Cappetta v. Comm'r of Soc. Sec. Admin.
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Opinion
16‐3540‐ag Cappetta v. Comm’r of Soc. Sec. Admin.
1 In the 2 United States Court of Appeals 3 For the Second Circuit 4 5 6 August Term, 2017 7 No. 16‐3540‐ag 8 ______________________ 9 10 SALVATORE CAPPETTA, 11 Petitioner, 12 13 v. 14 15 COMMISSIONER OF SOCIAL SECURITY ADMINISTRATION, 16 Respondent.* 17 18 19 ARGUED: DECEMBER 15, 2017 20 DECIDED: SEPTEMBER 14, 2018 21 22 23 Before: WINTER, LYNCH, and DRONEY, Circuit Judges 24 25 Petitioner Salvatore Cappetta petitions for review of a decision 26 of the Commissioner of the Social Security Administration, adopting 27 the decision of the Departmental Appeals Board (DAB), and imposing 28 an assessment of $47,583.60 and penalty of $106,000 on Cappetta for
The Clerk of Court is directed to amend the caption as set forth above. *
1 his failure to report work activity while receiving Social Security 2 disability insurance (SSDI) benefits. We agree with the DAB that 3 Cappetta’s failure to report work activity to the Social Security 4 Administration was “material” for purposes of 42 U.S.C. § 1320a‐8, 5 which authorizes the Commissioner of Social Security to impose an 6 assessment and penalty for an SSDI recipient’s withholding of 7 information in connection with the receipt of benefits. We also reject 8 Cappetta’s other challenges to the DAB’s authority to impose the 9 assessment and penalty in this case. However, we conclude that the 10 DAB lacked substantial evidence to support the amounts of the 11 assessment and penalty it imposed because (1) Cappetta’s earnings 12 from work activity did not amount to “substantial gainful activity,” 13 (2) Cappetta remained disabled while failing to report work activity, 14 and (3) the findings of fact on which the DAB relies establish only that 15 Cappetta’s work was “sporadic.” Accordingly, we GRANT the 16 petition for review, VACATE the DAB’s decision, and REMAND for 17 further proceedings consistent with this opinion. 18 19 20 EDWARD A. WICKLUND (Nathaniel V. 21 Riley, on the brief), Olinsky Law 22 Group, Syracuse, NY, for Petitioner. 23 24 NATALIE N. ELICKER, Assistant United 25 States Attorney (Sandra S. Glover, on 26 the brief), for John H. Durham, United 27 States Attorney for the District of 28 Connecticut, New Haven, CT, for 29 Respondent.
1 DRONEY, Circuit Judge:
2 In 2009, an anonymous tipster reported to the Social Security
3 Administration (SSA) that petitioner Salvatore Cappetta was working
4 and earning substantial sums while receiving Social Security
5 disability insurance (SSDI) benefits. A subsequent investigation by
6 the Social Security Administration’s Inspector General (SSA IG)
7 concluded that Cappetta had failed to report work activity while
8 receiving SSDI benefits. The SSA IG ordered Cappetta to pay more
9 than $200,000 as an assessment and penalty for his failure to report.
10 Cappetta appealed the decision to an administrative law judge
11 (ALJ), who concluded that Cappetta’s failure to report work activity
12 was not “material” for the purposes of 42 U.S.C. § 1320a‐8 and that
13 Cappetta therefore was not subject to an assessment or penalty under
14 that statute. The SSA IG appealed to the Departmental Appeals Board
15 (DAB), which reversed and remanded to the ALJ. After the ALJ again
16 concluded that no assessment or penalty was appropriate, the DAB
1 reversed for a second time and imposed its own assessment and
2 penalty. Cappetta now petitions for review.
3 In his petition, Cappetta raises various legal and factual
4 challenges to the DAB’s decision. We reject Cappetta’s legal
5 challenges and hold that the DAB had the authority to impose an
6 assessment and penalty on Cappetta because a failure to report any
7 work activity—even if the earnings from that work activity do not
8 amount to “substantial gainful activity”—is “material” under 42
9 U.S.C. § 1320a‐8(a). However, we also conclude that the DAB’s
10 assessment and penalty were not supported by substantial evidence,
11 and accordingly we vacate and remand for further proceedings.
12 BACKGROUND
13 We begin by summarizing the statutory framework at issue in
14 this case, which our Court has never had occasion to address. We then
15 turn to the facts and procedural history before considering the parties’
16 arguments.
1 I. Statutory Framework
2 Under 42 U.S.C. § 1320a‐8 the Commissioner of the Social
3 Security Administration (the “Commissioner”) may impose an
4 assessment and civil monetary penalty on a Social Security benefits
5 recipient for failing to disclose a fact that is “material” to “any initial
6 or continuing right to . . . monthly insurance benefits.” 42 U.S.C. §
7 1320a‐8(a)(1)(C). The central issue in this appeal is whether evidence
8 of work activity is considered “material” under § 1320a‐8(a). Section
9 1320a‐8(a)(1) authorizes “penalties” of up to $5,000 for “each”
10 material false statement or omission, and an “assessment” that is “not
11 more than twice the amount of benefits or payments paid as a result
12 of such a statement or representation or such a withholding of
13 disclosure.” The Commissioner must consider a number of different
14 factors when determining the appropriate amount of a penalty or
15 assessment, including
16 (1) the nature of the statements, representations, or 17 actions referred to in subsection (a) of this section and the
1 circumstances under which they occurred; (2) the degree 2 of culpability, history of prior offenses, and financial 3 condition of the person committing the offense; and (3) 4 such other matters as justice may require. 5 6 Id. § 1320a‐8(c).
7 Under SSA regulations implementing § 1320a‐8, the
8 Commissioner has delegated the authority to impose assessments and
9 penalties to the SSA Inspector General’s office. See id. § 1320a‐8(i)
10 (authorizing delegation to Inspector General); 20 C.F.R. § 498.102(a)
11 (“The Office of the Inspector General may impose a penalty and
12 assessment . . . .”). An individual facing an assessment or penalty that
13 the SSA IG imposes is entitled to “written notice and an opportunity
14 for the determination to be made on the record after a hearing at
15 which the person is entitled to be represented by counsel, to present
16 witnesses, and to cross‐examine witnesses against the person.” 1 42
17 U.S.C. § 1320a‐8(b)(2); see also 20 C.F.R. § 498.202.
1 That language triggers the SSA’s obligation to comply with the formal adjudication requirements of the Administrative Procedure Act (APA). See, e.g., Am. Tel. & Tel. Co. v. FCC, 572 F.2d 17, 21‐22 (2d Cir. 1978) (“The APA requires
1 The hearing required by § 1320a‐8(b)(2) takes place before an
2 ALJ . 20 C.F.R. § 498.202. Once an ALJ renders a decision, “[a]ny party
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16‐3540‐ag Cappetta v. Comm’r of Soc. Sec. Admin.
