U.S. Department of Agriculture Food and Nutrition Service Administrative Review Branch Alexandria, VA 22302

Transcription

1 U.S. Department of Agriculture Food and Nutrition Service Administrative Review Branch Alexandria, VA C & F Convenient Food Store, LLC, ) ) Appellant ) ) v. ) Case Number: C ) ROD Office, ) ) Respondent ) ) FINAL AGENCY DECISION It is the decision of the U.S. Department of Agriculture, Food and Nutrition Service (FNS) that the permanent disqualification from the Supplemental Nutrition Assistance Program (SNAP) imposed upon C & F Convenient Food Store, LLC (hereinafter Appellant ) by the ROD (Retailer Operations Division, Investigations and Analysis Branch, hereinafter ROD Office ) is hereby sustained. ISSUE The issue accepted for review is whether the ROD Office took appropriate action, consistent with 7 U.S.C. 2021, 7 CFR 278.6(a) and 7 CFR (e)(1) and (i) in its administration of the SNAP when it imposed a permanent disqualification upon Appellant. AUTHORITY 7 U.S.C and the implementing regulations at 7 C.F.R provide that A food retailer or wholesale food concern aggrieved by administrative action under 278.1, or may file a written request for review of the administrative action with FNS. CASE CHRONOLOGY In a letter dated November 12, 2105, the Retailer Operations Division charged the Appellant with trafficking, as defined in Section of the SNAP regulations, based on a series of irregular SNAP transaction patterns that occurred during the months of May through September The letter noted that the sanction for trafficking is permanent disqualification, as provided by 7 CFR 278.6(e)(1). The letter also noted that the Appellant could request a trafficking civil money penalty (CMP) in lieu of a permanent disqualification within 10 days of receipt under the conditions specified in 7 CFR 278.6(i). The record reflects that the SNAP Office received and 1

2 duly considered Appellant s replies to the Charge Letter. By a letter dated March 22, 2016, Appellant was informed that it was permanently disqualified from participation as a retail store in the SNAP and was ordered upon receipt of the letter to cease accepting SNAP benefits; consequently, Appellant ceased to accept said benefits. On April 1, 2016, Appellant requested an administrative review of the SNAP Office s decision; the request was granted. STANDARD OF REVIEW In appeals of adverse actions an appellant bears the burden of demonstrating by a preponderance of the evidence that the administrative actions should be reversed. That means an appellant has the burden of providing relevant evidence which a reasonable mind, considering the record as a whole, would accept as sufficient to support a conclusion that the matter asserted is more likely to be true than not true. CONTROLLING LAW The controlling statute in this matter is contained in the Food & Nutrition Act of 2008, as amended, at 7 U.S.C and in Part 278 of Title 7 of the Code of Federal Regulations (CFR). 7 U.S.C. 2021, Part 278.6(a) and Part (e)(1)(i) of the Regulations establish the authority upon which a permanent disqualification may be imposed upon a retail food store or wholesale food concern. 7 USC 2018 (b)(7)(e). 7 U.S.C. 2021(b)(3)(B) states, inter alia: a disqualification under subsection (a) shall be permanent upon the first occasion or any subsequent occasion of a disqualification based on the purchase of coupons or trafficking in coupons or authorization cards by a retail food store or wholesale food concern or a finding of the unauthorized redemption, use, transfer, acquisition, alteration, or possession of EBT cards 7 CFR 278.6(a) states, inter alia: FNS may disqualify any authorized retail food store if the firm fails to comply with the Food & Nutrition Act of 2008, as amended, or this part. Such disqualification shall result from a finding of a violation on the basis of evidence that may include facts established through on-site investigations, inconsistent redemption data, evidence obtained through a transaction report under an electronic benefit transfer system. (Emphasis added.) 7 CFR 278.6(e)(1)(i) states: Disqualify a firm permanently if: Personnel of the firm have trafficked as defined in

