Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

The Inspector General of the Social Security Administration,
Petitioner,
v.
Donald Grady, Jr.,

Respondent.

Docket No. C-15-2312
Decision No. CR4633

Date: June 16, 2016

DECISION

In 2014, Respondent, Donald Grady, Jr., was receiving Social Security disability
insurance benefits. He responded to questions posed by the Social Security
Administration (SSA) about his impairments and abilities. The Inspector General (IG)
for SSA now charges that he violated section 1129 of the Social Security Act (Act)
because, in his responses, he knowingly made false statements and misrepresentations of
material fact regarding his alleged disability, functional abilities, and activities. SSA
proposes imposing against him a $10,000 civil money penalty (CMP).

For the reasons set forth below, I agree that Respondent Grady knowingly misrepresented
material facts to SSA for its use in determining his continuing eligibility for disability
insurance benefits, and I consider $10,000 a reasonable penalty.
Background

Section 1129(a)(1) of the Act subjects to penalty any person (including an organization,
agency, or other entity) who

(A) makes, or causes to be made, a statement or representation of a
material fact, for use in determining any initial or continuing right to or the
amount of monthly insurance benefits under title II . . . that the person
knows or should know is false or misleading,’

(B) makes such a statement or representation for such use with knowing
disregard for the truth, or

(C) omits from a statement or representation for such use, or otherwise
withholds disclosure of, a fact which the person knows or should know is
material to the determination of any initial or continuing right to or the
amount of monthly insurance benefits under title II . . . if the person knows,
or should know, that the statement or representation with such omission is
false or misleading or that the withholding of such disclosure is misleading

See also 20 C.F.R. § 498.102(a) (authorizing the IG to impose a penalty against any
person who has made a statement or representation of a material fact for use in
determining any initial or continuing right to or amount of Title II benefits, and who
knew, or should have known, that the statement or representation was false or misleading,
or who omitted a material fact, or who made such a statement with “knowing disregard
for the truth.”)

The Act defines a material fact as one that “the Commissioner of Social Security may
consider in evaluating whether an applicant is entitled to benefits under title II... .” Act
§ 1129(a)(2); 20 C.F.R. § 498.101.

The Commissioner of Social Security has delegated to the IG the authority to impose
penalties under section 1129. See 20 C.F.R. § 498.102.

In this case, the IG contends that, in responding to continuing-disability-review questions
posed by SSA, Respondent Grady deliberately and repeatedly misrepresented his
functional abilities so that he could continue receiving Social Security disability
insurance benefits. By letter dated January 8, 2015, the IG advised Respondent of his

' Title II of the Act governs the Social Security disability insurance program.
determination and the proposed penalty. SSA Ex. 8. Respondent requested a hearing.
SSA Exs. 9, 10.

The IG submitted a brief (SSA Br.) and 21 exhibits (SSA Exs. 1-21). Respondent Grady
submitted 13 exhibits (R. Exs. 1-13), which include, marked as R. Exs. | and 13, his
responses to the IG’s brief. Respondent submitted closing arguments.

Ihave admitted SSA Exs. 1-21, which include supplemental exhibits marked SSA Exs.
4.1 (video surveillance); 4.2 (screen shots from Respondent’s business website); and 4.3
(postings from Respondent’s Facebook page). I have also admitted R. Exs. 1-13.
Summary of Prehearing Conference and Order (January 19, 2016). Each party submitted
the written direct testimony of his witnesses (the IG has seven witnesses; Respondent
Grady has twelve witnesses, including himself), but neither party asked that any witness
be produced for cross-examination at an in-person hearing. An in-person hearing would
therefore serve no purpose, and I decide this case based on the written record.
Respondent letter (February 21, 2016); Order (February 22, 2016); see Order Scheduling
Submission of Briefs and Documents at 2-3 § 4 (June 11, 2015).

Issues
The issues before me are:

1. Did Respondent Grady make, or cause to be made, to SSA a statement or
representation of a material fact that he knew or should have known was false or
misleading, for SSA’s use in determining his right to Social Security Disability
Insurance benefits (Title II) and/or the amount of those benefits, or did he omit a
material fact or make such a statement with knowing disregard for the truth; and

2. if so, is the $10,000 proposed penalty reasonable?
Discussion

1. Respondent Donald Grady, Jr. violated section 1129 of
the Act because he knowingly made false statements and
misrepresentations to SSA for its use in determining his
ongoing eligibility for Social Security disability insurance
benefits.”

2 My findings of fact/conclusion of law are set forth, in italics and bold, in the discussion
captions of this decision.
To satisfy the basic definition of “disability,” an individual must have a severe medically
determinable physical or mental impairment that makes him unable to perform his past
relevant work or any other substantial gainful work. 20 C.F.R. § 404.1505.

Respondent’s representations. After finding someone disabled, SSA must occasionally
reevaluate the individual’s impairments to determine if he is still eligible for benefits, a
process referred to as a “continuing disability review.” If medical or other evidence
establishes that the recipient is no longer disabled, his benefits will end. 20 C.F.R.

§§ 404.1589, 404.1590. In this case, Respondent Grady was receiving disability
insurance benefits, and, in May 2014, he responded to questions on a Continuing
Disability Review Report (Form SSA-454). Among his representations were the
following:

e He listed as conditions that limit his ability to work: lower back, left leg, an
buttock pain; right knee pain; depression and a mood disorder; degenerative disc
disease; and weight gain. SSA Ex. | at 2,3.

e He said that he wore a knee brace all the time, a back support when he was up for
a long period, and used a cane when his knee was swollen and unstable. SSA Ex.
lat5.

e He claimed that, among other limitations, he had difficulty performing chores that
required bending and was unable to bend to reach some areas while bathing; he
could not perform activities that required prolonged standing (10 minutes or
more), and he used a cane at times; lifting objects caused him back pain; he used a
motorized carriage while shopping because he could not walk for long; he could
not concentrate because of his pain and medication; he was easily frustrated and
lost patience with people. SSA Ex. | at 6.

e He said that he opened a martial arts gym with the help of his wife “who runs it,”
and that volunteer instructors assisted him “in teaching the physical part of martial
arts that I can no longer do.” He said that he went to the gym from noon to 2:00
p.m. and from 5:00 p.m. to 9:00 p.m. He said that he “oversees” the instructors
and rests in the afternoon. He reiterated that he is unable to sit or stand for long
periods due to back and knee pain. He said that he spends much of his time lying
on a sofa in the gym. SSA Ex. | at 8.

In a July 21, 2014 telephone conversation with an employee of the Florida Department of
Health’s Division of Disability Determinations (state agency), Respondent Grady again
described back and right knee pain. He said he had a left foot drop. He had several
canes, keeping one in his car and using it whenever he has to go anywhere (but not inside
his house or getting from his home to the car). He claimed that “he doesn’t get out
much” and “is a hermit.” He said that he wore a brace on his right knee “at all times,”
both inside and outside his house and whenever he went anywhere. SSA Ex. 2.

When asked how he typically spends his day, “he was quiet for a very long time.” He
then said that he owned a martial arts studio where he goes three to five days a week and
where he “oversees” six martial arts instructors. He said that he could no longer teach
martial arts and spent most of the day on the studio sofa. He said that he doesn’t do
“much of anything.” SSA Ex. 2.

The investigation. Because of disparities in Respondent Grady’s medical evidence, as
well as inconsistencies in his statements to the state agency, state agency personnel
launched an investigation. SSA Ex. 15 at 2 (Miller Decl. § 4); SSA Ex. 16 at 1-2
(Andrews Decl. § 3). On August 5, 2014, Thomas Montgomery, a financial crimes
investigator for the state agency, began surveillance of Respondent’s residence. He
observed — and videotaped — Respondent Grady leaving his house, walking without
assistance, “with an unremarkable gait,” carrying two bags, one a gym bag. Respondent
Grady put the bags and his dog in the car and drove to his martial arts studio. SSA Ex. 4
at 1; SSA Ex. 17 at 1-2 (Montgomery Decl. §1); see SSA Ex. 4.1.

On August 6, 2014, Investigator Montgomery returned to Respondent Grady’s house.
Again, he observed — and videotaped — Respondent Grady leaving his house and walking
to his car. Respondent Grady carried two bags — a black nylon bag and a bag full of
groceries. Walking at “a brisk pace,” he retrieved his dog, who jumped into the car.
Respondent Grady got into the car and drove to his martial arts studio. SSA Ex. 4 at 2-3;
SSA Ex. 17 at 2 (Montgomery Decl. § 2); see SSA Ex. 4.1.

Investigator Montgomery returned to Respondent Grady’s home on August 11, 2014, but
Respondent was not there. The investigator went to Respondent Grady’s martial arts
studio and saw his car parked there. SSA Ex. 4 at 3; SSA Ex. 17 at 3 (Montgomery Decl.
§ 3).

On August 14, 2014, Investigator Montgomery again went to Respondent Grady’s home.
He observed — and videotaped — Respondent Grady leaving his house, accompanied by a
woman wearing hospital scrubs. Respondent Grady carried a gym bag and walked
without an assistive device, “with an unremarkable gait.” He put the gym bag into the
back seat, got into the passenger’s seat, and the woman drove him to the martial arts
studio. SSA Ex. 4 at 3; SSA Ex. 17 at 3 (Montgomery Decl. § 4).