1 In the 2 United States Court of Appeals 3 For the Second Circuit 4 5 6 August Term, 2017 7 No. 16‐3540‐ag 8 ______________________ 9 10 SALVATORE CAPPETTA, 11 Petitioner, 12 13 v. 14 15 COMMISSIONER OF SOCIAL SECURITY ADMINISTRATION, 16 Respondent.* 17 18 19 ARGUED: DECEMBER 15, 2017 20 DECIDED: SEPTEMBER 14, 2018 21 22 23 Before: WINTER, LYNCH, and DRONEY, Circuit Judges 24 25 Petitioner Salvatore Cappetta petitions for review of a decision 26 of the Commissioner of the Social Security Administration, adopting 27 the decision of the Departmental Appeals Board (DAB), and imposing 28 an assessment of $47,583.60 and penalty of $106,000 on Cappetta for
The Clerk of Court is directed to amend the caption as set forth above. *
1 his failure to report work activity while receiving Social Security 2 disability insurance (SSDI) benefits. We agree with the DAB that 3 Cappetta’s failure to report work activity to the Social Security 4 Administration was “material” for purposes of 42 U.S.C. § 1320a‐8, 5 which authorizes the Commissioner of Social Security to impose an 6 assessment and penalty for an SSDI recipient’s withholding of 7 information in connection with the receipt of benefits. We also reject 8 Cappetta’s other challenges to the DAB’s authority to impose the 9 assessment and penalty in this case. However, we conclude that the 10 DAB lacked substantial evidence to support the amounts of the 11 assessment and penalty it imposed because (1) Cappetta’s earnings 12 from work activity did not amount to “substantial gainful activity,” 13 (2) Cappetta remained disabled while failing to report work activity, 14 and (3) the findings of fact on which the DAB relies establish only that 15 Cappetta’s work was “sporadic.” Accordingly, we GRANT the 16 petition for review, VACATE the DAB’s decision, and REMAND for 17 further proceedings consistent with this opinion. 18 19 20 EDWARD A. WICKLUND (Nathaniel V. 21 Riley, on the brief), Olinsky Law 22 Group, Syracuse, NY, for Petitioner. 23 24 NATALIE N. ELICKER, Assistant United 25 States Attorney (Sandra S. Glover, on 26 the brief), for John H. Durham, United 27 States Attorney for the District of 28 Connecticut, New Haven, CT, for 29 Respondent.
1 DRONEY, Circuit Judge:
2 In 2009, an anonymous tipster reported to the Social Security
3 Administration (SSA) that petitioner Salvatore Cappetta was working
4 and earning substantial sums while receiving Social Security
5 disability insurance (SSDI) benefits. A subsequent investigation by
6 the Social Security Administration’s Inspector General (SSA IG)
7 concluded that Cappetta had failed to report work activity while
8 receiving SSDI benefits. The SSA IG ordered Cappetta to pay more
9 than $200,000 as an assessment and penalty for his failure to report.
10 Cappetta appealed the decision to an administrative law judge
11 (ALJ), who concluded that Cappetta’s failure to report work activity
12 was not “material” for the purposes of 42 U.S.C. § 1320a‐8 and that
13 Cappetta therefore was not subject to an assessment or penalty under
14 that statute. The SSA IG appealed to the Departmental Appeals Board
15 (DAB), which reversed and remanded to the ALJ. After the ALJ again
16 concluded that no assessment or penalty was appropriate, the DAB
1 reversed for a second time and imposed its own assessment and
2 penalty. Cappetta now petitions for review.
3 In his petition, Cappetta raises various legal and factual
4 challenges to the DAB’s decision. We reject Cappetta’s legal
5 challenges and hold that the DAB had the authority to impose an
6 assessment and penalty on Cappetta because a failure to report any
7 work activity—even if the earnings from that work activity do not
8 amount to “substantial gainful activity”—is “material” under 42
9 U.S.C. § 1320a‐8(a). However, we also conclude that the DAB’s
10 assessment and penalty were not supported by substantial evidence,
11 and accordingly we vacate and remand for further proceedings.
12 BACKGROUND
13 We begin by summarizing the statutory framework at issue in
14 this case, which our Court has never had occasion to address. We then
15 turn to the facts and procedural history before considering the parties’
16 arguments.
1 I. Statutory Framework
2 Under 42 U.S.C. § 1320a‐8 the Commissioner of the Social
3 Security Administration (the “Commissioner”) may impose an
4 assessment and civil monetary penalty on a Social Security benefits
5 recipient for failing to disclose a fact that is “material” to “any initial
6 or continuing right to . . . monthly insurance benefits.” 42 U.S.C. §
7 1320a‐8(a)(1)(C). The central issue in this appeal is whether evidence
8 of work activity is considered “material” under § 1320a‐8(a). Section
9 1320a‐8(a)(1) authorizes “penalties” of up to $5,000 for “each”
10 material false statement or omission, and an “assessment” that is “not
11 more than twice the amount of benefits or payments paid as a result
12 of such a statement or representation or such a withholding of
13 disclosure.” The Commissioner must consider a number of different
14 factors when determining the appropriate amount of a penalty or
15 assessment, including
16 (1) the nature of the statements, representations, or 17 actions referred to in subsection (a) of this section and the
1 circumstances under which they occurred; (2) the degree 2 of culpability, history of prior offenses, and financial 3 condition of the person committing the offense; and (3) 4 such other matters as justice may require. 5 6 Id. § 1320a‐8(c).
7 Under SSA regulations implementing § 1320a‐8, the
8 Commissioner has delegated the authority to impose assessments and
9 penalties to the SSA Inspector General’s office. See id. § 1320a‐8(i)
10 (authorizing delegation to Inspector General); 20 C.F.R. § 498.102(a)
11 (“The Office of the Inspector General may impose a penalty and
12 assessment . . . .”). An individual facing an assessment or penalty that
13 the SSA IG imposes is entitled to “written notice and an opportunity
14 for the determination to be made on the record after a hearing at
15 which the person is entitled to be represented by counsel, to present
16 witnesses, and to cross‐examine witnesses against the person.” 1 42
17 U.S.C. § 1320a‐8(b)(2); see also 20 C.F.R. § 498.202.
1 That language triggers the SSA’s obligation to comply with the formal adjudication requirements of the Administrative Procedure Act (APA). See, e.g., Am. Tel. & Tel. Co. v. FCC, 572 F.2d 17, 21‐22 (2d Cir. 1978) (“The APA requires
1 The hearing required by § 1320a‐8(b)(2) takes place before an
2 ALJ . 20 C.F.R. § 498.202. Once an ALJ renders a decision, “[a]ny party
3 may appeal the decision of the ALJ to the DAB by filing a notice of
4 appeal with the DAB within 30 days of the date of service of the initial
5 decision.” Id. § 498.221(a).2 “The DAB may remand a case to an ALJ
6 for further proceedings, or may issue a recommended decision to
7 decline review or affirm, increase, reduce, or reverse any penalty or
8 assessment determined by the ALJ.” Id. § 498.221(h). The DAB’s
9 recommended decision becomes the Commissioner’s final decision 60
10 days after the DAB serves the decision on the parties, unless the
11 decision is remanded to the ALJ or the Commissioner modifies the
trial‐type hearings only ‘(w)hen rules (or adjudications) are required by statute to be made (or determined) on the record after opportunity for an agency hearing.’ Since United States v. Florida East Coast Ry., 410 U.S. 224, 236‐38, 93 S. Ct. 810, 35 L.Ed.2d 223 (1973), the words ‘on the record’ have become, as the District of Columbia Circuit has observed, a ‘touchstone test’ for the applicability of the APA’s trial‐type procedures.” (internal citation omitted)).
2 The Departmental Appeals Board is part of the Department of Health and Human Services. 20 C.F.R. § 498.201.
1 decision. Id. § 498.222(a). In the event of an adverse decision, an
2 individual may appeal the Commissioner’s decision to the U.S. Court
3 of Appeals “for the circuit in which the person resides, or in which
4 the [material] statement or representation . . . was made.” 42 U.S.C.
5 § 1320a‐8(d)(1); see also 20 C.F.R. § 498.127.
