General Administrative Regulations; Administrative Remedies for Non-Compliance, 27981-27988 [E7-9418]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 72, Number 96 (Friday, May 18, 2007)]
[Proposed Rules]
[Pages 27981-27988]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9418]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 72, No. 96 / Friday, May 18, 2007 / Proposed 
Rules

[[Page 27981]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

RIN 0563-AB73


General Administrative Regulations; Administrative Remedies for 
Non-Compliance

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend 7 CFR part 400, subpart R to clarify existing administrative 
remedies, add additional administrative remedies that are available as 
a result of enactment of section 515(h) of the Federal Crop Insurance 
Act (Act) (7 U.S.C. 1515(h)), and make such other changes as are 
necessary to implement the provisions of section 515(h) of the Act.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business on June 18, 2007 and will be 
considered when the rule is to be made final.

ADDRESSES: Interested persons are invited to submit comments, titled 
``Administrative Remedies for Non-Compliance'', by any of the following 
methods:
     By Mail to: Deputy Administrator for Compliance, Risk 
Management Agency, United States Department of Agriculture, 1400 
Independence Avenue, SW., Stop 0806, Washington, DC 20250-0806.
     E-mail: cynthia.simpson@rma.usda.gov.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     A copy of each response will be available for public 
inspection and copying from 8 a.m. to 4:30 p.m., EST, Monday through 
Friday, except holidays, at the above address.

FOR FURTHER INFORMATION CONTACT: Michael Hand, Deputy Administrator for 
Compliance, at the address listed above, telephone (202) 720-0642.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be non significant for the 
purposes of Executive Order 12866 and, therefore, has not been reviewed 
by the Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    This rule does not constitute a collection of information under the 
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35).

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local, and 
tribal governments or the private sector. Therefore, this rule is not 
subject to the requirements of sections 202 and 205 of UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. All 
similarly situated participants are required to comply with the same 
standard of conduct contained in the Act, the regulations published at 
7 CFR chapter IV, the crop policies, and the applicable procedures. For 
example, any producer, whether growing 10 acres or 10,000 acres, 
submits the same documentation for insurance and for a claim. All 
agents, whether selling and servicing five policies or a hundred and 
five policies, are required to perform the same tasks for each. The 
consequences for failure to comply with the standards of conduct are 
also the same for all participants and other persons regardless of the 
size of their business. A Regulatory Flexibility Analysis has not been 
prepared since this regulation does not have a significant impact on a 
substantial number of small entities, and, therefore, this regulation 
is exempt from the provisions of the Regulatory Flexibility Act (5 
U.S.C. 605).

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988 on civil justice reform. The provisions of this rule will 
not have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

    Prior to the enactment of the Agricultural Risk Protection Act of 
2000 (ARPA), pursuant to section 506(n) of the Act (7 U.S.C. 1506(n)), 
FCIC had the election of disqualifying or imposing a $10,000 civil fine 
on a person who willfully and intentionally made a false

[[Page 27982]]

statement. With respect to the disqualification, the person was only 
disqualified from purchasing crop insurance or receiving noninsured 
crop disaster assistance (NAP) benefits. This meant the 
disqualification was only effective against producers and it would not 
apply to other program participants such as agents, loss adjusters, 
approved insurance providers or their employees or contractors or other 
persons who may provide information to a program participant. With 
respect to the imposition of civil fines, either the fine was 
insignificant in relation to the wrongful conduct or in many cases the 
person did not have the assets or resources to pay the fine so its 
imposition was meaningless.
    Through the enactment of section 515(h) of the Act in ARPA, 
Congress significantly strengthened FCIC's ability to combat fraud, 
waste and abuse by establishing a strong system of administrative 
actions that are now applicable to all participants in the Federal crop 
insurance program. Now, producers, agents, loss adjusters, approved 
insurance providers and their employees and contractors, and any other 
persons who willfully and intentionally provide any false or inaccurate 
information to FCIC or to an approved insurance provider with respect 
to a policy or plan of insurance are subject to remedial administrative 
remedies.
    If disqualified, participants in the Federal crop insurance program 
will be precluded from such participation. This means producers will 
not be able to insure their crops, agents and loss adjusters will no 
longer be able sell, service or adjust crop insurance policies, 
approved insurance providers would be precluded from holding 
reinsurance agreements related to insurance offered under the authority 
of the Act, and other persons, employees or contractors of approved 
insurance providers will not be able to purchase crop insurance or be 
affiliated with any entity participating in the crop insurance program 
for the period of disqualification.
    In addition to disqualification from participating in the Federal 
crop insurance program, producers will be disqualified from receiving 
benefits under the Agricultural Market Transition Act (7 U.S.C. 7201 et 
seq.), including NAP; the Agricultural Act of 1949 (7 U.S.C. 1421 et 
seq.); the Commodity Credit Corporation Charter Act (15 U.S.C. 714 et 
seq.); the Agricultural Adjustment Act of 1938 (7 U.S.C. 1281 et seq.); 
Title XII of the Food Security Act of 1985 (16 U.S.C. 3801 et seq.); 
the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et 
seq.); and any law that provides assistance to a producer of an 
agricultural commodity affected by a crop loss or a decline in the 
prices of agricultural commodities. This will allow greater protection 
of the interests of the government by preventing persons that commit 
wrongful acts in one governmental program from receiving program 
benefits from other governmental programs.
    Section 515(h) of the Act also authorizes disqualification of 
producers, agents, loss adjusters, approved insurance providers and 
their employees and contractors, and other persons if such person 
willfully and intentionally fails to comply with a requirement of FCIC. 
One purpose of this proposed rule is to define what constitutes a 
``requirement of FCIC.''
    In addition, civil fines have been increased. Previously only a 
civil fine of $10,000 could be imposed, regardless of how many times 
the person willfully and intentionally submits false or inaccurate 
information or fails to comply with a requirement of FCIC. Now a civil 
fine can be imposed for each violation and the civil fine is the 
greater of $10,000 or the amount of pecuniary gain obtained as a result 
of the false or inaccurate information provided or the noncompliance 
with a requirement of the Act. For example, a producer that submits a 
false claim for indemnity and collects $50,000 can be required to repay 
the $50,000 overpayment and an additional $50,000 in a civil fine, for 
a total of $100,000 owed, or an agent that submitted 20 false 
production reports that increased the amount of indemnities producers 
collected by $8,000 per producer can be required to pay a civil fine of 
$200,000. Like the previous administrative sanction provisions, the 
gravity of the violation must be taken into consideration when 
determining the appropriate term of disqualification or civil fine.
    The proposed changes to subpart R are as follows:

