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[Federal Register: October 12, 2005 (Volume 70, Number 196)]
[Rules and Regulations]               
[Page 59209-59221]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12oc05-1]                         


========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================



[[Page 59209]]



DEPARTMENT OF HOMELAND SECURITY

Office of the Secretary

6 CFR Part 13

[DHS-2005-0059]
RIN 1601-AA11

 
Program Fraud Civil Remedies

AGENCY: Office of the Secretary, Homeland Security.

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: This interim rule establishes uniform administrative 
procedures for the Department of Homeland Security (DHS) to implement 
the Program Fraud Civil Remedies Act of 1986 (the Act). The interim 
rule will provide a uniform, department-wide, administrative process 
for assessing penalties and recovering funds procured by fraud under 
departmental programs. It replaces the existing program fraud civil 
remedies rules of entities transferred from eight departments and the 
General Services Administration into DHS and establishes for the first 
time civil administrative procedures to deal with fraud under Federal 
Emergency Management Agency (FEMA) programs.

DATES: Effective Date: This interim rule is effective October 12, 2005.
    Comments: Written comments may be submitted to the Department of 
Homeland Security on or before November 14, 2005.

ADDRESSES: You may submit comments, identified by Docket DHS-2005-0059 
or RIN 1601-AA11, Program Fraud Civil Remedies, by one of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 

Follow the instructions for submitting comments.
     E-mail: FEMA-rules@dhs.gov. Include Docket DHS-2005-0059 
or RIN 1601-AA11 Program Fraud Civil Remedies, in the subject line of 
the message.
     Facsimile: Rules Docket Clerk, Office of the General 
Counsel, Federal Emergency Management Agency, (fax) 202-646-4536. 
Include Docket DHS-2005-0059 or RIN 1601-AA11, Program Fraud Civil 
Remedies, in the subject line of the message.
     Mail or Hand Delivery/Courier: For paper, disk, or CD-ROM 
submissions, Rules Docket Clerk, Office of the General Counsel, Federal 
Emergency Management Agency, Department of Homeland Security, 500 C 
Street, SW., Washington, DC 20472. Include Docket DHS-2005-0059 or RIN 
1601-AA11, Program Fraud Civil Remedies, in the subject line of the 
message.

FOR FURTHER INFORMATION CONTACT: Michael Russell, Acting Deputy 
Associate General Counsel, Office of the General Counsel, Department of 
Homeland Security, Washington, DC 20528. Telephone: 202-205-4634 or 
facsimile: 202-772-9735, not toll free calls; or email: 
michael.d.russell@dhs.gov.


SUPPLEMENTARY INFORMATION:

Public Participation

    Interested persons are invited to participate in this rulemaking by 
submitting written data, views, or arguments on all aspects of the 
interim rule. DHS also invites comments that relate to the economic, 
environmental, or federalism affects that might result from this 
interim rule. Comments that will provide the most assistance to DHS in 
developing these procedures will reference a specific portion of the 
proposed rule, explain the reason for any recommended change, and 
include data, information, or authority that support such recommended 
change.

I. Background

    This interim rule will implement the Program Fraud Civil Remedies 
Act of 1986 (the Act) which is codified at 31 U.S.C. 3801-3812. The Act 
establishes an administrative remedy against anyone who makes a false 
Claim or written Statement to any of certain Federal agencies, 
including the Department of Homeland Security (DHS or the Department). 
In brief, any person who submits a claim or written statement to an 
affected agency knowing or having reason to know that it is false, 
fictitious, or fraudulent, is liable for a penalty of up to $5,500 per 
false claim or statement and, in addition, with respect to claims, for 
an assessment of up to double the amount falsely claimed. The Act 
requires each affected Federal agency to publish rules and regulations 
necessary to implement the provisions of the Act (31 U.S.C. 3809).
    Congress established DHS in large part by transferring entities 
from other Federal departments and agencies to DHS. Before their 
transfer most of these entities were part of departments or agencies 
that had published rules under the Act. Prior to publication of this 
rule, most of the transferred entities followed the rules from their 
legacy department. The following program fraud rules have been in 
force:
     The program fraud regulations for the Bureau of Customs 
and Border Patrol, the Federal Law Enforcement Training Center, and the 
United States Secret Service, which were part of the U.S. Department of 
the Treasury, are in 31 CFR part 16;
     The program fraud regulations for the United States Coast 
Guard and the Transportation Security Administration, which were part 
of the Department of Transportation, are in 49 CFR part 31;
     The program fraud regulations for U.S. Citizenship and 
Immigration Services, the Bureau of Immigration and Customs 
Enforcement, the National Infrastructure Protection Center, the Office 
of Domestic Preparedness, and the Domestic Emergency Support Teams, 
which were part of the Department of Justice, are in 28 CFR part 71;
     The program fraud regulations for the National 
Communications System and the National Bio-Weapons Defense Analysis 
Center, which were part of the Department of Defense, are in 32 CFR 
part 277;
     The program fraud regulations for functions relating to 
agriculture import and entry inspection that were formerly in the 
Department of Agriculture, are in 7 CFR part 1, subpart L;
     The program fraud regulations for the National 
Infrastructure Simulation and Analysis Center (and energy security and 
assurances programs), programs and activities of the Department of 
Energy relating to the strategic nuclear defense posture of the United 
States, the Environmental Measurements Laboratory and, in some cases, 
the Nuclear Incident Response

[[Page 59210]]

Team, which were part of the Department of Energy are in 10 CFR part 
1013;
     The program fraud regulations for the Critical 
Infrastructure Assurance Office and the Integrated Hazard Information 
System, which were part of the Department of Commerce, are in 15 CFR 
part 25;
     The program fraud regulations for the Strategic National 
Stockpile, the Office of Emergency Preparedness, the National Disaster 
Medical System, and the Metropolitan Medical Response System, which 
were part of the Department of Health and Human Services, are in 45 CFR 
part 79; and
     The program fraud regulations for the Federal Protective 
Service and the Federal Computer Incident Response Center, which were 
part of the General Services Administration, are in 41 CFR part 105-70.
    Although these entities transferred to DHS, their published rules 
and procedures for dealing with program fraud cases remained in full 
force and effect. The ``savings provision'' of the Homeland Security 
Act of 2002, section 1512, ``saves'' completed administrative actions, 
such as regulations, until such time as DHS amends, modifies, 
supersedes, terminates, sets aside, or revokes them in accordance with 
law. Pub. L. 107-296 (Nov. 25, 2002). Under the savings provision, the 
legacy program fraud regulations from eight departments and the General 
Services Administration remained in full force and effect for the 
relevant DHS components.
    The only major DHS function not previously covered by regulations 
providing for an administrative resolution of suspected program fraud 
cases was the Federal Emergency Management Agency (FEMA). FEMA's cases 
of suspected fraud have required direct referral to the Department of 
Justice. The Department of Justice made a determination on the merits 
of a case and decided whether to proceed on either a criminal or civil 
basis against a Defendant. This interim rule will provide an 
administrative process, including hearings and appeals for the 
Defendant, to resolve program fraud cases for all DHS components, 
including FEMA. As in the past, this interim rule contemplates a review 
by the Department of Justice before issuance of a complaint against a 
person suspected of program fraud.
    DHS is therefore publishing this interim rule to ensure that all of 
its components are covered by rules under the Act. Furthermore, we have 
compared this interim rule with the rules that currently apply to DHS 
components and believe that this interim rule is, in material parts, 
identical to, or indistinguishable from, the existing rules. For 
example, the interim rule will mirror the complaint processing, 
hearing, and appeal rights that now exist.
    As applied to defendants in actions brought by FEMA, the 
regulations will prove less burdensome both to FEMA and to defendants. 
FEMA will have the same administrative procedures and administrative 
adjudication that are available to the rest of DHS, and, we estimate, a 
greater likelihood that legal action would be taken on cases that the 
Department of Justice might not otherwise prosecute. This interim rule 
will provide the additional benefit of reducing the caseloads in 
Federal courts by diverting actions to civil administrative proceedings 
at DHS. Defendants will have the advantage of a less formal, perhaps 
less expensive, adjudication and swifter resolution of complaints 
brought by DHS.

II. The Interim Rule

    This interim rule will implement the Program Fraud Civil Remedies 
Act of 1986, which imposes, through administrative adjudication and 
procedures, civil penalties and assessments against certain persons 
making false claims or statements against or to the Federal Government. 
The rule contains procedures governing the imposition of civil 
penalties and assessments against persons who make, submit, or present, 
or cause to be made, submitted, or presented, false, fictitious, or 
fraudulent claims or written statements to DHS or any of its 
components.

