OAH No. 6-0900-15419-2

 

 

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE DEPARTMENT OF HEALTH

 

 

In the Matter of Hamza Food Market WIC Vendor No. 0693.

FINDINGS OF FACT, CONCLUSIONS, AND RECOMMENDATION

                   

                                       

          The above-entitled matter came on for hearing before Administrative Law Judge Allan W. Klein on July 2, 2003 at the Office of Administrative Hearings, 100 Washington Avenue South, Minneapolis, Minnesota.  A supplemental proceeding was held on July 9, 2003 by telephone conference.  The hearing record in this matter closed at the conclusion of the supplemental proceeding.

 

          Stuart Alger, Assistant Attorney General, 445 Minnesota Street, Suite 1200, St. Paul, MN 55101-2131, appeared for the Department of Health (the Department).

 

          Daniel Kennedy, Esq., Kennedy Law Office, 4103 East Lake Street, Minneapolis, MN  55406, appeared for the Hamza Food Market.

 

NOTICE

 

This Report is a recommendation, not a final decision.  The Commissioner of Health will make a final decision in this matter after reviewing the administrative record.  The Commissioner may adopt, reject or modify these Recommendations.  Under Minn. Stat. § 14.61, the Commissioner may not make the final decision until this Report has been made available to the parties to the proceeding for at least ten days.  An opportunity must be afforded to each party adversely affected by this Report to file exceptions and present argument to the Commissioner.  Parties should contact the office of Dianne Mandernach, Commissioner of Health, 85 East Seventh Place, Suite 400, St. Paul, MN 55101, to find out how to file exceptions or present argument.

 

If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a.  The record closes upon the filing of exceptions to the report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so.  The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes.

 

Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.

 

STATEMENT OF ISSUE

 

          Has the Department proved a pattern of overcharges or a pattern of charging for food not received by a participant, so as to justify a three-year disqualification from participation in the WIC program?

 

          The Administrative Law Judge concludes that the Department has proved the overcharges at issue and that the Hamza Food Market must be disqualified for three years.

 

          Based upon all of the proceedings herein, the Administrative Law Judge makes the following:

 

FINDINGS OF FACT

 

The WIC Program

 

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, managed by the state, and administered locally by WIC clinics throughout Minnesota.[1]

 

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.  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 total 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.  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.  The vendor may not charge more for a food item than the price displayed in the store or marked on the item.

 

3.       There are approximately 1,100 vendors in Minnesota that are authorized to accept WIC vouchers for food.  Every food retailer seeking to become a WIC vendor must execute a Retail Food Vendor Agreement (Agreement).  The Agreement is a contract between the Department and the vendor that establishes the terms of the food store's participation in the program.  Penalties for failure to comply with the various program requirements are set out in the Agreement.  Upon approval of the vendor and execution of the Agreement, the Department issues the retailer a WIC vendor stamp.  This stamp bears a unique vendor number assigned to that particular vendor.  The store is required to place its stamp on the WIC vouchers that are received from participants when the vouchers are submitted for payment.  The Department periodically requires all of authorized vendors to receive training on the various WIC program requirements.[2]

 

4.       The Agreement requires that transactions between vendors and individual participants occur in particular ways.  Participants may only use a WIC voucher to obtain the kinds of food items listed on the voucher.  WIC-approved foods are limited to those food items that have been certified for appropriate nutritional content.  Where the items are generically of the same nutritional content, such as milk, eggs, or peanut butter, the volume will be specified,  but not any brand name.  Where items vary as to nutritional content, the volume of the item will be listed, but the participant may only choose from among a list of brand-named products.  This is particularly true of cereals.  For juice, the voucher identifies the volume and the requirement that the product be 100 percent juice.  When the participant presents a vendor with selected food items, the vendor must first ring up the total price of the items before the participant signs the voucher. 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 sign the voucher, and the vendor must then compare the signature on the voucher with the signatures on the participant's WIC identification cards.[3]

 

5.       The Department uses a variety of methods to ensure compliance with the Agreement and the regulations governing the WIC program.  One such method consists of compliance buys performed by undercover agents directed by the Department.  The purpose of these compliance buys is to monitor a wide variety of aspects of the WIC vendors' adherence to the Agreement.  Compliance buys are conducted according to a standard operating procedure, which includes the following:  An undercover agent and a "lead investigator" drive to a location nearby, but not within sight of the WIC vendor, and park their car.  The undercover agent then turns over to the lead investigator any WIC vouchers, food stamps, or cash that might be in his or her possession (so the investigator has no method other than the voucher to make a purchase).  The lead investigator gives the undercover agent one WIC identification card with a fictitious identity. The lead investigator also gives the agent one WIC voucher that can be redeemed for the foods specified on it.  The identification number of the voucher has been recorded to identify the voucher after its redemption by the vendor.[4]  The lead investigator then records the time when the agent leaves the car to go into the WIC vendor's store.[5]