 1. Heading

    FCIC is proposing to replace the heading ``Subpart R--Sanctions'' 
with ``Administrative Remedies for Non-Compliance''. FCIC's policy 
underlying administrative actions is the protection of the public 
interest from potential harm from persons who have abused the program, 
maintaining program integrity, and fostering public confidence in the 
program. Therefore, ``Administrative Remedies for Non-Compliance'' is a 
more accurate title for this subpart.

 2. Section 400.451--General

    FCIC is proposing to revise paragraph (a) to add a reference to 
section 515(h) of the Act, which authorizes disqualifications and civil 
fines.
    FCIC is proposing to revise paragraph (b) to add the other program 
participants and other persons now covered under section 515(h) of the 
Act, including producers, agents, loss adjusters, approved insurance 
providers and their employees and contractors, and other persons who 
may submit information related to the Federal crop insurance program. 
In the past, administrative remedies for the most part targeted a 
limited segment of wrongdoers in the crop insurance industry, the 
producer, and there were often inadequate administrative remedies 
applicable to other persons who committed fraud, waste, and abuse in 
the Federal crop insurance program. As a result of the enactment of 
section 515(h) of the Act, administrative sanctions are now applicable 
to all program participants and persons who may provide information 
related to the crop insurance program.
    FCIC is proposing to revise paragraph (c) to make minor editorial 
changes for clarity.
    FCIC is proposing to revise paragraph (d) to clarify that with 
respect to the submission of false or inaccurate statement, this rule 
is applicable to such conduct occurring after June 20, 2000, and with 
respect to failure to comply with a requirement of FCIC, this rule is 
applicable to such conduct occurring on and after the date this rule 
becomes effective.
    FCIC is proposing to add a new paragraph (e) to clarify that the 
purpose of the remedial actions authorized in this subpart are for the 
protection of the public interest from potential harm from persons who 
have abused the Federal crop insurance program, maintaining program 
integrity, and fostering public confidence in the program. The 
Government does not want to do business with persons who abuse its 
programs.

3. Section 400.452--Definitions

    FCIC is proposing to add definitions for terms used in subpart R. 
Specifically, definitions have been added for the terms ``Act,'' 
``agency,'' ``agent,'' ``approved insurance provider,'' ``affiliate,'' 
``agricultural commodity,'' ``FCIC,'' ``managing general agent,'' 
``participant,'' ``person,'' ``policy,'' ``preponderance of the 
evidence,'' ``principal,'' ``producer,'' ``requirement of FCIC,'' 
``Standard Reinsurance Agreement,'' ``violation,''

[[Page 27983]]

and ``willful and intentional.'' Given that the remedial actions apply 
to all participants in the Federal crop insurance program, it is 
necessary to identify who qualifies as participants, such as producers, 
agencies, agents, approved insurance providers, and managing general 
agents since such persons or entities are now subject to the remedial 
actions in this subpart. The remedial actions can also apply to persons 
who are not participating in the Federal crop insurance program, but 
provide information that constitutes a willful and intentional 
violation so such persons must also be identified. In addition, it is 
necessary to define a ``requirement of FCIC'' to distinguish 
requirements of FCIC that may be contained in policy, the Standard 
Reinsurance Agreement or procedure, for which there are generally 
adequate remedies available for the breach, from violations of 
requirements, such as cease and desist letters, letters or memoranda 
requiring that specific action be taken, or violations of policy, the 
Standard Reinsurance Agreement or procedure so egregious that remedial 
action is appropriate. Further, disqualification and civil fines are 
imposed upon a showing of a willful and intentional violation. 
Therefore, it is necessary to specify what constitutes willful and 
intentional conduct. It is also important that the standard of proof be 
identified for disqualifications and civil fines. Preponderance of the 
evidence was determined to be appropriate because this is the standard 
most commonly used by the government for imposition of similar 
administrative remedies. Most of the definitions will refer to terms 
and definitions contained in other regulations, such as the Common Crop 
Insurance Policy Basic Provisions (7 CFR 457.8) to ensure consistency 
and eliminate the need to revise multiple regulations when the 
definition is changed.

