STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SILVIA S. IBANEZ, )

)

Petitioner, )

and )

) JAMES R. BREWSTER and AMERICAN ) ASSOCIATION OF ATTORNEY ) CERTIFIED PUBLIC ACCOUNTANTS, )

)

Intervenors, )

)

vs. ) CASE NO. 91-3336RX

)

STATE OF FLORIDA, DEPARTMENT )

OF PROFESSIONAL REGULATION, )

BOARD OF ACCOUNTANCY, )

)

Respondent, )

and )

) FLORIDA INSTITUTE OF CERTIFIED ) PUBLIC ACCOUNTANTS, )

)

Intervenor. )

)

FINAL ORDER

Upon due notice, this cause came on for formal hearing on August 1 and 2, 1991, in Tallahassee, Florida, before Ella Jane P. Davis, a duly assigned Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

FOR PETITIONER Silvia S. Ibanez, Esquire SILVIA S. IBANEZ: Post Office Drawer 7667

Winter Haven, Florida 33883 and

Michael P. Sampson, Esquire Holland & Knight

Post Office Box 32092 Lakeland, Florida 33802-2092

FOR RESPONDENT STATE OF John J. Rimes, III

FLORIDA, DEPARTMENT OF Assistant Attorney General PROFESSIONAL REGULATION, Department of Legal Affairs BOARD OF ACCOUNTANCY: The Capitol, LL04

Tallahassee, Florida 32399-1050

FOR INTERVENOR Julie Gallagher, Esquire JAMES R. BREWSTER: Stowell, Anton & Kraemer

Post Office Box 11059 Tallahassee, Florida 32302

FOR INTERVENOR AMERICAN Thomas W. McCulloch, Esquire ASSOCIATION OF ATTORNEY McCulloch, Ellis & Payne CERTIFIED PUBLIC 6671 Southwest Freeway, Suite 800 ACCOUNTANTS: Houston, Texas 77074

and

Sydney S. Traum, P.A. Semet, Lickstein,

Morgenstern & Berger

Twelfth Floor, Ponce De Leon Plaza

201 Alhambra Circle

Coral Gables, Florida 33134

FOR INTERVENOR FLORIDA Kenneth R. Hart, Esquire INSTITUTE OF CERTIFIED Ausley, McMullen, McGehee, PUBLIC ACCOUNTANTS: Carothers & Proctor

Post Office Box 391 Tallahassee, Florida 32302

STATEMENT OF THE ISSUE

Whether or not existing Rule 21A-20.012 F.A.C. is an invalid exercise of delegated legislative authority. See, Sections 120.52(8) and 120.56 F.S.

PRELIMINARY STATEMENT

Petitioner filed a petition on May 10, 1991 challenging the validity of Rule 21A-20.012 F.A.C., a rule upon which a pending disciplinary action against the Petitioner is based. The two cases, the rule challenge and the disciplinary action, were first consolidated, but were subsequently bifurcated and this final order relates solely to Petitioner's challenge to Rule 21A-20.012 F.A.C.

At formal hearing, Petitioner Ibanez presented her own oral testimony and that of John E. Sullivan, John R. Rowe, and Martha Willis. Petitioner's exhibits, Ibanez 1-5 and 7-9, were admitted in evidence. Intervenor James R. Brewster presented no oral testimony, but had Brewster Exhibits 1, 2, and 6-11 admitted in evidence. Intervenor American Association of Attorney Public Accountants (AAA-CPA) presented neither witnesses nor exhibits.

Respondent presented the oral testimony of Petitioner Silvia Ibanez and Dean Dennison. Intervenor Florida Institute of Certified Public Accountants' (FICPA's) Exhibits 1-17 were admitted in evidence, without independent oral testimony.

Official recognition was taken of many items as reflected in the record.

A transcript was filed in due course and all timely filed proposed findings of fact have been ruled on in the appendix to this final order, pursuant to Section 120.59(2) F.S.

FINDINGS OF FACT

1. Petitioner Silvia S. Ibanez is a practicing attorney and a member of the Florida Bar, and holds active Florida CPA License No. 10842, currently in good standing. She is also a Registered Investment Advisor with the Florida Division of Securities and a certified financial planner (CFP). She has been charged with violating Rule 21A-20.012 F.A.C. in DOAH Case No. 91-4100 which is currently pending before the Division of Administrative Hearings.

   
   

2. As a licensee with the federal Securities and Exchange Commission, Petitioner is required to, and does, disclose the fact that she is a CPA.

   
   

3. Petitioner Ibanez is listed in the yellow pages under the heading "Attorneys" as "Ibanez, Silvia, S., CPA, CFP." On its face, there is nothing false or fraudulent about this listing. As an attorney, Petitioner also places CPA after her name on her business cards and on her letterhead. Respondent contends that because Petitioner "holds out" to the public as a CPA, uses accounting skills, and provides one or more types of management, advisory, or consulting services, she is currently "practicing public accounting."

   
   

4. Intervenor James R. Brewster is also a practicing attorney, a Board- certified tax lawyer, and a member of the Florida Bar, and holds an active Florida CPA license. Mr. Brewster has been charged with violating Rule 21A-

   20.012 F.A.C. in DOAH Case No. 90-3278 which is currently pending before the Division of Administrative Hearings. The administrative complaint therein charges violations of Rule 21A-20.012 F.A.C. and Sections 473.323(1)(a), (g), and (h) F.S. on the basis that Brewster's law firm letterhead designates him as a "CPA" and the law firm is not licensed by the Board of Accountancy as a public accounting firm.

