COMMONWEALTH OF MASSACHUSETTS

DIVISION OF ADMINISTRATIVE LAW APPEALS

Suffolk, ss.

Department of Public Health,

Petitioner,
Docket No. PH-08-423
v.

M&M Seafood, Inc.,

Manuel Monteiro, Sr. and
Maria Monteiro,
Respondents.

Appearance for Petitioner:

Madeline Piper, Esq.

Deputy General Counsel
Massachusetts Department of Public Health
250 Washington Street, 2nd Floor
Boston, Massachusetts 02108

Appearance for Respondents:

Brenda Panaggio, Esq.

Donnelly & Panaggio
275 Martine Street, Suite 206
Fall River, Massachusetts 02723

Administrative Magistrate:

Natalie S. Monroe, Esq.

SUMMARY OF DECISION

The petitioner demonstrated that M&M Seafood, Inc., its owners, officers, directors and manager should be disqualified from the Women, Infants and Children's program (the "WIC Program") for three years for a pattern of overcharging the WIC Program. The petitioner also proved that the respondents violated other provisions in the store's WIC contract, including participating in activities of questionable business integrity and allowing a WIC participant to use WIC checks to buy unauthorized grocery items. The petitioner did not demonstrate that the respondents trafficked in WIC checks or that the company's foreign corporation status had been revoked.


DECISION

On June 9, 2008, the Department of Public Health ("DPH") notified the respondents, M&M Seafood, Inc., Manuel Monteiro, Sr., and Maria Monteiro, that the agency was terminating their participation as vendors in the Women, Infants and Children's program (the "WIC Program") for six years for numerous alleged violations of the WIC program, including trafficking in WIC checks and overcharging the WIC program. The respondents timely appealed the DPH's decision. On June 25, 2008, the appeal was referred to the Division of Administrative Law Appeals for a full hearing pursuant to 7 C.F.R. § 246.18 (2005).

On July 24, 2008, DPH filed a motion in limine seeking to have one of its witnesses, an undercover compliance buyer, testify under a pseudonym and behind a visual barrier in order to conceal the witness's identity. The respondents opposed the motion on August 6, 2008. After hearing oral argument from both parties, I allowed DPH's motion on November 4, 2008. I ordered the witness to be referred to under the pseudonym of "Compliance Buyer," allowed the witness to testify behind a visual barrier, and prohibited the parties from asking any questions that could lead to the discovery of the Compliance Buyer's identity.
On November 4, 2008, I held a hearing in accordance with 801 CMR 1.02, the Standard Adjudicatory Rules of Practice and Procedure (Informal Rules). At the beginning of the hearing, the parties submitted a set of agreed-upon facts, which was marked as Exhibit "A" for identification. Four witnesses testified at the hearing. Mary Blocksidge and the Compliance Buyer testified for DPH; Manuel Monteiro, Sr. and Marlena Lobo testified on behalf of the respondents. I admitted twenty-three exhibits (Exhibits 1-23) into the record during the hearing and there are two cassette tapes of the proceedings.

The record remained open until December 4, 2008, to allow DPH and the respondents to file Findings of Fact and Conclusions of Law. The record closed on December 5, 2008.

FINDINGS OF FACT

Based on the testimony of Mary Blocksidge, Marlena Lobo, Manuel Monteiro, Sr., and the Compliance Buyer; the stipulations of fact; the exhibits presented at the hearing (Exhibits 1-23); and reasonable inferences drawn from the evidence, I make the following findings of fact:

1. The WIC Program provides food supplements and nutrition information to eligible pregnant women, breastfeeding mothers, infants, and children up to five years old. (Exhibit A at ¶ 4).

2. DPH is responsible for administering the WIC Program in Massachusetts. (Exhibit A at ¶ 3).

3. DPH issues eligible women, infants and children "WIC checks," which can be used to buy food. (Exhibit A at ¶¶ 5, 14).

4. Each WIC check lists the specific types and quantities of food that can be purchased with the check. The foods listed on the check are tailored to the WIC participant's specific health needs. (Exhibit A at ¶¶ 5, 14).

5. In some instances, the WIC Program regulates which brands can and cannot be purchased with a WIC check. For example, the Massachusetts WIC Program has identified approximately thirty-five national and one hundred local brands of cereal that may be purchased with a WIC check. (Testimony of Mary Blocksidge; Exhibits 3, 22, 24).

6. WIC checks can be redeemed only at stores that DPH has approved. An approved store is known as a "WIC vendor." (Exhibit A at ¶¶ 5, 6).

7. A store seeking to become a WIC vendor in Massachusetts must apply to DPH. (Testimony of Mary Blocksidge; Exhibit A at ¶ 6).

8. The WIC Program sets a maximum price that a WIC vendor can charge for food purchased with a WIC check. (Testimony of Mary Blocksidge and Compliance Buyer; Exhibits 3, 20).

9. In calculating the cost of food purchased with a WIC check, the WIC vendor must use the actual price listed on the item or the maximum price allowed by the WIC Program, whichever is less. (Testimony of Mary Blocksidge and Compliance Buyer; Exhibits 3, 20).

