STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA DEPARTMENT OF )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 90-7341

)

MURRY COHEN and )

TIME PROPERTIES, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on June 5, 1991, in Miami, Florida.

APPEARANCES

For Petitioner: James H. Gillis, Esquire

Senior Attorney

Department of Professional Regulation Division of Real Estate

Hurston Building North Tower

400 West Robinson Street, Suite N-308 Post Office Box 1900

Orlando, Florida 32802-1900

For Respondent: Robert Lederman, Esquire

Robert Lederman, P.A.

9040 Sunset Drive, Suite 40

Miami, Florida 33173-3450 STATEMENT OF THE ISSUES

The ultimate issues for determination in this proceeding are whether Respondents committed the acts alleged in the Administrative Complaint and, if so, what disciplinary action, if any, should be taken against Respondent's license as a real estate broker. 1/

PRELIMINARY STATEMENT

Petitioner served Respondents with an Administrative Complaint on September 5, 1990. Respondents requested a formal hearing, and the matter was referred to the Division of Administrative Hearings on November 19, 1990, for assignment of a hearing officer. The matter was assigned to the undersigned on November 28, 1991. A formal hearing was scheduled for February 15, 1991, pursuant to a

Notice of Hearing issued on December 11, 1990. The formal hearing was rescheduled for June 5, 1991, pursuant to an Order Continuing and Rescheduling Formal Hearing entered on February 14, 1991.

At the formal hearing, Petitioner presented the testimony of one witness and submitted seven exhibits for admission in evidence. Petitioner's exhibits were admitted in evidence without objection. 2/

Respondent, Murry Cohen, testified in his own behalf and presented the testimony of two witnesses. Respondents submitted 10 exhibits for admission in evidence. Respondents' Exhibits 1, and 3-10 were admitted in evidence without objection. Respondents' Exhibit 2 was admitted in evidence over objection. 3/

A transcript of the record of the formal hearing was not requested by the parties. Proposed findings of fact and conclusions of law were filed by Petitioner on June 12, 1991, and by Respondents on June 17, 1991. The parties' proposed findings of fact are addressed in the Appendix to this Order.

FINDINGS OF FACT

1. Petitioner is the state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints pursuant to the laws of the State of Florida. Respondent, Murry Cohen ("Cohen"), is a licensed real estate broker in the state, holding license number 0389337. Respondent, Time Properties, Inc. ("Time"), is a corporation registered as a real estate broker in the state, holding license number 0226474.

   
   

2. The last license issued to Cohen was as a broker, c/o Time Properties, Inc., 8817 Southwest 107th Avenue, Miami, Florida 33176. The last license issued to Time was at the address of 8817 Southwest 107th Avenue, Miami, Florida 33176. Cohen is the qualifying broker and officer for Time.

   
   

3. Respondents prepared and signed written monthly escrow reconciliation statements in compliance with Section 475.25(1)(e), Florida Statutes, and Florida Administrative Code Rule 2IV-14.012(2) and (3). Jacquelyn Kyle ("Kyle"), certified Public Accountant, manually prepared monthly reconciliations of Respondents' escrow account from September 1, 1987, through August 31, 1990. Beginning with the reconciliation for September, 1989, Kyle prepared each monthly reconciliation on the form suggested by the Florida Real Estate Commission ("Commission").

   
   

4. Kyle was provided a ledger book containing an account for each individual transaction. Each account was maintained on a separate page of the ledger. Kyle was also provided with a record of all deposits and withdrawals from Respondents' escrow account and the monthly bank statement for Respondents' escrow account. Kyle manually prepared the monthly reconciliation of Respondents' escrow account. Maricarmen de Molina ("De Molina"), Respondents' bookkeeper, manually verified the balances indicated on the individual ledger cards against the individual pending files. After De Molina verified the balances, she gave the monthly reconciliation to Cohen. Cohen personally reviewed the monthly reconciliations for accuracy, dated and signed them.

