Implementation of the Program Fraud Civil Remedies Act of 1986

CourtNational Endowment For The Humanities,National Foundation On The Arts And Humanities
Citation86 FR 44626
Publication Date13 Aug 2021
Record Number2021-16763
Federal Register, Volume 86 Issue 154 (Friday, August 13, 2021)
[Federal Register Volume 86, Number 154 (Friday, August 13, 2021)]
                [Rules and Regulations]
                [Pages 44626-44635]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-16763]
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                NATIONAL FOUNDATION ON THE ARTS AND HUMANITIES
                National Endowment for the Humanities
                45 CFR Part 1174
                RIN 3136-AA36
                Implementation of the Program Fraud Civil Remedies Act of 1986
                AGENCY: National Endowment for the Humanities; National Foundation on
                the Arts and the Humanities.
                ACTION: Final rule.
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                SUMMARY: The National Endowment for the Humanities (NEH) is adopting as
                final its proposed regulations to implement the Program Fraud Civil
                Remedies Act of 1986 (PFCRA). The PFCRA authorizes certain Federal
                agencies, including NEH, to impose civil penalties and assessments
                through administrative adjudication against any person who makes,
                submits, or presents a false, fictitious, or fraudulent claim or
                written statement to NEH. The rule establishes the procedures that NEH
                will follow in implementing the PFCRA, and specifies the hearing and
                appeal rights of persons subject to penalties and assessments under the
                PFCRA.
                DATES: This final rule is effective on August 13, 2021.
                FOR FURTHER INFORMATION CONTACT: Elizabeth Voyatzis, Deputy General
                Counsel, Office of the General Counsel, National Endowment for the
                Humanities, 400 7th Street SW, Room 4060, Washington, DC 20506; (202)
                606-8322; [email protected].
                SUPPLEMENTARY INFORMATION:
                1. Background
                 On June 25, 2021, NEH published in the Federal Register a notice of
                proposed rulemaking (86 FR 33603), requesting public comment on a
                proposed rule to implement to implement the PFCRA. The agency received
                no comments. Accordingly, NEH is adopting the rule as proposed, subject
                to certain minor corrections to the rule's organization and formatting.
                 In October 1986, Congress enacted the PFCRA, 31 U.S.C. 3801-3812.
                The PFCRA established an administrative remedy against any person who
                makes, or causes to be made, a false claim or written statement to
                certain Federal agencies. The PFCRA requires these
                [[Page 44627]]
                Federal agencies to follow certain procedures in recovering penalties
                and assessments against people who file false claims or statements for
                which the liability is $150,000 or less. Initially, the PFCRA did not
                apply to NEH. Section 10 of the Inspector General Reform Act of 2008,
                Public Law 110-409, 122 Stat. 4314, however, expanded the PFCRA's scope
                to include NEH.
                 The PFCRA requires each covered agency to promulgate rules and
                regulations necessary to implement its provisions. Following the
                PFCRA's enactment, the President's Council on Integrity and Efficiency
                requested that the Department of Health and Human Services lead an
                inter-agency task force to develop model PFCRA regulations. This action
                was in keeping with the Senate Governmental Affairs Committee's desire
                that ``the regulations would be substantially similar throughout the
                government'' (S. Rep. No. 99-212, 99th Cong., 1st Sess. 12 (1985)). The
                Council recommended that all covered agencies adopt the model rule.
                 Accordingly, NEH is implementing the PFCRA's provisions through
                this final rule--which substantively conforms to the model rule--in
                order to establish procedures by which NEH will seek to recover
                penalties and assessments against persons who file, or cause to have
                filed, false claims or statements with NEH for which liability is
                $150,000 or less.
                2. Maximum Penalty Amount
                 The PFCRA established a maximum penalty of $5,000 for each
                violation. The Federal Civil Penalties Inflation Adjustment Act
                Improvements Act of 2015 (the 2015 Act), 28 U.S.C. 2461 note, required
                all Federal agencies to (1) adjust the penalty amount to 2016 inflation
                levels with an initial ``catch-up'' inflation adjustment; and (2) make
                subsequent annual adjustments for inflation.\1\ This rule incorporates
                the initial ``catch-up'' adjustment to 2016 inflation levels and the
                annual adjustments for 2017 through 2021, and applies those adjustments
                cumulatively to the civil monetary penalties that the PFCRA imposes.\2\
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                 \1\ For a more detailed explanation of the 2015 Act and the
                civil monetary penalty inflation adjustment calculations that it
                requires, see NEH's regulation implementing the 2015 Act at 85 FR
                35566.
                 \2\ Table 1 details the annual adjustments to the PFCRA maximum
                penalty amount for years 2016-2021.
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                A. Initial ``Catch-Up'' and 2021 Adjustments for Inflation
                 NEH determined the first ``catch-up'' adjustment to 2016 inflation
                levels using the formula set forth in the 2015 Act. Specifically, NEH
                calculated the percent change between the Consumer Price Index for all
                Urban Consumers (CPI-U) for October of the last year in which Congress
                adjusted the PFCRA civil penalties (October 1986) and the CPI-U for
                October 2015, and then rounded to the nearest dollar.
                 NEH similarly determined each subsequent annual adjustment by
                calculating the percent increase between the CPI-U for the month of
                October preceding the date of the adjustment and the CPI-U for the
                October one year prior to the October immediately preceding the date of
                the adjustment.
                 Table 1, below, details the above calculations.
                 Table 1--Annual Adjustments to PFCRA Civil Monetary Penalties, 2016-2021
                ----------------------------------------------------------------------------------------------------------------
                 Applicable
                 multiplier
                 Baseline based on New baseline
                 Effective date maximum percent maximum
                 penalty increase in penalty
                 CPI-U
                ----------------------------------------------------------------------------------------------------------------
                August 1, 2016.................................................. $5,000 \3\ 2.15628 $10,781
                January 15, 2017................................................ 10,781 \4\ 1.01636 10,957
                January 15, 2018................................................ 10,957 \5\ 1.02041 11,181
                January 15, 2019................................................ 11,181 \6\ 1.02522 11,463
                January 15, 2020................................................ 11,463 \7\ 1.01764 11,665
                January 15, 2021................................................ 11,665 \8\ 1.01182 11,803
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                B. Future Annual Adjustments
                 The 2015 Act requires agencies to make annual adjustments to civil
                penalty amounts no later than January 15 of each year following the
                initial adjustment. NEH will calculate future annual adjustments using
                the same method as the adjustments previously described herein. If the
                CPI-U does not increase, then the civil penalties remain the same.
