Source: https://www.fdic.gov/regulations/laws/federal/00fraud.html
Timestamp: 2016-07-27 15:30:42
Document Index: 462832098

Matched Legal Cases: ['art 308', 'art 308', 'art 308', 'art 308', 'art 308', 'ART 308', 'art 308']

[Federal Register: August 29, 2000 (Volume 65,
Number 168)]
[Proposed Rules] [Page 52352-52363]
[DOCID:fr29au00-24] ========================================================================
[[Page 52352]]
FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 308 RIN 3064-AB41 Program Fraud AGENCY: Federal Deposit Insurance Corporation (FDIC). ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: The Board of Directors of the Federal Deposit Insurance Corporation proposes to implement the Program Fraud Civil Remedies Act (PFCRA) of 1986 by means of a regulation. The proposed rule would establish administrative procedures to impose statutorily authorized civil penalties against any person who makes, submits, or presents a false, fictitious, or fraudulent statement or claim under $150,000 for property, services, or money to the FDIC in connection with FDIC employment matters, FDIC contracting activities, and the FDIC Asset Purchaser Certification Program. The scope of the proposed rule is expressly limited to exclude programs and activities of the FDIC (other than as set forth in the preceding sentence) that are related to FDIC regulatory, supervision, enforcement, insurance, receivership and liquidation matters. DATES: Written comments must be received on or before October 30, 2000. ADDRESSES: All comments should be addressed to Robert E. Feldman, Executive Secretary, Attention: Comments/OES, Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington, D.C. 20429. Comments may be hand delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7:00 a.m. and 5:00 p.m. (FAX number (202) 898-3838; Internet address: comments@fdic.gov). Comments may be inspected and photocopied in the FDIC Public Information Center, Room 100, 801 17th Street, NW, Washington, D.C. 20429, between 9:00 a.m. and 4:30 p.m. on business days. FOR FURTHER INFORMATION CONTACT: Linda Rego, Counsel, Corporate Affairs Section, Legal Division, Federal Deposit Insurance Corporation, 550 17th Street, NW, Washington, D.C. 20429, (202) 898-8740. SUPPLEMENTARY INFORMATION: I. Background In October 1986, Congress enacted the Program Fraud Civil Remedies Act (PFCRA) to establish a new administrative procedure as a remedy against those who knowingly make false claims and/or false statements to entities of the federal government.\1\ The statute requires specified entities of the federal government to adopt regulations that establish procedures to recover penalties and assessments against persons who file false claims or statements. The FDIC is subject to the requirements of the PFCRA pursuant to the Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat. 2369), enacted December 20, 1993.
--------------------------------------------------------------------------- \1\ The Program Fraud Civil Remedies Act was originally enacted as subtitle VI(B) of the Omnibus Budget Reconciliation Act of 1986 (Pub. L. 99-509, 100 Stat. 1874) and is codified at 31 U.S.C. 3801 et seq.
--------------------------------------------------------------------------- The FDIC is required by the PFCRA to promulgate the necessary rules and regulations to implement its provisions. To facilitate the implementation process and to promote uniformity in the government, an interagency task force was established by the President's Council on Integrity and Efficiency to develop model regulations for implementation of the PFCRA. The FDIC proposes to adopt the model regulations set forth by the Council's taskforce with certain substantive changes necessary due to the FDIC's status as an independent regulatory agency. Further, certain revisions have been made in order for the FDIC to comply with the requirement of section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, title VII, 113 Stat. 1472 (Nov. 12, 1999), codified at 12 U.S.C. 4809, for all regulations issued by the FDIC after January 1, 2000 to be written in ``plain language.''
The proposed regulation would apply to anyone who, with knowledge or reason to know, submits a false, fictitious, or fraudulent statement or claim under $150,000 for property, services, or money to the FDIC in connection with FDIC employment matters, contracting activities and the FDIC Asset Purchaser Certification Program.
The FDIC's implementation of the PFCRA is based on Congress's underlying purpose in enacting the PFCRA, which was to provide federal agencies with an administrative remedy for ``small dollar fraud'' cases for which there is no other remedy because the cases are too small for the United States Department of Justice (DOJ) to prosecute. Absent DOJ's prosecution, individuals who commit small dollar frauds against the government would profit from their wrongdoing because most agencies lack independent litigating authority. PFCRA was designed to remedy that problem.
The FDIC is different from most agencies because, pursuant to 12 U.S.C. 1819(a) Fourth, the FDIC has independent litigating authority and may pursue legal remedies through its own attorneys. The FDIC is particularly independent from representation by the DOJ when it is enforcing statutes governing financial institutions and in its receivership/liquidation activities.
