OAH Docket No.    4-0900-11686-2

 

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

 

FOR THE MINNESOTA DEPARTMENT OF HEALTH

 

 

 

In the Matter of Twins Food Market                         FINDINGS OF FACT,

WIC Vendor No. W7181                                                      CONCLUSIONS AND

RECOMMENDATION

 

 

Administrative Law Judge Bruce H. Johnson conducted a hearing in this contested case proceeding on June 23 and July 8, 1998, at the Office of Administrative Hearings, 100 Washington Square, Suite 1700, Minneapolis, Minnesota.  The record closed on July 17, 1998, when the Administrative Law Judge received the parties’ post-hearing memoranda.

 

Wendy Willson Legge, Assistant Attorney General, 525 Park Street, Suite 500, St. Paul, Minnesota 55103, appeared at the hearing as attorney for the Minnesota Department of Health.  Edward F. Kautzer, Attorney at Law, Suite 510, Spruce Tree Centre, 1600 University Avenue West, St. Paul, Minnesota  55401-3829, appeared at the hearing as attorney for Twins Food Market.

 

 

NOTICE

 

            This Report is a recommendation, not a final decision.  The Commissioner of the Minnesota Department of Health will make the final decision after reviewing the administrative record.  The Commissioner may adopt, reject or modify these Recommendations.  Under Minnesota law,[1] the Commissioner may not make her final decision until after the parties have had access to this report for at least ten days.  During that time, the Commissioner must give each party adversely affected by this report an opportunity to file exceptions and present argument to her.  Parties should contact the office of Anne Barry, Commissioner of Health, 717 Delaware Street Southeast, Minneapolis, Minnesota 55440, to find out how to file exceptions or present argument.

 

 

STATEMENT OF ISSUES

 

(1)               Whether Twins Food Market violated its vendor agreement with the Department by charging the WIC program for foods not received;

(2)               Whether Twins Food Market violated its vendor agreement with the Department by allowing unauthorized food to be obtained in exchange for a WIC voucher;

(3)               Whether Twins Food Market violated its vendor agreement with the Department by failing to enter the dollar amount on a WIC voucher at the time of purchase;

(4)               Whether Twins Food Market violated its vendor agreement with the Department by using its vendor stamp to redeem a WIC voucher accepted by another non-WIC vendor; and

(5)               If so, whether the Department should disqualify Twins Food Market from participating in the WIC program for three years.

 

Based on the evidence in the hearing record, the Administrative Law Judge makes the following: 

 

 

FINDINGS OF FACT

 

1.                  The Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Program provides pregnant women, nursing mothers, infants, and children up to the age of five with nutritional supplements and other health care services.  The program is federally funded, is administered by the state, and is implemented locally through approximately 70 WIC clinics throughout the state.[2]

2.                  WIC clinics provide eligible women and children (participants) with WIC identification cards and vouchers that participants or their authorized proxies can redeem for specific kinds of food products.[3]  Program rules require participants and their proxies to sign the identification cards.  The program then periodically issues vouchers to participants.  Each voucher contains a unique identification number and lists the food items that the participant is entitled to receive.  There are spaces on the vouchers for the vendor to record the price charged for the food items received by the participant, for the signature of the participant or proxy, and for the vendor’s WIC stamp.[4]  A participant may choose to receive all or only some of the food items listed on the voucher, but the vendor may only charge the program for the food items that the participant actually receives.[5]

3.                  Only retail food stores that the Department specifically designates as WIC vendors may supply authorized food items to participants and submit WIC vouchers to the Department’s bank for payment.  To become a WIC vendor, a food store must apply to the Department.  If the Department accepts the application, the food store must then execute a Retail Food Vendor Guarantee — that is, a contract between the Department and the vendor that, among other things, describes the terms of the food store’s participation in the program and establishes the penalties for failing to comply with various program requirements.  The Department then issues the food store a WIC vendor stamp bearing a unique vendor number.  The store is required to place its stamp on the WIC vouchers it receives from participants in order to receive payment.[6]  The Department periodically requires all of its WIC vendors to receive training on the program’s various requirements.[7]

