30440 Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Proposed Rules

95–541, as amended by the Antarctic

Science, Tourism and Conservation Act

of 1996, Public Law 104–227, and

Article 15 of the Protocol on

Environmental Protection to the

Antarctic Treaty done at Madrid on

October 4, 1991. Specifically, this part

is designed to ensure that non-U.S.

flagged vessels supporting nongovernmental expeditions to Antarctica

will have appropriate emergency

response plans. This part is also

designed to ensure that expedition

members are informed of their

environmental protection obligations

under the Antarctic Conservation Act.

§ 673.2 Scope.

The requirements in this part apply to

non-governmental expeditions to or

within the Antarctic Treaty area for

which the United States is required to

give advance notice under Paragraph (5)

of Article VII of the Antarctic Treaty.

§ 673.3 Definitions.

In this part:

Antarctica means the area south of 60

degrees south latitude

Expedition means an activity

undertaken by one or more

nongovernmental persons organized

within or proceeding from the United

States to or within the Antarctic Treaty

area for which advance notification is

required under Paragraph 5 of Article

VII of the Antarctic Treaty.

Person has the meaning given that

term in section 1 of title 1, United States

Code, and includes any person subject

to the jurisdiction of the United States

except that the term does not include

any department, agency, or other

instrumentality of the Federal

Government.

§ 673.4 Environmental protection

information.

(a) Any person organizing a nongovernmental expedition to or within

Antarctica and who does business in the

United States shall notify expedition

members of the environmental

protection obligations of the Antarctic

Conservation Act. Upon request by the

National Science Foundation, the

person organizing such an expedition

shall provide the National Science

Foundation Office of Polar Programs

with copies of materials used to meet

this notification obligation.

(b) The National Science Foundation

Office of Polar Programs may prepare

for publication and distribution

explanation of the prohibited acts set

forth in the Antarctic Conservation Act,

as well as other appropriate educational

material for tour operators, their clients,

and employees. Such material provided

to tour operators for distribution to their

passengers and crew shall be

disseminated prior to or during travel to

the Antarctic.

§ 673.5 Emergency response plan.

Any person organizing an expedition

to or within Antarctica who is

transporting passengers aboard a nonU.S. flagged vessel shall ensure that:

(a) The vessel owner’s or operator’s

shipboard oil pollution emergency plan,

prepared and maintained according to

Regulation 26 of Annex I of the

International Convention for the

Prevention of Pollution from Ships,

1973, as modified by the Protocol of

1978 relating thereto (MARPOL 73/78),

has provisions for prompt and effective

response action to such emergencies as

might arise in the performance of the

vessel’s activities in Antarctica. If the

vessel owner or operator does not have

a shipboard oil pollution emergency

plan, a separate plan for prompt and

effective response action is required.

(b) The vessel owner or operator

agrees to take all reasonable measures to

implement the plan for a prompt and

effective response action in the event of

an emergency, taking into account

considerations of risk to human life and

safety.

[FR Doc. 98–14779 Filed 6–3–98; 8:45 am]

BILLING CODE 7555–01–P

LEGAL SERVICES CORPORATION

45 CFR Parts 1606 and 1625

Termination and Debarment

Procedures; Recompetition Denial of

Refunding

AGENCY: Legal Services Corporation.

ACTION: Proposed rule.

SUMMARY: This proposed rule would

remove the Corporation’s rule on denial

of refunding from the Code of Federal

Regulations and substantially revise the

Corporation’s rule governing the

termination of financial assistance.

These revisions are intended to

implement major changes in the law

governing how the Corporation deals

with post-award grant disputes. The

proposed termination rule also adds

new provisions authorizing the

Corporation to recompete service areas

and to debar recipients for good cause

from receiving additional awards of

financial assistance.

DATES: Comments should be received on

or before August 3, 1998.

ADDRESSES: Comments should be

submitted to the Office of the General

Counsel, Legal Services Corporation,

750 First St. NE., 11th Floor,

Washington, DC 20002–4250.

FOR FURTHER INFORMATION CONTACT:

Office of the General Counsel, 202–336–

8817.

SUPPLEMENTARY INFORMATION: The

Operations and Regulations Committee

(Committee) of the Legal Services

Corporation’s (LSC) Board of Directors

(Board) met on April 5, 1998, in

Phoenix, Arizona, to consider proposed

revisions to the Corporation’s rules

governing procedures for the

termination of funding, 45 CFR part

1606, and denial of refunding, 45 CFR

part 1625. The Committee made several

changes to the draft rule and adopted

this proposed rule for publication in the

Federal Register for public comment.

This proposed rule is intended to

implement major changes in the law

governing how the Corporation deals

with post-award grant disputes.

Prior to 1996, LSC recipients could

not be denied refunding, nor could their

funding be suspended or their grants

terminated, unless the Corporation

complied with sections 1007(a)(9) and

1011 of the LSC Act, 42 U.S.C. 2996 et

seq., as amended. For suspensions, the

Corporation could not suspend financial

assistance unless the recipient had been

provided reasonable notice and an

opportunity to show cause why the

action should not be taken. For

terminations and denials of refunding,

the Corporation was required to provide

the opportunity for a ‘‘timely, full and

fair hearing’’ before an independent

hearing examiner.

