Opinion ID: 2320131
Heading Depth: 2
Heading Rank: 4

Heading: The Sanction Imposed by the Authority

Text: [¶ 18] Finally, the dissent articulates Dowling's contention that the Authority imposed the ultimate sanction of termination of her subsidy based largely on its finding that she initiated the agreement, as opposed to her mere participation in the agreement, which finding, Dowling argues, is not supported by substantial evidence because it is based only on the hearsay notes of McDonald. We disagree. [¶ 19] The Authority is vested with the power to terminate subsidy assistance for the commission of any act of fraud pursuant to 24 C.F.R. § 982.552(c)(1)(iv), or for violation of any program obligation pursuant to section 24 C.F.R. § 982.552(c)(1)(i) (2005). The evidence revealed that Dowling failed to uphold her obligation to supply true and complete information by failing to disclose the side agreement to the Authority. Further, Dowling concedes that she committed at least a program violation by participating in the side agreement; that participation in the side agreement supports the Authority's finding of fraud within the meaning of the regulations. Accordingly, the Authority had the power to terminate Dowling's subsidy for either her failure to supply information about the side agreement or for her participation in it, and certainly for both. [¶ 20] Moreover, there is little support in the record for Dowling's contention, articulated in the dissent, that the Authority's decision to terminate Dowling's subsidy was largely dependent on its finding that she initiated the side agreement. The Authority's initial decision, expressed in a letter to Dowling dated July 22, 2004, which was issued after the hearing at which McDonald's notes were admitted, informed Dowling that it was terminating her subsidy pursuant to 24 C.F.R. § 982.551, and went on to quote portions of that section, including the portion related to failure to supply required information. The letter further stated that [a]ll Section 8 tenants during orientation are warned that they are committing fraud if they enter into a side agreement with a landlord to pay him more than the [contract provides], and that Dowling was equally responsible for entering into a side agreement with Mr. Wortman and failing to report that information to [the Authority] because it was favorable to [her] at that time. (Emphases added.) Although the letter did mention Wortman's version of the story that Dowling approached him to initiate the side agreement, the letter did not indicate that the initiation of the side agreement was, by itself, the finding on which the termination of her subsidy is based. Indeed, as the quotes above illustrate, it was Dowling's mere participation in the side agreement that was the focus of the letter terminating her subsidy. It was only after the Superior Court remanded the matter back to the Authority for further findings and conclusions that the Authority specifically found that Dowling initiated the side agreement with Wortman. [¶ 21] Further, the Authority's April 2005 decision does not state that it was Dowling's initiation of the side agreement, as opposed to the fact of her participation in the agreement, that was the basis of the Authority's termination of her subsidy. The April 2005 decision lists a series of numbered factual findings, and also sets out the legal conclusions of the Authority, including Dowling's sanction. The Authority's conclusions include: (1) that Dowling failed to supply [the Authority with] information required of her which is necessary for the administration of the Section 8 program in violation of 24 C.F.R. § 982.551(b); (2) that side agreements such as the one between Ms. Dowling and Mr. Wortman are illegal and are considered fraudulent; (3) that Ms. Dowling was . . . aware that the side agreement which she entered was considered fraud; and (4) that despite Dowling's obligation to report such agreements to the Authority, she concealed that agreement from the . . . Authority and failed to report it. Her failure to report this agreement prevented the . . . Authority from discovering the agreement, and taking any appropriate action regarding Mr. Wortman. (Emphasis added.) Finally, the Authority's final conclusion and imposition of the sanction states: HUD regulations set forth at 24 C.F.R. § 982.552(c)[(1)](i) and (iv) specifically provide that a [Housing Authority] may terminate assistance if the recipient violates any program obligations set forth at 24 C.F.R. § 982.551, or if the recipient commits fraud. By entering into this fraudulent agreement and refusing to disclose it to the Housing Authority, I conclude that Ms. Dowling violated 24 C.F.R. §§ 982.551(b) and (k) and that her assistance should be terminated as a result. [¶ 22] These conclusions are replete with references to Dowling's failure to disclose the existence of the side agreement to the Authority, as well as her fraudulent participation in the side agreement. Nowhere among the Authority's conclusions, including its ultimate conclusion and sanction, is there any explicit reliance on Dowling's initiation of the side agreement. Dowling's contention that the sanction of termination of her Section 8 subsidy was based on her initiation of, as opposed to her participation in and her failure to disclose, the side agreement is not supported by the language of the decision. See Poland v. Webb, 1998 ME 104, ¶ 10, 711 A.2d 1278, 1280 (noting that we review a fact-finder's factual findings in the light most favorable to the prevailing party). [¶ 23] Moreover, the evidence on which the Authority based its finding that Dowling initiated the side agreement  the notes of McDonald's conversation with the landlord's son  were considered by the Authority without objection from Dowling. The applicable federal regulations themselves provide that [e]vidence may be considered without regard to admissibility under the rules of evidence applicable to judicial proceedings. 