Civil Monetary Penalties, Assessments and Recommended Exclusions, 28574-28581 [06-4594]

Agencies

• Social Security Administration

[Federal Register Volume 71, Number 95 (Wednesday, May 17, 2006)]
[Rules and Regulations]
[Pages 28574-28581]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-4594]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 498

RIN 0960-AG08


Civil Monetary Penalties, Assessments and Recommended Exclusions

AGENCY: Office of the Inspector General (OIG), Social Security 
Administration (SSA).

ACTION: Final rules.

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SUMMARY: These final rules reflect provisions of Public Law 106-169, 
the Foster Care Independence Act of 1999, and Public Law 108-203, the 
Social Security Protection Act of 2004, to provide new and amended 
procedures for SSA's civil monetary penalty cases filed pursuant to 
sections 1129 and 1140 of the Social Security Act .
    These final rules implement amendments to section 1129 of the 
Social Security Act (42 U.S.C. 1320a-8) to provide for the imposition 
of civil monetary penalties and/or assessments: against representative 
payees who convert Social Security benefits for a use other than for 
the use or benefit of the beneficiary; against those who withhold 
disclosure of material statements to SSA; and, against those who make 
false or misleading statements or representations or omissions of a 
material fact with respect to benefits or payments under title VIII of 
the Social Security Act.

[[Page 28575]]

    These final rules also implement amendments to section 1140 of the 
Social Security Act (42 U.S.C. 1320b-10) to: Add to the list of 
enumerated terms that may give rise to a violation of section 1140; 
and, provide for the imposition of civil monetary penalties against 
those who charge fees for products or services, otherwise provided free 
of charge by SSA, unless the offers provide sufficient notice that the 
product or service can be obtained free of charge from SSA.

DATES: These final rules are effective June 16, 2006, except that Sec.  
498.102(d) will be effective December 16, 2006.
    Applicability Date: Section 498.102(a)(3), as it relates to the 
withholding of information from, or failure to disclose information to, 
SSA, will be applicable upon implementation of the centralized computer 
file described in section 202 of Public Law 108-203. If you want 
information regarding the applicability date of this provision, call or 
write the SSA contact person. SSA will publish a document announcing 
the applicability date in a subsequent Federal Register document. The 
remainder of Sec.  498.102(a)(3), currently in effect, is unaffected by 
this delay.

FOR FURTHER INFORMATION CONTACT: Kathy A. Buller, Chief Counsel to the 
Inspector General, Social Security Administration, Office of the 
Inspector General, Room 3-ME-1, 6401 Security Boulevard, Baltimore, MD 
21235-6401, (410) 965-2827 or TTY (410) 966-5609. For information on 
eligibility or filing for benefits, call our national toll-free number, 
1-800-772-1213 or TTY 1-800-325-0778, or visit our Internet Web site, 
Social Security Online, at www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:
    Electronic Version: The electronic file of this document is 
available on the date of publication in the Federal Register at https://
www.gpoaccess.gov/fr/.

Background

    We published a notice of proposed rulemaking (NPRM) in the Federal 
Register on March 23, 2005 (70 FR 14603), that proposed to amend the 
civil monetary penalty (CMP) and assessment procedures in order to 
implement and reflect changes made to sections 1129 and 1140 of the 
Social Security Act (42 U.S.C. 1320a-8 and 1320b-10) by the Foster Care 
Independence Act of 1999, Public Law 106-169, and the Social Security 
Protection Act of 2004, Public Law 108-203.

Changes Required by Public Law 106-169

    Section 251(a) of Public Law 106-169, the Foster Care Independence 
Act of 1999, enacted December 14, 1999, added title VIII, Special 
Benefits for Certain World War II Veterans, to the Social Security Act. 
Title VIII provides that individuals who qualify under section 802 of 
the Social Security Act (42 U.S.C. 1002) will be entitled to a monthly 
benefit paid by SSA for each month after September 2000 (or an earlier 
date if determined by SSA) the individual resides outside the United 
States. Section 251(b)(6) of Public Law 106-169 amended section 1129 to 
include reference to title VIII. This change will subject an individual 
to the possible imposition of a civil monetary penalty and/or 
assessment for making false or misleading statements or representations 
or omissions of a material fact with respect to benefits or payments 
under title VIII.

Changes Required by Public Law 108-203

    Sections 111, 201(a)(1), 204, and 207 of Public Law 108-203, the 
Social Security Protection Act of 2004, enacted March 2, 2004, amended 
sections 1129 and 1140 of the Social Security Act (42 U.S.C. 1320a-8 
and 1320b-10). These changes expand and enhance our enforcement 
authority for violations of sections 1129 and 1140 of the Social 
Security Act, as set out in more detail in the preceeding Summary 
section. These additional enforcement authorities will better protect 
SSA's programs and operations from waste, fraud and abuse, as well as 
protect citizens, many elderly, who may be misled by solicitations/
advertisements to believe that SSA has endorsed or authorized the 
solicitation/advertisement.

