Implementation of the Program Fraud Civil Remedies Act of 1986, 43031-43036 [2016-15620]

Agencies

• FEDERAL HOUSING FINANCE AGENCY

[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Rules and Regulations]
[Pages 43031-43036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15620]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1217

RIN 2590-AA76


Implementation of the Program Fraud Civil Remedies Act of 1986

AGENCY: Federal Housing Finance Agency.

ACTION: Interim final rule.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is adopting an 
interim final rule to implement the Program Fraud Civil Remedies Act of 
1986 (31 U.S.C. 3801 et seq.) (PFCRA), by establishing administrative 
procedures for imposing civil penalties and assessments against persons 
who make false, fictitious, or fraudulent claims or written statements 
to FHFA in the context of its contracting or employment activities, 
where the amount of money or the value of property or services involved 
or requested from FHFA is $150,000 or less. FHFA previously issued a 
notice of proposed rulemaking to implement PFCRA. This rule is issued 
as an interim final rule rather than as a final rule because it 
increases the maximum penalty amount set forth in the proposed rule as 
required by the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015 (Adjustment Improvements Act), and that Act 
also requires that such ``catch up'' adjustments be published in the 
form of an interim final rule. If, prior to the effective date of the 
interim final rule, FHFA does not receive any comments from which FHFA 
concludes that the rule should be revised, this rule will become final 
without further action by FHFA.

DATES: Effective Date: August 1, 2016.
    Comment Date: Comments on the interim final rule must be received 
prior to August 1, 2016.

ADDRESSES: You may submit your comments, identified by regulatory 
information number (RIN) 2590-AA76, by any of the following methods:
    Agency Web site: www.fhfa.gov/open-for-comment-or-input.
    Federal eRulemaking Portal: https://www.regulations.gov. Follow the 
instructions for submitting comments. If you submit your comments to 
the Federal eRulemaking Portal, please also send it by email to FHFA at 
RegComments@FHFA.gov to ensure timely receipt by the agency. Please 
include ``RIN 2590-AA76'' in the subject line of the message.
    Hand Delivery/Courier: The hand delivery address is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA76, Federal 
Housing Finance Agency, Constitution Center, (OGC) Eighth Floor, 400 
Seventh Street SW., Washington, DC 20219. The package should be 
delivered to the Seventh Street entrance Guard Desk, First Floor, on 
business days between 9 a.m. and 5 p.m.
    U.S. Mail, United Parcel Service, Federal Express, or Other Mail 
Service: The mailing address for comments is: Alfred M. Pollard, 
General Counsel, Attention: Comments/RIN 2590-AA76, Federal Housing 
Finance Agency, Constitution Center, (OGC) Eighth Floor, 400 Seventh 
Street SW., Washington, DC 20219.
    Copies of all comments will be posted without change, including any 
personal information you provide, such as your name, address, or phone 
number, on the FHFA Internet Web site at https://www.fhfa.gov. In 
addition, copies of all comments received will be available for 
examination by the public on business days between the hours of 10 a.m. 
and 3 p.m., at the Federal Housing Finance Agency, Eighth Floor, 400 
Seventh Street, SW., Washington, DC 20219. To make an appointment to 
inspect comments, please call the Office of General Counsel at (202) 
649-3804.

FOR FURTHER INFORMATION CONTACT: Maura Dundon, Assistant General 
Counsel, Office of the General Counsel, (202) 649-3961, 
Maura.Dundon@fhfa.gov, or Ellen Bailey, Managing Associate General 
Counsel, Office of General Counsel, (202) 649-3056, 
Ellen.Bailey@fhfa.gov, 400 Seventh Street SW., Eighth Floor, 
Washington, DC 20219 (not toll free numbers). The telephone number for 
the Telecommunications Device for the Hearing Impaired is (800) 877-
8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. General

