52130 Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 28 

[Docket No. FR–5085–P–01] 

RIN 2501–AD25 

Revisions to the Regulations 

Implementing the Program Fraud Civil 

Remedies Act of 1986 

AGENCY: Office of the Secretary, HUD. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

amend HUD’s regulations implementing 

the Program Fraud Civil Remedies Act 

of 1986 (PFCRA), which were codified 

in 1996 and were amended in 2003 to 

include inflation adjustments. The 

purpose of this proposed rule is to more 

closely conform the PFCRA regulations 

with the PFCRA statutory language, to 

incorporate additional definitions into 

the PFCRA regulations, and to add an 

additional item to the list of factors the 

Secretary shall consider in determining 

the amount of penalties and assessments 

to be imposed. 

DATES: Comment Due Date: November 7, 

2008. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this proposed rule to the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 10276, Washington, DC 20410– 

0500. Communications must refer to the 

above docket number and title. There 

are two methods for submitting public 

comments. All submissions must refer 

to the above docket number and title. 

1. Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 10276, 

Washington, DC 20410–0500. 

2. Electronic Submission of 

Comments. Interested persons may 

submit comments electronically through 

the Federal eRulemaking Portal at 

http://www.regulations.gov. HUD 

strongly encourages commenters to 

submit comments electronically. 

Electronic submission of comments 

allows the commenter maximum time to 

prepare and submit a comment, ensures 

timely receipt by HUD, and enables 

HUD to make them immediately 

available to the public. Comments 

submitted electronically through the 

http://www.regulations.gov Web site can 

be viewed by other commenters and 

interested members of the public. 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Note: To receive consideration as public 

comments, comments must be submitted 

through one of the two methods specified 

above. Again, all submissions must refer to 

the docket number and title of the rule. 

No Facsimile Comments. Facsimile 

(FAX) comments are not acceptable. 

Public Inspection of Public 

Comments. All properly submitted 

comments and communications 

submitted to HUD will be available for 

public inspection and copying between 

8 a.m. and 5 p.m. weekdays at the above 

address. Due to security measures at the 

HUD Headquarters building, an advance 

appointment to review the public 

comments must be scheduled by calling 

the Regulations Division at 202–708– 

3055 (this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

via TTY by calling the Federal 

Information Relay Service at 800–877– 

8339. Copies of all comments submitted 

are available for inspection and 

downloading at http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Dane Narode, Acting Associate General 

Counsel, Office of Program 

Enforcement, Department of Housing 

and Urban Development, 1250 

Maryland Avenue, Suite 200, 

Washington, DC 20024–0500; telephone 

number 202–708–2350 (this is not a tollfree number); e-mail address 

Dane.M.Narode@hud.gov. Hearing- or 

speech-impaired individuals may access 

the voice telephone number listed above 

by calling the toll-free Federal 

Information Relay Service during 

working hours at 800-877-8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On June 24, 1988 (53 FR 24000), HUD 

published its regulations implementing 

the Program Fraud Civil Remedies Act 

of 1986 (31 U.S.C. 3801) (PFCRA). 

PFCRA established 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 HUD or its agents. 

HUD’s regulations implementing 

PFCRA are located at 24 CFR part 28. 

On September 24, 1996 (61 FR 50208), 

HUD issued a final rule further 

streamlining the PFCRA regulations at 

part 28. 

II. This Proposed Rule 

This proposed rule would more 

closely conform both § 28.5 

(‘‘Definitions’’) and § 28.10 (‘‘Basis for 

civil penalties and assessments’’) to the 

PFCRA statutory provisions. A 

definition of ‘‘reasonable prospect’’ 

would be included in § 28.5 to explain 

that the Reviewing Official will use 

limited information available in HUD’s 

Report of Investigation to determine 

whether allocating HUD’s resources to a 

particular action is appropriate. Also, a 

definition of ‘‘Ability to pay’’ would be 

included in § 28.5 to clarify that a factor 

in determining amounts of penalties and 

assessments will be based on an 

assessment of the respondent’s 

resources available presently and 

prospectively, from which the 

Department could ultimately recover the 

total award. The definition would also 

allow for the consideration of 

respondent’s resources to be based on 

historical evidence. The proposed rule 

would also modify § 28.25 

(‘‘Complaint’’) so that the provisions for 

methods of complaint transmittal more 

closely conform to PFCRA and to give 

the same meaning to the term ‘‘deliver’’ 

that it has in PFCRA. This section 

would require both parties to preserve 

documents upon issuance of the 

complaint for the Department, and 

receipt of the complaint for the 

respondent. Additionally, this section 

and § 28.30 would be revised to provide 

for the filing of the complaint and 

answer directly with the Office of 

Administrative Law Judges, in 

accordance with the specified 

provisions of § 26.30 of this title. 

