[Federal Register Volume 86, Number 120 (Friday, June 25, 2021)]
[Proposed Rules]
[Pages 33603-33612]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13085]


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NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES

National Endowment for the Humanities

45 CFR Part 1174

RIN 3136-AA36


Implementation of the Program Fraud Civil Remedies Act of 1986

AGENCY: National Endowment for the Humanities; National Foundation on 
the Arts and the Humanities.

ACTION: Proposed rule with request for comments.

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SUMMARY: The National Endowment for the Humanities (NEH) is proposing 
to issue regulations to implement the Program Fraud Civil Remedies Act 
of 1986 (PFCRA). The PFCRA authorizes certain Federal agencies, 
including NEH, to impose civil penalties and assessments through 
administrative adjudication against any person who makes, submits, or 
presents a false, fictitious, or fraudulent claim or written statement 
to NEH. The proposed rule will establish the procedures that NEH will 
follow in implementing the PFCRA, as well as specify the hearing and 
appeal rights of persons subject to penalties and assessments under the 
PFCRA.

DATES: Send comments on or before July 26, 2021.

ADDRESSES: You may send comments by email to <a href="/cdn-cgi/l/email-protection#fe999b909d918b908d9b92be909b96d0999188"><span class="__cf_email__" data-cfemail="9ff8faf1fcf0eaf1ecfaf3dff1faf7b1f8f0e9">[email protected]</span></a>.
    Instructions: Include ``3136-AA36'' in the subject line of the 
email.

FOR FURTHER INFORMATION CONTACT: Elizabeth Voyatzis, Deputy General 
Counsel, Office of the General Counsel, National Endowment for the 
Humanities, 400 7th Street SW, Room 4060, Washington, DC 20506; (202) 
606-8322; <a href="/cdn-cgi/l/email-protection#482f2d262b273d263b2d2408262d20662f273e"><span class="__cf_email__" data-cfemail="94f3f1faf7fbe1fae7f1f8d4faf1fcbaf3fbe2">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

1. Background

    In October 1986, Congress enacted the PFCRA, 31 U.S.C. 3801-3812. 
The PFCRA established an administrative remedy against any person who 
makes, or causes to be made, a false claim or written statement to 
certain Federal agencies. The PFCRA requires these Federal agencies to 
follow certain procedures in recovering penalties and assessments 
against people who file false claims or statements for which the 
liability is $150,000 or less. Initially, the PFCRA did not apply to 
NEH. Section 10 of the Inspector General Reform Act of 2008, Public Law 
110-409, 122 Stat. 4314, however, expanded the PFCRA's scope to include 
NEH.
    The PFCRA requires each covered agency to promulgate rules and 
regulations necessary to implement its provisions. Following the 
PFCRA's enactment, the President's Council on Integrity and Efficiency 
requested that the Department of Health and Human Services lead an 
inter-agency task force to develop model PFCRA regulations. This action 
was in keeping with the Senate Governmental Affairs Committee's desire 
that ``the regulations would be substantially similar throughout the 
government'' (S. Rep. No. 99-212, 99th Cong., 1st Sess. 12 (1985)). The 
Council recommended that all covered agencies adopt the model rule.
    Accordingly, NEH is implementing the PFCRA's provisions through 
this proposed rule--which substantively conforms to the model rule--in 
order to establish procedures by which NEH will seek to recover 
penalties and assessments against persons who file, or cause to have 
filed, false claims or statements with NEH for which liability is 
$150,000 or less.

2. Maximum Penalty Amount

    The PFCRA established a maximum penalty of $5,000 for each 
violation. The Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015 (the 2015 Act), 28 U.S.C. 2461 note, required 
all Federal agencies to (1) adjust the penalty amount to 2016 inflation 
levels with an initial ``catch-up'' inflation adjustment; and (2) make 
subsequent annual adjustments for inflation.\1\ This proposed rule 
incorporates the initial ``catch-up'' adjustment to 2016 inflation 
levels and the annual adjustments for 2017 through 2021, and applies 
those adjustments cumulatively to the civil monetary penalties that the 
PFCRA imposes.\2\
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    \1\ For a more detailed explanation of the 2015 Act and the 
civil monetary penalty inflation adjustment calculations that it 
requires, see NEH's regulation implementing the 2015 Act at 85 FR 
35566.
    \2\ Table 1 details the annual adjustments to the PFCRA maximum 
penalty amount for years 2016-2021.
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A. Initial ``Catch-Up'' and 2021 Adjustments for Inflation

    NEH determined the first ``catch-up'' adjustment to 2016 inflation 
levels using the formula set forth in the 2015 Act. Specifically, NEH 
calculated the percent change between the Consumer Price Index for all 
Urban Consumers (CPI-U) for October of the last year in which Congress 
adjusted the PFCRA civil penalties (October 1986) and the CPI-U for 
October 2015, and then rounded to the nearest dollar.
    NEH similarly determined each subsequent annual adjustment by 
calculating the percent increase between the CPI-U for the month of 
October preceding the date of the adjustment and the CPI-U for the 
October one year prior to the October immediately preceding the date of 
the adjustment.
    Table 1, below, details the above calculations.

                    Table 1--Annual Adjustments to PFCRA Civil Monetary Penalties, 2016-2021
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                                                                                    Applicable
                                                                                    multiplier
                                                                     Baseline        based on      New baseline
                         Effective date                               maximum         percent         maximum
                                                                      penalty       increase in       penalty
                                                                                       CPI-U
----------------------------------------------------------------------------------------------------------------
August 1, 2016..................................................          $5,000     \3\ 2.15628         $10,781
January 15, 2017................................................          10,781     \4\ 1.01636          10,957
January 15, 2018................................................          10,957     \5\ 1.02041          11,181
January 15, 2019................................................          11,181     \6\ 1.02522          11,463
January 15, 2020................................................          11,463     \7\ 1.01764          11,665

[[Page 33604]]

 
January 15, 2021................................................          11,665     \8\ 1.01182          11,803
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B. Future Annual Adjustments
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    \3\ Office of Management and Budget, Memorandum M-16-06 
(February 24, 2016).
    \4\ Office of Management and Budget, Memorandum M-17-11 
(December 16, 2016).
    \5\ Office of Management and Budget, Memorandum M-18-03 
(December 15, 2017).
    \6\ Office of Management and Budget, Memorandum M-19-04 
(December 14, 2018).
    \7\ Office of Management and Budget, Memorandum M-20-05 
(December 16, 2019).
    \8\ Office of Management and Budget, Memorandum M-21-10 
(December 23, 2020).
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    The 2015 Act requires agencies to make annual adjustments to civil 
penalty amounts no later than January 15 of each year following the 
initial adjustment. NEH will calculate future annual adjustments using 
the same method as the adjustments previously described herein. If the 
CPI-U does not increase, then the civil penalties remain the same.
    NEH will publish a Notice in the Federal Register containing the 
amount of these annual inflation adjustments no later than January 15 
of each year.

