Section 5051 - Suspension; Suspension Board Hearing Procedure; Temporary Withdrawal Board Hearing Procedure(a) Upon a finding that a Corporation has failed to substantially comply with one or more of the criteria described in subsections (1) through (4), the Director may suspend the Corporation or suspend the Corporation, with suspension stayed until the Director approves a Remedial Action Plan submitted by the Corporation. Suspension of a Corporation requires a finding that irreparable harm will occur unless the Corporation is suspended and a finding that the Director has considered the Corporation's history and past performance. (1) The California Small Business Financial Development Corporation Law and implementing regulations;(2) The plan of operation specified in Corporations Code section 14025(d);(3) Fiscal and portfolio requirements as contained in the fiscal and portfolio audits specified in section 14027; or(4) Milestones and scope of work as contained in the annual contract between the Corporation and the Agency.(b) The Director shall issue a Notice of Proposed Suspension ("Suspension Notice"), which shall include the facts upon which the proposed Suspension is based. The Suspension Notice shall include a statement that the Corporation is entitled to a hearing pursuant to this section. The Suspension Notice shall be served by registered mail.(c) Not later than ten (10) calendar days before the effective date of a Suspension, the Corporation shall mail a statement to the Director specifying whether it requests a hearing to contest the Suspension. The statement shall be mailed to the Chair of the Board and to the Director, both at 980 9th Street, Suite 2450, Sacramento, California 95814. If the statement is not mailed to the Director's Office not later than ten (10) days before the effective date of a Suspension, the Corporation shall waive all rights to a hearing. However, the Director shall be authorized, for good cause shown, to set aside the Corporation's waiver of its right to a hearing and reinstate the Corporation's full appeal rights. Provided however, that any request for reinstatement of a Corporation's full appeal rights is received by the Director within forty-five (45) calendar days of receipt of the Suspension Notice.(d) If the Corporation mails to the Director a timely request for hearing, or waiver of hearing is set aside, the Director shall deliver to the Chair of the Board a copy of the Suspension Notice and the Corporation's response. The Corporation's response shall include a designation of a representative who can receive future Suspension and hearing notices. The response shall include the name, title, address and telephone number of the designated representative.(e) Within thirty (30) calendar days of receiving a request for hearing, or setting aside or waiver of hearing, the Board shall determine whether it will hear the matter as a full Board, or elect a subcommittee consisting of not fewer than five (5) Board members to hear the matter. If the Board decides to elect a subcommittee, each member of the subcommittee must be acceptable to both the Director and the Corporation. If the Board elects a subcommittee, the subcommittee shall issue findings, and the full Board shall make a decision pursuant to subsection (l) based upon the subcommittee findings.(f) The Board or its subcommittee shall employ an Administrative Law Judge from the Office of Administrative Hearings, Department of General Services, to conduct the hearing and to advise the Board or subcommittee on the preparation of its findings or decision. The hearing shall be conducted pursuant to the procedures contained in Government Code section 11500, et seq., and the Board shall be authorized to conduct the hearing in executive session, as pursuant to Government Code section 11126.(g)(1) Within thirty (30) days of a Corporation requesting a hearing, either the Corporation or Director shall have the right to request discovery. Discovery requests shall be limited to the following: (A) Names, titles and addresses of witnesses at the hearing; and(B) A request for any documents in the possession of the other party which are relevant to the determinations to be made at the hearing, and which are not privileged under any provision of law.(2) The obligation to provide discovery, once request is properly made, shall be a continuing one. Any witnesses and documents which are not identified at least five (5) working days prior to the hearing date shall be inadmissible at the hearing, unless a finding is made on the record that the witness or document was not reasonably available and identifiable to the party presenting it prior to the hearing.(h) Any dispute as to the discoverability of the identity of a witness or the discoverability or admissibility of a document, shall be adjudicated by the Administrative Law judge at a conference prior to the hearing, to be scheduled at the convenience of the parties. The Administrative Law judge shall preside over the conference, at which documents shall be marked, and the order of presentations shall be determined.(i) Each party shall have the following rights at the hearing:(1) To call and to cross-examine witnesses, and to introduce relevant exhibits and documents;(2) To cross-examine and impeach witnesses;(3) To introduce any relevant evidence, including hearsay, if it is the sort of evidence on which responsible parties are accustomed to rely in the conduct of serious affairs. However, no finding of the Board at the conclusion of the hearing shall be based solely on hearsay unless corroborated by direct evidence, or admissible in a civil proceeding over a hearsay objection.(j) Members of the Board, through the Administrative Law Judge, may interrogate witnesses or call additional witnesses if the Board deems such action appropriate. In its sole discretion, the Board may allow either or both parties to present written argument at the conclusion of the hearing.(k) At the hearing the Director or his or her designee, shall have the initial burden of presenting evidence supporting the conclusion that the Suspension is appropriate. On completing such presentation, the burden of going forward with the evidence shall pass to the Corporation, which shall then have the burden of persuading the Board, by a preponderance of the evidence, that the Suspension is not supported by the facts. Subsequent to the Corporation's presentation, the Director or his or her designee shall have the right to rebut the Corporation's contentions.