Two other investigators, Lance Paul from the state agency and Jermaine Jack from SSA,
went to Respondent Grady’s martial arts studio on August 29, 2014, apparently without
revealing their purpose. Respondent Grady, who wore no knee brace and used no type of
assistive device, greeted them and shook their hands “with a firm grip.” He spoke to the
investigators about the gym and told them that he currently trains professional fighters in
mixed martial arts. He walked with a slight limp but moved “briskly” from one training
area to another, showing them the studio equipment. He squatted, bending at the knees,

while reaching into a locker to remove boxing gloves. He also squatted to demonstrate
how to throw a heavy medicine ball (although without the ball itself). He told them that
on Tuesday and Thursday evenings, between 6:00 and 9:00 p.m., he physically grappled
with students in the octagon ring. He said that he would be willing to teach his
techniques to local law enforcement agencies. “Fluidly using both arms and hands,” he
demonstrated his technique for subduing someone into unconsciousness. He gave the
agents his business card and said that he hoped to see them soon. SSA Ex. 6 at 2; SSA
Ex. 19 (Paul Decl. §§ 2-14); see SSA Ex. 4.1.

The investigators’ observations are corroborated by other evidence, including their
videotape of the encounters described in their declarations. SSA Ex. 4.1. Investigator
Montgomery and Program Specialist Jeanette Kerns also visited Respondent Grady’s
business and Facebook websites. His business website lists Respondent Grady as one of
three instructors. SSA Ex. 4.2 at 1. Respondent’s Facebook website describes Grady’s
Family Mixed Martial Arts as a gym that teaches classes in a variety of martial
arts/styles, including boxing, kickboxing, judo, wrestling, self-defense, and other
disciplines. SSA Ex. 4.3 at 1. The Facebook website includes photographs of
Respondent Grady actively engaged in what appear to be martial arts, including sparring
(boxing) and wrestling. SSA Ex. 4.3 at 2,3, 4, 6, 7, 8; SSA Ex. 17 at 4 (Montgomery
Decl. §§ 7, 8).

Thus, the IG presents compelling evidence that, contrary to his representations to SSA,
Respondent Grady was able to walk — and often walked — without a knee brace or any
assistive device. He was able to squat and bend and instructed students in mixed martial
arts, which included sparring and “grappling” with them in the ring.

Respondent’s defenses. Respondent Grady denies responsibility for the statements he
made during his July 21 interview, claiming that he did not remember what he said
because he was heavily medicated and sleepy. R. Ex. 1 at 2-3. On the other hand, he
repeats many of those statements. He and his witnesses maintain that he is disabled by
chronic back and knee pain, as well as depression and a mood disorder. Notwithstanding
the investigators’ recorded observations, Respondent reiterates that he keeps a cane in
each of his cars and “usually” wears knee braces. R. Ex. 1 at 3. He concedes that he
goes to his gym “that others are teaching in” but says that he is unable to do what he used
to. R. Ex. 13 at 1. He defends his use of the word “hermit” to describe himself, arguing
that it “seems to have different meanings to different people,” and does not preclude his
going to the gym regularly: “Even a hermit gets up with his shell on his back and moves
to another location when he needs to.” Id. He denies that he is a martial arts instructor
but claims that he “teach[es] thru” others and provides a place of learning. R. Ex. 1 at 2.

Respondent’s wife, Sandra Grady, echoes Respondent’s testimony. R. Ex. 2. She claims
that she has to help him shower because he is afraid of falling; that he cannot mow the
lawn; that he cannot cook anything that requires him to stand for a long time. He has
canes, knee braces, and back support braces. R. Ex. 2 at 3. She insists that the
investigators caught him on his “good days”; on other days, he wears his knee braces and
back brace. She also maintains that the YouTube video, to which SSA alludes, was
staged for demonstration purposes. R. Ex. 2 at 43

Respondent’s other witnesses, friends and associates from his gym, generally echo his
claims, with some notable differences. They describe him as “honest” and support his
claim that he is no longer able to do what he once did. They say that they have observed
him in pain, but none claim that constant pain prevents him from functioning. At the
same time, all seem to concede, at least tacitly, that he goes to the gym regularly and that
he runs it. Many of his witnesses refer to him as an “instructor.” R. Ex. 5 (referring to
Shihan Grady and “his other instructors”; “he keeps on trying to be a good instructor”);
R Ex. 6 (“We taught along side of [S]hihan Grady); R. Ex. 7 (“He is very good at
directing students and . . . I could tell he just wanted to jump in and once in a while [he]
did and was unable to come to the gym for a day or two... .”); R. Ex. 8 (“he has been my
MMA [iJnstructor”); R. Ex. 10 (“I have been a student of Shihan Don Grady for four
years”).

Whether Respondent is able to do what he once did is not the issue here. Whether his
activities and abilities should disqualify him from receiving disability benefits is also
beside the point. A disability recipient must accurately report his functional abilities and
activities, and, based on his representations (and other factors), SSA determines whether
he continues to qualify for benefits.

This record is characterized by glaring discrepancies between what Respondent told SSA
and what the investigators observed and recorded. The videos, taken over several days,
show some impairment: one calf appears smaller than the other, and Respondent
occasionally walks with a slight limp. Yet, the videos also show Respondent on the
ground, wrestling with an adolescent; they show him in the boxing ring, moving and
pivoting, with a young boy. The videos show him bending and twisting with relative
ease. Compelling evidence thus establishes that Respondent Grady made false statements
and representations to SSA for its use in determining his ongoing eligibility for Social
Security disability benefits. Contrary to his representations, he does not wear knee braces
all the time, and is able to walk almost normally; he leaves his house regularly and goes
to the gym where he teaches classes. He is also able to sit, bend, twist, and lift and carry
objects.

> She also says that her husband and his friends started the gym about four years earlier.
R. Ex. 2 at 2. She does not repeat her husband’s claim that she “runs the gym.” To the
contrary, she works full time as a nurse. R. Ex. 2.
2. The IG proposes a reasonable penalty, $10,000, against
Respondent Grady.

The IG may impose a CMP of not more than $5,000 for each false statement or
misrepresentation. Act § 1129(a)(1); 20 C.F.R. § 498.103(a).

I now apply the regulatory criteria to assess the appropriateness of the penalty. I am
specifically authorized to affirm, deny, increase, or reduce the penalties proposed by the
IG. 20 CFR. § 498.220. In determining the appropriateness of the penalty, I must
consider: 1) the nature of the statements and representations and the circumstances under
which they occurred; 2) the degree of culpability of the person committing the offense; 3)
the history of prior offenses of the person committing the offense; 4) the financial
condition of the person committing the offense; and 5) such other matters as justice may
require. 20 C.F.R. § 498.106.

First, Respondent Grady has no history of prior offenses.

With respect to his financial condition, the respondent bears the burden of establishing
that his financial condition prevents him from paying the penalty. SSA v. Clara Sloan,
DAB CR1081 (2003); Recommended Decision to Decline Review, App. Div. Dkt. No. A-
04-03 at 2 (Feb. 9, 2004) (finding “no basis to disturb the ALJ’s . . . legal conclusions.”).
Respondent did not return to the IG a financial disclosure form for its use in determining
his ability to pay a penalty. See SSA Ex. 8. Although he asserts that he is strapped
financially, he has submitted to this forum no support for the claim.

With respect to the other factors, I find that Respondent has made more than two false
statements to SSA. He deliberately exaggerated his impairment and minimized his
activities and abilities. Without adequately explaining the obvious discrepancies between
the investigators’ videos and his representations to SSA, Respondent doubles down and
continues to maintain that he is unable to perform the tasks that the videos show him
performing with relative ease. For this he is culpable.

Finally, I note that the integrity of the disability system depends on each claimant and
beneficiary accurately describing his functional abilities, so that SSA can determine
whether he qualifies or continues to qualify for benefits. Where, as here, a claimant
misrepresents his functional capacity, he undermines the integrity of that system.
Conclusion

Respondent Grady violated section 1129 of the Act when he knowingly misrepresented
material facts to SSA for its use in determining his continuing eligibility for Social
Security disability insurance benefits. I consider the $10,000 CMP reasonable.

/s/
Carolyn Cozad Hughes
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

St. Dominic-Jackson Memorial Hospital
(CCN: 25-0048),

Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-16-173
ALJ Ruling No. 2016-12
Date: June 15, 2016
ORDER OF DISMISSAL

I dismiss the hearing request of Petitioner, St. Dominic-Jackson Memorial Hospital,
because it has no right to an administrative law judge (ALJ) hearing. Specifically,
Petitioner is not seeking review of an action that is subject to ALJ review. 42 C.F.R.
§§ 498.3, 498.5.

I. Background and Procedural History

Petitioner is a hospital in Jackson, Mississippi, that is enrolled in the Medicare program.
In October 2013, Petitioner submitted a Form CMS-855A to its Medicare Administrative
Contractor, Novitas Solutions (Novitas). Petitioner’s Exhibit (P. Ex.) 1. Petitioner stated
that the purpose of the enrollment application was to change its Medicare information
(P. Ex. 1 at 9), to include its identifying information, practice location information,
payment address, medical record storage information, and authorized officials. P. Ex. 1
at 10. In Section 4 of the enrollment application, Petitioner indicated that it would be
adding a hospital psychiatric unit, effective January 1, 2014. P. Ex. 1 at 27. That same
month, Petitioner sent a letter to the Mississippi State Department of Health (DOH)
requesting an exception from the Medicare Prospective Payment System (PPS) for the
upcoming fiscal year beginning January 1, 2014. P. Ex. 3 at 1. Petitioner included an
2

attestation statement and a Psychiatric Unit Criteria Work Sheet (Form CMS-437)
indicating it was requesting an exclusion for the cost reporting period from January 1,
2014, to December 31, 2014. P. Ex. 3 at 2-11.

On January 17, 2014, Novitas informed Petitioner that it needed to make revisions to its
CMS-855A and provide supporting documentation within 30 days. P. Ex. 4. After
receiving Petitioner’s response, in a letter dated February 17, 2014, Novitas informed
Petitioner that it had assessed Petitioner’s Medicare enrollment application and sent it to
both the DOH and the Atlanta Regional Office of the Centers for Medicare & Medicaid
Services (CMS). P. Ex. 6.