6 II. Factual Background
7 Petitioner Salvatore Cappetta first began receiving Social
8 Security disability benefits in 1997, after the SSA determined that
9 Cappetta was disabled “due to rheumatoid arthritis, [a] heart
10 condition, and headaches.” AR 109.3 Prior to receiving SSDI, Cappetta
11 owned and operated a construction business.
12 On June 16, 2009, an anonymous individual contacted the SSA
13 to report concerns that Cappetta might be receiving disability benefits
14 unlawfully. According to the caller, Cappetta was engaged in a major
15 home renovation (including the construction of an above‐ground
3 We use “AR” as shorthand to refer to the administrative record.
1 pool) and had stated that he (Cappetta) worked for Peter Cameron
2 Construction, earning money that he was not reporting to the SSA.
3 Based on the tip, the SSA IG began to investigate Cappetta. The SSA
4 IG first reviewed Cappetta’s history of disability and reported work,
5 and found that Cappetta had never reported performing any work
6 after 1999. Then, in August 2009, an SSA IG investigator conducted
7 surveillance of Cappetta, during which the investigator observed
8 Cappetta leaving his house to obtain an item for the construction that
9 was underway at his house. The investigator did not observe
10 Cappetta engaging in any labor or other work, including for Cameron
11 Construction.
12 On November 6, 2009, investigators interviewed Peter
13 Cameron, who owned Cameron Construction. According to the
14 investigators’ unsworn report, Cameron stated that Cappetta had
15 worked for the company for eight years and that Cappetta’s pay
16 varied from job to job and week to week (ranging from $50 to $500 a
1 job, and $150 to $1500 a week). The report also stated that Cameron
2 denied paying Cappetta substantial sums such as $20,000 to $30,000 a
3 year. During a second interview in February 2010, the investigators
4 reported that Cameron further detailed Cappetta’s work for the
5 company, including Cappetta’s assistance with “tiling backsplashes,
6 walls, and floors; hanging doors; trim work, framing, and taping
7 sheetrock.” AR 111.
8 On the same day of Cameron’s first interview in November
9 2009, investigators also interviewed Cappetta. During the interview,
10 Cappetta admitted that he worked sporadically for Cameron and
11 received assistance from Cameron on his house in exchange for his
12 help for Cameron Construction. However, Cappetta denied being
13 paid for his work. A few days later, investigators continued the
14 interview, and Cappetta signed a sworn statement. In that statement,
15 Cappetta asserted that he had not been employed since receiving
16 disability benefits.
1 On July 26, 2012, following its investigation, the SSA IG issued
2 a decision concluding that Cappetta had worked “from November
3 2002 through April 2011” while receiving SSDI benefits. AR 1215. The
4 SSA IG concluded that Cappetta made 53 material omissions by
5 failing to report work activity each month from December 2006 until
6 April 2011 (a period of 53 months).4 During that time, Cappetta and
7 his children received $47,583.60 in benefits. Using those amounts, the
8 SSA IG informed Cappetta that it would assess him $95,167.20 (twice
9 the amount of benefits received from December 2006 to April 2011)
4 In 2004, Congress amended 42 U.S.C. § 1320a‐8(a) to permit SSA to impose an assessment and penalty for a Social Security benefits recipient’s “withhold[ing]” of information from the SSA. See Social Security Protection Act of 2004, Pub. L. No. 108‐203, § 201, 118 Stat 493, 507 (2004) (codified at 42 U.S.C. § 1320a‐8(a)). According to the SSA IG, the relevant amendments in the Act became effective in late November 2006, and therefore December 2006 served as the starting point for imposing an assessment and penalty on Cappetta. AR 31, 1215; see also Social Security Protection Act of 2004 § 201(d), 118 Stat 493, 508 (describing conditions for effective date of amendments to 42 U.S.C. § 1320a‐8(a)).
1 and issue a penalty of $106,000 ($2,000 for each month Cappetta failed
2 to report work activity). The total came to $201,167.20.5
3 Cappetta exercised his right to contest the SSA IG’s decision
4 before an ALJ. The hearing before the ALJ featured a number of
5 witnesses, including an SSA IG investigator, an SSA claims
6 representative, Cameron, and Cappetta. The investigator testified
7 about her interviews with Cameron and Cappetta, which are detailed
8 above. The claims representative testified about her work reviewing
9 Cappetta’s file and the SSA IG investigation materials. In particular,
10 the claims representative detailed how she used interview notes from
11 the SSA IG investigators’ interview with Cameron to conclude that
12 Cappetta had engaged in “substantial gainful activity” while
13 receiving disability benefits. That level of earnings and work would
14 have disqualified Cappetta from receiving further disability benefits
The SSA IG also twice requested that the U.S. Attorney’s Office for the District of 5
Connecticut criminally prosecute Cappetta for his failure to report work activity. That office declined both requests.
1 and would mean that Cappetta unlawfully received benefits for many
2 years.
3 Cappetta’s testimony was largely consistent with the
4 statements that the SSA IG attributed to him in his interviews. During
5 the hearing, Cappetta stated that he did “little things” to assist
6 Cameron, received small payments in exchange as gifts, and received
7 some funds from Cameron to help finance a trip to Italy. AR 324.
8 Cappetta denied that he worked for Cameron. Significantly, however,
9 Cappetta also acknowledged that he knew he had to report any work
10 that he performed to the SSA.
11 In contrast to Cappetta, Peter Cameron’s testimony diverged
12 considerably from the statements that the SSA IG attributed to him in
13 its investigative report. In his testimony, as described in the ALJ’s
14 decision, Cameron “denied that [Cappetta] ever worked for him[,] but
15 testified that [Cappetta] would show‐up at job sites and run to the
16 store for him if he needed materials. [Cameron] denied paying
1 [Cappetta] wages but [also said that] by running errands for him
2 [Cappetta] was paying [Cameron] back for work [that] Cameron did
3 on his house.” AR 113 (citations omitted). Cameron also
4 acknowledged during the hearing that Cappetta would give advice
5 on how to perform certain construction work, given Cappetta’s
6 background in the field. In addition, Cameron “testified that he gave
7 [Cappetta] gifts at Christmas; he gave him money for his kids’
8 birthdays; and he gave him a couple hundred bucks when he went to
9 Italy. He also gave [Cappetta] money to go get coffee and donuts and
10 for the gas [Cappetta] used going to the store.” AR 113 (citations
11 omitted).
12 III. Procedural History
13 The ALJ issued his first decision on June 11, 2014. In the
14 decision, the judge rejected the SSA IG’s conclusion that Cappetta
15 engaged in substantial gainful activity, finding that the claims
16 representative’s testimony was “not credible” because both the
1 statements that Cameron made to investigators and at the ALJ
2 hearing provided an insufficient evidentiary basis to conclude that
3 Cappetta was engaged in substantial gainful activity. AR 261; see also
4 AR 263 (reasoning that the “evidence [did] not show . . . when and
5 how frequently gainful work activity was actually performed”).
6 However, the ALJ determined that Cappetta did perform some
7 work, despite his statements to the contrary. The ALJ noted that
8 Cappetta “admitted that he ran errands for Peter Cameron and that
9 he received money, items of value, or in kind labor on his house from
10 Peter Cameron.” AR 263. The ALJ concluded that Cappetta “did
11 engage in some gainful work activity for Peter Cameron.” AR 263.
12 Nevertheless, the ALJ also concluded that imposing any assessment
13 or penalty was unreasonable, reasoning that Cappetta’s failure to
14 report his work was not “material” because Cappetta had received
15 disability benefits for more than 24 months and thus his work activity
1 could not be used as evidence of his disability under 42 U.S.C. §
2 421(m)(1)(B).