In 1996, the Corporation implemented

a system of competition for grants that

ended a recipient’s right to yearly

refunding. Under the competition

system, grants are now awarded for

specific terms, and, at the end of a grant

term, a recipient has no right to

refunding and must reapply as a

competitive applicant for a new grant.

Accordingly, this rule proposes to

remove 45 CFR part 1625, the

Corporation’s regulation on the denial of

refunding, from the Code of Federal

Regulations as no longer consistent with

applicable law.

The FY 1998 appropriations act made

additional changes to the law affecting

LSC recipients’ rights to continued

funding. See Pub. L. 105–119, 111 Stat.

2440 (1997). Section 504 provides

authority for the Corporation to debar a

recipient from receiving future grant

awards upon a showing of good cause.

Section 501(c) authorizes the

Corporation to recompete a service area

when a recipient’s financial assistance

has been terminated. Finally, section

501(b) of the appropriations act
Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Proposed Rules 30441

provides that the hearing rights

prescribed by sections 1007(a)(9) and

1011 are no longer applicable to the

provision, denial, suspension, or

termination of financial assistance to

recipients. This proposed rule

implements section 501(b) as it applies

to terminations and denials of

refunding. Also in this publication of

the Federal Register is a related

proposed rule, 45 CFR part 1623, which

sets out new proposed policies and

procedures for the suspension of

financial assistance to recipients.

The change in the law on hearing

rights does not mean that grant

recipients have no rights to a hearing

before the Corporation may terminate

funding or debar a recipient. Sections

501(b) and 501(c) of the FY 1998

appropriations act require the

Corporation to provide a recipient with

‘‘notice and an opportunity for the

recipient to be heard’’ before it can

terminate a grant or debar a recipient

from future grants. In addition,

constitutional due process generally

requires that a discretionary grant

recipient is entitled to ‘‘some type of

notice’’ and ‘‘some type of hearing’’

before its grant funding can be

suspended or terminated during the

term of the grant period. Stein,

Administrative Law at § 53.05(4).

However, the new law in the

appropriations act emphasizes a

congressional intent to strengthen the

ability of the Corporation to ensure that

recipients are in full compliance with

the LSC Act and regulations and other

applicable law. See H. Rep. No. 207,

105th. Cong., 1st Sess. 140 (1997).

Accordingly, under this proposed rule,

the hearing procedures in part 1606

have been streamlined. The changes are

intended to emphasize the seriousness

with which the Corporation takes its

obligation to ensure that recipients

comply with the terms of their grants

and provide quality legal assistance. At

the same time, the Corporation intends

that recipients be provided notice and a

fair opportunity to be heard before any

termination or debarment action is

taken.

Section-by-Section Analysis

Section 1606.1 Purpose

One purpose of this proposed rule is

to ensure that the Corporation is able to

terminate grants or debar recipients

from receipt of future grants in a timely

and efficient manner when necessary as

part of its ongoing effort and obligation

to ensure compliance by recipients with

the terms of their LSC grants or

contracts. Another purpose of the rule is

to ensure that scarce LSC funds are

provided to recipients who can provide

the most effective and economical legal

assistance to the poor. Finally, the rule

is also intended to ensure that a

recipient is provided notice and an

opportunity to be heard before it may be

debarred or before its grant may be

terminated by the Corporation.

Section 1606.2 Definitions

Paragraph (a) of this section defines

‘‘debarment’’ as an action to prohibit a

recipient from receiving another grant

award from the Corporation or from

entering into a future agreement with

another recipient for LSC funds. Thus,

for the period of time stated in the

debarment decision, a recipient would

not be permitted to participate in future

competitions for LSC grants or

contracts. Nor could the recipient enter

into any future subgrant, subcontract or

similar agreement for LSC funds with

another recipient. The proposed

definition is similar to those used in

various Federal agency debarment

regulations.

Paragraph (b) defines ‘‘recipient’’ as

any grantee or contractor receiving

funds from the Corporation under

1006(a)(1)(A) of the LSC Act. This

provision in the Act generally refers to

recipients who provide direct legal

assistance to eligible clients.

Paragraph (c) defines ‘‘termination.’’

A termination is a permanent reduction

of funding, as opposed to a temporary

withholding of funds under a

suspension. When funds are suspended,

they are returned to the recipient at the

end of the suspension period, either

because the problem has been or is in

the process of being cured, or the

Corporation initiates a termination

process. In a termination, the funds

taken or withheld by the Corporation

are not returned to the recipient at a

later date.

A termination may be ‘‘in whole or in

part.’’ A termination ‘‘in whole’’ means

that the recipient’s grant with the

Corporation is completely terminated

and the recipient is no longer a grantee

of the Corporation, at least for the grant

that was terminated. A partial

termination or a termination ‘‘in part’’

means that only a percentage of the

recipient’s grant with the Corporation is

terminated. The recipient is still a

grantee of the Corporation but receives

less funding under the grant. The

definition of termination also includes

language that clarifies that partial

terminations will reduce only the

amount of the recipient’s current year’s

funding, unless the Corporation

provides otherwise in the final

termination decision.

