STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF MANAGEMENT SERVICES, )

)

Petitioner, )

)

vs. ) CASE NO. 94-2820CVL

)

WHITE SWAN, INC., )

)

Respondent. )

)

FINAL ORDER

This case came before James W. York, a duly designated Hearing Officer of the Division of Administrative Hearings, after the parties waived their rights to a formal administrative hearing and submitted a stipulated record.

APPEARANCES

For Petitioner: Terry A. Stepp, Esquire

Department of Management Services Knight Building, Suite 312

2737 Centerview Drive, Suite 309

Tallahassee, Florida 32399-0950

For Respondent: John A. Price, Esquire

WINSTEAD, SECHREST & MINICK

1201 Elm Street, Suite 5400

Dallas, Texas 75270 STATEMENT OF THE ISSUES

Whether the Respondent should be placed on the convicted vendor list maintained by the Petitioner pursuant to Section 287.133, Florida Statutes.

PRELIMINARY STATEMENT

By letter dated April 21, 1994, the Department of Management Services (DMS), informed White Swan, Inc. (White Swan) that the Department had determined that good cause existed to place that entity on the State of Florida convicted vendor list. On or about May 10, 1994, White Swan filed a petition disputing the DMS decision. The petition was filed with the Division of Administrative Hearings on May 17, 1994, from DMS, with a request that a Hearing Officer be designated to conduct a hearing pursuant to Section 120.57(1), Florida Statutes.

On May 24, 1994, the undersigned issued an Initial Order requesting that, if the parties agreed that there were no disputed issues of material fact, the parties file a joint stipulation as to admitted material facts.

On June 1, 1994, the parties filed a Joint Stipulation in response to the Initial Order in which the parties requested that disposition of this case be rendered based upon stipulated facts.

Pursuant to the Joint Stipulation filed by the parties, any rights to a formal hearing have been waived and the parties have agreed to the disposition of this matter based on facts stipulated to in the previously filed Joint Stipulation.

The facts agreed upon by the parties as contained in the Joint Stipulation are incorporated and accepted in this Final Order. The parties also stipulated the admission into evidence of certain exhibits which are hereby accepted.

One June 6, 1994, an Order was entered providing that disposition would be rendered based upon stipulated facts. The parties were informed that this Final Order would be entered within thirty (30) days of the Order of June 6, 1994, and that the parties were afforded the opportunity to file Proposed Final Orders by no later than June 13, 1994, at 5:00 p.m. No Proposed Final Orders have been filed.

Although the petition in this cause was filed by White Swan, Inc., by operation of Section 287.133, Florida Statutes, the DMS has the burden of proof; DMS is the Petitioner and White Swan is the Respondent.

FINDINGS OF FACT

1. White Swan is a corporation registered and doing business in the State of Florida. White Swan is engaged in the sale of wholesale food supplies to Florida public entities. A sampling of the Florida public entities White Swan has transacted business with, include: Tampa General Hospital, Charlotte County Sheriff's Department, County Jails in West and Central Tampa, Pasco County Detention Center, Polk County Sheriff's Department and the Duval County School System.

   
   

2. White Swan entered a plea of guilty and was convicted on June 10, 1993, of an offense constituting a public entity crime as defined within Section 287.133(1)(g), Florida Statutes. White Swan pled guilty and was convicted in the U.S. District Court for the Southern District of Texas, Houston Division, of a one count information for violation of the Sherman Antitrust Act, 15 U.S.C. S. 1.

   
   

3. The count for which White Swan pled guilty and was convicted was brought by information filed April 28, 1993, pursuant to a plea agreement. It charged a conspiracy to rig bids for contracts to supply wholesale grocery products to certain public school districts and other public entities located in southeastern Texas.

   
   

4. On June 10, 1993, White Swan, pursuant to its plea, was sentenced to pay a fine in the amount of $650,000. The amount of $200,000 was paid on the date of sentencing and $90,000 was to be paid each month thereafter. White Swan has paid the fine in full.

   
   

5. On July 30, 1993, White Swan entered into a settlement agreement with the State of Texas. In connection with the settlement, the State of Texas filed an original petition, and a consent judgement and agreed permanent injunction. The settlement resulted in White Swan paying a civil fine in the amount of

   $35,000 and attorney's fees in the amount of $25,000.

6. Mr. James Maurice Johnson, a former employee of White Swan, also pled guilty to an offense arising from the same transaction for which White Swan entered a plea. On March 12, 1991, a one count information was filed by the United States against Mr. Johnson (a former employee of White Swan's Houston Division Office involved in the preparation and submission of bids for the supply of wholesale grocery products to certain public school districts located in southeastern Texas) for violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. S. 1.