Civil Monetary Penalties and Assessments for False Statements, 
Conversions, and Withholding

    The two amendments to section 1129 broaden the scope of the civil 
monetary penalty program by adding new categories for civil monetary 
penalties and/or assessments (1) against representative payees with 
respect to conversions and (2) against individuals who withhold the 
disclosure of material facts to SSA.
    The first amendment to section 1129 extends the civil monetary 
penalty and assessment provisions to representative payees of 
individuals entitled to benefits. The final rule implements this 
amendment by subjecting representative payees who convert a payment, or 
any part thereof, made under title II, title VIII or title XVI of the 
Social Security Act, intended for a Social Security beneficiary to a 
use other than for the use and benefit of the beneficiary to a civil 
monetary penalty of up to $5,000 and/or an assessment in lieu of 
damages for each such conversion. Our final rule applies to any person 
(including any organization, agency, or other entity) who receives 
benefits on behalf of another individual for the purpose of 
distributing the benefits with the beneficiary's best interests in 
mind. Previously, representative payees could elude civil monetary 
penalties and/or assessments under section 1129 for such actions, as 
section 1129 did not extend to representative payees who converted 
lawfully issued payments intended for a beneficiary unless the 
representative payee had either made false or misleading statements or 
representations or omitted from a statement a material fact regarding a 
beneficiary's initial or continuing right to, or the amount of, monthly 
Social Security benefits or payments. In addition, the representative 
payee must have known or should have known that the statements or 
representations or omissions of material facts were false or 
misleading.
    The second amendment under section 1129 extends the civil monetary 
penalty and/or assessment provisions to individuals who withhold from 
SSA disclosure of material facts that are used in determining an 
individual's initial or continuing eligibility for, or amount of, 
benefits or payments under title II, title VIII or title XVI of the 
Social Security Act.
    Our final rule implements this amendment by providing for civil 
monetary penalties and/or assessments in lieu of damages to be imposed 
for the failure to come forward and notify SSA of changed circumstances 
that affect eligibility or benefit amounts when the individual knew or 
should have known that the withheld fact was material and that the 
failure to come forward was misleading.
    This amendment extends the coverage of section 1129. Previously, 
under section 1129, the OIG was able to impose a civil monetary penalty 
and/or assessment only against individuals who either made false or 
misleading statements or representations or omitted from a statement a 
material fact regarding an individual's initial or continuing right to, 
or the amount of, monthly Social Security benefits or payments. In 
addition, the individual must have known or should have known that the 
statements or

[[Page 28576]]

representations or omissions of material facts were false or 
misleading.
    Therefore, a civil monetary penalty and/or assessment could not be 
imposed against an individual who should have known to come forward and 
notify the SSA of changed circumstances that affected that individual's 
or another individual's eligibility or benefit amount but failed to do 
so. The amendment addresses this issue. As stated at page 14 in Senate 
Report 108-176, accompanying Public Law 108-203, this amendment is 
intended to cover situations that ``include (but are not limited to) 
the following: (1) An individual who has a joint bank account with a 
beneficiary in which the SSA direct deposited the beneficiary's Social 
Security checks; upon the death of the beneficiary, this individual 
fails to disclose the death of the beneficiary to SSA, instead spending 
the proceeds from the deceased beneficiary's Social Security checks; 
and (2) an individual who is receiving benefits under one SSN while 
working under another SSN.''
    This final rule allows the OIG to impose a penalty of up to $5,000 
and/or an assessment in lieu of damages for each individual payment of 
Social Security benefits received while withholding disclosure of such 
material fact from the SSA.
    Senate Committee Report 108-176 also states in its analysis of the 
amendment, at pages 13-14, that this amendment is not intended to apply 
against individuals whose failure to come forward was not for the 
purpose of improperly obtaining or continuing to receive benefits.
    This amendment is effective only for violations occurring after the 
date on which the Commissioner implements the centralized computer file 
described in section 202 of Public Law 108-203 to record the date of 
submission of information by a disabled beneficiary (or representative) 
regarding a change in the beneficiary's work or earnings status. SSA 
will announce when it has implemented the centralized computer file in 
a subsequent Federal Register notice.
    This amendment strengthens the deterrence factor of section 1129 by 
enabling the OIG to pursue civil monetary penalties and/or assessments 
against individuals who withhold disclosure of material facts in order 
to receive benefits to which they are not entitled. The OIG will 
continue to impose reasonable civil monetary penalties and assessments, 
as applicable, on a case-by-case basis by applying the five enumerated 
factors employed in other section 1129 cases, as set out at 20 CFR 
498.106(a).