10. When a WIC participant uses a WIC check to buy food, the WIC vendor must check the participant's WIC identification card to confirm that the person's identity matches the name on the WIC check. (Testimony of Mary Blocksidge and Compliance Buyer; Exhibits 3, 22, 24).

11. M&M Seafood, Inc. ("M&M Seafood") is a foreign corporation that is authorized to conduct business in Massachusetts. (Testimony of Manuel Monteiro, Sr.; Exhibit A at ¶¶ 8, 9).

12. M&M Seafood operates a grocery store and catering business located at 1124 Main Street in Brockton, Massachusetts. (Testimony of Manuel Monteiro, Sr.; Exhibit A at ¶ 9; Exhibit 19).

13. Manuel Monteiro, Sr. and Maria Monteiro own M&M Seafood. They are its sole officers and directors. (Testimony of Manuel Monteiro, Sr.; Exhibit A at ¶ 8; Exhibit 19).

14. Mr. Monteiro makes all of the major decisions for the company. He is responsible for all personnel matters, including hiring, firing and signing paychecks. (Testimony of Manuel Monteiro, Sr.).

15. Mr. Monteiro also runs the seafood portion of the business, including buying fresh seafood for the store, and therefore often is not in the store during regular business hours. (Testimony of Manuel Monteiro, Sr.).

16. Mrs. Monteiro is responsible for M&M Seafood's catering business, which is located in the back of the store. (Testimony of Manuel Monteiro, Sr.).

17. Manuel Monteiro, Jr. is Manuel and Maria Monteiro's son. He manages the day-to-day operations of the store, including supervising the cashiers. (Testimony of Manuel Monteiro, Sr.).

18. On or about February 12, 2007, M&M Seafood applied to become a WIC vendor. (Exhibit A at ¶ 13; Exhibit 19).

19. On July 10, 2007, Manuel Monteiro, Jr. attended mandatory training to learn about the WIC Program. The training included instructions on how to process WIC checks, what foods are authorized under the WIC Program, and the sanctions for violating the WIC Program. (Testimony of Mary Blocksidge and Manuel Monteiro, Sr.; Exhibit 4).

20. On or about August 3, 2007, M&M Seafood and DPH entered into a written vendor agreement (the "Vendor Agreement"), which authorized M&M Seafood to become a vendor in the WIC Program. (Testimony of Mary Blocksidge; Exhibits 3, 5).

21. The Vendor Agreement contains the policies and procedures that M&M Seafood was required to follow as a WIC vendor. (Exhibit 3).

22. The Vendor Agreement contains sanctions for violating the policies and procedures set forth in the agreement. Violations are classified in Classes I through IV. (Exhibit 3).

23. When M&M Seafood entered into the Vendor Agreement, DPH issued the store a WIC stamp, which the store was required to use on all WIC checks that it accepted. M&M Seafood's WIC stamp bore the vendor number 6539, which number was unique to M&M Seafood. (Testimony of Mary Blocksidge; Exhibit A at ¶ 8; Exhibits 3, 4, 5).

24. When M&M Seafood became a WIC vendor, DPH gave M&M Seafood training materials regarding the proper method for processing WIC checks. (Testimony of Mary Blocksidge and Manuel Monteiro, Sr.).

25. M&M Seafood and WIC renewed the Vendor Agreement on November 5, 2007. (Testimony of Mary Blocksidge; Exhibits 3, 4).

26. On November 5, 2007, Manuel Monteiro, Jr. attended a second WIC training session. The training covered the same material that had been addressed at the July 10, 2007 session, including the sanctions for violating the WIC Vendor Agreement. (Testimony of Mary Blocksidge and Manuel Monteiro, Sr.; Exhibit 5).

27. During the time that M&M Seafood was a WIC vendor, Manuel Monteiro, Jr. was responsible for overseeing the WIC Program for the store. (Testimony of Manuel Monteiro, Sr. and Marlena Lobo; Exhibits 4, 5).

28. After a store is approved to become a WIC vendor, an undercover compliance buyer hired by DPH periodically monitors the store to determine whether it is complying with the WIC Program. (Testimony of Mary Blocksidge and the Compliance Buyer; Exhibit A at ¶¶ 10, 12).

29. The Compliance Buyer visited M&M Seafood on March 4, 2008; March 25, 2008; April 3, 2008; and April 16, 2008. (Testimony of Compliance Buyer; Exhibits 6, 9, 12, 15).

The March 4, 2008 Visit
30. On March 4, 2008, the Compliance Buyer shopped at M&M Seafood with two WIC checks; one had a serial number that ended in 53 ("Check 53") and the other had a serial number ending in 54 ("Check 54"). (Exhibits 6, 7).
31. Check 53 authorized the Compliance Buyer to buy the following items:
2 gallons of milk
1 dozen large eggs
36 ounces or less of cereal
3 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 7).



32. The Compliance Buyer used Check 53 to buy the following items, all of which were WIC-approved:
Item: Cost:
1 gallon of milk $4.50
2 13-ounce boxes of White Rose Rice Crisps ($1.99 each) $3.98
2 46-ounce cans of grape Juicy Juice ($2.50 each) $5.00
TOTAL $13.48
(Testimony of Compliance Buyer; Exhibits 6, 8).

