Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division

Derilyn Serrano-Bernacet
(O.I File No. 2-11-4-0532-9),

Petitioner,
v.

The Inspector General,
Department of Health and Human Services.

Docket No. C-15-3476
Decision No. CR4517

Date: February 1, 2016

DECISION

Petitioner, Derilyn Serrano-Bernacet, is excluded from participation in Medicare,
Medicaid, and all federal health care programs pursuant to section 1128(a)(3) of the
Social Security Act (Act) (42 U.S.C. § 1320a-7(a)(3)), effective May 20, 2015.
Petitioner’s exclusion for the minimum period of five years is required by section
1128(c)(3)(B) of the Act (42 U.S.C. § 1320a-7(c)(3)(B)).!

I. Background

The Inspector General (I.G.) notified Petitioner by letter dated April 30, 2015, that she
was being excluded from participation in Medicare, Medicaid, and all federal health care
programs for five years. The L.G. cited section 1128(a)(3) of the Act as the basis for
Petitioner’s exclusion and stated that the exclusion was based on her conviction in the
United States District Court for the District of Puerto Rico (District Court) of a criminal

' Pursuant to 42 C.F.R. § 1001.3001, Petitioner may apply for reinstatement only after
the period of exclusion expires. Reinstatement is not automatic upon completion of the
period of exclusion.
offense related to fraud, theft, embezzlement, breach of fiduciary responsibility or other
financial misconduct in connection with the delivery of a health care item or service.

Petitioner filed a request for hearing (RFH) dated June 30, 2015. The case was assigned
to me on August 13, 2015, for hearing and decision. A prehearing telephone conference
was convened on September 3, 2015. The substance of the conference is memorialized in
my Order to Show Cause, Prehearing Conference Order, and Schedule for Filing Briefs
and Documentary Evidence dated September 9, 2015 (Prehearing Order).

The LG. filed a motion for summary judgment and supporting brief (I.G. Br.) on October
6, 2015, with LG. exhibits (Exs.) 1 through 3. Petitioner did not object to my
consideration of I.G. Exs. | through 3 and they are admitted as evidence. The I.G. failed
to file a copy of the April 30, 2015 notice of exclusion as an I.G. exhibit as required by
my Prehearing Order ¥ 7. The I.G. is required by 42 C.F.R. § 1001.2003(a)’ to give an
individual or entity to be excluded proper notice. Whether or not Petitioner has a right to
hearing, whether or not I have jurisdiction, and whether or not the I.G. may proceed with
the exclusion action are all dependent upon whether Petitioner was properly notified by
the I.G. The I.G. has the burden under 42 C.F.R. § 1005.15(c) and paragraph 7 of my
Prehearing Order to establish that proper notice was given. In this case, Petitioner has
raised no issue related to the sufficiency of the April 30, 2015 notice. Petitioner filed two
pages of the April 30, 2015 notice with her request for hearing and as an exhibit.
Therefore, I conclude that there is no issue to be resolved regarding the sufficiency of the
notice Petitioner received, and there is no prejudice due to the I.G.’s failure to comply
with the Prehearing Order by filing the notice of exclusion as evidence. Counsel for the
1.G. is admonished, however, to ensure careful compliance with the Prehearing Order in
the future.

Petitioner filed two documents in response to the I.G. motion for summary judgment, one
titled “Petitioner’s Opposition to Motion for Summary Judgment” (P. Opp.) and the other
titled “Opposition to Motion for Summary Judgment” (P. Br.)* on November 20, 2015.
Petitioner also filed three exhibits marked “EXIBIT I,” “EXHIBIT II,” and “EXHIBIT
Ill” (DAB E-File Item # 14c). Petitioner failed to mark and number the pages of the
exhibits as required by Civil Remedies Division Procedures (CRDP) § 14. Rather than
reject the documents, | treat them as being marked as follows:

> References are to the 2014 revision of the Code of Federal Regulations (C.F.R.), unless
otherwise stated.

> Departmental Appeals Board Electronic Filing System (DAB E-File) Items # 14 and
14a, respectively.
P. Ex. 1: “EXIBIT I,” a four-page document containing the judgment the District
Court entered against Petitioner, which is also I.G. Ex. 1.

P. Ex. 2: “EXHIBIT II,” two pages of the April 30, 2015 notice letter the I.G. sent
to Petitioner providing her notice of the proposed exclusion.

P. Ex. 3: “EXHIBIT IIL,” the last page of the I.G.’s notice letter informing
Petitioner of the limitations an exclusion imposes on her.

The L.G. has not objected to my consideration of P. Exs. 1 through 3 and they are
admitted as evidence. On December 7, 2015, the LG. filed a reply brief.

II. Discussion
A. Applicable Law

Section 1128(f) of the Act (42 U.S.C. § 1320a-7(f)) establishes Petitioner’s rights to a
hearing by an administrative law judge (ALJ) and judicial review of the final action of
the Secretary of Health and Human Services (the Secretary).

Pursuant to section 1128(a)(3) of the Act, the Secretary must exclude from participation
in any federal health care program:

Any individual or entity that has been convicted for an
offense which occurred after... [August 21, 1996], under
Federal or State law, in connection with the delivery of a
health care item or service or with respect to any act or
omission in a health care program (other than those
specifically described in [section 1128(a)(1)]) operated by or
financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting of a
felony relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.

The Secretary has promulgated regulations implementing these provisions of the Act. 42
C.F.R. § 1001.101(c).

Pursuant to section 1128(i) of the Act, an individual is convicted of a criminal offense
when: (1) a judgment of conviction has been entered by a federal, state, or local court
whether or not an appeal is pending or the record has been expunged; (2) there is a
finding of guilt in a court; (3) a plea of guilty or no contest is accepted by a court; or (4)
the individual has entered into any arrangement or program where judgment of
conviction has been withheld. 42 U.S.C. § 1320a-7(i)(1)-(4); 42 C.F.R. § 1001.2.
Section 1128(c)(3)(B) of the Act provides that an exclusion imposed under section
1128(a) of the Act will be for a period of not less than five years. 42 C.F.R.

§ 1001.102(a). The Secretary has published regulations that establish aggravating factors
the I.G. may consider to extend the period of exclusion beyond the minimum five-year
period, as well as mitigating factors that may be considered only if the I.G. proposes to
impose an exclusion greater than five years. 42 C.F.R. § 1001.102(b), (c).

The standard of proof is a preponderance of the evidence, and there may be no collateral
attack of the conviction that provides the basis of the exclusion. 42 C.F.R.
§ 1001.2007(c), (d). Petitioner bears the burden of proof and the burden of persuasion on

any affirmative defenses or mitigating factors, and the I.G. bears the burden on all other
issues. 42 C.F.R. § 1005.15(b), (c).

B. Issues
The Secretary has by regulation limited my scope of review to two issues:

Whether the I.G. has a basis for excluding Petitioner from participation in
Medicare, Medicaid, and all federal health care programs; and

Whether the length of the proposed period of exclusion is unreasonable.
42 C.F.R. § 1001.2007(a)(1).
If, as in this case, the I.G. imposes the minimum authorized five-year period of exclusion
under section 1128(a) of the Act, there is no issue as to whether the period of exclusion is
unreasonable. 42 C.F.R. § 1001.2007(a)(2).

C. Findings of Fact, Conclusions of Law, and Analysis

My conclusions of law are set forth in bold followed by the pertinent findings of fact and
analysis.

1. Petitioner’s request for hearing was timely and I have jurisdiction.
2. Summary judgment is appropriate in this case.

The L.G. informed Petitioner by letter dated April 30, 2015, that the I.G. was excluding
Petitioner effective 20 days from the date of the letter. P. Ex. 2 at 1. Petitioner requested
a hearing by letter dated June 30, 2015. The Civil Remedies Division received
Petitioner’s request for hearing on July 7, 2015, via U.S. Mail. The LG. has not offered
evidence that he personally served Petitioner with the notice of exclusion. In the absence
of evidence of personal service, Petitioner is presumed to have received the notice of
exclusion on May 5, 2015, and Petitioner states that she did in fact receive the notice of
exclusion on May 5, 2015. 42 C.F.R. § 1005.2(c); RFH at 1. Petitioner had 60 days from
the date she received the notice of exclusion to request a hearing, or Saturday, July 4,
2015, a federal holiday. 42 C.F.R. § 1005.2(c). Therefore, Petitioner had until the next
business day, July 6, 2015, to file her request for hearing. CRDP § 11. Because
Petitioner filed her request for hearing via regular U.S. Mail and the Civil Remedies
Division received it on July 7, 2015, I infer that Petitioner filed her hearing request
timely, consistent with the date Petitioner’s counsel certified he filed it. RFH at 4. I
conclude, that Petitioner’s request for hearing was timely, and I have jurisdiction
pursuant to section 1128(f) of the Act and 42 C.F.R. pt. 1005.

Pursuant to section 1128(f) of the Act, a person subject to exclusion has a right to
reasonable notice and an opportunity for a hearing. The Secretary has provided by
regulation that a sanctioned party has the right to hearing before an ALJ. Pursuant to 42
C.F.R. § 1005.15(a), Petitioner is entitled to a “hearing on the record.” Both the
sanctioned party and the LG. have a right to participate in the hearing. 42 C.F.R.

§§ 1005.2-.3. Either or both parties may choose to waive appearance at an oral hearing
and to submit only documentary evidence and written argument for my consideration.
42 CFR. § 1005.6(b)(5).

