Cannon, Gloria v. Apfel, Kenneth S. ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-1578
GLORIA CANNON,
Plaintiff-Appellant,
v.
KENNETH S. APFEL, Commissioner
of Social Security,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of Illinois.
No. 98 C 3117--Charles H. Evans, Magistrate Judge.
Argued November 2, 1999--Decided May 24, 2000
Before COFFEY, FLAUM and KANNE, Circuit Judges.
COFFEY, Circuit Judge. In January 1993, the
Social Security Administration ("SSA") certified
Sampson Strong ("Strong") as a "representative
payee" to receive Supplemental Security Income
("SSI") payments on behalf of his minor niece,
Gloria Faye Cannon ("Gloria")./1 A few weeks
later, in February 1993, the SSA sent Strong a
lump-sum payment of $23,202.98 in past due SSI on
Gloria’s behalf. But Strong neglected to use this
money for Gloria’s use and benefit, and on
January 22, 1994, the SSA determined that Strong
had misused $22,767.68 of Gloria’s SSI money by
spending it on himself.
Gloria sought reimbursement of her SSI benefits
from the SSA, but the Commissioner denied her
claim. On February 16, 1999, the district court
affirmed the Commissioner’s decision, stating
that "there is substantial evidence to support
the ALJ’s finding that Defendant exercised
reasonable care and was not negligent in
appointing Strong as Plaintiff’s representative
payee." We affirm.
I. BACKGROUND
A. The SSA’s Use of Representative Payments
The Social Security Act provides that since
there are beneficiaries who are unable to direct
the management of their own affairs, including
their finances, the SSA may make payment of their
benefits to a "representative payee." See 42
U.S.C. sec.sec. 405(j)(1)(A) &
1383(a)(2)(A)(ii)(I).
The SSA’s operating procedures require that it
exercise "extreme care" in selecting
representative payees. See Social Security
Program Operations Manual System ("POMS") sec. GN
00501.005(C). Furthermore, in order to protect
the funds of the beneficiaries against misuse by
their representative payees, the Social Security
Act provides that if the SSA is negligent in its
selection of a representative payee, and that
negligence results in misuse of the beneficiary’s
benefits, then the SSA is obligated to reimburse
the beneficiary for the misused funds./2 On the
other hand, if the SSA is not negligent in
selecting a beneficiary’s payee, but the payee,
nevertheless, misuses the beneficiary’s benefits,
then the beneficiary must collect the misused
payments from the representative payee directly.
See 20 C.F.R. sec. 416.641.
B. The SSA’s Certification of Strong as Gloria’s
Representative Payee
On December 5, 1990, shortly before her death,
Gloria’s terminally-ill mother, Georgia Mae
Cannon, signed a social security consent form
naming Strong as the representative payee for the
Child’s Insurance Benefits ("CIB") to which her
three minor children, Gloria (15 years old),
Barbara (15 years old), and Emanuel (5 years old)
were entitled. Shortly thereafter, on December
13, 1990, the Illinois Circuit Court for Sangamon
County appointed Strong to be the legal and
custodial guardian of Gloria, Barbara, and
Emanuel.
After the death of their mother, Georgia, on
December 18, 1990, Gloria, her sister, and her
brother began living with Strong in his
Springfield, Illinois apartment. A few weeks
later, in January 1991, the SSA appointed Strong
as Gloria’s representative payee for her CIB.
From January 1991 through January 1993, Strong
received $3670 in CIB funds on Gloria’s behalf.
On December 23, 1992, the SSA awarded Gloria
SSI benefits under 42 U.S.C. sec. 1381a (but did
not yet turn over the funds). Shortly thereafter,
Strong applied to the SSA to be appointed as the
representative payee for Gloria’s SSI benefits.
On January 14, 1993, Strong submitted an
Application Form SSA-11-BK (Request to be
Selected as Payee) and a Form SSA-8000-BK
(Application for Supplemental Security Income).
On those forms that Strong filled out and
submitted, he stated that he was Gloria’s uncle,
that she was a minor, and that she (and her
brother and sister) lived with him in his
apartment. Furthermore, Strong claimed (falsely)
that he had never been convicted of a felony.
