Curtis, Esquire, Fort Lauderdale, Florida.
Petitioner herein served upon Respondent a Notice to Show Cause why its cigarette permit should not he suspended or revoked or have a civil penalty assessed against it. Both the memoranda of law filed by the parties herein posthearing and the Respondent's Motion to Strike and/or Dismiss filed posthearing indicate that the Notice to Show Cause initially filed with the Division of Administrative Hearings is different from the Notice to Show Cause referred to by the parties. By Stipulation filed August 19, 1980, the parties agree that the ten-count Notice to Show Cause served on Counsel for the Respondent on March 3, 1980, Is the only Notice to Show Cause served on Respondents, is the true and correct pending Notice to Show Cause, and is the Notice to Show Cause containing the allegations which were in fact tried on June 13, 1980, in the above-captioned matter.
Petitioner presented the testimony of John J. Harris, Jr., Gerald Burtosky, Harold Wasserman, Vernon S. Hoff, Theodore Scott Nelson, Robert Kaplan, Jeff Favitta, Fred Wright, Gary Levy, Jesus Rodriguez, and Maria D. Sanchez.
Respondent presented the testimony of Harold Wasserman, Jeff Favitta, Felicia Katz, Robert Kaplan, Denise Marino, George Katcher, Henry Orlove, and Michael R. Watson. Additionally, the Respondent proffered the testimony of Alan Edelstein.
Felicia Katz, a resident of the State of New York, and operator of a cigarette business in that State, filed an application with the petitioner for licensure as a cigarette wholesale dealer in Florida. According to the application, she was the sole stockholder and officer of Respondent, Yoth, Inc. Petitioner's Cigarette Wholesale Dealer's License No. 23-230 was subsequently issued to Yoth, Inc., and that corporation began doing business as Merchants
Tobacco & Candy Company in January of 1970 in Dade County, Florida. Katz had determined that her friend, David Valancy, would run her Florida business for her; and after it began its operation, the corporation was structured so that Felicia Katz served as the President, Alan Edelstein served as the Vice President, and David Valancy served as the Secretary-Treasurer. Additionally, the corporate stock was issued so that Katz held fifty percent, Edelstein held twenty-five percent, and Valancy held twenty-five percent.
Katz visited her Florida business during the months of January and February, 1979. On February 8, Katz signed under oath the Petitioner's Cigarette Wholesale Dealer's Report for the mouth ending January 31, 1979, certifying that the report contained true and correct information. On February 11, David Valancy contacted Gary Levy, an auditor with the Division, to request Levy's assistance regarding information required to be contained within the January report. Levy, who had visited the business premises on January 19, accordingly reappeared at the premises on February 12, 1970. He met with Valancy and reviewed with him certain business records. One of the items discussed was an invoice from American Brands, Inc., reflecting the purchase of 21,000 packs of cigarettes. Levy initialed the invoice and instructed Valancy to report that purchase. That purchase was not so included in the January report filed on February 13. The failure to include that purchase in the January or any other report thereby affected carry-over figures and rendered each subsequent report through the last report filed for the month of November, 1979, inaccurate.
The period of time involved in this proceeding is from January, 1979, when the Respondent began operating its business, through December, 1979, when the November report was filed and the Division began its investigation of Respondent's activities. Felicia Katz signed and swore to the accuracy of the reports filed with the Petitioner for the months of January and February. Thereafter, Valancy signed and filed the Respondent's reports for the months of March through and including November.
On the August report, Valancy reported purchases of 12,008 packs of cigarettes from R. J. Reynolds on August 29, and 608 packs of cigarettes from Philip Morris on August 22. He failed to report purchases of 600 packs of cigarettes from French Tobacco, Inc., on August 14, and an additional 450 packs from French Tobacco, Inc., on August 31. When Maria D. Sanchez, an auditor for the Petitioner, reviewed the Respondent's August report, she determined that the report was inconsistent with the final reading of the meter utilized for marking packs of cigarettes for resale to Indians. She contacted Valancy to inquire whether there might be an error on the report, and Valancy replied by submitting replacement pages for the August report. The revised August report failed to report the purchases from R. J. Reynolds and from Philip Morris in addition to continuing to fail to report the two purchases from French Tobacco, Inc.
On July 17, Harold Wasserman, General Manager of both Seminole Indian Plaza Store No. 1 and Store No. 2, purchased cigarettes for Store No. 2 from the Respondent in the amount of $30,226.00, according to Respondent's Invoice No. PC 2-514, which amount was paid by Seminole's Check No. 180. Respondent's copy of that invoice, which provides no information as to the location of the purchaser and which was attached to the monthly report from July, contains an additional eighty cartons of Vantage cigarettes, reflecting an additional sales price of
$252.00. Those additional cartons were neither received, nor paid for, by Seminole Indian Plaza.