    The Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801 et 
seq.) (PFCRA) requires FHFA, as an ``authority,'' to establish by rule 
procedures for imposing civil penalties and assessments on any person 
who makes a false claim for property, services, or money from FHFA, or 
makes a false material statement to FHFA in connection with a claim, 
where the amount involved does not exceed $150,000.\1\ A ``claim'' as 
defined in the Act includes a request, demand, or submission for 
property, services, or money from FHFA or a party to a contract with 
FHFA, including money representing benefits.\2\ A ``statement'' is any 
representation, certification, affirmation, document, record, or 
accounting or bookkeeping entry with respect to a claim, a contract or 
a bid or proposal for a contract with FHFA, or a benefit from FHFA.\3\ 
For covered claims and statements, PFCRA provides an administrative 
remedy as an alternative to judicial action, where the Department of 
Justice (DOJ) has declined to prosecute under the civil False Claims 
Act, 31 U.S.C. 3729.\4\
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    \1\ See 31 U.S.C. 3801(a)(1)(C) and 3803(g); see also 5 U.S.C., 
App. 3, 11(2).
    \2\ 31 U.S.C. 3801(a)(3).
    \3\ Id. at section 3801(a)(9).
    \4\ See S.Rep. No. 99-212 at 6, 99th Cong., 1st Sess. 6 (1985) 
(``[E]xisting remedies are not adequate to cope with the problem of 
fraud in Federal programs. The Committee [of Governmental Affairs of 
the Senate], therefore, believes that an alternative administrative 
remedy is needed to adjudicate small-dollar false claim and 
statement cases that otherwise would not be initiated civilly.'').
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    PFCRA establishes a process of (a) investigation by the 
``investigating official,'' who, by statute, is the Inspector General 
(IG) of the agency or a designee of the IG; (b) review by the agency's 
``reviewing official,'' designated by the agency head, to determine if 
adequate evidence of liability exists; \5\ and (c) review by DOJ. If 
the Attorney General approves use of the PFCRA process, PFCRA 
authorizes the reviewing official to initiate an action by providing 
notice to the person alleged to be liable; if a hearing on the record 
is requested, it is before a ``presiding official,'' which by statute 
is

[[Page 43032]]

an Administrative Law Judge (ALJ) appointed or detailed for such 
purpose.\6\ PFCRA also establishes appeal rights to the agency head by 
any person determined by an ALJ to be liable, and further review is 
available by a U.S. District Court.\7\
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    \5\ 31 U.S.C. 3801(a)(8)(A) and 3803. The Director of FHFA has 
designated the General Counsel of FHFA as FHFA's reviewing official. 
See 80 FR 79719, 79719 n.5 (Dec. 23, 2015).
    \6\ 31 U.S.C. 3803.
    \7\ Id.; see also section 3805.
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    A civil penalty may be imposed for making a false claim or 
statement to an agency even if the agency did not provide any money, 
property, services, or benefits to any person as a result. Where money, 
property, services, or benefits were provided as a result of the 
person's false claim or statement, an ``assessment'' may also be 
imposed as the administrative equivalent of damages. The maximum amount 
of any civil penalty is established by PFCRA, subject to periodic 
adjustments for inflation, and PFCRA also caps any assessment at an 
amount equal to twice the value of the money, property, services, or 
benefits provided.\8\
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    \8\ Id. at section 3802(a)(1) and (3).
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    Following PFCRA's enactment in 1986, an interagency task force was 
established under the leadership of the Department of Health and Human 
Services to develop model implementing regulations by all affected 
agencies and departments. This action was consistent with the 
expectation that ``regulations would be substantively uniform 
throughout the government, except as necessary to meet the specific 
needs of a particular agency or program.'' \9\ For that reason, FHFA 
reviewed the PFCRA rules of other departments and agencies and has 
modeled its proposed and interim final rule on the final rules of the 
Federal Deposit Insurance Corporation (FDIC) and Department of Housing 
and Urban Development (HUD).\10\ The FDIC rule was employed because, 
like FHFA, FDIC is a federal financial safety and soundness regulator. 
FHFA's supervisory, regulatory, enforcement, and resolution powers are 
similar to FDIC's, and both FDIC and FHFA have express independent 
litigating authority and authority to bring administrative actions for 
civil money penalties for false claims or statements made to them by 
their regulated institutions or entities and affiliated parties 
separate and apart from authority provided by PFCRA. The HUD rule was 
employed as it provides a structural model and an established 
operational approach.
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    \9\ See S. Rep. No. 99-212 at 12; see also 52 FR 27423 (July 21, 
1987).
    \10\ See 12 CFR part 308, subpart T (FDIC) and 24 CFR part 28 
(HUD) (2015).
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B. Proposed Rule