After Strong submitted his payee application, he
was interviewed by an SSA representative, where,
once again, he stated that he had never been
convicted of a felony./3 Contrary to Strong’s
assertions, he had in fact been convicted of
three felonies: He was convicted in Detroit,
Michigan, in 1955 for overdrawing unemployment
benefits; in California, in 1970 for stealing an
automobile; and in California, in 1976 for
receiving stolen property. Because of its lack of
diligence in engaging in a thorough investigation
of Strong, the SSA did not have the benefit of
this information. So, based on the fact Gloria
lived with Strong, and that Strong was her uncle
and court-appointed legal guardian, and that
Strong had previously served as her CIB payee (on
the recommendation of her now deceased mother),
on January 12, 1993, the SSA certified Strong as
Gloria’s SSI representative. On February 22,
1993, Strong received $23,202.98 on Gloria’s
behalf, and continued to receive Gloria’s $300
monthly SSI checks until September 1993, at which
time Gloria started receiving her SSI checks
directly./4
C. Strong’s Performance as Gloria’s Representative
Payee
On October 13, 1993, Gloria’s sister, Barbara,
submitted a signed statement to the SSA stating
that Strong had misused approximately $23,000 of
Gloria’s SSI benefits. At about this time,
Gloria, obviously upset that Strong had misused
the funds, appointed Linda Rockey ("Rockey") as
her representative, and Rockey submitted a signed
statement which stated that Gloria never received
the benefits that the SSA had paid to Strong.
In response to these allegations of misuse, the
SSA, which had already stopped sending Gloria’s
SSI checks to Strong, asked Strong for an
accounting. But Strong failed to respond and
provide the requested accounting information, and
on January 22, 1994, the SSA determined that
Strong had misused $22,767.68 of Gloria’s SSI
benefits. See 20 C.F.R. sec. 416.635(a); POMS
sec. GN 00604.001(B)(4)./5
In a letter dated March 27, 1995, the SSA
demanded restitution from Strong, informing him,
"you will have to return the $22,767.68 of the
Supplemental Security Income money we sent you as
Gloria Cannon’s payee. We have decided that you
did not use this money for her as you agreed to
do. For that reason you must pay us back."/6
D. Gloria’s Claim for Reimbursement of Her Misused
SSI Funds
Although Gloria was able to recover some/7 of
the misused funds from Strong,/8 she attempted
to recover the remainder of the funds directly
from the SSA. See POMS sec. GN 00604.035(C). As
stated before, the SSA came to its own defense,
determining that it had not been negligent in
selecting Strong as Gloria’s representative
payee, and that decision was subsequently upheld
both by the ALJ and by the Appeals Council.
Thereafter, Gloria sought review of the ALJ’s
decision in the United States District Court for
the Central District of Illinois. Gloria alleged
that the SSA violated 42 U.S.C. sec.
1383(a)(2)(E) by negligently selecting Strong as
her representative payee. Both parties filed
motions for summary judgment. The Magistrate
Judge/9 granted the Commissioner’s motion for
summary judgment and denied Gloria’s motion for
summary judgment, finding that "there is
substantial evidence to support the ALJ’s finding
that Defendant exercised reasonable care and was
not negligent in appointing Strong as Plaintiff’s
representative payee." We affirm.
II. ISSUES
On appeal, Gloria argues: (1) that the ALJ’s
finding that the SSA was not negligent in
selecting Strong as her representative payee is
not supported by substantial evidence; (2) that
the SSA’s administrative review of her claim
violated her right to constitutional due process;
and (3) that the ALJ failed to develop a fair and
complete record by refusing to allow Gloria’s
representative to testify.
III. ANALYSIS
A. The SSA’s Selection of Strong as Representative
Payee
1. Standard of Review
As we have long held, we will uphold the
Commissioner of Social Security’s decision, if
the ALJ’s findings of fact are supported by
substantial evidence and no error of law was
committed. See Nelson v. Apfel, 131 F.3d 1228,
1234 (7th Cir. 1997); see also 42 U.S.C. sec.