On July 18, Wasserman purchased, on behalf of Seminole Indian Plaza Store No. 1, cigarettes from Respondent in the amount of $70,702.60, according to Respondent's Invoice No. PO 1-114, which amount was paid for by Seminole's Check No. 225. Respondent's copy of that Invoice, which provides no information as to the location of the purchaser and which was attached to the monthly report for July, contains an additional two hundred cartons of Salem cigarettes and increases the price by $630.00. Those additional cartons were neither received, nor paid for, by Seminole Indian Plaza.
On July 25, Seminole Smokes, owned by Theodore Scott Nelson, purchased cigarettes from Respondent in the amount of $35,263.20, according to Seminole Smokes' copy of Respondent's invoice marked only "Nelson's" and paid for in that amount by Check No. 1794. That invoice not only fails to correctly identify the purchaser, but also fails to provide information as to the purchaser's location. The Respondent's copy of that Invoice which it filed with its July report reflects an additional purchase of forty-six cartons of Winston, for an additional charge of $144.90. Those additional cigarettes were neither received, nor paid for, by Seminole Smokes.
Respondent's monthly report for September has attached to it Respondent's Invoice No. 3719, dated September 21, 1070, reflecting a sale in the amount of $474.02 to Seminole Indian Plaza without providing information regarding that purchaser's location. This invoice reflects that 137 cartons of "Kings" cigarettes were received by "R. Kaplan." The signature on the invoice is not the signature of Robert Kaplan, a shift manager for Seminole Indian Plaza, and Seminole has no record of this transaction. Likewise, attached to Respondent's October report is its Invoice No. 5331, dated October 20, reflecting a sale of 12,419 cartons of "Kings" cigarettes to Seminole Indian Plaza without any address in formation in the amount of $42,969.74. The signature on that Invoice purporting to be that of Harold Wasserman, the General Manager, is not the signature of Wasserman, and Seminole Indian Plaza has no record of this transaction either.
The records of Marcellus Osceola Trading Post contain a copy of an invoice of Respondent, dated July 10, reflecting as the sole information regarding the purchaser "Marcellus Osceola," and showing a sale by Merchants of 1,530 cartons of cigarettes for a purchase price of $4,897.50. This purchase was paid for by Check No. 1093. This sale is not reported on Schedule "L" of the Respondent's July report, nor is a copy of this invoice attached to that report. Additionally, the purchaser's name is spelled Incorrectly, and no address is provided on the invoice.
Respondent's August report contains information on Schedule "L" of certain sales made to Marcellus Osceola, without giving any information as to the address or county of residence of that business. Attached to that same report is Respondent's Invoice No. 263 dated August 16, showing only the purchaser as Marcellus Osceola Trading Post with no address information. Although marked "refused," the invoice indicates the sale took place by virtue of its attachment to the monthly report. Yet, this invoice is not reflected in Schedule "L" wits the other sales to "Marcellus Osceola."
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto.
In order to regulate cigarette sales, Section 210.09, Florida Statutes, authorizes the Petitioner to require that records be kept and that reports be made on or before the tenth day of the month following the month for which the report is made, thus assuring that taxable sales can be monitored and taxes may be collected and properly distributed.
Sections 210.05(5), Florida Statutes, effective July 1, 1979, further authorizes wholesale dealers to sell stamped but untaxed cigarettes to the Seminole Indian Tribe, or to members thereof, for retail sale. Although taxation on those sales is waived, the reporting requirements contained in Chapter 210, Florida Statutes, are imposed.
Section 210.09(4)(a), Florida Statutes, specifically mandates that:
All persons who are . . . cigarette wholesalers . . . and agents and employees of the same, are required to keep daily sales tickets or invoices of cigarette sales and it shall be the duty of said persons to see that each sales ticket and invoice handled by them or on behalf of them show the correct name and address to whom sold and the number of packages or cartons of each brand sold. It shall also be the duty of said persons to see that each sales ticket or invoice correctly shows whether the same is inside or outside of a qualified municipality and if the sale is made within the limits of a qualified municipality, the correct name of the municipality must be indicated.
Subsection (4)(b) of that same Section requires the Petitioner to suspend or revoke the license of a cigarette wholesaler for failure to keep daily sales tickets or invoices in accordance with the above-quoted Subsection.
Substantial, competent evidence was presented to show that Respondent therein violated the recording requirements of Section 210.09(4)(a), Florida Statutes, by creating, altering, and falsifying Invoices PD 2-514, PO 1-114, Nelson's," 3719, and 5331 between the dates of July 17 and October 20, 1979, as set forth in Paragraph numbered 1 of the subject Notice to Show Cause. Not only was each of these invoices either partially or totally false, but also each Invoice failed to contain information regarding the purchaser's correct name, address, and location inside or outside of a qualified municipality in order that sales could he easily verified by the Petitioner herein.