Request for Comments

    NEH requests comments, which NEH must receive at the above address, 
by the above date.

Executive Order 12866, Regulatory Planning and Review, and Executive 
Order 13563, Improving Regulation and Regulatory Review

    This action is not a significant regulatory action and was 
therefore not submitted to the Office of Management and Budget for 
review.

Executive Order 13132, Federalism

    This rulemaking does not have federalism implications. It will not 
have substantial direct effects on the states, on the relationship 
between the national government and the states, or on the distribution 
of power and responsibilities among the various levels of government.

Executive Order 12988, Civil Justice Reform

    This rulemaking meets the applicable standards set forth in section 
3(a) and 3(b)(2) of Executive Order 12988. Specifically, this 
rulemaking is written in clear language designed to help reduce 
litigation.

Executive Order 13175, Indian Tribal Governments

    Under the criteria in Executive Order 13175, NEH evaluated this 
rulemaking and determined that it will not have any potential effects 
on Federally recognized Indian Tribes.

Executive Order 12630, Takings

    Under the criteria in Executive Order 12630, this rulemaking does 
not have significant takings implications. Therefore, a takings 
implication assessment is not required.

Regulatory Flexibility Act of 1980

    This rulemaking will not have a significant adverse impact on a 
substantial number of small entities, including small businesses, small 
governmental jurisdictions, or certain small not-for-profit 
organizations.

Paperwork Reduction Act of 1995

    This rulemaking does not impose an information collection burden 
under the Paperwork Reduction Act. This action contains no provisions 
constituting a collection of information pursuant to the Paperwork 
Reduction Act.

Unfunded Mandates Reform Act of 1995

    This rulemaking does not contain a Federal mandate that will result 
in the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector of $100 million or more in any one 
year.

National Environmental Policy Act of 1969

    This rulemaking will not have a significant effect on the human 
environment.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rulemaking will not be a major rule as defined in section 804 
of the Small Business Regulatory Enforcement Fairness Act of 1996. This 
rulemaking will not result in an annual effect on the economy of $100 
million or more, a major increase in costs or prices, significant 
adverse effects on competition, employment, investment, productivity, 
innovation, or the ability of United States-based companies to compete 
with foreign-based companies in domestic and export markets.

E-Government Act of 2002

    All information about NEH required to be published in the Federal 
Register may be accessed at www.neh.gov. The website 
www.regulations.gov contains electronic dockets for NEH's rulemakings 
under the Administrative Procedure Act of 1946.

Plain Writing Act of 2010

    To ensure this proposed rule speaks in plain and clear language so 
that the public can use and understand it, NEH modeled the language of 
the proposed rule on the Federal Plain Language Guidelines.

List of Subjects in 45 CFR 1174

    Claims, Fraud, Penalties.

0
 For the reasons set forth in the preamble, the National Endowment for 
the Humanities proposes to amend 45 CFR chapter XI by adding part 1174, 
to read as follows:

PART 1174--PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS

Subpart A--Purpose, Definitions, and Basis for Liability
Sec.
1174.1 Purpose.
1174.2 Definitions.
1174.3 Basis for civil penalties and assessments.
Subpart B--Procedures Leading to Issuance of a Complaint
Sec.
1174.4 Who investigates program fraud.
1174.5 Review of suspected program fraud by the reviewing official.
1174.6 Prerequisites for issuing a complaint.
1174.7 Contents of a complaint.
1174.8 Service of a complaint.
Subpart C--Procedures Following Service of a Complaint
Sec.
1174.9 Answer to a complaint.
1174.10 Default upon failure to file an answer.

[[Page 33605]]

1174.11 Referral of complaint and answer to the ALJ.
Subpart D--Hearing Procedures
Sec.
1174.12 Notice of hearing.
1174.13 Location of the hearing.
1174.14 Parties to the hearing and their rights.
1174.15 Separation of functions.
1174.16 The ALJ's role and authority.
1174.17 Disqualification of reviewing official or ALJ.
1174.18 Parties' rights to review documents.
1174.19 Discovery.
1174.20 Discovery Motions.
1174.21 Depositions.
1174.22 Exchange of witness lists, statements, and exhibits.
1174.23 Subpoenas for attendance at the hearing.
1174.24 Protective orders.
1174.25 Filing and serving documents with the ALJ.
1174.26 Computation of time.
1174.27 The hearing and the burden of proof.
1174.28 Presentation of evidence.
1174.29 Witness testimony.
1174.30 Ex parte communications.
1174.31 Sanctions for misconduct.
1174.32 Post-hearing briefs.
Subpart E--Decisions and Appeals
Sec.
1174.33 Initial decision.
1174.34 Determining the amount of penalties and assessments.
1174.35 Reconsideration of the initial decision.
1174.36 Finalizing the initial decision.
1174.37 Procedures for appealing the ALJ's decision.
1174.38 Appeal to the authority head.
1174.39 Judicial review.
1174.40 Collection of civil penalties and assessments.
1174.41 Rights to administrative offset.
1174.42 Deposit in Treasury of the United States.
1174.43 Voluntary settlement of the administrative complaint.
1174.44 Limitations regarding criminal misconduct.

    Authority: 31 U.S.C. 3801-3812; 5 U.S.C. App. 8G(a)(2).

Subpart A--Purpose, Definitions, and Basis for Liability


Sec.  1174.1   Purpose.

    This part implements the Program Fraud Civil Remedies Act of 1986, 
31 U.S.C. 3801-3812 (PFCRA). The PFCRA provides the National Endowment 
for the Humanities (NEH), and other Federal agencies, with an 
administrative remedy to impose civil penalties and assessments against 
persons who make, submit, or present, or cause to be made, submitted or 
presented, false, fictitious, or fraudulent claims or written 
statements to NEH. The PFCRA also provides due process protections to 
all persons who are subject to administrative proceedings under this 
part.


Sec.  1174.2   Definitions.

