This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

24985

Vol. 63, No. 87

Wednesday, May 6, 1998

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: Proposed Rule

SUMMARY: The purpose of this proposed

rule is to implement the Food Stamp

Program retailer provisions included in

the Personal Responsibility and Work

Opportunity Reconciliation Act

(PRWORA) of 1996, as well as the

retailer provision included in the

Federal Agriculture Improvement and

Reform Act. While a number of

amendments to the current regulations

are proposed in order to meet the

objectives of streamlining the

regulations in response to the

Departmental review of the regulations,

the majority of the proposed changes

included in this proposal are derived

from the retailer provisions of the

Personal Responsibility and Work

Opportunity Reconciliation Act of 1996.

Most of the provisions in this proposed

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, by improving the

Department’s ability to monitor

authorized firms, and by strengthening

penalties against firms that violate

program rules.

DATES: Comments must be received by

July 6, 1998 to be assured of

consideration. Comments on the

discretionary provisions identified in

this rule are encouraged. Comments will

not affect implementation of those

provisions identified as

nondiscretionary that are mandated by

law and over which the Secretary has no

discretion.

ADDRESSES: Comments should be

addressed to Suzanne Fecteau, Chief,

Redemption Management Branch, Food

and Nutrition Service, 3101 Park Center

Drive, Alexandria, Virginia 22302–1594.

All written comments will be open for

public inspection at the office of the

Food and Consumer Service during

regular business hours (8:30 a.m. to 5

p.m., Monday through Friday) in Room

706, 3101 Park Center Drive,

Alexandria, Virginia.

FOR FURTHER INFORMATION CONTACT:

Questions regarding this rulemaking

should be addressed to Suzanne

Fecteau, Chief, Redemption

Management Branch, Benefit

Redemption Division, Food Stamp

Program, 3101 Park Center Drive,

Alexandria, Virginia 22302, or by

telephone at (703) 305–2418.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been

determined to be not significant under

Executive Order 12866 and therefore

has not been reviewed by the Office of

Management and Budget.

Executive Order 12372

The Food Stamp Program is listed in

the Catalog of Federal Domestic

Assistance under No. 10.551. For the

reasons set forth in the final rule and

related notice(s) to 7 CFR Part 3015,

Subpart V (48 FR 29115, June 24, 1983),

this program is excluded from the scope

of Executive Order 12372, which

requires intergovernmental consultation

with State and local officials.

Regulatory Flexibility Act

This proposed rule has been reviewed

with regard to the requirements of the

Regulatory Flexibility Act of 1980 (5

U.S.C. § 601–612). Yvette S. Jackson, the

Administrator of the Food and Nutrition

Service, has certified that this rule does

not have a significant economic impact

on a substantial number of small

entities. 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, this notice

announces 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 Food Stamp Program

(FSP). We also intend to request OMB

approval of the revised estimates for 3

years.

Comments on this notice must be

submitted by July 6, 1998.

Comments are invited on: (a) Whether

the proposed collection of information

is necessary for the performance of the

functions of the agency, including

whether the information will have

practical utility; (b) the accuracy of the

agency’s estimate of the burden of the

proposed collection of information

including the validity of the

methodology and assumptions used; (c)

ways to enhance the quality, utility and

clarity of the information to be

collected; and (d) ways to minimize the

burden of the collection of information

on those who are to respond, including

through the use of appropriate

automated, electronic, mechanical, or

other technological collection

techniques or other forms of information

technology.

Comments may be sent to Laura

Oliven, Desk Officer, Office of

Information and Regulatory Affairs,

Office of Management and Budget

(OMB), Washington, D.C. 20502 ( a copy

may also be sent to Suzanne M. Fecteau,

Chief, Redemption Management Branch,

Benefit Redemption Division, Food and

Nutrition Service, U.S. Department of

Agriculture, 3101 Park Center Drive,

Alexandria, Va. 22302. FOR FURTHER

INFORMATION, or for copies of the

information collection, please contact

Ms. Fecteau at the above address.)

All responses to this notice will be

summarized and included in the request

for OMB approval, and will become a

matter of public record.

For Further Information Contact:

Suzanne M. Fecteau, (703) 305–2418.

