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 Ocean Live Poultry Market Appellant, v. Case Number: C Retailer Operations Division, Respondent. FINAL AGENCY DETERMINATION It is the decision of the U.S. Department of Agriculture (USDA, Food and Nutrition Service (FNS, that there is sufficient evidence to support a finding that the Retailer Operations Division properly permanently withdrew the authorization of Ocean Live Poultry Market as a retailer in the Supplemental Nutrition Assistance Program (SNAP. 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 withdrew the authorization of Ocean Live Poultry Market in its determination letter dated June 16, 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 The Appellant firm, Ocean Live Poultry Market, was originally authorized to participate as a retailer in SNAP on November 18, In accordance with regulation the firm was required to undergo a periodic reauthorization process approximately every five years to determine whether or not the firm still met eligibility requirements. These reauthorizations took place in 2011 and again in early During the most recent reauthorization, as requested by the Retailer Operations Division, the Appellant firm submitted the required reauthorization application, FNS-252-R, Supplemental Nutrition Assistance Program 1

2 Reauthorization Application for Stores, on February 22, On this document, Question #10 asked, Was any officer, owner, partner, member, and/or manager convicted of any crime after June 1, 1999? The Appellant marked yes, and stated that a store owner had been convicted of gambling. A review of the Appellant s store file, including the firm s original 2005 Food Stamp application, revealed to the Retailer Operations Division that owner 7 U.S.C (b(6 & (b(7(cwas the owner who had been convicted of a gambling violation. In a letter sent on April 29, 2016, the Retailer Operations Division requested from the Appellant documentation pertaining to the gambling charges. In response to this request, the Appellant submitted a copy of a seven-page criminal docket from U.S. District Court, Eastern District of New York (Brooklyn. This document gave a chronological history of the charges against 7 U.S.C (b(6 & (b(7(c, from the indictment on July 22, 1999 to the conviction date of January 14, It also listed the date of sentencing (July 21, 2000 and the terms of probation. The docket also identified a January 2004 probation violation and subsequent penalty. The charges against 7 U.S.C (b(6 & (b(7(c included two counts of felony illegal gambling in accordance with 18 CFR 1955, and one count of felony conspiracy to defraud the United States in accordance with 18 CFR 371. The court found 7 U.S.C (b(6 & (b(7(c guilty of the illegal gambling charges, but dismissed the conspiracy charge. It sentenced 7 U.S.C (b(6 & (b(7(c to four years probation, six months of home confinement, 150 hours of community service, and was ordered to pay a $100 special assessment fee. He was also ordered not to have any connection with gambling activity. The probation violation referenced earlier resulted in a fine of $5,000. After reviewing this documentation, the Retailer Operations Division determined that 7 USC 2018 (b(7(e conviction constituted a lack of business integrity as provided by SNAP regulations at 7 CFR 278.1(b(3(i(A and (C. As a result, the Appellant s SNAP authorization was permanently withdrawn. A letter of withdrawal was sent to the Appellant on June 16, 2016 and indicated that the withdrawal would take effect 10 days from receipt of the letter unless the firm submitted a timely written request for review. In a letter postmarked June 20, 2016, the Appellant, through counsel, requested an administrative review of the Retailer Operations Division s decision to permanently withdraw the firm s SNAP authorization. The appeal was granted and implementation of the withdrawal was held in abeyance pending completion of this review. STANDARD OF REVIEW In an appeal of adverse action, such as the withdrawal of a firm s SNAP authorization, an appellant bears the burden of proving by a preponderance of the evidence that the administrative action should be reversed. This 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. 2

