SUBJECT: Korangy Radiology Associates, P. A., t/a Baltimore
Imaging Centers,

Petitioner,

Food and Drug Administration

FINAL DECISION ON REVIEW OF
ADMINISTRATIVE LAW JUDGE DECISION

On January 13, 2005, the two respondents, Korangy Radiology Associates, P.A., t/a Baltimore Imaging Centers (KRA), and Amile A. Korangy, M.D., collectively referred to herein as "Korangy," ⁽¹⁾ appealed the December 17, 2004, initial decision of Administrative Law Judge (ALJ) Daniel J. Davidson, who served as presiding officer in this matter. Korangy Radiology Associates, P.A., t/a Baltimore Imaging Centers, and Amile A. Korangy, M.D., FDA Docket No. 2003H-0432 (2004) (ALJ Initial Decision). The ALJ Decision upheld imposition of a civil money penalty (CMP) of $3,000 per violation for each of 193 violations of the Mammography Quality Standards Act of 1992 (MQSA), 42 U.S.C. § 263b, for a total CMP of $1,158,000, or $579,000 imposed separately on each of the two respondents. The ALJ Initial Decision incorporated by reference an earlier Partial Summary Decision (ALJ Summary Decision) issued by the ALJ on May 17, 2004, which found Korangy liable for the violations. Korangy took exception to the ALJ Initial Decision, including the incorporated ALJ Summary Decision, on a number of substantive and procedural grounds. ⁽²⁾

We find no merit to any of these exceptions. Therefore, for the reasons fully explained below, we affirm the ALJ Initial Decision in its entirety.

Applicable legal authority

The MSQA provides that "[n]o facility may conduct an examination or procedure described in paragraph (2) involving mammography after October 1, 1994, unless the facility obtains" a certificate --

(i) that is issued, and, if applicable, renewed, by the Secretary . . .
(ii) that is applicable to the examination or procedure to be conducted; and
(iii) that is displayed prominently in such facility.

42 U.S.C. § 263b(b)(1). Paragraph (2) identifies the examinations and procedures which a certificate is required to perform, including to -

(A) operate radiological equipment that is used to image the breast;
(B) provide for the interpretation of a mammogram produced by such equipment at the facility or under arrangements with a qualified individual at a facility different from where the mammography examination is performed; and
(C) provide for the processing of film produced by such equipment at the facility or under arrangements with a qualified individual at a facility different from where the mammography examination is performed.

A facility is defined in relevant part to mean "a hospital, outpatient department, clinic, radiology practice, or mobile unit, an office of a physician, or other facility as determined by the Secretary [of the United States Department of Health and Human Services], that conducts breast cancer screening or diagnosis through mammography activities." 42 U.S.C. § 263b(a). ⁽³⁾

The MSQA provides for the Secretary to establish minimum standards for facilities to meet in order to be accredited, including standards relating to equipment, personnel, and reviewing physicians. 42 U.S.C. § 263b(f). Quality standards have been established by regulations at 21 C.F.R. Part 900.

The Secretary is authorized to approve non-profit or state agencies to serve as accreditation bodies for purposes of evaluating quality. 42 U.S.C. § 263b(e). The Secretary has approved the American College of Radiology (ACR) as an accreditation body. A facility must apply to the accreditation body for accreditation and be approved before the FDA will issue or renew a certificate for the facility to perform mammography services. 42 C.F.R. § 263(b)(d)(1)(A)(iv); see also 21 C.F.R. § 900.11.

Where a facility has allowed its certificate to expire or has been refused a renewal of its certificate, reinstatement may be sought from the FDA, which may treat the facility as a new facility eligible for a provisional certificate.

The Secretary is authorized under the MSQA to "assess civil money penalties in an amount not to exceed $10,000" for--

(A) failure to obtain a certificate as required by subsection (b) of this section,
(B) each failure by a facility to substantially comply with, or each day on which a facility fails to substantially comply with, the standards established under subsection (f) of this section or the requirements described in subclauses (I) through (III) of subsection (d)(1)(B)(ii) of this section,
(C) each failure to notify a patient of risk as required by the Secretary pursuant to paragraph (2), and
(D) each violation, or for each aiding and abetting in a violation, of any provision of, or regulation promulgated under, this section by an owner, operator, or any employee of a facility required to have a certificate.

42 U.S.C. § 263b(h)(3)(emphasis added).

The Secretary is required by the MSQA to --

develop and implement procedures with respect to when and how each of the sanctions is to be imposed under paragraphs (1) through (3). Such procedures shall provide for notice to the owner or operator of the facility and a reasonable opportunity for the owner or operator to respond to the proposed sanctions and appropriate procedures for appealing determinations relating to the imposition of sanctions.

42 U.S.C. § 263b(h)(4).

The FDA's regulations governing CMPs appear at 21 C.F.R. Part 17, and are made applicable to CMPs under the MSQA by section 17.1(f). These regulations set out the details of how a case is initiated by service of a complaint, provide for a hearing on the record before a presiding officer, and place the burden of proof on the FDA. 21 C.F.R. §§ 17.5, 17.7, 17.33. The regulations provide respondents a right of appeal from the presiding officer's initial decision to the Departmental Appeals Board (DAB), which was exercised by Korangy in the present appeal. 21 C.F.R. § 17.47. The preamble to the final rule explains the reasons for the assignment of FDA CMP appeals to the DAB as follows:

The DAB is generally recognized as a fair and effective adjudicative forum. The DAB is an independent body within HHS with expertise in adjudication of civil money penalties. Accordingly, FDA will use that board, at least initially, for the adjudication of all appeals, including review of default judgments, interlocutory appeals, and appeals from initial decisions under this part.

60 Fed. Reg. 38,612, 38,613 (July 27, 1995).

The regulations also provide guidance for how adjudicators are to determine the appropriateness of CMP amounts as follows:

(a) When determining an appropriate amount of civil money penalties and assessments, the presiding officer and the Commissioner of Food and Drugs or entity designated by the Commissioner to decide the appeal (currently the DAB) shall evaluate any circumstances that mitigate or aggravate the violation and shall articulate in their opinions the reasons that support the penalties and assessments imposed.
(b) The presiding officer and the entity deciding the appeal shall refer to the factors identified in the statute under which the penalty is assessed for purposes of determining the amount of penalty.
(c) Nothing in this section shall be construed to limit the presiding officer or the entity deciding the appeal from considering any other factors that in any given case may mitigate or aggravate the offense for which penalties and assessments are imposed.

21 C.F.R. § 17.34.

Factual background

The following background information is not in dispute on appeal (except as indicated) and is drawn from the ALJ Initial and Summary Decisions, and the record before the ALJ. This summary is presented for the convenience of the reader, but should not be treated as new findings.

At all relevant times, Dr. Korangy was the owner, operator, employee, and lead interpreting physician of Korangy Radiology Associates, P.A. (KRA), which operated a mammography facility as Baltimore Imaging Centers under a certificate issued by the FDA on May 6, 1999.

On April 1, 2002, the FDA wrote to Dr. Korangy at KRA's address warning that once KRA's certificate expired on May 6, 2002, KRA would be "no longer certified and cannot continue to offer mammography services." Exhibit G-1. Dr. Korangy denied receiving this letter. Exhibit R-1 (Korangy Declaration) at ¶15.