24 C.F.R. § 982.555(e)(5) (2005). Furthermore, the rules of evidence, including those regarding hearsay, do not apply in proceedings for the imposition of a sanction, a concept long reflected in M.R. Evid. 1101(b)(4). [3] In determining a criminal sentence, a court may consider information based on investigations and reports conducted by agency officials. See State v. Rosa, 575 A.2d 727, 731 (Me.1990). Information from newspaper articles may also be subject to the sentencing court's consideration. See State v. Fleming, 644 A.2d 1034, 1037 (Me.1994). Thus, the consideration of hearsay evidence in determining an appropriate sanction, criminal or administrative, by the sanctioning authority or court is permissible. [¶ 24] Although Dowling argues that the sanction imposed on her for her participation in the side agreement and her failure to disclose that agreement to the Authority is unduly harsh, pursuant to section 982.552(c)(1)(i), (iv), the Authority is empowered to terminate subsidy assistance in such circumstances. The Authority may consider all relevant circumstances such as the seriousness of the case, the extent of participation or culpability of individual family members, mitigating circumstances related to the disability of a family member, and the effects of denial or termination of assistance on other family members who were not involved in the action or failure in determining the appropriate sanction. 24 C.F.R. § 982.552(c)(2)(i). The weight to be given to such mitigating factors, however, is within the discretion of the Authority. In this case, the Authority concluded that it [did] not find that any such [mitigating] circumstances in this case would justify refraining from terminating Ms. Dowling's assistance. Participation in an improper side agreement with a landlord for a period of eight months and failing to disclose the agreement to the Authority, with knowledge that such action violated the tenant's obligations for Section 8 eligibility, is sufficiently serious to merit termination of the subsidy. Because the Authority has power to terminate rental subsidies, and because its findings are supported by substantial evidence in the record, the Authority neither erred nor acted beyond its discretion in terminating Dowling's subsidy. The entry is: Judgment affirmed. LEVY, J., with whom SILVER, J., joins, concurring in part and dissenting in part. [¶ 25] I join in the Court's opinion except with respect to part D concerning the sanction that was imposed by the Authority against Dowling. The hearing officer recommended that the ultimate sanction  termination from Section 8 housing assistance  be imposed based largely on his finding that Dowling had initiated the fraudulent side agreement she had with her former landlord, Robert Wortman Sr. Because this finding is not supported by substantial evidence in the administrative record, the judgment should be vacated and the Authority required to reconsider the appropriate sanction. A. The Decision to Terminate Dowling's Section 8 Housing Assistance [¶ 26] If a tenant violates any program obligations set forth in the federal regulations, a housing authority may, but is not required to, terminate the tenant's Section 8 assistance. See 24 C.F.R. §§ 982.551, 982.552(c)(2)(i) (2006). The regulations provide that before imposing a sanction for a violation, a public housing authority may consider: [A]ll relevant circumstances such as the seriousness of the case, the extent of participation or culpability of individual family members, mitigating circumstances related to the disability of a family member, and the effects of denial or termination of assistance on other family members who were not involved in the action or failure. Id. § 982.552(c)(2)(i). [¶ 27] In this case, the hearing officer's decision acknowledged the discretion afforded by section 982.552(c)(2)(i), but he concluded that no mitigating circumstances existed, in part, because her participation in this arrangement allowed her to live in a unit which she preferred to the original unit offered by Mr. Wortman. This finding refers to the prior finding that Dowling had initiated the side agreement with Wortman [i]n order to have the opportunity to move into a more favorable rental unit. [¶ 28] Dowling was the only witness at the administrative hearing. She admitted to participating in the side agreement with Wortman, explaining that Wortman had come to her house and proposed the side agreement, and that she only agreed to it because she feared that she and her young son would be evicted by Wortman and left homeless if she refused the arrangement. [¶ 29] The only support in the administrative record for the hearing officer's finding that Dowling initiated the side agreement was an entry in the handwritten notes of Sally McDonald, an employee of the Authority. The entry appears to be based on a telephone or in-person discussion McDonald had with Wortman's son, Robert Wortman Jr.: 6/9/04 Spoke with Bob Wortman, Jr. He stated that [Dowling] had requested that his father Bob Sr. charge the $600 and she would pay the utilities directly to them. They were not going to let her have the unit because the Rent Reasonable was below fair market. [¶ 30] Apart from Dowling's testimony and McDonald's handwritten note, there was no other evidence concerning whether Dowling initiated the side agreement to obtain a better unit, or whether Wortman initiated the side agreement and Dowling felt compelled to accept it because she feared becoming homeless if she refused. The question thus presented is whether the entry in McDonald's handwritten notes is substantial evidence that supports the finding that Dowling initiated the side agreement. B. Uncorroborated Hearsay Evidence and the Substantial Evidence Test [¶ 31] Courts uphold administrative findings so long as they are supported by substantial evidence. See