405(g) ("The findings of the Commissioner of
Social Security as to any fact, if supported by
substantial evidence, shall be conclusive."). To
determine whether substantial evidence exists,
the court reviews the record as a whole but is
not allowed to substitute its judgment for the
ALJ’s "by reconsidering facts, reweighing
evidence, resolving conflicts in evidence, or
deciding questions of credibility." Williams v.
Apfel, 179 F.3d 1066, 1071-72 (7th Cir. 1999)
(internal quotations omitted); see also Estok v.
Apfel, 152 F.3d 636, 638 (7th Cir. 1998). In
agency cases, a mere scintilla of proof will not
suffice to uphold the SSA’s findings, but the
standard of "substantial evidence requires no
more than ’such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.’"
Diaz v. Chater, 55 F.3d 300, 305 (7th Cir. 1995)
(quoting Richardson v. Perales, 402 U.S. 389, 401
(1971)).
2. Deference to the SSA’s Determination of an
Adequate Investigation
Gloria contends that the SSA was negligent
because it failed to ascertain whether Strong had
a criminal arrest and conviction record as part
of its investigation. In determining whether the
SSA has an obligation to check the criminal
background of candidate representative payees, we
look first to the language of the Social Security
Act. See United States v. Balint, 201 F.3d 928,
932-33 (7th Cir. 2000). The relevant statute
requires that the SSA investigate representative
payees in a manner calculated to produce
"adequate evidence" of the representative payee’s
fitness:
(i) Any determination made under subparagraph
(A) for payment of benefits to the representative
payee of an individual or eligible spouse shall
be made on the basis of--
(I) an investigation by the Commissioner of
Social Security of the person to serve as
representative payee, which shall be conducted in
advance of such payment, and shall, to the extent
practicable, include a face-to-face interview
with such person; and
(II) adequate evidence that such payment is in
the interest of the individual or eligible spouse
(as determined by the Commissioner of Social
Security in regulations).
(ii) As part of the investigation referred to in
clause (i)(I), the Commissioner of Social
Security shall--
(I) require the person being investigated to
submit documented proof of the identity of such
person, unless information establishing such
identity was submitted with an application for
benefits under subchapter II of this chapter or
this subchapter;
(II) verify the social security account number
(or employer identification number) of such
person;
(III) determine whether such person has been
convicted of a violation of section 408 or 1383a
of this title; and
(IV) determine whether payment of benefits to
such person has been terminated pursuant to
subparagraph (A)(iii), and whether certification
of payment of benefits to such person has been
revoked pursuant to section 405(j) of this title,
by reason of misuse of funds paid as benefits
under subchapter II of this chapter or this
subchapter.
42 U.S.C. sec.1383(a)(2)(B)./10
Nothing in the statutory language explicitly
requires the SSA to conduct criminal background
checks of those who apply to be appointed as
representative payees. Moreover, the statute
commits to the SSA’s discretion what constitutes
"adequate evidence," defining "adequate evidence"
as that evidence "determined by the Commissioner
of Social Security in regulations." 42 U.S.C.
sec. 1383(a)(2)(B)(i)(II). And although the SSA
has not implemented regulations concerning this
statute, we nevertheless owe SSA’s interpretation
of this statute "respectful consideration." See
First Chicago NBD Corp. v. Commissioner of
Internal Revenue, 135 F.3d 457, 458-59 (7th Cir.
1998); Parsons v. Pitzer, 149 F.3d 734, 738 (7th
Cir. 1998) (citing Reno v. Koray, 515 U.S. 50, 61
(1995)); see also City of Chicago v. FCC, 199
F.3d 424, 429 (7th Cir. 2000) ("An agency’s
interpretation of a statute it administers
commands deference, regardless of whether it
emerges as a result of an adjudicative
proceedings [sic] or a rulemaking process.")
(citing Cowherd v. United States Dep’t of Hous.
and Urban Dev., 827 F.2d 40 (7th Cir. 1987)).
3. The Applicability of Holt v. Bowen
Gloria relies on Holt v. Bowen, 712 F. Supp.