4.                  Retail food vendor guarantee agreements[8] require that transactions between vendors and individual participants occur in certain particular ways.  For example, a participant may only use a WIC voucher to obtain the kinds of food items listed on the voucher.  In many cases, WIC-approved foods are limited to certain brands of food items — for example, only certain brands of cereals.[9]  Even though the voucher may specify that the participant can receive several different kinds of food items in the transaction, the vendor may only charge the programs for the food items the participant chooses to receive and actually does receive.[10]  When the participant provides the requested food items, the vendor must first ring up the total price of the items before the participant signs the voucher.[11]  The vendor may not charge more for a food item than the price agreed upon in its retail food vendor guarantee agreement.[12]  The participant then presents the blank voucher to the vendor to record the total price on it.  After the vendor records the total price, the participant must then sign the voucher, and the vendor must then compare the signature on the voucher with the signatures on the participant’s WIC identification cards.[13]

5.                  On March 18, 1993, Alfred B. King, II, and three other persons formed Twins Food Market, Inc., a Minnesota corporation, for the purpose of owning and operating a small grocery store located at 2020 Nicollet Avenue South in Minneapolis.[14]  Mr. King served as the corporation’s chief executive officer, and the store was operated under the name “Twins Food Market.”[15]

6.                  On or about February 22, 1994, Twins Food Market, Inc., opened a second store at 1808 West Broadway Avenue North, Minneapolis, Minnesota.  The corporation operated that second store under the name “Twins Food Market #2.”[16]  On September 27, 1995, Mr. King, acting on behalf of Twins Food Market, signed a retail food vendor agreement with the Department, and the Twins Food Market located at 2020 Nicollet Avenue South became a WIC vendor.[17]  On October 24, 1995, Aamfoulth Sunnies Davies became president of Twins Food Market, Inc.[18]

7.                  On September 10, 1997, Paul H. Tarr and Victory Y. Davies formed North Side Food Market, Inc., a Minnesota corporation, for the purpose of purchasing, owning, and operating a small grocery store located at 1808 West Broadway Avenue North in Minneapolis.  On or about September 10, 1997, Twins Food Market, Inc., sold its second store that was located at 1808 West Broadway Avenue and being operated under the name of Twins Food Market #2 to North Side Food Market, Inc.  The new corporation changed the business name of that store to North Side Food Market.[19]  North Side Food Market has not been a WIC vendor at any time during calendar year 1998.[20]

8.                  On October 5, 1997, Twins Food Market executed another retail food vendor guarantee that was effective from 10/1/97 to 4/30/98.[21]  Although the Department amended its WIC rules on August 18, 1997, a transition rule provided that Twins Food Market would be governed by the old rules until its guarantee period expired on April 30, 1998.[22]  That included provisions in the old rules about the grounds for disqualifying the vendor from participating in the WIC program, as well as the periods of disqualification.

9.                  In late December of 1997, Henry Addy, who was employed as the manager of Twins Food Market from September of 1997 through April of 1998, attended a training session on the WIC program at the Department’s offices in Minneapolis.  While attending the training, Mr. Addy was provided with a Minnesota WIC Program Retail Food Vendor Manual,[23] which described and explained all WIC program requirements.  Mr. Addy read the contents of that manual while at the training session.[24]

10.             The Department required authorized vendors, including Twins Food Market, to submit a price survey that identified how much they charged for WIC-allowed foods.  Twins Food Market’s price survey for the guarantee period from 10/1/97 through 4/30/98 indicated that the price for one pound of cheese was $3.79.[25]  The Department’s compliance specialist verified that price during a monitoring visit on April 28, 1998.[26]

11.             In January of 1998, the Department decided to conduct random compliance buys, using undercover agents, at all of its WIC vendors in Hennepin County.[27]  The Department’s agents conducted those compliance buys according to predetermined standard operating procedures, which included the following:  An undercover agent and a Department compliance specialist would drive to a location about two blocks from the WIC vendor and park their car.  The investigator would then turn over to the compliance specialist any WIC vouchers, food stamps, or cash that might be in his or her possession.  Next, the compliance specialist would give the investigator one WIC identification card with a fictitious identity.  The investigator had previously written the signature of the fictitious person on the identification card.  The compliance specialist would also give the investigator one WIC voucher that could be redeemed for the foods specified on it.  The compliance specialist would then record the time when the investigator left the car to go to the WIC vendor’s store.[28]

