Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

The Inspector General of the Social Security Administration,
v.
Andre Watley,
Respondent.
Docket No. C-13-1179
Decision No. CR3710

Date: March 11, 2015

DECISION

The Inspector General (IG) of the Social Security Administration (SSA) proposed to
impose on Respondent, Andre Watley, a $5,000 civil monetary penalty (CMP) for each
of 24 alleged violations of 42 U.S.C. § 1320a-8. Respondent disputed the SSA IG’s
allegations. For the reasons stated below, I conclude that Respondent is liable for a CMP
based on 11 violations of 42 U.S.C. § 1320a-8. Further, I affirm the SSA IG’s proposed
penalty of $5,000 for each violation. Therefore, Respondent is liable for a $55,000 CMP.

I. Background and Procedural History

On December 17, 2007, Respondent filed applications for Disability Insurance Benefits
(DIB) and Supplemental Security Income (SSI) with SSA. SSA Exhibit (Ex.) 1.
Respondent indicated on the SSI application that he: is disabled and has been disabled
since May 25, 2000; does not “own any type of resource”; and has “not been accused or
convicted of a felony or an attempt to commit a felony.” SSA Ex. | at 1-2. Also on
December 17, 2007, Respondent filed a DIB application. SSA Ex. 1 at 6-7. On
December 24, 2007, Respondent signed a Form SSA-3369-BK (Work History Report) in
which he indicated that in the preceding 15 years, Respondent had only been employed as
a cook from August 2005 through December 2006. SSA Ex. 2. SSA apparently denied
this application and denied Respondent’s request for reconsideration. SSA Ex. 21 at 3.

On June 12, 2009, Respondent filed new applications for DIB and SSI, alleging that his
disability commenced January 1, 2004. SSA Ex. 3 at 1. Respondent again asserted that
he did not own any type of resource and has not been accused or convicted of a felony or
attempt to commit a felony. SSA Ex. 3 at 9. On September 14, 2009, Respondent
completed and signed a Form SSA-3373-BK (Function Report — Adult). SSA Ex. 4.
SSA denied Respondent’s applications, at both the initial and reconsideration stages of
review. SSA Ex. 21 at 3.

Respondent requested a hearing and, on May 25, 2010, an SSA Administrative Law
Judge (ALJ) held a hearing on Respondent’s claim. SSA Exs. 5, 6. Respondent amended
his disability onset date to November 30, 2007. SSA Ex. 6. On July 9, 2010, the SSA
ALJ issued a fully favorable decision in which he reopened Respondent’s previous claims
and found Respondent had been disabled since November 30, 2007. SSA Ex. 7. The
ALJ found Respondent’s testimony credible and gave “controlling weight” to the opinion
of Respondent’s physician. SSA Ex. 7 at 7-8. On July 20, 2010, Respondent provided
the following additional information in support of his SSI application: Respondent has
not been accused or convicted of a felony or attempt to commit a felony; and Respondent
does not own any resources. SSA Ex. 8. Ina July 26, 2010 Notice of Award, SSA
informed Respondent that he was entitled to DIB beginning May 2008; however, SSA
also stated that it could not pay Respondent at that time because he was convicted of a
crime and imprisoned. R. Ex. 3. Ina July 27, 2010 Notice of Award, SSA informed
Respondent that he would receive SSI benefits and indicated the amount of back pay and
monthly payments he would receive. SSA Ex. 9. This notice failed to account for
Respondent’s incarceration and Respondent was overpaid SSI benefits. SSA Ex. 9; SSA
Ex. 33 at 2. In August 2010, SSA discontinued Respondent’s SSI benefits “because
[Respondent’s] DIB was too high to qualify for SSI.” SSA Ex. 33 at 2.

On or about August 26, 2011, the Wichita, Kansas Police Department informed the SSA
1G’s Kansas City Cooperative Disability Investigations (CDI) Unit that an article was
published about Respondent and “his ice cream truck business.” SSA Ex. 28 at 1.
Between August 2011 and July 2012, the CDI unit conducted an investigation. SSA Ex.
28 at 2. The Wichita SSA office also conducted a continuing disability review for
Respondent. SSA Ex. 33 at 1.

On July 11, 2012, SSA ceased Respondent’s DIB benefits. SSA Ex. 33 at 2. Respondent
requested reconsideration, but a hearing officer upheld the cessation of benefits in May
2013. SSA Ex. 33 at 2-3; R. Ex. 9. Respondent requested a hearing before an SSA ALJ
and requested that SSA continue to pay his benefits pending his appeal. SSA agreed to
continue paying benefits to Respondent. SSA Ex. 33 at 2-3.

On June 14, 2013, the SSA IG personally served a notice on Respondent proposing to
impose a CMP of $120,000 based on 24 alleged false statements in relation to
Respondent’s claims for DIB and SSI. Respondent filed a request for a hearing with the
Civil Remedies Division and generally denied the allegations in the penalty notice. I was
assigned to adjudicate this case and issued an Acknowledgement and Pre-Hearing Order
(Pre-Hearing Order) establishing a submission schedule for prehearing exchanges. The
Pre-Hearing Order required the parties to submit proposed exhibits and written direct
testimony for all proposed witnesses (except when the witnesses are hostile or adverse
witnesses), and for the parties to file objections to proposed exhibits and requests to
cross-examine proposed witnesses. Pre-Hearing Order § 2.

The parties filed their prehearing briefs (SSA Br. and R. Br.) and proposed exhibits. The
SSA IG also filed a reply brief (SSA Reply Br.) with an attached exhibit marked
Attachment A. After review of both parties’ prehearing exchanges, I noted that
Respondent objected to several of the SSA IG’s proposed exhibits. Respondent also
listed two witnesses but did not provide written direct testimony. The SSA IG listed
witnesses and provided written direct testimony for all but two witnesses (Respondent
Andre Watley and Sharron Griffin) the same two witnesses on Respondent’s witness list.
Respondent did not request to cross-examine any of the SSA IG’s witnesses. The SSA
IG did not file subpoena requests for the two witnesses for which no written direct
testimony was submitted. Respondent also requested a stay in this proceeding pending a
decision by an SSA ALJ regarding the cessation of Respondent’s DIB benefits.

I held a prehearing telephone conference on November 17, 2014, the substance of which
is summarized in my November 19, 2014 Order Following Prehearing Conference
(November 19 Order). Counsel for both parties appeared at the conference. At the
conference, the parties confirmed that neither of them intended to call any witnesses to
testify at a hearing and that the parties agreed that I should issue a decision on the basis of
the written record. Respondent’s counsel indicated that the record in the case before SSA
contained relevant medical documentation. I denied Respondent’s motion for a stay
because the SSA ALJ’s decision would not directly impact the outcome of this case.
However, I permitted Respondent time to obtain and submit any evidence from his case
before the SSA ALJ that was relevant to the present case. Further, I ruled on the
admission to exhibits into the record. I also permitted the SSA IG to submit additional
declarations to authenticate SSA Exs. 17, 23, and 35 and permitted Respondent to file
objections to those declarations. Finally, I gave Respondent an opportunity to file a
written objection to the admission of Attachment A to the SSA IG’s reply brief (as
indicated below, I mark Attachment A as SSA Ex. 37).

In response to the November 19 Order, SSA timely filed two declarations, which I mark
as SSA Exs. 38 and 39, supplementing the testimony of witnesses already entered into the
record. SSA Exs. 28, 36. Respondent did not submit any additional exhibits.
II. Evidentiary Rulings

As discussed below, with the exception of SSA Ex. 35, I admit all of the proposed exhibits
from the parties (i.e., SSA Exs. 1-34, 36-39 and R. Exs. 1-12) into the record.

At the prehearing conference, I entered Respondent’s exhibits (R. Exs. 1-11) into the record
without objection. November 19 Order at 3. Respondent had also submitted R. Ex. 12.
Because the SSA IG did not object to that exhibit, I admit R. Ex. 12 into the record as well.

During the prehearing conference, I also entered SSA Exs. 1-16, 18-22, 24-34, and 36 into the
record. Respondent did not object to most of those exhibits, but objected to some of them. I
addressed those objections before entering the exhibits into the record. I reserved ruling on
SSA Exs. 17, 23, and 35. November 19 Order at 3-4.

Respondent objected to SSA Exs. 17 and 23 because of hearsay and a lack of foundation.
Respondent is concerned that the information in those exhibits, which relates to Respondent’s
criminal convictions, is not sufficiently reliable. However, as the SSA IG argues in response,
I am not bound by the Federal Rules of Evidence. 20 C.F.R. § 498.217(b). Therefore, a
earsay objection, by itself, will not serve to preclude admission of these exhibits. Rather,
such an argument goes to the weight that I should afford that evidence.