Petitioner did not appear during the prehearing conference and did not waive the right to
appear at an oral hearing. In her opposition to the motion for summary judgment,
Petitioner stated that she “opposes the [I.G.’s] Motion for Summary Judgment and moves
for a remedy as a matter of law, on the record, since there are no issues of fact to be
decided.” P. Opp. at 1. I interpret Petitioner’s statement to be a concession that there are
no genuine disputes of material fact that require an oral hearing and that only issues of
law are presented for decision. However, Petitioner has not unambiguously waived an
oral hearing in writing. Therefore, I evaluate whether summary judgment is appropriate
in this case.

Summary judgment is appropriate, and no hearing is required, where either: there are no
genuine disputes of material fact and the only questions that must be decided involve
application of law to the undisputed facts; or, the moving party prevails as a matter of law
even if all disputed facts are resolved in favor of the party against whom the motion is
made. A party opposing summary judgment must allege facts which, if true, would
refute the facts relied upon by the moving party. Deciding a case on summary judgment
differs from deciding a case on the merits after a hearing. An ALJ does not assess
credibility or weigh conflicting evidence when deciding a case on summary judgment.
Bartley Healthcare Nursing and Rehab., DAB No. 2539 at 3-4 (2013); Senior Rehab. &
Skilled Nursing Ctr., DAB No. 2300 at 3 (2010); Holy Cross Village at Notre Dame, Inc.,
DAB No. 2291 at 5 (2009); see Fed. R. Civ. Pro. 56.
Petitioner does not dispute that: she was convicted within the meaning of section 1128(i)
of the Act; she pled guilty to and was convicted of felony misbranding and adulterating
prescription medications with intent to mislead and defraud; her criminal offense was
related to fraud; and the offense for which she was convicted occurred after August 21,
1996. RFH at 1; P. Br. at 2. Petitioner argues that her exclusion violates the District
Court’s judgment; is vague and overbroad; and constitutes double jeopardy. The issues
that Petitioner raises are issues that must be resolved against her as a matter of law. I
conclude that summary judgment is appropriate as there are no genuine disputes as to any
material facts related to the elements for an exclusion pursuant to section 1128(a)(3) of
the Act. The LG. prevails as a matter of law on the issue of whether there is a basis for
exclusion based on the facts conceded by Petitioner. The five-year period of exclusion is
not unreasonable as a matter of law because the period is the minimum authorized by
Congress for exclusion pursuant to section 1128(a) of the Act. Petitioner’s defenses are
unavailing as matters of law.

3. Petitioner’s exclusion is required by section 1128(a)(3) of the Act.
a. Facts

On February 26, 2014, a 14-count indictment was filed against Petitioner
and three other individuals in the District Court. Petitioner was charged
with six counts of health care fraud in violation of 18 U.S.C. §§ 2 and 1347;
one count of conspiracy to commit health care fraud in violation of 18
U.S.C. §§ 1347 and 1349; and five counts of misbranding prescription
medications with intent to mislead and defraud in violation of 21 U.S.C.

§§ 331(k); 333(a)(2); 351(a)(2)(A)-(B); and 352(a), (b), and (0). I.G. Ex. 2
at 8, 13, 16-17; LG. Ex. 3 at 8.

Petitioner entered into a plea agreement with the United States Attorney on July 11, 2014.
The agreement provided that Petitioner would plead guilty to Count Ten of the
indictment, which alleged misbranding and adulterating prescription medications with
intent to mislead and defraud. I.G. Ex. 3 at 1. Petitioner stipulated as part of her plea
agreement that on or about April 11, 2011, she and others aiding and abetting each other:

cause[d] drugs known as Levalbuterol and Budenoside to
become misbranded and adulterated by among other:

(1) Bearing labeling that was false and misleading in any
particular in violation of 21 U.S.C. §352(a);

(2) Failing to bear a label containing the name and place of
business of the manufacturer, packer, and distributor in
violation of Title 21 U.S.C. §352(b);

(3) Being manufactured, prepared, propagated, compounded,
and processed in an establishment not duly registered with
FDA in violation of Title 21 U.S.C. §352(0));

(4) Being prepared, packed, and held under insanitary
conditions whereby they may have been contaminated with
filth and may have been rendered injurious to health in
violation of 21 U.S.C. §351(a)(2)(A);

(5) Employing methods used in, and facilities and controls
used for, their manufacture, packing, storage, and installation
that did not conform with the current good manufacturing
practices established by Title 21 U.S.C. §351(a)(2)(B);

All in violation of Title 21, United States Code, Sections
331(k), 333(a)(2), 351(a)(2)(A) and (B), 352(a), (b), 352(0)
and Title 18, United States Code, Section 2.

LG. Ex. 3 at 8.

On November 24, 2014, Petitioner entered a guilty plea in the District Court to Count
Ten of the indictment. The District Court accepted Petitioner’s guilty plea to
misbranding and adulterating prescription medications with intent to mislead and defraud
in violation of 21 U.S.C. §§ 331(k), 333(a)(2), 351(a)(2)(A) and (B), and 352(a),(b) and
(o). The District Court entered a judgment of conviction against Petitioner and sentenced
her to two years of probation and a $100 assessment. I.G. Ex. 1.

b. Analysis

The LG. cites section 1128(a)(3) of the Act as the basis for Petitioner’s mandatory
exclusion. The statute provides:

(a) MANDATORY EXCLUSION.—The Secretary shall
exclude the following individuals and entities from
participation in any Federal health care program (as defined
in section 1128B(f)):

(3) Felony Conviction Relating to Health Care Fraud. — Any
individual or entity that has been convicted for an offense
which occurred after the date of the enactment of the Health
Insurance Portability and Accountability Act of 1996, under
Federal or State law, in connection with the delivery of a
health care item or service or with respect to any act or
omission in a health care program (other than those
specifically described in paragraph (1)) operated by or
financed in whole or in part by any Federal, State, or local
government agency, of a criminal offense consisting of a
felony relating to fraud, theft, embezzlement, breach of
fiduciary responsibility, or other financial misconduct.

Act § 1128(a)(3) (emphasis added). The statute requires that the Secretary exclude from
participation any individual or entity: (1) who was convicted for an offense under federal
or state law; (2) whose offense occurred after August 21, 1996 (the date of enactment of
the Health Insurance Portability and Accountability Act of 1996); (3) whose offense was
committed in connection with the delivery of a health care item or service; (4) whose
crime was a felony offense; and (5) whose offense was related to fraud, theft,
embezzlement, breach of fiduciary responsibility, or other financial misconduct.

All the elements for exclusion under section 1128(a)(3) of the Act are satisfied in this
case. Petitioner does not dispute that she was convicted of a criminal offense within the
meaning of section 1128(i) of the Act (42 U.S.C. § 1320a-7(i)). RFH; P. Br. at 2.
Petitioner’s guilty plea was accepted and she was found guilty based on her plea. The
District Court issued a judgment of conviction and sentenced Petitioner for the offense
for which she was convicted. I conclude that Petitioner was convicted of a criminal
offense within the meaning of section 1128(i) of the Act.

The statute requires that Petitioner be excluded if she was convicted of a felony criminal
offense that occurred after August 21, 1996, related to fraud, theft, embezzlement, breach
of fiduciary responsibility, or other financial misconduct in connection with the delivery
of a health care item or service. Act § 1128(a)(3). Petitioner does not dispute that she
pled guilty to and was convicted of a felony criminal offense under federal law. I.G. Exs.
3 at 1; 1 at 1. Petitioner does not contest that her offense occurred after August 21, 1996.
.G. Ex. 1 at 1. Petitioner does not contest that her offense related to fraud. Count Ten,
to which Petitioner pled guilty, alleges specifically that Petitioner had the “intent to
mislead and defraud.” 1.G. Exs. 3 at 1; 2 at 16. Finally, Petitioner does not dispute that
er felony offense was committed in connection with the delivery of a health care item or
service. Count Ten specifically alleged that the misbranded or adulterated prescription of
Budenosonide was dispensed to a Medicare Beneficiary with the initials A.L. I.G. Ex. 2
at 16. The nexus between Petitioner’s offense and the delivery of a health care item or
service is plain.

Petitioner argues that the exclusion runs contrary to the District Court’s order that as part
of her probation Petitioner remain employed. P. Br. at 4-5. As part of the “Standard
Conditions of Supervision,” the District Court ordered Petitioner to “support his or her
dependents and meet other family responsibilities” and “work regularly at a lawful
occupation, unless excused by the probation officer for schooling, training, or other
acceptable reasons.” I.G. Ex. | at 2 §§ 4-5. Petitioner argues that because of the broad
nature of the exclusion, Petitioner’s ability to support her family will be impeded should
the exclusion remain in place without any modification.’ P. Br. at 2. Petitioner’s
argument is without merit. The fact that Petitioner cannot participate in any capacity in
the Medicare program, Medicaid program, and all state health care programs as defined
in Section 1128B(f) of the Act, in no way prevents her from supporting her family by
engaging in other lawful occupations. P. Ex. 2 at 1. The District Court did not specify
that Petitioner support her family as a pharmacy technician. While excluded, Petitioner
is free to obtain any employment whatsoever, as long as it does not violate the terms of
her exclusion by causing her to participate in the Medicare program, Medicaid program,
or any state health care programs as defined in Section 1128B(f) of the Act. Therefore,
the exclusion does not conflict with the District Court judgment.

