uncovered prior to its going out of

business. If the same owner seeks authorization for a different store,

such a store would not be immediately authorized in the FSP and would

be subject to a waiting period equivalent to the period of time that

the previously-investigated firm under that ownership would have been

disqualified. This waiting period would be applicable whether or not

the previously-investigated firm was authorized in the FSP or was an

unauthorized firm found to be violating the FSP.

This provision also applies to persons who are owners or officers

of multi-unit firms, as well as managers who are employed by the owner

of a multi-unit firm. If an owner or officer of a multi-unit firm

personally committed FSP violations at one unit of a multi-unit firm,

and a sanction was not served, this rule finalizes that an applicant

firm under that same ownership would be denied authorization for a

period of time that should have been served for the previously

committed violations. Moreover, as currently provided in the FSP

regulations, the authorization of other units of such multi-unit firms

may be withdrawn in response to violations of the FSP by ownership.

If management personnel of such multi-unit firms commit

sanctionable violations at more than one location, this would indicate

that such actions are reflective of the overall operating practice of

the firm, thus indicating a lack of business integrity on the part of

ownership. If such violations occur and an appropriate penalty was not

served, the applicant firm will be denied or restricted from applying

for authorization in the FSP for the period of time that should have

been served by the firm for violations committed at these other

locations under the same ownership. The period would be equivalent to

the longest sanction period that would have been served for the most

serious of violations committed by any one of the associated firms.

Finally, this final rule modifies the proposed rule with regard to

other evidence reflecting on business integrity. One commentor believed

that the provision as proposed was very broad. Therefore, this final

rule refines the provision by stipulating that a one year period of

denial in the program would result from the commission of any other

offense (other than convictions, judgments, removal or patterns of

noncompliance) which: (1) Reflects negatively on the business integrity

or business honesty of the owners, officers or managers of a firm; and

(2) seriously and directly affects the present responsibility of a

person.

The proposal also made an editorial change, unrelated to PRWORA's

provisions, to conform the language of Sec. 278.1(k), Denying

authorization and Sec. 278.1(l), Withdrawing authorization. A further

editorial change was made to Sec. 278.1(m) so as to conform this

section with Sec. 278.1(k) and Sec. 278.1(l). These revisions do not

result in any substantive change in the program, but simply clarify the

intent that the provisions are applicable to both denials and

withdrawals in the program. In addition, language was added in

Sec. 278.1(k) and Sec. 278.1(l) of this rule to reflect the current

prohibition against participation in the program as specified in the

current rule at Sec. 278.6(f)(4), which prohibits authorization for

participation of firms that have outstanding transfer of ownership

civil money penalties owed to FNS. This final rule implements these

changes as proposed.

Authority To Establish Authorization Periods

Section 832 of PRWORA provides authority for the Secretary to

establish specific time periods during which a firm may be authorized

to accept food stamps. The intent of this provision is to eliminate the

current open-ended authorization of firms in the program.

It was proposed that no firm be assigned an authorization period

for participation in the FSP for longer than five years. Moreover, the

proposal provided that the FNS Officer in Charge may assign a lesser

period of authorization, depending on the circumstances of the

particular firm.

Two comments were received on this proposed provision. One

commentor favored the provision, while the second disagreed in general

with the proposed five year maximum authorization period, particularly

with regard to firms that are longstanding participants in the program.

In addition, this commentor voiced concerns with providing general

discretion to FNS Officers in Charge to authorize firms for less than

the five year period on the basis of undefined circumstances

surrounding a firm's participation or approval in the program.

The final rule has been revised to comply with the intent of the

statute that authorization periods be specified in the program. The

Department agrees with the comment discussed above, and, therefore,

this final rule provides that all firms will be authorized for a

maximum period of five years. This final rule does not provide FNS

Officers in Charge the discretion to authorize firms for lesser periods

of time.

The Department believes that the five year authorization period is

reasonable and necessary for the effective administration of the

program. Moreover, the specification of an authorization period in no

way precludes FNS from periodically requesting information from a firm

or concern for purposes of reauthorization in the program or from

withdrawing or terminating the authorization of a firm in accordance

with program regulations. The Department will develop administrative

procedures to ensure that, prior to the time of expiration of a firm's

authorization period, the firm is provided with authorization materials

and given the opportunity to submit such materials and information to

enable FNS to evaluate the firm's qualifications for continued

participation in the FSP. This provision is included in Sec. 278.1(j)

of the regulation.

