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

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1 U.S. Department of Agriculture Food and Nutrition Service Administrative Review Branch Alexandria, VA Nick s Food Mart, Inc, Appellant, v. Case Number: C Retailer Operations Division, Respondent. FINAL AGENCY DECISION It is the decision of the U.S. Department of Agriculture (USDA), Food and Nutrition Service (FNS) that there is sufficient evidence that a permanent disqualification of Nick s Food Mart, Inc. (hereinafter Nick s Food Mart ) from participation as an authorized retailer in the Supplemental Nutrition Assistance Program (SNAP) was properly imposed by the Retailer Operations Division. ISSUE The issue accepted for review is whether or not the Retailer Operations Division took appropriate action, consistent with Title 7 Code of Federal Regulations (CFR) Part 278 in its administration of SNAP, when it imposed a permanent disqualification against Nick s Food Mart. AUTHORITY 7 U.S.C and its implementing regulations at 7 CFR 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. SUMMARY OF CHARGES The Appellant was charged with falsifying an application and subsequently permanently disqualified from SNAP based on a conclusion by FNS that personnel of the firm knowingly submitted a SNAP application that contained false information of a substantive nature that could affect the eligibility of the firm. Specifically, the Retailer Operations Division determined that the Appellant intentionally misled FNS by not including on its application an owner who had previously been permanently disqualified from SNAP participation. 1

2 CASE CHRONOLOGY The agency s record shows that FNS initially authorized Nick s Food Mart for SNAP participation as a combination grocery/other store on March 25, In early August 2016, the Retailer Operations Division conducted a business entity search on the Missouri Secretary of State s public website and discovered that the reported owner of Nick s Food Mart, Suhair Hassen Abu Shawish, was not listed on any of the documents that were provided by the firm to the State. Instead, the only person listed was Eyad Mohammad, who identified himself as the incorporator of the business; the registered agent; the president and secretary of the corporation; and a member of the corporation s board of directors. Mr. Mohammad is one of three former owners of Art s Supermarket, a store in St. Louis, Missouri that was permanently disqualified from SNAP participation in July Because of Mr. Mohammad s ownership in a permanently disqualified firm, he is not eligible to participate as an owner in any store that submits an application subsequent to that disqualification. In a letter dated August 31, 2016, the Retailer Operations Division charged the Appellant with falsifying a SNAP application by intentionally not listing Mr. Mohammad as an owner of the store. The Retailer Operations Division determined that the false information was of a substantive nature that could affect the eligibility of the firm for authorization in the Program. The letter noted that the penalty for submitting an application with false information is permanent disqualification as provided by Federal statute at 7 U.S.C and in Federal regulations at 7 CFR 278.6(e)(1)(iii). The letter also stated that the Appellant had the right to reply to the charges, either by phone or in writing. In a letter dated September 23, 2016, the Appellant, through counsel, responded to the charges by claiming that the allegations were not well-founded. In short, the Appellant stated that the application did not contain false information because Mr. Mohammad was not and never has been an owner of the firm. Additionally, the Appellant claims that even if Mr. Mohammad had been an owner, it would not have affected the firm s eligibility to participate in SNAP because Mr. Mohammad has never been disqualified from SNAP and there is nothing to prevent his participation in the Program. In support of its contentions, the Appellant submitted a copy of a Stipulated Order of Dismissal from U.S. District Court, Eastern District of Missouri, showing the dismissal of the case Hani Abdelkarim and Eyad Mohammad v. United States of America, Case No. 4:10CV01682 RWS. The Order, filed on January 30, 2012, indicates that Mr. Mohammad wished to end his pursuit of the case against USDA because of financial considerations. After considering the Appellant s reply and reviewing the documentation in the case, the Retailer Operations Division determined that falsification of a SNAP application had occurred as charged and issued a determination letter dated October 31, This determination letter informed the Appellant that it would be permanently disqualified from SNAP upon receipt of the letter in accordance with 7 CFR 278.6(c) and 278.6(e)(1)(iii). The letter also stated that the determination would be final unless the firm submitted a written request for review to FNS s Administrative Review Branch. 2