The definition is not intended to

suggest that a partial termination affects

the amount of funding required by

statute to be allocated to the affected

recipient’s service area. The

Corporation’s appropriations act

requires that funding be provided to

service areas according to a prescribed

formula. Pursuant to that formula, a

specific grant amount is awarded to a

recipient pursuant to the Corporation’s

competition process. However, this does

not mean that the Corporation cannot

recover funds awarded under a grant

when it sanctions a recipient for cause.

The legislative history of the funding

provision makes it clear that the

Corporation may withhold or recover

grant funds for good cause. When funds

are recovered, they may be

reprogrammed and used for similar

purposes, according to relevant law and

Corporation policy. Comments are

requested on whether substantial

recoveries should be applied to the

same service areas.

Paragraphs (c) (1) through (4) clarify

what is not intended to be included

within the definition of termination.

Paragraph (c)(1) provides that a

reduction or rescission of a recipient’s

funding required by law is not a

termination for the purposes of this part.

For example, in 1995, the Corporation

was required to reduce and rescind its

recipients’ funding pursuant to

Congressional legislation that rescinded

the amount of appropriations for

Corporation grants and required the

termination of a category of recipients.

Subparagraphs (c)(2) and (c)(3) provide

that a recovery of funds pursuant to

§ 1630.9(b) of the Corporation’s

regulations on costs standards and

procedures or § 1628.3(c) of the

Corporation’s rule on fund balances

does not constitute a termination.

Finally, paragraph (c)(4) provides that

a reduction of funding of less than 5

percent of a recipient’s current annual

level of financial assistance does not

constitute a termination. Administrative

hearings are costly and time-consuming

for all parties involved. For certain

compliance problems, the Corporation

may wish to utilize lesser sanctions than

suspensions and terminations. The

Committee noted that the Corporation

should promulgate regulations setting

out standards and procedures for

applying lesser sanctions before such

actions may be taken by the

Corporation. The use of lesser sanctions

is consistent with the Corporation’s

rules on denials of refunding in which

a denial of refunding did not include a

reduction of 10 percent or less of a

recipient’s annual funding level. The

notion that minor reductions do not
30442 Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Proposed Rules

necessarily warrant elaborate hearings

has been implicit in LSC’s rules since

the establishment of the Corporation

and, indeed, is traceable to the rules of

LSC’s antecedent organization, the

Office of Economic Opportunity (OEO)

which defined a denial of refunding as

a reduction of 20 percent or more of a

grant. See 48 FR 54196 (Nov. 30, 1983).

OEO’s denial of a hearing for cases

covering funding reductions of less than

20 percent was specifically upheld.

Economic Opportunity Commission of

Nassau County v. Weinberger, 524 F.2d

393 (2d Cir. 1975). Part 1618, the

Corporation’s regulations on

enforcement procedures, has long

provided that, in addition to the

statutory defunding remedies, the

Corporation ‘‘may take other action to

enforce compliance with the Act.’’ See

§ 1618.5(b).

The Committee specifically seeks

input on the legal and practical effects

of including this provision in the rule

and, if included, whether the

provision’s 5 percent is the appropriate

cutoff and whether a dollar amount

should also be included.

Section 1606.3 Grounds for a

Termination

This section sets out the grounds for

a termination. Paragraph (a)(1) permits

termination for a substantial violation

by a recipient of applicable law or the

terms or conditions of its grant with the

Corporation. This provision has been

carried over from the current rule,

except that the proposed provision no

longer provides the recipient with a

right to take corrective action before the

Corporation may terminate its grant. A

recipient that has substantially violated

the terms of its grant with the

Corporation is not entitled to a second

chance as a matter of right. If the

Corporation identifies a compliance

problem with a recipient that has the

potential for easy correction pursuant to

a corrective action plan, the Corporation

already has discretion to require a

recipient to take corrective action. In

addition, paragraph (b)(4) provides that,

in determining if there has been a

substantial violation that warrants

initiation of procedures under this part,

the Corporation will consider whether a

recipient has failed to take appropriate

and adequate steps to cure the problem

when it became aware of a violation.

Paragraph (b) of this section proposes

criteria for the Corporation to consider

to determine whether there has been a

‘‘substantial violation’’ under paragraph

(a)(2). The current rules on termination

and denial of refunding include two

different undefined standards.

Terminations are undertaken for

substantial violations and denial of

refunding for significant violations.

There has been some confusion over the

years about the scope of the meaning of

the two standards.

The proposed criteria include the

consideration of whether the violation

was intentional, the importance of the

restriction or requirement violated, and

whether the violation is of a serious

nature rather than merely technical or

minor. The Corporation will also

consider whether the immediate

problem is part of a history of violations

by the recipient and whether the

recipient took appropriate action to

correct the problem when it became

aware of the violation. These criteria

would permit the Corporation to take

action, for example, for a single serious

violation. The fifth criterion permits the

Corporation to consider whether the

violation was intentional. Although the

Committee included this criterion in the

proposed rule, it requests public

comment on whether other standards

would be more appropriate; for

example, whether the recipient

‘‘knowingly and willfully’’ committed

the violation.

The current rule expressly states that

action will be taken against a recipient

only for a substantial violation that

occurred at a time when the law

violated by the recipient was in effect.