    On December 23, 2015, FHFA published a proposed rule to implement 
PFCRA.\11\
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    \11\ See 80 FR 79719.
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    Similar to the FDIC in its final rule, FHFA proposed that its PFCRA 
rule would apply only to FHFA's employment and contracting activities, 
and not to FHFA's supervisory, regulatory, enforcement, 
conservatorship, or receivership activities because other civil and 
administrative remedies available to FHFA are adequate to redress fraud 
in the areas not covered. FHFA noted in the notice of proposed 
rulemaking that it intended that the PFCRA administrative process not 
be confused with ordinary Agency procedures available in regulatory or 
conservatorship situations.\12\ FHFA also proposed a process to 
investigate and adjudicate PFCRA claims in accordance with PFCRA's 
procedural requirements.\13\ Should a PFCRA case proceed to 
adjudication by an ALJ, FHFA proposed to use its existing Rules of 
Practice and Procedure, which were incorporated by reference.\14\
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    \12\ Id. at 79720.
    \13\ Id. at 79720-79721.
    \14\ Id. at 79721.
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    FHFA's proposed rule also established a maximum civil penalty that 
reflected an inflation adjustment to the statutory PFCRA civil penalty, 
addressed an assessment in lieu of damages of up to twice the amount of 
the false, fictitious, or fraudulent claim, and stated that the PFCRA 
rule would not preclude the imposition of any other authorized actions 
or sanctions currently employed by FHFA, including debarment and 
suspension of contractors.\15\
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    \15\ Id.
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    FHFA invited comments on all aspects of the proposed rule during a 
60-day comment period that closed on February 22, 2016. FHFA received 
one comment from a private citizen that did not address the substance 
of the proposed rule.

II. Analysis of Final Rule; Publication as an Interim Final Rule

    FHFA has determined that no changes to the scope and process of the 
rule as proposed are necessary in light of comments received. Following 
publication of the proposed rule, however, FHFA reviewed provisions of 
the recently enacted Adjustment Improvements Act and has determined 
that further adjustment of the maximum penalty is required.\16\ Both 
the requirement that the penalty be adjusted and the adjustment formula 
to be applied are set forth in the Adjustment Improvements Act. 
Further, the Adjustment Improvements Act requires agencies to publish 
adjustments in accordance with that Act in an interim final rule.\17\ 
Consequently, FHFA is publishing this rule as an interim final rule to 
meet that requirement. If, prior to the effective date of the interim 
final rule, FHFA does not receive any comments from which FHFA 
concludes that the rule should be revised, this rule will become final 
without further action by FHFA.
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    \16\ Section 701, Public Law 114-74 (Nov. 2, 2015), codified as 
28 U.S.C. 2461 note.
    \17\ 28 U.S.C. 2461 note, section 4(b)(1)(A).
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    Scope. As does the FDIC's PFCRA rule, FHFA's interim final rule 
states that it applies to FHFA's employment and contracting activities 
and does not apply to FHFA's supervisory, regulatory, enforcement, 
conservatorship, or receivership activities because other civil and 
administrative remedies available to FHFA with regard to its regulated 
entities (Fannie Mae, Freddie Mac (together, the Enterprises), any 
affiliate of an Enterprise, and the Federal Home Loan Banks) and the 
Office of Finance of the Federal Home Loan Bank System (OF) or any 
other entity-affiliated party are adequate to redress fraud in the 
areas not covered. This statement of scope is almost identical to the 
scope set forth by the FDIC in its PFCRA rule, at 12 CFR 
308.500(c).\18\
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    \18\ FDIC's PFCRA rule applies to FDIC's employment and 
contracting activities but does not apply to false claims or 
statements made in connection with FDIC's regulatory, supervision, 
enforcement, insurance, receivership or liquidation 
responsibilities. See 12 CFR 308.500(c). FDIC explained that, as so 
limited, its rule was consistent with PFCRA's underlying purpose 
``to provide federal agencies with an administrative remedy for 
`small dollar fraud' cases for which there is no other remedy 
because the cases are too small for the [DOJ] to prosecute,'' and 
distinguished FDIC's circumstances from those of other agencies 
based on its other available administrative remedies and on its 
independent litigating authority. 65 FR 52352 (Aug. 29, 2000) 
(proposed rule); see also 66 FR 9187, 9188 (Feb. 7, 2001) (final 
rule).
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    In the event a regulated entity, any affiliate of an Enterprise, or 
the OF or any other entity-affiliated party made a false claim on or 
provided false information to FHFA in its supervisory, regulatory, 
enforcement, conservatorship, or receivership activities, FHFA has 
other available administrative remedies and independent litigating 
authority. See generally 12 U.S.C. 4513, 4514, 4585, and 4636. As a 
result, even without PFCRA, FHFA could pursue

[[Page 43033]]