Post-Authorization Controls and Stiffer Penalties in the Program

Retailers that abuse the privilege of authorization in the FSP will

have that privilege revoked. The PRWORA includes a number of

significant tools that will enhance the Department's ability to enforce

the effectiveness of the FSP and the monitoring of retailers.

Authority To Suspend Stores Violating Program Requirements Pending

Administrative and Judicial Review

Section 845 of PRWORA amends section 14 of the FSA to require that

a permanent disqualification of a firm from the FSP be effective from

the date of the firm's receipt of the notice of disqualification. The

PRWORA also provides that if such an administrative action by FNS is

reversed through administrative or judicial review, the Secretary is

not liable for the value of any revenues lost by the firm during such a

disqualification period. This nondiscretionary provision was effective

upon the date of enactment of the law, and affects firms that are

subject to permanent disqualification for trafficking in the program,

as well as those firms subject to permanent disqualification for having

been sanctioned twice before for violations of the program. These

changes are found at Sec. 278.6(b) of the final rule. Editorial

revisions have also been made to Secs. 278.8(a), 279.7(a) and

279.10(d). Since this provision is nondiscretionary, its implementation

cannot be affected by public comment.

It is important to note that the statute specifically refers only

to permanent

[[Page 23170]]

disqualification actions. Therefore, firms which request and are found

to be eligible for a civil money penalty in lieu of permanent

disqualification for trafficking are not affected by the immediate

suspension requirement of the statute. Further, such firms would not be

expected to pay the civil money penalty pending appeal and may continue

to participate in the program pending appeal. One commentor agreed with

the Department's assertion that immediate disqualification refers only

to those firms not eligible for a civil money penalty in lieu of

permanent disqualification, but pointed out that the preamble

discussion in the proposed rule was not reflected in the regulatory

language itself. In response to this comment, the language at

Secs. 278.6(b)(2)(i) and 278.6(c) has been clarified to account for

this.

In addition, the commentor requested clarification as to how the

period between receipt of the notice of immediate disqualification and

the 10-day period for a firm to submit a request and documentation for

a trafficking CMP is handled. The immediate disqualification pending

appeal is effective upon the date of receipt of the determination

letter by the firm. The current regulations at Sec. 278.6(b)(1) provide

that, prior to such a determination, the firm receives a letter of

charges to which it may respond. It is at that time, subsequent to

receipt of the charge letter, that the firm would be indicating whether

or not it desires a CMP in lieu of permanent disqualification and would

submit documentation in support of such a request. If it is determined

that the firm is eligible for a trafficking CMP, the determination

letter that follows would acknowledge that the firm has requested and

documented its eligibility for a trafficking CMP, and thus could

continue to participate in the program pending any appeal of the

trafficking finding itself. However, once the determination is made

that the firm is not eligible for a CMP in lieu of trafficking, the

firm receives a determination letter that indicates the firm has been

found to be ineligible for a CMP in lieu of permanent disqualification

for trafficking and that the permanent disqualification is effective

upon receipt of the determination letter. The firm, while disqualified,

is eligible to appeal the determination. However, in those cases, the

disqualification action cannot be held pending appeal because the firm

has been permanently disqualified.

Investigations

Section 278.6(a) of the regulation was proposed to be amended in

accordance with section 841 of PRWORA to make an editorial change

stipulating that findings of program violations and the subsequent

suspension or disqualification of a firm may be made based on evidence

established through on-site investigations, inconsistent redemption

data, or evidence obtained through a transaction report under an

electronic benefit transfer system. This editorial change supports

current program practice and USDA authority to enforce program

compliance. The provision is nondiscretionary and is finalized in this

rule.

Disqualification of Retailers Disqualified From the WIC Program

Section 843 of PRWORA amends section 12 of the FSA to require the

Secretary to develop standards by which firms disqualified from the

Special Supplemental Nutrition Program for Women, Infants and Children

(WIC) are to be reciprocally disqualified from participation in the

FSP. Currently, the regulations provide for the withdrawal of such

firms from the FSP in response to WIC disqualification action. Such

withdrawals must run for a concurrent period of time. This has proven

to be problematic in that it is sometimes difficult for the Food Stamp

withdrawal action to catch up to the WIC disqualification, particularly

if the WIC disqualification is for a 6 month period or less. Under the

current regulations, a firm has the right to appeal the FSP action, and

often, by the time the firm has appealed the FSP withdrawal, the WIC

disqualification period is ending.