 

6.       Upon entering the store, the agent proceeds to collect food items, and bring them to the cashier to be rung up.  Depending on the type of compliance being assessed, the foods that the agent brings to the cashier will sometimes include some items that are not specifically approved by the WIC program.  The agent will typically omit some food items described on the WIC voucher.  The agent then presents the WIC voucher in his or her possession to the cashier.  Under the Agreement, the cashier must record the total price on the voucher of the foods presented for purchase before returning the voucher for the agent's signature.  The agent does not request a cash register receipt, but takes one if offered.  The agent does not produce the WIC identification card for comparison of signatures unless requested by the cashier.  After signing the WIC voucher and returning it to the cashier, the agent allows the cashier to bag the groceries and returns to the car where the lead investigator is waiting.[6]

 

7.       Upon the agent’s return to the car, the lead investigator records the time when the investigator returned to the car.  The lead investigator then prepares a written inventory of the food items that the agent brought back from the store.  The food items are placed on the back seat and photographed (with a slip of paper identifying the WIC vendor where the items were purchased).  The agent and lead investigator then complete a written report of the results of their investigation.  After the paperwork is completed, the nonperishable food items are kept in the bag provided by the vendor, separate from any food items that have been purchased from other vendors on the same day.  Perishable foods are kept in a cooler.  At the end of the day or whenever the cooler is full, the investigators take the food items to a charitable institution, where the food is donated.[7]

 

Hamza Food Market

 

8.       Hamza Food Market is a small grocery store located at  Chicago Avenue South in Minneapolis.  Mohamed Maani owns and operates the market.  Due to its small volume of purchases, Hamza Food Market obtains some of its stock from another food retailer, Johnson Street Market.   

 

9.       On behalf of Hamza Food Market, Mr. Maani executed a Retail Food Vendor Agreement with the Department, effective February 5, 2002 through April 30, 2002.[8]  Another Agreement was executed to be effective from May 1, 2002 through April 30, 2004.[9] 

 

Compliance Buys

 

10.     As part of the Department's compliance program, a lead investigator and undercover agent conducted a compliance buy at Hamza Food Market on March 19, 2002.  On that date, an agent, following the Department's standard operating procedures, entered the store and brought the following food items to the cashier: one 12-ounce pink lemonade frozen concentrate, one 12-ounce grape cocktail frozen concentrate, two 16-ounce boxes of Quaker Toasted Oats Cinnamon Squares, one 16-ounce bag of dry pinto beans, one gallon of milk (Dairy Fresh brand), and one dozen eggs.  The investigator did not attempt to purchase cheese, which the voucher would have authorized.  The cashier did not allow the agent to purchase the Quaker cereal, which is not WIC-approved.  The cashier did allow the agent to purchase the frozen drink concentrate, which is not WIC-approved.  The agent substituted two 18-ounce boxes of Kelloggs Corn Flakes (a WIC-approved cereal) for the Quaker product.  The cashier entered the price of $14.72 price on the voucher, had the agent sign the voucher, and compared the signature on the voucher against the signature on the WIC identification card.[10]

 

11.     The WIC voucher used in this compliance buy was processed for payment by the Department's bank and returned to the compliance manager.[11]  The voucher indicates a total price of $24.72 for items purchased.  The writing of the first digit of the price does not match the writing of the final digit.  The shape of the first digit is consistent with the upper and lower loops of the digit being added to a preexisting 1.  To determine whether there was an overcharge, the Department obtained prices for the milk and eggs from a cash purchase performed on April 25, 2002.  At the time of that visit, whole milk was selling for $3.89 per gallon and large eggs were $1.29.[12]  The cereal was priced on the box at $3.09 each.  The lemonade and grape cocktail was priced on the container at $1.49 each and the pinto beans were priced on the package at 99 cents.  The total food value amounted to $15.33, as opposed to the $24.72 entered on the voucher.[13]  The resulting overcharge was $9.39.[14]

 

12.     On April 20, 2002, the Department conducted another compliance buy at Hamza Food Market.  The standard operating procedure was followed in making the buy.  The agent purchased two boxes of approved cereal, one gallon of milk (Land O’ Lakes brand), one dozen eggs, and two containers of approved juice.[15]  The cashier entered the total of $18.53 on the voucher before having the agent sign the voucher.  The cashier checked the agent’s signature against the signature on the WIC program identification card carried by the agent.[16]  The voucher was redeemed for $18.53.[17]

13.     On October 24, 2002, the Department notified Hamza Food Market of a number of violations that had occurred during that year, warned that continued violations could result in disqualification from the WIC program, and identified a contact person for questions about the letter or assistance in training at the store.[18]  The notice letter identified the dates of the violations and described the violations in detail, including the overcharge and alteration of the voucher on March 19, 2002.

