Revisions to the Regulations Implementing the Program Fraud Civil Remedies Act of 1986, 52130-52133 [E8-20760]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 73, Number 174 (Monday, September 8, 2008)]
[Proposed Rules]
[Pages 52130-52133]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-20760]



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Part IV





Department of Housing and Urban Development





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24 CFR Part 28



Revisions to the Regulations Implementing the Program Fraud Civil 
Remedies Act of 1986; Proposed Rule

Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / 
Proposed Rules

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 28

[Docket No. FR-5085-P-01]
RIN 2501-AD25


Revisions to the Regulations Implementing the Program Fraud Civil 
Remedies Act of 1986

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend HUD's regulations implementing 
the Program Fraud Civil Remedies Act of 1986 (PFCRA), which were 
codified in 1996 and were amended in 2003 to include inflation 
adjustments. The purpose of this proposed rule is to more closely 
conform the PFCRA regulations with the PFCRA statutory language, to 
incorporate additional definitions into the PFCRA regulations, and to 
add an additional item to the list of factors the Secretary shall 
consider in determining the amount of penalties and assessments to be 
imposed.

DATES: Comment Due Date: November 7, 2008.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500. Communications must 
refer to the above docket number and title. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
https://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
https://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note:  To receive consideration as public comments, comments 
must be submitted through one of the two methods specified above. 
Again, all submissions must refer to the docket number and title of 
the rule.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-708-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Information Relay 
Service at 800-877-8339. Copies of all comments submitted are available 
for inspection and downloading at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Dane Narode, Acting Associate General 
Counsel, Office of Program Enforcement, Department of Housing and Urban 
Development, 1250 Maryland Avenue, Suite 200, Washington, DC 20024-
0500; telephone number 202-708-2350 (this is not a toll-free number); 
e-mail address Dane.M.Narode@hud.gov. Hearing- or speech-impaired 
individuals may access the voice telephone number listed above by 
calling the toll-free Federal Information Relay Service during working 
hours at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On June 24, 1988 (53 FR 24000), HUD published its regulations 
implementing the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 
3801) (PFCRA). PFCRA established administrative procedures for imposing 
civil penalties and assessments against persons who make, submit, or 
present, or cause to be made, submitted, or presented, false, 
fictitious, or fraudulent claims or written statements to HUD or its 
agents. HUD's regulations implementing PFCRA are located at 24 CFR part 
28. On September 24, 1996 (61 FR 50208), HUD issued a final rule 
further streamlining the PFCRA regulations at part 28.

II. This Proposed Rule

    This proposed rule would more closely conform both Sec.  28.5 
(``Definitions'') and Sec.  28.10 (``Basis for civil penalties and 
assessments'') to the PFCRA statutory provisions. A definition of 
``reasonable prospect'' would be included in Sec.  28.5 to explain that 
the Reviewing Official will use limited information available in HUD's 
Report of Investigation to determine whether allocating HUD's resources 
to a particular action is appropriate. Also, a definition of ``Ability 
to pay'' would be included in Sec.  28.5 to clarify that a factor in 
determining amounts of penalties and assessments will be based on an 
assessment of the respondent's resources available presently and 
prospectively, from which the Department could ultimately recover the 
total award. The definition would also allow for the consideration of 
respondent's resources to be based on historical evidence. The proposed 
rule would also modify Sec.  28.25 (``Complaint'') so that the 
provisions for methods of complaint transmittal more closely conform to 
PFCRA and to give the same meaning to the term ``deliver'' that it has 
in PFCRA. This section would require both parties to preserve documents 
upon issuance of the complaint for the Department, and receipt of the 
complaint for the respondent. Additionally, this section and Sec.  
28.30 would be revised to provide for the filing of the complaint and 
answer directly with the Office of Administrative Law Judges, in 
accordance with the specified provisions of Sec.  26.30 of this title.
    Furthermore, the proposed rule would revise Sec.  28.35 to remove 
the disclosure of documents regulation from part 28. The disclosure of 
documents regulation would, under a separate proposed rule regarding 
HUD's hearing procedures, be moved to part 26 (``Hearing Procedures''). 
Under this proposed rule, Sec.  28.35 would incorporate the substance 
of the regulation on the statute of limitations for PFCRA hearings, 
which would be moved from part 26 under the separate proposed rule.
    Finally, the proposed rule would add ``ability to pay'' to Sec.  
28.40 (``Hearings'') as an additional factor to be considered in 
determining the amount of penalties and assessments; the factor has 
been added to the definitions at Sec.  28.5, as discussed above.

