Jamil Saleh, D/b/a Kb's Limited Fine Foods, Plaintiff-appellant, v. United States of America, Defendant-appellee, 41 F.3d 1504 (4th Cir. 1994)

Appellant Jamil Saleh, d/b/a KB's Limited Fine Foods, operates a small grocery store in Wilmington, North Carolina. Saleh participated in the Food Stamp Program administered by the U.S. Department of Agriculture (USDA), Food and Nutrition Service ( FNS) . Saleh's one part-time clerk--without Saleh's knowledge or authorization--bought $300 worth of food stamps for $170 cash in two transactions. These illegal acts subjected both the clerk and Saleh to penalties. See 7 U.S.C. §§ 2021, 2024 and 7 C.F.R. Sec. 278(i). The clerk was prosecuted and the FNS permanently disqualified Saleh from participation in the Food Stamp Program. Saleh sought judicial review of his disqualification by filing a complaint in the United States District Court for the Eastern District of North Carolina. On cross-motions for summary judgment, the district court concluded that Saleh failed to establish that he had an effective compliance policy and program to prevent violations of the Food Stamp Program. The district court upheld Saleh's disqualification, acknowledging that " [t]he result, indeed, is harsh." The result is very harsh, but the regulations leave no room for mercy in this case. We must affirm.

This case results from a USDA undercover operation aimed at rooting out illegal food stamp transactions. On August 28, 1991, USDA undercover agent Mark Wells entered Saleh's store and told the part-time clerk, Dameen Mohammad, that he (Wells) had $100 worth of food stamps he wanted to sell. Mohammad offered Wells $60 and Wells accepted. Mohammad then walked to the cash register and asked another man (who was never identified) to get $60 from the register. After being handed the money, Mohammad completed his deal with Wells. A week later Wells went to Saleh's store again and sold Mohammad another $200 worth of food stamps for $110 cash.

In July 1992, Mohammad pled guilty to one count of unlawful possession of food stamps, in violation of 7 U.S.C. § 2024. The district court sentenced Mohammad to 18 months probation, fined him $1,000, and ordered him to pay $200 restitution.

On July 31, 1992, the FNS notified Saleh (1) that he was liable for Mohammad's "trafficking (exchange of food stamps for cash) violations" and (2) that it was considering permanently disqualifying Saleh and his store from the Food Stamp Program. Saleh responded, requesting that he be sanctioned with a civil money penalty in lieu of disqualification. See 7 C.F.R. Sec. 278.6(e)-(f); 7 U.S.C. § 2021(b) (3) (B).

In support of his request for a lesser sanction, Saleh submitted two affidavits, his and Mohammad's. Saleh stated or indicated the following: (1) he did not know about, did not approve of, and did not benefit from Mohammad's food stamp trafficking; (2) no other food stamp violation had ever occurred at his store; (3) his only help was a part-time clerk; (4) he made sure that the clerk knew about the laws and regulations regarding the Food Stamp Program; and (5) he always tried to supervise his part-time clerk to insure compliance with the laws and regulations. Mohammad's affidavit totally supported Saleh. Mohammad swore that he used his own money to buy the food stamps and that Saleh knew nothing of his (Mohammad's) illegal activities.

FNS's acting officer-in-charge in Raleigh denied Saleh's request for a civil money penalty in lieu of disqualification as follows:

It is our finding that there is not substantial evidence that your firm had an effective policy and program in effect to prevent violations. You failed to submit documentation of training activity through dated training records and records of dates training sessions were conducted as required by section 278.6(I) (2) [sic] of the regulations.

The officer imposed permanent disqualification. Saleh then sought and was granted review of his disqualification by the Director of FNS's Administrative Review Division. An administrative review officer sustained the permanent disqualification.

Saleh next filed a complaint in federal district court, seeking judicial review of his permanent disqualification under 7 U.S.C. § 2023(a).¹  In awarding summary judgment to the government, the district court concluded "that [Saleh] has not supplied'substantial evidence which demonstrates that the firm had established and implemented an effective compliance policy and program to prevent violations of the [Food Stamp] Program.' 7 C.F.R. Sec. 278.6(i)." According to the district court, Saleh was not eligible for consideration of a civil money penalty in lieu of permanent disqualification. Thus, the sanction stood. Saleh appeals, and we review de novo the district court's award of summary judgment to the government.

We begin by looking at the applicable statute and regulations. Section 2021 of the Food Stamp Act instructs the Secretary of Agriculture to disqualify permanently a store found trafficking in food coupons, unless (1) the owner neither knew of nor benefited from the trafficking and (2) the store had an "effective policy and program" to prevent violations of the Act. 7 U.S.C. § 2021(b) (3) (B). If the store owner proves, by substantial evidence, both innocence and an effective compliance policy and program, then the Secretary has the discretion to impose a civil money penalty in lieu of disqualification. Id.²  Turning to the FNS regulations, section 278.6(e) (1) (i) provides for permanent disqualification of a store when its personnel have trafficked in food stamps. The regulations set forth extensive criteria under which an innocent owner can avoid permanent disqualification by proving an effective policy and program to prevent food stamp violations. 7 C.F.R. Sec. 278.6(i).³ 

The statute and regulations present us with two dispositive questions in this case. The first question is: did Saleh know of or benefit from the trafficking of his part-time clerk, Mohammad. The second question is: did Saleh have an effective compliance policy and program. If the answer to the first question is "yes" or the answer to the second question is "no", then Saleh's permanent disqualification must stand.

The first question is easily answered "no" in Saleh's favor. The undisputed Saleh and Mohammad affidavits establish that Saleh neither knew of nor benefited from Mohammad's trafficking.

Answering the second question is more difficult, but the answer is ultimately "no" and therefore fatal to Saleh's case. The regulatory criteria for proving an effective compliance policy and program plainly favor written and dated training manuals, logs, and policies. See 7 C.F.R. Sec. 278(i). Criterion 1 (development of an effective policy) and criterion 2 (policy and program in operation prior to violation), however, permit consideration of " [t]he nature and scope of the violation charged," the prior "record" of the firm, and "any other information the firm may present." Id. at Sec. 278(i) (1). Here, information responsive to these factors appears to favor Saleh. His store's prior record was clean, and he neither knew about nor benefited from Mohammad's limited violations.

Saleh, however, has not provided the documentation required under criterion 3 (effective personnel training program). Criterion 3 must be satisfied as follows:

A firm which seeks a civil money penalty in lieu of permanent disqualification shall document its training activity by submitting to FNS its dated training curricula and records of dates training sessions were conducted; a record of dates of employment of firm personnel; and contemporaneous documentation of the participation of the violating employee(s) in initial and any follow-up training held prior to the violation(s).

7 C.F.R. Sec. 278.6(i) (2) (emphasis added).

Saleh did not submit any dated training curricula. His conclusory affidavit did not provide any dates of training sessions for Mohammad, nor did his affidavit even provide the dates of Mohammad's employment. Finally, Saleh did not provide any contemporaneous documentation of Mohammad's participation in training. Saleh argues that the excessive paperwork required by the criteria is impractical and crippling for a small, owner-operated grocery store with one part-time employee.⁴  Criterion 3, however, allows no exceptions. Saleh did not meet criterion 3, and therefore he did not establish that he had an "effective compliance policy and program" under the statute as implemented by the regulations. Accordingly, Saleh does not qualify for any sanction short of permanent disqualification.

For the foregoing reasons, the judgment of the district court is affirmed.

AFFIRMED