III. Procedural Requirements

Administrative Procedure Act

    Implementation of this rule as an interim rule with a request for 
public comment after the effective date of the rule is based upon the 
``good cause'' exception found under the Administrative Procedure Act 
(APA) at 5 U.S.C. 553(b)(B). DHS has determined that delaying 
implementation of this rule to await public notice and comment is 
unnecessary, impracticable, and contrary to the public interest.
    The rule provides procedures governing the imposition of civil 
penalties and assessments against persons who make, submit, or present, 
or cause to be made, submitted, or presented, false, fictitious, or 
fraudulent claims or written statements to the Department or any of its 
components.
    Congress established DHS in large part by transferring entities 
from other federal departments and agencies to DHS. Before their 
transfer most of these entities were part of departments or agencies 
that had published rules under the Act. Although the entities 
transferred to DHS, their published rules and procedures for dealing 
with program fraud cases remained in full force and effect. The 
``savings provision'' of the Homeland Security Act of 2002, section 
1512, ``saves'' completed administrative actions, such as regulations, 
until such time as DHS amends, modifies, supersedes, terminates, sets-
aside or revokes them in accordance with law. Under the savings 
provision program fraud regulations that the nine entities had in place 
when they transferred to the Department of Homeland Security remain in 
full force and effect until DHS amends or otherwise changes them. See 
section 19.1(d).
    DHS is therefore publishing this interim rule to ensure that all of 
its components are covered by rules under the Act. Furthermore, we have 
compared this rule against the rules that formerly applied to DHS 
components and believe that this rule is, in material parts, identical 
to, or indistinguishable from, the former rules. For example, the rule 
mirrors the complaint processing, hearing, and appeal rights of the 
other agencies. Since this rule borrows from existing rules that have 
already been subject to APA notice and comment procedures, and applies 
very similar rules to FEMA, we believe that publishing this rule with 
the usual notice and comment procedures is unnecessary.
    As applied to defendants in actions brought by FEMA, the 
regulations will prove less burdensome both to FEMA and to defendants. 
FEMA will have the same administrative procedures and administrative 
adjudication available to the rest of DHS, and, we estimate, a greater 
likelihood that legal action may be taken on cases that the Department 
of Justice might not otherwise undertake to prosecute. It could have 
the further benefit of reducing the caseloads in federal courts, 
diverting actions to civil administrative proceedings. Defendants will 
have the advantage of a less formal, perhaps less expensive 
administrative and swifter process to resolve complaints bought by the 
Department.
    The Department has a great number of grant and other financial 
assistance programs that benefit the public. We, therefore, believe it 
is in the public interest to implement this rule as soon as possible to 
afford DHS consolidated, uniform remedies under the Act against those 
who attempt to defraud the taxpayers.

[[Page 59211]]

    Moreover, the historic assistance and relief efforts following 
Hurricane Katrina will make more urgent the need for efficient 
administrative procedures for processing cases of fraud. The department 
is responsible to the public for stewardship of public funds. The 
increase in the expenditure of program funds in response to Hurricane 
Katrina necessitates these immediate measures to ensure that resources 
appropriated for relief efforts reach their intended recipients.
    DHS also finds good cause, under 5 U.S.C. 553(d)(3), for this 
interim rule to take effect immediately. DHS finds that, for the 
reasons previously discussed, it would be impracticable and contrary to 
the public interest to subject this interim rule to prior notice and 
public comment, or to delay its taking effect.
    Although we have good cause to publish this rule without prior 
notice and comment, we value public comments. The Department does not 
anticipate a significant number of comments, but will consider any such 
comments in the process of amending or revising the rule in the future.

Executive Order 12866

    This interim rule is considered by the Department of Homeland 
Security to be a ``significant regulatory action'' under Executive 
Order 12866, section 3(f), Regulatory Planning and Review. 58 FR 51735, 
October 4, 1993 (Executive Order). Under Executive Order 12866 a 
significant regulatory action is subject to an Office of Management and 
Budget (OMB) review and to the requirements of the Executive Order. The 
Executive Order defines ``significant regulatory action'' as one that 
is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $ 100 million or more 
or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights or obligations of recipients 
thereof;
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Due to the ``savings clause'' discussed above, the only additional 
programmatic impact of this interim rule relates to fraud cases 
resulting from FEMA programs--major disasters, emergencies, and other 
financial assistance programs. FEMA's cases of suspected fraud 
currently require direct referral to the Department of Justice. The 
Department of Justice makes a determination on the merits of a case and 
decides whether to proceed on either a criminal or civil basis in the 
federal courts against a defendant. This interim rule will provide an 
administrative process, including hearings for the defendant, to 
resolve program fraud cases for all components in DHS, including FEMA. 
It is difficult to predict the precise number of additional program 
fraud cases. Exogenous variables that could affect the number of FEMA 
program fraud cases include the number and severity of major disasters 
and emergencies in a given year. FEMA expects that these administrative 
procedures will be less costly to defendants than cases referred to the 
Department of Justice and litigated in the Federal court system.
    The interim rule will not have an annual effect on the economy of 
$100 million or more or adversely affect in a material way the economy, 
the legal sector, the insurance sector, State, local or tribal 
governments or communities, competition, or other sectors of the 
economy. As most other Departments and agencies have nearly identical 
rules in place, it will create no serious inconsistency or otherwise 
interfere with an action taken or planned by another agency. It will 
not materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof, although it will alter the procedures to be followed when an 
entity is alleged to have engaged in a fraudulent act, involving no 
more than $150,000, in a program operated by the Department.
    Because this rule announces procedures for a unique and relatively 
new cabinet-level department, and because DHS engages in uncommon 
relief and assistance efforts such as those following Hurricane 
Katrina, this rule may raise novel policy issues. Accordingly, this 
rule was reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) mandates that an agency 
conduct an RFA analysis when an agency is ``required by section 553 * * 
*, or any other law, to publish general notice of proposed rulemaking 
for any proposed rule, or publishes a notice of proposed rulemaking for 
interpretative rule involving the internal revenue laws of the United 
States * * *.'' 5 U.S.C. 603(a). RFA analysis is not required when a 
rule is exempt from notice and comment rulemaking under 5 U.S.C. 
553(b). DHS has determined that good cause exists under 5 U.S.C. 
553(b)(B) to exempt this rule from the notice and comment requirements 
of 5 U.S.C. 553(b). Therefore no RFA analysis under 5 U.S.C. 603 is 
required for this rule.

Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a State, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 or more in any 
one year. The Act does not require an assessment in the case of an 
interim rule issued without prior notice and public comment. 
Nevertheless, DHS does not expect this rule to result in such an 
expenditure. We discuss this rule's effects elsewhere in this preamble.

Executive Order 13132, Federalism

    This interim rule will not have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. It will not preempt any state laws. In 
accordance with section 6 of Executive Order 13132, we determine that 
this rule will not have federalism implications sufficient to warrant 
the preparation of a federalism impact statement.

Executive Order 12988, Civil Justice Reform

    This interim rule meets the applicable standards in section 3(a) 
and 3(b)(2) of Executive Order 12988.

Paperwork Reduction Act

    This interim rule will not require or invite any additional record 
or information maintenance, submission, or collection for the DHS 
programs. Therefore, this interim rule will not invoke the requirements 
of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

List of Subjects in 6 CFR Part 13

    Administrative practice and procedure, Claims, Fraud, Penalties.

Authority and Issuance

0
This interim rule is issued under the authority of 31 U.S.C. 3809. 
Accordingly, chapter I of 6 CFR is amended by adding part 13 to read as 
follows:

[[Page 59212]]

PART 13--PROGRAM FRAUD CIVIL REMEDIES

Sec.
13.1 Basis, purpose, scope and effect.
13.2 Definitions.
13.3 Basis for civil penalties and assessments.
13.4 Investigation.
13.5 Review by the Reviewing Official.
13.6 Prerequisites for issuing a Complaint.
13.7 Complaint.
13.8 Service of Complaint.
13.9 Answer.
13.10 Default upon failure to answer.
13.11 Referral of Complaint and answer to the ALJ.
13.12 Notice of hearing.
13.13 Parties to the hearing.
13.14 Separation of functions.
13.15 Ex parte contacts.
13.16 Disqualification of Reviewing Official or ALJ.
13.17 Rights of parties.
13.18 Authority of the ALJ.
13.19 Prehearing conferences.
13.20 Disclosure of Documents.
13.21 Discovery.
13.22 Exchange of witness lists, Statements, and exhibits.
13.23 Subpoenas for attendance at hearing.
13.24 Protective order.
13.25 Fees.
13.26 Filing, form and service of papers.
13.27 Computation of time.
13.28 Motions.
13.29 Sanctions.
13.30 The hearing and burden of proof.
13.31 Determining the amount of penalties and assessments.
13.32 Location of hearing.
13.33 Witnesses.
13.34 Evidence.
13.35 The record.
13.36 Post-hearing briefs.
13.37 Initial Decision.
13.38 Reconsideration of Initial Decision.
13.39 Appeal to Authority Head.
13.40 Stays ordered by the Department of Justice.
13.41 Stay pending appeal.
13.42 Judicial review.
13.43 Collection of civil penalties and assessments.
13.44 Right to administrative offset.
13.45 Deposit in Treasury of United States.
13.46 Compromise or settlement.
13.47 Limitations.