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                 \3\ Office of Management and Budget, Memorandum M-16-06
                (February 24, 2016).
                 \4\ Office of Management and Budget, Memorandum M-17-11
                (December 16, 2016).
                 \5\ Office of Management and Budget, Memorandum M-18-03
                (December 15, 2017).
                 \6\ Office of Management and Budget, Memorandum M-19-04
                (December 14, 2018).
                 \7\ Office of Management and Budget, Memorandum M-20-05
                (December 16, 2019).
                 \8\ Office of Management and Budget, Memorandum M-21-10
                (December 23, 2020).
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                 NEH will publish a Notice in the Federal Register containing the
                amount of these annual inflation adjustments no later than January 15
                of each year.
                Executive Order 12866, Regulatory Planning and Review, and Executive
                Order 13563, Improving Regulation and Regulatory Review
                 This action is not a significant regulatory action and was
                therefore not submitted to the Office of Management and Budget for
                review.
                Executive Order 13132, Federalism
                 This rulemaking does not have federalism implications. It 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.
                Executive Order 12988, Civil Justice Reform
                 This rulemaking meets the applicable standards set forth in section
                3(a) and 3(b)(2) of Executive Order 12988. Specifically, this
                rulemaking is written in clear language designed to help reduce
                litigation.
                Executive Order 13175, Indian Tribal Governments
                 Under the criteria in Executive Order 13175, NEH evaluated this
                rulemaking and determined that it will not have any
                [[Page 44628]]
                potential effects on Federally recognized Indian Tribes.
                Executive Order 12630, Takings
                 Under the criteria in Executive Order 12630, this rulemaking does
                not have significant takings implications. Therefore, a takings
                implication assessment is not required.
                Regulatory Flexibility Act of 1980
                 This rulemaking will not have a significant adverse impact on a
                substantial number of small entities, including small businesses, small
                governmental jurisdictions, or certain small not-for-profit
                organizations.
                Paperwork Reduction Act of 1995
                 This rulemaking does not impose an information collection burden
                under the Paperwork Reduction Act. This action contains no provisions
                constituting a collection of information pursuant to the Paperwork
                Reduction Act.
                Unfunded Mandates Reform Act of 1995
                 This rulemaking does not contain a Federal mandate that will result
                in the expenditure by State, local, and Tribal governments, in the
                aggregate, or by the private sector of $100 million or more in any one
                year.
                National Environmental Policy Act of 1969
                 This rulemaking will not have a significant effect on the human
                environment.
                Small Business Regulatory Enforcement Fairness Act of 1996
                 This rulemaking will not be a major rule as defined in section 804
                of the Small Business Regulatory Enforcement Fairness Act of 1996. This
                rulemaking will not result in an annual effect on the economy of $100
                million or more, a major increase in costs or prices, significant
                adverse effects on competition, employment, investment, productivity,
                innovation, or the ability of United States-based companies to compete
                with foreign-based companies in domestic and export markets.
                E-Government Act of 2002
                 All information about NEH required to be published in the Federal
                Register may be accessed at www.neh.gov. The website
                www.regulations.gov contains electronic dockets for NEH's rulemakings
                under the Administrative Procedure Act of 1946.
                Plain Writing Act of 2010
                 To ensure this rule speaks in plain and clear language so that the
                public can use and understand it, NEH modeled the language of the rule
                on the Federal Plain Language Guidelines.
                List of Subjects in 45 CFR 1174
                 Claims, Fraud, Penalties.
                 For the reasons set forth in the preamble, the National Endowment
                for the Humanities amends 45 CFR chapter XI by adding part 1174 to read
                as follows:
                PART 1174--PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS
                Subpart A--Purpose, Definitions, and Basis for Liability
                Sec.
                1174.1 Purpose.
                1174.2 Definitions.
                1174.3 Basis for civil penalties and assessments.
                Subpart B--Procedures Leading to Issuance of a Complaint
                1174.4 Who investigates program fraud.
                1174.5 Review of suspected program fraud by the reviewing official.
                1174.6 Prerequisites for issuing a complaint.
                1174.7 Contents of a complaint.
                1174.8 Service of a complaint.
                Subpart C--Procedures Following Service of a Complaint
                1174.9 Answer to a complaint.
                1174.10 Default upon failure to file an answer.
                1174.11 Referral of complaint and answer to the ALJ.
                Subpart D--Hearing Procedures
                1174.12 Notice of hearing.
                1174.13 Location of the hearing.
                1174.14 Parties to the hearing and their rights.
                1174.15 Separation of functions.
                1174.16 The ALJ's role and authority.
                1174.17 Disqualification of reviewing official or ALJ.
                1174.18 Parties' rights to review documents.
                1174.19 Discovery.
                1174.20 Discovery motions.
                1174.21 Depositions.
                1174.22 Exchange of witness lists, statements, and exhibits.
                1174.23 Subpoenas for attendance at the hearing.
                1174.24 Protective orders.
                1174.25 Filing and serving documents with the ALJ.
                1174.26 Computation of time.
                1174.27 The hearing and the burden of proof.
                1174.28 Presentation of evidence.
                1174.29 Witness testimony.
                1174.30 Ex parte communications.
                1174.31 Sanctions for misconduct.
                1174.32 Post-hearing briefs.
                Subpart E--Decisions and Appeals
                1174.33 Initial decision.
                1174.34 Determining the amount of penalties and assessments.
                1174.35 Reconsideration of the initial decision.
                1174.36 Finalizing the initial decision.
                1174.37 Procedures for appealing the ALJ's decision.
                1174.38 Appeal to the authority head.
                1174.39 Judicial review.
                1174.40 Collection of civil penalties and assessments.
                1174.41 Rights to administrative offset.
                1174.42 Deposit in Treasury of the United States.
                1174.43 Voluntary settlement of the administrative complaint.
                1174.44 Limitations regarding criminal misconduct.
                 Authority: 31 U.S.C. 3801-3812; 5 U.S.C. App. 8G(a)(2).