Moreover, the FDIC has special administrative remedies available to it for the imposition of civil money penalties in cases relating to the FDIC's supervision and regulation of financial institutions. With respect to deposit insurance, since insurance coverage for financial institutions and deposit insurance payments to depositors are not federal benefit programs or federal payments for other purposes, PFCRA should not be applied. Furthermore, if fraud were ever to occur concerning the FDIC paying off a depositor of a failed financial institution, the FDIC would rely upon its independent litigating authority to bring an action in federal court to recover the precise amount of the insurance payment. A civil penalty procedure would not be particularly useful. For these reasons, FDIC's implementation of the PFCRA only to FDIC employment matters, FDIC contracting activities and the FDIC Asset Purchaser Certification Program recognizes Congress's intent that PFCRA provide administrative remedies for cases where the FDIC may have no other viable monetary remedy. The scope of the proposed rule is also limited to [[Page 52353]] clearly exclude claims and statements pertaining to deposit insurance.
The PFCRA provides for designated investigative and reviewing officials, an administrative hearing process, and an agency appeal procedure with limited judicial review. In accordance with these requirements, the FDIC's proposed regulation provides that the Inspector General or a designee will act as the Investigating Official; the General Counsel or a designee will serve as the Reviewing Official; an administrative law judge provided by the Office of Financial Institution Adjudication will be the Presiding Officer; and the Board of Directors of the FDIC will act as Authority Head on appeals.
In addition to providing procedures for dealing with the filing of false claims or statements, Sec. 308.502(c) of the proposed regulation provides procedures for assessing civil penalties against those doing business with the FDIC who intentionally fail to file declarations and/
or certifications required by law. The provision carries out the statutory mandate of the so-called ``Byrd Amendment'' \2\ (31 U.S.C. 1352) that the failure to file a declaration and/or certification concerning lobbying activities which is required by that statute is punishable using procedures adopted pursuant to the PFCRA. The same is true for any affirmative false statements concerning lobbying activities.
--------------------------------------------------------------------------- \2\ The Byrd Amendment prohibits recipients of federal contracts, grants, loans, or cooperative agreements from using funds appropriated by any act for lobbying of agency officials or employees and members of Congress in connection with the making, awarding, extension, continuation, renewal, amendment or modifications of any federal contract, grant, loan, or cooperative agreement. The Byrd Amendment also provides for certain disclosures, declarations and/or certifications concerning lobbying activities, in connection with federal contracts, grants, or loans, whether or not appropriated funds are used. These requirements apply to all persons who request or receive a federal contract, grant, or cooperative agreement valued at $100,000 or greater, and persons who request or receive a loan of at least $150,000.
--------------------------------------------------------------------------- The proposed procedures would be established by adding a new subpart to 12 CFR part 308, subpart T. The procedures set forth in subpart T would apply only to proceedings under PFCRA or 31 U.S.C. 1352. Further, a technical amendment is proposed to make it clear that the Uniform Rules and subpart B of the Local Rules under part 308 would not apply to proceedings initiated under subpart T. II. Debt Collection Improvement Act of 1996 The Debt Collection Improvement Act of 1996 provides for the FDIC adjusting civil money penalties every four years in accordance with a formula based on the rate of inflation, which is set forth in section 5 of 28 U.S.C. 2461, note. The draft notice of proposed rulemaking includes paragraph (d) to 12 CFR 308.530, determining the amount of penalties and assessments. The paragraph states that civil money penalties that may be assessed for PFCRA violations under the subpart are subject to adjustment on a four-year basis to account for inflation and cross-references 12 CFR 308.132(c)(3)(xv), which sets forth the current amount of the civil money penalty that may be assessed. The amount of civil money penalties that the FDIC may access for PFCRA violations has been adjusted for inflation in 12 CFR 308.132(c)(3)(xv) from the statutory amount of $5,000 per claim or statement to an amount that is currently $5,500. A conforming technical amendment to 12 CFR 308.132(c)(3)(xv) is also proposed, which would change the phrase ``$5,500 per day'' to correctly state ``$5,500 per claim or statement.''
Comments are invited on all issues relating to these proposed rules. III. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the FDIC hereby certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities.
The FDIC has reached this conclusion because the rule imposes no compliance or regulatory requirements but will apply only when the FDIC determines that a false claim has been knowingly filed and pursues a PFCRA action to recover penalties and assessments. IV. Paperwork Reduction Act No collections of information pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in this notice. Consequently, no information has been submitted to the Office of Management and Budget for review. V. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families The FDIC has determined that this proposed rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 (1998). No assessment or certification to the OMB and Congress is required.
For the reasons set forth in the preamble, the FDIC proposes to amend part 308 of title 12 of chapter III of the Code of Federal Regulations as follows: Lists of Subjects in 12 CFR Part 308 Administrative practice and procedure, Banks, banking, Claims, Crime, Equal access to justice, Fraud, Hearing procedure, Investigations, Lawyers, Penalties, State nonmember banks. PART 308--RULES OF PRACTICE AND PROCEDURE 1. The authority citation for part 308 is revised to read as follows: Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 1817, 1818, 1820, 1828, 1829, 1829b, 1831o, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3, and 78w; 28 U.S.C. 2461 note; 31 U.S.C. 330, 3809, 5321; 42 U.S.C. 4012a; sec. 31001(s), Pub. L. 104-134, 110 Stat. 1321-358. 2. Revise Sec. 308.101(b) to read as follows:
Sec. 308.101 Scope of Local Rules. * * * * *
(b) Except as otherwise specifically provided, the Uniform Rules and subpart B of the Local Rules shall not apply to subparts D through T of the Local Rules.