    Authority: Pub. L. 107-296, 116 Stat. 2135 (6 U.S.C., Ch. 1, 
sections 101 et seq.); 5 U.S.C. 301; 31 U.S.C. 3801-3812.


Sec.  13.1  Basis, purpose, scope and effect.

    (a) Basis. This part implements the Program Fraud Civil Remedies 
Act of 1986, 31 U.S.C. 3801-3812. Section 3809 of title 31, United 
States Code, requires each authority to promulgate regulations 
necessary to implement the provisions of the statute.
    (b) Purpose. This part:
    (1) Establishes administrative procedures for imposing civil 
penalties and assessments against Persons who Make, submit, or present, 
or cause to be Made, submitted, or presented, false, fictitious, or 
fraudulent Claims or written Statements to the Authority or to certain 
others; and
    (2) Specifies the hearing and appeal rights of Persons subject to 
allegations of liability for such penalties and assessments.
    (c) Scope. This part applies to all components of the Department of 
Homeland Security.
    (d) Effect. (1) This part applies to program fraud cases initiated 
by any component of the Department of Homeland Security on or after 
October 12, 2005.
    (2) Program fraud cases initiated by any component of the 
Department of Homeland Security before October 12, 2005, but not 
completed before October 12, 2005, will continue to completion under 
the rules and procedures in effect before this part.


Sec.  13.2  Definitions.

    The following definitions have general applicability throughout 
this part:
    (a) ALJ means an Administrative Law Judge in the Authority 
appointed pursuant to 5 U.S.C. 3105 or detailed to the Authority 
pursuant to 5 U.S.C. 3344. An ALJ will preside at any hearing convened 
under the regulations in this part.
    (b) Authority means the Department of Homeland Security.
    (c) Authority Head means the Deputy Secretary, Department of 
Homeland Security, or another officer designated by the Deputy 
Secretary.
    (d) Benefit means, in the context of a Statement, anything of 
value, including but not limited to any advantage, preference, 
privilege, license, permit, favorable decision, ruling, status, or loan 
guarantee.
    (e) Claim means any request, demand, or submission:
    (1) Made to the Authority for property, services, or money 
(including money representing grants, loans, insurance, or Benefits);
    (2) Made to a recipient of property, services, or money from the 
Authority or to a party to a contract with the Authority:
    (i) For property or services if the United States:
    (A) Provided such property or services;
    (B) Provided any portion of the funds for the purchase of such 
property or services; or
    (C) Will reimburse such recipient or party for the purchase of such 
property or services; or
    (ii) For the payment of money (including money representing grants, 
loans, insurance, or Benefits) if the United States:
    (A) Provided any portion of the money requested or demanded; or
    (B) Will reimburse such recipient or party for any portion of the 
money paid on such request or demand; or
    (3) Made to the Authority which has the effect of decreasing an 
obligation to pay or account for property, services, or money.
    (f) Complaint means the administrative Complaint served by the 
Reviewing Official on the Defendant under Sec.  13.7.
    (g) Defendant means any Person alleged in a Complaint under Sec.  
13.7 to be liable for a civil penalty or assessment under Sec.  13.3.
    (h) Government means the Government of the United States.
    (i) Individual means a natural Person.
    (j) Initial Decision means the written decision of the ALJ required 
by Sec.  13.10 or Sec.  13.37, and includes a revised Initial Decision 
issued following a remand or a motion for reconsideration.
    (k) Investigating Official means the Inspector General of the 
Department of Homeland Security or an officer or employee of the Office 
of the Inspector General designated by the Inspector General and 
eligible under 31 U.S.C. 3801(a)(4)(B).
    (l) Knows or Has Reason to Know, means that a Person, with respect 
to a Claim or Statement:
    (1) Has actual knowledge that the Claim or Statement is false, 
fictitious, or fraudulent;
    (2) Acts in deliberate ignorance of the truth or falsity of the 
Claim or Statement; or
    (3) Acts in reckless disregard of the truth or falsity of the Claim 
or Statement.
    (m) Makes includes presents, submits, and causes to be made, 
presented, or submitted. As the context requires, Making or Made will 
likewise include the corresponding forms of such terms.
    (n) Person means any Individual, partnership, corporation, 
association, or private organization, and includes the plural of that 
term.
    (o) Representative means an attorney who is a member in good 
standing of the bar of any State, Territory, or possession of the 
United States, the District of Columbia, or the Commonwealth of Puerto 
Rico. This definition is not intended to foreclose pro se appearances. 
That is, an Individual may appear for himself or herself, and a 
corporation or other entity may appear by an owner, officer, or 
employee of the corporation or entity.
    (p) Reviewing Official means the General Counsel of the Department 
of

[[Page 59213]]

Homeland Security, or other officer or employee of the Department who 
is designated by the General Counsel and eligible under 31 U.S.C. 
3801(a)(8).
    (q) Statement means any representation, certification, affirmation, 
Document, record, or accounting or bookkeeping entry Made:
    (1) With respect to a Claim or to obtain the approval or payment of 
a Claim (including relating to eligibility to Make a Claim); or
    (2) With respect to (including relating to eligibility for):
    (i) A contract with, or bid or proposal for a contract with the 
Authority, or any State, political subdivision of a State, or other 
party, if the United States Government provides any portion of the 
money or property under such contract or for such grant, loan, or 
Benefit, or if the Government will reimburse such State, political 
subdivision, or party for any portion of the money or property under 
such contract or for such grant, loan, or Benefit; or
    (ii) A grant, loan, or Benefit from, the Authority, or any State, 
political subdivision of a State, or other party, if the United States 
Government provides any portion of the money or property under such 
contract or for such grant, loan, or Benefit, or if the Government will 
reimburse such State, political subdivision, or party for any portion 
of the money or property under such contract or for such grant, loan, 
or Benefit.


Sec.  13.3  Basis for civil penalties and assessments.

    (a) Claims. (1) Except as provided in paragraph (c) of this 
section, a Person will be subject, in addition to any other remedy that 
may be prescribed by law, to a civil penalty of not more than $5,500 
for each Claim (as adjusted in accordance with the Federal Civil 
Penalties Inflation Adjustment Act of 1990 (Public Law 101-140), as 
amended by the Debt Collection Improvement Act of 1996 (Public Law 104-
134)) if such Person Makes a Claim that such Person Knows or Has Reason 
to Know:
    (i) Is false, fictitious, or fraudulent;
    (ii) Includes or is supported by any written Statement that asserts 
a material fact that is false, fictitious, or fraudulent;
    (iii) Includes or is supported by any written Statement that:
    (A) Omits a material fact;
    (B) Is false, fictitious, or fraudulent as a result of such 
omission; and
    (C) Is a Statement in which the Person Making such Statement has a 
duty to include such material fact; or
    (iv) Is for payment for the provision of property or services that 
the Person has not provided as claimed.
    (2) Each voucher, invoice, Claim form, or other Individual request 
or demand for property, services, or money constitutes a separate 
Claim.
    (3) A Claim will be considered Made to the Authority, recipient, or 
party when such Claim is actually Made to an agent, fiscal 
intermediary, or other entity, including any State or political 
subdivision thereof, acting for or on behalf of the Authority, 
recipient, or party.
    (4) Each Claim for property, services, or money is subject to a 
civil penalty regardless of whether such property, services, or money 
is actually delivered or paid.
    (5) If the Government has Made any payment (including transferred 
property or provided services) on a Claim, a Person subject to a civil 
penalty under paragraph (a)(1) of this section will also be subject to 
an assessment of not more than twice the amount of such Claim or that 
portion thereof that is determined to be in violation of paragraph 
(a)(1) of this section. Such assessment will be in lieu of damages 
sustained by the Government because of such Claim.
    (b) Statements. (1) Except as provided in paragraph (c) of this 
section, a Person will be subject, in addition to any other remedy that 
may be prescribed by law, to a civil penalty of not more than $5,500 
(as adjusted in accordance with the Federal Civil Penalties Inflation 
Adjustment Act of 1990 (Public Law 101-140), as amended by the Debt 
Collection Improvement Act of 1996 (Public Law 104-134)) if such Person 
Makes a written Statement that:
    (i) The Person Knows or Has Reason to Know:
    (A) Asserts a material fact that is false, fictitious, or 
fraudulent; or
    (B) Is false, fictitious, or fraudulent because it omits a material 
fact that the Person Making the Statement has a duty to include in such 
Statement; and
    (ii) Contains, or is accompanied by, an express certification or 
affirmation of the truthfulness and accuracy of the contents of the 
Statement.
    (2) Each written representation, certification, or affirmation 
constitutes a separate Statement.
    (3) A Statement will be considered Made to the Authority when such 
Statement is actually Made to an agent, fiscal intermediary, or other 
entity, including any State or political subdivision thereof, acting 
for or on behalf of the Authority.
    (c) Specific intent not required. No proof of specific intent to 
defraud is required to establish liability under this section.
    (d) More than one Person liable. (1) In any case in which it is 
determined that more than one Person is liable for Making a Claim or 
Statement under this section, each such Person may be held liable for a 
civil penalty under this section.
    (2) In any case in which it is determined that more than one Person 
is liable for Making a Claim under this section on which the Government 
has Made payment (including transferred property or provided services), 
an assessment may be imposed against any such Person or jointly and 
severally against any combination of such Persons.


