FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JACK YETIV; TREIMEE CORPORATION, 

No. 04-76044 Petitioners,

HUD No.

v.  CV-03-00665-

U. S. DEPARTMENT OF HOUSING AND LRH/VPC

URBAN DEVELOPMENT,

OPINION Respondent. 

On Petition for Review of an Order of the

Department Of Housing & Urban Development

Argued and Submitted

November 15, 2006—San Francisco, California

Filed September 20, 2007

Before: William C. Canby, Jr., John T. Noonan, and

Richard A. Paez, Circuit Judges.

Opinion by Judge Canby;

Concurrence by Judge Noonan

12795
COUNSEL

Jack Z. Yetiv, Gardnerville, Nevada, for the petitioners. 

Greg Addington, Assistant United States Attorney, Reno,

Nevada, for the respondent. 

YETIV v. HUD 12797
OPINION

CANBY, Circuit Judge: 

Jack Yetiv and his wholly-owned TREIMee Corporation

(collectively, “Yetiv”) petition for review of an administrative

decision of the U.S. Department of Housing and Urban

Development (“HUD”) imposing civil monetary penalties

under 12 U.S.C. § 1735f-15(c). The penalties were imposed

for Yetiv’s failure to provide HUD with audited annual financial statements relating to the operation of Yetiv’s multifamily housing project, which Yetiv purchased with a HUDinsured loan. Yetiv presents numerous challenges to HUD’s

decision, most notably that: (1) HUD was without jurisdiction

to impose penalties because Yetiv pre-paid the HUD-insured

loan prior to the final adjudication of HUD’s Administrative

Law Judge (“ALJ”); (2) the decision to impose penalties was

arbitrary and capricious in violation of section 706(2)(a) of

the Administrative Procedure Act (“APA”), 5 U.S.C.

§ 706(2)(a), because the ALJ applied an illogical standard in

determining that the violations were “material” (and hence

eligible for penalties); and (3) the decision imposing penalties

was not supported by substantial evidence. We affirm. 

Background

The Park on Westview property (“the property”) is a 212-

unit multi-family housing project in Houston, Texas. Yetiv

purchased the property in 1997 with a HUD-insured loan. To

secure HUD insurance, Yetiv was required to sign a regulatory agreement which imposed various duties related to the

management and financial operations of the property, including the duty to submit annual financial statements. As a multifamily mortgagor, Yetiv was additionally subject to the Civil

Money Penalty statute, 12 U.S.C. § 1735f-15, which authorizes HUD to impose civil penalties against mortgagors who

“knowingly and materially” commit certain enumerated violations. § 1735f-15(b)(1). One of the violations for which civil

12798 YETIV v. HUD
penalties may be imposed is the failure to provide HUD with

annual audited financial statements. See § 1735f15(c)(1)(B)(x). 

After Yetiv failed to file financial statements for the five

fiscal years spanning 1997-2001, HUD issued an administrative complaint in July 2002 seeking civil penalties pursuant to

the Civil Monetary Penalty statute. Five months later, prior to

an adjudication on the merits, Yetiv prepaid the HUD-insured

loan. Despite Yetiv’s contention that his early payment

deprived HUD of jurisdiction to maintain the enforcement

action, the HUD ALJ issued a summary judgment order finding that TREIMee “knowingly and materially” violated the

financial reporting requirement for the years 1997 - 2001.

After a hearing to determine the amount of TREIMee’s penalty and the extent of Yetiv’s individual liability as an officer

of TREIMee, the ALJ issued an Initial Decision ordering

TREIMee to pay $50,000.00 for its violations and imposing

a penalty of $20,000 against Yetiv and TREIMee jointly and

severally.1 Yetiv subsequently appealed to the Secretary of

HUD, who adopted the ALJ decision without change. Yetiv

petitions for review and we have jurisdiction under 12 U.S.C.

§ 1735f-15(e) over Yetiv’s timely petition for review. 

Standard of Review

We review de novo the scope of an agency’s jurisdiction.

Saratoga Sav. & Loan Ass’n v. Fed. Home Loan Bank Bd.,

879 F.2d 689, 691 (9th Cir. 1989). HUD’s decision to impose

civil money penalties is reviewed pursuant to the Administrative Procedure Act (“APA”), 5 U.S.C. § 706. 12 U.S.C.

1Yetiv (individually) was not penalized for his pre-2002 violations

because, prior to that year, the Civil Monetary Penalty statute applied only

to mortgagors. Congress amended the statute in 1997 to add additional liable parties, including officers and directors of corporate mortgagors. Pub.