Except for Count 1d in Paragraph numbered 2 of the Notice to Show Cause, Petitioner has presented substantial, competent evidence to show that Respondent violated the reporting requirements of Section 210.85(5), Florida Statutes, and Sections 7A-10.05(c) and 7A-10.26, Florida Administrative Code, by attaching to its monthly reports falsified invoices PO 2-514, PO 1-134, "Nelson's," 3719, and 5331 as charged in Paragraph numbered 2. Count Id should be stricken from that charge, since the unreported sale of 1,530 cartons of cigarettes on July 10, 1979, does not constitute a false invoice attached to the monthly report of the Respondent herein.
The allegations in Paragraph numbered 3 of the Notice to Show Cause have been proven by substantial, competent evidence in violation of Section
210.05(5), Florida Statutes, and Sections 7A-10.11 and 7A-10.26, Florida Administrative Code. Clearly, Respondent failed to keep accurate sales records as required by failing to report the sale of 1,530 cartons of cigarettes on July 10, 1979, and by recording the four additional sales to Seminole Indian Plaza and the one additional sale to Seminole Smokes, which transactions did not take place.
The seven invoices set forth in Paragraph numbered 4 of the Notice to Show Cause clearly failed to delineate the number of cartons of each brand of cigarettes sold, the correct business name of the purchaser of the cigarettes, the correct street or location of the purchaser's place of business, and/or the name of the municipality or county in which the purchaser's place of business is located. Respondent's continued failure to provide the required information regarding the purchaser is in direct contravention to the reporting requirements of Section 210.09(4)(a), Florida Statutes, and Section 7A-18.18, Florida Administrative Code.
Section 7A-10.24, Florida Administrative Code, requires persons making reports to the Petitioner pursuant to the requirements of Section 210.09, Florida Statutes, to ensure that such reports are complete, accurate, and timely. Paragraphs numbered 5 and 6 of the Notice to Show Cause charge that Felicia Katz knowingly filed false and inaccurate Cigarette Wholesale Dealer Reports for the months of January and February, 1979, and that thereafter David Valancy knowingly filed false and inaccurate reports for the months of March, 1979, through and including November, 1979. The testimony was uncontroverted that Felicia Katz signed under oath the January, 1979, report at a time when the report had not been compiled and at a time when she knew that Valancy had requested Gary Levy to come to the office in order to review certain records for inclusion in the report. There can be no question that Katz knew the report to be inaccurate when it was not in existence at the time that she swore to its accuracy. The failure to report the 21,600 packs of cigarettes purchased from American Brands on January 19, 1979, which rendered the January, 1979, report false and inaccurate, was repeated in the preparation of the report for February, 1979, which report was also signed by Felicia Katz. No testimony was presented on behalf of the Respondent to indicate that Katz did other than blithely swear to the accuracy of those reports. Although Katz's gross negligence in fulfilling her statutory reporting duty cannot be condoned, the Petitioner has failed to sustain its burden of proof that Katz knowingly filed a false and inaccurate report for the month of February, 1979. Accordingly, Count
2 of Paragraph numbered 6 should be dismissed. On the other hand, the evidence clearly shows that Valancy knowingly omitted the purchase of the 21,600 packs of cigarettes on January 10 in the reports that he prepared for Katz to sign for the months of January and February. His knowledge of this omission which affected the carry-over figures on all monthly reports thereafter, together with his falsification of the invoices introduced into evidence in this proceeding, clearly prove that Valancy knowingly filed false and inaccurate Cigarette Wholesale Dealer Reports for the months alleged in Paragraph numbered 5.
Valancy' s falsification of every monthly report filed by the Respendent herein, his falsification of invoices attached to those reports, and his continued failure to report purchases and sales of cigarettes by the Respondent herein clearly establish the lack of good moral character necessary for the holding of a Cigarette Dealer's Wholesale Permit pursuant to the mandatory requirement of Section 210.15(1)(c), Florida Statutes. Petitioner has, accordingly, sustained its burden of proof regarding that allegation contained in Paragraph numbered 7 of the Notice to Show Cause.
Paragraph numbered 8 alleges that the failure of the Respondent through Katz to file under oath true and accurate monthly Cigarette Wholesale Dealer's Reports for the months of January and February of 1979 establishes the lack of good moral character necessary for the holding of a Cigarette Dealer's Wholesale Permit as required by Section 210.15(1)(c), Florida Statutes. As has been previously determined, Katz knowingly filed a false report for the month of January, 1979. Although it has been further determined that she did not "knowingly" file a false report for the month of February, 1979, Katz clearly obtained the subject permit while intending to do nothing to actively involve herself in the business, and instead turned the day-to-day operation of that business over to a person who was permitted to knowingly and continuously violate every reporting requirement statutorily imposed. As recently defined by the Supreme Court of Florida,
finding of a lack of "good moral character" should not be restricted to those acts that reflect moral turpitude. A more appropriate definition of the phrase requires an inclusion of acts and conduct which would cause a reasonable man to have substantial doubts about an individual's honesty, fairness, and respect for the rights of others and for the laws of the state and nation. Florida Board of Bar Examiners, 364 So.2d 454, 458 (Fla. 1978).
