STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
GOLDEN SHOW, INC., d/b/a SOLID ) GOLD (License No. 23-00030), )
)
Petitioner, )
) Case No. 97-2261
vs. )
)
DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, DIVISION ) OF ALCOHOLIC BEVERAGES AND )
TOBACCO, )
)
Respondent. )
) SILVER SHOW, INC., d/b/a SOLID ) GOLD (License No. 16-00504), )
)
Petitioner, )
) Case No. 97-2262
vs. )
)
DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, DIVISION ) OF ALCOHOLIC BEVERAGES AND )
TOBACCO, )
)
Respondent. )
) PLATINUM SHOW, INC., d/b/a PURE ) PLATINUM (License No. 16-00010), )
)
Petitioner, )
) Case No. 97-2263
vs. )
)
DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, DIVISION ) OF ALCOHOLIC BEVERAGES AND )
TOBACCO, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a formal hearing was conducted in these consolidated cases on September 2, 3, and 4, 1997, in Fort Lauderdale, Florida, before Michael M. Parrish, an Administrative Law Judge of the Division of Administrative Hearings.
APPEARANCES
For Petitioners: Louis J. Terminello, Esquire
Chadroff, Terminello & Terminello 2700 Southwest 37th Avenue
Miami, Florida 33133-2728 and
Bruce S. Rogow, Esquire Beverly A. Pohl, Esquire
500 East Broward Boulevard, Suite 1930 Fort Lauderdale, Florida 33394
For Respondent: Miguel Oxamendi, Esquire
Department of Business and Professional Regulation
1940 North Monroe Street Tallahassee, Florida 32399-1007
STATEMENT OF THE ISSUES
Each of the Petitioners is an applicant for an alcoholic beverage license. The issue in each case is whether the license application of each Petitioner should be granted or denied.
PRELIMINARY STATEMENT
At the final hearing in these cases, all parties presented the testimony of witnesses and offered numerous exhibits. The parties also filed a written stipulation regarding numerous exhibits and containing stipulations as to numerous facts.
At the conclusion of the hearing, the parties were allowed until October 17, 1997, within which to file their proposed recommended orders. The transcript was filed with the Division of Administrative Hearings on September 22, 1997. Thereafter, the parties requested, and were granted, an extension of the deadline for filing their proposed recommended orders. On October 27, 1997, all parties filed proposed recommended orders containing proposed findings of fact and conclusions of law. The parties' proposals have been carefully considered during the preparation of this Recommended Order.
FINDINGS OF FACT
The parties have stipulated to the facts set forth in subparagraphs (a) through (o), below, which facts are taken as established without the need for proof:
That the records from City National Bank in Respondent's Exhibit 30 accurately reflect that on November 22, 1996, the Petitioners received a $8,200,000 wire funds transfer from Parex Bank, Riga, Republic of Latvia, which was received through the Bank of New York.
That the records from City National Bank in Respondent's Exhibit 30 accurately reflect that on November 22, 1996, the Petitioners transferred $8,000,000 to Rubin, Baum, Levin, et al., trust account. The Petitioners assert that this transfer was made to satisfy the terms of the Agreement entered into by the Petitioners and the MJP Entities.
That the records from NationsBank in Respondent's Exhibits 32 and 33 accurately reflect that on November 13, 1996, SS Trans, Inc., transferred by check a sum in the amount of 1.5 million dollars ($1,500,000) to
International Value Group's account at NationsBank.
That the records from NationsBank in Respondent's Exhibit 33 accurately reflect that on November 21, 1996, SS Trans, Inc., made a funds wire transfer in the amount of
$100,000 to Parex Bank, Riga, Republic of Latvia.
That the records from NationsBank in Respondent's Exhibit 32 accurately reflect that on November 20, 1996, a company known as Oakdale Trading, Ltd., made a wire fund transfer in the amount of five million dollars ($5,000,000.00) to International Value Group's NationsBank account no. 3660385026.
That the records from NationsBank in Respondent's Exhibit 32 accurately reflect that on November 21, 1996, International Value Group, Inc., made a wire funds transfer in the amount of 6.5 million dollars to Parex Bank, Riga, Republic of Latvia.
That on January 14, 1997, the MJP Entities filed a Petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in and for the Southern District of Florida, Broward Division, in Case Nos. 97-20219-BKC-PGH through and including 97-20226-BKC-PGH.
That the MJP Entities as referenced herein are the Debtors in the bankruptcy petition referenced in Stipulation [g] above, and as referenced in the Exhibits 28 and 29, [mentioned] above.
Larry Church, Chief Executive Officer for the Petitioners, was sole corporate officer of the MJP Entities while in bankruptcy until approximately June, 1997. He is no longer serving in such capacity.
The Schedule of Assets filed by the Debtor MJP entities in U.S. Bankruptcy Court lists the three alcoholic beverage licenses that the Petitioners are seeking as assets of the Debtors.
The Schedule of Assets filed by the Debtor MJP Entities in the U.S. Bankruptcy Court lists the three businesses for which the Petitioners seek licensure as assets of the Debtors.
That Skobeltsyn was physically present in the State of Florida, United States of America, on November 19, 20, 21, and 22, 1996.
That Skobeltsyn's B-1 Visa has been canceled by the United States' Embassy in Moscow, Russia, under INA 221(g) and
INA 214(b). Skobeltsyn is permanently excluded from entry into the United States under INA 212(A)(6)(e). There is no formal appeal process available to Skobeltsyn because he is a foreign national outside the territory of the United States. However, Skobeltsyn may at any time submit a visa petition with the consular section of the United States' Moscow Embassy and attempt to establish that the earlier L-1 petition should not be a basis for denial.
The alcoholic beverage license transfer applications by Wilan Corporation d/b/a Pure Platinum Club and Olympic Investments Corporations d/b/a Thee Doll House Club filed in January 1997 in the Division's Orlando District office have not been disapproved by the Division. However, the Division is investigating the qualifications of the applicants. Michael J. Peter also has a term in the sale agreements for these Orlando clubs that permits the clubs to use his trademarks.
The United States Attorney's Office has not sought criminal charges against Michael Peter for violation of the terms of his Plea Agreement.
Respondent is the State of Florida, Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco (hereinafter "the DABT").
On January 22, 1997, the Petitioners filed three alcoholic beverage transfer applications with the DABT. The Petitioner, Golden Show, Inc., d/b/a Solid Gold, filed an application for license number 23-00030 to sell alcoholic beverages at its premises located in Dade County. The
Petitioner, Platinum Show, Inc., d/b/a Pure Platinum, filed an application for license number 16-00010 to sell alcoholic beverages at its premises located in Broward County. The Petitioner, Silver Show, Inc., d/b/a Solid Gold, filed an application for license number 16-00504 to sell alcoholic beverages at its premises located in Broward County.
Cinderella Ice, Inc. (hereinafter "Cinderella Ice"), is the sole stockholder of the Petitioner corporations (hereinafter "the clubs"). Sergey V. Skobeltsyn (hereinafter "Skobeltsyn") is the sole corporate officer and sole stockholder of Cinderella Ice. Skobeltsyn is also the sole corporate officer of each of the Petitioner corporations.
Following an investigation, by means of a Notice of Disapproval dated May 8, 1997, the DABT advised the Petitioners in writing that each of their alcoholic beverage license applications were disapproved. The Notice of Disapproval stated the following specific reasons for the proposed disapproval of each application:
The Applicants have failed to correct errors and/or omissions on their alcoholic beverage license applications and have thus submitted incomplete alcoholic beverage license applications.
The Applicants have failed to supply additional information required by the Division in order for it to conduct a full investigation of the qualifications of the applicants as required by Section 561.18, Florida Statutes, and as requested in the Division's letters of January 27,
February 12, and April 18, 1997.
The Applicants' sole corporate officer and sole shareholder of Cinderella Ice, Inc., Sergey V. Skobeltsyn is not qualified to hold an interest in an alcoholic beverage license. He is not legally authorized to manage and control the premises sought to be licensed as required by Rule 61A-3.017, Florida Administrative Code, and Section 561.17, Florida Statutes. Mr. Skobeltsyn is an alien national who has not been authorized by the
U.S. Department of State or the U.S. Department of Justice, Immigration and Naturalization Service, to enter the United States as a foreign investor who can manage and control a business in this country. Furthermore, Mr. Skobeltsyn's current B-1 Visa does not permit him to be an employee for hire in the United States. Therefore, Mr. Skobeltsyn cannot legally serve as an employee or corporate officer of the Applicant corporations, by which capacity he could legally exercise management and control of the business sought to be licensed.
The Applicants do not exercise ultimate
over-all control over the businesses sought to be licensed. The business conducted on the licensed premises is not managed and controlled by the Applicants, or managed by an authorized employee or employees of the applicants, contrary to Rule 61A-3.017, Florida Administrative Code, and Section 561.17, Florida Statutes.
A person not qualified to hold an alcoholic beverage license has a direct or indirect financial interest in the businesses sought to be licensed contrary to Section 561.17(1), Florida Statutes, to wit: Michael
J. Peter, who is disqualified from holding an alcoholic beverage license pursuant to Section 561.15, Florida Statutes, has a direct or indirect financial interest in the business sought to be licensed.
The Applicants have falsely sworn to the alcoholic beverage license applications by not disclosing the direct or indirect financial interest of Michael J. Peter and/or of various business entities owned by Michael
J. Peter, contrary to Section 559.791, Florida Statutes.
The Applicants have falsely sworn to the alcoholic beverage license applications by not disclosing the direct or indirect financial interest of International Value Group, Inc., and/or Tathimtrans, LLP (a foreign corporation), and/or SS Trans, Inc., and/or Oakdale Trading (a foreign corporation), contrary to Section 559.791, Florida Statutes.
The Applicants have falsely sworn to the alcoholic beverage license applications by declaring on the applications that the source of investment funds was an 8.2 million dollar commercial loan from Pareks Banka in Riga, Latvia, contrary to Section 559.791, Florida Statutes.
The Notice of Disapproval also notified the Petitioners of their right to request a hearing. The Petitioners timely invoked that right.
On November 22, 1996, the Petitioners entered into an agreement with Michael J. Peter, the prior license holder and owner of the three clubs, for purchase of the three clubs. The purchase price for these clubs was eight million dollars ($8,000,000). A key term of the agreement for sale was that the sellers would file a Chapter 11 Bankruptcy under the U.S. Bankruptcy Code. The sellers, who would become the debtors in bankruptcy, would then submit a plan of reorganization to the bankruptcy court by which the clubs and their alcoholic beverage licenses would be transferred to the Petitioners. During the pendency of the bankruptcy, the purchasers would act as the managers of the clubs, and all profits from the clubs would be used to satisfy the debts of the clubs and sellers.