3 7 CFR states, inter alia: Trafficking means the buying, selling, stealing, or otherwise effecting an exchange of SNAP benefits issued and accessed via Electronic Benefit Transfer (EBT) cards, card numbers, (PINs), or by manual voucher and signature, for cash or consideration other than eligible food, either directly, indirectly, in complicity or collusion with others, or acting alone. 7 CFR 278.6(f)(1) states, inter alia: A civil money penalty for hardship to SNAP households may not be imposed in lieu of a permanent disqualification. 7 CFR 278.6(i) states, inter alia: FNS may impose a civil money penalty in lieu of a permanent disqualification for trafficking as defined in if the firm timely submits to FNS substantial evidence which demonstrates that the firm had established and implemented an effective compliance policy and program to prevent violations 7 CFR 278.6(b)(2)(iii) states, inter alia: If a firm fails to request consideration for a civil money penalty in lieu of a permanent disqualification for trafficking and submit documentation and evidence of its eligibility within the 10 days specified in 278.6(b)(1), the firm shall not be eligible for such a penalty. Additionally, in interpretation of the regulations, relevant policy provides, inter alia, that: the retailer must provide adequate proof that credit accounts existed at the time the suspicious EBT transactions occurred. The determining office shall compare the credit information provided by the retailer against the transactions in the Charge Letter and the recipient s personal identifying information If the retailer does not provide adequate proof the determining office shall permanently disqualify the retailer for trafficking. SUMMARY OF THE CHARGES Examples of transaction data contained in the SNAP Office s Charge Letter, as well as additional data reflected in the record, are included below to serve as a point of reference for the following discussion: 7 USC 2018 (b)(7)(e): 7 USC 2018 (b)(7)(e) 3

4 7 USC 2018 (b)(7)(e): USC 2018 (b)(7)(e) 7 USC 2018 (b)(7)(e): 7 USC 2018 (b)(7)(e) 7 USC 2018 (b)(7)(e) 7 USC 2018 (b)(7)(e) Data indicating clients shop at better-stocked firms on or about the same day as conducting implausible transactions at Appellant s firm (SS = super store, SM = supermarket; LG large grocery; MG = medium grocery; SG = small grocery; CO = combination grocery/other store; ME = meat specialty store; SE = seafood specialty store; CS = convenience store): 7 U.S.C (b)(6) & (b)(7)(c) Store Name Store Type Date/Time Amount CS 05/15/ :05:05 AM $1.85 C & F Convenient Food Store, LLC CS 05/15/ :11:36 AM $50.69 CS 05/15/ :29:06 PM $4.10 C & F Convenient Food Store, LLC CS 05/15/ :37:29 PM $10.23 SS 05/15/ :01:26 PM $80.29 CS 05/16/ :20:45 PM $2.00 CS 05/16/ :22:05 PM $10.02 CS 05/17/ :09:15 AM $7.01 CS 05/17/ :28:01 AM $4.04 CS 05/17/ :03:38 PM $2.00 C & F Convenient Food Store, LLC CS 05/17/ :36:10 PM $6.17 CS 05/17/ :43:14 PM $2.17 CS 05/18/ :04:27 AM $3.14 C & F Convenient Food Store, LLC CS 06/15/ :07:26 AM $ C & F Convenient Food Store, LLC CS 06/15/ :49:38 AM $74.85 C & F Convenient Food Store, LLC CS 06/15/ :02:13 PM $8.38 CS 06/17/ :42:20 AM $1.25 CO 07/15/ :53:27 AM $9.63 C & F Convenient Food Store, LLC CS 07/15/ :46:46 AM $85.48 SS 07/16/ :44:05 AM $77.42 CS 07/16/ :26:19 PM $1.88 CO 08/21/ :31:27 AM $6.99 CS 08/21/ :47:26 AM $1.00 C & F Convenient Food Store, LLC CS 08/21/ :10:24 PM $ C & F Convenient Food Store, LLC CS 08/21/ :24:25 PM $

5 CO 08/21/ :08:10 PM $7.25 CS 08/21/ :14:53 PM $1.99 CO 08/22/ :25:44 PM $4.50 The above HH conducted 30 transactions during the analysis period, 12 of which were at the Appellant firm. 7 USC 2018 (b)(7)(e). 7 U.S.C (b)(6) & (b)(7)(c) Store Name Store Type Date/Time Amount SS 05/23/ :39:03 PM $ C & F Convenient Food Store, LLC CS 05/23/ :00:04 PM $42.87 C & F Convenient Food Store, LLC CS 05/23/ :05:59 PM $55.01 C & F Convenient Food Store, LLC CS 05/24/ :39:20 PM $36.47 C & F Convenient Food Store, LLC CS 05/24/ :50:41 PM $20.72 C & F Convenient Food Store, LLC CS 05/24/ :12:00 PM $13.17 C & F Convenient Food Store, LLC CS 05/24/ :15:32 PM $ CS 05/31/ :47:58 AM $1.00 CS 06/23/ :18:29 AM $20.07 CS 06/23/ :43:12 AM $ SS 06/23/ :04:22 PM $ CO 06/23/ :11:56 PM $20.19 C & F Convenient Food Store, LLC CS 06/23/ :31:57 PM $ CS 06/24/ :41:43 AM $8.16 C & F Convenient Food Store, LLC CS 06/24/ :02:57 AM $69.71 C & F Convenient Food Store, LLC CS 06/24/ :58:35 AM $4.24 C & F Convenient Food Store, LLC CS 06/24/ :05:06 PM $10.95 SS 07/23/ :32:04 PM $ C & F Convenient Food Store, LLC CS 07/23/ :48:50 PM $51.81 ME 07/23/ :33:32 PM $65.00 ME 07/24/ :26:20 PM $ SM 08/23/ :39:14 AM $70.56 C & F Convenient Food Store, LLC CS 08/23/ :45:45 PM $ C & F Convenient Food Store, LLC CS 08/23/ :11:05 PM $25.89 C & F Convenient Food Store, LLC CS 08/23/ :12:01 PM $58.80 CS 08/23/ :17:21 PM $13.47 CS 08/24/ :41:41 AM $6.53 C & F Convenient Food Store, LLC CS 08/24/ :22:54 PM $ SS 08/25/ :17:07 PM $16.47 CS 08/25/ :23:44 PM $5.76 5