813 (D. Colo. 1989), in support of her contention
that the SSA was negligent in failing to
investigate Strong’s criminal background./11
But, even assuming that Holt is applicable, the
holding in that case at most requires the SSA to
do criminal background investigations of
candidate representative payees where it has a
good reason to do so. The Holt court stated: "We
do not infringe upon the [SSA’s] authority to
determine the scope of the investigation of
proposed representative payees. However, at a
minimum, such an investigation should include
appropriate background questions along with a
face-to-face interview. Answers to these
questions could then be used in determining the
need for further investigation." Holt, 712 F.
Supp. at 815./12
In Holt, the court determined that the SSA was
negligent in failing to investigate Reginald
Holt’s proposed representative payee, Billy
Stewart, because Stewart had no significant
connection to the claimant, he gave a bad
address, and he gave an incorrect job reference.
These factors all indicated that Stewart might
not be a suitable payee. Thus, the court found
that the SSA had a duty to investigate Stewart
further. See Holt, 712 F. Supp at 815.
The circumstances in this case, in contrast to
those in Holt, suggested to the SSA
representative that there was no reason for
"further investigation" of Strong. As the ALJ
explained, "[t]here was nothing presented to the
SSA at that time to show that such a procedure
should have been followed." Not only did the
SSA’s investigation of Strong not raise any red
flags, but Strong satisfied several conditions
which the SSA considers to be strongly indicative
of payee suitability.
First, Strong was Gloria’s court-appointed legal
guardian. The Sangamon County, Illinois Court had
already determined that Strong was a suitable
person to act in Gloria’s best interests. See 20
C.F.R. sec. 416.621(b)(1); POMS sec.sec. GN
00502.105(C) & GN 00502.139(B)(1). Second, Strong
is Gloria’s uncle. See 20 C.F.R. sec.sec.
416.620(a) & 416.621(b)(4). Third, Strong had
custody of Gloria. See 20 C.F.R. sec.sec.
416.620(d) & 416.621(b)(4). Finally, Strong had
prior experience managing and accounting for
Gloria’s benefits. See 20 C.F.R. sec. 416.620(e).
With the consent of Gloria’s mother, Strong had
been appointed representative payee for Gloria’s
CIB. Strong performed well as Gloria’s CIB payee
for the two year period from January 1991 to
January 1993. He received approximately $3670 on
Gloria’s behalf, and Gloria does not allege that
Strong misused any of those funds. See POMS
secs. GN 00502.130 (B)(2) & GN 00502.136(A).
Accordingly, considering the record as a whole,
we are forced to hold that there is "such
evidence as a reasonable mind might accept as
adequate to support a conclusion" that the SSA
exercised reasonable care in appointing Strong as
Gloria’s representative payee./13
4. The Adequacy of the SSA’s Monitoring of
Strong
Section 1383 requires that the SSA not only
investigate representative payees before
certifying them but also that the SSA monitor
representative payees once they are certified in
order to make sure that they are acting in the
best interests of the beneficiaries they
represent. See 42 U.S.C. sec. 1383(a)(2)(C); POMS
sec. GN 00604.051(A). Gloria contends that the
SSA was negligent in paying her $23,202.98 SSI
award to Strong because it had actual notice that
Strong had previously misused SSA benefits.
Initially, Gloria contends that when her sister,
Barbara Cannon, filed a request to be her own
payee in January 1993, Barbara informed the SSA
that Strong had refused to hand over her CIB
checks for December 1992 and January 1993. The
SSA denies that it was notified of Strong’s
misuse of funds at that time. The Appeals Council
found, "The ’Request to be Selected as Payee’
filed by Barbara M. Cannon on January 15, 1993
states only that she no longer lived with her
payee and would prefer to receive her own checks.
There is no mention of misuse of funds by Sampson
Strong."
We have repeatedly held that "an ALJ’s
credibility determination will not be disturbed
unless it is patently wrong." See, e.g., Diaz, 55
F.3d at 308. Here, the ALJ’s credibility finding
is supported by the record. Barbara Cannon’s
request to be her own payee states only:
I feel that I am able to manage my own funds. I
am no longer living with my payee and would
prefer to receive my own checks. I am living with
a friend and feel that I would [be the] best
payee for my benefits. The people I am living
with are not related to me.