Furthermore, the proposed rule would 

revise § 28.35 to remove the disclosure 

of documents regulation from part 28. 

The disclosure of documents regulation 

would, under a separate proposed rule 

regarding HUD’s hearing procedures, be 

moved to part 26 (‘‘Hearing 

Procedures’’). Under this proposed rule, 

§ 28.35 would incorporate the substance 

of the regulation on the statute of 

limitations for PFCRA hearings, which 

would be moved from part 26 under the 

separate proposed rule. 

Finally, the proposed rule would add 

‘‘ability to pay’’ to § 28.40 (‘‘Hearings’’) 

as an additional factor to be considered 

in determining the amount of penalties 

and assessments; the factor has been 

added to the definitions at § 28.5, as 

discussed above. 

III. Small Business Concerns Related to 

Board Enforcement Actions 

With respect to enforcement actions 

undertaken pursuant to this proposed 

rule, HUD is cognizant that section 222 

of the Small Business Regulatory 

Enforcement Fairness Act of 1996 (Pub. 

L. 104–121) (SBREFA) requires the 

Small Business and Agriculture 


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Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 52131 

Regulatory Enforcement Ombudsman to 

‘‘work with each agency with regulatory 

authority over small businesses to 

ensure that small business concerns that 

receive or are subject to an audit, on-site 

inspection, compliance assistance effort, 

or other enforcement related 

communication or contact by agency 

personnel are provided with a means to 

comment on the enforcement activity 

conducted by this personnel.’’ To 

implement this statutory provision, the 

Small Business Administration has 

requested that federal agencies include 

the following language on agency 

publications and notices that are 

provided to small business concerns at 

the time the enforcement action is 

undertaken. The language is as follows: 

Your Comments Are Important 

The Small Business and Agriculture 

Regulatory Enforcement Ombudsman and 10 

Regional Fairness Boards were established to 

receive comments from small businesses 

about federal agency enforcement actions. 

The Ombudsman will annually evaluate the 

enforcement activities and rate each agency’s 

responsiveness to small business. If you wish 

to comment on the enforcement actions of 

[insert agency name], you will find the 

necessary comment forms at www.sba.gov/ 

ombudsman or call 1–888–REG–FAIR (1–

888–734–3247). 

In accordance with its notice 

describing HUD’s actions on the 

implementation of SBREFA, which was 

published on May 21, 1998 (63 FR 

28214), HUD will include the language 

cited above on notices implementing 

enforcement actions, to ensure that 

small entities have the full means to 

comment on the enforcement activity 

conducted by HUD. 

IV. Findings and Certifications 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.) generally requires 

an agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. This proposed 

rule would revise definitions and usages 

of terms to conform more closely with 

those of the governing statute, and 

would add ‘‘ability to pay’’ as a factor 

to be considered in determining penalty 

and assessment amounts. These 

revisions impose no significant 

economic impact on a substantial 

number of small entities. Therefore, the 

undersigned certifies that this rule will 

not have a significant impact on a 

substantial number of small entities. 

Notwithstanding HUD’s view that this 

rule will not have a significant effect on 

a substantial number of small entities, 

HUD specifically invites comments 

regarding any less burdensome 

alternatives to this rule that will meet 

HUD’s objectives as described in this 

preamble. 

Environmental Impact 

This proposed rule does not direct, 

provide for assistance or loan and 

mortgage insurance for, or otherwise 

govern or regulate real property 

acquisition, disposition, leasing, 

rehabilitation, alteration, demolition, or 

new construction; or establish, revise, or 

provide for standards for construction or 

construction materials, manufactured 

housing, or occupancy. Accordingly, 

under 24 CFR 50.19(c)(1), this proposed 

rule is categorically excluded from 

environmental review under the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321 et seq.). 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from promulgating a regulation 

that has federalism implications and 

either imposes substantial direct 

compliance costs on state and local 

governments and is not required by 

statute, or preempts state law, unless the 

relevant requirements of Section 6 of the 

Executive Order are met. This rule does 

not have federalism implications and 

does not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the Executive 

Order. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) (2 U.S.C. 

1531–1538) establishes requirements for 

federal agencies to assess the effects of 

their regulatory actions on state, local, 

and tribal governments and the private 

sector. This proposed rule does not 

impose any federal mandates on any 

state, local, or tribal government or the 

private sector within the meaning of 

UMRA. 