4. Section 400.454--Disqualification and Civil Fines

    FCIC is proposing to change the title of section 400.454 ``Civil 
penalties'' and to replace it with ``Disqualification and Civil 
Fines''. The procedures related to disqualifications have now been 
added to the section, which should be reflected in the title. Further, 
the Act now refers to civil fines, not civil penalties.
    FCIC is proposing to revise paragraph (a) to clarify that before 
any disqualification or civil fine is imposed, the participant or other 
person will have the opportunity for a hearing on the record. 
Proceedings will still be initiated by a complaint filed by the Manager 
of FCIC and the hearing will be before the Department's Administrative 
Law Judges in accordance with 7 CFR part 1, subpart H.
    In paragraph (a), FCIC is also proposing to clarify the effective 
date of disqualification. FCIC is proposing the effective date of 
disqualification will be the date specified in the order issued by the 
Administrative Law Judge, Judicial Officer, or settlement agreement. If 
no date is specified in such documents, the effective date will be the 
date the disqualification order or settlement agreement was issued or 
executed.
    In paragraph (a), FCIC is also proposing to use a standard of proof 
of preponderance of the evidence for disqualification and civil fines 
this is the standard most commonly used by the government for 
imposition of similar administrative remedies. FCIC is also proposing 
that disqualification and civil fines may be imposed even if FCIC or 
the approved insurance provider has not sustained a financial loss. 
There may be situations where the false statement or other misconduct 
has the potential to create losses or increase payments but the act was 
discovered before the payment could be made. There may also be 
situations where the misconduct can be used to collect a future 
indemnity, such as falsely reporting high yields to increase the 
guarantee and a possibility of a future loss. The fact that any 
information is falsely or inaccurately reported adversely affects 
program integrity and has the potential to create a situation where the 
public loses confidence in the program.
    FCIC is proposing to revise paragraph (b) to include the situations 
in section 515(h) of the Act where disqualification and civil fines may 
be imposed. Disqualification and civil fines may be imposed on a person 
based on either willfully and intentionally: (1) Providing false or 
inaccurate information; or (2) failing to comply with a requirement of 
FCIC. FCIC is proposing to clarify that the false or inaccurate 
information can be provided either through action (for example, falsely 
reporting the number of acres planted) or omission to act when there is 
knowledge that false or inaccurate information has or will be provided 
and no action is taken to prevent it (for example, the agent knows the 
planted acreage has been falsely reported and still submits the acreage 
reports with the false information). FCIC has determined that persons 
who knowingly allow false or inaccurate statements to be provided by 
others affect the program just as adversely as those who made the false 
or inaccurate statement in the first place.
    FCIC is proposing to revise paragraph (c) to specify the standards 
that will be applied when FCIC considers imposing a disqualification or 
civil fine. The gravity of the violation will be considered when 
determining whether to impose a disqualification or civil fine, the 
length of the disqualification or the amount, if any, of any civil 
fine. FCIC is also proposing that the maximum be imposed where there 
have been multiple violations in the same crop year or over several 
crop years, or a single violation that results in an overpayment of at 
least $100,000 or multiple acts of wrongdoings resulting in an 
overpayment in excess of $100,000. FCIC has determined that such 
conduct is so harmful to the program that the maximum remedial action 
is appropriate. However, these criteria are not all-inclusive and there 
may be other circumstances where the maximum actions are appropriate.
    FCIC is proposing to revise paragraph (d) to allow FCIC to impute 
the improper conduct of a person to another person, if such other 
person knew or should have known of the improper conduct, has the power 
to direct, manage, control or influence the activities of the person, 
participated in the improper conduct, or the improper conduct occurred 
in the connection with the person's duties on behalf of the person to 
whom the conduct is imputed or with such persons approval or 
acquiescence. There are situations where the person who provided the 
false or inaccurate information has been directed to do so by another 
person, a person participates in providing false or inaccurate 
information, such as obtaining the false information and passing it on 
to the person to provide to an approved insurance provider, or a person 
knows that false or inaccurate information is being provided and does 
nothing to stop it. The conduct of the person who directed the conduct, 
participated in providing it, or allowed it to be provided is just as 
detrimental to the crop insurance program. Therefore, to protect the 
public interest, such persons should also be disqualified or have civil 
fines imposed. This is the same as the imputing of conduct permitted 
with respect to suspensions and debarments under 7 CFR 3017.
Disqualifications
    FCIC proposes to revise paragraph (e) to incorporate the expanded 
range of administrative remedies made available under section 515(h) of 
the Act to include those that are applicable to: (1) Producers, which 
precludes many of the benefits provided to producers under other farm 
programs offered by the

[[Page 27984]]