3 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. Though not cited in the Retailer Operations Division s withdrawal letter, 7 CFR 278.1(l, in particular, establishes the authority upon which FNS shall withdraw the SNAP authorization of any firm if it fails to meet established eligibility requirements. 7 CFR 278.1(l(1 reads, in part: FNS may withdraw the authorization of any firm authorized to participate in the program for any of the following reasons: (i The firm s continued participation in the program will not further the purposes of the program; (ii The firm fails to meet the specification of paragraph (b, (c, (d, (e, (f, (g, (h, or (i of this section; (iii The firm fails to meet the requirements for eligibility under Criterion A or B, as specified in paragraph (b(1(i of this section; or for co-located wholesale/retail firms, the firm fails to meet the requirements of paragraph (b(1(vi of this section, for the time period specified in paragraph (k(2 of this section. (iv The firm fails to meet the necessary business integrity to further the purposes of the program, as specified in paragraph (b(3 of this section. Such firms shall be withdrawn for lack of business integrity for period of time in accordance with those stipulated in paragraph (k(3 of this section for specific business integrity findings. 7 CFR 278.1(k(3 reads, in 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: (i Firms for which records of criminal conviction or civil judgment exist that reflect on the business integrity of owners, officers, or managers as stipulated in 278.1(b(3(i shall be denied authorization permanently. 7 CFR 278.1(b(3 states, in relevant 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: 3

4 (i Conviction of or civil judgment against the owners, officers or managers of the firm for: (A Commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public or private agreement or transaction; (B Commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, receiving stolen property, making false claims, or obstruction of justice; or (C Violation of Federal, State and/or local consumer protection laws or other laws relating to alcohol, tobacco, firearms, controlled substances, and/or gaming licenses. APPELLANT S CONTENTIONS The Appellant, through counsel, made the following summarized contentions in its administrative review request, in relevant part: Appellant owners 7 U.S.C (b(6 & (b(7(c, combined, own a 100 percent interest in Ocean Live Poultry Market. The clientele of the firm rely on SNAP and the ability to have local businesses such as Ocean Live Poultry Market participate in SNAP so that recipients can have access to affordable fresh poultry. 7 U.S.C (b(6 & (b(7(cwas under the impression that his attorney at the time had applied for an expungement of the conviction as permitted under New Jersey law. However, the attorney is now deceased and the process of expungement was not completed, unbeknownst to 7 U.S.C (b(6 & (b(7(c. 7 U.S.C (b(6 & (b(7(c is disabled, having been rendered totally blind due to an accident in November 2003, and there may have been some miscommunication to the person who filled out the reauthorization form. Any incorrect entries or omissions were inadvertent. In order to avoid any future misunderstandings, 7 U.S.C (b(6 & (b(7(c will be immediately conveying his entire interest in the firm to 7 U.S.C (b(6 & (b(7(c and proof of this will be furnished to USDA. The Appellant does not dispute that 7 U.S.C (b(6 & (b(7(c was convicted of illegal gambling, but it should not be the basis for USDA withdrawing the firm from SNAP for the following reasons: o The conviction is almost 15 years old o It does not correlate to the firm s business record, which has been impeccable o The conviction has been disclosed to FNS every year since 2002 and without ever any issue o Because 7 U.S.C (b(6 & (b(7(c is blind, he can no longer run the business on a day- to-day basis o The Appellant relies on SNAP for 80 percent of its sales, and revoking the firm s authorization will cause irreparable damage to the business o The business is the only live poultry market in Jersey City and withdrawing the firm s authorization will irreparably injure the customer base in this poor neighborhood. 4

5 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 specifically 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 in accordance with established laws and regulations. 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. Business Integrity The primary issue under consideration is whether or not the Appellant firm has the necessary business integrity and reputation, in accordance with regulation, to further the purposes of the Supplemental Nutrition Assistance Program. The USDA holds that the business integrity of a firm is critically important to the effective operation of SNAP. Therefore, the criteria outlined in the regulations focus on the business integrity and reputation of the owners, officers and management of firms seeking SNAP authorization or reauthorization. Prior criminal convictions relating to business integrity reflects on the ability of a firm to effectuate the purposes of, and abide by the rules governing, the program. As noted earlier, Question #10 of the SNAP reauthorization application asks, Was any officer, owner, partner, member, and/or manager convicted of any crime after June 1, 1999? The Appellant marked yes, and explained that owner 7 U.S.C (b(6 & (b(7(c had been convicted of illegal gambling. The record clearly shows that 7 U.S.C (b(6 & (b(7(c was convicted in U.S. District Court of felony illegal gambling in accordance with 18 CFR This conviction occurred on January 14, 2000, and 7 U.S.C (b(6 & (b(7(c was sentenced to four years of probation. As indicated earlier, the Appellant does not dispute these facts. In accordance with 7 CFR 278.1(b(3(i(A and (C, 278.1(k(3(i, and 278.1(l(1(iv, FNS shall permanently deny the authorization of any firm that lacks the necessary business integrity and reputation to further the purposes of the Supplemental Nutrition Assistance Program. Specifically, permanent denial is the required penalty for firms in which there is a conviction or civil judgment against the owners, officers or managers of the firm for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public or private agreement or transaction, and violation of Federal, State and/or local consumer protection laws or other laws relating to alcohol, tobacco, firearms, controlled substances, and/or gaming licenses. 7 USC 2018 (b(7(e. As such, the appropriate penalty is permanent denial in accordance 5