In this regard, section 2(e) of the agreement of November 22, 1996, reads as follows:
(e) Following the termination of the Receivership and until confirmation of the Plan, all earnings of the Clubs shall be used to pay down the liabilities of the Clubs as quickly as possible; provided, however, that MJP shall permit Purchaser or its designee to manage the Clubs following termination of the Receivership, subject to Purchaser or its designee obtaining the appropriate licenses therefore, and to receive a management fee not to exceed $70,000 per month (which shall accrue from month to month to the extent that the Clubs' revenues after paying all other operating expenses due for the month are insufficient.
The sellers filed for bankruptcy on January 15, 1997, and the bankruptcy court issued an order by which the Petitioners were placed in possession of the clubs and were authorized to manage and control the clubs.1 However, as of the date of these proceedings, no plan for reorganization has been approved by the bankruptcy court. It appears that the Petitioners intend to propose a change in the plan, by means of which Skobeltsyn will contribute an additional one million dollars and Cinderella Ice will receive the real estate associated with two additional clubs in Orlando. Although Petitioners have paid eight million dollars for the clubs, the transfer of the clubs from the seller is not final and is still awaiting a confirmation order, or plan approval, by the bankruptcy court.
Michael J. Peter is disqualified from holding an interest in an alcoholic beverage license by virtue of a Federal
felony conviction, stemming from his criminal failure to disclose the interest of another person in these alcoholic beverage licensed businesses. Michael J. Peter entered into a consent order with the DABT wherein he agreed to divest himself, prior to January 15, 1997, of all ownership interests in any and all alcoholic beverage licenses in which he has an interest. Michael
J. Peter also agreed to divest himself of all ownership interests in any entity holding an alcoholic beverage license.
The November 22, 1996, sale agreement did not sell to the Petitioners the trademarks used by the businesses. The trademarks "Pure Platinum" and "Solid Gold" remain the personal assets of Michael J. Peter. Michael J. Peter and the Petitioners entered into a License and Support Agreement for the use of these trademarks. According to this agreement, the Petitioners are licensed to use the trademarks with certain specific restrictions, and with the requirement that certain business activities of the clubs be subject to Michael J. Peter's approval. For example, the Petitioners can transfer their rights to use the trademarks only if they sell the clubs, and then only in accordance with the following provision of the amended License and Support Agreement:
However, if Licensee desires to effectuate a Transfer in conjunction with the sale of any or all of the Clubs, Licensee shall be permitted to do so, provided that (a) in Licensor's reasonable judgment, the transferee has the knowledge, expertise and financial wherewithal to maintain the standards of quality required by this
Agreement, and (b) such transferee expressly assumes this Agreement in a written instrument in form and substance reasonably acceptable to Licensor. If either of the conditions stated in (a) or (b) are not met, Licensor shall be permitted to terminate this Agreement.
Under the amended License and Support Agreement, Michael J. Peter is also authorized to exercise control over certain business decisions of the clubs, including the entertainers hired by the clubs to promote the trademarks and the quality of certain merchandise sold by the clubs. Michael J. Peter is also authorized to control, at least indirectly, the quality of the clubs' business activities by virtue of the language in the amended License and Support Agreement which, as a condition of the used of the trademarks, require that the clubs will
. . . not apply the Licensed Marks to any Products of less than the highest quality, use the Licensed Marks in connection with any marketing, advertising or promotional materials or productions not of the highest quality, allow any Licensed Business to provide service, food and beverage or entertainment of less than the highest quality, or allow the appearance of any Licensed Business to be anything less than the highest quality. (Emphasis added.)
The right to use the trademarks "Pure Platinum" and "Solid Gold" are rights that are very valuable to the Petitioners. These trademarks are a valuable asset in attracting customers to the Petitioners' businesses. It would be difficult to sell the Petitioners' businesses without also being able to
transfer the right to continue to use the trademarks. By reason of his ownership of the subject trademarks, and by the rights and authority he has reserved to himself under the amended License and Support Agreement, Michael J. Peter has an interest, direct or indirect, in the Petitioners' businesses by reason of his ability to assert control of how some aspects of those businesses are operated, as well as by reason of a potential financial benefit to himself in the event of a future sale of the clubs, at which time Michael J. Peter would have an opportunity to dictate the terms on which the use of the licensed trademarks would be transferred to the new purchaser of the clubs.
The Petitioners assert that they acquired the
8.2 million dollars for purchase of the clubs by a means of a commercial loan from Parex Bank. The purported bank loan was wired to the Petitioners on November 22, 1996, the same day they entered into the sale agreement for purchase of the clubs. Parex Bank is in Riga, Latvia, a country of the former Soviet Union. The Petitioners submitted to the DABT several loan documents.
The documents were written in the Russian language, but English translations were also provided by the Petitioners.
The loan application, dated November 19, 1996, consisted of a brief one page request. The purported loan agreement, titled "Credit Agreement No. 3102," and dated November 21, 1996, was the principal loan document that was presented by the Petitioners as evidence of a loan. Skobeltsyn
was physically present in the State of Florida on the date that he and Cinderella Ice allegedly entered into his agreement with Parex Bank.
The provision of law pursuant to which Skobeltsyn has been excluded from entry into the United States,
INA 212(A)(6)(e), provides that any person who knowingly aids another alien to enter, or to try to enter, the United States in violation of law is inadmissible.
The applications in these cases were accompanied by a copy of an L-1 visa petition which had earlier been filed on behalf of Skobeltsyn. Skobeltsyn does not now have an L-1 visa, or any other type of visa, for entry into the United States. An L-1 visa permits a foreign national to enter the United States to be employed by a subsidiary in the United States of a foreign corporation. The L-1 Visa petition represented that Skobeltsyn was entering the United States to be employed by International Value Group, Inc. (IVG). IVG is a wholly-owned subsidiary of Tathramtrans, a Russian corporation, which is co-owned by Skobeltsyn and Yevgenii Sulyagin. Nothing else is known of Sulyagin. Skobeltsyn is the President of Tathramtrans. The L-1 petition states that the business of IVG is selling household goods, auto parts, and airplane parts to Russia. The DABT's investigation revealed that the business address stated on the
L-1 petition for IVG was an empty store front, with no export
business activity, or any other activity, occurring at the location.
Rodion Sokrovichtchouk (Rodion),2 born on April 24, 1977, has been, according to his petition for an L-1 visa, a vice-president of IVG since 1993, when he was sixteen years old.3
He is also a Russian citizen. He entered the United States under a student visa, but has since obtained an L-1 visa to be employed by IVG in its export of goods to Russia. Rodion is a personal friend of Skobeltsyn. Rodion has been described as the eyes and ears of Skobeltsyn. Skobeltsyn communicates through Rodion with the employees of Cinderella Ice and its affiliates, and with his chief executive officer, Lawrence Church. Rodion is fluent in Russian and English. Rodion is an essential link between Skobeltsyn and the chief executive officer, Lawrence Church, because Mr. Church does not speak Russian and Skobeltsyn does not speak enough English to discuss business in English. Rodion is also a link in the transmission of business documents. For example, business checks and other bank documents of Cinderella Ice that require Skobeltsyn's signature are given to Rodion.
Rodion then arranges for the documents to be delivered to Skobeltsyn, and when they are signed, the documents are returned to Rodion, who then distributes them to Lawrence Church or to whichever other employee needs the documents.
Although Lawrence Church has a contract to manage the clubs, Rodion is, of necessity, actively involved in the
management of the clubs, because he is the only person to whom Skobeltsyn can effectively communicate instructions.
Furthermore, in view of the long personal and business relationships between Rodion and Skobeltsyn, and the relatively brief relationship between Church and Skobeltsyn, it is more likely than not that whatever managerial authority may actually be exercised by Church is subordinate to the authority actually exercised by Rodion in the management of Cinderella Ice and its clubs.
The corporate office of IVG is located at the corporate offices of Cinderella Ice. Rodion now uses the business office that was used by Skobeltsyn prior to Skobeltsyn's exclusion from the United States. IVG has not limited its business activities to the export activities described in the L-1 petitions it filed on behalf of Skobeltsyn and Rodion. It has also entered into two contracts with Cinderella Ice and into one contract with Professional Parking Management, Inc.
One of the contracts between IVG and Cinderella Ice is one pursuant to which, in the words of Lawrence Church, IVG "supplies hats, T-shirts, novelty items to the three applicant companies."4 The most reasonable inference that can be drawn from the little that appears in the record regarding this agreement, is that IVG has contracted with Cinderella Ice to provide the "Licensed Products" and items bearing the "Licensed Marks" described in the License and Support Agreement between
Michael J. Peter and Cinderella Ice.5 That agreement, as amended, includes the following language at section 9.2:
Licensor [Michael J. Peter] agrees to provide or to cause one or more of his affiliates to provide to Licensee [Cinderella Ice], but only to the extent requested by Licensee, Licensed Products and other items bearing the Licensed Marks or on or to which the Licensed Marks are to be applied for use at or in connection with the Licensed Businesses.
It is clear from the information in the L-1 petitions that IVG does not have any expertise or experience in providing the types of goods described in the preceding paragraph. There does not appear to be any logical business reason for Cinderella Ice to enter into such an agreement with IVG. From the point of view of IVG, it would not make good business sense to enter into such an agreement unless it expected to make a profit by marking up the cost of the goods it sold to Cinderella Ice. From the point of view of Cinderella Ice, it would not make good business sense to buy goods at an inflated price from IVG when it can buy the same goods directly from Michael J. Peter, or his affiliates, without paying a marked-up price to IVG.
The other contract between Cinderella Ice and IVG is titled Valet Parking Agreement. Under the terms of this agreement, dated December 23, 1996, IVG agrees to provide valet parking services and parking lot security services at all three of the clubs operated by Cinderella Ice. In exchange for providing such services, IVG ". . . shall be entitled to retain
all income derived from the operation of the valet parking service and is obligated to pay all expenses, including security services, associated therewith."
The Valet Parking Agreement dated December 23, 1996, includes the following introductory language:
WHEREAS: The Concessionaire is in the business inter alia, of operating automobile valet parking services at divers clubs, restaurants, hotel and other public places.
The very next day after signing the Valet Parking Agreement with Cinderella Ice, on December 24, 1996, IVG signed a contract with Professional Parking Management, Inc., a Florida corporation. The essence of that agreement is that Professional Parking Management will provide all of the valet parking and security services that IVG agreed to provide in its contract with Cinderella Ice. In exchange for providing those services, Professional Parking Management will receive fifty percent of the net pre-tax profit. The other fifty percent of the profit will be retained by IVG.
It is clear from the information in the L-1 petitions that IVG does not have any expertise or experience in providing valet parking services or security services. Professional Parking Management, on the other hand, is operated by people who do have such expertise and experience.