administrative or judicial remedies for such false claims or statements 
on its own behalf with similar or greater effect.
    FHFA also notes that its PFCRA rule would not apply to false claims 
or statements made by any person to any regulated entity, an affiliate 
of an Enterprise, or the OF. PFCRA generally does not apply to false 
claims or statements made to private companies conducting private 
business activities, unless those companies are allocating money, 
property, services or benefits where the actual provider is the United 
States government.\19\ Because the regulated entities, including any 
affiliate of an Enterprise, and the OF do not receive United States 
government money, property, services, or benefits from FHFA, FHFA's 
interim final rule implementing PFCRA does not apply to any false claim 
or statement by any person to any regulated entity, including any 
affiliate of an Enterprise, or the OF.\20\
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    \19\ 31 U.S.C. 3801(a)(3)(B). Application of PFCRA does not 
require or imply the establishment of a principal-agent 
relationship.
    \20\ If a regulated entity, an affiliate of an Enterprise, or 
the OF were to allocate United States government money, property, 
services, or benefits to any person on behalf of another agency or 
department of the Federal government, then any PFCRA rule of that 
other agency or department may be applicable.
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    Process. Pursuant to PFCRA and FHFA's interim final rule, FHFA's 
``investigating official'' (under PFCRA, the FHFA IG or the IG's 
designee) is responsible for initiating an investigation of any claim 
or statement believed to be false.\21\ The investigating official 
submits a report containing information about the case (including 
exculpatory information), the potential violation, and other relevant 
information relating to liability to the General Counsel of FHFA, the 
``reviewing official'' designated by the Director of FHFA.\22\ The 
reviewing official (or the designee thereof) would then make a 
determination of whether there is adequate evidence of liability. If 
so, the reviewing official would provide written notice to the Attorney 
General of the intent to refer the allegations to an ALJ as presiding 
officer. Under the terms of PFCRA and the authority of the Attorney 
General, DOJ could elect to bring an action for civil relief under 
other applicable law, or the FHFA action may be deferred or postponed 
to avoid interference with a criminal investigation or prosecution by 
the Attorney General.
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    \21\ See 31 U.S.C. 3801(a)(4)(A).
    \22\ See 31 U.S.C. 3801(a)(8)(A), requiring the agency head to 
designate a reviewing official; see also footnote 5, supra.
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    If the Attorney General approves the use of PFCRA, FHFA's reviewing 
official may refer the case to an ALJ as presiding officer. To initiate 
the action, the reviewing official must provide notice to any person 
who is subject to the allegation of liability. That person may then 
request a formal hearing on the record and is entitled to all 
exculpatory information in the possession of the investigating official 
or the reviewing official. If a hearing is requested, the ALJ would 
determine liability based on the preponderance of the evidence and the 
amount of any penalty (and, if appropriate, any assessment) to be 
imposed. The interim final rule implements statutory provisions for an 
appeal of the ALJ's decision to the Director of FHFA as the ``authority 
head'' and then to the appropriate U.S. District Court.
    FHFA's interim final rule provides for hearing and appeal rights of 
persons subject to allegations of liability for any penalty or 
assessment under PFCRA. FHFA currently has Rules of Practice and 
Procedure in place at title 12 of the Code of Federal Regulations, part 
1209, which establish evidentiary, hearing, and appeals procedures and 
processes for hearings on the record at FHFA. Similar to the HUD rule, 
FHFA's PFCRA rule cross-references its existing administrative 
enforcement procedures for purposes of PFCRA actions. FHFA's existing 
rules of procedure were issued subject to a notice and comment 
rulemaking process and, by using them for purposes of any PFCRA action, 
FHFA ensures due process and procedural consistency.
    Maximum Penalty Amount. PFCRA establishes a maximum civil penalty 
of $5,000 for each violation of the Act.\23\ That amount is required to 
be adjusted for inflation by the Adjustment Improvements Act, which 
also sets forth the formula for the initial, or ``catch up,'' 
adjustment.\24\ FHFA has incorporated that adjustment into its interim 
final rule, resulting in a maximum penalty amount of $10,781. This is 
an increase in the maximum penalty amount initially set forth in the 
proposed rule, but it is required to comply with the Adjustment 
Improvements Act. This is the only substantive change FHFA has made to 
the rule as proposed.\25\
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    \23\ See 31 U.S.C. 3802(a).
    \24\ 28 U.S.C. 2461 note. The Adjustment Improvements Act 
amended the Federal Civil Penalties Inflation Adjustment Act of 1990 
(``1990 Adjustment Act''). To establish the maximum civil penalty in 
its proposed rule, FHFA applied the initial adjustment formula set 
forth in the 1990 Adjustment Act. That formula has been repealed by, 
and replaced with a ``catch up'' adjustment formula set forth in, 
the Adjustment Improvements Act.
    \25\ This interim final rule also corrects a typographical error 
in the rule text at section 1217.9: a reference to ``subpart B'' of 
FHFA's Rules of Practice and Procedure at 12 CFR part 1209 that 
should have been to ``subpart C,'' where other sections of the 
proposed rule correctly referred to ``subpart C'' (see sections 
1217.1(a)(2) and 1217.6(b)(8), 80 FR at 79721 and 79723) and, in 
read context, the reference to ``subpart C'' was clearly intended.
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    The Adjustment Improvements Act also requires that such ``catch-
up'' adjustments be published in the form of an interim final rule. 
This rule is issued as an interim final rule, rather than as a final 
rule, only for purposes of meeting that requirement. If, prior to the 
effective date of the interim final rule, FHFA does not receive any 
comments from which FHFA concludes that the rule should be revised, 
this rule will become final without further action by FHFA.