L. No. 105-65, § 561(a)(2)(B)(i), 111 Stat. 1344, 1415 (Oct. 27, 1997)

(codified as amended at 12 U.S.C. § 1735f-15(c)(1)(A)(iii)). 

YETIV v. HUD 12799
§ 1735f-15(e)(3). Under Section 706, HUD’s action “must be

set aside if the action was ‘arbitrary, capricious, an abuse of

discretion, otherwise not in accordance with law’ or if the

action failed to meet statutory, procedural, or constitutional

requirements.” Citizens to Preserve Overton Park, Inc. v.

Volpe, 401 U.S. 402, 414 (1971), overruled on other grounds

by Califano v. Sanders, 430 U.S. 99, 105 (1977), (quoting 5

U.S.C. § 706(2)(A), (B), (C), and (D)). We must also set aside

any factual findings that are not supported by substantial evidence. § 706(2)(E). 

Discussion

As a threshold matter, Yetiv contends that HUD lacked

jurisdiction to impose civil money penalties because he prepaid the HUD-insured loan prior to the final adjudication. We

reject that contention. 

[1] Under 12 U.S.C. § 1735f-15(c)(1)(A), the Secretary of

HUD has jurisdiction to proceed against mortgagors who

commit any of the violations listed in subsection (B), including the failure to file an annual financial statement. § 1735f15(c)(1)(B)(x). The governing statute does not state that the

Secretary loses jurisdiction to prosecute past violations the

moment a HUD-insured mortgage is paid off. An agency generally does not lose jurisdiction over a claim for money penalties because of the post-violation actions of the violator. See

Reich v. Occupational Safety & Health Review Comm’n, 102

F.3d 1200, 1202 (11th Cir. 1997). The general rule is that liability for civil penalties attaches at the time of the violation,

see, e.g., San Francisco BayKeeper, Inc. v. Tosco Corp. 309

F.3d 1153, 1159-60 (9th Cir. 2002), and we see no reason to

create an exception in this case. Were we to accept Yetiv’s

argument, the practical effect would be to encourage mortgagors to forego the expense of compliance because, in the

event of an enforcement action, they could always escape liability by prepaying the HUD-insured mortgage before the

assessment of penalties. Yetiv’s early payment of the loan,

12800 YETIV v. HUD
after his failure to supply annual financial statements to HUD,

accordingly did not deprive HUD of jurisdiction to maintain

the enforcement action and, ultimately, to impose penalties. 

[2] At oral argument, Yetiv characterized himself as the

victim of a vendetta: he had paid off his loan, neither HUD

nor the public had lost any money, and it was simply asking

too much to require annual audited statements and to persevere in that requirement after the loan had been paid off.

Unquestionably there is considerable exasperation on the part

of both parties reflected in the record. But surely HUD is entitled to require, by regulation and agreement, that the borrowers it insures regularly document the financial health of their

HUD-insured projects.2 And Congress has authorized HUD to

exact monetary penalties for the failure to file such reports.

See § 1735f-15(c)(1)(B)(x). Collection of a penalty here

serves a deterrent purpose that goes beyond the circumstances

of Yetiv’s successful loan; it discourages other project operators from failing to file audited financial statements. Requiring such statements across the board is a legitimate regulatory

and legislative goal. 

[3] We also are not persuaded by Yetiv’s primary procedural argument. He contends that HUD’s decision to impose

penalties was arbitrary and capricious because the ALJ used

an illogical standard for determining whether the violations

were “material.” Under the controlling regulations, a material

violation is one that is significant in some respect or to some

degree. 24 C.F.R. § 30.10. The ALJ found that Yetiv’s violations were significant by considering, as the Secretary

requires, the so-called “totality of circumstances” factors set

forth in 24 C.F.R. § 30.80 (the same factors used to determine

the amount of the penalty). As relevant here, these factors are:

the gravity of the offense, § 30.80(a); any history of prior

offenses, § 30.80(b); the ability to pay the penalty, §30.80(c);

the injury to the public, § 30.80(d); any benefits received by

2Yetiv’s regulatory agreement with HUD also required annual audits. 

YETIV v. HUD 12801
the violator, or the extent of potential benefit to other persons,

§ 30.80(e), (f); deterrence of future violations, § 30.80(g); the

degree of the violator’s culpability, § 30.80(h); and such other

matters as justice may require, § 30.80(j). 

