Civil Monetary Penalties, 672-675 [2012-31712]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Housing Service

[Federal Register Volume 78, Number 3 (Friday, January 4, 2013)]
[Proposed Rules]
[Pages 672-675]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31712]


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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. 78, No. 3 / Friday, January 4, 2013 / 
Proposed Rules

[[Page 672]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3560

RIN 0575AC93


Civil Monetary Penalties

AGENCY: Rural Housing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Housing Service (RHS or Agency) proposes to 
implement two civil monetary penalty provisions. First, RHS proposes to 
amend its regulations to create a new section, for imposing civil 
monetary penalties under the authority of 42 U.S.C. 1490s (section 543 
of the Housing Act of 1949, as amended (Act)) (Housing Act CMP). 
Second, RHS proposes to adopt the USDA civil monetary penalty 
provisions for the Program Fraud Civil Remedies Act of 1986 (PFCRA) in 
a revision to an existing section (PFCRA CMP). The new section will 
include an amended version of the existing Housing Act CMP provision 
together with additional language providing procedural guidance.

DATES: Written comments must be received on or before February 4, 2013 
to be assured of consideration.

ADDRESSES: You may submit comments to this proposed rule by any of the 
following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street SW., 7th Floor, address listed 
above.

FOR FURTHER INFORMATION CONTACT: Stephanie White, Director, Multi-
Family Housing Portfolio Management Division, Rural Housing Service, 
Stop 0782, 1400 Independence Avenue SW., Washington, DC 20250-0782, 
Telephone: 202-720-1615.

SUPPLEMENTARY INFORMATION:

Executive Order 12866--Classification

    This proposed rule has been determined to be non-significant and 
was reviewed by the Office of Management and Budget (OMB) under 
Executive Order 12866.

Authority

    The Housing Act CMP provision is authorized under section 543(b) of 
the Housing Act of 1949, as amended (42 U.S.C. 1490s(b)). The PFCRA is 
codified at 31 U.S.C. 3801-3812. PFCRA establishes an administrative 
remedy against any person who makes a false, fictitious, or fraudulent 
claim or written statement to certain federal agencies, such as the 
United States Department of Agriculture.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G. RHS has determined that this action does not constitute a 
major Federal action significantly affecting the quality of the 
environment. In accordance with the National Environmental Policy Act 
of 1969, Public Law 91-190, an Environmental Impact Statement is not 
required.

Regulatory Flexibility Act

    This proposed rule has been reviewed with regard to the 
requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). 
Under Section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 
605(b), the Agency has determined and certified by signature on this 
document that this rule will not have a significant economic impact on 
a substantial number of small entities since this rulemaking action 
does not involve a new or expanded program nor does it require any more 
action on the part of a small business than required of a large entity.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any 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. This rule does 
not impose substantial direct compliance costs on State and local 
Governments; therefore, consultation with the States is not required.

Executive Order 12988, Civil Justice Reform

    This rule has been reviewed under Executive Order 12988. In 
accordance with this rule: (1) Unless otherwise specifically provided, 
all State and local laws that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule except 
as specifically prescribed in the rule; and (3) administrative 
proceedings of the National Appeals Division of the Department of 
Agriculture (7 CFR part 11) must be exhausted before bringing suit in 
court that challenges action taken under this rule.

Unfunded Mandate Reform Act (UMRA)

    Title II of the UMRA, Public Law 104-4, establishes requirements 
for Federal Agencies to assess the effects of their regulatory actions 
on State, local, and tribal Governments and on the private sector. 
Under section 202 of the UMRA, Federal Agencies generally must prepare 
a written statement, including cost-benefit analysis, for proposed and 
Final Rules with ``Federal mandates'' that may result in expenditures 
to State, local, or tribal Governments, in the aggregate, or to the 
private sector, of $100 million or more in any 1 year. When such a 
statement is needed for a rule, section 205 of the UMRA generally 
requires a Federal Agency to identify and consider a reasonable number 
of regulatory alternatives and adopt the least costly, more cost-
effective, or least burdensome alternative that achieves the objectives 
of the rule. This rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local, and 
tribal governments or for the private sector. Therefore, this rule is 
not subject to the requirements of sections 202 and 205 of the UMRA.