Department; and (2) to other participants in the Federal crop insurance 
program and any other person who may provide information regarding the 
insured agricultural commodity, which precludes such participants or 
persons from participating in the Federal crop insurance program and 
receiving any benefit under the Act. This means such participants or 
persons could no longer hold a reinsurance agreement or be involved in 
any way in the sale, service or loss adjustment of a crop insurance 
policy and would also be precluded from purchasing a crop insurance 
policy or receiving any subsidy authorized under the Act.
    In paragraph (e), FCIC is also proposing to specify that 
disqualifications are for a period of not less than one year and not 
greater than five years from the date the disqualification is 
effective. Disqualifications of less than one year could be meaningless 
because existing policies can only be terminated at the next 
termination date. Disqualifications of less than one year could begin 
and end within the insurance period thereby making the 
disqualifications meaningless. Therefore, FCIC has determined that one 
year is the least period that could be effective.
    In addition, in paragraph (e) FCIC is proposing that 
disqualifications be imposed in one-year increments up to the maximum 
of five years. Most of the crop insurance policies and reinsurance 
agreements are in effect for one year. Disqualifications of different 
periods, such as 18 months, would be burdensome and create additional 
complexities in determining when persons are eligible again to 
participate in the program.
    In paragraph (e) FCIC is also proposing to specify that the names 
of all persons who are disqualified will be placed into FCIC's 
Ineligible Tracking System (ITS) and reported to the U.S. General 
Services Administration (GSA) in accordance with 7 CFR part 3017. GSA 
publishes a list of all persons who are determined ineligible in its 
Excluded Parties List System (EPLS). FCIC is also proposing to specify 
that if a person is doing business with a disqualified person, such 
person may also be subject disqualification. FCIC does not want to 
allow persons who have been disqualified to still participate in the 
program through the association with another person. FCIC also proposes 
to make it the responsibility of a person who participates in the 
Federal crop insurance program to routinely review ITS and EPLS to 
ensure that the person is not doing business with a disqualified 
person.
Civil Fines
    FCIC is proposing to revise paragraph (f) to specify that, in 
accordance with section 515(h) of the Act, the amount of civil fines 
will not exceed the greater of the amount of monetary gain or $10,000. 
In addition, in accordance with section 515(h) of the Act, FCIC is 
proposing that the civil fine will be imposed for each violation. FCIC 
is also proposing to clarify that a civil fine is a debt owed to FCIC 
and that the civil fine must be paid by the due date specified in the 
order issued by the Administrative Law Judge or Judicial Officer, as 
applicable, or the settlement agreement, or, if no due date is 
specified, it shall be 30 days after the date the order was issued or 
the settlement agreement signed by FCIC. This is to clarify that even 
though the amount of monetary gain may be owed to another person, for 
example, overpaid indemnity is owed to the approved insurance provider, 
the civil fine is always owed to FCIC. Further, there must be a due 
date because FCIC is proposing that failure to pay by the due date can 
subject the person to ineligibility to participate in the program. This 
is to provide a meaningful consequence for failure to comply with their 
responsibility to timely pay their civil fine. Without such 
consequences, persons may delay forever the payment of such fines.
    In paragraph (f), FCIC also proposes to specify that a civil fine 
imposed under this section is in addition to any debt that may be owed 
to FCIC or to any approved insurance provider, such as an overpaid 
indemnity, underpaid premium, or other amounts owed. This is necessary 
to distinguish between the civil fine, which could equal the amount 
owed, and the other amount owed. For example, if the producer was 
overpaid $12,000 and a civil fine of $12,000 is imposed, the producer 
owes a total of $24,000. FCIC is also proposing to specify that, in its 
sole discretion, FCIC may settle any civil fine imposed if it considers 
it appropriate or in the best interest of the USDA.
    In paragraph (f), FCIC is also proposing to specify that the 
ineligibility procedures established in subpart U are not applicable to 
ineligibility determinations for nonpayment of civil fines. This is 
necessary because subpart U applies to producers and there could be 
confusion regarding which procedures apply. FCIC is also proposing to 
specify that failure to timely pay a civil fine will make a person 
ineligible for further benefits under the Act until the civil fine is 
paid in full.
    FCIC proposed to add a new paragraph (g) that specifies the 
consequences of disqualification or if a person fails to timely pay the 
civil fines. FCIC is proposing that with respect to producers, all 
existing policies will automatically terminate as of the next 
termination date and that new application cannot be made until the next 
sales closing date after the period of disqualification has ended and 
the civil fine is paid in full. This is consistent with the 
requirements of other types of ineligibility and is necessary under the 
terms of the policy. With respect to all other persons, FCIC is 
proposing that such persons cannot be involved in any way with the crop 
insurance program. Further, if the person is an agent or agency, FCIC 
is proposing to require that the approved insurance provider assign the 
book to another agent or agency during the period of disqualification 
or ineligibility. This will ensure the continued, uninterrupted service 
of the policy. If the person is an approved insurance provider, FCIC is 
proposing that the approved insurance provider be precluded from 
selling any new policies or renewing any existing policies during the 
period of disqualification or ineligibility. FCIC has made this similar 
to a suspension under its reinsurance agreements because FCIC wants to 
make sure that there is uninterrupted service for all existing policies 
during the crop year, but that such policies be cancelled and 
transferred for subsequent crop years if the period of disqualification 
or ineligibility is still ongoing.
    FCIC is proposing to add a new paragraph (h) that specifies that 
the imposition of disqualification or a civil fine under this section 
is in addition to any other administrative or legal remedies available 
under this section or other applicable law including, but not limited 
to, debarment and suspension. Other remedies may serve a different 
purpose or have different consequences and may be equally appropriate 
for the wrongful conduct.