In August 2014, Petitioner submitted a Determination of Reviewability Application Form
to the DOH for the “Establishment of Geriatric Psychiatric Distinct Part Unit.” P. Ex. 7.
In its submission, Petitioner was “requesting authority to establish a twenty-six (26) bed
distinct-part geriatric psychiatric unit (“Geropsych unit”).” P. Ex. 7 at 1. Petitioner
further explained that it intended to use adult psychiatric licensed beds in the Geropsych
unit and that it would be located in a distinct part of the hospital that is physically
separate from other psychiatric beds not included in the unit. P. Ex. 7 at 1. On October
15, 2015, the DOH informed Petitioner that “the proposed project will not be in
compliance under Mississippi Code Annotated 41-7-191, et seq. (1972) (Supp. 1972),”
and that “the Department is not authorized to approve adult psychiatric beds as licensed
acute care beds, as proposed in the project.” P. Ex. 8 at 2. In closing, the DOH informed
Petitioner that a certificate of need (CON) would be required for Petitioner’s project.!

P. Ex. 8 at 2.

In November 2014, Petitioner re-submitted a Determination of Reviewability Application
Form to the DOH, at which time it significantly modified its request and no longer sought
to establish a Geropsych unit. P. Ex. 9 at 1-2. Whereas the first proposal indicated

' The DOH letter referenced Appendix F of the DOH’s Certificate of Need Review
Manual. Appendix F is entitled “Guidelines for Establishing a Medicare Certified,
Distinct Part, PPS-Excluded Psychiatric Unit for Geriatric Psychiatric Patients in
Mississippi Acute Care Hospitals,” and that appendix details the requirements for
establishing a distinct part geriatric psychiatric unit. See
http://msdh.ms.gov/msdhsite/_static/resources/3346.pdf (last visited June 10, 2016).
Appendix F directs that “the beds to be included in the proposed unit will remain licensed
acute care beds.” Petitioner had stated in its application that it did not plan “to convert
acute care licensed beds to be used in the Geropsych unit as contemplated in Appendix F
of the Certificate of Need Review Manual.” P. Ex. 7 at 1.
3

Petitioner was seeking approval to establish a distinct part geriatric psychiatric unit, the
November 2014 application indicated that Petitioner “will not restrict the treatment in the
[distinct part unit] to patients of a particular age or payer source.” P. Ex. 9 at 3.

On May 7, 2015, the DOH informed Petitioner that it had approved Petitioner’s request to
establish a 26-bed psychiatric distinct part unit. P. Ex. 10. Specifically, the DOH
concluded that “because St. Dominic will provide the same service, and the beds will
remain licensed as adult psychiatric beds,” it would “approve adult psychiatric beds as
licensed adult psychiatric beds as proposed in the above project (establishment of
Psychiatric Distinct-Part Unit (26-Bed Unit)).” P. Ex. 10 at 2. The letter explained that
Petitioner had 83 psychiatric beds, and that it could convert 26 of those beds to beds in
the 26-bed unit, which would have its own medical director and head full-time nurse.

P. Ex. 10 at 1-2. Petitioner subsequently, in June 2015, submitted a new Attestation
Statement for Exclusion from PPS for Fiscal Year Beginning January 1, 2016. P. Ex. 11
at 2 (emphasis in original).

CMS informed Petitioner that its enrollment application and request for exclusion of the
distinct part psychiatric unit was granted, with an effective date of January 1, 2016. CMS
assigned Petitioner a sub-provider certification number (CCN). CMS Exhibit (CMS Ex.)
1.

Petitioner challenged the effective date assigned, January 1, 2016, in its request for
hearing. I issued an Acknowledgment and Pre-Hearing Order on December 29, 2015.
On March 28, 2016, CMS filed a motion to dismiss, with two supporting exhibits (CMS
Exs. 1-2). Petitioner filed a response to the motion to dismiss, along with 19 exhibits
(P. Exs. 1-19).?

II. Issues

The general issue here is whether I should dismiss Petitioner’s hearing request, to
specifically include whether the determination of the effective date for exclusion of
Petitioner’s distinct part psychiatric unit from PPS is an initial determination that is
subject to ALJ review.

2 Petitioner also submitted a brief in which it addressed the merits of the instant case.
However, since I have granted CMS’s motion to dismiss, it is unnecessary to address
Petitioner’s arguments on the merits.
III. Discussion®

CMS contends that I lack the authority to hear this case, whereas Petitioner argues that it
has appealed a reviewable initial determination that is within my jurisdiction. For the
reasons explained herein, I conclude that I lack jurisdiction over the instant case.

1. The assignment of the effective date for the exclusion of Petitioner’s distinct
part psychiatric unit from PPS is not a reviewable initial determination.

This case is governed by 42 C.F.R. Part 498, which gives providers and suppliers the
right to appeal certain CMS actions. Petitioner is a provider of services, and the term
“provider of services” means “a hospital, critical access hospital, skilling nursing facility,
comprehensive outpatient rehabilitation facility, home health agency, hospice program,
or, for purposes of section 1814(h) and section 1835(e), a fund.” 42 U.S.C. § 1395x(u).
Pursuant to 42 C.F.R. § 498.3(a)(1), an initial determination regarding one of the matters
specified in 42 C.F.R. § 498.3(b) may be appealed such that a provider or supplier is
entitled to a hearing before an ALJ and Departmental Appeals Board (Board) review of
the ALJ decision. See Vijendra Dave, M.D., DAB No. 2672 at 10 (2016). One of the
matters listed in section 498.3(b) includes “[t]he effective date of a Medicare provider
agreement or supplier approval,” and Petitioner contends that it is entitled to a hearing
pursuant to 42 C.F.R. § 498.3(b)(15). The issue at hand involves Petitioner’s request for
exclusion from PPS, which is a system of Medicare reimbursement for providers.

42 C.F.R. § 412.20(a) (stating that “all covered hospital inpatient services furnished to
beneficiaries during the subject cost reporting periods are paid under the prospective
payment system as specified in § 412.1(a)(1)”). Petitioner, by creating a new distinct part
psychiatric unit, was seeking reimbursement for that unit’s covered services outside of
PPS.

Petitioner contends that it “filed a Medicare Enrollment Application (“Form CMS-
855A”) with Novitas,” and “this provider application is appealable and was effectively
denied when CMS assigned an effective date of January 1, 2016, instead of the January 1,
2014 as originally sought by St. Dominic’s in the application.” P. Br. at 1, 6. Petitioner
further argues that 42 C.F.R § 498.5 provides appeal rights if an existing provider is
dissatisfied with an initial determination or revised initial determination related to the
denial or revocation of billing privileges. P. Br. at 3-4. Petitioner also contends that
several decisions of the Board support the proposition that a provider or supplier has a
right to challenge the effective date of enrollment, to include a provider agreement or

3 My findings of fact and conclusions of law are in bold and italic font.
5

supplier approval.* P. Br. at 5, citing Eugene Rubach, M.D., DAB CR2125 at 3 (2010)
(which in turn references a number of other ALJ decisions). Petitioner argues that the
letter from CMS notifying it that its distinct part unit had been approved is an initial
determination pursuant to 42 C.F.R. § 498.3(b)(15).

Section 498.3(b)(15) states that the “effective date of a Medicare provider agreement or
supplier approval” is an initial determination. While Petitioner asserts that section
498(b)(15) is applicable, it has not demonstrated that the effective date of its provider
agreement with Medicare was impacted by its request for an exclusion from PPS of its
distinct part psychiatric unit. When Petitioner first informed CMS that it would be
adding a new “practice location” to its hospital, its enrollment application stated that this
unit would be a practice location under the same provider agreement that was already in
effect. P. Ex. 1 at 9-10. In fact, the instructions on the Form CMS-855A enrollment
application state that “[i]f a provider agreement is not required, the location can be added
as a practice location,” but that if the provider was adding a practice location “and the
location requires a separate provider agreement, a separate, complete CMS-855A must be
submitted for that location. The location is considered a separate provider for purposes
of enrollment, and is not considered a practice location of the main provider.” P. Ex. | at
20; see Form CMS-855A, Section 4 Instructions, https://www.cms.gov/Medicare/CMS-
Forms/CMS-Forms/downloads/cms855a.pdf, \ast visited June 10, 2016. Petitioner, in its
Form CMS-855A, simply added a new practice location to its existing enrollment
information that was previously on file with CMS. In its application, Petitioner indicated
that it was changing its Medicare information, to include identifying information, practice
location information, payment address, and medical record storage information, and
authorized officials; Petitioner did not, in any way, indicate that it was attempting to add
a separate practice location that would require a separate provider agreement. P. Ex. 1.
As nothing in Petitioner’s October 2013 enrollment application initiated a new Medicare
provider agreement, Petitioner has no basis to challenge the “effective date of a Medicare
provider agreement” as stated in section 498.3(b)(15). See 42 C.F.R. § 489.3 (defining a
provider agreement as “an agreement between CMS and one of the providers specified in
§ 489.2(b) to provide services to Medicare beneficiaries and to comply with the

4 T observe that all decisions cited by Petitioner in support of its arguments consist of
decisions by individual ALJs and not decisions by panels of the Board. In citing to these
decisions, Petitioner is correct that a provider can challenge the effective date of a
provider agreement pursuant to 42 C.F.R. § 498.3(b)(15). However, in the instant case,
section 498.3(b)(15) is not an applicable provision of law.
6

requirements of section 1866 of the [Social Security] Act”). Petitioner has presented no
evidence that, as a result of CMS’s approval of its update to its enrollment information in
October 2013, it entered into a new provider agreement with a new effective date.*

The Board has previously concluded that the creation of a PPS-excluded unit under
similar circumstances did not give rise to a new provider agreement. The Board has
explained that 42 C.F.R. § 412.25 “sets forth the requirements for PPS excluded hospital
units” and “states that in order to be excluded, a distinct part . . . unit must: ‘Be part of an
institution that—(1) Has in effect an agreement under part 489 . . . to participate as a
hospital... .”” Metropolitan Methodist Hospital, DAB No. 1694 at 3 (1999) (emphasis
omitted). The Board explained in Metropolitan that the hospital “was already qualified
as a ‘hospital’ to provide inpatient services under Medicare when it sought the PPS
exclusion” and that “[n]either the statute nor the regulations recognize distinct part...
units of hospitals as independent providers of inpatient hospital services.” Jd. The Board
further explained that the petitioner had not sought to have the distinct part unit certified
as a provider separate from Metropolitan, and that “services excluded under PPS” is not a
category of appealable covered services under the Act. Id.; see also Specialty Hospital of
Southern California — La Mirada, DAB No. 1730 (1999) (explaining that the assignment
of a new provider number of the PPS-excluded unit “did not affect the status of either
entity as a hospital or the type of services that either entity provided” but rather “the
change reflected what reimbursement methodology would apply.”).