    For the purposes of this part--
    ALJ means an Administrative Law Judge in the authority appointed 
pursuant to 5 U.S.C. 3105 or detailed to the authority pursuant to 5 
U.S.C. 3344.
    Authority means the National Endowment for the Humanities (NEH).
    Authority head means the NEH Chairperson or the Chairperson's 
designee.
    Benefit means anything of value, including but not limited to any 
advantage, preference, privilege, license, permit, favorable decision, 
ruling, status or loan guarantee.
    Claim means any request, demand or submission that a person makes--
    (a) to the authority--
    (1) for property, services, or money (including money representing 
grants, loans, insurance, or benefits); or
    (2) which has the effect of decreasing an obligation to pay or 
account for property, services, or money; or
    (b) to a recipient of property, services, or money from the 
authority or to a party to a contract with the authority--
    (1) for property or services if the United States--
    (i) provided such property or services;
    (ii) provided any portion of the funds for the purchase of such 
property or services; or
    (iii) will reimburse such recipient or party for the purchase of 
such property or services; or
    (2) for the payment of money (including money representing grants, 
loans, insurance, or benefits) if the United States--
    (i) provided any portion of the money requested or demanded; or
    (ii) will reimburse such recipient or party for any portion of the 
money paid on such request or demand.
    Complaint means the administrative complaint that the reviewing 
official serves on the defendant under Sec.  1174.8.
    Defendant means any person alleged in a complaint to be liable for 
a civil penalty or assessment pursuant to the PFCRA.
    Government means the United States Government.
    Individual means a natural person.
    Initial decision means the written decision of the ALJ under Sec.  
1174.33, and includes a revised initial decision issued following a 
remand or a motion for reconsideration.
    Knows or has reason to know means that a person, with respect to a 
claim or statement--
    (a) has actual knowledge that the claim or statement is false, 
fictitious, or fraudulent;
    (b) acts in deliberate ignorance of the truth or falsity of the 
claim or statement; or
    (c) acts in reckless disregard of the truth or falsity of the claim 
or statement;


and no proof of specific intent to defraud is required.
    Makes shall include the terms presents, submits, and causes to be 
made, presented, or submitted. As the context requires, making or made 
shall likewise include the corresponding forms of such terms.
    Person means any individual, partnership, corporation, association, 
or private organization, and includes the plural of that term.
    Representative means an attorney who is in good standing of the bar 
of any State, Territory, or possession of the United States, or the 
District of Columbia, or the Commonwealth of Puerto Rico, or any other 
individual who the defendant designates in writing.
    Reviewing official means the NEH General Counsel or the General 
Counsel's designee.
    Statement means any representation, certification, affirmation, 
document, record, or accounting or bookkeeping entry that a person 
makes--
    (a) with respect to a claim (or eligibility to make a claim) or to 
obtain the approval or payment of a claim; or
    (b) with respect to (or with respect to eligibility for)--
    (1) a contract with, or a bid or proposal for a contract with, or
    (2) a grant, loan, or benefit from,


the authority, or any State, political subdivision of a State, or other 
party, if the United States Government provides any portion of the 
money or property under such contract or for such grant, loan, or 
benefit, or if the Government will reimburse such State, political 
subdivision, or party for any portion of the money or property under 
such contract or for such grant, loan, or benefit.


Sec.  1174.3   Basis for civil penalties and assessments.

    (a) Claims.
    (1) Any person shall be subject, in addition to any other remedy 
that may be prescribed by law, to a civil penalty of not more than 
$11,803 for each claim that person makes that the person knows or has 
reason to know--
    (i) Is false, fictitious, or fraudulent;
    (ii) Includes or is supported by any written statement which 
asserts a material fact which is false, fictitious, or fraudulent;

[[Page 33606]]

    (iii) Includes or is supported by any written statement that--
    (A) Omits a material fact;
    (B) Is false, fictitious, or fraudulent as a result of such 
omission; and
    (C) Is a statement in which the person making such statement has a 
duty to include such material fact; or
    (iv) Is for payment for the provision of property or services which 
the person has not provided as claimed.
    (2) Each voucher, invoice, claim form, or other individual request 
or demand for property, services, or money constitutes a separate 
claim.
    (3) A claim shall be considered made to the authority, recipient, 
or party when such a claim is actually made to an agent, fiscal 
intermediary, or other entity, including any State or political 
subdivision of a State, acting for or on behalf of the authority.
    (4) Each claim for property, services, or money is subject to a 
civil penalty regardless of whether such property, services, or money 
is actually delivered or paid.
    (5) If the Government has made any payment on a claim, a person 
subject to a civil penalty under paragraph (a)(1) of this section may 
also be subject to an assessment of not more than twice the amount of 
that claim or the portion thereof that violates paragraph (a)(1) of 
this section. Such assessment shall be in lieu of damages that the 
Government sustained because of such a claim.
    (b) Statements.
    (1) Any person shall be subject, in addition to any other remedy 
prescribed by law, to a civil penalty of not more than $11,803 for each 
written statement that person makes that the person knows or has reason 
to know--
    (i) Asserts a material fact which is false, fictitious or 
fraudulent; or
    (ii) Is false, fictitious, or fraudulent because it omits a 
material fact that the person making the statement has a duty to 
include in such a statement; and
    (iii) Contains or is accompanied by an express certification or 
affirmation of the truthfulness and accuracy of the statement's 
contents.
    (2) A person will only be subject to a civil penalty under 
paragraph (b)(1) of this section if the written statement made by the 
person contains or is accompanied by an express certification or 
affirmation of the truthfulness and accuracy of the statement's 
contents.
    (3) Each written representation, certification, or affirmation 
constitutes a separate statement.
    (4) A statement shall be considered made to the authority when it 
is actually made to an agent, fiscal intermediary, or other entity, 
including any State or political subdivision of a State, acting for or 
on behalf of the authority.
    (c) Proof of specific intent to defraud is not required to 
establish liability under this section.
    (d) In any case in which more than one person is liable for making 
a false, fictitious, or fraudulent claim or statement under this 
section, each person may be held liable for a civil penalty and 
assessment.
    (e) In any case in which more than one person is liable for making 
a claim under this section on which the Government has made payment, 
the authority may impose an assessment against any such person or 
jointly and severally against any combination of persons.
    (f) The authority will annually adjust for inflation the maximum 
amount of the civil penalties described in this section, and will 
publish a document in the Federal Register containing the new maximum 
amount no later than January 15 of each year.

Subpart B--Procedures Leading to Issuance of a Complaint


Sec.  1174.4   Who investigates program fraud.

    The Inspector General, or his or her designee, is the investigating 
official responsible for investigating allegations that a person has 
made a false claim or statement. In this regard, the Inspector General 
has authority under the PFCRA and the Inspector General Act of 1978, 5 
U.S.C. App. 3, as amended, to issue administrative subpoenas for the 
production of records and documents.


Sec.  1174.5   Review of suspected program fraud by the reviewing 
official.