                Subpart A--Purpose, Definitions, and Basis for Liability
                Sec. 1174.1 Purpose.
                 This part implements the Program Fraud Civil Remedies Act of 1986,
                31 U.S.C. 3801-3812 (PFCRA). The PFCRA provides the National Endowment
                for the Humanities (NEH), and other Federal agencies, with an
                administrative remedy to impose 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 NEH. The PFCRA also provides due process protections to
                all persons who are subject to administrative proceedings under this
                part.
                Sec. 1174.2 Definitions.
                 For the purposes of this part--
                 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.
                 Authority means the National Endowment for the Humanities (NEH).
                 Authority head means the NEH Chairperson or the Chairperson's
                designee.
                 Benefit means anything of value, including but not limited to any
                advantage, preference, privilege, license, permit, favorable decision,
                ruling, status or loan guarantee.
                 Claim means any request, demand or submission that a person makes--
                 (1) To the authority--
                 (i) For property, services, or money (including money representing
                grants, loans, insurance, or benefits); or
                 (ii) Which has the effect of decreasing an obligation to pay or
                account for property, services, or money; or
                 (2) 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--
                [[Page 44629]]
                 (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.
                 Complaint means the administrative complaint that the reviewing
                official serves on the defendant under Sec. 1174.8.
                 Defendant means any person alleged in a complaint to be liable for
                a civil penalty or assessment pursuant to the PFCRA.
                 Government means the United States Government.
                 Individual means a natural person.
                 Initial decision means the written decision of the ALJ under Sec.
                1174.33, and includes a revised initial decision issued following a
                remand or a motion for reconsideration.
                 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;
                 and no proof of specific intent to defraud is required.
                 Makes shall include the terms presents, submits, and causes to be
                made, presented, or submitted. As the context requires, making or made
                shall likewise include the corresponding forms of such terms.
                 Person means any individual, partnership, corporation, association,
                or private organization, and includes the plural of that term.
                 Representative means an attorney who is in good standing of the bar
                of any State, Territory, or possession of the United States, or the
                District of Columbia, or the Commonwealth of Puerto Rico, or any other
                individual who the defendant designates in writing.
                 Reviewing official means the NEH General Counsel or the General
                Counsel's designee.
                 Statement means any representation, certification, affirmation,
                document, record, or accounting or bookkeeping entry that a person
                makes--
                 (1) With respect to a claim (or eligibility to make a claim) or to
                obtain the approval or payment of a claim; or
                 (2) With respect to (or with respect to eligibility for)--
                 (i) A contract with, or a bid or proposal for a contract with, 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. 1174.3 Basis for civil penalties and assessments.
                 (a) Claims. (1) Any person shall be subject, in addition to any
                other remedy that may be prescribed by law, to a civil penalty of not
                more than $11,803 for each claim that person makes that the person
                knows or has reason to know--
                 (i) Is false, fictitious, or fraudulent;
                 (ii) Includes or is supported by any written statement which
                asserts a material fact which 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 which
                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 shall be considered made to the authority, recipient,
                or party when such a claim is actually made to an agent, fiscal
                intermediary, or other entity, including any State or political
                subdivision of a State, acting for or on behalf of the authority.
                 (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 on a claim, a person
                subject to a civil penalty under paragraph (a)(1) of this section may
                also be subject to an assessment of not more than twice the amount of
                that claim or the portion thereof that violates paragraph (a)(1) of
                this section. Such assessment shall be in lieu of damages that the
                Government sustained because of such a claim.
                 (b) Statements. (1) Any person shall be subject, in addition to any
                other remedy prescribed by law, to a civil penalty of not more than
                $11,803 for each written statement that person makes that the person
                knows or has reason to know--
                 (i) Asserts a material fact which is false, fictitious or
                fraudulent; or
                 (ii) Is false, fictitious, or fraudulent because it omits a
                material fact that the person making the statement has a duty to
                include in such a statement; and
                 (iii) Contains or is accompanied by an express certification or
                affirmation of the truthfulness and accuracy of the statement's
                contents.
                 (2) A person will only be subject to a civil penalty under
                paragraph (b)(1) of this section if the written statement made by the
                person contains or is accompanied by an express certification or
                affirmation of the truthfulness and accuracy of the statement's
                contents.
                 (3) Each written representation, certification, or affirmation
                constitutes a separate statement.
                 (4) A statement shall be considered made to the authority when it
                is actually made to an agent, fiscal intermediary, or other entity,
                including any State or political subdivision of a State, acting for or
                on behalf of the authority.
                 (c) Proof of specific intent to defraud is not required to
                establish liability under this section.
                 (d) In any case in which more than one person is liable for making
                a false, fictitious, or fraudulent claim or statement under this
                section, each person may be held liable for a civil penalty and
                assessment.
                 (e) In any case in which more than one person is liable for making
                a claim under this section on which the Government has made payment,
                the authority may impose an assessment against any such person or
                jointly and severally against any combination of persons.
                 (f) The authority will annually adjust for inflation the maximum
                amount of the civil penalties described in this section, and will
                publish a document in the Federal Register containing the new maximum
                amount no later than January 15 of each year.
                Subpart B--Procedures Leading to Issuance of a Complaint
                Sec. 1174.4 Who investigates program fraud.
                 The Inspector General, or his or her designee, is the investigating
                official responsible for investigating allegations that a person has
                made a false claim or statement. In this regard, the Inspector General
                has authority under the PFCRA and the Inspector General Act of 1978,
                [[Page 44630]]
                5 U.S.C. App. 3, as amended, to issue administrative subpoenas for the
                production of records and documents.
                Sec. 1174.5 Review of suspected program fraud by the reviewing
                official.