[[Page 673]]

Paperwork Reduction Act of 1995

    The revisions in this rulemaking for 7 CFR part 3560 are subject to 
the Paperwork Reduction Act package with the assigned OMB control 
number of 0575-0189. No changes are being proposed that would impact 
that package.

E-Government Act Compliance

    RHS 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.

Programs Affected

    The programs affected by this regulation are listed in the Catalog 
of Federal Domestic Assistance under Section 514 program and Section 
516 program (10.405); Section 515 program (10.415); Section 521 
(10.427); and Section 542 (10.448).

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on RHS in the development 
of regulatory policies that have tribal implications or preempt tribal 
laws. RHS has determined that the proposed rule does not have a 
substantial direct effect on one or more Indian tribe(s) or on either 
the relationship or the distribution of powers and responsibilities 
between the Federal Government and the Indian tribes. Thus, the 
proposed rule is not subject to the requirements of Executive Order 
13175. If tribal leaders are interested in consulting with RHS on this 
proposed rule, they are encouraged to contact USDA's Office of Tribal 
Relations or Rural Development's Native American Coordinator at (720) 
544-2911 or AIAN@wdc.usda.gov to request such consultation.

Executive Order 12372, Intergovernmental Review of Federal Programs

    These loans and grants are subject to the provisions of Executive 
Order 12372 which require intergovernmental consultation with State and 
local officials. RHS conducts intergovernmental consultations for each 
loan and grant in a manner delineated in 7 CFR part 3015 subpart V.

Background

    USDA implemented the Program Fraud Civil Remedies Act of 1986 in 
regulations at 7 CFR part 1, subpart L. The Agency is proposing to 
incorporate those regulations in this rule.
    Section 543(b) of the Act states that the Secretary may, after 
notice and opportunity for a hearing, impose a civil monetary penalty 
against any person, including its owners, officers, directors, general 
partners, limited partners, or employees, who knowingly and materially 
violate, or participate in the violation of the Act, or the regulations 
and agreements used to implement the Act. Such violations include:
    (A) Submitting information to the Secretary that is false;
    (B) Providing the Secretary with false certifications;
    (C) Failing to submit information requested by the Secretary in a 
timely manner;
    (D) Failing to maintain the property subject to loans made or 
guaranteed under the Act in good repair and condition, as determined by 
the Secretary;
    (E) Failing to provide acceptable management for a project which 
received a loan made or guaranteed under the Act that is acceptable to 
the Secretary; or
    (F) Failing to comply with the provisions of applicable civil 
rights statutes and regulations.
    In 2004, the Agency included Housing Act CMPs in 7 CFR 3560.461(b) 
with limited procedural detail. Consequently, the Agency has found 
Housing Act CMPs to not be an effective remedy. This proposed rule will 
provide sufficient procedural detail to enable the Agency to utilize 
Housing Act CMPs while at the same time providing due process 
protection to program participants. By implementing procedures for 
Housing Act CMPs, the Agency will be provided an important tool to 
enforce compliance with relevant statutes, regulations, and loan 
documents. The Agency's Housing Act CMP amount will be published in 7 
CFR part 3, subpart I.

List of Subjects in 7 CFR Part 3560

    Aged, Loan programs-Agriculture, Loan programs-Housing and 
Community Development, Low and moderate income housing, Public housing, 
Rent subsidies.

    For the reasons set forth in the preamble, chapter XXXV, Title 7 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 3560--DIRECT MULTI-FAMILY HOUSING LOANS AND GRANTS

0
1. The authority citation for part 3560 continues to read as follows:

    Authority:  42 U.S.C. 1480.

Subpart J--Special Servicing, Enforcement, Liquidation, and Other 
Actions

0
2. Amend Sec.  3560.461 by revising paragraph (b) to read as follows:


Sec.  3560.461  Enforcement provisions.