Sec.  13.4  Investigation.

    (a) If an Investigating Official concludes that a subpoena pursuant 
to the Authority conferred by 31 U.S.C. 3804(a) is warranted:
    (1) The subpoena so issued will notify the Person to whom it is 
addressed of the Authority under which the subpoena is issued and will 
identify the records or Documents sought;
    (2) The Investigating Official may designate a Person to act on his 
or her behalf to receive the Documents sought; and
    (3) The Person receiving such subpoena will be required to tender 
to the Investigating Official or the Person designated to receive the 
Documents a certification that the Documents sought have been produced, 
or that such Documents are not available and the reasons therefore, or 
that such Documents, suitably identified, have been withheld based upon 
the assertion of an identified privilege.
    (b) If the Investigating Official concludes that an action under 
the Act may be warranted, the Investigating Official will submit a 
report containing the findings and conclusions of such investigation to 
the Reviewing Official.
    (c) Nothing in this section will preclude or limit an Investigating 
Official's discretion to refer allegations directly to the Department 
of Justice for suit under the False Claims Act or other civil relief, 
or to defer or postpone a report or referral to the Reviewing Official 
to avoid interference with a criminal investigation or prosecution.
    (d) Nothing in this section modifies any responsibility of an 
Investigating Official to report violations of criminal law to the 
Attorney General.


Sec.  13.5  Review by the Reviewing Official.

    (a) If, based on the report of the Investigating Official under 
Sec.  13.4(b), the Reviewing Official determines that there is adequate 
evidence to believe that a Person is liable under Sec.  13.3, the 
Reviewing Official will transmit to the Attorney General a written 
notice of the

[[Page 59214]]

Reviewing Official's intention to issue a Complaint under Sec.  13.7.
    (b) Such notice will include:
    (1) A Statement of the Reviewing Official's reasons for issuing a 
Complaint;
    (2) A Statement specifying the evidence that supports the 
allegations of liability;
    (3) A description of the Claims or Statements upon which the 
allegations of liability are based;
    (4) An estimate of the amount of money or the value of property, 
services, or other Benefits requested or demanded in violation of Sec.  
13.3;
    (5) A Statement of any exculpatory or mitigating circumstances that 
may relate to the Claims or Statements known by the Reviewing Official 
or the Investigating Official; and
    (6) A Statement that there is a reasonable prospect of collecting 
an appropriate amount of penalties and assessments.


Sec.  13.6  Prerequisites for issuing a Complaint.

    (a) The Reviewing Official may issue a Complaint under Sec.  13.7 
only if:
    (1) The Department of Justice approves the issuance of a Complaint 
in a written Statement described in 31 U.S.C. 3803(b)(1); and
    (2) In the case of allegations of liability under Sec.  13.3(a) 
with respect to a Claim, the Reviewing Official determines that, with 
respect to such Claim or a group of related Claims submitted at the 
same time such Claim is submitted (as defined in paragraph (b) of this 
section), the amount of money or the value of property or services 
demanded or requested in violation of Sec.  13.3(a) does not exceed 
$150,000.
    (b) For the purposes of this section, a related group of Claims 
submitted at the same time will include only those Claims arising from 
the same transaction (e.g., grant, loan, application, or contract) that 
are submitted simultaneously as part of a single request, demand, or 
submission.
    (c) Nothing in this section will be construed to limit the 
Reviewing Official's authority to join in a single Complaint against a 
Person's Claims that are unrelated or were not submitted 
simultaneously, regardless of the amount of money, or the value of 
property or services, demanded or requested.


Sec.  13.7  Complaint.

    (a) On or after the date the Department of Justice approves the 
issuance of a Complaint in accordance with 31 U.S.C. 3803(b)(1), the 
Reviewing Official may serve a Complaint on the Defendant, as provided 
in Sec.  13.8.
    (b) The Complaint will state:
    (1) The allegations of liability against the Defendant, including 
the statutory basis for liability, an identification of the Claims or 
Statements that are the basis for the alleged liability, and the 
reasons why liability allegedly arises from such Claims or Statements;
    (2) The maximum amount of penalties and assessments for which the 
Defendant may be held liable;
    (3) Instructions for filing an answer to request a hearing, 
including a specific Statement of the Defendant's right to request a 
hearing by filing an answer and to be represented by a Representative; 
and
    (4) That failure to file an answer within 30 days of service of the 
Complaint will result in the imposition of the maximum amount of 
penalties and assessments without right to appeal, as provided in Sec.  
13.10.
    (5) That the Defendant may obtain copies of relevant material and 
exculpatory information pursuant to the process outlined in Sec.  
13.20.
    (c) At the same time the Reviewing Official serves the Complaint, 
he or she will serve the Defendant with a copy of the regulations in 
this part.


Sec.  13.8  Service of Complaint.

    (a) Service of a Complaint must be Made by certified or registered 
mail or by delivery in any manner authorized by Rule 4(d) of the 
Federal Rules of Civil Procedure. Service of a Complaint is complete 
upon receipt.
    (b) Proof of service, stating the name and address of the Person on 
whom the Complaint was served, and the manner and date of service, may 
be Made by:
    (1) Affidavit of the Individual serving the Complaint by delivery;
    (2) A United States Postal Service return receipt card 
acknowledging receipt; or
    (3) Written acknowledgment of receipt by the Defendant or his or 
her Representative; or
    (4) In case of service abroad, authentication in accordance with 
the Convention on Service Abroad of Judicial and Extrajudicial 
Documents in Commercial and Civil Matters.


Sec.  13.9  Answer.

    (a) The Defendant may request a hearing by serving an answer on the 
Reviewing Official within 30 days of service of the Complaint. Service 
of an answer will be Made by delivering a copy to the Reviewing 
Official or by placing a copy in the United States mail, postage 
prepaid and addressed to the Reviewing Official. Service of an answer 
is complete upon such delivery or mailing. An answer will be deemed to 
be a request for hearing.
    (b) In the answer, the Defendant:
    (1) Will admit or deny each of the allegations of liability Made in 
the Complaint;
    (2) Will state any defense on which the Defendant intends to rely;
    (3) May state any reasons why the Defendant contends that the 
penalties and assessments should be less than the statutory maximum; 
and
    (4) Will state the name, address, and telephone number of the 
Person authorized by the Defendant to act as Defendant's 
Representative, if any.
    (c) If the Defendant is unable to file an answer meeting the 
requirements of paragraph (b) of this section within the time provided, 
the Defendant may, before the expiration of 30 days from service of the 
Complaint, serve on the Reviewing Official a general answer denying 
liability and requesting a hearing, and a request for an extension of 
time within which to serve an answer meeting the requirements of 
paragraph (b) of this section. The Reviewing Official will file 
promptly the Complaint, the general answer denying liability, and the 
request for an extension of time as provided in Sec.  13.11. For good 
cause shown, the ALJ may grant the Defendant up to 30 additional days 
from the original due date within which to serve an answer meeting the 
requirements of paragraph (b) of this section.


Sec.  13.10  Default upon failure to answer.

    (a) If the Defendant does not answer within the time prescribed in 
Sec.  13.9(a), the Reviewing Official may refer the Complaint to an ALJ 
by filing the Complaint and a Statement that Defendant has failed to 
answer on time.
    (b) Upon the referral of the Complaint, the ALJ will promptly serve 
on Defendant in the manner prescribed in Sec.  13.8, a notice that an 
Initial Decision will be issued under this section.
    (c) In addition, the ALJ will assume the facts alleged in the 
Complaint to be true, and, if such facts establish liability under 
Sec.  13.3, the ALJ will issue an Initial Decision imposing the maximum 
amount of penalties and assessments allowed under the statute.
    (d) Except as otherwise provided in this section, by failing to 
answer on time, the Defendant waives any right to further review of the 
penalties and assessments imposed under paragraph (c) of this section, 
and the Initial Decision will become final and binding upon the parties 
30 days after it is issued.