                 (a) If the investigating official concludes that the results of his
                or her investigation warrant an action under this part, the
                investigating official shall submit to the reviewing official a report
                containing the investigation's findings and conclusions.
                 (b) If the reviewing official determines that the report provides
                adequate evidence that a person made a false, fictitious or fraudulent
                claim or statement, the reviewing official shall transmit to the
                Attorney General written notice of the reviewing official's intention
                to refer the matter for adjudication, with a request for approval of
                such referral. This notice will include the reviewing official's
                statement concerning:
                 (1) The reasons for the referral;
                 (2) The claims or statements that form the basis for liability;
                 (3) The evidence that supports liability;
                 (4) An estimate of the amount of money or the value of property,
                services, or other benefits requested or demanded in the false claim or
                statement;
                 (5) Any exculpatory or mitigating circumstances that may relate to
                the claims or statements that are 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.
                 (c) If, at any time, the Attorney General (or designee) requests in
                writing that the authority stay this administrative process, the
                authority head must stay the process immediately. The authority head
                may resume the process only upon receipt of the Attorney General's
                written authorization.
                Sec. 1174.6 Prerequisites for issuing a complaint.
                 The authority may issue a complaint only if:
                 (a) The Attorney General (or designee) approves the reviewing
                official's referral of the allegations for adjudication; and
                 (b) In a case of submission of false claims, if the amount of money
                or the value of property or services that a false claim (or a group of
                related claims submitted at the same time) demanded or requested does
                not exceed $150,000.
                Sec. 1174.7 Contents of a complaint.
                 (a) The complaint will state that the authority seeks to impose
                civil penalties, assessments, or both, against the defendant and will
                include:
                 (1) The allegations of liability against the defendant and the
                statutory basis for liability, identification of the claims or
                statements involved, and the reasons 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) A statement that the defendant may request a hearing by filing
                an answer and may be represented by a representative;
                 (4) Instructions for filing such an answer; and
                 (5) A warning that failure to file an answer within thirty days of
                service of the complaint will result in an imposition of the maximum
                amount of penalties and assessments.
                 (b) The reviewing official must serve the complaint on the
                defendant and, if the defendant requests a hearing, provide a copy to
                the ALJ assigned to the case.
                Sec. 1174.8 Service of a complaint.
                 (a) The reviewing official must serve the complaint on an
                individual defendant directly, on a partnership through a general
                partner, and on a corporation or an unincorporated association through
                an executive officer or a director, except that the reviewing official
                may also make service on any person authorized by appointment or by law
                to receive process for the defendant.
                 (b) The reviewing official may serve the complaint either by:
                 (1) Registered or certified mail; or
                 (2) Personal delivery by anyone eighteen years of age or older.
                 (c) The date of service is the date of personal delivery or, in the
                case of service by registered or certified mail, the date of postmark.
                 (d) When the reviewing official serves the complaint, he or she
                should also serve the defendant with a copy of this part and 31 U.S.C.
                3801-3812.
                Subpart C--Procedures Following Service of a Complaint
                Sec. 1174.9 Answer to a complaint.
                 (a) A defendant may file an answer with the reviewing official
                within thirty days of service of the complaint. An answer will be
                considered a request for an oral hearing.
                 (b) In the answer, the defendant--
                 (1) Must admit or deny each allegation of liability contained in
                the complaint (a failure to deny an allegation is considered an
                admission);
                 (2) Must state any defense on which the defendant intends to rely;
                 (3) May state any reasons why the penalties, assessments, or both
                should be less than the statutory maximum; and
                 (4) Must state the name, address, and telephone number of the
                person the defendant authorized to act as the defendant's
                representative, if any.
                 (c) If the defendant is unable to file a timely answer which meets
                the requirements set forth in paragraph (b) of this section, the
                defendant may file with the reviewing official a general answer denying
                liability, requesting a hearing, and requesting an extension of time in
                which to file a complete answer. The defendant must file a general
                answer within thirty days of service of the complaint.
                 (d) If the defendant initially files a general answer requesting an
                extension of time, the reviewing official must promptly file with the
                ALJ the complaint, the general answer, and the request for an extension
                of time.
                 (e) For good cause shown, the ALJ may grant the defendant up to
                thirty additional days within which to file an answer that meets the
                requirements of paragraph (b) of this section. The defendant must file
                such an answer with the ALJ and must serve a copy on the reviewing
                official.
                Sec. 1174.10 Default upon failure to file an answer.
                 (a) If the defendant does not file any answer within thirty days
                after service of the complaint, the reviewing official may refer the
                complaint to the ALJ.
                 (b) Once the reviewing official refers the complaint, the ALJ will
                promptly serve on the defendant a notice that the ALJ will issue an
                initial decision.
                 (c) The ALJ will assume the facts alleged in the complaint to be
                true and, if such facts establish liability under the statute, the ALJ
                will issue an initial decision imposing the maximum amount of penalties
                and assessments allowed under the PFCRA.
                 (d) Except as otherwise provided in this section, when a defendant
                fails to file a timely answer, the defendant waives any right to
                further review of the penalties and assessments the ALJ may impose in
                the initial decision.
                 (e) The initial decision becomes final thirty days after the ALJ
                issues it.
                 (f) At any time before an initial decision becomes final, a
                defendant may file a motion with the ALJ asking that the ALJ reopen the
                case. An ALJ may only reopen a case if he or she determines that the
                defendant set forth in the motion extraordinary circumstances that
                prevented the defendant from filing a timely answer.
                [[Page 44631]]
                The initial decision will be stayed until the ALJ decides on the
                motion. The reviewing official may respond to the motion.
                 (g) If the ALJ determines that a defendant has demonstrated
                extraordinary circumstances that excuse his or her failure to file a
                timely answer, the ALJ will withdraw the initial decision and grant the
                defendant an opportunity to answer the complaint.
                 (h) The ALJ's decision to deny a defendant's motion to reopen a
                case is not subject to reconsideration under Sec. 1174.35.