Title: Food Stamp Program Store

Applications.

OMB Number: 0584–0008.

Type of Request: Revision of a

currently approved collection.

Abstract: The Food and Nutrition

Service (FNS) of the U.S. Department of

Agriculture is the Federal agency

responsible for the FSP. The Food
24986 Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules

Stamp Act of 1977, as amended (the

Act) (7 U.S.C. 2011–2036), requires that

the Agency determine the eligibility of

firms and certain food service

organizations to accept and redeem food

stamp benefits and to monitor them for

compliance and continued eligibility.

Part of FNS’ responsibility is to accept

applications from retail food

establishments and meal service

programs that wish to participate in the

FSP, review the applications in order to

determine whether or not applicants

meet eligibility requirements, and make

determinations whether to grant or deny

authorization to accept and redeem food

stamp benefits. FNS is also responsible

for requiring updates to application

information and reviewing that

information to determine whether or not

the firms or services continue to meet

eligibility requirements.

There are currently 3 application

forms approved under OMB No. 0584–

0008. Together these forms are used by

retailers, wholesalers, meal service

providers, certain types of group homes,

shelters, and state-contracted

restaurants, to apply to FNS for

authorization to participate in the FSP.

Form FNS–252, Food Stamp

Application For Stores, is generally

used by stores, excluding facilities

which provide meal services such as

communal dining, shelters, restaurant

and other meal service programs, which

are newly applying for authorization;

Form FNS–252R, Food Stamp Program

Application For Stores-Reauthorization,

is used by the majority of currently

authorized stores to apply for

reauthorization, excluding facilities

which provide meal services such as

communal dining, shelters, restaurants

and other meal service programs; and

Form FNS–252–2, Application to

Participate in the Food Stamp Program

for Communal Dining Facility/Others,

generally used by communal dining and

restaurant facilities and other food

service programs which are newly

applying or applying for

reauthorization. In a few cases, at the

discretion of the FNS field offices, some

stores would be required to complete

Form FNS–252 to apply for

reauthorization. Section 9(c) of the Act

provides the necessary authorization(s)

to collect the information contained in

these forms.

The proposed revisions to the

authorization process contained in

§ 278.1(a) of this proposed rule do not

impose new information collection,

reporting or recordkeeping

requirements. There are 3 application

forms used by firm’s who wish to

participate in the program. These forms

and associated burden hours have been

approved by OMB under OMB No.

0584–0008 through October 31, 1999.

We are proposing to adjust the current

burden estimates based on more recent

data and a technical correction to

capture a change in application

requirements for private restaurants that

was inadvertently omitted from the

hourly burden estimates when last

submitted to OMB and an error in

estimating the average hourly burden

time for Form FNS–252–2. Comments

are solicited on the adjusted burden

estimates as discussed in the following

paragraphs and reflected in the

summary chart at the end of this section

of the preamble.

We do not collect information on the

number of FSP applications received

annually. Current burden estimates

associated with these 3 application

forms are determined from information

maintained in STARS (Store Tracking

and Redemption System) based on the

total number of currently authorized

stores or the number of newly

authorized stores. The number of

expected applications is divided

between initial applications from new

applicants and applications for

reauthorization from currently

authorized stores.

Adjustments—Re-estimates Based on

More Recent Data and Corrections

For burden estimates associated with

new applicants (initial authorizations),

we used the number of stores (all types)

newly authorized/approved currently

estimated at 20,696; (rounded to 20,700)

based on FY 1997 year-end data from

STARS and inflated this number by

10% (2,070) to capture a total of 22,770

applications expected to be received

and processed from stores annually. It is

estimated that 98% (22,315) of the

22,770 applications expected to be

received would be on Form FNS–252

and 2% (455) would be on Form FNS–

252–2. Due to a technical correction

discussed later in this section of the

preamble, the number of expected

applications would be further changed

to reflect an expected total of 22,347

applications using Form FNS–252 and

423 applications using Form FNS–252–

2.

For burden estimates associated with

applications for reauthorization, we

used the total number of stores (all

types) authorized (184,300) as of

December 1997. Generally, authorized

stores are subject to reauthorization at

least once every 4 years. Thus, it is

estimated that 25% (46,000) of all

authorized stores would be subject to

reauthorization in any given year.

