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

Social Security Administration, Inspector General,
Petitioner,

Vv.

Salvatore Cappetta,
Respondent.

Docket No. C-15-714 (On Remand)
Decision No. CR4112
Date: August 10,2015
DECISION

There is no basis for the imposition of a civil money penalty (CMP) or an assessment in
lieu of damages (assessment) under section 1129(a)(1) of the Social Security Act (the
Act) (42 U.S.C. § 1320a-8(a)(1)), against Respondent, Salvatore Cappetta.

I. Procedural History

The Counsel for the Inspector General (IG) of the Social Security Administration (SSA)
notified Respondent, Salvatore Cappetta, by letter dated July 26, 2012, that the SSA IG
proposed imposition of a CMP of $106,000 and an assessment of $95,167.20 against
Respondent, pursuant to section 1129 of the Act (42 U.S.C. § 1320a-8).! The SSA IG
cited as the basis for the CMP and assessment that Respondent failed to report to SSA
that he worked while he received Social Security Disability Insurance Benefits (DIB) and

' The current version of the Act is available at http://www.ssa.gov/OP_Home/ssact/ssact-
toc.htm. The Code of Federal Regulations (C.F.R.), Federal Register (Fed. Reg.), and the
United States Code (U.S.C.) cited in this decision are available at
http://www.gpo.gov/fdsys/.

while his children received children’s benefits (CIB) from November 2002 through April
2011. SSA IG Exhibit (SSA Ex.) 17.

Respondent requested a hearing pursuant to 20 C.F.R. § 498.202, 2 through counsel,
Charles J. Riether, by letter dated September 18,2012. The case was assigned to me for
hearing and decision.

A prehearing conference was convened by telephone on November 5, 2012, at 11:00 a.m.
ET. Counsel for the SSA IG participated but neither Respondent nor his attorney
appeared. The substance of the prehearing conference is memorialized in my Scheduling
Order & Notice of Hearing issued on November 5, 2012 (Scheduling Order), which also
set the case for hearing on March 5 and 6, 2013. A more detailed statement of the
procedural history of this case between the November 5, 2012 prehearing conference and
the hearing may be found in my prior decision in this case. Salvatore Cappetta, DAB
CR3260 at 2-6 (2014).

On September 25 and November 20, 2013, a hearing was convened by video
teleconference (VTC). The SSA IG appeared by VTC from Baltimore, MD; Respondent
appeared by VTC from New Haven, CT; I participated by VTC from Kansas City, MO;
with the court reporter and Attorney Advisor Whitney Fisler participating from my office
in Washington, DC. Joscelyn Funnié, Esquire, appeared on behalf of Petitioner, the SSA
IG. Respondent was represented by Charles Riether. A transcript of the proceedings was
prepared. The SSA IG offered SSA exhibits (SSA. Exs.) | through 19. Tr. 22. SSA Exs.
1 through 12; SSA Ex. 13 pages | through 3, and 9 through 12; SSA Exs. 14-15; and
SSA Ex. 17 were admitted. Tr. 32, 50-51, 71, 89, 95, 107, 109-110, 115. No exhibits
offered by Respondent were admitted as substantive evidence as a sanction but any
documentary evidence submitted by Respondent remains with the record for any
subsequent review. Tr. 34-42; Cappetta, DAB CR3260 at 2-5 (detailing grounds for
sanction). The SSA IG called the following witnesses: Chad Bungard, counsel to the
SSA IG; Respondent, Salvatore Cappetta; Elisabetta Cappetta, Respondent’s wife; Peter
Cameron, Respondent’s purported employer; Gulrukh Niazi, SSA Claims Representative;
and SSA IG Special Agent (SA) Sarah Hanson.

The SSA IG filed a post-hearing brief (SSA Br.) on February 25, 2014. Respondent also
filed his post-hearing brief (R. Br.) on February 25, 2014. The SSA IG filed a post-
hearing reply brief on March 21, 2014 (SSA Reply). Respondent failed to timely file a
reply brief. After inquiry by my staff, Respondent’s counsel advised staff by email on

> References are to the 2011 revision of the C.F.R. unless otherwise stated.
April 17, 2014 that further reply was waived. The record was then considered closed and
ready for decision.

On June 11, 2014, I issued a decision holding that there was no basis for imposing either
a CMP or assessment under section 1129(a)(1) of the Act. Cappetta, DAB CR3260 at |.
The SSA IG requested review by the Departmental Appeals Board (the Board). An
appellate panel of the Board issued a decision on December 10, 2014. Salvatore
Cappetta, DAB No. 2606 (2014). The Board reversed my legal conclusion that
Respondent’s work activity was not a material fact as a matter of law due to application
of section 221(m)(1) of the Act. The Board remanded the case for me to make findings
of fact and conclusions of law regarding whether Respondent is liable for a CMP and
assessment under section 1129(a)(1) of the Act. If I conclude he is liable, the Board
specified that I must determine if the SSA IG has established the months for which a
CMP and assessment may be imposed; and the reasonableness of the CMP and
assessment proposed. Cappetta, DAB No. 2606 at 1-2, 14-16.

The record was returned to me on January 30, 2015. On March 3, 2015, I ordered that
the parities submit new proposed findings of fact, conclusions of law, and briefing on the
issues specified by the Board. On March 24, 2015, Respondent filed a brief and a
proposed finding. The SSA IG also filed proposed findings of fact and conclusions of
law on March 24, 2015, but no brief in support thereof (SSA IG Remand Br.).
Respondent filed its amended brief and finding on March 26, 2015 (R. Remand Br.). On
June 6, 2015, the SSA IG waived the right to file a reply and Respondent waived his right
to reply on June 10, 2015.

II. Discussion
A. Applicable Law

Pursuant to title II 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
(DIB). 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 (SSI) 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 IG. 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 II, 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 failure to disclose
a material fact. 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. § 498.103(a).

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 IG may
request a hearing before an administrative law judge (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 C.F.R. §§ 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 IG 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 judged by a preponderance of the evidence. 20 C.F.R. § 498.215(c).

B. Issues

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

Issues specified by the Board on remand:

Whether Respondent is liable for a CMP and assessment under section
1129(a)(1) of the Act;

Whether, if Respondent is liable, the SSA IG has established the months for
which a CMP and assessment may be imposed; and

Whether the proposed CMP is reasonable.
Whether an assessment is reasonable based on the amount of benefits
Respondent and his children received during the period he failed to report

work activity.

Cappetta, DAB No. 2606 at 1-2, 14-16.
Respondent mischaracterizes the issues before me as including the issue of whether
Respondent’s DIB should have been terminated and whether his DIB should be
reinstated. R. Remand Br. at 1, 3-4, 6. Whether or not Respondent may be liable for an
overpayment of Social Security benefits and whether or not he continued to meet the
requirements for payment of Social Security benefits are not issues before me. 20 C.F.R.
Part 404, subpart J.

C. Findings of Fact, Conclusions of Law, and 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 have also
carefully considered the Board’s opinion in support of its decision to remand this case
and the issues specified therein. I discuss the credible evidence given the greatest weight
in my decision-making.’ I also 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. & Prac. § 5:64 (3d ed. 2013).

Following are my conclusions of law from my first decision in this case. Cappetta, DAB
CR3260 at 10-11.

1. Respondent was entitled to receive DIB under section 223 of the Act
for at least 24 months.

2. Pursuant to section 221(m)(1)(B) of the Act, the Commissioner is
prohibited from considering any work activity of Respondent as
evidence that Respondent was no longer disabled and no longer
entitled to DIB.

3. Respondent’s work activity after he received DIB for at least 24
months is not a fact that the Commissioner was permitted to evaluate

> “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.
to determine if Respondent was entitled to continuing receipt of DIB,
and therefore, not a material fact within the meaning of section
1129(a)(2) of the Act or 20 C.F.R. § 498.101.

4. Although Respondent failed to report work activity in violation of
the regulation, the fact he engaged in work activity was not a material
fact and the failure to report is not a basis for the imposition of a CMP
or an assessment under section 1129 of the Act.

5. The SSA IG failed to show by a preponderance of the evidence that
Respondent knew or should have known that his work activity was a
material fact that he failed to report because pursuant to section
221(m) of the Act his work activity is not material as a matter of law.

The Board, in its remand decision, rejected my legal interpretation and application of
section 221(m) of the Act to bar the imposition of a CMP and assessment against
Respondent in this case. Cappetta, DAB No. 2606 at 10-12. | attribute the Board’s
rejection of my interpretation of section 221(m) to a lack of clarity in my prior analysis.
Accordingly, I conclude it is both necessary and appropriate to explain my analysis with
more clarity to permit the Board to reconsider its legal ruling to ensure that the Act is
applied consistent with the manifest intent of Congress and to avoid injustice. If the
Board does not change its interpretation of section 221(m) of the Act as it applies to the
facts of this case, I encourage the Commissioner to consider the legal issue as the agency
head responsible for implementing section 221(m) of the Act.

The kernel of my legal analysis is simply stated. All DIB beneficiaries are required to
report work activity. Normally, the Commissioner may consider work activity as
evidence of whether one is entitled or continues to be entitled to DIB. However, in the
case of a DIB beneficiary who has been receiving benefits for 24 months or more (24-
month DIB beneficiary), Congress has specifically prohibited the Commissioner from
considering work activity as a basis for determining continuing entitlement to receive
benefits. Because the Commissioner is prohibited from considering work activity when
determining continuing entitlement for a 24-month DIB beneficiary, work activity is not
a material fact under the definition of material fact established by the Act and regulations.
Because work activity of a 24-month DIB beneficiary is not a material fact, failure of the
24-month DIB beneficiary to report the work activity cannot be the basis for the
imposition of a CMP or assessment under section 1129(a) of the Act. Substantial gainful
activity determined based on earnings may be considered in determining continuing
entitlement of a 24-month DIB beneficiary and is a material fact, but not the work
activity that yielded the earnings. The SSA IG cannot avoid the limitation imposed by
Congress in the case of 24-month DIB beneficiaries by arguing that work activity is a
material fact because work activity is required for there to be earnings.
The following is a clarification of my original legal analysis for why section 221(m)(1) of
the Act prevents the SSA IG from citing a failure to report “work activity” as a basis for
imposing a CMP or an assessment against a 24-month DIB beneficiary.

Counsel to the SSA IG, B. Chad Bungard, notified Respondent by letter dated July 26,
2012, that the SSA IG proposed to impose against Respondent a CMP of $106,000 and
an assessment in the amount of $95,167.20, a total penalty of $201,167.20. The SSA IG
notice stated that the CMP was based on Respondent’s failure to disclose that during the
period November 2002 through April 2011, he worked for Cameron Construction, Inc.
The SSA IG notice states that the IG determined that Respondent committed 53 separate
violations, one violation for each of the 53 months beginning December 2006 and
continuing through April 2011, that he failed to report that he worked for Cameron
Construction, Inc. The notice explains that there may be no CMP or assessment for
withholding or failure to report material facts prior to December 2006, as the effective
date of section 1129 of the Act and 20 C.F.R. § 498.102(a)(3) was November 26, 2006.
71 Fed. Reg. 28574, 28575 (May 17, 2006). The SSA IG notice states that the
assessment was calculated as twice the $47,583.60 in DIB payments received by
Respondent and his children during the period December 2006 through April 2011. SSA
Ex. 17 at 1.