                 (i) The defendant may appeal the ALJ's decision denying a motion to
                reopen by filing a notice of appeal with the authority head within
                fifteen days after the ALJ denies the motion. The timely filing of a
                notice of appeal shall stay the initial decision until the authority
                head decides the issue.
                 (j) If the defendant files a timely notice of appeal with the
                authority head, the ALJ shall forward the record of the proceeding to
                the authority head.
                 (k) The authority head shall decide expeditiously, based solely on
                the record before the ALJ, whether extraordinary circumstances excuse
                the defendant's failure to file a timely answer.
                 (l) If the authority head decides that extraordinary circumstances
                excuse the defendant's failure to file a timely answer, the authority
                head shall remand the case to the ALJ with instructions to grant the
                defendant an opportunity to answer.
                 (m) If the authority head decides that the circumstances do not
                excuse the defendant's failure to file a timely answer, the authority
                head shall reinstate the ALJ's initial decision, which shall become
                final and binding upon the parties thirty days after the authority head
                issues such a decision.
                Sec. 1174.11 Referral of complaint and answer to the ALJ.
                 When the reviewing official receives an answer, he or she must
                simultaneously file the complaint, the answer, and a designation of the
                authority's representative with the ALJ.
                Subpart D--Hearing Procedures
                Sec. 1174.12 Notice of hearing.
                 (a) When the ALJ receives the complaint and the answer, the ALJ
                will promptly serve a notice of hearing upon the defendant and the
                authority's representative in the same manner as the complaint. The ALJ
                must serve the notice of oral hearing within six years of the date on
                which the claim or statement was made.
                 (b) The hearing is a formal proceeding conducted by the ALJ during
                which a defendant will have the opportunity to cross-examine witnesses,
                present testimony, and dispute liability.
                 (c) The notice of hearing must include:
                 (1) The tentative date, time, and place of the hearing;
                 (2) The legal authority and jurisdiction under which the hearing is
                being 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 defendant's
                representative and the representative for the authority; and
                 (6) Such other matters as the ALJ deems appropriate.
                Sec. 1174.13 Location of the hearing.
                 (a) The ALJ shall hold the hearing:
                 (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 a claim
                or statement in issue was made; or
                 (3) In such other place as the parties and the ALJ may agree upon.
                 (b) Each party shall have the opportunity to present arguments with
                respect to the location of the hearing.
                 (c) The ALJ shall decide the time and the place of the hearing.
                Sec. 1174.14 Parties to the hearing and their rights.
                 (a) The parties to the hearing shall be the defendant and the
                authority.
                 (b) Except where the authority head designates another
                representative, the NEH General Counsel (or designee) shall represent
                the authority.
                 (c) Each party has the right to:
                 (1) Be represented by a representative;
                 (2) Request a pre-hearing conference and participate in any
                conference held by the ALJ;
                 (3) Conduct discovery;
                 (4) Agree to stipulations of fact or law which will be made a part
                of the record;
                 (5) Present evidence relevant to the issues at the hearing;
                 (6) Present and cross-examine witnesses;
                 (7) Present arguments at the hearing as permitted by the ALJ; and
                 (8) Submit written briefs and proposed findings of fact and
                conclusions of law after the hearing, as permitted by the ALJ.
                Sec. 1174.15 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 authority head's review of the
                initial decision; or
                 (3) Make the collection of penalties and assessment.
                 (b) The ALJ must not be responsible to or subject to the
                supervision or direction of the investigating official or the reviewing
                official.
                Sec. 1174.16 The ALJ's role and authority.
                 (a) An ALJ serves as the presiding officer at all hearings. The
                Office of Personnel Management selects the ALJ.
                 (b) The ALJ must conduct a fair and impartial hearing, avoid delay,
                maintain order, and assure that a record of the proceeding is made.
                 (c) 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 witness attendance and the production
                of documents at depositions or at hearings;
                 (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 when 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.
                 (d) The ALJ does not have the authority to find Federal statutes or
                regulations invalid.
                Sec. 1174.17 Disqualification of reviewing official or ALJ.
                 (a) A reviewing official or an ALJ may disqualify himself or
                herself at any time.
                [[Page 44632]]
                 (b) Upon any party's motion, the reviewing official or ALJ may be
                disqualified as follows:
                 (1) The party must support the motion by an affidavit containing
                specific facts establishing that personal bias or other reason for
                disqualification exists, including the time and circumstances of the
                party's discovery of such facts;
                 (2) The party must file the motion promptly after discovery of the
                grounds for disqualification or the objection will be deemed waived;
                and
                 (3) The party, or representative of record, must certify in writing
                that such party makes the motion in good faith.
                 (c) Once a party has filed a motion to disqualify, the ALJ will
                halt the proceedings until he or she resolves the disqualification
                matter. If the ALJ disqualifies the reviewing official, the ALJ will
                dismiss the complaint without prejudice. If the ALJ disqualifies
                himself or herself, the authority will promptly reassign the case to
                another ALJ.
                Sec. 1174.18 Parties' rights to review documents.
                 (a) Once the ALJ issues a hearing notice pursuant to Sec. 1174.12,
                and upon written request to the reviewing official, the defendant may:
                 (1) Review any relevant and material documents, transcripts,
                records, and other materials that relate to the allegations set out in
                the complaint and upon which the investigating official based his or
                her findings and conclusions, unless such documents are subject to a
                privilege under Federal law, and obtain copies of such documents upon
                payment of duplication fees; and
                 (2) Obtain a copy of all exculpatory information in the reviewing
                official's or investigating official's possession that relates to the
                allegations in the complaint, even if it appears in a document that
                would otherwise be privileged. If the document would otherwise be
                privileged, the other party only must disclose the portion containing
                exculpatory information.
                 (b) The notice that the reviewing official sends to the Attorney
                General, as described in Sec. 1174.5(b), is not discoverable under any
                circumstances.
                 (c) If the reviewing official does not respond to the defendant's
                request within twenty days, the defendant may file with the ALJ a
                motion to compel disclosure of the documents, subject to the provisions
                of this section. The defendant may only file such a motion with the ALJ
                after filing an answer pursuant to Sec. 1174.9.
                Sec. 1174.19 Discovery.
