HLIH-88-005-BC
2-0900-2022-2
STATE OF MINNESOTA
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE MINNESOTA DEPARTMENT OF HEALTH
In the Matter of FINDINGS OF FACT,
County Cub Foods, CONCLUSIONS AND
Vendor No. W2618 RECOMMENDATION
The above-entitled matter initially came on for hearing before
Administrative Law Judge Richard DeLong on January 6, 1988, in Minneapolis,
Minnesota, pursuant to a Notice and Order for Hearing dated December 7, 1988.
Shortly after the date of the hearing, Administrative Law Judge DeLong was
incapacitated for an indeterminate period. By letter dated January 21, 1988,
the Chief Administrative Law Judge, Duane R. Harves, communicated the fact of
Judge DeLong's incapacity to counsel for both parties. In that letter, he
stated that the case would be assigned to Administrative Law Judge Bruce D.
Campbell for the issuance of Findings of Fact, Conclusions and a Recommendation
to the Commissioner of Health on the basis of the existing record unless either
counsel requested a rehearing of the case. With the consent of both parties,
Administrative Law Judge Bruce D. Campbell reconvened the proceedings on
February 26, 1988, in Minneapolis, Minnesota. On that date, a witness for the
Department of Health presented rebuttal testimony and counsel made oral final
arguments.
Robert T. Holley, Special Assistant Attorney General, Suite 136, 2829
University Avenue Southeast, Minneapolis, Minnesota 55414, appeared on behalf
of the Minnesota Department of Health (Department); and Marc G. Kurzman,
Attorney at Law, 2402 Stevens Avenue South, Minneapolis, Minnesota 55404,
appeared on behalf of County Cub Foods owned by Joseph Lincoln (County Cub or
Respondent).
The record herein closed on March 7, 1988, with the receipt by the
Administrative Law Judge of the transcript of the hearing held on February 26,
1988.
This Report is a recommendation, not a final decision. The Commissioner
of the Department of Health will make the final decision after a review of the
record which may adopt, reject or modify the Findings of Fact, Conclusions,
and Recommendations contained herein. Pursuant to Minn. Stat. 14.61, the
final decision of the Commissioner shall not be made 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 Sister Mary Madonna Ashton, Commissioner, Minnesota Department
of Health, 717 Delaware Street Southeast, Minneapolis, Minnesota 55440 to
ascertain the procedure for filing exceptions or presenting argument.
STATEMENT OF ISSUES
The issues to be determined in this proceeding are whether the Respondent
violated the program requirements of the Special Supplemental Food Program for
Women, Infants and Children (WIC), by providing unauthorized food items in
exchange for WIC food instruments and employing improper price entry and
identity verification procedures; and, if so, whether Respondent should be
disqualified as a WIC food vendor for a six-month period, beginning
December 7, 1987.
Based upon all of the proceedings herein, the Administrative Law Judge
makes the following:
FINDINGS OF FACT
1. The Special Supplemental Food Program for Women, Infants and Children
(WIC) is a federal nutritional foods program regulated by the United States
Department of Agriculture. The program is designed to make nutritional foods
available to low income women who are either pregnant or breast-feeding, to
infants, and to children under five years of age. The WIC program, in
Minnesota, is administered by the Department of Health which uses local
service agencies for primary client contact. The local agencies screen
applicants for participation in the program and assess the specialized health
and nutritional needs of prospective WIC participants. After nutritional
evaluation by a "competent professional authority," participants receive food
vouchers which allow them to obtain the special nutritional foods deemed
necessary from authorized, participating retail vendors. The voucher lists on
its front side the quantity of supplemental food the participant may obtain
from each food group. At the time of program qualification, each WIC client
also receives a WlC Program Authorization/Transfer of Certification Card,
Dept. Ex. 5, which lists persons other than the named participant who are
authorized to countersign a WIC voucher and negotiate it with a WIC vendor to
receive the authorized supplemental food. Each month, a program participant
or an authorized proxy may obtain a voucher valid for that month to be used to
obtain that month's supply of authorized supplemental foods. Participants
also receive periodic health monitoring at local clinics to determine progress
or changed nutritional needs. On the back of the WIC voucher there is printed
a list of acceptable supplemental food. The Department is required by federal
regulations to prepare that list of WIC acceptable foods. The list is revised
annually by the Department.
2. Pursuant to federal regulation, the Department has adopted a State
Plan implementing the Minnesota WIC program. The State Plan in effect in
1987, Dept. Ex. 10, was adopted after a public hearing which was noticed in
the State Register. The Department staff administering the WIC program
includes eight employees responsible for federal funds of approximately
$27 million and 1900-2000 participating WIC food vendors.
3. County Cub Foods submitted an application to participate in the
Minnesota WIC program as a retail vendor on November 20, 1985. Dept. Ex. 1.
In that application, the Respondent indicated that it was currently authorized
to participate in the Minnesota WIC program through participation by a second
store owned by Mr. Lincoln. The retail vendor application includes the
following Statement of Vendor:
The Company . . . hereby applies for authorization to
participate in the Minnesota WIC program. The vendor has
received and understands the Minnesota WIC Compliance
Statement. The vendor represents that it and its employees
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will adhere to the Compliance Statement, and understands
that any authorization to participate in the WIC program
granted to it may be revoked for any violation of the
Compliance Statement by it or any of its employees . . . .