In regard to the foundation objection to SSA Ex. 17, the SSA IG submitted supplemental
testimony from Lora Tarango, an employee with the Kansas City Police Department and a
member of the SSA IG CDI unit investigating Respondent. This testimony provided a
detailed explanation that the information in SSA Ex. 17 reflects the information she obtained
during her investigation. I mark Ms. Tarango’s supplemental testimony as SSA Ex. 38.

In regard to the foundation objection to SSA Ex. 23, the SSA IG provided supplemental
testimony from Special Agent Jon Guilford. Agent Guilford testified that he created the SSA
IG report marked as SSA Ex. 23 under the SSA IG’s “policy to reduce investigative findings
to writing.” I mark Agent Guilford’s supplemental testimony as SSA Ex. 39.

The supplemental testimony that the SSA IG provided is sufficient to overcome Respondent’s
objections related to a lack of foundation. Further, although Respondent objected to the
supplemental testimony itself, Respondent provided no specific basis for the objections.
Therefore, I admit SSA Exs. 17, 23, 38, and 39 into the record.

The SSA IG also submitted SSA Ex. 35. This exhibit is a video of a truck driving on a
street and stopping near the curb. I summarized the discussion of this proposed exhibit at
the prehearing conference as follows:
Counsel for the SSA IG stated that Special Agent Jon
Guilford and other witnesses could authenticate this video,
which she believes was taken from Respondent’s facebook
page. Respondent’s counsel argued that the exhibit lacked
foundation, that it is impossible to determine if Respondent
appears in the video, and that the exhibit is not relevant.
Counsel for the SSA IG responded that if Respondent could
not be seen in the video, less weight could be given to this
exhibit.

November 19 Order at 4.

The SSA IG did not submit supplemental testimony concerning this proposed exhibit. I
agreed with Respondent that, when viewing the video, I could not see who was driving
the vehicle. I also do not know where or how this video was obtained. Therefore, I
exclude this exhibit as lacking authentication. Further, without testimony to provide
additional information, this video has little or no probative value to outweigh the danger
of unfair prejudice. 20 C.F.R. § 498.217(c).

Finally, the SSA IG proposed that a document it labeled as Attachment A to its reply
brief ought to be admitted into the record. Respondent objected to this document as
being untimely filed, i.e., not filed with the SSA IG prehearing exchange. However, the
SSA IG argues that it is rebuttal evidence. Attachment A is composed of copies of the
original application for a license to operate an ice cream truck filed by Respondent’s
former wife, Sharron Griffin, along with several subsequent applications to renew that
icense. One of the documents in Attachment A is the same as SSA Ex. 19.

In his prehearing brief, Respondent cited the SSA IG’s proposed exhibits to show that
ownership of the Ice Cream and More was Ms. Griffin’s business and not Respondent’s
business. R. Br. at 3-4. Respondent cited to SSA Ex. 19 to show that Ms. Griffin
renewed the license almost a year before there were allegations from the Wichita Police
Department that Respondent was selling ice cream. R. Br. at 4. In its reply brief, the
SSA IG argued that the Ice Cream and More business existed earlier than 2011 and the
SSA IG submitted the documents in Attachment A to show Ms. Griffin first filed an
application for a license in 2007. SSA IG Reply Br. at 3.

I will admit Attachment A, which I mark as SSA Ex. 37, into the record. “The ALJ will
permit the parties to introduce rebuttal . . . evidence as to those issues raised in the
parties’ case-in-chief.” 20 C.F.R. § 498.217(g). There is no doubt that the SSA IG
submitted Attachment A in response to an issue Respondent raised in its prehearing
exchange.
III. Issues

At the prehearing conference, I identified the issues I will decide in this case, pursuant to
42 U.S.C. § 1320a-8, as follows:

1) Whether Respondent made false statements to SSA in relation to Respondent’s
claims for Disability Insurance Benefits and Supplemental Security Income and
withheld material information from SSA regarding Respondent’s work activity,
income, and resources between December 2007 and July 2012; and

2) If so, I will determine the appropriate civil monetary penalty, with consideration of
the SSA IG’s proposed penalty of $120,000 and the statutory factors in subsection
(c) of section 1129 of the Social Security Act and implementing regulations in
20 C.F.R. § 498.106.

November 19 Order at 2.
IV. Jurisdiction

Individuals against whom the SSA IG proposes to impose a CMP have a right to a formal
hearing on the record before the CMP is imposed. 42 U.S.C. § 1320a-8(b)(2).
Respondent filed a timely request for an ALJ hearing. 20 C.F.R. § 498.202. ALJs at the
Departmental Appeals Board adjudicate SSA CMP cases. See 20 C.F.R. § 498.201
(definition of ALJ); see also 20 C.F.R. §§ 498.202-498.220. Therefore, I have
jurisdiction to decide this case.

V. Findings of Fact, Conclusions of Law, and Analysis!
A person is subject to a CMP and assessment if he:

(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 VII 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

' My findings of fact and conclusions of law are set forth in italics and bold font.
(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.

42 U.S.C. § 1320a-8(a)(1).

The SSA IG has the burden of proving all facts in an SSA CMP case with the exception
of the affirmative defenses and mitigating circumstances raised by a respondent.

20 C.F.R. § 498.215(b). The standard of proof is a preponderance of the evidence.

20 C.F.R. § 498.215(c). An ALJ must ultimately “determine whether the respondent
should be found liable” for a CMP and/or assessment, and issue a decision in which he
“may affirm, deny, increase, or reduce the penalties or assessments proposed by the
Inspector General.” 20 C.F.R. §§ 498.215(a), 498.220(b).

A, Respondent stated to SSA in his December 17, 2007 SSI application, June
12, 2009 SSI application, and July 20, 2010 Review Statement Summary for
SSI that he had not been accused or convicted of a felony or an attempt to
commit a felony; however, Respondent had been arrested and/or convicted of
multiple felonies prior to the dates on which he made those statements to
SSA.

On December 17, 2007, Respondent filed applications for DIB and SSI. SSA Ex. 1.
Respondent indicated on the SSI application that he had “not been accused or convicted
of a felony or an attempt to commit a felony.” SSA Ex. | at 1-2.

On June 12, 2009, Respondent filed new applications for DIB and SSI. SSA Ex. 3 at 1.
Respondent again asserted on the SSI application that he had not been accused or
convicted of a felony or attempt to commit a felony. SSA Ex. 3 at 9.

On a July 20, 2010 Review Statement Summary for SSI, Respondent again stated that he
had not been accused or convicted of a felony or attempt to commit a felony. SSA Ex. 8
at 1.

In 2011, an SSA IG CDI unit commenced an investigation of Respondent that included a
check of law enforcement records. SSA Ex. 28 at 2. Ms. Tarango of the Kansas City
Police Department conducted the law enforcement records investigation. SSA Ex. 38 at
2. Ms. Tarango testified that her search included a review of the Regional Justice
Information Service (REJIS) law enforcement database and the Kansas Criminal Justice
Information System (KCJIS). SSA Ex. 38 at 2. She also obtained information from the
Sedgwick County Court Clerk and the Wichita Kansas Police Department Investigations
Unit. SSA Ex. 36 at 1.

Ms. Tarango testified that the KCJIS yielded 41 pages of Respondent’s arrest history with
information concerning the disposition for some of those charges. SSA Ex. 38 at 3; see
also SSA Ex. 17 at 7-15. Ms. Tarango testified that she verified that the information was
related to Respondent. SSA Ex. 38 at 2. She also testified that the information from the
KCIJIS is included in SSA Ex. 17. Further, Ms. Tarango testified that her investigation
yielded the following arrest and conviction history for Respondent:

1995 — sale of opiates, opium or narcotic drugs and no drug
tax stamp for marijuana or controlled substance (both felony
convictions — received a 24 month prison sentence)

2000 — arrest for felony possession of
depressants/stimulants/hallucinogenics/anabolic steroids
(dismissed without prejudice)

2003 — felony drug conviction (30 month prison sentence)

2008 — felony convictions for two counts of possession of
cocaine and for no tax stamp (record was closed in June of

2010)

2009 — arrested for felony conspiracy to sale of opiates,
opium, narcotic drugs (crack cocaine) ....D.A. declined
prosecution.

SSA Ex. 36 at 1-2.

Based on the evidence of record, I find that Respondent represented to SSA in 2007,
2009, and 2010 that he had not been arrested or convicted of a felony. I also find that
Respondent was arrested no less than five times for felony offenses and convicted no less
than three times from 1995 through 2009.