                 (a) Parties may conduct the following types of discovery:
                 (1) Requests for production of documents for inspection and
                copying;
                 (2) Requests for admissions of authenticity of any relevant
                document or of the truth of any relevant fact;
                 (3) Written interrogatories; and
                 (4) Depositions.
                 (b) For the purpose of this section, the term ``documents''
                includes information, documents, reports, answers, records, accounts,
                papers, and other data and documentary evidence. Nothing contained
                herein shall be interpreted to require the creation of a document.
                 (c) Unless the parties mutually agree to discovery, a party may
                conduct discovery only as ordered by the ALJ. The ALJ shall regulate
                the timing of discovery.
                 (d) Each party shall bear its own discovery costs.
                Sec. 1174.20 Discovery motions.
                 (a) Any party seeking discovery may file a motion with the ALJ
                together with a copy of the requested discovery, or in the case of
                depositions, a summary of the scope of the proposed deposition.
                 (b) Within ten days of service, a party may file an opposition to
                the motion and/or a motion for protective order as provided in Sec.
                1174.24.
                 (c) The ALJ may grant a motion for discovery only if he or she
                finds that the discovery sought--
                 (1) Is necessary for the expeditious, fair, and reasonable
                consideration of the issues;
                 (2) Is not unduly costly or burdensome;
                 (3) Will not unduly delay the proceeding; and
                 (4) Does not seek privileged information.
                 (d) The burden of showing that the ALJ should allow discovery is on
                the party seeking discovery.
                 (e) The ALJ may grant discovery subject to a protective order under
                Sec. 1174.24.
                Sec. 1174.21 Depositions.
                 (a) If the ALJ grants a motion for deposition, the ALJ shall issue
                a subpoena for the deponent, which may require the deponent to produce
                documents. The subpoena shall specify the time and place at which the
                deposition will take place.
                 (b) The party seeking to depose shall serve the subpoena in the
                manner prescribed by Sec. 1174.8.
                 (c) The deponent may file with the ALJ a motion to quash the
                subpoena or a motion for a protective order within ten days of service.
                 (d) The party seeking to depose shall provide for the taking of a
                verbatim transcript of the deposition, which it shall make available to
                all other parties for inspection and copying.
                Sec. 1174.22 Exchange of witness lists, statements, and exhibits.
                 (a) As ordered by the ALJ, the parties must exchange witness lists
                and copies of proposed hearing exhibits, including copies of any
                written statements or transcripts of deposition testimony that each
                party intends to offer in lieu of live testimony.
                 (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
                or any exhibit not provided to an opposing party in advance, unless the
                ALJ finds good cause for the omission or concludes that there is no
                prejudice to the objecting party.
                 (c) Unless a party objects within the time set by the ALJ,
                documents exchanged in accordance with this section are deemed to be
                authentic for the purpose of admissibility at the hearing.
                Sec. 1174.23 Subpoenas for attendance at the 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.
                 (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 shall file a written request no less
                than fifteen days before the hearing date unless otherwise allowed by
                the ALJ for good cause shown. Such request shall specify any documents
                to be produced, designate the witness, and describe the witness'
                address and location with sufficient particularity to permit the
                witness to be found.
                 (d) The subpoena shall 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 shall serve it in the same
                manner prescribed in Sec. 1174.8. The party seeking the subpoena may
                serve the subpoena on a party, or upon an individual under the control
                of a party, by first class mail.
                 (f) The party requesting a subpoena shall pay the subpoenaed
                witness' fees and mileage 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 shall accompany the subpoena when it is
                served, except that when the authority
                [[Page 44633]]
                issues a subpoena, a check for witness fees and mileage need not
                accompany the subpoena.
                 (g) A party, or the individual to whom the subpoena is directed,
                may file with the ALJ 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.
                Sec. 1174.24 Protective orders.
                 (a) A party, prospective witness, or deponent may file a motion for
                a protective order that seeks to limit the availability or disclosure
                of evidence with respect to discovery sought by an opposing party or
                with respect to the hearing.
                 (b) In issuing a protective order, the ALJ may make any order which
                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 parties shall not have discovery;
                 (2) That the parties shall have discovery only on specified terms
                and conditions;
                 (3) That the parties shall have discovery only through a method of
                discovery other than requested;
                 (4) That the parties shall not inquire into certain matters, or
                that the parties shall limit the scope of discovery to certain matters;
                 (5) That the parties shall conduct discovery with no one present
                except persons designated by the ALJ;
                 (6) That the parties shall seal the contents of the discovery;
                 (7) That a sealed deposition shall 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 shall not be disclosed or shall be disclosed only in a
                designated way; or
                 (9) That the parties shall simultaneously file specified documents
                or information enclosed in sealed envelopes to be opened as the ALJ
                directs.
                Sec. 1174.25 Filing and serving documents with the ALJ.
                 (a) Documents filed with the ALJ must include an original and two
                copies. Every document filed in the proceeding must contain a title
                (e.g., motion to quash subpoena), a caption setting forth the title of
                the action, and the case number assigned by the ALJ. Every document
                must be signed by the person on whose behalf the paper was filed, or by
                his or her representative.
                 (b) Documents are considered filed when they are mailed. The
                mailing date 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.
                 (c) A party filing a document with the ALJ must, at the time of
                filing, serve a copy of such document on every other party. When a
                party is represented by a representative, the party's representative
                must be served in lieu of the party.
                 (d) A certificate from the individual serving the document
                constitutes proof of service. The certificate must set forth the manner
                in which the document was served.
                 (e) Service upon any party of any document other than the complaint
                must be made by delivering a copy or by placing a copy in the United
                States mail, postage prepaid and addressed to the party's last known
                address.
                 (f) If a party consents in writing, documents may be sent
                electronically. In this instance, service is complete upon transmission
                unless the serving party receives electronic notification that
                transmission of the communication was not completed.
                Sec. 1174.26 Computation of time.
                 (a) In computing any period of time under this part or in an order
                issued under it, 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 that is 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 that are observed
                by the Federal government are excluded from the computation.