3 In a letter postmarked November 1, 2016, the Appellant, through counsel, appealed the Retailer Operations Division s determination by requesting an administrative review. The request was granted. STANDARD OF REVIEW In an appeal of adverse action, such as disqualification from SNAP participation, an appellant bears the burden of proving by a preponderance of the evidence that the administrative action should be reversed. This means that 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 AND REGULATIONS The controlling law in this matter is found in the Food and Nutrition Act of 2008, as amended (7 U.S.C. 2021), and promulgated through regulation under Title 7 CFR Part 278. In particular, 7 CFR 278.6(a) and (e)(1) establish the authority upon which a permanent disqualification may be imposed against a retail food store or wholesale food concern. 7 U.S.C. 2021(a) states, inter alia: (a) DISQUALIFICATION. (1) IN GENERAL. An approved retail food or wholesale food concern that violates a provision of this Act or a regulation under this Act may be (A) disqualified for a specified period of time from further participation in the supplemental nutrition assistance program; (B) assessed a civil penalty of up to $100,000 for each violation; or (C) both. (2) REGULATIONS. Regulations promulgated under this Act shall provide criteria for the finding of a violation of, the suspension or disqualification of and the assessment of a civil penalty against a retail food store or wholesale food concern on the basis of evidence that may include facts established through on-site investigations, inconsistent redemption data, or evidence obtained through a transaction report under an electronic benefit transfer system. 7 U.S.C. 2021(b)(4) states, inter alia: a disqualification under subsection (a) shall be for a reasonable period of time to be determined by the Secretary, including permanent disqualification, on the knowing submission of an application for the approval or reauthorization to accept and redeem coupons that contains false information about a substantive matter that was a part of the application. 3

4 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 and 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, [or] evidence obtained through a transaction report under an electronic benefit transfer system [D]isqualification shall be permanent for a disqualification based on paragraph (e)(1) of this section. 7 CFR 278.6(e)(1) states, in relevant part: FNS shall take action as follows against any firm determined to have violated the Act or regulations The FNS regional office shall: (1) Disqualify a firm permanently if: (iii) It is determined that personnel of the firm knowingly submitted information on the application that contains false information of a substantive nature that could affect the eligibility of the firm for authorization in the program, such as, but not limited to, information related to: (A) Eligibility requirements under 278.1(b), (c), (d), (e), (f), (g) and (h); (F) Ownership of the firm; (H) Food Stamp Program history, business practices, business ethics or (I) Any other information of a substantive nature that could affect the eligibility of a firm. 7 CFR 278.6(b)(1) states, inter alia: Any firm considered for disqualification... under paragraph (a) of this section shall have full opportunity to submit to FNS information, explanation, or evidence concerning any instances of noncompliance before FNS makes a final administrative determination. The FNS regional office shall send the firm a letter of charges before making such determination. The letter shall specify the violations or actions which FNS believes constitute a basis for disqualification. The letter shall inform the firm that it may respond either orally or in writing to the charges contained in the letter within 10 days of receiving the letter 7 CFR 278.6(c) states, inter alia: The letter of charges, the response, and any other information available to FNS shall be reviewed and considered by the appropriate FNS regional office, which shall then issue the determination. In the case of a firm subject to permanent disqualification under paragraph (e)(1) of this section, the determination shall inform such a firm that action to permanently disqualify the firm shall be effective immediately upon the date of receipt of the notice of determination from FNS, regardless of whether a request for review is filed in accordance with part 279 of this chapter. APPELLANT S CONTENTIONS The Appellant, through counsel, made the following summarized contentions in its request for administrative review, in relevant part: Appellant does not believe the allegations to be well-founded. First, Ms. Shawish did 4