On April 29, 2002, ACR wrote to Korangy that it had found the mammograms produced by KRA's equipment to be deficient in clinical image quality. Exhibit G-2. This letter contained a paragraph advising KRA how to proceed after this notification of failure which read as follows:

Because this is your unit's second unsuccessful attempt at attaining accreditation, it is regarded as a FAILURE. ACR strongly recommends that you cease conducting mammography with this unit upon receipt of this letter. As an FDA-approved accrediting body, the ACR is required to notify the FDA of this failure and the FDA will officially notify you to discontinue mammography with this unit. Continuing to conduct mammography with this unit may result in official sanction and fines from the FDA. Please note that this will not be an order to permanently cease mammography. A process is in place to allow you to resume mammography under specific conditions. The ACR will work with your facility through this process to help you improve image quality and patient care so that accreditation can be achieved.

Id. at 2 (emphasis in original). The letter provided the following further warning in closing:

Please remember that your facility cannot legally conduct mammography after receiving notification to cease from the FDA. Should you continue to conduct mammography without legal certification, your facility will not be eligible for reimbursement by Medicare or Medicaid for services provided during that time, and your facility could be subject to sanctions or fines from the FDA.

Id. at 4 (emphasis in original). Korangy acknowledged receiving this letter. Exhibit R-1, at ¶11.

On May 1, 2002, the FDA sent a letter to KRA following the denial of accreditation that instructed them that "[u]pon receipt of this letter, you must cease performing mammography and you should no longer display your certificate, regardless of the date of expiration." Exhibit G-3. Dr. Korangy denied receiving that letter. Exhibit R-1, at ¶16.

KRA's certificate expired by its terms on May 6, 2002. Korangy does not deny that 192 mammograms were performed at KRA after that date and before a new certificate was obtained.

Korangy ordered replacement equipment in March 2002, and that equipment was placed in service on or around June 28, 2002. ALJ Summary Decision at 5-6, and record citations therein. Korangy does not dispute the FDA's assertion that 165 of the 192 mammograms at issue were performed on the older equipment. FDA Appeal Br. at 15, and record citations therein.

The FDA originally sought to impose CMPs of $10,000 per violation for 193 violations on each of the respondents. In its post-hearing brief, however, the FDA reduced the CMP amounts which it proposed to assess to $3,000 per violation. ALJ Initial Decision at 2.

Standard of Review

The standard of review on appeal from the decision of a presiding officer as to disputed issues of fact is whether the initial decision is supported by substantial evidence on the whole record. 21 C.F.R. § 17.47(k). The standard of review as to disputed issues of law is whether the initial decision is erroneous. Id.

Korangy's exceptions fall into two main categories: challenges to the legal authority of the FDA to impose CMPs here (largely relating to the ALJ Summary Decision) and arguments about the adequacy of the FDA's showing that the amounts of the CMPs were appropriate (largely relating to the ALJ Initial Decision). We discuss each in turn below.

In resolving these disputes, we have reviewed the record developed before the ALJ and the parties' briefing on appeal. We also permitted an opportunity for oral argument at the request of Korangy.

I. Korangy's challenges to the FDA's legal authority are without merit.

A. The FDA is authorized by the MSQA to impose multiple CMPs under the circumstances here.

Korangy argues that the only CMP which could properly be imposed here under the MSQA was a single CMP of no more than $10,000 for operating without a valid certificate after the KRA certificate expired. Korangy Memorandum at 1. Korangy contends that subsection (3)(A) of the MSQA, quoted above, singles out the failure to obtain a certificate as the only offense separately mentioned. Id. at 2. From this observation, Korangy reasons that, since the allegation of operating mammography equipment without a certificate makes out a violation under subsection (3)(A) for failure to obtain a certificate, multiple acts of operating mammography equipment while not certified may not be charged as multiple violations under subsection (3)(D). Id.

The plain language of the statute is to the contrary. The MSQA indeed proscribes any mammography facility from operating without a certificate on pain of a CMP of up to $10,000, but it also provides for CMPs for "each violation, or for each aiding and abetting in a violation of, any provision of, or regulation promulgated under, this section by an owner, operator, or any employee of a facility required to have a certificate." The statute thus specifically provides for multiple penalties where there have been multiple violations. 42 U.S.C. § 263b(h)(3)(D). Furthermore, the subsections are joined conjunctively with "and," which emphasizes that the FDA is not expected to choose to enforce only subsection (A) alone or subsection (B), (C), or (D), but rather any or all of those which apply.

Korangy argues that subsection (3)(D) must be read to cover only "violations beyond those previously specified in section (h)[of 42 U.S.C. § 263b] and [not to] repeat them." Korangy Memorandum at 2. Korangy also notes that subsection (3)(A), alone among the subsections of section 263b(h), does not refer to "each" failure or violation, from which Korangy extrapolates that the MSQA does not contemplate liability for multiple violations of subsection (3)(A). Id. While Korangy is correct that subsection (3)(A) does not refer to "each" violation, we do not agree that this fact somehow undercuts the FDA's application of the MSQA to Korangy here. The violations of subsection (3)(D) with which Korangy is charged do not merely duplicate the failure to obtain a certificate but constitute many repeated acts of performing mammography examinations with an expired certificate. These affirmative actions go beyond the passive failure to become certified. Further, the FDA did not charge Korangy with multiple violations under subsection (3)(A), but rather under subsection (3)(D). ⁽⁴⁾ Subsection (3)(D) expressly provides for multiple charges and imposing multiple charges under that subsection does not equate to "magically" multiplying liability under subsection (3)(A), as Korangy puts it. Id.

Nor is this enforcement scheme irrational or impermissible, contrary to Korangy's claim that subsection (A) is rendered somehow superfluous or meaningless thereby. See Korangy Memorandum at 2. The purpose of the MSQA was to create nationwide comprehensive quality standards for mammography in the face of evidence that poor image quality and inadequate radiographic interpretation could cost lives from breast cancer. S. Rep. No. 448, 102d Cong., 2d Sess. at 3-5 (1992). The first step in applying quality standards is to assure that all facilities are certified. Clearly, the FDA cannot assure that a facility that operates without a certificate is in compliance with any of the standards. The extent of the risk posed by that facility to patients bears an obvious relationship to the scope of the operation, however. If no greater penalty could be imposed on a facility that performed many mammograms without a certificate than on a facility that performed just one, the law would present no significant deterrent to continuing in operation indefinitely without becoming certified.

B. The FDA did develop and implement procedures as to when and how CMPs are imposed under the MSQA.

Korangy further contends that the FDA lacked authority to impose any CMP because the FDA failed to meet a statutory requirement to issue procedures for imposing sanctions under the MSQA. The ALJ rejected this argument on the grounds that FDA regulations specifically govern the procedures for imposing CMPs under the MSQA and that the FDA had also issued a manual in September 1999 providing more general guidance for how sanctions are applied under the MSQA. ALJ Initial Decision at 2-3; 21 C.F.R. Part 17 passim, and specifically applied to MSQA by section 17.1(e); FDA Compliance Program Guidance Manual - CPG 7382.014 (September 30, 1999)(CPG Manual). ⁽⁵⁾

The provision on which Korangy relies for this argument states that the "Secretary shall develop and implement procedures with respect to when and how each of the sanctions is to be imposed . . . . Such procedures shall provide for notice to the owner or operator of the facility and a reasonable opportunity for the owner or operator of the facility to respond to the proposed sanctions and appropriate procedures for appealing a determination relating to the imposition of sanctions." 42 U.S.C. § 263b(h)(4). On appeal, Korangy ignores the basis for the ALJ's conclusion that this provision was satisfied and baldly asserts that it "is uncontroverted, and, in fact, admitted by FDA, that the agency has never issued guidance with respect to the requirement to develop and implement procedures for when and how the sanction authority that includes the use of CMPs is to be utilized." Korangy Memorandum at 2. The only authority which Korangy cites for this claim is the following colloquy elicited on cross-examination from an FDA compliance expert, Michael P. Divine:

Q [by counsel for Korangy] Okay. Are there any substantive guidelines that the FDA follows with respect to the issuance of civil money penalties?