The change in the law provides that the FSP disqualification period

(1) shall be for the same period of time as the WIC disqualification

period; (2) may run consecutive to the WIC disqualification; and (3)

shall not be subject to FSP administrative or judicial review. These

provisions of the statute are nondiscretionary and are finalized in

this rule.

In addition, the law stipulates that the Secretary establish

criteria for such reciprocal disqualification actions. Current

regulations at Sec. 278.1(o) set forth the types of WIC violations that

will result in withdrawal of a firm from participation in the FSP. The

Department proposed to retain these same criteria, now found at

Sec. 278.6(e)(8), with some editorial changes to ensure that

trafficking violations are fully covered in the listed violations. The

WIC violations included here, therefore, represent very serious

violations of the WIC Program that are comparable to serious violations

of the FSP. These violations best represent the potential risk of

violations of a similar nature being committed by unscrupulous firms in

the FSP, thus necessitating reciprocal FSP action to protect the

integrity of the FSP.

The Department solicited comments on the reciprocal

disqualification standards set out in Sec. 278.6(e)(8). One comment was

received on these specific provisions. The commentor indicated concern

that some WIC State agencies may be misinterpreting the standards set

forth in the regulation, and that without the opportunity to appeal to

the FSP to dispute such misinterpretations, the firm's reciprocal

disqualification would be erroneous. Section 12(g) of the FSA does not

allow a firm to appeal a reciprocal disqualification action taken by

FNS. Editorial changes to this final rule have been made to conform to

the language of the WIC program final rule, which provides some

clarification to WIC State agencies. In addition, the preamble to that

rule provides WIC State agencies with further clarification regarding

WIC Program sanctions and guidance to assist those State agencies in

appropriately classifying WIC Program violations.

Conforming changes to restrict those firms subject to reciprocal

disqualification from eligibility for FSP administrative and judicial

review are made to Sec. 278.6(n), Sec. 278.8(a), Sec. 279.3(a)(2) and

Sec. 279.10(a) of this regulation. The changes made to these sections

are nondiscretionary and are not subject to public comment.

Disqualification of Retailers Who Intentionally Submit Falsified

Applications

Section 842 of the PRWORA amends section 12(b) of the FSA to

authorize the Secretary to disqualify, including permanently

disqualify, participating retailers who knowingly submit applications

that contain false information about substantive issues. The May 6,

1998 rule proposed to permanently disqualify a firm if it is found that

false information directly related to the firm's eligibility for

authorization is knowingly submitted on the application. In addition,

the rule proposed that in cases in which any false information is

knowingly submitted that would impact on the ability of FNS to monitor

and identify potentially violative firms, the firm shall be

disqualified for three years.

The proposed rule outlined examples of the type of information that

would be considered ``substantive'' for the purpose of determining

eligibility, as

[[Page 23171]]

well as the type of information that is considered to be substantive

from a monitoring standpoint. These examples, however, are not

inclusive of all of the information that, if fraudulently submitted,

may result in disqualification of a firm.

The rule also proposed to deny authorization of any such firm which

is found to have knowingly submitted false information on the

application at the time of initial application processing. It was

proposed that such firms be denied for the same period of time for

which they would be disqualified under Sec. 278.6(e). The Department

encouraged comments on this discretionary provision; however, no

comments were received. Therefore, the revisions as proposed are

finalized in Sec. 278.6(e) and Sec. 278.1(k) of this rule.

List of Subjects

7 CFR Part 271

Administrative practice and procedure, Food stamps, Grant

programs--social programs.

7 CFR Part 278

Administrative practice and procedure, Banks, banking, Claims, Food

stamps, Groceries--retail, Groceries, General line--wholesaler,

Penalties.

7 CFR Part 279

Administrative practice and procedure, Food stamps, Groceries--

retail, Groceries, General line--wholesaler.

Accordingly, 7 CFR Parts 271, 278 and 279 are amended as follows:

1. The authority citation for parts 271, 278 and 279 continues to

read as follows:

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

PART 271--GENERAL INFORMATION AND DEFINITIONS

2. In Sec. 271.2, the definition of ``coupon'' is revised to read

as follows:

Sec. 271.2 Definitions.