5 not provide false information. Second, even if a mistake was made, the mistake was not about matters that would affect the store s eligibility to participate in the program. Ms. Shawish purchased the store in February Because she travels a great deal, she intended to hire a manager to work with her two sons at the store. The manager s name is Eyad Mohammad. Mr. Mohammad assisted Ms. Shawish in starting the corporation. He is not an attorney and neither he nor Ms. Shawish consulted an attorney before filing the Articles of Incorporation. In fact, Mr. Mohammad did not allow Ms. Shawish to review the Articles before filing them on February 9, Two key aspects to the Articles of Incorporation: o The Articles do not list any of the owners for the company; o Mr. Mohammad listed himself as the registered agent and incorporator. He did not list himself as an owner or officer. Anyone can be a registered agent and an incorporator does not need to be an owner. Nothing on the Articles of Incorporation designates Eyad Mohammad as an owner of the company. At the time of the firm s SNAP application, the only owner of the company was Ms. Shawish. Eyad Mohammad was not an owner of the company. To this day, Mr. Mohammad does not have an ownership interest in the company. Without Ms. Shawish s review, Mr. Mohammad has filed the routine and required annual registration reports listing himself as President, Secretary and Board Member for the company. These reports do not identify any owners, of which Ms. Shawish is the only one. There is no law requiring that any officer or board member also be an owner of a company. As such, Ms. Shawish did not provide false information to USDA by listing only herself as the owner of the company. Even if Mr. Mohammad was an owner, it would not have affected the store s ability to participate in the Program. The charge letter states that Eyad Mohammad is the previous owner of Art s Supermarket FNS # This store was permanently disqualified from SNAP effective 7/6/2010. However this allegation is disproved by the Stipulated Order of Dismissal in the case captioned Hani Abdelkarim and Eyad Mohammad v. United States of America, Case No. 4:10CV01682 RWS. This Order notes that Mr. Mohammad was not the owner of Art s Supermarket at the time it was disqualified and Mr. Mohammad was never disqualified from SNAP. Paragraph 7 of the Order states: The Defendant United States Department of Agriculture has not issued a Civil Money Penalty ( CMP ) with respect to Art s Supermarket and/or plaintiff Eyad Mohammad and there are no pending issues with respect to Art s Supermarket and/or Eyad Mohammad that would warrant issuance of any CMP. [Emphasis added by Appellant s counsel.] Listing Mr. Mohammad as an owner of the company would not have affected Nick s Food Mart from participation in SNAP because Mr. Mohammad has never been disqualified and there is nothing to prevent his participation in the Program. USDA should not disqualify Ms. Shawish or Nick s Food Mart from participation in SNAP because they did not violate any statute or regulation in that they did not provide false information of a substantive nature that would affect the eligibility of the firm. The preceding may represent only a brief summary of the Appellant s contentions presented in 5

6 this matter. However, in reaching a decision, full attention was given to all contentions presented, including any not specifically summarized or explicitly referenced herein. ANALYSIS AND FINDINGS The primary issue for consideration in a falsification case is whether or not the Retailer Operations Division adequately established that the Appellant firm knowingly submitted a SNAP application that contained false information of a substantive nature that could affect the eligibility of the firm for authorization in the Program. In other words, did the Retailer Operations Division, through a preponderance of the evidence, establish that it is more likely true than not true that Appellant knowingly provided false information in an attempt to become authorized to participate in SNAP? Appellant s Claim That Eyad Mohammad is Not an Owner The Appellant claims that Ms. Shawish purchased the store in February 2015 and that because she travels a great deal, she hired Eyad Mohammad to be the store manager and to work at the store with her two sons. The Appellant contends that Mr. Mohammad assisted Ms. Shawish in starting the corporation, but that neither he nor Ms. Shawish consulted an attorney before filing the Articles of Incorporation. The Appellant states: In fact, Mr. Mohammad did not allow Ms. Shawish to review the Articles before filing them on February 9, The Appellant states that no owners are listed on the Articles of Incorporation, nor must they be. The Appellant claims that Mr. Mohammad listed himself as the registered agent and incorporator, but did not list himself as an owner or officer. According to the Appellant, anyone can be a registered agent, and a person acting as an incorporator does not need to be an owner. Nothing on the Articles of Incorporation designates Eyad Mohammad as an owner of the company. The Appellant contends that at the time of the firm s SNAP application, the only owner of the company was Ms. Shawish, and to this day, Mr. Mohammad does not have an ownership interest in the company. The Appellant claims that without Ms. Shawish s review, Mr. Mohammad submitted to the State the routine and required annual registration reports listing himself as President, Secretary and Board Member for the company. The Appellant argues that these reports do not identify any owners. It contends that there is no law requiring that any officer or board member also be an owner of a company. The Appellant claims that as such, Ms. Shawish did not provide false information to FNS by listing only herself as the owner of the company. This review does not agree with the Appellant s contention that Mr. Mohammad is not an owner of the firm. It is likely true that virtually anyone can be listed as a firm s registered agent, however, FNS has long held that being an officer, partner, or member of a corporation is tantamount to having an ownership interest in the firm. Question #12 of the SNAP application requires that the name and home address of all officers, owners, partners, and members be entered on the application. It is interesting to note that when Ms. Shawish entered her information, she did not call herself an owner. The business title she listed for herself was corporate officer. 6

