GSA’s System for Award Management is a comprehensive database of persons excluded from doing business with the federal government. Widely known as the SAM List, most of the people whose names can be found there were debarred or suspended from doing business with the federal government. Debarment and suspension are serious sanctions that prevent persons from doing business with the entire federal government for a period of time, typically not to exceed three years. Most of the time, debarment only takes place following a criminal conviction based on the commission of extremely serious violations of federal law. Under regulations developed by the Office of Personnel Management (OPM), persons facing debarment are provided with notice and a hearing. Suspension is similar to debarment, although that is usually an interim measure imposed by agencies while criminal proceedings are ongoing and usually lasts one year or less. Those facing suspension are also provided with due process – notice and an opportunity for a hearing. Most of the people placed on the SAM List following debarment or suspension proceedings were previously convicted of engaging in health care fraud, usually involving the Medicare or Medicaid programs.
A third category, disqualification, can also land persons on the SAM List. Disqualification is much narrower than debarment or suspension, and is limited to an exclusion from a single federal program run by one federal agency. Oddly, disqualification from an agency’s program can be permanent and no due process rights are provided to the individual before his or her name is placed on the SAM List forever. Few federal agencies disqualify persons and only one, USDA’s Food and Nutrition Service (FNS), appears to have ever listed persons on the SAM List following an administrative disqualification. FNS is the federal agency that administers the Supplemental Nutrition Assistance Program (SNAP), formerly known as the food stamp program. As part of its administration of the SNAP and pursuant to the Food and Nutrition Act of 2008 and its own regulations, FNS authorizes groceries, convenience stores, and other retail food stores as participating vendors. FNS also permanently disqualifies more than 2,000 SNAP retailers on an annual basis for trafficking, which usually involves the exchange of SNAP benefits for cash.
Although its regulations only provide for the disqualification of “firms,” not people, FNS has listed owners of disqualified retailers on the SAM List for more than seven years. FNS does so even when the agency has no direct or circumstantial evidence that the owner did anything wrong. In fact, in most instances involving the permanent disqualification of firms for trafficking, FNS had no evidence that the owners of SNAP retailers did anything wrong. This is undisputable because most SNAP disqualifications are based on FNS’s ALERT system, which flags “patterns of suspicious transactions.” Even in cases involving undercover investigations, the overwhelming majority of SNAP retailers permanently disqualified for trafficking involved the acts of a renegade clerk or manager, not the owner.
Since 2012, FNS has placed the names of more than 14,000 individuals on the SAM List without providing written notice to them. FNS’s actions are shocking when one learns that neither federal law nor the agency’s regulations provide that it has authority to list retailers on the SAM List. Before 2018, FNS’s application materials (including FNS Form 252) and its SNAP Retailer Training Guide did not advise SNAP retailers that their names will be placed on the SAM List if their store was disqualified for trafficking. And FNS did not provide hearings or any other procedural rights to owners whose names it placed on the SAM List.
Not surprisingly, FNS’s actions have caused serious problems for numerous owners of disqualified retail food stores, especially those who work in the health care field. OFW Law has assisted doctors, nursing home administrators, pharmacists, and even an attorney in securing the removal of their names from the SAM List. As previously reported here, OFW Law Principal Stewart Fried obtained preliminary injunction orders from federal judges in South Carolina and California which required FNS to remove the names of the plaintiffs from the SAM List during the pendency of the litigation. In the California case, U.S. District Court Judge Kimberly Mueller issued an Order that concluded FNS exceeded its authority when it listed the names of owners of disqualified SNAP retailers on the SAM List because USDA’s departmental regulations did not permit FNS and other agencies to do so.
During early November, presumably in light of the preliminary injunction order obtained by OFW Law, FNS removed the names of all 14,000 owners of disqualified SNAP retailers it listed on the SAM List. Whether FNS will do so in the future remains to be seen. Andrea Gold, FNS’s SNAP Retailer Branch Chief recently declined to advise whether the agency’s removal of names of disqualified owners was permanent or not, despite an express request from OFW Law.
There is no compelling reason for FNS to permanently list the names of innocent owners of disqualified SNAP retailers on the SAM List. This is especially true when considering that convicted felons are typically debarred for not more than three years. Hopefully, USDA and FNS will not attempt to bring back to life its now-rescinded inequitable policy of listing owners of disqualified SNAP retailers on the SAM List. Unfortunately, USDA appears to have started efforts designed to authorize FNS with authority to do so. During early October, USDA issued a Final Rule amending its Suspension and Debarment regulations. USDA did so without providing the public with notice or an opportunity to comment. It also added a new provision defining “disqualification.” Whether this amendment is one that complies with the Administrative Procedure Act or satisfies the requirements of USDA’s departmental regulation is debatable. Additionally, USDA’s departmental regulation also suggests that FNS must first amend its SNAP regulations before it can list disqualified owners on the SAM List. So does President Trump’s recently issued Executive Order regarding Transparency and Fairness in Civil Administrative Enforcement and Adjudication.
USDA Secretary Sonny Perdue recently appointed Pam Miller as FNS Administrator. Ms. Miller has a long and distinguished history of federal service focused on nutrition policy and funding. While it is doubtful that Administrator Miller is intimately familiar with FNS’s now-rescinded policy of listing owners of disqualified SNAP retailers on the SAM List, Ms. Miller and USDA Acting Deputy Under Secretary Brandon Lipps have authority to make policy decisions. Both should refrain from starting on a lengthy regulatory process designed to give FNS authority to permanently list the names of hard-working small business owners who did nothing wrong on the SAM List. Other less punitive options remain available to FNS. For example, FNS could post a list of disqualified retailers on its own website. It could also choose to only list persons that personally engaged in illegal activity. Creating an evidentiary administrative hearing process similar to that used in debarment and suspension proceedings would also make the process more equitable and transparent, a key aspiration of President Trump’s administration.
Another good reason exists for USDA and FNS to decide to not take a second bite at the SAM List apple. It is virtually certain that any effort by FNS to re-commence listing owners of disqualified SNAP retailers on the SAM List will be met with legal challenges from what USDA Secretary Perdue referred to, during testimony before Congress, as a “cottage industry” of lawyers representing SNAP retailers. While litigation will hopefully not be necessary, that is entirely dependent on whether USDA and FNS remains committed to imposing punitive measures on innocent owners of small retailers or if it will instead focus its efforts on reforming its SNAP retailer administrative process and more equitably combatting SNAP fraud by not using an overly broad net that ensnares hundreds of innocent retailers on an annual basis.