    (a) If the investigating official concludes that the results of his 
or her investigation warrant an action under this part, the 
investigating official shall submit to the reviewing official a report 
containing the investigation's findings and conclusions.
    (b) If the reviewing official determines that the report provides 
adequate evidence that a person made a false, fictitious or fraudulent 
claim or statement, the reviewing official shall transmit to the 
Attorney General written notice of the reviewing official's intention 
to refer the matter for adjudication, with a request for approval of 
such referral. This notice will include the reviewing official's 
statement concerning:
    (1) The reasons for the referral;
    (2) The claims or statements that form the basis for liability;
    (3) The evidence that supports liability;
    (4) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in the false claim or 
statement;
    (5) Any exculpatory or mitigating circumstances that may relate to 
the claims or statements that are known by the reviewing official or 
the investigating official; and
    (6) A statement that there is a reasonable prospect of collecting 
an appropriate amount of penalties and assessments.
    (c) If, at any time, the Attorney General (or designee) requests in 
writing that the authority stay this administrative process, the 
authority head must stay the process immediately. The authority head 
may resume the process only upon receipt of the Attorney General's 
written authorization.


Sec.  1174.6   Prerequisites for issuing a complaint.

    The authority may issue a complaint only if:
    (a) The Attorney General (or designee) approves the reviewing 
official's referral of the allegations for adjudication; and
    (b) In a case of submission of false claims, if the amount of money 
or the value of property or services that a false claim (or a group of 
related claims submitted at the same time) demanded or requested does 
not exceed $150,000.


Sec.  1174.7   Contents of a complaint.

    (a) The complaint will state that the authority seeks to impose 
civil penalties, assessments, or both, against the defendant and will 
include:
    (1) The allegations of liability against the defendant and the 
statutory basis for liability, identification of the claims or 
statements involved, and the reasons liability allegedly arises from 
such claims or statements;
    (2) The maximum amount of penalties and assessments for which the 
defendant may be held liable;
    (3) A statement that the defendant may request a hearing by filing 
an answer and may be represented by a representative;
    (4) Instructions for filing such an answer; and
    (5) A warning that failure to file an answer within thirty days of 
service of the complaint will result in an imposition of the maximum 
amount of penalties and assessments.
    (b) The reviewing official must serve the complaint on the 
defendant and, if the defendant requests a hearing, provide a copy to 
the ALJ assigned to the case.


Sec.  1174.8   Service of a complaint.

    (a) The reviewing official must serve the complaint on an 
individual

[[Page 33607]]

defendant directly, on a partnership through a general partner, and on 
a corporation or an unincorporated association through an executive 
officer or a director, except that the reviewing official may also make 
service on any person authorized by appointment or by law to receive 
process for the defendant.
    (b) The reviewing official may serve the complaint either by:
    (1) Registered or certified mail; or
    (2) Personal delivery by anyone eighteen years of age or older.
    (c) The date of service is the date of personal delivery or, in the 
case of service by registered or certified mail, the date of postmark.
    (d) When the reviewing official serves the complaint, he or she 
should also serve the defendant with a copy of this part and 31 U.S.C. 
3801-3812.

Subpart C--Procedures Following Service of a Complaint


Sec.  1174.9   Answer to a complaint.

    (a) A defendant may file an answer with the reviewing official 
within thirty days of service of the complaint. An answer will be 
considered a request for an oral hearing.
    (b) In the answer, the defendant--
    (1) Must admit or deny each allegation of liability contained in 
the complaint (a failure to deny an allegation is considered an 
admission);
    (2) Must state any defense on which the defendant intends to rely;
    (3) May state any reasons why the penalties, assessments, or both 
should be less than the statutory maximum; and
    (4) Must state the name, address, and telephone number of the 
person the defendant authorized to act as the defendant's 
representative, if any.
    (c) If the defendant is unable to file a timely answer which meets 
the requirements set forth in paragraph (b) of this section, the 
defendant may file with the reviewing official a general answer denying 
liability, requesting a hearing, and requesting an extension of time in 
which to file a complete answer. The defendant must file a general 
answer within thirty days of service of the complaint.
    (d) If the defendant initially files a general answer requesting an 
extension of time, the reviewing official must promptly file with the 
ALJ the complaint, the general answer, and the request for an extension 
of time.
    (e) For good cause shown, the ALJ may grant the defendant up to 
thirty additional days within which to file an answer that meets the 
requirements of paragraph (b) of this section. The defendant must file 
such an answer with the ALJ and must serve a copy on the reviewing 
official.


Sec.  1174.10   Default upon failure to file an answer.

    (a) If the defendant does not file any answer within thirty days 
after service of the complaint, the reviewing official may refer the 
complaint to the ALJ.
    (b) Once the reviewing official refers the complaint, the ALJ will 
promptly serve on the defendant a notice that the ALJ will issue an 
initial decision.
    (c) The ALJ will assume the facts alleged in the complaint to be 
true and, if such facts establish liability under the statute, the ALJ 
will issue an initial decision imposing the maximum amount of penalties 
and assessments allowed under the PFCRA.
    (d) Except as otherwise provided in this section, when a defendant 
fails to file a timely answer, the defendant waives any right to 
further review of the penalties and assessments the ALJ may impose in 
the initial decision.
    (e) The initial decision becomes final thirty days after the ALJ 
issues it.
    (f) At any time before an initial decision becomes final, a 
defendant may file a motion with the ALJ asking that the ALJ reopen the 
case. An ALJ may only reopen a case if he or she determines that the 
defendant set forth in the motion extraordinary circumstances that 
prevented the defendant from filing a timely answer. The initial 
decision will be stayed until the ALJ decides on the motion. The 
reviewing official may respond to the motion.
    (g) If the ALJ determines that a defendant has demonstrated 
extraordinary circumstances that excuse his or her failure to file a 
timely answer, the ALJ will withdraw the initial decision and grant the 
defendant an opportunity to answer the complaint.
    (h) The ALJ's decision to deny a defendant's motion to reopen a 
case is not subject to reconsideration under Sec.  1174.35.
    (i) The defendant may appeal the ALJ's decision denying a motion to 
reopen by filing a notice of appeal with the authority head within 
fifteen days after the ALJ denies the motion. The timely filing of a 
notice of appeal shall stay the initial decision until the authority 
head decides the issue.
    (j) If the defendant files a timely notice of appeal with the 
authority head, the ALJ shall forward the record of the proceeding to 
the authority head.
    (k) The authority head shall decide expeditiously, based solely on 
the record before the ALJ, whether extraordinary circumstances excuse 
the defendant's failure to file a timely answer.
    (l) If the authority head decides that extraordinary circumstances 
excuse the defendant's failure to file a timely answer, the authority 
head shall remand the case to the ALJ with instructions to grant the 
defendant an opportunity to answer.
    (m) If the authority head decides that the circumstances do not 
excuse the defendant's failure to file a timely answer, the authority 
head shall reinstate the ALJ's initial decision, which shall become 
final and binding upon the parties thirty days after the authority head 
issues such a decision.


