In the Matter of Farid M. Abdelaziz, Co-Owner, Abe Abraham, Co-Owner, and Midland Meat Town, Inc. v. United States of America, Acting Through the Department of Agriculture
Docket: 201
Court: Court of Appeals for the Second Circuit; January 20, 1988; Federal Appellate Court
Farid M. Abdelaziz and Abe Abraham, co-owners of Midland Meat Town, Inc., were found to have unlawfully purchased food stamps for cash from an undercover officer, allowing their store to redeem the stamps at a profit. The Food and Nutrition Service (FNS) disqualified both the individuals and their store from the food stamp program, a decision that was upheld by the district court. The plaintiffs contested whether the disqualification could be applied to them personally in addition to the corporate entity. Initially, the government stated that Abdelaziz and Abraham were not personally charged or disqualified, only the corporation was. However, this position changed, leading to a more complex legal discussion. The store, located in a struggling neighborhood in Syracuse, was permanently disqualified under the Food Stamp Act following their guilty pleas to misdemeanor charges related to food stamp trafficking. The FNS notified them of the disqualification on March 6, 1986, which was later upheld despite their request for reconsideration.
The disqualification letter dated March 6, 1986, initially appeared to apply only to the corporation. However, Abdelaziz, Abraham, and Midland Meat Town, Inc. sought judicial review of the FNS decision, resulting in a trial de novo presided over by Judge McAvoy. The judge upheld the disqualification of Abdelaziz and the corporation but reserved judgment on Abraham, who claimed he had no intention of purchasing food stamps and had given $150 to Abdelaziz for personal reasons. Ultimately, Judge McAvoy ruled that Abraham had knowingly trafficked in food stamps, justifying his disqualification.
The court determined that Abdelaziz and Abraham acted as agents of the corporation regarding food stamp handling and found that Abraham had directly given the cash to the officer, contradicting his earlier testimony. On appeal, Abdelaziz and Abraham raised statutory and due process issues, which were deemed meritless. They specifically argued that it was improper to impose permanent sanctions against them individually, claiming the Food Stamp Program Regulations did not authorize charges against individuals who were officers and shareholders of the corporation.
This argument had not been previously presented to the FNS or the district court and was considered weak given the circumstances of their actions. The government's brief countered that the charge letter was appropriately directed to the co-owners, clarifying that the disqualification pertained to the store. However, the government's response inadvertently raised the question of whether Abdelaziz and Abraham had received proper notice of the charges against them. Following this, the government requested additional time to submit a supplemental brief, which continued to argue for the affirmation of the district court's judgment.
Congress has granted the Secretary of Agriculture authority to regulate retail and wholesale food entities that accept food stamps, as outlined in 7 U.S.C. Sec. 2018(a). To qualify for stamp redemption, the Food and Nutrition Service (FNS) evaluates the applicant's business integrity and reputation. The Secretary can disqualify entities for violations of the Food Stamp Act or FNS regulations (7 U.S.C. Sec. 2021). In response to a significant rise in violations, Congress instituted automatic permanent disqualification for food stamp trafficking in 1982.
Section 2021(e)(1) addresses ownership transfers of disqualified firms, imposing civil monetary penalties on sellers or transferors equivalent to the remaining disqualification period. For permanently disqualified entities, the penalty is double that of a ten-year disqualification. The disqualification continues for the seller regardless of penalties imposed. This indicates Congress's intent for personal disqualifications of owners, though the statute is ambiguous, especially concerning multi-store ownership and passive investors.
The FNS's letter brief mentions a policy of permanently disqualifying owners who engage in trafficking but lacks legal authority citations. It also asserts that the term "retail food store" includes management responsible for violations, a claim unsupported by clear legal references apart from vague regulatory language.
A broad rule disqualifying store owners involved in illegal food stamp trafficking is not adopted due to lack of clear guidance. Instead, the principle of disregarding the corporate form where it is used to circumvent legislative policies is applied. Congress has expressed concern that such trafficking undermines the food stamp program's goals. Abdelaziz and Abraham were found to have shared control of Midland Meat Town, Inc. and were personally involved in food stamp trafficking. Their actions warranted permanent disqualification from the food stamp program to uphold congressional intent against fraud.
The Food and Nutrition Service (FNS) is urged to establish clearer regulations regarding personal disqualifications of store owners, considering the significant economic impact of such actions. It is noted that the notice and disqualification forms should explicitly state the entities and individuals involved. Although Abraham was not formally charged, no lack of notice claim was raised since both individuals understood the disqualification applied to them.
The court also dismissed the appellants' argument regarding the scope of the district court's de novo review of the FNS decision, affirming that such a review is mandated by the Food Stamp Act and satisfies due process requirements. The decision of the district court is affirmed.