6 CS 08/26/ :38:27 PM $3.27 C & F Convenient Food Store, LLC CS 08/27/ :19:46 PM $13.97 C & F Convenient Food Store, LLC CS 08/27/ :30:39 PM $16.12 CO 09/21/ :36:27 PM $3.00 SS 09/23/ :52:08 AM $ ME 09/23/ :59:57 AM $ CS 09/23/ :26:59 PM $5.57 C & F Convenient Food Store, LLC CS 09/24/ :36:21 PM $11.09 SS 09/27/ :27:22 PM $3.49 The above HH conducted 45 transactions during the analysis period, 20 of which were at the Appellant firm. 7 USC 2018 (b)(7)(e). 7 U.S.C (b)(6) & (b)(7)(c) Store Name Store Type Date/Time Amount WAL-MART S/C 1153 SS 07/23/ :17:18 PM $ Family Supermarket SS 07/24/ :48:09 AM $90.64 Food Depot 56 SS 07/25/ :31:24 AM $83.37 C & F Convenient Food Store, LLC CS 07/25/ :10:55 PM $30.11 C & F Convenient Food Store, LLC CS 07/26/ :25:14 PM $80.31 C & F Convenient Food Store, LLC CS 07/27/ :14:00 PM $84.25 C & F Convenient Food Store, LLC CS 09/23/ :33:35 AM $ KROGER 400 SM 09/23/ :45:20 PM $91.93 C & F Convenient Food Store, LLC CS 09/23/ :24:38 PM $ WAL-MART S/C 1153 SS 09/27/ :02:12 AM $50.66 The above HH conducted 53 transactions during the analysis period, five of which were at the Appellant firm. 7 USC 2018 (b)(7)(e). 7 U.S.C (b)(6) & (b)(7)(c) Store Name Store Type Date/Time Amount Family Supermarket SS 09/09/ :51:39 AM $57.60 C & F Convenient Food Store, LLC CS 09/09/ :38:04 AM $ C & F Convenient Food Store, LLC CS 09/09/ :14:53 PM $ Food Depot 56 SS 09/09/ :26:08 PM $53.91 Food Depot 56 SS 09/09/ :20:13 PM $26.97 KROGER 328 SM 09/11/ :58:47 PM $61.12 Food Depot 56 SM 09/13/ :57:18 PM $43.00 Food Depot 56 SM 09/13/ :59:57 PM $60.81 C & F Convenient Food Store, LLC CS 09/14/ :14:14 AM $31.98 C & F Convenient Food Store, LLC CS 09/14/ :21:12 AM $1.99 Food Depot 56 SM 09/20/ :48:16 PM $1.10 Food Depot 56 SM 09/21/ :32:45 PM $4.84 The above HH conducted 59 transactions during the analysis period, four of which were at the 6