* * * * *

Coupon means any coupon, stamp, type of certificate, authorization

card, cash or check issued in lieu of a coupon, or access device,

including an electronic benefit transfer card or personal

identification number issued pursuant to the provisions of the Food

Stamp Act of 1977, as amended, for the purchase of eligible food.

* * * * *

PART 278--PARTICIPATION OF RETAIL FOOD STORES, WHOLESALE FOOD

CONCERNS AND INSURED FINANCIAL INSTITUTIONS

3. In Sec. 278.1:

a. Paragraph (a) is revised;

b. Paragraph (b)(3) is revised;

c. Paragraph (j) is revised;

d. Paragraph (k) is amended by revising the first sentence of

paragraph (k)(2) and redesignating the paragraph (k)(2) as paragraph

(k)(7), and adding new paragraphs (k)(2), (k)(3), (k)(4), (k)(5) and

(k)(6);

e. Paragraph (l) is amended by redesignating paragraphs (l)(1)(iii)

through (l)(1)(v) as (l)(1)(v) through (l)(1)(vii), respectively,

revising newly redesignated paragraph (l)(1)(vi), and adding new

paragraphs (l)(1)(iii) and (l)(1)(iv);

f. The introductory text of paragraph (m) is revised;

g. Paragraph (o) is removed, and paragraphs (p) through (t) are

redesignated as paragraphs (o) through (s), respectively; and

h. Newly redesignated paragraph (o) is revised and newly

redesignated paragraph (q) is amended by removing references to (r)(2),

(r)(3), (r)(1)(ii), (r)(1)(i), (r)(1)(iv), (r)(2)(ii), (r)(2)(iv),

(r)(3)(iv) and (r), wherever they appear, and adding in their place

references to (q)(2), (q)(3), (q)(1)(ii), (q)(1)(i), (q)(1)(iv),

(q)(2)(ii), (q)(2)(iv), (q)(3)(iv) and (q), respectively.

The revisions and additions read as follows:

Sec. 278.1 Approval of retail food stores and wholesale food concerns.

(a) Application. Any firm desiring to participate or continue to be

authorized in the program shall file an application as prescribed by

FNS. Such an application shall contain information which will permit a

determination to be made as to whether such an applicant qualifies, or

continues to qualify, for authorization under the provisions of the

program. FNS may require that a retail food store or wholesale food

concern be visited to confirm eligibility for program participation

prior to such store or concern being authorized or reauthorized in the

program. Required visits shall be conducted by an authorized employee

of the Department, a designee of the Secretary, or an official of the

State or local government designated by the Secretary. FNS shall deny

or approve the application, or request additional information from the

applicant firm, within 30 days of receipt of the initial application.

(b) Determination of authorization. * * *

(3) The business integrity and reputation of the applicant. FNS

shall deny the authorization of any firm from participation in the

program for a period of time as specified in paragraph (k) of this

section based on consideration of information regarding the business

integrity and reputation of the firm as follows:

(i) Conviction of or civil judgment against the owners, officers or

managers of the firm for:

(A) Commission of fraud or a criminal offense in connection with

obtaining, attempting to obtain, or performing a public or private

agreement or transaction;

(B) Commission of embezzlement, theft, forgery, bribery,

falsification or destruction of records, making false statements,

receiving stolen property, making false claims, or obstruction of

justice; or

(C) Violation of Federal, State and/or local consumer protection

laws or other laws relating to alcohol, tobacco, firearms, controlled

substances, and/or gaming licenses;

(ii) Administrative findings by Federal, State or local officials

that do not give rise to a conviction or civil judgment but for which a

firm is removed from such a program, or the firm is not removed from

the program but FNS determines a pattern exists (3 or more instances)

evidencing a lack of business integrity on the part of the owners,

officers or managers of the firm;

(iii) Evidence of an attempt by the firm to circumvent a period of

disqualification, a civil money penalty or fine imposed for violations

of the Food Stamp Act and program regulations;

(iv) Previous Food Stamp Program violations administratively and/or

judicially established as having been committed by owners, officers, or

managers of the firm for which a sanction had not been previously

imposed and satisfied;

(v) Evidence of prior Food Stamp Program violations personally

committed by the owner(s) or the officer(s) of the firm at one or more

units of a multi-unit firm, or evidence of prior Food Stamp Program

violations committed by management at other units of multi-unit firms

which would indicate a lack of business integrity on the part of

ownership and for which sanctions had not been previously imposed and

satisfied; or

(vi) Commission of any other offense indicating a lack of business

integrity or business honesty of owners, officers or managers of the

firm that seriously and

[[Page 23172]]

directly affects the present responsibility of a person.