Using, the number of authorized stores

as of December 1997, it is estimated that

46,000 reauthorization applications

would be expected to be received

annually. Of the 46,000 reauthorization

applications expected, it is estimated

that 96% (44,160) will be on Form FNS–

252R, 3% (1,380) will be on Form FNS–

252–2, and 1% (460) will be on Form

FNS–252.

Hourly burden time per response

varies by type of application and

includes the time to review instructions,

search existing data resources, gather

and copy the data needed, complete and

review the application, and submit the

form and documentation to FNS. It

should be noted that the number of

applicant and authorized stores has

been declining over the past few years

due to several program changes, such as

changes in eligibility requirements,

stronger sanctions against violators, and

implementation of Electronic Benefit

Transfer systems. These declines have

resulted in a reduction in the overall

number of respondents and ultimately a

reduction in the overall proposed

burden hours reflected in the following

summary chart.

Currently, private restaurants

applying for FSP participation in the

State-administered special restaurant

program use Form FNS–252–2 to apply

for participation. This category of

applicant represents about 7% of the

number of current applicants using

Form FNS–252–2. Over time, it has been

determined that we need additional

information from such private

restaurants to ensure that they meet

necessary requirements of operation to

carry out the intent of the FSP. The

additional information needed would be

captured by having these respondents,

estimated at about 32, complete Form

FNS–252 rather than Form FNS–252–2.

We estimate that these restaurants will

spend an estimated 10 minutes of

additional burden time using the longer

Form FNS–252, however, this

contributes to a negligible amount to the

increase in the average hourly burden

rate reflected in the summary chart

because the number of respondents is so

small. This change is a technical

correction rather than a re-estimate

based on more recent data, and is

reflected in the number of initial

applications expected to be received as

shown in the summary chart.

As currently approved by OMB, the

hourly burden rate per response for

Form FNS–252 is 20 to 68 minutes, with

the average being 27 minutes and 10 to

20 minutes for Form FNS 252–2, with

the average being 10 minutes. These

hourly burden rates are not affected by

the re-estimated number of applications

expected to be received or the technical

correction. However, previous estimates
Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules 24987

to OMB erroneously reflected the

average burden time for Form FNS–252–

2 as 10 minutes. The average time is 12

minutes and this correction appears in

the proposed estimates in the summary

chart.

Total number of respondents

completing at least one of the 3

applications in question, taking into

consideration the adjustments discussed

above, would be as follows:

FNS–252:

New authorizations ........................................................................................................... 22,347 (22,770 × .98 + 32)

Reauthorizations ................................................................................................................ 460 (184,000 × .25 × .01)

22,807

FNS–252–2:

New authorizations ........................................................................................................... 434 (22,770 × .02 ¥ 32)

Reauthorizations ................................................................................................................ 1,380 (184,000 × .25 × .03)

1,803

FNS–252R:

Reauthorizations ................................................................................................................ 44,160 (184,000 × .25 × .01 ¥ 1,380 ¥ 460)

Total Responses ............................................................................................................. 68,770

The existing estimates, as approved

by OMB through May 1999 and shown

on the following chart, reflect the total

annual number of responses as 80,613

and the annual burden hours as 18,396.

The proposed number of responses

would be 68,700 with total burden

hours of 15,777 hours. The net effect of

the proposed burden estimates is an

overall decrease in burden hours of

2,619 hours annually.

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.

Estimated Total Annual Burden:

15,777.

SUMMARY OF PROPOSED BURDEN ESTIMATES FOR FORMS FNS–252, 252–2 AND 252R

Title Number of

respondents

Responses

per

respondent

Total annual

responses

Burden hours

per response

Total annual

burden hours

Form FNS–252:

Existing .......................................................................... 26,431 1 26,431 .4500 11,894

Proposed ....................................................................... 22,807 1 22,807 .4500 10,263

Difference ................................................................... ¥3,624 1 ¥3,624 ........................ ¥1,631

Form FNS–252–2:

Existing .......................................................................... 2,592 1 2,592 .1855 481