6 with 7 CFR 278.1(k(3(i. The regulations do not give FNS any latitude to consider a shorter denial period; neither do the regulations take into consideration whether or not the convicted individual has fulfilled his probationary obligations or how long ago the conviction occurred, except that the conviction must have occurred after June 1, 1999, which is the date the business integrity provisions of the SNAP regulations became effective. It should also be noted that the business integrity provisions at 7 CFR 278.1(b, (k, or (l do not allow for latitude to shorten or vacate a permanent withdrawal decision based on the firm s compliance with SNAP regulations during its authorization. The regulations have clearly set out the position of USDA with regard to the business integrity of participating retailers. Therefore, there is no discretion available to any party involved in the determination of eligibility or the determination of an administrative review regarding the seriousness of a business integrity violation. If the matter violates the provisions of 7 CFR 278.1(b(3, action to permanently deny an application or permanently withdraw the authorization of a firm must be taken accordingly. Therefore, the Appellant s request to reverse the permanent withdrawal determination cannot be granted. Conviction Was Previously Reported The Appellant, through counsel, contends that the conviction has been disclosed to FNS every year since 2002 and there has never been an issue. The Appellant claims that it never once tried to hide the conviction or pretend that it was not part of 7 U.S.C (b(6 & (b(7(c past. The Appellant further argues that the conviction did not prevent the firm from becoming authorized and has not prevented [it] from being reauthorized to participate in SNAP [in] 2003, 2004, 2005, 2006, 2007, 2008, etc. With that disclosure every single year since the initial application was filed, the reauthorization was granted. With regard to these contentions, it is noted that the Appellant was originally authorized for SNAP participation in November 2005, not in Additionally, agency records show that there have been only two reauthorization requirements since that initial authorization. Except in very limited circumstances, FNS does not require an annual reauthorization, and did not require that in this case. That said, the Appellant is correct that 7 U.S.C (b(6 & (b(7(c criminal conviction did not prevent the agency from authorizing Ocean Live Poultry Market in the first place. However, based on 7 U.S.C (b(6 & (b(7(c conviction, the agency should have denied the Appellant s original application. Assuming that the conviction was also reported during the 2011 reauthorization process, the agency should have taken action at that point to withdraw the firm. Unfortunately, the agency did not identify its mistake until 2016, the second time the firm was up for reauthorization. However, FNS is under no obligation to extend its mistake in perpetuity. While the firm is not expected to repay or refund to FNS any of the monies earned through its SNAP authorization during the 11 years in which it should not have been authorized, the agency 6

