This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

59209 

Vol. 70, No. 196 

Wednesday, October 12, 2005 

DEPARTMENT OF HOMELAND 

SECURITY 

Office of the Secretary 

6 CFR Part 13 

[DHS–2005–0059] 

RIN 1601–AA11 

Program Fraud Civil Remedies 

AGENCY: Office of the Secretary, 

Homeland Security. 

ACTION: Interim rule. 

SUMMARY: This interim rule establishes 

uniform administrative procedures for 

the Department of Homeland Security 

(DHS) to implement the Program Fraud 

Civil Remedies Act of 1986 (the Act). 

The interim rule will provide a uniform, 

department-wide, administrative 

process for assessing penalties and 

recovering funds procured by fraud 

under departmental programs. It 

replaces the existing program fraud civil 

remedies rules of entities transferred 

from eight departments and the General 

Services Administration into DHS and 

establishes for the first time civil 

administrative procedures to deal with 

fraud under Federal Emergency 

Management Agency (FEMA) programs. 

DATES: Effective Date: This interim rule 

is effective October 12, 2005. 

Comments: Written comments may be 

submitted to the Department of 

Homeland Security on or before 

November 14, 2005. 

ADDRESSES: You may submit comments, 

identified by Docket DHS–2005–0059 or 

RIN 1601–AA11, Program Fraud Civil 

Remedies, by one of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: FEMA-rules@dhs.gov. 

Include Docket DHS–2005–0059 or RIN 

1601–AA11 Program Fraud Civil 

Remedies, in the subject line of the 

message. 

• Facsimile: Rules Docket Clerk, 

Office of the General Counsel, Federal 

Emergency Management Agency, (fax) 

202–646–4536. Include Docket DHS– 

2005–0059 or RIN 1601–AA11, Program 

Fraud Civil Remedies, in the subject 

line of the message. 

• Mail or Hand Delivery/Courier: For 

paper, disk, or CD–ROM submissions, 

Rules Docket Clerk, Office of the 

General Counsel, Federal Emergency 

Management Agency, Department of 

Homeland Security, 500 C Street, SW., 

Washington, DC 20472. Include Docket 

DHS–2005–0059 or RIN 1601–AA11, 

Program Fraud Civil Remedies, in the 

subject line of the message. 

FOR FURTHER INFORMATION CONTACT: 

Michael Russell, Acting Deputy 

Associate General Counsel, Office of the 

General Counsel, Department of 

Homeland Security, Washington, DC 

20528. Telephone: 202–205–4634 or 

facsimile: 202–772–9735, not toll free 

calls; or email: 

michael.d.russell@dhs.gov. 

SUPPLEMENTARY INFORMATION: 

Public Participation 

Interested persons are invited to 

participate in this rulemaking by 

submitting written data, views, or 

arguments on all aspects of the interim 

rule. DHS also invites comments that 

relate to the economic, environmental, 

or federalism affects that might result 

from this interim rule. Comments that 

will provide the most assistance to DHS 

in developing these procedures will 

reference a specific portion of the 

proposed rule, explain the reason for 

any recommended change, and include 

data, information, or authority that 

support such recommended change. 

I. Background 

This interim rule will implement the 

Program Fraud Civil Remedies Act of 

1986 (the Act) which is codified at 31 

U.S.C. 3801–3812. The Act establishes 

an administrative remedy against 

anyone who makes a false Claim or 

written Statement to any of certain 

Federal agencies, including the 

Department of Homeland Security (DHS 

or the Department). In brief, any person 

who submits a claim or written 

statement to an affected agency knowing 

or having reason to know that it is false, 

fictitious, or fraudulent, is liable for a 

penalty of up to $5,500 per false claim 

or statement and, in addition, with 

respect to claims, for an assessment of 

up to double the amount falsely 

claimed. The Act requires each affected 

Federal agency to publish rules and 

regulations necessary to implement the 

provisions of the Act (31 U.S.C. 3809). 

Congress established DHS in large 

part by transferring entities from other 

Federal departments and agencies to 

DHS. Before their transfer most of these 

entities were part of departments or 

agencies that had published rules under 

the Act. Prior to publication of this rule, 

most of the transferred entities followed 

the rules from their legacy department. 

The following program fraud rules have 

been in force: 

• The program fraud regulations for 

the Bureau of Customs and Border 

Patrol, the Federal Law Enforcement 

Training Center, and the United States 

Secret Service, which were part of the 

U.S. Department of the Treasury, are in 

31 CFR part 16; 

• The program fraud regulations for 

the United States Coast Guard and the 

Transportation Security Administration, 

which were part of the Department of 

Transportation, are in 49 CFR part 31; 

• The program fraud regulations for 

U.S. Citizenship and Immigration 

Services, the Bureau of Immigration and 

Customs Enforcement, the National 

Infrastructure Protection Center, the 

Office of Domestic Preparedness, and 

the Domestic Emergency Support 

Teams, which were part of the 

Department of Justice, are in 28 CFR 

part 71; 

• The program fraud regulations for 

the National Communications System 

and the National Bio-Weapons Defense 

Analysis Center, which were part of the 

Department of Defense, are in 32 CFR 

part 277; 

• The program fraud regulations for 

functions relating to agriculture import 

and entry inspection that were formerly 

in the Department of Agriculture, are in 

7 CFR part 1, subpart L; 

• The program fraud regulations for 

the National Infrastructure Simulation 

and Analysis Center (and energy 

security and assurances programs), 

programs and activities of the 

Department of Energy relating to the 

strategic nuclear defense posture of the 

United States, the Environmental 

Measurements Laboratory and, in some 

cases, the Nuclear Incident Response 

59210 Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 

Team, which were part of the 

Department of Energy are in 10 CFR part 

1013; 

• The program fraud regulations for 

the Critical Infrastructure Assurance 

Office and the Integrated Hazard 

Information System, which were part of 

the Department of Commerce, are in 15 

CFR part 25; 

• The program fraud regulations for 

the Strategic National Stockpile, the 

Office of Emergency Preparedness, the 

National Disaster Medical System, and 

the Metropolitan Medical Response 

System, which were part of the 

Department of Health and Human 

Services, are in 45 CFR part 79; and 

• The program fraud regulations for 

the Federal Protective Service and the 

Federal Computer Incident Response 

Center, which were part of the General 

Services Administration, are in 41 CFR 

part 105–70. 

Although these entities transferred to 

DHS, their published rules and 

procedures for dealing with program 

fraud cases remained in full force and 

effect. The ‘‘savings provision’’ of the 

Homeland Security Act of 2002, section 

1512, ‘‘saves’’ completed administrative 

actions, such as regulations, until such 

time as DHS amends, modifies, 

supersedes, terminates, sets aside, or 

revokes them in accordance with law. 

Pub. L. 107–296 (Nov. 25, 2002). Under 

the savings provision, the legacy 

program fraud regulations from eight 

departments and the General Services 

Administration remained in full force 

and effect for the relevant DHS 

components. 

The only major DHS function not 

previously covered by regulations 

providing for an administrative 

resolution of suspected program fraud 

cases was the Federal Emergency 

Management Agency (FEMA). FEMA’s 

cases of suspected fraud have required 

direct referral to the Department of 

Justice. The Department of Justice made 

a determination on the merits of a case 

and decided whether to proceed on 

either a criminal or civil basis against a 

Defendant. This interim rule will 

provide an administrative process, 

including hearings and appeals for the 

Defendant, to resolve program fraud 

cases for all DHS components, including 

FEMA. As in the past, this interim rule 

contemplates a review by the 

Department of Justice before issuance of 

a complaint against a person suspected 

of program fraud. 

DHS is therefore publishing this 

interim rule to ensure that all of its 

components are covered by rules under 

the Act. Furthermore, we have 

compared this interim rule with the 

rules that currently apply to DHS 

components and believe that this 

interim rule is, in material parts, 

identical to, or indistinguishable from, 

the existing rules. For example, the 

interim rule will mirror the complaint 

processing, hearing, and appeal rights 

that now exist. 

As applied to defendants in actions 

brought by FEMA, the regulations will 

prove less burdensome both to FEMA 

and to defendants. FEMA will have the 

same administrative procedures and 

administrative adjudication that are 

available to the rest of DHS, and, we 

estimate, a greater likelihood that legal 

action would be taken on cases that the 

Department of Justice might not 

otherwise prosecute. This interim rule 

will provide the additional benefit of 

reducing the caseloads in Federal courts 

by diverting actions to civil 

administrative proceedings at DHS. 

Defendants will have the advantage of a 

less formal, perhaps less expensive, 

adjudication and swifter resolution of 

complaints brought by DHS. 

II. The Interim Rule 

This interim rule will implement the 

Program Fraud Civil Remedies Act of 

1986, which imposes, through 

administrative adjudication and 

procedures, civil penalties and 

assessments against certain persons 

making false claims or statements 

against or to the Federal Government. 

The rule contains procedures governing 

the imposition of 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 DHS or any of its 

components. 

III. Procedural Requirements 

Administrative Procedure Act 

Implementation of this rule as an 

interim rule with a request for public 

comment after the effective date of the 

rule is based upon the ‘‘good cause’’

exception found under the 

Administrative Procedure Act (APA) at 

5 U.S.C. 553(b)(B). DHS has determined 

that delaying implementation of this 

rule to await public notice and comment 

is unnecessary, impracticable, and 

contrary to the public interest. 

The rule provides procedures 

governing the imposition of 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 the 

Department or any of its components. 