A [by Mr. Divine] We don't have any formal guidance at this time for civil money penalty cases that I'm aware of. We have some draft guidance, but we don't - it's not official.

Q Is that the draft guidance from 1999 that you're referring to?

A Yeah, I believe so.

Transcript of September 20, 2004, hearing before the ALJ (Hearing Tr.) at 12-13. From this statement, Korangy infers that there "exist no rules, policies or procedures with respect to issuance of such fines" and that therefore the imposition of CMPs under the MSQA "is illegal." Korangy Memorandum at 2-3.

This contention is untenable. It is founded on inexplicably ignoring the existence of regulations that set out detailed procedural safeguards, including notice of proposed sanctions and an opportunity to appeal them as required by the statute. 21 C.F.R. Part 17. In addition, the regulations spell out the factors to be considered in determining the appropriate amount of a CMP, as quoted earlier in this decision. The CPG Manual, in the record as Exhibit G-31, elaborates on the situations in which regulatory actions will be taken, on the evidence needed to support such actions, on the manner of providing notice, and on the factors bearing on the severity of violations leading to CMPs, among other subjects. See, e.g., CPG Manual, Part III passim.

Korangy fails to explain what more would be required to accomplish the statutory goal of developing procedures for "when and how" CMP sanctions would be imposed under the MSQA, including notice and provision for appeal. In argument on appeal, Korangy's counsel simply asserts that the CPG Manual guidelines do not meet the statutory requirements because they are too "general" and because Mr. Divine did not reference them as providing for "how and when the sanctions were to be in place." Oral Argument Tr. at 11.

Certainly, the testimony by Mr. Divine alone cannot be read to eviscerate the FDA's regulatory authority. Even if Mr. Divine individually were unaware of the existence of the regulations and the CPG Manual, that would hardly negate their preparation and issuance by the FDA. ⁽⁶⁾ The context of the colloquy at the hearing is confusing and suggests that the exchange may have resulted from miscommunication between Korangy counsel and the FDA witness rather than from Mr. Divine's unawareness of the regulations and the CPG Manual. See Oral Argument Tr. at 31-32. Mr. Divine described in detail the internal steps by which an investigation is reported and a recommendation forwarded and evaluated by several different offices, resulting in a final approval by a Center Director who signs a formal complaint to the facility. Hearing Tr. at 11-12. Mr. Divine affirmed that the complaint against Korangy had followed this normal process. The follow-up questioning was ambiguous about what additional "substantive guidelines" counsel intended to ask about. It is not reasonable, in context, to draw the inferences which Korangy seeks to draw from Mr. Divine's response. In any case, whatever Mr. Divine was thinking about in answering the questions, as discussed above, the FDA regulations and guidelines are adequate as a matter of law to meet the requirements of the MSQA and the FDA had authority to issue the proposed sanction against Korangy under the MSQA. ⁽⁷⁾

C. Korangy was provided with adequate legal notice.

Korangy argues that the FDA failed to develop procedures providing for "notice to the owner or operator of the facility" of sanctions imposed under the MSQA. 42 U.S.C. § 263(h)(4). Korangy Memorandum at 3. Korangy asserts that, whether or not notice delivered to the facility was "fair," any service on the facility that did not "restrict delivery" to Dr. Korangy personally or assure his personal receipt could not constitute a procedure meeting the statutory mandate. Id.

Questions of the adequacy of notice arose in multiple contexts in this case, so it is important to distinguish precisely what kind of notice is at issue in this argument on appeal. ⁽⁸⁾ Korangy's brief refers to notice "of the existence of a violation that required remediation," but the portion of the statute cited addresses procedures for imposition of a sanction, notice of a sanction, and opportunities to be heard on and to appeal a sanction. Cf. Korangy Memorandum at 3. The complaint proposing the CMPs here served notice of the sanction in this case and these proceedings provided the opportunity to be heard and to appeal that sanction. There can thus be no question that Dr. Korangy was informed of the FDA's proposed imposition of the CMPs and of the opportunity to appeal exercised in the present proceedings.

Dr. Korangy argues that, regardless of his actual notice of the CMP sanctions, the notice process was nevertheless defective because no effort was made to restrict delivery to him personally or to ensure that he actually received a copy of the document. Korangy Memorandum at 3. Further, Korangy's position seems to be that the absence of an adequate procedural notice requirement divested FDA of authority to impose any CMPs here. Id.

The regulations provide that a complaint may be served by "[c]ertified or registered mail or similar express delivery service." 21 C.F.R. § 17.7(a)(1). ⁽⁹⁾ Proof of service may be through a return receipt card or by written statement of "the respondent or by the respondent's counsel or authorized representative or agent." 21 C.F.R. § 17.7(b)(2) and (3). Dr. Korangy cited no authority for the proposition that the statute requires the FDA to have a notice process that "restricts delivery" to Dr. Korangy personally. We see nothing inadequate or defective about the procedures for notice set out in these regulations.

Korangy relies on testimony by Mr. Divine as evidence that the FDA accepted any delivery of notice to the facility as adequate to bind Dr. Korangy personally "and that it did not matter 'who' received it." Korangy Memorandum at 3, citing Hearing Tr. at 17-20. The testimony to which Korangy cites related to the FDA's service of the April 1, 2002, warning letter sent to Korangy in advance of the expiration of KRA's certificate. For those warning letters, Mr. Divine stated that the FDA uses a contractor to send them "by some type of accountable mail . . . which would get some confirmation that it had been received by the facility." Hearing Tr. at 17. For that purpose, he indicated, the FDA does not specify who at the facility may sign for the correspondence which would be addressed to the responsible person, here to Dr. Korangy. Hearing Tr. at 18-20. Nothing in the testimony addresses service of a complaint. In any case, the regulatory notice procedures were used to serve the complaint here. Furthermore, even had the service of the individual complaint been in any way defective, such defect would have been cured by the actual notice of the complaint which Dr. Korangy plainly acknowledges having received long before the hearing in this matter. See generally Cary Health and Rehabilitation Center, DAB No. 1771 (2001).

II. The CMP amounts imposed by the ALJ were appropriate.

Korangy argues that the FDA failed to meet its burden of proof under the regulations to establish the appropriateness of the CMPs sought. Korangy Memorandum at 3, citing 21 C.F.R. § 14.33. Korangy contends in essence that neither the FDA in the first instance nor the ALJ adequately articulated any rationale for the amount of the CMPs imposed originally or the reduced amounts imposed in the ALJ Decision. Korangy also sets out three specific factors that he argues should have received consideration to reduce the CMP amounts. First, Korangy complains that the FDA failed to consider the prompt replacement of the existing mammography equipment as mitigation. Korangy Memorandum at 3. Second, Korangy contends that the FDA rested its determination that both respondents had the ability to pay the CMPs solely on the fact that KRA has several different locations and did not consider any "other factors or information regarding ability to pay . . . before issuing the CMPs." Id. Next, Korangy acknowledges that the FDA claims to have considered the length of time he was in violation and the number of procedures performed but asserts that this claim is undermined by comparison of the penalties here with those imposed by another complaint filed by the FDA in In re Ecumed Health Group, et al., FDA Docket 2004H-0322. Finally, Korangy contends that the ALJ lacked authority to impose CMPs in a different amount than that originally sought by the FDA. Korangy Reply Memorandum at 2.