12.             The Department also established standard operating procedures to govern what an investigator would do after entering a WIC vendor’s store.  After entering the store, the investigator would proceed to collect food items, and bring them to the cashier to be rung up.  The foods that the investigator would bring to the cashier would commonly include some items that were not specifically approved by the WIC program, and the investigator would commonly omit some food items described on the WIC voucher.  The investigator would then present the WIC voucher in his or her possession to the cashier.  It was then the responsibility of the cashier to record the total price on the voucher of the foods presented for purchase before returning the voucher for the investigator’s signature.  The investigator would not produce the WIC identification card for comparison of signatures unless requested.  After signing the WIC voucher and returning it to the cashier, the investigator would allow the cashier to bag the groceries and then would leave the store, proceeding directly to the car where the compliance specialist was waiting.[29]

13.             The Department’s standard operating procedures for compliance buys also covered what would occur when the investigator returned to the car with the bag or bags of groceries.  The compliance specialist would record the time when the investigator returned to the car.  He or she would then prepare a written inventory of the food items that the investigator had brought back from the store and place a slip of paper in each bag of groceries identifying the WIC vendor from which the items had been purchased.  The investigator and the compliance specialist would then complete a written report of the results of their investigation.[30]  The food items were kept separate from any food items that may have been purchased from other vendors on the same day.  At the end of the day, the compliance specialist and the investigator would bring the food items to a charitable institution for donation.  There, the food items were inventoried again, photographed, and then donated.[31]

14.             As part of the Department’s compliance program, an undercover investigator employed by the Department conducted a compliance buy at Twins Food Market on March 5, 1998.  The investigator and the Department’s compliance specialist followed all of the standard operating procedures described in Findings Nos. 11, 12 and 13.  During that first compliance buy, the investigator brought the following food items to the cashier:  a gallon of milk, a dozen eggs, two cans of juice, one package of Cheerios Plus cereal, and one package of Apple Cinnamon Cheerios cereal.[32]  The investigator did not purchase cheese, and Apple Cinnamon Cheerios was not a WIC-approved food.[33]  During the first compliance buy, the cashier at Twins Food Market did not enter the total price of the food items on the WIC voucher before returning it to the investigator for signature or before the investigator left the store.[34]

15.             The WIC voucher used in the first compliance buy was processed for payment by the Department’s bank and returned to the compliance specialist.[35]  When returned, a price of $25.82 was recorded on the voucher.[36]  Based on the prices in a competitive price worksheet that Twins Food Market had submitted to the Department, as later confirmed by the compliance specialist during a monitoring visit,[37] the dollar food value totaled $17.64, or $8.18 less than the amount for which Twins Food Market had redeemed the voucher.[38]

16.             On April 1, 1998, after the Department had made the first compliance buy and had received the WIC voucher from its bank, the compliance specialist made a monitoring visit to Twins Food Market for the purpose of informing the store of the rule violations that had occurred during the first compliance buy and also to determine whether the store was complying with other program requirements.[39]  Neither Mr. King, who identified himself as chief executive officer of Twins Food Market, Inc., nor Henry Addy, who was the store’s manager, was on the premises when that visit occurred, so the compliance officer discussed the violations that the Department had found with Andy Addy, a cashier who was then on duty.[40]  Andy Addy was the older brother of Henry Addy, the manager of Twins Food Market and the individual who had participated in the Department’s WIC training session in late December of 1997.  The compliance officer also gave the cashier a copy of a training verification form to pass on to the store’s manager or owner.[41]

17.             The compliance officer followed up on that discussion by sending a letter on April 2, 1998, to Alfred King specifically inviting his attention to the fact that Twins Food Market cashiers were “providing unauthorized foods in lieu of the WIC allowed foods authorized on the program” and were “not entering a price on the vouchers before the vouchers are signed by a participant or proxy.”[42]  The letter also indicated that WIC-approved foods were not priced and that the store was not maintaining the minimum stock requirement for tuna.[43]  Additionally, that letter invited Mr. King’s attention to various kinds of WIC program rules, the violation of which could result in Twins Food Market being disqualified from participating in the program.[44]  Mr. King was visiting relatives in Houston, Texas, when the letter arrived and did not personally see it until April 15, 1998.[45]