3. Revise Sec. 308.132(c)(3)(xv) to read as follows:
Sec. 308.132 Assessment of penalties. * * * * *
(xv) Civil money penalties assessed for false claims and statements pursuant to the Program Fraud Civil Remedies Act. Pursuant to the Program Fraud Civil Remedies Act (31 U.S.C. 3802), civil money penalties of not more than $5,500 per claim or statement may be assessed for violations involving false claims and statements.
4. Add new subpart T to read as follows:
Subpart T--Program Fraud Civil Remedies and Procedures
308.505 Prerequisites for issuing a complaint.
308.509 Default upon failure to file an answer. [[Page 52354]] 308.510 Referral of complaint and answer to the ALJ.
308.538 Appeal to Board of Directors.
308.546 Limitations. Subpart T--Program Fraud Civil Remedies and Procedures
Sec. 308.500 Basis, purpose, and scope. (a) Basis. This subpart implements the Program Fraud Civil Remedies Act, Pub. L. 99-509, sections 6101-6104, 100 Stat. 1874 (October 21, 1986), codified at 31 U.S.C. 3801-3812, (PFCRA) and made applicable to the Federal Deposit Insurance Corporation (FDIC) by section 23 of the Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat. 2369). 31 U.S.C. 3809 of the statute requires each Authority head to promulgate regulations necessary to implement the provisions of the statute.
(b) Purpose. This subpart: (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 FDIC or to its agents; and
(c) Scope. This subpart applies only to persons who make, submit, or present or cause to be made, submitted, or presented false, fictitious, or fraudulent claims or written statements to the FDIC or to its agents acting on behalf of the FDIC in connection with FDIC employment matters, FDIC contracting activities, and the FDIC Asset Purchaser Certification Program. It does not apply to false claims or statements made in connection with programs (other than as set forth in the preceding sentence) related to the FDIC's regulatory, supervision, enforcement, insurance, receivership or liquidation responsibilities. The FDIC is restricting the scope of applicability of this subpart because other civil and administrative remedies are adequate to redress fraud in the areas not covered.
Sec. 308.501 Definitions. For purposes of this subpart:
(a) Administrative Law Judge (ALJ) means the presiding officer appointed by the Office of Financial Institution Adjudication pursuant to 12 U.S.C. 1818 note and 5 U.S.C. 3105.
(b) Authority means the Federal Deposit Insurance Corporation (FDIC).
(c) Authority head or Board means the Board of Directors of the FDIC, which is herein designated by the Chairman of the FDIC to serve as head of the FDIC for PFCRA matters.
(d) Benefit means, in the context of ``statement'' as defined in 31 U.S.C. 3801(a)(9), any financial assistance received from the FDIC that amounts to $150,000 or less. The term does not include the FDIC's deposit insurance program.
(1) Made to the FDIC 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 FDIC or to a party to a contract with the FDIC;
(C) Will reimburse such recipient or party for the purchase of such property or services;
(3) Made to the FDIC that 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 Sec. 308.506 of this subpart.
(g) Corporation means the Federal Deposit Insurance Corporation.
(h) Defendant means any person alleged in a complaint under Sec. 308.506 of this subpart to be liable for a civil penalty or assessment under Sec. 308.502 of this subpart.
(k) Initial decision means the written decision of the ALJ required by Sec. 308.509 or Sec. 308.536 of this subpart, and includes a revised initial decision issued following a remand or a motion for consideration.
(l) Investigating official means the Inspector General of the FDIC, or an officer or employee of the Inspector General designated by the Inspector General. The investigating official must serve in a position that has a rate of basic pay under the pay scale utilized by the FDIC that is equal to or greater than 120 percent of the minimum rate of basic pay for grade 15 under the federal government's General Schedule.
(m) Knows or has reason to know, means that a person, with respect to a claim or statement:
(n) Makes, wherever it appears, includes the terms ``presents'', ``submits'', and ``causes to be made, presented, or submitted.'' As the context requires, ``making'' or ``made'', likewise includes the corresponding forms of such terms.
(p) Representative means an attorney, who is a member in good standing of the bar of any state, territory, or possession of the United States or of the District of Columbia or the Commonwealth of Puerto Rico, and designated by a party in writing.
(q) Reviewing official means the General Counsel of the FDIC or his designee who is: [[Page 52355]] (1) Not subject to supervision by, or required to report to, the investigating official;
(2) Not employed in the organizational unit of the FDIC in which the investigating official is employed; and
(3) Serving in a position that has a rate of basic pay under the pay scale utilized by the FDIC that is equal to or greater than 120 percent of the minimum rate of basic pay for grade 15 under the federal government's General Schedule.