III. Paperwork Reduction Act

    The interim final rule does not contain any collections of 
information pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.). Therefore, FHFA has not submitted any information to the 
Office of Management and Budget for review.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that 
a regulation that has a significant economic impact on a substantial 
number of small entities, including small businesses and or small 
organizations, must include an initial regulatory flexibility analysis 
describing the regulation's impact on small entities. Such an analysis 
need not be undertaken if the agency has certified that the regulation 
will not have a significant economic impact on a substantial number of 
small entities.\26\ FHFA has considered the impact of the interim final 
rule under the Regulatory Flexibility Act. The General Counsel of FHFA 
certifies that the interim final rule is not likely to have a 
significant economic impact on a substantial number of small entities, 
because the regulation merely fulfills a statutory requirement under 
PFCRA to establish procedures for imposing civil penalties and 
assessments against those persons who have violated existing 
prohibitions against making fraudulent claims or statements to FHFA in 
its contracting and employment activities, and does not alter any 
underlying requirements or prohibitions or impose any new

[[Page 43034]]

requirements or prohibitions on persons subject to regulation by FHFA.
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    \26\ See 5 U.S.C. 605(b).
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List of Subjects in 12 CFR Part 1217

    Civil remedies, Program fraud.

Authority and Issuance

    Accordingly, for the reasons stated in the preamble, and under the 
authority of 12 U.S.C. 4511, 4513, 4514, 4526, 4585 and 4636 and 31 
U.S.C. 3803, FHFA amends subchapter A of Chapter XII of Title 12 of the 
Code of Federal Regulations by adding a new Part 1217 to read as 
follows:

PART 1217--PROGRAM FRAUD CIVIL REMEDIES ACT

Sec.
1217.1 Purpose and scope.
1217.2 Definitions.
1217.3 Basis for civil penalties and assessments.
1217.4 Investigation.
1217.5 Request for approval by the Department of Justice.
1217.6 Notice.
1217.7 Response.
1217.8 Statute of limitations.
1217.9 Hearings.
1217.10 Settlements.

    Authority:  12 U.S.C. 4501; 12 U.S.C. 4526, 28 U.S.C. 2461 note; 
31 U.S.C. 3801-3812.


Sec.  1217.1  Purpose and scope.

    (a) Purpose. This part:
    (1) Establishes 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 FHFA or to its agents; and
    (2) 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 1209, subpart C, of this 
chapter.
    (b) Scope. This part applies only to persons who make, submit, or 
present or cause to be made, submitted, or presented false, fictitious, 
or fraudulent claims or written statements to FHFA or to those acting 
on its behalf in connection with FHFA employment matters and FHFA 
contracting activities. It does not apply to false claims or statements 
made in connection with matters or activities related to FHFA's 
supervisory, regulatory, enforcement, conservatorship, or receivership 
responsibilities, as other civil and administrative actions available 
to FHFA to redress fraud in such areas provide for remedies that are 
equal to or exceed those available through this part.


Sec.  1217.2  Definitions.