Proposed ....................................................................... 1,803 1 1,803 .2000 361

Difference ................................................................... ¥789 ........................ ¥789 +.0145 ¥120

Form FNS–252R:

Existing .......................................................................... 51,590 1 51,590 .1167 6,021

Proposed ....................................................................... 44,160 1 44,160 .1167 5,153

Difference ................................................................... ¥7,430 ........................ ¥7,430 ........................ ¥868

Totals:

Existing .......................................................................... 80,613 ........................ 80,613 ........................ 18,396

Proposed ....................................................................... 68,770 ........................ 68,770 ........................ 15,777

Difference ................................................................... ¥11,843 ........................ ¥11,843 ........................ ¥2,619

Executive Order 12988

This proposed 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 Food Stamp

Program, the administrative procedures

are as follows: (1) for Program benefit

recipients—State administrative

procedures issued pursuant to 7 U.S.C.

2020 (e)(10) and 7 CFR 273.15; (2) for

State agencies—administrative

procedures issued pursuant to 7 U.S.C.

§ 2023 set out at 7 CFR 276.7 ( for rules

related to non-quality control (QC)

liabilities) or 7 CFR 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
24988 Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules

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 proposed 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

Pub. L. 104–193, the Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996 (PRWORA)

was enacted on August 22,1996, and

contains a number of provisions directly

affecting the participation of retailers,

wholesalers and other entities eligible to

be authorized to participate in the Food

Stamp Program (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. While these five

provisions are incorporated into this

proposed rule, 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 cannot be modified by

public comment. The PRWORA

provides discretion in the

implementation of the remaining

provisions of the law, and these

provisions are being proposed for public

comment in this proposed rulemaking.

The Department encourages all

interested parties to comment on the

discretionary provisions as set forth in

this proposed rule.

The PRWORA and this proposed

rulemaking include 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);

• Requirement that USDA, or its

designees, 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 proposed rulemaking also

includes a provision of the Federal

Agriculture Improvement and Reform

Act (FAIR), Pub.L. 104–127, 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

(§ 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 § 278.6 (i).

This rulemaking proposes 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. 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.

This provision was effective on April

4,1996, the date of enactment of the

statute. It was implemented upon the

date on which Food and Nutrition

Service (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

to § 278.6(i) of this proposed regulation

reflects this change. Comments are

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).

Provisions of the Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996 (PRWORA)

The provisions of the PRWORA

related to retailer participation in the

FSP represent a three-tiered approach to
Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules 24989

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.

Pre-Authorization Screening

The participation of retailers in the

FSP is a privilege, not a right. The

PRWORA and the provisions of this

proposed 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,

and provides discretion to the Secretary

to designate such firms on the basis of

size, location and types of items sold.

Amendments to § 278.1(a) of the

regulation reflect the Secretary’s

authority to conduct such

preauthorization visits as contained in

the statute. It is anticipated that firm

types subject to preauthorization visits

will be determined by the FNS on an

annual basis, as priorities and resources

permit.

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 is

proposed to be revised to include the

minimum 6-month prohibition from

reapplication, which applies to those

firms that are shown to not meet

Criterion A or Criterion B of the

eligibility requirements of the Food

Stamp Act, (7 U.S.C. 2012(k)) and, for

co-located wholesale/retail firms, the

requirements of § 278.1(b)(1)(iv).

Criteria A and B were incorporated into

the definition of ‘‘retail food store’’ in

the Food Stamp Act, as amended by the

Pub. L. 103–225, the Food Stamp

Program Improvements Act of 1994.

While this change in the definition was

effective immediately upon enactment

of the law and has been implemented,

a proposed rule incorporating this

statutory change specifically in the

regulations is currently in Departmental

clearance.

Currently, there is no waiting period

for stores that wish to reapply to

participate in the FSP after their

application is denied because the stores

fail to meet basic eligibility criteria for

authorization. Such stores can adjust the

types of staple food items that they offer

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. The implementation

of the 6-month waiting period will

reduce the number of firms that

temporarily stock minimum

requirements of food items solely for the

purpose of becoming authorized in the

program and then engage in food stamp

trafficking as their primary business.

This 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. This 6-month prohibition is

nondiscretionary.