Sec.  1174.11   Referral of complaint and answer to the ALJ.

    When the reviewing official receives an answer, he or she must 
simultaneously file the complaint, the answer, and a designation of the 
authority's representative with the ALJ.

Subpart D--Hearing Procedures


Sec.  1174.12   Notice of hearing.

    (a) When the ALJ receives the complaint and the answer, the ALJ 
will promptly serve a notice of hearing upon the defendant and the 
authority's representative in the same manner as the complaint. The ALJ 
must serve the notice of oral hearing within six years of the date on 
which the claim or statement was made.
    (b) The hearing is a formal proceeding conducted by the ALJ during 
which a defendant will have the opportunity to cross-examine witnesses, 
present testimony, and dispute liability.
    (c) The notice of hearing must include:
    (1) The tentative date, time, and place of the hearing;
    (2) The legal authority and jurisdiction under which the hearing is 
being held;
    (3) The matters of fact and law to be asserted;
    (4) A description of the procedures for the conduct of the hearing;
    (5) The name, address, and telephone number of the defendant's 
representative and the representative for the authority; and
    (6) Such other matters as the ALJ deems appropriate.


Sec.  1174.13   Location of the hearing.

    (a) The ALJ shall hold the hearing:
    (1) In any judicial district of the United States in which the 
defendant resides or transacts business;
    (2) In any judicial district of the United States in which a claim 
or statement in issue was made; or
    (3) In such other place as the parties and the ALJ may agree upon.
    (b) Each party shall have the opportunity to present arguments with 
respect to the location of the hearing.

[[Page 33608]]

    (c) The ALJ shall decide the time and the place of the hearing.


Sec.  1174.14   Parties to the hearing and their rights.

    (a) The parties to the hearing shall be the defendant and the 
authority.
    (b) Except where the authority head designates another 
representative, the NEH General Counsel (or designee) shall represent 
the authority.
    (c) Each party has the right to:
    (1) Be represented by a representative;
    (2) Request a pre-hearing conference and participate in any 
conference held by the ALJ;
    (3) Conduct discovery;
    (4) Agree to stipulations of fact or law which will be made a part 
of the record;
    (5) Present evidence relevant to the issues at the hearing;
    (6) Present and cross-examine witnesses;
    (7) Present arguments at the hearing as permitted by the ALJ; and
    (8) Submit written briefs and proposed findings of fact and 
conclusions of law after the hearing, as permitted by the ALJ.


Sec.  1174.15   Separation of functions.

    (a) The investigating official, the reviewing official, and any 
employee or agent of the authority who takes part in investigating, 
preparing, or presenting a particular case may not, in such case or a 
factually related case:
    (1) Participate in the hearing as the ALJ;
    (2) Participate or advise in the authority head's review of the 
initial decision; or
    (3) Make the collection of penalties and assessment.
    (b) The ALJ must not be responsible to or subject to the 
supervision or direction of the investigating official or the reviewing 
official.


Sec.  1174.16   The ALJ's role and authority.

    (a) An ALJ serves as the presiding officer at all hearings. The 
Office of Personnel Management selects the ALJ.
    (b) The ALJ must conduct a fair and impartial hearing, avoid delay, 
maintain order, and assure that a record of the proceeding is made.
    (c) The ALJ has the authority to--
    (1) Set and change the date, time, and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing, in whole or in part, for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring witness attendance and the production 
of documents at depositions or at hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of discovery;
    (8) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude, or limit evidence;
    (11) Upon motion of a party, take official notice of facts;
    (12) Upon motion of a party, decide cases, in whole or in part, by 
summary judgment when there is no disputed issue of material fact;
    (13) Conduct any conference, argument or hearing on motions in 
person or by telephone; and
    (14) Exercise such other authority as is necessary to carry out the 
responsibilities of the ALJ under this part.
    (d) The ALJ does not have the authority to find Federal statutes or 
regulations invalid.


Sec.  1174.17   Disqualification of reviewing official or ALJ.

    (a) A reviewing official or an ALJ may disqualify himself or 
herself at any time.
    (b) Upon any party's motion, the reviewing official or ALJ may be 
disqualified as follows:
    (1) The party must support the motion by an affidavit containing 
specific facts establishing that personal bias or other reason for 
disqualification exists, including the time and circumstances of the 
party's discovery of such facts;
    (2) The party must file the motion promptly after discovery of the 
grounds for disqualification or the objection will be deemed waived; 
and
    (3) The party, or representative of record, must certify in writing 
that such party makes the motion in good faith.
    (c) Once a party has filed a motion to disqualify, the ALJ will 
halt the proceedings until he or she resolves the disqualification 
matter. If the ALJ disqualifies the reviewing official, the ALJ will 
dismiss the complaint without prejudice. If the ALJ disqualifies 
himself or herself, the authority will promptly reassign the case to 
another ALJ.


Sec.  1174.18   Parties' rights to review documents.

    (a) Once the ALJ issues a hearing notice pursuant to Sec.  1174.12, 
and upon written request to the reviewing official, the defendant may:
    (1) Review any relevant and material documents, transcripts, 
records, and other materials that relate to the allegations set out in 
the complaint and upon which the investigating official based his or 
her findings and conclusions, unless such documents are subject to a 
privilege under Federal law, and obtain copies of such documents upon 
payment of duplication fees; and
    (2) Obtain a copy of all exculpatory information in the reviewing 
official's or investigating official's possession that relates to the 
allegations in the complaint, even if it appears in a document that 
would otherwise be privileged. If the document would otherwise be 
privileged, the other party only must disclose the portion containing 
exculpatory information.
    (b) The notice that the reviewing official sends to the Attorney 
General, as described in Sec.  1174.5(b), is not discoverable under any 
circumstances.
    (c) If the reviewing official does not respond to the defendant's 
request within twenty days, the defendant may file with the ALJ a 
motion to compel disclosure of the documents, subject to the provisions 
of this section. The defendant may only file such a motion with the ALJ 
after filing an answer pursuant to Sec.  1174.9.


Sec.  1174.19   Discovery.