B. Respondent made or caused to made three statements or representations of
material fact related to his criminal history, for use in determining an initial
right to or amount of SSI benefits, that Respondent knew or should have
known were false or misleading in violation of 42 U.S.C. § 1320a-8(a)(1).
The SSA IG alleged that Respondent made three false or misleading statements of fact
material to his initial application for SSI related to his criminal record. Specifically, the
relevant statements that the SSA IG alleged as being false, located in the second, sixth,
and thirteenth bullets in the CMP notice, are:

e On [the December 17, 2007 SSI application,
Respondent] falsely stated that [Respondent] had not
been accused or convicted of a felony or an attempt to
commit a felony.

e On [the June 12, 2009 SSI application, Respondent]
falsely stated that [Respondent] had not been accused
or convicted of a felony when, in fact, [Respondent]
ad been arrested and/or charged with numerous
felonies beginning in at least 2005.

e On [the July 20, 2010] Review Summary [for SSI],
Respondent] falsely stated that as of June 1, 2009,
Respondent] had not been accused or convicted of a
felony.

SSA Ex. 24 at 1-2.

As found above, Respondent had been arrested for a felony five times by 2009 and
convicted of felonies three times by 2008, and denied those arrests and convictions on his
SSI applications and the Review Statement Summary for SSI. For the reasons stated
below, I conclude that information concerning felony arrests and convictions is material
to an SSI application and that Respondent knew or should have known his statements
were false.

A material fact for CMP purposes is one that SSA may consider in evaluating whether an
applicant is entitled to SSI benefits. 42 U.S.C. § 1320a-8(a)(2). In the present matter, the
question as to whether an individual applying for SSI is accused or convicted of a
criminal offense is a fact that SSA must consider before paying benefits.

The title of the section on the SSI applications and the Review Statement Summary for
SSI that included the question as to whether Respondent was accused or convicted of a
felony is: “Fugitive Felony and Parole or Probation Violation Information.” SSA Ex. 1
at 1; SSA Ex. 3 at 8; SSA Ex. 8 at 1. This title is used because individuals are ineligible
for SSI benefits for any time that the individual is fleeing to avoid prosecution or to avoid
confinement after being convicted of a felony. 20 C.F.R. § 416.1339(a). Further,
individuals who are residents of public institutions, which often include individuals
incarcerated in jails and prisons, are ineligible for SSI payments. 20 C.F.R. § 416.1325;
10

SSA Program Operations Manual System § S100520.009. It is significant that SSA paid
Respondent SSI benefits while he was incarcerated and that SSA later had to recover that
overpayment. SSA Ex. 22 at 2. Therefore, I conclude that Respondent’s answers
regarding his history of felony arrests and convictions involved material facts.

also conclude that Respondent knew or should have known that his statements were
false or misleading. Because Respondent was three times convicted of felony offenses,
there is no possible way that Respondent was not aware his answers on the SSI
applications and the Review Statement Summary for SSI were false. Further, each of
those documents provided a warning that Respondent was declaring under penalty of
perjury that all of the statements he made in the applications and the Review Statement
Summary for SSI were true and correct to the best of his knowledge, and that false or
misleading statements of material fact may result in penalties. SSA Ex. | at 2; SSA Ex. 3
at 9; SSA Ex. 8 at 3. Therefore, I conclude that Respondent is liable for a CMP based on
three violations of 42 U.S.C. § 1320a-8(a)(1)(A)-(B).

Respondent disputes the violations, asserting that SSA knew of Respondent’s criminal
record and accounted for this when determining his benefits, as can be seen in the July
26, 2010 Notice of Award for DIB. R. Ex. 3 at 1 (“We cannot pay you because you are
imprisoned for the conviction of a crime.”’). Respondent asserts that SSA’s knowledge of
is incarceration at the time SSA granted benefits means that he could not have violated
42 U.S.C. § 1320a-8. R. Br. at 3, 5. This argument is not correct because CMP liability
under 42 U.S.C. § 1320a-8(a)(1) does not include as an element of the offense that the
SSA IG must prove that SSA believed a respondent’s false statement or that SSA did not
now a respondent’s false statement was false. Therefore, the fact that SSA determined
correctly for DIB that Respondent was in prison despite Respondent’s false statement
only means that SSA exercised due diligence before paying Respondent benefits. It does
not exculpate Respondent. Finally, while SSA correctly withheld DIB from Respondent
while he was incarcerated (R. Ex. 3 at 1), SSA failed to withhold SSI benefits and later

ad to recover the funds overpaid Respondent while he was in prison. SSA Ex. 9; SSA
Ex. 33 at 2. SSA’s confusion may have risen in part from Respondent’s false statements
on his SSI applications and the Review Statement Summary for SSI.

Respondent also asserts that he has borderline intellectual functioning and thus could not

ave made knowing false statements. R. Br. at 2, 8; R. Ex. 2. Respondent has not met

is burden of proving this affirmative defense. The document Respondent submitted to
support this contention is primarily directed at a finding of depression. Other than
indicating the diagnosis of borderline intellectual functioning, there is no other discussion
of this or how this was specifically determined. Further, the diagnosis was made by a
social worker, and not a higher level medical professional. R. Ex. 2 at 3. Finally, there is
no other evidence in the record that would support Respondent’s inability to understand
the importance of truthfully reporting information to SSA. Although Respondent
indicates that his diagnosis of borderline intellectual functioning is significant, it does not

11

appear to have been mentioned as a severe impairment in the 2010 SSA ALJ decision
finding Respondent disabled, or in the 2013 decision of a hearing officer finding
Respondent not disabled. SSA Ex. 7 at 7; R. Ex. 9. Perhaps the diagnosis has only been
made subsequent to these decisions. If so, then there is nothing to support it except one
statement on the social worker’s report that Respondent submitted.

C. Respondent engaged in work activities related to an ice cream truck business
commencing no later than August 2011.

On March 5, 2007, Respondent purchased a 1986 white Chevrolet van with a vehicle
identification number (VIN) of 2GCEG25H0G4137190. When purchasing this vehicle,
Respondent gave his address as 1443 N Fairmount, Wichita, KS. R. Ex. 1.

On April 2, 2007, Sharron Griffin, Respondent’s former wife, filed an application for a
Food Safety License with the Kansas Department of Agriculture for a business named
Ice Cream and More. SSA Ex. 37 at 1. Ms. Griffin indicated that the address of the
business was 1443 N. Fairmount, Wichita, KS, the same address Respondent used when
buying the white van one month earlier. SSA Ex. 37 at 1. Ms. Griffin indicated that the
license was for an ice cream truck. SSA Ex. 37 at 2. Ms. Griffin filed renewal
applications for Ice Cream and More in 2008, 2011, 2012, and 2013, indicating on each
application that the address of the business was 1443 N. Fairmount, Wichita, KS. SSA
Exs. 19,37. In April 2012, Ms. Griffin obtained an Employer Identification Number
from the Internal Revenue Service for “Ice Cream Truck and More” located at 1443
Fairmount St., Wichita, KS. R. Ex. 4.

From August 2011 through July 2012, the SSA IG CDI unit investigated Respondent’s
work activity while receiving benefits. SSA Ex. 28 at 2. During that investigation,
Ms. Tarango from the Kansas City Police Department determined that Respondent was
the primary owner of the white van with the VIN of 2GCEG25H0G4137190, but that
Ms. Griffin was a secondary owner of it. SSA Ex. 17 at 3-4; see also SSA Ex. 38 at 2.
The registration for the van indicated an address of 1443 N. Fairmont Avenue Wichita,
KS. SSA Ex. 17 at 4. During this investigation, a local police officer took a picture of
the van’s license plate (Kansas 346APJ); visible in the picture are markings indicating
that it is an ice cream truck. SSA Ex. 17 at 4; SSA Ex. 28 at 6. Following the
completion of the investigation, Ms. Griffin purchased Respondent’s van on March 13,
2013, and retitled it in her name with an address of 1443 Fairmount St., Wichita, KS. R.
Ex. 5. Ms. Griffin also obtained insurance for the vehicle. R. Ex. 6.

On December 6, 2011, during the investigation, Respondent signed a statement in which
he said that he did not own a business and he has not worked since November 2007. R.
Ex. 7. Respondent asserted that:
12

A friend of mine, Shar[rJon Gri[ff]in, owns an ice cream
business. She owns the truck and drives around and sells ice
cream. ... I occasionally ride with her, maybe twice a
month, for maybe | hr. I do not have any involvement in the
business. On occasion I have put gas in the truck and
checked the oil. A couple of times I took some orders and
wrote them down.