This rulemaking also proposes 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 the PRWORA provides

that the Secretary may establish such

time restrictions, up to a permanent

denial, of a firm’s ability to reapply for

program authorization depending upon

the severity of the reason for the denial

of such a firm’s initial application or

subsequent application for authorization

or reauthorization. Section 278.1(b)(3)

sets out the criteria discussed below that

are proposed 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.

Section 278.1(k) details the proposed

periods of time for which a firm will be

denied authorization in the program in

response to the criteria set out in

§ 278.1(b)(3). It is proposed that these

provisions be 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 Food Stamp Act, as

amended, 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. Therefore, the criteria in this

proposed rulemaking focus on the

business integrity and reputation of the

ownership, management and other

personnel 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. Therefore, this rulemaking

proposes 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. If

personnel of the firm have been

criminally convicted or found civilly

liable for reasons related to business

integrity, the firm will be denied the

opportunity for reapplication to the

program for as long as that person is

employed by the firm. Examples of such

business integrity matters include

conviction or civil liability for offenses

such as insurance fraud, tax fraud, and

embezzlement.

In addition, this proposal stipulates

that firms that have been removed from

other federal, State or local government

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 the

WIC Program, or had their State or local

liquor or lottery license suspended.

It is also proposed that firms for

which it is found that an attempt has

been made to circumvent a period of

disqualification, a civil money penalty
24990 Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules

or a fine imposed for FSP violations, or

firms for which evidence exists of prior

violative behavior which is not related

to the FSP, shall be denied the

opportunity to apply for the program for

a period of 3 years. For example, a firm

fined for lottery or liquor license

infractions, but not removed from the

State or local program through

suspension, would be restricted from

participation in the FSP for 3 years,

commencing from the effective date of

the FSP denial.

Further, this rulemaking proposes that

firms in which violations of the program

have been committed 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 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 management and

personnel 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, it is proposed 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 or 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, it is proposed that firms for

which any other evidence exists that

negatively impacts on the business

integrity or reputation of the firm shall

be denied the opportunity to apply for

authorization in the FSP for one year

from the effective date of the denial.

Firms adversely affected by any such

actions would be entitled to appeal

rights provided by section 14 of the

Food Stamp Act.

This proposal also makes an editorial

change unrelated to the PRWORA

provisions to conform the language of

§ 278.1(k), Denying authorization. and

§ 278.1(l), Withdrawing authorization.

An additional editorial change is also

being made to § 278.1(m) so as to

conform this section with § 278.1(k) and

§ 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 is

proposed to be added in § 278.1(k) and

§ 278.1(l) that reflects the current

prohibition against participation in the

program as specified in the current rule

at § 278.6(f)(4), which prohibits

authorization for participation of firms

that have outstanding transfer of

ownership civil money penalties owed

to FNS.

Authority To Establish Authorization

Periods

Section 832 of the PRWORA provides

authority for the Secretary to establish

specific periods of time 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.

Further, it is intended to protect the

integrity of the FSP by requiring a firm

to re-apply periodically for continued

participation and thereby ensuring that

only legitimate and eligible firms are

authorized to accept FSP benefits.

It is proposed that no firm be assigned

an authorization period for participation

in the FSP for longer than 5 years.

Moreover, the FNS Officer in Charge

may assign a lesser period of

authorization, depending on the

circumstances. Such circumstances may

include the fact that a store is a new

firm with unknown sales history, an

additional outlet of a chain grocery store

with an inconsistent FSP compliance

record or a firm that only minimally

meets the eligibility criteria for

participation in the FSP.

The Department believes that the five

year maximum authorization period,

after which a firm is required to apply

to be reauthorized in the program, is

reasonable and necessary for the

effective administration of the program,

and will ensure that the eligibility of all

firms are routinely and periodically

reviewed.

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 will be

provided with reauthorization materials

and be 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 proposal

is included in § 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 the PRWORA amends

section 14 of the Food Stamp Act 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 provision

is nondiscretionary and was effective

upon the date of enactment of the law.