Congress established DHS in large 

part by transferring entities from other 

federal departments and agencies to 

DHS. Before their transfer most of these 

entities were part of departments or 

agencies that had published rules under 

the Act. Although the entities 

transferred to DHS, their published 

rules and procedures for dealing with 

program fraud cases remained in full 

force and effect. The ‘‘savings 

provision’’ of the Homeland Security 

Act of 2002, section 1512, ‘‘saves’’

completed administrative actions, such 

as regulations, until such time as DHS 

amends, modifies, supersedes, 

terminates, sets-aside or revokes them in 

accordance with law. Under the savings 

provision program fraud regulations that 

the nine entities had in place when they 

transferred to the Department of 

Homeland Security remain in full force 

and effect until DHS amends or 

otherwise changes them. See section 

19.1(d). 

DHS is therefore publishing this 

interim rule to ensure that all of its 

components are covered by rules under 

the Act. Furthermore, we have 

compared this rule against the rules that 

formerly applied to DHS components 

and believe that this rule is, in material 

parts, identical to, or indistinguishable 

from, the former rules. For example, the 

rule mirrors the complaint processing, 

hearing, and appeal rights of the other 

agencies. Since this rule borrows from 

existing rules that have already been 

subject to APA notice and comment 

procedures, and applies very similar 

rules to FEMA, we believe that 

publishing this rule with the usual 

notice and comment procedures is 

unnecessary. 

As applied to defendants in actions 

brought by FEMA, the regulations will 

prove less burdensome both to FEMA 

and to defendants. FEMA will have the 

same administrative procedures and 

administrative adjudication available to 

the rest of DHS, and, we estimate, a 

greater likelihood that legal action may 

be taken on cases that the Department 

of Justice might not otherwise undertake 

to prosecute. It could have the further 

benefit of reducing the caseloads in 

federal courts, diverting actions to civil 

administrative proceedings. Defendants 

will have the advantage of a less formal, 

perhaps less expensive administrative 

and swifter process to resolve 

complaints bought by the Department. 

The Department has a great number of 

grant and other financial assistance 

programs that benefit the public. We, 

therefore, believe it is in the public 

interest to implement this rule as soon 

as possible to afford DHS consolidated, 

uniform remedies under the Act against 

those who attempt to defraud the 

taxpayers. 

Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 59211 

Moreover, the historic assistance and 

relief efforts following Hurricane 

Katrina will make more urgent the need 

for efficient administrative procedures 

for processing cases of fraud. The 

department is responsible to the public 

for stewardship of public funds. The 

increase in the expenditure of program 

funds in response to Hurricane Katrina 

necessitates these immediate measures 

to ensure that resources appropriated for 

relief efforts reach their intended 

recipients. 

DHS also finds good cause, under 5 

U.S.C. 553(d)(3), for this interim rule to 

take effect immediately. DHS finds that, 

for the reasons previously discussed, it 

would be impracticable and contrary to 

the public interest to subject this 

interim rule to prior notice and public 

comment, or to delay its taking effect. 

Although we have good cause to 

publish this rule without prior notice 

and comment, we value public 

comments. The Department does not 

anticipate a significant number of 

comments, but will consider any such 

comments in the process of amending or 

revising the rule in the future. 

Executive Order 12866 

This interim rule is considered by the 

Department of Homeland Security to be 

a ‘‘significant regulatory action’’ under 

Executive Order 12866, section 3(f), 

Regulatory Planning and Review. 58 FR 

51735, October 4, 1993 (Executive 

Order). Under Executive Order 12866 a 

significant regulatory action is subject to 

an Office of Management and Budget 

(OMB) review and to the requirements 

of the Executive Order. The Executive 

Order defines ‘‘significant regulatory 

action’’ as one that is likely to result in 

a rule that may: 

(1) Have an annual effect on the 

economy of $ 100 million or more or 

adversely affect in a material way the 

economy, a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or tribal governments or 

communities; 

(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impact of entitlements, grants, user fees, 

or loan programs or the rights or 

obligations of recipients thereof; 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

Due to the ‘‘savings clause’’ discussed 

above, the only additional programmatic 

impact of this interim rule relates to 

fraud cases resulting from FEMA 

programs—major disasters, emergencies, 

and other financial assistance programs. 

FEMA’s cases of suspected fraud 

currently require direct referral to the 

Department of Justice. The Department 

of Justice makes a determination on the 

merits of a case and decides whether to 

proceed on either a criminal or civil 

basis in the federal courts against a 

defendant. This interim rule will 

provide an administrative process, 

including hearings for the defendant, to 

resolve program fraud cases for all 

components in DHS, including FEMA. It 

is difficult to predict the precise number 

of additional program fraud cases. 

Exogenous variables that could affect 

the number of FEMA program fraud 

cases include the number and severity 

of major disasters and emergencies in a 

given year. FEMA expects that these 

administrative procedures will be less 

costly to defendants than cases referred 

to the Department of Justice and 

litigated in the Federal court system. 

The interim rule will not have an 

annual effect on the economy of $100 

million or more or adversely affect in a 

material way the economy, the legal 

sector, the insurance sector, State, local 

or tribal governments or communities, 

competition, or other sectors of the 

economy. As most other Departments 

and agencies have nearly identical rules 

in place, it will create no serious 

inconsistency or otherwise interfere 

with an action taken or planned by 

another agency. It will not materially 

alter the budgetary impact of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof, although it will alter 

the procedures to be followed when an 

entity is alleged to have engaged in a 

fraudulent act, involving no more than 

$150,000, in a program operated by the 

Department. 

Because this rule announces 

procedures for a unique and relatively 

new cabinet-level department, and 

because DHS engages in uncommon 

relief and assistance efforts such as 

those following Hurricane Katrina, this 

rule may raise novel policy issues. 

Accordingly, this rule was reviewed by 

the Office of Management and Budget. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

mandates that an agency conduct an 

RFA analysis when an agency is 

‘‘required by section 553 * * *, or any 

other law, to publish general notice of 

proposed rulemaking for any proposed 

rule, or publishes a notice of proposed 

rulemaking for interpretative rule 

involving the internal revenue laws of 

the United States * * *.’’ 5 U.S.C. 

603(a). RFA analysis is not required 

when a rule is exempt from notice and 

comment rulemaking under 5 U.S.C. 

553(b). DHS has determined that good 

cause exists under 5 U.S.C. 553(b)(B) to 

exempt this rule from the notice and 

comment requirements of 5 U.S.C. 

553(b). Therefore no RFA analysis under 

5 U.S.C. 603 is required for this rule. 

Unfunded Mandates Reform Act of 1995 

The Unfunded Mandates Reform Act 

of 1995 (2 U.S.C. 1531–1538) requires 

Federal agencies to assess the effects of 

their discretionary regulatory actions. In 

particular, the Act addresses actions 

that may result in the expenditure by a 

State, local, or tribal government, in the 

aggregate, or by the private sector of 

$100,000,000 or more in any one year. 

The Act does not require an assessment 

in the case of an interim rule issued 

without prior notice and public 

comment. Nevertheless, DHS does not 

expect this rule to result in such an 

expenditure. We discuss this rule’s 

effects elsewhere in this preamble. 

Executive Order 13132, Federalism 

This interim rule 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. It will not 

preempt any state laws. In accordance 

with section 6 of Executive Order 

13132, we determine that this rule will 

not have federalism implications 

sufficient to warrant the preparation of 

a federalism impact statement. 

Executive Order 12988, Civil Justice 

Reform 

This interim rule meets the applicable 

standards in section 3(a) and 3(b)(2) of 

Executive Order 12988. 

Paperwork Reduction Act 

This interim rule will not require or 

invite any additional record or 

information maintenance, submission, 

or collection for the DHS programs. 

Therefore, this interim rule will not 

invoke the requirements of the 

Paperwork Reduction Act, 44 U.S.C. 

3501 et seq. 

List of Subjects in 6 CFR Part 13 

Administrative practice and 

procedure, Claims, Fraud, Penalties. 

Authority and Issuance 

■ This interim rule is issued under the 

authority of 31 U.S.C. 3809. 

Accordingly, chapter I of 6 CFR is 

amended by adding part 13 to read as 

follows: 

59212 Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 

PART 13—PROGRAM FRAUD CIVIL 

REMEDIES 

Sec. 

13.1 Basis, purpose, scope and effect. 

13.2 Definitions. 

13.3 Basis for civil penalties and 

assessments. 

13.4 Investigation. 

13.5 Review by the Reviewing Official. 

13.6 Prerequisites for issuing a Complaint. 

13.7 Complaint. 

13.8 Service of Complaint. 

13.9 Answer. 

13.10 Default upon failure to answer. 

13.11 Referral of Complaint and answer to 

the ALJ. 

13.12 Notice of hearing. 

13.13 Parties to the hearing. 

13.14 Separation of functions. 

13.15 Ex parte contacts. 

13.16 Disqualification of Reviewing Official 

or ALJ. 

13.17 Rights of parties. 

13.18 Authority of the ALJ. 

13.19 Prehearing conferences. 

13.20 Disclosure of Documents. 

13.21 Discovery. 

13.22 Exchange of witness lists, Statements, 

and exhibits. 

13.23 Subpoenas for attendance at hearing. 

13.24 Protective order. 

13.25 Fees. 

13.26 Filing, form and service of papers. 

13.27 Computation of time. 

13.28 Motions. 

13.29 Sanctions. 

13.30 The hearing and burden of proof. 

13.31 Determining the amount of penalties 

and assessments. 

13.32 Location of hearing. 

13.33 Witnesses. 

13.34 Evidence. 

13.35 The record. 

13.36 Post-hearing briefs. 

13.37 Initial Decision. 

13.38 Reconsideration of Initial Decision. 

13.39 Appeal to Authority Head. 

13.40 Stays ordered by the Department of 

Justice. 