Petitioner argues that the exclusion is vague and overbroad, and thereby violates her due
process rights because it does not notify her of the conduct it prohibits. P. Br. at 5-8. She
asserts that “the Office of the Inspector General’s interpretation and enforcement of the
law must be consistent with the Court’s judgment, and rational and consistent with the
statute.” P. Br. at 7. Petitioner’s argument verges on frivolity. The April 30, 2015 notice
of exclusion (P. Ex. 2) and its attachment (P. Ex. 3) are detailed and absolutely clear in
describing the exclusion, its basis, and its scope.° Petitioner and her counsel cannot
credibly claim ignorance or confusion about the fact that she has been excluded, why she
has been excluded, or the scope and effect of the exclusion. The I.G. action and notice is
based on and consistent with the clear direction of Congress. Section 1128(a) of the Act
requires that the Secretary exclude an individual convicted of an offense within the scope
of section 1128(a)(3), except when the limited circumstances exist that give the Secretary
discretion to grant a waiver under section 1128(c)(3)(B) — circumstances which do not
exist in this case. Congress mandates exclusion for a minimum of five years. Act

§ 1128(c)(3)(B). Congress also mandates that exclusion be from any federal health care
program as defined in section 1128B(f) of the Act. Section 1128B(f) defines federal
health care program as:

* Petitioner’s counsel appears to have confused the Petitioner in this matter with another
party. Petitioner is described as ‘“‘a licensed pharmacist in Puerto Rico. He has worked
all his life as such in a pharmacy in a small rural community (Utuado).” P. Br. at 4-5.
Elsewhere, Petitioner is referred to as “Ms. Derilyn Serrano Bernacet.” P. Br. at 1. The
indictment states that Petitioner is a female pharmacy technician. I.G. Ex. 2 at 8, 10.

> To the extent Petitioner has further questions about the scope of her exclusion, the IG.
has provided additional guidance in its UPDATED Special Advisory Bulletin on the Effect
of Exclusion from Participation in Federal Health Care Programs, available at:
http://oig.hhs.gov/exclusions/files/sab-05092013.pdf.

10

(1) any plan or program that provides health benefits, whether
directly, through insurance, or otherwise, which is funded
directly, in whole or in part, by the United States Government
(other than the health insurance program under chapter 89 of
title 5 United States Code); or

(2) any State health care program, as defined in section
1128(h).

Act § 1128B(f). Section 1128(h) of the Act includes any state plan or program that is
approved or receives federal funds under title V, XIX, XX, XXI of the Act.

Furthermore, I have no authority to find the provisions of the Act or regulations
unconstitutionally vague or overbroad. Susan Malady, R.N., DAB No. 1816 (2002); 42
C.F.R. § 1005.4(c)(1). While I must interpret the Act and the Secretary’s regulations in a
manner consistent with Constitutional principles, Petitioner does not ask me to interpret
the term “exclusion” and the scope of exclusion specified by Congress, but rather, asks
that I invalidate the exclusion itself or somehow compel the Inspector General to interpret
the term in a certain manner. Petitioner does not request relief that 1 am empowered to
grant.

Finally, Petitioner argues that her exclusion constitutes double jeopardy because the
exclusion is a second punishment from the government that “rises upon the federal court
judgment” and “carries with it” criminal sanctions. P. Br. at 8-10. Petitioner is in error.
Exclusion under section 1128 of the Act is not a criminal penalty. It is well-settled that
1.G. exclusions pursuant to section 1128 of the Act are civil sanctions designed to protect
the beneficiaries of health care programs and are remedial in nature.° I.G. exclusions
thus do not trigger double jeopardy, since they are primarily remedial and not punitive.
Manocchio v. Kusserow, 961 F.2d 1539, 1542-43 (11th Cir. 1992); Greene v. Sullivan,
731 F.Supp. 838 (E.D. Tenn. 1990); cf: Patel v. Thompson, 319 F.3d 1317 (11th Cir.

° Congress enacted the exclusion provisions to serve two purposes: the protection of
federal funds and program beneficiaries from untrustworthy individuals; and the
deterrence of health care fraud. S. REP. NO. 109, 100th Cong., Ist Sess. 1-2 (1987),
reprinted in 1987 U.S.C.C.A.N. 682, 686 (noting “clear and strong deterrent”); Joann
Fletcher Cash, DAB No. 1725, at 18 (2000) (discussing trustworthiness and deterrence).
When Congress added section 1128(a)(3) in 1996, it again focused upon the deterrent
effect of exclusions: “greater deterrence was needed to protect the Medicare program
from providers who have been convicted of health care fraud felonies... .” H.R. REP.
496(1), 104th Cong., 2nd Sess. (1996), reprinted in 1996 U.S.C.C.A.N. 1865, 1886.
11

2003), cert. denied, 539 U.S. 959 (2003) (finding exclusions present no ex post facto
problem because they are remedial, not punitive).

Accordingly, I conclude that the elements of section 1128(a)(3) of the Act are satisfied,
including the required nexus between Petitioner’s criminal offense and the delivery of a
health care item or service. Therefore, I conclude that there is a basis for Petitioner’s
exclusion pursuant to section 1128(a)(3) of the Act and that her exclusion is required.

4. Five years is the minimum authorized period of exclusion pursuant
to section 1128(a)(3) of the Act.

5. Petitioner’s exclusion for five years is not unreasonable as a matter
of law.

I have concluded that there is a basis to exclude Petitioner pursuant to section 1128(a)(3)
of the Act. Therefore, Petitioner must be excluded for a minimum period of five years
pursuant to section 1128(c)(3)(B) of the Act.

Exclusion is effective 20 days from the date of the I.G.’s notice of exclusion to the
affected individual or entity. 42 C.F.R. § 1001.2002(b).

II. Conclusion
For the foregoing reasons, Petitioner is excluded from participation in Medicare,

Medicaid, and all federal health care programs for the minimum statutory period of five
years, effective May 20, 2015.

/s/
Keith W. Sickendick
Administrative Law Judge


Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD

Civil Remedies Division
Laura Leyva,
(OI File No. M-14-40037-9),
Petitioner,
v.

The Inspector General.
Docket No. C-15-3181
Decision No. CR4516

Date: January 29, 2016

DECISION

I sustain the determination of the Inspector General (I.G.) to exclude Petitioner, Laura
Leyva, from participating in Medicare, Medicaid, and all other federally funded health
care programs for a period of at least 10 years.

I. Background

The I.G. excluded Petitioner for a 10-year minimum period based on her conviction of a
criminal offense that falls within the reach of section 1128(a)(1) of the Social Security
Act (Act) and on the alleged presence of evidence relating to three aggravating factors
identified at 42 C.F.R. § 1001.102, which governs the length of exclusions imposed
pursuant to section 1128(a)(1) of the Act. Petitioner did not contest the I.G.’s authority to
exclude her but challenged the length of the exclusion. Petitioner asserts that her
exclusion should be reduced to the five-year minimum period that is mandated for
exclusions imposed pursuant to section 1128(a)(1). See Act § 1128(c)(3)(B).

The LG. filed a brief and a reply brief, and five proposed exhibits, identified as 1.G. Ex. 1
- LG. Ex. 5. Petitioner did not oppose my receiving any of the I.G.’s proposed exhibits
and I receive them into the record. Petitioner filed a brief and seven proposed exhibits,
identified as P. Ex. 1 - P. Ex. 7. The LG. objected to my receiving most of these exhibits
on the ground that they are incomplete, irrelevant, or both. I overrule the I.G.’s
objections and receive P. Ex. | - P. Ex. 7 into evidence. I find these exhibits to be
relevant to the issue of the Petitioner’s trustworthiness to provide care, or, if not relevant,
I find their admission not to be prejudicial to the I.G.

Neither side offered testimony and, therefore, I decide the case based on the parties’
written exchanges of evidence and arguments.

IL. Issue, Findings of Fact and Conclusions of Law
A. Issue

The issue is whether a 10-year exclusion is reasonable.
B. Findings of Fact and Conclusions of Law

Section 1128(a)(1) of the Act mandates the I.G. to exclude any individual who is
convicted of a criminal offense related to the delivery of an item or service under
Medicare or a state Medicaid program. The minimum exclusion that must be imposed
against anyone convicted of such a crime is five years. Act § 1128(c)(3)(B).

Petitioner was convicted of a section 1128(a)(1) crime. She pled guilty in a Florida
federal district court to the crimes of conspiracy to commit health care fraud and
conspiracy to commit money laundering. I.G. Ex. 4. Specifically, Petitioner pled guilty
to engaging in a conspiracy that began in around June 2007 and that continued through
November 2009 involving other individuals and two companies in which Petitioner
served as president and in other executive capacities. I.G. Ex. 2 at 8-10. That conspiracy
involved a number of specific enabling acts, including: filing false Medicare claims;
causing patient recruiters to be paid for obtaining personal health care information of
Medicare beneficiaries in order for false claims to be submitted to Medicare; and paying
co-conspirators in exchange for falsified medical records for the purpose of falsely
claiming reimbursement from Medicare. Jd. at 11-12.