This provision pertains to firms that are

subject to permanent disqualification for

trafficking in the program, as well as to

those firms subject to permanent

disqualification for having been

sanctioned twice before for violations of

the program. Changes reflecting this
Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules 24991

provision of the law have been made at

§ 278.6(b). Editorial revisions have also

been made to § 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

disqualification actions. Therefore,

firms that 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 nor would such firms be

expected to pay the civil money penalty

pending appeal and may continue to

participate in the program pending

appeal.

Investigations

Section 278.6(a) of the regulation is

proposed to be amended in accordance

with section 841 of the PRWORA to

make an editorial change that stipulates

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

supports current practice in the program

and the current authority provided to

the Secretary to enforce program

compliance. The provision is

nondiscretionary.

Disqualification of Retailers

Disqualified From the WIC Program

Section 843 of the PRWORA amends

section 12 of the Food Stamp Act 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, FSP

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 Food

Stamp action, and often, by the time the

firm has appealed the FSP withdrawal,

the WIC disqualification period is

ending. Thus, the impact of reciprocal

withdrawal is not significant. 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.

In addition, the law stipulates that the

Secretary establish criteria for such

reciprocal disqualification actions.

Current regulations set forth the types of

WIC violations that will result in

withdrawal of a firm from participation

in the FSP.

The Department proposes to retain

these same criteria, 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 solicits comments on the

reciprocal disqualification standards set

out in § 278.6(e)(8).

Conforming changes to restrict those

firms subject to reciprocal

disqualification from eligibility for FSP

administrative and judicial review are

made to § 278.6(n), § 278.8(a),

§ 279.3(a)(2) and § 279.10(a) of this

regulation. The changes made to these

sections are nondiscretionary and will

not be affected by public comment.

Disqualification of Retailers Who

Intentionally Submit Falsified

Applications

Section 842 of the PRWORA amends

section 12(b) of the Food Stamp Act to

authorize the Secretary to disqualify,

including permanently disqualify,

participating retailers who knowingly

submit applications that contain false

information about substantive issues.

This proposed rule proposes to subject

a firm to permanent disqualification if it

is found that false information directly

related to the eligibility of the firm for

authorization is knowingly submitted

on the application. In addition, this rule

proposes 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.

This proposed rule outlines examples

of the type of information that would be

considered ‘‘substantive’’ for the

purpose of determining eligibility, as

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.

This rule also proposes to deny

authorization of any such firm which is

found to have knowingly submitted

such false information on the

application at the time of initial

application processing. It is proposed

that such firms be denied for the same

period of time for which they would be

disqualified under § 278.6(e). The

Department encourages comments on

this discretionary provision.

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 proposed to be 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 § 271.2, the definition of

‘‘coupon’’ is revised to read as follows:

§ 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 § 278.1:
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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 (u) are

redesignated as paragraphs (o) through

(t), 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)(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)(2)(ii), (q)(2)(iv),

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

The revisions and additions read as

follows:

§ 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. FNS shall

determine, based on factors that include

size, location, and types of items sold,

which stores or concerns shall be

visited. 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) Criminal conviction records

reflecting on the business integrity of

owners, officers, managers, or other

personnel of the applicant firm;

(ii) Judicial determinations in civil

litigation adversely reflecting on the

business integrity of owners, officers,

managers or other personnel of the

applicant firm;

(iii) Official records of removal of the

applicant firm from other Federal, State

or local government programs;

(iv) Evidence of an attempt by the

applicant firm to circumvent a period of

disqualification, a civil money penalty

or fine imposed for violations of the

Food Stamp Act and program

regulations;

(v) Evidence (other than a record of a

civil or criminal conviction) of prior

fraudulent behavior of owners, officers,

managers, or other personnel of the

applicant firm that is not Food Stamp

Program related for which a Food Stamp

Program sanction had not been

previously imposed and satisfied;

(vi) Previous Food Stamp Program

violations by owners, officers, managers,

or other personnel of the applicant firm

for which a sanction had not been

previously imposed and satisfied;

(vii) 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 or other

personnel 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

(viii) Any other evidence adversely

reflecting on the business integrity or

reputation of the applicant firm.