   
   

5. Intervenor American Association of Attorney Public Accountants (AAA- CPA) is a not-for-profit corporation with its principal place of business in Mission Viejo, California. Founded in 1964, the AAA-CPA is an active professional organization of persons dually qualified as both attorneys and CPAs. Its membership is comprised of practitioners in public accounting, law, government, education, and other activities. One of the functions of the AAA- CPA is to engage in the analysis and discussion of ethical and other issues related to practitioners who are dually licensed in the accounting and law professions. This includes monitoring and commenting upon legislation affecting the practice of law and public accountancy and participating in the development of ethical standards of lawyers and CPAs. AAA-CPA's substantial interests are affected by this proceeding in that its members are CPAs who are directly affected by the definition, scope, and regulation of the practice of public accounting by Florida statutes and rules.

   
   

6. Respondent Board of Accountancy is an agency of the State of Florida established pursuant to the provisions of Chapter 473 F.S. Pursuant to Section

   473.301 F.S., the Board is authorized in the following language to regulate the "practice of public accounting":

   
   

   1. Purpose.--The Legislature recognizes that there is a public need for independent and objective public accountants and that it is necessary to regulate the practice of public accounting to assure the minimum competence of practitioners and the accuracy of audit statements upon which the public relies and to protect the public from dishonest practitioners and, therefore, deems it necessary in the interest of public welfare to regulate the practice of public accountancy in this

      state.

      
      

7. Respondent Department of Professional Regulation is an umbrella agency for the Board of Accountancy, established under the provisions of Section 20.16 and Chapter 455 F.S.

   
   

8. Intervenor Florida Institute of Certified Public Accountants (FICPA) is a Florida not-for-profit corporation with its principal place of business in Tallahassee. Founded in 1905, the FICPA is an active professional organization with approximately 17,800 members. Its membership is comprised of practitioners in public accounting, industry, government, education, law, and other activities. One of the functions of the FICPA is to engage in the analysis and discussion of issues related to the accounting profession. This includes monitoring the scope of services provided by certified public accountants in Florida and throughout the United States, monitoring legislation affecting the practice of public accountancy, and participating in the development of auditing, accounting, and ethical standards of CPAs. Intervenor FICPA's substantial interests are affected by this proceeding in that its members are CPAs who are directly affected by the definition, scope, and regulation of the practice of public accounting by Florida statutes and rules. It is even recognized in the statute. See, Section 473.302 F.S., infra.

   
   

9. Challenged existing Rule 21A-20.012 F.A.C., also referred to as the "holding out" rule, provides as follows:

   
   

   21A-20.012 Holding Out. "Holding himself or itself out" as used in Section 473.302(4), F.S. is defined as publicizing that the licensee is a certified public accountant when providing, or offering to provide services or products to the public, in such a manner that an uninformed person may not be able to differentiate whether or not the licensee may also be in the practice of public accounting. The display of the CPA certificate and license issued by the Department of Professional Regulation shall not constitute holding out under the terms of this rule.

   All other publication of the fact that a licensee is a CPA constitutes holding oneself out.

   
   

10. The specific statutory authorities currently cited by the agency for the rule are Sections 473.302, 473.304 and 473.307 F.S. and the law implemented is cited as Section 473.302 F.S. Section 473.307, dealing with "experience," does not impinge on these proceedings. The remaining authorities provide as follows:

    
    

    1. Definitions.--As used in this act:

       1. "Board" means the Board of Accountancy.

       2. "Department" means the Department of Professional Regulation.

       3. "Certified public accountant" means a person who holds a license to practice public accounting in this state under the authority of this act.

       4. "Practice of," "practicing public accountancy," or "public accounting" means:

          1. Offering to perform or performing for the public one or more types of services involving the use of accounting skills or one or more types of management

             advisory consulting services, by a certified public accountant or firm of certified public accountants, of this state, including the performance of such services in the employ of another person; or

          2. Offering to perform or performing for the public one or more types of services involving the use of accounting skills or one or more types of management advisory or consulting services, by any other person holding himself or itself out as a certified public accountant or firm of certified public accountants, including the performance of such services by a certified public accountant in the employ of a person so holding himself or itself out.

    However, these terms shall not include services provided by the American Institute of Certified Public Accountants, the Florida Institute of Certified Public Accountants, or any full service association of certified public accounting firms whose plans of administration have been approved by the board, to their members or services performed by these entities in reviewing the services provided to the public by members of these entities. [Emphasis supplied]

    473.304 Rules of board.--The board shall adopt all rules necessary to administer this act. Every licensee shall be governed and controlled by this act and the rules adopted by the Board.

    
    

11. Also relevant to these proceedings is Section 473.322 F.S. which provides as follows:

    
    

    473.322 Prohibitions; penalties.--

    1. No person shall knowingly:

       1. Practice public accounting unless the person is a certified public accountant or a public accountant;

       2. Assume or use the titles or designations "certified public accountant" or "public accountant" or the abbreviations "C.P.A." or any other title,

          designation, words, letters, abbreviations, sign, card, or device tending to indicate that such person holds an active license under this act, unless such person holds an active license under this act;

       3. Attest as an expert in accountancy to the reliability or fairness of presentation of financial information or utilize any form of disclaimer of opinion which is intended or conventionally understood to convey an assurance of reliability as to matters not specifically disclaimed unless such person holds an active license under this act. This subsection shall not prevent the performance by persons other than certified public accountants of other services involving the use of accounting skills including the preparation of tax returns and the preparation of financial statements without expression of opinion thereon.

