STATE OF MICHIGAN
DEPARTMENT OF COMMUNITY HEALTH
ADMINISTRATIVE TRIBUNAL AND APPEALS DIVISION
P. O. Box 30195, Lansing, MI 48909
In the Matter of:
VG’S FOOD CENTER, INC, #4928-050Docket No. 04-2053-TER
Administrative Law Judge Martin D. Snider
Appellant.
Elizabeth M. McIntyre (P38319)
Miller, Johnson, Snell & Cummiskey, PLC
Attorney for Appellant
P.O. Box 306
Grand Rapids, Michigan 49501-0306
Ph: (616) 831-1730/Fax: (616) 831-1701
Santiago Rios (P48199)
Assistant Attorney General
Attorney for the Dept of Community Health
Department of Attorney General
Community Health Division
P. O. Box 30217
Lansing, MI 48909
Ph: (517) 373-3488/Fax: (517) 373-0241
/
CLOSING ARGUMENT OF THE MICHIGAN
DEPARTMENT OF COMMUNITY HEALTH
This case involves an appeal of an action issued by the Michigan Department of Community Health [Department] against VG’s Food Center [VG’s] to terminate its contract to participate as a vendor in the WIC program and disqualify it from participation in the WIC program for a period of one year. The evidence shows that this action was taken because VG’s repeatedly provided unauthorized food items in exchange for a WIC coupon contrary to paragraph 5 of the WIC contract [Respondent’s Exhibit 3] that it executed with the Department, and the federal regulations governing the WIC program. [42 CFR 246.12(f)(2)(i), 246.12(k)(1)]. Federal regulations applicable to this matter, 7 CFR 246.18(a) and (b), state that vendors who are terminated, disqualified, or denied contracts must be provided with the opportunity to appeal the adverse action and the opportunity to present its case. Consequently, the vendor bears the burden of demonstrating that the Department’s adverse action requires reversal. Further, basic administrative law places the burden of proof on the petitioner to establish facts supporting its petition. Hovey v. General Construction Co., 233 Mich. 531; 207 NW 852 (1926); Lafayette Market and Sales Co. v. City of Detroit, 43 Mich. App. 129; 203 NW2d 745 (1972); Bienfeld, Michigan Administrative Law, 15-18 (1978). Here, VG’s has failed to meet its burden and, therefore, its appeal must be denied.
WIC is the supplemental food program for women, infants and children, which was created by Congress under the Child Nutrition Act. Under the Act, the federal government provides cash grants to participating states to provide supplemental foods such as milk, eggs and cereal to poor women who are pregnant or lactating and infants and children to protect children from nutritional deficiencies. The food is distributed to poor women and children through a system similar to the food stamp system. The participating state contracts with grocery stores (vendors), the grocery stores accept coupons from the participants in the program as payment for food and then the grocery stores submit these coupons to the state for payment.
The WIC program is administered by the United States Department of Agriculture through its Food and Nutrition Service Division which has promulgated regulations governing the program at 7 CFR 246.1, et seq. USDA has contracted with the State of Michigan to implement the program through the Department in accordance with these regulations.
As required by federal regulations, Michigan has adopted a State plan of program operation and administration that was submitted to and approved by the United States Department of Agriculture. The State plan establishes the specifics as to how Michigan will implement the food program. It also contains the types and levels of sanctions to be imposed for violations by vendors of the WIC program. [Respondent’s Exhibits 4 & 5].
The Department contracted with VG’s to serve as an authorized vendor in the WIC program. The contract executed between VG’s and the Department specifically prohibits the vendor from providing unauthorized food products in exchange for WIC coupons. [Respondent’s Exhibit 3, paragraph 5, page 2]. Imprinted on the WIC coupon is a specially prescribed food package and participants are allowed to select among certain types and brands of food within each category. As Kurt Smith testified, the Department has issued to vendors and participants the list of authorized food products that can be exchanged for WIC coupons. [Respondent’s Exhibit 11].
As set forth in the federal regulations and the WIC contract, the vendor is responsible for training his orher employees regarding the handling of WIC coupons; also, the vendor is responsible and accountable for employees’ actions. Furthermore, even if the contract violation was not intentional, but a result of carelessness, an intentional violation is not required.
The facts are really not disputed. An undercover investigator went into the vendor’s store on three separate occasions and used a WIC coupon to purchase foods. As testified by April Mack, the undercover investigator, on each of these occasions, which occurred on 6/6/03, 10/3/03, and 11/2/03, VG’s provided unauthorized food items in exchange for a WIC coupon contrary to paragraph 5 of the WIC contract [Respondent’s Exhibit 3] that it executed with the Department, and the federal regulations governing the WIC program. [42 CFR 246.12(f)(2)(i), 246.12(k)(1)].