The LG. asserts that the evidence warrants exclusion for at least 10 years. According to
the I.G. the evidence establishes the presence of three aggravating factors that, pursuant
to applicable regulations, justifies lengthening the period of Petitioner’s exclusion. The
LG. asserts that these alleged aggravating factors consist of the following:

e The acts resulting in Petitioner’s conviction caused a financial loss to a
government program of $5,000 or more. 42 C.F.R. § 1001.102(b)(1). As
supporting evidence the LG. cites the fact that the sentencing court ordered
Petitioner to pay restitution to the Centers for Medicare & Medicaid Services
(CMS), the agency that administers the Medicare program, in an amount in excess
of $200,000. IG. Ex. 4 at 5.

e The acts resulting in Petitioner’s conviction were committed over a period of one
year or more. 42 C.F.R. § 1001.102(b)(2). The LG. asserts that Petitioner pled
guilty to a conspiracy that included acts extending over a period of more than two
years, from June 2007 to November 2009. I.G. Ex. 4 at 1.

e Petitioner was sentenced to a period of incarceration. 42 C.F.R. § 1001.102(b)(5).
Here, the LG. relies on Petitioner’s sentence that included time served in prison
from the date of her arrest until the date of her sentencing plus eight months of
home detention. I.G. Ex. 4 at 2, 4.

The evidence offered by the I.G. overwhelmingly establishes the presence of three

aggravating factors. Petitioner asserts, however, that the evidence, when viewed in its
entirety, either does not establish the presence of aggravating factors or shows that her
crimes are far less significant than the LG. alleges.

The gravamen of Petitioner’s argument is that she was at most a bit player in the
conspiracy. She contends that she realized no personal financial benefit from the crimes,
that these crimes were the brainchild of, and executed by, other persons, and that her only
offense was to destroy some documents related to the conspiracy when she realized that
she and her companies were under investigation. These minimal crimes, according to
Petitioner, were of so little significance that the judge who sentenced her essentially
found her to be without culpability. See P. Ex. | at 5-6.

But, while it may be true that Petitioner’s role in the conspiracy was minor, she
nonetheless was a participant in that conspiracy and by participating she participated in a
scheme to defraud Medicare. That is made evident by her guilty plea. She explicitly
pleaded guilty to involvement in a two-year conspiracy to defraud the program. She
cannot now retract that plea and assert that she is actually not guilty of her admitted
crime. See 42 C.F.R. § 1001.2007(d) (prohibiting collateral attack, on substantive or
procedural grounds, of an underlying criminal conviction serving as the basis for the
exclusion.).

Moreover, the impact of her participation in that conspiracy was not, as she claims,

de minimis. Destruction of documents in order to obstruct a criminal investigation is a
serious crime. By her own admission Petitioner willfully impeded an investigation,
obviously seeking to protect herself and others from the reach of the law. Furthermore,
although the sentencing judge found Petitioner to be less culpable than others she also
clearly found that Petitioner’s crimes were serious. That is reflected both in the amount
of the restitution to CMS that Petitioner was sentenced to pay — more than $200,000 —
and in the fact that Petitioner was sentenced to a fairly lengthy period of incarceration.

The regulations do not establish a formula for deciding the length of exclusions. The
aggravating and mitigating factors established by the regulations function as rules of
evidence. Evidence that relates to an aggravating or mitigating factor is relevant.
Evidence that does not relate to one of these factors is not relevant and may not be
considered. Ultimately, the question that is to be determined in weighing evidence that
does relate to an aggravating or mitigating factor is: what does that evidence say about an
individual’s trustworthiness to provide care to program beneficiaries and to deal with
program funds?

Here, the evidence as to aggravation is persuasive proof that Petitioner is not trustworthy.
Her participation in a criminal conspiracy, the financial impact of her crime, and the fact
that the trial judge sentenced her to incarceration, persuades me that she is not an
individual who is a good risk to deal with program monies or beneficiaries. An exclusion
of 10 years is not unreasonable given this evidence.

Petitioner points to other evidence, which she says offsets the evidence relevant to the
aggravating factors. She asserts, first, that she should be given credit for her cooperation
with prosecuting authorities. Cooperation can be a mitigating factor but only where it
leads to the conviction of others or to other specific administrative actions. 42 C.F.R.

§ 1001.102(c)(3). Petitioner did not prove that whatever cooperation she may have
offered led to any of the requisite outcomes. Therefore, her assertion that her cooperation
should be considered in mitigation is irrelevant.

Petitioner has offered also a number of statements from associates and other individuals
attesting to her character and her good works. These statements are also irrelevant
because they do not relate to any mitigating factor.

/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.
Del Prado Gas and Food Mart LLC / Sunoco,
Respondent.

Docket No. C-15-3449
FDA No. FDA-2015-H-2632

Decision No. CR4515

Date: January 29, 2016

INITIAL DECISION AND DEFAULT JUDGMENT

The Center for Tobacco Products (CTP) initiated a $500 civil money penalty (CMP)
action against Respondent for unlawfully selling cigarettes to minors, on two occasions,
and failing to verify, by means of photo identification containing a date of birth, that the
purchasers were 18 years of age or older, on two occasions, in violation of the Federal
Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing
regulations, 21 C.F.R. pt. 1140. During the hearing process, Respondent failed to comply
with a judicial direction regarding CTP’s discovery request. I therefore strike
Respondent’s answer and issue this decision of default judgment.

I. Procedural History

Respondent timely answered CTP’s complaint opposing the CMP and requested a
hearing. I issued an Acknowledgement and Prehearing Order (APHO) that set deadlines
for parties’ submissions, including the September 28, 2015 deadline to request that the
opposing party provide copies of documents relevant to this case. Additionally, the
APHO stated that a party receiving such a request must provide the requested documents
no later than 30 days after the request.

CTP served Respondent with its request for documents on September 28, 2015. On
November 9, 2015, CTP filed a motion to compel discovery indicating that Respondent
did not respond to its request for production of documents. See 21 C.F.R. § 17.23(a). On
November 9, 2015, CTP also filed a motion to extend the deadlines. Pursuant to my
direction, a November 12, 2015 letter allowed Respondent until November 27, 2015 to
file an objection to CTP’s motion to compel discovery. The November 12, 2015 letter
also extended the parties’ pre-hearing exchange deadlines.

On December 1, 2015, I issued an Order that granted CTP’s motion to compel discovery.
I noted that Respondent had not filed a response to CTP’s motion to compel discovery.
In that Order, I stated that Respondent shall comply with CTP’s request for production of
documents by December 16, 2015. I further stated that:

Failure to do so may result in sanctions, including the issuance of an Initial
Decision and Default Judgment finding Respondent liable for the violations
listed in the Complaint and imposing a civil money penalty. CTP shall file
a status report by December 22, 2015, informing me of whether it is
seeking sanctions.

Emphasis removed.

On December 18, 2015, CTP filed an updated status report advising me that Respondent
had not complied with my December 1, 2015 Order. On December 18, 2015, CTP also
filed a motion to impose sanctions that asked me to strike the Respondent’s answer and
issue a default judgment in this case.

Il. Striking Respondent’s Answer

Respondent failed to file a response to CTP’s motion to compel discovery, and to comply
with the December 1, 2015 Order compelling discovery responses to be provided by
December 16, 2015. Respondent did not comply with CTP’s discovery requests.
Respondent has not made any contact with this Court since August 21, 2015, the date
Respondent timely filed its answer. Respondent’s failure to effectively prosecute and
defend actions taken over the course of the proceedings have interfered with the orderly
and speedy processing of this case, further warranting imposition of sanctions. See

21 C.F.R. § 17.35(a) (1)(2) and (3).

Due to Respondent’s noncompliance with the December 1, 2015 Order compelling
discovery, I am striking Respondent’s Answer, issuing this default decision, and
assuming the facts alleged in CTP’s complaint to be true. See 21 C.F.R.
§ 17.35(c) (3), 17.11(a). The harshness of the sanctions I impose upon either party must
relate to the nature and severity of the misconduct or failure to comply, and I find the
failure to comply here sufficiently egregious to warrant striking the answer and issuing a
decision without further proceedings. See 21 C.F.R. § 17.35(b). Respondent failed to
comply with the December 1, 2015 Order, nor did it provide any adequate justification
for not doing so.

III. Default Decision

Striking Respondent’s answer leaves the Complaint unanswered. Therefore, I am
required to issue an initial decision by default if the complaint is sufficient to justify a
penalty. 21 C.F.R. § 17.11(a). Accordingly, I must determine whether the allegations in
the Complaint establish violations of the Act.

For purposes of this decision, I assume the facts alleged in the Complaint are true and
conclude that default judgment is merited based on the allegations of the Complaint and
the sanctions imposed on Respondent for failure to comply with my orders. 21 C.F.R.
§ 17.11. Specifically:

¢ During an inspection of Respondent’s establishment on November 19, 2014, at
approximately 4:41 PM, an FDA-commissioned inspector observed that “a person
younger than 18 years of age was able to purchase a package of Camel Crush
Menthol cigarettes . . . [.]” The inspector also observed that “the minor's
identification was not verified before the sale... .” Complaint § 10.

¢ On December 18, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observation from November 19, 2014. The letter explained that the
observations constituted violations of regulations found at 21 C.F.R. § 1140.14(a)
and (b)(1), and that the named violations were 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 violations, 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.