Civil Monetary Penalties and Assessments for Misuse of SSA's Words or 
Emblems

    Section 1140 prohibits individuals and groups from using in a 
solicitation, advertisement or other communication specific terms 
related to Social Security that could be interpreted or construed as 
conveying the impression either that the item is approved, endorsed, or 
authorized by SSA or that such person has some connection with, or 
authorization from, SSA. Section 1140 is aimed at protecting consumers, 
especially senior citizens who rely on SSA and are some of our most 
vulnerable stakeholders, from being victimized by misleading solicitors 
or direct marketers who improperly use Social Security symbols or 
emblems in order to suggest they have some connection with, or 
authorization from, SSA.
    The first amendment to section 1140 authorizes the Commissioner to 
impose a civil monetary penalty against certain individuals or groups 
who offer to assist an individual in obtaining products or services for 
a fee that SSA provides free of charge. If the individual or group 
charges a fee for such product or service, the solicitation/mailing for 
the product or service must include a written notice stating that the 
product or service is available from SSA free of charge. Section 204 of 
Public Law 108-203 authorizes the Commissioner to set the standards for 
the notice with respect to content, placement and legibility. Pursuant 
to this authority, our final rule requires clear and prominent display 
of the notice. By drawing the attention of the reader, the notice would 
help protect consumers. The goal of this regulation is to prevent 
advertisements or other communication that embed such notices within 
other text or place the notice in small type face in an attempt to hide 
the fact that the products or services are available from SSA free of 
charge.
    Consistent with the amendment, our final rule provides exceptions 
for persons serving as a claimant representative in connection with a 
claim arising under title II, title VIII or title XVI of the Social 
Security Act and for persons assisting individuals in a plan with the 
goal of supporting themselves without Social Security disability 
benefits. As specified in section 204(b) of the SSPA, this rule applies 
to offers of assistance made six months after these final regulations 
are issued.
    The second amendment to section 1140 adds certain words and phrases 
to the statute and prohibits the use of these words and phrases, or any 
combination or variation of such words, in a misleading manner. 
Specifically, the amendment expands section 1140 to include: ``Death 
Benefits Update,'' ``Federal Benefit Information,'' ``Funeral 
Expenses,'' and ``Final Supplemental Program.'' These words and phrases 
have been used by solicitors/marketers to give the false impression 
that their solicitations/mailings or other items are connected to or 
authorized by the SSA or that the solicitors/marketers have some 
connection with, or authorization from, SSA.
    We have made some non-substantive, technical changes to the Notice 
of Proposed Rulemaking (NPRM) including:
    (1) Section 498.100 (b)(1) was modified to state, ``Make or cause 
to be made false statements or representations or omissions or 
otherwise withhold disclosure of a material fact for use in determining 
any right to or amount of benefits under title II or benefits or 
payments under title VIII or title XVI of the Social Security Act; * * 
*'' We believe that the addition of ``or otherwise withhold the 
disclosure of a material fact'' to section (b)(1) accurately reflects 
the amendment to section 1129 of the Social Security Act made by 
section 201 of Public Law 108-203. The phrase ``otherwise withhold 
disclosure'' is defined in Sec.  498.101.
    (2) Section 498.100(b)(2) was modified to state, ``Convert any 
payment, or any part of a payment, received under title II, title VIII, 
or title XVI of the Social Security Act for the use and benefit of 
another individual, while acting in the capacity of a representative 
payee for that individual, to a use that such person knew or should 
have known was other than for the use and benefit of such other 
individual; or * * *.'' We believe that this more accurately tracks the 
amendment to section 1129 by section 111 of Public Law 108-203 and 
clarifies that a civil monetary penalty and/or assessment, may be 
imposed if the payment, or any part of the payment, in question was 
made to the representative payee for the use and benefit of another 
person. We changed the word ``beneficiary'' at the end of the section 
to ``such other individual'' as this change more accurately track the 
language of the legislation.
    (3) Section 498.100(b)(3) was previously section (b)(2) but was 
renumbered due to the amendments to sections 1129 and 1140. In 
addition, because we added a new section (b)(4), the word ``or'' was 
added to the end of Sec.  498.100(b)(3).

[[Page 28577]]