Dept. Ex. 1, paragraph 9. Mr. Lincoln, as owner of County Cub Foods, signed
the WIC program retail vendor application, which includes the Statement of
Vendor.
4. When the Department received the Respondent's request for a food
vendor application form, it provided Mr. Lincoln with a copy of the Minnesota
Vendor Manual, WIC Program. Dept. Ex. 2. The Vendor Compliance Statement,
attached as Exhibit F to the Minnesota Vendor Manual, WIC Program, inter alia
requires:
In submitting this application to participate in the
Minnesota WIC Program, the vendor agrees to comply with the
following WIC Program vendor requirements:
C. Charge a price for the supplemental foods purchased
with the WIC vouchers that is the current price, or
less than the current price, charged to customers
other than WIC participants. The vendor must write in
the actual price of the WIC foods purchased before the
participant countersigns the voucher. (Emphasis in
original.)
D. Provide only those supplemental foods which are
identified on the vouchers, in the amounts specified
and which appear on the current WIC Acceptable Foods
List . . . .
E. Redeem the vouchers only for authorized persons
identified on the Minnesota WIC Program Authorization/
Transfer of Certification Card and obtain the counter-
signature of the authorized person in the appropriate
space on the face of the voucher. The Vendor must
review the Minnesota WIC Program Authorization/
Transfer of Certification Card when the counter-
signature does not match the signature and may not
accept such vouchers if the Card is not presented or
if the signature does not appear on the Card as an
authorized proxy.
K. Provide all store personnel involved in handling
WIC vouchers appropriate training and instructions in
WIC procedures. The Vendor shall be held accountable
for actions of all employees in the handling of WIC
vouchers.
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Dept. Ex. 2, Ex. F. Federal regulations require all authorized vendors to
execute a food vendor contract. 7 C.F.R. 246.12(f) (1987). Respondent's
participation in the WIC program as an authorized vendor was granted in
December of 1985.
5. Pursuant to federal regulations, the Department is required to
identify "high risk vendors", who may be abusing the program. The program
administrators identify "high risk vendors" by two criteria: complaints
received; and high charges reflected in vouchers submitted for payment. The
Department has established "cut offs" that identify "high risk vendors" on the
basis of price. It determines an expected price for particular items and adds
up to 20 percent to that amount when the location of the vendor causes risk
factors that would be reflected in its pricing. If more than 15 percent of
the redeemed vouchers of a particular vendor are above the cut-off point, that
vendor may be classified by the Department as a "high risk vendor". Thirty
percent of the vouchers redeemed at County Cub exceeded the cut-off point.
6. There is no evidence in the record that the Respondent charged WIC
participants higher prices for items than would have been charged to its
customers generally.
7. Between the date of its initial participation in the WIC program and
April of 1987, the Department received at least four complaints about
Respondent's implementation of the WIC program. These complaints, which are
not the subject of charges in this proceeding, also influenced the Department
to classify Respondent as a "high risk vendor".
8. Classification of a vendor as a "high risk vendor" results, initially,
in a "high risk visit" being paid to that establishment. In July of 1986,
Department staff visited the Respondent and program requirements were
discussed.
9. On several other occasions, the Respondent and the Department had
official contact which specifically brought WIC program requirements to the
store's attention. By letter dated January 9, 1987, the Department advised
the Respondent as follows:
You, along with all store cashiers, should review items C &
F of the attached Minnesota WIC Vendor Compliance Statement.
This Compliance Statement was signed by the store owner who
agreed to abide by its contents as a condition of authoriza-
tion to participate in the WIC program. Further evidence of
noncompliance with any provisions in the WIC Compliance
Statement will be grounds for termination of your WIC
authorization.
Dept. Ex. 11. An additional copy of the Minnesota WIC Vendor Compliance
Statement was sent to Mr. Lincoln with the letter of January 9, 1987. By
letter dated April 15, 1987, the Department advised the Respondent as follows:
. . . WIC vouchers are issued for authorized foods only.
Your responsibility as a WIC vendor is to make sure that
the foods purchased are WIC approved and in the specified
amounts. A WIC vendor has no authority to substitute non-
authorized foods. (Emphasis in original.)
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You, along with all store cashiers, should review item D of
the attached Minnesota WIC Vendor Compliance Statement.
This Compliance Statement was signed by an officer of your
store who agreed to abide by its contents as a condition of
authorization to participate in the WIC program. Further
evidence of non-compliance with any provision of the WIC
Compliance Statement will be grounds for terminating your
WIC authorization.
Please remember that all authorized WIC foods are listed on
the back of each WIC voucher. I have enclosed a copy of
the WIC Acceptable Food List for easy reference.
Dept. Ex. 13.
10. Selection of a vendor as a "high risk vendor" may also, by federal
regulation, result in employees of the Department visiting a vendor and, under
the guise of being program participants, attempting to negotiate a WIC voucher
for unauthorized items.
11. On May 4, 1987, two employees of the Department, Peter Kuzj and his
supervisor, Patti Maier, Chief of the WIC section of the Department of Health,
met to discuss a compliance buy at County Cub. They decided that Mr. Kuzj and
an aide should visit Respondent and attempt to purchase unauthorized items.