This proposed rule deletes such

language as unnecessary. Retroactive

application of law is strongly disfavored

in the law, and the Corporation may not

sanction recipients for violations of a

law that was not in effect at the time of

the violation. Paragraph (a)(2) includes

as a ground for termination the

substantial failure of the recipient to

provide high quality, economical, and

effective legal assistance. This provision

is in the current rule. Although the

competition process provides another

method for making quality judgments

about and weeding out recipients that

perform poorly, this provision is

retained so that the Corporation may act

when necessary during the term of a

grant or contract to terminate a recipient

that has substantially failed to provide

high quality, economical, and effective

legal assistance. The Committee

requests public comment on what

standards should be considered by the

Corporation to determine whether there

has been a substantial failure of a

recipient to provide such legal

assistance.

Section 1606.4 Grounds for Debarment

Section 504 of the Corporation’s FY

1998 appropriations act provides

authority for the Corporation to debar a

recipient from receiving future grant

awards upon a showing of good cause.

Debarments are common in the Federal

government for both procurement

contracts and assistance grants. Causes

for debarment range from debarments

for fraud, embezzlement, and false

claims, to debarments for a Federal

grantee’s longstanding unsatisfactory

performance or the failure to pay a

substantial debt owed to the Federal

government. Principles of Federal

Appropriations Law at 10–28, United

States Government Accounting Office

(GAO); Grants Management Advisory

Service at section 558 (1995).

The grounds for debarment of an LSC

grantee implement section 501(c) of the

Corporation’s appropriations act and are

set out in paragraph (b) of this section.

They include a termination of a

recipient for violations of Federal law

related to the use of Federal funds, such

as law on fraud, bribery, or false claims

against the government; or substantial

violations by a recipient of the terms of

its grant with the Corporation. Also,

similar to Federal practice, recipients

may also be debarred for knowingly

entering into any subgrant or similar

agreement with an entity debarred by

the Corporation.

Section 1606.4(a)(5) permits the

Corporation to debar a recipient if the

recipient seeks judicial review of an

agency action taken under any

Federally-funded program for which the

recipient receives Federal funds and

applies regardless of the source of

funding used by the recipient for the

litigation. This provision applies when

the recipient files a lawsuit on behalf of

the recipient and the lawsuit is related

to a program for which the recipient

receives Federal funds. It does not apply

when the recipient files a lawsuit on

behalf of a client of the recipient which

seeks judicial review of an agency

action that affected the client.

Section 1606.5 Termination and

Debarment Procedures

This section states the due process

requirement that, before a recipient’s

grant or contract may be terminated or

a recipient may be debarred, it will be

provided notice and an opportunity to

be heard according to the procedures in

this part.

Section 1606.6 Proposed Decision

This section sets out the requirements

for providing notice to the recipient of

the Corporation’s proposed decision to

terminate a recipient’s funding or to

debar a recipient. Under this section the

Corporation may simultaneously take

action to terminate and debar a recipient

in the same proceeding.
Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Proposed Rules 30443

The notice of the proposed decision is

required by paragraph (a) of this section

to be in writing and must provide the

grounds for termination or debarment in

a manner sufficiently detailed to inform

the recipient of the charges against it,

the legal and factual bases of the

charges, and the proposed sanctions.

Paragraph (b) requires that the recipient

be told of its right to request an informal

conference and a hearing. Paragraph (c)

sets out the circumstances when a

proposed decision becomes final.

Section 1606.7 Informal Conference

This section is generally the same as

§ 1606.5 in the current rule, but has

been renumbered and restructured for

clarity and ease of use. It allows the

Corporation and recipient to have an

informal conference to either resolve the

matter at issue through compromise or

settlement or to narrow the issues and

share information so that any

subsequent hearing might be rendered

shorter or less complicated. Language in

the current rule stating that the

preliminary conference may be

adjourned for deliberation or

consultation is proposed to be deleted

as unnecessary. Nothing in this section

requires that the conference must be

completed under any particular time

frame and, indeed, the language in this

section emphasizes the informality of

the conference, thus providing the

Corporation a large measure of

discretion in determining how the

conference will be conducted.

This proposed rule has also

eliminated the provisions providing a

right for the recipient or the Corporation

to request a pre-hearing conference. The

intent is to simplify and shorten the

hearing procedures available for

terminations. The informal conference

section already provides an opportunity

for the parties in the dispute to narrow

and define issues and to determine

whether compromise or settlement is

possible.

Section 1606.8 Hearing

This section delineates the procedures

for the due process hearing that will be

provided to a recipient before it may be

debarred or before its grant may be

terminated. It has been simplified from

the process in the current rule by

deleting unnecessary provisions and

provisions permitting third party

participation in the hearing. The

deletion is not intended to mean that

third parties may never participate in a

hearing. However, the proposed rule

would no longer provide a recipient

with the right to demand such

participation.

Paragraph (c) provides for an

impartial hearing officer who will be

appointed by the President or designee.

Reference to a designee is included

because, occasionally, the President

may be disqualified from choosing a

hearing officer. Delegation would be

appropriate, for example, if the

President has had prior involvement in

the matter under consideration.

Under the current rule, which was

promulgated to implement section 1011

of the LSC Act, an independent hearing

examiner was required to preside over

the hearing. The independent hearing

examiner was required to be someone

who was not employed by the

Corporation or who did not perform

duties within the Corporation. Because

section 1011 no longer applies to

hearing procedures under this part,

recipients no longer have a right to an

independent hearing examiner.