       4. Present as his own the license of another;

       5. Give false or forged evidence to the board or a member thereof for the purpose of obtaining a license;

       6. Use or attempt to use a public accounting license which has been suspended, revoked, or placed on inactive status;

       7. Employ unlicensed persons to practice public accounting; or

       8. Conceal information relative to violations of this act.

    2. Any person who violates any provisions of this section is guilty of a misdemeanor of the first degree, punishable as provided in s. 775.082, s. 775.083, or s.

    775.084. [Emphasis supplied]

    
    

12. Although it has not been challenged, Rule 21A-21.009 F.A.C., the "other business activity rule," is relevant to these proceedings. That existing rule currently provides as follows:

    
    

    21A-21.009 Other Business Activities. A licensee engaged in the practice of public accounting may concurrently engage in another business, occupation, or profession if:

    1. The licensee does not hold himself out as a certified public accountant in that activity,

    2. The activity is conducted under a name which the public will not associate with licensee's practice of public accounting,

    3. The other business, occupation, or profession is not used to promote the practice of public accounting in any manner prohibited by Chapter 473, F.S.,

    4. Facilities used by the licensee in his public accounting practice and other activity conform to the requirements of 21A-26.001(3),

    5. The entity's dealings with the licensee's public accounting clients shall not violate the provisions of Chapter 473, F.S., and 21A, Florida Administrative Code, relating to integrity and objectivity,

    6. The entity does not interpret financial statements, forecasts or projections audited, reviewed, compiled or prepared by others. [Emphasis supplied]

       
       

13. Although it has not been challenged, Rule 21A-20.011 F.A.C. is relevant to these proceedings. That existing rule currently provides as follows:

    
    

    21A-20.011 Practice of, or Practicing Public Accountancy. "Practice of, or practicing public accountancy" as defined by Section 473.302(4), F.S., shall exclude any of the following:

    1. Services rendered by a licensee as an employee of a governmental unit or an employee rendering accounting services only to his employer as long as that employer is not required to be licensed under

       F.S. 473, or

    2. Activities of licensees who do not hold themselves out as CPAs and who are not associated with financial statements, or

    3. Activities of licensees who do not hold themselves out as certified public accountants. [Emphasis supplied]

       
       

14. Petitioner's and Intervenor Brewster's CPA certificates (like all Florida CPA certificates) authorize them to display their CPA credentials. The CPA certificate represents that the recipient

    
    

    . . . has passed all examinations and has met all other requirements prescribed by law and by rule of this board for certification as an expert public accountant, and is therefore entitled to append the letters CPA after this registrant's name to evidence registration by this board as a Certified Public Accountant. [Emphasis supplied]

    
    

15. The Board's only classifications of CPA licenses/licensees are "active" or "inactive." "Active" and "inactive" refer to the status of the CPA license and do not refer to or imply that the licensee is actively practicing public accounting. One can be an actively licensed CPA and not be practicing public accounting.

    
    

16. Attainment of the CPA credential is an accomplishment that is recognized in the business community. The CPA credential of a Florida-licensed CPA connotes high competency and achievement levels in the discipline of accounting. Truthful communication of the CPA credential by actively licensed CPAs for identification purposes constitutes valuable disclosure to the public.

    
    

17. The use of the term "CPA" implies a specific competency to the public. The fact that Petitioner Ibanez or Intervenor Brewster is a CPA is valuable to their respective legal clients.

    
    

18. CPA status is a valuable property right to each CPA, and the ability of a practicing attorney to publicize the fact that s/he also holds an active CPA license is a valuable asset to that individual.

    
    

19. It is conceded by all parties that it is possible to practice law and public accounting in the same business activity.

    
    

20. There are firms that simultaneously hold themselves out as law firms and public accounting firms.

    
    

21. The activities of other regulated professionals, such as members of the Florida Bar, which overlap those of practicing CPAs are subject to the regulatory standards of their principal regulated professions and applicable judicial and administrative remedies for malpractice and negligence.

    
    

22. It is conceded by all parties that many activities conducted by professionals and nonprofessionals, other than by CPAs and other than by attorneys, are identical to activities performed by CPAs engaged in public accounting. For instance, anyone can legally prepare a tax return. Bookkeepers and free-lance tax assistors of all sorts are unregulated in any way.

    
    

23. The only activity among public accounting activities that is a unique activity of CPAs is the "attest" function. See, Section 473.322(1)(c) F.S.

24. Truthful use, communication, or disclosure of the CPA credential by an actively licensed CPA does not per se constitute false, misleading, or deceptive advertising. The evidence does not support a finding that withholding truthful disclosure that one has earned the CPA credential benefits the public welfare or effects the purposes of the enabling legislation, or indeed, how such nondisclosure could promote them, particularly since it has been shown that persons of considerably lesser competency and achievement levels in the discipline of accounting may legally offer to the public almost all the services provided by CPAs.

    
    

25. Prior to 1984, when the "holding out" rule was adopted, a Florida- licensed CPA who offered one or more types of accounting services to the public or who offered one or more types of management advisory or consulting services to the public was considered to be "practicing public accountancy," whether or not that person appended the initials "CPA" after his or her name.

    
    

26. The "holding out" rule became effective on September 17, 1984.

    
    

27. Chapter 89-87 Laws of Florida amended Section 473.302(4) F.S. (i.e., the definition of public accountancy) but the amendment did not change the previously existing "holding out" language therein.