   
   

5. Beginning in November, 1989, Respondents purchased a computer system and hired Joaquin Lopez, Jr. ("Lopez") as a computer consultant to provide a customized software package to maintain the records required by the Commission and to assist Respondents in the implementation of the computer system. During December, 1989, and January, 1990, Respondents utilized both computer and manual

   systems to maintain their accounting records and to reconcile the escrow account. Kyle manually prepared monthly reconciliation statements in the customary manner. Under the supervision of Lopez, De Molina then generated computer printouts of all deposits received and checks issued (the "transaction report") and the running balances for each individual file (the "ledger report") for the month of reconciliation.

   
   

6. The printouts for December, 1989, and January, 1990, matched the manual reports prepared by Kyle for the same periods. Lopez determined that the customized software was operating properly and that De Molina was capable of independently operating the computer software. For the month of February, 1990, Respondents discontinued the manual record keeping previously performed by Kyle and maintained all records through the computer system.

   
   

7. Beginning in February, 1990, Kyle prepared monthly reconciliation statements based upon computer printouts given to her by De Molina. Cohen instructed De Molina to provide Kyle with a transaction report, a ledger report, and the bank statement for the escrow account for each month of reconciliation. De Molina was instructed to compare the monthly reconciliations given to her by Kyle with the individual files for each transaction.

   
   

8. From February, 1990, through April, 1990 De Molina provided Kyle with the transaction report and bank statements for the escrow account but failed to give Kyle a copy of the ledger report. Kyle continually requested the ledger reports but never received them because De Molina did not know how to generate the ledger reports. Kyle produced monthly reconciliation statements based upon the transaction report and the bank statements alone. De Molina never compared the reconciliation statements received from Kyle against the individual files. De Molina performed her duties contrary to the express instructions of Cohen and without Cohen's knowledge. Cohen reviewed and signed each monthly reconciliation statement from February, 1990, through April, 1990.

   
   

9. Kyle advised Cohen at the end of May, 1990, that Kyle had not been receiving the ledger reports. Cohen requested Kyle to manually reconstruct the escrow account records beginning in February, 1990.

   
   

10. Kyle manually reconstructed Respondents' escrow account records from February, 1990, through May, 1990. The manual reconciliations performed by Kyle revealed a shortage of $3,187.19 in the escrow account. The shortage was comprised of the following individual items:

    
    

    1. $4,650.00 was inadvertently deposited on February 6, 1990, into Respondents' operating account instead of Respondents' escrow account;

    2. Respondents issued a check from their escrow account on March 1, 1990, based upon the mistaken belief that the funds had been properly deposited to the escrow account;

    3. Respondents inadvertently deposited

       $1,300 into their escrow account that should have been deposited into their operating account; and

    4. Respondents maintained $162.81 in the escrow account-or bank charges against the escrow account. 4/

11. Kyle met with Cohen on June 7, 1990, to review her findings. 5/ Hector F. Sehwerert, Petitioner's investigator, first contacted Cohen on June 4, 1990, and advised Cohen that an audit of Respondents' records would be performed on June 11 1990. In an effort to avoid any appearance of impropriety, Cohen decided not to deposit the funds necessary to correct the shortage in the escrow account until after disclosing the shortage to Petitioner's investigator. The shortage could then be corrected in a manner approved by the investigator.

    
    

12. Cohen and Kyle advised Sehwerert of the shortage in the escrow account on June 11, 1990, immediately before Sehwerert began his audit of Respondents' escrow account Cohen and Kyle offered to show Sehwerert the amount of the shortage and the manner in which the shortage was created. Cohen offered to deposit the funds necessary to correct the shortage before Sehwerert began his audit. Sehwerert declined the offers by Kyle and Cohen and never allowed either of them to explain the shortage. The audit conducted by Sehwerert disclosed no irregularities in Respondents' escrow account other than those uncovered by Kyle pursuant to Cohen's request in May, 1990. At the conclusion of his audit, Sehwerert requested that Cohen deposit the funds necessary to correct the escrow account shortage, and Cohen immediately deposited $3,187.19.

    
    

13. Kyle was present at Respondents' office the entire time Sehwerert conducted his audit. Kyle had copies of Respondents' signed monthly escrow reconciliation statements from September, 1989, through April, 1990, and a copy of the unsigned reconciliation for May, 1990. Sehwerert never asked Kyle or Cohen for copies of the monthly reconciliation statements.

