FINDINGS OF FACT AND CONCLUSIONS OF LAW
Thomas Brooks ("Brooks") has filed a self-prepared Complaint against the United States Department of Agriculture ("Department"), in which he challenges the decision of the Secretary of Agriculture ("Secretary") to disqualify his sole proprietorship Sir Bee's Food Mart ("Sir Bee's"), 337 East 69th Street, Chicago, Illinois from participating in the government's Food Stamp Program (the "Program," established by 7 U.S.C. §§ 2011-2032
) for a three-year period. In response the United States has acknowledged this Court's jurisdiction over the review of Secretary's administrative decision under Section 2023(a) (although the United States has properly pointed out that it and not Department is the correct defendant here). In addition, the United States has coupled its Answer to Brooks' Complaint with a two-count Counterclaim seeking recovery alternatively under the False Claims Act (31 U.S.C. § 3729(a)(1)
) or for unjust enrichment.
This Court conducted a bench trial over a period of several days, during which Brooks elected to represent himself. Trial continuances were granted to enable Brooks to reach whatever witnesses and to obtain whatever exhibits he said he needed to present his case. After the proofs were closed, another brief continuance was granted to enable both Brooks and government counsel to assemble their thoughts for the preparation of closing arguments. Then at the conclusion of the closing arguments this Court stated its decision orally, summarizing certain findings of fact ("Findings") and conclusions of law ("Conclusions").
These Findings and Conclusions are intended to formalize this Court's decision and to provide full details explaining the basis of the judgment reached by this Court.
To the extent (if any) that the Findings as stated may be deemed conclusions of law, they shall also be considered Conclusions. In the same way, to the extent (if any) that matters later expressed as Conclusions may be deemed findings of fact, they shall also be considered Findings. In both of those respects, see Miller v. Fenton, 474 U.S. 104, 113-14, 88 L. Ed. 2d 405, 106 S. Ct. 445 (1985).
Findings of Fact
1. Anyone who owns a retail food store and wishes to participate in the Program is first required to participate in an orientation session (given weekly) at the Chicago office of Department's Food and Nutrition Service ("Service"), a session that is then followed immediately by an individual interview. Decisions by the Service authorizing such participation are based on the information in the application that must then be filled out by the applicant and, if the Service deems it necessary (as is not too often the case), based on a visit to the store as well. After such authorization is granted, the Service's Minneapolis computer center issues certificates for redemption and mails them directly to the store. Food stamps may be exchanged only for "eligible foods," defined in relevant part by 7 C.F.R. § 271.2 as "any food or food product intended for human consumption except . . . hot foods and hot food products prepared for immediate consumption." In short, it is improper not only to accept food stamps in exchange for commodities other than food but also to accept such stamps in exchange for the kinds of products purveyed in establishments commonly known as "fast food" operations.
2. After an authorized store that is participating in the Program accepts food stamps in exchange for its sale of eligible foods, it takes those stamps to a financial institution together with a redemption certificate in which the participant certifies the total amount and also certifies that the food stamps were indeed used to purchase eligible foods. That financial institution redeems the certificate, so that the store participating in the program is paid the full value of the food stamps, and the financial institution is then in turn reimbursed by the Federal Reserve Bank. Certificates of redemption are retained by the Federal Reserve Bank for only a six-month period before they are destroyed. However, the Service's Minneapolis computer center does maintain a permanent microfilm record of the redemption certificates (no copies are retained in the Chicago office, but it has access to the Minneapolis computer in that respect).
3. Brooks originally applied for Sir Bee's participation in the Program on August 7, 1991, and approval was granted by authorizing official Loretta Mitchell ("Mitchell," the officer in charge of Service's Chicago office) on August 16. In Brooks' application (Govt. Ex. 2) he checked the description "Medium or Small Grocery" rather than any of the other 15 or so listed categories (one of which was a combination "Grocery/Restaurant"), but he also checked "Household Supplies," "Hot Food" and "Hardware" as non-food inventory items that he would handle in the seven-day-a-week 8 a.m. to 10 p.m. operation that he portrayed. In the portion of the form that called for a statement of the store's volume, he estimated annual gross sales of $ 82,000, $ 55,000 of which were estimated as food sales.
4. When the Service then mailed out the redemption kit to Sir Bee's to enable Brooks to begin participating in the Program, the kit was returned with a notation "store closed." It developed during the trial that Brooks was then still remodeling the store, so that it had not yet opened for business. After the Service made several unsuccessful attempts to reach Brooks, the original authorization was cancelled. Some time later Brooks called to inquire what had happened to his authorization and was told about the just-described events, so he reapplied for Program participation on February 18, 1992 (Govt. Ex. 3). This time Brooks estimated the store's annual sales at $ 85,000, of which $ 75,000 was estimated as the volume of food-stamp-eligible sales of food. Again Brooks checked the "Medium or Small Grocery" type of operation rather than any other choice, but this time the only non-food inventory that he listed was for "Household Supplies"--nothing was checked to cover "Hot Food" or other items.