The decision to conduct a compliance buy was motivated chiefly by Respondent's
classification as a "high risk vendor" and complaints received from former
employees. The complaints received from the former employees were not a basis
for Respondent's subsequent disqualification as a WIC vendor and are not
charges in this proceeding.
12. On May 4, 1987, Mr. Kuzj and Linda Dorsey, an investigative aide, went
to the vicinity of the store. Mr. Kuzj entered the store at approximately
2:15 p.m. He took with him a WIC voucher prepared by the Department in the
name of a fictitious female participant. Her signature had been signed by a
Department employee. He also carried a fictitious WIC Program Authorization/
Transfer of Certification Card made out in the name of the same fictitious
female participant. That card listed the erroneous name he used in the store
as an authorized proxy for countersignature of the voucher. The investigative
aide entered the store several minutes after Mr. Kuzj and was standing behind
him in the checkout line to witness his WIC transaction with the cashier.
13. Mr. Kuzj approached the checkout line with an order including the
items listed in Dept. Ex. 15, 3 and Dept. Ex. 17, 3. The cashier who waited
on Mr. Kuzj was "obviously new and being trained by the regular cashier."
Dept. Ex. 15. The cashier serving Mr. Kuzj asked the more experienced cashier
if Cheerios and Wheaties were WIC foods. The older cashier responded in the
affirmative and then told the younger cashier that all WIC foods were listed
on the back of each voucher. The cashier servicing Mr. Kuzj turned the
voucher over, looked at the back of it where the WIC Acceptable Foods List is
printed, and totaled the purchases. She then gave Mr. Kuzj back the WIC
voucher and asked him to sign it. At that point, the clerk had not entered
the price of the items on the voucher. Immediately after Mr. Kuzj signed the
voucher, the cashier entered the price total on the voucher and asked Mr. Kuzj
for a WIC Authorization/Transfer of Certification Card. He gave the card to
her and she appeared to check the signatures.
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1 4 . During the May 4, 1987, compliance buy, Mr. Kuzj purchased the
following items which were not included on the Department's WIC Approved Foods
List : Wheaties (12-ounce box); Cheerios (10-ounce box); and two 12-ounce cans
of frozen Tree Top apple juice. Dept. Ex. 15; Dept. Ex. 17.
15. There is no evidence in the record that the amount entered by the
cashier on the WIC voucher for items purchased by Mr. Kuzj on May 4, 1987, was
erroneous or higher in amount than would have been charged for the same items
to a nonparticipant in the WIC program.
16. The voucher that Mr. Kuzj presented to Respondent's employee on
May 4, 1987, was processed through the WIC reimbursement system and Respondent
obtained payment for that transaction. Dept. Ex. 15; Dept. Ex. 17.
17. On or about August 12, 1987, Mr. Kuzj and his supervisor, Ms. Maier,
decided to conduct a second compliance buy at County Cub. They wanted to
attempt to obtain some unauthorized foods that were not within the same food
categories reflected on the voucher presented. Again, a voucher was prepared
in the name of a fictitious female WIC participant and Mr. Kuzj carried with
him the same WIC Program Authorization/Transfer of Certification Card that
listed the name he would countersign on the voucher as an authorized proxy for
the fictitious participant. The voucher included in the food prescription
15 4.2-ounce jars of infant juice (100%). Dept. Ex. 16.
18. On August 12, 1987, Mr. Kuzj and Linda Dorsey went to the vicinity of
the store. At approximately 1:50 p.m., Mr. Kuzj entered the store and began
selecting items. Several minutes later, Ms. Dorsey also entered the store and
followed him to the checkout line. Mr. Kuzj had selected two 8-ounce packages
of Gerber infant rice cereal; one 8-ounce box of Gerber rice cereal with
banana; seven 13-ounce cans of Similac, low-iron formula; one 46-ounce can of
Dole pineapple juice; one 46-ounce can of Speas 100 percent natural apple
juice; and one 46-ounce can of Libby's tomato juice. The cashier, a middle-
aged male, looked at the can of tomato juice and inquired of another employee
who was stocking the shelves whether the tomato juice was an authorized WIC
food. The second employee stated that it was not and Mr. Kuzj returned the
can of tomato juice to the shelf. The cashier assisted Mr. Kuzj in selecting
a 46-ounce can of grapefruit juice. The cashier totaled the purchases,
entered the price on the WIC voucher and asked Mr. Kuzj to countersign the
voucher. The cashier did not ask Mr. Kuzj to produce a WIC Authorization/
Transfer of Certification Card to determine whether he was an authorized
proxy. The cashier took the original receipt, attached it to the WIC voucher
and placed them in an envelope, which he retained. At that point, Mr. Kuzj
left the store with the merchandise.
19. There is no evidence in the record as to why the cashier placed the
receipt and original voucher in an envelope or whether the voucher was ever
deposited by the Respondent in its account for WIC reimbursement.
20. The following items purchased on August 12, 1987, are either not on
the WIC authorized food list or, if on the list, are not within the purchases
authorized on the face of the voucher presented by Mr. Kuzj: Gerber rice
cereal with banana; 46-ounce can of Dole pineapple juice; 46-ounce can Big Tex
grapefruit juice; 46-ounce can 100 percent natural Speas apple juice; and
seven 13-ounce cans of Similac concentrated formula--low-iron.