[[Page 59215]]

    (e) If, before such an Initial Decision becomes final, the 
Defendant files a motion seeking to reopen on the grounds that 
extraordinary circumstances prevented the Defendant from answering, the 
Initial Decision will be stayed pending the ALJ's decision on the 
motion.
    (f) If, on such motion, the Defendant can demonstrate extraordinary 
circumstances excusing the failure to answer on time, the ALJ will 
withdraw the Initial Decision in paragraph (c) of this section, if such 
a decision has been issued, and will grant the Defendant an opportunity 
to answer the Complaint.
    (g) A decision of the ALJ denying a Defendant's motion under 
paragraph (e) of this section is not subject to reconsideration under 
Sec.  13.38.
    (h) The Defendant may appeal to the Authority Head the decision 
denying a motion to reopen by filing a notice of appeal in accordance 
with Sec.  13.26 within 15 days after the ALJ denies the motion. The 
timely filing of a notice of appeal will stay the Initial Decision 
until the Authority Head decides the issue.
    (i) If the Defendant files a timely notice of appeal with the 
Authority Head, the ALJ will forward the record of the proceeding to 
the Authority Head.
    (j) The Authority Head will decide expeditiously whether 
extraordinary circumstances excuse the Defendant's failure to answer on 
time based solely on the record before the ALJ.
    (k) If the Authority Head decides that extraordinary circumstances 
excused the Defendant's failure to answer on time, the Authority Head 
will remand the case to the ALJ with instructions to grant the 
Defendant an opportunity to answer.
    (l) If the Authority Head decides that the Defendant's failure to 
answer on time is not excused, the Authority Head will reinstate the 
Initial Decision of the ALJ, which will become final and binding upon 
the parties 30 days after the Authority Head issues such decision.


Sec.  13.11  Referral of Complaint and answer to the ALJ.

    Upon receipt of an answer, the Reviewing Official will refer the 
matter to an ALJ by filing the Complaint and answer in accordance with 
Sec.  13.26.


Sec.  13.12  Notice of hearing.

    (a) When the ALJ receives the Complaint and answer, the ALJ will 
promptly serve a notice of hearing upon the Defendant in the manner 
prescribed by Sec.  13.8.
    (b) Such notice will include:
    (1) The tentative time and place, and the nature of the hearing;
    (2) The legal authority and jurisdiction under which the hearing is 
to be held;
    (3) The matters of fact and law to be asserted;
    (4) A description of the procedures for the conduct of the hearing;
    (5) The name, address, and telephone number of the Representative 
of the Government and of the Defendant, if any; and
    (6) Such other matters as the ALJ deems appropriate.


Sec.  13.13  Parties to the hearing.

    (a) The parties to the hearing will be the Defendant and the 
Authority.
    (b) Pursuant to 31 U.S.C. 3730(c)(5), a private plaintiff under the 
False Claims Act may participate in these proceedings to the extent 
authorized by the provisions of that Act.


Sec.  13.14  Separation of functions.

    (a) The Investigating Official, the Reviewing Official, and any 
employee or agent of the Authority who takes part in investigating, 
preparing, or presenting a particular case may not, in such case or a 
factually related case:
    (1) Participate in the hearing as the ALJ;
    (2) Participate or advise in the Initial Decision or the review of 
the Initial Decision by the Authority Head, except as a witness or a 
Representative in public proceedings; or
    (3) Make the collection of penalties and assessments under 31 
U.S.C. 3806.
    (b) The ALJ will not be responsible to, or subject to the 
supervision or direction of, the Investigating Official or the 
Reviewing Official.
    (c) Except as provided in paragraph (a) of this section, the 
Representative for the Government may be employed anywhere in the 
Authority, including in the offices of either the Investigating 
Official or the Reviewing Official.


Sec.  13.15  Ex parte contacts.

    No party or Person (except employees of the ALJ's office) will 
communicate in any way with the ALJ on any matter at issue in a case, 
unless on notice and opportunity for all parties to participate. This 
provision does not prohibit a Person or party from inquiring about the 
status of a case or asking routine questions concerning administrative 
functions or procedures.


Sec.  13.16  Disqualification of Reviewing Official or ALJ.

    (a) A Reviewing Official or ALJ in a particular case may disqualify 
himself or herself at any time.
    (b) A party may file a motion for disqualification of a Reviewing 
Official or an ALJ. Such motion will be accompanied by an affidavit 
alleging personal bias or other reason for disqualification.
    (c) Such motion and affidavit will be filed promptly upon the 
party's discovery of reasons requiring disqualification, or such 
objections will be deemed waived.
    (d) Such affidavit will state specific facts that support the 
party's belief that personal bias or other reason for disqualification 
exists and the time and circumstances of the party's discovery of such 
facts. It will be accompanied by a certificate of the Representative of 
record that it is Made in good faith.
    (e)(1) If the ALJ determines that a Reviewing Official is 
disqualified, the ALJ will dismiss the Complaint without prejudice.
    (2) If the ALJ disqualifies himself or herself, the case will be 
reassigned promptly to another ALJ.
    (3) If the ALJ denies a motion to disqualify, the Authority Head 
may determine the matter only as part of his or her review of the 
Initial Decision upon appeal, if any.


Sec.  13.17  Rights of parties.

    Except as otherwise limited by this part, all parties may:
    (a) Be accompanied, represented, and advised by a Representative;
    (b) Participate in any conference held by the ALJ;
    (c) Conduct discovery;
    (d) Agree to stipulations of fact or law, which will be Made part 
of the record;
    (e) Present evidence relevant to the issues at the hearing;
    (f) Present and cross-examine witnesses;
    (g) Present oral arguments at the hearing as permitted by the ALJ; 
and
    (h) Submit written briefs and proposed findings of fact and 
conclusions of law after the hearing.


Sec.  13.18  Authority of the ALJ.

    (a) The ALJ will conduct a fair and impartial hearing, avoid delay, 
maintain order, and assure that a record of the proceeding is Made.
    (b) The ALJ has the authority to:
    (1) Set and change the date, time, and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring the attendance of witnesses and the 
production of Documents at depositions or at hearings;

[[Page 59216]]

    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of discovery;
    (8) Regulate the course of the hearing and the conduct of 
Representatives and parties;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude, or limit evidence;
    (11) Upon motion of a party, take official notice of facts;
    (12) Upon motion of a party, decide cases, in whole or in part, by 
summary judgment where there is no disputed issue of material fact;
    (13) Conduct any conference, argument, or hearing on motions in 
Person or by telephone; and
    (14) Exercise such other authority as is necessary to carry out the 
responsibilities of the ALJ under this part.
    (c) The ALJ does not have the authority to Make any determinations 
regarding the validity of treaties or other international agreements, 
Federal statutes or regulations, or Departmental Orders or Directives.


Sec.  13.19  Prehearing conferences.

    (a) The ALJ may schedule prehearing conferences as appropriate.
    (b) Upon the motion of any party, the ALJ will schedule at least 
one prehearing conference at a reasonable time in advance of the 
hearing.
    (c) The ALJ may use prehearing conferences to discuss the 
following:
    (1) Simplification of the issues;
    (2) The necessity or desirability of amendments to the pleadings, 
including the need for a more definite Statement;
    (3) Stipulations and admissions of fact or as to the contents and 
authenticity of Documents;
    (4) Whether the parties can agree to submission of the case on a 
stipulated record;
    (5) Whether a party chooses to waive appearance at an oral hearing 
and to submit only documentary evidence (subject to the objection of 
other parties) and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits;
    (8) Discovery;
    (9) The time and place for the hearing; and
    (10) Such other matters as may tend to expedite the fair and just 
disposition of the proceedings.
    (d) The ALJ may issue an order containing all matters agreed upon 
by the parties or ordered by the ALJ at a prehearing conference.


Sec.  13.20  Disclosure of Documents.

    (a) Upon written request to the Reviewing Official, the Defendant 
may review, at a time and place convenient to the Authority, any 
relevant and material Documents, transcripts, records, and other 
materials that relate to the allegations set out in the Complaint and 
upon which the findings and conclusions of the Investigating Official 
under Sec.  13.4(b) are based, unless such Documents are subject to a 
privilege under Federal law. Special arrangements as to confidentiality 
may be required by the Reviewing Official, who may also assert 
privilege or other related doctrines. Upon payment of fees for 
duplication, the Defendant may obtain copies of such Documents.
    (b) Upon written request to the Reviewing Official, the Defendant 
also may obtain a copy of all exculpatory information in the possession 
of the Reviewing Official or Investigating Official relating to the 
allegations in the Complaint, even if it is contained in a Document 
that would otherwise be privileged. If the Document would otherwise be 
privileged, only that portion containing exculpatory information must 
be disclosed.
    (c) The notice sent to the Attorney General from the Reviewing 
Official as described in Sec.  13.5 is not discoverable under any 
circumstances.
    (d) The Defendant may file a motion to compel disclosure of the 
Documents subject to the provisions of this section. Such a motion may 
only be filed following the serving of an answer pursuant to Sec.  
13.9.


Sec.  13.21  Discovery.