A. The FDA met its burden of proof that the CMP amounts were appropriate.

The FDA originally imposed the maximum CMP of $10,000 per violation in this case. In its post-hearing brief, the FDA reduced its requested penalty amounts to $3,000 per violation, which the ALJ then imposed. The record reflects that the FDA articulated a rationale for the original and the reduced amounts proposed, and substantial evidence in the record supports the ALJ's finding that the FDA proved by a preponderance of the evidence that the amount imposed was appropriate.

Contrary to Korangy's assertions that the FDA had no rationale for its original amounts, Mr. Divine testified about the factors considered in setting the CMP:

In this particular case, when we found that the facility had violated MQSA, we looked at that and we looked at other factors aside from the fact that they operated uncertified. We looked at the history of the facility. We knew that the facility had gotten a warning letter for quality control violations. In the most recent investigation which uncovered the fact that they operated uncertified, we found additional violations, and so we considered those as other factors and considered to take this particular case for civil money penalties.

Hearing Tr. at 21-22. Mr. Divine testified that the FDA did not consider the purchase of the new machine relevant and that they believed that the respondents had "sufficient assets to pay the fine based on the available information, including the fact that the facility had multiple locations." Hearing Tr. at 23-24. He also testified that the FDA did not intend to force bankruptcy and remained willing to consider a reduction of the penalty amounts if the FDA received credible documentation of inability to pay. Hearing Tr. at 26, 28-29. In fact, the FDA did reduce the amounts by more than two thirds after the hearing in this case, even while not accepting all of Korangy's representations about the respondents' financial situations.

In explaining the amount of the penalty it ultimately requested, the FDA articulates the core of its concern as that the respondents' conduct, "committed over a period of two months, put almost 200 patients at risk that their mammograms would not detect breast cancer at a stage where treatment would be most effective." FDA Br. at 14. According to the FDA, the seriousness of this danger is evidenced by Congress's provision for penalties of up to $10,000 per violation. Id. In addition, the FDA emphasizes that Korangy knew that KRA's certificate had expired and that it was unlawful to perform mammograms without a valid certificate (even apart from the issues relating to the ACR notifications about the poor image quality). Id. In addition, the FDA reiterates KRA's history of prior quality control violations ⁽¹⁰⁾ and the presence of additional quality problems during the admitted period of unlawful operation as aggravating factors. Id. At the same time, the FDA has consistently stated that it did not want to assess penalties so severe as to bankrupt Korangy. FDA Post-Hearing Br. at 9; Oral Argument Tr. at 49.

The factors that concerned the FDA and the ALJ here appear consistent with both the regulations and the focus of the CPG Manual. The regulations provide that, in setting the amount of a CMP, the ALJ and the DAB "shall evaluate any circumstances that mitigate or aggravate the violation," explaining the reasons in their opinions; that they shall "refer to the factors identified in the statute under which the penalty is assessed for purposes of determining the amount of penalty;" and that they are not restricted "from considering any other factors that in any given case may mitigate or aggravate the offense." 21 C.F.R. § 17.34.

The CPG Manual advises that the "highest priority, for compliance purposes, is to ensure that uncertified facilities do not perform mammography until they comply with MQSA," and that this priority applies to both "those that were never certified and those who have expired, revoked, or suspended certificates." CPG Manual, Part II, at 3. Among those facilities with certificates, the highest level of priority for inspection includes those that "have complaints against them concerning quality standards, including complaints from accreditation bodies." Id. ACR warned Korangy that it was notifying the FDA of its determination that the clinical image quality was unacceptable and that accreditation was denied due to this repeat failure of quality. ACR letter to Dr. Korangy, dated April 29, 2002. ACR also sent a confidential communication to the FDA by letter dated July 18, 2002, of its belief that the facility had continued to perform mammograms despite having failed accreditation review and despite the expiration of the facility's certificate. ⁽¹¹⁾

According to the CPG Manual, in determining what regulatory action to take when "evidence confirms that an uncertified facility is performing mammography, consideration should be given to the extent of illegal operation and if there is evidence that the facility has quality problems," such as "that the facility was operating after having been denied accreditation." Id., Part III, at 14. Korangy was not only operating after expiration of the facility's certificate but also after learning that its clinical image quality was such that it could not be accredited.

The choice of an appropriate CMP depends on severity, based on factors which "could include the number of patients that were examined while uncertified, whether the facility knew that it was performing mammography uncertified (i.e., was it clear from correspondence that the facility received that they were no longer certified), evidence that the facility tried to mislead its accreditation body or FDA, repeated instances where the facility failed to obtain accreditation, or other factors," and on consultation with the accreditation body "to evaluate clinical quality concerns." Id. We have noted that the FDA, and the ALJ, considered just such factors in terms of the large number of affected patients, the two-month period of noncompliance, the clear notice of the expiration date of the certificate, and the opinion provided by the accreditation body, ACR, to the FDA. All of these considerations fit the policy guidelines for selection of a significant CMP sanction for the violations.

Korangy's contention that the FDA lacked a rationale for either the original or reduced CMP amounts appears to reduce to the absence of a general policy or specific formula for matching dollar amounts of the CMP to individual factors or circumstances. We do not see any basis for the position that the FDA is required, either in its guidelines or in explaining the factors applied in a particular case, to provide a mathematical algorithm defining the precise CMP amounts tied to each relevant factor. It is enough that the FDA articulated appropriate factors to guide its discretion in imposing CMPs and showed by a preponderance of the evidence in the record of this case that the facts relating to those factors support the reasonableness of the amount imposed. See St. Anthony Hospital, DAB No. 1728 (2000) (under analogous civil money penalty provisions, the "correct standard is that the I.G. had the burden to show that a CMP in the amount sought by the I.G. was reasonable in light of the criteria set forth in 42 C.F.R. § 1003.106(a)(4)"). The ALJ found that the FDA had met this burden, and we agree. ALJ Initial Decision at 9. We turn next to whether Korangy proved that the amounts should nevertheless have been further reduced because of mitigating circumstances.

B. Korangy did not demonstrate that the FDA and ALJ ignored mitigating circumstances.

First, it is important to note that the mitigating circumstances on which Korangy relies are in the nature of affirmative defenses as to which Korangy rather than the FDA has the burden of proof. 21 C.F.R. § 17.33(c). This shifting of the burden is logical since evidence of the facts underlying the alleged mitigating circumstances (here, installation of equipment at the facility, lack of profits from mammography practice, and inability to pay) would be much more likely to be under Korangy's control. We turn now to consideration of whether the ALJ's findings as to these alleged mitigating circumstances were legally correct and supported by substantial evidence.

1. Purchase of new equipment

The FDA and the ALJ determined that Korangy's purchase of new equipment was not a mitigating circumstance. Korangy reiterates the claim that KRA ordered a replacement machine even before the ACR informed KRA that the existing one could not be recertified. Korangy Memorandum at 3. Nowhere does Korangy respond to the FDA's point that there is no evidence at all in the record that the machine was ordered before the ACR decertification letter. FDA Br. at 14-15. Nor does Korangy dispute that the machine was not placed in service until June 28, 2002, or that 165 of the 192 uncertified mammograms were performed on the old, unacceptable equipment. If the equipment was indeed ordered in advance of the ACR notification, it becomes even clearer that Dr. Korangy and the facility staff were aware of the inadequacy of the existing machine, and it becomes even more difficult to understand their persistence in using that equipment for so long.

Under all these circumstances, Korangy's complaint that the FDA did not consider mitigation is without merit. Mr. Divine testified that the FDA considered the purchase and eventual installation of the new equipment irrelevant. We agree. Taking steps to ultimately remedy the unacceptable quality of the mammography images hardly provides any exonerating circumstance for continuing to perform mammography without a certificate, mostly on unacceptable equipment.