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21. The back of the WIC voucher and the WIC Approved Foods List
distributed in November of 1986 includes as an approved food Similac with
iron. Dept. Ex. 3. On January 14, 1986, federal regulations specified that
any infant formula sold at retail must include a statement concerning its iron
content. In late winter of 1986 or early January of 1987, the Department sent
by first-class mail to its list of Minnesota WIC vendors a statement that
infant formulas labeled "with iron or iron-fortified" would be acceptable to
WIC, but that formulas labeled "low iron" would not be acceptable because the
iron content was not sufficient to satisfy the federal requirements. Dept.
Ex. 18. In that communication, the Department also indicated by the color of
individual brand name cans which iron content formulas would be acceptable to
WIC. The notification was not sent return receipt requested.
22. There is no direct evidence in the record that the Respondent actually
received the notification.
23. The applicable federal regulations set nutritional standards that WIC
approved foods must meet. 7 C.F.R. 246.10 (1986). The State WIC authority
is required to specify foods which meet the nutritional requirements in its
list of acceptable foods. Not all of the brand name items which meet federal
nutritional standards are, necessarily, included on the State WIC Approved
Foods List. Because of budgetary constraints and staff size, an annual review
of approved foods is made by a Department of Health staff nutritionist. Even
after that annual review, some food items in the appropriate food categories
which meet federal nutritional requirements may not be included on the State
WIC Approved Foods List. Some brand items may not be included either because
the manufacturer has not requested that the State review a particular item for
WIC compliance or because product changes are made or new items are marketed
after the approved list has been prepared and circulated to the State's
1900-2000 WIC-approved vendors. The State WIC staff of eight employees must
oversee program participation by all authorized vendors, local agencies and
WIC clients, as well as assume fiscal responsibility for the approximately
$27 million WIC budget. The size of the staff of the Department responsible
for the WIC program is fixed by federal regulation. 7 C.F.R. 246.3(d)
(1987).
24. At the time of the compliance buys, Department investigative staff
were aware which foods were on the authorized list, but their knowledge of the
nutritional composition of the unauthorized food items purchased depended on
information received from the Department's nutritionist or the general
reputation of products within the WIC section.
25. County Cub Foods is located at 3300 Fourth Avenue South, Minneapolis,
Minnesota. Within a one-mile area of the store, 16 other retail establishments
provide some or all of the WIC required foods, including special pharmacy
purchases. Dept. Ex. 7. The 16 stores include convenience stores, general
supermarkets, and two drug stores.
26. The Department is required, by federal regulation, to adopt policies
governing the type and level of sanctions that may be imposed on WIC-approved
food vendors for program violations. 7 C.F.R. 246.12(k)(1) (1987).
Attachment V-B to Volume 2 of the 1987 Minnesota WIC Program State Plan divides
vendor abuses into three groups of seriousness, specifying disqualifications
of 30 days, three months and six months. Dept. Ex. 10, Attachment V-B.
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Included in Group B Abuses, for which a three-month suspension may be imposed :
are entering the price on vouchers after the participant has countersigned it,
and failing to verify that vouchers are redeemed only by authorized persons
identified on the Minnesota WIC Program Authorization/Transfer of Certification
Card. Included in Group C Abuses, for which a disqualification of six months
may be imposed, is providing cash, unauthorized food, or other items in lieu
of authorized foods. Dept. Ex. 10, Attachment V-B.
27. The federal regulations authorize monetary fines and vendor disquali-
fication from program participation for a period not to exceed three years.
The Department has never informed WIC vendors that penalties will be cumula-
tive. The Department disqualified Respondent from program participant for a
six-month period because that sanction is consistent with its prior treatment
of similar conduct and in accordance with the understanding of participating
vendors.
28. By letter dated November 18, 1987, the Department disqualified County
Cub Foods from participating in the WIC program for a six-month period,
effective December 7, 1987.
29. By letter dated November 24, 1987, the Respondent contested the
disqualification and requested a contested case hearing.
30. On December 7, 1987, the Department issued a Notice and order for
Hearing, complying in all respects with applicable federal and state laws,
rules and regulations.
Based on the foregoing Findings of Fact, the Administrative Law Judge
makes the following:
CONCLUSIONS
1. The Commissioner of the Minnesota Department of Health and the
Administrative Law Judge have jurisdiction in this matter pursuant to 7 C.F.R.
246.18 (1987), and Minn. Stat. 145.891, et seg., and 14.50 (1986).
2. The Department gave proper notice of the time of the hearing in this
matter and has complied with all other relevant substantive and procedural
requirements of statute or rule.
3. Since the Department is the party proposing the disqualification, it
has the burden of proof to establish the propriety of its proposed action by a
preponderance of the evidence. Minn. Rule pt. 1400.7300, subp. 5 (1985).
4. On May 4, 1987 and August 12, 1987, Respondent violated 7 C.F.R.
246.12(k)(1) (1987), Item D of the Minnesota WIC Vendor Compliance Statement
and the federally approved State Plan by providing either nonapproved food
items or unauthorized approved food items to the Department's investigator in
exchange for a WIC voucher.
5. On May 4, 1987, Respondent violated Item D of the Minnesota WIC
Vendor Compliance Statement, the provisions of the State Plan, and 7 C.F.R.
246.12(r)(3) (1987), when its cashier required the Department investigator
to countersign the WIC voucher presented prior to entering on it the price of
the items obtained.