18.             On April 7, 1998, the Department conducted a second compliance buy at Twins Food Market.  Again, the investigator and the compliance specialist followed all of the standard operating procedures described in Findings Nos. 11, 12 and 13.  During the second compliance buy, the investigator brought the following food items to the cashier:  a gallon of milk, a dozen eggs, one package of Kix cereal, one package of Waffle Crisp cereal, and two cans of Hi-C juice.[46]  The investigator did not purchase cheese, and the Waffle Crisp cereal and cans of Hi-C juice that the investigator presented to the cashier were not WIC-approved foods.[47]  During the course of the second compliance buy, the cashier asked the undercover investigator whether he wanted to purchase cheese, and the undercover investigator replied that he did not.  The cashier did compare the investigator’s signature on the WIC voucher with the signatures on the investigator’s WIC identification card but, again, did not enter the total price of the food items on the WIC voucher before returning it to the investigator for signature or before the investigator left the store. [48]

19.             The WIC voucher used in the second compliance buy was thereafter processed for payment by the Department’s bank and returned to the compliance specialist.[49]  When returned, the price of $25.82 was recorded on the voucher.[50]  Based on the prices in the competitive price worksheet that Twins Food Market had submitted to the Department, the information gathered by the compliance specialist during his monitoring visits, and the compliance specialist’s estimates,[51] the dollar food value of the food purchased during the second compliance buy totaled $17.64[52] — again, $8.18 less than the $25.82 that Twins Food Market’s cashier had recorded on the voucher.[53]  The amount by which Twins Food Market overcharged the Department in the second compliance buy greatly exceeded the price of the cheese that the investigator did not purchase.

20.             On March 20, 1998, the Department conducted a compliance buy at North Side Food Market, which was not a WIC vendor.  During that compliance buy, the investigator and the compliance specialist followed all of the standard operating procedures described in Findings Nos. 11, 12 and 13.  During the compliance buy at North Side, the investigator brought the following food items to the cashier:  a gallon of milk, a dozen eggs, two packages of Froot Loops cereal, and two cans of Hawaiian punch.[54]  The investigator did not purchase cheese, and the Froot Loops cereal and cans of Hawaiian punch that the investigator presented to the cashier were not WIC-approved foods.[55]  During the course of the compliance buy at North Side, the cashier asked the undercover investigator whether she wanted to purchase cheese, and the undercover investigator replied that “They do not like cheese at my house.”[56]  The cashier at North Side entered a total price of $26.81 on the WIC voucher and returned it to the investigator for signature.[57]  The cashier did not compare the investigator’s signature on the WIC voucher with the signatures on the investigator’s WIC identification card and did not enter the total price of the food items on the WIC voucher before returning it to the investigator for signature or before the investigator left the store. [58]

21.             By letter dated April 14, 1998,[59] which Mr. King received on April 15, 1998,[60] the Department notified Twins Food Market that it was disqualifying the store from participating in the WIC program for a period of three years, effective April 29, 1998, because

[o]n two separate occasions between February 1, 1998 and April 13, 1998, a store cashier provided unauthorized foods in exchange for a WIC voucher, charged the WIC Program for foods not received by the WIC customer, and did not enter the dollar amount of the purchase on a WIC voucher at the time the voucher was used to buy food.  In addition to these violations, the Minnesota WIC program has additional documentation that a WIC voucher accepted at another retail food store has been deposited with the vendor stamp issued to Twins Food Market.[61]

22.             By letter dated April 19, 1998,[62] Mr. King appealed the Department’s disqualification, and this contested case proceeding ensued.

23.             These Findings are based on all of the evidence in the record.  Citations to portions of the record are not intended to be exclusive references.

24.             The Administrative Law Judge adopts as Findings any Conclusions that are more appropriately described as Findings.

 

 

Based upon these Findings of Fact, the Administrative Law Judge makes the following: 

 

CONCLUSIONS

 

1.                  Both Minnesota and federal law give the Administrative Law Judge and the Commissioner of Health authority to consider and rule on the issues in this contested case proceeding.[63]

2.                  The Notice of and Order for Hearing were proper in all respects, and the Department has complied with all of the law’s other substantive and procedural requirements.