    As used in this part:
    Ability to pay is determined based on a review of the respondent's 
resources available both currently and prospectively, from which FHFA 
could ultimately recover the total penalty, and as appropriate, 
assessment, which may be predicted based on historical evidence.
    Assessment means a monetary penalty that is in addition to a civil 
penalty and may be imposed if FHFA has made any payment, transferred 
property, or provided services for a claim that is determined to be in 
violation of paragraph (a)(1) of Sec.  1217.3. An assessment may not 
exceed an amount that is twice the amount of the claim or portion of 
the claim determined to be in violation of paragraph (a)(1) of Sec.  
1217.3. A civil penalty other than an assessment may be imposed whether 
or not FHFA has made a payment, transferred property, or provided 
services in response to the false claim or statement.
    Benefit means anything of value, including, but not limited to, any 
advantage, preference, privilege, license, permit, favorable decision, 
ruling, or status.
    Claim means any request, demand, or submission:
    (1) Made to FHFA for property, services, or money (including money 
representing benefits);
    (2) Made to a recipient of property, services, or money from FHFA 
or to a party to a contract with FHFA:
    (i) For property or services, if FHFA:
    (A) Provided such property or services;
    (B) Provided any portion of the funds for the purchase of such 
property or services; or
    (C) Will reimburse such recipient or party for the purchase of such 
property or services; or
    (ii) For the payment of money (including money representing 
benefits) if the United States:
    (A) Provided any portion of the money requested or demanded; or
    (B) Will reimburse such recipient or party for any portion of the 
money paid on such request or demand; or
    (3) Made to FHFA, which has the effect of decreasing an obligation 
to pay or account for property, services, or money.
    Investigating official means the FHFA Inspector General, or an 
officer or employee of the FHFA Office of Inspector General designated 
by the FHFA Inspector General.
    Knows or has reason to know. (1) For purposes of establishing 
liability under 31 U.S.C. 3802 and this part, means that a person, with 
respect to a claim or statement:
    (i) Has actual knowledge that the claim or statement is false, 
fictitious, or fraudulent;
    (ii) Acts in deliberate ignorance of the truth or falsity of the 
claim or statement; or
    (iii) Acts in reckless disregard of the truth or falsity of the 
claim or statement.
    (2) No proof of specific intent to defraud is required for purposes 
of establishing liability under 31 U.S.C. 3802 or this part.
    Makes a claim or statement includes making, presenting, or 
submitting the claim or statement and causing the claim or statement to 
be made, presented, or submitted.
    Notice means the charging document served by FHFA to commence an 
administrative proceeding to impose a civil penalty and, if 
appropriate, an assessment under chapter 38 of subtitle III of title 
31, U.S.C., and this part.
    Person means any individual, partnership, corporation, association, 
or private organization.
    Presiding officer means an administrative law judge appointed under 
5 U.S.C. 3105 or detailed to FHFA under 5 U.S.C. 3344.
    Reasonable prospect of collecting an appropriate amount of 
penalties and assessments is determined based on a generalized analysis 
made by the reviewing official, based on the limited information 
available in the report of investigation for purposes of determining 
whether the allocation of FHFA's resources to any particular action is 
appropriate.
    Report of investigation means a report containing the findings and 
conclusions of an investigation under chapter 38 of subtitle III of 
title 31, U.S.C., by the investigating official, as described in Sec.  
1217.4.
    Respondent means any person alleged to be liable for a civil 
penalty or assessment under Sec.  1217.3.
    Reviewing official means the General Counsel of FHFA, as so 
designated by the Director pursuant to 31 U.S.C. 3801(a)(8)(A).
    Statement means, unless the context indicates otherwise, any 
representation, certification, affirmation, document, record, or 
accounting or bookkeeping entry made:
    (1) With respect to a claim or to obtain the approval or payment of 
a claim (including relating to eligibility to make a claim); or
    (2) With respect to (including relating to eligibility for) a 
contract with, or a bid or proposal for a contract with, or benefit 
from, FHFA or any State, political subdivision of a State, or other

[[Page 43035]]

party, if FHFA provides any portion of the money or property under such 
contract or benefit, or if FHFA will reimburse such State, political 
subdivision, or party for any portion of the money or property under 
such contract or for such benefit.


Sec.  1217.3  Basis for civil penalties and assessments.

    (a) False, fictitious or fraudulent claims. (1) A civil penalty of 
not more than $10,781 may be imposed upon a person who makes a claim to 
FHFA for property, services, or money where the person knows or has 
reason to know that the claim:
    (i) Is false, fictitious, or fraudulent;
    (ii) Includes or is supported by a written statement that:
    (A) Asserts a material fact which is false, fictitious, or 
fraudulent; or
    (B) Omits a material fact and, as a result of the omission, is 
false, fictitious, or fraudulent, where the person making, presenting, 
or submitting such statement has a duty to include such material fact; 
or
    (iii) Is for payment for the provision of property or services to 
FHFA which the person has not provided as claimed.
    (2) Each voucher, invoice, claim form, or other individual request 
or demand for property, services, or money constitutes a separate claim 
for purposes of this part.
    (3) A claim shall be considered made to FHFA, a recipient, or party 
when the claim is actually made to an agent, fiscal intermediary, or 
other entity, acting for or on behalf of FHFA, the recipient, or the 
party.
    (4) Each claim for property, services, or money is subject to a 
civil penalty, without regard to whether the property, services, or 
money actually is delivered or paid.
    (5) There is no liability under this part if the amount of money or 
value of property or services claimed exceeds $150,000 as to each claim 
that a person submits. For purposes of this paragraph (a), a group of 
claims submitted simultaneously as part of a single transaction shall 
be considered a single claim.
    (6) If the FHFA has made any payment, transferred property, or 
provided services for a claim, then FHFA may make an assessment against 
a person found liable in an amount of up to twice the amount of the 
claim or portion of the claim that is determined to be in violation of 
paragraph (a)(1) of this section. This assessment is in addition to the 
amount of any civil penalty imposed.
    (b) False, fictitious or fraudulent statements. (1) A civil penalty 
of up to $10,781 may be imposed upon a person who makes a written 
statement to FHFA with respect to a claim, contract, bid or proposal 
for a contract, or benefit from FHFA that:
    (i) The person knows or has reason to know:
    (A) Asserts a material fact which is false, fictitious, or 
fraudulent; or
    (B) Omits a material fact and is false, fictitious, or fraudulent 
as a result of such omission, where the person making, presenting, or 
submitting such statement has a duty to include such material fact; and
    (ii) Contains or is accompanied by an express certification or 
affirmation of the truthfulness and accuracy of the contents of the 
statement.
    (2) Each written representation, certification, or affirmation 
constitutes a separate statement.
    (3) A statement shall be considered made to FHFA when the statement 
is actually made to an agent, fiscal intermediary, or other entity 
acting for or on behalf of FHFA.
    (c) Joint and several liability. A civil penalty or assessment may 
be imposed jointly and severally if more than one person is determined 
to be liable.