* * * * *

(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

coupons under the program. 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. No

firm may be assigned an authorization

period in the program of longer than 5

years; however, the FNS Officer in

Charge may assign a lesser period for

authorization of a firm, depending on

the circumstances of such firm. 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 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 criminal

conviction records reflecting on the

business integrity of owners, officers, or

managers exist shall be denied

authorization permanently; firms for

which such records exist with regard to

other personnel employed by the firm

shall be denied for as long as such

person continues to be employed by the

firm;

(ii) Firms for which judicial

determinations in civil litigation

adversely reflecting on the business

integrity of owners, officers or managers

of the firm have been made shall be

denied authorization permanently; firms

for which such determinations have

been made with regard to other

personnel employed by the firm shall be

denied authorization for as long as such

person continues to be employed by the

firm;

(iii) Firms which have been officially

removed from other Federal, State or

local government programs shall be

denied for a period equivalent to the

period of removal from any such

programs;

(iv) 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 and program

regulations shall be denied for a period
Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules 24993

of three years from the effective date of

denial;

(v) Firms for which evidence exists of

prior fraudulent behavior of owners,

officers, or managers of the firm which

is not Food Stamp Program related and

for which a Food Stamp Program

sanction had not been previously

imposed and satisfied shall be denied

for a period of three years from the

effective date of denial; firms for which

such fraudulent behavior was

committed by personnel employed by

the firm shall be denied authorization

for as long as such person continues to

be employed by the firm;

(vi) Firms for which evidence exists of

prior Food Stamp Program violations by

owners, officers, managers, or other

personnel 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;

(vii) Firms for which evidence exists

of prior Food Stamp Program violations

at other units of multi-unit firms 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;

(viii) Firms for which any other

evidence exists which reflects

negatively on the business integrity or

reputation of the applicant firm 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 § 278.6(e). Such firms

shall be denied authorization for the

periods specified in § 278.6(e)(1) or

§ 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 § 278.7, any fines assessed

under § 278.6(l) or § 278.6(m), or a

transfer of ownership civil money

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

(l) Withdrawing authorization. (1)

* * *

(iii) The firm fails to meet the

requirements for eligibility 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, 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 § 278.7 or any fines assessed

under § 278.6(l) or § 278.6(m) or a

transfer of ownership civil money

penalty assessed under § 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 § 278.6, and may subject the

firm and persons responsible to civil or

criminal action.

* * * * *

4. In Section 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 two new sentences to the end of

the paragraph;

d. Paragraph (c) is amended by adding

three 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:

§ 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 or this part.

Such disqualification shall result from a

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

§ 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 § 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 § 279.5 of this

chapter. If the disqualification is
24994 Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules

reversed through administrative or

judicial review, the Secretary shall not

be liable for the value of any sales lost

during the disqualification period.

* * * * *

(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 § 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. 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

§ 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, as amended;

(D) Annual staple food sales;

(E) Total annual gross retail food sales

for firms seeking authorization as colocated 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) 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) Receiving, transacting and/or

redeeming WIC food instruments

outside of authorized channels;

(D) Accepting WIC food instruments

from unauthorized persons;

(E) Exchanging non-food items for a

WIC food instrument;

(F) Charging WIC customers more for

food than non-WIC customers or

charging WIC customers more than the

current shelf price; or

(G) 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

(C) A determination is made in

accordance with § 278.6(a) 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. 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 § 279.5. Notwithstanding the

aforementioned, 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 § 278.8, paragraph (a) is revised

to read as follows:

§ 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 § 278.1,

§ 278.6 or § 278.7 may, within the

period stated in § 279.5 of this chapter,

file a written request for review of the

administrative action with the review

officer, except that disqualification

actions taken against firms in

accordance with § 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
Federal Register / Vol. 63, No. 87 /Wednesday, May 6, 1998 / Proposed Rules 24995

specified in § 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 § 279.3, paragraph (a)(2) is

revised to read as follows:

§ 279.3 Authority and jurisdiction.

(a) Jurisdiction. * * *

(2) Imposition of a fine under

§ 278.6(l) of this chapter or § 278.6 (m)

of this chapter or disqualification from

participation in the program or

imposition of a civil money penalty

under § 278.6 of this chapter, except for

disqualification actions imposed under

§ 278.6(e)(8) of this chapter;

* * * * *

7. In § 279.7, paragraph (a) is

amended to add two new sentences after

the first sentence to read as follows:

§ 279.7 Action upon receipt of a request

for review.