There is no typed or handwritten statement on
this request (or any other documented proof in
the record) alleging misuse by Strong. Thus, we
will not disturb the ALJ’s finding that Barbara
Cannon did not inform the SSA of Strong’s misuse
of her CIB prior to the SSA’s payment of her
sister’s $23,202.98 SSI award in February 1993.
Next, Gloria contends that the SSA had actual
notice of Strong’s misuse of SSI funds when, in
August 1992, Strong failed to provide a requested
representative payee accounting as required under
20 C.F.R. sec. 416.665. The SSA sent Strong two
"nonresponder alerts" both dated August 2, 1992,
for failure to report expenditures for Barbara
Cannon and Emanuel Cannon. But by August 20,
1992, Strong provided the requested
Representative Payee Reports and the reports
failed to reflect any foul play or irregularity
in the use of benefits that had been paid.
Strong’s tardiness in submitting the accounting
reports was not so unusual that it would have
alerted the SSA to possible misuse. Cf. POMS sec.
GN 00605.085 (allowing payees up to six months to
respond to a nonresponder alert). Accordingly, we
are of the opinion that there is "such evidence
as a reasonable mind might accept as adequate to
support a conclusion" that the SSA exercised
reasonable care in monitoring Strong.
B. Due Process Problems with SSA Self-Evaluation
Gloria next contends that the SSA’s
administrative review of her claim for
reimbursement violated her right to
constitutional due process because the SSA,
"should not evaluate itself on questions
regarding its own negligence. . . . SSA cannot
possibly evaluate itself in such matters where it
has a clear conflict of interest in the outcome."
To the extent that Gloria attacks the institution
of administrative review, the Supreme Court has
rejected this assertion. See Richardson v.
Perales, 402 U.S. 389, 410 (1971) ("Neither are
we persuaded by the advocate-judge-multiple-hat
suggestion. It assumes too much and would bring
down too many procedures designed, and working
well, and for a governmental structure of great
and growing complexity."). To the extent that
Gloria attempts to get around the high degree of
deference that we accord to ALJ decisions, see,
e.g., Estok, 152 F.3d at 638, by attacking the
neutrality of the ALJ in this particular case,
Gloria has failed to identify any evidence to
substantiate such an assertion. Cf. Chapman v.
U.S. Commodity Futures Trading Comm’n, 788 F.2d
408, 411 (7th Cir. 1986). Accordingly, we hold
that the SSA afforded Gloria constitutional due
process.
C. The Fairness of the Hearing
Finally, Gloria contends that the ALJ hearing
was not fair because the "ALJ’s failure to fully
develop the record prejudiced the outcome of
[her] case." Gloria argues that the ALJ should
have allowed her non-attorney representative,
Linda Rockey, to testify as a witness at the
hearing. The ALJ informed Rockey that she could
not act both as Gloria’s representative and as a
witness.
ALJ: No you can’t act as a representative and as
a witness.
REP: Okay. Well, that makes sense.
But the ALJ allowed Rockey to bring out any
facts and arguments that she requested to make
known while acting in her capacity as
representative. Cf. Butera v. Apfel, 173 F.3d
1049, 1059 (7th Cir. 1999). The ALJ told Rockey
at the hearing, "the record will be left open for
two weeks for you to mail a statement in then if
you desire." Cf. 20 C.F.R. sec. 416.1510(a)(3)
("Your representative may, on your behalf--make
statements about facts and law."); 20 C.F.R. sec.
416.1449 ("[Y]our representative may . . . enter
written statements about the facts and law
material to your case into the record."). Gloria
has failed to identify any evidence that was not
obtained or how a lack of evidence prejudiced
her. "Mere conjecture or speculation that
additional evidence might have been obtained in
the case is insufficient to warrant remand."
Binion v. Shalala, 13 F.3d 243, 246 (7th Cir.
1994). Accordingly, we hold that the ALJ
developed a fair and complete record.
IV. CONCLUSION
On the face of the record, we are forced to
agree with the district court’s determination
that there is substantial evidence in the record
supporting the ALJ’s decision, finding that the
Commissioner was not negligent in selecting
Strong as Gloria’s representative payee. Thus,
the SSA is not liable under 42 U.S.C. sec.