    (a) Parties may conduct the following types of discovery:
    (1) Requests for production of documents for inspection and 
copying;
    (2) Requests for admissions of authenticity of any relevant 
document or of the truth of any relevant fact;
    (3) Written interrogatories; and
    (4) Depositions.
    (b) For the purpose of this section, the term ``documents'' 
includes information, documents, reports, answers, records, accounts, 
papers, and other data and documentary evidence. Nothing contained 
herein shall be interpreted to require the creation of a document.
    (c) Unless the parties mutually agree to discovery, a party may 
conduct discovery only as ordered by the ALJ. The ALJ shall regulate 
the timing of discovery.
    (d) Each party shall bear its own discovery costs.


Sec.  1174.20   Discovery Motions.

    (a) Any party seeking discovery may file a motion with the ALJ 
together with a copy of the requested discovery, or in the case of 
depositions, a summary of the scope of the proposed deposition.
    (b) Within ten days of service, a party may file an opposition to 
the motion and/or a motion for protective order as provided in Sec.  
1174.24.
    (c) The ALJ may grant a motion for discovery only if he or she 
finds that the discovery sought--

[[Page 33609]]

    (1) Is necessary for the expeditious, fair, and reasonable 
consideration of the issues;
    (2) Is not unduly costly or burdensome;
    (3) Will not unduly delay the proceeding; and
    (4) Does not seek privileged information.
    (d) The burden of showing that the ALJ should allow discovery is on 
the party seeking discovery.
    (e) The ALJ may grant discovery subject to a protective order under 
Sec.  1174.24.


Sec.  1174.21   Depositions.

    (a) If the ALJ grants a motion for deposition, the ALJ shall issue 
a subpoena for the deponent, which may require the deponent to produce 
documents. The subpoena shall specify the time and place at which the 
deposition will take place.
    (b) The party seeking to depose shall serve the subpoena in the 
manner prescribed by Sec.  1174.8.
    (c) The deponent may file with the ALJ a motion to quash the 
subpoena or a motion for a protective order within ten days of service.
    (d) The party seeking to depose shall provide for the taking of a 
verbatim transcript of the deposition, which it shall make available to 
all other parties for inspection and copying.


Sec.  1174.22   Exchange of witness lists, statements, and exhibits.

    (a) As ordered by the ALJ, the parties must exchange witness lists 
and copies of proposed hearing exhibits, including copies of any 
written statements or transcripts of deposition testimony that each 
party intends to offer in lieu of live testimony.
    (b) If a party objects, the ALJ will not admit into evidence the 
testimony of any witness whose name does not appear on the witness list 
or any exhibit not provided to an opposing party in advance, unless the 
ALJ finds good cause for the omission or concludes that there is no 
prejudice to the objecting party.
    (c) Unless a party objects within the time set by the ALJ, 
documents exchanged in accordance with this section are deemed to be 
authentic for the purpose of admissibility at the hearing.


Sec.  1174.23   Subpoenas for attendance at the hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual at the hearing may request that the ALJ issue a subpoena.
    (b) A subpoena requiring the attendance and testimony of an 
individual may also require the individual to produce documents at the 
hearing.
    (c) A party seeking a subpoena shall file a written request no less 
than fifteen days before the hearing date unless otherwise allowed by 
the ALJ for good cause shown. Such request shall specify any documents 
to be produced, designate the witness, and describe the witness' 
address and location with sufficient particularity to permit the 
witness to be found.
    (d) The subpoena shall specify the time and place at which the 
witness is to appear and any documents the witness is to produce.
    (e) The party seeking the subpoena shall serve it in the same 
manner prescribed in Sec.  1174.8. The party seeking the subpoena may 
serve the subpoena on a party, or upon an individual under the control 
of a party, by first class mail.
    (f) The party requesting a subpoena shall pay the subpoenaed 
witness' fees and mileage in the amounts that would be payable to a 
witness in a proceeding in United States District Court. A check for 
witness fees and mileage shall accompany the subpoena when it is 
served, except that when the authority issues a subpoena, a check for 
witness fees and mileage need not accompany the subpoena.
    (g) A party, or the individual to whom the subpoena is directed, 
may file with the ALJ a motion to quash the subpoena within ten days 
after service, or on or before the time specified in the subpoena for 
compliance if it is less than ten days after service.


Sec.  1174.24   Protective orders.

    (a) A party, prospective witness, or deponent may file a motion for 
a protective order that seeks to limit the availability or disclosure 
of evidence with respect to discovery sought by an opposing party or 
with respect to the hearing.
    (b) In issuing a protective order, the ALJ may make any order which 
justice requires to protect a party or person from annoyance, 
embarrassment, oppression, or undue burden or expense, including one or 
more of the following:
    (1) That the parties shall not have discovery;
    (2) That the parties shall have discovery only on specified terms 
and conditions;
    (3) That the parties shall have discovery only through a method of 
discovery other than requested;
    (4) That the parties shall not inquire into certain matters, or 
that the parties shall limit the scope of discovery to certain matters;
    (5) That the parties shall conduct discovery with no one present 
except persons designated by the ALJ;
    (6) That the parties shall seal the contents of the discovery;
    (7) That a sealed deposition shall be opened only by order of the 
ALJ;
    (8) That a trade secret or other confidential research, 
development, commercial information, or facts pertaining to any 
criminal investigation, proceeding, or other administrative 
investigation shall not be disclosed or shall be disclosed only in a 
designated way; or
    (9) That the parties shall simultaneously file specified documents 
or information enclosed in sealed envelopes to be opened as the ALJ 
directs.


Sec.  1174.25   Filing and serving documents with the ALJ.

    (a) Documents filed with the ALJ must include an original and two 
copies. Every document filed in the proceeding must contain a title 
(e.g., motion to quash subpoena), a caption setting forth the title of 
the action, and the case number assigned by the ALJ. Every document 
must be signed by the person on whose behalf the paper was filed, or by 
his or her representative.
    (b) Documents are considered filed when they are mailed. The 
mailing date may be established by a certificate from the party or its 
representative, or by proof that the document was sent by certified or 
registered mail.
    (c) A party filing a document with the ALJ must, at the time of 
filing, serve a copy of such document on every other party. When a 
party is represented by a representative, the party's representative 
must be served in lieu of the party.
    (d) A certificate from the individual serving the document 
constitutes proof of service. The certificate must set forth the manner 
in which the document was served.
    (e) Service upon any party of any document other than the complaint 
must be made by delivering a copy or by placing a copy in the United 
States mail, postage prepaid and addressed to the party's last known 
address.
    (f) If a party consents in writing, documents may be sent 
electronically. In this instance, service is complete upon transmission 
unless the serving party receives electronic notification that 
transmission of the communication was not completed.


