SUBJECT:

Social Security Administraation,

Lela Mae Smith,

Respondent.

The proposed civil money penalty (CMP) of $5,000 is not reasonable and shall not be imposed against Lela Mae Smith, Respondent.

I. PROCEDURAL HISTORY

Respondent has requested a hearing by letter through counsel dated March 28, 2003, pursuant to 20 C.F.R. § 498.202. Respondent appeals the January 22, 2003, notice of the Social Security Administration (SSA), Counsel to the Inspector General (I.G.), Petitioner, proposing imposition of a CMP of $5,000.00 against Respondent pursuant to section 1129 of the Social Security Act (Act). Respondent indicated in her request for hearing that she "does not contest liability . . . [but] hopes that the proposed penalty will be reduced or modified in light of her current financial situation." The request for hearing was received at the Civil Remedies Division (CRD) of the Departmental Appeals Board (DAB) on April 2, 2003, docketed, and assigned to me for hearing and decision on May 2, 2003. I have jurisdiction pursuant to 42 C.F.R. § 498.201-202.

Petitioner, is represented by Amy Thompson, Esq. and Joscelyn N. Funnie, Esq., SSA, Office of the I.G. Respondent is represented by Michael J. Novara, Assistant Federal Public Defender, Pittsburgh, Pennsylvania. On July 1, 2003, Respondent waived her right to an oral hearing and agreed to a decision of the case based on the briefs and supporting documents.

The I.G. filed its opening brief (SSA Brief) on September 5, 2003, with nine exhibits (SSA Exs. 1 through 9). Respondent filed her opening brief (R. Brief) on September 4, 2003, with seven exhibits (R. Exs. 1 through 7). No objections have been made to any of the offered exhibits and they are all admitted as offered. Neither party filed a response brief.

II. FINDINGS OF FACT AND CONCLUSIONS OF LAW

A. FINDINGS OF FACT

The following findings of fact are based upon the exhibits admitted and the briefs of the parties.

1. Respondent completed an application for Supplemental Security Income (SSI) on March 3, 1997, in which she stated that she had not received income since September 1, 1996, other than local assistance of $205 monthly, when in fact, since August 1996, Respondent had wages from employment with Pennsylvania Residential Developers, Inc. SSA Ex. 8; R. Ex. 4.

2. Respondent admits that she was indicted and arraigned in federal court on a charge of failure to disclose and making a false statement in connection with her SSI application of March 3, 1997. R. Ex. 1; R. Brief, ¶ 1.

3. On April 24, 2001, Respondent entered a diversion agreement with the U.S. Attorney for the Western District of Pennsylvania and was placed on probation for 12 months and the federal indictment was dismissed on October 1, 2002. R. Exs. 2-3.

4. Respondent does not dispute the alleged misconduct or her liability for the CMP in this proceeding. R. Brief, ¶ 5.

5. Respondent received an overpayment of $12,321.60 as a result of her misconduct. SSA Brief at 1; SSA Ex. 4.

6. Respondent is making restitution at the rate of $25 per month. R. Ex. 6 at 2.

7. Respondent argues only that her ability to pay is a mitigating factor, effectively conceding that the other factors justify the maximum penalty of $5,000 for this one incident.

8. Respondent was born September 24, 1941 and is currently 62 years old. R. Ex. 6 at 1.

9. Respondent's financial disclosure form does not report a spouse with income. Id.

10. Respondent reports her sole income is a monthly SSI benefit of $579.40 with monthly expenses of $577.00. Id. at 2.

11. The bankruptcy trustee's report of no distribution dated October 1, 2002, reveals that Respondent has no assets. R. Ex. 7.

12. Respondent is disabled and cannot work to increase her monthly income.

13. Respondent has minimal income in the form of monthly SSI benefits of $579.40. R. Ex. 6.

14. Including restitution, Respondents monthly expenses amount to $577.00. R. Ex. 6.

B. CONCLUSIONS OF LAW

1. Respondent timely requested a hearing.

2. There is a basis for the imposition of a CMP as authorized by section 1129(a)(1) of the Act.

3. The maximum penalty authorized is $5,000 for each false statement or representation. Act, section 1129(a)(1)(C); 42 C.F.R. § 498.103.

4. It would be fundamentally unfair to pursue collection of a CMP in any amount in this case, based on Respondent's financial situation and disability.

5. A CMP should not be imposed against Respondent based upon her financial situation and disability.

III. DISCUSSION

A. ISSUES

Whether there is a basis for the imposition of a CMP or assessment pursuant to section 1129(a)(1) of the Act.

Whether the penalty or assessment proposed is reasonable considering the factors specified by section 1129(c) of the Act.