    (4) Section 498.100(b)(4) was added to state, ``With limited 
exceptions, charges a fee for a product or service that is available 
from SSA free of charge without including a written notice stating the 
product or service is available from SSA free of charge.'' We believe 
that separating section Sec.  498.100(b)(3) as it appeared in the NPRM 
into sections (b)(3) and (b)(4) more clearly and accurately reflects 
the amendment to section 1140 by section 204 of Public Law 108-203 to 
address anyone who charges a fee for a product or service that is 
available from SSA free of charge without including a written notice so 
stating.
    (5) Section 498.101, we deleted the phrase ``title XVI'' and 
inserted the phrase ``title VIII or title XVI'' in the definition of 
``material fact.'' The definition now reads, ``Material fact means a 
fact which the Commissioner of Social Security may consider in 
evaluating whether an applicant is entitled to benefits under title II 
or eligible for benefits or payments under title VIII or title XVI of 
the Social Security Act.'' We made this change to be consistent with 
other sections of the regulations wherein both title VIII and title XVI 
are mentioned together.
    (6) Section 498.102(a)(1)(ii), we inserted the word ``title'' 
before ``XVI'' to be consistent with the other sections of the 
regulations wherein title VIII and title XVI are mentioned together.
    (7) Section 498.102(c), we changed the word ``whom'' to ``who'' to 
be grammatically correct. We also deleted the phrase ``an advertisement 
or other item'' and inserted the phrase ``a solicitation, 
advertisement, or other communication'' before the phrase ``was 
authorized, approved, or endorsed * * *''
    (8) Section 498.102(d), we deleted the phrase ``products or 
services'' after the word ``obtaining'' and inserted the phrase ``a 
product or service'' in order to be consistent with the use of the 
terms ``product or service'' in the remainder of subsection (d). We 
also deleted the word ``that'' before the phrase ``the Social Security 
Administration * * *''
    (9) Section 498.102(d)(1), we moved the phrase ``before the product 
or service is provided to the individual'' from the end of the sentence 
to after the phrase ``sufficient notice.'' The sentence now reads, 
``the person provides sufficient notice before the product or service 
is provided to the individual that the product or service is available 
free of charge and:'
    (10) Section 498.102(d)(1)(i), we deleted the phrase ``in printed 
solicitations or advertisements,'' and inserted the phrase ``in a 
printed solicitation, advertisement or other communication.'' We 
believe this is consistent with similar language in Sec.  498.102(c).
    (11) Section 498.102(d)(1)(ii), we deleted ``must be'' after the 
phrase ``such notice'' and inserted ``is'' after the phrase ``such 
notice.'' This parallels current section (i) that precedes this 
section.
    (12) Section 498.102(d)(2), we deleted the introductory phrase 
``Paragraph (d) of this section shall not apply to offers--'' and 
inserted the phrase, ``Civil monetary penalties will not be imposed 
under paragraph (d) of this section with respect to offers--* * *'' We 
believe this modification parallels the language in 498.102(c)(2).
    (13) Section 498.102(d)(2)(i), we inserted the word ``title'' 
before ``VIII'' and before ``XVI'' to be consistent with the other 
sections of the regulations wherein title II, title VIII and title XVI 
are mentioned together.
    (14) Section 498.103(b), we deleted the word ``wrongfully'' and 
inserted the phrase ``or any part thereof'' after the phrase ``converts 
such payment.'' We believe this accurately reflects the amendment to 
section 1129 by section 111 of Public Law 108-203 and is parallel to 
Sec.  498.102(b). The section now reads, ``Under Sec.  498.102(b), the 
Office of the Inspector General may impose a penalty of not more than 
$5,000 against a representative payee for each time the representative 
payee receives a payment under title II, title VIII, or title XVI of 
the Social Security Act for the use and benefit of another individual, 
and who converts such payment, or any part there of, to a use that such 
representative payee knew or should have known was other than for the 
use and benefit of such other individual.''
    (15) Section 498.103(c), we separated the section included in the 
NPRM into two sections, (c) and (d). We renumbered previous Sec.  
498.103(d) as (e). We believe that this clarifies the sections and is 
now parallel to Sec.  498.100(b), which states the purpose of the 
regulations. Section 498.103(c) now reads, ``Under Sec.  498.102(c), 
the Office of the Inspector General may impose a penalty of not more 
than $5,000 for each violation resulting from the misuse of Social 
Security Administration program, words, letters, symbols, or emblems 
relating to printed media and a penalty of not more than $25,000 for 
each violation in the case that such misuse related to a broadcast or 
telecast.'' Section 498.103(d) now reads, ``Under Sec.  498.102(d), the 
Office of the Inspector General may impose a penalty of not more than 
$5,000 for each violation resulting from insufficient notice relating 
to printed media regarding products or services provided free of charge 
by the Social Security Administration and a penalty of not more than 
$25,000 for each violation in the case that such insufficient notice 
relates to a broadcast or telecast.'' We have also deleted the word 
``in'' before ``printed media,'' in Sec.  498.103(d) and inserted the 
phrase ``relating to'' before ``printed media.'' This parallels Sec.  
498.103(c).
    (16) Section 498.103(e) (1), we deleted the word ``or'' between 
``solicitation'' and ``advertisement'' and inserted the phrase ``or 
other communication'' after advertisement. This parallels the use of 
this phrase in Sec.  498.102.(c) and Sec.  498.102(d)(1)(i). Also, in 
Sec.  498.103(e) (1) and (2), we inserted ``or (d)'' after the phrase 
``Sec.  498.102(c).'' We made this change to accurately reflect the 
amendment to section 1140 by section 204 of the SSPA to address anyone 
who charges a fee for a product or service that is available from SSA 
free of charge without including a written notice so stating.
    (17) Section 498.104, we separated the first sentence of the NPRM 
into two sentences. We believe the revised language states more clearly 
the instances when an assessment may be imposed more closely tracks the 
language of the legislation. Now the section reads: ``A person subject 
to a penalty determined under Sec.  498.102(a) may be subject, in 
addition, to an assessment of not more than twice the amount of 
benefits or payments paid under title II, title VIII or title XVI of 
the Social Security Act as a result of the statement, representation, 
omission, or withheld disclosure of a material fact which was the basis 
for the penalty. A representative payee subject to a penalty determined 
under Sec.  498.102(b) may be subject, in addition, to an assessment of 
not more than twice the amount of benefits or payments received by the 
representative payee for the use and benefit of another individual and 
converted to a use other than for the use and benefit of such other 
individual. An assessment is in lieu of damages sustained by the United 
States because of such statement, representation, omission, withheld 
disclosure of a material fact, or conversion, as referred to in 
Sec. Sec.  498.102(a) and (b).'' In the sentence regarding 
representative payee, we also deleted the word ``person'' and inserted 
``individual'' in its place, inserted the phrase ``use and'' before the 
word ``benefit'' and deleted the word ``the'' before ``individual'' and 
inserted the phrase ``such other'' in its place. We

[[Page 28578]]

believe this more closely tracks the language of the legislation.
    (18) Section 498.106(b), we deleted ``Sec.  498.103(c),'' and 
inserted ``Sec. Sec.  498.103(c) and (d),''. This is consistent with 
and parallels the modifications we made to section Sec.  498.103(c) 
from the NPRM wherein we separated Sec.  498.103(c) into subsections 
(c) and (d).
    (19) Section 498.109(a)(2), we deleted the word ``or'' before 
``other actions.'' We believe the deletion of these terms more clearly 
expresses the intent of the legislation.
    (20) Section 498.128(c)(1), we added an ``s'' to ``Violation'' to 
make the term grammatically correct. We also deleted ``and'' in the 
phrase ``under Sec. Sec.  498.102(c) and (d)'' and inserted ``under 
Sec. Sec.  498.102(c) or (d).'' We believe this modification addresses 
potential confusion arising from the section as previously written 
regarding the scope of the section and reflects the intent of the SSPA 
to provide authority to the Commissioner to compromise and collect a 
penalty imposed under either Sec. Sec.  498.102(c) or (d).

