STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EXPEDIENT SERVICES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 95-5067

) COMMISSION ON MINORITY ECONOMIC ) AND BUSINESS DEVELOPMENT, )

)

Respondent. )

)

RECOMMENDED ORDER

On April 25, 1996, a formal administrative hearing was held in this case in Melbourne, Florida, before Daniel M. Kilbride, Hearing Officer, Division of Administrative Hearings. The following appearances were entered:

APPEARANCES

For Petitioner: Horace Hughes, President

Expedient Services, Inc. Post Office Box 5400

Titusville, Florida 32783-5400

For Respondent: Joseph L. Shields

General Counsel

Commission on Minority Economic and Business Development

107 West Gaines Street

201 Collins Building Tallahassee, Florida 32399-2005

STATEMENT OF THE ISSUES

Whether Expedient Services, Inc. should be certified as a minority business enterprise by the Respondent, pursuant to Section 288.703(1) and (2), Florida Statutes and the applicable rules implementing the statute.

PRELIMINARY STATEMENT

On April 7, 1995, the Petitioner filed an application with the office of Respondent for Minority Business Enterprise (MBE) certification. By letter dated August 22, 1995, the Respondent notified the Petitioner that its application for MBE certification was denied. Petitioner filed a Petition for formal hearing on September 11, 1995. This matter was referred to the Division of Administrative Hearings on October 6, 1995 and this proceeding followed. The formal hearing was scheduled but continued once at the request of the Petitioner, and once at the request of the Respondent.

At the hearing, Sherry Ann Hughes and Horace Hughes testified on behalf of the applicant. No exhibits were offered in evidence. Respondent presented the testimony of one witness and twelve exhibits were admitted in evidence.

Official recognition was taken of the Respondent's statutes and rules as set forth herein. A transcript of the proceedings was filed on May 20, 1996.

Petitioner did not file proposed findings of fact or conclusions of law. Respondent filed its proposals on June 5, 1996. Explicit rulings on the proposed findings of fact contained in the Respondent's proposals may be found in the attached Appendix to Recommended Order, Case No. 95-5067.

Based upon all of the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. Petitioner is a Florida corporation founded prior to 1978 by five minority owners who purchased all of the stock originally issued. The primary business of the corporation was to provide janitorial services for corporate and governmental clients.

   
   

2. In 1978, Harvey Hughes was hired as president and CEO. As part of his compensation package, Hughes purchased a minority interest in the corporation at par value. Hughes continues to serve in that capacity to the present day.

   
   

3. Beginning after 1983, the five original stockholders, on separate occasions, sold their shares back to the corporation leaving Hughes as the sole stockholder with 833 shares outstanding.

   
   

4. In the late 1980's, Hughes' son, Carl Hughes, joined the company as Vice-President and began the process of changing the type of services the corporation provided. He became a minority shareholder in 1991.

   
   

5. Sherry Hughes has served as a member of the Board of Directors and Secretary/Treasurer to the Corporation for many years. In addition, she is employed by the Corporation as its Human Resources Director.

   
   

6. In 1992, for past services rendered and no additional consideration, Horace Hughes transferred 450 shares, or 54 percent of the outstanding shares, to Sherry Hughes, his wife.

   
   

7. Fifty-Four percent of the Petitioner/applicant is presently owned by Sherry Hughes, a woman.

   
   

8. The Petitioner's current business is the repair and sales of computers and peripheral equipment.

   
   

9. The majority owner, Sherry Hughes, is not a computer technician. She cannot diagnose a computer which needs repairs. The corporation hires computer technicians.

   
   

10. Sherry Hughes does not hire technicians, as that duty has been delegated to the Service Manager, Vincent Schneider. Additionally, Schneider usually does the firing when needed.

    
    

11. Payroll for Petitioner is done by an employee, Kathy Levann.

12. Mrs. Hughes purchases office supplies and leaves the purchasing of technical supplies to a buyer.

    
    

13. The company presently has three male Directors and two women Directors, including Sherry Hughes.

    
    

14. All the Directors are authorized to sign corporate checks.

    
    

15. For their work, Sherry Hughes is paid $5.00 hourly; Horace Hughes is paid $12-14 hourly and Carl Hughes is paid $12-15 hourly. All are stockholders.

    
    

16. Horace Hughes, as President, signed the lease for the business location.

    
    

17. Horace Hughes signed the affidavit for insurance on the business vehicles.

    
    

18. Horace Hughes signed for a business loan in the financed amount of

    $70,302.71, both as President and Guarantor at SunTrust Bank.

    
    

19. Horace Hughes is authorized by corporate resolution to borrow money on behalf of the corporation.

    
    

20. Carl Hughes entered into the agreements with various computer dealers on behalf of the Petitioner.

    
    

21. Sherry Hughes does not handle invitations to bid. Carl Hughes handles all invitations to bid, cost estimating and negotiations.

    
    

22. Applicant has not established by competent evidence that Sherry Hughes exercises a real, substantial continuing ownership and control of the applicant corporation.

    
    

23. Other than her salary, no evidence was introduced to establish that Sherry Hughes receives income commensurate with the percentage of her ownership in the company.

    
    

24. Sherry Hughes failed to establish that she shares in all of the risk through her role in decision-making, negotiations, and execution of documents as either an individual or officer of the corporation.

    
    

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding, and the parties thereto, pursuant to subsection 120.57(1), Florida Statutes.