From the point of view of Cinderella Ice, it does not make good business sense to use IVG, which has no experience in such matters, as an intermediary to obtain valet parking services
and parking lot security services from Professional Parking Management, an experienced provider of such services. Had Cinderella Ice contracted directly with Professional Parking Management, Cinderella Ice would be receiving half of the profits from the operation of the valet parking service. As it is, that share of the profits goes to IVG, in exchange for which IVG performs no service of value to Cinderella Ice.
For reasons that are not explained in the record of these cases, the contracts described above between Cinderella Ice and IVG have the effect of diverting revenue from Cinderella Ice to IVG without any useful service or function being performed by IVG. In essence, under these contract, Cinderella Ice is giving money to IVG without receiving anything of value from IVG.
There is evidence of additional unexplained entanglements between IVG, Rodion, and S.S. Trans Incorporated and Cinderella Ice and the clubs it operates. On at least one occasion, Cinderella Ice has paid an American Express credit card bill for Rodion. During March and April of 1997, Cinderella Ice made a number of payments to IVG and to S.S. Trans Incorporated. On at least one occasion, Rodion signed a twenty thousand dollar ($20,000) check on Cinderella Ice's account at First Union Bank.
During the investigation of these applications, the DABT sought to learn more about the relationships between Rodion and Skobeltsyn, between Rodion and Cinderella Ice, between Rodion and IVG, between IVG and Skobeltsyn, between IVG and Cinderella
Ice, and between S.S. Trans Incorporated, Skobeltsyn, and Cinderella Ice. To that end a DABT agent served Rodion with an investigative subpoena. When Rodion appeared in response to the subpoena, he asserted his right to remain silent guaranteed by the Fifth Amendment of the United States Constitution. Rodion did not answer any questions at all. During the entire DABT investigation of these applications, Skobeltsyn was unable to make himself available for interview in the State of Florida.
The relationships mentioned immediately above, which the DABT has not been able to fully investigate, are sufficient to warrant an inference that at least Rodion and IVG have undisclosed financial interests in Cinderella Ice and/or the clubs operated by Cinderella Ice. The existence of such an undisclosed financial interest is the most logical explanation for the contracts between IVG and Cinderella Ice, pursuant to which IVG receives financial benefits without providing any useful service for Cinderella Ice. The inference is compelling when the foregoing is considered in light of the fact that, as addressed in further detail below, IVG sent six and a-half million dollars ($6,500,000) to the Parex Bank the day before the Parex Bank sent eight million two hundred thousand dollars ($8,200,000) back to Cinderella Ice.
The DABT's licensing processes are conducted primarily through the DABT's local District Offices. The DABT issued to the Petitioners temporary licenses, prior to the issuance of
permanent licenses. The DABT must issue a temporary license upon the submission of an application that on its face appears to disclose no grounds for denial. A license investigation is then conducted by the office responsible for the district in which the applicant's business is located. Because of the similarity of the three applications in these cases, the Dade County application of Golden Show, Inc., was processed and investigated through the Broward County office along with those of the other two Petitioners.
The DABT assigned Special Agent Philip Krauss to investigate the qualifications of these applicants. Special Agent Krauss has had many years of experience conducting investigations of this type for the DABT. Special Agent Krauss began his investigation in these cases by conducting a thorough review of the applications. This is the first step in a license investigation process, and it includes a review of any supporting documents submitted with the applications, such as the personal questionnaires, and management agreements, leases, and contracts.
The next step in a license investigation is to advise the applicant in writing of the need for any additional information to correct any errors, ambiguities, or omissions in the applications. In letters dated January 27, 1997, February 12, 1997, and April 18, 1997, the DABT requested additional information and documents from the Petitioners and advised them of deficiencies in the applications. One of the issues in these
cases is whether the Petitioners complied with the DABT's requests.
The funds used for the purchase of the clubs came from a bank in Latvia, a republic of the former Soviet Union. Even though the Iron Curtain has fallen, it is difficult to obtain investigative information from Russia, such as date of birth, place of birth, or employment verification. In the investigation of these cases, the DABT has had to rely to a greater degree than usual on the applicants for information. Therefore, it was more important than usual that the information provided by the applicants be complete, consistent, accurate, and timely.
In the January 27, 1997, correspondence the DABT asked the Petitioners to provide, among other things, copies of all closing statements between Skobeltsyn and his corporate entities, and Michael J. Peter and his entities. The DABT never received a copy of a closing statement showing that the applicants had ever acquired an ownership interest in the businesses. Such a record could not be provided because the sale agreement does not reflect a final sale and transfer of the business assets. Rather, as mentioned earlier in these findings of fact, transfer of the business assets to Cinderella Ice will not be final until the bankruptcy court issues a confirmation order or plan approval. The DABT does not normally approve an application to transfer an alcoholic beverage license until there has been a final sale of
the business to the applicant. Until the sale is final, the DABT views the application as incomplete.
The investigation of these applications of necessity focused on Skobeltsyn, because he is the only natural person disclosed as having an ownership interest in any of the applicant businesses.
In its January 27, 1997, letter the DABT also asked the Petitioners to provide a "Net Worth Statement for Skobeltsyn which identifies all assets, tangible and intangible, all incomes, royalties, savings, expense allowances and equity in real property." Similar requests were made in the DABT's letters of February 12, 1997, and April 18, 1997. In the April 18, 1997, letter the DABT also made it clear that it sought such information for each of the applicant corporations and for the officers and shareholders of each of the applicant corporations. The Petitioners responded through their attorneys that there was no net worth statement in existence, but provided what they described as "copies of various items that reflect Mr. Skobeltsyn's ownership of real and personal property such as an apartment, a vehicle, etc." In its April 18, 1997, letter, the DABT explained that the previously provided information did not provide sufficient information to conduct a full investigation of Skobeltsyn's financial background. The DABT had good reason to conclude that the previously provided information was not a complete response to the DABT's requests. For example, the
information did not disclose all of the personal property and business investments that the DABT's investigation had revealed, such as Skobeltsyn's residence in North Miami Beach and his ownership interests in IVG and S.S. Trans Incorporated. The previously provided information also failed to mention such things as Skobeltsyn's business and personal bank accounts and credit card accounts at the Kazan branch of the Mezhcom Bank. As a result of these shortcomings, in its letter of April 18, 1997, the DABT rephrased its request for information, as follows:
The Applicants are hereby requested to provide documents, records and/or information which identifies all assets, tangible and intangible, all income, royalties, savings, expense allowances, and equity in real property, of the Applicant corporations, its officers and shareholders.
The Petitioners never fully complied with the above-quoted request. To the contrary, as noted in further detail below, the information provided by the Petitioners was incomplete, inconsistent, inaccurate, and illogical. And some of it simply appears to have been false.
In order to conduct a complete investigation, the DABT must have sufficient information to verify the applicants' financial ability to obtain a commercial bank loan, especially when the loan is as large as the one involved in this case. The goal of the DABT's inquiry into such matters is to confirm that there are no other interested persons involved in the applicants' businesses that need to be disclosed to the DABT. The primary
concern of the DABT in this regard is to make certain that all persons that have a direct or indirect interest in the businesses are qualified.
The DABT could not conduct a full investigation without verifying the source of the Petitioner's investment funds. The purported loan agreement, Credit Agreement No. 3102, and the Personal Guaranty of Skobeltsyn state that the loan was secured by all of the tangible and intangible assets of the borrower, Cinderella Ice.6 The DABT attempted to verify the existence and extent of these tangible and intangible assets. The DABT apparently never received any information about any assets of Cinderella Ice, other than the $8,200,000 it received from the Parex Bank. If Cinderella Ice had no other assets, then it is most unlikely that a bank would loan an empty corporate shell
$8,200,000 with which to start a business in a foreign country. If Cinderella Ice did have other assets, those assets should have been disclosed when requested by the DABT. The DABT's requests for information along these lines was for the purpose of confirming that the investment funds did not originate from persons other than Skobeltsyn or the Petitioners.
According to the information submitted with the applications, Skobeltsyn was a bookkeeper for Tattramsgaz, a company in Kazan, Russia, from 1991 through 1992. From 1992 to the present, he asserts that he has been the president of two corporations in Russia, Edson, Inc., and Tachentrans (possibly
the same entity as Tathramtrans). If the information submitted with the application is true, in four years, Skobeltsyn progressed from a job as a bookkeeper to become the president of a corporation that can obtain a loan of $8,200,000 from a Latvian bank within two days of submitting a brief one-paragraph loan request, a request which was submitted and approved without Skobeltsyn even having to go to the bank.
In response to the DABT's request for a net worth statement, Skobeltsyn's attorneys provided a document titled Personal Financial Statement. It is a rather bare bones summary of what is purported to be Skobeltsyn's assets and liabilities as of April 29, 1997. It does not contain any identifying information regarding any of the assets and liabilities, with the sole exception of Skobeltsyn's ownership of "Thaimtrans Corporation" and Cinderella Ice. Some interesting details reported in the Personal Financial Statement include the following. Skobeltsyn is reported to have total assets of
$69,702,000, and total liabilities of $29,062,000, which results in a net worth of $40,640,000. But he is reported to have only
$40,000 cash in checking and savings accounts. He is reported to have none of the following: notes owed to him, certificates of deposit, treasury bills, savings certificates, life insurance, money market funds, precious metals, stocks, or bonds. Other than the cash mentioned above, Skobeltsyn's only reported assets consist of:
Real estate (market value) | 1,530,000 |
Vehicles (market value) | 132,000 |
Ownership: "Thaimtrans" Corporation | 60,000,000 |
Ownership: Cinderella Ice, Inc. | 8,000,000 |
Notably, the Personal Financial Statement makes no mention of Skobeltsyn's ownership interest in S.S. Trans Incorporated.
The Personal Financial Statement reports Skobeltsyn's liabilities as follows:
Credit card obligations | 15,000 |
Home mortgage | 840,000 |
Auto loans | 7,000 |
Personal Guarantee-Pareks Bank for | |
Cinderella Ice, Inc. | 8,200,000 |
Business loan obligations- | |
Tathimtrans Corporation | 20,000,000 |
Total Liabilities | 29,062,000 |
44. During the course of the investigation, | the DABT agents |
obtained numerous documents related to Skobeltsyn's purchase of a residence in North Miami Beach, Florida. Those documents include a Uniform Residential Loan Application signed under oath by Skobeltsyn on March 8, 1996. That application included representations as to Skobeltsyn's assets and liabilities. The only assets listed in the loan application of March 8, 1996, were as follows:
Cash deposit towards purchase | 80,000 | |
Bank account at Nations Bank, | Ft. Laud. | 419,963 |
Net worth of businesses owned | 2,000,000 | |
1996 720 BMW automobile | 90,000 | |
Total Assets | 2,589,963 |
The loan application also reported Skobeltsyn's net worth as
$2,589,963, because he reported as his only liability a single credit card account, on which he reportedly owed no balance.
