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 La Bodega Latina Deli & Grocery Corp, 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 the Retailer Operations Division improperly denied the application of La Bodega Latina Deli & Grocery Corp. to participate as an authorized retailer in the Supplemental Nutrition Assistance Program (SNAP). As a result, the denial decision by the Retailer Operations Division is reversed. 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 denied the retailer application of La Bodega Latina Deli & Grocery Corp. 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. CASE CHRONOLOGY La Bodega Latina Deli & Grocery Corp. originally submitted an application to participate in SNAP as a retailer on December 8, On December 30, 2016, the Retailer Operations Division sent the firm a letter requesting a number of documents in an effort to determine whether or not the Appellant was connected to the previous store owner, who was permanently disqualified from SNAP for program violations. Requested documents included: all business licenses, business filings, bill of sale, copy of property lease, letter from financial institution identifying authorized signers on the account, and Federal tax returns. 1

2 In response to this request, the Appellant submitted the following: Notarized affidavit, dated January 11, 2017, stating that the Appellant is not associated with or related to any past disqualified store owners. Bill of sale and contract of sale, dated November 1, 2016 and signed by current and former owners. Documentation shows that the firm was purchased by the Appellant for 7 U.S.C (b)(6) & (b)(7)(c). This documentation was notarized on December 2, Business filing from New York Department of State, Division of Corporations and State Records, dated October 27, Certificate of Authority, dated October 28, 2016, from the New York State Department of Taxation and Finance. Beer License from the New York State Liquor Authority, dated December 19, Tobacco license, dated January 4, 2017, from New York State Department of Taxation and Finance. 7 U.S.C (b)(6) & (b)(7)(c) 7 U.S.C (b)(6) & (b)(7)(c) Assignment and Assumption of Lease, dated November 1, 2016, showing a transfer of the property lease from 7 U.S.C (b)(6) & (b)(7)(c) (the disqualified firm) to La Bodega Latina Deli & Grocery Corp., signed by both the new and old owners and the landlord. Upon discovering that the Appellant s home address that was listed on the 2015 tax return was the same home address as the previous store owner, and upon discovering that the Appellant owner s wife s last name, 7 U.S.C (b)(6) & (b)(7)(c), was the same last name as the previous store owner, the Retailer Operations Division suspected the new application could be an attempt by the disqualified owner to circumvent the disqualification by having a relative submit a new store application in his stead. The Retailer Operations Division was concerned that the transfer of ownership may not have been an arm s length transaction and that the disqualified owner could have some level of involvement or interest in the new store. It is noted that on Question #6 of the January 11, 2017 affidavit, the Appellant marked No, indicating that no owners or managers of the new store were related by birth or marriage to an owner or manager of a firm that has been disqualified from SNAP. In a letter dated January 31, 2017, the Retailer Operations Division requested additional information from the firm to clarify the potential relationship between the new owner and the former owner. In this letter, the Retailer Operations Division gave the Appellant a new affidavit to complete and specifically requested clarifying information about the potential relationship between the two store owners in light of the information on the tax return and the same last name, as described above. In response to this request, the Appellant submitted the new affidavit, dated and notarized on February 13, 2017, showing that the new owner is related by marriage to the previous store owner. The Appellant owner also provided a brief letter of explanation, dated February 8, 2017, 2

3 acknowledging that he is the previous owner s brother-in-law, but stating that the former owner is in no way associated with the new firm. After reviewing the documentation and evidence provided by the Appellant, the Retailer Operations Division concluded that the firm s application was an attempt by the disqualified owner to circumvent his disqualification through a purported sale of the store to his brother-inlaw. In a letter dated March 10, 2017, the Retailer Operations Division informed the Appellant that its SNAP application was denied for three years in accordance with 7 CFR 278.1(b)(3)(iii) for attempting to circumvent a period of disqualification. In a letter postmarked March 20, 2017, the Appellant requested an administrative review of the Retailer Operations Division s decision to deny the firm s SNAP application. The request was granted. STANDARD OF REVIEW In an appeal of adverse action, such as an application denial, 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. 2018), and promulgated through regulation under Title 7 CFR Part 278. In particular, 7 CFR 278.1(k) establishes the authority upon which FNS shall deny the authorization of any firm applying for participation in SNAP if it fails to meet established eligibility requirements. 7 CFR 278.1(k)(3)(iii) reads, in relevant part: FNS shall deny the application of any firm if it determines that: (3) The firm has been found to lack the necessary business integrity and reputation to further the purposes of the program. Such firms shall be denied authorization in the program for the following period of time: (iii) Firms for which evidence exists of an attempt to circumvent a period of disqualification, a civil money penalty, or fine imposed for violations of the Food Stamp Act of 1977, as amended, and program regulations shall be denied for a period of three years from the effective date of denial 3

4 7 CFR 278.1(b)(3) states, in part: (3) The business integrity and reputation of the applicant. FNS shall deny the authorization of any firm from participation in the program for a period of time as specified in paragraph (k) of this section based on consideration of information regarding the business integrity and reputation of the firm as follows: (iii) Evidence of an attempt by the firm to circumvent a period of disqualification, a civil money penalty or fine imposed for violations of the Food Stamp Act and program regulations. APPELLANT S CONTENTIONS The Appellant made the following summarized contentions in its request for administrative review, in relevant part: Appellant owner acknowledges the mistake made on the first affidavit, by marking no on the question regarding whether or not he was related to the previous owner. He thought he was supposed to answer yes if the prior owner was a blood relative. When he realized that he should have answered yes because they are related by marriage, he made the correction on the second affidavit. The previous owner is in no way involved in the business. The prior owner mentioned that he was selling the store and the Appellant saw it as an opportunity. Appellant owner has cooperated with everything that was asked of him and has sent all the information asked for by the Retailer Operations Division. Appellant has in no way tried to hide any facts from FNS. The business will not survive if it cannot accept SNAP benefits because it is in an area that relies heavily on the Program. The preceding may represent only a brief summary of the Appellant s contentions presented in this matter. However, in reaching a final agency decision, full attention was given to all contentions presented, including any not specifically summarized or explicitly referenced herein. ANALYSIS AND FINDINGS It is important to clarify for the record that the purpose of this review is to either validate or invalidate the earlier determination of the Retailer Operations Division. Thus, this review is limited to consideration of the relevant facts and circumstances as they existed at the time the Retailer Operations Division rendered its decision. The primary issue under consideration is whether or not the Appellant firm s application is, as the Retailer Operations Division believes, an attempt by the previous store owner to circumvent a period of disqualification through a purported sale of the store to his brother-in-law. It is the determination of this review that an attempt to circumvent a period of disqualification does not exist in this case. Familial relationship alone is not a sufficient reason to declare that 4

5 circumvention is being attempted. A thorough review of all of the documentation in this case provides strong evidence that the sale of the store from the previous owner to the Appellant was bona fide. This review cannot find any evidence that the prior owner has any financial or material interest in the new store, or that he is involved in the new business in any way. CONCLUSION On the basis of the analysis above, it is the determination of this review that the decision by the Retailer Operations Division to deny the application of La Bodega Latina Deli & Grocery Corp. was improper and not made in accordance with SNAP regulations. This review finds no affiliation between the disqualified former store owner and the Appellant, and thus finds no effort to circumvent the disqualification. As a result, the denial decision by the Retailer Operations Division is reversed. The application must be approved if the firm is otherwise eligible for program authorization under all other applicable provisions and requirements of SNAP program regulations. JON YORGASON May 17, 2017 Administrative Review Officer 5