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6. On August 12, 1987, the Respondent violated 7 C.F.R. 246.12(p)
(1987), Item E of the Minnesota WIC Vendor Compliance Statement, and the State
Plan when its cashier did not review the Minnesota WIC Program Authorization/
Transfer of Certification Card to determine whether an authorized person
countersigned the WIC voucher.
7. A food vendor under the WIC program is accountable for the actions of
its employees in the utilization of food vouchers and the provision of
supplemental foods. 7 C.F.R. 246.12(f)(2)(ix) (1987); Item K, Minnesota WIC
Vendor Compliance Statement; 1987 State Plan, Volume 2, V-A-3.
B. The provision of nonapproved or unauthorized food on two occasions
and lack of compliance with prescribed voucher handling procedures did not
result from the isolated actions of an individual employee who did not
understand WIC program rules. 7 C.F.R. 246.12(k)(1) (1987).
9. The disqualification of County Cub Foods from participation in the
WIC program as an authorized vendor will not create an undue hardship for WIC
food recipients.
10. A six-month suspension of Respondent from participation in the WIC
program as an authorized vendor is in accordance with the sanctions stated in
the State Plan and prior sanctions imposed on other vendors for similar
conduct.
Based upon the foregoing Conclusions, the Administrative Law Judge makes
the following:
RECOMMENDATION
The Administrative Law Judge respectfully recommends that the Commissioner
disqualify County Cub Foods from participation in the Minnesota WIC Program as
an authorized vendor for a period of six months, commencing December 7, 1987.
Dated this 15th day of April, 1988.
BRUCE D. CAMPBELL Administrative Law Judge
NOTICE
Pursuant to 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.
Reported: Transcript Prepared.
Volumes I & 11 - Mary Ann Hintz, Route 4, Box 142, Isanti, MN 55040.
Hearing Transcript, February 26, 1988 - Karen Toughill, 2019 Laurel
Avenue West, Minneapolis, MN 55405.
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MEMORANDUM
The Department, in its Notice and Order for Hearing, asserted four
violations of WIC program requirements: the provision of unauthorized food in
exchange for a WIC voucher on May 4, 1987; improperly requiring counter-
signature of the WIC voucher before entry on it of the sale price during that
May 4, 1987 transaction; the provision of unauthorized food in exchange for a
WIC voucher on August 12, 1987; and a violation of the WIC proxy verification
procedure during that same transaction. The Department presented, as witnesses
in this proceeding, the investigator who conducted the two compliance buys and
the Chief of the Department's WIC section. All applicable program documents
were also introduced. The Respondent appeared at both days of the hearing
only through counsel and presented no independent evidence relating to the
circumstances of the compliance buys. Counsel for the Respondent stipulated
that the facts contained in the reports prepared by the Department investigator
after the compliance buys were accurate. Dept. Ex. 15, 17 and 16. Counsel
also stipulated that his client was bound by the provisions of the WIC Program
Retail Vendor Application signed by Mr. Lincoln on behalf of County Cub. The
Respondent argues that the Department has not established that chargeable
violations of the WIC program requirements occurred on May 4, 1987, and
August 12, 1987, under circumstances that would justify vendor
disqualification.
The Department has the burden of establishing by a preponderance of the
evidence the charged program violations and the propriety of the proposed
penalty. For the reasons hereinafter discussed, the Administrative Law Judge
concludes that the Department has, in all respects, sustained that burden.
The Respondent admits that on both May 4, 1987, and August 12, 1987, the
Department investigator exchanged a WIC voucher for foods that were not on the
then current WIC Approved Foods List. Dept. Ex. 3. Moreover, on August 12,
1987, the investigator received items which, though on the WIC Approved Foods
List, were not specified on the face of the voucher as fulfilling the special
nutritional needs of the program participant. See Findings 14 and 20, supra.
7 C.F.R. 246.10(b) (1987), requires the State to identify foods which are
acceptable for use under the program. The federal regulation lists nutritional
requirements of qualifying foods according to stated "food packages". 7 C.F.R.
246.10(c) (1987). The Respondent apparently argues that the Department must
show not only that the items did not appear on the WIC Approved Foods List,
but that the nonapproved items obtained did not meet the nutritional require-
ments specified in 7 C.F.R. 246.10(c) (1987). Absent such proof, the
Respondent asserts that the Department has failed to establish a program abuse
within the meaning of 7 C.F.R. 246.12(f)(xvii) (1987). The Department
asserts that the fact that a particular item does not appear on the WIC
Approved Foods List at the time of the transaction in question is sufficient
to establish the violation.
The nonapproved food items purchased on May 4, 1987, included three items:
a 12-ounce box of Wheaties; a 10-ounce box of Cheerios; and a 12-ounce can of
frozen Tree Top apple juice. At the time of the purchase, at least the box of
Wheaties and the can of Tree Top apple juice did not meet federal nutritional
standards as specified in 7 C.F.R. 246.10(c) (1987). The compliance buy on
August 12, 1987, included both items that did not appear on the WIC Authorized
Foods List (nonapproved foods) and items which though contained on the list of
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approved foods were not within the supplemental food prescription of the
Program participant. With respect to the nonapproved unauthorized foods, at
least the Gerber rice cereal with bananas, the Similac formula--low-iron type
and the Speas apple juice do not meet federal nutritional requirements under
the WIC program. Moreover, the Respondent does not contest that the various
fruit juices obtained on August 12, 1987, did not meet the food prescription
contained on the voucher presented. That voucher specified small cans of
infant fruit juice. The voucher was exchanged for large cans of juice not
prepared for infants. Hence, even under the argument of the Respondent, on
the two occasions at issue, food items were exchanged for WIC vouchers when
those items were both nonapproved and not within the federal nutritional
requirements specified for the WIC program.