   
   

   1. Pursuant to Plea Agreement entered into between Mr. Johnson and the United States pursuant to Fed. R. Crim. P. 7(b), as well as a settlement agreement, Mr. Johnson entered a plea of guilty to the one count information, constituting commission of a public entity crime as defined within Section 287.133(1)(g), Florida Statutes.

      
      

   2. The information to which Mr. Johnson entered a plea of guilty detailed participation by him in a conspiracy to rig bids for the award and performance of contracts to supply wholesale grocery products to certain public school districts in Southeastern Texas in late 1986 through May 1990.

      
      

   3. The activities of Mr. Johnson did not involve any business conducted by White Swan within the State of Florida, by its Florida division.

      
      

7. Pursuant to Sections 287.133(3)(a) and (b), Florida Statutes, White Swan timely notified DMS of its guilty plea resulting in conviction through submission of a Public Entity Crime Sworn Statement, dated January 20, 1992.

   
   

   1. By letter dated January 28, 1992, DMS corresponded with a representative of White Swan's Lakeland, Florida division requesting additional information regarding said conviction. By letter dated February 7, 1992, counsel for White Swan responded to the January 28, 1992, letter from DMS providing additional information and documentation regarding the conviction of Mr. Johnson.

      
      

   2. By letter dated March 9, 1992, DMS corresponded with counsel for White Swan requesting to be provided with additional information and documentation and, by letter of April 3, 1992, the requested information and documentation was forwarded to the Department.

      
      

8. On April 21, 1994, DMS issued a Notice of Intent pursuant to Subsection 287.133(3)(e)1., Florida Statutes. The Notice of Intent was based on the June 10, 1993 conviction of White Swan of a public entity crime as defined by Section 287.133(1)(g), Florida Statutes.

   
   

9. On May 10, 1994, pursuant to Subsection 287.133(3)(e)2., Florida Statutes, White Swan timely filed a petition for formal administrative hearing pursuant to section 120.57(1), Florida Statutes, to determine whether it is in the public interest for White Swan to be placed on the State of Florida convicted vendor list.

   
   

10. Subsection 287.133(3)(e)3., Florida Statutes, establishes factors which, if applicable to a convicted vendor, will mitigate against placement of that vendor upon the convicted vendor list.

11. Subsection 287.133(3)(e)3.d, Florida Statutes, establishes "[p]rompt or voluntary payment of any damages or penalty as a result of the conviction" as a factor mitigating against placement on the convicted vendor list.

    
    

    1. On August 5, 1991, Mr. Johnson was sentenced to five years probation (as well as service of four months confinement via electronic monitoring), and he was fined $10,000 payable at $200 per month over the five years' probation. Mr. Johnson is in full compliance with the terms of the sentence.

       
       

    2. White Swan has made full restitution to all of the school districts potentially involved in or affected by any of the subject activities of Mr. Johnson in southeastern Texas, and the potential claims against White Swan have been released. The subject school districts include: Alvin Independent School District; Alief Independent School District; Brazosport Independent School District; Clear Creek Independent School District; Columbia- Brazoria Independent School District; Channelview Independent School District; East Chambers Independent School District; Fort Bend Independent School District; Goose Creek Independent School District; Galveston Independent School District; Huntsville Independent School District; Katy Independent School District; Klein Independent School District; Sheldon Independent School District; Spring Branch Independent School District; Stafford Municipal School District; and Houston Independent School District. In total, White Swan has paid to these school districts the sum of $185,086.22. In each instance, the schools have agreed to utilize the amounts paid for restitution in conjunction with their nutritional programs, exclusive of those portions of the payments representing attorneys' fees and administrative expenses.

       
       

    3. White Swan commenced discussions with the Department of Justice on July 30, 1990, for the purpose of acceptance of responsibility for Mr. Johnson's actions, as well as for negotiations of a criminal fine in conjunction with the entry of a plea to a one count information.

       
       

    4. Upon finalization of the matter with the U.S. Department of Justice, White Swan paid a civil penalty to the State of Texas in the amount of

       $60,000.

       
       

12. Subsection 287.133(3)(e)3.e, Florida Statutes, establishes "[c]ooperation with state or federal investigation or prosecution of any public entity crime" as a mitigating factor.

    
    

    1. Upon learning of the Grand Jury investigation and the possible violation of antitrust laws in connection with bids submitted to public schools in Southeastern Texas, in early June of 1990, White Swan fully cooperated with the Department of Justice. It encouraged the full cooperation of Mr. Johnson (and any and all other employees) in the investigation.

       
       

    2. White Swan immediately took affirmative steps to ensure a complete cessation of any activities of the nature alleged to have occurred, and it commenced its own internal investigation of the matter.

       
       

    3. Mr. Johnson was reprimanded and relieved from his responsibilities as bid manager for the Houston division. Separate counsel was engaged for Mr. Johnson.

    4. Through the cooperative efforts of White Swan, Mr. Johnson entered into a plea agreement and voluntarily entered a plea of guilty to the one count information.