* * * * *
    (b) Civil monetary penalties. (1) This section is in accordance 
with the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-
U.S.C. 3831) which provides for 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 Federal authorities or to their agents.
    (2) Proceedings under this section will be in accordance with 
subpart L of 7 CFR part 1, ``Procedures Related to Administrative 
Hearings under the Program Fraud Civil Remedies Act of 1986.''
    (3) The Administrator of the Rural Housing Service, or designee, is 
authorized to serve as Agency Fraud Claims Officer for the purposes of 
implementing the requirements of this subsection.
    (4) Civil penalties and assessments imposed pursuant to this 
section are in addition to any other remedies that maybe prescribed by 
law or imposed under this subpart.
* * * * *
0
3. Add Sec.  3560.464 to read as follows:


Sec.  3560.464  Civil monetary penalties.

    (a) The Agency may impose a civil monetary penalty in accordance 
with this section against any individual or entity, including its 
owners, officers, general partners, limited partners, or employees 
(Respondent(s), who knowingly and materially violate, or participate in 
the violation of, the provisions of the programs covered by this part 
or agreements made in furtherance of those programs. ``Knowingly'' 
includes having actual knowledge of or acting with deliberate ignorance 
of or reckless disregard for the prohibitions under this part. Actions 
covered include, but are not limited to:
    (1) Submitting information to the Agency that is false.
    (2) Providing the Agency with false certifications.
    (3) Failing to submit information requested by the Agency in a 
timely manner.
    (4) Failing to maintain the property subject to loans or grants 
made under the programs covered by this part in good repair and 
condition, as determined by the Agency.

[[Page 674]]