Section 1129(a)(1)(C) of the Act authorizes the Commissioner to impose a CMP and
assessment against one who fails to disclose a material fact. Pursuant to section
1129(a)(1)(C) the Commissioner may impose a CMP and assessment against any person
who:

(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 ... .

Act § 1129(a)(1)(C) (emphasis added). The Act defines a “material fact” as a fact “which
the Commissioner of Social Security may consider in evaluating whether an applicant is
entitled to benefits under title II or title VIII, or eligible for benefits or payments under
title XVI.” Act § 1129(a)(2).

The Commissioner delegated the authority of section 1129 of the Act to the IG. The
regulatory delegation applicable in this case provides:
(a) The Office of the Inspector General may impose a penalty
and assessment, as applicable, against any person who it
determines in accordance with this part—

(3) Omitted from a statement or representation, or
otherwise withheld disclosure of, a material fact for use
in determining any initial or continuing right to or
amount of benefits or payments, which the person knew
or should have known was material for such use and that
such omission or withholding was false or misleading.

20 C.F.R. § 498.102(a)(3) (emphasis added). The regulation defines a “material fact” as
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. 20 C.F.R. § 498.101.
The phrase “otherwise withheld disclosure” is defined as

the failure to come forward to notify the SSA of a material
fact when such person knew or should have known that the
withheld fact was material and that such withholding was
misleading for purposes of determining eligibility or Social
Security benefit amount for that person or another person.

20 CFR. § 498.101.

According to the July 26, 2012 SSA IG notice to Respondent, the CMP and assessment in
this case are based on Respondent’s failure to report that he “worked” at Cameron
Construction, Inc. and that he failed to report the work for 53 months, from December
2006 through April 2011. SSA Ex. 17 at 1; Tr. 396-97, 401-02, 406-08. The SSA IG
notice did not charge Respondent with failure to report earnings or failure to report
substantial gainful activity. SSA Ex. 17. Mr. Bungard testified in response to my
questioning that his determination was based on Respondent’s failure to report work
activity not failure to report earnings or substantial gainful activity. Tr. 401-03, 406-08.

Understanding the meaning of the terms “work,” “earnings,” and “substantial gainful
activity” is important for proper interpretation of the provisions of the Act and
regulations at issue in this case. “Work,” “earnings,” and “substantial gainful activity”
are not synonymous. The SSA IG in its briefing to the Board and the Board in its
decision appear to use the terms as if they have the same meaning or refer to the same
thing, which clearly they do not. As a threshold matter, it is important to understand that
whether or not one is disabled for purpose of receiving DIB benefits is not based on
10

whether or not one can do “work.” Disability for purposes of entitlement to DIB
payments is the “inability to engage in substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of not less
than 12 months.” Act § 223(d)(1)(A) (emphasis added). However, an individual may
only be determined to be under a disability if his or her physical or mental impairment or
impairments prevent previous work, and considering the individual’s age, education, and
work experience, any other substantial gainful work that exists in significant numbers
in the national economy. Act § 223(d)(2)(A).

The Board recognized that the term “work” is not defined in the Act or regulations.
Cappetta, DAB No. 2606 at 3. Earnings as used in the regulations for purposes of
determining DIB coverage (insured status), include wages, compensation, self-
employment income, and deemed military wage credits creditable to an individual for
Social Security purposes. 20 C.F.R. § 404.221(b). “Substantial gainful activity” is work
that involves “significant and productive physical or mental duties” and is “done (or
intended) for pay or profit.” 20 C.F.R. §§ 404.1510, 404.1572. Generally, work, whether
or not legal, is a fact that may be considered to determine whether an individual can work
at the level of substantial gainful activity. If one can work at the level of substantial
gainful activity, he or she is not disabled for purposes of receiving DIB payments even if
the individual meets the medical requirements for DIB. The regulation provides that
even work done that was not substantial gainful activity may be considered to decide
whether or not an individual should be able to perform substantial gainful activity.

20 C.F.R. § 404.1571. Self-care, household tasks, hobbies, therapy, school attendance,
club activities, or social programs are generally not considered to be substantial gainful
activity. 42 C.F.R. § 404.1572. The nature of work activity, how well the work was
performed, whether work is done under special conditions (accommodated), whether
work was performed by one self-employed, and time spent in work, are all factors
considered to determine whether work is “substantial gainful activity.” 20 C.F.R.
§ 404.1573. Based on the definitions provided by the regulations, work or work activity
may or may not be substantial gainful activity; substantial gainful activity is defined as
work at a certain intensity and quality with or without earnings; and earnings are derived
from work and may be evidence that work is at the level of substantial gainful activity.
As a general rule, all these facts related to work are facts that the Commissioner may
consider in determining whether an applicant is engaging in substantial gainful activity
and is initially entitled to benefits or continuing benefits under title II of the Act (DIB)
and, therefore, they are material facts under section 1129(a)(2) of the Act and 20 C.F.R.
§ 498.101. Furthermore, the facts listed related to work are the type of material facts
which may be the basis for imposing a CMP or assessment by the SSA IG because they
are facts “for use in determining any initial or continuing right to or amount of
benefits or payments.” Act § 1129(a)(1)(C) (emphasis added); 20 C.F.R.

§ 498 .102(a)(3) (emphasis added). Therefore, as I stated in my prior decision, because a
DIB beneficiary has a regulatory duty to report work activity under 42 C.F.R.

11

§ 404.1588(a) and work activity is material to a determination of continuing entitlement,’
I would generally find a DIB beneficiary who failed to report work activity, no matter
how minimal the activity, is subject to a CMP or an assessment under section 1129(a)(1)
of the Act. Cappetta, DAB No. CR3260 at 18.

In my initial decision in this case I concluded that Congress acted to prohibit the
Commissioner from considering work activity in certain cases and, thereby, removed
“work activity” from status as a material fact for purposes of the SSA IG imposing a
CMP or assessment. My conclusion was based on the plain language of the Act.

(1) In any case where an individual entitled to disability
insurance benefits under section 223 or to monthly insurance
benefits under section 202 based on such individual’s
disability (as defined in section 223(d)) has received such
benefits for at least 24 months—

(A) no continuing disability review conducted by
the Commissioner may be scheduled for the
individual solely as a result of the individual’s work

activity;

(B) no work activity engaged in by the individual
may be used as evidence that the individual is no
longer disabled; and

(C) no cessation of work activity by the individual
may give rise to a presumption that the individual is
unable to engage in work.

(2) An individual to which paragraph (1) applies shall
continue to be subject to—

(A) continuing disability reviews on a regularly
scheduled basis that is not triggered by work; and

* Unlike retirement benefits and SSI, the amount of DIB payments is generally not
affected by earnings. 42 C.F.R. §§ 404.317, 404.401, 404.415(a), 404.417, 416.420.
However, DIB payments may be suspended or terminated as provided by the regulations.
20 C.F.R. §§ 404.401a, 404.467, 404.1592, 404.1592a, 404.1596, 404.1597.
12

(B) termination of benefits under this title in the
event that the individual has earnings that exceed
the level of earnings established by the
Commissioner to represent substantial gainful
activity.

Act § 221(m) (emphasis added). The Board criticizes my analysis stating that I failed to
consider the entire statutory provision. Cappetta, DAB No. 2606 at 10. However, I set
orth in my decision the entirety of subsection 221(m) of the Act to show that I did, in
‘act, consider that entire subsection. The language of subsection 221(m) is clear and
requires no interpretation as to its meaning. Subsection 221(m)(1) states that it applies to
DIB beneficiaries such as Respondent, who have been receiving DIB benefits for at least
24 months. Subsection 221(m)(1) has no application to those initially filing for DIB
benefits, those who have been DIB beneficiaries for less than 24 months, or to individuals
receiving SSI benefits. Subsection 221(m)(1)(A), (B), and (C) specifically prohibit the
Commissioner from considering work activity of a 24-month DIB beneficiary as: (1) the
basis for scheduling a continuing disability review, that is, a review to determine if the
DIB beneficiary is no longer disabled and entitled to benefits; (2) evidence that the DIB
beneficiary is no longer disabled; or (3) triggering a presumption that the cessation of
work activity indicates the individual is unable to engage in work. Subsection 221(m)(2)
does not permit consideration of work activity prohibited by subsection 221(m)(
Rather, subsection 221(m)(2)(A) provides that the 24-month DIB beneficiary remains
subject to continuing disability reviews that are regularly scheduled as required under the
Act and regulations and not triggered by work activity. Subsection 221(m)(2)(B)
provides that a 24-month DIB beneficiary is subject to termination of benefits when he or
she has earnings that exceed the level of substantial gainful activity. Subsection
221(m)(2)(B) refers to “earnings” as the factual basis for determining whether a 24-
month DIB beneficiary is exceeding the level of substantial gainful activity. Subsection
221(m)(2)(B) does not state that the Commissioner may consider work activity of the 24-
month DIB beneficiary to determine whether or not the work activity rises to the level of
substantial gainful activity, which would be contrary to the prohibition of subsection
221(m)(1) on considering work activity of the 24-month beneficiary either as a basis for
triggering a continuing disability review or as a basis for terminating entitlement. My
interpretation gives effect to all provisions of section 221(m) of the Act. The SSA IG’s
interpretation advanced to the Board does not. The legislative history of section 221(m)
cited by the Board actually supports my interpretation of the provision, rather than the
Board’s:

The history explains that section 221(m) “is intended to
encourage long-term [DIB] beneficiaries to return to work
by ensuring that work activity would not trigger an
unscheduled medical review of their eligibility” but that
13

“like all beneficiaries, long-term beneficiaries would have
benefits suspended if earnings exceeded the
substantial gainful activity level, and would be subject to
periodic continuing disability reviews.” H.R. Rep. 106-
393(1), at 45 (1999) (emphasis added).

Cappetta, DAB No. 2606 at 12. This history simply states that for a 24-month DIB
beneficiary no continuing disability review may be triggered by work activity (with or
without earnings) but earnings may be the basis for finding substantial gainful activity,
which would be a basis for suspending benefit payments. The legislative history does not
indicate that Congress intended that the Commissioner is permitted to consider the 24-
month DIB beneficiaries work activity. To the contrary the legislative history is clear
that Congress intended to encourage long-term DIB beneficiaries to attempt to return to
work without fear that the work activity would cause a suspension of their benefits or
termination of their entitlement. This is clearer from reading the complete section of the
cited legislative history in context:

Present law

Eligibility for Social Security disability insurance
[DIB] cash benefits requires an applicant to meet certain
criteria, including the presence of a disability that renders the
individual unable to engage in substantial gainful activity.
Substantial gainful activity is defined as work that results in
earnings exceeding an amount set in regulations ($700 per
month, as of July 1, 1999). Continuing disability reviews
(CDRs) are conducted by the Social Security Administration
(SSA) to determine whether an individual remains disabled
and thus eligible for continued benefits. CDRs may be
triggered by evidence of recovery from disability, including
return to work. SSA is also required to conduct periodic
CDRs every 3 years for beneficiaries with a nonpermanent
disability, and at times determined by the Commissioner for
beneficiaries with a permanent disability.

Explanation of provision

The Committee bill establishes the standard that CDRs
for long-term SSDI [DIB] beneficiaries (i.e., those receiving
disability benefits for at least 24 months) would be limited to
periodic CDRs. SSA would continue to evaluate work
activity to determine whether eligibility for cash benefits
continued, but a return to work would not trigger a review of
14

the beneficiary’s impairment to determine whether it

continued to be disabling.