On 6/6/03, VG’s provided Kellogg’s Corn Pops, which is an unauthorized food item, in exchange for a WIC coupon. On 10/3/03, VG’s provided Kellogg’s Corn Pops, which is an unauthorized food items, in exchange for a WIC coupon. On 11/2/03 VG’s provided Kellogg’s Corn Pops, which is an unauthorized food item, in exchange for a WIC coupon. [See Respondent’s Exhibits 11 for a list of authorized food products]. As testified by Kurt Smith, the vendor submitted these coupons to the State for payment, for each of the three buys. [Respondent’s Exhibits 7C, 8C, and 9C].
The incontrovertible evidence on the record establishes that VG’s submitted each of the three WIC coupons used by Ms. Mack to buy unauthorized product to the state for reimbursement. [Respondent’s Exhibits 7C, 8C, and 9C].
In addition to violating the WIC contract, providing unauthorized food products in exchange for WIC coupons also violates federal regulations and these regulations mandate that the state agency sanction vendors that provide unauthorized food products in exchange for WIC coupons. [7CFR246.12(f)(2)(i), (k)(1)].
Federal regulations require that the Department establish policies that determine the type and level of sanctions to be applied against food vendors for violations of the WIC program. [7CFR 246.12(k)(1)]. The Department has established a sanction policy, which is included in its State plan and has been reviewed and approved by USDA. [Respondent’s Exhibits 4 & 5]. As set out in the sanction policy, the sanction for three or more occurrences of providing unauthorized food in exchange for WIC coupons is termination of the contract and disqualification of the vendor from participation in the WIC program for one year. This sanction meets the sanction requirements in federal regulations. [7CFR246.12(k)(1)(iv)].
Federal regulations mandate that the state agency, prior to disqualifying a vendor, determine if disqualification of the vendor would result in inadequate participant access. 7CFR246.12(k)(l)(ix) and 246.12(k)(8). Participant access determinations are not subject to administrative review. [7 CFR 246.18(a)(l)(i)].
…State agencies are uniquely qualified to make participant access determinations, because their primary concern is WIC Program participants. Whereas vendors know the volume of their own WIC business, only State agencies know the geographic distribution of WIC participants and of other WIC-authorized vendors, which are the primary criteria for making participant access determinations. The Department [USDA] strongly believes that State agencies are in the best position to make participant access determinations that are in the best interests of program participants. In addition, the Department [USDA] strongly believes that administrative reviews should focus on whether a vendor committed the violation(s) of which it has been accused, rather than whether a violative vendor agrees with a State agency's participant access determination. Consequently, the final rule maintains that State agencies' participant access determinations are not subject to administrative review.” 64 FR 13311, March 18, 1999. [Emphasis added.]
*****
This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect unless so specified in the Dates paragraph of the final rule. Prior to any judicial challenge to the application of provisions of this rule, all applicable administrative procedures must be exhausted.” 64 FR 13319, March 18, 1999. [emphasis added].
The Department has established an access policy, which is a part of its State Plan and has been reviewed and approved by the USDA [Respondent’s Exhibit 4, Appendix C, p. 16]. This policy requires only that the Department make a determination, as it has in this case, that there is least one WIC vendor within a one-half mile radius. As testified by Kurt Smith, Vendor Compliance Coordinator for the WIC program, the Department has considered and determined that disqualification of VG’s will not result in inadequate participant access to WIC authorized vendors. Mr. Smith testified that there is one WIC authorized vendor within a one-half mile radius of VG’s Food Center. This determination was made based on his field visits to this store (Save-A-Lot) and VG’s to verify the store’s location. Mr. Smith additionally used the Department’s standard computer map analysis of these locations. [Respondent’s Exhibit 10].
The only evidence presented by VG’s, in an attempt to refute the testimony of the Department’s witness in regard to adequate participant access, was to state that the store within one-half mile, Save-A-Lot, is a non-compliant vendor and therefore VG’s cannot be stripped of its status as a WIC vendor. However, this determination is for the Department to make and not the independent examination of a WIC vendor. If such practices were allowed, this would completely undermine the Department’s power to investigate WIC vendors. Vendors under investigation would attempt to disqualify every WIC vendor within one-half mile in order to absolve their own contract violations. This court must not allow VG’s to dictate the investigative powers of the Department. At worst, allowing VG’s to breach its contract based on such claims would send the message that all WIC vendors could breach their WIC contracts in effect canceling out one another, eliminating the controls the Department has to regulate the WIC program. However, the individuals harmed by these abuses are the woman and children the WIC program was designed to help. As such, VG’s claim that Save-A-Lot is a noncompliant vendor is inappropriate.