The Administrative Law Judge, however, does not accept the argument of the
Respondent that program abuse may only be demonstrated by proof that the non-
approved food items exchanged for a WIC voucher did not meet the nutritional
requirements specified by federal regulations. Only supplemental foods
approved by the Department on its WIC Approved Foods List may be provided in
exchange for a WIC voucher.
Pursuant to 7 C.F.R. 246.10(b)(1) (1987), the Department is required to
identify foods which are acceptable for use under the program as meeting
federal nutritional requirements. That same regulation requires the Department
to provide local agencies with a list of acceptable foods and their maximum
monthly quantities. The federal regulation does not require that the State
include in the approved list every food or brand of food that meets the
federal nutritional standards. The Respondent argues that the failure to
include on the list all foods which satisfy federal nutritional requirements
is "arbitrary and capricious" and, hence, no violation can be predicated
solely on the contents of the list. As the Department testified, however,
changes in product composition, the periodic offering of new brands and
products, and the difficulty of revising the WIC Approved Foods List on more
than an annual basis make it a practical impossibility to include on the list,
at any one time, all brand foods that satisfy the federal nutritional
requirements. As stated in 7 C.F.R. 246.10 (1987), and the governing
statute, the purpose of the WIC program is to ensure that particularly
vulnerable, low-income women and children receive food necessary to satisfy
their particular nutritional requirements. Maximizing the selection of
products from which those nutritional needs are met is not a stated or even
implicit purpose of the program.
Agency action is "arbitrary or capricious" in the context of a rulemaking
or program requirement when it has no rational basis. Manufactured_Housing
Institute v. Petterson, 347 N.W.2d 238, 247 (Minn. 1984); Greenhill v. Bailey,
519 F.2d 5 (8th Cir. 1975). As noted in the Findings, the Vendor Compliance
Statement requires the Respondent to only supply supplemental food that has
been included on the WIC Acceptable Foods List. Given the scope of the
program that the Department must administer with the staff level and allowable
administration costs limited by federal regulation, requiring adherence to the
WIC Acceptable Foods List is entirely reasonable.
The Program, as currently designed, does not allow substitution of foods
by the vendor or its employees. The Respondent argues that vendor employees
are perfectly capable of making substitutions by reading the nutritional
content contained on product packages. Although Respondent states that you
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should be able to assume that people can read, that is precisely what counsel
later suggests the Administrative Law Judge should not do. The strength of
the argument advanced can be judged by the fact situation in this case. On
May 4, 1987, two clerks thought that products which did not meet federal
nutritional standards were acceptable. On August 12, 1987, the transaction
clerk apparently reached a similar conclusion.
The Respondent suggests that the provision of unauthorized supplemental
food may not be a program violation under 7 C.F.R. 246.10(e) (1987), which
allows the substitution of foods. The apparent suggestion is that a vendor
clerk may exercise discretion in substituting foods. A review of that
provision, however, reveals that the substitution of foods may only be done by
a State agency pursuant to a plan for substitution of foods accepted by the
Federal Nutrition Service and only to accommodate different cultural eating
patterns. Moreover, the State agency's plan must include a justification for
the proposed substitution, including a specific explanation of the cultural
eating patterns which require the substitutions. Under no reading of that
section is any substitution by vendor clerks authorized or even remotely
suggested. Finally, there is no evidence that the vendor's clerks in this
proceeding were attempting rationally to substitute foods during the trans-
actions. That suggestion is particularly remote in light of the argument of
the Respondent that the clerk conducting the May 4, 1987, transaction, perhaps,
was unable to read print, including product labels.
The Administrative Law Judge concludes that the provision of nonapproved
supplemental food is a program violation under the applicable federal
regulations, the Minnesota WIC Vendor Compliance Statement and the State
Plan.
The Respondent next challenged the right of the Department to impose any
penalty for providing unauthorized supplemental food by asserting that the
operative federal regulation is impermissibly vague. 7 C.F.R. 246.12(f)
(1987). That provision, dealing with the content of the standardized vendor
agreement, provides that the agreement must contain a statement, in particular
wording to be determined by the State, that a vendor may be disqualified from
program participation because of "program abuse". The argument advanced by
the Respondent, logically, includes two concepts. Initially, the argument
appears to be that the generality of the language does not provide a person
with reasonable notice of the conduct prohibited. The Respondent may also be
arguing that the phrase "program abuse" is so imprecise as to deprive a state
of authority to define specific actions constituting "program abuse".
The federal regulations do not contain a definition of the word "abuse" in
the context of 7 C.F.R. 246.12(f) (1987). The word is not, however, used in
any technical sense. In the absence of an indication that a special, technical
meaning is intended, words in a statute or regulation are to be given their
accepted ordinary meaning. Minn. Stat. 645.08(l) (1986). The accepted
ordinary meaning of the term "abuse" is to use wrongly or misuse. Webster,
New World Dictionary (Collins & World Publishing Co. 1976). Judicial decisions
interpreting the word "abuse" in a variety of circumstances, have also defined
the term to mean "improper use" or "to use improperly". Erie - & N.E.R. Co. v.