Reason for change

The provision is intended to encourage long-term
SSDI [DIB] beneficiaries to return to work by ensuring that
work activity would not trigger an unscheduled medical
review of their eligibility. However, like all beneficiaries,
long-term beneficiaries would have benefits suspended if

earnings exceeded the subs
would be subject to periodi

tantial gainful activity level, and
ic continuing disability reviews.

HR. Rep. 106-393(1), at 45. This legislative history shows that Congress specifically
intended to prohibit the Commissioner from considering a 24-month DIB beneficiary’s

Wor!

activity as a basis for conducting a CDR and terminating benefits. Congress only

authorized consideration of earnings from work activity as a basis for suspension of a 24-
month DIB beneficiary’s DIB payments.

Un
eval

ler the Act and regulations a material

§ 1129(a)(2); 20 C.F.R. § 498.101. For tl
specifically limited the Commissioner to
activity in evaluating continuing entitlement and payments.” Congress has specifically
prohibited consideration of work activity

Wor!

N.Y. Apr. 28, 2008) (discusses DIB entit

Wor!

fact is a fact the Commissioner may consider in

uating whether an applicant is entitled to benefits or payments under the Act. Act

e 24-month DIB beneficiary, Congress has
considering earnings and substantial gainful

to encourage long-term beneficiaries to attempt

activity. Cf. Reed v. Astrue, No. 03-CV-6235T, 2008 WL 1902431, at 15 (W.D.

lement during a reentitlement period and that

activity of a 24-month DIB beneficiary may not be used as evidence that the

plaintiff is no longer disabled, citing 42 U.S.C. § 421(m)(1)(B).) Thus, earnings and
substantial gainful activity are material facts while “work activity” is not as a matter of
law. Because work activity is not a material fact for a 24-month DIB beneficiary, which
Respondent was, his failure to report work activity cannot be the basis for imposition of a
CMP or assessment under section 1129(a)(1) of the Act. In this case, the SSA IG did not
charge Respondent with failure to report earnings or failure to report substantial gainful
activity, both of which are material facts. The SSA IG cited failure to report work
activity as the basis for the CMP and assessment. SSA Ex. 17 at 1; Tr. 396-97, 401-02,
406-08.

> Of course, the Commissioner may also consider medical improvement, evidenced by
activities or medical evidence, as a basis for terminating entitlement.
15

The SSA IG argument that earnings and substantial gainful activity both refer to work
activity and therefore work activity remains a material fact flies in the face of the
carefully drafted language of section 221(m) of the Act and fails to give meaning to both
subsections of section 221(m). In section 221(m) the drafters used all three terms, “work
activity,” “earnings,” and “substantial gainful activity.” The use of the three specific
terms clearly reflects that the terms have different meanings and the drafter’s intended
that those specific meanings be accorded those specific terms. The drafter’s specifically
prohibited consideration of “work activity” but equally clearly preserved consideration of
“earnings” and “substantial gainful activity.”

The SSA IG argued to the Board and the Board seemed to attach some significance to the
fact that I blind-sided the parties with my legal ruling based on section 221(m) of the Act.
The Board noted that neither party cited section 221(m) and I did not request that the
parties brief the issue. Cappetta, DAB No. 2606 at 10. I am not sure what the Board
suggests by its comment but the Board cited no authority for the proposition that an ALJ
need give notice to the parties before resolving a case on an issue of law; or that an ALJ
must assist counsel, particularly government counsel, by giving notice of the particular
sections of the statute that the government counsel are charged with enforcing or by
suggesting theories for counsel to explore. The SSA IG was represented by competent
counsel who I am entitled to presume knows the law they are responsible to discharge.
Furthermore, I specifically inquired of Mr. Bungard during the hearing about the
difference between work activity and substantial gainful activity in the context of this
case. I also specifically directed counsel for the parties to address whether substantial
gainful activity was the material fact that needed to be proved rather than work activity.
Tr. 398-402, 421-23. The SSA IG counsel apparently failed to grasp the cause for my
concern about the important difference between work activity and substantial gainful
activity or how it might impaction this case. Certainly counsel for the SSA IG should
have been aware of section 221(m) of the Act and its potential application to this
Respondent, who clearly had been a DIB recipient for more than 24 months prior to the
alleged date he began engaging in work activity.

To be clear, I do not mean to suggest that the SSA IG cannot consider work activity as
evidence leading to the discovery of earnings or substantial gainful activity, which may
affect the suspension or termination of benefits. But the law is clear that, in the case of a
24-month DIB beneficiary, Congress specifically prohibited the Commissioner from
considering work activity as a basis for determining continuing entitlement to receive
benefits. Therefore, work activity cannot be a material fact under the definitions found in
the Act and regulations. Because work activity of a 24-month DIB beneficiary is not a
material fact, failure of the 24-month DIB beneficiary to report the work activity cannot
be the basis for the imposition of a CMP or assessment. I also do not suggest that the 24-
month DIB beneficiary is relieved of the regulatory obligation to report work activity,

16

only that the failure to report work activity is not the basis for a CMP or assessment

authorized by section 1129(a)(1) of the Act.

Anticipating that the

Board will not reconsider its prior ruling and decide this case on the

narrowest possible grounds, I proceed to address the issues specified by the Board

treating the prior rulii

ng regarding section 221(m) as the law of the case. The following

conclusions of law in bold, followed by the discussion of pertinent facts, address the
specific issues identified by the Board. I begin numbering my conclusions of law on
remand with the next number in sequence following the conclusions of law from my prior
decision for ease of reference in the event the Board should chose to revisit the prior

conclusions.

6. Res

pondent did not know and could not have known that his failure

to report work activity to SSA was a material fact and that failure to

report

7. Res

was misleading.

pondent engaged in reportable work activity as early as

November 2001, which he failed to report for 53 months between

Decem

8. Res

ber 2007 and April 2011 as alleged by the SSA IG.

pondent has not contested the amount of benefits that the SSA

IG alleges Respondent and his children received during the period

Decem

ber 2006 through April 2011.

10. Based upon de novo review of the factors required by the Act and
regulations, no CMP or assessment is reasonable in this case.

Set forth here is the section from my first decision titled “Facts.” Cappetta, DAB
CR3260 at 11-16. The section is set forth here, with some modifications, to avoid the
need for the reader to refer back to my prior decision.

a. Facts

SSA records reflect that SSA determined that Respondent was disabled and entitled to
DIB with an onset of disability on January 15, 1997, due to rheumatoid arthritis, heart
condition, and headaches. He reported being self-employed doing construction in 1996,
1997, 1998, and 1999, with net income over $400 only in 1997 and 1996. On October

26, 1998, Responden

it was contacted and reported owning a construction business; he

reported that he no longer ran the business; a former employee ran the business; and he
went to the job less than 15 hours per month just to see how it was going. SSA Ex. | at

1-2, 6.

17

The SSA IG does not dispute before me that Respondent is medically eligible for benefits
and the SSA IG stipulated to his disability based on medical factors. Tr. 37-40. The SSA
IG evidence shows that SSA initiated and completed a medical CDR that found
Respondent was no longer disabled as of November 1, 2010, due to medical
improvement with his last DIB payment to be January 1, 2011. SSA Ex. 13 at 4-12.
Subsequently, on January 11,2012, it was determined that Respondent met the medical
requirements for DIB entitlement. Upon learning that Respondent was medically
approved, SA Hanson protested and Respondent was not reinstated. SA Hanson’s notes
show that as of March 15, 2012, Respondent’s entitlement was terminated due to work
activity and not medical improvement. SSA Ex. 14 at 2-4.

On June 16, 2009, an anonymous concerned citizen contacted SSA and reported that the
lifestyle of Respondent’s family was questionable because: Respondent was in the
process of completing a large home renovation, including an apartment and an above
ground pool; Respondent received disability benefits and both he and his wife earned
wages; Respondent bragged about the money he earned working for Peter Cameron
Construction for the last 10 years, money that was paid under-the-table; and Respondent
worked daily from 7:30 a.m. to 4:30 p.m. Erica N. Durham of the SSA received the
anonymous call and issued a report of conversation (SSA Ex. 2). This report o
conversation is given no weight for reasons discussed hereafter.

The SSA IG presented for my consideration Reports of Investigation prepared by SA
Hanson that reflect that an investigation of Respondent was initiated on June 24, 2009,
officially opened and assigned to her on July 1, 2009, and continued until November 21,
2011. SSA Exs. 3, 5-14. SA Hanson determined based on SSA records that Respondent
was found disabled due to erythematous conditions (includes discoid lupus), based on an
application filed September 15, 1998, with a date of entitlement of September 1997; and
that he had no reported earnings for 1999 through 2008. On July 16, 2009, she had
Respondent’s record flagged to reflect that there was an open SSA IG investigation
assigned to her and that no action was to be taken on the case, including no notices and
no contacts with the Respondent. SSA Ex. 3 at 2-3. SA Hanson located records for Peter
Cameron and his businesses, which included Cameron Construction and Remodeling.
SA Hanson determined that Respondent’s wife and children received benefits on his
account at one time but none were in pay status on July 17, 2009, when she inquired.
SSA Ex. 3 at 4-5. SA Hanson learned that no review of Respondent’s work had been
done since his initial application; SSA had not sent Respondent any notices regarding
work or request for work history and Respondent had reported no work activity; and no
continuing disability review had been done. SSA Ex. 3 at 7. SA Hanson determined that
Respondent’s wife, Elisabetta Cappetta, received $253 in benefits from 1997 through
2005. She determined that the following children of Respondent received benefits during
the periods indicated but she did not state the amount of benefits paid each child:
Rosanna Cappetta, September 1997 to November 2007; Daniela Cappetta, September

18

1997 to June 2005; Aniello Cappetta, September 1997 to November 2003; Salvatore
Cappetta, Jr., September 1997 to June 2001. SSA Ex. 3 at 7-8.

On July 27, 2009, SA Hanson received photographs of Respondent and his wife, and
Peter Cameron and his wife from the Connecticut Department of Motor Vehicles (DMV).
She also obtained information from the DMV regarding the vehicles owned by
Respondent and his wife, the Cameron’s, and Cameron Construction. SSA Ex. 5 at 2.

On August 26, 2009, SA Hanson conducted surveillance of Respondent while SA Kevin
Rogers conducted surveillance of Peter Cameron. SA Hanson began her surveillance at
Respondent’s home at about 6:30 a.m. She noted that the home had no siding but rather a
house-wrap material like Tyvek® and appeared to be under a remodel or construction;
she noted an above ground pool; and she observed a three car garage with a room above
that appeared to be under construction. She saw Respondent water the lawn. She
observed Respondent move a red Chevy Avalanche pickup to a different location on the
property. When a small black sedan left Respondent’s driveway, she drove her
surveillance vehicle around the block and when she returned the pickup was gone.
Approximately 16 minutes later the pickup returned driven by Respondent with either a
large white window or a bathtub on the back. Subsequently, she saw Respondent
measuring the large white item in the bed of the pickup. She ended the simultaneous
surveillances at 8:30 a.m. At 9:57 a.m. she drove by Respondent’s residence and saw
him leaning out of a window in the garage and the large white item was still on the
pickup. SSA Ex. 6.