5. During the course of the authorization process when Brooks filed his second application for participation in February 1992, Senior Food Program Specialist Bohumil Polcar ("Polcar") met with Brooks at Service's Chicago office. At that time Polcar both obtained information from Brooks and gave some information about the Program to Brooks. In part Polcar inquired about the size of the Sir Bee's store and the products carried there. In response to the question about what types of foods Brooks would be selling, he responded essentially:
All staple foods except for fresh meat and produce.
Polcar then reinstructed Brooks in the restrictions imposed by the Program, including the fact that no credit could be given to customers, that food stamps were not to be accepted for cash (even on a dollar for dollar basis) and also as to what foods would qualify. Brooks gave no indication of any lack of understanding in any of the respects covered by that meeting.
6. After obtaining his second authorization to participate in the Program, Brooks proceeded to submit the necessary documentation (food stamps and redemption certificates) on a regular basis. After those submissions had covered something more than three full months of Sir Bee's operations, the Service's Minneapolis computer generated a printout that automatically included the store on a list of Program participants as to which questions appeared to exist based on a comparison between their projected food sales and their actual redemptions. As to Sir Bee's, its food stamp redemptions were not only grossly over the average for stores in the same census tract (most of which were small neighborhood stores whose sales would normally be expected to be comparable to each other) but had also totaled--even though only a fraction of a year had elapsed--over 90% of the amount that Brooks had listed as Sir Bee's anticipated annual sales. To determine whether some computer error may have been the source of that reported disparity, Mitchell ordered copies of Sir Bee's actual redemption slips from the Minneapolis office. Those slips confirmed the existence of a potential problem: In just the first three full months of its operations (April through June 1992), Sir Bee's food stamp redemptions aggregated nearly 2/3 of Brooks' entire $ 75,000 annual estimate.
7. Mitchell then took two steps in an effort to ascertain what the situation was in terms of Brooks' compliance with the Program's requirements. For one thing, on February 22, 1993 she sent Brooks the type of "affirmation letter" (Govt. Ex. 8) that is typically sent to food stamp participants where any such question exists, in which she told him that in terms of his original estimate as to volume, the amount of food stamp redemptions exceeded the eligible food sales as he had stated them. Accordingly the letter asked that Brooks provide further information if the original sales information were not correct or if he wanted to provide any additional information (for which purpose it would be necessary for him to provide supporting documentation, such as sales tax returns or purchase invoices). In addition to sending that "affirmation letter," Mitchell also directed Polcar to go out to observe Sir Bee's operation.
8. When Polcar went out on February 25, 1993 to observe Sir Bee's at Mitchell's direction, he did so through a drive-by (a brief few minutes' observation from his automobile) rather than by entering the store. Even on the basis of that limited observation it was apparent to Polcar, in consequence of his extensive experience with Program participants over a period of many years, that the operation that he observed at Sir Bee's could not legitimately account for the large volume of food stamps that had been submitted by Brooks for redemption. On that same day Polcar placed a brief written report in the file covering his drive-by visit (Govt. Ex. 13).
9. Sometime after receiving Mitchell's "affirmation letter" (Govt. Ex. 8), Brooks telephoned her to inquire why the type of documentation referred to was needed (nothing in the record reflects just when that inquiry was made, but nothing turns on that). When Mitchell explained the need for verification in light of the Program's purposes, Brooks told her that he kept no receipts or invoices at all to evidence his purchases.
10. As a result of Brooks' lack of any satisfactory response to the "affirmation letter," on March 18, 1993 Mitchell then properly transmitted a "charge letter" (Govt. Ex. 9) to Brooks, notifying him "that there is reason to believe that you, doing business as Sir Bee's Food Mart, 337 East 69th Street, Chicago, have violated the terms and conditions of the regulations governing the Food Stamp Program (hereinafter called the Regulations) as stated in the following paragraph." What followed in the "charge letter" was a statement of the disparity between the amount redeemed in food coupons from February 1, 1992 through January 31, 1993 and Brooks' statement at the time that he had obtained his second authorization--contrasting Brooks' $ 75,000 estimate of gross food sales in that second application for participation with the actual food stamp redemptions aggregating $ 232,256. After a detailed month-by-month listing of those redemptions, Govt. Ex. 9 went on:
Because of the seriousness of these charges, your store is being considered for disqualification from the Food Stamp Program or the imposition of a civil money penalty in lieu of disqualification. Therefore, we encourage you to give us the benefit of any information, explanation or evidence you have regarding these charges. To insure consideration of your response you should reply within ten days of the date you receive this letter. You may respond either in writing or in person. If you wish to reply in writing, please send your reply to Loretta Mitchell, Officer-in-Charge, U.S. Department of Agriculture, Food and Nutrition Service, Chicago Field Office, 55 East Monroe, Room 1530, Chicago, Illinois, 60603. If you wish to reply in person, please telephone Ms. Mitchell at (312) 353-4413 for an appointment.
We will fully consider your reply and any information you provide before we make a decision in this matter. Any revision in sales figures presented to the Field Office must be substantiated by documentation such as sales receipts or other records which support the new figures. Any documentation presented shall be segregated in an orderly, chronological fashion and summarized in order to be considered in your reply. However, if we do not hear from you within the time indicated we will make a decision based on the information already available to us.