Constitutional due process, however,

requires that, before funding for a

recipient of Federal grants may be

terminated during the grant term, the

recipient must be provided a hearing

before an impartial decision maker.

Stein, Administrative Law at § 53.05(4).

An impartial decision maker may be an

employee of the Corporation as long as

that employee has not prejudged the

adjudicative facts and has no pecuniary

interest or personal bias in the decision.

Id.; Spokane County Legal Services v.

Legal Services Corporation, 614 F. 2d

662, 667–668 (9th Cir. 1980). See also,

M. Asinow, When the Curtain Falls:

Separation of Functions in the Federal

Administrative Agencies, 81 Columbia

Law Review 759, 782 (1981). In order to

ensure against such prejudgment, this

rule requires that a hearing officer be a

person who has not been involved in

the pending action.

The Corporation has the burden of

proof under the current rule. This

proposed section places the burden on

the recipient. It is the intent of these

procedures that the Corporation not

make a prejudgment before the hearing.

Rather, when it has reason to believe

that grounds exist for a termination or

debarment, it issues a proposed decision

and the recipient then has the burden to

show why the Corporation should not

take the action it proposes. The

Committee has asked for comments on

whether the language in this proposed

rule adequately reflects that intent. The

change is also intended to reflect the

emphasis in current law on

strengthening the Corporation’s ability

to sanction recipients and to recompete

service areas. See H. Rep. No. 207, 105th

Cong., 1st Sess. 140 (1997).

Section 1606.9 Recommended

Decision

Only minor changes have been made

to this section, which sets out the

requirements for the recommended

decision issued by the hearing officer.

Section 1606.10 Final Decision

Mostly technical revisions are made

to this section, which delineates the

process by which a party to the

termination proceeding may request a

review of the recommended decision by

the President. Language has been added,

however, requiring that the President’s

review be based solely on the record of

the hearing below and any additional

submissions requested by the President.

A decision by the President is a final

decision.

Section 1606.11 Qualifications on

Hearing Procedures

It is the intent of this section to clarify

that, if a recipient has already been

provided a termination hearing on the

underlying grounds for the debarment,

the recipient is not due a second

termination hearing under this part.

Rather, the recipient will be given a

brief review process set out in paragraph

(b) of this section. In many cases, the

Corporation may utilize the procedure

delineated in paragraph (a) of this

section, which permits the Corporation

to simultaneously take action to

terminate and debar a recipient within

the same hearing procedure. In any

debarment action where the recipient

has not already been provided a

termination hearing, the recipient will

be provided the same hearing

procedures set out in this rule for

terminations.

Paragraph (d) permits the Corporation

to reverse a debarment decision if there

has been a reversal of the conviction or

civil judgment upon which the

debarment was based, new material

evidence has been discovered, there has

been a bona fide change in the

ownership or management of the

recipient, the causes for the debarment

have been eliminated, or for other

reasons the Corporation finds

appropriate. This paragraph is patterned

after Federal debarment regulations.

See, e.g., 29 CFR 1471.320. Paragraph

(d)(2) takes account of reversals of

convictions for violations of Federal law

under part 1640.

Section 1606.12 Time and Waiver

With two exceptions, this paragraph

is essentially the same as in the current

rule. Paragraph (b) in the current rule is

deleted in this proposed rule, because it

implemented a time limit to the

proceedings required under law that no
30444 Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Proposed Rules

longer has effect. Also, paragraph (c) in

the current rule is not included, because

it provides for the waiver or

modification of any provision in this

part. Such a sweeping waiver provision

has the potential to undo the due

process rights of recipients that are

required under the Constitution. The

rule already provides sufficient

discretion and flexibility.

Section 1606.13 Interim Funding

This section requires the Corporation

to continue funding the recipient at its

current level until the termination

proceeding set out in this part is

completed. This is consistent with the

current rule and the due process

requirement that funding not be

terminated until a fair hearing has been

provided.

Paragraph (b) provides that a failure of

the Corporation to meet a time

requirement does not preclude the

Corporation from terminating funding or

debarring a recipient from receiving

additional funding. See Brock v. Pierce

County, 476 U.S. 253 (1986).

Section 1606.14 Recompetition

This section replaces the section in

the current rule on termination funding.

Section 501(c) of Public Law 105–119

authorizes the Corporation to recompete

a service area when a recipient’s

financial assistance has been terminated

after notice and an opportunity to be

heard. Accordingly, this section

authorizes the Corporation to recompete

any service area where a final decision

has been made under this part to

terminate in whole a recipient’s grant

for any service area. It also provides that

until a new recipient has been awarded

a grant for the service area pursuant to

the competition process, the

Corporation shall take all practical steps

to ensure the continued provision of

legal assistance in the service area

pursuant to § 1634.11 of the

Corporation’s rule on competition

procedures.

List of Subjects in 45 CFR Part 1606

Administrative practice and

procedures, Legal services.

For reasons set out in the preamble,

LSC proposes to revise 45 CFR part 1606

to read as follows:

PART 1606—TERMINATION AND

DEBARMENT PROCEDURES;

RECOMPETITION

Sec.

1606.1 Purpose.

1606.2 Definitions.

1606.3 Grounds for a termination.

1606.4 Grounds for debarment.

1606.5 Termination and debarment

procedures.