SA Hanson and SA Stephen Brown interviewed Peter Cameron on November 6, 2009.
SA Hanson’s Report of Investigation reflects that Peter Cameron identified Respondent
from a photograph. Peter Cameron told SA Hanson that: Respondent worked for him for
approximately the past eight years; Respondent was paid by the job; Respondent worked
three to five hours per day when he worked; the amount of pay depended upon the job
and could be $50, $100, or $500 per job; Respondent would do any type of work;
Respondent could work several weeks in a month and make $700 to $800 or more; he
paid Respondent cash; he paid Respondent from $150 to $1,500 per week depending
upon the job but that he did not pay Respondent $20,000 or $30,000 in a year. SSA Ex.7
at 1-3; Tr. 122-25. On February 23, 2010, SA Hanson and SA Brown interviewed Peter
Cameron again. SA Hanson reported that Peter Cameron said that Respondent’s work for
him included tiling backsplashes, walls, and floors; hanging doors; trim work, framing,
and taping sheetrock. Peter Cameron also stated that he no longer heard from
Respondent, who did no work for him after the investigators first came around on
November 6, 2009. SSA Ex. 9 at 2.

SA Hanson and SA Brown interviewed Respondent on November 6, 2009. SA Hanson’s
report reflects that Respondent told her that he suffers from rheumatoid arthritis and
lupus and he had a stroke the prior year. Respondent stated that he works once in a while
19

doing little things and, if there is heavy work, he has friends who help. Respondent
stated that he would make a couple hundred dollars and maybe he could work a few
hours. SA Hanson reported that Respondent told her that he worked for Peter Cameron
once in a while, doing little things and he had done so for years. SSA Ex. 7 at 4-6;

Tr. 116-22. SA Hanson and SA Brown continued their interview of Respondent on
November 9, 2009. SA Hanson reported that during this second interview, Respondent
stated that his business dissolved in 1998; he did not work after 1998; he never went back
to work; but he recently started helping out a friend; he denied being paid cash for work
except he might be given $10 or $20 to buy cigarettes. An attorney, Vincent Gallo,
entered the interview room and a designation of representation was executed.
Respondent made a sworn statement. SSA Ex. 8 at 1-4; Tr. 86-87. In his sworn
statement, Respondent stated that he had not been employed from 1998 to November 9,
2009, the date of the statement. SSA Ex. 8 at 6. In response to questions by SA Hanson,
Respondent stated that he helped out Peter Cameron because Cameron helped him with
his house; he was never paid by Cameron but he did receive a gift certificate for a couple
hundred dollars from Cameron. Respondent also stated that Peter Cameron lied. SSA
Ex. 8 at 4; Tr. 125-30.

SSA determined that Respondent’s disability ceased effective November 1, 2010, with
the last payment of DIB on January 1, 2011. SSA Ex. 13 at 9-11. SSA determined that
Respondent was overpaid DIB in the amount of $85,325.10 for the period November
2002 through April 2011, based on the determination that Respondent was paid $1,500
per month during an eight year period that began on November 2001. SSA Ex. 11; SSA
Ex 12 at 10. SSA also determined that Respondent’s children were overpaid child
benefits in the amount of $24,377.00. SSA Ex. 12 at 10.

SA Hanson testified in response to my questions that she asked Peter Cameron general
questions. SA Hanson surmised based on Cameron’s responses to general questions that
Respondent had worked for him on and off for eight years, he paid Respondent cash, and
the amount paid depended upon the job and varied from $150 to $1,500 per week. Mr.
Cameron was not asked and did not disclose how much he paid Respondent over the
course of a year. But he denied paying Respondent $20,000 to $30,000 per year. SA
Hanson admitted in response to questions from Respondent’s counsel that she definitely
did not know how much Respondent was paid by Mr. Cameron. Tr. 154-58. In response
to my questioning, SA Hanson indicated that an analysis of Respondent’s and his
family’s reported income, resources, liabilities, and expenses did not reflect that
Respondent was receiving significant amounts of unreported cash income. Tr. 178-83.

Respondent testified that he met Peter Cameron in 2000, and they became friends. Tr.
248. He testified that he never worked for Peter Cameron but he gave him construction
related advice. Tr. 250-51. He testified that he did do little things such as going to get
coffee and cigarettes. He denied telling SA Hanson that he used to do things for
Cameron or that he worked for Cameron and that if heavy work was involved friends
20

helped. He admitted that he received $50 to $100 when doing things for Cameron but
stated the money was a gift. He testified that Peter Cameron gave him a gift at Christmas
and also when Respondent went to Italy. Tr. 253-55. Respondent denied that he worked
but agreed that he knew that if he worked he had to report the work to SSA. Tr. 301-02.
On cross-examination Respondent denied working for Peter Cameron but admitted that
he received minimal gifts from him. Tr. 315.

Elisabetta Cappetta, Respondent’s wife, testified that Respondent did not work for Peter
Cameron. Tr. 322-23, 333.

Peter Cameron testified that he has known Respondent for 15 years, having met him
through a mutual friend. Tr. 344. Cameron testified that he and Respondent were friends
but that they have not spoken due to the investigation by SSA. Tr. 344-455. At hearing
he denied that Respondent ever worked for him but testified that Respondent would
show-up at job sites and run to the store for him if he needed materials. Tr. 345-47. He
denied paying Respondent wages but by running errands for him Respondent was paying
back for work Cameron did on his house. Tr. 350. Peter Cameron testified that
sometimes he called Respondent and requested his help and sometimes Respondent just
showed-up. Tr. 350-51. He testified that he gave Respondent gifts at Christmas; he gave
him money for his kids’ birthdays; and he gave him a couple hundred bucks when he
went to Italy. Tr. 352. He also gave Respondent money to go get coffee and donuts and
for the gas Respondent used going to the store. Tr. 352. He denied telling SA Hanson
that Respondent did tiling, taping, sheetrock, backsplashes, grout or mortar work. Tr.
353-54. On cross-examination, Mr. Cameron testified that he did not pay Respondent
wages, by check or otherwise. Tr. 355.

Gulrukh Niazi, an SSA Claims Representative, testified that she determined that
Respondent had worked based on the investigator reports, and therefore, she stopped
Respondent’s benefits. Tr. 365, 370-74. She also determined that Respondent was
engaged in substantial gainful activity. She testified that to qualify as substantial gainful
activity pay for work had to be $940 per month in 2008 and $980 per month in 2009, and
that was the limit on how much an individual could earn per month and still be entitled to
receive DIB payments. She testified that she determined the amount of Respondent’s
earnings based on the statements of Peter Cameron to the investigators. Tr. 375-77. Her
opinion that Respondent engaged in substantial activity is not credible as the evidence of
record, including the statements of Cameron as recorded by the investigators, does not
support a finding that Respondent actually earned more than the substantial gainful
activity amount or an equivalent in any month. The evidence is also insufficient to show
that Respondent’s work for Cameron was substantial gainful activity based on either
earnings or level of activity.

The SSA IG failed to offer any admissible evidence of the calculation of the monthly and
total amount of DIB payments to Respondent and the CIB payments for his children for
21

the period at issue: December 2006 to November 6, 2009. SSA IG offered copies of an
email marked as SSA Ex. 16. However, Respondent’s objection to the document for lack
of authentication was sustained subject to the document being reoffered with a proper
foundation. Tr. 28-33. The SSA IG failed to reoffer the document. The SSA IG alleges
in the July 26, 2012 notice of proposed CMP and assessment that Respondent and his
children improperly received $47,583.60 in DIB and CIB from December 2006 through
April 2011. SSA Ex. 17. The amount alleged by the SSA IG is consistent with other
evidence. SSA Exs. 11 at 5; 12 at 5; 14 at 5. Respondent does not concede that either his
DIB or the CIB payments were improper nor has he contested that the amount alleged by
the SSA IG is inaccurate.

There is no dispute that there is no evidence of work activity after November 2009. Tr.
104.

c. Analysis

The Board remanded to me to clarify my findings “and make findings on factual issues
necessary to resolve the case.” Cappetta, DAB No. 2606 at 13. The Board provided
some additional guidance. I stated in my initial decision that failure to report work
activity subjects one to a CMP and assessment. The Board stated:

Respondent would be subject to a CMP and assessment,
however, only if he knew or should have known that the
withheld fact was material and that such withholding was
misleading for purposes of determining eligibility or benefit
amount. Act § 1129(a)(1)(C); 20 C.F.R. § 498.102(a)(3).

Id. (footnote omitted). I agree with the Board’s conclusion that the SSA IG has the
burden to show by a preponderance of the evidence that Respondent knew or should have
known that his work activity was a “material fact” and that failure to report his work
activity was misleading for purposes of continuing eligibility for DIB. As already noted,
the amount of DIB payments is not generally affected by earnings during a period of
disability, unless the earnings are at or above the level of substantial gainful activity.

The Board noted that I concluded that Respondent knew he was supposed to report work
activity to SSA. Respondent had both constructive knowledge based on the publication

of that requirement in the regulations at 20 C.F.R. § 404.1588(a); and he admitted at the

hearing that he had actual knowledge of the requirement to report work activity to SSA.

Cappetta, DAB CR3260 at 16-17; Tr. 301-02. The Board stated:

Notice of the requirement to report work is relevant in
determining whether Respondent knew or should have known
that his work was material and that withholding information
22

about his work would be misleading, but such notice is not
necessarily determinative of these issues.

Cappetta, DAB 2606 at 13. The Board directed that if I conclude that Respondent knew
or should have known that the information he failed to report, i.e. his work activity for
Peter Cameron or Cameron Construction, was material to the determination of his right to
continue to receive benefits or the amount of benefits and that his withholding of the
information from SSA was misleading, the Board directed that I consider:

* Whether the SSA IG has established the duration of the period for which
CMPs and assessments may be imposed.

* Whether the SSA IG has shown that the CMP amount is reasonable
based on the factors in the regulations.

+ Whether the SSA IG has shown that the assessment is reasonable based
on the amount of benefits Respondent received during the period in which
he withheld information about his work.

Id. at 14-16.

In my prior decision I concluded that, despite Respondent’s protestations to the contrary,
he did work for Cameron Construction or Peter Cameron. Respondent admitted that he
ran errands for Peter Cameron and that he received money, items of value, or in kind
labor on his house from Peter Cameron. Tr. 253-55, 315. Peter Cameron testified that
Respondent never worked for him but admitted that Respondent would show-up at job
sites and run to the store for him if he needed material, or for donuts and coffee. Tr. 345-
47,352. Peter Cameron denied that he paid Respondent wages but by running errands
for him Respondent was paying back for work Cameron did on his house. Tr. 350-51.
Mr. Cameron testified that he gave Respondent money to go get coffee and donuts and
for the gas Respondent used going to the store. He also testified that he gave gifts of
money to Respondent and his children. Tr. 352. Therefore, I concluded in my prior
decision that Respondent did engage in some work activity for the benefit of Cameron
Construction and Peter Cameron. I further concluded that the preponderance of the
evidence does not show whether Respondent’s work activity rose to the level of
substantial gainful activity or when and how frequently gainful work activity was
performed. The SSA IG agreed that no gainful activity was performed after November 6,
2009. Tr. 104. I concluded it was not necessary to resolve specific fact issues related to
whether Respondent’s work activity amounted to substantial gainful activity or how
frequently substantial and gainful activity may have been performed. Cappetta, DAB
CR3260 at 17. The SSA IG proposed a CMP and assessment based on Respondent’s
failure to report work activity, not substantial gainful activity. SSA Ex. 17 at 1. I
concluded that Congress had, by enacting section 221(m)(1) of the Act, barred the

23

Commissioner from considering work activity of a 24-month DIB beneficiary for
purposes of determining continuing entitlement, thus, work activity could not be a
material fact. Cappetta, DAB CR3260 at 17. My opinion in that regard is not changed.
Earnings and substantial gainful activity fit the definition of material facts in the case of a
24-month DIB beneficiary and failure to report earnings and substantial gainful activity
could be a basis for the imposition of a CMP and assessment under section 1129(a) of the
Act. But the SSA IG did not notify Respondent pursuant to 20 C.F.R. § 498.109, or
allege before me, that failure to report substantial gainful activity and/or earnings was the
basis for the proposed CMP and assessment. The SSA IG notified Respondent, who is a
24-month DIB beneficiary, that the CMP and assessment were based on his unreported
work activity. However, for a 24-month DIB beneficiary, work activity is not standing
alone a material fact within the meaning of Act § 1129(a)(2) and 20 C-F.R. § 498.101,
because section 221(m) of the Act limits the Commissioner to considering whether a 24-
month DIB beneficiary has engaged in substantial gainful activity and bars consideration
of work activity that does not rise to the level of substantial gainful activity.