33. M&M Seafood charged the WIC Program $27.56 for the items purchased with Check 53. (Testimony of Compliance Buyer; Exhibit 7).

34. Check 54 authorized the Compliance Buyer to purchase the following items:
1 gallon of milk
1 pound or less of cheese
1 18-ounce jar of peanut butter or 1 pound of peas or beans
2 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 7).

35. The Compliance Buyer used Check 54 to buy the following items, all of which were WIC-approved:
Item: Cost:
1 gallon of milk $4.50
1 16-ounce package of cheese $3.99
1 16-ounce package of beans $1.69
1 46-ounce can of grape Juicy Juice $2.50
TOTAL $12.68
(Testimony of Compliance Buyer; Exhibits 6, 8).

36. M&M Seafood charged the WIC Program $17.47 for the items purchased with Check 54. (Testimony of Compliance Buyer; Exhibit 7).

37. Before accepting the WIC checks, the cashier at M&M Seafood who waited on the Compliance Buyer did not ask for the buyer's WIC identification. (Testimony of Compliance Buyer; Exhibit 6).

38. Before accepting the WIC checks, the cashier did not observe the Compliance Buyer sign them. (Testimony of Compliance Buyer).

39. After accepting Checks 53 and 54 from the Compliance Buyer, M&M Seafood stamped the checks with its WIC vendor stamp. (Exhibit 7).

The March 25, 2008 Visit
40. On March 25, 2008, the Compliance Buyer used two WIC checks to buy food at M&M Seafood; one check had a serial number that ended in 57 ("Check 57") and the other had a serial number ending in 58 ("Check 58"). (Exhibits 9, 10).

41. Check 57 authorized the Compliance Buyer to buy the following items:
2 gallons of milk
1 dozen large eggs
36 ounces or less of cereal
3 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 10).

42. The Compliance Buyer originally selected two boxes of General Mills Cheerios, a gallon of milk and two cans of Juicy Juice punch for Check 57. (Testimony of Compliance Buyer; Exhibit 9).

43. When the cashier was ringing up the Compliance Buyer's purchases, the cashier noted that the Compliance Buyer did not have all of the food listed on Check 57. (Testimony of Compliance Buyer; Exhibit 9).

44. The cashier asked the Compliance Buyer if she wanted more milk, cereal or juice because she (the cashier) was "going to ring it all up anyway." (Testimony of Compliance Buyer; Exhibit 9).

45. The Compliance Buyer said she did not want any more food. (Testimony of Compliance Buyer; Exhibit 9).

46. The cashier then asked the Compliance Buyer if she wanted a brand of cereal other than Cheerios because "we don't care here." (Testimony of Compliance Buyer; Exhibit 9).

47. The Compliance Buyer put back the Cheerios and chose Post Cocoa Pebbles, which is not a WIC-approved cereal. (Testimony of Compliance Buyer; Exhibits 9, 22).

48. The cashier allowed the Compliance Buyer to use Check 57 to buy the following items:
1 gallon of milk
2 17-ounce boxes of Post Cocoa Pebbles
2 46-ounce cans of Juicy Juice punch
(Testimony of Compliance Buyer; Exhibit 9).
49. The total cost of the WIC-approved products - milk ($4.50) and Juicy Juice ($5.00) - that the Compliance Buyer purchased with Check 57 was $9.50. (Exhibits 9, 11).

50. M&M Seafood charged the WIC Program $28.00 for the items purchased with Check 57. (Testimony of Compliance Buyer; Exhibit 10).


51. Check 58 authorized the Compliance Buyer to purchase the following items:
1 gallon of milk
1 pound or less of cheese
1 18-ounce jar of peanut butter or 1 pound of peas or beans
2 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 10).
52. The Compliance Buyer used Check 58 to buy the following items, all of which were WIC-approved:
Item: Cost:
1 gallon of milk $4.50
1 16-ounce package of cheese $3.99
1 16-ounce package of beans $1.69
1 46-ounce can of Juicy Juice punch $2.50
TOTAL $12.68
(Testimony of Compliance Buyer; Exhibits 9, 11).

53. M&M Seafood charged the WIC Program $14.17 for the items purchased with Check 58. (Testimony of Compliance Buyer; Exhibit 10).

54. Before accepting the WIC checks, the cashier at M&M Seafood who waited on the Compliance Buyer did not ask for the buyer's WIC identification. (Testimony of Compliance Buyer; Exhibit 9).

55. Before accepting the WIC checks, the cashier did not observe the Compliance Buyer sign them. (Testimony of Compliance Buyer).

56. After accepting Checks 57 and 58 from the Compliance Buyer, M&M Seafood stamped the checks with its WIC vendor stamp. (Exhibit 10).

The April 3, 2008 Visit
57. On April 3, 2008, the Compliance Buyer used two WIC checks to buy food at M&M Seafood; one check had a serial number that ended in 00 ("Check 00") and the other had a serial number ending in 01 ("Check 01"). (Exhibits 12, 13).

58. Check 00 authorized the Compliance Buyer to buy the following items:
2 gallons of milk
1 dozen large eggs
36 ounces or less of cereal
3 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 13).