R. Ex. 7 at 1. On this statement, Respondent gave 1443 N. Fairmount, Wichita, KS as his
address.

Consistent with this statement, Respondent disputes that he engaged in any work activity
for times relevant to the charges in this case. Respondent asserts that there is no evidence
that when Respondent purchased the van in 2007 it was an ice cream truck, thus making
the vehicle a personal vehicle and not a resource reportable on his SSI application. R. Br.
at 2,6. Respondent states that he bought a truck and Ms. Griffin owned a business. R.
Br at 6. Although the SSA IG provided evidence that Ms. Griffin works at another job,
Respondent argues that this does not foreclose her from owning her own business as well.
R. Br. at 7. Respondent also asserts that all of the SSA IG’s evidence of alleged work
activity related to August 2011 and later, which is after Respondent was approved for
benefits. R. Br. at 3. Respondent also avers that to the extent there was any work
activity, it was covered by a trial work period allowed under the Social Security Act. R.
Br. at 4. Finally, Respondent asserts that he has borderline intellectual functioning and
did not have sufficient understanding of any reporting requirements to knowingly make
false statements. R. Br. at 7-8; R. Ex. 2.

The SSA IG supports its charges that Respondent was operating an ice cream truck
business with an August 12, 2011 article, located on the internet from “nakedcity,” which
is a site apparently located at wichita.com. SSA Ex. 18. The article, entitled
“scrumptiously secret steals” is about a business called Ice Cream Truck & More, and
specifically identifies Respondent by name and describes the ice cream truck in question.
Significantly, it does not include Ms. Griffin’s name.

The ever-mobile Ice Cream Truck & More is painted a
neopolitan black, pink, and white, and laced with a shiny set
of chrome Polo 20” rims. Andre Watley, or “Ice Cream Dre”
to his friends, sells arguably the cheapest frozen treats in town
and even better, can bring it directly to your block party,
family reunion, or church function with a single phone call.
13

The truck is specially equipped to cook snacks like Hot
Wings ($4) and Texas Hot Links ($3.75). I love a good food
truck, and Ice Cream & More is truly legit. The giant hot
wings are spicy and fresh, served 4-5 to an order with a side
of ranch dressing, and were the clear winner at a house party I
recently attended.

And after most ice cream men hang their hats for the winter,
Dre will be cranking out Chili, Stew, Cocoa, and Coffee for
the cold weary. Give him a call; you will not regret his tasty,
entertaining and friendly visit.

SSA Ex. 18 at 2. The SSA IG has provided testimony that it obtained the article on the
internet. SSA Ex. 28 at 6-7; SSA Ex. 38 at 2.

I give weight to this article as evidence that Respondent was actively engaged in working
with Ice Cream Truck & More. The article has a photograph of Respondent sitting in the
ice cream truck. SSA Ex. 18 at 1. This photograph looks like Respondent. SSA Ex. 17
at 1. Further, the ice cream truck in the picture looks like Respondent’s ice cream truck.
SSA Ex. 17 at 2. In addition, the article not only accurately describes the appearance of
the ice cream truck, but also accurately describes information appearing on the side of the
truck, i.e., Ice Cream Truck & More can be reserved for “Reunions, Church Functions”
and that in addition to ice cream, “Hot Wings” are served. SSA Ex. 17 at 2.

I also find it significant that Ice Cream Truck & More provides hot food. The only job
that Respondent stated that he held in the 15 years preceding his 2007 SSI and DIB
applications was as a cook at BG Bolders from August 2005 through December 2006.
SSA Ex. 2 at 1-2; SSA Ex. 6. This work experience is consistent with the article in
describing Respondent’s ability to cook and serve hot food from the truck.

Further, I consider the uncontested testimony of several Wichita police officers to
significantly support the SSA IG’s charge related to Respondent’s alleged work activity
involving the ice cream truck. Officer Donald Moore testified that on August 26, 2011,
he was dispatched to a disturbance and, after arriving at the scene, observed Respondent
standing outside an ice cream truck with the license plate 346APJ. SSA Ex. 31 at 1.
Although the officer did not see Respondent sell food from the truck, he noticed chips
and candy in the ice cream truck and the officer “saw customers outside [the ice cream
truck] consuming and holding chips and candy that appeared to have been purchased
from the truck.” SSA Ex. 31 at 1-2; see also SSA Ex. 20 at 1-2.

14

Officer Ryan Tyrrell testified that on September 10, 2011, the concession manager at
Grove Park reported that an ice cream truck was operating in the park’s parking lot.
Officer Tyrrell responded and observed Respondent “selling ice cream and other treats
from a white and maroon conversion style van with Kansas tag number 346APJ.” SSA
Ex. 32 at 1. Officer Tyrrell asked Respondent to leave the area and Respondent drove the
ice cream truck away. SSA Ex. 32 at 1. Officer Tyrrell’s contemporaneous report of the
incident is consistent with his testimony; however, the report makes it clear that
Respondent “was observed selling ice cream and other treats to customers by himself. . .
and drove the . . . vehicle away; again alone in the vehicle.” SSA Ex. 20 at 4.

Officer Donielle Watson testified that in June 2013, he saw Respondent driving the ice
cream truck in a parade and handing out water bottles. SSA Ex. 30.

Therefore, based on the evidence of record, I find that Respondent engaged in work
activity related to the ice cream truck business commencing no later than August 2011.

D. Respondent made or caused to be made five statements or representations of
material fact related to his work activity, for use in determining a continuing
right to or amount of DIB benefits that Respondent knew or should have
known were false or misleading in violation of 42 U.S.C.

§ 1320a-8(a)(1).

The SSA IG alleged that Respondent made several false or misleading statements of fact
material to his continued receipt of DIB benefits related to his involvement with the Ice
Cream and More business. SSA Ex. 24 at 2. Specifically, the relevant statements that the
SSA IG alleged as being false, located in the twentieth through twenty-fourth bullets in
the CMP notice, are:

e On a Statement of Claimant or Other Person (SSA
Form 795) that [Respondent] signed on December 6,
2011, [Respondent] falsely stated that [Respondent]
did not own a business.

e On this statement, [Respondent] falsely stated that
Respondent] had not worked since November 2007.
Respondent] stated that [Respondent’s] friend Sharron
Griffin owned an ice cream business.

e [Respondent] falsely stated that [Ms. Griffin] owned
the ice cream truck for this business.
15

e [Respondent] falsely stated the [Respondent] drive[s]
around in the ice cream truck with [Ms. Griffin] only
about twice per month, for an hour.

e [Respondent] falsely stated that [Respondent] had no
involvement in this business.

SSA Ex. 24 at 2.

Based on the evidence of record, as summarized above, I conclude that the SSA IG has
proven the twentieth through twenty-fourth bulleted allegations in the CMP notice, and
that Respondent made five false or misleading statements of material fact. The record
reveals that Respondent does not occasionally ride in the ice cream truck with Ms.
Griffin, but rather has operated the Ice Cream and More truck on his own. SSA Exs. 18,
20, 30-32. In fact, Respondent has operated this truck enough times to have earned a
special name, “Ice Cream Dre” and to have an article written about him, with his
photograph, posted in a local online publication on August 12, 2011. SSA Ex. 18. In
2011, Respondent was the principal owner of the ice cream truck for the Ice Cream and
More business; Ms. Griffin only acquiring complete ownership in 2013. SSA Ex. 17 at 4;
R. Ex. 5.

A material fact is a fact that SSA may consider in evaluating whether an individual is
entitled to DIB benefits. 42 U.S.C. § 1320a-8(a)(2). Under this definition, Respondent’s
statements on December 6, 2011, are material because they involve the issue as to
whether Respondent engaged in work activities, an issue that SSA will always consider
when evaluating the entitlement to disability benefits.

To be found “disabled,” a claimant must not be able to engage in substantial gainful
activity (SGA) as that term is defined in SSA’s regulations. 42 U.S.C. § 423(d)(1)(A),
(d)(4)(A); 20 C.F.R. § 404.1505. Under the regulations, SGA “means work that...
[i]Jnvolves doing significant and productive physical or mental duties ... and... . is done
(or intended) for pay or profit. 20 C.F.R. § 404.1510. However, work activity may be
considered gainful “whether or not a profit is realized,” and work activity may be
substantial “‘even if it is done on a part-time basis or if you do less, get paid less, or have
less responsibility than when you worked before.” 20 C.F.R. § 404.1572(a)-(b). This is
why, “[e]ven if the work you have done was not [SGA], it may show that you are able to
do more work than you actually did. [SSA] will consider all of the medical and
vocational evidence . . . to decide whether or not you have the ability to engage in
[SGA].” 20 C.F.R. § 404.1571 (emphasis added).

also conclude that Respondent knew or should have known that his statements were
false or misleading. Respondent made this statement on an SSA form that provides the
following directly above his signature:

16

I declare under penalty of perjury that I have examined all the
information on this form . . . 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 information, 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. 13 at 2; R. Ex. 7 at 2.