Public Comments

    The 60-day public comment period closed on May 23, 2005. We 
received comments on the NPRM from 2 organizations, the National 
Organization of Social Security Claimants' Representatives (NOSSCR) and 
the Disability Law Center, Inc. Both commenters raised similar concerns 
that the regulations were overly broad and that there were unaddressed 
problems which would increase the likelihood of an overbroad 
application of these rules to claimants and their representatives. For 
the reasons discussed below, the public comments we received in 
response to the NPRM have not led us to make substantive, non-technical 
changes in these final rules.
    Comment: The commenters raised concerns that the proposed 
regulations were overbroad in defining when a person may be subject to 
a civil monetary penalty and assessment, as applicable, for withholding 
the disclosure of a fact which the person knows or should know is 
material to the determination of any initial or continuing right to 
Social Security benefits if the person knows or should know, that the 
withholding of the disclosure is misleading. The commenters are 
concerned that this proposed rule could conflict with State Bar rules 
regarding the attorney's duty of confidentiality to the client and not 
to act in a way that is adverse to the client's interest, presenting a 
dilemma for attorney representatives. The commenters recommended that 
we eliminate to the extent possible the potential for such conflicts.
    Response: We understand the commenters' concern of placing attorney 
representatives in the potential position of risking sanctions for 
violating State Bar rules or facing the imposition of a civil monetary 
penalty and/or assessment under these rules. However, after careful 
review of the commenters' comments, we do not believe further 
modification of the rules is warranted.
    As acknowledged in NOSSCR's comments, representatives of claimants 
before SSA operate under a ``Prohibited Action'' in SSA's Standards of 
Conduct not to ``* * * knowingly make or present, or participate in the 
making or representation of, false or misleading oral or written 
statements, assertions or representations about a material fact or law 
concerning a matter within our jurisdiction * * *.'' See 20 CFR 
404.1740(c)(3) and 416.1540(c)(3). Furthermore, while attorney 
representatives are also bound by State codes of professional conduct 
that mandate affirmative duties, such as the duties to maintain client 
confidentiality and provide zealous representation, those rules are not 
intended to enable an attorney to violate the law.
    One of the commenters referred to SSA's final rules issued in 1998 
governing the conduct of all claimants' representatives, both attorneys 
and non-attorneys, who appear before SSA. At that time, SSA received 
public comments questioning SSA's authority to issue such regulations 
because standards regulating the conduct of attorneys were already set 
out in State laws. In its response, SSA noted that in Sperry v. State 
of Florida, 373 U.S. 379 (1963), a case involving State bar membership 
rules, the Supreme Court held that the Federal government had pre-
emptive powers over States' legislative and judicial authorities when 
acting under valid Federal regulations. Accordingly, SSA disagreed with 
the contention that it lacked authority to issue the regulations and 
stated that its regulations ``would supersede any inconsistent State or 
local rules.'' See 63 Fed. Reg. 41404, 41408 (August 4, 1998). We 
believe that SSA's 1998 response addresses the comments regarding the 
current rules.
    Further, in 2000, the Department of Justice, Immigration and 
Naturalization Service (INS), promulgated a final rule to amend ``the 
rules and procedures concerning professional conduct for attorneys and 
representatives (practitioners) who appear before the Executive Office 
for Immigration Review (EOIR) and/or the Immigration and Naturalization 
Service (the Service).'' See 65 FR 39513-39534 (June 27, 2000). Several 
commenters on the INS notice of proposed rulemaking indicated that it 
was ``inappropriate for Federal agencies to unilaterally impose a 
national disciplinary scheme where states should have sole jurisdiction 
and, further that Federal regulations concerning discipline [would] 
cause confusion and uncertainty with regard to State rules. Others 
objected that the rule subject[ed] practitioners to being disciplined 
twice for the same conduct--once by the Federal government and once by 
the State bar. Others believed that this rule [was] an unnecessary and 
impermissible intrusion into the state law licensure process and `to 
bar a lawyer from practice before an agency [was] unheard of.' ''
    In its response, the INS cited to the 1998 SSA regulations 
discussed above and the case of Sperry v. State of Florida, 373 U.S. 
379 (1963), to support the promulgation of its rules. In part, INS 
stated as follows:

    For the reasons explained in SSA's supplementary information to 
their disciplinary rule, EOIR and the Service should not be expected 
or required to apply numerous local rules, or local interpretations 
of the rules, to problems that require national uniformity. Applying 
local rules or local interpretations in lieu of a national standard 
would leave immigration attorneys in one State subject to 
discipline, while possibly exempting immigration attorneys in 
another State.