       
       

    5. Pursuant to the negotiations with the Department of Justice, White Swan has submitted detailed information regarding the volume of commerce affected by the activities of Mr. Johnson (including detailed sales documentation regarding all items sold to the various entities during the relevant bid period).

       
       

    6. White Swan offered to provide any additional information or documentation which might be desired by the Department of Justice in conjunction with its investigation and plea negotiations.

       
       

13. White Swan has fully cooperated with DMS in connection with its investigation initiated pursuant to section 287.133, Florida Statutes.

    
    

14. Subsection 287.133(3)(e)3.f, Florida Statutes, establishes "[d]isassociation form any other person or affiliates convicted of the public entity crime" as a mitigating factor.

    
    

    1. White Swan reprimanded Mr. Johnson and removed him as bid manager for the Houston division, arranged for the institution of new procedures for handling bids by the Houston division and, in addition, appointed a new Houston division president. Mr. Johnson's employment has been subsequently terminated.

       
       

    2. The former Houston division president (Mr. John Cogniglio) was transferred to White Swan's Euless, Texas, office in the early fall of 1990. He currently holds the title of Director of Sales -- Coffees and Chemicals, and he does not have any supervisory responsibility over any management personnel located in the other divisions of White Swan.

       
       

15. Subsection 287.133(3)(e)3.g, Florida Statutes, establishes "[p]rior or future self-policing by the person or affiliate to prevent public entity crimes" as a mitigating factor.

    
    

    1. White Swan has established an extensive antitrust compliance program (including adoption and distribution of written policies and guidelines) to educate all employees in position of authority in connection with the sales of any products (including but not limited to all those involved in the submission of bids to any public entity).

       
       

    2. White Swan, in late 1990, adopted for dissemination within the corporation and all divisional offices a comprehensive "Antitrust Policy and Compliance Guide" setting forth in detail the corporation's policy regarding strict compliance with any and all antitrust laws (state and federal), explaining the types and nature of activities prohibited and proscribed by those laws (including specific "do's and don't's"), covering commonly asked questions, etc.

       
       

    3. The Policy and Compliance Guide sets forth disciplinary actions the corporation may take against any employee violating the antitrust laws, including possible termination. The Policy and Compliance Guide addresses in detail the types of activities in connection with bidding on public entity contracts which are prohibited.

    4. White Swan has conducted educational sessions for all employees having responsibilities encompassed by the antitrust laws.

       
       

    5. A copy of the Policy and Compliance Guide was distributed to all management, sales, office, and clerical employees of the Florida division, and each of those employees signed acknowledgments of receipt and understanding of the information set forth therein.

       
       

    6. Training sessions were held at the Florida division on July 19- 20, 1991, and White Swan will continue to engage in periodic training sessions in each of its division offices.

       
       

    7. All supervisory personnel of the White Swan corporation have been advised of their responsibility to review the conduct of all employees under their supervision for adherence with all applicable antitrust laws, as well as other related laws applicable to the corporation's business, and each employee has been instructed to promptly notify corporate management in the event of the occurrence of any activity potentially violative of the antitrust laws or the corporate policy statement.

       
       

16. Subsection 287.133(3)(e)3.h, Florida Statutes, establishes "[r]einstatement or clemency in any jurisdiction in relation to the public entity crime at issue in the proceeding" as a mitigating factor.

    
    

    1. To date, White Swan has not been advised of any limitation placed upon its engaging in business with any public or private entities in any location throughout the United States including the school districts of Texas.

       
       

17. Subsection 287.133(3)(e)3.i, Florida Statutes, establishes "[c]ompliance by the person or affiliate with the notification provisions of paragraph (a) or paragraph (b)" as a mitigating factor.

    
    

    1. White Swan has fully complied in providing notification to DMS with regard to the guilty pleas and resulting convictions of White Swan and Mr. Johnson. It has also promptly supplied to DMS all information and documentation requested in conjunction with the investigation by DMS.

       
       

18. Subsection 287.133(3)(e)3.j, Florida Statutes, establishes "[t]he needs of public entities for additional competition in the procurement of goods and services in their respective markets" as a mitigating factor.

    
    

    1. White Swan is engaged in the sale of wholesale food supplies to various public entities within the State of Florida. As part of its April 3, 1992 response to the inquiry letter of DMS of March 9, 1992, White Swan provided a copy of the computer printout reflecting the names and addresses of all entities within the State of Florida to whom White Swan has sold products during the fiscal years 1989 through 1990, as well as a similar customer listing for the fiscal years 1991 through March 25, 1992.

       
       

    2. White Swan is a supplier of significant goods and services to public entities within the State of Florida through its Florida division office. The inability of White Swan's Florida division office to bid for the supply of wholesale health food products would have an impact on competition for the supply of those goods to public entities in the State of Florida.