    (5) Failing to provide management for a project that received a 
loan or grant made under this part that is acceptable to the Agency. 
Such failures include, without limitation, failure to provide fiscal 
management in accordance with Agency regulations including failure to 
maintain reserve accounts and unauthorized use of fund in such reserve 
accounts, failure to handle vacancies in accordance with Agency 
regulations, and failure to handle rent collection in accordance with 
Agency regulations.
    (6) Failing to comply with the provisions of applicable civil 
rights statutes and regulations.
    (b) Amount. (1) Civil penalties shall be assessed and adjusted in 
accordance with 7 CFR part 3, subpart I or its successor regulation and 
must be subject to a fine per violation of not more than the amount 
specified in that subpart.
    (2) In determining the amount of a civil monetary penalty under 
this section, the Agency must take into consideration:
    (i) The gravity of the offense;
    (ii) Any history of prior offenses by the Respondent (including 
offenses occurring prior to the enactment of this section);
    (iii) Any injury to tenants;
    (iv) Any injury to the public;
    (v) Any benefits received by the Respondent as a result of the 
violation;
    (vi) Deterrence of future violations;
    (vii) The degree of the Respondent's culpability; and
    (viii) The Respondent's ability to pay the penalty, which ability 
shall be presumed unless raised as an affirmative defense or mitigating 
factor by the Respondent. The ability to pay is determined based on an 
assessment of the Respondent's resources available both presently and 
prospectively from which the Agency could ultimately recover the total 
award, which may be predicted based on historical evidence.
    (3) Payment of penalties. No payment of a penalty assessed under 
this section may be made from funds provided under any program covered 
by this part or from funds of a project which serve as security for a 
loan made from a program covered by this part.
    (c) Agency Official. The Administrator of the Rural Housing 
Service, or designee, (Agency Official) may initiate a civil money 
penalty proceeding against a Respondent who has committed any of the 
actions referenced in paragraph (a) of this section.
    (d) Pre-penalty notice. Prior to determining whether to issue a 
complaint under paragraph (f) of this section, the Agency Official 
shall issue a written pre-penalty notice to the Respondent. This pre-
penalty notice shall include the following:
    (1) That the Rural Housing Service is considering seeking a civil 
money penalty;
    (2) The specific violations alleged;
    (3) The maximum civil money penalty that may be imposed;
    (4) The opportunity to reply in writing to the Agency Official 
within 30 days after the date of the notice;
    (5) That failure to respond with the 30-day period may result in 
issuance of a complaint under paragraph (f) of this section without 
consideration of any information that the Respondent may wish to 
provide;
    (6) That upon receipt of the pre-penalty notice, the Respondent is 
required to preserve and maintain all documents and data, including 
electronically stored data, within Respondent's possession or control 
that may relate to the violations alleged in the pre-penalty notice. 
The Agency shall also preserve such documents or data upon the issuance 
of the pre-penalty notice;
    (7) That any response to the pre-penalty notice shall be in a 
format prescribed in the pre-penalty notice, and shall address the 
factors in subsection (a), any arguments opposing the imposition of a 
civil money penalty, and any affirmative defense or mitigating factor 
concerning the Respondent's ability to pay the proposed civil money 
penalty, including documentary evidence to support any of Respondent's 
arguments or defenses; and.
    (8) That if a complaint is issued under Sec.  3560.464(f), the 
Respondent may request a hearing before an administrative law judge. 
Proceedings under this section will be in accordance with subpart L of 
7 CFR part 1.
    (e) Response. (1) The response shall be in a format prescribed in 
the pre-penalty notice. The response shall address the factors set 
forth in paragraph (d) of this section and include any arguments 
opposing the imposition of a civil money penalty that the Respondent 
may wish to present.
    (2) In any case where Respondent seeks to raise ability to pay as 
an affirmative defense or argument in mitigation, the Respondent shall 
provide documentary evidence as part of its response.
    (f) Complaint. (1) Upon the expiration of the 30-day response 
period for the pre-penalty notice, the Agency Official shall determine 
whether to seek a civil money penalty. Such determination shall be 
based upon a review of the pre-penalty notice, the response, if any, 
and the factors listed in paragraph (a)(2) of this section.
    (2) If a determination is made to seek a civil money penalty, a 
complaint shall be served upon the Respondent and simultaneously filed 
with the USDA Office of the Administrative Law Judges, providing the 
following:
    (i) The factual basis for the decision to seek a penalty;
    (ii) The applicable civil money penalty statute;
    (iii) The amount of penalty sought;
    (iv) The right to submit a response in writing, within 15 days of 
receipt of the complaint, requesting a hearing on any material fact in 
the complaint, or on the appropriateness of the penalty sought;
    (v) The address to which a response must be sent;
    (vi) That the failure to submit a response may result in the 
imposition of the penalty in the amount sought.
    (3) The complaint shall be served upon the Respondent by first 
class mail or personal delivery.
    (g) Response to the complaint. (1) In any case in which the 
Respondent has requested a hearing, the Respondent shall serve upon the 
Agency Official and file with the USDA Office of Administrative Law 
Judges a written answer to the complaint within 30 days of receipt of 
the complaint, unless such time is extended by the administrative law 
judge for good cause. The answer shall 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 civil money 
penalty should be less than the amount sought in the complaint, based 
on the factors listed in (a)(2); and the name, address, and telephone 
number of the person who will act as the Respondent's representative, 
if any.
    (2) If no response is submitted, then the Agency Official may file 
a motion for default judgment, together with a copy of the complaint, 
in accordance with subpart L of 7 CFR part 1.
    (h) Hearings under this part shall be conducted in accordance with 
the procedures applicable to hearings in accordance with subpart L of 
part 1 of title 7.
    (i) Settlement of a civil money penalty action. The Agency Official 
is authorized to settle civil money penalty actions that may be brought 
under this section.
    (j) Remedies for noncompliance.--(1) Judicial intervention. If a 
Respondent fails to comply with a final determination of the Agency 
imposing a civil monetary penalty, the Agency may request the Attorney 
General of the United States to bring an action in an

[[Page 675]]

appropriate District Court to obtain a monetary judgment against the 
Respondent and such other relief as may be available. The monetary 
judgment may, in the court's discretion, include attorney's fees and 
other expenses incurred by the United States in connection with the 
action.
    (2) Reviewability of determination. In an action under this 
paragraph, the validity and appropriateness of a determination by the 
Agency imposing the penalty shall not be subject to review.
    (k) Application of other remedies. A civil money penalty may be 
imposed in addition to other administrative sanctions or any other 
civil remedy or criminal penalty.

    Dated: November 15, 2012.
Tammye Trevino,
Administrator, Rural Housing Service.
[FR Doc. 2012-31712 Filed 1-3-13; 8:45 am]
BILLING CODE 3410-XV-P