    
    

28. The "holding out" rule was adopted more than one year before the initiation of this rule challenge.

    
    

29. There is no dispute among the parties that the definition within the challenged Rule 21A-20.012 F.A.C. is circular. In attempting to define the term "holding out" so that the use of that term in Section 473.302(4) F.S. may be clarified, the rule incorporates the statutory phrase "practice of public accounting," and the term "practice of public accountancy/accounting" in Section 473.302(4)(b) F.S. incorporates the term "holding out," 1/ as does Rule 21A-

    1. F.A.C., 2/ which creates exemptions to the statute.

       
       

30. At least one purpose of the second sentence of the existing rule seems to have been to allow all CPAs to display their CPA certificates on their inner office walls without fear of disciplinary action by the Board. The Board's expressed rationale for excluding "display of a CPA certificate" from its "holding out" rule is premised on the fact that during an office visit, a CPA can immediately disabuse any individual of the fact that s/he is practicing public accounting once that individual is inside the CPA's office. However, Petitioner demonstrated, and the Board conceded, that an individual may have the opportunity to disabuse members of the public that s/he is engaged in the activity of the practice of public accounting or that s/he is offering all the services normally associated with a CPA, as opposed to law or some other profession, at least where there is direct contact by letter or telephone.

    
    

31. Clearly, there are many ways a nonattesting, actively licensed CPA who is dually licensed can clarify to those seeking his or her services which profession, function, or service s/he is willing to perform for that client.

    
    

32. On the other hand, the challenged rule does not deal with all members of the public, or members of the public specifically seeking CPA services, or members of the public seeking some other service. The rule deals with "uninformed persons." As used in the rule, the term "uninformed person" is undefined and has been subject to differing speculative interpretations by the Board and by non-Board witnesses, some of which interpretations address such broad categories as anyone using a telephone book.

33. The Board also suggested that only display of the original CPA certificate on an inside office wall would be exempt from prosecution for publication, but a reasonable person could interpret the rule on its face to permit posting the CPA certificate or an exact facsimile of the certificate on a sign outside an office building or circulating as business cards exact reduced- size copies of the certificate even though these types of "publication" or "display" would not provide the same opportunity as an office visit would provide for the CPA to disclose to individuals the actual services the CPA was offering to perform.

    
    

34. Accordingly, there has been no rational basis for the "holding out" rule's distinction between "display" of the licensee's CPA certificate and other forms of truthful, nonmisleading publication of the CPA licensure/status.

    
    

35. The agency's expressed rationale behind its adoption of the "holding out" rule was to define the meaning of the statutory term "holding out," as used in Section 473.302(4) F.S., a term which has also been adopted into a number of other rules (see, supra), so as to provide guidance on when a person who has been licensed as a CPA is engaged in the "practice of public accounting." Specifically, the Board maintained that the "holding out rule" and the "other business activity rule" give licensees two options. Under the first option, the "holding out" rule permits licensees to retain their CPA certificates when not in compliance with all of the provisions of Chapter 473 F.S. and the rules promulgated thereunder, as long as they do not publicize themselves as CPAs. Alternatively, the Board perceives that under the second option, if licensees do publicize themselves as CPAs when performing services for the public, licensees become subject to regulation by the Board and are held to the standards of competency and conduct which are applicable to all CPAs who use their accounting skills for the public while trading on the fact of their licensure as a Florida CPA.

    
    

36. However, the words "publicizing" and "publication" as used in the "holding out" rule are also undefined. Although Respondents submitted that the "common usage" of these words is sufficient to embrace listings in the yellow pages, it is also quite possible to give these words a far broader reading to encompass the "assumption" and "use" of the designation "CPA" and the "assumption" and "use" of the CPA credential, which "assumption" and "use" are specifically reserved to all actively licensed CPAs and which designation is permitted to be inserted after their names on signs, cards, or devices by Section 473.322(1)(b) F.S. [see Finding of Fact No. 11] and by the CPA certificate itself which permits them to "append" CPA after their names [see Finding of Fact No. 14].

    
    

37. The rule has actually subjected CPAs, and specifically has subjected Petitioner and Intervenor Brewster, to DPR disciplinary proceedings independent of any other act or wrongdoing merely for any "publication" of the CPA credential in a form other than display of the original CPA certificate on an inner office wall. The rule may automatically subject attorney-CPA licensees to DPR disciplinary proceedings independent of any other act or wrongdoing merely on the basis of passive, truthful communications which are otherwise in full compliance with the standards of the Florida Supreme Court and Florida Bar. The rule has the potential for being interpreted so as to prohibit CPAs such as Petitioner and Intervenor Brewster from making disclosures of their earned status as CPAs to various regulatory bodies to which they are required by law to disclose that information. See, Findings of Fact 1 and 2, supra. The rule can be invoked to limit their income by chilling their appearances as expert CPA

    witnesses for a fee even if they never work for an uninformed layman at all. Applicants for certain state employments and candidates for public office may run afoul of the rule due to the disclosure requirements of public office. Even at risk is the CPA called as a factual witness who is then sworn to tell the truth and asked innocuous biographical information. One's desire to attain a CPA credential may be chilled by the hazard of using it.

    
    

38. Chapter 473 F.S. contains limitations on competitive negotiation, prohibits accepting contingent fees, prohibits the payment of certain commissions, and establishes other prohibitions to which persons who are deemed to be "practicing public accountancy" must adhere. Some of these prohibitions are contrary to normal, ethical practice of other professions, i.e., acceptance of contingent fees by lawyers. If the rule remains intact, the Board and DPR under Chapters 473 and 455 F.S. have the potential of breaching the confidentiality of CPA-attorneys' legal clients' files. See, Section 473.316(5) and 473.318 F.S. Since attorneys are exclusively overseen by the Florida Supreme Court, the rule potentially violates the doctrine of "separation of powers" among the three branches of state government.

