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

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1 U.S. Department of Agriculture Food and Nutrition Service Administrative Review Branch Alexandria, VA Sam s Liquor, Appellant, v. Case Number: C Retailer Operations Division, Respondent. FINAL AGENCY DECISION It is the decision of the USDA that the record indicates that Sam s Liquor (hereinafter Appellant) committed violations of the Supplemental Nutrition Assistance Program (SNAP). There is sufficient evidence to support a finding that the six-month disqualification from participation as an authorized retailer in the program, as initially imposed by the Retailer Operations Division was appropriate. ISSUE The issue accepted for review is whether the Retailer Operations Division took appropriate action, consistent with Title 7 Code of Federal Regulations (CFR) Part 278 in its administration of the SNAP, when it imposed a six-month disqualification against Appellant in a letter dated June 9, AUTHORITY 7 U.S.C and its implementing regulations at 7 CFR provides 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 The USDA, Office of Inspector General (OIG), conducted an investigation of the compliance of Appellant with Federal SNAP law and regulations from September 4, 2015 to March 4, The investigation report documents that personnel, working at Appellant, committed 1

2 SNAP violations on five (5) occasions where store personnel exchanged SNAP benefits for ineligible items including major ineligibles on four of those occasions. As a result of evidence compiled from this investigation, the Retailer Operations Division informed the Appellant, in a letter September 16, 2016, that it was charged with violating the terms and conditions of the SNAP regulations. The letter stated, in relevant part, that: Your firm is charged with accepting SNAP benefits in exchange for merchandise, which, in addition to eligible foods, included common and major ineligible non-food items. The misuse of SNAP benefits violates Section 278.2(a) of the SNAP regulations. The charge letter also stated that: Under certain conditions, FNS may impose a civil money penalty (CMP) of up to $59, in lieu of permanent disqualification of a firm for trafficking. The SNAP regulations, Section 278.6(i), list the criteria that you must meet in order to be considered for a CMP. If you request a CMP, you must meet each of the four criteria listed and provide the documentation as specified within 10 calendar days of your receipt of this letter. Subsequently, in correspondence dated May 5, 2017, Retailer Operations Division rescinded the Charge letter dated September 16, 2016, due to a typographical error, on its part, in the date of the fifth investigative transaction. The Charge letter was reissued dated May 5, 2017, to show transaction #5 with a corrected transaction date of March 4, The record does not indicate any errors in the investigative report as submitted. The record reflects that in correspondence dated October 3, 2016, Appellant, through counsel, submitted an FOIA request for records related to the Appellant s store and the case at hand. The record reflects that Appellant s attorney received the requested documentation on November 10, In correspondence dated December 1, 2016, Appellant, through counsel, replied to the Charge letter and generally stated that it denies the allegations set forth in the letter and deny that such transactions took place. The store has maintained a policy against such sales, and does not routinely make sales of ineligible items to SNAP participants. Given the lack of evidence ownership respectfully ask the Department to dismiss the charges. Appellant, through counsel further stated that from time to time the store conducts evaluations of transactions to determine whether or not employees have been correctly classifying items and no violations have been found. Counsel quoted case law and analysis of previous cases in support of its position in this case and stated that the information cannot, in and on its own, warrant the suspension of Appellant and to do so at this level will warrant a reversal. Appellant, through counsel provided nine color photographs of the stores stock of snack items and the back of the cash register showing the serial number. Counsel also provided six customer affidavits and 10 pages of purchase invoices from Appellant. 2

3 Retailer Operations Division informed Appellant s attorney, in a letter dated February 24, 2017 and received on February 27, 2017, that the Office of Inspector General (OIG) closed its FOIA Log for Counsel s failure to return the requested Privacy Act Declaration on or before December 13, 2016, and that the Agency will proceed with its charges described in the Charge letter dated September 16, Counsel was informed that he had 10 days from receipt of the letter to submit additional information in support of his client s position. No additional reply or information was received by Retailer Operations Division. The record reflects that in correspondence dated May 5, 2017, the initial charge letter dated September 16, 2016, was rescinded based on a typographical error in the date on the 5th transaction listed in the letter. Retailer Operations Division issued a corrected charge letter dated May 5, 2017, received by Counsel on May 8, In correspondence dated May 16, 2017, Appellant s Attorney requested a 21 day extension to reply to the charges. The extension was granted to June 6, 2017 and Counsel was notified of the extension. In correspondence dated June 6, 2017, Appellant, through counsel, offered an additional information and indicated that it was reiterating Appellant s answer letter dated December 1, 2016, and ask that the letter be reviewed in its defense as no trafficking was committed. Counsel asked that consideration be given to the significant delay between the allegations that were set forth in the Charge letter and the actual date of the Charge letter since there is no functional manner in which they could possibly look back approximately one year and eight months to unidentified transactions, with unidentified agents and unidentified store personnel, with unidentified transactions and somehow provide an explanation for those transactions. Counsel stated that this is a fundamental deprivation of due process rights, there were no sworn affidavits or details of the transactions provided and reliability of the evidence presented simply does not exist. After considering the Appellant s reply and the evidence in the case, the Retailer Operations Division issued a determination letter dated June 9, The determination letter informed the Appellant it was disqualified from the SNAP, for a period of six-months, in accordance with 7 CFR 278.6(a) and (c) of the SNAP regulations. The determination letter also stated that the Retailer Operations Division considered the Appellant s eligibility for a hardship CMP according to the terms of Section 278.6(f)(1) of the SNAP regulations. The Retailer Operations Division determined that the Appellant was not eligible for the hardship CMP because there are other authorized retail stores in the area selling as large a variety of staple foods at comparable prices. In a letter dated June 19, 2017, the Appellant, through counsel, requested an administrative review of the Retailer Operations Division s determination. The appeal was granted. STANDARD OF REVIEW In appeals of adverse actions, an appellant bears the burden of proving 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 3