B. APPLICABLE LAW

Pursuant to Title XVI of the Act certain eligible individuals are entitled to the payment of Supplemental Security Income (SSI) on a needs basis. To be eligible for SSI payments, a person must be: (1) 65 years of age or older; (2) blind; or (3) disabled. Disability is determined based on the existence of one or more impairments that will result in death or that prevent an individual from doing his or her past work or other work that exists in substantial numbers in the economy for at least one year. 20 C.F.R. §§ 416.202, 416.905, 416.906. Additionally, a person must have limited income and resources. 20 C.F.R. §§ 416.202, 416.1100. Anything other than a car and a primary residence is considered a resource or asset that is considered to determine whether an individual is of the limited resources and assets which qualify. 20 C.F.R. § 416.1210. The income and resources of a spouse or other individuals in a household are also subject to being considered. 20 C.F.R. §§ 416.1201-1204 & 416.1802.

Section 1129(a)(1) of the Act authorizes the imposition of a CMP against "(a)ny person . . . who makes, or causes to be made, a statement or representation of a material fact for use in determining any initial or continuing right to or the amount of . . . benefits or payments under Title XVI, that the person knows or should know was false or misleading or knows or should know omits a material fact or makes such statement with knowing disregard for the truth . . . . " A material fact is defined as one which the Commissioner of Social Security may consider in evaluating whether an applicant is entitled to SSI benefits or payments. Act, section 1129(a)(2). Individuals who violate section 1129 are subject to a CMP of not more than $5000 for each such false or misleading statement or representation. Violators are also subject to an assessment in lieu of damages, of not more than twice the amount of the benefits or payments made as a result of the statements or representations. Act, section 1129(a)(1). However, no actions may be initiated more than six years after the date of the alleged violation. Act, section 1129(b)(1). The Commissioner has delegated enforcement authority to the SSA I.G. pursuant to section 1129(h)(2). In determining the amount of a CMP, the I.G. must consider: (1) the nature of the subject statements and representations and circumstances under which they occurred; (2) the degree of culpability of the person committing the offense; (3) the person's history of prior offenses; (4) the person's financial condition; and (5) such other matters as justice requires. Act, section 1129(c); 20 C.F.R. §498.106.

Section 1129(b)(2) provides that the Commissioner of Social Security shall not decide to impose a CMP or assessment against a person until that person is given written notice and an opportunity for the determination to be made on the record after a hearing at which the person is allowed to participate. The Commissioner has provided by regulations at 20 C.F.R. Part 498 that a person against whom a CMP is proposed by the I.G., may request a hearing before an administrative law judge (ALJ) of the Departmental Appeals Board of the Department of Health and Human Services. The ALJ has jurisdiction to determine whether the person should be found liable for a CMP. 20 C.F.R. § 498.215(a). The person requesting the hearing, that is Respondent, has the burden of going forward and the burden of persuasion with respect to any affirmative defenses and any mitigating circumstances. 20 C.F.R. § 498.215(b)(1). The I.G. has the burden of going forward as well as the burden of persuasion with respect to all other issues. The burdens of persuasion are to be judged by a preponderance of the evidence. 20 C.F.R. § 498.215(c).

C. ANALYSIS

1. Respondent has conceded the misconduct alleged and that there is a basis for the imposition of a CMP pursuant to section 1129 of the Act.

In her letter dated January 22, 2003, counsel to the SSA I.G. proposed to impose a CMP of $5,000 against Respondent. The I.G. alleged in the notice that Respondent completed an application for SSI benefits on March 3, 1997, in which she stated that she had not received income since September 1, 1996, other than local assistance of $205 monthly, when in fact, since August 1996, Respondent had wages from employment with Pennsylvania Residential Developers, Inc. SSA Ex. 8; R. Ex. 4.

Respondent admits that she was indicted and arraigned in federal court on a charge of failure to disclose and making a false statement in connection with her SSI application of March 3, 1997. R. Ex. 1; R. Brief, ¶ 1. ⁽¹⁾ On April 24, 2001, Respondent entered a diversion agreement with the U.S. Attorney for the Western District of Pennsylvania and was placed on probation for 12 months with the provision that the federal indictment would be dismissed upon completion of the term of probation. R. Ex. 2. The indictment was dismissed on October 1, 2002. R. Ex. 3. Respondent does not dispute the alleged misconduct or her liability for the CMP in this proceeding. R. Brief, ¶ 5. SSA indicates in its brief that Respondent received an overpayment of $12,321.60 as a result of her misconduct. SSA Brief at 1; SSA Ex. 4. Respondent indicates she is making restitution at the rate of $25 per month. R. Ex. 6 at 2.