14.     On March 18, 2003, the Department conducted another compliance buy at Hamza Food Market.  The standard operating procedures were used to conduct the purchase.[19]  The agent brought the following food items to the cashier:  one 15-ounce box of Life cereal, one 20-ounce box of Good N’ Hearty Raisin Bran cereal (which is not WIC-approved), two 11.5-ounce frozen grape juice concentrate, and one gallon of whole milk.  The cashier rang up all of the food items (including the cereal that is not WIC-approved).  The investigator did not purchase cheese or peanut butter, which the voucher would have authorized.[20]  The cashier did not enter a price on the WIC voucher before returning it to the agent for signature.  The cashier did not compare the agent's signature on the WIC voucher with the signature on the identification card.

 

15.     The WIC voucher used in this compliance buy was processed for payment by the Department's bank and returned to the compliance manager.[21]  The voucher indicates a total price of $31.68 for items purchased.  To determine whether there was an overcharge, the Department used the prices marked on the cereal ($4.79 and $4.29) and the juice ($1.99 each).  The price of the only remaining item, the milk, was determined to be $3.59 based on a cash purchase on March 24, 2003.[22]  Based on these prices, the dollar food value for items purchased totaled $16.65, as opposed to the price on the voucher of $31.68, resulting in an overcharge of $15.03.[23]

 

 

Sanctions

 

15.     On April 7, 2003, Department staff members participated in a vendor violation forum to discuss the overcharges which had occurred in the compliance buys at Hamza Food Market.  Participants discussed that the store had overcharged the Department by substantial amounts on three occasions.[24]  The participants discussed additional violations in voucher handling and selling unapproved foods.  Six other WIC vendors were identified within one mile of Hamza Food Market that could serve WIC participants in the area.  The forum participants concluded that disqualification of Hamza Food Market would not result in inadequate participant access to WIC foods.  At the end of the discussion, the forum participants agreed that the Hamza Food Market should be disqualified for three years.[25]

 

16.     On April 14, 2003, the Department notified Hamza Food Market that the store was disqualified from participating in the WIC program for a period of three years, effective May 15, 2003.  The letter directed the store to discontinue accepting WIC vouchers and to return the vendor stamp.  The letter also notified the store of its appeal rights.[26]

 

17.     Hamza Food Market appealed its disqualification from the WIC program.  The Department issued a Notice of and Order for Hearing on June 12, 2003.  The hearing took place on July 2, 2003 and a supplemental hearing was held on July 9, 2003.

 

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

 

CONCLUSIONS

 

          1.       The Administrative Law Judge and the Commissioner of Health have authority to consider and rule on the issues in this contested case proceeding pursuant to 7 C.F.R. § 246.18 and Minn. R. 4617.0100.

 

          2.       The Notice of and Order for Hearing was 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 Hamza Food Market should be disqualified from participation in the WIC program for three years based on a pattern of overcharging, pursuant to Minn. R. 4617.0100, subp. 3.

 

4.       Minn. R. 4617.0084, subp. 1, requires that a vendor be given notice of a violation that does not result in disqualification.  The Department gave adequate notice to Hamza Food Market of the overcharging violation on March 19, 2002, which did not result in disqualification.

 

5.       U.S. Department of Agriculture regulations require that a vendor be disqualified from the WIC program for three years if the vendor has engaged in a "pattern of vendor overcharges" or a "pattern of charging for supplemental food not received by the participant."[27]

 

6.       State rules promulgated under Minn. Stat. § 145.894(k), the Maternal and Child Nutrition Act of 1975, define overcharging as either:

(1)  charging the WIC program more for WIC-allowed food than the vendor's usual and customary charge to non-WIC customers or charging the WIC program more than the vendor's current shelf price of the food; and

 (2) charging the WIC program for WIC-allowed food not received by a WIC customer.[28]

 

7.       A "pattern" of overcharging is defined in Minn. R. 4617.0084, subp. 8(B), which provides that:

The commissioner shall disqualify a vendor for three years if, on two occasions within any two-year period, the vendor overcharges the WIC program and if:

(1)  each violation involved an overcharge to the WIC program of $2 or more; and

(2)  each violation involved any of the following circumstances:  (a) no price was entered on the voucher at the time it was accepted by the vendor; (b) the price on the voucher was at any time altered to reflect a price higher than the price originally entered on the voucher; or (c) the price the WIC program paid the vendor for the voucher was more than 30 percent greater than the correct price for the voucher.