1383(a)(2)(E) to reimburse Gloria for the SSI
payments misused by Strong until the SSA recovers
those funds from Strong. But we strongly caution
that in the future it would be advisable for the
SSA to at least ascertain if a representative
payee has an arrest and conviction record, as it
would not be an administrative burden for the SSA
to perform this minimal investigation./14 We
further hold that the SSA afforded Gloria
constitutional due process and that the ALJ
developed a fair and complete record.
AFFIRMED
FOOTNOTES
/1 A "representative payee" is "the person, agency,
or institution selected to receive and manage
benefits on behalf of an incapable beneficiary."
POMS sec. GN 00501.005(D).
/2 In cases where the negligent failure of the
Commissioner of Social Security to investigate or
monitor a representative payee results in misuse
of benefits by the representative payee, the
Commissioner of Social Security shall make
payment to the beneficiary or the beneficiary’s
representative payee of an amount equal to such
misused benefits. The Commissioner of Social
Security shall make a good faith effort to obtain
restitution from the terminated representative
payee.
42 U.S.C. sec. 1383(a)(2)(E); see also POMS sec.
GN 00604.060(B).
/3 In addition to these representations, Strong also
stated that he was never convicted of a felony on
his December 5, 1990 application to be
representative payee for Gloria’s CIB benefits as
well as on his August 1992 payee accounting
report.
/4 As of September 1993, Gloria had turned eighteen
years old, moved out of Strong’s apartment, and
moved in with her sister Barbara.
/5 Strong later admitted in an Illinois state court
proceeding that he used most of the money for his
own purchases, including a Cadillac automobile,
electronic equipment, and furniture.
/6 After Strong did not return the misused funds,
the SSA commenced a civil action against Strong
to recover the funds pursuant to 42 U.S.C. sec.
1383(a)(2)(E) (Count One) and 31 U.S.C. sec. 3729
(Count Two). On April 21, 1999, the U.S. District
Court for the Central District of Illinois
rendered a judgment against Strong on Count One,
requiring him to repay the misused $22,767.68
with future costs and interest. United States v.
Strong, Civ. No. 99-3003 (C.D. Ill. Apr. 21,
1999) (Consent Judgment).
/7 The record does not reflect the exact amount.
/8 After the SSA issued its January 1994
determination that Strong had misused her funds,
Gloria proceeded to collect some of the misused
funds from Strong directly. For example, in an
Illinois state court action, Gloria obtained a
turn-over order requiring that Strong turn over
his 1986 Cadillac for which he had paid $6500. In
re Cannon, No. 90-P-696 (Ill. Cir. Ct., Sangamon
Cty. Mar. 15, 1994).
/9 On January 22, 1999, in accordance with 28 U.S.C.
sec. 636(c)(1), both parties consented to proceed
before a United States Magistrate.
/10 The district court quoted similar language from
42 U.S.C. sec. 405(j)(2). But because Gloria’s
reimbursement claim concerns her SSI benefits
under Title XVI rather than her CIB benefits
under Title II, we will analyze Gloria’s claim
for reimbursement under 42 U.S.C. sec.
1383(a)(2)(B).
/11 Gloria also relies on a proposed regulation,
Denial of Supplemental Security Income Benefits
for Fugitive Felons and Probation and Parole
Violators, 63 Fed. Reg. 32,161 (1998). But this
regulation is inapposite both because it post-
dates the SSA’s conduct in the instant case and
because it only requires the SSA to investigate
the criminal status of SSI recipients, not that
of representative payees.
/12 The SSA’s operating procedures similarly provide:
"Obtain additional information which verifies the
[payee] applicant’s answer(s) to any question(s)
which lead you to doubt any information
furnished." POMS sec. GN 00502.107(B)(1).
/13 We note that even if the SSA knew of Strong’s
convictions, that would not have automatically
disqualified him from serving as Gloria’s
representative payee. See POMS sec. GN
00502.133(A).
/14 See generally Inviting Fraud: Has the Social
Security Administration Allowed Some Payees to
Deceive the Elderly and Disabled? Hearings Before
the Senate Special Committee on Aging, 106th
Cong., 2000 WL 19303127 (2000) (Statement of
James Huse, Jr., Inspector General of the SSA).