2. Profitability of mammography services

Korangy also asserts that KRA lost money on every mammogram, and was performing them as a public service rather than a profit source, thus implying that the CMP amounts were wildly disproportionate to KRA's gain from providing mammograms while uncertified. Korangy Memorandum at 3; Oral Argument Tr. at 20-21. As with the other purported mitigating circumstances, Korangy has failed to substantiate the factual basis for this claim. All that is offered for the record is Dr. Korangy's bald assertions as to his billing and costs, without objective financial documentation, and a profit and loss statement for 2003 prepared by Dr. Korangy himself. Ex. R-4. While Dr. Korangy attached an explanation of how he allocated costs to arrive at his estimate of the total costs per procedure, he provided no underlying documentation of the costs incurred and no assurance that the "reimbursed" amounts used in the calculation represented all the potential collections for the procedures. The ALJ did not discuss this specific evidence, but did in general discuss how Dr. Korangy was not forthcoming about financial information. The ALJ could reasonably determine that the exhibit was not sufficient to establish the loss asserted.

Dr. Korangy asked rhetorically what possible "motive or reason" he had to break the law by doing these uncertified mammograms, if he was not making a profit. Oral Argument Tr. at 20. Even if Dr. Korangy had shown that doing the mammograms was not profitable, however, it is not clear that the mere lack of a profit motive is a mitigating circumstance.

Moreover, adjusting a CMP amount to be proportionate to the financial benefit to a respondent would overlook the non-financial harm to patients of relying on mammograms performed without the assurances of quality provided by certification. Whenever a facility is operating without certification, its patients are left unprotected by all of the remaining requirements for certification that directly impact quality control. The absence of such mandatory and universal guarantees of quality in the provision of mammograms was precisely the evil against which the MSQA was adopted. S. Rep. 448, at 4. The real basis for this concern is highlighted by the evidence in the present case that KRA's certificate did not merely expire by some oversight, but because the equipment used by KRA was found to produce clinical images of unacceptable quality making recertification impossible. In short, the correct focus, and that used by the FDA here, is on the harm threatened to patients, not on the alleged lack of benefits realized by the respondents.

3. Comparison with Ecumed complaint

Korangy argues that, although the FDA claimed that it considered in setting the CMP amount the time for which Korangy operated without a certificate and the number of procedures performed in that time, that claim, "if not false, is patently bizarre" in light of the CMPs proposed in another case under the MSQA. Korangy Memorandum at 4. The ALJ took notice of the complaint in In Re Ecumed Health Group, et al., FDA Docket 2004H-0322 (filed July 19, 2004). ALJ Order, dated October 7, 2004. The respondents in Ecumed were charged with improperly performing 1,201 procedures over 17 months. The FDA proposed a $10,000 CMP against each respondent for operating without a certificate and an additional $1,000 CMP for each procedure performed in violation of the MSQA. Korangy concludes that "in Ecumed, considerably more egregious alleged violations (in both number and time) brought penalties a mere tenth of those levied against" Korangy. ⁽¹²⁾ Korangy Memorandum at 4.

The ALJ found that the amounts of the CMPs sought by the FDA against the Ecumed respondents were not relevant to evaluating the appropriateness of the CMPs in the individual proceeding before him, all the more so given that Ecumed had not yet gone forward to any evidentiary proceeding or decision. ALJ Initial Decision at 4.

The FDA asserts that the difference in CMP amounts between the two cases is neither arbitrary nor capricious but rather based on separate consideration of relevant factors in each case, not all of which are or need be set out on the face of the complaints. FDA Br. at 25-26. According to the FDA, such factors include the prior history of the facility, individual respondents' roles and qualifications, and respondents' experience with the MSQA, not to mention mitigating circumstances. Id. The FDA points out that a mechanical application of a $10,000 per violation calculation in Ecumed would have generated total CMPs over more than $43 million, itself highly disproportionate to even the original CMP amounts sought here.

We find no error in the ALJ's rejection of Korangy's argument that the FDA complaint in Ecumed on its face undercuts the FDA evidence that it considered the period and number of violations in determining the CMPs here.

4. Inability to pay the CMP amounts

a. The ALJ's conclusions on inability to pay claims

Korangy suggests that the FDA failed to carry its burden of proof that the CMPs were appropriate because it failed to show that the respondents were able to pay the amounts imposed. Korangy Memorandum at 3-4. The ALJ evaluated the claim that respondents would be unable to pay the CMPs as an asserted mitigating circumstance, as to which Korangy bore the burden of proof. ALJ Initial Decision at 5. In fact, Korangy characterized this claim as asserted mitigation in the initial answer filed in this case. Korangy Answer, dated October 17, 2003, at 2. The burden of proof on inability to pay is plainly placed on the respondents under the applicable regulations. 21 C.F.R. § 17.33(c). We therefore agree with the ALJ that the proper inquiry was whether Korangy proved that he would be unable to pay the CMP amounts imposed by the ALJ.

The ALJ found that Korangy failed to meet his burden. Id. The ALJ did not find Korangy's assertions of inability to pay credible, finding Korangy "less than forthcoming with respect to relevant financial information." Id. The ALJ reviewed records which the FDA indicated were either provided by Korangy or found in public records of which the ALJ took official notice. Id. The ALJ concluded that both respondents "have access to more assets than they have revealed," noting that Dr. Korangy placed real property and automobiles in the names of his family members, or under trusts or companies over which he had control. Id. at 5-7. He noted that Dr. Korangy operates "at least six radiology facilities." Id. at 7. He also noted that KRA reported on its 2003 tax return that it was operating at a loss but also that its assets had appreciated in value by $1.2 million that year. Id. at 7-8. The ALJ determined, based on this record, that to "the extent that inability to pay may be considered a mitigating factor, Dr. Korangy's financial manipulations would appear to preclude any finding that Respondents' burden has been sustained." Id. at 8. ⁽¹³⁾

b. Due process argument on FDA evidence

Korangy contends that the ALJ's conclusions were improper because the respondents were never permitted to respond to evidence submitted by the FDA after the hearing was over. Korangy Memorandum at 5. The ALJ denied Korangy's motion to strike the FDA exhibits and also denied Korangy's request to submit an additional rebuttal brief. Korangy argues that the ALJ thereby provided no opportunity for a response to these documents or to related allegations in the FDA post-hearing brief. Korangy Memorandum at 5; see also Respondent's Motion to Strike, dated December 7, 2004. Korangy asserts that the ALJ violated due process and treated Korangy unfairly, especially since the ALJ allegedly "would not accept a two-page response because reading it appeared to be too much of a burden." Korangy Notice of Appeal at 2.

A party is generally entitled to have an opportunity to respond to new evidence presented against its claims. Korangy's claim that the ALJ accepted new evidence from the FDA while denying Korangy any opportunity to answer that evidence thus raises apparent questions of fairness. As a general rule, we take seriously fairness and due process for all parties before the Board and hence look closely at allegations that proceedings below were not conducted in a manner consistent with these basic principles.

In order to determine whether the ALJ's rulings on the motion to strike and the exclusion of the reply brief in fact created unfairness here, we must look at the context of those rulings. Further, when the Board finds a procedural error, the Board will generally reverse or remand only if the procedural error was prejudicial. See, e.g., Royal Manor, DAB No. 1990 (2005); Spring Meadows Health Care Center, DAB No. 1966 (2005). The FDA regulations here specifically include a harmless error rule for review of ALJ decisions in CMP cases. 21 C.F.R. § 17.48. ⁽¹⁴⁾ We therefore review next the procedural context in which the documents were submitted by the FDA and the bases for the ALJ's rulings on them to determine if the rulings constitute error and, if so, whether Korangy was prejudiced by them.