13.41 Stay pending appeal. 

13.42 Judicial review. 

13.43 Collection of civil penalties and 

assessments. 

13.44 Right to administrative offset. 

13.45 Deposit in Treasury of United States. 

13.46 Compromise or settlement. 

13.47 Limitations. 

Authority: Pub. L. 107–296, 116 Stat. 2135 

(6 U.S.C., Ch. 1, sections 101 et seq.); 5 U.S.C. 

301; 31 U.S.C. 3801–3812. 

§ 13.1 Basis, purpose, scope and effect. 

(a) Basis. This part implements the 

Program Fraud Civil Remedies Act of 

1986, 31 U.S.C. 3801–3812. Section 

3809 of title 31, United States Code, 

requires each authority to promulgate 

regulations necessary to implement the 

provisions of the statute. 

(b) Purpose. This part: 

(1) Establishes administrative 

procedures for imposing 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 the Authority or 

to certain others; and 

(2) Specifies the hearing and appeal 

rights of Persons subject to allegations of 

liability for such penalties and 

assessments. 

(c) Scope. This part applies to all 

components of the Department of 

Homeland Security. 

(d) Effect. (1) This part applies to 

program fraud cases initiated by any 

component of the Department of 

Homeland Security on or after October 

12, 2005. 

(2) Program fraud cases initiated by 

any component of the Department of 

Homeland Security before October 12, 

2005, but not completed before October 

12, 2005, will continue to completion 

under the rules and procedures in effect 

before this part. 

§ 13.2 Definitions. 

The following definitions have 

general applicability throughout this 

part: 

(a) 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. 

An ALJ will preside at any hearing 

convened under the regulations in this 

part. 

(b) Authority means the Department 

of Homeland Security. 

(c) Authority Head means the Deputy 

Secretary, Department of Homeland 

Security, or another officer designated 

by the Deputy Secretary. 

(d) Benefit means, in the context of a 

Statement, anything of value, including 

but not limited to any advantage, 

preference, privilege, license, permit, 

favorable decision, ruling, status, or 

loan guarantee. 

(e) Claim means any request, demand, 

or submission: 

(1) Made to the Authority for 

property, services, or money (including 

money representing grants, loans, 

insurance, or Benefits); 

(2) Made to a recipient of property, 

services, or money from the Authority 

or to a party to a contract with the 

Authority: 

(i) For property or services if the 

United States: 

(A) Provided such property or 

services; 

(B) Provided any portion of the funds 

for the purchase of such property or 

services; or 

(C) Will reimburse such recipient or 

party for the purchase of such property 

or services; or 

(ii) For the payment of money 

(including money representing grants, 

loans, insurance, or Benefits) if the 

United States: 

(A) Provided any portion of the 

money requested or demanded; or 

(B) Will reimburse such recipient or 

party for any portion of the money paid 

on such request or demand; or 

(3) Made to the Authority which has 

the effect of decreasing an obligation to 

pay or account for property, services, or 

money. 

(f) Complaint means the 

administrative Complaint served by the 

Reviewing Official on the Defendant 

under § 13.7. 

(g) Defendant means any Person 

alleged in a Complaint under § 13.7 to 

be liable for a civil penalty or 

assessment under § 13.3. 

(h) Government means the 

Government of the United States. 

(i) Individual means a natural Person. 

(j) Initial Decision means the written 

decision of the ALJ required by § 13.10 

or § 13.37, and includes a revised Initial 

Decision issued following a remand or 

a motion for reconsideration. 

(k) Investigating Official means the 

Inspector General of the Department of 

Homeland Security or an officer or 

employee of the Office of the Inspector 

General designated by the Inspector 

General and eligible under 31 U.S.C. 

3801(a)(4)(B). 

(l) Knows or Has Reason to Know, 

means that a Person, with respect to a 

Claim or Statement: 

(1) Has actual knowledge that the 

Claim or Statement is false, fictitious, or 

fraudulent; 

(2) Acts in deliberate ignorance of the 

truth or falsity of the Claim or 

Statement; or 

(3) Acts in reckless disregard of the 

truth or falsity of the Claim or 

Statement. 

(m) Makes includes presents, submits, 

and causes to be made, presented, or 

submitted. As the context requires, 

Making or Made will likewise include 

the corresponding forms of such terms. 

(n) Person means any Individual, 

partnership, corporation, association, or 

private organization, and includes the 

plural of that term. 

(o) Representative means an attorney 

who is a member in good standing of the 

bar of any State, Territory, or possession 

of the United States, the District of 

Columbia, or the Commonwealth of 

Puerto Rico. This definition is not 

intended to foreclose pro se 

appearances. That is, an Individual may 

appear for himself or herself, and a 

corporation or other entity may appear 

by an owner, officer, or employee of the 

corporation or entity. 

(p) Reviewing Official means the 

General Counsel of the Department of 

Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 59213 

Homeland Security, or other officer or 

employee of the Department who is 

designated by the General Counsel and 

eligible under 31 U.S.C. 3801(a)(8). 

(q) Statement means any 

representation, certification, affirmation, 

Document, record, or accounting or 

bookkeeping entry Made: 

(1) With respect to a Claim or to 

obtain the approval or payment of a 

Claim (including relating to eligibility to 

Make a Claim); or 

(2) With respect to (including relating 

to eligibility for): 

(i) A contract with, or bid or proposal 

for a contract with 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; or 

(ii) 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. 

§ 13.3 Basis for civil penalties and 

assessments. 

(a) Claims. (1) Except as provided in 

paragraph (c) of this section, a Person 

will be subject, in addition to any other 

remedy that may be prescribed by law, 

to a civil penalty of not more than 

$5,500 for each Claim (as adjusted in 

accordance with the Federal Civil 

Penalties Inflation Adjustment Act of 

1990 (Public Law 101–140), as amended 

by the Debt Collection Improvement Act 

of 1996 (Public Law 104–134)) if such 

Person Makes a Claim that such Person 

Knows or Has Reason to Know: 

(i) Is false, fictitious, or fraudulent; 

(ii) Includes or is supported by any 

written Statement that asserts a material 

fact that is false, fictitious, or 

fraudulent; 

(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 that 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 will be considered Made 

to the Authority, recipient, or party 

when such Claim is actually Made to an 

agent, fiscal intermediary, or other 

entity, including any State or political 

subdivision thereof, acting for or on 

behalf of the Authority, recipient, or 

party. 

(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 (including transferred property 

or provided services) on a Claim, a 

Person subject to a civil penalty under 

paragraph (a)(1) of this section will also 

be subject to an assessment of not more 

than twice the amount of such Claim or 

that portion thereof that is determined 

to be in violation of paragraph (a)(1) of 

this section. Such assessment will be in 

lieu of damages sustained by the 

Government because of such Claim. 

(b) Statements. (1) Except as provided 

in paragraph (c) of this section, a Person 

will be subject, in addition to any other 

remedy that may be prescribed by law, 

to a civil penalty of not more than 

$5,500 (as adjusted in accordance with 

the Federal Civil Penalties Inflation 

Adjustment Act of 1990 (Public Law 

101–140), as amended by the Debt 

Collection Improvement Act of 1996 

(Public Law 104–134)) if such Person 

Makes a written Statement that: 

(i) The Person Knows or Has Reason 

to Know: 

(A) Asserts a material fact that is false, 

fictitious, or fraudulent; or 

(B) Is false, fictitious, or fraudulent 

because it omits a material fact that the 

Person Making the Statement has a duty 

to include in such Statement; and 

(ii) Contains, or is accompanied by, an 

express certification or affirmation of 

the truthfulness and accuracy of the 

contents of the Statement. 

(2) Each written representation, 

certification, or affirmation constitutes a 

separate Statement. 

(3) A Statement will be considered 

Made to the Authority when such 

Statement is actually Made to an agent, 

fiscal intermediary, or other entity, 

including any State or political 

subdivision thereof, acting for or on 

behalf of the Authority. 

(c) Specific intent not required. No 

proof of specific intent to defraud is 

required to establish liability under this 

section. 

(d) More than one Person liable. (1) In 

any case in which it is determined that 

more than one Person is liable for 

Making a Claim or Statement under this 

section, each such Person may be held 

liable for a civil penalty under this 

section. 

(2) In any case in which it is 

determined that more than one Person 

is liable for Making a Claim under this 

section on which the Government has 

Made payment (including transferred 

property or provided services), an 

assessment may be imposed against any 

such Person or jointly and severally 

against any combination of such 

Persons. 

§ 13.4 Investigation. 

(a) If an Investigating Official 

concludes that a subpoena pursuant to 

the Authority conferred by 31 U.S.C. 

3804(a) is warranted: 

(1) The subpoena so issued will notify 

the Person to whom it is addressed of 

the Authority under which the 

subpoena is issued and will identify the 

records or Documents sought; 

(2) The Investigating Official may 

designate a Person to act on his or her 

behalf to receive the Documents sought; 

and 

(3) The Person receiving such 

subpoena will be required to tender to 

the Investigating Official or the Person 

designated to receive the Documents a 

certification that the Documents sought 

have been produced, or that such 

Documents are not available and the 

reasons therefore, or that such 

Documents, suitably identified, have 

been withheld based upon the assertion 

of an identified privilege. 

(b) If the Investigating Official 

concludes that an action under the Act 

may be warranted, the Investigating 

Official will submit a report containing 

the findings and conclusions of such 

investigation to the Reviewing Official. 