The loan application included several other relevant details. Skobeltsyn reported that he was paying rent of $4,500 per month. Skobeltsyn reported that he was receiving a salary of
$50,000 per month. Skobeltsyn answered "no" to the following question on the application: "Are you a co-maker or endorser on a note?" Skobeltsyn also answered "no" to the following question: "Have you had an ownership interest in property in the last three years?" Skobeltsyn answered "yes" to the following question: "Are you a permanent resident alien?" The loan application was signed under oath before a Notary Public. At the time of signing the loan application, Skobeltsyn was not a permanent resident alien.
In support of the residential loan application discussed above, Skobeltsyn submitted a copy of a bank statement dated January 31, 1996, from NationsBank for an account in the name of S.S. Trans Incorporated. The bank statement showed an account balance as of January 31, 1996, of $419,963. The bank statement also shows a "miscellaneous debit" in the amount of
$80,000, which is the exact amount that Skobeltsyn paid as a deposit on the residence he bought in North Miami Beach in March of 1996.7
In support of the residential loan application discussed above, Skobeltsyn submitted a letter dated February 8, 1996, written in Russian, and purportedly signed by the president of the Kazan Branch of the Mezhcom Bank, along with an English translation of the letter. The translation was prepared by Rodion. The text of the translated letter of February 8, 1996, from the Mezhcom Bank is as follows:8
We are acknowledging Mr. Sergey Skobeltsyn as a good customer of the Kazan branch. Mr. Sergey keeps large balances in U.S. currency. As a result we have issued to him a Eurocard, MasterCard and a Mexhchom Bank/Gold bank cards.
He has always been successful in timely paying all debts. Indeed, he constantly keeps large balances in his business and personal accounts. We are anxious to assist him in all his business ventures.
R. F. Kamaleev President Kazan Branch Mezhcom Bank
In support of the same loan application, Skobeltsyn also submitted a letter on the stationery of Tathimtrans, Inc., dated February 8, 1996, and written in Russian, along with an English translation. This translation was also prepared by Rodion. The text of the translated letter of February 8, 1996, on Tathimtrans stationery is as follows:
Mr. Sergey Skobeltsyn's annual income as President of "Tathimtrans" for 1995 was: U.S. $600,000.00.
Mr. Sergey Skobeltsyn's projected income for 1996 is $650,000.00.
N. A. Varfolomeeva Senior Accountant
Also submitted in support of the mortgage loan application was a letter dated the eighth day of an untranslated month in 1996, written in Russian on the stationery of Alma, Inc., along with an English translation of the letter. Again, the translation was prepared by Rodion. The text of the translation of the letter on Alma, Inc., stationery is as follows:
This letter verifies the sum of U.S.
$150,000 on January 22, bank reference number 430016533 and the sum U.S. $350,000 on January 25, bank reference number 430024652, were wired to the account of "SS TRANS" for services rendered as per our agreement.
F. R. Shakeirov Director
On March 8, 1996, Skobeltsyn closed on the purchase of a residence in North Miami Beach, Florida. The purchase price was $800,000. In conjunction with the purchase, Skobeltsyn signed a mortgage in the amount of $500,000.
It is clear from the documents related to Skobeltsyn's real estate transaction in March of 1996 that Skobeltsyn was treating the assets of S.S. Trans Incorporated as his personal assets. However, the Personal Financial Statement submitted in April of 1997 makes no mention of S.S. Trans Incorporated. This is one of a number of unexplained inconsistencies in the
documentation surrounding Skobeltsyn's personal and business financial circumstances.
It is clear from the documents related to Skobeltsyn's real estate transaction in March of 1996 that he represented his net worth at that time to be $2,589,963. Thirteen months later, in the Personal Financial Statement, he reports a net worth of
$40,640,000. While it is within the realm of possibility that a talented and fortunate businessman could increase his net worth that much in a mere thirteen months, it is also highly unlikely that any mere mortal actually did so. Absent some plausible explanation, and there is none in the record of these cases, the most reasonable inference is that Skobeltsyn has from time to time provided false information about his financial circumstances.
The Petitioners never provided the DABT with an itemization of Skobeltsyn's sources of income, as requested in the January 27, 1997, letter, and in later letters.
In its letter of January 27, 1997, the DABT also required the Petitioners to submit the following information:
Regarding Credit Agreement 3102: Provide a copy of the loan application, all schedules and attachments to the credit agreement, copies of all personal loan guaranty agreement(s) and a loan amortization schedule.
The Petitioners responded to the DABT's request by asserting in the February 7, 1997, letter, the following:
There is no loan application, schedules or attachments to the subject credit agreement, other than what has already been provided to AB&T in the original application package.
The loan amortization schedule is included in the body of the subject credit agreement and in order to obtain copies of any personal guaranty documents in existence, if any, an extension of time is needed.
Notwithstanding the Petitioners' assertions that there were no additional documents relating to the loan apart from a possible personal guaranty, on May 1, 1997, they subsequently submitted additional documents. The additional documents, which are discussed below, included copies of the original brief request for credit, a purported amendment to the credit agreement (along with a translation and a "correction" of the translation), and a request for an extension of time regarding the interest payments due under the credit agreement. The submission of documents late in an investigation, after representations that there are no additional documents, is the sort of inconsistency that raises the strong possibility of fabrication.
Credit Agreement 3102 and the documents related to it raise more questions than they answer. The first problematic document is the loan application document, Respondent's Exhibit 8, which reads in its entirety, as follows:
To the President AO "Pareks-Bank" Mr. Karginu V.
I am requesting credit, for the sum of 8
200 000 (eight million two hundred thousand)
U.S. dollars, for accomplishing a deal to buy three night clubs in South Florida, which are
estimated by experts to be one of the best in the U.S. territory. We are ready to submit a business plan from which it would be clearly respectable and profitable for this type of business.
Sincerely, Skobeltsyn, S.V. "CINDERELLA ICE, INC"
12000, BISCAYNE BLVD,FL.
Signature Dated: 11/19/96
Cinderella Ice, Inc. Corporate Seal
1996
Florida
During the course of the application investigation, the Petitioners' attorney explained that the business plan referred to in the brief credit application was not the usual type of business plan. Rather, as explained in the attorney's letter of May 1, 1997:
The "business plan" submitted in connection with the subject loan application and referenced in Mr. Skobeltsyn's letter of November 1996 to the Pareks Bank consisted of copies of the voluminous Receiver's Reports and proforma profit and loss statements related to the business. I have enclosed herewith copies of the Receiver's Reports submitted from March through October 1996 which included the subject profit and loss statements. The Receiver's Reports were obviously the most accurate description of the financial state of the businesses that existed at the time. It was most logical to submit that data rather than a projected business plan. The Pareks Bank accepted those reports in lieu of the business plan.
It is nothing less than incredible that, within 48 hours, the Pareks Bank, solely on the basis of a one-paragraph
loan request, a collection of receiver's reports, and Skobeltsyn's personal guarantee, would loan $8,200,000 to a brand-new Florida corporation with no assets, so that it could
buy a portion of the business assets of a convicted criminal, all of which assets were in the hands of a receiver, and were involved in complex litigation involving millions of dollars of claims.
During the course of its investigation, the DABT requested a copy of the "Schedule One" mentioned in Section 2.5 of Credit Agreement No. 3102. By letter of May 1, 1997, the Petitioners' attorney explained:
Schedule One to Credit Agreement No. 3102 is a copy of the November 1996 agreement between MJP and Cinderella Ice, Inc., as confirmed by the December 23, 1996 amendment to Section 2.5 of the subject credit agreement, which is enclosed.
Enclosed with the letter of May 1, 1997, were three documents; a document in Russian that purports to be an amendment to Section 2.5 of Credit Agreement No. 3102, an English translation of the purported amendment, and a written statement in English signed by Lawrence Church describing an error in the translation. The English translation reads as follows:
23.12.96
Amendment part of section 2.5 of the Credit Agreement Contract No. 3102, dated November 20, 1996, shall be the contract between Cinderella Ice, Inc. and M. J. Peter, executed on December 21, 1996.
V. Kargin
President, AO Parex Bank
Church's clarification of the above reads as follows: To Whom It May Concern
Please be advised that due to a translator's scriviners error, translation document dated 23.12.96 should read: "Amendment part of section 2.5 of the Credit Agreement Contract No. 3102, dated November 21, 1996, shall be the contract between Cinderella Ice, Inc. and M. J. Peter, executed December 20, 1996."
Lawrence Church
Agent for Cinderella Ice, Inc. (Emphasis in original.)
The purported amendment, with or without Church's clarification, is unintelligible and, therefore, of questionable validity. One cannot tell which part of Section 2.5 the amendment purports to amend. The purported amendment could just as logically be interpreted as an amendment to the first sentence of Section 2.5 or as an amendment to the last sentence of Section
2.5. The legitimacy of the purported amendment is also cast into doubt by the fact that it purports to be a unilateral amendment by the bank, without Skobeltsyn's signature agreeing to the amendment. Further, the purported amendment refers to a contract between Cinderella Ice and M. J. Peter executed on December 20 or December 21, 1996. Cinderella Ice and Michael J. Peter did not enter into a contract on either of those dates. Last, but not least, the purported amendment does not answer the underlying question which was posed by the DABT; the still unanswered
question being: What comprised the original "Schedule One" referred to in Section 2.5 of Credit Agreement No. 3102 prior to any amendment of the agreement? In the final analysis, the most logical inference to be drawn from the purported amendment to Section 2.5 of the credit agreement is that it is a clumsily executed fabrication designed to conceal an oversight or omission in an illegitimate and false document titled Credit Agreement No. 3102.
The credit agreement states that the interest rate on the loan is 9 percent per year to be paid monthly. The monthly interest due on an 8.2 million dollar loan at 9 percent per annum is $61,500 per month. The Petitioners attempted to explain the absence of interest payments by submitting to the DABT a copy of a request to Parex Bank dated December 28, 1996, for a six-month extension of the interest payments, which, curiously, also includes a promise to begin making interest payments by no later than April 30, 1997. The request for a six-month extension appears to be signed by Skobeltsyn, as well as by someone identified in the document as "President, AO Parex Bank." It is not clear whether the second signature constitutes agreement to the request or merely acknowledgment of receipt of the request. In April 1997, the Petitioners made a single interest payment of thirty thousand dollars. This is the only interest payment that the Petitioners have made on the purported loan. The Petitioners presented no persuasive evidence to explain the absence of
interest payments.9 The absence of regular interest payments by the Petitioners casts a significant cloud of doubt over the legitimacy of the loan. The most reasonable inference to be drawn from all of the irregularities and inconsistencies surrounding the purported 8.2 million dollar loan, is that the document titled Credit Agreement No. 3102 is some type of sham or subterfuge, and there is no genuine loan agreement from the Parex Bank.