* * * * *

(j) Authorization. Upon approval, FNS shall issue a nontransferable

authorization card to the firm. The authorization card shall be valid

only for the time period for which the firm is authorized to accept and

redeem food stamp benefits. The authorization card shall be retained by

the firm until such time as the authorization period has ended,

authorization in the program is superseded, or the card is surrendered

or revoked as provided in this part. All firms will be authorized in

the program for a period of 5 years. The specification of an

authorization period in no way precludes FNS from periodically

requesting information from a firm for purposes of reauthorization in

the program or from withdrawing or terminating the authorization of a

firm in accordance with this part.

(k) Denying authorization. * * *

(2) The firm has failed to meet the eligibility requirements for

authorization under Criterion A or Criterion B, as specified in the

Food Stamp Act of 1977, as amended; or, for co-located wholesale/retail

firms, the firm fails to meet the requirements of paragraph (b)(1)(iv)

of this section. Any firm that has been denied authorization on these

bases shall not be eligible to submit a new application for

authorization in the program for a minimum period of six months from

the effective date of the denial;

(3) The firm has been found to lack the necessary business

integrity and reputation to further the purposes of the program. Such

firms shall be denied authorization in the program for the following

period of time:

(i) Firms for which records of criminal conviction or civil

judgment exist that reflect on the business integrity of owners,

officers, or managers as stipulated in Sec. 278.1(b)(3)(i) shall be

denied authorization permanently;

(ii) Firms which have been officially removed from other Federal,

State or local government programs through administrative action shall

be denied for a period equivalent to the period of removal from any

such programs; or, if the firm is not removed from the program, but FNS

determines a pattern (3 or more instances) exists evidencing a lack of

business integrity on the part of the owners, officers or managers of

the firm, such firm shall be denied for a one year period effective

from the date of denial;

(iii) Firms for which evidence exists of an attempt to circumvent a

period of disqualification, a civil money penalty, or fine imposed for

violations of the Food Stamp Act of 1977, as amended, and program

regulations shall be denied for a period of three years from the

effective date of denial;

(iv) Firms for which evidence exists of prior Food Stamp Program

violations by owners, officers, or managers of the firm for which a

sanction had not been previously imposed and satisfied shall be denied

for a period of time equivalent to the appropriate disqualification

period for such previous violations, effective from the date of denial;

(v) Firms for which evidence exists of prior Food Stamp Program

violations at other units of multi-unit firms as specified in

Sec. 278.1(b)(3)(v) for which a sanction had not been previously

imposed and satisfied shall be denied for a period of time equivalent

to the appropriate disqualification period for such previous

violations, effective from the date of denial;

(vi) Firms for which any other evidence exists which reflects

negatively on the business integrity or business honesty of the owners,

officers or managers of the firm as specified in Sec. 278.1(b)(3)(vi)

shall be denied for a period of one year from the effective date of

denial;

(4) The firm has filed an application that contains false or

misleading information about a substantive matter, as specified in

Sec. 278.6(e). Such firms shall be denied authorization for the periods

specified in Sec. 278.6(e)(1) or Sec. 278.6(e)(3);

(5) The firm's participation in the program will not further the

purposes of the program;

(6) The firm has been found to be circumventing a period of

disqualification or a civil money penalty through a purported transfer

of ownership;

(7) The firm has failed to pay in full any fiscal claim assessed

against the firm under Sec. 278.7, any fines assessed under

Secs. 278.6(l) or 278.6(m), or a transfer of ownership civil money

penalty assessed under Sec. 278.6(f). * * *

(l) Withdrawing authorization. (1) * * *

(iii) The firm fails to meet the requirements for eligibility under

Criterion A or B, as specified in the Food Stamp Act of 1977, as

amended, or, for co-located wholesale/retail firms, the firm fails to

meet the requirements of paragraph (b)(1)(iv) of this section, for the

time period specified in paragraph (k)(2) of this section;

(iv) The firm fails to maintain the necessary business integrity to

further the purposes of the program, as specified in paragraph (b)(3)

of this section. Such firms shall be withdrawn for lack of business

integrity for periods of time in accordance with those stipulated in

paragraph (k)(3) of this section for specific business integrity

findings;

* * * * *

(vi) The firm has failed to pay in full any fiscal claim assessed

against the firm under Sec. 278.7 or any fines assessed under

Secs. 278.6(l) or 278.6(m) or a transfer of ownership civil money

penalty assessed under Sec. 278.6(f); or

* * * * *

(m) Refusal to accept correspondence or to respond to inquiries.

