Disqualification from Michigan’s Food Assistance Program (FAP) funded under the federal Supplementary Nutrition Assistance Program (SNAP) (7 USC § 2011 et seq.); Clear & convincing evidence required to establish an Intentional Program Violation (IPV); 7 CFR § 273(e)(6); In re Martin; Substantial evidence; VanZandt v. State Employees Ret. Sys.; United States Department of Agriculture—Food & Nutrition Service (USDA)

Holding that there was insufficient factual support for the ALJ’s decision finding that appellant committed an IPV and was disqualified from Michigan’s FAP for 12 months, the court reversed the circuit court’s order affirming that decision. After an investigation, the USDA determined that a store committed benefits “trafficking” (the use of “FAP benefits to receive cash, non-food items, or ineligible food items”) and permanently disqualified it from program participation. The USDA gave appellee-DHHS its investigative reports, which led to the DHHS concluding appellant had committed an IPV of the FAP’s regulations. At the ALJ hearing, he “testified that he bought ‘only food’” at the store. The court noted that there was no dispute he made the documented transactions, or “as to the nature, design, or operations of” the store, or that the USDA found the store “violated the SNAP program, or that the USDA has certain criteria it deems indicative of benefits ‘trafficking.’ However, there is no evidence whatsoever that any of appellant’s transactions were actually in violation of any SNAP or FAP rules. The only ostensible evidence is by way of inference based on the USDA’s criteria; yet, there is no evidence whatsoever explaining why those criteria are indicative of IPVs. The record shows that DHHS had ample opportunity to provide an explanation and simply failed to do so.” The court further noted that the ALJ did not make any credibility assessments – she “accepted DHHS’s unexplained conclusion essentially verbatim, but without evidence as to its basis or the specifics of appellant’s transactions, e.g., what he received in exchange for FAP benefits, or what his intent was. Although a pattern of transactions deemed to be suspicious may provide a proper basis for investigation,” the court concluded that by itself it “is insufficient to constitute substantial (much less clear and convincing) evidence that appellant actually committed an IPV.” The court emphasized it was not ruling that he did not commit an IPV, and expressly held that the DHHS was not barred from bringing a new IPV claim against him, if it “has some genuine evidence that any specific transaction was actually fraudulent.”