    (a) In general. (1) The following types of discovery are 
authorized:
    (i) Requests for production of Documents for inspection and 
copying;
    (ii) Requests for admissions of the authenticity of any relevant 
Document or of the truth of any relevant fact;
    (iii) Written interrogatories; and
    (iv) Depositions.
    (2) Unless mutually agreed to by the parties, discovery is 
available only as ordered by the ALJ. The ALJ will regulate the timing 
of discovery.
    (b) Documents defined. (1) For the purpose of this section and 
Sec. Sec.  13.22 and 13.23, the term Documents includes information, 
documents, reports, answers, records, accounts, papers, and other data 
and documentary evidence.
    (2) Nothing in this part will be interpreted to require the 
creation of a Document.
    (c) Motions for discovery. (1) A party seeking discovery may file a 
motion. Such a motion will be accompanied by a copy of the request for 
production of Documents, request for admissions, or interrogatories or, 
in the case of depositions, a summary of the scope of the proposed 
deposition.
    (2) Within ten days of service, a party may file an opposition to 
the motion or a motion for protective order as provided in Sec.  13.24.
    (3) The ALJ may grant a motion for discovery only if he or she 
finds that the discovery sought:
    (i) Is necessary for the expeditious, fair, and reasonable 
consideration of the issues;
    (ii) Is not unduly costly or burdensome;
    (iii) Will not unduly delay the proceeding; and
    (iv) Does not seek privileged information.
    (4) The burden of showing that discovery should be allowed is on 
the party seeking discovery.
    (5) The ALJ may grant discovery subject to a protective order under 
Sec.  13.24.
    (d) Depositions. (1) If a motion for deposition is granted, the ALJ 
will issue a subpoena for the deponent, which may require the deponent 
to produce Documents. The subpoena will specify the time and place at 
which the deposition will be held. Deposition requests for senior level 
DHS officials (including career and non-career senior executive level 
employees) shall not be approved absent showing of compelling need that 
cannot be met by any other means.
    (2) The party seeking to depose will serve the subpoena in the 
manner prescribed in Sec.  13.8.
    (3) The deponent may file a motion to quash the subpoena or a 
motion for a protective order within ten days of service. If the ALJ 
has not acted on such a motion by the return date, such date will be 
suspended pending the ALJ's final action on the motion.
    (4) The party seeking to depose will provide for the taking of a 
verbatim transcript of the deposition, which it will Make available to 
all other parties for inspection and copying.
    (e) Each party will bear its own costs of discovery.


Sec.  13.22  Exchange of witness lists, Statements, and exhibits.

    (a) At least 15 days before the hearing or at such other time as 
may be ordered by the ALJ, the parties will exchange witness lists, 
copies of prior Statements of proposed witnesses, and copies of 
proposed hearing exhibits, including copies of any written Statements 
that the party intends to offer in lieu of live testimony in accordance 
with Sec.  13.33(b). At the time the above Documents are

[[Page 59217]]

exchanged, any party that intends to rely on the transcript of 
deposition testimony in lieu of live testimony at the hearing, if 
permitted by the ALJ, will provide each party with a copy of the 
specific pages of the transcript it intends to introduce into evidence.
    (b) If a party objects, the ALJ will not admit into evidence the 
testimony of any witness whose name does not appear on the witness list 
of any exhibit not provided to the opposing party as provided above 
unless the ALJ finds good cause for the failure or that there is no 
prejudice to the objecting party.
    (c) Unless another party objects within the time set by the ALJ, 
Documents exchanged in accordance with paragraph (a) of this section 
will be deemed to be authentic for the purpose of admissibility at the 
hearing.


Sec.  13.23  Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
Individual at the hearing may request that the ALJ issue a subpoena. 
Requests for witness testimony of senior level DHS officials (including 
career and non-career senior executive level employees) shall not be 
approved absent a showing of compelling need that cannot be met by any 
other means.
    (b) A subpoena requiring the attendance and testimony of an 
Individual may also require the Individual to produce Documents at the 
hearing.
    (c) A party seeking a subpoena will file a written request 
therefore not less than 15 days before the date fixed for the hearing 
unless otherwise allowed by the ALJ for good cause shown. Such request 
will be accompanied by a proposed subpoena, which will specify and 
Documents to be produced and will designate the witnesses and describe 
the address and location thereof with sufficient particularity to 
permit such witnesses to be found.
    (d) The subpoena will specify the time and place at which the 
witness is to appear and any Documents the witness is to produce.
    (e) The party seeking the subpoena will serve it in the manner 
prescribed in Sec.  13.8. A subpoena on a party or upon an Individual 
under the control of party may be served by first class mail.
    (f) A party or the Individual to whom the subpoena is directed may 
file a motion to quash the subpoena within ten days after service or on 
or before the time specified in the subpoena for compliance if it is 
less than ten days after service. If the ALJ has not acted on such a 
motion by the return date, such date will be suspended pending the 
ALJ's final action on the motion.


Sec.  13.24  Protective order.

    (a) A party or a prospective witness or deponent may file a motion 
for a protective order with respect to discovery sought by an opposing 
party or with respect to the hearing, seeking to limit the availability 
or disclosure of evidence.
    (b) In issuing a protective order, the ALJ may Make any order that 
justice requires to protect a party or Person from annoyance, 
embarrassment, oppression, or undue burden or expense, including one or 
more of the following:
    (1) That the discovery not be had;
    (2) That the discovery may be had only on specified terms and 
conditions, including a designation of the time or place;
    (3) That the discovery may be had only through a method of 
discovery other than that requested;
    (4) That certain matters not be inquired into, or that the scope of 
discovery be limited to certain matters;
    (5) That discovery be conducted with no one present except Persons 
designated by the ALJ;
    (6) That the contents of discovery or evidence be sealed;
    (7) That a deposition after being sealed be opened only by order of 
the ALJ;
    (8) That a trade secret or other confidential research, 
development, commercial information, or facts pertaining to any 
criminal investigation, proceeding, or other administrative 
investigation not be disclosed or be disclosed only in a designated 
way; and
    (9) That the parties simultaneously submit to the ALJ specified 
Documents or information enclosed in sealed envelopes to be opened as 
directed by the ALJ.


Sec.  13.25  Fees.

    The party requesting a subpoena will pay the cost of the fees and 
mileage of any witness subpoenaed in the amounts that would be payable 
to a witness in a proceeding in United States District Court. A check 
for witness fees and mileage will accompany the subpoena when served, 
except that when a subpoena is issued on behalf of the Authority, a 
check for witness fees and mileage need not accompany the subpoena.


Sec.  13.26  Filing, form and service of papers.

    (a) Filing and form. (1) Documents filed with the ALJ will include 
an original and two copies.
    (2) Every pleading and paper filed in the proceeding will contain a 
caption setting forth the title of the action, the case number assigned 
by the ALJ, and a designation of the paper (e.g., Motion to Quash 
Subpoena).
    (3) Every pleading and paper will be signed by, and will contain 
the address and telephone number of, the party or the Person on whose 
behalf the paper was filed, or his or her Representative.
    (4) Papers are considered filed when they are mailed. Date of 
mailing may be established by a certificate from the party or its 
Representative or by proof that the Document was sent by certified or 
registered mail.
    (b) Service. A party filing a Document will, at the time of filing, 
serve a copy of such Document on every other party. Service upon any 
party of any Document other than those required to be served as 
prescribed in Sec.  13.8 will be Made by delivering a copy, or by 
placing a copy of the Document in the United States mail, postage 
prepaid and addressed, to the party's last known address. When a party 
is represented by a Representative, service will be Made upon such 
Representative in lieu of the actual party.
    (c) Proof of service. A certificate of the Individual serving the 
Document by Personal delivery or by mail, setting forth the manner of 
service, will be proof of service.


Sec.  13.27  Computation of time.

    (a) In computing any period of time under this part or in an order 
issued thereunder, the time begins with the day following the act, 
event, or default, and includes the last day of the period, unless it 
is a Saturday, Sunday, or legal holiday observed by the Federal 
Government, in which event it includes the next business day.
    (b) When the period of time allowed is less than seven days, 
intermediate Saturdays, Sundays, and legal holidays observed by the 
Federal Government will be excluded from the computation.
    (c) Where a Document has been served or issued by placing it in the 
United States mail, an additional five days will be added to the time 
permitted for any responses.


Sec.  13.28  Motions.

    (a) Any application to the ALJ for an order or ruling will be by 
motion. Motions will state the relief sought, the authority relied 
upon, and the facts alleged, and will be filed and served on all other 
parties.
    (b) Except for motions Made during a prehearing conference or at 
the hearing, all motions will be in writing. The ALJ may require that 
oral motions be reduced to writing.