FNS may withdraw or deny the authorization of any firm which:

* * * * *

(o) Applications containing false information. The filing of any

application containing false or misleading information may result in

the denial of approval for participation in the program, as specified

in paragraph (k) of this section, or disqualification of a firm from

participation in the program, as specified in Sec. 278.6, and may

subject the firm and persons responsible to civil or criminal action.

* * * * *

4. In Sec. 278.6:

a. Paragraph (a) is revised;

b. Paragraph (b)(1) is amended by adding one new sentence to the

end of the paragraph;

c. Paragraph (b)(2)(i) is amended by adding three new sentences to

the end of the paragraph;

d. Paragraph (c) is amended by adding four new sentences to the end

of the paragraph;

e. Paragraph (e) is amended by adding new paragraphs (e)(1)(iii),

(e)(3)(vi) and (e)(8);

f. Paragraph (i) is amended by removing the first sentence of

Criterion 4 and adding three new sentences in its place, and by

removing the words ``or management'' in paragraph (i)(1)(v); and

g. Paragraph (n) is revised.

The revisions and additions read as follows:

Sec. 278.6 Disqualification of retail food stores and wholesale food

concerns, and imposition of civil money penalties in lieu of

disqualifications.

(a) Authority to disqualify or subject to a civil money penalty.

FNS may disqualify any authorized retail food store or authorized

wholesale food concern from further participation in the program if the

firm fails to comply with the Food Stamp Act of 1977, as amended, or

this part. Such disqualification shall result from a

[[Page 23173]]

finding of a violation on the basis of evidence that may include facts

established through on-site investigations, inconsistent redemption

data, evidence obtained through a transaction report under an

electronic benefit transfer system, or the disqualification of a firm

from the Special Supplemental Nutrition Program for Women, Infants and

Children (WIC), as specified in paragraph (e)(8) of this section.

Disqualification shall be for a period of 6 months to 5 years for the

firm's first sanction; for period of 12 months to 10 years for a firm's

second sanction; and disqualification shall be permanent for a

disqualification based on paragraph (e)(1) of this section. Any firm

which has been disqualified and which wishes to be reinstated at the

end of the period of disqualification, or at any later time, shall file

a new application under Sec. 278.1 so that FNS may determine whether

reauthorization is appropriate. The application may be filed no earlier

than 10 days before the end of the period of disqualification. FNS may,

in lieu of a disqualification, subject a firm to a civil money penalty

of up to $10,000 for each violation if FNS determines that a

disqualification would cause hardship to participating households. FNS

may impose a civil money penalty of up to $20,000 for each violation in

lieu of a permanent disqualification for trafficking, as defined in

Sec. 271.2 of this chapter, in accordance with the provisions of

paragraphs (i) and (j) of this section.

(b) Charge letter. (1) * * * In the case of a firm for which action

is taken in accordance with paragraph (e)(8) of this section, the

charge letter shall inform such firm that the disqualification action

is not subject to administrative or judicial review, as specified in

paragraph (e)(8) of this section.

(2) Charge letter for trafficking. (i) * * * The charge letter

shall also advise the firm that the permanent disqualification shall be

effective immediately upon the date of receipt of the notice of

determination, regardless of whether a request for review is filed in

accordance with Sec. 279.5 of this chapter. If the disqualification is

reversed through administrative or judicial review, the Secretary shall

not be liable for the value of any sales lost during the

disqualification period. Firms that request and are determined eligible

for a civil money penalty in lieu of permanent disqualification for

trafficking may continue to participate in the program pending review

and shall not be required to pay the civil money penalty pending appeal

of the trafficking determination action.