Respondent has asserted that he has borderline intellectual functioning and thus could not
have made knowing false statements. R. Br. at 2, 8; R. Ex. 2. As addressed previously,
this argument is not sufficiently supported to prove this affirmative defense.

Respondent also argues that any work activity he might have engaged in would not
subject him to sanction because he is eligible for a trial work period. R. Br. at 4. “The
trial work period is a period during which you may test your ability to work and still be
considered disabled.” 20 C.F.R. § 404.1592. However, regardless as to whether
Respondent’s work activity, as detailed above, could be considered part of a trial work
period, 42 U.S.C. § 1320a-8(a)(1) still prohibited him from falsely stating to SSA that he
did not engage in work activity when he did. Interestingly, Respondent submitted a
February 27, 2012 notice from SSA regarding the results of his continuing disability
review in which SSA states: “The evidence shows that you have not worked in any trial
work months.” R. Ex. 8 at 1. This notice describes what a trial work period is. R. Ex. 8
at 3-4. However, the notice also states that Respondent must promptly report any
changes that may affect his benefits, specifically stating: “Let us know if: [y]ou returned
to work since your last report or you return to work in the future (no matter how little you
earn).” R. Ex. 8 at 1. Respondent not only did not report his work activity, he actively
denied it existed. Therefore, for the reasons stated above, I conclude that Respondent
violated 42 U.S.C. § 1320a-8(a)(1) five times based on the contents of his December 6,
2011 statement to SSA regarding his work activity.

E. Respondent stated to SSA in his December 17, 2007 SSI application, June
12, 2009 SSI Application, and July 20, 2010 Review Statement Summary for
SSI that he did not have any resources; however, from March 2007 until
March 2013 Respondent owned a 1986 Chevrolet van.

On December 17, 2007, Respondent filed applications for DIB and SSL. SSA Ex. 1.
Respondent indicated on the SSI application that: “I do not own any type of resource.”
SSA Ex. | at 2.
17

On June 12, 2009, Respondent filed new applications for DIB and SSI. SSA Ex. 3 at 1.
Respondent again asserted on the SSI application that: “I do not own any type of
resource.” SSA Ex. 3 at 9.

On a July 20, 2010 Review Statement Summary for SSI, Respondent again stated that: “I
do not own any type of resource.” SSA Ex. 8 at 3.

On March 5, 2007, Respondent purchased a 1986 Chevrolet van with the VIN of
2GCEG25H0G4137190 for $800. R. Ex. 1. A title for this vehicle was issued on April
26, 2007. SSA Ex. 17 at 3-4. State records show that Respondent was the primary owner
of the vehicle and Ms. Griffin was the secondary owner. SSA Ex. 17 at 4; see also SSA
Ex. 38. On March 13, 2013, Ms. Griffin purchased the van and applied to have the van
retitled in her name. R. Ex. 5.

F. Respondent made or caused to made three statements or representations of
material fact related to the resources he possessed, for use in determining an
initial right to or amount of SSI benefits, that Respondent knew or should
have known was false or misleading in violation of 42 U.S.C. § 1320a-
8(a)(1).

The SSA IG alleged that Respondent made three false or misleading statements of fact
material to his initial application for SSI related to the resources he possessed.
Specifically, the relevant statements that the SSA IG alleged as being false, located in the
first, fifth, and twelfth bullets in the CMP notice, are:

e In an application for [SSI] payments that [Respondent]
completed and attested to on December 17, 2007,
Respondent] falsely stated that [Respondent] had no
resources even though [Respondent was] the primary
owner of a truck that [Respondent] used for
Respondent’s] ice cream business.

e On this application, [Respondent] falsely stated that
Respondent] owned no resources when [Respondent]
in fact owned a truck purchased in 2007 that
Respondent] used for [Respondent’s] ice cream
business.

e On [the July 20, 2010] Review Summary [for SSI],
Respondent] falsely stated that [Respondent] owned
no resources.

SSA Ex. 24 at 1-2.
18

As found above, Respondent purchased a van in March of 2007, several months before he
filed the December 17, 2007 SSI application. Further, he possessed that vehicle until
well after the July 20, 2010 Review Statement Summary for SSI.

A material fact for CMP purposes is one that SSA may consider in evaluating whether an
applicant is entitled to SSI benefits. 42 U.S.C. § 1320a-8(a)(2). In the present matter, the
question as to whether an applicant for SSI has any resources is an important matter that
SSA must consider before paying benefits. 20 C.F.R. § 416.202(c) (in order to be
eligible for SSA, an individual must “not have more resources than permitted.”). For
purposes of SSI, “resources means cash or other liquid assets or any real or personal
property that an individual . . . owns and could convert to cash to be used for his or her
support and maintenance.” 20 C.F.R. § 416.1201(a).

There is no doubt that Respondent’s van, which he purchased for $800 in 2007, could
have been sold for cash. Therefore, the van was a resource.

Respondent argues that Respondent did not need to inform SSA of his van because the
van was not a significant resource, was his personal vehicle, and SSI recipients may own
avehicle. R. Br. at 2. Although it is true that SSI recipients may generally own one
vehicle for transportation purposes and that this will not be counted as a resource (20
C.F.R. § 416.1218), Respondent still needed to disclose the ownership of the vehicle so
that SSA, and not Respondent, could determine whether the vehicle qualified for the
regulatory exclusion from being a resource. 20 C.F.R. § 416.1210 (indicating that SSA
determines resources for an SSI applicant and providing a list of items that SSA excludes
from being counted as resources). In the present case, Respondent’s van was used for
business purposes by at least 2011, and, as discussed in the next paragraph, quite possibly
before that time. Respondent’s false statement that he did not have any resources
foreclosed SSA from inquiring as to the purpose for the van. Therefore, I conclude that
Respondent falsely stated three times that he did not have resources and that these false
statements were material facts.

I also conclude that Respondent knew or should have known that his statements were
false or misleading. Respondent purchased the van less than a year before he filed his
December 2007 SSI application. This van appears to be Respondent’s primary asset. At
some point, it became Respondent’s source of employment. It is possible that the van
was purchased in order to provide Respondent with employment, because Ms. Griffin
applied for an ice cream truck license from the state within a month of Respondent’s
purchase of the van. Compare R. Ex. 1 with SSA Ex. 37 at 1. When asked whether he
ad any resources, it is not reasonable to conclude that Respondent did not believe that
is primary asset was not a potential resource. Thus, Respondent knew or should have
nown his statement was false. Therefore, I conclude that Respondent is liable for a
CMP based on three violations of 42 U.S.C. § 1320a-8(a)(1).

19

G. I conclude that the SSA IG has not proven 13 of the 24 allegations of false or
misleading statements in the CMP notice.

The SSA IG has the burden of proving its allegations by a preponderance of the evidence.
In addition to the 11 allegations of false statements discussed above, the SSA IG alleged
13 other false statements.

I. The SSA IG did not prove by a preponderance of the evidence that
Respondent engaged in work activities before 2011.

The SSA IG alleged false statements regarding Respondent’s work activities and income
before 2011 from both the ice cream truck business and as a drug dealer. SSA Ex. 24 at
1-2 (third, fourth, seventh, eleventh, seventeenth, eighteenth, and nineteenth bullets).

As found above, the SSA IG’s direct evidence regarding Respondent’s work activities is
limited to the 2011 article concerning the Ice Cream and More business and observations
made in 2011 and 2013 by local police officers. Although the SSA IG has shown that
Ms. Griffin (an individual whom Respondent had been married to and has lived with
during times relevant to this case) applied for a business license for Ice Cream and More
shortly after Respondent purchased the van that would become Ice Cream and More’s ice
cream truck, this evidence, while suggestive, is insufficient to prove that Respondent
actually engaged in work activity from 2007 through 2011. This is especially so given
the lack of license renewals for Ice Cream and More in 2009 and 2010 and Respondent’s
incarceration in 2009 and 2010.” R. Br. at 3; R. Ex. 3 at 1; see also SSA Ex. 36 at 2; SSA
Ex. 37.

I am also unable to find that a preponderance of the evidence supports the conclusion that
Respondent engaged in work activity as a seller of illegal drugs. No doubt Respondent
has been convicted previously for possession of illegal drugs (SSA Exs. 17, 36);
however, I cannot find that possession violations prove work activity. Further, while
Respondent was arrested on a charge of selling drugs, this charge was dropped. SSA Ex.
36 at 2. Therefore, this charge is not proof that Respondent sold illegal drugs.