4 whole, might 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 , as amended, 7 U.S.C. 2021, as promulgated through regulation under Title 7 CFR Part 278. In particular, 7 CFR 278.6(a) and (e) establish the authority upon which a period of disqualification may be imposed against a retail food store or wholesale food concern. 7 CFR 278.2(a) states, inter alia: Coupons may be accepted by an authorized retail food store only from eligible households. Only in exchange for eligible food 7 CFR states, inter alia: Eligible food means: Any food or food product intended for human consumption except alcoholic beverages, tobacco and hot food and hot food products prepared for immediate consumption 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 1977, 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 7 CFR 278.6(e)(5) states, inter alia: Disqualify the firm for 6 months if it is to be the first sanction for the firm and the evidence shows that personnel of the firm have committed violations such as, but not limited to, the sale of common nonfood items due to carelessness or poor supervision by the firm s ownership or management. 7 CFR 278.6(f)(1) states, inter alia: FNS may impose a civil money penalty as a sanction in lieu of when the firm s disqualification would cause hardship to Food Stamp [SNAP] households because there is no other authorized retail food store in the area selling as large a variety of staple food items at comparable prices. SUMMARY OF THE CHARGES During an on-site investigation from September 4, 2015 to March 4, 2016, the USDA conducted five (5) compliance visits at Appellant. The investigation report documents the following: 1. On September 4, 2015, an unidentified clerk accepted SNAP benefits in exchange for one 4.6 oz. Colgate toothpaste, one 4 oz. bar Caress soap, and 1 roll Scott toilet paper. 2. On October 21, 2015, an unidentified clerk accepted SNAP benefits in exchange for one 4 oz. bar Caress soap and one 200 ml bottle Grey Goose vodka. 3. On December 3, 2015, an unidentified clerk accepted SNAP benefits in exchange for one 375 ml bottle of Cîroc vodka. 1 Effective October 1, 2008, the Food Stamp Act of 1977 was superseded by the Food and Nutrition Act of 2008, as amended through P.L

5 4. On January 5, 2016, an unidentified clerk accepted SNAP benefits in exchange for one denim rhinestone baseball cap and one 750 ml bottle E & J brandy. 5. On March 4, 2016, an unidentified clerk accepted SNAP benefits in exchange for one 750 ml bottle Hennessey. APPELLANT S CONTENTIONS The Appellant, through counsel, made the following summarized contentions in its request for administrative review, in relevant part: On September 16, 2016, the Department sent a charging letter to the Appellant indicating that there was a misuse of SNAP benefits in which it believed trafficking occurred. The charges set forth are only cites with no attachments, records, affidavits, statements or specific details regarding their charge in trafficking, but rather of just an alleged factual scenario under which this allegation arises, nearly a year and eight months prior to the charge letter. Such a significant and sever delay is inappropriate and the mere fact that (presumably) the Department s source for this information had to change the numbers should be indication enough that the Department simply does not have enough evidence to carry the more likely than not standard upon which this agency is to make these decisions. The charges lack significant evidence such as receipts and images of the alleged items purchased. There was no ALERT verification of the transactions or any other way to verify that the allegations occurred. What evidence does the Department have before it to determine that there has been a wrong doing? It is FNS burden of proof to demonstrate by a preponderance of the evidence that it is more likely than not that the allegations occurred. The evidence at bar does not comply with the requirements, and as a result, the evidence submitted does not achieve the preponderance standard. FNS refuses to furnish the Appellants with the exact time of the transaction so FNS has by design denied the Appellant the opportunity to present evidence. FNS inexplicably delayed its charges until long after a reasonable retailer would be expected to maintain specific transaction receipts again denying the Appellant a meaningful opportunity to respond. The Appellant avers that, after interview its employees, the alleged trafficking transactions did not occur. The preceding may represent only a brief summary of the Appellant s contentions presented in this matter. Please be assured, however, in reaching a decision, full attention was given to all contentions presented, including any not specifically recapitulated or specifically referenced herein. 5