While Petitioner is displeased that it took nearly two years to ultimately obtain DOH and
CMS approval of its PPS-excluded distinct part psychiatric unit, I have determined that
dismissal is warranted and I lack jurisdiction over the matter.° However, I will briefly

5 The State Operations Manual, while not binding on these proceedings, explains that a
“PPS excluded psychiatric unit is part of the hospital and is included as part of the overall
ospital survey” and the “term ‘exclusion’ is a reimbursement term.” State Operations
Manual, Appendix A (emphasis added).
® Tt may be possible for Petitioner to pursue this case through another entity. See
Medicare Provider Reimbursement Manual, Chapter 30, Section 3006 (stating that a
ospital has a right to appeal certain determinations to the Provider Reimbursement
Review Board (PRRB)). See Metropolitan Methodist Hospital, DAB No. 1694 (stating
that section 1878 of the Social Security Act and Part 405, Subpart R, of the Medicare
regulations authorize review by the PRRB of certain types of provider reimbursement
determinations). Section 3001 of the Provider Reimbursement Manual addresses the
instant situation and states: “A determination of excluded or nonexcluded status for a
ospital or hospital unit applies to the entire cost reporting period for which the
determination is made. ROs make these determinations, generally on an annual basis. If

7

address Petitioner’s arguments. Petitioner previously proposed that it would create a
Geropsych unit, and apparently based on this proposal, the DOH determined that a CON
was necessary. See P. Ex. 7; P. Ex. 8, citing M.C.A. § 41-7-191 et seq. (1972) (Supp.
1972). After Petitioner amended its proposal to serve “patients of all ages,” the DOH
determined that a CON was no longer necessary. P. Exs. 9, 10. The DOH approved
Petitioner’s significantly revised proposal in May 2015 (P. Ex. 10), and CMS
subsequently approved Petitioner’s request for PPS exclusion of the distinct part unit and
assigned a January 1, 2016 effective date for approval of the excluded unit, which was
the first day of the new cost reporting period. CMS Ex. 1.

Petitioner’s distinct part psychiatric unit was not approved by the DOH until May 7,
2015. P. Ex. 10. The regulations indicate that there are numerous requirements for CMS
approval of an excluded psychiatric unit pursuant to 42 C.F.R. § 412.27, to include the
broad areas of development of assessment/diagnostic data, psychiatric evaluations,
treatment plans, recording progress, discharge planning and discharge summary,
personnel, director of inpatient psychiatric services, medical staff, nursing services,
psychological services, social services, and therapeutic activities. Additionally, an
excluded psychiatric unit must meet the common requirements outlined in 42 C.F.R.

§ 412.25, to include:

Changes in the status of hospital units. For purposes of exclusions from the
prospective payment systems under this section, the status of each hospital
unit (excluded or not excluded) is determined . . . at the start of the cost
reporting period. [fa unit is added to a hospital after the start of a cost
reporting period, it cannot be excluded from the prospective payment
systems before the start of a hospital’s next reporting period.

42 C.F.R. § 412.25(c) (emphasis added). The regulation regarding excluded hospitals
and hospital units, 42 C.F.R. § 412.22(d), mirrors this language, stating:

For purposes of exclusion from the prospective payment systems under this
subpart, the status of each currently participating hospital (excluded or not
excluded) is determined at the beginning of each cost reporting period and is

a change in meeting applicable criteria occurs during a cost reporting period, the status
already determined for that period remains in effect for the duration of the period. The
change in the hospital’s or unit’s status (e.g., from excluded to not excluded) takes effect
only at the start of the next cost reporting period.”
8

effective for the entire cost reporting period. Any changes in the status of the
hospital are made only at the start of a cost reporting period.

(emphasis added). The applicable regulations indicate that changes to a hospital unit’s
PPS exclusion will occur at the start of a cost reporting period, and that the status at the
beginning of a cost reporting period remains in effect for the entire cost reporting period.
The DOH did not approve Petitioner’s request to establish a distinct part psychiatric unit
until May 7, 2015 (P. Ex. 10), and CMS in turn granted an exclusion from PPS beginning
at the start of the next cost reporting period that began on January 1, 2016.

2. I lack jurisdiction to hear this case.

As previously explained, 42 C.F.R. § 498.3(b)(15) is inapplicable, and the October 2015
CMS approval of Petitioner’s request for PPS exclusion of its distinct part psychiatric
unit is not an appealable initial determination. See Metropolitan, supra.

IV. Conclusion

I lack jurisdiction over Petitioner’s request for hearing. Therefore, I dismiss Petitioner’s
hearing request.

/s/
Leslie C. Rogall
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Michele Peetz, FNP-C,
Petitioner,
v.
Centers for Medicare & Medicaid Services.
Docket No. C-16-444
ALJ Ruling No. 2016-11

Date: June 10, 2016

ORDER DENYING REQUEST TO VACATE ORDER OF DISMISSAL

I deny the construed request of Petitioner, Michele Peetz, FNP-C, dated May 10, 2016,
that I vacate my previous order dismissing this case. Petitioner has not shown good cause
pursuant to 42 C.F.R. § 498.72 for vacatur of the Order of Dismissal that I issued on
April 25, 2016.! The Order of Dismissal was based on Petitioner’s failure to establish
good cause to extend the time for filing her request for hearing pursuant to 42 C.F.R.

§§ 498.40(a)(2), (c) and 498.70(c).

The Departmental Appeals Board (Board) has stated that pursuant to 42 C.F.R.
§ 498.40(c)(2), an administrative law judge (ALJ) may extend the time for filing an
untimely request for hearing, and that an ALJ may dismiss an untimely request for

' Thave construed Petitioner’s May 10, 2016 letter as a request for vacatur of the Order
of Dismissal. While the letter is addressed to “Counsel for CMS” and not to me,
Petitioner electronically submitted the letter to the Civil Remedies Division as a new
appeal shortly after I issued the Order of Dismissal. The April 25, 2016 Order of
Dismissal advised Petitioner of her appeal rights, and I remind Petitioner that if she
remains dissatisfied with the dismissal of her request for hearing, she has 60 days from
the date of receipt of the April 25, 2016 Order of Dismissal to request review by the
Departmental Appeals Board. See 42 C.F.R. §§ 498.80 and 498.82(a).

2

hearing pursuant to 42 C.F.R § 498.70(c) if good cause is not shown for the untimely
filing. MedStar Health, Inc., DAB No. 2684 at 7 (2016). Neither the Board nor
applicable regulations provide a definition of “good cause,” and an ALJ has the discretion
to deny a petitioner’s request to extend the time for filing a hearing request if no good
cause is shown. Medstar Health, DAB No. 2684 at 8; see NBM Healthcare, Inc., DAB
No. 2477 at 3-4 (2012). An ALJ may vacate his or her dismissal of a request for hearing
if a party files a request to vacate within 60 days from receipt of the dismissal notice and
the party shows good cause for vacating the dismissal. 42 C.F.R. § 498.72; see
Consolidated Community Resources, Inc., DAB No. 2676 at 5 (2016).

Petitioner previously argued, in an attempt to demonstrate good cause for filing an
untimely request for hearing, that she sought assistance from her credentialing
department, politicians, and others prior to filing her untimely request for hearing. In my
Order of Dismissal, I addressed her arguments and explained that Petitioner had not
shown good cause for filing her request for hearing almost nine months after the
expiration of the 60-day deadline for doing so, stating:

I conclude that Petitioner’s reason for failing to file a timely hearing request
does not constitute good cause to extend the filing deadline. Dismissal of a
hearing request is appropriate where the reconsidered determination clearly
explained the filing requirements and deadlines, the petitioner did not claim
that “it reasonably misunderstood what steps it needed to take to exercise
its right to a hearing,” and “the only reason for the late filing was that
Petitioner was hoping ... to achieve a satisfactory resolution by means
other than a formal hearing request before an administrative law judge.”
Borger Enterprises, LLC, D/B/A Caprock Nursing & Rehab., DAB No.
2618 at 3 (2015); see also Vanguard Vascular & Vein, PLLC, et al., DAB
No. 2523 at 3-4 (2013) (upholding the dismissal of an untimely hearing
request when the reconsidered determination explained in “unambiguous
and conspicuous language” that the petitioners had 60 days from their
receipt of the reconsidered determination to request a hearing before an
ALJ).

Here, the April 20, 2015 reconsidered determination clearly stated that
Petitioner had 60 days from receipt of the determination to request a
hearing. The determination also provided the postal address for Petitioner
to file her request by mail and an alternative electronic filing address and
instructions for Petitioner to file her hearing request electronically. In
addition, the determination included the office and telephone number to call
if Petitioner had any questions. Petitioner does not deny that she was
3

provided clear notice of her right to appeal and detailed instructions for
submitting her request or that she understood those instructions.