The documents at issue were submitted as attachments to the FDA's post-hearing brief and consisted of a variety of papers relating to financial assets which the FDA alleged to be under the ownership or control of Korangy. Korangy moved on December 8, 2004, to strike the attachments identified as Exhibits G-15 through G-25 and G-27 through G-29. The motion was denied by order dated December 15, 2004. See also ALJ Initial Decision at 5, n.2.

The assertion that Dr. Korangy and KRA lacked resources to pay the CMPs was raised in Korangy's first response to the FDA complaint. Korangy Answer, dated October 17, 2003, at 5. Korangy described the CMP amounts then sought as "extreme," "more than punitive," and "financially disastrous," both for the individual and corporate respondent. Id. On January 13, 2004, the FDA filed a request for production of documents which sought, inter alia, information on assets of the respondents, including those held by Dr. Korangy's immediate family, financial transactions and relationships between respondents, and receipts and employment information about respondents and any related businesses. Korangy sought a protective order on January 26, 2004, asserting, among other bases, that the FDA had "no legitimate interest in any financial records of the Respondents" and that the "assets of Respondents are not relevant to the issues in the instant case . . . [and the] assets of family members are less so." Id. at 1-2.

The parties resolved this discovery dispute by a joint agreement filed with the ALJ on January 30, 2004. Among other points, the FDA withdrew the discovery requests relating to Korangy's assets on condition that respondents agreed that they would respond to the discovery request no less than 60 days prior to -

(1) filing any motion, proposed finding of fact, evidence or any other written document in this proceeding in which all or either of them claim entitlement to a reduction of civil money penalties based on their inability to pay; or (2) the hearing in this proceeding if all or either of them claim, or offer evidence in support of a claim, during such hearing, that they are entitled to a reduction of civil money penalties based on their inability to pay. If Respondents fail to respond to Complainant's Document Request 2 sixty days prior to filing such motion, proposed finding of fact, evidence, or other written document, or the hearing . . . Respondents agree that the Presiding Officer should exclude any evidence of their inability to pay or entitlement to reduction of civil money penalties that is submitted in support . . . .

Joint Notice and Agreement to Resolve Discovery Dispute, dated January 30, 2004, at 3. On February 27, 2004, Korangy responded to the FDA's discovery requests and expressly withheld documents relating to the requests covered by the joint agreement. On April 2, 2004, Korangy filed a second request for a protective order, again objecting to the financial information requests as irrelevant, burdensome, and constituting an "unwarranted invasion of privacy." On April 7, 2004, the ALJ issued an order denying both of Korangy's requests for protective orders on the grounds that "Respondents' financial data would be relevant to any determination under 21 C.F.R. § 17.34." Order, dated April 7, 2004, at 1.

There is no evidence in the record that Korangy responded to the FDA document requests covered by the joint agreement at any point prior to the hearing. On June 2, 2004, however, after issuance of the ALJ Summary Decision, Korangy filed written direct testimony of Dr. Korangy, which included discussion of the financial income of both respondents and the following exchange:

35. Do you and/or BIC [Baltimore Imaging Centers] have the ability to pay a fine totaling approximately $3.8 million.

Answer: Clearly not. Where would the money come from?

Korangy Written Direct Testimony, dated May 26, 2004, at unnumbered p.6. On September 9, 2004, Korangy submitted two additional exhibits, Respondents' Exhibits 14 and 15, which consisted of a net asset analysis for Dr. Korangy as of July 31, 2004, and a financial statement for KRA for the period ended December 31, 2003. Both undated documents were reported to have been prepared by the same accountant. Cover Letter from Mr. Schwartz to the FDA Docket Clerk, dated September 9, 2004.

When the hearing began on September 20, 2004, FDA objected to the admission of the two exhibits based on the breach of the discovery agreement. Hearing Tr. at 4-5. Nevertheless, counsel for FDA stated that the FDA did "not wish to impose a penalty that would bankrupt these respondents," and asked that, if the ALJ allowed the late admission of the documents, the FDA be allowed to "fully brief the issue of inability to pay . . . and also be permitted to supplement the record with any appropriate rebuttal evidence." Hearing Tr. at 5-6. Counsel for Korangy stated that he had no objection to the ALJ permitting FDA to brief the issue or to "their providing rebuttal evidence, should there be any." Hearing Tr. at 6. Counsel for Korangy asserted that the disputed exhibits submitted by Korangy were created after the FDA's document request and were originally prepared by a CPA at Korangy's request. Hearing Tr. at 6. Korangy offered no other explanation for failing to notify the FDA 60 days in advance of raising a claim of inability to pay, or for failing to fully comply with the FDA discovery requests as required under the discovery agreement and the ALJ's order. The ALJ ruled orally that he would nevertheless admit the documents in the interest of considering all relevant evidence on the amount of the CMP but would allow for full briefing and would consider "what's available" thereafter. Hearing Tr. at 7.

The record contains two further requests from the FDA to Korangy's counsel after the hearing for specific information about assets, ownership of real and personal property, and investments by the respondents. The first is dated October 1, 2004. The second request, dated November 8, 2004, notes that only partial and incomplete responses had been received to date. The ALJ ordered the parties to submit simultaneous post-hearing briefs by December 3, 2004. Notice from ALJ, dated September 20, 2004.

On December 3, 2004, the FDA filed its post-hearing brief in which it asserted that Korangy had still failed to provide full responses to the FDA's requests for financial documents. FDA Post-Hearing Br. at 4. The FDA requested that the ALJ sanction Korangy for its breach of the joint agreement by excluding any evidence on inability to pay offered by Korangy which was not produced to the FDA at least 60 days before the hearing. Id. Alternatively, the FDA argued that Korangy failed to carry the burden of proving inability to pay based on the incomplete records provided to the FDA and the additional documents attached to the brief, which the FDA asserted it had gleaned from public tax and real property records. Id. at 4-5.

It was in this context of having permitted Korangy to present testimony and exhibits in support of a belated claim of inability to pay despite the joint agreement (after Korangy had consented to post-hearing rebuttal by the FDA) that the ALJ later considered Korangy's request to strike the FDA's documents concerning the financial status of both respondents. Korangy's entire argument against admission of these documents consisted of the following statement: "These documents were not presented pre-hearing, or during the hearing, so Respondents' have no opportunity to respond or cross-examine any witnesses regarding the allegations made with respect to these documents." Respondents' Motion to Strike, dated December 7, 2004, at 1. On this basis, Korangy asked the ALJ to strike the documents as "inappropriate and prejudicial." Id.

Korangy separately filed a two-page reply to the FDA's post-hearing brief on December 7, 2004, without seeking the ALJ's permission to submit an additional brief. The proffered reply brief addressed three legal issues: whether the FDA had not developed procedures for issuing CMPs, whether the FDA met its burden to show the appropriateness of the CMPs here, and whether the imposition of $10,000 per violation CMPs here was punitive and constitutionally excessive. Nothing in the reply brief addresses the financial status of the respondents or any of the specific allegations and documentation included in the FDA post-hearing brief in that regard. The record does not include any proffer of evidence by Korangy or request to develop the record further in response to the substance of the documents submitted with the FDA post-hearing brief.