List of Subjects for 24 CFR Part 28 

Administrative practice and 

procedure, Claims, Fraud, Penalties. 

Accordingly, for the reasons 

discussed in the preamble, HUD 

proposes to amend 24 CFR part 28 as 

follows: 

PART 28—IMPLEMENTATION OF THE 

PROGRAM FRAUD CIVIL REMEDIES 

ACT OF 1986 

1. The authority citation for 24 CFR 

part 28 is revised to read as follows: 

Authority: 28 U.S.C. 2461 note; 31 U.S.C. 

3801–3812; 42 U.S.C. 3535(d). 

2. Revise § 28.1(b) to read as follows: 

§ 28.1 Purpose. 

* * * * * 

(b) Specifies the hearing and appeal 

rights of persons subject to allegations of 

liability for such penalties and 

assessments. Hearings under this part 

shall be conducted in accordance with 

the Administrative Procedure Act 

pursuant to part 26, subpart B, of this 

chapter. 

3. Revise § 28.5 to read as follows: 

§ 28.5 Definitions. 

(a) The terms ALJ and HUD are 

defined in 24 CFR part 5. 

(b) The terms Claim, Knows or has 

reason to know, Person, Reviewing 

Official, and Statement have the same 

meanings as defined in 31 U.S.C. § 3801. 

(c) Ability to pay is determined based 

on an assessment of the respondent’s 

resources available both presently and 

prospectively from which the 

Department could ultimately recover the 

total award, which may be predicted 

based on historical evidence. 

(d) Benefit means anything of value, 

including, but not limited to, any 

advantage, preference, privilege, license, 

permit, favorable decision, ruling, 

status, or loan insurance or guarantee. 

(e) Respondent means any person 

alleged to be liable for a civil penalty or 

assessment under § 28.25. 

(f) The reasonable prospect of 

collecting an appropriate amount of 

penalties and assessments is 

determined based on a generalized 

assessment made by a Reviewing 

Official based on the limited 

information available in the Report of 

Investigation for purposes of 

determining whether the allocation of 

HUD’s resources to any particular action 

is appropriate. This assessment is not 

the same as the assessment made when 

determining ability to pay, nor is the 

reasonable prospect of collecting a 

factor to be considered in determining 

the amount of any penalty or assessment 

in any particular case. 

(g) Report of Investigation means a 

report containing the findings and 

conclusions of a Program Fraud Civil 

Remedies Act investigation by the 

Inspector General or his or her designee 

as described in § 28.15. 

4. Revise § 28.10(a)(1) and (b)(1) to 

read as follows: 


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52132 Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 

§ 28.10 Basis for civil penalties and 

assessments. 

(a) Claims. (1) A civil penalty of up 

to $7,500 may be imposed upon any 

person who makes, presents, or submits, 

or causes to be made, presented, or 

submitted, a claim that the person 

knows or has reason to know: 

(i) Is false, fictitious, or fraudulent; 

(ii) Includes or is supported by a 

written statement which asserts a 

material fact which 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 the omission; and 

(C) Is a statement in which the person 

making, presenting, or submitting such 

statement has a duty to include such 

material fact; or 

(iv) Is for payment for the provision 

of property or services which the person 

has not provided as claimed. 

* * * * * 

(b) Statements. (1) A civil penalty of 

up to $7,500 may be imposed upon any 

person who makes, presents, or submits, 

or causes to be made, presented, or 

submitted, a written statement that: 

(i) The person knows or has reason to 

know: 

(A) Asserts a material fact which is 

false, fictitious, or fraudulent; or 

(B) (1) Omits a material fact; and 

(2) Is false, fictitious, or fraudulent as 

a result of such omission; 

(ii) In the case of a statement 

described in paragraph (b)(1)(i)(B) of 

this section, is a statement in which the 

person making, presenting, or 

submitting such statement has a duty to 

include such material fact; and 

(iii) Contains or is accompanied by an 

express certification or affirmation of 

the truthfulness and accuracy of the 

contents of the statement. 

* * * * * 

5. Revise § 28.20 to read as follows: 

§ 28.20 Request for approval by the 

Department of Justice. 

(a) If the General Counsel or designee 

determines that the Report of 

Investigation supports an action under 

this part, he or she must submit a 

written request to the Department of 

Justice for approval to issue a complaint 

under § 28.25. 

(b) The request shall include a 

description of the claims or statements 

at issue; the evidence supporting the 

allegations; an estimate of the amount of 

money or the value of property, 

services, or other benefits requested or 

demanded in violation of § 28.10; any 

exculpatory or mitigating circumstances 

that may relate to the claims or 

statements; and a statement that there is 

a reasonable prospect of collecting an 

appropriate amount of penalties and 

assessments. 