7 It is very peculiar that Ms. Shawish alone completed the SNAP application, but appeared to leave the completing and submitting of all other documents, such as the Articles of Incorporation and Annual Registration Report, to a store manager with no ownership interest in the firm. This review finds that it highly improbable that if Ms. Shawish was indeed an owner or corporate officer, that Mr. Mohammad would exclude her name from every document submitted to the state. The Appellant claims that these documents were submitted without Ms. Shawish s review, and that Mr. Mohammad would not allow her to review the Articles of Incorporation before they were originally filed in However, this claim is not believable. A full seven months after the Retailer Operations Division issued its charge letter, Mr. Mohammad submitted another Annual Registration Report to the Missouri Secretary of State s office. As usual, only Mr. Mohammad s name was listed, again identifying himself as president and secretary of the firm, and a member of the board of directors. It is notable that prior to the Appellant s 2015 SNAP application, Mr. Mohammad, on three separate occasions, attempted to submit applications for SNAP participation: July 2013; September 2013; May The July 2013 application was withdrawn because Mr. Mohammad failed to provide requested information. The two subsequent applications were returned by FNS, informing Mr. Mohammad that he was ineligible to apply because of his earlier ownership association with Art s Supermarket, which was permanently disqualified from SNAP on July 6, It is further noted that in its response to the charge letter and in its request for administrative review, the Appellant did not submit any evidence to prove that Mr. Mohammad had no ownership interest in the firm. Such evidence could have included a bill of sale, lease agreement, banking information, or other documentation customarily found in a firm s files. Finally, it should be noted that prior to the firm s SNAP authorization in March 2015, a contractor visited the store on behalf of FNS to ensure that the store met the necessary food eligibility requirements to be able to participate in SNAP. When the contractor arrived, he asked the store clerk for the name of the owner, to which the clerk responded, Muhamid Auad [this is the spelling given by the contractor]. This is almost certainly a reference to Eyad Mohammad. The evidence found in both the case record and on the State of Missouri website as well as the lack of evidence provided by the Appellant very strongly points to Eyad Mohammad as an owner/officer of Nick s Food Mart. The evidence further suggests that Mr. Mohammad was likely excluded from the SNAP application by Ms. Shawish in a deliberate attempt to mislead FNS into believing that someone other than Mr. Mohammad who knew that he was ineligible to participate in SNAP was the owner of the firm. Appellant s Claim that Eyad Mohammad was not Disqualified Appellant s counsel has claimed that even if Eyad Mohammad was listed on the SNAP application as an owner, it would not have affected the store s ability to participate in the Program because Mr. Mohammad has never been disqualified from SNAP. As such, nothing could prevent his participation in the Program. According to the Appellant, the allegation that Mr. Mohammad was previously disqualified or that Art s Supermarket was disqualified is 7