3 The SSA IG appealed, and the DAB reversed and remanded to
4 the ALJ. The DAB first ruled that a failure to report work activity is
5 always material for purposes of 42 U.S.C. § 1320a‐8(a), rejecting the
6 ALJ’s conclusion to the contrary. The DAB then listed additional
7 findings of fact that it expected the ALJ to make on remand and
8 reminded the ALJ of his obligation to consider certain statutory
9 factors when reviewing the SSA IG’s assessment and penalty
10 decision.
11 On remand, the ALJ again determined that no assessment or
12 penalty was appropriate. The ALJ first requested that the DAB re‐visit
13 its legal decision, asserting once again that a failure to report work
14 activity after the initial 24‐month eligibility period is not a material
15 omission for purposes of issuing a civil monetary penalty or an
16 assessment. He then turned to assessing the statutory factors that the
1 DAB had ordered him to consider. The ALJ noted that Cappetta knew
2 that he needed to report some work activity to the SSA, but
3 nevertheless concluded that Cappetta did not understand that he
4 needed to report the type of work that he performed for Cameron or
5 whether his failure to report work activity constituted a material fact
6 under 8 U.S.C. § 1320a‐8(a). According to the ALJ, Cappetta’s lack of
7 knowledge was partly attributable to his limited command of English.
8 The ALJ also noted problems with the investigators’ unsworn
9 reports of Cameron’s statements about paying Cappetta, concluding
10 that Cameron’s “sworn hearing testimony that was subject to cross‐
11 examination must be accorded more weight.” AR 133. Moreover, he
12 concluded that there was “no dispute” that Cappetta did not engage
13 in work activity after November 2009. AR 131. Although the decision
14 reiterated the finding that Cappetta “engaged in work activity,
15 including running errands, for Peter Cameron or Cameron
16 Construction,” and found that it was more likely than not that this
1 work occurred “as early as 2001,” the ALJ nevertheless concluded that
2 Cappetta’s work was only “sporadic,” and his conduct not
3 “blameworthy.” AR 133, 135136. Accordingly, the ALJ again
4 determined that no assessment or penalty was appropriate.
5 The SSA IG appealed once more to the DAB. The DAB rejected
6 the ALJ’s request to revisit its previous decision about reporting work
7 activity, and again decided that work activity is a material fact under
8 the civil monetary penalty statute for all SSDI beneficiaries. The DAB
9 also concluded that the ALJ erred in weighing the relevant factors
10 when reviewing the SSA IG decision to impose an assessment and
11 penalty. The ALJ’s role, stated the DAB, is to assess whether the SSA
12 IG’s proposed assessment and penalty is reasonable. The DAB then
13 explained that to make this determination, an ALJ should apply the
14 statutory factors, which include
15 (1) the nature of the statements, representations, or 16 actions and the circumstances under which they 17 occurred; (2) the degree of culpability of the person 18 committing the offense; (3) the history of prior offenses
1 of the person committing the offense; (4) the person’s 2 financial condition; and (5) such other matters as justice 3 may require. 4 5 AR 44 (citing 42 U.S.C. § 1320a‐8(c) and 20 CFR § 498.106(a)).
6 Applying these factors, the DAB determined that Cappetta was
7 in fact culpable, reversing the ALJ’s finding. First, the DAB rejected
8 the ALJ’s conclusion that Cappetta required actual knowledge of the
9 need to report the type of work activity that he performed for
10 Cameron in order to face liability. Second, the DAB “reject[ed] the
11 ALJ’s suggestion that [Cappetta’s] limited English language skills
12 may have affected his ability to understand his duty to report . . . .”
13 AR 47. Instead, the DAB emphasized that Cappetta had engaged in
14 some work activity, that he knew he was supposed to report such
15 activity to the SSA, and that he failed to report his work activity over
16 many years. On the basis of this information, the DAB concluded that
17 the SSA IG had shown “substantial culpability.” AR 48.
1 Turning to the other factors, the DAB stated that it would
2 generally defer to the ALJ’s findings of fact and credibility findings.
3 Then, reviewing the testimony, the DAB agreed with the ALJ that “the
4 evidence of record does not establish the value of [Cappetta’s] work
5 activity.” AR 49. The DAB also approvingly noted the ALJ’s finding
6 that Cappetta’s work was “sporadic”—but it rejected any suggestion
7 that the work activity was “minimal in nature” and instead concluded
8 that Cappetta’s work was “significant.” AR 4950.
9 Finally, the DAB turned to the question of an appropriate
10 amount for an assessment and penalty. The DAB reduced the SSA
11 IG’s assessment amount by half, to $47,583.60, reasoning that the
12 “evidence is not sufficient” to support the SSA IG’s amount because
13 Cappetta’s work was not “continuous.” AR 50. But the DAB affirmed
14 the penalty amount of $106,000, which “reflect[ed] a reduction to less
15 than half the amount the SSA I.G. could have imposed.” AR 51. As a
16 result, the total assessment and penalty came to $153,583.60. The
1 Commissioner of the Social Security Administration adopted the
2 DAB’s decision, making the decision final. See 20 C.F.R. § 498.222.
3 Cappetta then petitioned this Court for review.
4 Before we consider Cappetta’s arguments, we note one
5 additional point of background and procedural history. In 2010, the
6 SSA determined that Cappetta’s medical condition had improved and
7 that he was no longer disabled. Cappetta appealed that
8 determination, and in early 2012, the agency ultimately concluded
9 that Cappetta was in fact disabled and eligible to continue receiving
10 disability benefits. The lead SSA IG investigator subsequently
11 intervened, and it appears that the SSA terminated Cappetta’s
12 benefits because of the work activity that the investigator claimed
13 Cappetta had performed. The record is unclear as to whether
14 Cappetta is now receiving benefits, but the government does not
15 contest that Cappetta was disabled during the time that he failed to
16 report, and that he remained disabled at least up until the hearings
1 before the ALJ. The DAB did not discuss Cappetta’s continuing
2 disability when analyzing the statutory factors for setting an
3 assessment and penalty.
4 DISCUSSION
5 In his petition for review, Cappetta raises various legal and
6 factual challenges to the DAB’s decision. His principal argument is
7 the same one endorsed by the ALJ: that a failure to report work
8 activity after having received disability benefits for 24 months is not
9 “material” for purposes of 42 U.S.C. § 1320a‐8(a). In addition,
10 Cappetta also contends that only a failure to report work activity
11 amounting to substantial gainful activity is material, that the DAB
12 lacked authority to recommend an assessment and penalty, and that
13 he withheld information only once, rather than 53 times (which was
14 the basis for the large penalty amount). Finally, Cappetta argues that
15 the agency lacked substantial evidence for the assessment and penalty
16 amount that it imposed. We address each of these arguments below.
1 I. Standard of Review
2 At the outset, we determine whether we accord the DAB’s legal
3 conclusions, which were adopted by the Commissioner of Social
4 Security, the same deference we give other formal agency decisions
5 from the Commissioner or DAB. See Chevron, U.S.A., Inc. v. Nat. Res.
6 Def. Council, Inc., 467 U.S. 837 (1984). The government briefly asserts
7 in its brief that we must do so, citing Lawrence + Memorial Hospital v.
8 Burwell, 812 F.3d 257, 264 (2d Cir. 2016). Lawrence, however, applied
9 Chevron’s framework to the Secretary of Health and Human Services’
10 interpretation of a Medicare provision—an area of federal law that
11 the Department of Health and Human Services (DHHS) administers.