    
    

14. As of the date of the formal hearing, Respondents had altered the manner in which their escrow account records are maintained and the manner in which the monthly account reconciliations are prepared. Cohen personally inputs all deposits into the computer. All escrow checks are printed by the computer personally by Cohen. The software system can be accessed only by Cohen and Lopez through personal passwords assigned to each of them. Cohen no longer has reconciliation statements prepared by a third party for his review. Cohen now prepares the reconciliation statements personally. Cohen reviews the monthly transaction report and ledger report and reconciles them against Respondents' monthly bank statement for the escrow account. Cohen then compares a list of account balances prepared by his secretary with the account balances indicated in the ledger report.

    
    

15. Respondents did not fail to make the required disclosures in writing prior to the signing of a contract offer in each of the two transactions at issue in this proceeding. Respondents mailed a radon disclosure form to the buyer's attorney in the "Hernandez" transaction in accordance with the instructions of the buyer's attorney. The buyer's executed the required disclosure in a timely manner and returned the executed disclosure to Respondents. The agency disclosure form in the "Lescano" transaction was executed by all parties in a timely manner. Copies of the signed contracts and signed disclosures in each of the two transactions were admitted in evidence.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this proceeding pursuant to Section 120.57(1), Florida Statutes. The parties were duly noticed for the formal hearing.

17. The burden of proof is on Petitioner to show by clear and convincing evidence that Respondent committed the acts alleged in the Administrative Complaint and that the penalties requested by Petitioner should be imposed. Ferris v. 510 So.2d 292 (Fla. 1987)

    
    

18. Petitioner did not show by clear and convincing evidence that Respondents failed to disclose agency relationships in violation of Section 475.25(1)(e), Florida Statutes, and Florida Administrative Code Rule 21V-10.033. Nor did Petitioner show by clear and convincing evidence that Respondents failed to maintain monthly reconciliation statements for their escrow account in violation of Section 475.25(1)(e) and Rule 21V- 14.012(2) and (3). The required reconciliation statements were properly maintained. Cohen and Kyle were ready, willing, and able to fully explain to Petitioner's investigator any disagreement between the escrow liability and the escrow bank balance.

    
    

19. Petitioner failed to show by clear and convincing evidence that Respondents are guilty of culpable negligence, breach of trust in a business transaction, or of having violated a duty imposed upon them in violation of Section 475.25(1)(b), Florida Statutes. Respondents exercised reasonable care in maintaining their escrow account records and preparing monthly reconciliation statements. In fact, the evidence demonstrated that Respondents exercised great care in attempting to maintain the integrity of funds in the escrow account and in preparing monthly reconciliation statements.

    
    

20. Respondents did, however, fail to maintain trust funds in their real estate brokerage escrow bank account until disbursement was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. Respondents also deposited and intermingled personal funds being held in escrow in violation of Section 475.25(1)(e) and Florida Administrative Code Rule 21V- 14.008(1)(c). Both violations occurred as a result of the acts described in Findings of Fact, paragraph 10, supra.

    
    

21. Respondents' violation of Sections 475.25(1)(e) and (k), Florida Statutes, is a technical violation rather than a violation caused by a dishonest and unscrupulous operator. A violation which is merely technical and which does net involve dishonest and unscrupulous behavior is not punishable by suspension or revocation of Respondents' licenses. Rivard v. McCoy, 212 So.2d 672, 674-676 (Fla. 1st DCA 1968). See also, Brod v. Jernigan, 188 So.2d 575, 581 (Fla. 2d DCA 1966)(holding that the authority of the Petitioner to discipline licensees should be aimed at the dishonest and unscrupulous operator). Cf. Dryer v. Florida Real Estate Commission, 370 So.2d 95, 99 (Fla. 4th DCA 1979)(holding that after-the-fact consent of the purchasers to use deposit monies pending closing was irrelevant to the issue of whether deposit monies were placed in escrow as required by statutes).

    
    

22. A technical violation is subject to any penalty less than suspension or revocation of a license, including the minimum penalty required by applicable administrative-rules. Brod, 188 So.2d at 581; Dryer, 370 So.2d at 100. The minimum penalty prescribed in Florida Administrative Code Rule 2IV- 24.001(3) for violations of Section 475.25(1)(k), Florida Statutes, is a reprimand and/or fine of $1,000 per count.