Hamza Rashid responded to the Warning Letter in an undated letter that CTP
received on January 7, 2015. “Mr. Rashid stated that he had ‘spoken with the
cashier in question as well as all the other persons working at the location and
advised them that this [would] not be tolerated.’ CTP responded to Mr. Rashid by
letter dated February 17, 2015, stating that a response was received, but seeking
further clarification of the remedial actions taken and reminding [Respondent] of
its continuing obligation to be in compliance with the Act and its implementing
regulations. CTP did not receive further clarification of Respondent's remedial
actions taken.” Complaint § 11.
e During a subsequent inspection of Respondent’s establishment on April 6, 2015, at
approximately 12:56 PM, an FDA-commissioned inspector documented that “a
person younger than 18 years of age was able to purchase a package of 305’s
Menthol Kings cigarettes . . . [.]” The inspector also observed that “the minor’s
identification was not verified before the sale... .” 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 CFR. 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).
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).

Taking the above alleged facts as true, Respondent violated the prohibition against selling
tobacco to persons younger than 18 years of age, 21 C.F.R. § 1140.14(a), on November
19, 2014, and April 6, 2015. On those same dates, Respondent also violated the
requirement that retailers verify, by means of photo identification containing a
purchaser’s date of birth, that no tobacco purchasers are younger than 18 years of age.

21 C.F.R. § 1140.14(b)(1). Therefore, Respondent’s actions constitute violations of law
that merit a civil money penalty.

CTP has requested a fine of $500, which is a permissible fine under the regulations.
21 C.F.R. § 17.2. Therefore, I find that a civil money penalty of $500 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
Golden Living Center - Superior,
(CCN: 52-5370),

Petitioner,

v.

Centers for Medicare & Medicaid Services.
Docket No. C-15-2887
Decision No. CR4514

Date: January 28, 2016

DECISION

I grant summary judgment in favor of the Centers for Medicare & Medicaid Services
(CMS), sustaining its determination to impose civil money penalties of $5100 against
Petitioner, Golden Living Center — Superior, for each day of a period that began on
January 26 and that ran through February 9, 2015.'

I. Background

Petitioner is a skilled nursing facility in Superior, Wisconsin. It requested a hearing in
order to challenge the remedies that I cite in this decision’s opening paragraph. CMS
moved for summary judgment and Petitioner opposed the motion. CMS moved for leave
to file a sur-reply brief, and I granted the motion.

' CMS imposed additional remedies against Petitioner including additional civil money
penalties. These were not contested by Petitioner and for that reason it is unnecessary
that I make specific noncompliance findings concerning these additional remedies. I find
CMS’s determination to impose these additional remedies to be administratively final.
CMS filed a total of 43 proposed exhibits, identified as CMS Ex. 1 — CMS Ex. 43, as part
of a pre-hearing submission in this case. Petitioner filed 15 proposed exhibits, identified
as P. Ex. | — P. Ex. 15. 1am making all of these exhibits part of the record for purposes
of ruling on CMS’s motion for summary judgment.

IL. Issues, Findings of Fact and Conclusions of Law
A. Issues
The issues are whether undisputed facts prove that:

1. Petitioner failed to comply substantially with the requirements of 42 C.F.R.
§ 483.65.

2. Petitioner’s noncompliance was so egregious as to comprise immediate
jeopardy for Petitioner’s residents.

3. CMS’s determination to impose civil money penalties of $5100 per day is
reasonable.

B. Findings of Fact and Conclusions of Law

CMS asserts that Petitioner failed to comply substantially with the requirements of 42
C.F.R. § 483.65. This regulation establishes a skilled nursing facility’s duty to protect its
residents against the spread of infection. In relevant part, this regulation states that a
skilled nursing facility must:

Establish and maintain an infection control program designed to provide a
safe, sanitary, and comfortable environment and to help prevent the
transmission of disease and infection.

CMS alleges that Petitioner failed to comply with this regulation because it failed to
implement its own protocols for dealing with influenza infection. These policies were
entitled “Influenza Outbreak Guideline” and “Influenza Outbreak Antiviral Procedures.”
P. Ex. 2 at 1-4, 5-7. Specifically, CMS asserts that Petitioner adopted infection protocols
that ought to have been triggered when even one of its residents developed influenza. Jd.
at 1. The protocols commanded Petitioner’s staff to implement its outbreak management
procedures immediately based on a resident developing the signs and symptoms of
influenza. The staff was told not to wait for a confirmed diagnosis before implementing
the protocols and to implement infection control measures “as soon as the influenza is
suspected.” Jd. at 3. The protocols included the following requirements in the event of a
suspected case of influenza:
e The staff was instructed to call Petitioner’s medical director and to request orders
for prophylactic and anti-viral medications for residents according to current
recommendations. The protocols called for considering providing anti-viral
medication to members of the staff as well.

e The protocols directed that staff not be moved around Petitioner’s facility.
Designated staff members were instructed to stay only in their regularly scheduled
work area and were told not to go from floor to floor within the facility.

e If several residents in a particular wing of the facility had influenza, then the staff
was instructed to cancel all activities and serve all residents their meals in their
rooms.

Id. at 3-4.

These protocols also included a treatment regimen that would be implemented with an
influenza outbreak. The staff would administer prophylactic doses of antiviral drugs
(Tamiflu or Relenza) to residents within 48 hours of the manifestation of signs or
symptoms of influenza. P. Ex. 2 at 6. Petitioner’s protocols also referred its staff to a
Centers for Disease Control (CDC) website for additional guidance on dealing with an
influenza outbreak. Jd. at 7. The CDC advises entities such as Petitioner that all
residents of an entire facility should receive antiviral medications as soon as an influenza
outbreak is determined or when two residents become ill within 72 hours and one of the
residents has confirmed influenza. CMS Ex. 13 at 6-7.

CMS contends that five residents of Petitioner’s facility tested positive for influenza
between January 22 and February 4, 2015. CMS asserts that the following residents
developed signs and symptoms of influenza during this period and ultimately tested
positive for influenza: Residents #s 11, 12, 13, 15, and 20. CMS’s Memorandum in
Support of its Motion for Summary Judgment at 9-11 and citations contained therein.
CMS argues that, during this period, Petitioner failed to apply its own protocols for
dealing with an influenza outbreak and failed to follow the CDC guidelines that it had
incorporated into its protocols.

Specifically, CMS asserts that:

e Petitioner failed to provide prophylactic Tamiflu treatment to all of its residents
before February 2, 2015, more than 10 days after the first case of influenza
became apparent and well after the point that several of Petitioner’s residents were
diagnosed with influenza. CMS Ex. 20 at 1; CMS Ex. 21 at 6. CMS notes that
this contention is buttressed by the admission of Petitioner’s medical director, who
acknowledged not ordering prophylactic Tamiflu administration to residents until
February 2, 2015, after five confirmed cases of influenza had occurred. P. Ex. 13
at 12-13. This statement is confirmed, according to CMS, by an admission by
Petitioner’s director of nursing. P. Ex. 11 at 15.

e Between January 22 and February 6, 2015, Petitioner’s management allowed at
least one member of its staff to move between the area of the facility where the
influenza outbreak had occurred, Petitioner’s Alzheimer’s unit, and other parts of
the facility. CMS Ex. 17.

e After January 22, residents in the Alzheimer’s unit continued to engage in small
group activities and were not isolated. P. Ex. 10 at 3; P. Ex. 11 at 11; P. Ex. 14 at
1-2.

The facts as asserted by CMS, if unchallenged, plainly establish noncompliance by
Petitioner with its own influenza protocols. These facts show that Petitioner had adopted
protocols that called for implementation of specific measures with the appearance of even
a single case of influenza at its facility. These protocols included prophylactic
administration of antiviral medications to all residents; restriction of staff movement from
the area in which an outbreak occurred; and suspension of group activities during an
outbreak. The facts as alleged by CMS show that Petitioner implemented none of these
measures at its facility after the January 22 outbreak of influenza.

These facts also establish that Petitioner failed to comply substantially with the
requirements of 42 C.F.R. § 483.65. The regulation does not contain specific protocols
for dealing with influenza outbreaks. Rather, it imposes on skilled nursing facilities the
duty to develop their own protocols and, importantly, to maintain them. Here, there is no
question that Petitioner developed detailed protocols for addressing an influenza
outbreak. But, the facts offered by CMS show that Petitioner failed to implement those
protocols at the critical moment when an outbreak occurred. That is noncompliance with
the regulation’s requirement that a facility maintain its infection controls.

Petitioner has thrown up a series of arguments in opposition to CMS’s motion. I find
them to be without merit. Most significantly, I find that Petitioner has adduced no facts
whatsoever to contradict those offered by CMS.

Petitioner starts off by contending that CMS’s allegations of noncompliance are “murky.”
Petitioner’s Reply to CMS’s Motion for Summary Judgment at 2. By that, Petitioner
evidently means that there is some vagueness or lack of clarity to CMS’s arguments and
fact contentions. I find no basis for Petitioner’s assertion. To the contrary, what CMS
alleges is crystal clear. From the outset of this case CMS has not varied in its central
argument: Petitioner developed infection control protocols for addressing an influenza
outbreak but failed to implement them when an outbreak occurred at its facility. There is
absolutely nothing unclear about that. Nor is there anything unclear or uncertain about
the facts and evidence relied on by CMS. The protocols that CMS identifies in its motion
are Petitioner’s protocols. They are stated explicitly in Petitioner’s own exhibits and
Petitioner has not asserted that CMS identified them inaccurately or incompletely. There
is no dispute that several residents of Petitioner’s facility developed influenza during the
period running from January 22 through February 6, 2015. Nor is there any dispute that
Petitioner: failed prior to February 2, 2015, to administer prophylactic antiviral
medication to its residents; allowed at least one member of its staff to move from the
Alzheimer’s unit where the infected residents resided to other parts of its facility; and
continued small group activities in the Alzheimer’s unit during the outbreak. All of these
failures to act or actions contravened Petitioner’s protocols.