    
    

26. The Commission on Minority Economic and Business Development is required, by statute, to ensure that the preferences for minority business firms obtained by the certification process are awarded only to those firms for which the benefit is intended. Petitioner, as applicant for minority business enterprise status, has the burden of proving its entitlement to certification. Florida Department of Transportation v. J. W. C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

27. Subsection 288.703(2) Florida Statutes (1995), defines MBE as follows:

    
    

    (2) "Minority business enterprise" means any small business concern as defined in sub- section (1) which is organized to engage in commercial transactions, which is domiciled in Florida, and which is at least 51-percent- owned by minority persons who are members of an insular group that is of a particular racial, ethnic, or gender makeup or national origin, which has been subjected historically to disparate treatment due to identification in and with that group resulting in an under-

    representation of commercial enterprises under the group's control, and whose management and daily operations are controlled by such persons.

    
    

28. Subsection 288.703(3), Florida Statutes, (1995) defines a minority person as follows:

    
    

    (3) "Minority person" means a lawful, permanent resident of Florida who is:

    (e) An American woman.

    
    

29. The Department of Management Services has promulgated rules to be followed in determining the certification of eligibility of applicants for MBE status, which rules have been transferred to the Commission on Minority Economic and Business Development.

    
    

30. Rule 60A-2.005, Florida Administrative Code defines the eligibility requirements for MBE certification. In substance, to be considered 51 percent minority owned, and thereby eligible for MBE certification, the applicant must establish real, substantial, continuing ownership of the firm by (a), owning 51 percent of the issued stock of the company; (b), receiving income commensurate with the percentage of her ownership from any means; (c), demonstrating she shares in all of the business and financial risks through her role in decision- making, negotiation and execution of documents as either an individual or officer of the firm, and (d), not being subject to rights of others which would dilute the minority's ownership below 51 percent. In addition, as paraphrased here, the rule requires the minority owner to exercise unfettered discretion in the control over the management and daily operation of the business; constitute a majority of the board of directors, if the entity is a corporation; exercise sufficient management and technical responsibilities to maintain control of the business; and, if a family business, control the purchase of goods, equipment, and services needed, the hiring and firing of personnel and the setting of all employment policies. The minority owner must demonstrate knowledge and control of the financial affairs of the business, and have managerial and technical capability, knowledge and training, and display independence and initiative in seeking and negotiating contracts and in conducting all operations of the business. Further, the minority owner shall exercise substantive personal direction and actual involvement with all major aspects of the business - those tasks essential to accomplish all business objectives and operations.

31. The Petitioner corporation does not meet the requirements of 60A- 2.005(3)(b), Florida Administrative Code, because three men (all non-minorities) and one woman are directors of the corporation with her. The rule clearly states that a majority of the directors must be minorities.

    
    

32. Although there was testimony that Sherry Hughes is the leader in the day-to-day operations of the applicant business, the testimony of all witnesses taken as a whole shows that Mrs. Hughes' control of the business is not real, substantial and continuing, but is shared with the other officers. Thus, the applicant does not comply with 60A-2.005(3)(d), Florida Administrative Code.

    
    

33. Applicant's majority ownership of the corporate stock (54 percent ) does not go beyond mere pro forma ownership because she obtained her husband's stock without payment for it. Horace Hughes' testimony that it was for prior services rendered is vague and unpersuasive and is in violation of 60A-2.005(2), Florida Administrative Code.

    
    

34. Sherry Hughes has not demonstrated that she shares income, earnings and other benefits from the applicant business to the same extent that are afforded Horace Hughes and Carl Hughes, as required by 60A-2.005(2)(b), Florida Administrative Code. On the contrary, the testimony indicated that the company pays Horace Hughes $12-14 per hour; Carl Hughes is paid $12-15 per hour; Sherry Hughes is paid only $5.00 per hour.

    
    

35. Sherry Hughes has failed to show that she controls all financial affairs of the applicant business as required by 60A-2.005(3)(d) 3, Florida Administrative Code because an employee writes all payroll checks and all five directors have authority to sign checks individually. Further, Horace Hughes signed the lease for the applicant business premises and borrows most of the money needed by the business for working capital.

    
    

36. Although Sherry Hughes makes a valuable contribution to the success of the Applicant corporation, the Applicant does not qualify for certification as an MBE.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application for Minority Business Certification filed

by Expedient Services, Inc. on April 7, 1995, be DENIED.

DONE and ENTERED this 12th day of June, 1996, in Tallahassee, Florida.

DANIEL M. KILBRIDE, 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 12th day of June, 1996.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-5067

The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on proposed findings of fact submitted by the parties.

Proposed findings of fact submitted by Petitioner.

Petitioner did not submit proposed findings of fact.

Proposed findings of fact submitted by Respondent.

Accepted in substance: paragraphs 1-18.

COPIES FURNISHED:

Horace Hughes, President Expedient Services, Inc. Post Office Box 5400

Titusville, Florida 32783-5400

Joseph L. Shields General Counsel

Commission on Minority Economic and Business Development

107 West Gaines Street

201 Collins Building Tallahassee, Florida 32399-2000

Veronica Anderson Executive Administrator

Commission on Minority Economic and Business Development

Collins Building, Suite 201

107 West Gaines Street Tallahassee, Florida 32399-2000

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to the 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 consult with the agency that will issue the final order in this case concerning their 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: 95-005067

Orders for Case No: 95-005067