Michele Peetz, FNP-C, ALJ Ruling No. 2016-9 at 4 (2016).

In her construed request for vacatur of the Order of Dismissal, Petitioner now
additionally contends that she “was not aware of how this process worked” and that she
did not have the assistance of legal counsel. As I previously explained, and as detailed
above, the April 20, 2015 reconsidered determination provided adequate notice informing
Petitioner how she could timely seek review by an ALJ. In fact, the reconsidered
decision clearly instructed that she “must file [an] appeal within 60 calendar days after
the date of receipt of this decision by writing to the following address,” and that
Petitioner should include specified identifying information and a copy of the decision
being appealed. While Petitioner has indicated in her submissions dated March 14, 2016
and May 10, 2016, that she sought assistance from politicians, a nursing organization,
government agencies, and local colleges after receiving the April 20, 2015 reconsidered
decision, she simply did not comply with the straightforward instructions that explained
how she could file a timely request for hearing. Furthermore, while Petitioner now
reports that she “was not aware” that she “needed to submit the letter of the intent to
appeal, thinking the credentialing department had already done so,” she also admitted in
the same letter that she “continued to work with her credentialing department until the
end of April 2015 when [she] was advised that the credentialing department had taken the
issue to the legal department on [her] behalf and was told they have gone as far as they
are willing to go on [her] behalf, but, [she] was free to look into it on [her] own.”
Petitioner’s May 10, 2016 Letter (emphasis added). Thus, Petitioner admits that well
before the deadline to file a request for hearing expired on June 26, 2015, she was aware
that her credentialing department would not handle the matter and that she would need to
file a request for hearing on her own (or else seek legal representation). Petitioner has
not demonstrated that she was prevented from filing a timely request for hearing due to a
lack of legal representation. Nor has Petitioner shown that her “ignorance of the
Medicare and legal system,” in the face of clear guidance in the April 20, 2015 letter
regarding how to file a timely request for hearing, constitutes good cause for her late
request for hearing.

For the foregoing reasons, Petitioner’s request for vacatur of the Order of Dismissal is
denied.

/s/
Leslie C. Rogall
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Civil Remedies Division

Social Security Administration,
Inspector General,

Petitioner,
v.

JACC,|
Respondent.
Docket No. C-15-3534
Decision No. CR4632

Date: June 15,2016

DECISION

A total civil money penalty (CMP) of $12,500.00 is imposed against Respondent,
pursuant to section 1129(a)(1) of the Social Security Act (the Act) (42 U.S.C. § 1320a-
8(a)(1)), for withholding information for seven months from February 2013 through
August 2013, that his condition had improved.

I. Background

On October 21, 2014, the Inspector General (1.G.), Social Security Administration (SSA),
personally served Respondent a notice alleging that the I.G. had received information that
Respondent had made or caused to be made false statements, misrepresentations, and
omissions of material fact in an effort to receive Social Security benefits. The I.G. also
alleged that Respondent failed to notify SSA that his condition had improved and his
abilities and activities were no longer consistent with the statements Respondent made

' Respondent’s name is withheld from the published decision due to the sensitive health
and financial information discussed.
when applying for benefits. The I.G. alleged that Respondent improperly received
approximately $62,323.50 in Social Security benefits between August 2010 and August
2013. The I.G. alleged that he could commence a civil action against Petitioner and
impose a CMP and assessment. SSA I.G. Exhibit (Ex.) 2 at 1-3 (English), 4-5 (Spanish).’

On June 1, 2015, the I.G. personally served Respondent a notice that he proposed to
impose a CMP of $18,500.00 and an assessment in lieu of damages of $50,500.50. The
notice advised Respondent that the CMP and assessment were based on the determination
that Respondent failed to notify SSA about his medical improvement; therefore,
Respondent wrongfully received $62,323.50 of Social Security Disability Insurance
benefits (SSDI) for 37 months between August 2010 and August 2013. The notice stated
that the $11,823.00 that Respondent paid as restitution ordered as part of his sentence for
his related criminal conviction was deducted from the amount of the assessment. SSA
Ex. 3 at 1-5 (English), 6-9 (Spanish).

Respondent requested a hearing by an administrative law judge (ALJ) on July 17,2015,
pursuant to 20 C.F.R. § 498.202.° Petitioner acknowledged in his request for hearing that
he was personally served on July 1, 2015 with the I.G. notice of imposition of the CMP
and assessment. The request for hearing was received at the Civil Remedies Division
(CRD) of the Departmental Appeals Board (DAB) on July 22, 2015, and assigned to me
for hearing and decision on August 21,2015. On September 14, 2015, I convened a
telephonic prehearing conference to discuss and establish the schedule to hearing in this
case. The substance of the prehearing conference is set forth in my Scheduling Order and
Notice of Hearing dated September 21, 2015. A final prehearing conference was
convened by telephone on January 20, 2016, the substance of which is reflected in my
Order Following Final Prehearing Conference and Notice of Hearing Location dated
January 21,2016. The I.G. clarified during the final prehearing conference that the
proposed CMP was reduced to $12,500.00, that is $500.00 per month for the 25-month
period from August 2011 through August 2013, and the assessment in lieu of damages
was reduced to $47,122.70.

On January 27, 2016, a hearing was convened by video teleconference with the SSA I.G.
appearing from sites in San Juan, Puerto Rico and Dallas, Texas; Respondent appearing

> Respondent, a resident of Puerto Rico, does not speak the English language so
translation of all documents into Spanish was required until such time as Respondent
engaged a representative who was fluent in English.

> References are to the version of the Code of Federal Regulations (C.F.R.) in effect at
the time of the SSA IG. action, unless otherwise indicated.
at a site in San Juan, Puerto Rico; and the ALJ, court reporter and translators participating
from Kansas City, Missouri. Transcript (Tr.) 5. Clara Soto-Isaac, Esquire, and Erin
Justice, Esquire, represented the SSA I.G. Respondent appeared represented by Louis A.
de Mier Leblanc, Esquire. Petitioner waived translation during the oral hearing except
for questions directed to him and his responses. Tr. 16. The parties filed in advance of
the hearing a joint stipulation of facts (Jt. Stip.) that was accepted and is treated as
binding on both parties. Tr. 16-18. The I.G. offered and I admitted SSA Exs. | through
7,7.1,7.2,7.3 and 8 through 21. Tr. 18-22. Respondent offered no documentary
evidence. Tr. 23. Respondent waived calling any witnesses. Tr. 24. The SSA LG.
presented the declarations of four witnesses: Joseph E. Gangloff (SSA Ex. 18); Rachel
Garner (SSA Ex. 19); Manual Rivera (SSA Ex. 20); and Karen Velez (SSA Ex. 21) and
Respondent did not object to admission of the declarations as evidence without cross-
examination. A transcript of the hearing was prepared and provided to the parties. SSA
filed its post-hearing brief (SSA Br.) and proposed findings of fact and conclusions of
law on March 16, 2016, and on April 18, 2016 waived a reply brief. Respondent filed his
post-hearing brief (R. Br.) on March 17, 2016. Respondent filed no reply brief.

II. Discussion
A. Applicable Law

Pursuant to title I of the Act, an individual who has worked in jobs covered by Social
Security for the required period of time, who has a medical condition that meets the
definition of disability under the Act, and who is unable to work for a year or more
because of the disability, may be entitled to monthly cash disability insurance benefits
referred to as SSDI. 20 C.F.R. §§ 404.315-404.373. Pursuant to title XVI of the Act,
certain eligible individuals are entitled to the payment of Supplemental Security Income
(SSDI) on a needs basis. To be eligible for SSI payments, a person must meet U.S.
residency requirements and must be: (1) 65 years of age or older; (2) blind; or (3)
disabled. Disability under both programs is determined based on the existence of one or
more impairments that will result in death or that prevent an individual from doing his or
her past work or other work that exists in substantial numbers in the economy for at least
one year. 20 C.F.R. §§ 416.202, 416.905, 416.906. SSI is not at issue in this case as
Respondent received no benefits under that program.

Section 1129(a)(1) of the Act authorizes the imposition of a CMP or an assessment
against:

(a)(1) Any person... who —
(A) makes, or causes to be made, a statement or

representation of a material fact, for use in determining
any initial or continuing right to or the amount of
monthly insurance benefits under title II or benefits or
payments under title VIII or XVI, that the person
knows or should know is false or misleading,

(B) makes such a statement or representation for such
use with knowing disregard for the truth, or

(C) omits from a statement or representation for such
use, or otherwise withholds disclosure of, a fact which
the person knows or should know is material to the
determination of any initial or continuing right to or
the amount of monthly insurance benefits under title II
or benefits or payments under title VIII or XVI, if the
person knows, or should know, that the statement or
representation with such omission is false or
misleading or that the withholding of such disclosure
is misleading ... .

The Commissioner of SSA (the Commissioner) delegated the authority of section 1129 of
the Act to the LG. 20 C.F.R. § 498.102(a). A material fact is a fact that the
Commissioner may consider in evaluating whether an applicant is entitled to benefits or
payments under titles I, VIII, or XVI of the Act. Act § 1129(a)(2); 20 C.F.R. § 498.101.
Individuals who violate section 1129 are subject to a CMP of not more than $5,000 for
each false or misleading statement or representation of material fact or for each month he
or she fails to disclose to SSA a material fact. 20 C.F.R. § 498.103(a). Violators are also
subject to an assessment in lieu of damages, of not more than twice the amount of the
benefits or payments made as a result of the statements, representations, or omissions.
Act § 1129(a)(1); 20 C.F.R. § 498.104.