Casey, 26 Pa. (2 Casey) 287, 318 (1856); City of Baltimore v. Cornellsville &
S.P. Ry,_Co., 6 Phila. 190, 191, 3 Pitt. 20, 23 (1840). In Brown v. Minnesota
Department of Public Welfare, 368 N.W.2d 906 (Minn. 1985), the Minnesota court
defined the term "abuse" in the context of the State Medical Assistance Program
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to include failure to abide by the regulations implementing the program.
Hence, program abuse wi thin the context of 7 C. F. R. 246.1 2( f ) ( 1 987) , is to
be equated with the term "program violations" contained in 7 C.F.R. 246.12(k)
(1987). That section authorizes the state authority to "establish policies
which determine the type and level of sanctions to be applied against food
vendors, based upon the severity and nature of the Program violations observed,
and such other factors as the state agency determines appropriate . . . . "
In the 1987 State Plan, Dept. Ex. 10, the State has defined three levels
of vendor abuses which merit some term of disqualification from program parti-
cipation. That State Plan has been specifically approved by the federal WIC
authority. The sanction contained in the State Plan for providing unauthorized
supplemental food is a six-month suspension of vendor participation. Hence,
both 7 C.F.R. 246.12(k) (1987), and 7 C.F.R. 246.12(f) (1987), clearly
authorize the disqualification of a food vendor from program participation for
the program violation here at issue.
Although the Administrative Law Judge has concluded that the operative
federal regulation is not vague, the argument that the Respondent did not have
notice of the prohibited conduct and its consequences is unsupported in the
record. As discussed in the Findings, when the Respondent applied for
participation in the Program, he received a copy of the Minnesota Vendor
Manual, WIC Program, containing the Minnesota WIC Vendor Compliance Statement.
Item D requires a vendor to supply only those supplemental foods which are
identified on the vouchers in the amounts specified and which appear on the
current WIC Acceptable Foods List. The program application, signed by the
Respondent contains the Statement of Vendor in which Mr. Lincoln agrees to
adhere to the provisions of the Compliance Statement. It includes his
understanding that revocation of his vendor authorization may result from "any
violation of the Compliance Statement by it or any of its employees." Dept.
Ex. 1. Moreover, as indicated in the Findings, on several occasions the
Department wrote Mr. Lincoln, calling to his attention specific provisions of
the WIC Vendor Compliance Statement, including Item D, and stating that
violations of that Compliance Statement could result in revocation of his
vendor authorization.
The Respondent then argues that no sanction may be imposed for the acts of
an employee because the operative federal regulation contains no definition of
the word "accountable". As previously noted, words in a statute or regulation
are to be given their ordinary accepted meaning, unless the context clearly
indicates that a specialized meaning was intended. The accepted common
meaning of the word "accountable" is "responsible for". Webster, New World
Dictionary (Collins & World Publishing Co. 1976.) Judicial interpretations of
the word "accountable", in a variety of legal contexts, have equated the word
with the phrase "liable for". Sun River Cattle Co.,_Inc. v. Miners Bank of
Montana, 164 Mont. 237, 521 P.2d 679, 684 (1974); Rock Island Auction Sales,
Inc. v._Empire_Packing Co., 32 111. 2d 269, 204 N.E.2d 721, 723 (1965);
Sullivan v. Carmony, 384 Pa. 486, 121 A.2d 174, 176 (1956).
The Administrative Law Judge does not conclude that the vendor, under all
circumstances, is strictly liable for all acts of its employees. The federal
regulation, itself, recognizes that a sanction may be inappropriate where the
act is one of only an individual employee who did not understand Program rules.
7 C.F.R 246.12(k) (1987). That is not, however, this case.
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The Respondent argues that the circumstances of the May 4, 1987 compliance
buy demonstrate unusual conditions making a penalty inappropriate. The
Respondent first states that the clerk who conducted that WIC transaction was
a new cashier being trained by a more experienced person. However, the more
experienced cashier who was providing training told the younger cashier that
unapproved items were included in the WIC Approved Foods List. She then told
the trainee to look on the back of the voucher for the list of foods. The
trainee clerk did so and, yet, allowed the investigator to obtain the
unauthorized foods. More specific notice or opportunity to verify whether the
foods were on the WIC Approved List could hardly be imagined. The Respondent
states that, perhaps, the trainee clerk was unable to read, or, at least, that
the Department did not establish her literacy. County Cub, apparently, would
place on the State the burden of establishing literacy as an element of a
prima facie case and, perhaps, whether the employer had knowledge of any
illiteracy.
Initially, it is unlikely that one functioning as a cashier who reads
prices from items, could be illiterate. In this case, the cashier rang up the
sale and later transferred that amount to the WIC voucher. Obviously, she was
able to read the numbers. Moreover, the clerk whom the Respondent had selected
to provide training, herself, gave erroneous information. Although the circum-
stances are not consistent with a conclusion that the clerk was illiterate,
the Administrative Law Judge does not accept the Respondent's assertion that
negation of illiteracy is an element of the State's prima facie case. It is
important to note that the Respondent provided no evidence. The asserted
illiteracy of an employee and the vendor's lack of knowledge of that circum-
stance are appropriately characterized as an affirmative defense. On such a
defense, the Respondent would at least bear the burden of coming forward with
evidence and, perhaps, the ultimate burden of persuasion.