 

          8.       The Department has demonstrated by a preponderance of the evidence that Hamza Food Market overcharged the WIC program twice within a two-year period, on March 19, 2002 and March 18, 2003.  The amount of the overcharge on both occasions was more than $2; both overcharges exceeded 30% of the correct price, on the former date the voucher was altered, and on the latter date the vendor failed to enter a price on the voucher.  The Department has demonstrated that Hamza Food Market should be disqualified from participating in the WIC program for three years.

 

          9.       The Department has considered the impact on participant access and demonstrated by a preponderance of the evidence that disqualification of Hamza Food Market will not result in inadequate participant access.

 

          10.     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 foregoing Conclusions, the Administrative Law Judge makes the following:

 

RECOMMENDATION

 

          The Administrative Law Judge respectfully recommends that the Commissioner DENY the appeal of Hamza Food Market from its disqualification from participation in the WIC program and UPHOLD the disqualification for a period of three years, effective May 15, 2003.

 

Dated: August 8, 2003

 

                                                           

                                                            /s/ Allan W. Klein by G.A.B.

                                                            ALLAN W. KLEIN

                                                            Administrative Law Judge

 

 

Transcribed:  Kirby A. Kennedy & Associates, Two Volumes.

 

 

 

MEMORANDUM

 

          Hamza Food Market disputes most aspects of the Department’s description of events on March 19, 2002 and March 18, 2003.  The core contention is that the undercover agent made errors in the compliance buys and that certain facts in the record show that the Department’s investigation is unreliable.

 

          Mr. Maani, owner of the Hamza Food Market, acknowledges that he filled out the voucher used in the March 19, 2002 compliance buy.[29]  He maintains that he filled out the voucher with $24.72 and that the investigator must have misremembered the amount.[30]   He explained that his handwriting skills are poor and that this explains the difference in appearance between the first and last digits in the number.[31]

 

The voucher used in the March 19, 2002 compliance buy was completed in the presence of the Department's agent.  The price identified by the agent in her report is very close to the calculated price of the food purchased.  The agent's testimony regarding the price written on the voucher is credible.  Comparing the price on the voucher as written to the price as redeemed is a portion of the Department's standard operating procedure.  The amount written on the voucher was altered before the voucher was redeemed.

 

Mr. Maani also asserted that the charge of $24.72 on the first voucher was correct.[32]  This assertion is based on the assumption that all of the food listed on the voucher is purchased.  The Department’s standard operating procedure in conducting compliance buys is to purchase fewer items than allowed on the voucher to test the vendor’s handling of the vouchers.  Filling out a voucher for the full amount when fewer items are purchased is a violation.

 

The brand of milk was cited as demonstrating that the March 19, 2002 compliance buy was not conducted properly.  Mr. Maani maintains that Hamza Food Market only carries Land O’ Lakes milk and does not stock Dairy Fresh milk.  The Department noted that Hamza Food Market obtains its milk from another retailer, which obtains its milk from Dean Foods.  Dean Foods carries both Land O’ Lakes milk and Dairy Fresh milk.  The Department also notes that the normal practice of Hamza Food market leaves open the possibility of obtaining milk from other retailers.     

 

The ALJ has carefully considered Mr. Maani’s contention concerning the milk.  The Department investigators took a numbered voucher to Hamza Food Market and purchased food, including one gallon of milk.  That food was photographed in the back seat of the car immediately after the purchase.  The photograph shows that the brand of milk was Dairy Fresh.  Hamza Food Market redeemed the numbered voucher used in the compliance buy.

 

The Department’s adherence to its standard operating procedures in the conduct of the compliance buys renders the Department’s evidence to be more credible than Mr. Maani’s assertion.  The record shows that the Department’s agent purchased the items shown in Exhibit 4 from the Hamza Food Market, including the Dairy Fresh milk.

 

All of the elements required for violations that meet the disqualification standard are present here.  Hamza Food Market has not demonstrated that any aspect of these violations did not occur or does not support disqualification.  Therefore, the ALJ recommends that the Hamza Food Market disqualification be UPHELD.        

         

                                                                      A.W.K.