3.                  The Department has the burden of proving by a preponderance of the evidence that Twins Food Market committed violations of its retail food vendor guarantee agreement and of WIC program rules that require suspending Twins Food Market from participating in the WIC program for a period of three years.[64]

4.                  The criteria for establishing which violations of WIC program rules may result in disqualifying Twins Food Market from the WIC program and for establishing how long any such disqualification must be for particular violations of program rules are the criteria described in Twins Food Market’s most recent retail food vendor guarantee agreement.[65]

5.                  Section XI, Part C, Item 8 of the retail food vendor guarantee agreement between the Department and Twins Food Market that was in effect on April 7, 1998, provides that Twins Food Market “will be [disqualified for] 12 months for the first offense and 24 months for each subsequent offense if the Vendor . . . [c]harges the WIC Program for foods not received by a WIC participant.”[66]

6.                  The fact that Twins Food Market charged the Department for cheese that the investigator did not actually receive during the second compliance buy can be inferred from the evidence tending to establish the prices of the food that the investigator did receive and from the fact that the amount by which Twins Food Market overcharged the Department exceeded the price that Twins Food Market was charging for cheese.  Twins Food Market therefore charged the WIC Program for foods not received by a WIC participant on April 7, 1998.

7.                  Section XI, Part C, Item 5 of the retail food vendor guarantee agreement between the Department and Twins Food Market that was in effect on April 7, 1998, provides that Twins Food Market “will be [disqualified for] 12 months for the first offense and 24 months for each subsequent offense if the Vendor . . . [e]xchanges cash or unauthorized food items for a WIC voucher.”[67]

8.                  During the second compliance buy on April 7, 1998, the cashier employed by Twins Food Market exchanged unauthorized food items for a WIC voucher — namely Waffle Crisp cereal and Hi-C juice.

9.                  Section XI, Part C, Item 4 of the retail food vendor guarantee agreement between the Department and Twins Food Market that was in effect on April 7, 1998, provides that Twins Food Market “will be [disqualified for] 12 months for the first offense and 24 months for each subsequent offense if the Vendor . . . [d]oes not enter the dollar amount of the purchase on a WIC voucher at the time the voucher is used to buy food.”[68]

10.             During the second compliance buy on April 7, 1998, the cashier employed by Twins Food Market did not enter the dollar value of the purchase on the WIC voucher presented to him by the undercover investigator at the time that WIC voucher was used to buy food.

11.             Section XI, Part C, Item 2 of the retail food vendor guarantee agreement between the Department and Twins Food Market that was in effect on April 7, 1998, provides that Twins Food Market “will be [disqualified for] 12 months for the first offense and 24 months for each subsequent offense if the Vendor . . . [p]ermits the use of a vendor stamp in a way that is inconsistent with this guarantee.”[69]  Section VII, Part A of the same agreement provides that Twins Food Market shall, among other things, “use the vendor stamp to validate only WIC vouchers accepted at the Vendor’s location . . . .”[70]

12.             At some time between March 20, 1998, and March 23, 1998, Twins Food Market used its vendor stamp to validate a WIC voucher that had been accepted at North Side Food Market, which was not a WIC vendor, during a compliance buy conducted there on March 20, 1998, and Twins Food Market therefore used its vendor stamp in a manner that was inconsistent with its guarantee agreement with the Department.

13.             Nothing in WIC program rules or in Twins Food Market’s retail food vendor guarantee agreement requires the Department to prove intent as an element of a violation of the provisions of that agreement.

14.             Minnesota law does not require the Department to give a WIC vendor notice that its employees have been violating WIC program requirements before disqualifying the vendor from further participation in the WIC program for violating those requirements.[71]  But even if there were such a legal requirement, Twins Food Market had both actual and implied notice that its cashiers were violating WIC rules before its employees committed some violations that formed the basis for its three-year disqualification.

15.             The law does not require the Department to justify the three-year disqualification that it imposed on Twins Food Market with specific assessments of the severity and nature of the violations of WIC requirements that Twins has been found to have committed here.

16.             The participant hardship provisions of the Department’s WIC rules[72] are inapplicable here.

17.             The Department has no obligation to train or to assist in the training of Twins Food Market’s cashiers about the requirements of the WIC program or about the obligations imposed on Twins Food Market in its vendor guarantee agreement.

18.             The Administrative Law Judge adopts as Conclusions any Findings that are more appropriately described as Conclusions.

19.             The Memorandum that follows explains the reasons for these Conclusions, and the Administrative Law Judge therefore incorporates that Memorandum into these Conclusions.

 

 

            Based upon the these Conclusions, and for the reasons explained in the accompanying Memorandum, the Administrative Law Judge makes the following:

 

 

RECOMMENDATIONS

 

            The Administrative Law Judge recommends:

 

(1)               That the Commissioner DENY Twins Food Market’s appeal of its disqualification from participation in the WIC program; and

(2)               That the Commissioner UPHOLD the Department’s disqualification of Twins Food Market’s from participating in the WIC Program for a period of three years, effective April 29, 1988.