* * * * *

(c) * * * In the case of a firm subject to permanent

disqualification under paragraph (e)(1) of this section, the

determination shall inform such a firm that action to permanently

disqualify the firm shall be effective immediately upon the date of

receipt of the notice of determination from FNS, regardless of whether

a request for review is filed in accordance with Sec. 279.5 of this

chapter. If the disqualification is reversed through administrative or

judicial review, the Secretary shall not be liable for the value of any

sales lost during the disqualification period. Firms that request and

are determined eligible to a civil money penalty in lieu of permanent

disqualification for trafficking may continue to participate in the

program pending review and shall not be required to pay the civil money

penalty pending appeal of the trafficking determination action. In the

case of a firm for which action is taken in accordance with paragraph

(e)(8) of this section, the determination notice shall inform such firm

that the disqualification action is not subject to administrative or

judicial review, as specified in paragraph (e)(8) of this section.

* * * * *

(e) Penalties. * * *

(1) * * *

(iii) It is determined that personnel of the firm knowingly

submitted information on the application that contains false

information of a substantive nature that could affect the eligibility

of the firm for authorization in the program, such as, but not limited

to, information related to:

(A) Eligibility requirements under Sec. 278.1(b), (c), (d), (e),

(f), (g) and (h);

(B) Staple food stock;

(C) Annual gross sales for firms seeking to qualify for

authorization under Criterion B as specified in the Food Stamp Act of

1977, as amended;

(D) Annual staple food sales;

(E) Total annual gross retail food sales for firms seeking

authorization as co-located wholesale/retail firms;

(F) Ownership of the firm;

(G) Employer Identification Numbers and Social Security Numbers;

(H) Food Stamp Program history, business practices, business

ethics, WIC disqualification or authorization status, when the store

did (or will) open for business under the current ownership, business,

health or other licenses, and whether or not the firm is a retail and

wholesale firm operating at the same location; or

(I) Any other information of a substantive nature that could affect

the eligibility of a firm.

* * * * *

(3) * * *

(vi) Personnel of the firm knowingly submitted information on the

application that contained false information of a substantive nature

related to the ability of FNS to monitor compliance of the firm with

FSP requirements, such as, but not limited to, information related to:

(A) Annual eligible retail food sales;

(B) Store location and store address and mailing address;

(C) Financial institution information; or

(D) Store name, type of ownership, number of cash registers, and

non-food inventory and services.

* * * * *

(8) FNS shall disqualify from the Food Stamp Program any firm which

is disqualified from the WIC Program:

(i) Based in whole or in part on any act which constitutes a

violation of that program's regulation and which is shown to constitute

a misdemeanor or felony violation of law, or for any of the following

specific program violations:

(A) A pattern of claiming reimbursement for the sale of an amount

of a specific food item which exceeds the store's documented inventory

of that food item for a specified period of time;

(B) Exchanging WIC food instruments for cash, credit or

consideration other than eligible food; or the exchange of firearms,

ammunition, explosives or controlled substances, as defined in section

802 of title 21 of the United States Code, for food instruments;

(C) A pattern of receiving, transacting and/or redeeming WIC food

instruments outside of authorized channels;

(D) A pattern of exchanging non-food items for a WIC food

instrument;

(E) A pattern of charging WIC customers more for food than non-WIC

customers or charging WIC customers more than the current shelf price;

or

(F) A pattern of charging for food items not received by the WIC

customer or for foods provided in excess of those listed on the food

instrument.

(ii) FNS shall not disqualify a firm from the Food Stamp Program on

the basis of a WIC disqualification unless:

(A) Prior to the time prescribed for securing administrative review

of the WIC disqualification action, the firm was provided individual

and specific notice that it could be disqualified from the Food Stamp

Program based on the WIC violations committed by the firm;

(B) A signed and dated copy of such notice is provided to FNS by

the WIC administering agency; and

[[Page 23174]]

(C) A determination is made in accordance with paragraph (a) of

this section that such action will not cause a hardship for

participating Food Stamp households.

(iii) Such a Food Stamp disqualification:

(A) Shall be for the same length of time as the WIC

disqualification;

(B) May begin at a later date than the WIC disqualification; and

(C) Shall not be subject to administrative or judicial review under

the Food Stamp Program.