1606.6 Proposed decision.

1606.7 Informal conference.

1606.8 Hearing.

1606.9 Recommended decision.

1606.10 Final decision.

1606.11 Qualifications on hearing

procedures.

1606.12 Time and waiver.

1606.13 Interim funding.

1606.14 Recompetition.

Authority: 42 U.S.C. 2996e (b)(1) and

2996f(a)(3); Pub. L. 105–119, 111 Stat. 2440,

Secs. 501(b) and (c) and 504; Pub. L. 104–

134, 110 Stat. 1321.

§ 1606.1 Purpose.

The purpose of this rule is to:

(a) Ensure that the Corporation is able

to take timely action to deal with

incidents of substantial noncompliance

by recipients with a provision of the

LSC Act, the Corporation’s

appropriations act or other law

applicable to LSC funds, a Corporation

rule, regulation, guideline or

instruction, or the terms and conditions

of the recipient’s grant or contract with

the Corporation;

(b) Provide timely and fair due

process procedures when the

Corporation has made a preliminary

decision to terminate a recipient’s LSC

grant or contract, or to debar a recipient

from receiving future LSC awards of

financial assistance; and

(c) Ensure that scarce funds are

provided to recipients who can provide

the most effective and economical legal

assistance to eligible clients.

§ 1606.2 Definitions.

For the purposes of this part:

(a) Debarment means an action taken

by the Corporation to exclude a

recipient from receiving an additional

award of financial assistance from the

Corporation or from receiving additional

LSC funds from another recipient of the

Corporation pursuant to a subgrant,

subcontract or similar agreement, for the

period of time stated in the final

debarment decision.

(b) Recipient means any grantee or

contractor receiving financial assistance

from the Corporation under section

1006(a)(1)(A) of the LSC Act.

(c)(1) Termination means that a

recipient’s level of financial assistance

under its grant or contract with the

Corporation will be permanently

reduced in whole or in part prior to the

expiration of the term of a recipient’s

current grant or contract. A partial

termination will affect only the

recipient’s current year’s funding,

unless the Corporation provides

otherwise in the final termination

decision.

(2) A termination does not include:

(i) A reduction of funding required by

law, including a reduction in or

rescission of the Corporation’s

appropriation that is apportioned among

all recipients of the same class in

proportion to their current level of

funding;

(ii) A reduction or deduction of LSC

support for a recipient under the

Corporation’s fund balance regulation at

45 CFR part 1628;

(iii) A recovery of disallowed costs

under the Corporation’s regulation on

costs standards and procedures at 45

CFR part 1630; or

(iv) A reduction of funding of less

than 5 percent of a recipient’s current

annual level of financial assistance

imposed by the Corporation as a lesser

sanction.

§ 1606.3 Grounds for a termination.

(a) A grant or contract may be

terminated when:

(1) There has been a substantial

violation by the recipient of a provision

of the LSC Act, the Corporation’s

appropriations act or other law

applicable to LSC funds, or Corporation

rule, regulation, guideline or

instruction, or a term or condition of the

recipient’s grant or contract; or

(2) There has been a substantial

failure by the recipient to provide high

quality, economical, and effective legal

assistance, as measured by generally

accepted professional standards, the

provisions of the LSC Act, or a rule,

regulation or guidance issued by the

Corporation.

(b) A determination of whether there

has been a substantial violation for the

purposes of paragraph (a)(1) of this

section will be based on consideration

of the following criteria:

(1) The importance and number of

restrictions or requirements violated;

(2) The seriousness of the violation;

(3) The extent to which the violation

is part of a pattern;

(4) The extent to which the recipient

has failed to take action to cure the

violation when it became aware of a

violation; and

(5) Whether the violation was

intentional.

(c) Paragraph (a)(1) of this section is

not applicable to any violation that

occurred more than 5 years prior to the

date the recipient receives notice of the

violation pursuant to § 1606.6(a).

§ 1606.4 Grounds for debarment.

(a) The Corporation may debar a

recipient, on a showing of good cause,

from receiving an additional award of

financial assistance from the

Corporation.
Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Proposed Rules 30445

(b) As used in paragraph (a) of this

section, ‘‘good cause’’ includes:

(1) Termination of financial assistance

of the recipient pursuant to part 1640 of

this chapter;

(2) Termination of financial assistance

in whole of the most recent grant of

financial assistance;

(3) The substantial violation by the

recipient of the restrictions delineated

in § 1610.2(a) and (b) of this chapter,

provided that the violation occurred

within 5 years prior to the receipt of the

debarment notice by the recipient;

(4) Knowing entry by the recipient

into a subgrant, subcontract, or other

similar agreement with an entity

debarred by the Corporation; or

(5) The filing of a lawsuit by a

recipient, provided that the lawsuit:

(i) Was filed on behalf of the

recipient;

(ii) Was related to a program for

which the recipient receives Federal

funds;

(iii) Named the Corporation, or any

agency or employee of a Federal, State,

or local government as a defendant; and

(iv) Was initiated after the effective

date of this rule.

§ 1606.5 Termination and debarment

procedures.

Before a recipient’s grant or contract

may be terminated or a recipient may be

debarred, the recipient will be provided

notice and an opportunity to be heard

as set out in this part.

§ 1606.6 Proposed decision.