 

 

 

Dated this

day of

August

1998.

 

 

 

                                                                             

BRUCE H. JOHNSON

Administrative Law Judge

 

 

Reported:       Tape Recorded (six tapes); No Transcript Prepared.

 

 

 

 

 

NOTICE

 

            Under Minnesota law,[73] the Commissioner of Health is required to serve her final decision upon each party and the Administrative Law Judge by first-class mail.

 

 

 

 

 

MEMORANDUM

 

Twins Food Market raises several defenses.  It first argues that the law required the Department to notify the store that it had violated particular kinds of WIC requirements and to give the store opportunities to correct those particular violations before imposing any sanctions.  Twins next contends that the Department must prove that the severity and nature of any violations Twins may have committed justify a three-year disqualification.  Third, it maintains that the Department failed to provide its cashiers with the training they needed to ensure they would comply with the program’s requirements.  Fourth, it argues that the Department erroneously failed to consider and apply a hardship exception found in program rules.  And finally, Twins argues that there is insufficient credible evidence to support findings and conclusions that it committed any violations of it guarantee agreement.

 

 

I.  Pre-Sanction Notice Requirement

 

Twins relies on the following language in Matter of Whitney’s Market,[74] a recent unpublished opinion issued by the Minnesota Court of Appeals, to support its argument that the Department erred by failing to give it adequate pre-sanction notice of all the particular violations forming the basis for its three-year disqualification:

 

In finding that Whitney’s received adequate notice that it was violating WIC procedures, the commissioner relied on evidence that the compliance specialist (1) notified Whitney’s she had received information that it had violated WIC rules, (2) ascertained at an in-person meeting that Whitney’s understood the rules and detailed the importance of following all rules and the consequences of violation, and (3) sent a follow-up letter reiterating the importance of following all WIC rules.

 

In addition to the reasons listed by the commissioner, we conclude that it is also significant that Whitney’s had specific notice in the guarantee it signed that participation in the program could be terminated by any violation of the guarantee. [75]

 

Twins suggests that the language quoted above establishes a legal requirement for pre-sanction notice and a test by which to measure the adequacy of such notice.  But a careful reading of the opinion reveals that is not the case.  The Court of Appeals’ precise holding was that the Statement of Need and Reasonableness (SONAR) that the Department prepared when it promulgated its WIC rules could not be a basis for establishing a pre-sanction notice requirement:

 

On the facts of this case, however, we decline to apply the SONAR to reverse the disqualification for the following reasons:  (1) the federal rules do not require the notice referred to in the SONAR; (2) the agency rule does not require the notice; (3) the guarantee that Whitney’s Market signed specifically states that any violation will result in disqualification; (4) the guarantee is consistent with the rules providing different penalties for a first and second offense; (5) Whitney’s did not demonstrate it relied on the SONAR; and (6) the nature of the violations demonstrate that Whitney’s knew that it was violating rules by providing unauthorized food because the vouchers were manipulated to reflect the cost of the WIC-approved foods rather than the cost of nonapproved food the customer received.[76]

 

The quote that Twins relies upon was dicta directed at a hypothetical argument — that is, even if the law did impose some sort of pre-sanction notice requirement on the Department, the WIC vendor in that case had ample warning that its practices violated WIC rules and its guarantee agreement.  The Court of Appeals never had held that Minnesota law establishes some kind of pre-sanction notice requirement.

 

But even if a pre-sanction notice requirement did exist in Minnesota law, its existence would not alter the result here because the material facts in this matter are indistinguishable from those in Whitney’s.  The first five reasons given for the result in Whitney’s all apply here with equal force.  The sixth reason was that the WIC vendor had actual knowledge it was violating WIC rules through price manipulation.  There is evidence of a similar kind of price manipulation here.  Twins Food Market’s cashier charged the Department’s undercover investigator the same price — $25.82 — for the food products obtained in both compliance buys, even though the investigator did not purchase all of the allowable WIC-approved food products and in each case substituted different nonapproved food products for some of the approved food products.  In other words, one could reasonably infer that Twins Food Market had a practice of having its employees record a total of $25.82 on WIC vouchers, regardless of how many and which kinds of food products a WIC purchaser actually receives.  Moreover, in the second compliance buy, the investigator specifically stated that he did not wish to purchase cheese, while the evidence established it was more likely than not that the cashier proceeded to charge the Department for cheese.  In short, there is even more evidence here than in Whitney’s that Twins Food Market “knew that it was violating [WIC]rules.”