On December 9, 2004, the ALJ issued an order excluding the reply brief from the record, noting that reply briefs were "specifically not authorized," which was discussed at the hearing itself. Order, dated December 9, 2004, at 1, citing Hearing Tr. at 48. Counsel for Korangy had not objected at the hearing to the rule requiring single simultaneous post-hearing briefs. On December 15, 2004, the ALJ denied Korangy's motion to strike, ruling that the documents were relevant, were submitted "by way of rebuttal of arguments raised" at the hearing, and were "either furnished by Respondents or . . . obtained from official public records." Order, dated December 15, 2004, at 1.

The Board has recognized that an ALJ has discretion to manage proceedings, which may include sanctioning parties that fail to comply with orders under certain circumstances. See, e.g., Royal Manor, at 14-29. The FDA regulations governing these specific proceedings provide the ALJ with the power to "[r]eceive, rule on, exclude, or limit evidence" and to "[e]xercise such other authority as is necessary to carry out the responsibilities of the presiding officer." 21 C.F.R. § 17.19(b)(11) and (19). The presiding officer "may in his or her discretion permit the parties to introduce rebuttal witnesses and evidence. 21 C.F.R. § 17.39(g). The ALJ also has explicit authority to impose sanctions for failure to comply with discovery orders or other requirements. 21 C.F.R. § 17.35.

The ALJ could properly have enforced the joint agreement and precluded any evidence or argument on the claim of inability to pay. Having nevertheless allowed Korangy to put forward evidence and argument on this claim of mitigation, the ALJ obtained express agreement from Korangy's counsel to allow the FDA to provide rebuttal evidence after the hearing. The ALJ therefore did not err in denying Korangy's motion to strike such evidence as untimely because it was provided after the hearing.

We note that Korangy did not ask to present responsive evidence or to reopen the hearing to cross-examine any witness as an alternative to its request that the FDA evidence be stricken. We also note that, despite Korangy's characerization of its attempted reply brief during proceedings on appeal, the two-page reply brief did not respond to the FDA documents or make any factual proffer of conflicting evidence. Compare Oral Argument Tr. at 16, 40, 52-53, 73. To the extent that the ALJ rulings had the effect of limiting Korangy's opportunity to present argument or evidence in response to the FDA post-hearing brief, we find that the rulings did not violate due process in light of the procedural history laid out above.

c. Proffer on appeal

Nevertheless, in the interest of developing a complete record, the Board offered Korangy an opportunity to show that the information he would have provided if given an opportunity to make additional submissions below would have made a material difference in the outcome of the case. Oral Argument Tr. at 66-68. Counsel for Korangy had asserted that prejudice resulted from the ALJ's reliance in the Initial Decision on information about assets taken from the FDA's submission as to which Korangy might have been able to show conflicting information, such as existence of a mortgage reducing net equity from that extrapolated from a purchase price alone. Id. at 57, 63. The Board instructed Korangy to submit a proffer that would be "very specific" in describing what evidence could have been presented, showing, for example, what mortgages existed on the assets at the time of the hearing. Id. at 66-69. Counsel for Korangy agreed that any asserted evidence be supported by documentation and accompanied by a sworn statement that the submission is "truthful and accurate." Id. at 71-72.

On May 3, 2005, pursuant to these instructions, Korangy submitted an affidavit from Dr. Korangy with six attached documents. The FDA filed its response to the proffer on May 11, 2005. As discussed below, this proffer fails to establish any prejudice to Korangy from the lack of an opportunity to reply to the FDA's rebuttal evidence.

d. Conclusion on inability to pay

Despite the ALJ's lengthy discussion of FDA's rebuttal evidence and our detailed discussion of the procedural challenge to the ALJ's rulings relating to the post-hearing evidence and briefing, the core issue is whether Korangy has proven by the preponderance of the evidence that Dr. Korangy and KRA are each financially unable to pay a CMP of $579,000.

The affirmative evidence offered by Korangy on this issue was the testimony of Dr. Korangy, unaudited tax returns for Dr. Korangy and his wife, the corporate tax return of KRA, and unaudited statements of net worth or financial status prepared by an accountant in anticipation of the hearing in the matter. Credibility of witnesses is a matter peculiarly in the province of the presiding officer. We defer here to the ALJ's evident negative evaluation of Dr. Korangy's credibility as "less than forthcoming" on the question of his finances. Nothing in Korangy's argument before us causes us to revise that evaluation.

Korangy objects that the ALJ did not place any weight on the financial documents which he submitted. This objection has no merit. These documents not only lack any independent validation, but themselves raise additional questions tending to undercut the assertions of financial need. For example, Dr. Korangy's statement of financial condition claims a net worth of only $155,626, yet an accompanying note states that he has personally guaranteed payment of five loans to KRA with outstanding balances totaling more than $900,000.

The FDA's rebuttal evidence showed assets not reflected on Korangy's affirmative evidence. FDA Post-Hearing Brief, Attachments passim. Thus, there was substantial evidence in the record before the ALJ to support his finding that Korangy had not shown inability to pay.

The additional evidence now proffered by Korangy, if admitted, would at best reduce the amount of the estimated value of some of those assets, and at worst raises additional questions about the reliability of the evidence Korangy submitted to the ALJ. We do not discuss all of the proffered evidence in detail, but provide here merely some examples of the deficiencies in the proffer.

First, on the disputed issue of the ownership and value of the residence shared by Dr. Korangy and his wife, the ALJ found, based on the FDA documentation, that the property was valued at nearly $1 million for tax purposes as of January 1, 2002, and was likely worth more based on real estate contracts on comparable properties. ALJ Initial Decision at 6. The ALJ also found that Dr. Korangy transferred the property out of his own name into a trust with his wife just two months after the FDA initiated its complaint in this action but that Dr. Korangy "appears to maintain control" over the residence. Id. In his proffer, Dr. Korangy asserted that the residence was only in his name briefly in December 2003 as a "straw man" as part of a transaction transferring title between two trusts for benefit of his wife and family. Post-Hearing Statement of Amile A. Korangy, M.D., at 1. His statement does not counter the ALJ's finding that Dr. Korangy retained control of the asset. The only documentation Dr. Korangy provides for this assertion is a quit claim deed dated August 8, 1995, transferring ownership of the property from Dr. Korangy and his wife to a family trust. Id., Attachment (Att.) 1. This document establishes that Dr. Korangy was an owner of the property as of 1995, in addition to the period he acknowledged in 2003 (which was after this action commenced), that the transfer was for zero consideration, and that the transferee was "The Korangy Family Revocable Trust." Another document shows a mortgage on the property (dated June 25, 2004) identifying the borrower as Pikesville Properties, LLC (another of Dr. Korangy's companies), rather than the family trust. Id., Att. 5; see also id., Att. 2. Thus, these documents further support the ALJ's conclusion that the title transfer did not effectively remove Dr. Korangy from control of the property.

Second, the documents that were proffered to show mortgages on property that the FDA had identified as assets not accounted for in Korangy's original unaudited financial statements do not permit determination of the amount currently owed (and therefore the extent of Korangy's equity in the property). The documents were either the original loan documents for mortgages entered into at an earlier date (unaccompanied by any statement from the mortgage company reflecting payments made as of any relevant date), or were merely documents establishing equity lines of credit (unaccompanied by any accounting for any funds drawn down under the line of credit or any payments made to reimburse the bank for any borrowed funds). Id., Atts. 2, 4, and 6.

In no instance has Korangy proffered evidence that carries the burden of proving that the net assets and income of either respondent are inadequate to satisfy the otherwise appropriate CMP amounts. Hence, even had we considered the ALJ's ruling to constitute procedural error, we find no prejudice since the same evidence, had it been presented below, would not have made any difference to the outcome.

Thus, we affirm the ALJ's conclusion that Korangy did not prove inability to pay by a preponderance of the evidence.