Because the Board concluded that work activity can be a material fact in the case of a 24-
DIB beneficiary and the SSA IG did not notify Respondent that earnings or substantial
gainful activity were the material facts not reported, whether or not Respondent had
earnings or engaged in substantial gainful activity (with or without earnings) are not
relevant to the issue of liability for a CMP and assessment. The Board commented that
“Tt]he amount of Respondent’s earnings might bear on determining whether Respondent
knew or should have known that his work was material, but is also not necessarily
dispositive on that question.” Cappetta, DAB No. 2606 at 14. The regulations give
Respondent constructive notice that earnings at or above the amount that creates a
presumption of substantial gainful activity may cause the Commissioner to determine that
his entitlement to DIB must end. Indeed, as I already mentioned there is no question that
earnings at or above the level of substantial gainful activity is material. 20 C.F.R.

§§ 404.316(d), 404.40 1a, 404.456, 404.1511, 404.1572, 404.1574. However, I do not see
that earnings below the level of substantial gainful activity may impact or be relevant to
the issue of whether or not Respondent knew or should have known that his work activity
was material.

The issues specified by the Board are considered in the order they appear in the Board’s
remand decision.

* Whether Respondent knew that failure to report work activity was failure
to report a material fact and that failure to report was misleading.

The SSA IG bears the burden to show by a preponderance of the evidence the statutory or
regulatory basis for the imposition of a CMP and assessment. 20 C.F.R. § 498.215(b)(2),
(c). The elements the SSA IG must prove under section 1129(a)(1)(C) of the Act are:

24

1. Respondent omitted from a statement or representation, or otherwise
withheld disclosure of a fact or facts;

2. Respondent knew or should have known that the fact or facts omitted or
withheld were 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; and

3. Respondent knew or should have known that the statement or
representation with such omission was false or misleading or that the
withholding of such disclosure was misleading.

The wording of 20 C.F.R. § 498.102(a)(3) is slightly different than that of section
1129(a)(1)(C) of the Act, but the elements the SSA IG must prove are the same.

Regarding the first element, the evidence shows that Respondent did engage in work
activity for Cameron Construction and Peter Cameron. There is no dispute that
Respondent did not disclose his work activity for Cameron Construction to SSA. My
prior findings were not disturbed by the Board. Cappetta, DAB CR3260 at 17; Cappetta,
DAB No. 2606 at 14.

The second element is whether Respondent knew or should have known that the fact he
did work activity for Cameron Construction was material to any initial or continuing right
to or the amount of DIB benefits. Respondent was a 24-month DIB beneficiary, a fact
that is not subject to dispute and only Respondent’s continuing right to benefits is at
issue. The second element requires proof by a preponderance of the evidence that
Respondent knew when he failed to report his work activity to SSA that his work activity
was material, that is, that it could be considered by the Commissioner with regard to
Respondent’s continuing entitlement to benefits. In my prior decision, I concluded that,
as a matter of law, Respondent could not know and should not have known his work
activity was material because it was not a fact the Commissioner could consider in
determining continuing entitlement by virtue of section 221(m)(1) of the Act. Based on
the Board’s contrary conclusion it is necessary to look at the law and evidence to
determine whether Respondent either knew or should have known that his work activity
was material.

Thad no trouble concluding that Respondent had at least constructive knowledge of his
obligation to report his work activity to SSA. The applicable regulation provides:

(a) Your responsibility to report changes to us. If you are
entitled to cash benefits or to a period of disability because
you are disabled, you should promptly tell us if—
25

(1) Your condition improves;

(2) You return to work;

(3) You increase the amount of your work; or
(4) Your earnings increase.

(b) Our responsibility when you report your work to us. When
you or your representative report changes in your work
activity to us under paragraphs (a)(2), (a)(3), and (a)(4) of this
section, we will issue a receipt to you or your representative
at least until a centralized computer file that records the
information that you give us and the date that you make your
report is in place. Once the centralized computer file is in
place, we will continue to issue receipts to you or your
representative if you request us to do so.

20 C.F.R. § 404.1588. Respondent also admitted that he knew he was to report work
activity. However, Respondent has not conceded that he understood that work activity
for Cameron Construction was a material fact or that failure to disclose that work activity
was misleading.

The SSA IG’s argument throughout has been that Respondent knew he was supposed to
report work activity and, therefore, Respondent must have known work activity was
material and that not reporting it was misleading. SSA IG’s Brief in Support of Imposing
a Civil Money Penalty (SSA Prehearing Br.) at 11-12; SSA Br. at 8-9; SSA Reply at 3-4.
In his prehearing brief, the SSA IG argued that because SSA asks about work and
income, Respondent was on notice that his work and income were material facts. The
SSA IG further asserted that Respondent minimized the amount of work he did and
subsequently denied working at all in interviews because he knew that work and earnings
were material facts. SSA Prehearing Br. at 11-12. There is no question that Respondent
had actual and constructive knowledge that he was to report work activity. However, I
am unwilling to infer based on the facts that Respondent knew he was supposed to report
work activity and that SSA asked about work activity, that Respondent knew or should
have known that work activity was material, that is, it could be considered by the
Commissioner related to Respondent’s continuing entitlement, or that it was potentially
misleading not to report work activity. The SSA IG concedes that its regulations are
complex and beneficiaries are told to report any changes in health or work activity that
might affect their entitlement. Beneficiaries are expected to report every change and not
attempt to determine whether or not their entitlement may be affected. SSA Br. at 5-6.
In fact, the SSA regulations are complicated and voluminous and they do not give a
reasonable beneficiary notice in language that may be understood by the beneficiary that

26

work activity is a material fact that may be considered by the Commissioner or that
failure to disclose work activity is misleading.

The Act defines “material fact” as a fact “which the Commissioner of Social Security
may consider in evaluating whether an applicant is entitled to benefits under title II or
title VIIL, or eligible for benefits or payments under title XVI.” Act § 1129(a)(2). The
regulation defines a “material fact” as a fact that “the Commissioner of Social Security
may consider in evaluating whether an applicant is entitled to benefits under title II or
eligible for benefits or payments under titles VII or XVI of the Act. 20 C.F.R.

§ 498.101. Title VII provides special benefits for certain World War II Veterans. Title
XVI provides for SSI. Neither titles VIII or XVI apply in this case. Based on the statute
and regulation, I conclude that Respondent had constructive knowledge that a material
fact is a fact the Commissioner may consider in evaluating whether an applicant is
entitled to benefits. However, the definition in the Act and the regulation do not state that
a material fact is a fact the Commissioner may consider in evaluating whether a
beneficiary continues to be entitled to benefits, as in the case of Respondent.
Accordingly, I cannot conclude that Respondent had constructive knowledge that a
material fact would be a fact that may be considered related to whether he continued to be
eligible for DIB benefits.

The Administrative Procedure Act requires publication of legislative rules adopted by
federal agencies and, based on that publication the public has at least constructive, if not
actual knowledge of the requirements of the regulations. 5 U.S.C. §§ 552(a)(1), 553(d); 2
Am. Jur. 2d Administrative Law § 166 (2015). “Except to the extent that a person has
actual and timely notice of the terms thereof, a person may not in any manner be required
to resort to, or be adversely affected by, a matter required to be published in the Federal
Register and not so published.” 5 U.S.C. § 552(a)(1). Therefore, if the Commissioner
properly published a regulation that stated that work activity is material to a
determination of continuing entitlement, the conclusion that Respondent had constructive
notice that work activity was material would be supported. However, there is no
regulation in 20 C.F R. pts. 404 or 498 that states that work activity is a material fact for
determining continued entitlement. The SSA IG has provided me no citation to a
regulation on which I could base a conclusion that Respondent had constructive notice
that his work activity was material to a determination of his continuing entitlement.°
Therefore it is necessary to consider whether the SSA IG has presented evidence to show

° Of course, as already discussed, at least I was convinced that section 221(m)(1) of the
Act actually provides to the contrary, i.e. that the Commissioner cannot consider the work
activity of a 24-month DIB beneficiary as evidence of continuing entitlement.
27

it is more likely than not that Respondent had actual and timely notice that his work
activity for Cameron Construction was material to the issue of his continuing entitlement
to DIB benefits.

The SSA IG offered as evidence copies of documents printed from a computer database
that contain information related to Respondent’s initial application for benefits in 1998.
SSA Ex. 1. The documents in SSA Ex. 1 do not reflect that Respondent was advised that
work activity was a material fact or that failure to report work activity was misleading.
The SSA IG offered copies of no other documents created by, signed by, or allegedly
received by Respondent related to Respondent’s initial application for benefits in 1998.

On November 9, 2009, SA Hanson and SA Brown interviewed Respondent with his wife
present. Claims Representatives Jennifer Ortiz and Gilda Agosto participated, apparently
as part of the CDR process.’ Respondent, with the assistance of his wife, completed
multiple forms. The forms Respondent completed during the interview and as part of the
CDR did not give him actual notice that failure to report work activity was a “material”
omission and misleading. SSA Ex. 8 at 6-31.