During the period from January 22, 1996, through November 21, 1996, S.S. Trans Incorporated received ten transfers of large sums of money from sources unknown to the DABT. Most of the funds originated from Parex Bank in Latvia, but four of the transfers originated from unknown banks and accounts. Four of the wire transfers from the Parex Bank came from account number 0714926. The total amount received by S.S. Trans Incorporated from account number 0714926 was one million five hundred seventy thousand dollars ($1,570,000). The sums transferred ranged in amount from seventy thousand dollars ($70,000) to one million dollars ($1,000,000). The sums transferred into the account comprised a grand total of two million seven hundred seventy thousand dollars ($2,770,000).
IVG received money transfers totaling six and a half million dollars ($6,500,000) in November of 1996. On
November 13, 1996, S.S. Trans Incorporated transferred one and a half million dollars ($1,500,000) to IVG's account at
NationsBank. On November 20, 1996, a company known as Oakdale Trading, Ltd., transferred five million dollars ($5,000,000) to IVG's account at NationsBank.
On November 21, 1996, IVG made a wire funds transfer in the amount of six and a half million dollars ($6,500,000) to Parex Bank, Riga, Latvia, into account number 0714926. On the same day, S.S. Trans Incorporated made a wire funds transfer in the amount of one hundred thousand dollars ($100,000) to the same account number at Parex Bank. The very next day, on November 22, 1996, Cinderella Ice received an eight million two hundred thousand dollar ($8,200,000) wire transfer from Parex Bank. On December 12, 1996, Cinderella Ice wrote a check in the amount of one hundred thousand dollars ($100,000) to S.S. Trans Incorporated. The one hundred thousand dollars paid to S.S. Trans Incorporated on December 12, 1996, was part of the proceeds of the 8.2 million dollars that Cinderella Ice had received from Parex Bank.
These unexplained transfers of large sums of money, occurring immediately prior to the disbursement of the purported loan funds from the Parex Bank, indicate that there were other undisclosed entities providing investment capital for the purchase of the clubs. The use of numerous corporate entities as part of the ownership structure, and the use of other corporations and business entities to hide ownership or to disguise the source of payments, constitutes a course of conduct
indicative of the existence of undisclosed interests. The one hundred thousand dollars paid on December 12, 1996, by Cinderella Ice to S.S. Trans Incorporated is undoubtedly related to the one hundred thousand dollars that S.S. Trans Incorporated transferred to the Parex Bank on November 21, 1996.
The evidence of unexplained wire transfers by other interests associated with Skobeltsyn and the Petitioners further justifies the DABT's concern that the Petitioners have not submitted complete applications by virtue of their failure to provide to the DABT the additional information it requested of the Petitioners. Specifically, the DABT requested that the Petitioners provide: "A listing, which contains name and address of all financial institutions, with account numbers, and current balance as of December 31, 1996, for which Skobeltsyn is a sole or joint account holder, in the United States or elsewhere." The DABT repeated its request for this information on at least two additional occasions. The Petitioners did not satisfactorily comply with this request, thus preventing the DABT from conducting a full investigation.
The Petitioners responded to these requests for account information by replying that they would not object to any subpoenas issued on the accounts of IVG and S.S. Trans Incorporated that were discovered by the DABT. The Petitioners also noted in their response that they interpreted the request as not referring to corporate accounts, but as limited to
Skobeltsyn's personal accounts in which he was a "sole or joint account holder." However, at least by April 18, 1997, the Petitioners knew that the request encompassed corporate accounts to which Skobeltsyn has access, including the accounts for S.S. Trans Incorporated.
In their May 1, 1996, letter, the Petitioners noted their narrower interpretation, but nevertheless provided information regarding some of the corporate accounts and expressed their willingness to cooperate with the DABT's efforts to subpoena "any bank anywhere in the world for any records that AB&T seeks." The Petitioners' stated willingness to cooperate with the DABT's subpoenas was worthless, however, without the requested list of bank accounts. Without the requested list, including the names and addresses of the financial institutions, and the account numbers, the DABT could not effectively serve subpoenas.
It is clear from the evidence in this case that there are other bank accounts in the control of Skobeltsyn, or to which Skobeltsyn has access, beyond those which the Petitioners have disclosed and which the DABT has been able to examine.
The DABT's examination of the bank records from NationsBank revealed references to accounts in foreign banks. These are accounts that were not disclosed to the DABT, despite repeated requests. For example, in the wire transfer of November 21, 1996, for six and a half million dollars
($6,500,000) from IVG to Parex Bank, the transfer was made into Parex Bank account number 0714926. S.S. Trans Incorporated made a wire transfer in the amount of one hundred thousand dollars ($100,000) to the same account. The Petitioners never provided to the DABT a list or other information identifying this account. The wire transfers to S.S. Trans Incorporated of January 22, 1996, through August 22, 1996, of funds ranging in amount from one hundred thousand dollars ($100,000) to one million dollars ($1,000,000) originated from banks and accounts that were never identified or disclosed to the DABT.
Among the bank accounts the DABT sought to obtain information about were the bank accounts of IVG, a corporation of which Skobeltsyn was President and in which he has an ownership interest. When the DABT repeated its request for the IVG bank account information, the Petitioners' attorney responded with a letter of May 1, 1997, which included the following:
As to the banking records from IVG's Capital Bank account from the time that
Mr. Skobeltsyn acquired his interest in IVG, please note that the account is now closed and without Mr. Skobeltsyn['s] presence in the United States, I cannot produce the records sought inasmuch as he was the sole signer on the account.
The above-quoted response is indicative of a lack of cooperation on the part of the applicants. Regardless of whether the account was closed or not, and regardless of whether Skobeltsyn could return to the United States or not, with written authorization from Skobeltsyn, the attorneys for the applicants
could have obtained the records and could have furnished them to the DABT.
The above-quoted response about IVG's bank account is also inconsistent with other information about the activities of International Value Group, Inc. Since December of 1996 and continuing through the date of the final hearing in this case, IVG has been engaged in at least two business activities in Florida, specifically the two business activities described in paragraphs 20 through 28 of these findings of fact. In the normal course of events those two business activities have been regularly generating revenues in the form of cash, checks, and/or credit cards. It is contrary to common sense to believe that IVG is engaged in business without having an open checking account.
Yet another example of the Petitioners' inconsistency and inaccuracy is reflected in the following statement from their attorney in a letter of May 1, 1997, responding to DABT comments that Skobeltsyn had failed to fully disclose his employment during the past five years:
Further, in his personal questionnaire listing his employment for the past five years, Mr. Skobeltsyn did not recite that he had been president of International Value Group and president of SS Transcorp, Inc., because at the time he completed the questionnaire, Mr. Skobeltsyn may not have been president of either company. He was a shareholder in SS Transcorp, Inc., which had no assets in, and was doing no business in, the United States. Further, Mr. Skobeltsyn did not state that he was "president" of International Value Group, as he may have not yet served as president. Notwithstanding the
foregoing, Mr. Skobeltsyn received no salary or benefits of any nature whatsoever from either corporation and therefore, correctly did not recite the names of these corporations under a heading which requested employment information.
The foregoing assertions become troublesome when considered in light of the following facts. Skobeltsyn signed his personal questionnaire on December 29, 1996. On November 13, 1996, Skobeltsyn signed a check written on the account of S.S. Trans Incorporated at NationsBank in Fort Lauderdale, Florida, in the amount of $1,500,000. The check was payable to International Value Group, Inc. The check was good, and there were funds left in the account after it cleared. When Skobeltsyn opened the S.S. Trans Incorporated account at NationsBank, he identified himself as president of the corporation. On November 13, 1996, Skobeltsyn opened a bank account in the name of International Value Group, Inc., at NationsBank in Fort Lauderdale, Florida, with the $1,500,000 check from S.S. Trans Incorporated. When he opened the account, he identified himself as president of International Value Group, Inc. On or about December 27, 1996, Skobeltsyn and Rodion signed a corporate resolution in conjunction with a bank account at First Union Bank of Florida in the name of International Value Group, Inc., in which Skobeltsyn is described as president of the corporation.
All three of the alcoholic beverage applications at issue in these cases were signed on December 29, 1996. On each of the three applications, Skobeltsyn is listed as holding each
of the following offices in each of the applicant corporations: President, Vice President, Secretary, and Treasurer. On each of the applications, Cinderella Ice is listed as the owner of 100 percent of the stock of each of the applicant corporations. Each of the three applications contains a statement reading: "Sergey
V. Skobeltsyn is the sole director, officer and shareholder of Cinderella Ice, Inc."
The records of the Florida Department of State include the following information regarding Golden Show, Inc. The articles of incorporation were filed with the Secretary of State on November 26, 1996. Skobeltsyn was the initial director of the corporation. The articles of incorporation did not identify any initial officers of the corporation. On January 27, 1997, Skobeltsyn, in his capacity as director, signed a document titled Articles of Amendment to Articles of Incorporation of Golden Show, Inc. That document was filed with the Secretary of State on January 31, 1996. The document states that several amendments were adopted on January 27, 1997. One of those amendments reads as follows:
SERGEY V. SKOBELTSYN was elected President, Secretary, Vice-President, Treasurer and Director, and his address is 3363-5 N. Federal Highway, Ft. Lauderdale, FL 33306."
The records of the Florida Department of State include the following information regarding Silver Show, Inc. The articles of incorporation were filed with the Secretary of State on November 26, 1996. Skobeltsyn was the initial director of the
corporation. The articles of incorporation did not identify any initial officers of the corporation. On January 27, 1997, Skobeltsyn, in his capacity as director, signed a document titled Articles of Amendment to Articles of Incorporation of Silver Show, Inc. That document was filed with the Secretary of State on January 31, 1996. The document states that several amendments were adopted on January 27, 1997. One of those amendments reads as follows:
SERGEY V. SKOBELTSYN was elected President, Secretary, Vice-President, Treasurer and Director, and his address is 3363-5 N. Federal Highway, Ft. Lauderdale, FL 33306."
The records of the Florida Department of State include the following information regarding Platinum Show, Inc. The articles of incorporation were filed with the Secretary of State on November 26, 1996. Skobeltsyn was the initial director of the corporation. The articles of incorporation did not identify any initial officers of the corporation. On January 27, 1997, Skobeltsyn, in his capacity as director, signed a document titled Articles of Amendment to Articles of Incorporation of Platinum Show, Inc. That document was filed with the Secretary of State on January 31, 1996. The document states that several amendments were adopted on January 27, 1997. The amendments concerned such matters as the principal place of business of the corporation, the mail address of the corporation, and the new registered agent for the corporation, but no provision regarding the election or appointment of any officers. The records of the Department of
State do not show that anyone has ever been appointed or elected to the offices of President, Vice-President, Secretary, or Treasurer of Platinum Show, Inc.