C. The ALJ did not exceed his authority by approving the reduced CMP amounts.

Korangy describes the ALJ as having "fashioned an alternative sanction" despite Korangy's position that "the ALJ had no power to revise the proposed sanctions, given the [FDA's] failure to (a) meet the burden of proof requirements of 21 CFR 17.33, and (b) produce the procedures required by 42 USC §263b(h)(4)." Korangy Memorandum at 4. We have already rejected Korangy's arguments that the FDA failed to meet its burden of proof in showing that the amounts of the CMPs were appropriate and that the FDA failed to develop statutorily-mandated procedures. It is not entirely clear what the basis is for Korangy's contention that the ALJ did not have authority to reduce the original CMPs or that the ALJ failed to offer any rationale for such reduction.

The regulations plainly anticipate that the adjudicator will ultimately determine the appropriate CMP amount once a respondent has chosen to seek a hearing. 21 C.F.R. § 17.34. It is implicit in section 17.34, which states that the presiding officer is to "evaluate any circumstances that mitigate or aggravate the violation" that the resulting conclusion may alter the amount of CMPs originally sought by the FDA. 21 C.F.R. § 17.34(a). Moreover, the FDA is not precluded from reducing the amount of the CMP it seeks, during a proceeding.

We have already concluded above that the FDA and ALJ both articulated an adequate rationale, supported by substantial evidence, to justify the CMPs imposed here. If Korangy is suggesting that the ALJ should also have articulated a rationale for accepting the lower amounts sought by the FDA, as opposed to imposing the full original penalties, we see no such requirement in the statute or regulations.

Conclusion

For the reasons explained in detail above, we affirm the ALJ Initial Decision, including the ALJ Summary Decision.

Donald F. Garrett

Sheila Ann Hegy

Judith A. Ballard
Presiding Board Member

1. "He" or "his" when used in this decision to refer to the respondents is intended to refer to both respondents, unless otherwise indicated.

2. Essentially, the ALJ Summary Decision addressed legal issues of Korangy's liability for sanctions under the MSQA based on those facts which had not been disputed, while the ALJ Initial Decision was issued after the evidentiary hearing to resolve the appropriateness of the amounts of the CMPs.

3. The Secretary has delegated his functions under the MSQA to the FDA. 21 C.F.R. § 5.10(a)(36).

4. Dr. Korangy's responsibility arises from his own actions in conducting procedures without a certificate and from aiding and abetting in the violations committed by KRA. 42 U.S.C. § 263b(h)(3)(A) and (D).

5. Korangy did not dispute that this guidance document was publicly available. Transcript of April 20, 2005, Oral Argument before the DAB (Oral Argument Tr.) at 75.

6. Korangy has also not persuaded us that, even if he had shown the FDA to have been dilatory in issuing procedures for when and how MSQA sanctions would be applied (which he has not done), the appropriate or permissible remedy would be to deprive the FDA of all authority to carry out its duties in enforcing the statutory provisions.

7. Korangy also argues that the FDA's production of the CPG Manual after the hearing deprived respondents of any opportunity to cross-examine Mr. Divine about it. Korangy Memorandum at 5. Nothing about which Mr. Divine could have testified would alter the legal question of whether the CPG Manual provides procedures for applying sanctions under the MSQA.

8. Below, Korangy contended that KRA was not aware that it should not have been performing mammography during the relevant period. Korangy Declaration, Ex. R-1. Korangy denied ever receiving either the April 1, 2002 FDA letter reminding KRA that it could not perform mammograms if its certificate expired without having been renewed or the May 1, 2002 FDA letter ordering KRA to stop immediately on pain of sanctions including CMPs. Id. Korangy also claimed that the April 29, 2002 letter KRA received from ACR did not make clear that KRA was to desist immediately from performing mammograms after its equipment failed accreditation. Id. The April 1, 2002 FDA letter was addressed to the facility using its former corporate name at the address of record for the certificate and was signed for, but Dr. Korangy denied recognizing the signature. Id. The May 1, 2002 FDA letter was signed for by a technician at KRA. ALJ Decision at 4, and record citations therein. The ALJ did not resolve the factual disputes relating to who received the FDA letters, but found that, at any rate, respondents had notice that KRA was operating without a certificate by way of the expiration date on the certificate itself. ALJ Summary Decision at 6-9, and Exhibit G-4. These notice issues were not raised by Korangy on appeal to us, and the ALJ's decision on them is therefore final.

9. Service may also be made in person to an individual respondent or to an officer or agent for a corporate respondent. 21 C.F.R. § 17.7(a)(2).

10. In an oral statement before the Board, Dr. Korangy and his counsel insisted that neither Dr. Korangy nor KRA had any problems with the FDA and had a "clear cut record" before the current enforcement action. Oral Argument Tr. at 20, 77-87. Korangy counsel alleged that the FDA was "making up" the prior enforcement action with no basis in the record, despite testimony about it by Mr. Divine. Compare Oral Argument Tr. at 82 with Hearing Tr. at 21. The Board, with Korangy's consent, then permitted the FDA to submit the referenced prior warning letter to Korangy, giving Korangy an opportunity to reply. Oral Argument Tr. at 86-90. The FDA did so by letter dated April 26, 2005. The letter included three attachments: (1) a warning letter dated September 24, 2001, citing the same facility for quality control problems; (2) Dr. Korangy's October 5, 2001 personal response to that warning letter offering an apology for "this serious infraction;" and (3) a March 3, 2003 FDA letter imposing a directed plan of correction based on continued "serious problems" with quality revealed during the same inspection that led to the present action for performing mammograms without a valid certificate.

11. This letter asserted that Dr. Korangy called the ACR on that date to ask whether the facility needed to send ACR clinical images as part of its reinstatement paperwork, that ACR staff was made suspicious by Dr. Korangy's reaction to the ACR staff's question of how images could be sent when the facility had not been certified to perform mammography, and that ACR staff called the facility posing as a patient and was told that the facility was currently performing mammograms and had a full schedule until August 13, 2002. The letter concludes that the "ACR believes that this is an intentional disregard for the FDA regulations." Letter from ACR to FDA, dated July 18, 2002, at 2.

12. This argument obviously ignores the FDA's reduction of the Korangy CMPs to $3,000 per violation, for a total amount that is less than the total in Ecumed.

13. The ALJ also stated that, if anything, the respondents' "financial activities and numerous asset transfers constitute an aggravating factor for consideration under 21 C.F.R. § 17.34(a)." Id. at 8. The ALJ did not, however, actually rely on this potential aggravating factor to increase the amount of the CMPs beyond the reduced amounts requested by the FDA, and the FDA has not pressed us to rely on this possible factor on appeal. We need not, therefore, consider whether or not an aggravating factor is created by any of Korangy's financial arrangements. Consequently, it is also not necessary to resolve disputes about whether any of the transfers of assets alleged here occurred after Korangy had notice of the FDA CMPs or with any view to eluding those CMPS nor whether any of the transactions or titling arrangements were in any way improper. Our only concern with the financial status of Dr. Korangy and KRA and the scope of assets under their control is with determining whether a demonstrated inability to pay demands reduction of the CMP amount below that imposed by the ALJ.

14. The regulation provides as follows:

No error in either the admission or the exclusion of evidence, and no error or defect in any ruling or order or in any act done or omitted by the presiding officer or by any of the parties is ground for vacating, modifying or otherwise disturbing an otherwise appropriate ruling or order or act, unless refusal to take such action appears to the presiding officer or the Commissioner inconsistent with substantial justice. The presiding officer and the Commissioner at every stage of the proceeding will disregard any error or defect in the proceeding that does not affect the substantial rights of the parties.