(r) Statement means any representation, certification, affirmation, document, record, or accounting or bookkeeping entry made:
(ii) A grant, loan, or benefit received, directly or indirectly, from the FDIC, or any state, political subdivision of a state, or other party, if the United States government provides any portion of the money or property under such contract or for such grant, loan, or benefit, or if the government will reimburse such state, political subdivision, or party for any portion of the money or property under such contract or for such grant, loan, or benefit.
Sec. 308.502 Basis for civil penalties and assessments. (a) Claims. (1) A person who makes a false, fictitious, or fraudulent claim to the FDIC is subject to a civil penalty of up to $5,000 per claim. A claim is false, fictitious, or fraudulent if the person making the claim knows, or has reason to know, that:
(i) The claim is false, fictitious, or fraudulent; or
(ii) The claim includes, or is supported by, a written statement that asserts a material fact which is false, fictitious or fraudulent; or
(iii) The claim includes, or is supported by, a written statement that:
(A) Omits a material fact; and
(B) Is false, fictitious, or fraudulent as a result of that omission; and
(iv) The claim seeks payment for providing property or services that the person has not provided as claimed.
(3) A claim will be considered made to the FDIC, recipient, or party when the 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 FDIC, recipient, or party.
(4) Each claim for property, services, or money that constitutes any one of the elements in paragraph (a)(1) of this section is subject to a civil penalty regardless of whether the property, services, or money is actually delivered or paid.
(5) If the FDIC 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 portion of the claim) that is determined to constitute a false, fictitious, or fraudulent claim under paragraph (a)(1) of this section. The assessment will be in lieu of damages sustained by the FDIC because of the claims.
(6) The amount of any penalty assessed under paragraph (a)(1) of this section will be adjusted for inflation in accordance with Sec. 308.132(c)(3)(xv) of this part.
(7) The penalty specified in paragraph (a)(1) of this section is in addition to any other remedy allowable by law.
(b) Statements. (1) A person who submits to the FDIC a false, fictitious or fraudulent statement is subject to a civil penalty of up to $5,000 per statement. A statement is false, fictitious or fraudulent if the person submitting the statement to the FDIC knows, or has reason to know, that:
(i) The statement asserts a material fact which is false, fictitious, or fraudulent; or
(ii) The statement omits a material fact that the person making the statement has a duty to include in the statement; and
(iii) The statement contains or is accompanied by an express certification or affirmation of the truthfulness and accuracy of the contents of the statement.
(3) A statement will be considered made to the FDIC when the 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 FDIC.
(4) The amount of any penalty assessed under paragraph (a)(1) of this section will be adjusted for inflation in accordance with Sec. 308.132(c)(3)(xv) of this part.
(5) The penalty specified in paragraph (a)(1) of this section is in addition to any other remedy allowable by law.
(c) Failure to file declaration/certification. Where, as a prerequisite to conducting business with the FDIC, a person is required by law to file one or more declarations and/or certifications, and the person intentionally fails to file such declaration/certification, the person will be subject to the civil penalties as prescribed by this subpart.
(e) Liability. (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 jointly and severally 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 FDIC 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.
Sec. 308.503 Investigations. (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 will identify the person to whom it is addressed and the authority under which the subpoena is issued and will identify the records or documents sought;
(3) The person receiving such subpoena will be required to provide 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 therefor, 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 PFCRA 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 [[Page 52356]] directly to the United States Department of Justice (DOJ) for suit under the False Claims Act (31 U.S.C. 3729 et seq.) or other civil relief, or to preclude or limit the investigating official's discretion to defer or postpone a report or referral to the reviewing official to avoid interference with a criminal investigation or prosecution.
Sec. 308.504 Review by the reviewing official. (a) If, based on the report of the investigating official under Sec. 308.503(b) of this subpart, the reviewing official determines that there is adequate evidence to believe that a person is liable under Sec. 308.502 of this subpart, the reviewing official will transmit to the Attorney General a written notice of the reviewing official's intention to issue a complaint under Sec. 308.506 of this subpart.
(4) An estimate of the amount of money or the value of property, services, or other benefits requested or demanded in violation of Sec. 308.502 of this subpart;
(6) A statement that there is a reasonable prospect of collecting an appropriate amount of penalties and assessments. Such a statement may be based upon information then known, or upon an absence of any information indicating that the person may be unable to pay such amount.
Sec. 308.505 Prerequisites for issuing a complaint. (a) The reviewing official may issue a complaint under Sec. 308.506 of this subpart only if:
(1) The DOJ 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 Sec. 308.502(a) of this subpart with respect to a claim (or a group of related claims submitted at the same time as defined in paragraph (b) of this section) the reviewing official determines that the amount of money or the value of property or services demanded or requested does not exceed $150,000.
(b) For the purposes of this section, a group of related 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 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.