In determining the amount of the CMP to impose, the SSA IG must consider: (1) the
nature of the subject statements and representations and circumstances under which they
occurred; (2) the degree of culpability of the person committing the offense; (3) the
person’s history of prior offenses; (4) the person’s financial condition; and (5) such other
matters as justice requires. Act § 1129(c); 20 C.F.R. §498.106(a).

Section 1129(b)(2) of the Act specifies that the Commissioner shall not decide to impose
a CMP or assessment against a person until that person is given written notice and an
opportunity for the determination to be made on the record after a hearing at which the
person is allowed to participate. The Commissioner has provided by regulations at

20 C.F.R. pt. 498 that a person against whom a CMP is proposed by the SSA I.G. may
request a hearing before an ALJ. The ALJ has jurisdiction to determine whether the
person should be found liable for a CMP and/or an assessment and the amount of each.
20 CFR. §§ 498.215(a), 498.220(b). The person requesting the hearing, the Respondent,
has the burden of going forward and the burden of persuasion with respect to any
affirmative defenses and any mitigating circumstances. 20 C.F.R. § 498.215(b)(1). The
SSA LG. has the burden of going forward as well as the burden of persuasion with
respect to all other issues. 20 C.F.R. § 498.215(b)(2). The burdens of persuasion are to
be judged by a preponderance of the evidence. 20 C.F.R. § 498.215(c).

The ALJ decision becomes final and binding on the parties 30 days after the decision is
served. Either party may appeal the ALJ decision by filing with the DAB a notice of
appeal within 30 days of the date of service of the initial decision. 20 C.F.R. §§ 498.220-
221.

B. Issues

Whether there is a basis for the imposition of a CMP pursuant to section
1129(a)(1) of the Act and 20 CFR. § 498.102(a).

Whether there is a basis for the imposition of an assessment pursuant to
section 1129(a)(1) of the Act and 20 C.F.R. § 498.102(a).

Whether a CMP and assessment should be imposed and, if so, in what
amount considering the factors specified by section 1129(c) of the Act and
20 C.F.R. § 498.106(a).

C. Analysis

My conclusions of law are set forth in bold followed by the statement of pertinent facts
and my analysis. I have carefully considered all the evidence and the arguments of both
parties, although not all may be specifically discussed in this decision. I discuss the
credible evidence given the greatest weight in my decision-making.* Talso discuss any
evidence that I find is not credible or worthy of weight. The fact that evidence is not
specifically discussed should not be considered sufficient to rebut the presumption that I
considered all the evidence and assigned such weight or probative value to the credible
evidence that I determined appropriate within my discretion as an ALJ. There is no
requirement for me to discuss the weight given every piece of evidence considered in this
case, nor would it be consistent with notions of judicial economy to do so. Charles H.
Koch, Jr., Admin. L. and Prac. § 5:64 (3d ed. 2013).

* “Credible evidence” is evidence that is worthy of belief. Black’s Law Dictionary 596
(18th ed. 2004). The “weight of evidence” is the persuasiveness of some evidence
compared to other evidence. Id. at 1625.
1. There is a basis for imposing a CMP against Respondent pursuant
to section 1129(a)(1) of the Act for failure to report his improved
condition.

2. For seven months from February 2013 through August 2013, while
he received benefits, Respondent failed to report that his physical
condition had improved in violation of his duty to report improved
condition under 20 C.F. R. § 404.1588.

3. A CMP of $12,500 (approximately $1,785.71 per month for seven
months from February 2013 through August 2013) and no assessment
is appropriate considering the factors established by section 1129(c) of
the Act and 20 CFR. § 498.106.

a. Facts

On or about August 4, 2011, Respondent applied for SSDI. SSA Exs. 6 at 1, 8 at 2.
Respondent claimed that his disability began on January 10,2010. SSA Ex. 8 at 2.
Respondent agreed to notify SSA “of all events explained to me” but the form does not
list the events explained to Respondent. SSA Ex. 8 at 3. The record of the application
for SSDI warned Respondent about making a false statement or representation of material
fact and perjury; and the need to report changes including returning to work and medical
improvement. SSA Ex. 8 at 3,4, and 6-7. The document is addressed to Respondent and
is entirely in English. Respondent does not speak or understand English (SSA Ex. 4 at
2), therefore I cannot infer that he received any notice of his reporting obligations based
on SSA Ex. 8. An electronic “Disability Report — Adult — Form SSA-3368” was
completed on August 9, 2011. The form was completed by Respondent’s representative
at that time. The form indicates that Respondent can neither read nor understand English.
SSA Ex. 4 at 1-2. Respondent listed the following impairments: depression, back
problems, cervical condition, pain, carpal tunnel, and numbness in both arms and legs.
The form states Respondent stopped working January 10, 2010 due to his conditions.
SSA Ex. 4 at 3. Respondent listed a history of full-time employment on a production
line, with a single employer from July 1988 to January 2010. SSA Ex. 4 at 4. The form
also shows treatment for anxiety. SSA Ex. 4 at 6. The form reflects complaints of pain,
numbness, falling, and loss of strength in both hands that limit Respondent’s ability to do
work. SSA Ex. 4. An electronic “Function Report — Adult (3373SP)” was completed on
about October 19, 2011. SSA Ex. 5. No translation of the document was provided by the
I.G., and it is not considered as evidence.

Respondent was notified by letter from SSA dated January 14, 2012, that he was
determined to have become disabled on January 10, 2010. Based on the determination
that he was disabled beginning January 10, 2010 and the August 4, 2011 filing date of his
application, he was determined to be eligible to begin receiving SSDI effective August
2010. The payment for back benefits to August 2010 amounted to $21,164.00 with a
continuing monthly benefit of $1,661.00 beginning in January 2012. SSA Ex. 6 at 1,
SSA Ex. 8 at 1. The notice letter advised Respondent that he had to notify SSA right
away if there was any change in his condition or work activity and reference was made to
an enclosed pamphlet titled “What You Need To Know When You Get Social Security
Disability Benefits.” SSA Ex. 6 at 3. The pamphlet clearly states that Respondent should
notify SSA if there was any change in his ability to work, he returned to work, or his
medical condition improves. SSA Ex. 6 at 11. The letter was addressed to Respondent
and not his representative. Unfortunately, both the letter and the pamphlet are in English,
which Respondent clearly notified SSA that he can neither speak nor understand. SSA
Ex. 4 at 2. Accordingly, I cannot infer that SSA Ex. 6 gave Respondent any notice he
could understand about his reporting responsibilities.

Respondent was targeted for investigation by the I.G. because Dr. Jose Hernandez was
one of his treating sources. Dr. Hernandez was indicted for assisting individuals file for
disability benefits based on fraudulent medical records. SSA Ex. 20 at 2 § 4. Respondent
was indicted on August 9, 2013. He subsequently pleaded guilty to one count of theft of
government property, admitting that he filed an application for SSDI that contained false
information. He was convicted pursuant to his plea and was sentenced to one year of
probation and to pay restitution of $11,823.00. SSA Ex. 20 at 29 6. Following the
conviction, the matter was referred back to the I.G. for consideration of a possible CMP
and assessment. SSA Ex. 20 at 3 9 7.

SSA stopped paying Respondent SSDI in August 2013 due to the I.G. investigation.”
SSA Ex. 21 at 3. From August 2010 until August 2013, Respondent was paid a total of

> SSA offered as evidence a video of a surveillance of Respondent conducted on
February 1, 2013 (SSA Ex. 10), an investigator’s summary of the surveillance (SSA Ex.
9), and the declaration of Federal Bureau of Investigation, Special Agent (SA) Rachel
Garner who participated in the surveillance (SSA Ex. 19). The investigators noted
physical activity and made assumptions about mental activity and acuity based on their
observations of Respondent’s physical activity and his responses to their verbal
interaction. SSA Exs. 9, 19. There is no evidence that the investigators are qualified to
assess Respondent’s residual functional capacity, physical or mental, based on their
observations or to render medical opinions. SSA Exs.9, 10. More significantly,
Respondent was granted SSDI based on an affective disorder only, which is a mental
disorder not a physical disorder. SSA Ex. 8 at 1. Accordingly, I give the investigators
opinions and the declaration of SA Garner little probative value. The video shows
physical functional ability on February 1, 2013 only, and its probative value is minimal at
most on the issue of Respondent’s mental capacity at the time of the surveillance.
$58,945.70 in SSDI, as follows: $45,434.50 in 2012 including $6,296.00 for 2010 and
$19,207.00 for 2011; and $13,511.20 in 2013. SSA Ex. 11; SSA Ex. 21 at 3.

On November 15, 2014, Respondent responded to the October 21, 2014 I.G. notice
imposing the CMP and assessment. Respondent submitted a document titled “Personal
Declaration” dated November 15, 2014. SSA Ex. 7.2. Petitioner acknowledged receipt
of the October 21, 2014 notice and provided a new mailing address. Respondent
discussed his family situation. He asserted that his health deteriorated and he sought
psychological help as early as 2005 with continuing psychiatric treatment. He states he
also developed back pain related to his cervical spine and he began seeing Dr. Hernandez
who encouraged him to seek disability. On January 10, 2010, Respondent states he was
fired from his job. He admitted successfully completing a refrigeration course sometime
between January 2010 and the summer of 2011. Dr. Hernandez subsequently convinced
him to meet a representative and file for SSDI. Contrary to his plea agreement and guilty
plea, Respondent denies that any of his statements made during the application process
were false and, rather, asserts they were accurate when made. He points out that he was
approved for SSDI based on his mental condition not his physical condition. SSA Ex. 7.2
at 1-8. He admits that at some unspecified time he began to feel physically better than he
did when he filed for SSDI; he admits he should have reported the improvement; and he
admits he did not report. SSA Ex. 7.2 at 7. He asserts that there was no improvement in
his mental condition. SSA Ex. 7.2 at 8. He states he should have reported that his health
condition had changed in February 2013. SSA Ex. 7.2 at 9. Respondent also submitted a
financial disclosure showing assets of $214,910.97, including a savings account with a
balance of $92,900.97 and his personal residence; liabilities of $11,618.00 (the restitution
owed to SSA); monthly family income of $764.90 and monthly expenses of $1,827.21.
SSA Ex. 7.3.