12 Id.; see also 42 U.S.C. §§ 1395ff, 1395kk.
13 By contrast, here, the DAB—which is part of DHHS, not the
14 SSA—interpreted parts of federal social security law, an area of law
15 that Congress has entrusted to a different agency, the Social Security
16 Administration. See 42 U.S.C. § 901 (establishing Social Security
1 Administration as an independent executive agency charged with
2 overseeing Social Security programs). However, through SSA
3 regulations, the Commissioner tasked the DAB with providing ALJ
4 administrative hearings and then reviewing the resulting decisions
5 for cases involving an assessment and penalty under 42 U.S.C. §
6 1320a‐8. See 20 C.F.R. §§ 498.201498.202, 498.221. After the DAB’s
7 process is complete, its final decision becomes the Commissioner’s
8 decision unless the DAB remands the decision to the ALJ. Id. §
9 498.222(a).
10 That arrangement raises a question about the deference we give
11 to the DAB’s legal interpretation, because “administrative
12 implementation of a particular statutory provision qualifies for
13 Chevron deference when it appears that Congress delegated authority
14 to the agency generally to make rules carrying the force of law, and
15 that the agency interpretation claiming deference was promulgated
16 in the exercise of that authority.” United States v. Mead Corp., 533 U.S.
1 218, 22627 (2001); see also Gonzales v. Oregon, 546 U.S. 243, 25868
2 (2006) (declining to accord Chevron deference to Attorney General
3 where AG was not delegated authority to interpret the provision at
4 issue). However, whether an agency administers a statute is not the
5 only relevant factor to accord that agency Chevron deference. As the
6 Mead Court explained, another “very good indicator of delegation
7 meriting Chevron treatment [is] express congressional authorization[]
8 to engage in the process of rulemaking or adjudication that produces
9 regulations or rulings for which deference is claimed.” 533 U.S. at 229.
10 In such circumstances, “[i]t is fair to assume generally that Congress
11 contemplates administrative action with the effect of law when it
12 provides for a relatively formal administrative procedure tending to
13 foster the fairness and deliberation that should underlie a
14 pronouncement of such force.” Id. at 230; see also Estate of Landers v.
15 Leavitt, 545 F.3d 98, 10507 (2d Cir. 2008) (applying Mead factors to
16 internal agency manual and declining to accord Chevron deference).
1 Here, that guidance easily resolves the Chevron question. First,
2 the Commissioner of the Social Security Administration ultimately
3 adopts the DAB’s decision when setting an assessment and penalty.
4 20 C.F.R. § 498.222(a). Although the Commissioner delegates the
5 authority to review SSA IG decisions to another federal agency, the
6 decision becomes that of the Commissioner, and the DAB’s decisions
7 are therefore “promulgated in the exercise of th[e] authority” given to
8 the Commissioner. Mead, 533 U.S. at 227. Second, as we explained
9 above, Congress intended for the Commissioner to use the
10 Administrative Procedure Act’s framework for formal adjudication,
11 another strong indicator that Chevron’s framework applies. See 42
12 U.S.C. § 1320a‐8(b)(2); Mead, 533 U.S. at 229.
13 Having decided that the Chevron framework applies, we briefly
14 review that standard and the “substantial evidence” standard that
15 applies to Cappetta’s factual challenges. Chevron requires us to apply
16 a two‐step inquiry to an agency’s interpretation of a statute. At the
1 first step of the analysis, a reviewing court must ask “whether
2 Congress has directly spoken to the precise question at issue. If the
3 intent of Congress is clear, that is the end of the matter; for the court,
4 as well as the agency, must give effect to the unambiguously
5 expressed intent of Congress.” Chevron, 467 U.S. at 842–43. If the
6 statute is ambiguous, then at the second step “the question for the
7 court is whether the agency’s answer is based on a permissible
8 construction of the statute,” id. at 843, in other words, whether the
9 agency’s interpretation is “reasonable,” Michigan v. EPA, 135 S. Ct.
10 2699, 2707 (2015).
11 As for Cappetta’s factual challenges, § 1320a‐8(d)(2) provides
12 that “[t]he findings of the Commissioner . . . if supported by
13 substantial evidence on the record considered as a whole, shall be
14 conclusive.” Substantial evidence is “such relevant evidence as a
15 reasonable mind might accept as adequate to support a conclusion.”
16 Richardson v. Perales, 402 U.S. 389, 401 (1971); see also Yancey v. Apfel,
1 145 F.3d 106, 111 (2d Cir. 1998) (“Where an administrative decision
2 rests on adequate findings sustained by evidence having rational
3 probative force, the court should not substitute its judgment for that
4 of the Commissioner.”).
5 II. Whether A Failure to Report Work Activity is “Material” for 6 the Purposes of 42 U.S.C. § 1320a‐8(a) 7 8 The threshold issue is whether the Commissioner had the
9 authority to impose an assessment and penalty for Cappetta’s failure
10 to report work activity. Understanding that issue requires some
11 background on the law governing an SSDI recipient’s eligibility for
12 benefits.
13 To obtain Social Security disability benefits, an applicant must
14 show in part that he or she “is under a disability,” 42 U.S.C.
15 § 423(a)(1)(E), which is defined as the “inability to engage in any
16 substantial gainful activity by reason of any medically determinable
17 physical or mental impairment which can be . . . expected to last for .
18 . . not less than 12 months,” id. § 423(d)(1)(A). To assess whether an
1 applicant can perform “substantial” activity, the SSA examines the
2 type of work that an applicant is capable of performing. See 20 C.F.R.
3 § 404.1572(a); see also id. § 404.1571 (“The work . . . that you have done
4 during any period in which you believe you are disabled may show
5 that you are able to work at the substantial gainful activity level. If
6 you are able to engage in substantial gainful activity, we will find that
7 you are not disabled.); id. § 404.1573 (using the circumstances of an
8 applicant’s employment to determine if the individual is disabled).
9 The definition for “gainful” explains that the work activity must be
10 done “for pay or profit.” Id. § 404.1572(b).
11 Once an individual is receiving SSDI benefits, that recipient is
12 subject to certain reporting and review requirements to ensure his or
13 her continuing eligibility. See 42 U.S.C. § 421(i); see also 20 C.F.R.
14 § 404.1589 (“After we find that you are disabled, we must evaluate
15 your impairment(s) from time to time to determine if you are still
16 eligible for disability cash benefits.”). However, certain restrictions
1 apply to the Commissioner’s review of whether an individual
2 remains disabled. Most significantly for our purposes, 42 U.S.C. §
3 421(m) provides that:
4 (1) In any case where an individual entitled to disability 5 insurance benefits . . . has received such benefits for at 6 least 24 months 7 (A) no continuing disability review conducted by 8 the Commissioner may be scheduled for the 9 individual solely as a result of the individual’s 10 work activity; [and] 11 (B) no work activity engaged in by the individual 12 may be used as evidence that the individual is no 13 longer disabled . . . . 14 (2) An individual to which paragraph (1) applies shall 15 continue to be subject to 16 (A) continuing disability reviews on a regularly 17 scheduled basis that is not triggered by work; and 18 (B) termination of benefits under this subchapter 19 in the event that the individual has earnings that 20 exceed the level of earnings established by the 21 Commissioner to represent substantial gainful 22 activity. 23 24 Cappetta argues that 42 U.S.C. § 421(m)(1) makes “work
25 activity” irrelevant for a continuing disability review, and as a result,
26 his failure to report that activity cannot be “material” for purposes of
1 42 U.S.C. § 1320a‐8(a). As we described above, § 1320a‐8(a)(1)(C)
2 authorizes the Commissioner to impose an assessment and penalty
3 where a SSDI recipient “omits from a statement or representation . . .