Sec. 308.506 Complaint. (a) On or after the date the DOJ 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 Sec. 308.507 of this subpart.
(1) The allegations of liability against the defendant, including the statutory basis for liability, or 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;
(3) Instructions for filing an answer and 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 Sec. 308.509 of this subpart.
(c) At the same time the reviewing official serves the complaint, he or she will provide the defendant with a copy of this subpart.
Sec. 308.507 Service of complaint. (a) Service of a complaint will be made by certified or registered mail or by delivery in any manner authorized by rule 4(c) of the Federal Rules of Civil Procedure (28 U.S.C. App.). Service is complete upon receipt.
Sec. 308.508 Answer. (a) The defendant may request a hearing by filing an answer with the reviewing official within 30 days of service of the complaint. An answer will be deemed to be a request for hearing.
(1) Must admit or deny each of the allegations of liability made in the complaint;
(c) If the defendant is unable to file an answer meeting the requirements of paragraph (b) of this section within the time provided:
(1) The defendant may, before the expiration of 30 days from service of the complaint, file with the reviewing official a general answer denying liability and requesting a hearing, and a request for an extension of time within which to file an answer meeting the requirements of paragraph (b) of this section.
(2) The reviewing official will file promptly with the ALJ the complaint, the general answer denying liability, and the request for an extension of time as provided in Sec. 308.510 of this subpart.
(3) For good cause shown, the ALJ may grant the defendant up to 30 additional days within which to file an answer meeting the requirements of paragraph (b) of this section.
Sec. 308.509 Default upon failure to file an answer. (a) If the defendant does not file an answer within the time prescribed in Sec. 308.508(a) of this subpart, the reviewing official may refer the complaint to the ALJ.
(b) Upon the referral of the complaint, the ALJ will promptly serve on defendant in the manner prescribed in Sec. 308.507 of this subpart, a notice that an initial decision will be issued under this section.
(c) If the defendant fails to answer, the ALJ will assume the facts alleged in the complaint to be true, and, if such facts establish liability under Sec. 308.502 of this subpart, the ALJ will issue an initial [[Page 52357]] decision imposing the maximum amount of penalties and assessments allowed under the statute.
(d) Except as otherwise provided in this section, by failing to file a timely answer, 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.
(e) If, before such an initial decision becomes final, the defendant files a motion with the ALJ seeking to reopen on the grounds that extraordinary circumstances prevented the defendant from filing an answer, the initial decision will be stayed pending the ALJ's decision on the motion.
(f) If, in the motion to reopen under paragraph (e) of this section, the defendant can demonstrate extraordinary circumstances excusing the failure to file a timely answer, 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 to reopen under paragraph (e) of this section is not subject to reconsideration under Sec. 308.537 of this subpart.
(h) The decision denying the motion to reopen under paragraph (e) of this section may be appealed by the defendant to the Board by filing a notice of appeal with the Board within 15 days after the ALJ denies the motion. The timely filing of a notice of appeal will stay the initial decision until the Board decides the issue.
(i) If the defendant files a timely notice of appeal with the Board, the ALJ will forward the record of the proceeding to the Board.
(j) The Board will decide whether extraordinary circumstances excuse the defendant's failure to file a timely answer based solely on the record before the ALJ.
(k) If the Board decides that extraordinary circumstances excuse the defendant's failure to file a timely answer, the Board will remand the case to the ALJ with instructions to grant the defendant an opportunity to answer.
(l) If the Board decides that the defendant's failure to file a timely answer is not excused, the Board will reinstate the initial decision of the ALJ, which will become final and binding upon the parties 30 days after the Board issues such decision.
Sec. 308.510 Referral of complaint and answer to the ALJ. Upon receipt of an answer, the reviewing official will file the complaint and answer with the ALJ. The reviewing official will include the name, address, and telephone number of a representative of the Corporation.
Sec. 308.511 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 Sec. 308.507 of this subpart. At the same time, the ALJ will send a copy of such notice to the representative of the Corporation.
(1) The tentative time, date, and place, and the nature of the hearing;
(5) The name, address, and telephone number of the representative of the Corporation and of the defendant, if any; and
(6) Other matters as the ALJ deems appropriate.
Sec. 308.512 Parties to the hearing. (a) The parties to the hearing will be the defendant and the Corporation.
(b) Pursuant to the False Claims Act (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.
Sec. 308.513 Separation of functions. (a) The investigating official, the reviewing official, and any employee or agent of the FDIC who takes part in investigating, preparing, or presenting a particular case may not, in such case or a factually related case:
(2) Participate or advise in the initial decision or the review of the initial decision by the Board, except as a witness or a representative in public proceedings; or
(c) Except as provided in paragraph (a) of this section, the representative for the FDIC will be an attorney employed in the FDIC's Legal Division; however, the representative of the FDIC may not participate or advise in the review of the initial decision by the Board.
Sec. 308.514 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.