                 (c) Where a document has been served or issued by placing it in the
                mail, an additional five days will be added to the time permitted for
                any response.
                Sec. 1174.27 The hearing and the burden of proof.
                 (a) The ALJ conducts a hearing in order to determine whether a
                defendant is liable for a civil penalty, assessment, or both and, if
                so, the appropriate amount of the penalty and/or assessment.
                 (b) The hearing will be recorded and transcribed. 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 ALJ's and the authority head's decisions.
                 (c) The hearing will be open to the public unless otherwise ordered
                by the ALJ for good cause shown.
                 (d) The authority must prove a defendant's liability and any
                aggravating factors by a preponderance of the evidence.
                 (e) A defendant must prove any affirmative defenses and any
                mitigating factors by a preponderance of the evidence.
                Sec. 1174.28 Presentation of evidence.
                 (a) The ALJ shall determine the admissibility of evidence.
                 (b) Except as provided in this part, the ALJ shall not be bound by
                the Federal Rules of Evidence, but the ALJ may apply the Federal Rules
                of Evidence where he or she deems appropriate.
                 (c) The ALJ shall exclude irrelevant and immaterial evidence.
                 (d) The ALJ may exclude evidence, although relevant, 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) The ALJ shall exclude evidence, although relevant, if it is
                privileged under Federal law.
                 (f) Evidence concerning compromise or settlement offers shall be
                inadmissible to the extent provided in Rule 408 of the Federal Rules of
                Evidence.
                 (g) The ALJ shall permit the parties to introduce rebuttal
                witnesses and evidence.
                 (h) All documents and other evidence taken for the record must be
                open to examination by all parties unless the ALJ orders otherwise.
                Sec. 1174.29 Witness testimony.
                 (a) Except as provided in paragraph (b) of this section, testimony
                at the hearing shall be given orally by witnesses under oath or
                affirmation.
                 (b) At the ALJ's discretion, the ALJ may admit testimony in the
                form of a written statement or deposition. The party offering such a
                statement must provide it to all other parties along with the last
                known address of the witness, in a manner which allows sufficient time
                for other parties to subpoena the witness for cross-examination at the
                hearing. The parties shall exchange deposition transcripts and prior
                written statements of witnesses proposed to testify at the hearing as
                provided in Sec. 1174.22.
                 (c) The ALJ shall exercise reasonable control over the mode and
                order of interrogating witnesses and presenting evidence.
                 (d) The ALJ shall permit the parties to conduct such cross-
                examination as may
                [[Page 44634]]
                be required for a full and true disclosure of the facts.
                 (e) Upon any party's motion, the ALJ shall order witnesses excluded
                from the hearing room 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, the party's
                officer or employee appearing for the entity pro se or designated by
                the party's representative; or
                 (3) An individual whose presence a party shows to be essential to
                the presentation of its case, including an individual employed by the
                Government or engaged in assisting the Government's representative.
                Sec. 1174.30 Ex parte communications.
                 A party may not communicate with the ALJ ex parte unless the other
                party consents to such a communication taking place. This does not
                prohibit a party from inquiring about the status of a case or asking
                routine questions concerning administrative functions or procedures.
                Sec. 1174.31 Sanctions for misconduct.
                 (a) The ALJ may sanction a person, including any party or
                representative, for failing to comply with an order, or for engaging in
                other misconduct that interferes with the speedy, orderly, and fair
                conduct of a hearing.
                 (b) Any such sanction shall reasonably relate to the severity and
                nature of the misconduct.
                 (c) When a party fails to comply with an order, including an order
                for taking a deposition, producing evidence within the party's control,
                or responding to 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 for
                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 filed by
                the party failing to comply with such a request.
                 (d) The ALJ may refuse to consider any motion, request, response,
                brief or other document which is not filed in a timely fashion.
                 (e) If a party fails to prosecute or defend an action under this
                part that is commenced by service of a hearing notice, the ALJ may
                dismiss the action or may issue an initial decision imposing penalties
                and assessments.
                Sec. 1174.32 Post-hearing briefs.
                 Any party may file a post-hearing brief. Such briefs are not
                required, however, unless ordered by the ALJ. The ALJ must fix the time
                for filing such briefs, not to exceed 60 days from the date the parties
                receive the transcript of the hearing or, if applicable, the stipulated
                record. Such briefs may be accompanied by proposed findings of fact and
                conclusions of law. The ALJ may permit the parties to file reply
                briefs.
                Subpart E--Decisions and Appeals
                Sec. 1174.33 Initial decision.
                 (a) The ALJ will issue an initial decision based only on the
                record. It will contain findings of fact, conclusions of law, and the
                amount of any penalties and assessments.
                 (b) The ALJ will serve the initial decision on all parties within
                ninety days after the hearing's close or, if the ALJ permitted the
                filing of post-hearing briefs, within ninety days after the final post-
                hearing brief was filed.
                 (c) The findings of fact must include a finding on each of the
                following issues:
                 (1) Whether any one or more of the claims or statements identified
                in the complaint violate this part; and
                 (2) If the defendant is liable for penalties or assessments, the
                appropriate amount of any such penalties or assessments, considering
                any mitigating or aggravating factors.
                 (d) If the defendant is liable for a civil penalty or assessment,
                the initial decision shall describe the defendant's right to file a
                motion for reconsideration with the ALJ or a notice of appeal with the
                authority head.
                Sec. 1174.34 Determining the amount of penalties and assessments.
                 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.
                Sec. 1174.35 Reconsideration of the initial decision.
                 (a) Any party may file a motion with the ALJ for reconsideration of
                the initial decision within twenty days of receipt of the initial
                decision. If the initial decision was served by mail, there is a
                rebuttable presumption that the party received the initial decision
                five days from the date of mailing.
                 (b) A motion for reconsideration must be accompanied by a
                supporting brief and must describe specifically each allegedly
                erroneous decision.
                 (c) A party only may file a response to a motion for
                reconsideration upon the ALJ's request.
                 (d) The ALJ will dispose of a motion for reconsideration by denying
                it or by issuing a revised initial decision.