5. Section 400.455--Governmentwide Debarment and Suspension 
(Procurement)

    FCIC is proposing to delete paragraph (a) because it does not add 
to the content or clarity of the provision.
    FCIC is proposing to redesignate paragraph (b) as paragraph (a) and 
revise it to correct the cross references and better specify that the 
Federal Acquisition Regulation will be applied in debarment and 
suspension proceedings involving procurement

[[Page 27985]]

transactions and that the FCIC's Manager will have the authority to 
suspend or debar any person under this provision.
    FCIC is proposing to redesignate paragraph (c) as paragraph (b) and 
revise it to clarify that if suspended or debarred, the person may not 
contract with FCIC or the Risk Management Agency. This change is 
necessary because the Risk Management Agency administers the crop 
insurance program on behalf of FCIC. FCIC has also made other minor 
editorial changes for clarity and consistency.

6. Section 400.456--Governmentwide Debarment and Suspension 
(Nonprocurement)

    FCIC is proposing to delete paragraph (a) because it does not add 
to the content or clarity of the provision.
    FCIC is proposing to redesignate paragraph (b) as paragraph (a) and 
revise it to clarify that suspensions and debarments will be done in 
accordance with 7 CFR part 3017.
    FCIC is proposing to revise paragraph (b) to specify the effects of 
suspension and debarment involving non-procurement transactions. FCIC 
is proposing that if suspended or debarred, the person may not contract 
with FCIC or the Risk Management Agency. FCIC is also proposing that if 
the person is suspended or debarred, the person cannot contract with an 
approved insurance provider or its contractors. This is consistent with 
the provisions in 7 CFR 3017 that participants in the crop insurance 
program cannot do business with debarred or disqualified persons. FCIC 
is proposing that FCIC have the discretion to waive the provisions if 
the approved insurance provider has taken sufficient action to ensure 
that the suspended or debarred person will not be involved in any way 
with the crop insurance program or receive any benefits from any 
program under the Act.

7. Section 400.457--Program Fraud Civil Remedies Act

    FCIC is proposing to add new paragraph (d) to specify that civil 
fines and assessments imposed under this provision are in addition to 
any other remedies provided by law or imposed under this subpart. This 
paragraph was added to for clarification of how this statute interacts 
with other laws and regulations.

8. Section 400.458--Scheme or Device

    FCIC is proposing to delete paragraph (b)(2) because the 
nonstandard classification system is no longer used by FCIC and 
redesignate paragraph (b)(3) as paragraph (b)(2).

 9. Section 400.459--Indebtedness

    FCIC is proposing to remove this section from subpart R. The 
consequences for failure to pay a civil fine have been included in 
section 400.454. With respect to any other debt, the provisions in the 
policy and 7 CFR part 400, subpart U apply. Therefore, this provision 
is no longer needed.

List of Subjects in 7 CFR Part 400

    Administrative practice and procedure, Penalties.

Proposed Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation proposes to amend 7 CFR part 400 as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

    1. Revise the authority citation for 7 CFR 400, subpart R to read 
as follows:

    Authority: 7 U.S.C. 1506(l) and 7 U.S.C. 1515(h).

Subpart R--Administrative Remedies for Non-Compliance

    2. Revise the heading for subpart R to read as set forth above.
    3. Revise Sec.  400.451 to read as follows:


Sec.  400.451  General.

    (a) FCIC has implemented a system of administrative remedies to 
ensure program compliance and prevention of fraud, waste, and abuse 
within the Federal crop insurance program. Such remedies include civil 
fines and disqualifications under the authority of section 515(h) of 
the Act (7 U.S.C. 1515(h)); government-wide suspension and debarment 
under the authority of 48 CFR part 9, 48 CFR part 409, and 7 CFR part 
3017; and civil fines and assessments under the authority of the 
Program Fraud Civil Remedies Act (31 U.S.C. 3801-3812).
    (b) The provisions of this subpart apply to all participants in the 
Federal crop insurance program, including but not limited to producers, 
agents, loss adjusters, approved insurance providers and their 
employees or contractors, as well as any other persons who may provide 
information to a program participant and meet the elements for 
imposition of one or more administrative remedies contained in this 
subpart.
    (c) Any remedial action taken pursuant to this subpart is in 
addition to any other actions specifically provided in applicable crop 
insurance policies, contracts, reinsurance agreements, or other 
applicable statutes and regulations.
    (d) With respect to the submission of a false or inaccurate 
statement, this rule is applicable to any act or omission occurring 
after June 20, 2000, and with respect to failure to comply with a 
requirement of FCIC, this rule is applicable to any act or omission 
occurring on and after the date this rule becomes effective.
    (e) The purpose of the remedial actions authorized in this subpart 
are for the protection of the public interest from potential harm from 
persons who have abused the Federal crop insurance program, maintaining 
program integrity, and fostering public confidence in the program.
    4. Revise Sec.  400.452 to read as follows:


Sec.  400.452  Definitions.