Accordingly, I conclude that there is a basis for the imposition of a CMP as authorized by section 1129(a)(1) of the Act.

2. A CMP of $5,000 is authorized for each incident. However, no CMP is reasonable in this case due to Respondent's financial condition.

Respondent requests that the $5,000 CMP be mitigated because she does not have the ability to pay. R. Brief, ¶ 7.

The maximum penalty authorized is $5,000 for each false statement or representation. Act, § 1129(a)(1)(C); 42 C.F.R. § 498.103. Pursuant to 42 C.F.R. § 498.220, I have the authority to affirm, deny, increase, or reduce the penalties or assessment proposed by the I.G. In determining the amount of penalties or assessment my review is de novo and just as the I.G. did when proposing penalties, I consider the factors specified by section 1129(c):

(1) the nature of the statements and representations . . . and the circumstances under which they occurred; (2) the degree of culpability, history of prior offenses, and financial condition of the person committing the offense; and (3) such other matters as justice may require."

See also SSA v. Lorene Griffith, DAB CR1019 (2003); SSA v. Brenda Estal, DAB CR1049 (2003). Pursuant to 20 C.F.R. § 498.215(b) the I.G. has the burden of going forward with the evidence and the burden of persuasion as to all issues, except Respondent's affirmative defenses and mitigating circumstances. 20 C.F.R. § 498.215(b)(1). The regulation does not specify the mitigating factors for which Respondent bears the burden, but Respondent is in the best position to present evidence of her financial situation. Thus, I conclude it is incumbent upon her to present any evidence upon which I might decide that her financial condition is such that any penalty or assessment should be mitigated.

In this case, Respondent argues only that her ability to pay is a mitigating factor, effectively conceding that the other factors justify the maximum penalty of $5,000 for this one incident. ⁽²⁾ Accordingly, I only examine the issue of Respondent's ability to pay.

Respondent has submitted two items in evidence, a financial disclosure form (R. Ex. 6) and a bankruptcy trustee's report (R. Ex. 7), as proof of her financial condition. Respondent was born September 24, 1941, and is currently 62 years old. R. Ex. 6 at 1. Respondent's financial disclosure form does not report a spouse with income. Id.

Respondent reports her sole income is a monthly SSI benefit of $579.40 with monthly expenses of $577.00. Id. at 2. The bankruptcy trustee's report of no distribution dated October 1, 2002, reveals that Respondent has no assets. R. Ex. 7. Respondent asserts in her brief that she is disabled and cannot work to increase her monthly income. R. Brief, para. 10.

The I.G. elected not to file a brief in response to Respondent's brief and, thus, has not disputed that Respondent is presently disabled or that her present entitlement to SSI benefits shows that the Commissioner of Social Security has determined that Respondent is presently unable to engage in substantial gainful employment.

Respondent has minimal income in the form of monthly SSI benefits of $579.40 and no assets. She is disabled and has no present capacity to earn additional income. It is undisputed that she is making monthly payments of $25 to repay the overpayment of SSI benefits and that, including the restitution, Respondents monthly expenses amount to $577.00. R. Ex. 6. There is no suggestion that Respondent's expenses are overstated. Considering her financial situation, it would be fundamentally unfair to pursue collection of a CMP in any amount. Given Respondent's present age, there is little probability of her returning to substantial gainful activity to make payment of a CMP possible. ⁽³⁾

IV. CONCLUSION

For the foregoing reasons, I conclude that a CMP should not be imposed against Respondent based upon her financial situation and disability.

KEITH W. SICKENDICK

Administrative Law Judge

1. Respondent admits in her sworn statement of January 13, 2000, that she made false statements in her application of November 5, 1996 and March 3, 1997. She alleges she was disabled but admits she continued to work and knew that if she disclosed the work activity she would not qualify for SSI benefits. SSA Ex. 6. The I.G. may not impose a CMP or assessment based on the November 5, 1996 application because more than six years have passed. Act, section 1129(b)(1).

2. Respondent does not dispute the other factors found by the I.G.: (1) Respondent admitted to a prior false statement which was made beyond the statute of limitations and not subject to penalty at this time; (2) Respondent admitted that she lied about her work activity and income on at least two occasions and is considered highly culpable; (3) Respondent has no history of prior offenses; and (4) Respondent has a history of misleading SSA and even tried to conceal her identity from agents of the OIG.

3. I do not intend to suggest by this decision that I do not consider Respondent highly culpable or that her conduct does not warrant some penalty. However, it is unlikely the government will ever recover a CMP, and therefore there is no point in making the government expend further resources in futile attempts to collect or even monitor Respondent in the hope she may gain further assets in the future.