> ‘The SSA IG indicates that Respondent failed to properly provide documents about his
work activity in response to a discovery request. SSA Ex. 26. The SSA IG asserts that
“had Respondent submitted requested evidence, such as information about the truck route
and times travelled, as he was legally required to do (see 20 CFR § 498.203(a)(3)
granting both parties the right to conduct discovery) [the SSA IG] would have been able
to establish exact dates and times of Respondent’s work activity.” SSA Reply Br. at 4.
However, the SSA IG did not file a motion for sanctions against Respondent. See

20 C.F.R. § 498.214(b)(1) (providing certain sanction for a refusal to permit or provide
discovery).
20

2. The SSA IG did not prove by a preponderance of the evidence that
Respondent’s functional capabilities before 2011 were greater than he
asserted to SSA.

The SSA IG alleged false statements concerning Respondent’s functional abilities from
before 2011. SSA Ex. 24 at 2 (eighth, ninth, and tenth bullets). I cannot find that a
preponderance of the evidence supports a finding that proves Respondent’s functional
capabilities were greater than he alleged in documents submitted before 2011 or in
statements he made to an SSA ALJ before 2011. There is simply no evidence in the
record, medical or otherwise, that proves Respondent was lying about his functional
capabilities before 2011. Indeed, an SSA ALJ concluded the following after holding a
hearing in Respondent’s SSI and DIB case in 2010: “I find [Respondent’s] allegations
[of his physical capabilities] to be credible and consistent with the record as a whole.”
SSA Ex. 7 at 7. Even the May 31, 2013 determination by a hearing officer to uphold
SSA’s decision to cease Respondent’s DIB acknowledged Respondent’s impairments and
indicated that he could have periods of time where he is better and worse.

An evaluation of the medical evidence establishes
Respondent] has a physical impairment that would limit him
vocationally. This impairment, Lupus, is well-documented
with a longitudinal history. Lupus is also an impairment that
as periods of exacerbations. [Respondent] has also been
diagnosed with Lupus nephritis, hypertension, and obesity.
However, at this time, the severity of the impairments
including exacerbations and the alleged functional limitations
are not fully supported by the medical evidence. . . . It is
medically reasonable that the impairment of Lupus would
limit [Respondent’s] ability to stand and walk and lift and
carry. However, his impairment has been stable for sometime
... and he appears much more active tha[n] he reports.

R. Ex. 9 at 4.

Respondent’s proven health condition makes it impossible, with the record before me, to
conclude that Respondent’s functional limitations before 2011 were falsely reported by
him.

3. The SSA IG did not prove by a preponderance of the evidence that
Respondent made false statements on a Continuing Disability Report

allegedly completed on December 7, 2011.

The SSA IG alleged the following false statements by Respondent:
21

e Ona Continuing Disability Review Report (SSA Form
454-BK) that you completed and attested to on
December 7, 2011, [Respondent] falsely stated that
[Respondent] had not worked since November 1, 2007.

e On this Report, [Respondent] stated that a typical day
consisted of only watching television and sitting
outside. [Respondent] stated that [Respondent]
sometimes needed a walker.

¢ On this form, [Respondent] indicated that
[Respondent] had difficulty dressing, bathing, walking,
standing, lifting objects, driving and using
[Respondent’s] arms.

SSA Ex. 24 at 2 (fourteenth through sixteenth bullets).

I cannot find that Respondent made false statements related to a Continuing Disability
Report that Respondent allegedly completed and attested to on December 7, 2011. The
only document in the record that appears to relate to the SSA IG’s allegations is SSA Ex.
12. However, there is no date or signature on this document. There is no attestation by
Respondent as alleged. I cannot be certain that SSA Ex. 12 is the document the SSA IG
references in the CMP notice. Further, although Agent Guilford’s testimony and
investigation report reflect concerns over false statements made by Respondent on the
December 6, 2011 Statement of Claimant or Other Person (Form SSA-795), which has
been discussed above, he does not mention a December 7, 2011 Continuing Disability
Report. SSA Ex. 21 at 4, 11; SSA Ex. 28 at 3. Because there is no other evidence in the
record, to explain this ambiguous document or support the allegations quoted above, I
cannot conclude that the SSA IG has proven these allegations.

H. The I.G.’s proposed CMP of $5,000 per false statement is permissible and
reasonable.

The SSA IG proposed the imposition of a $5,000 CMP for each of the 24 alleged false
statements enumerated in the CMP notice.> SSA Ex. 24 at 4. Because I have sustained
11 of the alleged false statements in the CMP notice, I must now consider the

reasonableness of the proposed penalty amount based on applicable statutory
requirements.

> The SSA IG only proposes in its CMP notice a $120,000 penalty and does seek an
assessment in lieu of damages. SSA Ex. 24; see also SSA Br. at 20 n.33; November 19
Order at 2.
22

As a general parameter, a CMP may not be more than $5,000 for each false statement or
misrepresentation of a material fact. 42 U.S.C. § 1320a-8(a)(1). Therefore, Respondent
is potentially subject to a maximum CMP amount of $55,000 for the 11 false or
misleading statements proven above.

In addition to establishing the maximum CMP amount that may be imposed, the statute
requires that the following factors be taken into account when determining the actual
amount of the CMP:

(1) the nature of the statements, representations, or actions
referred to in [42 U.S.C. § 1320a-8(a)] 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.
42 U.S.C. § 1320a-8(c); see also 20 C.F.R. § 498.106(a).

1. The nature and circumstances of Respondent’s misconduct.
In regard to the first factor, the SSA IG has stated the following:

[Respondent] has made a deliberate effort to mislead SSA.
He made false statements on SSI applications in 2007 and
2009 about his resource (the ice cream truck) and felony
history ... . He received about $36,000.00 in DIB and SSI as
a result of his false statements and misrepresentations.

SSA Br. at 21. Respondent does not appear to provide an argument regarding this factor
except to state that Respondent “is a person with a severe medical condition.” R. Br. at 8.

Although the record reflects that Respondent suffers from several severe medical
conditions, Respondent’s medical condition does not mitigate his misconduct. SSA Ex.
7; R. Ex. 10. From the beginning of his interaction with SSA, i.e., Respondent’s SSI
application in 2007, Respondent lied to SSA. He affirmatively stated he was not accused
or convicted of a felony and that he did not own any resources. SSA Ex. | at 2. He
repeated these lies in his 2009 SSI application and on the Review Statement Summary for
SSI in 2010. SSA Ex. 3 at 9; SSA Ex. 8 at 1,3. Although SSA learned of Respondent’s
incarceration and did not pay him DIB, it still accidently paid him SSI benefits while he
was in prison; benefits that SSA later had to recover. SSA Ex. 33 at 2; R. Ex. 3 at 3; see
23

also SSA Ex. 9. However, it is clear that Respondent did not and would not have
informed SSA of his incarceration on his own.

Respondent’s lies related to his ownership of a van might have a connection to his later
lies about his work activity. As found above, Respondent has engaged in work activity
related to an ice cream truck business since at least 2011. Although there was insufficient
evidence proving that work activity occurred before 2011, there are certainly indications
that this business may have been started in conjunction with Ms. Griffin as early as 2007,
the year Respondent first applied for DIB and SSI. See SSA Ex. 37; R. Ex. 1.
Respondent has asserted in this proceeding that there is no proof that Respondent
purchased an ice cream truck or proof of when it was converted to an ice cream truck.
That is certainly true, but based on the significant evidence of work activity in 2011
related to his van (which had been converted to an ice cream truck by that time), his lies
concerning a lack of resources seem likely to have been an attempt to hide the ice cream
truck business from as early as 2007.

Such a conclusion is not unwarranted. The record is clear that, in 2011, Respondent was
engaged in providing food services from an ice cream truck equipped to cook some hot
food dishes. SSA Exs. 18, 31, 32. Serving as a cook was Respondent’s past vocation and
one that he could do again. SSA Ex. 2 at 1-2; SSA Ex. 6 at 1-2. However, despite this
evidence of significant work activity while SSA was conducting a continuing disability
review of Respondent, Respondent provided a statement under penalty of perjury where
almost every one of his assertions denied involvement in the ice cream truck business.
SSA Ex. 13 at 1.

Respondent has an arrest record 41 pages long and is a felon multiple times over. His
defense in this case to most of the alleged false statements has simply been that the SSA
IG has not met its burden of proof. As discussed earlier, this is true for many allegations
and I have only upheld the allegations that a preponderance of the evidence in the record
supports. However, the SSA IG’s lack of proof is in some measure likely attributable to
Respondent’s efforts to mislead SSA.