[[Page 59218]]

    (c) Within 15 days after a written motion is served, or such other 
time as may be fixed by the ALJ, any party may file a response to such 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing response thereto has expired, except upon consent of the parties 
or following a hearing on the motion, but may overrule or deny such 
motion without awaiting a response.
    (e) The ALJ will Make a reasonable effort to dispose of all 
outstanding motions before the hearing begins.
    (f) Except as provided by Sec. Sec.  13.21(e)(3) and 13.23(f), 
which concern subpoenas, the filing or pendency of a motion will not 
automatically alter or extend a deadline or return date.


Sec.  13.29  Sanctions.

    (a) The ALJ may sanction a Person, including any party or 
Representative, for:
    (1) Failing to comply with an order, rule, or procedure governing 
the proceeding;
    (2) Failing to prosecute or defend an action; or
    (3) Engaging in other misconduct that interferes with the speedy, 
orderly, or fair conduct of the hearing.
    (b) Sanctions include but are not limited to those specifically set 
forth in paragraphs (c), (d), and (e) of this section. Any such 
sanction will reasonably relate to the severity and nature of the 
failure or misconduct.
    (c) When a party fails to comply with an order, including an order 
for taking a deposition, the production of evidence within the party's 
control, or a request for admission, the ALJ may:
    (1) Draw an inference in favor of the requesting party with regard 
to the information sought;
    (2) In the case of requests for admission, deem each matter of 
which an admission is requested to be admitted;
    (3) Prohibit the party failing to comply with such order from 
introducing evidence concerning, or otherwise relying upon, testimony 
relating to the information sought; and
    (4) Strike any part of the pleadings or other submissions of the 
party failing to comply with such request.
    (d) If a party fails to prosecute or defend an action under this 
part begun by service of a notice of hearing, the ALJ may dismiss the 
action or may issue an Initial Decision imposition penalties and 
assessments.
    (e) The ALJ may refuse to consider any motion, request, response, 
brief or other Document that is not filed in a timely fashion.


Sec.  13.30  The hearing and burden of proof.

    (a) The ALJ will conduct a hearing on the record in order to 
determine whether the Defendant is liable for a civil penalty or 
assessment under Sec.  13.3 and, if so, the appropriate amount of any 
such civil penalty or assessment considering any aggravating or 
mitigating factors.
    (b) The Authority will prove Defendant's liability and any 
aggravating factors by a preponderance of the evidence.
    (c) The Defendant will prove any affirmative defenses and any 
mitigating factors by a preponderance of the evidence.
    (d) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause shown.


Sec.  13.31  Determining the amount of penalties and assessments.

    (a) In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the Authority Head, upon appeal, should 
evaluate any circumstances that mitigate or aggravate the violation and 
should articulate in their opinions the reasons that support the 
penalties and assessments they impose. Because of the intangible costs 
of fraud, the expense of investigating such conduct, and the need to 
deter others who might be similarly tempted, ordinarily double damages 
and a significant civil penalty should be imposed.
    (b) Although not exhaustive, the following factors are among those 
that may influence the ALJ and the Authority Head in determining the 
amount of penalties and assessments to impose with respect to the 
misconduct (i.e., the false fictitious, of fraudulent Claims or 
Statements) charged in the Complaint:
    (1) The number of false, fictitious, or fraudulent Claims or 
Statements;
    (2) The time period over which such Claims or Statements were Made;
    (3) The degree of the Defendant's culpability with respect to the 
misconduct;
    (4) The amount of money or the value of the property, services, or 
Benefit falsely claimed;
    (5) The value of the Government's actual loss as a result of the 
misconduct, including foreseeable consequential damages and the costs 
of investigation;
    (6) The relationship of the amount imposed as civil penalties to 
the amount of the Government's loss;
    (7) The potential or actual impact of the misconduct upon national 
defense, public health or safety, or public confidence in the 
management of Government programs and operations, including 
particularly the impact on the intended beneficiaries of such programs;
    (8) Whether the Defendant has engaged in a pattern of the same or 
similar misconduct;
    (9) Whether the Defendant attempted to conceal the misconduct;
    (10) The degree to which the Defendant has involved others in the 
misconduct or in concealing it;
    (11) Where the misconduct of employees or agents is imputed to the 
Defendant, the extent to which the Defendant's practices fostered or 
attempted to preclude such misconduct;
    (12) Whether the Defendant cooperated in or obstructed an 
investigation of the misconduct;
    (13) Whether the Defendant assisted in identifying and prosecuting 
other wrongdoers;
    (14) The complexity of the program or transaction, and the degree 
of the Defendant's sophistication with respect to it, including the 
extent of the Defendant's prior participation in the program or in 
similar transactions;
    (15) Whether the Defendant has been found, in any criminal, civil, 
or administrative proceeding to have engaged in similar misconduct or 
to have dealt dishonestly with the Government of the United States or 
of a State, directly or indirectly; and
    (16) The need to deter the Defendant and others from engaging in 
the same or similar misconduct.
    (c) Nothing in this section will be construed to limit the ALJ or 
the Authority Head from considering any other factors that in any given 
case may mitigate or aggravate the offense for which penalties and 
assessments are imposed.


Sec.  13.32  Location of hearing.

    (a) The hearing may be held:
    (1) In any judicial district of the United States in which the 
Defendant resides or transacts business;
    (2) In any judicial district of the United States in which the 
Claim or Statement in issue was Made; or
    (3) In such other place as may be agreed upon by the Defendant and 
the ALJ.
    (b) Each party will have the opportunity to present written and 
oral argument with respect to the location of the hearing.
    (c) The hearing will be held at the place and at the time ordered 
by the ALJ.


Sec.  13.33  Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing will be given orally by witnesses under oath or 
affirmation.

[[Page 59219]]

    (b) At the discretion of the ALJ, testimony may be admitted in the 
form of a written Statement or deposition. Any such written Statement 
must be provided to all other parties along with the last known address 
of such witness, in a manner that allows sufficient time for other 
parties to subpoena such witness for cross-examination at the hearing. 
Prior written Statements of witnesses proposed to testify at the 
hearing and deposition transcripts will be exchanged as provided in 
Sec.  13.22(a).
    (c) The ALJ will exercise reasonable control over the mode and 
order of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the 
ascertainment of the truth;
    (2) Avoid needless consumption of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ will permit the parties to conduct such cross-
examination as may be required for a full and true disclosure of the 
facts.
    (e) At the discretion of the ALJ, a witness may be cross-examined 
on matters relevant to the proceeding without regard to the scope of 
his or her direct examination. To the extent permitted by the ALJ, 
cross-examination on matters outside the scope of direct examination 
will be conducted in the manner of direct examination and may proceed 
by leading questions only if the witness is a hostile witness, an 
adverse party, or a witness identified with an adverse party.
    (f) Upon motion of any party, the ALJ will order witnesses excluded 
so that they cannot hear the testimony of other witnesses. This rule 
does not authorize exclusion of:
    (1) A party who is an Individual;
    (2) In the case of a party that is not an Individual, an officer or 
employee of the party;
    (i) Appearing for the entity pro se; or
    (ii) Designated by the party's Representative; or
    (3) An Individual whose presence is shown by a party to be 
essential to the presentation of its case, including an Individual 
employed by the Government engaged in assisting the Representative for 
the Government.


Sec.  13.34  Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ will not be bound by 
the Federal Rules of Evidence. However, the ALJ may apply the Federal 
Rules of Evidence where appropriate, e.g., to exclude unreliable 
evidence.
    (c) The ALJ will exclude irrelevant and immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative 
value is substantially outweighed by the danger of unfair prejudice, 
confusion of the issues, or by considerations of undue delay or 
needless presentation of cumulative evidence.
    (e) Although relevant, evidence may be excluded if it is privileged 
under Federal law.
    (f) Evidence concerning offers of compromise or settlement will be 
inadmissible to the extent provided in Rule 408 of the Federal Rules of 
Evidence.
    (g) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence.
    (h) All Documents and other evidence offered or taken for the 
record will be open to examination by all parties, unless otherwise 
ordered by the ALJ pursuant to Sec.  13.24.


Sec.  13.35  The record.

    (a) The hearing will be recorded and transcribed. Transcripts may 
be obtained following the hearing from the ALJ at a cost not to exceed 
the actual cost of duplication.
    (b) The transcript of testimony, exhibits and other evidence 
admitted at the hearing, and all papers and requests filed in the 
proceeding constitute the record for the decision by the ALJ and the 
Authority Head.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by anyone, unless otherwise ordered by the ALJ pursuant 
to Sec.  13.24.


Sec.  13.36  Post-hearing briefs.

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ will fix the 
time for filing such briefs. Such briefs may be accompanied by proposed 
findings of fact and conclusions of law. The ALJ may permit the parties 
to file reply briefs.


Sec.  13.37  Initial Decision.