 

The Department’s letter to Mr. King of April 2, 1998, also placed Twins Food Market on notice that its cashiers were violating WIC requirements.  There is no merit in its argument that the letter represented insufficient notice because it failed to give Twins prior warning of each of the specific violations that subsequently occurred in the second compliance buy.  Twins Food Market had implied knowledge that its employees were violating WIC rules.  Implied knowledge exists where one has "actual knowledge of facts which would put one on further inquiry."[77]  The Department’s notice that some violations of WIC requirements were occurring should have prompted a reasonable and prudent vendor to ascertain whether other kinds of violations were occurring and to take measures to prevent any future violations.

 

 

II.                  The Sanction Imposed Here Accounts for

the Severity and Nature of the WIC Violations That Occurred.

 

Citing a federal regulation,[78] Twins Food Market suggests that the Department bears the burden of proving that the period of disqualification imposed here is based on an assessment of the “severity and nature of the Program violations observed” in this particular case.  But that federal regulation does not, as Twins suggests, require state enforcement agencies to make individual assessments of severity and nature of violations in each case.  Rather, it only requires that “[t]he State agency shall establish policies” and sanction schemes that take severity and nature into account.[79]

 

Twins Food Market also errs by attempting to measure its three-year disqualification against any standards that may be contained in the WIC rules, as they were amended in 1997.[80]  By operation of a transition rule,[81] the respective rights and responsibilities of the Department and Twins Food Market continued to be governed by what was contained in their vendor guarantee agreement during the period at issue here:

 

The commissioner and vendor shall comply with the terms of each fully executed vendor agreement or vendor guarantee, unless the vendor and the commissioner agree in writing to an amendment of the vendor guarantee or vendor agreement.

 

And another provision of the amended rules makes it clear that:

 

 

[t]he commissioner shall enforce the disqualification provisions in each fully executed vendor agreement or vendor guarantee, notwithstanding anything in part 4617.0086.  [Emphasis supplied.]

 

The language of the rule is not permissive but rather is mandatory.  The Administrative Law Judge has found that Twins Food Market has committed four separate violations of the WIC requirements contained in it vendor guarantee agreement — namely, charging for foods not received, providing unauthorized food items for a WIC voucher, failing to enter the dollar amount of the purchase on a voucher at the time of purchase, and using its vendor stamp in a way that is inconsistent with its guarantee.  The penalty for each of those four violations is disqualification for a period of one year, and the guarantee agreement provides that disqualifications for multiple violations shall be successive but may not exceed three years in the aggregate.[82]

 

            The outcome would be no different if the disqualification provisions of the new rules were applied here.  Twins Food Market would have been found to have committed two Class A violations,[83] one Class B violation,[84] and one Class C violation.[85]  Under the new rules, if a vendor commits two Class A violations more or less contemporaneously, “the commissioner shall disqualify the vendor for the maximum period authorized in Code of Federal Regulations, title 7, section 246.12 (k) (1) (ii),” which is three years.

 

 

III.                The Department Was Not Obliged to Provide Twins

Food Market’s Cashiers with Training on WIC Requirements.

 

            Twins Food Market also argues that the violations of WIC requirements that occurred here resulted from the Department’s failure to provide Twins’ cashiers with the training they needed to ensure they would comply with the program’s requirements.  First of all, as the court of appeals noted in Whitney’s, supra, guarantee agreements[86] describe WIC program requirements in detail, as well as the consequences of noncompliance, and are therefore major sources of program guidance to vendors.  The evidence further established that the Department provided comprehensive retail food vendor manuals,[87] which described and explained WIC requirements in detail, to all of its vendors.  The Department also scheduled several training sessions for its vendors in November and December of 1997 at which instructors explained various aspects of the WIC program.[88]  The manager of Twins Food Market, Henry Addy, testified that he had attended a WIC training session put on by the Department on December 22, 1997,[89] as required by a WIC program rule.[90]  He further testified that he received a copy of the vendor program manual at that training session and that he had read the manual.[91]  The WIC program rules go on to define the responsibilities of Twins Food Market and Mr. Addy after he attended that training:

 

A vendor shall ensure that: . . . the management representative who completes this training conveys all information presented during the training to all cashiers of the vendor;[92]

 

Mr. Addy testified that he did, in fact, train all of the employees of Twins Food Market on the WIC program’s rules.[93]  The vendor manual alone contains all of the information that Twins needed to be able to prevent the violations that ultimately occurred.  As noted above, a person is deemed to have implied knowledge of facts that further inquiry into information within his possession would have disclosed.[94]  In short, the Department fulfilled whatever training responsibilities it may have had here.  It was Messrs. Addy and King who appear to have failed in their training responsibilities.

 

 

IV.  The Hardship Exception to Program Rules Does Not Apply.

 

            Twins Food Market argues that the WIC program rules establishes a hardship exception that requires the Department to set aside its disqualification:

 

In determining whether participant hardship exists in a particular area, the commissioner shall consider the following factors:

 

      A.  the number of participants in the area;

 

      B.  the number of retail food vendors or pharmacy vendors in that area;

 

      C.  the proximity of retail food vendors or pharmacy vendors to participants in that area;

 

      D.  the availability of public roads and public transportation in that area; and

 

      E.  whether there is a documented cultural or religious need for an additional retail food vendor in that area.[95]

 

First of all, under this rule, hardship is expressly relevant only to certain aspects of the application process, to location, licensing, and registration requirements and to limitations on the number of retail food vendors.[96]  It is dubious whether this particular rule authorizes the Commissioner to set aside a disqualification made mandatory by other program rules because of hardship.  But even if this rule is applicable in a situation such as this, it requires the Commissioner to consider participant, and not vendor, hardship.  Here, the evidence established that there are 90 WIC vendors in the City of Minneapolis.[97]  There is a WIC vendor within two blocks of Twins Food Market, another vendor within four blocks, and yet another vendor a short bus ride away on Nicollet Avenue.[98]  Moreover, there is generally a surplus of vendors in Minneapolis in comparison with the number of participants who live there.[99]  Twins came forward with no evidence of a “documented cultural or religious need for an additional retail food vendor in that area.”[100]  So even if this particular hardship provision is considered germane to this matter, the evidence failed to establish the factual prerequisites to it application.

 

 

V.                 The Department Established Twins Food Market’s

WIC Violation by a Preponderance of Substantial Evidence.

 

            Finally, Twins Food Market argues that the Department failed to establish by a preponderance of credible evidence that it violated its vendor guarantee agreement. Twins offered no evidence tending to show that the four violations alleged by the Department did not occur.  Rather, it relies solely on what it considers to be a failure of proof by the Department.  In essence, Twins claims that the testimony of the Department’s undercover investigator and compliance officer is unreliable because they both have performed a large number of compliance buys and have few specific recollections of these compliance buys.  But these two witnesses largely compensate for the relative lack of specific recollections with two things.  First, there was evidence that in performing their undercover investigation, they both adhered rigidly to a set of standard operating procedures and investigative protocols designed to prevent investigative errors.  There was no evidence tending to suggest that they may have deviated from those procedures and protocols in this case:

 

            Evidence of the habit of a person or of the routine practice of an organization, whether corroborated or not and regardless of the presence of eyewitnesses, is relevant to prove that the conduct of the person or organization on a particular occasion was in conformity with the habit or routine practice.[101]

 

Not only did the Department present evidence of routine practices here.  It corroborated that evidence with specific recollections of both the undercover investigator and the compliance officer that were recorded immediately after the compliance buys occurred.[102]  Those recorded past recollections are reliable and represent additional evidence of the truth of the matter asserted.[103]  The testimony and recorded recollections and official reports are further corroborated and supplemented by a body of other reliable and admissible documentary evidence.  Twins Food Market came forward with no evidence to contradict any of the Department’s evidence, nor did it offer any reasonable alternative explanations for what occurred.  For example, Twins never even attempted to explain how a WIC voucher that a Department investigator handed over to another grocery store came to be stamped with Twins’ WIC vendor number and submitted for payment as if it had been given to Twins itself.  In short, the Administrative Law Judge concludes that the Department did establish by a preponderance of credible evidence that Twins Food Market did commit four violations of its vendor guarantee agreement.

 

B. H. J.