65 FR 39513, 39524 (June 27, 2000).
    INS further stated, ``[s]imilar to the SSA program, practice before 
EOIR and the Service is not limited to attorneys, but includes non-
attorneys who may not be subject to State bar rules. EOIR and the 
Service believe that all practitioners, attorneys and non-attorneys 
alike, must be held to uniform standards of professional conduct in 
immigration proceedings * * *.'' Id. We believe the INS's response to 
these comments also applies to the comments to our rule.
    We would also note that section 1129 provides that a civil monetary 
penalty and assessment, as applicable, may be imposed against ``any 
person (including an organization, agency, or other entity) * * *'' 
``Person'' is defined in section 1101(a)(3) of the Social Security Act 
(42 U.S.C. 1301(a)(3)) as ``an individual, a trust or estate, a 
partnership, or a corporation.'' The Social Security Act does not 
exempt attorneys from this definition.
    As discussed above, State bar rules differ in specific language and 
format among the 50 States, the District of

[[Page 28579]]

Columbia, and Puerto Rico. The intent of these regulations is to 
provide uniform guidance. We do not believe these rules will unduly 
burden the attorney representative by placing him/her in the position 
of either risking sanctions under the appropriate State Bar or facing 
the imposition of a civil monetary penalty and assessment in lieu of 
damages. As is stated in Rule 1.2(d) of the American Bar Association's 
Model Rules of Professional Conduct,

    A lawyer shall not counsel a client to engage, or assist a 
client, in conduct that the lawyer knows is criminal or fraudulent, 
but a lawyer may discuss the legal consequences of any proposed 
course of conduct with a client and may counsel or assist a client 
to make a good faith effort to determine the validity, scope, 
meaning or application of the law.

    Moreover, Rule 3.3 of the American Bar Association's Model Rules of 
Professional Conduct provides that a lawyer must be candid toward the 
tribunal. Rule 3.3(a)(1) states that ``a lawyer shall not knowingly * * 
* make a false statement of fact of law to a tribunal or fail to 
correct a false statement of material fact or law previously made to 
the tribunal by the lawyer * * *.''
    In determining whether to impose a civil monetary penalty and/or 
assessment and, if so, the amount, the OIG will take into account the 
five factors listed in 20 CFR 498.106(a), which include the degree of 
culpability of the person committing the offense and such other matters 
as justice may require. In making this determination, the OIG may 
consider, to the extent relevant, actions taken by an attorney 
representative pursuant to a State Bar code of professional conduct.
    Comment: The commenters also raised concerns that the proposed 
regulations were overbroad and would harm claimants whose failure to 
notify SSA of information was not done for the purpose of improperly 
obtaining benefits but resulted simply from not understanding the 
rules. In this vein, one commenter stated that we should provide 
guidance for determining whether the person ``knew or should have 
known,'' because knowledge is a critical factor for determining whether 
there is a basis for imposing a civil monetary penalty. See proposed 
rule Sec.  498.102(a)(2) and (3). It was suggested that we include a 
provision that requires consideration of physical or mental limitation 
and educational or linguistic limitation, including lack of facility 
with the English language.
    Response: We agree that whether the person ``knew or should have 
known'' is a critical factor in determining whether there is a basis 
for imposing a civil monetary penalty. Senate Committee Report 108-176, 
accompanying Public Law 108-203, states in its analysis of this 
amendment, at pages 13-14, that this amendment is not intended to apply 
against individuals whose failure to come forward was not for the 
purpose of improperly obtaining or continuing to receive benefits.
    In determining whether to impose a civil monetary penalty and/or 
assessment in lieu of damages and if so, the amount, of any civil 
monetary penalty and assessment, the OIG will take into account the 
following five factors: (1) The nature of the statements and 
representations and the circumstances under which they occurred; (2) 
the degree of culpability; (3) the history of prior offenses; (4) the 
financial condition of the person who committed the offense; and (5) 
such other matters as justice may require. See 20 CFR 498.106(a). These 
factors would include consideration of any information suggesting that 
the person's failure to disclose information was not done for the 
purpose of improperly obtaining benefits, such as any physical or 
mental limitations and educational or linguistic limitations, including 
lack of facility with the English language. We believe this addresses 
the concerns of the commenters and is consistent with the analysis of 
the amendment in the Senate Committee Report 108-176. Therefore, we 
believe the regulations are not overbroad and that additional guidance 
is not necessary.

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these rules meet the requirements for a significant 
regulatory action under Executive Order 12866, as amended by Executive 
Order 13258. Thus, the rules were subject to OMB review.

Regulatory Flexibility Act

    We have determined that no regulatory impact analysis is required 
for these regulations. While the penalties and assessments which the 
OIG could impose as a result of the amendments to sections 1129 and 
1140 of the Act might have a slight impact on small entities, we do not 
anticipate that a substantial number of small entities will be 
significantly affected by these rules. Based on our determination, the 
Inspector General certifies that these final regulations will not have 
a significant impact on a substantial number of small business 
entities. These final rules reflect legislative amendments to 
previously existing sections 1129 and 1140 of the Act and do not 
substantially alter the effect of these sections on small business 
entities. Therefore we have not prepared a regulatory flexibility 
analysis.

Paperwork Reduction Act

    These final regulations impose no new reporting or recordkeeping 
requirements requiring OMB clearance.

(Catalog of Federal Domestic Assistance Program Nos. 96.001 Social 
Security-Disability Insurance, 96.002 Social Security-Retirement 
Insurance, 96.003 Social Security-Survivors Insurance, 96.006 
Supplemental Security Income, 96.020 Special Benefits for Certain 
World War II Veterans)

List of Subjects in 20 CFR Part 498

    Administrative practice and procedure, Fraud, Penalties.

    Dated: May 10, 2006.
Patrick P. O'Carroll, Jr.,
Inspector General, Social Security Administration.

0
For the reasons set out in the preamble, we are amending part 498 of 
chapter III of title 20 of the Code of Federal Regulations as follows:

PART 498--CIVIL MONETARY PENALTIES, ASSESSMENTS AND RECOMMENDED 
EXCLUSIONS

0
1. The authority citation for part 498 continues to read as follows:

    Authority: Secs. 702(a)(5), 1129 and 1140 of the Social Security 
Act (42 U.S.C. 902(a)(5), 1320a-8 and 1320b-10).