6 ANALYSIS AND FINDINGS The Appellant, through counsel, contends that the disqualification is predicated on an incorrect and unsupported conclusion that the business engaged in trafficking and that after interviewing its employees, the alleged trafficking transactions did not occur. With regard to these contentions, they cannot be considered or substantiate as Appellant was not charged with trafficking but with the sale of ineligible items in exchange for SNAP benefits. Therefore, Appellant s contentions, through counsel, that the business did not engage in trafficking does not constitute valid grounds for dismissal of the current charges of violations or for mitigating the impact of those charges. Appellant, through counsel, contends that the charges set forth are only cites with no attachments, records, affidavits, statements or specific details regarding their charge in trafficking, but rather of just an alleged factual scenario under which this allegation arises nearly a year and eight months prior to the charge letter. Appellant, through counsel, also contends that the charges lack significant evidence such as receipts and images of alleged items purchased. There was no ALERT verification of the transactions or any other way to verify that the allegations occurred and FNS refuses to furnish the Appellants with the exact time of the transaction so by design FNS denied the Appellant the opportunity to present evidence. With regard to these contentions, the record reflects that Counsel submitted an FOIA request and was informed, by Retailer Operations Division, that he would receive a direct response to the FOIA request from the OIG Office. The record also reflects that counsel failed to respond to OIG s request to return a Privacy Act Declaration on or before December 13, 2016, and as a result, OIG records were not forwarded and the FOIA request was closed by OIG effective January 31, Appellant, through counsel, contends that it is FNS burden of proof to demonstrate by a preponderance of evidence that it more likely than not that the allegations occurred and the evidence at bar does not comply with the requirements. Regarding this contention, the charges of violations are based on the findings of a formal Department of Agriculture investigation; all transactions cited were conducted under the direct supervision of a Department Investigator. All such transactions are fully documented and a review of this documentation has yielded no indication of substantial error or discrepancy in the reported findings; the investigative record is specific and thorough with regard to the dates and other specifics of the violations and in all other critically pertinent detail. Moreover, 7 CFR 278.6(a), noted herein, establishes the authority upon which FNS may disqualify an authorized retail food store as a result from a finding of a violation on the basis of evidence that may include facts established through on-site investigations. The record reflects that an on-site investigation was conducted at Appellant s firm which resulted in five (5) separate instances of SNAP violations which included the exchange of SNAP benefits for merchandise not eligible for purchase with SNAP. 6

7 CIVIL MONEY PENALTY The Appellant requested reconsideration of the denial of a civil money penalty under the circumstances of the investigation. The Retailer Operations Division considered Appellant s eligibility for a hardship CMP under 7 CFR 278.6(f)(1). The Retailer Operations Division determined that the Appellant was not eligible for the hardship CMP in lieu of the six-month disqualification because there were at least 20 other authorized retail stores, within a one-mile radius of Appellant, including one superstore, three supermarkets, one large grocery store, one medium grocery store, and 14 other convenience stores selling as large a variety of staple foods at comparable prices. CONCLUSION The documentation presented by Retailer Operations Division provides through a preponderance of the evidence that the violations as reported occurred at the Appellant firm. 7 CFR 278.6(e)(5) specifies that FNS shall disqualify the firm for six months if it is to be the first sanction for the firm and the evidence shows that personnel of the firm have committed violations such as, but not limited to, the sale of common nonfood items due to carelessness or poor supervision by the firm s ownership or management. The violations were determined by Retailer Operations Division to represent the first sanction for the firm and evidence carelessness and poor supervision. Therefore, the imposition of a six-month disqualification, the least severe penalty allowed by regulation, is appropriate. It is therefore established that the violations as described in the letter of charges did in fact occur at the Appellant firm warranting a disqualification of six months in accordance with 7 CFR 278.6(e)(5). Based on the discussion herein, the decision to impose a six-month disqualification against Sam s Liquor is appropriate and the action is sustained. In accordance with the Act and regulations, the six-month period of disqualification shall become effective thirty (30) days after receipt of this letter. The Appellant may submit a new application for SNAP participation ten (10) days prior to the expiration of the sixmonth disqualification period. 7

8 RIGHTS AND REMEDIES Your attention is called to Section 14 of the Food and Nutrition Act of 1977, as amended, (7 U.S.C. 2023) and to Title 7, Code of Federal Regulations, Part (7 CFR 279.7) with respect to your right to a judicial review of this determination. Please note that 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 you reside or are engaged in business, or in any court of record of the State having competent jurisdiction. If any Complaint is filed, it must be filed within thirty (30) days of receipt of this Decision. Under the Freedom of Information Act (FOIA), 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. Monique Brooks September 7, 2017 Administrative Review Officer 8