    
    

39. Therefore, the definitional rule creates a wedge whereby the Board may insinuate its discipline into other professions and confuses dually licensed CPAs from knowing how they may behave in each profession without running afoul of discipline in the other. In application with other rules, the "holding out" rule sets confusing and varying standards for agency decisions involving attorneys, bankers, CPAs employed by private corporate employers, and CPAs with their own financial consultant firms.

    
    

40. The Board of Accountancy has issued a series of letter opinions based on the "holding out rule" or based on that rule read in conjunction with Rule 21A-21.009 F.A.C., the "other business activity rule," which indicate that a Florida CPA who does not "hold out" to the public as a CPA and who is not associated with financial statements is permitted by the Board to engage in other business activities without complying with the provisions of Chapter 473 F.S., that is, not being subject to DPR discipline, because the Board does not view that CPA in those activities as "practicing public accountancy." Also, the Board of Accountancy has issued a series of opinions to the effect that, by virtue of Section 473.302(4) F.S. and the "holding out rule," a CPA who "holds out" (publicizes his or her status as a CPA) is automatically, by definition, "practicing public accounting," regardless of what actual business activity s/he is performing. These opinions also indirectly insinuate the Board of Accountancy into many other professions, including the practice of law, which the Board has no statutory mandate to regulate pursuant to Section 473.301 F.S. The plethora of opinions issued by the Board dramatize the confusion experienced by CPAs who have sought to have the Board interpret the rule in question on a case-by-case basis.

    
    

41. Testimony of the Chairman of the Board was offered to establish that absent the challenged rule, the Board cannot reasonably regulate negligence in the profession and that absent the rule, only fraud could be prosecuted by the Board. He testified that, in his opinion, the challenged rule means that a CPA performing tax services for a client is not doing "public accounting" if "CPA" is not appended after the CPA's name in advertising and that that CPA cannot be disciplined by the Board for negligence, any more than he could be disciplined if he were a non-CPA doing tax services. The Chairman further opined that a CPA doing tax services is doing public accounting only if he appends CPA after his name, and in that instance, the Board can and will discipline that CPA for negligence, should he commit any. Further, the Chairman indicated that if Rules

    21A-21.009, 21A-20.011, and 21A-20.012 F.A.C. were not simultaneously in place, the actively licensed CPA who places CPA after his name could not be disciplined by the Board for negligence, but only for fraud. Precisely how this would occur was not made clear, but upon the foregoing, together with the Board opinions admitted in evidence, it is concluded that the Board has utilized what purports to be purely a definitional rule to establish disciplinary jurisdiction and that in certain instances the rule puts DPR in the precarious position of only being able to prosecute CPAs with "CPA" appended after their names, but not CPAs who perform the same services and who do not append "CPA" after their names. Such a result is nonsensical.

    
    

42. The Board does not seriously suggest that if Rule 21A-20.012 F.A.C. is invalidated, Rule 21A-20.011 would provide a blanket exclusion from all provisions of Chapter 473 F.S. for CPAs "using" or "assuming" or "publicizing" their status. At a minimum, such CPAs would have to maintain their credential as would any other CPA for good character, payment of fees, and recertification for competency based on continuing education.

    
    

43. What has actually occurred here is that the Board has consciously utilized Rules 21A-20.011 and 21A-20.012 F.A.C. so as to not enforce Section 473.302(4)(a) as written and so as to selectively enforce only Section 473.302(4)(b) F.S. Then, by its selective enforcement of Rule 21A-20.012, the Board has gone a step further. The Board has "interpreted" Section 473.302(4)(b) to include within Board jurisdiction not those functions, activities, or skills a CPA practices or holds out to the public for a fee as constituting "practicing public accountancy" but has made the definition of "practicing public accountancy" encompass any disclosure of CPA status or skill attainment, regardless of the disclosure's truth and regardless of whether or not the CPA is utilizing any of the functions, activities, or skills of a CPA. By so doing, the Board has exceeded its statutory mandate and legislative purpose as set forth in Section 473.301 F.S.

    
    

44. On its face, Rule 21A-20.012 F.A.C. consists of three sentences, which, in relationship to each other, are inconsistent and contradictory. Specifically, sentence ONE seems to be based on the overall representation made by a CPA to "uninformed persons." It simultaneously presumes fraud in the communication of what otherwise would be truthful, passive information. 3/ Sentence THREE subjects the CPA to discipline absent any fraud and totally without consideration to the impression formed by "uninformed persons" from the use of the CPA designation in any manner other than display of the certificate. 4/

    
    

45. Because there are two incompatible definitions in the challenged rule as now drafted, the Board is at liberty to selectively enforce the statute. One CPA could be prosecuted for simple disclosure of credential status or neutral biographical information (Ibanez). Another CPA might be prosecuted only after examination of the totality of his circumstances to determine if the circumstances mislead "uninformed persons" into believing he abides by all the regulations promulgated under Chapter 473 F.S., and still another CPA would never be prosecuted unless he performs the attest function. This is nonsensical and clearly unfair.

    
    

    CONCLUSIONS OF LAW

    
    

46. The Division of Administrative Hearings has jurisdiction of the parties and subject matter of this cause. See, Section 120.56 F.S.