No testimony was presented by Respondent herein regarding any reason to rely upon the reports prepared by Valancy. Further, Katz's total lack of concern with the veracity of the information contained in the reports signed by her and her total failure to verify any of the information contained in those reports, taken together with her willingness to sign under oath anything put before her, does establish a lack of good moral character.
Section 210.09(3), Florida Statutes, and Sections 7A-10.24 and 7A- 10.11, Florida Administrative Code, require a wholesale dealer to maintain complete and accurate records of all purchases of cigarettes within or without the state. Paragraph numbered 9 of the Notice to Show Cause alleges six instances whereby Respondent failed to report purchases of cigarettes. The parties hereto have stipulated that the Respondent failed to report the purchase of 21,600 packs of cigarettes from American Brands, Inc., on January 19, 1979. When Valancy was questioned as to a possible error in the August, 1979, report, he filed replacement pages to that report which purposely failed to report purchases made from R. J. Reynolds, front Philip Morris, and from French Tobacco, Inc. Petitioner has proven by substantial, competent evidence those allegations contained within Paragraph numbered 9 except for Count 1b. That Count alleges a failure to report the purchase of 26,700 packs from American Brands on January 25, 1979, although no evidence was presented to sustain that allegation. Accordingly, Count 1b of Paragraph numbered 9 should be dismissed.
Paragraph numbered 10 of the Notice to Show Cause alleges that Respondent knowingly falsified sales figures and signatures of persons authorized to receive cigarettes at certain business promises located on or about the Seminole Indian Reservation in Broward County, Florida, by creating, altering, and falsifying sales invoices to reflect incorrect sales of cigarettes as legitimate, legal, and ordinary business sales and by continuing to engage in that conduct from July 17, 1979, through October 20, 1979. Petitioner has
sustained its burden of proof that Respondent knowingly so falsified PO 2-514, PO 1-114, "Nelson's," 3719, and 5331.
Except for those specific three allegations which the undersigned Its's recommended should be dismissed or stricken herein, in all other respects, the Respondent's Motion to Strike and/or Dismiss should be denied. Although many of the paragraphs and counts contained within the subject Notice to Show Cause are repetitious or overlapping, the evidence is clear, and frequently uncontroverted, that Respondent, through its officers, Katz and Valancy, did engage in the conduct complained of by the Petitioner herein in violation of both the general and specific accurate reporting requirements.
The reporting requirements for cigarette wholesalers were made applicable to tax-free sales to the Seminole Indian Tribe on July 1, 1979. In the instant cause, all eleven monthly reports filed by the Respondent herein were false and inaccurate, both before and after July 1. Respondent's argument that it was confused as to the proper method of reporting tax-free sales to the Indians is without merit as is its argument that it is a first-time offender of the cigarette laws. Respondent's reports were false from the first report filed through the time that the Petitioner began its investigation. Additionally, invoices were falsified and information regarding sales and purchases was willfully withheld from the beginning of July through the end of October.
Petitioner in this cause seeks revocation of the Respondent's license. Respondent contends that revocation is improper in this situation, since only one of the three corporate officers committed the violations recited herein and that Respondent's President and principal stockholder, Felicia Katz, did not know about Valancy's conduct. If Katz did not know, then her lack of knowledge was purposeful. She set up the business in Florida while remaining physically present in New York; she selected Valancy to run the business in her place and stead; she signed under oath the January report at a time when it was not in existence, thereby indicating to Valancy her total disregard for the cigarette laws; and she took no steps whatsoever during the approximate one-year time period involved to ascertain if any of the reports were accurate or if any of the other business records were being kept in accordance with the law. She herself is culpably responsible for the violations of reporting requirements as a result of her own negligence, intentional wrongdoing, and lack of diligence to such an extent that one can only logically conclude that the falsification of records and reports was fostered, condoned, or negligently overlooked. Taylor v State Beverage Department, 194 So.2d 321 (2 DCA Fla 1967); Pauline v. Lee, 147 So.2d 359 (2 DCA Fla. 1962).
Respondent's argument that it, as a corporation, cannot be held liable for the acts of its individual officers, directors, employees, or stockholders is also without merit. A corporation can only act through those persons. Although Edelstein's involvement was relatively minimal, the only other officers and stockholders, Katz and Valancy, knowingly prepared false reports and have clearly demonstrated their lack of good moral character required to hold the subject license.