In his criminal case, Respondent entered a plea agreement on February 11, 2014, and
thereby agreed to be bound by the statement of facts that was part of the agreement, in
exchange for a sentence limitation and dismissal of any additional counts to which he did
not plead guilty. SSA Ex. 1. Respondent admitted in the statement of facts that on
August 4, 2011 he filed a claim for SSDI which contained false information; the claim
was approved, and, as of February 4, 2014, he had received $11,823 in fraudulent
benefits. SSA Ex. 1 at 9. There is no admission as to which specific information was
false.

Respondent and the I.G. agreed to stipulations of fact that are signed by counsel but
undated, that were filed on January 19,2016. The parties agreed to be bound by the
stipulations at hearing and they were accepted. Tr. 16-18. Respondent stipulated that he:

1. Applied for SSDI in August 2011;
2. Submitted two forms, a Disability Report — Adult on August 9, 2011 anda
Function Report — Adult dated October 19, 2011;
3. Was notified he was approved for SSDI on January 14, 2012 with an onset date
of January 10, 2010, entitlement to benefits beginning in August 2010, and the
diagnosis on which disability was based was an affective disorder;

4. Received benefits from August 2010 through August 2013, totaling
$58,954.70, including retroactive benefits received in January 2012 for the
period August 2010 through December 2011 and monthly benefits thereafter;

5. Pleaded guilty to theft of government property pursuant to a plea agreement he
entered on February 11, 2014;

6. Admitted as part of his plea agreement that his SSDI application contained
false information; and

7. Cannot deny the facts on which he was convicted.

b. Analysis

The first challenge in this case is to identify the false statement, representation, or
omission of material fact that is the basis for the imposition of the proposed CMP.

The initial notice personally served on Petitioner on October 21, 2014, alleged that
Respondent made false statements or representations of material fact at the time of
application and that he omitted to report the material fact that he had experienced medical
improvement. The I.G. alleged he “received information indicating that [Respondent]
made, or caused to be made, false statements and/or omissions of material fact to SSA,
which [Respondent] knew or should have known were false or misleading.” SSA Ex. 2
at 2. The I.G. alleged that Respondent improperly received approximately $62,323.50 in
SSDI between August 2010 and 2013. SSA Ex. 2 at 2. The IG. alleged that the false
statements and/or misrepresentations or omissions of material facts were related to
Respondent’s effort to receive SSDI. The I.G. did not specify what the false statements
or representations were, whether they were on the application or forms submitted during
the application process, or whether they were given during an interview by SSA staff.
The LG. also alleged that Respondent failed to notify SSA that his “condition had
improved and [his] abilities and activities were no longer consistent with the statements”
Respondent made when applying for SSDI. SSA Ex. 2 at 2. The I.G. invited Respondent
to submit information for the I.G. to consider prior to imposing a CMP. SSA Ex. 2 at 3.

Respondent submitted a response to the I.G.’s initial notice that has been placed in
evidence by the I.G. SSA Exs. 7.1, 7.2, 7.3.

The I.G. letter proposing a CMP and assessment in lieu of damages was personally
served on Respondent on June 1, 2015. The letter cited only Respondent’s failure to
report his medical improvement as the basis for imposing a CMP and assessment. In that
letter, the 1.G. advised Respondent that a CMP and assessment in lieu of damages was
proposed for the following reason:
10

This proposal is based upon my determination that you failed
to notify SSA that your medical condition improved. Due to
your failure to notify SSA about your medical improvement,
you wrongfully received $62,323.50 in Social Security
Disability Insurance (SSDI) between August 2010 and
August 2013.

SSA Ex. 3 at 2. The letter states that Respondent was subject to a CMP of up to $5,000
per month for each of the 37 months from August 2010 to August 2013 and an
assessment in lieu of damages of twice the amount of benefits he received during that
period, because he did not report his medical improvement. The letter goes on to explain
that the I.G. proposed a substantially reduced CMP of $500 per month for 37 months and
an assessment of $50,500.50. SSA Ex. 3 at 2. The I.G. letter served June 1, 2015, does
not identify what medical improvement Respondent experienced; cite to any evidence in
support of that allegation; or state when the I.G. concluded that Respondent’s duty to
report medical improvement occurred.° However, the fact that the I.G. proposed to
impose a CMP for each of the 37 months from the date of entitlement, August 2010,
through termination in August 2013, suggests that the I.G. concluded that medical
improvement had occurred and Respondent’s duty to report arose about the time he was
found entitled. The I.G. letter served on June 1, 2015, makes no reference to any false
statements, misrepresentation, or omissions related to the application process. I conclude
that, despite the fact that Respondent had been convicted of making false statements in
the application process, the I.G. did not propose a CMP or assessment on that basis.

During the hearing in this case, counsel for the I.G. asserted that the basis for the CMP
was the false information that Respondent provided at the time of his application, conduct
admitted by Respondent when he pleaded guilty to theft of government property.

Counsel for the I.G. argued that Respondent gave the false information and then failed to
report to SSA that his medical condition was improved compared to his initial report.
SSA Ex. | at 9; Tr. 35-46. There is no evidence that Respondent ever admitted to what
specific false information he provided with his application that he admitted as part of his
plea agreement, whether it related to work activity, physical capacity, mental capacity, or
some other information. The I.G. has also argued that SSA Exs. 4 and 5, documents
submitted at the time of application, contain false information, but Respondent never
conceded which if any information in those forms is false and the I.G. has presented no

® The required contents of the I.G. notice of a proposal to impose a CMP and assessment
are established by 20 C.F.R. § 498.109. Section 498.109(2) of 20 C.F.R. requires that the
1G. describe the false statements, representations, or other actions and incidents that are
the bases for proposing the penalties. Respondent did not challenge the sufficiency of the
notice and I treat the issue as waived.
11

evidence that shows which if any statements on those forms were false when made. SSA
Br. at 5. The surveillance of Respondent on February 1, 2013 (SSA Exs. 9, 10, 19)
provides some evidence as to his physical capacity on that date, which was 18 months
after the application. The evidence does not show that the investigators examined any
medical or other evidence related to Respondent’s physical or mental capacity from the
onset date to the date of application and compared it with Respondent’s mental or
functional capacity they observed on February 1, 2013. The evidence also does not show
what qualifications the investigators had to credibly opine that there was improvement in
Respondent’s physical or mental condition. SSA offered no evidence that it had
Respondent examined on about February 1, 2013 or at any other time to competently
determine his mental and physical functional capacity.

In his post-hearing brief, the I.G. clarifies that he now proposes only a CMP not an
assessment, and the basis for the CMP is Respondent’s admitted failure to report his
improved condition from February 2013 through August 2013. The SSA IG. states in
his post-hearing brief that the CMP has been reduced from “ta maximum penalty of
$35,000 ($5,000.00 for each of the 7 months he failed to notify SSA about his medial
improvement . . . between February 2013 and August 2013), plus an assessment of
$23,646 (which is two times the overpayment Respondent fraudulently received) . . .”
The I.G. has “instead determined that a total CMP of $12,500.00 would be more
appropriate.” SSA Br. at 9. The LG. states that because Respondent is in the process of
repaying the overpayment, the I.G. is not pursing an assessment in lieu of damages. SSA
Br. at 9-10.

Therefore, I conclude that the I.G. proposes only a CMP of $12,500 and no assessment.
The basis for the CMP proposed by the I.G. is Respondent’s failure to report his
improved condition during the seven-month period February 2013 through August 2013.

Pursuant to section 1129(a)(1) of the Act and 20 C.F.R. § 498.102(a), the SSA I.G. is
authorized to impose a CMP and an assessment against a person when the I.G.
determines the following elements are met. The I.G. may impose a CMP or assessment
against a person who:

(1) (a) made or caused to be made;
(b) a statement or representation of a material fact;

(c) the statement or representation of material fact was for use in determining
any initial or continuing right to monthly insurance benefits or the amount of
monthly insurance benefits under Title II (Federal Old-Age, Survivors, and
Disability Insurance Benefits), or benefits or payments under Title VIII
(Special Benefits for Certain World War II Veterans) or Title XVI
(Supplemental Security Income for Aged, Blind, and Disabled); and
12

(d) the person knows or should know the statement or representation of
material fact is false or misleading; or

(e) made such a statement or representation with knowing disregard for the
truth; or

(2) (a) omits from a statement or representation or otherwise withholds disclosure
of;

(b) a fact which the person knows or should know is material to the
determination of any initial or continuing right to or the amount of monthly
insurance benefits under Title II or benefits or payments under Titles VIII or
XVI; and

(c) if the person knows, or should know, that the statement or representation
with such omission is false or misleading or that the withholding of such
disclosure is misleading ....

A material fact is a fact that the Commissioner may consider in evaluating whether an
applicant is entitled to benefits or payments under Titles II, VIII, or XVI of the Act. Act
§ 1129(a)(2); 20 C.F.R. § 498.101. I interpret this provision broadly to include facts the
Commissioner may consider in evaluating initial eligibility and continuing eligibility and
the amount to which an applicant or beneficiary may be entitled. My interpretation is
based upon the language of section 1129(a)(1) of the Act and 20 C.F.R. § 498.102(a),
which specifically refer to determinations of initial or continuing entitlement or the
amount of monthly insurance benefits. Thus, in order for a CMP and assessment to be
imposed, the evidence must show that the allegedly false or misleading fact or facts were
material and that the fact or facts were either false or misleading as reported or false or
misleading by virtue of their omission or withholding. I conclude that the elements
necessary to establish a violation by a knowing omission or failure to report a material
fact are satisfied in this case and there is a basis for the imposition of a CMP.