The records of the Florida Department of State include the following information regarding Cinderella Ice, Inc. The articles of incorporation were filed with the Secretary of State on August 22, 1996. A person named Gregory Romenski was the initial director of the corporation. The articles of incorporation did not identify any initial officers of the corporation. On January 27, 1997, Skobeltsyn, in his capacity as director, signed a document titled Articles of Amendment to Articles of Incorporation of Cinderella Ice, Inc. That document was filed with the Secretary of State on January 31, 1997. The document states that several amendments were adopted on
January 27, 1997. One of those amendments reads as follows:
GREGORY ROMENSKI resigned as Director and SERGEY V. SKOBELTSYN was elected Director in his stead. SERGEY V. SKOBELTSYN was also elected President, Vice-President, Secretary, and Treasurer of the corporation and his address is: 3363-5 N. Federal Highway, Ft.
Lauderdale, FL 33306.
Skobeltsyn's apparent indifference to accuracy is reflected once again in the fact that at the time he signed his personal questionnaire he had not been elected as an officer of either Cinderella Ice or of any of the applicant corporations. Further, at the time he signed his personal questionnaire, Skobeltsyn was not a director of Cinderella Ice and Cinderella
Ice had an undisclosed director who has since resigned. Most of these irregularities have since been cleared up, but the statements were false at the time they were made.
The DABT has been unable to interview Skobeltsyn because he is legally excluded from entry into the United States. One of the most important steps in any investigation is to provide the applicant with an opportunity to answer questions. Skobeltsyn is in a position to answer many of the questions that were raised during the investigation. The Petitioners offered the DABT an opportunity to go to Latvia to interview Skobeltsyn and Latvian banking officials. The DABT refused to travel abroad because of safety concerns and because the investigator's law enforcement powers, particularly the power to place a witness under oath, did not extend as far as Latvia. The DABT cannot conduct a full investigation of the applications in these cases without an interview of Skobeltsyn taken under oath.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to these consolidated cases. Section 120.57, Florida Statutes.
With regard to the nature of the evidentiary burdens applicable in a case of this nature, in Department of Banking and Finance, Division of Securities and Investor Protection v. Osborne Stern and Company, 670 So. 2d 932 (Fla. 1996), the Florida Supreme Court quoted with approval the following language
from Judge Booth's dissenting opinion in the District Court of Appeal decision in the same case.
The general rule is that a party asserting the affirmative of an issue has the burden of presenting evidence as to that issue.
Florida Department of Transportation v. J.W.C. Company, 396 So. 2d 778 (Fla. 1st DCA 1981). Thus, the majority is correct in its observation that appellants had the burden of presenting evidence of their fitness for registration. The majority is also correct in its holding that the Department had the burden of presenting evidence that appellants had violated certain statutes and were thus unfit for registration. The majority's conclusion, however, that the Department had the burden of presenting its proof of appellants' unfitness by clear and convincing evidence is wholly unsupported by Florida law and inconsistent with the fundamental principle that an applicant for licensure bears the burden of ultimate persuasion at each and every step of the licensure proceedings, regardless of which party bears the burden of presenting certain evidence.
This holding is equally inconsistent with the
principle that an agency has particularly broad discretion in determining the fitness of applicants who seek to engage in an occupation the conduct of which is privilege rather than a right.
Following the language quoted immediately above, the Florida Supreme Court added the following language of its own at 670 So. 2d 934-35:
We emphasize the correctness of Judge Booth's conclusion that, while the burden of producing evidence may shift between the parties in an application dispute proceeding, the burden of persuasion remains upon the applicant to prove her entitlement to the license.
The denial of registration pursuant to section 517.161(6)(a), Florida Statutes (1989), is not a sanction for the applicant's
violation of the statute, but rather the application of a regulatory measure. School Board of Pinellas County v. Noble, 384 So. 2d 205, 206 (Fla. 1st DCA), review denied, 389 So. 2d 1114 (Fla. 1980); Lester v. Department of Prof. and Occ. Regulations, 348 So. 2d 923 (Fla. 1st DCA 1977). Further, such a denial is without prejudice to an applicant's subsequent attempts at registration.
The clear and convincing evidence standard is also inconsistent with the discretionary authority granted by the Florida legislature to administrative agencies responsible for regulating professions under the State's police power. Boedy v. Department of Professional Regulation, 463 So. 2d 215 (Fla. 1985). In this case, the Department was required to determine whether the respondents had demonstrated worthiness to transact business in Florida before approving their application. S. 517.12(11), Fla. Stat. (1989). At the formal hearing, the Department presented evidence that the respondents had violated several provisions of chapter 517. The Department offered testimony from its representative, who had warned respondents that their conduct was illegal, as well as a series of letters and affidavits from Florida investors with whom respondents had traded without being registered. Based on the evidence, the hearing officer found that the respondents had violated the relevant statutory provisions.
Nothing about this case shows that the
present standard invites an abuse of discretion by the Department in denying registration applications, or results in denial of licenses which otherwise should or would be granted if the Department were put to a higher burden of proof. In short, this case fails to provide any meaningful reasons warranting the extension of the clear and convincing standard to application proceedings.
Several provisions of Chapter 561, Florida Statutes are relevant to the issues in these cases. Section 561.17(1), Florida Statutes, reads as follows, in pertinent part:
Any person, before engaging in the business of manufacturing, bottling, distributing, selling, or in any way dealing in alcoholic beverages, shall file, with the district supervisor of the district of the division in which the place of business for which a license is sought is located, a sworn application in duplicate on forms provided to the district supervisor by the division. . . If the applicant or any person who is interested with the applicant either directly or indirectly in the business or who has a security interest in the license being sought or has a right to a percentage payment from the proceeds of the business, either by lease or otherwise, is not qualified, the application shall be denied by the division.
Section 561.18, Florida Statutes, reads as follows, in pertinent part:
After the application has been filed with the local district office supervisor, the district supervisor shall cause the application to be fully investigated, both as to qualifications of the applicants and a manager or person to be in charge and the premises and location sought to be
licensed. . . .
Section 561.19(1), Florida Statutes, reads as follows, in pertinent part: "Upon the completion of the investigation of an application, the division shall approve or disapprove the application."
Directing attention now to the specific reasons for disapproval set forth in the DABT's Notice of Disapproval, the first two reasons will be addressed together because the issues
raised by the first two reasons are somewhat interrelated. The first two reasons read as follows:
The applicants have failed to correct errors and/or omissions on their alcoholic beverage license applications and have thus submitted incomplete alcoholic beverage license applications.
The applicants have failed to supply additional information required by the Division in order for it to conduct a full investigation of the qualifications of the applicants as required by Section 561.18, Florida Statutes, and as requested in the Division's letters of January 27,
February 12, and April 18, 1997.
Similar issues were addressed in Jose Manuel Camino, d/b/a Torremolinos Restaurant v. State of Florida, Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, DOAH Case No. 83-0390 (Recommended Order issued July 13, 1983). The Hearing Officer's conclusions of law in Torremolinos include the following:10
Even though Sgt. Herrera testified initially that he received what bore the stamp of a complete application from the Respondent, further review of the documentation by Officer Loud, the individual charged with the actual investigation into its accuracy, revealed that it was not in any way sufficiently complete to support approval action. An application is not complete until sufficient information is furnished to the Division to enable it to conduct an effective investigation with a view toward meeting the criteria set forth in the aforementioned findings of fact herein. When the documentation submitted is insufficient to supply the Division with the necessary information, the Division is unable, under the law, to approve the application, Sans Souci v. Florida Division of Land Sales and
Condominiums, 421 So.2d 623 (Fla. 1 DCA 1982) and ABC Liquors v. Department of Business Regulation, 397 So.2d 696 (Fla. 1 DCA 1981).
The testimony of Sgt. Herrera and Officer Loud clearly established the failure of the Petitioner to provide sufficient information to the Division to allow it to effectively, and for the purposes set out, investigate the application. The affidavit submitted after the application failed to provide sufficient additional information, nor did the additional documentation submitted at the hearing.
As a complete application is one which does not contain material inconsistencies, and which provides sufficient documentation to allow the agency to make adequate inquiry into the ownership and financing arrangements of the proposed license, the failure to provide that information necessary to permit the agency to do that, as we see is the case here, leads to the inescapable conclusion that the application submitted by Petitioner was incomplete at the time of submission and was not made complete by any further presentation of requested information.
Since Section 561.18, Florida Statutes (1981) establishes the statutory authority for disapproval of an incomplete application; since this application has been clearly shown to be incomplete in many particulars; since the applicants were repeatedly afforded the opportunity to, and were solicited to, submit further clarifying and supporting documentation and failed to do so; and since the Division was thereby unable to fully investigate the application as called for by the statute, the application must be, as it was here, disapproved.
The facts in these cases show that the applications at issue here suffer from the same types of deficiencies and inconsistencies as those which compelled the denial of the application in Torremolinos. The DABT is required by statute to
conduct an investigation prior to approving an alcoholic beverage license application. Sections 561.18 and 561.19(1), Florida Statutes. Where, as here, the ability of the DABT to complete its investigation has been impeded by the failure of the applicants to supply requested information, the applications cannot be approved. Similarly, where the information supplied by the applicants is incomplete and inconsistent, and where additional information provided by the applicants and discovered during the course of the investigation raises more questions than it answers, as concluded above in Torremolinos, the applications must be treated as incomplete and must be denied. Accordingly, reasons 1 and 2 in the Notice of Disapproval are appropriate reasons for denying the subject applications.
Reason 3 of the Notice of Disapproval is to the effect that these applications should be denied because Skobeltsyn, the only shareholder of the applicants, and the only officer and director of any of the applicants, is precluded by federal law from holding the license he seeks or from operating the businesses. In this regard, attention is directed to 8 USC Section 1621, enacted in August of 1996, which provides, in pertinent part:
(a) In general
Notwithstanding any other provision of law and except as provided in subsections (b) and
of this section, an alien who is not-
a qualified alien (as defined in section 1641 of this title),
a nonimmigrant under the Immigration and Nationality Act [8 U.S.C.A. Section 1101 et seq.], or
an alien who is paroled into the United States under section 212(d)(5) of Act [8 U.S.C.A. Section 1182(d)(5)] for less than one year, is not eligible for any State or local public benefit (as defined in subsection (c) of this section). . . .
State or local public benefit defined
Except as provided in paragraphs (2) and (3), for purposes of this subchapter the term "State or local public benefit" means-
any grant, contract, loan, professional license, or commercial license provided by an agency of a State or local government or by appropriated funds of a State or local government; and
any retirement, welfare, health, disability, public or assisted housing, post- secondary education, food assistance, unemployment benefit, or any other similar benefit for which payments or assistance are provided to an individual, household, or family eligibility unit by an agency of a State or local government or by appropriated funds of a State or local government.