    
    

23. A reprimand is an appropriate penalty where, as in this proceeding, the record shows that Respondents were not attempting to cheat or defraud anyone and that no person was hurt or prejudiced by Respondents' actions. Peck v. Florida Real Estate Commission, 204 So.2d 355 (Fla. 2d DCA 1967). Furthermore, Respondents demonstrated by clear and convincing evidence the existence of

mitigating circumstances than entitle the Commission to deviate from its disciplinary guidelines pursuant to Florida Administrative Code Rule 21V- 24.001(4)(a).

RECOMMENDATION

Based upon the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that Petitioner should enter a final order finding the

Respondents not guilty of all a1legations in the Administrative Complaint except

the failure to maintain trust funds in the escrow account and depositing and intermingling escrow funds with personal funds in violation of Sections 475.25(1)(k) and (e) and Florida Administrative Code Rule 21V- 14.008(1)(c). Both violations were technical violations that resulted from the same act or acts. Therefore, it further recommended that the final order entered by Petitioner should impose a reprimand against Respondents.

DONE and ENTERED this 22nd day of July, 1991, in Tallahassee, Leon County, Florida

DANIEL MANRY

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of July, 1991.

ENDNOTES

1/ All statutory references are to Florida Statutes (1989) as amended by Florida Statutes (Supp. 1990) unless provided otherwise.

2/ Petitioner's Exhibit 1 is a certified copy of Respondent's licensure file. Exhibit 2 is the licensure file of Time Properties, Inc. Exhibit 3 is a copy of Respondent's responses to Petitioner's requests for admissions. Exhibit 4 is a copy of the Office Inspection and Escrow/Trust Account Audit Form completed by Petitioner's investigator. Exhibits 5 and 6 are copies of deposit receipts and cancelled checks for $4,650 and $3,187.19 respectively. Exhibit 7 is a copy of an affidavit made by Respondent.

3/ Respondent's Exhibit 1 is a copy of Respondent's Monthly Reconciliation Statement for the Real Estate Trust Account of Time Properties, Inc. Exhibit 2 is a copy of an unexecuted Deposit Receipt and Sales Purchase Agreement for the "Hernandez" property. Exhibit 3 is a copy of an executed Deposit Receipt and Sales Purchase Agreement for the "Hernandez"' property. Exhibit 4 is a copy of the Real Property Sales Disclosure form used in the "Hernandez" transaction.

Exhibit 5 is a copy of an executed Deposit Receipt and Sales Purchase Agreement for the "Lescano" property. Exhibit 6 is a copy of the Real Property Sales Disclosure form used in the "Lescano" transaction. Exhibit 7 is a copy of the

check register for the Time Properties' trust account. Exhibit 8 is a copy of the Transaction Report for Time Properties, Inc. Exhibit 9 is a copy of the Monthly Statement Reconciliation Real Estate Trust Account for Time Properties, Inc. Exhibit 10 is an affidavit made by Joaquin Lopez, Jr.

4/ At the time of the formal hearing, Respondents had terminated the practice of permitting bank charges against their escrow account. Bank charges for both the escrow and operating accounts are now applied to Respondents' operating account.

5/ They discovered that De Molina had first entered the $4,650.00 deposit into Respondents' computer records as deposit to the escrow account and then had voided the deposit on the same date, February 6, 1990.

APPENDIX

Petitioner submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

The Petitioner's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

stated in Findings 12, 13

1. Rejected as recited testimony

2. Rejected for the reasons

stated in Findings 3-9

Respondent submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

The Respondent's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

Regulation

400 West Robinson Street

P.O. Box 1900 Orlando, FL 32801

Jack McRay, Esquire General Counsel

Department of Professional Regulation

1940 North Monroe Street Tallahassee, FL 32399-0792

James H. Gillis, Esquire Senior Attorney

Department of Professional Regulation - Legal Section

Division of Real Estate Hurston Building North Tower

400 West Robinson Street Suite N-308

P.O. Box 1900

Orlando, Florida 32802-1900

Robert Lederman, Esquire Robert Lederman, P.A.

9040 Sunset Drive, Suite 40

Miami, Florida 33173

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 90-007341

Orders for Case No: 90-007341