0
2. Section 498.100 is amended by revising paragraph (b)(1); by 
redesignating paragraph (b)(2) as paragraph (b)(3) and adding ``; or'' 
at the end of newly designated paragraph (b)(3); and by adding new 
paragraphs (b)(2) and (b)(4) to read as follows:


Sec.  498.100  Basis and purpose.

* * * * *
    (b) * * *
    (1) Make or cause to be made false statements or representations or 
omissions or otherwise withhold disclosure of a material fact for use 
in determining any right to or amount of benefits under title II or 
benefits or payments under title VIII or title XVI of the Social 
Security Act;
    (2) Convert any payment, or any part of a payment, received under 
title II, title VIII, or title XVI of the Social Security Act for the 
use and benefit of another individual, while acting in the capacity of 
a representative payee for that individual, to a use that such person 
knew or should have known was

[[Page 28580]]

other than for the use and benefit of such other individual; or
* * * * *
    (4) With limited exceptions, charge a fee for a product or service 
that is available from SSA free of charge without including a written 
notice stating the product or service is available from SSA free of 
charge.

0
3. Section 498.101 is amended by revising the definition of ``Material 
fact'' and adding the new definition for ``Otherwise withhold 
disclosure'' in alphabetical order to read as follows:


Sec.  498.101  Definitions.

* * * * *
    Material fact means a fact which the Commissioner of Social 
Security may consider in evaluating whether an applicant is entitled to 
benefits under title II or eligible for benefits or payments under 
title VIII or title XVI of the Social Security Act.
    Otherwise withhold disclosure means the failure to come forward to 
notify the SSA of a material fact when such person knew or should have 
known that the withheld fact was material and that such withholding was 
misleading for purposes of determining eligibility or Social Security 
benefit amount for that person or another person.
* * * * *

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4. Section 498.102 is revised to read as follows:


Sec.  498.102  Basis for civil monetary penalties and assessments.

    (a) The Office of the Inspector General may impose a penalty and 
assessment, as applicable, against any person who it determines in 
accordance with this part--
    (1) Has made, or caused to be made, a statement or representation 
of a material fact for use in determining any initial or continuing 
right to or amount of:
    (i) Monthly insurance benefits under title II of the Social 
Security Act; or
    (ii) Benefits or payments under title VIII or title XVI of the 
Social Security Act; and
    (2)(i) Knew, or should have known, that the statement or 
representation was false or misleading, or
    (ii) Made such statement with knowing disregard for the truth; or
    (3) Omitted from a statement or representation, or otherwise 
withheld disclosure of, a material fact for use in determining any 
initial or continuing right to or amount of benefits or payments, which 
the person knew or should have known was material for such use and that 
such omission or withholding was false or misleading.
    (b) The Office of the Inspector General may impose a penalty and 
assessment, as applicable, against any representative payee who 
receives a payment under title II, title VIII, or title XVI for the use 
and benefit of another individual and who converts such payment, or any 
part thereof, to a use that such representative payee knew or should 
have known was other than for the use and benefit of such other 
individual.
    (c) The Office of the Inspector General may impose a penalty 
against any person who it determines in accordance with this part has 
made use of certain Social Security program words, letters, symbols, or 
emblems in such a manner that the person knew or should have known 
would convey, or in a manner which reasonably could be interpreted or 
construed as conveying, the false impression that a solicitation, 
advertisement or other communication was authorized, approved, or 
endorsed by the Social Security Administration, or that such person had 
some connection with, or authorization from, the Social Security 
Administration.
    (1) Civil monetary penalties may be imposed for misuse, as set 
forth in paragraph (c) of this section, of--
    (i) The words ``Social Security,'' ``Social Security Account,'' 
``Social Security Administration,'' ``Social Security System,'' 
``Supplemental Security Income Program,'' ``Death Benefits Update,'' 
``Federal Benefit Information,'' ``Funeral Expenses,'' ``Final 
Supplemental Program,'' or any combination or variation of such words; 
or
    (ii) The letters ``SSA,'' or ``SSI,'' or any other combination or 
variation of such letters; or
    (iii) A symbol or emblem of the Social Security Administration 
(including the design of, or a reasonable facsimile of the design of, 
the Social Security card, the check used for payment of benefits under 
title II, or envelopes or other stationery used by the Social Security 
Administration) or any other combination or variation of such symbols 
or emblems.
    (2) Civil monetary penalties will not be imposed against any agency 
or instrumentality of a State, or political subdivision of a State, 
that makes use of any words, letters, symbols or emblems of the Social 
Security Administration or instrumentality of the State or political 
subdivision.
    (d) The Office of the Inspector General may impose a penalty 
against any person who offers, for a fee, to assist an individual in 
obtaining a product or service that the person knew or should have 
known the Social Security Administration provides free of charge, 
unless:
    (1) The person provides sufficient notice before the product or 
service is provided to the individual that the product or service is 
available free of charge and:
    (i) In a printed solicitation, advertisement or other 
communication, such notice is clearly and prominently placed and 
written in a font that is distinguishable from the rest of the text;
    (ii) In a broadcast or telecast such notice is clearly communicated 
so as not to be construed as misleading or deceptive.
    (2) Civil monetary penalties will not be imposed under paragraph 
(d) of this section with respect to offers--
    (i) To serve as a claimant representative in connection with a 
claim arising under title II, title VIII, or title XVI; or
    (ii) To prepare, or assist in the preparation of, an individual's 
plan for achieving self-support under title XVI.
    (e) The use of a disclaimer of affiliation with the United States 
Government, the Social Security Administration or its programs, or any 
other agency or instrumentality of the United States Government will 
not be considered as a defense in determining a violation of section 
1140 of the Social Security Act.