6. Revise § 28.25 to read as follows: 

§ 28.25 Complaint. 

(a) General. Upon obtaining approval 

from the Department of Justice, the 

General Counsel or designee may issue 

a complaint to the respondent. The 

complaint shall be mailed, by registered 

or certified mail, or shall be delivered 

through such other means by which 

delivery may be confirmed. The 

complaint shall also be filed 

simultaneously with the Office of 

Administrative Law Judges in 

accordance with § 26.30(a) of this 

chapter. 

(b) Complaint. The complaint shall 

include: 

(1) The allegations of liability against 

the respondent, including the statutory 

basis for liability, the claims or 

statements at issue, and the reasons why 

liability arises from those claims or 

statements; 

(2) A statement that the required 

approval to issue the complaint was 

received from the Department of Justice 

as required by 24 CFR 28.20; 

(3) The amount of penalties and 

assessments for which the respondent 

may be held liable; 

(4) A statement that the respondent 

may request a hearing by submitting a 

written response to the complaint; 

(5) The addresses to which a response 

must be sent in accordance with § 26.38 

of this title; and 

(6) A statement that failure to submit 

an answer within 30 days of receipt of 

the complaint may result in the 

imposition of the maximum amount of 

penalties and assessments sought 

without right of appeal. 

(c) Parts 26 and 28. A copy of this 

part 28 and part 26, subpart B of this 

chapter shall be included with the 

complaint. 

(d) Obligation to preserve documents. 

Upon receipt of the complaint, the 

respondent is required to preserve and 

maintain all documents and data, 

including electronically stored data, 

within their possession or control that 

may relate to the allegations in the 

complaint. The Department shall also 

preserve such documents or data upon 

the issuance of the complaint. 

7. Revise § 28.30 to read as follows: 

§ 28.30 Response. 

(a) The respondent may file a written 

response to the complaint in accordance 

with § 26.30 of this title within 30 days 

of service of the complaint. The 

response shall be deemed to be a request 

for a hearing. The response must 

include the admission or denial of each 

allegation of liability made in the 

complaint; any defense on which the 

respondent intends to rely; any reasons 

why the penalties and assessments 

should be less than the amount set forth 

in the complaint; and the name, 

address, and telephone number of the 

person who will act as the respondent’s 

representative, if any. 

(b) Failure to respond. If no response 

is submitted, HUD may file a motion for 

default judgment in accordance with 

§ 26.41 of this chapter. 

8. Revise § 28.35 to read as follows: 

§ 28.35 Statute of limitations. 

The statute of limitations for 

commencing hearings under this part 

shall be tolled: 

(a) If the hearing is commenced in 

accordance with 31 U.S.C. 3803(d)(2)(B) 

within 6 years after the date on which 

the claim or statement is made; or 

(b) If the parties agree to such tolling. 

9. Amend § 28.40 as follows: 

a. Revise paragraphs (a) and (b); 

b. Redesignate paragraph (b)(17) as 

(b)(18); 

c. Add a new paragraph (b)(17); and 

d. Revise newly designated paragraph 

(b)(18). 

§ 28.40 Hearings. 

(a) General. Hearings under this part 

shall be conducted in accordance with 

the procedures in part 26, subpart B, of 

this chapter, governing actions in 

accordance with the Administrative 

Procedure Act. 

(b) Factors to consider in determining 

amount of penalties and assessments. In 

determining an appropriate amount of 

civil penalties and assessments, the ALJ 

and, upon appeal, the Secretary or 

designee, shall consider and state in his 

or her opinion any mitigating or 

aggravating circumstances. Because of 

the intangible costs of fraud, the 

expense of investigating fraudulent 

conduct, and the need for deterrence, 

ordinarily twice the amount of the claim 

as alleged by the government, and a 

significant civil penalty, should be 

imposed. The amount of penalties and 

assessments imposed shall be based on 

the ALJ’s and the Secretary’s or 

designee’s consideration of evidence in 

support of one or more of the following 

factors: 

(17) The respondent’s ability to pay, 

and 

(18) Any other factors that in any 

given case may mitigate or aggravate the 

seriousness of the false claim or 

statement. 

* * * * * 


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Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 52133 

Dated: July 28, 2008. 

Roy A. Bernardi, 

Deputy Secretary. 

[FR Doc. E8–20760 Filed 9–5–08; 8:45 am] 

BILLING CODE 4210–67–P 


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