59. The Compliance Buyer originally selected two boxes of Kellogg's Apple Jacks, a gallon of milk and two cans of Juicy Juice punch to buy with Check 00. (Testimony of Compliance Buyer; Exhibit 12).

60. Kellogg's Apple Jacks is not a WIC-approved cereal. (Exhibit 22).

61. As she was ringing up the Compliance Buyer's purchases, the cashier commented that the Compliance Buyer had not selected a second gallon of milk or the dozen eggs that were authorized on Check 00. (Testimony of Compliance Buyer; Exhibit 12).

62. The cashier asked the Compliance Buyer if she wanted something instead of the milk and eggs. (Testimony of Compliance Buyer; Exhibit 12).

63. The Compliance Buyer selected a two-liter bottle of Diet Coke and a box of animal crackers. (Testimony of Compliance Buyer; Exhibit 12).

64. Diet Coke and animal crackers are not WIC-approved foods, and Check 00 did not list soda or animal crackers as food products that could be purchased with that check. (Testimony of Compliance Buyer; Exhibits 13, 22).

65. The cashier allowed the Compliance Buyer to use Check 00 to buy the following items:
1 gallon of milk
2 15-ounce boxes of Kellogg's Apple Jacks
2 46-ounce cans of Juicy Juice punch
1 2-liter bottle of Diet Coke
1 13-ounce box of Vitarroz animal crackers
(Testimony of Compliance Buyer; Exhibit 12).
66. The total cost of the WIC-approved products - milk ($4.49) and Juicy Juice punch ($5.00) - that the Compliance Buyer purchased with Check 00 was $9.49. (Exhibit 14).

67. M&M Seafood charged the WIC Program $27.58 for the items purchased with Check 00. (Testimony of Compliance Buyer; Exhibit 13).

68. Check 01 authorized the Compliance Buyer to purchase the following items:
1 gallon of milk
1 pound or less of cheese
1 18-ounce jar of peanut butter or 1 pound of peas or beans
2 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 13).


69. The Compliance Buyer used Check 01 to buy the following items, all of which were WIC-approved:
Item: Cost:
1 gallon of milk $4.49
1 16-ounce package of cheese $4.99
1 16-ounce package of beans $0.99
1 46-ounce can of Juicy Juice punch $2.50
TOTAL $12.97
(Testimony of Compliance Buyer; Exhibits 12, 14).

70. M&M Seafood charged the WIC Program $17.48 for the items purchased with Check 01. (Testimony of Compliance Buyer; Exhibit 13).

71. Before accepting the WIC checks, the cashier at M&M Seafood who waited on the Compliance Buyer did not ask for the buyer's WIC identification. (Testimony of Compliance Buyer; Exhibit 12).

72. Before accepting the WIC checks, the cashier did not observe the Compliance Buyer sign them. (Testimony of Compliance Buyer).

73. After accepting Checks 00 and 01 from the Compliance Buyer, M&M Seafood stamped the checks with its WIC vendor stamp. (Exhibit 13).

The April 16, 2008 Visit

74. On April 16, 2008, the Compliance Buyer used two WIC checks to buy food at M&M Seafood; one check had a serial number that ended in 04 ("Check 04") and the other had a serial number ending in 05 ("Check 05"). (Exhibits 15, 16).


75. Check 04 authorized the Compliance Buyer to buy the following items:
2 gallons of milk
1 dozen large eggs
36 ounces or less of cereal
3 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 16).

76. The Compliance Buyer selected two boxes of General Mills Golden Grahams cereal, a bottle of Tide detergent, a bottle of Mountain Dew, and a box of popcorn. (Testimony of Compliance Buyer; Exhibits 15, 18).

77. None of the items that the Compliance Buyer selected was WIC-approved. (Testimony of Compliance Buyer; Exhibit 22).

78. The cashier rang into the cash register the prices of all of the food that was listed on Check 04, even though the Compliance Buyer had not chosen any of the food listed on the check. (Testimony of Compliance Buyer; Exhibit 15).

79. The cashier then listed on a piece of paper the price of the items that the Compliance Buyer actually had selected. (Testimony of Compliance Buyer; Exhibit 15).

80. The cashier added up the price of the items that the Compliance Buyer had selected. She subtracted the cost of the actual items selected from the total showing on the cash register. The cashier then told the Compliance Buyer that she had $12.05 left to spend. (Testimony of Compliance Buyer; Exhibit 15).

81. The Compliance Buyer selected a two-pound bag of cooked shrimp that cost $11.99. (Testimony of Compliance Buyer; Exhibits 15, 18).

82. The bag of shrimp was not a WIC-approved food and Check 04 did not list shrimp as a food that could be purchased with that check. (Testimony of Mary Blocksidge and Compliance Buyer; Exhibits 16, 22).

83. M&M Seafood charged the WIC Program $27.58 for the items purchased with Check 04. (Testimony of Compliance Buyer; Exhibit 16).