III. Small Business Concerns Related to Board Enforcement Actions

    With respect to enforcement actions undertaken pursuant to this 
proposed rule, HUD is cognizant that section 222 of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (SBREFA) 
requires the Small Business and Agriculture

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Regulatory Enforcement Ombudsman to ``work with each agency with 
regulatory authority over small businesses to ensure that small 
business concerns that receive or are subject to an audit, on-site 
inspection, compliance assistance effort, or other enforcement related 
communication or contact by agency personnel are provided with a means 
to comment on the enforcement activity conducted by this personnel.'' 
To implement this statutory provision, the Small Business 
Administration has requested that federal agencies include the 
following language on agency publications and notices that are provided 
to small business concerns at the time the enforcement action is 
undertaken. The language is as follows:

Your Comments Are Important

    The Small Business and Agriculture Regulatory Enforcement 
Ombudsman and 10 Regional Fairness Boards were established to 
receive comments from small businesses about federal agency 
enforcement actions. The Ombudsman will annually evaluate the 
enforcement activities and rate each agency's responsiveness to 
small business. If you wish to comment on the enforcement actions of 
[insert agency name], you will find the necessary comment forms at 
www.sba.gov/ombudsman or call 1-888-REG-FAIR (1-888-734-3247).

    In accordance with its notice describing HUD's actions on the 
implementation of SBREFA, which was published on May 21, 1998 (63 FR 
28214), HUD will include the language cited above on notices 
implementing enforcement actions, to ensure that small entities have 
the full means to comment on the enforcement activity conducted by HUD.

IV. Findings and Certifications

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
This proposed rule would revise definitions and usages of terms to 
conform more closely with those of the governing statute, and would add 
``ability to pay'' as a factor to be considered in determining penalty 
and assessment amounts. These revisions impose no significant economic 
impact on a substantial number of small entities. Therefore, the 
undersigned certifies that this rule will not have a significant impact 
on a substantial number of small entities.
    Notwithstanding HUD's view that this rule will not have a 
significant effect on a substantial number of small entities, HUD 
specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
and mortgage insurance for, or otherwise govern or regulate real 
property acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction; or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of Section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (2 
U.S.C. 1531-1538) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This proposed rule does not 
impose any federal mandates on any state, local, or tribal government 
or the private sector within the meaning of UMRA.

List of Subjects for 24 CFR Part 28

    Administrative practice and procedure, Claims, Fraud, Penalties.
    Accordingly, for the reasons discussed in the preamble, HUD 
proposes to amend 24 CFR part 28 as follows:

PART 28--IMPLEMENTATION OF THE PROGRAM FRAUD CIVIL REMEDIES ACT OF 
1986

    1. The authority citation for 24 CFR part 28 is revised to read as 
follows:

    Authority:  28 U.S.C. 2461 note; 31 U.S.C. 3801-3812; 42 U.S.C. 
3535(d).

    2. Revise Sec.  28.1(b) to read as follows:


Sec.  28.1   Purpose.

* * * * *
    (b) Specifies the hearing and appeal rights of persons subject to 
allegations of liability for such penalties and assessments. Hearings 
under this part shall be conducted in accordance with the 
Administrative Procedure Act pursuant to part 26, subpart B, of this 
chapter.
    3. Revise Sec.  28.5 to read as follows:


Sec.  28.5  Definitions.