(a) When the Corporation has made a

proposed decision that a recipient’s

grant or contract should be terminated

and/or that a recipient should be

debarred, the Corporation employee

who has been designated by the

President as the person to bring such

actions (hereinafter referred to as the

‘‘designated employee’’) shall issue a

written notice upon the recipient and

the Chairperson of the recipient’s

governing body. The notice shall:

(1) State the grounds for the proposed

action;

(2) Identify, with reasonable

specificity, any facts or documents

relied upon as justification for the

proposed action;

(3) Inform the recipient of the

proposed sanctions.

(4) Advise the recipient of its right to

request:

(i) An informal conference under

§ 1606.7; and

(ii) A hearing under § 1606.8; and

(5) Inform the recipient of its right to

receive interim funding pursuant to

§ 1606.13.

(b) If the recipient does not request

review within the time prescribed in

§ 1606.7(a) or § 1606.8(a), the proposed

determination shall become final.

§ 1606.7 Informal conference.

(a) A recipient may submit a request

for an informal conference within 30

days of its receipt of the proposed

decision.

(b) Within 5 days of receipt of the

request, the designated employee shall

notify the recipient of the time and

place the conference will be held.

(c) The designated employee shall

conduct the informal conference.

(d) At the informal conference, the

designated employee and the recipient

shall both have an opportunity to state

their case, seek to narrow the issues,

and explore the possibilities of

settlement or compromise.

(e) The designated employee may

modify, withdraw, or affirm the

proposed determination in writing, a

copy of which shall be provided to the

recipient within 10 days of the

conclusion of the informal conference.

§ 1606.8 Hearing.

(a) The recipient may make written

request for a hearing within 30 days of

its receipt of the proposed decision or

within 15 days of receipt of the written

determination issued by the designated

employee after the conclusion of the

informal conference.

(b) Within 10 days after receipt of a

request for a hearing, the Corporation

shall notify the recipient in writing of

the date, time and place of the hearing

and the names of the hearing officer and

of the attorney who will represent the

Corporation. The time, date and location

of the hearing may be changed upon

agreement of the Corporation and the

recipient.

(c) A hearing officer shall be

appointed by the President or designee

and may be an employee of the

Corporation. The hearing officer shall

not have been involved in the current

termination or debarment action and the

President or designee shall determine

that the person is qualified to preside

over the hearing as an impartial

decision maker. An impartial decision

maker is a person who has not formed

a prejudgment on the case and does not

have a pecuniary interest or personal

bias in the outcome of the proceeding.

(d) The hearing shall be scheduled to

commence at the earliest appropriate

date, ordinarily not later than 30 days

after the notice required by paragraph

(b) of this section.

(e) The hearing officer shall preside

over and conduct a full and fair hearing,

avoid delay, maintain order, and insure

that a record sufficient for full

disclosure of the facts and issues is

maintained.

(f) The hearing shall be open to the

public unless, for good cause and the

interests of justice, the hearing officer

determines otherwise.

(g) The Corporation and the recipient

shall be entitled to be represented by

counsel or by another person.

(h) At the hearing, the Corporation

and the recipient each may present its

case by oral or documentary evidence,

conduct examination and crossexamination of witnesses, examine any

documents submitted, and submit

rebuttal evidence.

(i) The hearing officer shall not be

bound by the technical rules of evidence

and may make any procedural or

evidentiary ruling that may help to

insure full disclosure of the facts, to

maintain order, or to avoid delay.

Irrelevant, immaterial, repetitious or

unduly prejudicial matter may be

excluded.

(j) Official notice may be taken of

published policies, rules, regulations,

guidelines, and instructions of the

Corporation, of any matter of which

judicial notice may be taken in a Federal

court, or of any other matter whose

existence, authenticity, or accuracy is

not open to serious question.

(k) A stenographic or electronic

record shall be made in a manner

determined by the hearing officer, and

a copy shall be made available to a party

upon payment of its cost.

(l) The recipient shall have the burden

of proof in the hearing under this

section.

§ 1606.9 Recommended decision.

(a) Within 20 calendar days after the

conclusion of the hearing, the hearing

officer shall issue a written

recommended decision which may:

(1) Terminate financial assistance to

the recipient as of a specific date; or

(2) Continue the recipient’s current

grant or contract, subject to any

modification or condition that may be

deemed necessary on the basis of

information adduced at the hearing;

and/or

(3) Debar the recipient from receiving

an additional award of financial

assistance from the Corporation.

(b) The recommended decision shall

contain findings of the significant and

relevant facts and shall state the reasons

for the decision. Findings of fact shall

be based solely on the record of, and the

evidence adduced at, the informal

conference and the hearing or on

matters of which official notice was

taken.
30446 Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Proposed Rules

§ 1606.10 Final decision.

(a) If neither the Corporation nor the

recipient requests review by the

President, a recommended decision

shall become final 10 calendar days

after receipt by the recipient.

(b) The recipient or the Corporation

may seek review by the President of a

recommended decision. A request shall

be made in writing within 10 days after

receipt of the recommended decision by

the party seeking review and shall state

in detail the reasons for seeking review.

(c) The President’s review shall be

based solely on the information in the

administrative record of the termination

or debarment proceedings and any

additional submissions, either oral or in

writing, that the President may request.