4 or otherwise withholds disclosure of, a fact which the person knows
5 or should know is material to the determination of any initial or
6 continuing right to or the amount of monthly insurance benefits.”
7 According to the Commissioner and the DAB, § 421(m)(2)(B)
8 defeats Cappetta’s argument. That section permits the Commissioner
9 to terminate benefits if an SSDI recipient’s earnings exceed the level
10 that amounts to “substantial gainful activity.” 42 U.S.C. §
11 421(m)(2)(B). However, SSA regulations make work activity relevant
12 to calculating substantial gainful activity. The SSA looks primarily to
13 earnings “from your work activity as an employee” to determine if an
14 SSDI recipient has “engaged in substantial gainful activity.” 20 C.F.R.
15 § 404.1574(b)(2). The Commissioner and DAB conclude from this
16 definition that reporting work activity is “material” under 42 U.S.C.
1 1320a‐8(a), because the SSA must first determine whether a recipient’s
2 earnings derive from work activity to determine whether they are
3 relevant earnings for purposes of continuing SSDI eligibility. The
4 Commissioner notes that that interpretation is consistent with the
5 statute, because the SSA still may not use the work activity as
6 evidence that an SSDI recipient is no longer physically disabled.
7 We agree, and conclude that the Commissioner may properly
8 consider a failure to report work activity that generates profit or pay
9 “material” for purposes of § 1320a‐8, and that the plain text of the
10 statute authorizes the Commissioner to do so. As a result, we resolve
11 this first issue at Chevron step one.
12 Section 423(d)(1)(A) conditions SSDI benefits on the inability to
13 perform substantial gainful activity. As we have explained, SSA
14 regulations in turn define substantial gainful activity as earnings
15 derived largely from work—a definition that Cappetta has not
16 challenged in his petition for review. 20 C.F.R. §§ 404.1572, 404.1574.
1 Congress explicitly made those earnings relevant to continuing
2 eligibility under 42 U.S.C. § 421(m)(2)(B), thus connecting earnings
3 that amount to substantial gainful activity to an SSDI recipient’s
4 continued eligibility. Thus, although § 421(m)(1) makes “work
5 activity” irrelevant as both a reason to conduct a continuing disability
6 review, and as evidence in such a review, the statute just as clearly
7 permits the SSA to consider substantial gainful activity to terminate
8 benefits. See 42 U.S.C. § 421(m)(2)(B); see also Exemption of Work
9 Activity as a Basis for a Continuing Disability Review, 71 Fed. Reg.
10 66840, 66846 (Nov. 17, 2006) (explaining that SSA would not use work
11 activity to determine continuing physical disability, but that work
12 activity can be used to assess whether an SSDI recipient generates
13 earnings amounting to substantial gainful activity). As a result, the
14 DAB correctly concluded that failing to report work activity is
15 material under § 1320a‐8.
1 The legislative history further supports our conclusion that the
2 agency’s interpretation is correct.6 A committee report for the Ticket
3 to Work and Work Incentives Improvement Act of 1999, which made
4 changes to continuing disability reviews for SSDI recipients, explains
5 that those changes were “intended to encourage long‐term SSDI
6 beneficiaries to return to work by ensuring that work activity would
7 not trigger an unscheduled medical review of their eligibility.” H.R.
8 Rep. 106‐393(I), at 45 (1999). The report then explains that “like all
9 beneficiaries, long‐term beneficiaries would have benefits suspended
10 if earnings exceeded the substantial gainful activity level, and would
6 As we have previously observed, the Supreme Court has sent “mixed messages” about whether we may consider legislative history when determining whether a statute is ambiguous at Chevron step one. Coke v. Long Island Care At Home, Ltd., 376 F.3d 118, 127 & n. 3 (2d Cir. 2004), vacated on other grounds by Long Island Care At Home, Ltd. v. Coke, 546 U.S. 1147 (2006). Given that the legislative authority speaks directly to the issue Cappetta raises, we find it appropriate to supplement our analysis with the legislative history here. Cf. United States v. Gayle, 342 F.3d 89, 94 (2d Cir. 2003) (“As a general matter, we may consider reliable legislative history where, as here, the statute is susceptible to divergent understandings and, equally important, where there exists authoritative legislative history that assists in discerning what Congress actually meant.”).
1 be subject to periodic continuing disability reviews.” Id. Those
2 observations support the Commissioner’s reading of the statute,
3 because they demonstrate Congress’s clear intent to continue making
4 substantial gainful activity—which the SSA assesses by looking
5 primarily at earnings derived from work—relevant and applicable to
6 SSDI beneficiaries.
7 As a result, the DAB correctly concluded that a failure to report
8 work activity is material under 42 U.S.C. § 1320a‐8(a). Cappetta’s
9 failure to make such reports consequently made him subject to a
10 potential assessment or penalty under § 1320a‐8.7
7 SSA regulations unambiguously require SSDI beneficiaries to report work activity to the agency. See 20 C.F.R. § 404.1588. That reporting requirement and Cappetta’s own admission that he knew he needed to report work activity resolve any question that the complex interplay between the statutory provisions at issue in this case left Cappetta without notice.
1 III. Cappetta’s Remaining Legal Challenges
2 Cappetta also raises four other questions of law that challenge
3 the Commissioner’s authority to impose an assessment and penalty
4 in this case. We find each of his arguments also unavailing.
5 First, Cappetta contends that a failure to report work activity is
6 material only if the work activity amounts to substantial gainful
7 activity. We conclude otherwise. If adopted, the approach Cappetta
8 urges would assign SSDI recipients responsibility to determine
9 whether their work activity was significant enough to disqualify them
10 for benefits, and potentially allow broad claims of good faith if a
11 beneficiary made the wrong call. However, calculating whether
12 earnings amount to substantial gainful activity that prevent the
13 continuing receipt of disability benefits is a complex undertaking that
14 requires the SSA to have a complete picture of a SSDI recipient’s
15 earnings. See 20 C.F.R. §§ 404.1574, 404.1592404.1592a. Thus,
16 requiring SSDI recipients to report all work activity, as the SSA does,
1 see 20 C.F.R. § 404.1588, helps to ensure an efficiently‐administered
2 program and to prevent fraud. Accordingly, we agree with the
3 Commissioner that a failure to report work activity, even if that
4 activity is not substantial and gainful, may be considered “material”
5 under 42 U.S.C. § 1320a‐8(a).8
6 Second, Cappetta asserts that the DAB may not impose an
7 assessment or penalty where the ALJ did not first recommend an
8 assessment or penalty. In support of that argument, Cappetta points
9 to 20 C.F.R. § 498.221(h), which states that the “DAB may remand a
10 case to an ALJ for further proceedings, or may issue a recommended
11 decision to decline review or affirm, increase, reduce, or reverse any
12 penalty or assessment determined by the ALJ.” 20 C.F.R. § 498.221(h).
13 Cappetta points to the phrase “any penalty or assessment determined
14 by the ALJ” to contend that the DAB “fundamentally misunderstood
8 However, as we discuss in section IV, infra, whether the work activity amounts to substantial gainful activity is relevant to whether an assessment is appropriate and the amount of any penalty.
1 its role in the appeals process” because the “regulation itself does not
2 appear to vest the DAB with the authority to find liability in cases . . .
3 w[h]ere the ALJ did not issue any penalty or assessment.” Pet’r’s Br.
4 5152.
5 That argument is also unavailing. The SSA regulations make
6 clear that the DAB may “reverse” an ALJ decision and that it may
7 adjust the amount of an assessment and penalty as part of its review.