Sec. 308.515 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 with the ALJ a motion for disqualification of a reviewing official or an ALJ. An affidavit alleging conflict of interest or other reason for disqualification must accompany the motion.
(c) Such motion and affidavit must be filed promptly upon the party's discovery of reasons requiring disqualification, or such objections will be deemed waived.
(d) Such affidavit must 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. The representative of record must certify that the affidavit is made in good faith and this certification must accompany the affidavit.
(e) Upon the filing of such a motion and affidavit, the ALJ will proceed no further in the case until he or she resolves the matter of disqualification in accordance with paragraph (f) of this section.
(f)(1) If the ALJ determines that a reviewing official is disqualified, the ALJ will dismiss the complaint without prejudice.
(3) If the ALJ denies a motion to disqualify, the Board may determine the matter only as part of the Board?s review of the initial decision upon appeal, if any.
Sec. 308.516 Rights of parties. Except as otherwise limited by this subpart, all parties may:
(d) Agree to stipulations of fact or law which will be made part of the record; [[Page 52358]] (e) Present evidence relevant to the issues at the hearing;
(h) Submit written briefs and proposed findings of fact and conclusions of law.
Sec. 308.517 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.
(11) Upon motion of a party, take official notice of facts, decide cases, in whole or in part, by summary judgment where there is no disputed issue of material fact;
(12) Conduct any conference, argument, or hearing on motions in person or by telephone; and
(13) Exercise such other authority as is necessary to carry out the responsibilities of the ALJ under this subpart.
(c) The ALJ does not have the authority to make any determinations regarding the validity of federal statutes or regulations or of directives, rules, resolutions, policies, orders or other such general pronouncements issued by the Corporation.
Sec. 308.518 Prehearing conferences. (a) The ALJ may schedule prehearing conferences as appropriate.
(2) The necessity or desirability of amendments to the pleading, including the need for a more definite statement;
(3) Stipulations and admissions of fact as to the contents and authenticity of documents;
(5) Whether a party chooses (subject to the objection of other parties) to waive appearance at an oral hearing and to submit only documentary evidence and written argument;
(9) The time, date, and place for the hearing; and
Sec. 308.519 Disclosure of documents. (a) Upon written request to the reviewing official, the defendant may review any relevant and material documents, transcripts, records, and other materials that relate to the allegations set out in the complaint and upon which the findings and conclusions of the investigating official under Sec. 308.503(b) of this subpart are based, unless such documents are subject to a privilege under federal law. Upon payment of fees for duplication, the defendant may obtain copies of such documents.
(c) The notice sent to the Attorney General from the reviewing official as described in Sec. 308.504 of this subpart 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 with the ALJ following the filing of an answer pursuant to Sec. 308.508 of this subpart.
Sec. 308.520 Discovery. (a) The following types of discovery are authorized:
(2) Requests for admission of the authenticity of any relevant document or of the truth of any relevant fact;
(b) For the purpose of this section and Secs. 308.521 and 308.522 of this subpart, the term documents includes information, documents, reports, answers, records, accounts, papers, and other data or documentary evidence. Nothing contained in this subpart will be interpreted to require the creation of a document.
(c) Unless mutually agreed to by the parties, discovery is available only as ordered by the ALJ. The ALJ will regulate the timing of discovery.
(d) Motions for discovery. (1) A party seeking discovery may file a motion with the ALJ a copy of the requested discovery, or in the case of depositions, a summary of the scope of the proposed deposition, must accompany such motions.
(2) Within 10 days of service, a party may file an opposition to the motion and/or a motion for protective order as provided in Sec. 308.523 of this subpart.
(5) The ALJ may grant discovery subject to a protective order under Sec. 308.523 of this subpart.
(e) Dispositions. (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, date, and place at which the deposition will be held.
(2) The party seeking to depose must serve the subpoena in the manner prescribed in Sec. 308.507 of this subpart.
(4) The party seeking to depose must provide for the taking of a verbatim transcript of the deposition, and must [[Page 52359]] make the transcript available to all other parties for inspection and copying.
(f) Each party must bear its own costs of discovery.
Sec. 308.521 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 must 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 Sec. 308.532(b) of this subpart. At the time such documents are 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, must 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 or any exhibit not provided to the opposing party as provided in paragraph (a) of this section unless the ALJ finds good cause for the failure or that there is no prejudice to the objecting party.
Sec. 308.522 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.
(c) A party seeking a subpoena must file a written request not less than 15 days before the date fixed for the hearing unless otherwise allowed by the ALJ for good cause shown. Such request must specify any documents to be produced and must designate the witnesses and describe the address and location thereof with sufficient particularity to permit such witnesses to be found.
(d) The subpoena must specify the time, date, and place at which the witness is to appear and any documents the witness is to produce.
(e) The party seeking the subpoena must serve it in the manner prescribed in Sec. 308.507 of this subpart. A subpoena on a party or upon an individual under the control of a party may be served by first class mail.
Sec. 308.523 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.