(c) Nothing in this section will 

preclude or limit an Investigating 

Official’s discretion to refer allegations 

directly to the Department of Justice for 

suit under the False Claims Act or other 

civil relief, or to defer or postpone a 

report or referral to the Reviewing 

Official to avoid interference with a 

criminal investigation or prosecution. 

(d) Nothing in this section modifies 

any responsibility of an Investigating 

Official to report violations of criminal 

law to the Attorney General. 

§ 13.5 Review by the Reviewing Official. 

(a) If, based on the report of the 

Investigating Official under § 13.4(b), 

the Reviewing Official determines that 

there is adequate evidence to believe 

that a Person is liable under § 13.3, the 

Reviewing Official will transmit to the 

Attorney General a written notice of the 

59214 Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 

Reviewing Official’s intention to issue a 

Complaint under § 13.7. 

(b) Such notice will include: 

(1) A Statement of the Reviewing 

Official’s reasons for issuing a 

Complaint; 

(2) A Statement specifying the 

evidence that supports the allegations of 

liability; 

(3) A description of the Claims or 

Statements upon which the allegations 

of liability are based; 

(4) An estimate of the amount of 

money or the value of property, 

services, or other Benefits requested or 

demanded in violation of § 13.3; 

(5) A Statement of any exculpatory or 

mitigating circumstances that may relate 

to the Claims or Statements 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. 

§ 13.6 Prerequisites for issuing a 

Complaint. 

(a) The Reviewing Official may issue 

a Complaint under § 13.7 only if: 

(1) The Department of Justice 

approves the issuance of a Complaint in 

a written Statement described in 31 

U.S.C. 3803(b)(1); and 

(2) In the case of allegations of 

liability under § 13.3(a) with respect to 

a Claim, the Reviewing Official 

determines that, with respect to such 

Claim or a group of related Claims 

submitted at the same time such Claim 

is submitted (as defined in paragraph (b) 

of this section), the amount of money or 

the value of property or services 

demanded or requested in violation of 

§ 13.3(a) does not exceed $150,000. 

(b) For the purposes of this section, a 

related group of Claims submitted at the 

same time will include only those 

Claims arising from the same 

transaction (e.g., grant, loan, 

application, or contract) that are 

submitted simultaneously as part of a 

single request, demand, or submission. 

(c) Nothing in this section will be 

construed to limit the Reviewing 

Official’s authority to join in a single 

Complaint against a Person’s Claims 

that are unrelated or were not submitted 

simultaneously, regardless of the 

amount of money, or the value of 

property or services, demanded or 

requested. 

§ 13.7 Complaint. 

(a) On or after the date the 

Department of Justice approves the 

issuance of a Complaint in accordance 

with 31 U.S.C. 3803(b)(1), the 

Reviewing Official may serve a 

Complaint on the Defendant, as 

provided in § 13.8. 

(b) The Complaint will state: 

(1) The allegations of liability against 

the Defendant, including the statutory 

basis for liability, an identification of 

the Claims or Statements that are the 

basis for the alleged liability, and the 

reasons why 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) Instructions for filing an answer to 

request a hearing, including a specific 

Statement of the Defendant’s right to 

request a hearing by filing an answer 

and to be represented by a 

Representative; and 

(4) That failure to file an answer 

within 30 days of service of the 

Complaint will result in the imposition 

of the maximum amount of penalties 

and assessments without right to appeal, 

as provided in § 13.10. 

(5) That the Defendant may obtain 

copies of relevant material and 

exculpatory information pursuant to the 

process outlined in § 13.20. 

(c) At the same time the Reviewing 

Official serves the Complaint, he or she 

will serve the Defendant with a copy of 

the regulations in this part. 

§ 13.8 Service of Complaint. 

(a) Service of a Complaint must be 

Made by certified or registered mail or 

by delivery in any manner authorized 

by Rule 4(d) of the Federal Rules of 

Civil Procedure. Service of a Complaint 

is complete upon receipt. 

(b) Proof of service, stating the name 

and address of the Person on whom the 

Complaint was served, and the manner 

and date of service, may be Made by: 

(1) Affidavit of the Individual serving 

the Complaint by delivery; 

(2) A United States Postal Service 

return receipt card acknowledging 

receipt; or 

(3) Written acknowledgment of 

receipt by the Defendant or his or her 

Representative; or 

(4) In case of service abroad, 

authentication in accordance with the 

Convention on Service Abroad of 

Judicial and Extrajudicial Documents in 

Commercial and Civil Matters. 

§ 13.9 Answer. 

(a) The Defendant may request a 

hearing by serving an answer on the 

Reviewing Official within 30 days of 

service of the Complaint. Service of an 

answer will be Made by delivering a 

copy to the Reviewing Official or by 

placing a copy in the United States mail, 

postage prepaid and addressed to the 

Reviewing Official. Service of an answer 

is complete upon such delivery or 

mailing. An answer will be deemed to 

be a request for hearing. 

(b) In the answer, the Defendant: 

(1) Will admit or deny each of the 

allegations of liability Made in the 

Complaint; 

(2) Will state any defense on which 

the Defendant intends to rely; 

(3) May state any reasons why the 

Defendant contends that the penalties 

and assessments should be less than the 

statutory maximum; and 

(4) Will state the name, address, and 

telephone number of the Person 

authorized by the Defendant to act as 

Defendant’s Representative, if any. 

(c) If the Defendant is unable to file 

an answer meeting the requirements of 

paragraph (b) of this section within the 

time provided, the Defendant may, 

before the expiration of 30 days from 

service of the Complaint, serve on the 

Reviewing Official a general answer 

denying liability and requesting a 

hearing, and a request for an extension 

of time within which to serve an answer 

meeting the requirements of paragraph 

(b) of this section. The Reviewing 

Official will file promptly the 

Complaint, the general answer denying 

liability, and the request for an 

extension of time as provided in § 13.11. 

For good cause shown, the ALJ may 

grant the Defendant up to 30 additional 

days from the original due date within 

which to serve an answer meeting the 

requirements of paragraph (b) of this 

section. 

§ 13.10 Default upon failure to answer. 

(a) If the Defendant does not answer 

within the time prescribed in § 13.9(a), 

the Reviewing Official may refer the 

Complaint to an ALJ by filing the 

Complaint and a Statement that 

Defendant has failed to answer on time. 

(b) Upon the referral of the Complaint, 

the ALJ will promptly serve on 

Defendant in the manner prescribed in 

§ 13.8, a notice that an Initial Decision 

will be issued under this section. 

(c) In addition, the ALJ will assume 

the facts alleged in the Complaint to be 

true, and, if such facts establish liability 

under § 13.3, the ALJ will issue an 

Initial Decision imposing the maximum 

amount of penalties and assessments 

allowed under the statute. 

(d) Except as otherwise provided in 

this section, by failing to answer on 

time, the Defendant waives any right to 

further review of the penalties and 

assessments imposed under paragraph 

(c) of this section, and the Initial 

Decision will become final and binding 

upon the parties 30 days after it is 

issued. 

Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 59215 

(e) If, before such an Initial Decision 

becomes final, the Defendant files a 

motion seeking to reopen on the 

grounds that extraordinary 

circumstances prevented the Defendant 

from answering, the Initial Decision will 

be stayed pending the ALJ’s decision on 

the motion. 

(f) If, on such motion, the Defendant 

can demonstrate extraordinary 

circumstances excusing the failure to 

answer on time, the ALJ will withdraw 

the Initial Decision in paragraph (c) of 

this section, if such a decision has been 

issued, and will grant the Defendant an 

opportunity to answer the Complaint. 

(g) A decision of the ALJ denying a 

Defendant’s motion under paragraph (e) 

of this section is not subject to 

reconsideration under § 13.38. 

(h) The Defendant may appeal to the 

Authority Head the decision denying a 

motion to reopen by filing a notice of 

appeal in accordance with § 13.26 

within 15 days after the ALJ denies the 

motion. The timely filing of a notice of 

appeal will stay the Initial Decision 

until the Authority Head decides the 

issue. 

(i) If the Defendant files a timely 

notice of appeal with the Authority 

Head, the ALJ will forward the record of 

the proceeding to the Authority Head. 

(j) The Authority Head will decide 

expeditiously whether extraordinary 

circumstances excuse the Defendant’s 

failure to answer on time based solely 

on the record before the ALJ. 

(k) If the Authority Head decides that 

extraordinary circumstances excused 

the Defendant’s failure to answer on 

time, the Authority Head will remand 

the case to the ALJ with instructions to 

grant the Defendant an opportunity to 

answer. 

(l) If the Authority Head decides that 

the Defendant’s failure to answer on 

time is not excused, the Authority Head 

will reinstate the Initial Decision of the 

ALJ, which will become final and 

binding upon the parties 30 days after 

the Authority Head issues such 

decision. 

§ 13.11 Referral of Complaint and answer 

to the ALJ. 

Upon receipt of an answer, the 

Reviewing Official will refer the matter 

to an ALJ by filing the Complaint and 

answer in accordance with § 13.26. 

§ 13.12 Notice of hearing. 

(a) When the ALJ receives the 

Complaint and answer, the ALJ will 

promptly serve a notice of hearing upon 

the Defendant in the manner prescribed 

by § 13.8. 

(b) Such notice will include: 

(1) The tentative time and place, and 

the nature of the hearing; 

(2) The legal authority and 

jurisdiction under which the hearing is 

to be 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 Representative of the 

Government and of the Defendant, if 

any; and 

(6) Such other matters as the ALJ 

deems appropriate. 

§ 13.13 Parties to the hearing. 

(a) The parties to the hearing will be 

the Defendant and the Authority. 

(b) Pursuant to 31 U.S.C. 3730(c)(5), a 

private plaintiff under the False Claims 

Act may participate in these 

proceedings to the extent authorized by 

the provisions of that Act. 

