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e-CFR data is current as of September 25, 2020

Title 31Subtitle BChapter IISubchapter APart 223 → §223.20


Title 31: Money and Finance: Treasury
PART 223—SURETY COMPANIES DOING BUSINESS WITH THE UNITED STATES


§223.20   Revocation proceedings initiated by Treasury upon receipt of an agency complaint.

(a) Agency complaint. If an agency determines that a company has not promptly made full payment or fully satisfied one or more bond obligations naming the agency as obligee, the head of the agency, or his or her designee, may submit a written complaint to the designated Treasury official (with executive oversight over the Treasury surety program, at the Assistant Commissioner level or equivalent), requesting that the company's certificate of authority be revoked for nonperformance. Under such complaint, the agency shall certify that:

(1) The bond obligations that are the subject of the complaint are administratively final under the agency's regulations or other authorities;

(2) The company has not paid or satisfied those bond obligations; and

(3) The company's obligation to pay or satisfy the bond obligations has not been stayed or enjoined by a court of competent jurisdiction.

(b) Documentation of complaint. The agency shall include in its complaint copies of the bonds, and documentation indicating that, for each such bond provided:

(1) The agency has determined the principal is in default on the obligation covered by the bond, consistent with agency authorities, or if the default has been litigated, documentation indicating a court of competent jurisdiction has determined the principal is in default;

(2) The agency made a written demand with the company on the bond requesting payment or satisfaction on its own behalf, consistent with agency authorities, or on behalf of laborers, materialmen, or suppliers (on payment bonds), based on the default status of the principal;

(3) The agency afforded the company the opportunity to request administrative review within the agency contesting the agency's demand on the bond;

(4) The agency made a final administrative determination that the bond obligation was due after the completion of such administrative review, or after the time period for the company to request administrative review within the agency has expired;

(5) The agency provided the company the opportunity to enter into a written agreement to pay or satisfy the bond; and

(6) The company has not made full payment or fully satisfied the demand, and the claim on the bond is past due.

(c) Notice to company. On receipt of a complaint meeting the requirements of paragraphs (a) and (b) of this section, Treasury will notify the company of the agency complaint. The notice will require the company to submit a written explanatory response to Treasury within 20 business days of the date of the notice. The notice will advise the company of the facts and conduct referenced in the complaint. Treasury will attach a copy of the incoming complaint to the notice. The notice will afford the company the opportunity to address the complaint and demonstrate its qualifications to retain its certificate of authority.

(d) Reviewing official and deciding official. The designated Treasury official (with executive oversight over the Treasury surety program, at the Assistant Commissioner level or equivalent) will appoint a Treasury Reviewing Official to conduct a review of the agency complaint referenced in paragraphs (a) and (b) of this section, and the company response referenced in paragraph (c) of this section, to determine whether revocation of the company's certificate of authority is warranted. To ensure appropriate consideration of relevant factual or legal issues, the Reviewing Official is authorized to require the submission of additional documentation from the complaining agency and the company. Upon completion of such review, the Reviewing Official shall prepare a written Recommendation Memorandum addressed to the designated Treasury official setting forth findings and a recommended disposition. The designated Treasury official will be the Deciding Official who will make the final decision whether the company's certificate of authority to write and reinsure bonds should be revoked based on the administrative record. The administrative record consists of the agency complaint referenced in paragraphs (a) and (b) of this section, the company response referenced in paragraph (c) of this section, any other documentation submitted to, or considered by, the Reviewing Official, and the Reviewing Official's Recommendation Memorandum.

(e) Final decision. (1) If the Deciding Official's final decision is that revocation is not warranted, the company and the agency will be notified of the basis of this decision and the complaint against the company will be dismissed.

(2) If the Deciding Official's final decision is that the company's certificate of authority shall be revoked, the Deciding Official will notify the company and the agency of the revocation decision and the basis for such decision. Except as provided in paragraph (g) of this section, the notice will afford the company an opportunity to cure its noncompliance by paying or satisfying the bonds (including payment of any interest, penalties, and fees) forming the basis of the final decision within 20 business days. If the company cures its noncompliance within 20 business days, the complaint against the company will be deemed moot and the company will retain its certificate of authority to write Federal bonds. If the company does not cure its noncompliance within 20 business days, the company's certificate of authority shall be revoked by Treasury without further notice.

(f) Standard of review. In reviewing whether the revocation of the company's certificate of authority is warranted under this section, the Reviewing Official will recommend, and the Deciding Official will determine, whether the default is clear and whether the company's failure to pay or satisfy the bonds is based on inadequate grounds.

(g) Consideration of willful conduct. The company is not entitled to an opportunity to cure its noncompliance if its conduct in failing to carry out its contracts is willful. For purposes of this regulation, “willful” means a careless or reckless disregard of a known legal obligation to satisfy an administratively final bond obligation. In considering whether a company's conduct is willful, the Deciding Official may consider whether:

(1) An agency has filed a prior complaint with Treasury requesting that the company's certificate be revoked for a substantially similar bond obligation;

(2) The company asserted substantially similar defenses to such bond obligation;

(3) Such defenses were considered by the agency under pertinent authorities and dismissed;

(4) Treasury made a final decision that revocation of the company's certificate was justified; and

(5) Other pertinent factors.

(h) Informal hearing. (1) If a company that is the subject of a complaint under paragraph (a) and (b) of this section believes the opportunity to make known its views, as provided for under paragraph (c) of this section, is inadequate, it may, within 20 business days of the date of the notice required by paragraph (c), request, in writing, that an informal hearing be convened.

(2) As soon as possible after a written request for an informal hearing is received, the Reviewing Official shall convene an informal hearing, at such time and place as he or she deems appropriate, for the purpose of determining whether the company's certificate of authority should be revoked.

(3) The company shall be advised, in writing, of the time and place of the informal hearing and shall be directed to bring all documents, records and other information as it may find necessary and relevant to support its position.

(4) The company may be represented by counsel and shall have a fair opportunity to present any relevant material and to examine the administrative record.

(5) The complaining agency may be requested by the Reviewing Official to send a representative to the hearing to present any relevant material, and the agency representative may examine the administrative record.

(6) The Reviewing Official is authorized to require the submission of additional documentation from the complaining agency and the company to ensure appropriate consideration of relevant factual or legal issues.

(7) Formal rules of evidence will not apply at the informal hearing.

(8) The formal adjudication standards under the Administrative Procedure Act, 5 U.S.C. 554, 556, 557 do not apply to the informal hearing or adjudication process.

(9) Treasury may promulgate additional procedural guidance governing the conduct of informal hearings. This additional procedural guidance may be contained in the Annual Letter to Executive Heads of Surety Companies referenced in §223.9, the Treasury Financial Manual, or other Treasury publication or correspondence.

(10) Upon completion of the informal hearing, the Reviewing Official shall prepare a written Recommendation Memorandum addressed to the Deciding Official setting forth findings and a recommended disposition. The Deciding Official will make the final decision whether the company's certificate of authority to write and reinsure Federal bonds should be revoked based on the administrative record. The administrative record consists of the Federal agency complaint referenced in paragraphs (a) and (b) of this section, the company response referenced in paragraph (c), any other documentation submitted to, considered by, or entered into the administrative record by the Reviewing Official, the hearing transcript, and the Reviewing Official's Recommendation Memorandum.

(11) The provisions of paragraphs (e), (f), and (g) of this section shall apply to the adjudication of the agency complaint when an informal hearing is conducted.

[79 FR 62002, Oct. 16, 2014]

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