7 Appellant firm. 7 USC 2018 (b)(7)(e). The above are a few examples of many existing in agency data. APPELLANT S CONTENTIONS In Appellant s written request for review dated April 1, 2016 it was argued that: 1. Appellant has been working to gather as much financial information as possible to justify SNAP sales in the Summer and Fall of The firm is owned by one family and was in operation for approximately 18 months prior the violations coming to light. Prior to said violations being brought to the Owner s attention, she had never dealt with SNAP cards and/or operated a convenience store. This was the first time investigators ever cited this store for the inappropriate use of EBT cards/snap benefits. Appellant requests that, should a sanction remain in place, the disqualification be reduced to a six-month suspension based on this being a first offense. ANALYSIS AND FINDINGS In regard to contention 1 above, Appellant bears the burden of demonstrating through a preponderance of the evidence that the violations as charged in fact did not occur and that the sanction imposed by the SNAP Office should therefore be reversed. Appellant petitions for consideration of a lesser sanction but provides no evidence that the violations did not occur as charged. It is acknowledged that demonstrating that trafficking did not occur does indeed place a considerable burden upon Appellant; however, that the burden is considerable does not render invalid the evidence of SNAP benefit trafficking existing in the record or the actions taken by the SNAP Office on the basis of that evidence, which will be summarized below. Regarding contention 2 above, Appellant notes that this case represents the firm s first and only SNAP violation (or series of same); however, a record of program participation with no previously or subsequently documented violations does not constitute valid grounds for dismissing the present serious charges or for mitigating the impact of the violations upon which they are based. 7 USC 2018 (b)(7)(e). Moreover, prior sanctions may precipitate an increase in the severity of a later sanction (see 278.6(e)(6)). Further, as noted above, the Food & Nutrition Act of 2008 provides that a store's disqualification "shall be (emphasis added) permanent upon... the first occasion of... trafficking." A contracted store visit to the Appellant firm was conducted on July 23, 2016, as a result of which documentation was obtained including photographs of the exterior and interior of the store, a store layout diagram and a store inventory survey. This documentation reflects that the firm maintained a substantial inventory of prepared, read-to-eat foods and accessory food items (candy, soda and other non-staple food items), as well as a substantial inventory of tobacco and tobacco-related products, alcohol, health and beauty items, household items, paper products, over-the-counter medicines, clothing, jewelry and other non-food items. The documentation presents no indication of advertised specials, promotions or bulk or expensive food items; Appellant provides no corroborating documentation of same. Several areas of the store s shelves were sparsely stocked. The checkout area was behind a Plexiglas barrier; only small items could 7

8 be passed through the small opening. Counter space was approximately one by one foot surrounded by tobacco products, candy, over-the-counter medicines and snack food items. There were no shopping carts or baskets with which customers could transport large orders to the small check-out area or to waiting transportation. This documentation reflects that the firm was a typically-stocked convenience store in all relevant respects. It is worth noting that the average SNAP purchase in a convenience store in the state of Georgia during the analysis period was $6.82, reflecting that large purchases are not routinely made in such stores. With regard to Attachment 1 to the Charge Letter, while there are legitimate reasons why a SNAP recipient or household member might return to a convenience store during a short period of time, such purchases are more typically in small amounts and for obtaining just a few items. The examples in Attachment 1 indicate a series of repetitive purchases that total large amounts. Customers spending such substantial amounts of SNAP allotments in a typically-stocked convenience store, when there are other larger food stores nearby which carry substantially larger varieties of food at lower costs, is implausible. Multiple transactions over a short period of time, especially of high dollar value, are very suspicious because they are typical of stores and SNAP customers which are attempting to diminish attention to signs of SNAP-benefit trafficking. Moreover, the record further reflects that Appellant s number of repetitive transactions during the analysis period was 144 times that of the six nearest comparable stores (all convenience stores from just under one-quarter mile to just over one-half mile). The other comparable firms conducted no repetitive transactions during this period. There is no compelling rationale to explain why only Appellant s customers made repetitive visits spending large amounts in short timeframes. The record reflects, as noted above, that Appellant s store is a typical convenience store in all relevant respects and provides no plausible bases for customer s unusual attraction to the firm and unorthodox transaction patterns. 7 USC 2018 (b)(7)(e). Attachment 2 contains instances in which SNAP customers depleted SNAP account balances to within pennies of a zero balance and/or depleted balances during the first week following benefit issuance. It is highly implausible that customers would desire, or be able, to regularly conduct large transactions which deplete balances to within pennies of a zero balance. A particular combination of groceries priced in particular ways is required in order to arrive at preplanned totals, is difficult to do without a calculator and, as such, is very uncommon. The likelihood that these transactions were the result of the legitimate sale of eligible foods only is extremely small. Additionally, a government report on SNAP shopping patterns 1 indicates that after the first day of benefit issuance, on average, 80 percent of a household s allotment remains unspent. After seven days 40 percent of benefits remain unspent. Typically two weeks elapse prior to the average household s depletion of 80 percent of its SNAP benefits while three weeks elapse prior to depleting 90 percent. Depleting one s entire allotment in one or two days during the first week following benefit issuance, in a single large transaction or in a series of high cumulative transactions in a short period of time, especially in a typically-stocked convenience store, leaving no benefits for the remainder of the month, is inconsistent with the normal shopping behavior of 1 Analysis of EBT Benefit Redemption Patterns: Methods for Obtaining, Preparing, and Analyzing the Data. Report prepared by Abt Associates for the Food and Nutrition Service, USDA, November