8 20 C.F.R. 498.221(h). That power includes the ability to reverse an
9 ALJ’s decision setting no assessment or penalty. As a result, the DAB
10 acted within its authority by imposing the assessment and penalty in
11 this case.
12 Third, Cappetta also argues that the Commissioner may not
13 impose a penalty for each month that he failed to report work activity.
14 According to Cappetta, § 1320a‐8 “proscribes ‘omissions’ only when
15 accompanied by ‘statements.’” Appellant’s Br. 53. Cappetta claims
16 that his only “statement” was the one he made to investigators in
1 November 2009, when he claimed he had not worked for Peter
2 Cameron.9
3 The plain text of 42 U.S.C. § 1320a‐8 resolves Cappetta’s
4 argument. Section 1320a‐8(a) authorizes a penalty where “[a]ny
5 person . . . omits from a statement or representation . . . , or otherwise
6 withholds disclosure of, a fact which the person knows or should know
7 is material to the determination of any initial or continuing right to or
8 the amount of monthly insurance benefits.” 42 U.S.C. § 1320a‐8(a)(1)
9 (emphasis added). That section then provides a penalty for “each such
10 statement or representation or each receipt of such benefits or
11 payments while withholding disclosure of [a material] fact.” Id.
12 (emphasis added). By separating omissions involving a statement
9 The Commissioner argues that Cappetta waived this argument because he failed to raise it before the agency. We decline to hold that Cappetta waived or failed to exhaust this argument because he did not have an opportunity to raise this issue. Until this petition for review, SSA IG was the appealing party, and Cappetta was merely responding to SSA IG’s arguments because he had successfully argued that no assessment or penalty was appropriate. Accordingly, we consider Cappetta’s argument on the merits.
1 from situations involving the “withholding” of facts, the statute
2 unambiguously permits imposing a penalty for each month that a
3 SSDI recipient withholds material information while receiving
4 benefits, such as the situation here. Indeed, it is the SSA’s practice to
5 view each month in which material information is concealed or
6 omitted as a separate false statement or misrepresentation. See, e.g.,
7 Inspector Gen. of Soc. Sec. Admin. v. Antone, CR4051 (Departmental
8 Appeals Board July 20, 2015) (applying penalties in the amount of
9 $500 per month, where there was a total concealment period of 62
10 months).
11 However, we note one substantial, but separate, concern with
12 the agency’s timeframe for imposing penalties and for calculating the
13 amount of benefits that Cappetta received when considering the
14 assessment. The ALJ concluded, and the parties do not dispute, that
15 Cappetta did not perform any work activity after November 2009.
16 Nevertheless, the Commissioner imposed a penalty on Cappetta for
1 his receipt of benefits for each month thereafter until April 2011 and
2 used that same date to calculate the amount Cappetta improperly
3 received in benefits, with no explanation. If Cappetta was not
4 working from November 2009 until April 2011, then he had no
5 earnings to report to the SSA, and the Commissioner could not
6 impose a penalty on him for that period under § 1320a‐8(a).
7 Furthermore, it is also unclear why the DAB relied on that April 2011
8 date when calculating the amount of benefits that Cappetta
9 improperly received. We trust that, on remand, the DAB will either
10 explain the legal basis for the timeframe it used, or adjust the
11 timeframe for the assessment and the penalty accordingly.
12 Finally, Cappetta argues that the DAB erred by considering his
13 failure to report work activity prior to November 27, 2006, when
14 determining the degree of his culpability. That date is significant
15 because it is the date when the Commissioner could first begin
1 imposing an assessment and penalty on SSDI recipients for
2 withholding material information.10 See supra n.4.
3 We conclude that the DAB was entitled to consider Cappetta’s
4 failure to report work activity prior to November 27, 2006. First, the
5 SSA IG appropriately limited the assessment and penalty it sought to
6 impose to any activity following November 27, 2006. As a result,
7 Cappetta was not ordered to pay for an omission for which the
8 Commissioner could not impose an assessment and penalty at the
9 time the omission occurred. Second, the SSA required Cappetta to
10 report any work activity long before November 2006. See Federal Old
11 Age, Survivors, and Disability Insurance Benefits; Supplemental
12 Security Income for the Aged, Blind, and Disabled, 45 Fed. Reg. 55566,
13 55596 (Aug. 20, 1980) (implementing work reporting requirement).
14 Thus, Cappetta’s failure to report work activity beginning in 2001
10 The government also argues that Cappetta waived this argument, but for reasons we discussed in footnote 9, we again reach the merits of Cappetta’s arguments.
1 does contribute to his culpability and is relevant for assessing the
2 appropriate amount of an assessment and penalty. See 42 U.S.C. §
3 1320a‐8(c)(2).
4 IV. Whether the Commissioner Had Substantial Evidence or 5 Failed to Consider Certain Evidence in Imposing an 6 Assessment and Penalty of $153,583.60 7 8 Although we agree with the foregoing legal conclusions of the
9 Commissioner, we find that the Commissioner erred in adopting the
10 amount of the DAB’s recommended assessment and penalty. First, as
11 to the assessment, the DAB failed to adequately account for the SSA’s
12 lack of financial loss and Cappetta’s continued disability. Second, as
13 to the penalty and assessment, we conclude that the DAB lacked
14 substantial evidence for concluding that Cappetta’s work activity was
15 significant, given that the DAB accepted the ALJ’s credibility
16 determinations. We address each point below.
17 Section 1320a‐8 authorizes an assessment “in lieu of damages
18 sustained by the United States” for “not more than twice the amount
1 of benefits or payments paid as a result of . . . such a withholding of
2 disclosure.” 42 U.S.C. § 1320a‐8(a)(1). For both assessments and
3 penalties, the statute also requires the Commissioner to “take into
4 account”
5 (1) the nature of the statements, representations, or 6 actions referred to in subsection (a) of this section and the 7 circumstances under which they occurred; (2) the degree 8 of culpability, history of prior offenses, and financial 9 condition of the person committing the offense; and 10 (3) such other matters as justice may require. 11 12 Id. § 1320a‐8(c); see also 20 C.F.R. § 498.106(a).
13 Section 1320a‐8(a)(1) requires the agency to assess the amount
14 of benefits improperly paid when imposing an assessment. Here,
15 however, the DAB failed to adequately consider that the SSA suffered
16 no loss whatsoever due to Cappetta’s failure to report work activity.
17 The DAB recommended that the Commissioner impose an
18 assessment of $47,583.60—an amount that the DAB stated was “the
19 amount of benefits improperly received by [Cappetta].” AR 51.
20 However, as both the ALJ and DAB held, the evidence that the SSA
1 IG presented does not establish that Cappetta engaged in substantial
2 gainful activity. Based on our review of the applicable statutes and
3 regulations, Cappetta’s failure to report by itself did not provide the
4 SSA with the authority to terminate his benefits. See, e.g., 20 C.F.R. §
5 404.1596 (specifying circumstances under which the SSA may
6 suspend or terminate benefits). As a result, it appears that the SSA
7 could not suspend Cappetta’s monthly benefits under these
8 circumstances and that it did not suffer any financial loss. Because the
9 statute is clear that an assessment cannot be “more than twice the
10 amount of benefits or payments paid as a result of the beneficiary’s
11 omission,” 42 U.S.C. § 1320a‐8(a)(3), the maximum assessment
12 available here is zero.
13 In addition, while the SSA IG investigation was ongoing, SSA
14 once again concluded that Cappetta remained medically disabled for
15 purposes of SSDI benefits. That conclusion further underscores that
1 Cappetta remained eligible to receive benefits during the period that
2 he failed to report work activity.