Next, Petitioner asserts that CMS impermissibly expanded or modified its allegations of
noncompliance beyond those which are stated in the survey report that is the basis for
CMS’s remedy determinations. See CMS Ex. 1. I disagree with Petitioner’s premise.
The survey report states explicitly that Petitioner: “did not ensure that it had an effective
control program consisting of recognizing and preventing outbreaks (including
appropriate precautions and timely use of Tamiflu) . . . during an outbreak ....” Jd. at
32-33. That is an accurate if somewhat broadly stated summary of CMS’s contentions
about Petitioner’s noncompliance. While Petitioner undoubtedly had an infection control
program, its program was not effective because it failed to implement it. Therefore,
Petitioner did not have an effective control program, as the survey report stated.
Moreover, the report recites in great detail the specific fact contentions on which CMS
bases its assertions. Jd. at 31-64.

Furthermore, Petitioner’s argument notwithstanding, there is nothing in the regulations at
42 C.F.R. Part 498, which govern hearings in cases involving CMS, that precludes CMS
from modifying, expanding on, or even raising additional, allegations of noncompliance
during the pendency of a case. The requirement of due process defines the boundaries of
what a party may argue in a Part 498 hearing. A party may amend or supplement its
allegations if it provides its adversary with notice and if the adverse party has the
opportunity to defend against and rebut the amendment or supplement. Livingston Care
Ctr., DAB No. 1871 (2003), aff’d, Livingston Care Ctr. v. U.S. Dep’t of Health and
Human Servs., 388 F.3d 168 (6th Cir. 2004). Petitioner has not made a showing that it
was surprised by any of CMS’s allegations nor has it shown that it was denied the
opportunity to present evidence and argument in opposition to whatever it is that CMS is
contending.

The central component of Petitioner’s defense is that CMS has failed to enunciate any
standard to which Petitioner may be held accountable. Petitioner repeatedly points out
that 42 C.F.R. § 483.65 fails to identify specific infection control requirements applicable
to influenza outbreaks. Petitioner asserts additionally that CMS has not at any time
identified an objective standard that defines the necessary elements of influenza control.
Thus, according to Petitioner, CMS’s entire case collapses because CMS has not and
cannot identify any criteria pursuant to which Petitioner may be held accountable.

Indeed, according to Petitioner, if any party merits summary judgment in its favor it is
Petitioner, due to CMS’s failure to identify an applicable legal standard.

This argument is a red herring. CMS did not identify a binding and objective standard
for influenza control because the regulation governing infection control at skilled nursing
facilities is not predicated on inflexible and rigid standards. Instead, the regulation vests
responsibility in skilled nursing facilities to develop their own standards and protocols
consistent with professionally recognized standards of nursing care. That is evident from
the plain language of 42 C.F.R. § 483.65. Moreover, the regulation takes into account the
likelihood that professional standards of care will evolve with time. Putting a specific
objective requirement in the regulations undercuts the statutory purpose of assuring that
skilled nursing facilities have the flexibility to adapt their protocols to changed
circumstances. Omni Manor Nursing Home, DAB No. 1920, at 11 (2004), aff'd, Omni
Manor Nursing Home v. Thompson, 151 F. App’x 427 (6th Cir. 2005).

A skilled nursing facility is granted discretion to develop and implement infection control
protocols including those that deal with influenza outbreaks. Once those protocols are in
place a facility is required to maintain them — that is to say, it is required to implement its
protocols and to assure that they are working. Barbourville Nursing Home, DAB No.
1962 (2005), aff'd, Barbourville Nursing Home v. U.S. Dep’t of Health and Human
Servs., 174 F. App’x 932 (6th Cir. 2006).

Now, it is conceivable that a facility’s infection control protocols could be so inadequate
as to fail to meet generally accepted nursing standards. In that event, CMS could impose
a remedy against a facility for failing to adopt meaningful protocols. But, that is not what
CMS alleges here. CMS does not challenge the theoretical efficacy of Petitioner’s
protocols. Indeed, it refers to them as “comprehensive” and notes that these protocols
accorded with recommendations adopted by the CDC. What CMS is contending is that
Petitioner failed to implement its protocols and thus, failed to “maintain” them as is
required by the governing regulation. The undisputed material facts support CMS’s
contention. Petitioner would have complied with regulatory requirements had it but
implemented the protocols that it developed.

In a variation on its argument Petitioner also contends that there exist a multitude of
protocols — published by the CDC and other entities — that address influenza outbreaks. It
seems to say that it is unfair to cite Petitioner for noncompliance if CMS does not identify
specifically which of these protocols Petitioner failed to comply with and explain why
failure to comply with one protocol, as opposed to some other, amounts to a deficiency.

That argument is another red herring. As I have stated, it isn’t CMS’s duty to establish
protocols for influenza control, nor is it CMS’s duty to pick and choose among those that
exist and hold skilled nursing facilities accountable for complying with whichever is
CMS’s preferred protocol. The regulatory obligation to establish and maintain an
influenza prevention protocol falls squarely on Petitioner. It could choose between
existing protocols or devise protocols of its own so long as those protocols comported
with professionally recognized standards of care. But, once it opted for specific infection
control protocols, Petitioner was obligated to follow them. Petitioner’s failure is that it
violated the protocols that it adopted.

Petitioner argues that CMS has offered no rationale that would support the conclusion
that it was obligated to follow its influenza protocols rather than its more general
infection control protocols. The infection control protocols are less stringent, according
to Petitioner, and CMS has not established any basis for requiring Petitioner to conform
its procedures to the more demanding influenza protocols. I find that argument to be
without merit. Petitioner obviously drafted and implemented its influenza protocols to
deal with the specific problems that are unique to an influenza outbreak. Influenza is a
ighly infectious and extremely dangerous disease in a community such as the one
oused at Petitioner’s facility and Petitioner's protocols recognize that. To now excuse it
from having to follow those protocols in the event of an actual outbreak — as Petitioner
advocates — would render them meaningless.

Petitioner argues also that it followed its influenza protocols for the most part. It
contends that its failure to follow only a few of these protocols should be weighed against
its compliance with the vast majority of them. I also find this argument to be without
merit. The three failures by Petitioner to comply with its protocols clearly were serious.
For example, allowing at least one member of its staff who worked with influenza-
infected residents to work also in other parts of Petitioner’s facility could have spread
infection widely among a community of highly vulnerable individuals. Consequently,
the failures by Petitioner were serious even if Petitioner complied with other aspects of its
protocols.

Petitioner argues that, if it did not follow its protocols, that is because its management
and medical director made reasoned judgments as to whether the protocols should be
applied strictly in the context of the outbreak at Petitioner’s facility. In support of that
argument Petitioner cites to the affidavit of Dr. Mark Boyce, Petitioner’s medical
director, in which he avers that he exercised his professional judgment in deciding not to
administer Tamiflu immediately to all residents when influenza was detected at
Petitioner’s facility. P. Ex. 13 at 8, 12.

I make no findings as to the credibility of Dr. Boyce’s assertions. For purposes of this
decision I accept as true his claim that he made a judgment call in deciding to defer
administering Tamiflu to Petitioner’s residents. But, that determination clearly
contravened Petitioner’s protocols and absent some documented and contemporaneous
decision to revise or modify the protocols, constituted noncompliance with regulatory
requirements to maintain its protocol. This is not a case in which Petitioner modified its
protocols based on documented clinical experience. Petitioner has offered no evidence
whatsoever of that. There is nothing at all in the record of this case showing that
Petitioner’s management reviewed the protocols and decided to modify them based on
reasoned medical judgment. At best, Petitioner can say only that its management decided
to ignore its influenza protocols because it concluded that this would be an appropriate
course of action, without documenting the reasons for that conclusion. That decision — to
ignore the protocols in the case of an actual outbreak of influenza — plainly violated the
regulatory requirement that infection control protocols be maintained once adopted.

Dr. Boyce’s explanation is that he made a professional judgment that Tamiflu should not
be administered until at least three cases of influenza were diagnosed at Petitioner’s
facility. Nothing in the record shows that Petitioner had revised its protocols to reflect

that judgment. At the time of the outbreak the protocols demanded that Petitioner’s staff
provide Tamiflu to residents within 48 hours of the first diagnosis of influenza. Dr.
Boyce’s ad hoc decision to ignore that specific requirement violated those protocols.

Petitioner also cites to studies that suggest that prophylactic Tamiflu administration may
be ineffective to prevent the spread of influenza. From these it suggests that Petitioner
should not be penalized for violating its own protocols. That is a kind of “no harm, no
foul” defense in which Petitioner essentially argues that it should not be penalized even if
it failed to comply with its responsibilities. I find that argument to be without merit.
Petitioner always had the option of modifying or re-writing its influenza protocols if it
concluded that they were obsolete or ineffective. But, that’s not what it did here. Rather,
it violated its protocols without documenting a reason for doing so and then gave an after
the fact explanation for its violation. That is not permitted.

