Anderson v. US, Court No. 90-11-00617.

Decision Date07 May 1992
Docket NumberCourt No. 90-11-00617.
Citation799 F. Supp. 1198
PartiesKenneth A. ANDERSON, Jr., Plaintiff, v. The UNITED STATES, Defendant.
CourtU.S. Court of International Trade

Kenneth A. Anderson, Jr., pro se.

Stuart M. Gerson, Asst. Atty. Gen., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office (Mark S. Sochaczewsky), U.S. Dept. of Justice, Civil Div., Christopher Doherty, U.S. Customs Service, of counsel, for defendant.

OPINION

RESTANI, Judge:

Pursuant to Rule 56.1 of the Rules of the United States Court of International Trade, plaintiff requests judgment upon the administrative record regarding revocation of his customs broker's license. Plaintiff's license was revoked by order of the Assistant Secretary of Treasury, acting on behalf of the Secretary of the Treasury (the "Secretary"). This revocation was based upon the Secretary's determination as recommended by an Administrative Law Judge ("ALJ"), that plaintiff violated several regulations and a statute pertaining to the conduct of customshouse brokers.

The decision of the ALJ to revoke plaintiff's license will be set aside if it is unsupported by substantial evidence. See 5 U.S.C. § 706(2)(E) (1988); Kazangian v. Brady, 15 CIT ___, ___, Slip Op. 91-87, at 3, 1991 WL 185716 (Sept. 18, 1991); Barnhart v. United States Treasury Dep't, 9 CIT 287, 290, 613 F.Supp. 370, 373 (1985). Substantial evidence consists of more than a mere scintilla, and includes "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Fusco v. United States Treasury Dep't, 12 CIT 835, 838-39, 695 F.Supp. 1189, 1193 (1988) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216, 83 L.Ed. 126 (1938)).

Background

Since receiving his customs broker's license in 1968, plaintiff has worked as a customs broker in the Port of Boston, Massachusetts. In a letter dated March 18, 1988, the District Director of Customs informed plaintiff that he proposed to revoke plaintiff's customs broker's license pursuant to 19 U.S.C. § 1641 and 19 C.F.R. § 111.57.1 A Statement of Charges submitted with this letter set forth the grounds for complaint as follows: (1) plaintiff induced his clients to violate certain rules and regulations of the Customs Service, in breach of 19 U.S.C. § 1641(d)(1)(D) (Charge I); (2) plaintiff himself violated laws enforced by Customs and the rules and regulations issued under these provisions, violating 19 U.S.C. § 1641(d)(1)(C) (Charge II); and (3) plaintiff willfully and knowingly deceived and misled his clients with intent to defraud, in violation of 19 U.S.C. § 1641(d)(1)(F) (Charge III). Plaintiff participated in preliminary proceedings regarding these charges.

In a letter dated April 8, 1988, plaintiff stated that he had no intention of defrauding either his clients or the United States government. Plaintiff also denied the charges against him and requested a formal hearing. In a letter dated June 21, 1988, the Acting Commissioner of Customs instructed the District Director to proceed with the license revocation procedure. The District Director, in a letter dated September 2, 1988, advised plaintiff that the Commissioner of Customs had determined that his license should be revoked. Attached to this letter was the final Statement of Charges which set forth the same three charges: the charges were the same as those contained in the preliminary version.

On June 20, July 24, and July 25, 1989, an ALJ held a hearing on the proposed revocation. At the hearing, the government argued that plaintiff's license should be revoked for essentially three reasons. First, the government alleged that on twenty occasions between February 25 and August 27, 1985, plaintiff obtained release of imported merchandise on behalf of his clients, collected the duties from his clients, deposited these monies into his own bank account, and sent Customs a check written on his own account. The checks were then returned for insufficient funds, and each importer was required to pay Customs directly a second time. Second, it was alleged that in thirty instances between October 8, 1985 and May 5, 1986, plaintiff failed to submit entry summaries and duty payments after he obtained the release of merchandise and received duty payments from his clients. Third, the government contended that plaintiff overcharged his clients for overtime services performed by Customs and billed to him between October 1 and December 31, 1985.

Plaintiff, appearing pro se, argued that his bank had simply processed his deposits too slowly for some of the checks to clear. Plaintiff also maintained that he did not overcharge his clients for Customs' overtime, and the overtime charges appearing on the bills reflected both Customs' and his own personal overtime. Citing a temporary cash flow problem, plaintiff argued that he never intended to defraud his clients in any manner; he insisted that he was working out settlements with his clients.