8 disproven by the Stipulated Order of Dismissal in the case Hani Abdelkarim and Eyad Mohammad v. United States of America. The Appellant claims that this Order indicates that Mr. Mohammad was not an owner of Art s Supermarket at the time it was disqualified. Therefore, he couldn t have been part of the disqualification.to illustrate that Mr. Mohammad has not been disqualified from SNAP, Appellant s counsel cites Paragraph 7 of the Order of Dismissal: The Defendant United States Department of Agriculture has not issued a Civil Money Penalty ( CMP ) with respect to Art s Supermarket and/or plaintiff Eyad Mohammad and there are no pending issues with respect to Art s Supermarket and/or Eyad Mohammad that would warrant issuance of any CMP. [Emphasis added by Appellant s counsel.] This review finds the Appellant s arguments in this regard to be without merit. The Order of Dismissal cited by Appellant s counsel is not a dismissal of the disqualification action against Art s Supermarket. Rather it is Mr. Mohammad bowing out of the case because of financial concerns. The order states, In preparing this cause of action, the plaintiff has spent a significant amount of money on attorney s fees. Paragraph 5 adds, Plaintiff Eyad Mohammad contends that he has no interest in Art s Supermarket and because of financial considerations wants to terminate the expenses related to litigation concerning a business of which he has no further interest. This review acknowledges that Paragraphs 1-4 of the Order of Dismissal address Mr. Mohammad s contentions that he never finalized the purchase of Art s Supermarket and was therefore not an owner of the disqualified store. However, there is no indication in the Order that FNS, the U.S. Attorney s Office, or the court agreed with such a contention. There is no evidence that the Order of Dismissal hinged upon agreement to Mr. Mohammad s claims. As for Paragraph 7, cited above, this is simply a statement that a civil money penalty (CMP) has not been issued against Art s Supermarket and that no CMPs are pending. Paragraph 7 does not imply that Mr. Mohammad was never disqualified. The reason that a CMP was not issued in the case against Art s Supermarket is that the firm was not eligible for a CMP in lieu of permanent disqualification for trafficking. The fact that a CMP was not issued does not eliminate the disqualification that took place. It should be reiterated that the dismissal of the case against Art s Supermarket was executed at Mr. Mohammad s request. Because the case was dismissed at the plaintiff s request, the previous action permanent disqualification remains in effect. The previous determination by FNS that Eyad Mohammad was an owner of Art s Supermarket also remains in force. CONCLUSION The regulation at 7 CFR 278.6(e)(1)(iii) states that permanent disqualification is required if an application which is submitted by a firm contains false information of a substantive nature that could affect the eligibility of the firm to participate in SNAP. This includes false information regarding the ownership of the firm. Because the evidence in this case shows that Eyad Mohammed is an owner or officer of Nick s Food Mart, and because of his previous permanent 8

9 disqualification which remains in effect any subsequent firm in which Mr. Mohammad has such an interest is not eligible for participation in SNAP. Based on a preponderance of the evidence, it is the conclusion of this review that it is more likely true than not true that the Appellant knowingly submitted an application containing false information of a substantive nature that could affect the eligibility of the firm. Therefore, the decision to impose a permanent disqualification against the Appellant, Nick s Food Mart, is sustained. RIGHTS AND REMEDIES Applicable rights to a judicial review of this decision are set forth in Section 14 of the Food and Nutrition Act of 2008 (7 U.S.C. 2023) and in Section of the SNAP regulations. If a judicial review is desired, the complaint, naming the United States as the defendant, must be filed in the U.S. District Court for the district in which the Appellant owner resides or is engaged in business, or in any court of record of the State having competent jurisdiction. If a complaint is filed, it must be filed within 30 days of receipt of this decision. Under the Freedom of Information Act, we are releasing this information in a redacted format as appropriate. FNS will protect, to the extent provided by law, personal information that could constitute an unwarranted invasion of privacy. JON YORGASON July 6, 2017 Administrative Review Officer 9