84. Check 05 authorized the Compliance Buyer to purchase the following items:
1 gallon of milk
1 pound or less of cheese
1 18-ounce jar of peanut butter or 1 pound of peas or beans
2 items of juice in any of the following forms: 11.5 or 12-ounce frozen, 46-ounce canned, or 11.5-ounce liquid concentrate
(Exhibit 16).

85. The Compliance Buyer used Check 05 to buy the following items, all of which were WIC-approved:
Item: Cost:
1 gallon of milk $4.50
1 16-ounce package of cheese $4.49
1 16-ounce package of beans $1.69
2 46-ounce cans of Juicy Juice punch ($2.50 each) $5.00
TOTAL $15.68
(Testimony of Compliance Buyer; Exhibits 15, 17).

86. M&M Seafood charged the WIC Program $17.48 for the items purchased with Check 05. (Testimony of Compliance Buyer; Exhibit 16).

87. Before accepting the WIC checks, the cashier at M&M Seafood who waited on the Compliance Buyer did not ask for the buyer's WIC identification. (Testimony of Compliance Buyer; Exhibit 15).

88. Before accepting the WIC checks, the cashier did not observe the Compliance Buyer sign them. (Testimony of Compliance Buyer).

89. M&M Seafood did not stamp Checks 04 and 05 with its WIC vendor stamp before it deposited the checks for payment. (Exhibit 16).

90. All eight of the WIC checks that the Compliance Buyer used at M&M Seafood during her four visits were deposited into M&M Seafood's bank account at Citizens' Bank. (Exhibits 7, 10, 13, 16).

91. During the period that the Compliance Buyer visited M&M Seafood, the store had one female cashier who worked the day shift, Monday through Friday. That cashier was Marlena Lobo. (Testimony of Marlena Lobo).
Termination from the WIC Program

92. On June 9, 2008, DPH issued a Notice of Termination of WIC Vendor Agreement and Disqualification from the WIC Program ("Notice of Termination") to M&M Seafood, Inc., Manuel Monteiro, Sr., and Maria Monteiro. (Exhibit 1).

93. The Notice of Termination alleged that M&M Seafood had violated seven policies and procedures in the Vendor Agreement. It stated that DPH intended to terminate the agreement and to disqualify M&M Seafood, its owners, officers, directors and managers from being WIC vendors for six years. (Exhibit 1).

94. The respondents received the Notice of Termination no later than June 19, 2008. (Exhibit 2).

95. Manuel Monteiro, Jr. also received the Notice of Termination on June 19, 2008. (Testimony of Manuel Monteiro, Sr.).

96. On June 19, 2008, M&M Seafood, Manuel Monteiro, Sr., and Maria Monteiro filed this appeal to challenge the Notice of Termination. (Exhibit 2).

DISCUSSION


The federal regulations governing the WIC Program provide that the Administrative Magistrate's review of DPH's decision must be
based solely on whether the State agency has correctly applied Federal and State statutes, regulations, policies, and procedures governing the Program, according to the evidence presented at the review.
7 C.F.R. § 246.18(b)(8) (2005). DPH has the burden of proof. After considering all of the evidence, I conclude that DPH "correctly applied… [f]ederal and [s]tate statutes, regulations, policies, and procedures governing" the WIC Program with respect to five of the seven charges against the respondents. Id. I further conclude that DPH did not correctly apply its policies and procedures with respect to two of the charges. Finally, based on the penalties set forth in the WIC Vendor Agreement, M&M Seafood, Manuel Monteiro, Sr., Maria Monteiro, and Manuel Monteiro, Jr. all must be disqualified from the WIC Program for three years.
Trafficking in WIC Checks
Section 9.l of the Vendor Agreement prohibits M&M Seafood from "trafficking in WIC checks." Exhibit 3 at p. 6. The agreement defines trafficking as "the buying or selling of WIC checks for cash… instead of WIC products…." Id. DPH alleges that M&M Seafood trafficked in WIC checks on April 16, 2008, when it allowed the Compliance Buyer to use Check 04 to buy groceries that were not WIC approved. See Exhibit 1 at p. 2.

M&M Seafood did not buy or sell Check 04 for cash. Rather, it allowed the Compliance Buyer to purchase non-WIC items with the check. M&M Seafood's conduct therefore does not fall within the definition of trafficking in WIC checks. See Exhibit 3 p. 6. DPH therefore has not sustained its burden of proof with respect to this charge.

Overcharging the WIC Program

Under Section 6.b of the Vendor Agreement, M&M Seafood must charge the WIC Program the actual cost of the WIC-approved items that a WIC client purchases with a WIC check. Exhibit 3 at p. 3. DPH alleges that M&M Seafood violated this provision on each of the Compliance Buyer's visits to the store. DPH has sustained its burden of proof on this charge.

On March 4, 2003, the Compliance Buyer used Checks 53 and 54 to purchase WIC-approved products worth $13.48 and $12.68, respectively. When M&M Seafood deposited Checks 53 and 54 for payment, however, the store alleged that the WIC-approved products for Checks 53 and 54 cost $27.56 and $17.47, respectively. M&M Seafood therefore overcharged the WIC Program $18.87 in connection with the Compliance Buyer's March 4, 2008 visit.