Following the hearing, plaintiff retained counsel who submitted a post-hearing brief and a motion to strike certain evidence presented at the hearing. In this motion, plaintiff sought to exclude parts of Special Agent Eileen Geehan's testimony and many documents introduced by Customs. The ALJ issued a recommended decision. As an initial matter, the ALJ denied plaintiff's motion to strike the testimony and documents. Turning to the merits, the ALJ found that plaintiff had violated 19 U.S.C. § 1641(d)(1)(C) (Charge II of the Statement of Charges), by violating laws enforced by Customs and various regulations.

Specifically, the ALJ concluded that plaintiff had violated the following sections: 19 C.F.R. § 111.292 by failing to exercise due diligence in making financial settlements, payments of duties, and written accountings to clients; 19 C.F.R. § 111.393 by withholding information from clients; 19 C.F.R. § 111.284 by failing to exercise responsible supervision and control over his Customs business; and 18 U.S.C. § 5425 by willfully acting or failing to act in such a manner as to deprive the government of lawful duties. The ultimate recommendation of the ALJ was revocation of plaintiff's customs broker's license. The ALJ recommended dismissal of Charges I and III because they were not proven by a preponderance of the evidence.

On October 9, 1990, the Secretary adopted the recommended decision of the ALJ and ordered revocation of plaintiff's license. The Secretary ruled that Charge II of the Statement of Charges had been sustained by a preponderance of the evidence. This appeal ensued.

Discussion
I. Plaintiff's motion to strike was properly denied.

In his post-trial brief, incorporated by reference in these proceedings, plaintiff argued that denial of his motion to strike was an abuse of discretion. Plaintiff's objections to the evidence may be categorized as follows: (1) hearsay objections to importers' invoices and cancelled checks; (2) objections to Agent Geehan's testimony as biased, and to her competence as the foundation witness for certain records and letters; and (3) hearsay objections to importers' letters regarding payments to plaintiff for duties owed and later payments to Customs as a result of plaintiff's non-payment. Plaintiff also raised objections to certain other documents, including: notices of liquidated damages and cash receipts (Customs Forms 5955A and 5104 respectively), and documents describing settlement agreements between plaintiff and certain importers.

Plaintiff conceded that the traditional rules of evidence do not apply in administrative proceedings, but argued that Richardson v. Perales, 402 U.S. 389, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971) stands for the proposition that a higher standard of admissibility than that set out in the Administrative Procedures Act ("APA") must be applied to hearsay evidence offered in a license revocation proceeding.6

Unless modified by agency rules, evidence is admitted in administrative proceedings in accordance with § 556(d) of the APA, which provides: "Any oral or documentary evidence may be received, but the agency as a matter of policy shall provide for the exclusion of irrelevant, immaterial, or unduly repetitious evidence." 5 U.S.C. § 556(d) (1988); see also 3 K. Davis, Administrative Law Treatise § 16.1-1 (Supp. 1989), § 16.5 (1980). The APA further provides that "relevant evidence" may be admitted in administrative hearings. 5 U.S.C. § 556(c)(3) (1988). If hearsay evidence satisfies the APA standard, agencies may consider it in light of its "`truthfulness, reasonableness, and credibility'." Veg-Mix, Inc. v. U.S. Dep't of Agriculture, 832 F.2d 601, 606 (D.C.Cir.1987) (quoting Johnson v. United States, 628 F.2d 187, 190-91 (D.C.Cir.1980)).

This court has specifically recognized that administrative proceedings are governed by the APA, not the Federal Rules of Evidence. See Baltimore Security Warehouse Co. v. United States, 9 CIT 641, 645, 1985 WL 25793 (1985) (hearsay evidence admissible in proceeding to revoke bonded warehouse status); Allen Robbins and Robbins, Inc. v. James A. Baker, 14 CIT ___, ___, Slip Op. 90-40, at 4, 1990 WL 62640 (Apr. 27, 1990) (charges in license revocation proceeding need not be proven in accordance with Federal Rules of Evidence).

The case cited by plaintiff, Richardson v. Perales, does not support a contrary finding. In Richardson, the Supreme Court discussed factors that "assured underlying reliability and probative value" of hearsay evidence.7 402 U.S. at 402, 91 S.Ct. at 1428. Plaintiff's reliance on Richardson is misguided because that case stands for the principle that admissibility of hearsay evidence in an administrative proceeding is determined by an inquiry into its reliability and probativeness, and not by strict adherence to a specific test or rule. The Supreme Court expressly found that under the APA, hearsay evidence is admissible "up to the point of relevancy." Id. at 410, 91 S.Ct. at 1431-32. Thus, Richar...

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