Such term shall not apply-
to any contract, professional license, or commercial license for a nonimmigrant whose visa for entry is related to such employment in the United States or
with respect to an alien who as a work authorized nonimmigrant or as an alien lawfully admitted for permanent residence under the Immigration and Nationality Act
[8 U.S.C.A. Section 1101 et seq.] qualified for such benefits and for whom the United States under reciprocal treaty agreements is required to pay benefits, as determined by the Secretary of State, after consultation with the Attorney General.
Such term does not include any Federal public benefit under section 1611(c) of this title.
State authority to provide for eligibility of illegal aliens for State and local public benefits.
A State may provide that an alien who is not lawfully present in the United States is eligible for any State or local public benefit for which such alien would otherwise be ineligible under subsection (a) of this section only through the enactment of a State law after August 22, 1996 which affirmatively provides for such eligibility.
There are no legal circumstances which permit Skobeltsyn, a foreign national permanently barred from entry into the United States, to hold a commercial license or to operate a business in the United States. The absence of such a legal ability necessarily compels the DABT to deny the Petitioners' applications. To hold otherwise would require the State of Florida and the DABT to violate the clear mandate of 8 USC Section 1621.
In 8 USC Section 1621, the DABT is prohibited from granting Skobeltsyn an interest in an alcoholic beverage license. The Petitioners have presented no evidence that would show Skobeltsyn meets any of the exceptions in the immigration law, or that he is otherwise legally qualified to hold an interest in a business holding a commercial license.
Skobeltsyn's immigration status disqualifies him from holding an interest in an alcoholic beverage license and further prohibits the DABT from granting him or the Petitioners a license. The authority of an agent or employee to operate and manage a licensed premises derives from the authority of the
principal license holder. The authority of an agent is no greater than the authority of the principal. "[A] principal cannot delegate to an agent authority to do for him what he cannot do himself. An act which, if done by the principal, would be illegal because in violation of a statute cannot be done for him by an agent." Boatright v. City of Jacksonville, 334 So. 2d 339, 344 (Fla. 1st DCA 1996). Accordingly, what Skobeltsyn cannot do, his agents cannot do for him. Such being the case, reason 3 in the Notice of Disapproval is an appropriate reason for denying the subject applications.
In reaching this conclusion, the Petitioners' arguments in support of a different conclusion have not been overlooked. Their argument, which appears at page 27 of their proposed recommended order, is as follows:
Since the Applicants for the licenses are Florida Corporations (Stipulation Respondent's Exhibit 36), Mr. Skobeltsyn's alien or nonimmigrant status under the Personal Responsibility and Work Opportunity Act of 1996 does not disqualify the Applicants. Assuming that an alcoholic beverage license is a "State or local public benefit," the federal statutory scheme focuses on individuals, not corporations.
The definitions provided by Title 8 U.S.C. Section 1101 leave no doubt that the "immigrants" and "aliens" addressed by the statute are individuals. . . .
* * * Therefore there is nothing in the
immigration law which precludes the corporate Applicants from seeking and holding an alcoholic beverage license because their 100%
stockholder may not meet the Title 8 U.S.C. Section 1621 definition of a qualified alien.
The Petitioner's arguments in this regard are unpersuasive for the following reasons. It is clear from the provisions of 8 USC Section 1621 that Skobeltsyn, the individual, is a person who is ineligible to receive the alcoholic beverage licenses sought here. The federal legislation which precludes individuals in Mr. Skobeltsyn's circumstances from obtaining such licenses would serve no useful purpose if such individuals could circumvent the effect of the prohibition by the simple expedient of setting up a little family of interlocked corporations in which the individual was the sole stockholder, and the sole officer and director. Under the circumstances of these cases, Cinderella Ice, and its three wholly-owned subsidiaries, are nothing more than alter-egos for Mr. Skobeltsyn, which should not be allowed to insulate him from the prohibitions of 8 USC Section 1621. See Steinhardt v. Banks, 511 So. 2d 336 (Fla. 4th DCA 1987), and Tiernan v. Sheldon, 191 So. 2d 87 (Fla. 4th DCA 1966), in which it is concluded that it is appropriate to look behind the corporate veil "where the purpose is to evade some statute."
Reason 4 in the Notice of Disapproval reads as follows:
4. The Applicants do not exercise ultimate over-all control over the businesses sought to be licensed. The business conducted on the licensed premises is not managed and controlled by the Applicants, or managed by an authorized employee or employees of the applicants, contrary to Rule 61A-3.017,
Florida Administrative Code, and Section 561.17, Florida Statutes.
Rule 61A-3.017, Florida Administrative Code, reads as follows, in pertinent part:
All business conducted on the licensed premises under the beverage law shall be managed and controlled at all times by the licensee or managed by his authorized employee or employees.
The term "employee," as used herein, shall mean a person who receives a salary or wages for services performed, for and in behalf of a licensee, under the exclusive control and direction of the latter. It does not include a lessee, an independent contractor or any person employed by collateral agreement to independently manage and control the said business on the licensed premises.
The DABT argument on this point is based primarily on the fact that the reorganization plan has never been confirmed and, therefore, Cinderella Ice has not yet become the legal owner of the businesses because the final closing has never taken place. The DABT goes on to argue that without legal ownership, the applicants lack authority to control and manage. This argument fails to give appropriate significance to the bankruptcy court order of February 13, 1997, which provided, among other things:
2. Cinderella Ice, Inc. ("Cinderella") or its wholly owned subsidiaries is authorized and directed to assume management of the operations and businesses of and possession of the assets and premises of IFB Systems, Eateries, and Sunny Isles, which Debtor entities Cinderella is to acquire under the Debtors' Joint Plan of Reorganization (hereinafter, the "Cinderella Acquired
Debtors"). The Cinderella Acquired Debtors are authorized to pay Cinderella an aggregate management fee in an amount not to exceed
$70,000 per month from available cash flow, after the payment of administrative operating expenses, and subordinate to the accumulation of cash in an amount sufficient to pay prepetition unsecured creditors in full.
Furthermore, such management fee shall accrue from month to month to the extent that cash flow after paying all other administrative operating expenses and after the accumulation of cash sufficient to pay prepetition unsecured creditors in full is insufficient to pay such management fee.
The authorization provided by the above-quoted order appears to be sufficient to meet the requirements of Rule 61A- 3.017, Florida Administrative Code. Accordingly, the evidence is insufficient to sustain Reason 4 in the Notice of Disapproval on the grounds argued by the DABT.11 This, of course, assumes that Skobeltsyn has the legal authority to hold the licenses and operate the three businesses. However, if the ultimate disposition of Reason 3 in the Notice of Disapproval is as recommended above, then the issue raised in Reason 4 is moot, because Skobeltsyn cannot authorize or empower others to do that which Skobeltsyn is himself precluded from doing.
Reason 5 of the Notice of Disapproval is based on the nature of the business relationship between Michael J. Peter and the Petitioners. It reads as follows:
5. A person not qualified to hold an alcoholic beverage license has a direct or indirect financial interest in the businesses sought to be licensed contrary to Section 561.17(1), Florida Statutes, to wit:
Michael J. Peter, who is disqualified from
holding an alcoholic beverage license pursuant to Section 561.15, Florida Statutes, has a direct or indirect financial interest in the business sought to be licensed.
Michael J. Peter is not qualified to hold an alcoholic beverage license because he has been convicted of a felony. See Section 561.15(2), Florida Statutes. In that regard, Section 561.17(1), Florida Statutes, reads as follows, in pertinent part:
If the applicant or any person who is interested with the applicant either directly or indirectly in the business or who has a security interest in the license being sought or who has a right to a percentage payment from the proceeds of the business, either by lease or otherwise, is not qualified, the application shall be denied by the division. (Emphasis added.)
Consistent with the foregoing, the applications in these cases must be denied if it is shown that Michael J. Peter has an interest, directly or indirectly, in the Petitioners' businesses. Michael J. Peter continues to own certain trademarks that, if not essential to, are at least very valuable to, the successful operation of the subject clubs. Michael J. Peter has licensed the use of the subject trademarks by the Petitioners.
In the course of doing so, Michael J. Peter has sought to protect his personal interest in the ownership of the trademarks by conditioning their use on his right to control some aspects of the business decisions of the Petitioners. In this manner, Michael J. Peter has inextricably intertwined his personal business interests with the business interests of the Petitioners. This interweaving of interests leads to the
conclusion that Michael J. Peter has an interest in the Petitioners' businesses and will continue to have such an interest for so long as he has the authority to control certain business decisions of the Petitioners and the authority to dictate at least some of the terms regarding the transfer of the trademarks in the event the clubs should be sold again in the future. Accordingly, Reason 5 in the Notice of Disapproval is an appropriate reason for denying the subject applications.
Reason 6 in the Notice of Disapproval is to the effect that "the Applicants have falsely sworn to the alcoholic beverage license applications by not disclosing the direct or indirect financial interest of Michael J. Peter and/or of various business entities owned by Michael J. Peter. . . ." For the following reasons, the evidence is insufficient to sustain this basis for denial. The basis upon which it is contended that Michael J. Peter has an interest in the applicant corporations is found in two documents, Respondent's Exhibits 5 and 6. Copies of those documents were included with the subject license applications.
In other words, the applicants provided with their applications all of the information upon which the DABT bases its argument that Michael J. Peter has an impermissible interest in the applicant businesses. And, while it is true that the applicants did not, at Section II, B., of the application form, list Michael J. Peter as a person who had an interest in the applicant businesses, neither did they hide the information upon which the
DABT now bases its argument in this regard. The failure to list Michael J. Peter at Section II, B., of the application form was explained by the fact that, on the basis of pre-application consultation with DABT staff, the applicants did not believe that Michael J. Peter had an impermissible interest in any of the applicant businesses. The fact that the documents comprising Respondent's Exhibits 5 and 6 were included with the application packages, and had previously been discussed with DABT staff indicates that the applicants were not trying to hide anything in this regard. Under these circumstances the omission of
Michael J. Peter's name from Section II, B., of the application form does not constitute false swearing.
Reason 7 of the Notice of Disapproval reads as follows:
7. The Applicants have falsely sworn to the alcoholic beverage license applications by not disclosing the direct or indirect financial interest of International Value Group, Inc., and/or Tathimtrans, LLP (a foreign corporation), and/or SS Trans, Inc., and/or Oakdale Trading (a foreign corporation), contrary to Section 559.791, Florida Statutes.