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5. Section 498.103 is revised to read as follows:


Sec.  498.103  Amount of penalty.

    (a) Under Sec.  498.102(a), the Office of the Inspector General may 
impose a penalty of not more than $5,000 for each false statement or 
representation, omission, or receipt of payment or benefit while 
withholding disclosure of a material fact.
    (b) Under Sec.  498.102(b), the Office of the Inspector General may 
impose a penalty of not more than $5,000 against a representative payee 
for each time the representative payee receives a payment under title 
II, title VIII, or title XVI of the Social Security Act for the use and 
benefit of another individual, and who converts such payment, or any 
part thereof, to a use that such representative payee knew or should 
have known was other than for the use and benefit of such other 
individual.
    (c) Under Sec.  498.102(c), the Office of the Inspector General may 
impose a penalty of not more than $5,000 for each violation resulting 
from the misuse of Social Security Administration program words, 
letters, symbols, or emblems relating to printed media and a penalty of 
not more than $25,000 for each violation in the case that such misuse 
related to a broadcast or telecast.

[[Page 28581]]

    (d) Under Sec.  498.102(d), the Office of the Inspector General may 
impose a penalty of not more than $5,000 for each violation resulting 
from insufficient notice relating to printed media regarding products 
or services provided free of charge by the Social Security 
Administration and a penalty of not more than $25,000 for each 
violation in the case that such insufficient notice relates to a 
broadcast or telecast.
    (e) For purposes of paragraphs (c) and (d) of this section, a 
violation is defined as--
    (1) In the case of a mailed solicitation, advertisement, or other 
communication, each separate piece of mail which contains one or more 
program words, letters, symbols, or emblems or insufficient notice 
related to a determination under Sec.  498.102(c) or (d); and
    (2) In the case of a broadcast or telecast, each airing of a single 
commercial or solicitation related to a determination under Sec.  
498.102(c) or (d).

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6. Section 498.104 is revised to read as follows:


Sec.  498.104  Amount of assessment.

    A person subject to a penalty determined under Sec.  498.102(a) may 
be subject, in addition, to an assessment of not more than twice the 
amount of benefits or payments paid under title II, title VIII or title 
XVI of the Social Security Act as a result of the statement, 
representation, omission, or withheld disclosure of a material fact 
which was the basis for the penalty. A representative payee subject to 
a penalty determined under Sec.  498.102(b) may be subject, in 
addition, to an assessment of not more than twice the amount of 
benefits or payments received by the representative payee for the use 
and benefit of another individual and converted to a use other than for 
the use and benefit of such other individual. An assessment is in lieu 
of damages sustained by the United States because of such statement, 
representation, omission, withheld disclosure of a material fact, or 
conversion, as referred to in Sec.  498.102(a) and (b).

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7. Section 498.106 is amended by revising paragraphs (a) introductory 
text, (a)(1), and (b) introductory text to read as follows:


Sec.  498.106  Determinations regarding the amount or scope of 
penalties and assessments.

    (a) In determining the amount or scope of any penalty and 
assessment, as applicable, in accordance with Sec.  498.103(a) and (b) 
and 498.104, the Office of the Inspector General will take into 
account:
    (1) The nature of the statements, representations, or actions 
referred to in Sec.  498.102(a) and (b) and the circumstances under 
which they occurred;
* * * * *
    (b) In determining the amount of any penalty in accordance with 
Sec.  498.103(c) and (d), the Office of the Inspector General will take 
into account--
* * * * *

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8. Section 498.109 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  498.109  Notice of proposed determination.

    (a) * * *
    (2) A description of the false statements, representations, other 
actions (as described in Sec.  498.102(a) and (b)), and incidents, as 
applicable, with respect to which the penalty and assessment, as 
applicable, are proposed;
* * * * *

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9. Section 498.114 is amended by revising paragraph (a) to read as 
follows:


Sec.  498.114  Collateral estoppel.

* * * * *
    (a) Is against a person who has been convicted (whether upon a 
verdict after trial or upon a plea of guilty or nolo contendere) of a 
Federal or State crime; and
* * * * *

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10. Section 498.128 is amended by revising paragraphs (b), (c)(1), and 
(d)(1) to read as follows:


Sec.  498.128  Collection of penalty and assessment.

* * * * *
    (b) In cases brought under section 1129 of the Social Security Act, 
a penalty and assessment, as applicable, imposed under this part may be 
compromised by the Commissioner or his or her designee and may be 
recovered in a civil action brought in the United States District Court 
for the district where the violation occurred or where the respondent 
resides.
    (c) * * *
    (1) Violations referred to in Sec.  498.102(c) or (d) occurred; or
* * * * *
    (d) * * *
    (1) Monthly title II, title VIII, or title XVI payments, 
notwithstanding section 207 of the Social Security Act as made 
applicable to title XVI by section 1631(d)(1) of the Social Security 
Act;
* * * * *
[FR Doc. 06-4594 Filed 5-16-06; 8:45 am]
BILLING CODE 4191-02-P