Phaiah v. Town of Fayette, 2005 ME 20, ¶ 8, 866 A.2d 863, 866. Administrative findings are reviewed to determine whether a reasonable mind would rely on that evidence as sufficient support for a conclusion. Forbes v. Town of Southwest Harbor, 2001 ME 9, ¶ 6, 763 A.2d 1183, 1186. [¶ 32] We have previously had occasion to apply the substantial evidence standard in cases involving challenges to administrative findings based entirely on hearsay. In Keller v. Maine Unemployment Insurance Commission, 477 A.2d 1159, 1161 (Me.1984), we considered whether the plaintiff's double hearsay evidence of a telephone call between his friend and an unidentified Commission employee was admissible pursuant to the evidentiary standard of the Maine Administrative Procedures Act. We concluded that the double hearsay, although not inadmissible, did not satisfy the substantial evidence standard without additional corroborating evidence in the form of the employee's or the friend's testimony. Id. ; see also Heal v. Me. Employment Sec. Comm'n, 447 A.2d 1223, 1225-26 (Me.1982). [¶ 33] More recently, in State v. James, 2002 ME 86, 797 A.2d 732, we addressed the importance of assessing the reliability of hearsay evidence when determining the weight it should be given in probation revocation hearings. [4] We noted in James that a variety of factors should be considered, including: (1) whether the hearsay evidence is corroborated, in whole or part, by live testimony presented at the . . . hearing or an admission; (2) the source of the hearsay, including the potential for bias or motive to fabricate; and (3) whether the hearsay evidence is sufficiently detailed. Id. ¶ 15, 797 A.2d at 737. The James criteria comport with the approaches adopted by various courts that have grappled with the question of the role of hearsay when applying the substantial evidence standard in connection with administrative proceedings. [5] [¶ 34] Our review of administrative findings based exclusively on hearsay evidence must recognize the need for informality in administrative proceedings, but also the imperative that agency proceedings should not degenerate to the point where critical findings are based exclusively on hearsay evidence that carries no indicia of reliability. The suggestion in the majority opinion that administrative proceedings are comparable to criminal sentencing hearings is, in my view, mistaken because criminal sentencing hearings are not subject to the substantial evidence standard. If we permit agency decisions to rest on nothing more than newspaper articles, a possibility suggested by the majority opinion, the substantial evidence test will be rendered meaningless. [¶ 35] Accordingly, whether hearsay evidence is, standing alone, substantial evidence that can support administrative findings must be resolved on a case-by-case basis and in a manner that is consistent with the goal of promoting informal hearing processes that remain true to the overriding goal of fundamental fairness. The substantial evidence test is not an exacting standard and it does not impose an undue burden on administrative decision-makers. Yet the standard serves an important societal function by providing a modest degree of assurance that important decisions affecting the lives of individuals will be based on something more than unsubstantiated rumor or attenuated third-hand information. C. The Uncorroborated Hearsay Evidence in This Case [¶ 36] Applying the James criteria, the brief entry in Sally McDonald's notes that characterizes Dowling as the initiator of a fraudulent side agreement does not rise to the level of substantial evidence. [¶ 37] First, the multi-level hearsay evidence was neither sworn, nor corroborated by any testimony or other evidence. The statement attributed to Wortman appears to have been made to his son, who then reported it to McDonald, who then recorded it in her notes. [¶ 38] Second, the source of the hearsay had a substantial potential for bias or motive to fabricate. Wortman had a motive to blame Dowling for the side agreement because his participation in the agreement was itself a violation of the rules and put his own interests as a Section 8 landlord at risk. [6] [¶ 39] Third, the brief entry in McDonald's notes provides no details with which to meaningfully assess the accuracy of the statement attributed to Wortman. In addition, the administrative record provides no basis for us to presume the reliability of the written records of the Authority's employees. See Richardson v. Perales, 402 U.S. 389, 403, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971) (treating written medical reports prepared by independent medical examiners in connection with a vast administrative process as having an indicia of reliability). [¶ 40] The evidence supporting the finding that Dowling initiated the side agreement is decidedly insubstantial, and the hearing officer's adoption of that evidence as a finding was in error. The Authority's ultimate decision to terminate Dowling's participation was undoubtedly influenced by the hearing officer's rejection of her claim that she was coerced into accepting the side agreement and his finding that she had initiated the side agreement for her own benefit. Any error regarding this critical finding cannot be excused as harmless. [¶ 41] The Authority should be required to reconsider the sanction in this case and, in particular, whether Dowling's participation in the side agreement justifies the complete termination of her Section 8 benefits. In doing so, the Authority would have the opportunity to also consider other relevant information that the hearing officer failed to address pursuant to section 982.552(c)(2)(i), including the effects of . . . termination of assistance on Dowling's young son as a family member[] . . . not involved in the action or failure. 24 C.F.R. § 982.552(c)(2)(i). The judgment should be vacated and this case remanded to the Authority.