(1) That the discovery will not be conducted;
(2) That the discovery will be conducted only on specified terms and conditions, including a designation of the time or place;
(3) That the discovery will be conducted only through a method of discovery other than that requested;
(6) That the contents of discovery or evidence be sealed or otherwise kept confidential;
Sec. 308.524 Witness fees. The party requesting a subpoena must 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 must accompany the subpoena when served, except that when a subpoena is issued on behalf of the FDIC, a check for witness fees and mileage need not accompany the subpoena.
Sec. 308.525 Form, filing, and service of papers. (a) Form. (1) Documents filed with the ALJ must include an original and two copies.
(2) Every pleading and paper filed in the proceeding must 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 must be signed by, and must 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 by certified or registered mail. 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 with the ALJ must, 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 Sec. 308.507 of this subpart must 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 must be made upon such representative in lieu of the actual party. The ALJ may authorize facsimile transmission as an acceptable form of service.
(c) Proof of service. A certificate by the individual serving the document by personal delivery or by mail, setting forth the manner of service, will be proof of service.
Sec. 308.526 Computation of time. (a) In computing any period of time under this subpart 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 7 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 mail, an additional 5 days will be added to the time permitted for any response. [[Page 52360]] Sec. 308.527 Motions. (a) Any application to the ALJ for an order or ruling must be by motion. Motions must state the relief sought, the authority relied upon, and the facts alleged, and must be filed with the ALJ and served on all other parties. Motions may include, without limitation, motions for summary judgment.
(c) Within 15 days after a written motion is served, or any other time as may be fixed by the ALJ, any party may file a response to such motion.
Sec. 308.528 Sanctions. (a) The ALJ may sanction a person, including any party or representative for:
(b) Any such sanction, including but not limited to, those listed in paragraphs (c), (d), and (e) of this section, must reasonably relate to the severity and nature of the failure or misconduct.
(4) Strike any part of the related pleading 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 subpart commenced by service of a notice of hearing, the ALJ may dismiss the action or may issue an initial decision imposing penalties and assessments.
(e) The ALJ may refuse to consider any motion, request, response, brief, or other document which is not filed in a timely fashion.
Sec. 308.529 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 Sec. 308.502 of this subpart, and, if so, the appropriate amount of any such civil penalty or assessment considering any aggravating or mitigating factors.
(b) The FDIC must prove defendant's liability and any aggravating factors by a preponderance of the evidence.
(c) The defendant must prove any affirmative defenses and any mitigating factors by a preponderance of the evidence.
Sec. 308.530 Determining the amount of penalties and assessments. (a) In determining an appropriate amount of civil penalties and assessments, the ALJ and the Board, 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 Board in determining the amount of penalties and assessments to impose with respect to the misconduct (i.e., the false, fictitious, or fraudulent claims or statement) charged in the complaint:
(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 a similar transaction;
(c) Nothing in this section will be construed to limit the ALJ or the Board from considering any other factors that in any given case may mitigate or aggravate the offense for which penalties and assessments are imposed.
(d) Civil money penalties that are assessed pursuant to this subpart are subject to adjustment on a four-year basis to account for inflation as required by section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended (codified at 28 U.S.C. 2461, note) (see also Sec. 308.132(c)(3)(xv)).
Sec. 308.531 Location of hearing. (a) The hearing may be held:
(2) In any judicial district of the United States in which the claim or statement at issue was made; or [[Page 52361]] (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 argument with respect to the location of the hearing.
Sec. 308.532 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.
(b) At the discretion of the ALJ, testimony may be admitted in the form of a written statement or deposition. The party offering a written statement must provide all other parties with a copy of the written statement along with the last known address of the witness. Sufficient time must be allowed for other parties to subpoena the witness for cross-examination at the hearing. Prior written statements and deposition transcripts of witnesses identified to testify at the hearing must be exchanged as provided in Sec. 308.521(a) of this subpart.
(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.
(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 Corporation engaged in assisting the representative for the Corporation.
Sec. 308.533 Evidence. (a) The ALJ will determine the admissibility of evidence.
(b) Except as provided in this subpart, the ALJ will not be bound by the Federal Rules of Evidence (28 U.S.C. App.). However, the ALJ may apply the Federal Rules of Evidence where appropriate, e.g., to exclude unreliable evidence.
(h) All documents and other evidence offered or taken for the record must be open to examination by all parties, unless otherwise ordered by the ALJ pursuant to Sec. 308.523 of this subpart.
Sec. 308.534 The record. (a) The hearing will be recorded by audio or videotape 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 Board.
(c) The record may be inspected and copied (upon payment of a reasonable fee) by anyone, unless otherwise ordered by the ALJ pursuant to Sec. 308.523 of this subpart.
Sec. 308.535 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, not to exceed 60 days from the date the parties receive the transcript of the hearing or, if applicable, the stipulated record. Such briefs may be accompanied by proposed findings of fact and conclusions of law. The ALJ may permit the parties to file reply briefs.
Sec. 308.536 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.