(d) As soon as practicable after receipt

of the request for review of a

recommended decision, but not later

than 30 days after the request for

review, the President may adopt,

modify, or reverse the recommended

decision, or direct further consideration

of the matter. In the event of

modification or reversal, the President’s

decision shall conform to the

requirements of § 1606.9(b).

(e) The President’s decision shall

become final upon receipt by the

recipient.

§ 1606.11 Qualifications on hearing

procedures.

(a) The Corporation may

simultaneously take action to debar and

terminate a recipient within the same

hearing procedure that is set out in

§§ 1606.6 through 1606.10 of this part.

In such a case, the same hearing officer

shall oversee both the termination and

debarment actions.

(b) If the Corporation does not

simultaneously take action to debar and

terminate a recipient under paragraph

(a) of this section and initiates a

debarment action based on a prior

termination under § 1606.4(b) (1) or (2),

the hearing procedures set out in

§ 1606.6 through 1606.10 shall not

apply. Instead:

(1) The President shall appoint a

hearing officer to review the matter and

make a written recommended decision

on debarment.

(2) The hearing officer’s

recommendation shall be based solely

on the information in the administrative

record of the termination proceedings

providing grounds for the debarment

and any additional submissions, either

oral or in writing, that the hearing

officer may request.

(3) If neither party appeals the hearing

officer’s recommendation within 10

days of receipt of the recommended

decision, the decision shall become

final.

(4) Either party may appeal the

recommended decision to the President

who shall review the matter and issue

a final written decision pursuant to

§ 1606.9(b).

(c) All final debarment decisions shall

state the effective date of the debarment

and the period of debarment, which

shall be commensurate with the

seriousness of the cause for debarment

but shall not be for longer than 6 years.

(d) The Corporation may reverse a

debarment decision upon request for the

following reasons:

(1) Newly discovered material

evidence;

(2) Reversal of the conviction or civil

judgment upon which the debarment

was based;

(3) Bona fide change in ownership or

management of a recipient;

(4) Elimination of other causes for

which the debarment was imposed; or

(5) Other reasons the Corporation

deems appropriate.

§ 1606.12 Time and waiver.

Except for the 6-year time limit for

debarments in § 1606.11(c), any period

of time provided in these rules may,

upon good cause shown and

determined, be extended:

(a) By the designated employee who

issued the proposed decision until a

hearing officer has been appointed;

(b) By the hearing officer, until the

recommended decision has been issued;

(c) By the President at any time.

§ 1606.13 Interim funding.

(a) Pending the completion of

termination proceedings under this part,

the Corporation shall provide the

recipient with the level of financial

assistance provided for under its current

grant or contract with the Corporation.

(b) Failure by the Corporation to meet

a time requirement of this part does not

preclude the Corporation from

terminating a recipient’s grant or

contract with the Corporation.

§ 1606.14 Recompetition.

After a final decision has been issued

by the Corporation terminating financial

assistance to a recipient in whole for

any service area, the Corporation shall

implement a new competitive bidding

process for the affected service area.

Until a new recipient has been awarded

a grant pursuant to such process, the

Corporation shall take all practical steps

to ensure the continued provision of

legal assistance in the service area

pursuant to § 1634.11.

PART 1625—[REMOVED AND

RESERVED]

For the reasons set out in the

preamble, and under the authority of 42

U.S.C. 2996g(e), 45 CFR part 1625 is

proposed to be removed and reserved.

Dated: May 29, 1998.

Victor M. Fortuno,

General Counsel.

[FR Doc. 98–14772 Filed 6–3–98; 8:45 am]

BILLING CODE 7050–01–P

LEGAL SERVICES CORPORATION

45 CFR Part 1623

Suspension Procedures

AGENCY: Legal Services Corporation.

ACTION: Proposed rule.

SUMMARY: This proposed rule

substantially revises the Legal Services

Corporation’s rule on procedures for the

suspension of financial assistance to

recipients to implement changes in the

law governing how the Corporation

deals with post-award grant disputes.

DATES: Comments should be received on

or before August 3, 1998.

ADDRESSES: Comments should be

submitted to the Office of the General

Counsel, Legal Services Corporation,

750 First St. NE., 11th Floor,

Washington, DC 20002–4250.

FOR FURTHER INFORMATION CONTACT:

Office of the General Counsel, 202–336–

8817.

SUPPLEMENTARY INFORMATION: The

Operations and Regulations Committee

(Committee) of the Legal Services

Corporation’s (LSC) Board of Directors

(Board) met on April 5, 1998, in

Phoenix, Arizona, to consider proposed

revisions to the Corporation’s rule on

procedures for suspending funding to

LSC recipients. The Committee made

several changes to the draft rule and

adopted this proposed rule for

publication in the Federal Register for

public comment. This proposed rule is

intended to implement major changes in

the law governing how the Corporation

deals with post-award grant disputes.

Prior to 1996, LSC recipients could

not be denied refunding, nor could their

funding be suspended or their grants

terminated, unless the Corporation

complied with sections 1007(a)(9) and

1011 of the LSC Act, 42 U.S.C. 2996 et

seq., as amended. For suspensions, the

Corporation could not suspend financial

assistance unless the recipient had been

provided reasonable notice and an

opportunity to show cause why the

action should not be taken. For

terminations and denials of refunding,