3 Thus, to summarize, the DAB’s failure to consider the SSA’s
4 loss and Cappetta’s continued disability when determining the
5 appropriate assessment was error. Because there is no evidence that
6 the work activity Cappetta failed to report would have disqualified
7 him from receiving benefits, the amount of benefits improperly
8 received is zero. It thus follows that, because the statute caps
9 assessments at “twice the amount of benefits or payments’ paid as a
10 result of misrepresentations or omissions,” 42 U.S.C. 1320a‐8(a)(3),
11 the maximum assessment that the SSA IG may impose on Cappetta
12 would be $0. Because the $47,583.60 assessment exceeds that statutory
13 maximum, we vacate the assessment.
14 We also conclude that the DAB lacked substantial evidence for
15 the penalty amount because it accepted the ALJ’s credibility findings.
16 The DAB’s approach resulted in a flawed factual analysis and
1 undermined key factors supporting the DAB’s recommended
2 penalty. See Williams ex rel. Williams v. Bowen, 859 F.2d 255, 261 (2d
3 Cir. 1988) (finding administrative decision unsupported by
4 substantial evidence where ALJ failed to “set forth reasons for
5 rejecting consistent and uncontradicted . . . testimony”).
6 As we detailed in our overview of the facts, Cappetta admitted
7 during the SSA IG investigation that he sporadically assisted
8 Cameron and that in return, Cameron helped him with work on his
9 house. However, Cappetta denied being paid for his “work.” At the
10 hearing before the ALJ, Cappetta’s statements were largely consistent
11 with his interview. For example, Cappetta stated that he did “little
12 things” to assist Cameron, received small payments in exchange or as
13 a gift, received a gift from Cameron to help finance a trip to Italy, and
14 denied that he worked for Cameron.
15 Cameron’s testimony at the hearing was largely consistent with
16 Cappetta’s interview and testimony, but inconsistent with what he
1 previously told the SSA IG investigators. Noting the inconsistencies,
2 the ALJ credited Cameron’s hearing testimony, relying on the hearing
3 testimony when it was inconsistent with the statements that Cameron
4 allegedly gave to SSA IG. According to the hearing testimony,
5 Cameron denied that Cappetta worked for him and instead stated
6 that Cappetta would run small errands for him or advise him how to
7 perform certain construction tasks. Cameron also noted that he gave
8 gifts to Cappetta and his family, worked on Cappetta’s house, and
9 gave Cappetta funds to pay for the items purchased during errands.
10 However, he denied paying Cappetta any wages. On that record, the
11 ALJ concluded that Cappetta engaged in “work activity,” but
12 determined that it was only “sporadic” and that much of work
13 involved running errands for Cameron. AR 133, 135.
14 The DAB did not disturb the ALJ’s credibility findings on
15 appeal. Indeed, the DAB stated its general rule of deferring to the
16 ALJ’s weighing of evidence and credibility assessments “absent a
1 compelling reason to do otherwise.” AR 49. The DAB then agreed that
2 Cappetta’s work activity was “sporadic,” as the ALJ had concluded.
3 AR 49.. However, the DAB also determined that the work activity was
4 “significant.” AR 50. 11 Having drawn that conclusion, the DAB
5 concluded that the evidence supported an assessment equal to the
6 amount of benefits paid from November 2006 to April 2011, and a
7 penalty of $2,000 per month (out of a possible $5,000 per month).
8 The DAB lacked substantial evidence for that conclusion for
9 two reasons. First, having accepted the ALJ’s credibility findings, the
10 DAB did not have substantial evidence to conclude that Cappetta’s
11 work activity was “significant.” AR 50. Instead, Cappetta’s and
11 To help support this conclusion, the DAB stated that the “ALJ did not discuss as part of his assessment of Peter Cameron’s statement to investigators that on the days [Cappetta] did work, he did so for 35 hours at a time, and nothing in Peter Cameron’s testimony rebuts that statement.” AR 50. However, the portion of the transcript that the DAB cites to support that argument rebuts the DAB’s statement, or at least calls it into significant doubt. When asked whether Cappetta ever worked for him, Cameron stated “No, he didn’t.” AR 416. Cameron repeated his denials later in his testimony, and also denied that he told the SSA IG investigator that Cappetta worked for him.
1 Cameron’s testimony—which together form the primary evidence of
2 Cappetta’s work activity deemed credible by the agency—show that
3 Cappetta worked for Cameron only on an occasional basis, merely
4 running errands and providing advice on construction techniques.
5 Second, that same testimony from Cappetta and Cameron—which
6 was largely consistent—established only that Cameron at times gave
7 Cappetta and his family small sums of money and performed work
8 on his house in exchange for Cappetta’s help. That evidence falls far
9 short of establishing that Cappetta engaged in work activity that can
10 be described as “significant.” See Pratts v. Chater, 94 F.3d 34, 38 (2d
11 Cir. 1996) (finding that SSA denial of benefits was not supported by
12 substantial evidence because ALJ made findings of fact inconsistent
13 with the record).
14 The DAB’s lack of substantial evidence impaired its weighing
15 of the § 1320a‐8 factors and requires the DAB to reconsider the penalty
16 amount on remand. The limited nature of Cappetta’s work and
1 earnings is relevant to at least two of these factors: the degree of
2 Cappetta’s culpability and the nature of his withholding of
3 information from the SSA. 42 U.S.C. § 1320a‐8(c).12 Specifically, the
4 record contains insufficient evidence to show that Cappetta’s
5 sporadic work activity was of such a nature to render the SSA IG’s
6 penalty amount reasonable. Additionally, Cappetta’s lack of
7 reporting is rendered less culpable by the relatively small amounts he
8 failed to report and the limited nature of the money and
9 compensation that he received (small sums of money and some free
12 Other facts do support the DAB’s conclusion that Cappetta bore considerable culpability by failing to report. As the DAB correctly noted, Cappetta testified that he was aware that he must report work activity. Furthermore, Cameron testified that when Cappetta first began to help him with errands and advice, Cappetta informed him that he could only perform small amounts of work in order to continue receiving SSDI benefits. Although the DAB did not mention that second part of Cameron’s testimony in its decision, that statement provides further evidence of Cappetta’s culpability. Our decision does not discount the relevance of these factors—indeed, the DAB can and should consider those facts. Rather, our view of the evidence and criticism of the DAB’s decision results from the DAB’s own decision to adhere to the ALJ’s credibility findings and weighing of the evidence, as well as the limited evidence that the SSA IG put forth at the hearing.
1 labor on his house). On remand, the DAB must account for these facts
2 when imposing a penalty.
3 CONCLUSION
4 Our decision affirms the Commissioner’s authority to impose
5 an assessment and penalty in cases where a beneficiary withholds
6 information relating to work activity even after the initial 24‐month
7 period of benefits has passed. However, the agency must adequately
8 support its conclusion that the recipient’s conduct and the agency’s
9 financial loss merit the imposed assessment and penalty. Here, the
10 record before this Court cannot support the amount of the assessment
11 because the SSA did not suffer financial loss, nor does it support the
12 penalty in light of the DAB’s reliance on the ALJ’s credibility findings.
13 For the foregoing reasons, we GRANT the petition for review,
14 VACATE the Commissioner’s decision, and REMAND for further
15 proceedings consistent with this opinion.
Related
Cite This Page — Counsel Stack
Cappetta v. Comm'r of Soc. Sec. Admin., Counsel Stack Legal Research, https://law.counselstack.com/opinion/cappetta-v-commr-of-soc-sec-admin-ca2-2018.