Sec.  1174.26   Computation of time.

    (a) In computing any period of time under this part or in an order 
issued

[[Page 33610]]

under it, the time begins with the day following the act, event, or 
default, and includes the last day of the period, unless it is a 
Saturday, Sunday, or legal holiday that is observed by the Federal 
government, in which event it includes the next business day.
    (b) When the period of time allowed is less than seven days, 
intermediate Saturdays, Sundays, and legal holidays that are observed 
by the Federal government are excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional five days will be added to the time permitted for 
any response.


Sec.  1174.27   The hearing and the burden of proof.

    (a) The ALJ conducts a hearing in order to determine whether a 
defendant is liable for a civil penalty, assessment, or both and, if 
so, the appropriate amount of the penalty and/or assessment.
    (b) The hearing will be recorded and transcribed. The transcript of 
testimony, exhibits and other evidence admitted at the hearing, and all 
papers and requests filed in the proceeding, constitute the record for 
the ALJ's and the authority head's decisions.
    (c) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause shown.
    (d) The authority must prove a defendant's liability and any 
aggravating factors by a preponderance of the evidence.
    (e) A defendant must prove any affirmative defenses and any 
mitigating factors by a preponderance of the evidence.


Sec.  1174.28   Presentation of evidence.

    (a) The ALJ shall determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ shall not be bound by 
the Federal Rules of Evidence, but the ALJ may apply the Federal Rules 
of Evidence where he or she deems appropriate.
    (c) The ALJ shall exclude irrelevant and immaterial evidence.
    (d) The ALJ may exclude evidence, although relevant, if its 
probative value is substantially outweighed by the danger of unfair 
prejudice, confusion of the issues, or by considerations of undue delay 
or needless presentation of cumulative evidence.
    (e) The ALJ shall exclude evidence, although relevant, if it is 
privileged under Federal law.
    (f) Evidence concerning compromise or settlement offers shall be 
inadmissible to the extent provided in Rule 408 of the Federal Rules of 
Evidence.
    (g) The ALJ shall permit the parties to introduce rebuttal 
witnesses and evidence.
    (h) All documents and other evidence taken for the record must be 
open to examination by all parties unless the ALJ orders otherwise.


Sec.  1174.29   Witness testimony.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing shall be given orally by witnesses under oath or 
affirmation.
    (b) At the ALJ's discretion, the ALJ may admit testimony in the 
form of a written statement or deposition. The party offering such a 
statement must provide it to all other parties along with the last 
known address of the witness, in a manner which allows sufficient time 
for other parties to subpoena the witness for cross-examination at the 
hearing. The parties shall exchange deposition transcripts and prior 
written statements of witnesses proposed to testify at the hearing as 
provided in Sec.  1174.22.
    (c) The ALJ shall exercise reasonable control over the mode and 
order of interrogating witnesses and presenting evidence.
    (d) The ALJ shall permit the parties to conduct such cross-
examination as may be required for a full and true disclosure of the 
facts.
    (e) Upon any party's motion, the ALJ shall order witnesses excluded 
from the hearing room so that they cannot hear the testimony of other 
witnesses. This rule does not authorize exclusion of--
    (1) A party who is an individual;
    (2) In the case of a party that is not an individual, the party's 
officer or employee appearing for the entity pro se or designated by 
the party's representative; or
    (3) An individual whose presence a party shows to be essential to 
the presentation of its case, including an individual employed by the 
Government or engaged in assisting the Government's representative.


Sec.  1174.30   Ex parte communications.

    A party may not communicate with the ALJ ex parte unless the other 
party consents to such a communication taking place. This does not 
prohibit a party from inquiring about the status of a case or asking 
routine questions concerning administrative functions or procedures.


Sec.  1174.31   Sanctions for misconduct.

    (a) The ALJ may sanction a person, including any party or 
representative, for failing to comply with an order, or for engaging in 
other misconduct that interferes with the speedy, orderly, and fair 
conduct of a hearing.
    (b) Any such sanction shall reasonably relate to the severity and 
nature of the misconduct.
    (c) When a party fails to comply with an order, including an order 
for taking a deposition, producing evidence within the party's control, 
or responding to a request for admission, the ALJ may:
    (1) Draw an inference in favor of the requesting party with regard 
to the information sought;
    (2) In the case of requests for admission, deem each matter for 
which an admission is requested to be admitted;
    (3) Prohibit the party failing to comply with such order from 
introducing evidence concerning, or otherwise relying upon testimony 
relating to, the information sought; and
    (4) Strike any part of the pleadings or other submissions filed by 
the party failing to comply with such a request.
    (d) The ALJ may refuse to consider any motion, request, response, 
brief or other document which is not filed in a timely fashion.
    (e) If a party fails to prosecute or defend an action under this 
part that is commenced by service of a hearing notice, the ALJ may 
dismiss the action or may issue an initial decision imposing penalties 
and assessments.


Sec.  1174.32   Post-hearing briefs.

    Any party may file a post-hearing brief. Such briefs are not 
required, however, unless ordered by the ALJ. The ALJ must fix the time 
for filing such briefs, not to exceed sixty days from the date the 
parties receive the transcript of the hearing or, if applicable, the 
stipulated record. Such briefs may be accompanied by proposed findings 
of fact and conclusions of law. The ALJ may permit the parties to file 
reply briefs.

Subpart E--Decisions and Appeals


Sec.  1174.33   Initial decision.

    (a) The ALJ will issue an initial decision based only on the 
record. It will contain findings of fact, conclusions of law, and the 
amount of any penalties and assessments.
    (b) The ALJ will serve the initial decision on all parties within 
ninety days after the hearing's close or, if the ALJ permitted the 
filing of post-hearing briefs, within ninety days after the final post-
hearing brief was filed.
    (c) The findings of fact must include a finding on each of the 
following issues:
    (1) Whether any one or more of the claims or statements identified 
in the complaint violate this part; and
    (2) If the defendant is liable for penalties or assessments, the

[[Page 33611]]

appropriate amount of any such penalties or assessments, considering 
any mitigating or aggravating factors.
    (d) If the defendant is liable for a civil penalty or assessment, 
the initial decision shall describe the defendant's right to file a 
motion for reconsideration with the ALJ or a notice of appeal with the 
authority head.


Sec.  1174.34   Determining the amount of penalties and assessments.

    In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the authority head, upon appeal, should 
evaluate any circumstances that mitigate or aggravate the violation and 
should articulate in their opinions the reasons that support the 
penalties and assessments they impose.