(1) Whether the claims or statements identified in the complaint, or any portions of such claims or statements, violate Sec. 308.502 of this subpart; and
(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 Sec. 308.530 of this subpart.
(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 Board. 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 Board, or a motion for reconsideration of the initial decision is timely filed, the initial decision will constitute the final decision of the Board and will be final and binding on the parties 30 days after it is issued by the ALJ.
Sec. 308.537 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 is made by mail, receipt will be presumed to be 5 days from the date of mailing in the absence of proof to the contrary.
(b) Every motion for reconsideration must set forth the matters claimed to have been erroneously decided and the nature of the alleged errors. The motion must be accompanied by a supporting brief.
(c) Responses to the motions will be allowed only upon order of the ALJ.
(d) No party may file a motion for reconsideration of an initial decision [[Page 52362]] that has been revised in response to a previous motion for reconsideration.
(f) If the ALJ denies a motion for reconsideration, the initial decision will constitute the final decision of the FDIC and will be final and binding on all parties 30 days after the ALJ denies the motion, unless the final decision is timely appealed to the Board in accordance with Sec. 308.538 of this subpart.
(g) If the ALJ issues a revised initial decision, that decision will constitute the final decision of the FDIC and will be final and binding on the parties 30 days after it is issued, unless it is timely appealed to the Board in accordance with Sec. 308.538 of this subpart.
Sec. 308.538 Appeal to the Board of Directors. (a) Any defendant who has filed 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 Board by filing a notice of appeal with the Board in accordance with this section.
(b)(1) No notice of appeal may be filed until the time period for filing a motion for reconsideration under Sec. 308.537 of this subpart has expired.
(4) The Board may extend the initial 30-day period for an additional 30 days if the defendant files with the Board 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 with the Board, the ALJ will forward the record of the proceeding to the Board.
(e) The representative for the Corporation 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 Board.
(h) In reviewing the initial decision, the Board 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 Board 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 Board will remand the matter to the ALJ for consideration of such additional evidence.
(j) The Board may affirm, reduce, reverse, compromise, remand, or settle any penalty or assessment determined by the ALJ in any initial decision.
(k) The Board will promptly serve each party to the appeal with a copy of the decision of the Board and a statement describing the right of any person determined to be liable for a penalty or an 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 subpart and within 60 days after the date on which the Board serves the defendant with a copy of the Board's decision, a determination that a defendant is liable under Sec. 308.502 of this subpart is final and is not subject to judicial review.
Sec. 308.539 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 Board a written finding that continuation of the administrative process described in this subpart 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 Board will stay the process immediately. The Board may order the process resumed only upon receipt of the written authorization of the Attorney General.
Sec. 308.540 Stay pending appeal. (a) An initial decision is stayed automatically pending disposition of a motion for reconsideration or of an appeal to the Board.
(b) No administrative stay is available following a final decision of the Board.
Sec. 308.541 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 Board imposing penalties or assessments under this subpart and specifies the procedures for such review.
Sec. 308.542 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 subpart and specify the procedures for such actions.
Sec. 308.543 Right to administrative offset. The amount of any penalty or assessment which has become final, or for which a judgment has been entered under Sec. 308.541 or Sec. 308.542 of this subpart, or any amount agreed upon in a compromise or settlement under Sec. 308.545 of this subpart, may be collected by administrative offset under 31 U.S.C. 3716, except that an administrative offset may not be made under this section against a refund of an overpayment of federal taxes, then or later owing by the United States to the defendant.
Sec. 308.544 Deposit in Treasury of United States. All amounts collected pursuant to this subpart will be deposited as miscellaneous receipts in the Treasury of the United States, except as provided in 31 U.S.C. 3806(g).
Sec. 308.545 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 subpart 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 Board has exclusive authority to compromise or settle a case under this subpart any time after the date on which the ALJ issues an initial decision, except during the pendency of any review under Sec. 308.541 of this subpart or during the pendency of any action to collect penalties and assessments under Sec. 308.542 of this subpart.
(d) The Attorney General has exclusive authority to compromise or settle a case under this subpart during the pendency of any review under Sec. 308.541 of this subpart 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 Board, or the Attorney General, as appropriate. The reviewing official may recommend settlement terms to the Board, or the Attorney General, as appropriate.
(f) Any compromise or settlement must be in writing. [[Page 52363]] Sec. 308.546 Limitations. (a) The notice of hearing with respect to a claim or statement will be served in the manner specified in Sec. 308.507 of this subpart within 6 years after the date on which such claim or statement is made.
(b) If the defendant fails to file a timely answer, service of notice under Sec. 308.509(b) of this subpart will be deemed a notice of a hearing for purposes of this section.
(c) The statute of limitations may be extended by agreement of the parties. By order of the Board of Directors. Dated at Washington, D.C., this 27th day of July, 2000. Federal Deposit Insurance Corporation.
[FR Doc. 00-21999 Filed 8-28-00; 8:45 am]