On March 25, 2008, the Compliance Buyer used Checks 57 and 58 to purchase WIC-approved products worth $9.50 and $12.68, respectively. When M&M Seafood deposited Checks 57 and 58 for payment, however, the store alleged that the WIC-approved products for Checks 57 and 58 cost $28.00 and $14.17, respectively. M&M Seafood therefore overcharged the WIC Program $19.99 in connection with the Compliance Buyer's March 25, 2008 visit.

On April 3, 2008, the Compliance Buyer used Checks 00 and 01 to purchase WIC-approved products worth $9.49 and $12.97, respectively. When M&M Seafood deposited Checks 00 and 01 for payment, however, the store alleged that the WIC-approved products purchased with those checks cost $27.58 and $17.48, respectively. M&M Seafood therefore overcharged the WIC Program $22.60 in connection with the Compliance Buyer's April 3, 2008 visit.
On April 16, 2008, the Compliance Buyer did not purchase any WIC-approved products with Check 04, and used Check 05 to purchase WIC-approved food totaling $15.68. When M&M Seafood deposited Checks 04 and 05 for payment, however, the store alleged that the WIC-approved products purchased with those checks cost $27.58 and $17.48, respectively. M&M Seafood therefore overcharged the WIC Program $29.38 in connection with the Compliance Buyer's April 16, 2008 visit.

Under the Vendor Agreement, a pattern of overcharging the WIC program constitutes a Class II violation. Exhibit 3 at p. 21. The Vendor Agreement defines a pattern as "two or more incidences of a violation." Id. Because M&M Seafood overcharged the WIC Program on four separate occasions, it engaged in a pattern of overcharging. M&M Seafood therefore is guilty of a Class II violation. The penalty for a Class II violation is disqualification from the WIC Program for three years. Id.

Substituting Non-food Items for WIC Products

Section 4.h of the Vendor Agreement prohibits M&M Seafood from substituting "non-food items for WIC products…." Exhibit 3 at p. 2. On April 16, 2008, M&M Seafood allowed the Compliance Buyer to use Check 04 to purchase a bottle of Tide laundry detergent. M&M Seafood therefore violated this provision of the Vendor Agreement. The Vendor Agreement does not contain a penalty for one violation of Section 4.h. Compare Exhibit 3 at pp. 21-22 (a pattern of violating Section 4.h is a Class II violation).
Substituting Food Products That Are Not WIC-approved
Section 4.f of the Vendor Agreement states as follows:
Never substitute an unauthorized product for [a] WIC product, for example, a more expensive brand when [a] store brand or least expensive is specified or a nine-ounce box of cereal when twelve-ounce or larger boxes of cereal are specified.
Exhibit 3 at p. 2. On the following dates, M&M Seafood allowed the Compliance Buyer to use WIC checks to buy the following food products, which are not WIC-approved:
March 25, 2008: 2 boxes of Post Cocoa Pebbles cereal
April 3, 2008: 2 boxes of Kellogg's Apple Jacks cereal
1 box of animal crackers
1 2-liter bottle of Diet Coke
April 16, 2008: 2 boxes of Golden Grahams cereal
1 2-liter bottle of Mountain Dew
1 package of popcorn
1 bag of cooked shrimp
DPH therefore has sustained its burden of proving that M&M Seafood violated Section 4.f of the Vendor Agreement.
DPH alleges that M&M Seafood also violated Section 4.f of the Vendor Agreement when it allowed the Compliance Buyer to buy Tide detergent on April 16, 2008. As the examples in Section 4.f demonstrate, however, this provision pertains to selling food that WIC has not approved. See Exhibit 3 at p. 2. Indeed, if Section 4.f applied to products other than food, Section 4.h of the Vendor Agreement, which expressly prohibits the sale of non-food items, would be superfluous. See, e.g., Hagerty v. Myers, 333 Mass. 387, 388, 131 N.E.2d 176, 177 (1955) ("It is an elementary rule in the interpretation of contracts that whenever reasonably practicable every word shall be given effect") (citation omitted).
Under the Vendor Agreement, a pattern of providing unauthorized food products is a Class III violation. Exhibit 3 at p. 23. Because M&M Seafood allowed the Compliance Buyer to purchase food that was not WIC approved on three separate occasions, the store engaged in a pattern of providing unauthorized food products. Id. at p. 21. M&M Seafood therefore is guilty of a Class III violation. Id. at p. 23. The penalty for a Class III violation is disqualification from the WIC Program for one year. Id.

Failure to Observe the WIC Shopper Sign the WIC Checks

The cashier who rang up the Compliance Buyer's purchases on March 4, 2008, March 25, 2008, April 3, 2008, and April 16, 2008, did not observe the Compliance Buyer sign any of the WIC checks and did not ensure that the buyer's signature matched the signature on the Compliance Buyer's WIC identification. This failure violated Section 5.e of the Vendor Agreement, which states:
Observe the authorized WIC shopper as she/he signs the WIC check, and be sure the signature on the WIC check matches the authorized signature in the WIC ID folder on the official Massachusetts WIC ID card….
Exhibit 3 at p. 3.