§ 13.14 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 Initial 

Decision or the review of the Initial 

Decision by the Authority Head, except 

as a witness or a Representative in 

public proceedings; or 

(3) Make the collection of penalties 

and assessments under 31 U.S.C. 3806. 

(b) The ALJ will not be responsible to, 

or subject to the supervision or direction 

of, the Investigating Official or the 

Reviewing Official. 

(c) Except as provided in paragraph 

(a) of this section, the Representative for 

the Government may be employed 

anywhere in the Authority, including in 

the offices of either the Investigating 

Official or the Reviewing Official. 

§ 13.15 Ex parte contacts. 

No party or Person (except employees 

of the ALJ’s office) will communicate in 

any way with the ALJ on any matter at 

issue in a case, unless on notice and 

opportunity for all parties to participate. 

This provision does not prohibit a 

Person or party from inquiring about the 

status of a case or asking routine 

questions concerning administrative 

functions or procedures. 

§ 13.16 Disqualification of Reviewing 

Official or ALJ. 

(a) A Reviewing Official or ALJ in a 

particular case may disqualify himself 

or herself at any time. 

(b) A party may file a motion for 

disqualification of a Reviewing Official 

or an ALJ. Such motion will be 

accompanied by an affidavit alleging 

personal bias or other reason for 

disqualification. 

(c) Such motion and affidavit will be 

filed promptly upon the party’s 

discovery of reasons requiring 

disqualification, or such objections will 

be deemed waived. 

(d) Such affidavit will state specific 

facts that support the party’s belief that 

personal bias or other reason for 

disqualification exists and the time and 

circumstances of the party’s discovery 

of such facts. It will be accompanied by 

a certificate of the Representative of 

record that it is Made in good faith. 

(e)(1) If the ALJ determines that a 

Reviewing Official is disqualified, the 

ALJ will dismiss the Complaint without 

prejudice. 

(2) If the ALJ disqualifies himself or 

herself, the case will be reassigned 

promptly to another ALJ. 

(3) If the ALJ denies a motion to 

disqualify, the Authority Head may 

determine the matter only as part of his 

or her review of the Initial Decision 

upon appeal, if any. 

§ 13.17 Rights of parties. 

Except as otherwise limited by this 

part, all parties may: 

(a) Be accompanied, represented, and 

advised by a Representative; 

(b) Participate in any conference held 

by the ALJ; 

(c) Conduct discovery; 

(d) Agree to stipulations of fact or law, 

which will be Made part of the record; 

(e) Present evidence relevant to the 

issues at the hearing; 

(f) Present and cross-examine 

witnesses; 

(g) Present oral arguments at the 

hearing as permitted by the ALJ; and 

(h) Submit written briefs and 

proposed findings of fact and 

conclusions of law after the hearing. 

§ 13.18 Authority of the ALJ. 

(a) The ALJ will conduct a fair and 

impartial hearing, avoid delay, maintain 

order, and assure that a record of the 

proceeding is Made. 

(b) 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 the 

attendance of witnesses and the 

production of Documents at depositions 

or at hearings; 

59216 Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 

(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 where 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. 

(c) The ALJ does not have the 

authority to Make any determinations 

regarding the validity of treaties or other 

international agreements, Federal 

statutes or regulations, or Departmental 

Orders or Directives. 

§ 13.19 Prehearing conferences. 

(a) The ALJ may schedule prehearing 

conferences as appropriate. 

(b) Upon the motion of any party, the 

ALJ will schedule at least one 

prehearing conference at a reasonable 

time in advance of the hearing. 

(c) The ALJ may use prehearing 

conferences to discuss the following: 

(1) Simplification of the issues; 

(2) The necessity or desirability of 

amendments to the pleadings, including 

the need for a more definite Statement; 

(3) Stipulations and admissions of fact 

or as to the contents and authenticity of 

Documents; 

(4) Whether the parties can agree to 

submission of the case on a stipulated 

record; 

(5) Whether a party chooses to waive 

appearance at an oral hearing and to 

submit only documentary evidence 

(subject to the objection of other parties) 

and written argument; 

(6) Limitation of the number of 

witnesses; 

(7) Scheduling dates for the exchange 

of witness lists and of proposed 

exhibits; 

(8) Discovery; 

(9) The time and place for the hearing; 

and 

(10) Such other matters as may tend 

to expedite the fair and just disposition 

of the proceedings. 

(d) The ALJ may issue an order 

containing all matters agreed upon by 

the parties or ordered by the ALJ at a 

prehearing conference. 

§ 13.20 Disclosure of Documents. 

(a) Upon written request to the 

Reviewing Official, the Defendant may 

review, at a time and place convenient 

to the Authority, any relevant and 

material Documents, transcripts, 

records, and other materials that relate 

to the allegations set out in the 

Complaint and upon which the findings 

and conclusions of the Investigating 

Official under § 13.4(b) are based, unless 

such Documents are subject to a 

privilege under Federal law. Special 

arrangements as to confidentiality may 

be required by the Reviewing Official, 

who may also assert privilege or other 

related doctrines. Upon payment of fees 

for duplication, the Defendant may 

obtain copies of such Documents. 

(b) Upon written request to the 

Reviewing Official, the Defendant also 

may obtain a copy of all exculpatory 

information in the possession of the 

Reviewing Official or Investigating 

Official relating to the allegations in the 

Complaint, even if it is contained in a 

Document that would otherwise be 

privileged. If the Document would 

otherwise be privileged, only that 

portion containing exculpatory 

information must be disclosed. 

(c) The notice sent to the Attorney 

General from the Reviewing Official as 

described in § 13.5 is not discoverable 

under any circumstances. 

(d) The Defendant may file a motion 

to compel disclosure of the Documents 

subject to the provisions of this section. 

Such a motion may only be filed 

following the serving of an answer 

pursuant to § 13.9. 

§ 13.21 Discovery. 

(a) In general. (1) The following types 

of discovery are authorized: 

(i) Requests for production of 

Documents for inspection and copying; 

(ii) Requests for admissions of the 

authenticity of any relevant Document 

or of the truth of any relevant fact; 

(iii) Written interrogatories; and 

(iv) Depositions. 

(2) Unless mutually agreed to by the 

parties, discovery is available only as 

ordered by the ALJ. The ALJ will 

regulate the timing of discovery. 

(b) Documents defined. (1) For the 

purpose of this section and §§ 13.22 and 

13.23, the term Documents includes 

information, documents, reports, 

answers, records, accounts, papers, and 

other data and documentary evidence. 

(2) Nothing in this part will be 

interpreted to require the creation of a 

Document. 

(c) Motions for discovery. (1) A party 

seeking discovery may file a motion. 

Such a motion will be accompanied by 

a copy of the request for production of 

Documents, request for admissions, or 

interrogatories or, in the case of 

depositions, a summary of the scope of 

the proposed deposition. 

(2) Within ten days of service, a party 

may file an opposition to the motion or 

a motion for protective order as 

provided in § 13.24. 

(3) The ALJ may grant a motion for 

discovery only if he or she finds that the 

discovery sought: 

(i) Is necessary for the expeditious, 

fair, and reasonable consideration of the 

issues; 

(ii) Is not unduly costly or 

burdensome; 

(iii) Will not unduly delay the 

proceeding; and 

(iv) Does not seek privileged 

information. 

(4) The burden of showing that 

discovery should be allowed is on the 

party seeking discovery. 

(5) The ALJ may grant discovery 

subject to a protective order under 

§ 13.24. 

(d) Depositions. (1) If a motion for 

deposition is granted, the ALJ will issue 

a subpoena for the deponent, which 

may require the deponent to produce 

Documents. The subpoena will specify 

the time and place at which the 

deposition will be held. Deposition 

requests for senior level DHS officials 

(including career and non-career senior 

executive level employees) shall not be 

approved absent showing of compelling 

need that cannot be met by any other 

means. 

(2) The party seeking to depose will 

serve the subpoena in the manner 

prescribed in § 13.8. 

(3) The deponent may file a motion to 

quash the subpoena or a motion for a 

protective order within ten days of 

service. If the ALJ has not acted on such 

a motion by the return date, such date 

will be suspended pending the ALJ’s 

final action on the motion. 

(4) The party seeking to depose will 

provide for the taking of a verbatim 

transcript of the deposition, which it 

will Make available to all other parties 

for inspection and copying. 

(e) Each party will bear its own costs 

of discovery. 

§ 13.22 Exchange of witness lists, 

Statements, and exhibits. 

(a) At least 15 days before the hearing 

or at such other time as may be ordered 

by the ALJ, the parties will exchange 

witness lists, copies of prior Statements 

of proposed witnesses, and copies of 

proposed hearing exhibits, including 

copies of any written Statements that 

the party intends to offer in lieu of live 

testimony in accordance with § 13.33(b). 

At the time the above Documents are 

Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 59217 

exchanged, any party that intends to 

rely on the transcript of deposition 

testimony in lieu of live testimony at the 

hearing, if permitted by the ALJ, will 

provide each party with a copy of the 

specific pages of the transcript it intends 

to introduce into evidence. 

(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 of any exhibit 

not provided to the opposing party as 

provided above unless the ALJ finds 

good cause for the failure or that there 

is no prejudice to the objecting party. 

(c) Unless another party objects 

within the time set by the ALJ, 

Documents exchanged in accordance 

with paragraph (a) of this section will be 

deemed to be authentic for the purpose 

of admissibility at the hearing. 

§ 13.23 Subpoenas for attendance at 

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. Requests 

for witness testimony of senior level 

DHS officials (including career and noncareer senior executive level employees) 

shall not be approved absent a showing 

of compelling need that cannot be met 

by any other means. 