9 SNAP households. Rather, large single transactions, or multiple and high cumulative transactions which diminish balances over a short period of time soon after benefit issuance, are indicative of SNAP benefit trafficking and attempts to diminish attention to signs of same. Additionally, similar to Attachment 1, appellant s number of balance-depleting transactions during the analysis period was 67 times that of the nearest six comparable convenience stores (the other firms conducted no balance-depleting transactions during this period).7 USC 2018 (b)(7)(e). The SNAP Office notes that, at the time of the sanction decision, there were 45 SNAPauthorized stores within a two-mile radius of the Appellant firm, including two super stores, one supermarket, one large grocery store, two small grocery stores and 39 other convenience stores. Agency data indicates that there are currently 18 SNAP-authorized firms within a one-mile radius, including one supermarket (at just over one-half mile from the Appellant firm), two combination grocery/other stores (one at just under one-tenth of a mile), two seafood specialty stores (both at just over one-half mile) and 13 other convenience stores (six from under onequarter mile to just over one-half mile). As noted, the data reflected in the examples on pages 6 through 9 above indicate many customers clearly have access to and routinely shop at betterstocked super stores, supermarkets, grocery stores and combination grocery/other stores in the immediate area, again, calling into question what customers were able to obtain at Appellant s typically-stocked convenience store/gas station that they were not able to obtain at much betterstocked and more competitively-priced stores. This information further indicates that these customers were conducting implausible transactions only at or primarily at the Appellant firm. The Appellant store was clearly not the only store in the immediate area offering food items to SNAP customers; as noted above, it was clearly not the best-stocked firm in the area and it was clearly not the only store being visited by Appellant s customers. The record reflects that Appellant s SNAP redemptions during the analysis period were over six times that of the state store-type average during the same period. Additionally, the record contains a comparison of Appellant s redemption activity during the analysis period to six nearby SNAP-authorized convenience stores and found that Appellant s SNAP redemptions during the analysis period ranged from just under two to just under 10 times that of the nearby comparable firms. 7 USC 2018 (b)(7)(e). 7 USC 2018 (b)(7)(e): 7 USC 2018 (b)(7)(e) 7 USC 2018 (b)(7)(e) 7 USC 2018 (b)(7)(e) 7 USC 2018 (b)(7)(e) 7 USC 2018 (b)(7)(e). In the absence of compelling evidence to the contrary, the precipitous redemption decline following the firm s receipt of the Charge Letter signals a compliance response thereto and a corresponding reduction of violative activity. 9

10 7 USC 2018 (b)(7)(e). Lastly, once trafficking is established, there is no latitude to impose a lesser sanction, with the exception of civil money penalty. There is provision at 7 CFR 278.6(i) for the imposition of a civil money penalty in lieu of permanent disqualification for trafficking. Appellant was advised of this provision in the SNAP Office s Charge Letter dated November 12, 2015, which also advised that documentation of eligibility for that alternative sanction was to have been provided within a specific time limit. In the absence of any such documentation, a civil money penalty was not imposed in lieu of permanent disqualification by the SNAP Office. The SNAP regulations are specific at 7 CFR 278.6(b)(2)(iii) in that if a firm fails to request consideration for a civil money penalty in lieu of a permanent disqualification for trafficking and submit documentation and evidence of its eligibility within the 10 days specified (within 10 days of receiving the letter of charges), the firm shall not be eligible for such a penalty. As Appellant did not request such consideration and provided no evidence or information in support thereof, the SNAP Office s decision not to impose a civil money penalty is sustained as appropriate pursuant to 7 CFR 278.6(b)(1); 278.6(b)(2)(ii), 278.6(b)(2)(iii) and 278.6(i). CONCLUSION In view of the above, the decision of the ROD Office to permanently disqualify Appellant from participation in the SNAP is hereby sustained. The decision will become final upon the 30 th day following Appellant s receipt of this document. RIGHTS AND REMEDIES Applicable rights to a judicial review of this decision are set forth in 7 U.S.C and 7 CFR If a judicial review is desired, the complaint must be filed in the U.S. District Court for the district in which Appellant s owner resides, is engaged in business, or in any court of record of the State having competent jurisdiction. This complaint, naming the United States as the defendant, must be filed within thirty (30) days of receipt of this decision. Under the provisions of the Freedom of Information Act (FOIA), it may be necessary to release this document and related correspondence and records upon request. If such a request is received, FNS will seek to protect, to the extent provided by law, personal information that if released could constitute an unwarranted invasion of privacy. January 9, 2017 DANIEL S. LAY ADMINISTRATIVE REVIEW OFFICER DATE 10