47. Upon the foregoing findings of fact it is clear that Petitioner, Respondent, and all Intervenors have standing in this proceeding.

    
    

48. Petitioner bears the burden to go forward and prove that Rule 21A-

    1. F.A.C. is an invalid exercise of delegated legislative authority. Agrico Chemical Co. v. State Department of Environmental Regulation, 364 So. 2d 759 (Fla. 1st DCA 1978), cert. denied, 376. So. 2d 74 (1979). It is a stringent burden of proof. Adams Smith Enterprises v. Florida Department of Environmental Regulation, 553 So. 2d 1260 (Fla. 1st DCA 1989).

    
    

49. Petitioners asserted that the economic impact statement (EIS) prepared pursuant to Section 120.54(2)(b) F.S. prior to adoption of Rule 21A-20.012

    F.A.C. was inadequate and thus the Board of Accountancy failed to comply with appropriate rulemaking proceedings. They further asserted that such failure, if not specifically fatal, is indicative of other flaws in the rule. Since the rule in question was effective in September 1984, an attack on the EIS is foreclosed at this late date. See, Section 120.54(2)(d) F.S. and Herring v. Department of Administration, 9 FALR 5210 (1987).

    
    

50. Pursuant to Section 473.304 F.S., the Board of Accountancy has authority to adopt all rules necessary to administer Chapter 473 F.S.

    
    

51. Where the empowering provision of a statute states simply that an agency may "make such rules and regulations as may be necessary to carry out the provisions of this act," the validity of the regulations promulgated thereunder will be sustained as long as they are reasonably related to the purposes of the enabling legislation and are not arbitrary or capricious. See, General Telephone Co. of Florida v. Florida Public Service Commission, 446 So. 2d 1063, 1067 (Fla. 1984).

    
    

52. Citing Peninsular Supply Co. v. C. B. Day Realty of Florida, 423 So. 2d 500 (Fla. 3d DCA 1982) and State ex rel. Szabo Food Services Inc. of N. C. v. Dickson, 286 So. 2d 529 (Fla. 1973), Respondents asserted that the Legislature's reenactment of Chapter 473 F.S. after "sunset review" subsequent to the effective date of the challenged rule (see, Chapter 85-9 Laws of Florida) and amendment of Section 473.302(4) F.S. (see, Chapter 89-87 Laws of Florida) without modifying the "holding out" language therein creates a conclusive presumption that the challenged rule is a valid exercise of delegated authority. The first case is clearly distinguishable and should be rejected. Peninsular Supply Co. stands for the proposition that the legislature's enactment of a new statutory right cannot implicitly abrogate a common law right firmly entrenched by court decisions. The facts enunciated in Szabo are more closely on point, but the legal presumption is not conclusive. That case hinges in part on presumptions peculiarly applicable to tax cases, and therein the prior administrative interpretations were considered merely "persuasive unless erroneous or clearly unauthorized." Therefore, even if Szabo is appropriate for the premise for which it is cited, it permits the presumption to be rebutted, where, as here, the result of the rule's application by the Board has led to nonsensical results. The Legislature cannot be presumed to have intended an absurd result. See, by analogy, State v. Safer, 368 So. 2d 620 (Fla. 1st DCA 1979); State Farm Mut. Auto. Ins. Co. v. O'Kelley, 349 So. 2d 717 (Fla. 1st DCA 1977).

    
    

53. Respondents also contended that the challenged rule may not be held invalid because it is definitional in nature and contains no affirmative or negative requirements. However, where a definitional rule enacted for purposes of exemption enlarges, modifies, or contravenes specific provisions of the law

    implemented, it may be declared invalid. See, Section 120.52(8)(c) F.S. and Department of Natural Resources v. Wingfield Development Co., 581 So. 2d 193 (Fla. 1st DCA 1991). Here, the rule's application does that and as applied with other rules also has invaded the practice of other professions, rendering the rule overbroad and exceeding the Board's authority. See, Section 120.52(8)(b) F.S.

    
    

54. The purpose of Chapter 473 F.S. is set forth in 473.301 F.S., which reads as follows:

    
    

    473.301 Purpose.--The Legislature recognizes that there is a public need for independent and objective public accountants and that it is necessary to regulate the practice of public accounting to assure the minimum competence of practitioners and the accuracy of audit statements upon which the public relies and to protect the public from dishonest practitioners and, therefore, deems it necessary in the interest of public welfare to regulate the practice of public accountancy in this state. [Emphasis supplied]

    
    

55. Under Section 120.52(8)(d) F.S., a rule may also constitute an invalid exercise of delegated legislative authority if it is vague and fails to establish adequate standards for decision making. A rule is vague or fails to establish adequate standards for agency decisions if persons of common intelligence must necessarily guess at its meaning and differ as to its application. See, State v. Cumming, 365 So. 2d 153 (Fla. 1978).

    
    

56. The first sentence of Rule 21A-20.012 F.A.C. defines "holding out" as follows:

    
    

    "Holding himself or itself out" as used in Section 473.302(4), F.S., is defined as publicizing that the licensee is a certified public accountant when providing, or offering to provide services or products to the public, in such a manner that an uninformed person may not be able to differentiate whether or not the licensee may also be in the practice of public accounting. [Emphasis supplied]

    
    

    This first sentence suggests that whether or not a practitioner is "holding out" is based on the overall representation made by the CPA, as interpreted by an "uninformed person." The terms "uninformed person," and "publicizing" are not defined and are subject to a number of interpretations. This sentence, unmodified by sentences two and three, also presumes that, whatever "publicizing" is, it must be misleading.