2. Respondent’s level of culpability, prior offenses, and financial
condition.

The second factor includes three parts. The SSA IG considered each of these in its CMP
notice.

i. Respondent’s level of culpability

The SSA IG stated the following regarding culpability:
24

I have considered the degree of your culpability in this
offense and conclude that it is substantial. You have made
numerous false statements to SSA during your application
process, appeals process and post-eligibility review. You
have lied not only about your work activity, but also about
other factors affecting your eligibility as noted above. There
is no indication you would ever have reported your work
activity and income to SSA unless and until you were caught.

Your degree of

SSA Ex. 24 at 3-4.

culpability is substantial.

Respondent’s argument related to culpability appears to be that he has been diagnosed
with borderline intellectual functioning. R. Br. at 8. However, as already indicated
above, there is insufficient evidence in the record to support a finding that such a

limitation on his intellectual
his actions.

I agree with the SSA IG that
only worked at the ice cream

‘unctioning is severe enough to preclude responsibility for

Respondent’s culpability is substantial. Respondent not
truck business while receiving disability benefits, but was

interviewed for an article in order to promote the business. SSA Ex. 18. While the
record in this case is limited regarding matters before 2011, it is sufficient for me to

surmise that Respondent worl

ed in tandem with Ms. Griffin concerning this business,

perhaps in an effort to avoid SSA learning of his work activity. He clearly lied on the

statement he made to SSA in

December 2011 related to his involvement in the ice cream

truck business. Further, Respondent overtly lied to SSA multiple times about his

extensive criminal record. T

ere is no possible way that Respondent did not do this

knowingly with the intent to mislead SSA.

ti. Respondent’s prior Social Security offenses

I agree with the SSA IG that there is no evidence in the record that Respondent
committed a previous offense related to SSA programs. SSA Ex. 24 at 4.

iii. Respondent’s financial condition

The SSA IG addressed the issue of Respondent’s financial condition as follows:

SSA-OIG considered [Respondent’s] financial condition. It
is important to note that [Respondent] bears the burden of
proving by a preponderance of the evidence that his financial
condition would prevent him from being able to pay the
penalty imposed against him... .
25

Respondent] failed to submit a financial disclosure form to
SSA-OIG to consider. Because SSA-OIG was unable to
serve an initial CMP letter to [Respondent] which would have
allowed him to submit financial information for consideration
prior to issuing a proposed penalty, in this case, SSA-OIG’s
notice still offered [Respondent] an opportunity to submit
financial information so that it could consider and revise the
proposed penalty, if appropriate. To date, [Respondent]
failed to provide any financial information. Even after
making a request for discovery and requesting financial
information, [Respondent] indicated he had no debts, no
expenses, and no bank accounts. Perhaps he has no expenses,
but on July 28, 2010, [Respondent] requested that SSA
directly deposit his DIB benefits into a bank account, thus
leading OIG to presume he does, despite his assertion to the
contrary (SSA Ex. 26, p. 3) in fact have a bank account, at
least as of July 2010. Without financial information to
consider, SSA-OIG proposes the maximum penalty. . .

SSA Br at 22-23. In response, Respondent only asserts that he has provided financial
information with his discovery response and baldly states that “fining him at the
maximum penalty would have severe financial consequences.” R. Br. at 8.

I agree with the SSA IG’s argument that Respondent has failed to meet his burden of
proving that his financial condition should serve as a mitigating factor regarding the
amount of the penalty to be imposed. Respondent provided no evidence concerning his
financial condition. Respondent did not even submit a declaration related to that issue.
Finally, due to the reduced number of false statements proven in this case, the potential
maximum total penalty has been reduced from $120,000 to $55,000. To the extent that a
$120,000 penalty would have caused “severe financial consequences,” there is no reason
to believe that a greatly reduced amount would as well.

3. Other matters as justice may require.

In the CMP notice, the SSA IG “considered the fact that [Respondent] ha[s] a lengthy
criminal history. I am not aware of additional factors.” SSA Ex. 24 at 4. Respondent
has not raised any other factors.

I agree with the SSA IG that Respondent has been a criminal throughout his adult life.
He is still only in his early 40’s and may come in contact with SSA or other government
programs for years to come. A high penalty must be imposed to deter future fraudulent
acts.
26

4. A CMP of $55,000 is reasonable.

The SSA IG proposed to penalize Respondent at the maximum rate of $5,000 per false
statement. Based on the analysis above, I conclude that the SSA IG’s proposal is
reasonable and supported by the statutory factors that must be considered when
determining such a penalty. Therefore, a total penalty of $55,000 is appropriate.

Order

Based on the evidence of record, and consistent with my findings of fact and conclusions
of law, I hereby order the following:

1. Respondent is LIABLE to pay a CMP under 42 U.S.C. § 1320a-8(a)(1) for
knowingly making 11 false statements of material fact to SSA;

2. The I.G.’s proposed CMP of $5,000 per false statement is AFFIRMED; and

3. Respondent is directed to pay a total of $55,000 in the manner specified by the
SSA IG in his CMP notice (SSA Ex. 24 at 4) or in any other manner prescribed by
the SSA IG following the issuance of this decision.

/s/
Scott Anderson
Administrative Law Judge


Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,

Complainant,

Vv.

7 Days Grocery, LLC / Shedid F. Shedid
d/b/a 7 Days Grocery,

Respondent.

Docket No. C-15-923

FDA No.

FDA-2015-H-0119

Decision No. CR3708

Date:

INITIAL DECISION

The Center for Tobacco Products (CTP)

March 11, 2015

AND DEFAULT JUDGMENT

began this matter by serving an administrative

complaint on Respondent, 7 Days Grocery, LLC / Shedid F. Shedid d/b/a 7 Days

Grocery, at 4565 Durant Avenue, North

Charleston, South Carolina 29405, and by filing

a copy of the complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. The complaint alleges that 7 Days Grocery impermissibly sold

cigarettes to minors and failed to verify,

by means of photo identification containing a

date of birth, that a tobacco purchaser was 18 years of age or older, thereby violating the
Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its

implementing regulations, Cigarettes an

Smokeless Tobacco, 21 C.F.R. pt. 1140 (2013).

CTP seeks to impose a $500 civil money penalty against 7 Days Grocery.

As provided for in 21 C.F.R. §§ 17.5 and 17.7, on January 15, 2015, CTP served the
complaint on Respondent 7 Days Grocery by United Parcel Service. In the complaint
and accompanying cover letter, CTP explained that, within 30 days, Respondent should
pay the penalty, file an answer, or request an extension of time in which to file an answer.
CTP warned Respondent that, if it failed to take one of these actions within 30 days, the
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering it to pay the full amount of the proposed penalty.

Respondent 7 Days Grocery has neither filed an answer within the time prescribed, nor
requested an extension of time within which to file an answer. Pursuant to 21 C.F.R.

§ 17.11, Lassume that the facts alleged in the complaint (but not its conclusory
statements) are true. Specifically:

¢ On March 11, 2014, at 4:36 p.m., at Respondent’s business establishment, 4565
Durant Avenue, North Charleston, South Carolina 29405, an FDA-commissioned
inspector observed that a person younger than 18 years of age was able to
purchase a package of Newport Box 100s cigarettes. The inspector also
documented that staff failed to verify, by means of photographic identification
containing a date of birth, that the purchaser was 18 years of age or older;

e Ina warning letter dated May 15, 2014, CTP informed Respondent of the
inspector’s March 11, 2014 observations, and that such actions violate federal
laws, 21 C.F.R. §§ 1140.14(a) and 1140.14(b)(1). The letter further warned that
Respondent’s failure to correct the violations could result in a civil money penalty
or other regulatory action;

e At approximately 7:55 a.m. on July 22, 2014, at Respondent’s business
establishment, 4565 Durant Avenue, North Charleston, South Carolina 29405,
FDA-commissioned inspectors observed that a person younger than 18 years of
age was able to purchase a package of Newport Box 100s cigarettes. The
inspector also documented that staff failed to verify, by means of photographic
identification containing a date of birth, that the purchaser was 18 years of age or
older.

These facts establish Respondent 7 Days Grocery’s liability under the Act. The Act
prohibits misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is
misbranded if sold or distributed in violation of regulations issued under section 906(d)
of the Act. 21 U.S.C. § 387f(d); see 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b).
The Secretary of the U.S. Department of Health and Human Services issued the
regulations at 21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1;
see 21 U.S.C. § 387£(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The
regulations prohibit the sale of cigarettes to any person younger than 18 years of age. 21
C.F.R. § 1140.14(a). The regulations also require retailers to verify, by means of photo
identification containing a purchaser’s date of birth, that no cigarette purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1).

