The opinion of the court was delivered by: SHAPIRO
This is a civil action to obtain a de novo review of a Department of Agriculture Food and Nutrition Service ("FNS") decision disqualifying L&S Tropical Food Products, Inc. ("L&S") from participating in the Food Stamp Program for a period of one (1) year. This court has jurisdiction of this matter under 7 U.S.C. § 2023(a).
L&S is a Pennsylvania corporation organized in August, 1980. The shareholders of the corporation are Candelario Lamboy, President of the corporation, his brother Antonio (Tony) Lamboy, and Joaquin (Jack) Suarez, Secretary/Treasurer of the corporation. The corporation owns and operates a store in a warehouse-type building at 401 West Columbia Avenue in Philadelphia, Pennsylvania. Jack Suarez and Tony Lamboy operate the business on a daily basis. Mr. Suarez is generally responsible for listing merchandise on invoices, pricing items and accepting payment for merchandise. In August and September, 1982, the store had two employees, Pablo Ayala and his son Edwin Ayala, who are related to Tony Lamboy.
On October 19, 1981, Joseph Devereaux, Food Stamp Specialist, visited the store and spoke with Mr. Suarez. Devereaux told Suarez that the store had an unusually high rate of coupon redemptions and warned him that the store might be violating the Food Stamp Program in that regard. Devereaux reviewed the Food Stamp Regulations, including those regarding the sale of ineligible items.
The October 19, 1981 visit was followed by a letter dated October 21, 1981 from the FNS. The letter summarized the October 19 visit, enclosed a copy of the Food Stamp Regulations, warned that "violations may lead to your disqualification," and stated that all store employees must "know the program regulations and adhere to them."
On or about March 31, 1982, the FNS issued a Request for Investigation ("RFI") of L&S based upon the unusually large volume of food stamp transactions at the store. The FNS had also received an anonymous report that this store was accepting food stamps from retailers.
Clifford Rank undertook the investigation for the Government and hired Carmen Vadiz to test-buy merchandise for food stamp coupons from the store. Ms. Vadiz was the sole investigative aide assigned to the case. The court finds the testimony of Ms. Vadiz credible; notwithstanding her lack of formal education and her failure to report the income received to welfare agencies, she stood up well to rigorous and thorough cross-examination. She testified that she visited the store on four occasions: August 18, 1982, September 8, 1982, September 13, 1982, and September 15, 1982. The Government presented receipts for all of these transactions other than the September 8, 1982 visit.
On August 18, 1982, Ms. Vadiz purchased $72 worth of merchandise with food stamps. The purchase included $14.95 worth of insulated cups and $26 worth of paper towels, which were ineligible for purchase with food stamps. When she left the store after making her purchases, she met with Mr. Rank, told him what happened, and returned the excess food stamps to him. She provided a description of a clerk but not his name. There was no mention or description of more than one clerk. A transaction report was filled out by Mr. Rank and signed by Ms. Vadiz.
On the September 8, 1982 visit, Ms. Vadiz purchased $67.95 worth of merchandise. Once again Ms. Vadiz stated she purchased from the same clerk involved in the transaction on August 18, 1982. The ineligible items she purchased with food stamps included cases of bathroom tissue, toothpaste, cleaner ($13.95), and seven packages of plastic forks. The receipt for this transaction was not in evidence nor was its unavailability adequately explained.
On September 15, 1982, Ms. Vadiz purchased $89.15 worth of merchandise. The ineligible items totalled $58 and included cases of cleanser ($19.25), oven cleaner ($21.25), soap pads ($7.45) and bathroom tissue ($10.95). Because Ms. Vadiz was carrying only $88 worth of food stamps, the clerk gave her credit for the $1.15 balance. Her testimony suggested L&S personnel expected that Ms. Vadiz would use the cups for the sale of coffee in her own business. Her description of the clerk involved in this transaction was different than in the prior transactions; the transaction report she signed on this occasion stated that this clerk had been present on prior occasions. But the contemporaneous transaction reports neither described nor referred to him. This clerk was later identified as Mr. Suarez. The court rejects the conclusions of the investigator on September 23, 1982 as inconsistent with the contemporaneous records and not supported by the preponderance of the evidence.
By letter of February 18, 1983, Malachy P. Cox, FNS Chief of Federal Operations Section, notified plaintiffs that FNS had reason to believe that plaintiffs had violated the Food Stamp Regulations and provided the reasons for that belief. By letter dated February 21, 1983, Candelario Lamboy responded to FNS' February 18, 1983 letter and requested a meeting to discuss the charges. By letter of March 17, 1983, N. Harwood, FNS Unit Supervisor, Federal Operations Section, denied Mr. Lamboy's request for a meeting and informed him that he had ten (10) days to respond to the charges. By letter dated March 26, 1983 Mr. Lamboy responded that he would wait until the FNS made a final determination before answering the charges. By letter of April 1, 1983, Malachy P. Cox notified plaintiffs that they were disqualified from participation in the Food Stamp Program for one year for violation of applicable regulations. Candelario Lamboy timely requested an administrative review of this decision and an opportunity to appear before the Food Stamp Review Officer. Plaintiffs were furnished with copies of materials on file and with the investigative report. On June 5, 1983, plaintiffs Suarez and Candelario Lamboy met with Administrative Review Officer John P. Kraynak to discuss the case. After administrative review, Kraynak sustained the one-year disqualification of plaintiffs by letter of October 28, 1983; this letter constitutes the final Agency action.
Plaintiffs filed the current action on November 29, 1983. Their complaint challenged both the factual determination underlying the administrative decision ...