Respondent admitted in his response to the I.G.’s initial notice that at some unspecified
time he began to feel physically better than he did when he filed for SSDI; he admits he
should have reported the improvement to SSA; and he admits that he did not report. SSA
Ex. 7.2 at 7. Respondent asserts that there was no improvement in his mental condition,
which was the reason he was granted SSDI. SSA Ex. 7.2 at 7-8. However, Respondent
admitted that he should have reported that his physical condition had changed in
February 2013. SSA Ex. 7.2 at 9. Respondent also conceded at hearing (Tr. 33) that he
did experience improvement in his condition sometime on or before February 2013, that
13

he omitted to report to the SSA I.G. that there was improvement in his condition; and that
he should have reported his improved condition by February 2013.’ Therefore, there is
no dispute that Respondent admits that he omitted to report a change in his physical
condition to SSA as early as February 2013, or that he continued to receive benefits paid
from February through August 2013. Based on Respondent’s admissions, I conclude that
Respondent either knew or should have known that his failure to report his improved
physical condition was misleading to the extent that the omission to disclose prevented a
review of whether or not he continued to be entitled to SSDI.

I also conclude that the element of materiality has been satisfied in this case, that is,
Respondent’s failure to report his improved physical condition on or about February 2013
was a material fact. A material fact is a fact that the Commissioner may consider in
evaluating whether an applicant is entitled to benefits or payments under Titles II, VIII,
or XVI of the Act, an applicant’s continuing eligibility, and the amount to which the
applicant or beneficiary may be entitled under section 1129(a) and 20 C.F.R. § 498.101.

The regulations are clear that medical improvement is one basis on which the
Commissioner may determine that disability and entitlement to continued benefits has
ended. 20 C.F.R. § 404.1594.

Medical improvement is any decrease in the medical severity
of your impairment(s) which was present at the time of the
most recent favorable medical decision that you were
disabled or continued to be disabled. A determination that
there has been a decrease in medical severity must be based
on changes (improvement) in the symptoms, signs and/or
laboratory findings associated with your impairment(s) (see
§ 404.1528).

7 Respondent does not speak or understand English. The evidence does not show he was
informed of any reporting requirements in a language he understands. SSA Ex. 6 and 8.
However, Respondent concedes that he knew he should have reported the change in his
physical condition. SSA Ex. 7.2. The concession is significant. Respondent’s legal
obligation to report certain matters to SSA that might affect his entitlement, including
medical improvement, is established by 20 C.F.R. § 404.1588. Normally, I would
conclude, in the absence of an admission of actual knowledge as in this case, that
publication in the C.F.R. constitutes constructive notice to Respondent of his reporting
responsibilities under the law, but it does not appear that the C.F.R. is published in
Spanish by the federal government.
https://www.gpo.gov/fdsys/browse/collectionCfr.action?collectionCode=CFR
14

20 CFR. § 404.1594(b)(1). Respondent’s conceded that he sensed an improvement in
his physical condition that he should have reported in February 2013. Tr. 33. Although
Respondent did not concede medical improvement in his mental condition, 20 C.F.R.

§ 404.1588(a)(1) requires reporting any improvement in condition, whether or not related
to the disabling condition. Improvement in medical condition is material because
medical improvement may be considered by the Commissioner in determining whether or
not one is entitled to continued SSDI payments. Respondent’s concession that he knew
that he should have reported that he felt physically improved, shows that he knew or
should have known, that the fact he felt better was a material fact that might affect his
continued entitlement.

Accordingly, I conclude that Respondent is liable under section 1129(a)(1)(C) of the Act
and 20 C.F.R. § 498.102(a)(2), and subject to a CMP for his omission to report during the
period February 2013 through August 2013, the material fact that he perceived an
improvement in his physical condition that may have impacted a decision of the
Commission regarding Respondent’s continued entitlement to SSDI.

The remaining issue is the appropriate penalty to be imposed against Respondent. The
I.G. proposes a CMP of $12,500 and no assessment in lieu of damages because
Respondent is already making restitution of benefits paid him. In determining a
reasonable CMP, I consider the basis for imposing the CMP already discussed. I also
consider that a $12,500 CMP divided by seven months shows that the I.G. proposes to
impose a CMP of approximately $1,785.71 for each month Respondent failed to report —
an amount well under the maximum of $5,000 that the I.G. is authorized to impose for
each month that an omission to report continues. Act § 1129(a)(1); 20 C.F.R. § 498.103.

Pursuant to 20 C.F.R. § 498.220(b), I may affirm, deny, increase, or reduce the CMP
proposed by the I.G. In determining the CMP or assessment to impose, I am bound to
follow the guidance of 20 C.F.R. §§ 498.102 through 498.106. The regulations do not
provide that I am limited to reviewing whether the CMP or assessment proposed by the
IG. is “reasonable.” Cassandra Ballew, Recommended Decision, App. Div. Docket No.
A-14-98 at 9-10 (2014) (ALJ evaluated and applied regulatory factors and determined a
lesser assessment that the Board recommend the Commissioner approve). In determining
the amount of penalties or assessment, my review is de novo, and, just as the I.G. did
when proposing penalties, I must consider the factors specified by section 1129(c) of the
Act:

(1) the nature of the statements, representations . . . and the
circumstances under which they occurred; (2) the degree of
culpability, history of prior offenses, and financial condition
of the person committing the offense; and (3) such other
matters as justice may require.
15

Act § 1129(c); 20 C-F.R. § 498.106.
I evaluate the required factors as follows:

(1) Nature of the statements and representations and the
circumstances under which they occurred.

The CMP I impose is based on Respondent’s failure to report his improved condition
between February and August 2013. The CMP is not based on Respondent’s admission
that he made false statements when applying for SSDI. The information Respondent
failed to report was not related to the diagnosis for which he was granted SSDI. He was
granted based on a mental impairment only and the information he failed to report related
to his physical condition. However, Respondent admits that he knew he should have
reported and he failed to do so. Respondent’s improved physical condition may have
impacted a decision to further investigate Respondent’s disabling condition and his
continuing entitlement to SSDI. Therefore, Respondent’s failure to report was both
material and significant.

(2) Degree of culpability, history of prior offenses, and financial
condition of Respondent.

The simple definition for culpability is blameworthiness. Black’s Law Dictionary 406
(18th ed. 2004). Respondent is culpable. He admits that he knew he should have
reported his improved physical condition but he failed to do so. Respondent also
admitted and he was convicted for providing false information in connection with his
initial application for SSDI. Respondent agreed, as part of his plea agreement, to make
restitution to SSA for part, but not all, of the SSDI benefits he received and there is no
evidence he is not paying as required. Considering Respondent’s net assets, the payment
of a $12,500 CMP will not deprive Respondent of all of his family’s available financial
resources nor pose a significant threat to Respondent’s ability to meet living expenses.

(3) Other matters as justice may require.

A $12,500 CMP is a significant penalty for one in Respondent’s position. The CMP will
serve the purpose of deterrence both for Respondent and others. The CMP is also just in

that it is not excessive and will not place Respondent in financial risk or make him totally
dependent upon the social-welfare system. The penalty also recognizes that Respondent

confessed to his initial crime and also admitted that he was wrong by failing to report his

improved condition to the Commissioner. Respondent’s admissions minimized, to some

extent, the cost to the government in imposing an appropriate penalty.

Based on my consideration of the statutory and regulatory factors, I conclude that a total
CMP of $12,500 is appropriate in this case.
16

III. Conclusion

For the foregoing reasons, I conclude Respondent is liable to pay a CMP and that a CMP
in the amount of $12,500 is reasonable.

/s/
Carolyn Cozad Hughes
Administrative Law Judge

STATEMENT OF APPEAL RIGHTS PURSUANT TO 20 C.F R. § 498.221

(a) Any party may appeal the decision of the ALJ to the DAB
by filing a notice of appeal with the DAB within 30 days of
the date of service of the initial decision. The DAB may
extend the initial 30-day period for a period of time not to
exceed 30 days if a party files with the DAB a request for an
extension within the initial 30-day period and shows good
cause.

(c) A notice of appeal will be accompanied by a written brief
specifying exceptions to the initial decision and reasons
supporting the exceptions, and identifying which finding of
fact and conclusions of law the party is taking exception to.
Any party may file a brief in opposition to exceptions, which
may raise any relevant issue not addressed in the exceptions,
within 30 days of receiving the notice of appeal and
accompanying brief. The DAB may permit the parties to file
reply briefs.

(d) There is no right to appear personally before the DAB, or
to appeal to the DAB any interlocutory ruling by the ALJ.

(e) No party or person (except employees of the DAB) will
communicate in any way with members of the DAB 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.
17

(f) The DAB will not consider any issue not raised in the
parties’ briefs, nor any issue in the briefs that could have
been, but was not, raised before the ALJ.

(g) If any party demonstrates to the satisfaction of the DAB
that additional evidence not presented at such hearing is
relevant and material and that there were reasonable grounds
for the failure to adduce such evidence at such hearing, the
DAB may remand the matter to the ALJ for consideration of
such additional evidence.

(i) When the DAB reviews a case, it will limit its review to
whether the ALJ’s initial decision is supported by substantial
evidence on the whole record or contained error of law.

(j) Within 60 days after the time for submission of briefs or, if
permitted, reply briefs has expired, the DAB will issue to
each party to the appeal and to the Commissioner a copy of
the DAB’s recommended decision and a statement describing
the right of any respondent who is found liable to seek
judicial review upon a final decision.

Respondent’s request for review by the DAB automatically stays the effective date of this
decision. 20 C.F.R. § 498.223.