(l) At the conclusion of the hearing, the Administrative Law judge, in conference with the Board, shall prepare a written decision, or, in a case where the hearing was conducted by a subcommittee, shall prepare written findings. If a subcommittee conducted the hearing, the findings shall be presented to the full Board, and the Administrative Law judge shall prepare a written decision for the Board. The decision shall be based on the evidence introduced at the hearing, and the testimony presented. The written decision shall be signed by the chair of the Board, or his or her designee. Issuance of the written decision shall constitute completion of the administrative hearing process. The decision shall include findings of fact and conclusions of law demonstrating one of the following: (1) Suspension is appropriate, effective upon issuance of the decision;(2) Suspension is appropriate, with Suspension stayed until the Corporation adopts a specified Remedial Action Plan and presents it to the Board, and the Board adopts a resolution repealing or implementing the Suspension;(3) Suspension is not appropriate so long as the Corporation adopts a specified Remedial Action Plan which is approved by the Director within a period of time specified in the decision. Failure of the Corporation to comply with this subsection shall be reviewed by the Board at its next regularly scheduled meeting, and the Board shall be authorized to Suspend the Corporation at that meeting; or(4) Suspension is not appropriate.(m) Any decision pursuant to subsection (l)(1) or (2) must include a finding that irreparable harm will occur unless the Corporation is Suspended.(n) The Board shall be assisted during the Temporary Withdrawal hearing by an attorney from the Agency, the Attorney General's Office or the Office of Administrative Hearings ("Board Attorney"). The Board Attorney shall not have been involved in the investigation, development or preparation of the findings. The Board Attorney shall rule on the admissibility of any documentary evidence, supervise the oral presentation, and otherwise assist the Board with questioning the Director or his or her designee, and any representative of the Corporation. The Board Attorney shall also advise the Board on the form of its findings and conclusions, based on the presentation at the meeting. The Board Attorney shall discharge his or her responsibility relying upon the standards contained in Chapter 5, Part 1 of Division 3, Title 2 of the Government Code (commencing with section 11500).(o) The hearing shall not take place unless there is a quorum of the Board present. If there is no quorum for the Temporary Withdrawal hearing or at a continuance of the hearing, the hearing shall be continued for not more than seven (7) calendar days, and the Temporary Withdrawal shall remain in effect until the following hearing.(p) At the Board meeting to review the Temporary Withdrawal, the Board shall first hear the Director or his or her designee. The Director or his or her designee shall explain the basis of the Temporary Withdrawal and submit to the Board members any documents on which the Temporary Withdrawal is based, including the affidavit attached to the original Withdrawal Notice. Copies of any documents submitted by the Director shall be provided to the Corporation. The Corporation shall have an opportunity to make a presentation, which shall consist of an oral statement, documentary evidence previously submitted to the Director pursuant to subsection 5050, written statements, or combination thereof.(q) Within thirty (30) calendar days the Board shall issue a written decision.(r) The decision of the Board shall be limited to one of the following:(1) Disapprove the determination made by the Director, resulting in the termination of the Temporary Withdrawal;(2) Disapprove the requested Temporary Withdrawal subject to the Corporation's adoption of a Remedial Action Plan detailed in the Board's decision. The termination of the Temporary Withdrawal is effective upon adoption of the Remedial Action Plan by the Corporation and the certification by the Director that the Corporation has adopted the Remedial Action Plan.(3) Continue the Temporary Withdrawal until the Board issues its decision following the Suspension hearing. This decision by the Board requires a finding that the Corporation has failed to comply with the Law, and as part of the decision, the Board shall instruct the Director to issue a Suspension Notice, pursuant to section 5051(b) not later than thirty (30) calendar days from the date of the Temporary Withdrawal hearing. The Board decision shall further state that the Temporary Withdrawal will be automatically terminated thirty-one (31) calendar days from the date of the Temporary Withdrawal hearing unless the Director has previously issued a Suspension Notice.Cal. Code Regs. Tit. 10, § 5051
1. New section filed 6-24-91; operative 7-24-91 (Register 91, No. 42).
2. Amendment of section heading and section filed 6-9-97 as an emergency; operative 6-9-97 (Register 97, No. 24). A Certificate of Compliance must be transmitted to OAL by 10-7-97 or emergency language will be repealed by operation of law on the following day.
3. Reinstatement of section heading and section as they existed prior to 6-9-97 emergency amendment by operation of Government Code section 11346.1(f) (Register 98, No. 30)
4. Amendment of section heading, section and NOTE filed 7-24-98; operative 7-24-98 pursuant to Government Code section 11343.4(d) (Register 98, No. 30).
5. Amendment of subsections (a)(1), (a)(4) and (c) filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.
6. Editorial correction of HISTORY 5 (Register 2005, No. 27).
7. Certificate of Compliance as to 12-27-2004 order, including amendment of NOTE, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27). Note: Authority cited: Section 14024, Corporations Code. Reference: Section 14028, Corporations Code.
1. New section filed 6-24-91; operative 7-24-91 (Register 91, No. 42).
2. Amendment of section heading and section filed 6-9-97 as an emergency; operative 6-9-97 (Register 97, No. 24). A Certificate of Compliance must be transmitted to OAL by 10-7-97 or emergency language will be repealed by operation of law on the following day.
3. Reinstatement of section heading and section as they existed prior to 6-9-97 emergency amendment by operation of Government Code section 11346.1(f) (Register 98, No. 30)
4. Amendment of section heading, section and Note filed 7-24-98; operative 7-24-98 pursuant to Government Code section 11343.4(d) (Register 98, No. 30).
5. Amendment of subsections (a)(1), (a)(4) and (c) filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.
6. Editorial correction of History5 (Register 2005, No. 27).
7. Certificate of Compliance as to 12-27-2004 order, including amendment of Note, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27).