Clearly, the only issue before the ALJ, in regards to participant access, was whether the Department had considered and made a determination as to whether the disqualification of VG’s would result in inadequate participant access. The evidence on the record clearly establishes that the Department considered and made a determination that the disqualification of VG’s would not result in inadequate participant access because the Department had determined there was one other authorized WIC vendors within a one-half mile radius of VG’s Food Center. As set forth above, Petitioner failed to present any credible evidence whatsoever to support its claim that there was not another authorized vendor within a one-half mile radius of VG’s, or to refute the direct testimony of Department representatives.
The action taken by the Department is authorized by the Department’s contract with VG’s, which states on page 9 that the Department may terminate this contract and disqualify the vendor for program violations as set forth in the most recent vendor sanction policy. The sanction policy is part of the State plan that has been approved by USDA, and which must be used by the Department in implementing the WIC program. Under the sanction policy, the sanction for providing unauthorized food in exchange for WIC coupons on three or more occasions is termination of the vendor contract and disqualification from the WIC program for one year.[1]
Petitioner also claims that in the past notice was sent for WIC violations, but after the 6/6/03 noncompliance buy no further notices were sent. Furthermore, they claim there was no notice that notices would no longer be sent as a result of noncompliance. As a result, Petitioner believes that the Department must provide notice of noncompliance. Yet, there is nothing in the WIC contract to create such reliance on notice. [See Respondent’s Exhibit 3, Responsibilities-Department, page 8]. All WIC vendors, including VG’s are informed of any changes in policies or procedures and the Department publishes a quarterly WIC Vendor Newsletter that is distributed to all WIC vendors to keep them informed of program regulations, requirements and changes. [Respondent’s Exhibit 4, Appendix D, page 17]. “USDA Regulations at 7 CFR 246.12 state that the Department does not have to provide the vendor with prior warning that violations were occurring before imposing any of the sanctions under 7 CFR 246.12.” [Respondent’s Exhibit 5, paragraph C]. Perhaps most significant is the following:
THE DEPARTMENT WILL NOT PROVIDE VENDORS WITH PRIOR WARNING (NO WARNING LETTERS) THAT VIOLATIONS WERE OCCURRING BEFORE IMPOSING MANDATORY SANCTIONS REQUIRED BY USDA FEDERAL REGULATIONS SET FORTH IN SECTION C OF THIS SANCTION POLICY.
Id. Ultimately, it is up to the discretion of the Department to send letters of violation. With such language in the WIC Vendor Sanction Policy, VG’s was well aware of the availability of notices. Still, VG’s continued two additional times to breach its contract with this state after receiving an initial notice of noncompliance. Even if the state had provided notice for each of VG’s unauthorized sales, we would still be in this hearing because VG’s cannot seem to follow the simple guidelines of the contract that they signed.[2]
Therefore, the Department respectfully requests that the Administrative Law Judge determine that the Department’s termination of the WIC contract with the vendor and disqualification of the vendor from the WIC program for one year are valid; and, issue an order upholding the actions of the Department.
Respectfully submitted,
Michael A. Cox
Attorney General
Santiago Rios (P48199)
Assistant Attorney General
Community Health Division
P.O. Box 30217
Lansing, Michigan 48909
(517) 373-3488
Dated:
1
[1]Federal regulations permit a civil money penalty in lieu of disqualification only when there is inadequate participant access:
The State agency shall disqualify a vendor for the mandatory sanctions listed in paragraphs (k)(1)(ii) through (k)(1)(iv) of this section. However, if a state agency determines that disqualification of the vendor would result in inadequate participant access, the state agency shall impose a civil money penalty in lieu of disqualification. 7 CFR 246.12(f)(2)(xxi).
Because, the Department has made a determination that the disqualification of VG’s Food Center would not result in inadequate participant access, the mandatory one-year disqualification must be imposed.
[2] See Respondent’s Exhibit 12. This is evident from the three receipts we presented that reveal that VG’s Food Center on three additional occasions accepted WIC coupons for unauthorized Kellogg’s Corn Pops. Petitioner’s witness Alan Brody testified to the validity of these receipts.