    (a) The terms ALJ and HUD are defined in 24 CFR part 5.
    (b) The terms Claim, Knows or has reason to know, Person, Reviewing 
Official, and Statement have the same meanings as defined in 31 U.S.C. 
Sec.  3801.
    (c) Ability to pay is determined based on an assessment of the 
respondent's resources available both presently and prospectively from 
which the Department could ultimately recover the total award, which 
may be predicted based on historical evidence.
    (d) Benefit means anything of value, including, but not limited to, 
any advantage, preference, privilege, license, permit, favorable 
decision, ruling, status, or loan insurance or guarantee.
    (e) Respondent means any person alleged to be liable for a civil 
penalty or assessment under Sec.  28.25.
    (f) The reasonable prospect of collecting an appropriate amount of 
penalties and assessments is determined based on a generalized 
assessment made by a Reviewing Official based on the limited 
information available in the Report of Investigation for purposes of 
determining whether the allocation of HUD's resources to any particular 
action is appropriate. This assessment is not the same as the 
assessment made when determining ability to pay, nor is the reasonable 
prospect of collecting a factor to be considered in determining the 
amount of any penalty or assessment in any particular case.
    (g) Report of Investigation means a report containing the findings 
and conclusions of a Program Fraud Civil Remedies Act investigation by 
the Inspector General or his or her designee as described in Sec.  
28.15.
    4. Revise Sec.  28.10(a)(1) and (b)(1) to read as follows:

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Sec.  28.10  Basis for civil penalties and assessments.

    (a) Claims. (1) A civil penalty of up to $7,500 may be imposed upon 
any person who makes, presents, or submits, or causes to be made, 
presented, or submitted, a claim that the person knows or has reason to 
know:
    (i) Is false, fictitious, or fraudulent;
    (ii) Includes or is supported by a written statement which asserts 
a material fact which is false, fictitious, or fraudulent;
    (iii) Includes or is supported by any written statement that:
    (A) Omits a material fact;
    (B) Is false, fictitious, or fraudulent as a result of the 
omission; and
    (C) Is a statement in which the person making, presenting, or 
submitting such statement has a duty to include such material fact; or
    (iv) Is for payment for the provision of property or services which 
the person has not provided as claimed.
* * * * *
    (b) Statements. (1) A civil penalty of up to $7,500 may be imposed 
upon any person who makes, presents, or submits, or causes to be made, 
presented, or submitted, a written statement that:
    (i) The person knows or has reason to know:
    (A) Asserts a material fact which is false, fictitious, or 
fraudulent; or
    (B) (1) Omits a material fact; and
    (2) Is false, fictitious, or fraudulent as a result of such 
omission;
    (ii) In the case of a statement described in paragraph (b)(1)(i)(B) 
of this section, is a statement in which the person making, presenting, 
or submitting such statement has a duty to include such material fact; 
and
    (iii) Contains or is accompanied by an express certification or 
affirmation of the truthfulness and accuracy of the contents of the 
statement.
* * * * *
    5. Revise Sec.  28.20 to read as follows:


Sec.  28.20  Request for approval by the Department of Justice.

    (a) If the General Counsel or designee determines that the Report 
of Investigation supports an action under this part, he or she must 
submit a written request to the Department of Justice for approval to 
issue a complaint under Sec.  28.25.
    (b) The request shall include a description of the claims or 
statements at issue; the evidence supporting the allegations; an 
estimate of the amount of money or the value of property, services, or 
other benefits requested or demanded in violation of Sec.  28.10; any 
exculpatory or mitigating circumstances that may relate to the claims 
or statements; and a statement that there is a reasonable prospect of 
collecting an appropriate amount of penalties and assessments.
    6. Revise Sec.  28.25 to read as follows:


Sec.  28.25  Complaint.