Sec.  1217.4  Investigation.

    (a) General. FHFA may initiate an action under chapter 38 of 
subtitle III of title 31, U.S.C., and this part against a respondent 
only upon an investigation by the investigating official.
    (b) Subpoena. Pursuant to 31 U.S.C. 3804(a), the investigating 
official may require by subpoena the production of records and other 
documents. The subpoena shall state the authority under which it is 
issued, identify the records sought, and name the person designated to 
receive the records. The recipient of the subpoena shall provide a 
certification that the documents sought have been produced, that the 
documents are not available and the reasons they are not available, or 
that the documents, suitably identified, have been withheld based upon 
the assertion of an identified privilege.
    (c) Investigation report. If the investigating official concludes 
that an action under chapter 38 of subtitle III of title 31, U.S.C., 
and this part may be warranted, the investigating official shall 
prepare a report containing the findings and conclusions of the 
investigation, including:
    (1) A description of the claim or statement at issue;
    (2) The evidence supporting the allegations;
    (3) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in violation of Sec.  
1217.3; and
    (4) Any exculpatory or mitigating circumstances that may relate to 
the claim or statement.
    (d) Referrals to the Attorney General. The investigating official 
may refer allegations directly to the Department of Justice for civil 
relief under other applicable law, as appropriate, or may defer or 
postpone submitting a report to the reviewing official to avoid 
interference with a criminal investigation or prosecution.


Sec.  1217.5  Request for approval by the Department of Justice.

    (a) General. If the reviewing official determines that the report 
of investigation supports an action under this part, the reviewing 
official must submit a written request to the Department of Justice for 
approval to issue a notice under Sec.  1217.6.
    (b) Content of request. A request under this section shall include:
    (1) A description of the claim or statement at issue;
    (2) The evidence supporting the allegations;
    (3) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in violation of Sec.  
1217.3;
    (4) Any exculpatory or mitigating circumstances that may relate to 
the claim or statement; and
    (5) A statement that there is a reasonable prospect of collecting 
an appropriate amount of penalties and assessments. Determining there 
is a reasonable prospect of collecting an appropriate amount of 
penalties and assessments is separate from determining ability to pay, 
and may not be considered in determining the amount of any penalty or 
assessment in any particular case.


Sec.  1217.6  Notice.

    (a) Commencement of action; notice. Upon obtaining approval from 
the Department of Justice, the reviewing official may commence an 
action to establish liability of the respondent under the Program Fraud 
Civil Remedies Act of 1986 (31 U.S.C. 3801 et seq.) and this part. To 
commence an action, the reviewing official must issue a notice to the 
respondent of the allegations of liability against the respondent. The 
notice shall be mailed, by registered or certified mail, or shall be 
delivered through such other means by which delivery may be confirmed.
    (b) Notice contents. The notice required under this section shall 
include:
    (1) The allegations of liability against the respondent, including 
the statutory basis for liability, the claim or statement

[[Page 43036]]

at issue, and the reasons why liability arises from that claim or 
statement;
    (2) A statement that the required approval to issue the notice was 
received from the Department of Justice;
    (3) The amount of the penalty and, if applicable, any assessment 
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 notice;
    (5) The addresses to which a response must be sent in accordance 
with Sec.  1209.15 of this chapter;
    (6) A statement that failure to submit an answer within 30 days of 
receipt of the notice may result in the imposition of the maximum 
amount of penalties and assessments sought, without right of appeal;
    (7) A statement that the respondent must preserve and maintain all 
documents and data, including electronically stored data, within the 
possession or control of the respondent that may relate to the 
allegations; and
    (8) A copy of this part 1217 and part 1209, subpart C of this 
chapter.
    (c) Obligation to preserve documents. Upon the issuance of a notice 
under this section, FHFA and the respondent shall each preserve and 
maintain all documents and data, including electronically stored data, 
within their respective possession or control that may relate to the 
allegations in the complaint.