    (a) The ALJ will issue an Initial Decision based only on the 
record, which will contain findings of fact, conclusions of law, and 
the amount of any penalties and assessments imposed.
    (b) The findings of fact will include a finding on each of the 
following issues:
    (1) Whether the Claims or Statements identified in the Complaint, 
or any portions thereof, violate Sec.  13.3;
    (2) If the Person is liable for penalties or assessments, the 
appropriate amount of any such penalties or assessments considering any 
mitigating or aggravating factors that he or she finds in the case, 
such as those described in Sec.  13.31.
    (c) The ALJ will promptly serve the Initial Decision on all parties 
within 90 days after the time for submission of post-hearing briefs and 
reply briefs (if permitted) has expired. The ALJ will at the same time 
serve all parties with a Statement describing the right of any 
Defendant determined to be liable for a civil penalty or assessment to 
file a motion for reconsideration with the ALJ or a notice of appeal 
with the Authority Head. If the ALJ fails to meet the deadline 
contained in this paragraph, he or she will notify the parties of the 
reason for the delay and will set a new deadline.
    (d) Unless the Initial Decision of the ALJ is timely appealed to 
the Authority Head, or a motion for reconsideration of the Initial 
Decision is timely filed, the Initial Decision will constitute the 
final decision of the Authority Head and will be final and binding on 
the parties 30 days after it is issued by the ALJ.


Sec.  13.38  Reconsideration of Initial Decision.

    (a) Except as provided in paragraph (d) of this section, any party 
may file a motion for reconsideration of the Initial Decision within 20 
days of receipt of the Initial Decision. If service was Made by mail, 
receipt will be presumed to be five days from the date of mailing in 
the absence of contrary proof.
    (b) Every such motion must set forth the matters claimed to have 
been erroneously decided and the nature of the alleged errors. Such 
motion will be accompanied by a supporting brief.
    (c) Responses to such motions will be allowed only upon request of 
the ALJ.
    (d) No party may file a motion for reconsideration of an Initial 
Decision that has been revised in response to a previous motion for 
reconsideration.
    (e) The ALJ may dispose of a motion for reconsideration by denying 
it or by issuing a revised Initial Decision.
    (f) If the ALJ denies a motion for reconsideration, the Initial 
Decision will constitute the final decision of the Authority Head and 
will be final and binding on the parties 30 days after the ALJ denies 
the motion, unless the Initial Decision is timely appealed to the 
Authority Head in accordance with Sec.  13.39.
    (g) If the ALJ issues a revised Initial Decision, that decision 
will constitute the final decision of the Authority Head and will be 
final and binding on the parties 30 days after it is issued, unless it 
is timely appealed to the Authority Head in accordance with Sec.  
13.39.

[[Page 59220]]

Sec.  13.39  Appeal to Authority Head.

    (a) Any Defendant who has served a timely answer and who is 
determined in an Initial Decision to be liable for a civil penalty or 
assessment may appeal such decision to the Authority Head by filing a 
notice of appeal in accordance with this section and Sec.  13.26.
    (b)(1) A notice of appeal may be filed at any time within 30 days 
after the ALJ issues an Initial Decision. However, if another party 
files a motion for reconsideration under Sec.  13.38, consideration of 
the appeal will be stayed automatically pending resolution of the 
motion for reconsideration.
    (2) If a Defendant files a timely motion for reconsideration, a 
notice of appeal may be filed within 30 days after the ALJ denies the 
motion or issues a revised Initial Decision, whichever applies.
    (3) The Authority Head may extend the initial 30-day period for an 
additional 30 days if the Defendant files with the Authority Head a 
request for an extension within the initial 30-day period and shows 
good cause.
    (c) If the Defendant files a timely notice of appeal and the time 
for filing motions for reconsideration under Sec.  13.38 has expired, 
the ALJ will forward two copies of the notice of appeal to the 
Authority Head, and will forward or Make available the record of the 
proceeding to the Authority Head.
    (d) A notice of appeal will be accompanied by a written brief 
specifying exceptions to the Initial Decision and reasons supporting 
the exceptions.
    (e) The Representative for the Government may file a brief in 
opposition to exceptions within 30 days of receiving the notice of 
appeal and accompanying brief.
    (f) There is no right to appear personally before the Authority 
Head.
    (g) There is no right to appeal any interlocutory ruling by the 
ALJ.
    (h) In reviewing the Initial Decision, the Authority Head will not 
consider any objection that was not raised before the ALJ unless a 
demonstration is Made of extraordinary circumstances causing the 
failure to raise the objection.
    (i) If any party demonstrates to the satisfaction of the Authority 
Head that additional evidence not presented at such hearing is material 
and that there were reasonable grounds for the failure to present such 
evidence at such hearing, the Authority Head will remand the matter to 
the ALJ for consideration of such additional evidence.
    (j) The Authority Head may affirm, reduce, reverse, compromise, 
remand, or settle any penalty or assessment determined by the ALJ in 
any Initial Decision.
    (k) The Authority Head will promptly serve each party to the appeal 
with a copy of the decision of the Authority Head and with a Statement 
describing the right of any Person determined to be liable for a 
penalty or assessment to seek judicial review.
    (l) Unless a petition for review is filed as provided in 31 U.S.C. 
3805 after a Defendant has exhausted all administrative remedies under 
this part and within 60 days after the date on which the Authority Head 
serves the Defendant with a copy of the Authority Head's decision, a 
determination that a Defendant is liable under Sec.  13.3 is final and 
is not subject to judicial review.


Sec.  13.40  Stays ordered by the Department of Justice.

    If at any time the Attorney General or an Assistant Attorney 
General designated by the Attorney General transmits to the Authority 
Head a written finding that continuation of the administrative process 
described in this part with respect to a Claim or Statement may 
adversely affect any pending or potential criminal or civil action 
related to such Claim or Statement, the Authority Head will stay the 
process immediately. The Authority Head may order the process resumed 
only upon receipt of the written authorization of the Attorney General.


Sec.  13.41  Stay pending appeal.

    (a) An Initial Decision is stayed automatically pending disposition 
of a motion for reconsideration or of an appeal to the Authority Head.
    (b) No administrative stay is available following a final decision 
of the Authority Head.


Sec.  13.42  Judicial review.

    Section 3805 of title 31, United States Code, authorizes judicial 
review by an appropriate United States District Court of a final 
decision of the Authority Head imposing penalties or assessments under 
this part and specifies the procedures for such review.


Sec.  13.43  Collection of civil penalties and assessments.

    Sections 3806 and 3808(b) of title 31, United States Code, 
authorize actions for collection of civil penalties and assessments 
imposed under this part and specify the procedures for such actions.


Sec.  13.44  Right to administrative offset.

    The amount of any penalty or assessment that has become final, or 
for which a judgment has been entered under Sec.  13.42 or Sec.  13.43, 
or any amount agreed upon in a compromise or settlement under Sec.  
13.46, may be collected by administrative offset under 31 U.S.C. 3716, 
except that an administrative offset may not be Made under that 
subsection against a refund of an overpayment of Federal taxes, then or 
later owing by the United States to the Defendant.


Sec.  13.45  Deposit in Treasury of United States.

    All amounts collected pursuant to this part will be deposited as 
miscellaneous receipts in the Treasury of the United States, except as 
provided in 31 U.S.C. 3806(g).


Sec.  13.46  Compromise or settlement.

    (a) Parties may Make offers of compromise or settlement at any 
time.
    (b) The Reviewing Official has the exclusive authority to 
compromise or settle a case under this part at any time after the date 
on which the Reviewing Official is permitted to issue a Complaint and 
before the date on which the ALJ issues an Initial Decision.
    (c) The Authority Head has exclusive authority to compromise or 
settle a case under this part at any time after the date on which the 
ALJ issues an Initial Decision, except during the pendency of any 
review under Sec.  13.42 or during the pendency of any action to 
collect penalties and assessments under Sec.  13.43.
    (d) The Attorney General has exclusive authority to compromise or 
settle a case under this part during the pendency of any review under 
Sec.  13.42 or of any action to recover penalties and assessments under 
31 U.S.C. 3806.
    (e) The Investigating Official may recommend settlement terms to 
the Reviewing Official, the Authority Head, or the Attorney General, as 
appropriate. The Reviewing Official may recommend settlement terms to 
the Authority Head, or the Attorney General, as appropriate.
    (f) Any compromise or settlement must be in writing and signed by 
all parties and their Representatives.


Sec.  13.47  Limitations.

    (a) The notice of hearing with respect to a Claim or Statement must 
be served in the manner specified in Sec.  13.8 within 6 years after 
the date on which such Claim or Statement is Made.
    (b) If the Defendant fails to serve a timely answer, service of a 
notice under Sec.  13.10(b) will be deemed a notice of hearing for 
purposes of this section.
    (c) The statute of limitations may be extended by agreement of the 
parties.


[[Page 59221]]


    Dated: September 25, 2005.
Michael Chertoff,
Secretary.
[FR Doc. 05-20346 Filed 10-11-05; 8:45 am]
BILLING CODE 4410-10-P




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