Under the Vendor Agreement, the failure to comply with Section 5.e constitutes a Class IV violation with an assessment of ten "sanction points." Exhibit 3 at pp. 23, 24. Because M&M Seafood failed to comply with Section 5.e on four separate occasions, it committed four Class IV violations, resulting in the assessment of forty sanction points. The penalty for twenty or more sanction points is disqualification from the WIC Program for one year. Id. at p. 23.

Revocation of M&M Seafood's Foreign Corporation Status

DPH alleges that the Corporations Division of the Massachusetts Secretary of State's Office revoked M&M Seafood's foreign corporation status on March 31, 2008. Exhibit 1 at p. 4. DPH further alleges that Mr. and Mrs. Monteiro violated the Vendor Agreement when they failed to notify DPH of this revocation. Id. DPH did not, however, present any evidence that the Corporations Division ever revoked M&M Seafood's foreign corporation status. The agency therefore failed to meet its burden of proof with respect to this charge.

Business Integrity

Section 9.m of the Vendor Agreement prohibits M&M Seafood from "participat[ing] in any activity of questionable business integrity." Exhibit 3 at p. 6. "Activities indicating a lack of business integrity include fraud, … embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, …making false claims, and obstruction of justice." 7 C.F.R. § 246.12(3)(g)(iii) (2005). DPH alleges that M&M Seafood's conduct in connection with the March 25, 2008, April 3, 2008, and April 16, 2008 compliance visits violated Section 9.m. I agree.

While the cashier was ringing up the Compliance Buyer's purchases on March 25, 2008, the cashier noted that the Compliance Buyer did not have all of the food listed on WIC Check 57. The cashier asked the Compliance Buyer if she wanted more milk, cereal or juice because she (the cashier) was "going to ring it all up anyway." The cashier then offered to let the Compliance Buyer buy food that was not WIC approved because "we don't care here." The cashier allowed the Compliance Buyer to switch a WIC-approved cereal (Cheerios) for a cereal that is not WIC-approved (Cocoa Pebbles). After the transactions were complete, moreover, M&M Seafood submitted false claims to DPH, alleging that the Compliance Buyer had purchased WIC-approved food costing $32.17 when the WIC-approved food actually cost $22.18.

During the April 3, 2008 visit, the Compliance Buyer did not select two foods - eggs and milk - that were listed on Check 00. The cashier suggested to the Compliance Buyer that she could choose something other than the eggs and milk. The cashier then allowed the Compliance Buyer to use Check 00 to buy animal crackers and Diet Coke; neither food was authorized on Check 00 and neither food is WIC-approved. The cashier also allowed the Compliance Buyer to use a WIC check to buy Kellogg's Apple Jacks, which is not a WIC-approved cereal. After the transactions were complete, M&M Seafood submitted false claims to DPH, alleging that the Compliance Buyer had purchased WIC-approved food costing $45.06, when the WIC-approved food actually cost $22.46.
During the April 16, 2008 compliance visit, the Compliance Buyer attempted to buy two boxes of General Mills Golden Grahams cereal, a bottle of Tide detergent, a bottle of Mountain Dew and a box of popcorn with Check 04. That WIC check did not authorize the Compliance Buyer to purchase any of the items that the buyer had chosen. Rather than rejecting the sale, the cashier calculated both the cost of the items that the Compliance Buyer wanted to buy (the "Selected Items") and the cost of the food that was listed on Check 04 (the "Authorized Food"). The cashier then subtracted the cost of the Selected Items from the cost of the Authorized Food; the difference was $12.05. The cashier told the Compliance Buyer that she still had $12.05 left to spend. The cashier then allowed the Compliance Buyer to buy an $11.99 bag of shrimp, which is not a WIC-approved food.

Furthermore, the cashier rang into the cash register the cost of the Authorized Food, creating a false record that the Compliance Buyer had purchased the food listed on Check 04. Finally, after the transactions were complete, M&M Seafood submitted false claims to DPH, alleging that the Compliance Buyer had purchased WIC-approved food costing $45.06, when the WIC-approved food actually cost $15.68.

By actively encouraging the Compliance Buyer to violate the WIC Program, allowing the buyer to purchase products that were not WIC approved, and creating a false record concerning the food that the Compliance Buyer purchased, M&M Seafood participated in activities that demonstrate a lack of business integrity. See, e.g., 7 C.F.R. § 246.12(3)(g)(iii) (2005). M&M Seafood's submission of false claims to DPH also demonstrates a lack of business integrity. Id. DPH therefore has sustained its burden of proving that it correctly applied the pertinent federal and state regulations, policies and procedures with respect to this charge. 7 C.F.R. § 246.18(b)(6) (2005).

Under the Vendor Agreement, participating in conduct that demonstrates a lack of business integrity constitutes a Class IV violation with an assessment of ten "sanction points." Exhibit 3 at pp. 23, 25. Because M&M Seafood acted in a manner that demonstrated a lack of business integrity on three separate occasions, it committed three Class IV violations, resulting in the assessment of thirty sanction points. The penalty for twenty or more sanction points is disqualification from the WIC Program for one year. Id. at p. 23.
M&M Seafood's Owners, Officers, Directors and Manager
In addition to disqualifying M&M Seafood, DPH also seeks to disqualify the store's owners, officers, directors and manager from participating in the WIC Program. The Vendor Agreement states:
If the Vendor fails to comply with any provision of the Agreement, or violates any of the rules, regulations, policies or procedures governing the WIC Program, including the Federal regulations, the Massachusetts WIC Program may initiate administrative action to disqualify the store, its owners, managers and others given responsibility for WIC compliance from the WIC Program.