7 has a duty to apply the regulations as uniformly as possible. This means correcting any errors to ensure that only those retailers that meet all eligibility criteria are authorized to participate in the program. Therefore, the contention that the conviction has not prevented the firm from participating in SNAP in the past does not provide a valid basis for reversing the determination made by the Retailer Operations Division. Appellant Owner s Disability The Appellant, through counsel, has contended that due to a 2003 accident, 7 U.S.C (b(6 & (b(7(c is blind and can no longer run the business on a day-to-day basis. The Appellant states that 7 U.S.C (b(6 & (b(7(c and another employee take care of the business and 7 U.S.C (b(6 & (b(7(c could be seen as only an owner on paper, being very far removed from the day to day affairs. The Appellant additionally indicated that 7 U.S.C (b(6 & (b(7(c will be immediately conveying his entire interest in the firm to 7 U.S.C (b(6 & (b(7(c and that proof of this will be furnished to USDA. As of the date of this decision, no proof of transfer of ownership interest has been provided to FNS. Therefore,. 7 U.S.C (b(6 & (b(7(c is still considered an owner of record and remains part of the firm s ownership and management. Because 7 U.S.C (b(6 & (b(7(c continues to be an owner of the business, the entire firm is subject to the withdrawal decision. The regulations cited earlier refer to the business integrity and reputation of the firm, which includes any of the firm s owners, officers, or managers. Therefore, the contention that 7 U.S.C (b(6 & (b(7(c is no longer an active participant in the firm s day-to-day operations does not provide a valid basis for reversing the determination made by the Retailer Operations Division. Conviction Not Expunged The Appellant, through counsel, has contended that 7 U.S.C (b(6 & (b(7(c was under the impression that his attorney at the time at the time of the conviction had applied for an expungement of the conviction as permitted under New Jersey law. However, the attorney is now deceased and the process of expungement was not completed, unbeknownst to 7 U.S.C (b(6 & (b(7(c. With regard to this contention, this review cannot substantiate this claim, nor does it have any bearing on the outcome of this case. Records clearly show that the conviction remains on 7 U.S.C (b(6 & (b(7(c record and no evidence of expungement was provided to FNS. As such, this contention cannot serve as a basis for reversing the withdrawal determination. Hardship to Appellant and SNAP Recipients The Appellant, through counsel, has argued that the local community relies on stores such as Ocean Live Poultry Market to provide it with fresh, quality foods. The Appellant claims that 80 percent of its sales are due to SNAP transactions and revoking the firm s 7

8 authorization will cause irreparable damage to the business. The Appellant further contends that the firm is the only live poultry market in Jersey City and withdrawing the firm s authorization will irreparably injure the customer base in this poor neighborhood. With regard to the contention that a permanent withdrawal decision would cause the Appellant to suffer financially, Federal statute at 7 U.S.C and corresponding regulations make it clear that the business integrity and reputation of a retailer is of critical importance in furthering the purposes of SNAP. FNS is afforded no latitude in enforcing business integrity rules. Further, it is recognized that some degree of economic hardship is a likely consequence whenever a store is withdrawn from participation in SNAP. However, there is no provision in the SNAP regulations for waiver or reduction of a withdrawal period on the basis of possible economic hardship to either the ownership personally or to the firm resulting from the imposition of such an administrative action. To allow store ownership to be exempted from a withdrawal determination based on a purported economic hardship to the Appellant or firm would render virtually meaningless the provisions of the Food and Nutrition Act of 2008 and the enforcement efforts of the USDA. Moreover, giving special consideration to economic hardship to the firm would forsake fairness and equity, not only to competing stores and other participating retailers who are complying fully with Program regulations, but also to those retailers who have been denied participation or withdrawn from the Program in the past for similar business integrity concerns. With regard to the contention that the community will be adversely affected if the store is withdrawn, it is recognized that some degree of inconvenience for SNAP households is likely whenever a SNAP-authorized store is withdrawn and a household is forced to use its SNAP benefits elsewhere. However, as noted earlier, FNS is afforded no latitude in enforcing business integrity rules as provided in the SNAP regulations. Therefore, the Appellant s contentions that the community will be adversely affected and that the firm may incur economic hardship based on the firm s withdrawal from SNAP participation does not provide a valid basis for reversing or reducing the Retailer Operations Division s permanent withdrawal determination. A store may only accept SNAP benefits if it meets the required criteria for authorization, including demonstrating that it has the necessary business integrity and reputation to further the purposes of the program. As noted above, the Appellant does not meet these regulatory requirements. CONCLUSION It is the determination of this review that the Appellant firm does not further the purposes of the program due to its lack of business integrity and reputation as a result of a felony illegal gambling conviction of one of the firm s owners. In accordance with 7 CFR 278.1(b(3(i(A and (C, 278.1(k(3(i, and 278.1(l(1(iv, permanent withdrawal is the appropriate action in this case. On the basis of the analysis above, the decision by the Retailer Operations Division to permanently withdraw the authorization of Ocean Live Poultry Market to participate as a retailer in SNAP is sustained. In accordance with the Food and Nutrition Act of 2008, as amended, and SNAP 8

9 r egulations, the permanent withdrawal of Ocean Live Poultry Market shall become effective 30 days after receipt of this letter. 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 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 (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. JON YORGASON ADMINISTRATIVE REVIEW OFFICER December 15, 2016 DATE 9