Petitioner asserts repeatedly that it in fact complied with the letter of its influenza
protocols. Notwithstanding, it admits or fails to rebut the facts that CMS asserts are
undisputed. As I have discussed, Petitioner concedes that it did not order administration
of Tamiflu to its residents as was required by its protocols. Likewise, Petitioner does not
deny CMS’s assertion that Petitioner allowed at least one member of its staff who was
assigned to Petitioner’s Alzheimer’s unit to move to other parts of the facility during the
influenza outbreak. Petitioner argues that it limited its staff to working on the
Alzheimer’s unit “to the extent feasible.” Petitioner’s Reply to CMS’s Motion for
Summary Judgment at 22. But, Petitioner’s protocols do not call for limiting staff
movement during an outbreak to the extent that is feasible. They prohibit staff
movement. P. Ex. 2 at 4 (“Do not move your staff around the building.”).

Petitioner asserts that it took additional measures to assure that staff did not communicate
influenza such as not allowing ill staff to work. I am accepting all of Petitioner’s
representations as true for purposes of deciding whether to issue summary judgment, but
those representations do not gainsay the fact that Petitioner explicitly violated its
protocols by allowing at least one member of its staff to move between the Alzheimer’s
unit with its infected residents and other parts of Petitioner’s facility.
Petitioner’s response to CMS’s contention that the staff continued to hold small group
activities in the Alzheimer’s unit during the influenza outbreak is unavailing. In
response, Petitioner explains that it canceled some group activities, but continued to
permit “sensory activities” for small groups of residents who had not shown signs of
influenza. Petitioner’s medical director states that “the Center’s influenza policy
provides that in the case of an influenza outbreak, all services, including therapy, can be
provided on the Unit....” P. Ex. 13 at 10. His statement directly conflicts with
Petitioner’s written policy. P. Ex. 2 at 4 (“Cancel all activities/serve all meals in rooms if
several residents have influenza in a particular wing.”). All activities means all activities,
not some activities and not activities for only the sick residents. Petitioner’s actions were
an express violation of its protocols.

According to Petitioner, it implemented all sorts of actions in order to curb the spread of
influenza at its facility. See, e.g., P. Ex. 11 at 10-12. These actions, apparently, are what
Petitioner means when it argues that it complied with its protocols. However, although
some of those actions may have been in compliance with the protocols, that compliance
does not negate the noncompliance that CMS asserts and that is established by
undisputed facts.

A skilled nursing facility’s noncompliance with a Medicare participation requirement is
so egregious as to comprise immediate jeopardy for the facility’s residents where the
noncompliance causes or is likely to cause serious injury, harm, impairment, or death to a
resident. 42 C.F.R. § 488.301. CMS determined that Petitioner’s noncompliance with 42
C.F.R. § 483.65 was at the level of immediate jeopardy. Petitioner has not responded to
this assertion. It offered no argument, either in its initial brief or in its opposition to
CMS’s motion for summary judgment, that CMS’s determination of immediate jeopardy
was incorrect. I sustain CMS’s determination as unchallenged. Furthermore, I find the
immediate jeopardy determination to be well supported by the undisputed material facts.

Influenza can be — and often is — a deadly event for elderly individuals, particularly the
frail, debilitated, and demented residents of Petitioner’s Alzheimer’s unit. For
individuals such as these, influenza often produces a mortality rate of ten percent or
more. CMS Ex. 40 at 7. Among the residents of Petitioner’s facility who contracted
influenza during the 2015 outbreak, three of them were hospitalized and one received
palliative care. CMS Ex. | at 33-34; CMS Ex. 23 - CMS Ex. 27. These facts are
overwhelming proof that acts or omissions that might facilitate the spread of influenza in
a nursing facility place residents of that facility at immediate jeopardy.
10

Petitioner’s failure to implement its own influenza protocols could have facilitated the
spread of influenza at Petitioner’s facility and thus jeopardized Petitioner’s residents. At
the very least, allowing at least one member of its staff who had been exposed to the virus
and who possibly had become infected to work in other parts of the facility outside of the
Alzheimer’s unit put residents at risk. So also did allowing small group activities among
possibly infected residents within the Alzheimer’s unit to continue.

Petitioner also did not challenge the reasonableness of CMS’s determination to impose
civil money penalties of $5100 for each day of the period running from January 22
through February 9, 2015. It never argued, either in its initial brief or its opposition to
CMS’s motion for summary judgment, that these penalty amounts and the duration of the
penalties were unjustified, assuming that it was noncompliant at the immediate jeopardy
level. Therefore, I sustain these remedies as being unchallenged.

But, I also sustain them because the undisputed material facts establish them to be
entirely reasonable. Regulations governing the imposition of civil money penalties for
noncompliance state that CMS may impose daily penalties ranging from $3050 to
$10,000 for immediate jeopardy level noncompliance. 42 C.F.R. § 488.438(a)(1)(i).
Penalty amounts within this range are determined based on evidence pertaining to factors
that include: the seriousness of a facility’s noncompliance; its culpability; its compliance
history; and its financial condition. 42 C.F.R. §§ 488.438(f)(1)-(4), 488.404
(incorporated by reference into 42 C.F.R. § 488.438(f)(3)).

CMS cites three reasons for imposing penalties of $5100 per day (which, as CMS notes,
are only about one-half of the maximum penalty amounts allowed by regulation). First,
Petitioner’s noncompliance was serious. The undisputed material facts establish that
Petitioner’s noncompliance put residents at jeopardy for contracting influenza, an illness
that is often fatal in populations of frail and elderly individuals. Second, Petitioner
demonstrates substantial culpability for its noncompliance. Its management was
responsible not only for implementing the influenza protocols but for understanding the
risks attendant to not implementing them. And, yet, it blatantly disregarded several of the
protocols’ explicit requirements. Finally, Petitioner has a poor compliance history. It
had been found substantially noncompliant for health or Life Safety Code requirements at
every survey cycle conducted at its facility since 2004 — a more than ten-year history of
substantial noncompliance. These reasons — in the absence of any opposition by
Petitioner — amply justify the penalty amounts.
11

Finally, I note that Petitioner makes other arguments concerning burden of proof. These
issues have long been settled, and I have no authority to reopen them. More important,
“burden of proof” is not an issue that is germane to summary judgment. I do not weigh
the evidence here. In issuing summary judgment I decide the case based on the existence
of facts that are not in dispute.

/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.
CK Smoke Shop, LLC,
Respondent.

Docket No. C-15-2502
FDA No. FDA-2015-H-1711

Decision No. CR4513

Date: January 28, 2016

INITIAL DECISION

The Center for Tobacco Products (CTP) seeks to impose a civil money penalty
against Respondent, CK Smoke Shop, LLC for four violations of the Federal
Food, Drug, and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its
implementing regulations, 21 C.F.R. pt. 1140, within a twenty-four month period.
Specifically, CTP alleges that CK Smoke Shop, LLC violated the Act by
impermissibly selling tobacco products to minors, failing to verify, by means of
photo identification containing a date of birth, that the purchasers were 18 years of
age or older, and using a self-service display in a non-exempt facility.

Procedural History

CTP began this matter by serving an administrative complaint seeking a $2,000
civil money penalty on Respondent CK Smoke Shop, LLC and by filing a copy of
the complaint with the Food and Drug Administration’s (FDA) Division of
Dockets Management. Respondent timely answered CTP’s complaint. In its
answer, Respondent admitted to all of the allegations, but asserted that the civil
money penalty was too high. On July 1, 2015, issued an Acknowledgement and
Prehearing Order (APHO) that set deadlines for the parties to file their pre-hearing
exchanges.

On July 31, 2015, CTP filed a Notice of Entry of Appearance, a Joint Status
Report, and a Notice of Pending Settlement and Unopposed Motion to Extend
Deadlines. The Notice of Pending Settlement and Unopposed Motion to Extend
Deadlines stated that the parties had agreed to settle and that CTP understands that
payment will be forthcoming. CTP requested that any deadlines, including the
deadline to request documents, be extended by 30 days. On August 4, 2015, I
extended the deadline for the parties to serve their requests for documents, and the
parties’ pre-hearing exchange deadlines.

CTP timely filed its pre-hearing exchange on October 21, 2015. Respondent’s
pre-hearing exchange was due on November 12, 2015, and to date Respondent has
not filed a pre-hearing exchange.

As [had earlier been given notice of a pending settlement, on January 6, 2016, I
ordered the parties to inform me whether they had reached a settlement. On
January 19, 2016, CTP filed a Status Report that stated in pertinent part: “The
parties reached a settlement agreement in this case; however, Respondent has
failed to provide payment. In light of Respondent’s failure to pay, as well as its
failure to file a pre-hearing exchange, CTP intends to file a motion for sanctions
and default judgment.”

CTP’s Intent to File a Motion for Sanctions

CTP has expressed an intent to file a motion for sanctions and default judgment
because of Respondent’s failure to provide the payment it agreed to as part of the
settlement agreement, and because Respondent failed to file a pre-hearing
exchange. I have no authority to enforce settlement agreements, and so I will not
issue a default judgment because CTP asserts that Respondent failed to fulfill the
terms of a settlement agreement. And, here, Respondent’s failure to file a pre-
hearing exchange is insufficient justification to issue a default judgment.

Decision on the Record

Pursuant to 21 C.F.R. § 17.37(b), all direct testimony of witnesses shall be
admitted in the form of a written declaration. In its pre-hearing exchange, CTP
did not submit any witness declarations. Respondent CK Smoke Shop, LLC has
not submitted direct testimony. Because neither party has submitted any direct
testimony, there is no one to request to cross-examine. Therefore, I will decide
this case on the basis of the written record.