    
    

57. In sharp contrast to the first sentence of the rule, the remainder of Rule 21A-20.012 provides:

    
    

    The display of the CPA certificate and license issued by the Department of Professional Regulation shall not constitute holding out under the terms of this rule.

    All other publication of the fact that a licensee is a CPA constitutes holding oneself out. [Emphasis supplied]

    As the term "holding out" is defined in the second and third sentences, a CPA is "holding out," and therefore subject to all the requirements of Chapter 473 F.S., simply by truthfully using the "CPA" designation in any manner other than display of the CPA certificate. Under the definition contained in sentences two and three, as contrasted with the definition under the first sentence of the rule, no consideration is given to the impression made upon uninformed persons by the practitioner as to whether or not the practitioner is actually practicing public accounting and therefore is subject to the Board's jurisdiction. The term "publication" is likewise undefined here.

    
    

58. Whether or not a practitioner is "holding out" is dependent upon which portion of the rule is being relied upon, the first sentence or the following two. Also, as clearly demonstrated, Rule 21A-20.012 F.A.C. is, on its face, both vague and internally contradictory and is, therefore, subject to widely differing interpretations, not the least of which is what jurisdiction over fraud versus jurisdiction over negligence resides in the Board. Although at formal hearing the Board and FICPA asserted that this rule is necessary to regulate negligent (as opposed to fraudulent) activities of licensed CPAs, the purported purpose of the "holding out" rule was to inform licensed CPAs as to what constitutes "holding out," and in conjunction with Rules 21A-20.009 and

    21A-20.011 F.A.C., to give CPAs the opportunity to engage in practices other than public accounting without being subject to the jurisdiction of the Board and the requirements of Chapter 473 F.S. Except for the blanket assertion that the public assumes the CPA designation, however used, symbolizes oversight by the licensing authority, no explanation was offered to justify the apparent contradiction between the intent to allow some CPAs to fall outside the Board's jurisdiction and the desire, now, to ensure that the Board maintains jurisdiction for disciplinary purposes over CPAs dually licensed in other professions.

    
    

59. The Board and FICPA's position is that the rule is justified and reasonable since any display or publication of a licensee's CPA credential, other than the display of the CPA certificate and license on an inner office wall, would deceive members of the public into believing that the individual is abiding by all regulations of the Board. The Board is also concerned because it will have difficulty discerning which CPAs may be prosecuted unless every benefit to a CPA from disclosing his or her CPA status, however slight that benefit is, concomitantly subjects the disclosing CPA to all aspects of Board regulation. However, the Petitioner has shown that passive dissemination of factual information is not necessarily detrimental to the public and is not contrary to the expressed purpose of the Act. Indeed, Section 473.301 F.S. states a threefold purpose for Board regulation of the "practice of public accounting": (1) to assure minimum competence; (2) to assure accuracy of audit statements upon which the public relies; and (3) to protect the public from dishonest practitioners. None of these purposes seems served by the rule as presently drafted.

    
    

60. The rule at issue seems intended to prohibit publication of a licensee's CPA status when that publication would confuse or mislead consumers as to whether the licensee is performing public accounting services or some other type of professional service at a particular time. The rule does not accomplish that intent, but rather utterly confuses a licensee as to when an activity, legitimate on its face, is proscribed and subject to disciplinary prosecution.

    
    

61. The Board seeks to impose disciplinary oversight to protect the public against both fraud and negligence, but the statutory and regulatory scheme

    ranges far beyond that legitimate purpose, contrary to the expressed legislative intent for the Board. The rule is overbroad, vague, contradictory, and ambiguous.

    
    

62. The Legislature's avowed purpose for the Board is to "regulate the practice of public accounting." The circuitous nature of the challenged rule has, through other rules, permitted the Board to insinuate its regulation into professions other than accounting, regardless of the nature of those professions' work or other business activities, simply because the licensees are simultaneously licensed as CPAs and have truthfully indicated that they hold CPA licenses. However, those other rules have not been challenged herein and because the foregoing analysis of the challenged rule's other failings (overbroad, facially vague, internally contradictory, and ambiguous) resolves the issue that the challenged rule is not valid because it is arbitrary and capricious (see, Section 120.52(8)(e) F.S.), it is not necessary to further address those ancillary issues.

    
    

63. Although the rule's challengers have also raised issues including but not limited to the rule's conflict with federal and state constitutional safeguards of free speech and against restraint of trade, the undersigned is without jurisdiction, power, or authority to resolve those issues and will not attempt to do so. Cf. Key Haven Associated Enterprises, Inc. v. Board of Trustees of the Internal Improvement Trust Fund, 427 So. 2d 153 (Fla. 1st DCA 1982).

Upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that Rule 21A-20.012 F.A.C. constitutes an invalid exercise of delegated legislative authority.

DONE and ORDERED this 15th day of January, 1992, at Tallahassee, Florida.

ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675 Suncom 278-9675

Filed with the Clerk of the Division of Administrative Hearings this 15th day of January, 1992.

ENDNOTES

1/ See Finding of Fact No. 10, supra. 2/ See Finding of Fact No. 13, supra.

3/ The first sentence defines "holding out" as, ". . . publicizing that the licensee is a certified public accountant when providing, or offering to provide services or products to the public, in such a manner that an uninformed person may not be able to differentiate whether or not the licensee may also be in the practice of public accounting."