(a) Holding action. * * * However, in

cases of permanent disqualification

under § 278.6(e)(1) of this chapter, such

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 § 279.10, the first sentence of

paragraph (a) and paragraph (d) are

revised to read as follows:

§ 279.10 Judicial review.

(a) Filing for judicial review. Except

for firms disqualified from the program

in accordance with § 278.6(e)(8) of this

chapter, a firm aggrieved by the

determination of the food stamp 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

§ 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 24, 1990.

Yvette S. Jackson,

Administrator, Food and Nutrition Service.

[FR Doc. 98–12038 Filed 5–5–98; 8:45 am]

BILLING CODE 3410–30–U

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Parts 1710 and 1714

Prioritizing the Queue for Hardship

Rate and Municipal Rate Loans to

Electric Borrowers

AGENCY: Rural Utilities Service,

Agriculture.

ACTION: Extension of public comment

period.

SUMMARY: On April 8, 1998, the Rural

Utilities Service (RUS) published in the

Federal Register an Advanced Notice of

Proposed Rulemaking for Prioritizing

the Queue for Hardship Rate and

Municipal Rate Loans to Electric

Borrowers. RUS wishes to extend the

comment period for this proposed rule.

The RUS makes hardship rate and

municipal rate loans to electric

borrowers who meet certain statutory

requirements. All applicants from

borrowers for these loans are usually

considered for approval on a first-come

first-served basis. RUS now has a

significant shortfall between the total

dollar amount of qualified applicants

and loan authority for both hardship

rate and municipal rate loans. This

shortfall has resulted in long waits in

the queues for loan approval. RUS is

considering making changes to its

administrative procedures to prioritize

the applications for hardship rate and

municipal rate loans, separately, in

order to offer these loans to borrowers

in greater need of assistance before

offering them to other borrowers in the

loan queues.

DATES: The date by which written

comments must arrive at the address

given below is extended from May 8,

1998, to June 8, 1998.

ADDRESSES: Submit written comments

to F. Lamont Heppe, Jr., Director,

Program Development and Regulatory

Analysis, U.S. Department of

Agriculture, Rural Utilities Service, Stop

1522, 1400 Independence Avenue, SW,

Washington, D.C. 20250–1522. RUS

requires, in hard copy, a signed original

and 3 copies of all comments (7 CFR

1700.4(e)). Comments will be available

for public inspection during regular

business hours (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Alex

M. Cockey, Jr., Deputy Assistant

Administrator-Electric Program, U.S.

Department of Agriculture, Rural

Utilities Service, Stop 1560, 1400

Independence Avenue, SW.,

Washington, D.C. 20250–1560.

Telephone: 202–720–9545. FAX: 202–

690–0717.

Blaine C. Stockton,

Acting Administrator, Rural Utilities Service.

[FR Doc. 98–11995 Filed 5–5–98; 8:45 am]

BILLING CODE 3410–15–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Airspace Docket No. 98–AEA–02]

Proposed Amendment to Class E

Airspace; Philadelphia, PA

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking.

SUMMARY: This notice proposes to

amend the Class E airspace area at

Philadelphia, PA. The amendment of a

Standard Instrument Approach

Procedure (SIAP) based on an

Instrument Landing System (ILS) at

Philadephia International Airport has

made this proposal necessary.

Additional controlled airspace

extending upward from 700 feet Above

Ground Level (AGL) is needed to

accommodate the SIAP and for

Instrument Flight Rules (IFR) operations

at the airport.

DATES: Comments must be received on

or before June 5, 1998.

ADDRESSES: Send comments on the

proposal in triplicate to: Manager,

Airspace Branch, AEA–520, Docket No.

98–AEA–02, F.A.A. Eastern Region,

Federal Building #111, John. F. Kennedy

Int’l Airport, Jamaica, NY 11430.

The official docket may be examined

in the Office of the Regional Counsel,

AEA–7, F.A.A. Eastern Region, Federal

Building #111, John F. Kennedy

International Airport, Jamaica, New

York 11430.