A $500 civil money penalty is permissible under 21 C.F.R. § 17.2.
Order

For these reasons, I enter default judgment in the amount of $500 against Respondent
7 Days Grocery, LLC / Shedid F. Shedid d/b/a 7 Days Grocery. Pursuant to 21 C.F.R.
§ 17.11(b), this order becomes final and binding upon both parties after 30 days of the
date of its issuance.

/s/
Catherine Ravinski
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

STEBPC, LLC
d/b/a Blue Plate Cafe,

Respondent.

Docket No. C-15-695
FDA Docket No. FDA-2014-H-2218

Decision No. CR3707

Date: March 11, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, STEBPC, LLC d/b/a Blue Plate Cafe that alleges facts and legal
authority sufficient to justify the imposition of a civil money penalty of $2,000.
Respondent did not answer the Complaint, nor did Respondent request an extension of
time within which to file an answer. Therefore, I enter a default judgment against
Respondent and assess a civil money penalty of $2,000.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly utilized a vending
machine to sell regulated tobacco products in a non-exempt facility, and offered tobacco
products for sale using false or misleading advertising,
thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et
seq., and its implementing regulations, Cigarettes and Smokeless Tobacco, 21 C.F.R. pt.
1140 (2013). CTP seeks a civil money penalty of $2,000.

On January 14, 2015, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Blue Plate Cafe, an establishment that sells tobacco products
and is located at 180 Woodford Avenue, Plainville, Connecticut 06062.
Complaint § 3.

e CTP previously initiated a civil money penalty action, CRD Docket Number C-13-
963, FDA Docket Number FDA-2013-H-0802, against Respondent for two
violations of 21 C.F.R. pt. 1140 within a 12-month period. Specifically, on April
25, 2012, and December 17, 2012 the Respondent utilized a vending machine in a
non-exempt facility. On April 25, 2012 and on December 17, 2012, Respondent
offered tobacco products for sale through a vending machine using false or
misleading advertising. Complaint ¥ 10; July 5, 2013 Complaint 1, 10.

e The previous action concluded when, on August 27, 2013, an Administrative Law
Judge issued an Initial Decision and Default Judgment finding Respondent liable
for the violations. That Initial Decision became final and binding on the parties on
September 26, 2013. Complaint ¥ 11.

e During a subsequent inspection of Respondent’s establishment conducted on June
5, 2014 at an unspecified time, FDA-commissioned inspectors documented a
violation for selling misbranded tobacco products through a vending machine.

Specifically the inspectors noted the establishment has a vending machine with
“selection buttons “[s]election buttons marked ‘Marlboro Light’ and ‘Marlboro
Light 100s.’” However, the “cigarettes stocked to correspond to with the
“Marlboro Light’ and ‘Marlboro Light 100s’ button are not labeled as such.”
Complaint § 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). A tobacco
product is also misbranded under section 903 of the Acct if its labeling is false or
misleading in any particular or if it is offered for sale and its advertising is false or
misleading in any particular. 21 U.S.C. § 387c(a)(1) and (a)(7)(A). The Secretary of the
U.S. Department of Health and Human Services issued the regulations at 21 C.F.R.

pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C. § 387£(d)(1);
75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations require retailers to sell
cigarettes or smokeless tobacco exclusively in a direct, face-to-face exchange without the
assistance of any mechanical device in a facility that does not ensure that no person
younger than 18 years of age is present or permitted to enter, at any time. 21 C.F.R.

§ 1140.14(c).

Taking the above alleged facts as true, on April 23, 2012 and again on December 17,
2012, Respondent impermissibly maintained a vending machine in a facility that allows
minors to enter, in violation of 21 C.F.R. § 1140.14(c). On those same dates as well as
on June 5, 2014, Respondent violated the prohibition against offering tobacco products
for sale using false or misleading advertising, 21 U.S.C. § 387c, when it sold cigarette
packages that did not correspond to their labels on the vending machine and contained the
labels “light.”

CTP has requested a civil fine of $2,000, which is a permissible fine under the
regulations. 21 C.F.R. § 17.2. Therefore, I find that a civil penalty of $2,000 is
warranted and so order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Center for Tobacco Products,
Complainant
v.

Shane F. Baker
d/b/a Average Joe’s,

Respondent.

Docket No. C-15-909
FDA Docket No. FDA-2015-H-0108

Decision No. CR3706

Date: March 11, 2015

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) filed an Administrative Complaint (Complaint)
against Respondent, Shane F. Baker d/b/a Average Joe’s that alleges facts and legal
authority sufficient to justify the imposition of a civil money penalty of $250.
Respondent did not answer the Complaint, nor did Respondent request an extension of
time within which to file an answer. Therefore, I enter a default judgment against
Respondent and assess a civil money penalty of $250.

CTP began this case by serving the Complaint on Respondent and filing a copy of the
Complaint with the Food and Drug Administration’s (FDA) Division of Dockets
Management. The Complaint alleges that Respondent impermissibly sold cigarettes to
minors, thereby violating the Federal Food, Drug, and Cosmetic Act (Act), 21 U.S.C.
§ 301 et seq., and its implementing regulations, Cigarettes and Smokeless Tobacco,

21 C.F.R. pt. 1140 (2013). CTP seeks a civil money penalty of $250.
On January 16, 2015, CTP served the Complaint on Respondent by United Parcel
Service, pursuant to 21 C.F.R. §§ 17.5 and 17.7. In the Complaint and accompanying
cover letter, CTP explained that within 30 days, Respondent should pay the proposed
penalty, file an answer, or request an extension of time within which to file an answer.
CTP warned Respondent that if it failed to take one of these actions within 30 days, an
Administrative Law Judge could, pursuant to 21 C.F.R. § 17.11, issue an initial decision
ordering Respondent to pay the full amount of the proposed penalty.

Respondent has not filed an answer within the time provided by regulation, nor has it
requested an extension. Pursuant to 21 C.F.R. § 17.11(a), 1 am required to “assume the
facts alleged in the [C]omplaint to be true” and, if those facts establish liability under the
Act, issue a default judgment and impose a civil money penalty. Accordingly, I must
determine whether the allegations in the Complaint establish violations of the Act.

Specifically, CTP alleges the following facts in its Complaint:

e Respondent owns Average Joe’s, an establishment that sells tobacco products and
is located at 311 North Highway 39, Miller, Missouri 65707. Complaint § 3.

e During an inspection of Respondent’s establishment on December 31, 2013, at
approximately 2:08 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Pall Mall Red
cigarettes .. . [.]” Complaint § 10.

¢ On March 27, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observation from December 31, 2013. The letter explained that the
observations constituted violation of the regulation found at 21 C.F.R.
§ 1140.14(a), and that the named violation was not necessarily intended to be an
exhaustive list of all violations at the establishment. The Warning Letter went on
to state that if Respondent failed to correct the violation, regulatory action by the
FDA or a civil money penalty action could occur and that Respondent is
responsible for complying with the law. Complaint § 10.

e Although United Parcel Service records indicate that “GH” received the Warning
Letter on March 28, 2014, the FDA did not receive a response. Complaint § 11.

e During a subsequent inspection of Respondent’s establishment on June 5, 2014, at
approximately 1:51 PM, FDA-commissioned inspectors documented that “a
person younger than 18 years of age was able to purchase a package of Pall Mall
Red cigarettes... [.]” Complaint { 1.

These facts establish that Respondent is liable under the Act. The Act prohibits
misbranding of a tobacco product. 21 U.S.C. § 331(k). A tobacco product is misbranded
if distributed or offered for sale in any state in violation of regulations issued under
section 906(d) of the Act. 21 U.S.C. § 387c(a)(7)(B); 21 C.F.R. § 1140.1(b). The
Secretary of the U.S. Department of Health and Human Services issued the regulations at
21 C.F.R. pt. 1140 under section 906(d) of the Act. 21 U.S.C. § 387a-1; see 21 U.S.C.

§ 387f(d)(1); 75 Fed. Reg. 13,225, 13,229 (Mar. 19, 2010). The regulations prohibit the
sale of cigarettes to any person younger than 18 years of age. 21 C.F.R. § 1140.14(a).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
cigarettes to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on December
31, 2013, and June 5, 2014. Therefore, Respondent’s actions constitute a violation of law
that merits a civil money penalty.

CTP has requested a fine of $250, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $250 is warranted and so
order one imposed.

/s/
Steven T. Kessel
Administrative Law Judge