    (a) General. Upon obtaining approval from the Department of 
Justice, the General Counsel or designee may issue a complaint to the 
respondent. The complaint shall be mailed, by registered or certified 
mail, or shall be delivered through such other means by which delivery 
may be confirmed. The complaint shall also be filed simultaneously with 
the Office of Administrative Law Judges in accordance with Sec.  
26.30(a) of this chapter.
    (b) Complaint. The complaint shall include:
    (1) The allegations of liability against the respondent, including 
the statutory basis for liability, the claims or statements at issue, 
and the reasons why liability arises from those claims or statements;
    (2) A statement that the required approval to issue the complaint 
was received from the Department of Justice as required by 24 CFR 
28.20;
    (3) The amount of penalties and assessments for which the 
respondent may be held liable;
    (4) A statement that the respondent may request a hearing by 
submitting a written response to the complaint;
    (5) The addresses to which a response must be sent in accordance 
with Sec.  26.38 of this title; and
    (6) A statement that failure to submit an answer within 30 days of 
receipt of the complaint may result in the imposition of the maximum 
amount of penalties and assessments sought without right of appeal.
    (c) Parts 26 and 28. A copy of this part 28 and part 26, subpart B 
of this chapter shall be included with the complaint.
    (d) Obligation to preserve documents. Upon receipt of the 
complaint, the respondent is required to preserve and maintain all 
documents and data, including electronically stored data, within their 
possession or control that may relate to the allegations in the 
complaint. The Department shall also preserve such documents or data 
upon the issuance of the complaint.
    7. Revise Sec.  28.30 to read as follows:


Sec.  28.30  Response.

    (a) The respondent may file a written response to the complaint in 
accordance with Sec.  26.30 of this title within 30 days of service of 
the complaint. The response shall be deemed to be a request for a 
hearing. The response must include the admission or denial of each 
allegation of liability made in the complaint; any defense on which the 
respondent intends to rely; any reasons why the penalties and 
assessments should be less than the amount set forth in the complaint; 
and the name, address, and telephone number of the person who will act 
as the respondent's representative, if any.
    (b) Failure to respond. If no response is submitted, HUD may file a 
motion for default judgment in accordance with Sec.  26.41 of this 
chapter.
    8. Revise Sec.  28.35 to read as follows:


Sec.  28.35  Statute of limitations.

    The statute of limitations for commencing hearings under this part 
shall be tolled:
    (a) If the hearing is commenced in accordance with 31 U.S.C. 
3803(d)(2)(B) within 6 years after the date on which the claim or 
statement is made; or
    (b) If the parties agree to such tolling.
    9. Amend Sec.  28.40 as follows:
    a. Revise paragraphs (a) and (b);
    b. Redesignate paragraph (b)(17) as (b)(18);
    c. Add a new paragraph (b)(17); and
    d. Revise newly designated paragraph (b)(18).


Sec.  28.40  Hearings.

    (a) General. Hearings under this part shall be conducted in 
accordance with the procedures in part 26, subpart B, of this chapter, 
governing actions in accordance with the Administrative Procedure Act.
    (b) Factors to consider in determining amount of penalties and 
assessments. In determining an appropriate amount of civil penalties 
and assessments, the ALJ and, upon appeal, the Secretary or designee, 
shall consider and state in his or her opinion any mitigating or 
aggravating circumstances. Because of the intangible costs of fraud, 
the expense of investigating fraudulent conduct, and the need for 
deterrence, ordinarily twice the amount of the claim as alleged by the 
government, and a significant civil penalty, should be imposed. The 
amount of penalties and assessments imposed shall be based on the ALJ's 
and the Secretary's or designee's consideration of evidence in support 
of one or more of the following factors:
    (17) The respondent's ability to pay, and
    (18) Any other factors that in any given case may mitigate or 
aggravate the seriousness of the false claim or statement.
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    Dated: July 28, 2008.
Roy A. Bernardi,
Deputy Secretary.
[FR Doc. E8-20760 Filed 9-5-08; 8:45 am]
BILLING CODE 4210-67-P