(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 will 

file a written request therefore not less 

than 15 days before the date fixed for 

the hearing unless otherwise allowed by 

the ALJ for good cause shown. Such 

request will be accompanied by a 

proposed subpoena, which will specify 

and Documents to be produced and will 

designate the witnesses and describe the 

address and location thereof with 

sufficient particularity to permit such 

witnesses to be found. 

(d) The subpoena will 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 

will serve it in the manner prescribed in 

§ 13.8. A subpoena on a party or upon 

an Individual under the control of party 

may be served by first class mail. 

(f) A party or the Individual to whom 

the subpoena is directed may file 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. If the ALJ has not acted on 

such a motion by the return date, such 

date will be suspended pending the 

ALJ’s final action on the motion. 

§ 13.24 Protective order. 

(a) A party or a prospective witness or 

deponent may file a motion for a 

protective order with respect to 

discovery sought by an opposing party 

or with respect to the hearing, seeking 

to limit the availability or disclosure of 

evidence. 

(b) In issuing a protective order, the 

ALJ may Make any order that 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 discovery not be had; 

(2) That the discovery may be had 

only on specified terms and conditions, 

including a designation of the time or 

place; 

(3) That the discovery may be had 

only through a method of discovery 

other than that requested; 

(4) That certain matters not be 

inquired into, or that the scope of 

discovery be limited to certain matters; 

(5) That discovery be conducted with 

no one present except Persons 

designated by the ALJ; 

(6) That the contents of discovery or 

evidence be sealed; 

(7) That a deposition after being 

sealed 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 not be disclosed or be 

disclosed only in a designated way; and 

(9) That the parties simultaneously 

submit to the ALJ specified Documents 

or information enclosed in sealed 

envelopes to be opened as directed by 

the ALJ. 

§ 13.25 Fees. 

The party requesting a subpoena will 

pay the cost of the fees and mileage of 

any witness subpoenaed 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 will accompany the subpoena 

when served, except that when a 

subpoena is issued on behalf of the 

Authority, a check for witness fees and 

mileage need not accompany the 

subpoena. 

§ 13.26 Filing, form and service of papers. 

(a) Filing and form. (1) Documents 

filed with the ALJ will include an 

original and two copies. 

(2) Every pleading and paper filed in 

the proceeding will contain a caption 

setting forth the title of the action, the 

case number assigned by the ALJ, and 

a designation of the paper (e.g., Motion 

to Quash Subpoena). 

(3) Every pleading and paper will be 

signed by, and will contain the address 

and telephone number of, the party or 

the Person on whose behalf the paper 

was filed, or his or her Representative. 

(4) Papers are considered filed when 

they are mailed. Date of mailing 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. 

(b) Service. A party filing a Document 

will, at the time of filing, serve a copy 

of such Document on every other party. 

Service upon any party of any 

Document other than those required to 

be served as prescribed in § 13.8 will be 

Made by delivering a copy, or by 

placing a copy of the Document in the 

United States mail, postage prepaid and 

addressed, to the party’s last known 

address. When a party is represented by 

a Representative, service will be Made 

upon such Representative in lieu of the 

actual party. 

(c) Proof of service. A certificate of the 

Individual serving the Document by 

Personal delivery or by mail, setting 

forth the manner of service, will be 

proof of service. 

§ 13.27 Computation of time. 

(a) In computing any period of time 

under this part or in an order issued 

thereunder, 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 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 

observed by the Federal Government 

will be excluded from the computation. 

(c) Where a Document has been 

served or issued by placing it in the 

United States mail, an additional five 

days will be added to the time permitted 

for any responses. 

§ 13.28 Motions. 

(a) Any application to the ALJ for an 

order or ruling will be by motion. 

Motions will state the relief sought, the 

authority relied upon, and the facts 

alleged, and will be filed and served on 

all other parties. 

(b) Except for motions Made during a 

prehearing conference or at the hearing, 

all motions will be in writing. The ALJ 

may require that oral motions be 

reduced to writing. 

59218 Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 

(c) Within 15 days after a written 

motion is served, or such other time as 

may be fixed by the ALJ, any party may 

file a response to such motion. 

(d) The ALJ may not grant a written 

motion before the time for filing 

response thereto has expired, except 

upon consent of the parties or following 

a hearing on the motion, but may 

overrule or deny such motion without 

awaiting a response. 

(e) The ALJ will Make a reasonable 

effort to dispose of all outstanding 

motions before the hearing begins. 

(f) Except as provided by 

§§ 13.21(e)(3) and 13.23(f), which 

concern subpoenas, the filing or 

pendency of a motion will not 

automatically alter or extend a deadline 

or return date. 

§ 13.29 Sanctions. 

(a) The ALJ may sanction a Person, 

including any party or Representative, 

for: 

(1) Failing to comply with an order, 

rule, or procedure governing the 

proceeding; 

(2) Failing to prosecute or defend an 

action; or 

(3) Engaging in other misconduct that 

interferes with the speedy, orderly, or 

fair conduct of the hearing. 

(b) Sanctions include but are not 

limited to those specifically set forth in 

paragraphs (c), (d), and (e) of this 

section. Any such sanction will 

reasonably relate to the severity and 

nature of the failure or misconduct. 

(c) When a party fails to comply with 

an order, including an order for taking 

a deposition, the production of evidence 

within the party’s control, or 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 of 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 of the party failing to 

comply with such request. 

(d) If a party fails to prosecute or 

defend an action under this part begun 

by service of a notice of hearing, the ALJ 

may dismiss the action or may issue an 

Initial Decision imposition penalties 

and assessments. 

(e) The ALJ may refuse to consider 

any motion, request, response, brief or 

other Document that is not filed in a 

timely fashion. 

§ 13.30 The hearing and burden of proof. 

(a) The ALJ will conduct a hearing on 

the record in order to determine 

whether the Defendant is liable for a 

civil penalty or assessment under § 13.3 

and, if so, the appropriate amount of 

any such civil penalty or assessment 

considering any aggravating or 

mitigating factors. 

(b) The Authority will prove 

Defendant’s liability and any 

aggravating factors by a preponderance 

of the evidence. 

(c) The Defendant will prove any 

affirmative defenses and any mitigating 

factors by a preponderance of the 

evidence. 

(d) The hearing will be open to the 

public unless otherwise ordered by the 

ALJ for good cause shown. 

§ 13.31 Determining the amount of 

penalties and assessments. 

(a) 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. Because of the intangible costs 

of fraud, the expense of investigating 

such conduct, and the need to deter 

others who might be similarly tempted, 

ordinarily double damages and a 

significant civil penalty should be 

imposed. 

(b) Although not exhaustive, the 

following factors are among those that 

may influence the ALJ and the 

Authority Head in determining the 

amount of penalties and assessments to 

impose with respect to the misconduct 

(i.e., the false fictitious, of fraudulent 

Claims or Statements) charged in the 

Complaint: 

(1) The number of false, fictitious, or 

fraudulent Claims or Statements; 

(2) The time period over which such 

Claims or Statements were Made; 

(3) The degree of the Defendant’s 

culpability with respect to the 

misconduct; 

(4) The amount of money or the value 

of the property, services, or Benefit 

falsely claimed; 

(5) The value of the Government’s 

actual loss as a result of the misconduct, 

including foreseeable consequential 

damages and the costs of investigation; 

(6) The relationship of the amount 

imposed as civil penalties to the amount 

of the Government’s loss; 

(7) The potential or actual impact of 

the misconduct upon national defense, 

public health or safety, or public 

confidence in the management of 

Government programs and operations, 

including particularly the impact on the 

intended beneficiaries of such programs; 

(8) Whether the Defendant has 

engaged in a pattern of the same or 

similar misconduct; 

(9) Whether the Defendant attempted 

to conceal the misconduct; 

(10) The degree to which the 

Defendant has involved others in the 

misconduct or in concealing it; 

(11) Where the misconduct of 

employees or agents is imputed to the 

Defendant, the extent to which the 

Defendant’s practices fostered or 

attempted to preclude such misconduct; 

(12) Whether the Defendant 

cooperated in or obstructed an 

investigation of the misconduct; 

(13) Whether the Defendant assisted 

in identifying and prosecuting other 

wrongdoers; 

(14) The complexity of the program or 

transaction, and the degree of the 

Defendant’s sophistication with respect 

to it, including the extent of the 

Defendant’s prior participation in the 

program or in similar transactions; 

(15) Whether the Defendant has been 

found, in any criminal, civil, or 

administrative proceeding to have 

engaged in similar misconduct or to 

have dealt dishonestly with the 

Government of the United States or of 

a State, directly or indirectly; and 

(16) The need to deter the Defendant 

and others from engaging in the same or 

similar misconduct. 

(c) Nothing in this section will be 

construed to limit the ALJ or the 

Authority Head from considering any 

other factors that in any given case may 

mitigate or aggravate the offense for 

which penalties and assessments are 

imposed. 

§ 13.32 Location of hearing. 

(a) The hearing may be held: 

(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 the Claim or 

Statement in issue was Made; or 

(3) In such other place as may be 

agreed upon by the Defendant and the 

ALJ. 

(b) Each party will have the 

opportunity to present written and oral 

argument with respect to the location of 

the hearing. 

(c) The hearing will be held at the 

place and at the time ordered by the 

ALJ. 

§ 13.33 Witnesses. 

(a) Except as provided in paragraph 

(b) of this section, testimony at the 

hearing will be given orally by 

witnesses under oath or affirmation. 

Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 59219 

(b) At the discretion of the ALJ, 

testimony may be admitted in the form 

of a written Statement or deposition. 