Sec.  1174.35   Reconsideration of the initial decision.

    (a) Any party may file a motion with the ALJ for reconsideration of 
the initial decision within twenty days of receipt of the initial 
decision. If the initial decision was served by mail, there is a 
rebuttable presumption that the party received the initial decision 
five days from the date of mailing.
    (b) A motion for reconsideration must be accompanied by a 
supporting brief and must describe specifically each allegedly 
erroneous decision.
    (c) A party only may file a response to a motion for 
reconsideration upon the ALJ's request.
    (d) The ALJ will dispose of a motion for reconsideration by denying 
it or by issuing a revised initial decision.
    (e) If the ALJ issues a revised initial decision upon a party's 
motion, no party may file a further motion for reconsideration.


Sec.  1174.36   Finalizing the initial decision.

    (a) Thirty days after issuance, the ALJ's initial decision shall 
become the authority's final decision and shall bind all parties, 
unless any party timely files a motion for reconsideration or any 
defendant adjudged to have submitted a false, fictitious, or fraudulent 
claim or statement timely appeals to the authority head, as set forth 
in Sec.  1174.37.
    (b) If the ALJ disposes of a motion for reconsideration by denying 
it or by issuing a revised initial decision, the ALJ's order on the 
motion for reconsideration shall become the authority's final decision 
thirty days after the ALJ issues the order, unless a defendant that is 
adjudged to have submitted a false, fictitious, or fraudulent claim or 
statement timely appeals to the authority head, as set forth in Sec.  
1174.37.


Sec.  1174.37   Procedures for appealing the ALJ's decision.

    (a) Any defendant who submits a timely answer and is found liable 
in an initial decision for a civil penalty or assessment may appeal the 
decision.
    (b) The defendant may file a notice of appeal with the authority 
head within thirty days following issuance of the initial decision, 
serving a copy of the notice of appeal on all parties and the ALJ. The 
authority head may extend this deadline for up to an additional thirty 
days if the defendant files an extension request within the initial 
thirty day period and shows good cause.
    (c) The authority head shall not consider a defendant's appeal 
until all timely motions for reconsideration have been resolved.
    (d) If the ALJ denies a timely motion for reconsideration, the 
defendant may file a notice of appeal within thirty days following such 
denial or issuance of a revised initial decision, whichever applies.
    (e) The defendant must support its notice of appeal with a written 
brief specifying why the authority head should reverse or modify the 
initial decision.
    (f) The authority's representative may file a brief in opposition 
to the notice of appeal within thirty days of receiving the defendant's 
appeal and supporting brief.
    (g) If a defendant timely files a notice of appeal, and the time 
for filing reconsideration motions has expired, the ALJ will forward 
the record of the proceeding to the authority head.
    (h) An initial decision is automatically stayed pending disposition 
of a motion for reconsideration or of an appeal to the authority head.
    (i) No administrative stay is available following the authority 
head's final decision.


Sec.  1174.38   Appeal to the authority head.

    (a) A defendant has no right to appear personally, or through a 
representative, before the authority head.
    (b) There is no right to appeal any interlocutory ruling.
    (c) The authority head will not consider any objection or evidence 
that was not raised before the ALJ unless the defendant demonstrates 
that extraordinary circumstances excuse the failure to object. If the 
defendant demonstrates to the authority head's satisfaction that 
extraordinary circumstances prevented the presentation of evidence at 
the hearing, and that the additional evidence is material, the 
authority head may remand the matter to the ALJ for consideration of 
the additional evidence.
    (d) The authority head may affirm, reduce, reverse, compromise, 
remand, or settle any penalty or assessment that the ALJ imposed in the 
initial decision or reconsideration decision.
    (e) The authority head will promptly serve each party to the appeal 
and the ALJ with a copy of the decision. This decision must contain a 
statement describing the right of any person, against whom a penalty or 
assessment has been made, to seek judicial review.


Sec.  1174.39   Judicial review.

    31 U.S.C. 3805 authorizes the appropriate United States District 
Court to review any final decision imposing penalties or assessments, 
and specifies the procedures for such review. To obtain judicial 
review, a defendant must file a petition with the appropriate court in 
a timely manner.


Sec.  1174.40   Collection of civil penalties and assessments.

    31 U.S.C. 3806 and 3808(b) authorize actions for collecting civil 
penalties and assessments imposed under this part and specify the 
procedures for such actions.


Sec.  1174.41   Rights to administrative offset.

    The authority may make an administrative offset under 31 U.S.C. 
3716 to collect the amount of any penalty or assessment which has 
become final, for which a judgment has been entered, or which the 
parties agree upon in a compromise or settlement. However, the 
authority may not make an administrative offset under this subsection 
against a Federal tax refund that the United States owes to the 
defendant then or at a later time.


Sec.  1174.42   Deposit in Treasury of the United States.

    The authority shall deposit all amounts collected pursuant to this 
part as miscellaneous receipts in the Treasury of the United States, 
except as provided in 31 U.S.C. 3806(g).


Sec.  1174.43   Voluntary settlement of the administrative complaint.

    (a) Parties may make offers of compromise or settlement at any 
time. Any compromise or settlement must be in writing.
    (b) The reviewing official has the exclusive authority to 
compromise or settle the case from the date on which the reviewing 
official is permitted to issue a complaint until the ALJ issues an 
initial decision.
    (c) The authority head has exclusive authority to compromise or 
settle the case from the date of the ALJ's initial

[[Page 33612]]

decision until initiation of any judicial review or any action to 
collect the penalties and assessments.
    (d) The Attorney General has exclusive authority to compromise or 
settle the case while any judicial review or any action to recover 
penalties and assessments is pending.
    (e) The investigating official may recommend settlement terms to 
the reviewing official, the authority head, or the Attorney General, as 
appropriate.


Sec.  1174.44   Limitations regarding criminal misconduct.

    (a) Any investigating official may:
    (1) Refer allegations of criminal misconduct or a violation of the 
False Claims Act directly to the Department of Justice for prosecution 
and/or civil action, as appropriate;
    (2) Defer or postpone a report or referral to the reviewing 
official to avoid interference with a criminal investigation or 
prosecution; or
    (3) Issue subpoenas under any other statutory authority.
    (b) Nothing in this part limits the requirement that the 
authority's employees must report suspected violations of criminal law 
to the NEH Office of the Inspector General or to the Attorney General.

    Dated: June 16, 2021.
Elizabeth Voyatzis,
Deputy General Counsel, National Endowment for the Humanities.
[FR Doc. 2021-13085 Filed 6-24-21; 8:45 am]
BILLING CODE 7536-01-P


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