Being taken to court on a fraud claim

The CalFresh program can take a person to court, instead of holding a fraud hearing. The county has the choice whether to prosecute a person criminally or try to disqualify her in an administrative disqualification hearing. There is a good argument, however, that it cannot do both. The Food Stamp Act of 1977 expressly allowed a state to hold a disqualification hearing or prosecute or both. The language allowing states to do both was dropped in 1981. [7 U.S.C. § 2015(b)(2).] The clear implication of the change in the statute is to prohibit states from both holding a disqualification hearing and prosecuting for fraud.

The USDA Food and Nutrition Service (FNS) defended this interpretation of the statute when it wrote the current regulation:

We continue to believe that Congress intended to prevent the State agency from pursuing the same case of alleged program abuse by way of both an administrative hearing and a referral for prosecution when the language of the statute changed. Therefore, the final rule prohibits the State agency from initiating an administrative disqualification hearing against an accused individual whose case is currently being referred for prosecution or subsequent to any action taken against the accused individual by the prosecutor or a court of appropriate jurisdiction. This prohibition would not apply, however, in those instances where the factual issues of a case do not involve circumstances which are the same or related to those of the case against an individual previously referred for prosecution.

[48 Fed.Reg 6836, 6840 (Feb. 15, 1983).]

The current regulation provides:

The State agency shall not initiate an administrative disqualification hearing against an accused individual whose case is currently being referred for prosecution or subsequent to any action taken against the accused individual by the prosecutor or a court of appropriate jurisdiction, if the factual issues of the case arise out of the same, or related, circumstances.

[7 C.F.R. § 273.16(a)(1).]

The rule does set forth exceptions, instances in which cases previously referred for prosecution may and should be pursued by way of an administrative hearing. These include referred cases that prosecutors have declined to pursue or on which the prosecutor has taken no action within “a reasonable period of time.” In the second instance the state agency must formally withdraw the referral before proceeding with the disqualification hearing. [Id.]

A separate regulation requires state agencies to include on their schedulinlg notices for administrative disqualification hearings …

… [a] statement that the hearing does not preclude the State or Federal Government from prosecuting the individual for the intentional program violation in a civil or criminal court action, or from collecting any overissuance(s).

[7 C.F.R. § 273.16(e)(3)(iii)(H).] This language may be construed to be consistent with the statutory ban on pursuing both a disqualification hearing and prosecution, if it refers to a situation where additional facts come to light after the initial decision not to prosecute was initially made.

However, a more recent FNS position is more equivocal. In a memorandum on fraud policy published in 2004, FNS stated:

[The Food Stamp Act and implementing regulations] require the State agency to make a determination as to which procedure, administrative or judicial, it believes appropriate for a given case and to pursue that procedure to its conclusion. The State agency must not offer an ADH waiver if it intends to refer the case for prosecution nor suggest prosecution if the waiver is not signed. … The prohibition against conducting both administrative and judicial procedures simultaneously, or in combination, does not preclude the State agency from prosecuting an individual upon completion of the administrative process.

[See 7 C.F.R. § 273.16 (February 4, 2004) (interpreting 7 C.F.R. § 273.16(a)(1), 273.16(g)); see also MPP § 20-300.21.]

The CalFresh office must have reason to suspect fraud before it can turn files over to a prosecutor. [See, e.g., Roberts v. Austin, 632 F.2d 1202 (5th Cir. 1980), cert. denied, 454 U.S. 975 (1981); see MPP § 20-300.21 (“clear and convincing evidence”).] The state can prosecute a household member even though they are paying back the overissuance, unless the prosecutors made a clear promise not to do so. [See People v. Durrett, 164 Cal.App. 3d 947 (1985).]

The state can take a person to court in a civil (non-criminal) action to get back the CalFresh benefits he should not have received and stop the person’s CalFresh benefits. The state also can file criminal fraud charges against the person. Demand of restitution prior to bringing a criminal action is no longer necessary to pursue welfare fraud. [See People v. Preston, 43 Cal. App. 4th 450 (1996).]

If a court finds a person guilty of fraud in a criminal case, the judge can assess a fine, sentence them to jail or both. The person also will be disqualified from CalFresh benefits if the court finds fraud occurred or they admit it. [7 C.F.R. § 273.16(g)(2)(i); MPP § 20-300.4.]

A person should not be disqualified if the court’s order says that they should not be disqualified or that the other penalties ordered by the court are the only ones that the court orders. [7 C.F.R. § 273.16(g)(2)(i) and (h)(2)(i); MPP § 20-300.4.] The court can order a disqualification shorter than the one called for in the rules. [Id.]

Although legal services programs cannot represent defendants in criminal proceedings, it is a good idea for them to work closely with the public defenders’ offices that do represent individuals accused of criminal fraud. [See McGregor Smyth, Bridging the Gap: A Practical Guide to Civil-Defender Collaboration, Clearinghouse Review, May/June 2003, at 56.]