T As already discussed in detail, because Respondent was a 24-month DIB beneficiary a
CDR based on work activity was prohibited by section 221(m)(1)(A) of the Act. Even if
one viewed the CDR as being triggered by a failure to report work activity, the CDR
would still be triggered by and based on work activity and would transgress the
prohibition of section 221(m)(1)(A). In this case the evidence is clear that SSA received
an anonymous tip that Respondent was working for Cameron Construction. An
investigation was triggered. SSA conducted a CDR based on the reported work activity
but characterized the CDR as a medical CDR and terminated Respondent not because of
work activity, but due to purported medical improvement. Respondent was subsequently
found to be medically eligible on January 11,2012, but SA Hanson successfully stopped
any DIB payments to Respondent. SA Hanson’s notes state that Respondent was then
found not entitled based on work activity. SSA Ex. 14 at 2-4. The SSA IG’s stipulation
that Respondent continues to be medically eligible for DIB (Tr. 37-40) and the January
11, 2012 determination, strongly suggest that the characterization of the CDR as a
medical CDR with termination based on medical improvement (SSA Ex. 13 at 4-12) was
an overt effort to avoid the application of section 221(m) of the Act. However, whether
or not SSA correctly characterized the CDR for Respondent as a medical CDR with
termination of entitlement based on medical improvement is not an issue that I need to
resolve as it does not affect my decision except to the extent that the inconsistency
between the SSA IG’s position before me, the January 11, 2012 determination, and the
SSA action on the CDR reflects negatively upon the credibility of the SSA IG’s
interpretation and application of section 221(m) of the Act.
28

Respondent gave a sworn statement during his interview by SA Hanson on November 9,
2009. During the interview, Respondent explained that he could read a little English but

punishe
Respon

his writt
wrote th
knowled

SSA Ex.

he could not write in English. During the hearing it was apparent that English is not
Respondent’s first language and he had some difficulty understanding more than simple
sentences. There is no evidence that Respondent was advised he was under suspicion for
raud during the interview by SA Hanson or that he was advised regarding the meaning
of material fact or that withholding a material fact is potentially misleading. There is no
evidence Respondent was advised that he was under suspicion or that he might be

with a CMP or assessment. SSA Ex. 8 at 4. I understand that advising
lent that he was under suspicion may have been counterproductive from an

investigator’s perspective and in the administrative context arguably protections in the
Bill of Rights against self-incrimination do not apply. During the interview and before

en statement, counsel did appear to represent Respondent. Respondent’s counsel
e statement as Respondent dictated. Respondent stated “[t]o the best of my

ge I have not been employed during the time periods of 1998 to the present day.”
8 at 6. Respondent did not deny he engaged in some work activity, he denied

that he was an employee. There is no reference in the statement to Peter Cameron or
Cameron Construction. Respondent explained in his statement that in 1996 and 1997,

prior to

being found disabled, his ability to work declined and he had to rely on others to

complete work until he finally ceased his business when his license expired. He also
explained to SA Hanson who witnessed the statement that a stroke in 2008 made it

difficult

Respon

for him to concentrate and he was forgetful. SSA IG Ex. 8 at 6-7.

lent completed two Forms SSA-820-F4 (2-1991), “Work Activity Report — (Self

Employed Person)” during the interview on November 9, 2009. Both contained the
following Privacy Act notice:

The information requested on this form is authorized by
Section 223 and Section 1632 of the Social Security Act. The
information provided will be used in making a decision on
your claim. While completion of this form is voluntary,
failure to provide all or part of the requested information
could prevent an accurate and timely decision on your claim
and could result in the loss of benefits. Information you
furnish on this form may be disclosed by the Social Security
Administration to another person or governmental agency
only with respect to Social Security programs and to comply
with Federal law requiring the exchange of information
between Social Security and another agency. We may also
use the information you give us when we match records by
computer. Matching programs compare our records with
those of other Federal, State or local government agencies.
29

Many agencies may use matching programs to find or prove
that a person qualifies for benefits paid by the Federal
government. The law allows us to do this even if you do not
agree to it. Explanations about these and other reasons why
information you provide us may be used or given out are
available in Social Security Offices. If you want to learn
more about this, contact any Social Security Office.

SSA Ex. 8 at 8, 17. The Privacy Act Statement does not mention or define the term
“material fact.” The Privacy Act Statement clearly states only one effect of failure to
provide information, that is, failure to provide information may delay a timely decision
regarding benefits. The Privacy Act Statement does not state or imply that failure to
report subjects one to sanctions for failure to report. No reasonable lay person exercising
reasonable diligence in reading would understand based on the statement that work
activity is a material fact or that failure to report may be misleading. SSA Ex. 8 at 8, 17.
The forms asked Respondent to report all work activity since January 1997. However,
the form in block 2 requests a “name and address of business” and description of primary
product or service. Block 2 does not request a description of work activity. Respondent
listed his business ““Cappetta Construction,” which there is no question he ended in 1998.
SSA Ex. 8 at 8, 17. Blocks 3 and 4 request further information about the business not
work activity. Block 5 requested a description of “present work activities” and any
change in the business. Respondent responded that he had not worked at all since 1998.
The SSA IG did not charge Respondent for this response. SSA Ex. 18 at 8, 17. Blocks 6,
7, and 8 ask questions related to a business. Block 9 asks about any assistance required
in operating the business due to illness or injury. Block 10 is the overflow space for the
preceding blocks. Block 11 requires that the person completing the form indicate
whether or not they receive DIB or SSI. SSA Ex. 18 at 9-10, 18-19. Block 11 includes
the statement in the area to be checked by one receiving benefits that he or she
“understands that the information provided above may result in my benefits being
stopped.” SSA Ex. 18 at 10, 19. Respondent did not check the box on either form
indicating he was receiving DIB or that he understood his responses could result in
suspension or termination. Block 11 did not explain the term “material fact” or that
failure to report could be misleading or permit a sanction including a CMP and
assessment. SSA Ex. 8 at 10, 19. The forms including the following attestation:

Knowing that anyone who makes a false statement or
misrepresentation of a material fact for use in determining a
right to payment under the Social Security Act commits a
crime punishable under Federal law, I affirm that the answers
to questions on this form are true.

SSA Ex. 18 at 10, 19. The attestation statement does not mention omission of a material
fact. Therefore the form does not give one notice that omitted facts may be the basis for
30

criminal action or administrative penalties. The statement uses the term “material fact”
but it does not define or describe what constitutes a material fact. I conclude that a
person of reasonable intelligence exercising reasonable diligence in reading and
attempting to understand the warnings on this form could not determine what is “a
material fact” or that the omission or failure to report a material fact could result in the
imposition of administrative penalties.

Respondent also completed a form SSA-821-BK “Work Activity Report — Employee,”
that he did not sign and which states he did not work since January 15, 1997. SSA Ex. 8
at 12-16. Respondent was not charged for making a false statement on this form. The
copy of the form in evidence has no attestation block or block for Respondent to sign.
The form includes the following Privacy Act Statement:

Sections 205(a), 223(d), 1612, 1613 and 1633(a) of the Social
Security Act, as amended, authorize us to collect this
information. The information is needed to make a
determination on your claim. The information you furnish on
this form is voluntary. However, failure to provide all or part
of the information could prevent an accurate and timely
decision on your benefit eligibility.

We rarely use the information you supply for any purpose
other than for making a determination on your disability
claim. However, we may use it for the administration and
integrity of Social Security programs. We may also disclose
information to another person or to another agency in
accordance with approved routine uses, which include but are
not limited to: (1) to enable a third party or an agency to
assist Social Security in establishing rights to Social Security
benefits and/or coverage; (2) to comply with Federal laws
requiring the release of information from Social Security
records (e.g., to the Government Accountability Office and
Department of Veteran Affairs); (3) to make determinations
for eligibility in similar health and income maintenance
programs at the Federal, State, and local level; (4) to State
agencies or other agencies providing services to disabled
children; (5) to contractors for the purpose of assisting SSA in
the administration of the Ticket to Work and Self Sufficiency
Program; and (6) to facilitate statistical research, audit or
investigative activities necessary to assure the integrity of
Social Security programs.
31

We may also use the information you provide in computer
matching programs. Matching programs compare our records
with records kept by other Federal, state or local government
agencies. Information from these matching programs can be
used to establish or verify a person's eligibility for Federally
funded and administered benefit programs and for repayment
of payments or delinquent debts under these programs.

SSA Ex. 8 at 15. The Privacy Act Statement does not mention or define the term
“material fact.” The Privacy Act Statement clearly states only one effect of failure to
provide information, that is, failure to provide information may delay a timely decision
regarding benefits. The Privacy Act Statement also states that the information used on
the form is rarely used for any purpose other than determining entitlement to benefit
payments. The statement “we may use the information you give us for the administration
and integrity of our programs” may be recognized by one employed by SSA, an attorney,
or law enforcement as a threat to use the information provided or not provided against the
person who completes the form in the interest of program integrity. But a reasonable lay
person exercising reasonable diligence in reading and understanding the form is unlikely
to get that vague reference. Similarly, the statement in item 4 of the Privacy Act
Statement states that routine uses of the information provided is investigative activities
necessary to assure the integrity and improvement of Social Security programs. The
statement in item 4 is another veiled reference to the fact that SSA intends to use false
information or omitted information for criminal prosecution or as the basis for imposing a
CMP or assessment to ensure program integrity. I conclude that a person of reasonable
intelligence exercising reasonable diligence in reading and attempting to understand the
warnings on this form could not determine what is “a material fact” or that the omission
or failure to report a material fact could result in the imposition of administrative
penalties.

Respondent completed a Form SSA-454-BK titled “Continuing Disability Review
Report” on November 9, 2009. He indicated on the form, apparently with the assistance
of his wife that he speaks English, but he reads only a little and can do no more than write
his name. SSA Ex. 8 at 22. The copy of this form placed in evidence does not have a
printed Privacy Act Statement, a declaration statement, or a signature line for the disabled
person. The word material does not appear on the form. SSA Ex. 18 at 22-28. Because
material fact is not a term used, it is not explained. Therefore the form does not provide
Respondent actual notice of what constituted a material fact or that omission of a material
act could result in criminal or administrative penalties.

Respondent also filled out a Form SSA-795 titled “Statement of Claimant or Other
Person” that Respondent and his wife both signed but failed to date. On the second page
of the form is the following Privacy Act Statement:

32

Collection and Use of Personal Information

Section 205a of the Social Security Act (42 U.S.C. § 405a), as
amended, authorizes us to collect the information on this
form. We will use this information to determine your
potential eligibility for benefit payments.

Furnishing us this information is voluntary. However, failing
to provide us with all or part of the requested information
may affect our ability to evaluate the decision on your claim.
We rarely use the information you provide for any purpose
other than for determining entitlement to benefit payments.
However, we may use the information you give us for the
administration and integrity of our programs. We may also
disclose information to another person or to another agency in
accordance with approved routine uses, which include, but
are not limited to, the following:

1. To enable a third party or an agency to assist us in
establishing rights to Social Security benefits and/or
coverage;

2. To comply with Federal laws requiring the release of
information from our records (e.g., to the Government
Accountability Office and the Department of Veterans’
Affairs);

3. To make determinations for eligibility in similar health and
income maintenance programs at the Federal, State, and local
level; and,

4. To facilitate statistical research, audit, or investigative
activities necessary to assure the integrity and improvement
of Social Security programs.

We may also use the information you provide in computer
matching programs. Matching programs compare our records
with records kept by other Federal, State, or local government
agencies. We use the information from these programs to
establish or verify a person’s eligibility for federally-funded
or administered benefit programs and for repayment or
incorrect payments or delinquent debts under these programs.

Above Respondent’s signature on page 2 is the following declaration in bold as it appears
here:
33

I declare under penalty of perjury that I have examined
all the information on this form, and on any
accompanying statements or forms, and it is true and
correct to the best of my knowledge. I understand that
anyone who knowingly gives a false or misleading
statement about a material fact in this infor mation, or
causes someone else to do so, commits a crime and may be
sent to prison, or may face other penalties, or both.

SSA Ex. 8 at 30-31. The Privacy Act Statement does not mention or define the term
“material fact.” The Privacy Act Statement clearly states only one effect of failure to
provide information, that is, failure to provide information may delay a timely decision
regarding benefits. The Privacy Act Statement also states that the information used on
the form is rarely used for any purpose other than determining entitlement to benefit
payments. The statement “we may use the information you give us for the administration
and integrity of our programs” may be recognized by one employed by SSA, an attorney,
or law enforcement as a threat to use the information provided or not provided against the
person who completes the form in the interest of program integrity. But a reasonable lay
person exercising reasonable diligence in reading and understanding the form is unlikely
to get that vague reference. Similarly, the statement in item 4 of the Privacy Act
Statement states that routine uses of the information provided is investigative activities
necessary to assure the integrity and improvement of Social Security programs. The
statement in item 4 is another veiled reference to the fact that SSA intends to use false
information or omitted information for criminal prosecution or as the basis for imposing a
CMP or assessment to ensure program integrity. The declaration statement does not
include the words “and complete” and does not mention omission of a material fact.
Therefore the form does not give one notice that omitted facts may be the basis for
criminal action or administrative penalties. The declaration statement does use the term
“material fact” but it does not define or describe what constitutes a material fact. I
conclude that a person of reasonable intelligence exercising reasonable diligence in
reading and attempting to understand the warnings on this form could not determine what
is “a material fact” or that the omission or failure to report a material fact could result in
the imposition of administrative penalties. Therefore, this form did not provide
Respondent actual notice of what constituted a material fact or that omission of a material
fact could result in criminal or administrative penalties.