Analysis
I. Violations

In its Complaint, CTP alleges that Respondent CK Smoke Shop, LLC committed
four violations of the Act and its implementing regulations within a twenty-four
month period. CK Smoke Shop, LLC filed an answer to the Complaint that
admitted to all of the allegations, but asserted that the civil money penalty was too
high. Answer.

CTP makes the following uncontested allegations:

e Respondent owns CK Smoke Shop, LLC, an establishment that sells
tobacco products and is located at 457 West Washington Street, Sequim,
Washington 98382. Complaint § 3.

e During an inspection of Respondent’s establishment on January 25, 2014,
at approximately 2:39 PM, an FDA-commissioned inspector observed that
“a person younger than 18 years of age was able to purchase a package of
Marlboro cigarettes . . . [.]” The inspector also observed that “the minor’s
identification was not verified before the sale... .” Complaint ¥ 10.

e On May 8, 2014, CTP issued a Warning Letter to Respondent regarding the
inspector’s observations from January 25, 2014. The letter explained that
the observations constituted violations of regulations found at 21 C.F.R.

§ 1140.14(a) and (b)(1), and that the named violations were 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
violations, 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 UPS records show that the Warning Letter was received on May 9, 2014,
but FDA did not receive a response. Complaint § 11.

e During a subsequent inspection of Respondent’s establishment on January
9, 2015, at approximately 1:19 PM, FDA-commissioned inspectors
documented that “a person younger than 18 years of age was able to
purchase a package of Top Regular Premium cigarette tobacco .. . [.]” The
inspectors also documented that “the minor’s identification was not verified
before the sale ....” Finally, an “inspector observed an unlocked
customer-accessible display containing Nat Sherman brand cigarettes and
the most responsible person on duty told the inspector that small children
are allowed to enter the establishment when accompanied by a parent.”
Complaint § 1.

Respondent CK Smoke Shop, LLC does not dispute these allegations. Therefore,
I find that these facts establish Respondent CK Smoke Shop, LLC’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. § 387f(d)(1); 75 Fed.
Reg. 13,225, 13,229 (Mar. 19, 2010). Under 21 C.F.R. § 1140.14(a), no retailer
may sell tobacco products to any person younger than 18 years of age. Under 21
C.F.R. § 1140.14(b)(1), retailers must verify, by means of photographic
identification containing a purchaser’s date of birth, that no tobacco purchasers are
younger than 18 years of age. Pursuant to 21 C.F.R. § 1140.16(c), self-service
displays in facilities are prohibited where, at any time, persons younger than 18
years of age are present or permitted to enter.

Taking the above alleged facts as true, Respondent violated the prohibition against
selling tobacco products to persons younger than 18 years of age, 21 C.F.R.

§ 1140.14(a), on January 25, 2014 and January 9, 2015. On those same dates,
Respondent also violated the requirement that retailers verify, by means of photo
identification containing a purchaser’s date of birth, that no tobacco purchasers are
younger than 18 years of age. 21 C.F.R. § 1140.14(b)(1). On January 9, 2015
and/or January 15, 2015, Respondent violated the prohibition against using a self-
service display in a facility where minors were permitted to enter, 21 C.F.R.

§ 1140.16(c). Complaint § 1; Informal Brief of Complainant, at 4. Therefore,
Respondent’s actions constitute violations of law that merit a civil money penalty.

II. Civil Money Penalty

Pursuant to 21 U.S.C. § 333(f)(9), Respondent CK Smoke Shop, LLC is liable for
a civil money penalty not to exceed the amounts listed in FDA’s civil money
penalty regulations at 21 C.F.R. § 17.2. In its Complaint, CTP sought to impose
the maximum penalty amount, $2,000, against Respondent for four violations of
the Act and its implementing regulations within a twenty-four period. Complaint
4 13. In its Informal Brief, CTP lowered the amount of the civil money penalty it
was seeking to $600. Informal Brief of Complainant at 5.
When determining the amount of a civil money penalty, I am required to take into
account “the nature, circumstances, extent and gravity of the violations and, with
respect to the violator, ability to pay, effect on ability to continue to do business,
any history of prior such violations, the degree of culpability, and such other
matters as justice may require.” 21 U.S.C. § 303(f)(5)(B).

i. Nature, Circumstances, Extent and Gravity of the Violations

Time and again, Respondent CK Smoke Shop, LLC has failed to comply with the
Act and its implementing regulations. Respondent has admitted to all five
violations discussed in the Complaint’; specifically Respondent has admitted to:
two violations of selling tobacco products to minors, two violations of failing to
verify, by means of photo identification containing a date of birth, that the
purchasers were 18 years of age or older, and one violation of using a self-service
display in a non-exempt facility. The repeated inability of Respondent to comply
with federal tobacco regulations is serious in nature and the civil money penalty
amount should be set accordingly.

ii. Respondent’s Ability to Pay

CTP is seeking a $600 civil money penalty against Respondent CK Smoke Shop,
LLC. CTP asserts that Respondent did not argue that it was unable to pay the
$600 civil money penalty. In its Answer, Respondent asserted that the $2,000
civil money penalty was too high because “[a]long with the increase of tobacco
prices the economic recession my business is in financial difficulty. Even my
sales tax is a month behind.” Respondent also requested a monthly payment plan.
Respondent did not make any filings following the filing of CTP’s pre-hearing
exchange that lowered the amount of the civil money penalty it was seeking to
$600.

iii. Effect on Ability to do Business

There is nothing in the evidentiary record that shows the effect a civil money
penalty will have on Respondent CK Smoke Shop, LLC’s ability to do business.
CTP asserts that “Respondent may continue to sell tobacco products and other
products at the establishment.” Informal Brief of Complainant at 7. In asserting
that a $2,000 civil money penalty was too high, Respondent stated that he was a
month behind in his sales tax. However, Respondent did not make any assertions
as to whether a $600 civil money penalty would have an effect on its ability to do
business. Neither party has provided evidence of whether a $600 civil money

' T note that CTP’s requested civil money penalty that was set forth in the
Complaint is based upon 4 violations.
penalty against Respondent would have a substantial effect on Respondent’s
ability to do business.

iv. History of Prior Violations

The current action is the first civil money penalty action brought against
Respondent CK Smoke Shop, LLC for violations of the Act and its implementing
regulations. In this civil money penalty action, Respondent violated the
prohibition against selling tobacco products to persons younger than 18 years of
age, 21 C.F.R. § 1140.14(a), violated the requirement that retailers verify, by
means of photo identification containing a purchaser’s date of birth, that no
tobacco purchasers are younger than 18 years of age, 21 C.F.R. § 1140.14(b)(1),
and used a self-service display in a facility where minors were permitted to enter,
21 CFR. § 1140.16(c).

I agree with CTP that “[t]hese repeat violations show an unwillingness or inability
to sell tobacco products in accordance with federal tobacco regulations.” Informal
Brief of Complainant at 7.

v. Degree of Culpability

Respondent CK Smoke Shop, LLC admitted to all violations. Based on
Respondent CK Smoke Shop, LLC’s own admissions, I hold it fully culpable for
all five violations of the Act and its implementing regulations.”

vi. Additional Mitigating Factors
In its Answer, Respondent CK Smoke Shop, LLC stated that:

When I train my employees I always emphasize them to
check the customer’s ID and to ask the minors who are under
18 to leave the store. If customers are under 18 or do not
possess any ID we ask them to leave. When families bring
along their children under 12 they are asked to leave their
children at the door to wait while they purchase products. I
strictly train my employees to check the customer’s ID
always.

> Tnote that CTP’s requested civil money penalty that was set forth in the
Complaint is based upon four violations.
The last 14 years of my business the [only] time I received a
compliance check premises check from the W.A. Liquor
Control Board. I passed the check and received certificates. I
promise to train my employees to check customers’ ID
thoroughly. Please consider this and I request for some
leniency.

Answer.
vii. Penalty

I note that the record lacks evidence of Respondent’s ability to pay a $600 civil
money penalty, and that the record does not contain evidence that shows the effect
that a $600 civil money penalty would have on Respondent’s ability to do
business. Respondent’s request to lower the amount of the civil money penalty
and mention of its financial difficulties were raised in response to a $2,000 civil
money penalty. Respondent did not file a response to CTP’s pre-hearing exchange
that lowered its requested civil money penalty to $600. Respondent has not
argued that he does not have the ability to pay a $600 civil money penalty, nor
does Respondent argue that such a penalty would affect his ability to do business.
l acknowledge the Respondent’s statements that he provides his employees with
training and that he passed a prior compliance check. However, based on the
foregoing reasoning, I find a penalty amount of $600 to be appropriate under

21 U.S.C. §§ 303(£)(5)(B) and 333(f)(9).

Lalso note Respondent’s request for a monthly payment plan. I have no authority
to address this request. My authority in this case is limited to deciding whether
Respondent has violated applicable regulations and whether a civil money penalty
amount is a reasonable remedy for any violation that is established.

Conclusion

Pursuant to 21 C.F.R. § 17.45, I enter judgment in the amount of $600 against
Respondent, CK Smoke Shop, LLC, for four violations of the Federal Food, Drug,
and Cosmetic Act (Act), 21 U.S.C. § 301 et seq., and its implementing regulations,
21 C.F.R. pt. 1140, within a twenty-four month period.

/s/
Steven T. Kessel
Administrative Law Judge