The Respondent also argues that the sale of Similac formula--low-iron on
August 12, 1987, should not be the subject of sanction because the WIC
Acceptable Foods List does not clearly prohibit the providing of an infant
formula labeled as low-iron. As noted in Finding 21, supra, in late 1986 or
early 1987, the Department mailed to its list of WIC vendors a statement that
infant formulas labeled low-iron were not acceptable foods for purposes of the
WIC Acceptable Foods List. The Respondent asserts that the State must estab-
lish that County Cub actually received the document as an essential element of
proving the violation. County Cub suggests that such notifications should be
sent "return receipt requested" to establish actual receipt by individual
program vendors. The Department witness testified that the notification was
sent by first class mail to the then current list of WIC vendors. The
Respondent's name and address were included on the vendor list. At least in
the absence of some evidence that the notification was not received, posting
by first class mail is legally sufficient.
The Respondent next asserts that the August 12, 1987, compliance buy
cannot be the basis of a sanction because the Department can't establish that
County Cub ever received reimbursement for the voucher. In the absence of
proven reimbursement, it argues that donating free food is not a Program
violation. The State admits that it does not have the returned voucher
showing reimbursement to the vendor. There are two explanations for that
circumstance. Given the volume of WIC vouchers that are ultimately processed
by a single bank in Maine, it is entirely possible that payment was made to
the vendor on the voucher and it was improperly "end coded" by the Maine
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bank. If the voucher was improperly "end coded" by the Maine bank, it would
not be returned to the Department. It is also possible that the vendor never
deposited the negotiated voucher in its bank account. If County Cub did not
deposit the voucher, it would not have received monetary reimbursement for the
items transferred to the Department investigator in exchange for the WIC
voucher on August 12, 1987.
The Administrative Law Judge concludes that, in the context of a vendor
disqualification for program violation, consideration need not be established.
It is important to note that, in addition to disqualification, additional
sanctions are authorized under the federal regulations. See, 7 C.F.R.
sec. 246.12(k)(i) (1987); 7 C.F.R. 246.23 (1987). The imposition of those
penalties specifically requires an improper receipt of program funds. The
violation here asserted, however, does not. The program violation is providing
unauthorized food items in lieu of authorized supplemental foods. 7 C.F.R.
sec. 246.12(k) (1987). Suspension or termination of provider participation in a
government program need not be premised only on improper reimbursement. 81
C.J.S., Social Security and Welfare, 136.
The argument of the Respondent, that providing free food cannot be a
violation, has no application to the facts of the August 12, 1987, compliance
buy. The employee accepted a WIC voucher in exchange for unauthorized food.
Clearly, no donative intent appears in the record. As noted in the Findings,
particularly vulnerable women and young children are selected to participate
in the WIC program and are given a specific food prescription after nutritional
evaluation. The number of vouchers received and even the amount of prescribed
food are strictly limited both by federal regulation and Department implement-
ing policies. The "currency" for satisfaction of the participant's special
nutritional needs is the voucher. If the monthly voucher is taken by the
vendor in exchange for food which does not meet the nutritional prescription,
the adverse effect on Plan participants in the same, whether the vendor later
receives reimbursement or not.
The Department has also established that the Respondent, on May 4, 1987
violated 7 C.F.R. 246.12(r)(3) (1987), and Item C of the Vendor Compliance
Statement when the transaction clerk required countersignature of the food
voucher prior to her entry on it of the total purchase price. The federal
regulation clearly states that the Department may impose such a requirement
The Department has done so in the Vendor Compliance Statement and has provided
a specific penalty for the infraction in the federally approved State Plan.
The Department testified that the requirement was the only practical method of
insuring that the appropriate cost of authorized supplemental food was entered
on the voucher. The Department likened a contrary sequence of countersignature
to providing a vendor with, in effect, a blank check.
While the Department has established the violation and the propriety of
its requirement, the countersignature and entry of total price during the
May 4, 1987 transaction were almost contemporaneous. Apparently, in
recognition of this fact, the Department did not propose a separate penalty
for that violation. The Administrative Law Judge agrees that no separate
penalty should be imposed for the technical violation.
The Department has also established that a violation of 7 C.F.R.
246.12(p) (1987), and Item E of the Vendor Compliance Statement occurred on
August 12, 1987. As indicated in the Findings, during the August 12, 1987,
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compliance buy, the clerk did not check the Transfer of Certification Card to
ensure that the proxy countersignature was that of an authorized person.
Under the State Plan, that infraction merits a vendor disqualification of
three months. The Respondent has not contested the validity of that charged
infraction.
The Administrative Law Judge has referred both in his Findings and this
Memorandum to the status of the Respondent as a "high risk vendor", to the
elements of that determination and to communications between the Department
and the Respondent regarding complaints. The Administrative Law Judge has
referenced the Respondent's status, other complaints and communications with
the Department only to show reasons for the Department's compliance buys, to
negate any inference of selective enforcement and to document particular
notice of program requirements, including specified items in the Vendor
Compliance Statement. Those references have not been used to establish the
validity of any charged offense.
B.D.C.
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