On November 28, 2010, Respondent’s daughter, Rosanna Cappetta, completed a Form
SSA-3441-BK, which is titled “Disability Report — Appeal.” The form does not use or
define the term “material fact.” SSA Ex. 10 at 5-12.

The forms completed by Respondent with the assistance of his wife and daughter could
have and should have explained to the beneficiary or claimant in plain language that is
34

easy for even a cognitively impaired person or a representative payee to understand, the
following:

e What is considered to be work activity;

e That a change in medical condition, any work activity or change in work
activity, earnings of any amount or a change in earnings must all be
reported to SSA as required by the regulation (20 C.F.R. § 404.1588);

e The method for reporting and how quickly reporting must occur;

e That these facts are all considered to be material because they may be
considered by SSA in determining entitlement or continued entitlement to
benefits; and

e That failure to report these facts, incorrectly reporting these facts, or falsely
reporting these facts may result in criminal prosecution or the imposition of
civil penalties including a CMP for each false statement of fact or for each
month in which the claimant or beneficiary failed to report the facts or an
assessment of twice the amount of any benefits received.

Iam confident that the SSA regulation and form drafters can be even more precise than I
and create text that gives claimants and beneficiaries actual notice of what is required and
what sanctions they are subject to for false, incomplete, and erroneous responses. The
Form SSA-795 (SSA Ex. 8 at 31) for example includes more than half a page setting
forth the Privacy Act Statement but similar care was not exercised to ensure that
claimants and beneficiaries completing the form understood exactly what information
was required, e.g., work or work activity and what is included, earnings as defined by the
regulations, substantial and gainful activity compensated or uncompensated; the
ramifications, including criminal and administrative sanctions, of making errors,
intentional or not, in completing the information requested by the form or failure to
disclose all requested information. The oversight in providing adequate notice is
inexcusable and unjust particularly when the SSA IG then attempts to rely upon those
unclear and confusing forms to attempt to impose large CMPs and assessments against
beneficiaries for their erroneous and incomplete responses. The oversight also fails to
ensure protection of the Social Security Trust Fund because the SSA Commissioner is not
receiving all the information from beneficiaries needed to ensure benefits are not
improperly paid.

SSA sent Respondent a demand for payment of $85,352.10 on July 18, 2011. A demand
for payment of $24,377.00 was sent to Respondent’s wife on July 18, 2011. Neither
demand for payment defined the term “material fact.” However, both forms included
detailed Privacy Act Statements. SSA Ex. 12 at 5-12.

Respondent conceded that he knew that he was supposed to report work activity. But he
did not concede that he had actual knowledge of what fact is considered to be a material
fact that had to be reported, or that he knew he was subject to criminal or administrative
35

penalties for failure to report a material fact. None of the evidence presented by the SSA
IG shows that Respondent had actual or constructive knowledge that work activity is a
material fact or the ramifications of failure to report such a material fact.

Following remand I requested the parties to submit proposed findings of fact, conclusions
of law, and briefs addressing the issues raised by the Board. The SSA IG filed proposed
findings of fact and conclusions of law on March 24, 2015 and, on June 8, 2015, waived
the right to file a reply to Respondent’s submissions. The SSA IG proposed that I
conclude that Respondent knew or should have known that work activity was a material
fact and his failure to report that material fact was misleading. But the SSA IG points to
no support for that conclusion other than my prior decision and his prior brief. Therefore,
the SSA IG’s proposed findings of fact and conclusions of law provide no further
enlightenment on the issue of whether Respondent had actual or constructive knowledge
that work activity is a material fact the omission of which is misleading subjecting
Respondent to administrative penalties.

The SSA IG bears the burden to show by a preponderance of the evidence the statutory or
regulatory basis for the imposition of a CMP and assessment. 20 C.F.R. § 498.215(b)(2),
(c). The elements the SSA IG must prove under section 1129(a)(1)(C) of the Act include
the requirement to show that Respondent knew or should have known that his failure to
report that he engaged in work activity for Cameron Construction was the omission or
withholding of a fact that was material to the determination of his continuing right
receive DIB benefit payments. The SSA IG failed to meet its burden to show this
element.

The SSA IG also failed to establish the third element by a preponderance of the evidence,
that is:

Respondent knew or should have known that the statement or
representation with such omission was false or misleading or
that the withholding of such disclosure was misleading.

Under section 1129(a)(1)(C) it is not enough for the failure to report a fact to be
misleading, the person who omitted to report the fact must have known, or should have
known, that the omission of the information from a statement or representation or the
failure to disclose was misleading. Respondent has not conceded that he knew that
failure to report his work activity for Cameron Construction was misleading. The SSA
IG has not pointed to evidence that Respondent knew or should have known that the
failure to report his work activity was misleading with regard to a possible determination
as to his continuing entitlement to his DIB payments or with regard to any other
determination by SSA.
36

There are at least two possible explanations, pertinent to this case, for why Respondent
did not report his work activity for Cameron Construction, either:

1. Respondent did not actually know that his work activity met some definition of
work activity that had to be reported either on the forms he completed on
November 9, 2009 (SSA Ex. 8 at 5-31), or in another fashion such as by telephone
or in person; and thus, he would not have known, and it cannot be concluded he
should have known, that failure to report that work activity was misleading; or

2. He actually knew that his work activity should be reported on those forms, by
telephone, in person or in some other fashion, but he did not report, from which
fact I could infer that he knew or should have known that the omission of the
information was misleading.

The SSA IG must prove the second explanation or a similar explanation by a
preponderance of the evidence; that is, the evidence must show it was the more likely
explanation of the two. Respondent cannot argue that he did not have actual and
constructive knowledge that work activity should be reported. However, Respondent
argues that he did not recognize that his efforts for Peter Cameron and Cameron
Construction were actually work activity that was required to be reported. Respondent’s
assertion that he did not understand that his activities constituted work activity that was
required to be reported has an air of credibility. Respondent testified at hearing. My
assessment of Respondent was that he was of average or higher intelligence but English
is not his first language and he had difficulty understanding more than simple sentences.

There is no dispute that the SSA regulations do not provide a definition of work of which
Respondent may be presumed to have constructive knowledge and against which
Respondent could be required to compare his activities at Cameron Construction.
Cappetta, DAB No. 2606 at 3. The regulations state that any work, whether legal or not,
may show that one is able to work at the substantial gainful activity level, in which case it
may be determined that a person is not disabled. 20 C.F.R. §404.1571. The regulation
does not explain what activity constitutes work, though it does provide an explanation for
how work is considered by SSA. The regulation also indicates that criminal activity may
be work activity. The regulation creates some confusion as to whether all work activity
needs to be reported. For example, 20 C.F.R. § 404.1572(a) and (b) provide the
following definitions:

e “Substantial gainful activity” is work activity that is both substantial and
gainful.

e “Substantial work activity” is work involving significant physical or mental
activity.

e “Gainful work activity” is work of the kind that is usually done for pay or
profit whether or not there is actual pay or profit.
37

The regulation provides that not all work activity need be reported, even if it could be
characterized as substantial and gainful. The regulation states that, generally hobbies,
activities of daily living, household tasks, club activities, school attendance, and social
programs are not considered substantial gainful activity. 20 C.F.R. § 404.1572(c); Social
Security Ruling 83-33: Titles II and XVI: Determining Whether Work Is Substantial
Gainful Activity Employees. Under these regulations tying flies for your brother to use
for fishing might be a hobby that need not be reported as work activity. But, if you tie
ots of flies that your brother uses in his professional guide business or that you give or
sell to tourists during fishing season, even if as part of your medically prescribed therapy,
SSA may consider it work activity that needs to be reported, even if you do not receive
any money for the flies or your labor and even if you are stealing the parts or killing
protected species to obtain the materials.

The forms Respondent completed on November 9, 2011, also do not clearly require that
Respondent report “work activity” nor contain any notice that work activity is considered
a “material fact” and that failure to report work activity is misleading and may result in
penalties for failure to report. SSA Ex. 8 at 6-31.

SSA is required to show it is more likely than not that Respondent knew or should have
nown that his failure to report work activity for Cameron Construction was misleading.
Based on my review of the regulations and the forms Respondent completed on
November 9, 2011, I conclude that it was more likely than not that Respondent did not
understand that his failure to report work activity for Peter Cameron and Cameron

Construction was misleading. The forms that
describe what activity is considered to be worl
The Work Activity Report form is confusing i

Respondent completed do not specifically
activity and must be reported as such.
n that it requests business information

rather than a listing and description of work activity. SSA Ex. 8 at 8-11, 17-20. The

regulations seem to require the reporting of al

work activity but then provide that some

work activity need not be reported even if it is activity that is both substantial and gainful.
In light of the lack of clarity in the regulations and the forms and absent some evidence
that Respondent was actually told to report all work activity (whether legal or illegal, for
pay, profit, with or without benefits) and that any failure to report is misleading; I will not
infer that Respondent knew that his failure to report work activity for Peter Cameron or
Cameron Construction was misleading.

I conclude that the preponderance of the evidence does not show that Respondent knew
or should have known that the withholding of the information about his work activity for
Peter Cameron or Cameron Construction was misleading.

Accordingly, I conclude that the SSA IG has failed to establish a basis for the imposition
of a CMP or assessment.
38

° Whether the SSAIG has established the duration of the
period for which CMPs and assessments may be imposed.

Although the Board may resolve this case on the basis that work activity for a 24-month
DIB beneficiary is not material and, therefore, not a basis for the imposition of a CMP
and assessment; or that the SSA IG failed to prove that Respondent knew that work
activity was a material fact he omitted to report; or that the Respondent did not know his
failure to report was misleading; I address the additional two issues directed by the
Board in its remand decision.

The SSA IG notified Respondent that he determined Respondent failed to report work
activity from November 2002 through April 2011. However, only the failure to report
from December 2006 through April 2011 was actionable. SSA Ex. 17. There is no
dispute that there is no evidence of work activity after November 2009. Tr. 104.
However, there is also no dispute that Respondent did not report to SSA any work
activity for Cameron Construction or Peter Cameron through April 2011. The fact issue
to be resolved is when was the earliest date Respondent engaged in work activity for
Peter Cameron or his company.

SSA’s Erica Durham received an anonymous call on June 16, 2009 at about 11:45 a.m.
The caller alleged that Respondent was paid for work for Cameron Construction for at
least the past ten years. SSA Ex. 2. Ms. Durham’s statement is unsigned and unsworn.
The anonymous caller is not identified. Neither Ms. Durham nor the anonymous caller
were called to testify and subjected to cross-examination. Although 20 C.F.R.

§ 498.216(b) permits me to receive witness testimony in writing, that section does not
create an exception to of 20 C.F.R. § 498.216(a) requiring that testimony be under oath
or affirmation. Accepting and giving weight to unsworn statements in lieu of live
testimony under oath, would violate the clear purpose of requiring that testimony be
given under oath or affirmation.