Any such written Statement must be 

provided to all other parties along with 

the last known address of such witness, 

in a manner that allows sufficient time 

for other parties to subpoena such 

witness for cross-examination at the 

hearing. Prior written Statements of 

witnesses proposed to testify at the 

hearing and deposition transcripts will 

be exchanged as provided in § 13.22(a). 

(c) The ALJ will exercise reasonable 

control over the mode and order of 

interrogating witnesses and presenting 

evidence so as to: 

(1) Make the interrogation and 

presentation effective for the 

ascertainment of the truth; 

(2) Avoid needless consumption of 

time; and 

(3) Protect witnesses from harassment 

or undue embarrassment. 

(d) The ALJ will permit the parties to 

conduct such cross-examination as may 

be required for a full and true disclosure 

of the facts. 

(e) At the discretion of the ALJ, a 

witness may be cross-examined on 

matters relevant to the proceeding 

without regard to the scope of his or her 

direct examination. To the extent 

permitted by the ALJ, cross-examination 

on matters outside the scope of direct 

examination will be conducted in the 

manner of direct examination and may 

proceed by leading questions only if the 

witness is a hostile witness, an adverse 

party, or a witness identified with an 

adverse party. 

(f) Upon motion of any party, the ALJ 

will order witnesses excluded 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, an officer or employee of 

the party; 

(i) Appearing for the entity pro se; or 

(ii) Designated by the party’s 

Representative; or 

(3) An Individual whose presence is 

shown by a party to be essential to the 

presentation of its case, including an 

Individual employed by the 

Government engaged in assisting the 

Representative for the Government. 

§ 13.34 Evidence. 

(a) The ALJ will determine the 

admissibility of evidence. 

(b) Except as provided in this part, the 

ALJ will not be bound by the Federal 

Rules of Evidence. However, the ALJ 

may apply the Federal Rules of 

Evidence where appropriate, e.g., to 

exclude unreliable evidence. 

(c) The ALJ will exclude irrelevant 

and immaterial evidence. 

(d) Although relevant, evidence may 

be excluded 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) Although relevant, evidence may 

be excluded if it is privileged under 

Federal law. 

(f) Evidence concerning offers of 

compromise or settlement will be 

inadmissible to the extent provided in 

Rule 408 of the Federal Rules of 

Evidence. 

(g) The ALJ will permit the parties to 

introduce rebuttal witnesses and 

evidence. 

(h) All Documents and other evidence 

offered or taken for the record will be 

open to examination by all parties, 

unless otherwise ordered by the ALJ 

pursuant to § 13.24. 

§ 13.35 The record. 

(a) The hearing will be recorded and 

transcribed. Transcripts may be 

obtained following the hearing from the 

ALJ at a cost not to exceed the actual 

cost of duplication. 

(b) 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 decision by the ALJ and 

the Authority Head. 

(c) The record may be inspected and 

copied (upon payment of a reasonable 

fee) by anyone, unless otherwise 

ordered by the ALJ pursuant to § 13.24. 

§ 13.36 Post-hearing briefs. 

The ALJ may require the parties to file 

post-hearing briefs. In any event, any 

party may file a post-hearing brief. The 

ALJ will fix the time for filing such 

briefs. Such briefs may be accompanied 

by proposed findings of fact and 

conclusions of law. The ALJ may permit 

the parties to file reply briefs. 

§ 13.37 Initial Decision. 

(a) The ALJ will issue an Initial 

Decision based only on the record, 

which will contain findings of fact, 

conclusions of law, and the amount of 

any penalties and assessments imposed. 

(b) The findings of fact will include a 

finding on each of the following issues: 

(1) Whether the Claims or Statements 

identified in the Complaint, or any 

portions thereof, violate § 13.3; 

(2) If the Person is liable for penalties 

or assessments, the appropriate amount 

of any such penalties or assessments 

considering any mitigating or 

aggravating factors that he or she finds 

in the case, such as those described in 

§ 13.31. 

(c) The ALJ will promptly serve the 

Initial Decision on all parties within 90 

days after the time for submission of 

post-hearing briefs and reply briefs (if 

permitted) has expired. The ALJ will at 

the same time serve all parties with a 

Statement describing the right of any 

Defendant determined to be liable for a 

civil penalty or assessment to file a 

motion for reconsideration with the ALJ 

or a notice of appeal with the Authority 

Head. If the ALJ fails to meet the 

deadline contained in this paragraph, he 

or she will notify the parties of the 

reason for the delay and will set a new 

deadline. 

(d) Unless the Initial Decision of the 

ALJ is timely appealed to the Authority 

Head, or a motion for reconsideration of 

the Initial Decision is timely filed, the 

Initial Decision will constitute the final 

decision of the Authority Head and will 

be final and binding on the parties 30 

days after it is issued by the ALJ. 

§ 13.38 Reconsideration of Initial Decision. 

(a) Except as provided in paragraph 

(d) of this section, any party may file a 

motion for reconsideration of the Initial 

Decision within 20 days of receipt of the 

Initial Decision. If service was Made by 

mail, receipt will be presumed to be five 

days from the date of mailing in the 

absence of contrary proof. 

(b) Every such motion must set forth 

the matters claimed to have been 

erroneously decided and the nature of 

the alleged errors. Such motion will be 

accompanied by a supporting brief. 

(c) Responses to such motions will be 

allowed only upon request of the ALJ. 

(d) No party may file a motion for 

reconsideration of an Initial Decision 

that has been revised in response to a 

previous motion for reconsideration. 

(e) The ALJ may dispose of a motion 

for reconsideration by denying it or by 

issuing a revised Initial Decision. 

(f) If the ALJ denies a motion for 

reconsideration, the Initial Decision will 

constitute the final decision of the 

Authority Head and will be final and 

binding on the parties 30 days after the 

ALJ denies the motion, unless the Initial 

Decision is timely appealed to the 

Authority Head in accordance with 

§ 13.39. 

(g) If the ALJ issues a revised Initial 

Decision, that decision will constitute 

the final decision of the Authority Head 

and will be final and binding on the 

parties 30 days after it is issued, unless 

it is timely appealed to the Authority 

Head in accordance with § 13.39. 

59220 Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 

§ 13.39 Appeal to Authority Head. 

(a) Any Defendant who has served a 

timely answer and who is determined in 

an Initial Decision to be liable for a civil 

penalty or assessment may appeal such 

decision to the Authority Head by filing 

a notice of appeal in accordance with 

this section and § 13.26. 

(b)(1) A notice of appeal may be filed 

at any time within 30 days after the ALJ 

issues an Initial Decision. However, if 

another party files a motion for 

reconsideration under § 13.38, 

consideration of the appeal will be 

stayed automatically pending resolution 

of the motion for reconsideration. 

(2) If a Defendant files a timely 

motion for reconsideration, a notice of 

appeal may be filed within 30 days after 

the ALJ denies the motion or issues a 

revised Initial Decision, whichever 

applies. 

(3) The Authority Head may extend 

the initial 30-day period for an 

additional 30 days if the Defendant files 

with the Authority Head a request for an 

extension within the initial 30-day 

period and shows good cause. 

(c) If the Defendant files a timely 

notice of appeal and the time for filing 

motions for reconsideration under 

§ 13.38 has expired, the ALJ will 

forward two copies of the notice of 

appeal to the Authority Head, and will 

forward or Make available the record of 

the proceeding to the Authority Head. 

(d) A notice of appeal will be 

accompanied by a written brief 

specifying exceptions to the Initial 

Decision and reasons supporting the 

exceptions. 

(e) The Representative for the 

Government may file a brief in 

opposition to exceptions within 30 days 

of receiving the notice of appeal and 

accompanying brief. 

(f) There is no right to appear 

personally before the Authority Head. 

(g) There is no right to appeal any 

interlocutory ruling by the ALJ. 

(h) In reviewing the Initial Decision, 

the Authority Head will not consider 

any objection that was not raised before 

the ALJ unless a demonstration is Made 

of extraordinary circumstances causing 

the failure to raise the objection. 

(i) If any party demonstrates to the 

satisfaction of the Authority Head that 

additional evidence not presented at 

such hearing is material and that there 

were reasonable grounds for the failure 

to present such evidence at such 

hearing, the Authority Head will 

remand the matter to the ALJ for 

consideration of such additional 

evidence. 

(j) The Authority Head may affirm, 

reduce, reverse, compromise, remand, 

or settle any penalty or assessment 

determined by the ALJ in any Initial 

Decision. 

(k) The Authority Head will promptly 

serve each party to the appeal with a 

copy of the decision of the Authority 

Head and with a Statement describing 

the right of any Person determined to be 

liable for a penalty or assessment to seek 

judicial review. 

(l) Unless a petition for review is filed 

as provided in 31 U.S.C. 3805 after a 

Defendant has exhausted all 

administrative remedies under this part 

and within 60 days after the date on 

which the Authority Head serves the 

Defendant with a copy of the Authority 

Head’s decision, a determination that a 

Defendant is liable under § 13.3 is final 

and is not subject to judicial review. 

§ 13.40 Stays ordered by the Department 

of Justice. 

If at any time the Attorney General or 

an Assistant Attorney General 

designated by the Attorney General 

transmits to the Authority Head a 

written finding that continuation of the 

administrative process described in this 

part with respect to a Claim or 

Statement may adversely affect any 

pending or potential criminal or civil 

action related to such Claim or 

Statement, the Authority Head will stay 

the process immediately. The Authority 

Head may order the process resumed 

only upon receipt of the written 

authorization of the Attorney General. 

§ 13.41 Stay pending appeal. 