[4] Yetiv argues, and we tend to agree, that some of these

factors (notably, the violator’s ability to pay), while perhaps

relevant to the determination of the amount of a penalty, have

no logical relationship to the significance of the underlying

violation. The issue here, however, is not whether HUD’s

materiality standard is logical in the abstract, but whether its

application in this case resulted in a decision that is arbitrary

or capricious. The ALJ acknowledged the inapplicability of

some of the HUD-prescribed factors, but carefully based his

decision on two factors that do logically relate to materiality:

the injury to the public, and the fact that Yetiv benefitted economically from his violations. Relying on irrelevant factors

renders an agency adjudication arbitrary and capricious. See

City of Los Angeles v. U.S. Dep’t of Commerce, 307 F.3d 859,

874 (9th Cir. 2002). Here, however, the ALJ did not do so.

Yetiv has cited no authority, and we have found none, for the

proposition that a decision based on appropriate considerations may be set aside simply because the standard used to

reach it requires consideration of other factors that were found

to be inapplicable (and therefore did not guide the determination). HUD’s standard for determining materiality is certainly

a candidate for revision, but we cannot say that the ALJ’s

decision to impose penalties in this case was arbitrary or

capricious. 

[5] Nor are we persuaded by Yetiv’s challenges to the sufficiency of evidence. In support of his finding that Yetiv’s violations were committed “knowingly,” the ALJ relied on

admissions by Yetiv, an attorney, that he was informed of the

financial reporting requirement prior to entering into the regulatory agreement. These admissions constitute substantial evidence of a knowing violation even if, as Yetiv claims, his

private mortgage broker advised him that the financial report12802 YETIV v. HUD
ing requirement was not routinely enforced. See 12 U.S.C.

§ 1735f-15(h) (a knowing violation may be established,

among other ways, by proof that the mortgagor acted “with

reckless disregard” of the statutory prohibitions). 

[6] In support of his conclusion that Yetiv’s violations were

material, and to determine the amount of the penalty, the ALJ

found that Yetiv benefitted by failing to provide the required

audited statements for the five years in question in an amount

at least equal to the cost of compliance. At the penalty phase,

the ALJ additionally relied upon a survey showing that, for

the fiscal years 2001 and 2002, the annual financial audit

costs of fourteen comparable Houston-area, multi-family projects ranged from $6,000 to $24,631, and averaged $9,118.

Because, as the ALJ noted, the audit costs reflected in the

government’s survey included both the cost of audited financial statements and the cost of preparation of tax returns, it

was not possible to determine with precision what portion of

the total costs were attributable to the cost of audited financial

statements. Despite this deficiency in the record, the ALJ was

entitled to infer from the survey that a substantial portion of

the $9,118 average was incurred for the preparation of an

audited financial statement. We conclude, therefore, that sufficient evidence exists to support both the determination of

materiality, see Order on Secretarial Review, Matter of Associate Trust Financial Servs. (Associate Trust III), HUDALJ

96-008-CMP (Nov. 20, 1997) (evidence of even one factor

may lead to a conclusion that a violation is material),3 and the

amount of the penalties imposed ($50,000 against TREIMee,

and $20,000 against Yetiv and TREIMee jointly). 

We have carefully reviewed the many other arguments

3Our conclusion that evidence of economic benefit to Yetiv was sufficient to support the imposition of penalties makes it unnecessary to consider Yetiv’s argument that the ALJ erred when he found that the risk to

the insurance fund caused by Yetiv’s violations was an “injury to the public” cognizable under 24 C.F.R. § 30.80(d). 

YETIV v. HUD 12803
presented by Yetiv, individually and for his corporation, and

find them to be without merit. Accordingly, the ALJ’s order

imposing civil money penalties is 

PETITION FOR REVIEW DENIED.

NOONAN, Circuit Judge, concurring: 

At oral argument, Yetiv, a lawyer representing himself,

made a spirited case that he was the object of bureaucratic

spite. Reading the record has not entirely dispelled that

impression. Yetiv says he was doing what others did; the government had no loss; he was picked on out of pique. Nonetheless, Yetiv’s legal arguments do not carry the day.

Analogously, a claim of “selective prosecution” of a crime is

rarely a winner. Oyler v. Boles, 368 U.S. 448, 456 (1962)

(“the conscious exercise of some selectivity in enforcement is

not in itself a federal constitutional violation.”) HUD, when

I first became acquainted with it in redevelopment work fifty

years ago, was a lumbering agency, slow to act and not very

vigilant in the performance of its duties. It does not seem to

have changed. Yet an annual report on the financial health of

projects financed by the federal government is not an unreasonable requirement. Failure to file is a material harm to the

agency providing the money. However casually and unexpectedly HUD decides to make an example of a developer, it acts

within its jurisdiction and is not arbitrary in asserting the need

of annual reports as a material aid to its activities.

12804 YETIV v. HUD