Exhibit 3 at p. 9. Mr. and Mrs. Monteiro are the store's sole owners, officers and directors. Mrs. Monteiro works in the store full-time, while Mr. Monteiro is responsible for making all major decisions for the business, including hiring personnel. The manager, Manuel Monteiro, Jr., attended all WIC training on M&M Seafood's behalf and was responsible for overseeing the WIC program at the store. The DPH therefore has met its burden of proving that Manuel Monteiro, Sr., Maria Monteiro and Manual Monteiro, Jr. should be held responsible for M&M Seafood's failure to comply with the WIC program.

The respondents argue that Manuel Monteiro, Sr. and Maria Monteiro did not know about or condone any of the WIC violations. Specifically, Mr. Monteiro testified that he believed M&M Seafood employees always complied with the WIC Program, but if they did not, neither he nor his wife knew about the violations. Lack of knowledge about or participation in WIC violations is not a defense. The Vendor Agreement states that M&M Seafood shall be "[a]ccountable for the actions of all owners, officers, managers, agents, employees and personnel … at the Vendor's store…." Exhibit 3 at p. 1.

M&M Seafood's Defenses

The respondents presented two defenses. First, the respondents tried to establish that the Compliance Buyer was biased against the store. In particular, they attempted to show that the Compliance Buyer knows two DPH employees who allegedly are related to the owner of one of M&M Seafood's competitors. There is no evidence that the Compliance Buyer knew the two DPH employees or that the buyer was biased in any other way.

Second, the respondents contend that the Compliance Buyer's descriptions of the cashiers who waited on her do not match the cashier, Marlena Lobo, who worked at the store during the time that the buyer visited it. The respondents' implication, apparently, is that the compliance reports were either inaccurate or falsified. I do not find this argument persuasive.

The Compliance Buyer described the cashier who waited on during her first, third and fourth visits (March 4, 2008; April 3, 2008; and April 16, 2008) as follows:
Hispanic female
Age: teen (20-25)
Height: 5' 6"
Build: small
Hair: brown
Wore glasses: No
Name tag: n/a
Exhibit 6, 12, 15. The Compliance Buyer described the cashier who waited on her during the second visit (March 25, 2008) as follows:
Hispanic female
Age: Teen (20-25)
Height: 5' 6"
Build: medium
Hair: black, curly
Wore glasses: No
Name tag: n/a
Exhibit 9.
Having observed the Compliance Buyer testify, I found her to be a credible witness. She responded to questions in a straightforward manner and admitted when she could not recall the answer to a question. She did not display any animus toward any of the respondents, and the respondents' attorney did not elicit any evidence that the buyer had any reason to lie about the store visits. Moreover, the eight WIC checks that the Compliance Buyer used during her four visits provide objective evidence that she visited M&M Seafood on the four dates at issue. Specifically, each check was deposited in M&M Seafood's bank account and six were stamped with the WIC stamp that was issued to M&M Seafood when it became a WIC vendor in 2007.

Finally, the Compliance Buyer's descriptions of the cashiers are almost identical, varying only with respect to hair (brown versus black and curly) and build (small versus medium). M&M Seafood's only female cashier, Marlena Lobo, testified at the hearing. Having observed her, both of the Compliance Buyer's descriptions could apply to her. Moreover, hair color can be changed easily.
Based on all of the evidence, I conclude that it is more likely than not that the Compliance Buyer was waited on by Marlena Lobo on all four occasions and that the buyer described the cashier differently on March 25, 2008 based on her subjective observations of Ms. Lobo that day. I also find that the Compliance Buyer did not fabricate or falsify any of her reports.

CONCLUSION AND DISPOSITION

The Vendor Agreement states as follows:
Where… a Vendor has committed multiple violations… the Massachusetts WIC Program shall disqualify the Vendor for the period corresponding to the most serious mandatory violation.
Exhibit 3 at p. 9. Moreover, the disqualification begins fifteen days from the date the respondents first received the Notice of Termination. Id.; Exhibit 1.
As set forth above, DPH has demonstrated that M&M Seafood committed a Class II violation, a Class III violation, and seven Class IV violations. A Class II violation carries the greatest mandatory penalty: disqualification from the WIC Program for three years. M&M Seafood, Manuel Monteiro, Sr., Maria Monteiro, and Manuel Monteiro, Jr. therefore are disqualified from the WIC Program for three years. The disqualification began fifteen days after June 19, 2008, the date that the respondents and Manuel Monteiro, Jr. received the Notice of Termination


DIVISION OF ADMINISTRATIVE LAW APPEALS


/s/ Natalie S. Monroe
Natalie S. Monroe
Administrative Magistrate
Dated: March 30, 2009


DATE ISSUED: September 21, 2009