Sec.  1217.7  Response.

    (a) General. (1) To obtain a hearing, the respondent must file a 
written response to a notice under Sec.  1217.6:
    (i) In accordance with Sec.  1209.24 of this chapter; and
    (ii) Not later than 30 days after the date of service of the 
notice.
    (2) A timely filed response to a notice under Sec.  1217.6 shall be 
deemed to be a request for a hearing.
    (3) A response to a notice under Sec.  1217.6 must include:
    (i) The admission or denial of each allegation of liability made in 
the notice;
    (ii) Any defense on which the respondent intends to rely;
    (iii) Any reasons why the penalty and, if appropriate, any 
assessment should be less than the amount set forth in the notice; and
    (iv) 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 to a notice under this part 
is timely submitted, FHFA may file a motion for default judgment in 
accordance with Sec.  1209.24(c) of this part.


Sec.  1217.8  Statute of limitations.

    The statute of limitations for commencing a hearing 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.


Sec.  1217.9  Hearings.

    (a) General. Hearings under this part shall be conducted in 
accordance with the procedures in subpart C of part 1209 of this 
chapter, governing actions in accordance with subchapter II of chapter 
5, U.S.C. (commonly known as the Administrative Procedure Act).
    (b) Factors to consider in determining amount of penalties and 
assessments. In determining an appropriate amount of any civil penalty 
and, if appropriate, any assessment, the presiding officer and, upon 
appeal, the Director or designee thereof, shall consider and state in 
his or her opinion any mitigating or aggravating circumstances. The 
amount of penalties and assessments imposed shall be based on the 
presiding officer's and the Director's or designee's consideration of 
evidence in support of one or more of the following factors:
    (1) The number of false, fictitious, or fraudulent claims or 
statements;
    (2) The time period over which such claims or statements were made;
    (3) The degree of the respondent's culpability with respect to the 
misconduct;
    (4) The amount of money or the value of the property, services, or 
benefit falsely claimed;
    (5) The value of the actual loss to FHFA as a result of the 
misconduct, including foreseeable consequential damages and the cost of 
investigation;
    (6) The relationship of the civil penalties to the amount of the 
loss to FHFA;
    (7) The potential or actual impact of the misconduct upon public 
health or safety or public confidence in the management of FHFA 
programs and operations, including particularly the impact on the 
intended beneficiaries of such programs;
    (8) Whether the respondent has engaged in a pattern of the same or 
similar misconduct;
    (9) Whether the respondent attempted to conceal the misconduct;
    (10) The degree to which the respondent has involved others in the 
misconduct or in concealing it;
    (11) If the misconduct of employees or agents is imputed to the 
respondent, the extent to which the respondent's practices fostered or 
attempted to preclude the misconduct;
    (12) Whether the respondent cooperated in or obstructed an 
investigation of the misconduct;
    (13) Whether the respondent assisted in identifying and prosecuting 
other wrongdoers;
    (14) The complexity of the program or transaction, and the degree 
of the respondent's sophistication with respect to it, including the 
extent of the respondent's prior participation in the program or in 
similar transactions;
    (15) Whether the respondent has been found, in any criminal, civil, 
or administrative proceeding, to have engaged in similar misconduct or 
to have dealt dishonestly with the Government of the United States or 
of a State, directly or indirectly;
    (16) The need to deter the respondent and others from engaging in 
the same or similar misconduct;
    (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.
    (c) Stays ordered by the Department of Justice. If at any time the 
Attorney General or an Assistant Attorney General designated by the 
Attorney General notifies the Director in writing that continuation of 
FHFA's action may adversely affect any pending or potential criminal or 
civil action related to the claim or statement at issue, the presiding 
officer or the Director shall stay the FHFA action immediately. The 
FHFA action may be resumed only upon receipt of the written 
authorization of the Attorney General.


Sec.  1217.10  Settlements.

    (a) General. The reviewing official, on behalf of FHFA, and the 
respondent may enter into a settlement agreement under Sec.  1209.20 of 
this chapter at any time prior to the issuing of a notice of final 
decision under Sec.  1209.55 of this chapter.
    (b) Failure to comply. Failure of the respondent to comply with a 
settlement agreement shall be sufficient cause for resuming an action 
under this part, or for any other judicial or administrative action.

    Dated: June 27, 2016.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2016-15620 Filed 6-30-16; 8:45 am]
 BILLING CODE 8070-01-P