    Act. Has the same meaning as the term in section 1 of the Common 
Crop Insurance Policy Basic Provisions (7 CFR 457.8).
    Affiliate. Persons are affiliates of each other if, directly or 
indirectly, either one controls or has the power to control the other, 
or, a third person controls or has the power to control both. Indicia 
of control include, but are not limited to: interlocking management or 
ownership, identity of interests among family members, shared 
facilities and equipment, common use of employees, or a business entity 
organized following the disqualification, suspension or debarment of a 
person which has the same or similar management, ownership, or 
principal employees as the disqualified, suspended, debarred, 
ineligible, or voluntarily excluded person.
    Agency. The person authorized by an approved insurance provider, or 
its designee, to sell and service a crop insurance policy under the 
Federal crop insurance program.
    Agent. Has the same meaning as the term in 7 CFR 400.701.
    Agricultural commodity. Has the same meaning as the term in section 
1 of the Common Crop Insurance Policy Basic Provisions (7 CFR 457.8).
    Approved insurance provider. Has the same meaning as the term in 7 
CFR 400.701.
    FCIC. Has the same meaning as the term in 7 CFR 400.701.
    Managing General Agent. Has the same meaning as the term in 7 CFR 
400.701.
    Participant. Any person who obtains any benefit that is derived in 
whole or in part from funds paid by FCIC to the approved insurance 
provider or premium paid by the producer.

[[Page 27986]]

Participants include but are not limited to producers, agents, loss 
adjusters, agencies, managing general agencies, approved insurance 
providers, and any person associated with the approved insurance 
provider through employment, contract, or agreement.
    Person. An individual, partnership, association, corporation, 
estate, trust or other legal entity, any affiliate or principal 
thereof, and whenever applicable, a State or political subdivision or 
agency of a State. ``Person'' does not include the United States 
Government or any of its agencies.
    Policy. Has the same meaning as the term in section 1 of the Common 
Crop Insurance Policy Basic Provisions (7 CFR 457.8).
    Preponderance of the evidence. Evidence which is of greater weight 
or more convincing than the evidence which is offered in opposition to 
it; that is, evidence which as a whole shows that the fact sought to be 
proved is more probable than not.
    Principal. A person who is an officer, director, owner, partner, 
key employee, or other person within an entity with primary management 
or supervisory responsibilities; or a person who has a critical 
influence on or substantive control over the activities of the entity.
    Producer. A person engaged in producing an agricultural commodity 
for a share of the insured crop, or the proceeds thereof.
    Reinsurance agreement. Has the same meaning as the term in 7 CFR 
400.161, except that such agreement is only between FCIC and the 
approved insurance provider.
    Requirement of FCIC. Includes, but is not limited to, any 
regulation, procedure, policy provision, reinsurance agreement, or 
other written communication from FCIC that requires a particular 
program participant or group of program participants to take a specific 
action or to cease and desist from a taking a specific action. General 
regulations procedures, policy provisions, or reinsurance agreements 
for which there is a remedy provided in such document for the breach 
will not be considered a requirement of FCIC unless such breach arises 
to the level where remedial action is appropriate (For example, 
multiple breaches of the same provision in separate policies or the 
procedures or multiple breaches of different provisions in the same 
policy or procedure).
    Violation. Each act or omission by a person that satisfies all 
required elements for the imposition of a disqualification or a civil 
fine under this subpart.
    Willful and intentional. To make a false or inaccurate statement 
with the knowledge that the statement is false or inaccurate at the 
time the statement was made; the failure to correct the false or 
inaccurate statement when its nature becomes known to the person who 
made it; or to commit an act or omission with the knowledge that the 
act or omission is not in compliance with a ``requirement of FCIC'' at 
the time the act or omission occurred. No showing of malicious intent 
is necessary.
    5. Revise Sec.  400.454 to read as follows:


Sec.  400.454  Disqualification and civil fines.

    (a) Before any disqualification or civil fine is imposed, FCIC will 
provide the affected participants and other persons with notice and an 
opportunity for a hearing on the record in accordance with 7 CFR part 
1, subpart H.
    (1) Proceedings will be initiated when the Manager of FCIC files a 
complaint with the Hearing Clerk, United States Department of 
Agriculture.
    (2) Disqualifications become effective:
    (i) On the date specified in the order issued by the Administrative 
Law Judge or Judicial Officer, as applicable, or if no date is 
specified in the order, the date that the order was issued.
    (ii) With respect to a settlement agreement with FCIC, the date 
contained in the settlement agreement or, if no date is specified, the 
date that such agreement is executed by FCIC.
    (3) Disqualification and civil fines may only be imposed if a 
preponderance of the evidence shows that the participant or other 
person has met the standards contained in Sec.  400.454(b).
    (4) Disqualification and civil fines may be imposed regardless of 
whether FCIC or the approved insurance provider has suffered any 
monetary losses.
    (b) Disqualification and civil fines may be imposed on any 
participant or person who willfully and intentionally:
    (1) Provides any false or inaccurate information to FCIC or to any 
approved insurance provider with respect to a policy or plan of 
insurance authorized under the Act either through action or omission to 
act when there is knowledge that false or inaccurate information is or 
will be provided; or
    (2) Fails to comply with a requirement of FCIC.
    (c) When imposing any disqualification or civil fine,
    (1) The gravity of the violation must be considered when 
determining:
    (i) Whether to disqualify a participant or other person;
    (ii) The amount of time that a participant or other person should 
be disqualified;
    (iii) Whether to impose a civil fine; and
    (iv) The amount of a civil fine that should be imposed.
    (2) The maximum term of disqualification and civil fines will be 
imposed against participants and other persons who:
    (i) Commit multiple violations in the same crop year or over 
several crop years; or
    (ii) Commit a single violation but such violation results in an 
overpayment of more than $100,000 or multiple acts of wrongdoings 
resulting in an overpayment in excess of $100,000.
    (iii) Commit such other action or omission of so serious a nature 
that imposition of the maximum is appropriate.
    (d) With respect to the imputing of conduct:
    (1) The conduct of any officer, director, shareholder, partner, 
employee, or other individual associated with an organization, in 
violation of Sec.  400.454(b) may be imputed to that organization when 
such conduct occurred in connection with the individual's performance 
of duties for or on behalf of that organization, or with the 
organization's knowledge, approval or acquiescence. The organization's 
acceptance of the benefits derived from the violation is evidence of 
knowledge, approval or acquiescence.
    (2) The conduct of any organization in violation of Sec.  
400.454(b) may be imputed to an individual, or from one individual to 
another individual, if the individual to whom the improper conduct is 
imputed either participated in, had knowledge of, or reason to know of 
such conduct.
    (3) The conduct of one organization in violation of Sec.  
400.454(b) may be imputed to another organization when such conduct 
occurred in connection with a partnership, joint venture, joint 
application, association or similar arrangement, or when the 
organization to whom the improper conduct is imputed has the power to 
direct, manage, control or influence the activities of the organization 
responsible for the improper conduct. Acceptance of the benefits 
derived from the conduct is evidence of knowledge, approval or 
acquiescence.
    (4) If such conduct is imputed, the person to whom the conduct is 
imputed to may be subject to the same disqualification and civil fines 
as the person from whom the conduct is imputed.
    (e) With respect to disqualifications:
    (1) If a person is disqualified and that person is a:

[[Page 27987]]

    (i) Producer, the producer will be precluded from receiving any 
monetary or non-monetary benefit provided under all of the following 
authorities, or their successors:
    (A) The Act;
    (B) The Agricultural Market Transition Act (7 U.S.C. 7201, et 
seq.);
    (C) The noninsured crop disaster assistance program (7 U.S.C. 
7333);
    (D) The Agricultural Act of 1949 (7 U.S.C. 1421 et seq.);
    (E) The Commodity Credit Corporation Charter Act (15 U.S.C. 714 et 
seq.);
    (F) The Agricultural Adjustment Act of 1938 (7 U.S.C. 1281 et 
seq.);
    (G) Title XII of the Food Security Act of 1985 (16 U.S.C. 3801 et 
seq.);
    (H) The Consolidated Farm and Rural Development Act (7 U.S.C. 1921, 
et seq.); and
    (I) Any law that provides assistance to the producer of an 
agricultural commodity affected by a crop loss or decline in the prices 
of agricultural commodities.
    (ii) Participant or other person, other than a producer, such 
participant or person will be precluded from participating in any way 
in the Federal crop insurance program and receiving any monetary or 
non-monetary benefit under the Act.
    (2) With respect to the term of disqualification:
    (i) The minimum term will be not less than one year from the 
effective date determined in Sec.  400.454(a)(2);
    (ii) The maximum term will be not more than five years from the 
effective date determined in Sec.  400.454(a)(2); and
    (iii) Disqualification is to be imposed only in one-year 
increments, up to the maximum five years.
    (3) Once a disqualification becomes final, the name, address, and 
other identifying information of the participant or other person shall 
be entered into the Ineligible Tracking System (ITS) maintained by FCIC 
in accordance with 7 CFR part 400, subpart U, and this information 
along with a list of the programs that the person is disqualified from 
shall be promptly reported to the General Services Administration for 
listing in the Excluded Parties List System (EPLS) in accordance with 7 
CFR part 3017, subpart E.
    (i) It is a participant's responsibility to periodically review the 
ITS and EPLS to determine those participants and other persons who have 
been disqualified.
    (ii) No participant may conduct business with a disqualified 
participant or other person if such business directly relates to the 
Federal crop insurance program, or if, through the business 
relationship, the disqualified participant or other person will derive 
any monetary or non-monetary benefit from a program administered under 
the Act.
    (iii) If a participant or other person does business with a 
disqualified participant or other person, such participant may be 
subject to disqualification under this section.
    (f) With respect to civil fines:
    (1) A civil fine may be imposed for each individual action that 
violates Sec.  400.454(b).
    (2) The amount of such civil fine shall not exceed the greater of:
    (i) The amount of monetary gain, or value of the benefit, obtained 
as a result of the false or inaccurate information provided, or the 
amount obtained as a result of noncompliance with a requirement of 
FCIC; or
    (ii) $10,000.
    (3) Civil fines are debts owed to FCIC.
    (i) A civil fine that is either imposed under with this subpart, or 
agreed to through an executed settlement agreement with FCIC, must be 
paid by the specified due date (If the due date is not specified in the 
order issued by the Administrative Law Judge or Judicial Officer, as 
applicable, or the settlement agreement, it shall be 30 days after the 
date the order was issued or the settlement agreement signed by FCIC).
    (ii) Any civil fine imposed under this section is in addition to 
any debt that may be owed to FCIC or to any approved insurance 
provider, such an overpaid indemnity, underpaid premium, or other 
amounts owed.
    (iii) FCIC, in its sole discretion, may reduce or otherwise settle 
any civil fine imposed under this section whenever it considers it 
appropriate or in the best interest of the USDA.
    (4) The ineligibility procedures established in 7 CFR part 400, 
subpart U are not applicable to ineligibility determinations made under 
this section for nonpayment of civil fines.
    (5) If a civil fine has been imposed and the person has not made 
timely payment for the total amount due, the person is ineligible to 
participate in the Federal crop insurance program until the amount due 
is paid in full.
    (g) With respect to any person that has been disqualified or is 
otherwise ineligible due to non-payment of civil fines in accordance 
with Sec.  400.454(f):
    (1) With respect to producers:
    (i) All existing insurance policies will automatically terminate as 
of the next termination date that occurs during the period of 
disqualification and while the civil fine remains unpaid;
    (ii) No new policies can be purchased, and no current policies can 
be renewed, between the date that the producer is disqualified and the 
date that the disqualification ends; and
    (iii) New application for insurance cannot be made for any 
agricultural commodity until the next sales closing date after the 
period of disqualification has ended and the civil fine is paid in 
full.
    (2) With respect to all other persons:
    (i) Such person may not be involved in any function related to the 
Federal crop insurance program during the disqualification or 
ineligibility period (including the sale, service, adjustment, data 
transmission or storage, reinsurance, etc. of any crop insurance 
policy) or receive any monetary or non-monetary benefit from a program 
administered under the Act.
    (ii) If the person is an agent or insurance agency, the approved 
insurance provider must assume all policies within the agent's or 
agency's book of business written for the approved insurance provider 
and assign them to a different agent or agency to service during the 
period of disqualification or ineligibility;
    (iii) If the person is an approved insurance provider, the approved 
insurance provider shall not sell, or authorize to be sold, any new 
policies or may not renew, or authorize the renewal of, existing 
policies, as determined by FCIC, during the period of disqualification 
or ineligibility. Nothing in this provision affects the approved 
insurance provider's responsibilities with respect to the service of 
existing policies.
    (h) Imposition of disqualification or a civil fine under this 
section is in addition to any other administrative or legal remedies 
available under this section or other applicable law including, but not 
limited to, debarment and suspension.
    6. Revise Sec.  400.455 to read as follows:


Sec.  400.455  Governmentwide debarment and suspension (procurement).

    (a) For all transactions undertaken pursuant to the Federal 
Acquisition Regulation, FCIC will proceed under 48 CFR part 9, subpart 
9.4 or 48 CFR part 409 when taking action to suspend or debar persons 
involved in such transactions, except that the authority to suspend or 
debar under these provisions will be reserved to the Manager of FCIC, 
or the Manager's designee.
    (b) Any person suspended or debarred under the provisions of 48 CFR 
part 9, subpart 9.4 or 48 CFR part 409 will not be eligible to contract 
with FCIC or the Risk Management Agency and will not be eligible to 
participate in or receive any benefit from any program under the Act 
during the period of ineligibility.

[[Page 27988]]

This includes, but is not limited to, being employed by or contracting 
with any approved insurance provider that sells, services, or adjusts 
policies offered under the authority of the Act. FCIC may waive this 
provision if it is satisfied that the person who employs the suspended 
or debarred person has taken sufficient action to ensure that the 
suspended or debarred person will not be involved, in any way, with 
FCIC or receive any benefit from any program under the Act.
    7. Amend Sec.  400.456 as follows:
    A. Remove paragraph (a).
    B. Redesignate paragraphs (b) through (d) as paragraphs (a) through 
(c).
    C. Revise newly redesignated paragraphs (a) and (b) to read as 
follows:


Sec.  400.456  Governmentwide debarment and suspension 
(nonprocurement).

* * * * *
    (a) FCIC will proceed under 7 CFR part 3017 when taking action to 
suspend or debar persons involved in non-procurement transactions.
    (b) Any person suspended or debarred under the provisions of 7 CFR 
part 3017, will not be eligible to contract with FCIC or the Risk 
Management Agency and will not be eligible to participate in or receive 
any benefit from any program under the Act during the period of 
ineligibility. This includes, but is not limited to, being employed by 
or contracting with any approved insurance provider, or its 
contractors, that sell, service, or adjust policies either insured or 
reinsured by FCIC. FCIC may waive this provision if it is satisfied 
that the approved insurance provider or contractors have taken 
sufficient action to ensure that the suspended or debarred person will 
not be involved in any way with the Federal crop insurance program or 
receive any benefit from any program under the Act.
* * * * *
    8. Amend Sec.  400.457 by adding a new paragraph (d) to read as 
follows:


Sec.  400.457  Program Fraud Civil Remedies Act.

* * * * *
    (d) Civil penalties and assessments imposed pursuant to this 
section are in addition to any other remedies that may be prescribed by 
law or imposed under this subpart.


Sec.  400.458  [Amended]

    9. Amend Sec.  400.458 by removing paragraph (b)(2), adding an 
``or'' at the end of paragraph (b)(1) and redesignating paragraph 
(b)(3) as paragraph (b)(2).


Sec.  400.459  [Removed]

    10. Remove Sec.  400.459 from subpart R.

    Signed in Washington, DC, on May 10, 2007.
Eldon Gould,
Manager, Federal Crop Insurance Corporation.
 [FR Doc. E7-9418 Filed 5-17-07; 8:45 am]
BILLING CODE 3410-08-P