* * * * *

(i) Criteria for eligibility for a civil money penalty in lieu of

permanent disqualification for trafficking. * * *

Criterion 4. Firm ownership was not aware of, did not approve,

did not benefit from, or was not in any way involved in the conduct

or approval of trafficking violations; or it is only the first

occasion in which a member of firm management was aware of,

approved, benefited from, or was involved in the conduct of any

trafficking violations by the firm. Upon the second occasion of

trafficking involvement by any member of firm management uncovered

during a subsequent investigation, a firm shall not be eligible for

a civil money penalty in lieu of permanent disqualification.

Notwithstanding the above provision, if trafficking violations

consisted of the sale of firearms, ammunition, explosives or

controlled substances, as defined in 21 U.S.C. Sec. 802, and such

trafficking was conducted by the ownership or management of the

firm, the firm shall not be eligible for a civil money penalty in

lieu of permanent disqualification.* * *

* * * * *

(n) Review of determination. The determination of FNS shall be

final and not subject to further administrative or judicial review

unless a written request for review is filed within the period stated

in Sec. 279.5 of this chapter.

Notwithstanding the above, any FNS determination made on the basis

of paragraph (e)(8) of this section shall not be subject to further

administrative or judicial review.

* * * * *

5. In Sec. 278.8, paragraph (a) is revised to read as follows:

Sec. 278.8 Administrative review--retail food stores and wholesale

food concerns.

(a) Requesting review. A food retailer or wholesale food concern

aggrieved by administrative action under Secs. 278.1, 278.6 or 278.7

may, within the period stated in Sec. 279.5 of this chapter, file a

written request for review of the administrative action with the review

officer. However, disqualification actions taken against firms in

accordance with Sec. 278.6(e)(8) shall not be subject to administrative

or judicial review. On receipt of the request for review, the

questioned administrative action shall be stayed pending disposition of

the request for review by the review officer, except in the case of a

permanent disqualification as specified in Sec. 278.6(e)(1). A

disqualification for failure to pay a civil money penalty shall not be

subject to administrative review.

* * * * *

PART 279--ADMINISTRATIVE AND JUDICIAL REVIEW--FOOD RETAILERS AND

FOOD WHOLESALERS

6. In Sec. 279.3, paragraph (a)(2) is revised to read as follows:

Sec. 279.3 Authority and jurisdiction.

(a) Jurisdiction. * * *

(2) Imposition of a fine under Secs. 278.6(l) or 278.6(m) of this

chapter or disqualification from participation in the program or

imposition of a civil money penalty under Sec. 278.6 of this chapter,

except for disqualification actions imposed under Sec. 278.6(e)(8) of

this chapter;

* * * * *

7. In Sec. 279.7, paragraph (a) is amended to add two new sentences

after the first sentence to read as follows:

Sec. 279.7 Action upon receipt of a request for review.

(a) Holding action. * * * However, in cases of permanent

disqualification under Sec. 278.6(e)(1) of this chapter, the

administrative action shall not be held in abeyance pending such a

review determination. If the disqualification is reversed through

administrative or judicial review, the Secretary shall not be held

liable for the value of any sales lost during the disqualification

period. * * *

* * * * *

8. In Sec. 279.10, the first sentence of paragraph (a) and

paragraph (d) are revised to read as follows:

Sec. 279.10 Judicial review.

(a) Filing for judicial review. Except for firms disqualified from

the program in accordance with Sec. 278.6(e)(8) of this chapter, a firm

aggrieved by the determination of the administrative review officer may

obtain judicial review of the determination by filing a complaint

against the United States in the U.S. district court for the district

in which the owner resides or is engaged in business, or in any court

of record of the State having competent jurisdiction. * * *

* * * * *

(d) Stay of action. During the pendency of any judicial review, or

any appeal therefrom, the administrative action under review shall

remain in force unless the firm makes a timely application to the court

and after hearing thereon, the court stays the administrative action

after a showing that irreparable injury will occur absent a stay and

that the firm is likely to prevail on the merits of the case. However,

permanent disqualification actions taken in accordance with

Sec. 278.6(e)(1) of this chapter shall not be subject to such a stay of

administrative action. If the disqualification action is reversed

through administrative or judicial review, the Secretary shall not be

liable for the value of any sales lost during the disqualification

period.

Dated: April 21, 1999.

Samuel Chambers, Jr.,

Administrator, Food and Nutrition Service.

[FR Doc. 99-10736 Filed 4-29-99; 8:45 am]

BILLING CODE 3410-30-P