                 (e) If the ALJ issues a revised initial decision upon a party's
                motion, no party may file a further motion for reconsideration.
                Sec. 1174.36 Finalizing the initial decision.
                 (a) Thirty days after issuance, the ALJ's initial decision shall
                become the authority's final decision and shall bind all parties,
                unless any party timely files a motion for reconsideration or any
                defendant adjudged to have submitted a false, fictitious, or fraudulent
                claim or statement timely appeals to the authority head, as set forth
                in Sec. 1174.37.
                 (b) If the ALJ disposes of a motion for reconsideration by denying
                it or by issuing a revised initial decision, the ALJ's order on the
                motion for reconsideration shall become the authority's final decision
                thirty days after the ALJ issues the order, unless a defendant that is
                adjudged to have submitted a false, fictitious, or fraudulent claim or
                statement timely appeals to the authority head, as set forth in Sec.
                1174.37.
                Sec. 1174.37 Procedures for appealing the ALJ's decision.
                 (a) Any defendant who submits a timely answer and is found liable
                in an initial decision for a civil penalty or assessment may appeal the
                decision.
                 (b) The defendant may file a notice of appeal with the authority
                head within thirty days following issuance of the initial decision,
                serving a copy of the notice of appeal on all parties and the ALJ. The
                authority head may extend this deadline for up to an additional thirty
                days if the defendant files an extension request within the initial
                thirty day period and shows good cause.
                 (c) The authority head shall not consider a defendant's appeal
                until all timely motions for reconsideration have been resolved.
                 (d) If the ALJ denies a timely motion for reconsideration, the
                defendant may file a notice of appeal within thirty days following such
                denial or issuance of a revised initial decision, whichever applies.
                 (e) The defendant must support its notice of appeal with a written
                brief specifying why the authority head should reverse or modify the
                initial decision.
                 (f) The authority's representative may file a brief in opposition
                to the notice of
                [[Page 44635]]
                appeal within thirty days of receiving the defendant's appeal and
                supporting brief.
                 (g) If a defendant timely files a notice of appeal, and the time
                for filing reconsideration motions has expired, the ALJ will forward
                the record of the proceeding to the authority head.
                 (h) An initial decision is automatically stayed pending disposition
                of a motion for reconsideration or of an appeal to the authority head.
                 (i) No administrative stay is available following the authority
                head's final decision.
                Sec. 1174.38 Appeal to the authority head.
                 (a) A defendant has no right to appear personally, or through a
                representative, before the authority head.
                 (b) There is no right to appeal any interlocutory ruling.
                 (c) The authority head will not consider any objection or evidence
                that was not raised before the ALJ unless the defendant demonstrates
                that extraordinary circumstances excuse the failure to object. If the
                defendant demonstrates to the authority head's satisfaction that
                extraordinary circumstances prevented the presentation of evidence at
                the hearing, and that the additional evidence is material, the
                authority head may remand the matter to the ALJ for consideration of
                the additional evidence.
                 (d) The authority head may affirm, reduce, reverse, compromise,
                remand, or settle any penalty or assessment that the ALJ imposed in the
                initial decision or reconsideration decision.
                 (e) The authority head will promptly serve each party to the appeal
                and the ALJ with a copy of the decision. This decision must contain a
                statement describing the right of any person, against whom a penalty or
                assessment has been made, to seek judicial review.
                Sec. 1174.39 Judicial review.
                 31 U.S.C. 3805 authorizes the appropriate United States District
                Court to review any final decision imposing penalties or assessments,
                and specifies the procedures for such review. To obtain judicial
                review, a defendant must file a petition with the appropriate court in
                a timely manner.
                Sec. 1174.40 Collection of civil penalties and assessments.
                 31 U.S.C. 3806 and 3808(b) authorize actions for collecting civil
                penalties and assessments imposed under this part and specify the
                procedures for such actions.
                Sec. 1174.41 Rights to administrative offset.
                 The authority may make an administrative offset under 31 U.S.C.
                3716 to collect the amount of any penalty or assessment which has
                become final, for which a judgment has been entered, or which the
                parties agree upon in a compromise or settlement. However, the
                authority may not make an administrative offset under this subsection
                against a Federal tax refund that the United States owes to the
                defendant then or at a later time.
                Sec. 1174.42 Deposit in Treasury of the United States.
                 The authority shall deposit all amounts collected pursuant to this
                part as miscellaneous receipts in the Treasury of the United States,
                except as provided in 31 U.S.C. 3806(g).
                Sec. 1174.43 Voluntary settlement of the administrative complaint.
                 (a) Parties may make offers of compromise or settlement at any
                time. Any compromise or settlement must be in writing.
                 (b) The reviewing official has the exclusive authority to
                compromise or settle the case from the date on which the reviewing
                official is permitted to issue a complaint until the ALJ issues an
                initial decision.
                 (c) The authority head has exclusive authority to compromise or
                settle the case from the date of the ALJ's initial decision until
                initiation of any judicial review or any action to collect the
                penalties and assessments.
                 (d) The Attorney General has exclusive authority to compromise or
                settle the case while any judicial review or any action to recover
                penalties and assessments is pending.
                 (e) The investigating official may recommend settlement terms to
                the reviewing official, the authority head, or the Attorney General, as
                appropriate.
                Sec. 1174.44 Limitations regarding criminal misconduct.
                 (a) Any investigating official may:
                 (1) Refer allegations of criminal misconduct or a violation of the
                False Claims Act directly to the Department of Justice for prosecution
                and/or civil action, as appropriate;
                 (2) Defer or postpone a report or referral to the reviewing
                official to avoid interference with a criminal investigation or
                prosecution; or
                 (3) Issue subpoenas under any other statutory authority.
                 (b) Nothing in this part limits the requirement that the
                authority's employees must report suspected violations of criminal law
                to the NEH Office of the Inspector General or to the Attorney General.
                 Dated: August 2, 2021.
                Elizabeth Voyatzis,
                Deputy General Counsel, National Endowment for the Humanities.
                [FR Doc. 2021-16763 Filed 8-12-21; 8:45 am]
                BILLING CODE 7536-01-P
                

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