4/ "All other publication [besides display of the certificate and license] of the fact that a licensee is a CPA constitutes holding oneself out." [Bracketed material added for clarification.]

APPENDIX TO FINAL ORDER

The following constitute specific rulings pursuant to Section 120.59(2)

F.S. upon the parties' respective proposed findings of fact (PFOF): Petitioner Silvia S. Ibanez' 38 PFOF:

Accepted, except where subordinate, unnecessary or cumulative to the facts as found. Material which falls in any of those categories has not been utilized in the final order (FO): 1, 2, 3, 4, 5, 6, 7, 9, 10, 14, 16, 17, 20, 21, 22,

23, 24, 25, 26, 28, 29, 30, 34, 35.

Rejected as stated because as stated these PFOF are misleading or constitute unreconciled or isolated record evidence or state a conclusion of law (COL) or mere legal argument, but the subject matter is covered in the FO: 8, 11, 12, 13, 15, 19, 27, 32, 33, 36, 37.

Rejected as subordinate, unnecessary, or cumulative or as otherwise nondispositive of the material issues of this rule challenge: 18, 31, 38.

Respondent Department of Professional Regulation, Board of Accountancy's and Intervenor Florida Institute of Certified Public Accountants' 69 PFOF:

Accepted, except where subordinate, unnecessary or cumulative to the facts as found. Material which falls in any of those categories has not been utilized in the FO: 1, 2, 4, 5, 6, 7, 8, 9, 11, 12, 13, 15, 16, 17, 18, 19, 20, 21, 23,

24, 25, 26, 27, 29, 31, 32, 33, 34, 40, 41, 42, 43, 44, 45, 46, 47, 51, 52, 53,

56, 57, 58.

Accepted but not adopted because not dispositive in light of all other factors. Partially covered in FO: 60, 61, 62, 63, 64, 65, 66, 67, 68, 69.

Rejected as stated because as stated these PFOF are misleading or constitute unreconciled or isolated record evidence or state a COL or mere legal argument, but the subject matter is covered in the FO: 3, 10, 14, 22, 28 (rejected in that "reasonable fit" has become a "term of art" encompassing the least restrictive regulation constitutionally permissible), 30, 49, 50 (as to 49 and 50, this record also is not clear on what degree of discipline as opposed to assurance of competency the public expects from the Board, also these PFOF are not dispositive of the rule challenge.), 59 (Safety of reliance on Board opinions except on a case-by-case basis also was not established.).

Rejected as not supported by the greater weight of the competent, substantial evidence: 48, 54, 55.

Immaterial or otherwise nondispositive of the material issues in this rules challenge. Partially covered in FO: 35, 36, 37, 38, 39.

Intervenor James R. Brewster's 26 PFOF:

Accepted, except where subordinate, unnecessary or cumulative to the facts as found. Material which falls in any of those categories has not been utilized in the FO: 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 16 (in part), 17, 18,

23.

Rejected as stated because as stated these PFOF constitute unreconciled or isolated record evidence or a COL or mere legal argument, but otherwise the subject matter is covered in the FO: 7, 15, 16 (in part), 19, 20, 22, 25.

Immaterial: 24.

Rejected as not affirmatively proven: 21, 26.

Intervenor American Association of Attorney Certified Public Accountants' 29 PFOF:

A majority of AAA-CPA's proposals did not conform to the post-hearing order and Rule 22I-6.039 F.A.C. in that they either did not contain any reference to the record or constituted PCOL and not PFOF and may be rejected accordingly. To the degree any facts were proposed therein, however, the following rulings are made.

Accepted, except where subordinate, unnecessary or cumulative to the facts as found. Material which falls in any of those categories has not been utilized in the FO: 3, 4, 5, 7, 9-10, 22, 25, 29.

Rejected as stated because as stated these PFOF constitute unreconciled or isolated record evidence or a COL or mere legal argument, but otherwise they are covered in the FO: 1, 2, 6, 8, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 23,

24, 26, 27, 28.

COPIES FURNISHED:

Michael P. Sampson, Esquire Holland & Knight

Post Office Box 32092 Lakeland, FL 33802-2092

Silvia S. Ibanez, Esquire Post Office Drawer 7667 Winter Haven, FL 33883

John J. Rimes, III Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, FL 32399-1050

Kenneth R. Hart, Esquire Stephen C. Emmanuel, Esquire

J. Jeffry Wahlen, Esquire Ausley, McMullen, McGehee,

Carothers & Proctor Post Office Box 391 Tallahassee, FL 32302

Mr. James R. Brewster 2212 Yaupon

Tallahassee, FL 32303

Sydney S. Traum, P.A.

Semet, Lickstein, Morgenstern & Berger, P.A.

Twelfth Floor, Ponce De Leon Plaza

201 Alhambra Circle Coral Gables, FL 33134

Thomas W. McCulloch McCulloch, Ellis & Payne

6671 Southwest Freeway, Suite 800

Houston, TX 77074

Liz Cloud, Chief

Bureau of Administrative Code Room 1802, The Capitol Tallahassee, FL 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, FL 32399-1300

Martha Willis Executive Director Board of Accountancy Suite 16

4001 Northwest 43rd Street Gainesville, FL 32606

Jack McRay General Counsel

Department of Professional Regulation

1940 North Monroe Street Tallahassee, FL 32399-0792

Courtesy copy to:

Julie Gallagher, Esquire Stowell, Anton & Kraemer Post Office Box 11059

201 South Monroe Street, Suite 200 Tallahassee, FL 32302

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 91-003336RX

Orders for Case No: 91-003336RX