(a) An Initial Decision is stayed 

automatically pending disposition of a 

motion for reconsideration or of an 

appeal to the Authority Head. 

(b) No administrative stay is available 

following a final decision of the 

Authority Head. 

§ 13.42 Judicial review. 

Section 3805 of title 31, United States 

Code, authorizes judicial review by an 

appropriate United States District Court 

of a final decision of the Authority Head 

imposing penalties or assessments 

under this part and specifies the 

procedures for such review. 

§ 13.43 Collection of civil penalties and 

assessments. 

Sections 3806 and 3808(b) of title 31, 

United States Code, authorize actions 

for collection of civil penalties and 

assessments imposed under this part 

and specify the procedures for such 

actions. 

§ 13.44 Right to administrative offset. 

The amount of any penalty or 

assessment that has become final, or for 

which a judgment has been entered 

under § 13.42 or § 13.43, or any amount 

agreed upon in a compromise or 

settlement under § 13.46, may be 

collected by administrative offset under 

31 U.S.C. 3716, except that an 

administrative offset may not be Made 

under that subsection against a refund 

of an overpayment of Federal taxes, then 

or later owing by the United States to 

the Defendant. 

§ 13.45 Deposit in Treasury of United 

States. 

All amounts collected pursuant to this 

part will be deposited as miscellaneous 

receipts in the Treasury of the United 

States, except as provided in 31 U.S.C. 

3806(g). 

§ 13.46 Compromise or settlement. 

(a) Parties may Make offers of 

compromise or settlement at any time. 

(b) The Reviewing Official has the 

exclusive authority to compromise or 

settle a case under this part at any time 

after the date on which the Reviewing 

Official is permitted to issue a 

Complaint and before the date on which 

the ALJ issues an Initial Decision. 

(c) The Authority Head has exclusive 

authority to compromise or settle a case 

under this part at any time after the date 

on which the ALJ issues an Initial 

Decision, except during the pendency of 

any review under § 13.42 or during the 

pendency of any action to collect 

penalties and assessments under 

§ 13.43. 

(d) The Attorney General has 

exclusive authority to compromise or 

settle a case under this part during the 

pendency of any review under § 13.42 

or of any action to recover penalties and 

assessments under 31 U.S.C. 3806. 

(e) The Investigating Official may 

recommend settlement terms to the 

Reviewing Official, the Authority Head, 

or the Attorney General, as appropriate. 

The Reviewing Official may recommend 

settlement terms to the Authority Head, 

or the Attorney General, as appropriate. 

(f) Any compromise or settlement 

must be in writing and signed by all 

parties and their Representatives. 

§ 13.47 Limitations. 

(a) The notice of hearing with respect 

to a Claim or Statement must be served 

in the manner specified in § 13.8 within 

6 years after the date on which such 

Claim or Statement is Made. 

(b) If the Defendant fails to serve a 

timely answer, service of a notice under 

§ 13.10(b) will be deemed a notice of 

hearing for purposes of this section. 

(c) The statute of limitations may be 

extended by agreement of the parties. 

Federal Register / Vol. 70, No. 196 / Wednesday, October 12, 2005 / Rules and Regulations 59221 

Dated: September 25, 2005. 

Michael Chertoff, 

Secretary. 

[FR Doc. 05–20346 Filed 10–11–05; 8:45 am] 

BILLING CODE 4410–10–P 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Parts 1005 and 1007 

[Docket No. AO–388–A15 and AO–366–A44; 

DA–03–11] 

Milk in the Appalachian and Southeast 

Marketing Areas; Order Amending the 

Orders 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Final rule. 

SUMMARY: This partial final rule amends 

the Appalachian and Southeast 

marketing orders. Specifically, the final 

rule expands the Appalachian milk 

marketing area, eliminates the ability to 

simultaneously pool the same milk on 

the Appalachian or Southeast order and 

on a State-operated milk order that has 

marketwide pooling, and amends the 

transportation credit provisions of the 

Southeast and Appalachian orders. The 

amendments are based on record 

evidence of a public hearing held 

February 2004. More than the required 

number of dairy farmers approved the 

issuance of the amended orders. 

EFFECTIVE DATE: November 1, 2005. 

FOR FURTHER INFORMATION CONTACT: 

Antoinette M. Carter, Marketing 

Specialist, USDA/AMS/Dairy Programs, 

Order Formulation and Enforcement, 

STOP 0231—Room 2971, 1400 

Independence Avenue, SW., 

Washington, DC 20250–0231, (202) 690–

3465, e-mail address: 

antoinette.carter@usda.gov. 

SUPPLEMENTARY INFORMATION: This 

administrative action is governed by the 

provisions of Sections 556 and 557 of 

Title 5 of the United States Code and, 

therefore, is excluded from the 

requirements of Executive Order 12866. 

This final rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. This rule is not intended 

to have a retroactive effect. This rule 

will not preempt any state or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

the rule. 

The Agricultural Marketing 

Agreement Act of 1937, as amended, (7 

U.S.C. 601–674) provides that 

administrative proceedings must be 

exhausted before parties may file suit in 

court. Under section 608c(15)(A) of the 

Act, any handler subject to an order may 

request modification or exemption from 

such order by filing with the 

Department a petition stating that the 

order, any provision of the order, or any 

obligation imposed in connection with 

the order is not in accordance with the 

law. A handler is afforded the 

opportunity for a hearing on the 

petition. After a hearing, the Department 

would rule on the petition. The Act 

provides that the district court of the 

United States in any district in which 

the handler is an inhabitant, or has its 

principal place of business, has 

jurisdiction in equity to review the 

Department’s ruling on the petition, 

provided a bill in equity is filed not 

later than 20 days after the date of the 

entry of the ruling. 

Regulatory Flexibility Act and 

Paperwork Reduction Act 

In accordance with the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.), the 

Agricultural Marketing Service has 

considered the economic impact of this 

action on small entities and has certified 

that this rule will not have a significant 

economic impact on a substantial 

number of small entities. For the 

purpose of the Regulatory Flexibility 

Act, a dairy farm is considered a ‘‘small 

business’’ if it has an annual gross 

revenue of less than $750,000, and a 

dairy products manufacturer is a ‘‘small 

business’’ if it has fewer than 500 

employees. 

For the purposes of determining 

which dairy farms are ‘‘small 

businesses,’’ the $750,000 per year 

criterion was used to establish a 

production guideline of 500,000 pounds 

per month. Although this guideline does 

not factor in additional monies that may 

be received by dairy producers, it 

should be an inclusive standard for 

most ‘‘small’’ dairy farmers. For 

purposes of determining a handler’s 

size, if the plant is part of a larger 

company operating multiple plants that 

collectively exceed the 500-employee 

limit, the plant will be considered a 

large business even if the local plant has 

fewer than 500 employees. 

During February 2004, the month in 

which the hearing was held, the milk of 

7,311 dairy farmers was pooled on the 

Appalachian (Order 5) and Southeast 

(Order 7) milk orders (3,395 Order 5 

dairy farmers and 3,916 Order 7 dairy 

farmers). Of the total, 3,252 dairy 

farmers (or 96 percent) and 3,764 dairy 

farmers (or 96 percent) were considered 

small businesses on the Appalachian 

and Southeast orders, respectively. 

During February 2004, there were a 

total of 36 plants associated with the 

Appalachian order (25 fully regulated 

plants, 7 partially regulated plants, 1 

producer-handler, and 3 exempt plants) 

and a total of 51 plants associated with 

the Southeast order (32 fully regulated 

plants, 6 partially regulated plants, and 

13 exempt plants). The number of plants 

meeting the small business criteria 

under the Appalachian and Southeast 

orders were 13 (or 36 percent) and 13 

(or 25 percent), respectively. 

The final rule will expand the 

Appalachian milk marketing area to 

include 25 unregulated counties and 15 

unregulated cities in the State of 

Virginia that currently are not in any 

Federal milk marketing area. Adopted 

amendments to the producer milk 

provisions of the Appalachian and 

Southeast milk orders will prevent 

producers who share in the proceeds of 

a state marketwide pool from 

simultaneously sharing in the proceeds 

of a Federal marketwide pool on the 

same milk. In addition, this final rule 

amends the transportation credit 

provisions of the Appalachian and 

Southeast orders. 

The final rule amendments that will 

expand the Appalachian marketing area 

will likely continue to regulate under 

the Appalachian order two fluid milk 

distributing plants located in Roanoke, 

Virginia, and Lynchburg, Virginia, and 

shift the regulation of a distributing 

plant located in Mount Crawford, 

Virginia, from the Northeast order to the 

Appalachian order. 

The amendments will allow the 

Kroger Company’s (Kroger) Westover 

Dairy plant, located in Lynchburg, 

Virginia, that competes for a milk 

supply with other Appalachian order 

plants to continue to be regulated under 

the order if it meets the order’s 

minimum performance standards. The 

plant has been regulated by the 

Appalachian order since January 2000. 

In addition, the adopted amendments 

will remove the disruption that occurs 

as a result of the Dean Foods Company’s 

(Dean Foods) Morningstar Foods plant, 

located in Mount Crawford, Virginia, 

shifting its regulatory status under the 

Northeast order. 

The Appalachian order currently 

contains a ‘‘lock-in’’ provision that 

provides that a plant located within the 

marketing area that meets the order’s 

minimum performance standard will be 

regulated by the Appalachian order 

even if the majority of the plant’s Class 

I route sales are in another marketing 

area. The expansion of the Appalachian 

marketing area along with the lock-in 

provision will regulate fluid milk 

distributing plants physically located in 

the marketing area that meet the order’s 

minimum performance standard even if