® Fact and expert witnesses are called to testify, not only to permit the opposing party an
opportunity to cross-examine, but to permit the fact finder to judge the credibility of the
witness in responding to both direct and cross-examination. The fact finder’s opportunity
to judge credibility is greatly impaired when a witness is not called to testify and a party
attempts to rely upon an affidavit or declaration, or in this case and an unsworn and
unsigned statement. Calling witnesses to testify before the fact finder is no less important
in the context of administrative hearings than it is in criminal and civil proceedings, only
the quantum of credible evidence required is different. Failure to call witnesses whose
direct observations and perceptions are necessary to establish an element of a party’s
prima facie case is a serious error.
39

Although SA Hanson conducted surveillance of Respondent for a few hours in August
2009, she never saw him doing any work at Cameron Construction. SSA Ex. 6.

SA Hanson and SA Brown interviewed Peter Cameron on November 6, 2009. Peter
Cameron told SA Hanson that: Respondent worked for him for approximately the past
eight years, which I calculate to be approximately November 2001. Peter Cameron
testified that Respondent was paid by the job; Respondent worked three to five hours per
day when he worked; the amount of pay depended upon the job and could be $50, $100,
or $500 per job; Respondent would do any type of work; Respondent could work several
weeks in a month and make $700 to $800 or more; he paid Respondent cash; he paid
Respondent from $150 to $1,500 per week depending upon the job. He denied that he
paid Respondent $20,000 or $30,000 in a year. SSA Ex. 7 at 1-3; Tr. 122-25. On
February 23, 2010, SA Hanson and SA Brown interviewed Peter Cameron again. SA
Hanson reported that Peter Cameron said that Respondent’s work for him included tiling
backsplashes, walls, and floors; hanging doors; trim work, framing, and taping sheetrock.
Peter Cameron also stated that he no longer heard from Respondent, who did no work for
him after the investigators first came around on November 6, 2009. SSA Ex. 9 at 2.
Peter Cameron testified at hearing that he had known Respondent for 15 years, having
met him through a mutual friend. Tr. 344. Cameron testified that he and Respondent
were friends but that they have not spoken due to the investigation by SSA. Tr. 344-455.
At hearing he denied that Respondent ever worked for him but testified that Respondent
would show-up at job sites and run to the store for him if he needed materials. Tr. 345-
47. He denied paying Respondent wages but by running errands for him Respondent was
paying back for work Cameron did on his house. Tr. 350. Peter Cameron testified that
sometimes he called Respondent and requested his help and sometimes Respondent just
showed-up. Tr. 350-51. He testified that he gave Respondent gifts at Christmas; he gave
him money for his kids’ birthdays; and he gave him a couple hundred dollars when he
went to Italy. Tr. 352. He also gave Respondent money to go get coffee and donuts and
for the gas Respondent used going to the store. Tr. 352. He denied telling SA Hanson
that Respondent did tiling, taping, sheetrock, backsplashes, grout or mortar work. Tr.
353-54. On cross-examination, Mr. Cameron testified that he did not pay Respondent
wages, by check or otherwise. Tr. 355.

SA Hanson testified in response to my questions that she asked Peter Cameron general
questions. SA Hanson surmised based on Cameron’s responses to general questions that
Respondent had worked for him on and off for eight years, he paid Respondent cash, and
the amount paid depended upon the job and varied from $150 to $1,500 per week. Mr.
Cameron was not asked and did not disclose how much he paid Respondent over the
course of a year. But he denied paying Respondent $20,000 to $30,000 per year. SA
Hanson admitted in response to questions from Respondent’s counsel that she definitely
did not know how much Respondent was paid by Mr. Cameron. Tr. 154-58. In response
to my questioning, SA Hanson indicated that an analysis of Respondent’s and his
40

family’s reported income, resources, liabilities, and expenses did not reflect that
Respondent was receiving significant amounts of unreported cash income. Tr. 178-83.

It is problematic that SA Hanson and SA Brown did not obtain a written and sworn
statement from Peter Cameron when they interviewed him on November 6, 2009. SA
Hanson’s clarification of the technique she used to question Mr. Cameron and to record
his responses convinces me not to give significant weight to the report of the November
6, 2009 interview. As SA Hanson testified, she asked general questions and drew
inferences based on Mr. Cameron’s responses that she then recorded. Thus, SA Hanson
admitted that her investigative report contains her inferences rather than the actual
statements of Peter Cameron. Accordingly, Peter Cameron’s sworn hearing testimony
that was subject to cross-examination must be accorded more weight in resolving
conflicts between the report of investigation and his testimony. My findings that
Respondent engaged in some work activity for Peter Cameron or Cameron Construction,
including running errands, is unchanged. Peter Cameron’s statement that Respondent
had been doing some work for him for about the last eight years is not inconsistent with
his testimony or otherwise rebutted and I treat that statement as credible. The statement
is consistent with Respondents testimony that he had known Peter Cameron since 2000;
they were friends; and though Respondent denied working for Peter Cameron, he
admitted to giving construction related advice, doing little things such as going to get
coffee and cigarettes. Tr. 248, 250-51, 253-55. Respondent’s admission that he ran
errands is consistent with Mr. Cameron’s testimony. Tr. 345-47, 350-51. I do not treat
SA Hanson’s interpretation of Peter Cameron’s statements regarding more significant
work activity as more credible or probative than Mr. Cameron’s hearing testimony which
was under oath and subject to cross-examination. No evidence was elicited tending to
show a motive for Mr. Cameron to provide false testimony, and I will not speculate that
the past friendship between Mr. Cameron and Respondent was a motive to commit
perjury. There is no evidence that Mr. Cameron or Cameron Construction was subject to
any punitive legal action related to Respondent’s work activity or any payments made by
Mr. Cameron to Respondent. SA Hanson’s report of investigation denotes that the
United States Attorney declined to prosecute Respondent (SSA Ex. 12 at 3); and there is
no suggestion that any prosecution was contemplated against Mr. Cameron based on his
relationship with Respondent.

Accordingly, I conclude that it is more likely than not that Respondent engaged in work
activity, including running errands, for Peter Cameron or Cameron Construction as early
as November 2001. There is no evidence and no allegation that Respondent reported his
work activity to SSA through April 2011.

~* Whether the SSAIG has shown that the CMP amount is reasonable
based on the factors in the regulations.
41

+ Whether the SSA IG has shown that the assessment is reasonable based
on the amount of benefits Respondent received during the period in which
he withheld information about his work.’

A maximum CMP of $5,000 for each false statement or representation of material fact
and for each month of withholding or failure to report a material fact is authorized by
section 1129(a)(1) of the Act and 20 C.F.R. §§ 498.102(a) and 498.103(a). Also
authorized is an assessment of not more than twice the amount of benefits or payments
received as a result of the false statements, representations, omissions or failure to report
material facts. Act § 1129(a)(1); 20 C-F.R. § 498.104.

Pursuant to 20 C.F.R. § 498.220(b), I may affirm, deny, increase, or reduce the penalties
or assessments proposed by the SSA IG 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 proposed CMP
or assessment are “reasonable.” Cassandra Ballew, Recommended Decision, App. Div.
Docket No. A-14-98 at 9-10. Just as the SSA IG 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.

Act § 1129(c); 20 C.F.R. § 498.106.

The SSA IG proposes a CMP of $106,000 and an assessment in lieu of damages of
$95,167.20. SSA Ex. 17 at 1. The SSA IG advised Respondent he considered that
Respondent failed to report his work activity from at least December 2006 through April
2011, a period of 53 months. The maximum CMP of $5,000 per month for 53 months
would amount to $265,000 but the SSA IG only proposed a CMP of $106,000, $2,000

° T stated in my initial decision that the SSA IG failed to offer any admissible evidence of
the monthly or total amount of DIB and CIB payments to Respondent and his children
(actually his daughter) during the period December 2006 through April 2011, to support
the amount of $47,583.60 alleged in the SSA IG notice to Respondent dated July 26,
2012. Cappetta, DAB CR3260 at 15-16. While that statement is correct, I agree that
despite many opportunities to do so, Respondent has not disputed that the amount of
benefits received from December 2006 through April 2011, amounted to $47,583.60.
42

per month, based on his assessment of the regulatory factors. The SSA IG advised
Respondent that it was determined that from December 2006 through April 2011,
Respondent and his children were paid benefits totaling $47,583.60. The SSA IG
proposed the maximum assessment of twice the benefits received, in this case
$95,167.20. SSA Ex. 17 at 1.

Mr. Bungard considered the following facts. Respondent knew he was supposed to
report work but failed to do so. On November 9, 2011, Respondent made a false
statement to investigators that he had done no work since 1998. Respondent was
culpable because he failed to report work activity and Respondent and his children
received more than $100,000 in benefits over a period or more than eight years. Mr.
Bungard considered that the mitigating factor of no prior offenses was outweighed by the
long-term nature of Respondent’s misconduct. He concluded that the CMP and
assessment would not jeopardize Respondent’s financial condition, because Respondent
failed to file a financial disclosure form. Mr. Bungard also considered in the interest of
justice that Respondent had a long history of work in construction; Respondent made
substantial additions and modifications to his home while receiving DIB to which he was
not entitled; Respondent had several minor children; and that he met the medical
requirements for disability even though he did work. SSA Ex. 17 at 1-2.

I evaluate the required factors as follows:

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

Respondent failed to report work activity as early as November 2001. Respondent knew
he was supposed to report work activity. However, the regulations do not clearly
describe what activity is work activity that must be reported. The SSA IG has failed to
present any evidence that Respondent had actual knowledge of what activity constituted
work activity that he was obliged to report. The evidence does not show it was more
likely than not that Respondent intended to defraud SSA. The evidence does not show it
was more likely than not that Respondent engaged in any more than sporadic work
activity for Peter Cameron or Peter Cameron Construction. The evidence does not show
it was more likely than not that Respondent received any earnings for his work activity.
The evidence does show that Respondent received gifts from Peter Cameron and that
Peter Cameron believed that some of Respondent’s work activity was in exchange for
work Peter Cameron did on Respondent’s house. The value of Respondent’s work
activity and the amount of any gifts or other compensation is not established by the
evidence. Indeed, SA Hanson testified that an analysis of Respondent’s and his family’s
reported income, resources, liabilities, and expenses did not reflect that Respondent was
receiving significant amounts of unreported cash income. Tr. 178-83. The evidence does
not show it was more likely than not that Respondent’s work activity was substantial and
gainful.

43

(b) Degree of culpability, history of prior offenses, financial
condition of Respondent, and such other matters as justice may
require.

There is no evidence of any prior offenses by Respondent. There is no evidence that
Respondent is unable to pay a CMP and assessment in the amount proposed by the SSA
IG.

The simple definition for culpability is blameworthiness. Black’s Law Dictionary 406
(18th ed. 2004). In this case, Respondent failed to report that he did some work for Peter
Cameron and Cameron Construction as early as November 2001. I do not find
Respondent’s failure to report to be blameworthy. The SSA regulations are not clear
enough for a person of reasonable intelligence to know what activity is reportable as
work activity. It is undisputed that Respondent’s command of English is significantly
limited.

I conclude that no CMP or assessment should be imposed against Respondent on the facts
of this case.

III. Conclusion

For the foregoing reasons, I conclude that there is no basis for the imposition of a CMP or
assessment in this case.

/s/
Keith W. Sickendick
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.
44

(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.

(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.