       
       

19. Subsection 287.133(3)(e)3.k, Florida Statutes, establishes "any demonstration of good citizenship" as a mitigating factor.

    1. The Florida division office of White Swan (like all other division offices) has been an active supporter of the activities of the public school districts located within its market area, including periodic donations of food preparation equipment and other supplies for school activities and charitable fund-raising functions.

       
       

20. The Joint Stipulation filed in this case on June 1, 1994, provides a full and complete factual basis for determining whether White Swan should be placed on the convicted vendor list in light of the facts and criteria set forth in Subsection 287.133(3)(e)3.a. through k., Florida Statutes. There are no other disputed issues of material fact between DMS and White Swan which would require a formal hearing.

    
    

    CONCLUSIONS OF LAW

    
    

    Jurisdiction

    
    

21. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes (1993).

    
    

    Burden of Proof

    
    

22. The burden of proof, absent a statutory directive to the contrary, is on the party asserting the affirmative of the issue of the proceeding. Antel v. Department of Professional Regulation, 522 So.2d 1056 (Fla. 5th DCA 1988); Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981); and Balino v. Department of Health and Rehabilitative Services, 348 So.2d

    249 (Fla. 1st DCA 1977).

    
    

23. In this proceeding it is DMS that is asserting the affirmative: that it is "in the public interest" to place the Respondent on the convicted vendor list. See Section 287.133(3)(e)4, Florida Statutes.

    
    

    The Convicted Vendor List

    
    

24. Sections 287.132 and 287.133, Florida Statutes, authorize the Department to investigate and determine whether persons transacting business with public entities have been convicted of certain crimes and, if so, whether it would be "in the public interest" to place such persons on a "convicted vendor list." Any person placed on the convicted vendor list is prohibited from transacting business with public entities in Florida.

    
    

25. Section 287.133(3)(e)4, Florida Statutes, governs whether a person should be placed on the convicted vendor list and provides as follows:

    
    

    4. In any proceeding under this section, the department shall be required to prove that it is in the public interest for the person to whom it has given notice under this section to be placed on the convicted vendor list. Proof of a conviction of the person or that one is an affiliate of such person shall constitute a prima facie case that it is in the public interest for the person or affiliate to whom the department has given

    notice to be put on the convicted vendor list. Prompt payment of damages or posting of a bond, cooperation with investigation, and termination of the employment or other relationship with the employee or other natural person responsible for the public entity crime shall create a rebuttable presumption that it is not in the public interest to place a person or affiliate on

    the convicted vendor list. Status as an affiliate must be proven by clear and convincing evidence. If the hearing officer determines that the person was not convicted or is not an affiliate of such person, that person or affiliate shall not be placed on the convicted vendor list.

    
    

26. White Swan, as a corporate entity, is a person for the purpose of Section 287.13, Florida Statutes. White Swan has been "convicted" of a "public entity crime." See Sections 287.133(1)(b) and (g), Florida Statutes, and paragraph 2 of the Joint Stipulation.

    
    

27. The parties have stipulated to facts concerning the factors to be considered pursuant to Section 287.133(3)(e), Florida Statutes, which mitigate against placing Respondents on the convicted vendor list.

    
    

28. The parties have stipulated to facts that indicate "[p]rompt payment of damages or posting of a bond, cooperation with investigation, the termination of the employment or other relationship with the employee or other natural person responsible for the public entity crime, prior or future self policing by White Swan to prevent public entity crimes, and reinstatement of clemency in a jurisdiction in relation to the public entity crime at issue . . ." Therefore, pursuant to Section 287.133(3)(e)4, Florida Statutes, the parties have stipulated to facts which create a rebuttable presumption that it is not in the public interest to place White Swan on the convicted vendor list.

    
    

29. DMS has not suggested that proof exists sufficient to overcome the rebuttable presumption that the Respondent should not be placed on the convicted vendor list. DMS has, therefore, failed to prove that it would be in the public interest to place the Respondent on the Florida convicted vendor list.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the Department of Management Services has failed to prove that

the Respondent should be placed on the Florida convicted vendor list.

DONE and ORDERED this 15th day of June, 1994, at Tallahassee, Florida.

JAMES W. YORK, 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 15th day of June, 1994.

COPIES FURNISHED:

Terry A. Stepp, Esquire Department of Management Services Knight Building, Suite 312

2737 Centerview Drive

Tallahassee, Florida 32399-0950

John A. Price, Esquire WINSTEAD, SECHREST & MINICK

1201 Elm Street, Suite 5400

Dallas, Texas 75270

William H. Lindner, Secretary Department of Management Services Knight Building, Suite 307

Koger Executive Center 2737 Centerview Drive

Tallahassee, Florida 32399-0950

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: 94-002820CVL

Orders for Case No: 94-002820CVL