Sections 559.79 and 559.791, Florida Statutes, read as follows, in pertinent part:
559.79 Applications for license or renewal.--
Each application for a license issued by the Department of Business and Professional Regulation shall include a statement showing the name, address, and social security number of each person who owns 10 percent or more of the outstanding stock or equity interest in the licensed activity and the name, address,
and social security number of each officer, director, chief executive, or other person who, in accordance with the rules of the issuing agency, is determined to be able directly or indirectly to control the operation of the business of the licensed entity, and each application for renewal of such a license shall set out any changes in the required names and addresses which have occurred since the license was issued or last renewed.
Each application for a license or renewal of a license issued by the Department of Business and Professional Regulation shall be signed under oath or affirmation by the applicant, or owner or chief executive of the applicant, without the need for witnesses unless otherwise required by law.
559.791 False swearing on application; penalties.--Any license issued by the Department of Business and Professional Regulation which is issued or renewed in response to an application upon which the person signing under oath or affirmation has falsely sworn to a material statement, including, but not limited to, the names and addresses of the owners or managers of the licensee or applicant, shall be subject to denial of the application or suspension or revocation of the license, and the person falsely swearing shall be subject to any other penalties provided by law.
The greater weight of the evidence in these cases is to the effect that International Value Group, Inc., and/or Tathimtrans, LLP (a foreign corporation), and/or S.S. Trans Incorporated, and/or Oakdale Trading, Ltd., contributed funds that were ultimately transferred to Cinderella Ice, Inc., for the purpose of buying the applicant businesses. By reason of such financial contributions, one or more, perhaps all, of such companies have a direct or indirect financial interest in
Cinderella Ice, Inc., and/or in the applicant businesses. Such financial interests have not been disclosed. The failure to disclose is a violation of Section 559.791, Florida Statutes.
Accordingly, Reason 7 of the Notice of Disapproval is an appropriate basis upon which to deny these applications.
Reason 8 of the Notice of Disapproval reads as follows:
8. The Applicants have falsely sworn to the alcoholic beverage license applications by declaring on the applications that the source of investment funds was an 8.2 million dollar commercial loan from Pareks Banka in Riga, Latvia, contrary to Section 559.791, Florida Statutes.
The greater weight of the evidence in these cases is to the effect that the funds used by Cinderella Ice to purchase the applicant businesses came from International Value Group, Inc., and/or Tathimtrans, LLP (a foreign corporation), and/or
S.S. Trans incorporated, and/or Oakdale Trading, Ltd., and that the source of such investment funds was not an 8.2 million dollar commercial loan from the Pareks Bank. Such being the case, the applicants have falsely stated the source of the investment funds. Such a false statement is an appropriate basis upon which to deny these applications.
For the numerous reasons discussed above, all three of the alcoholic beverage applications at issue here should be denied. As noted near the beginning of the conclusions of law, the burden of persuasion remains upon the applicant to prove
entitlement to the license sought. The applicants in these cases did not even come close to meeting their burden of persuasion.
Their failure in this regard was primarily and fundamentally the result of their carelessness about, or their disregard for, accuracy, completeness , and truth. Much of the information provided by the applicants is inaccurate or illogical. Much of the information they provided is incomplete. Much of the information they provided is inconsistent with other information. And, finally, some of the information provided by the applicants simply appears to be false.
Based on the foregoing Findings of Fact and Conclusions of Law, it is
RECOMMENDED that the Division of Alcoholic Beverages and Tobacco issue a Final Order in this case denying all three of the applications for alcoholic beverage licenses at issue in these cases.
DONE AND ENTERED this 6th day of March, 1998, in Tallahassee, Leon County, Florida.
MICHAEL M. PARRISH
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847
Filed with the Clerk of the Division of Administrative Hearings this 6th day of March, 1998.
ENDNOTES
1/ The bankruptcy court actually issued two such orders; a short order issued on January 15, 1997, and a more extensive order issued on February 13, 1997.
2/ Rodion Sokrovichtchouk is referred to by his first name in most places in this Recommended Order. This choice was made in the interests of clarity and readability, and to minimize the possibility that the readers of this document might confuse a reference to Sokrovichtchouk for a reference to Skobeltsyn.
3/ At page 2 of the L-1 petition, Rodion is reported to have been a vice-president of Tathimtrans since 1994. However, in a letter dated January 31, 1997, submitted in support of the petition, it is reported that: "As Vice President, Mr.
Sokrovichtchouk [Rodion] has directed and managed the marketing and sales activities of Tathimtrans in Russia and Eastern Europe since 1993." The letter of January 31, 1997, was signed by Skobeltsyn.
4/ Lawrence Church mentioned this agreement between IVG and Cinderella Ice in his testimony at the final hearing. A copy of the agreement was not included in the record of these cases.
5/ The License and Support Agreement, at paragraph 1.1(c), defines "Products" as, ". . . without limitation, sundry items used or sold in connection with marketing, advertising, promotion and operation of the Licensed Businesses, such as T-shirts, calendars, matches, videotapes, posters, displays and various other promotional items."
6/ The applicants have not provided any information showing that Cinderella Ice, Inc., had any assets at all, other than the
$8,200,000 it received from the Parex Bank. Under the agreement that Cinderella Ice was proposing to enter into with Michael J. Peter, Cinderella Ice expected to acquire numerous assets, but it does not appear to have had any assets at the time of the wire transfer of $8,200,000 from the Parex Bank.
7/ The bank records of the account maintained at NationsBank in the name of S.S. Trans, Incorporated, as well as other records in evidence, indicate that Skobeltsyn treated the funds in the S.S. Trans account as though they were his own personal funds.
8/ The Petitioners have never provided the DABT with any information about the credit card accounts or the business and personal bank accounts maintained by Skobeltsyn in the Kazan branch of the Mezhcom Bank.
9/ Lawrence R. Church, presently employed as the chief executive officer of Cinderella Ice., Inc., testified at deposition that Skobeltsyn is making the interest payments from his own accounts. If this assertion is true, it raises more questions than it answers; questions such as: Why doesn't Skobeltsyn loan money to Cinderella Ice and let Cinderella Ice pay its interest obligations so that Cinderella Ice could report the interest payments as business expenses on its tax returns in the United States? Where does Skobeltsyn have accounts with sufficient funds to be paying $61,500 per month? (Especially in light of his "personal financial statement" showing he had only $40,000 cash and no stocks, bonds, or similar investments.) Has Skobeltsyn disclosed sources of funds sufficient to make monthly payments of $61,500? By paying the debts of Cinderella Ice from his own accounts, has Skobeltsyn, in essence, pierced the corporate veil himself?
10/ The Hearing Officer's conclusions of law in Torremolinos were adopted by the agency, and on August 31, 1983, the DABT issued a Final Order denying the alcoholic beverage license at issue in that case.
11/ Although not addressed by the DABT in its proposed recommended order, there is an additional problem regarding the management of the applicant businesses. Management must be by the licensee or by "his authorized employee or employees." The evidence in these cases shows that Rodion plays a significant role in the management of the clubs, but Rodion has not been shown to be an authorized employee. The exact nature of Rodion'd relationship to Cinderella Ice and the clubs is still somewhat of a mystery, which Rodion was unwilling to clarify. Nevertheless, the evidence is sufficient to support a finding that Rodion is not an employee of Cinderella Ice, or of the clubs operated by Cinderella Ice, but Rodion is actively involved in the management of Cinderella Ice and the clubs.
COPIES FURNISHED:
Miguel Oxamendi, Esquire Department of Business and
Professional Regulation 1940 North Monroe Street
Tallahassee, Florida 32399-1007
Louis J. Terminello, Esquire Chadroff, Terminello & Terminello 2700 Southwest 37th Avenue
Miami, Florida 33133-2728
Bruce S. Rogow, Esquire Beverly A. Pohl, Esquire
500 East Broward Boulevard, Suite 1930 Fort Lauderdale, Florida 33394
Captain Allen F. Nash
Division of Alcoholic Beverages and Tobacco
Post Office Box 934127 Margate, Florida 33063-4127
Richard Boyd, Director
Division of Alcoholic Beverages and Tobacco
1940 North Monroe Street Tallahassee, Florida 32399-0792
Lynda L. Goodgame, General Counsel Department of Business and
Professional Regulation 1940 North Monroe Street
Tallahassee, Florida 32399-0792
NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
All parties have the right to submit written exceptions within 15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
| Issue Date | Proceedings |
|---|---|
| Jul. 15, 2004 | Final Order filed. |
| Mar. 26, 1998 | Petitioners Revised Exceptions to the Recommended Order filed. |
| Mar. 16, 1998 | Cover Letter to R. Boyd & cc: Parties of Record from Judge Parrish (& Enclosed Respondent`s Exhibit 43) sent out. |
| Mar. 06, 1998 | Recommended Order sent out. CASE CLOSED. Hearing held 09/02-04/97. |
| Jan. 30, 1998 | (From T. Pohl) Notice of Counsel`s Change of Address filed. |
| Oct. 27, 1997 | Notice of Filing, Respondent`s Proposed Recommended Order filed. |
| Oct. 27, 1997 | Petitioner`s Proposed Recommended Order, and Disk with PRO in word, TAGGED) filed. |
| Sep. 29, 1997 | Replacement pages 21 and 22 of Transcript filed. |
| Sep. 22, 1997 | (3 Volumes) Transcript filed. |
| Sep. 02, 1997 | (Joint) Stipulation filed. |
| Sep. 02, 1997 | CASE STATUS: Hearing Held. |
| Aug. 27, 1997 | (Petitioner) Notice of Taking Deposition (filed via facsimile). |
| Aug. 27, 1997 | (Petitioner) Notice of Taking Deposition (filed via facsimile). |
| Aug. 25, 1997 | (From L. Terminello) Notice of Taking Depositions Duces Tecum in-Aid-of Execution filed. |
| Aug. 19, 1997 | (Petitioner) Amended Notice of Taking Deposition (filed via facsimile). |
| Aug. 15, 1997 | (Petitioner) Notice of Taking Deposition (filed via facsimile). |
| Aug. 13, 1997 | Order sent out. (9/2/97 hearing will begin at 1:00pm) |
| Jul. 30, 1997 | Letter to Judge M. Parrish from L. Terminello Re: Changing time of hearing; Notice of Taking Depositions filed. |
| Jun. 16, 1997 | Notice of Hearing sent out. (hearing set for Sept. 2-5, 1997; 10:30am; Ft. Lauderdale) |
| Jun. 06, 1997 | (From B. Rogow & B. Pohl) Notice of Appearance of Counsel (for case nos. 97-2261, 97-2262, 97-2263) filed. |
| May 30, 1997 | Order of Consolidation sent out. (Consolidated cases are: 97-002261, 97-002262 & 97-002263) . CONSOLIDATED CASE NO - CN002709 |
| May 28, 1997 | Joint Response to Initial Order filed. |
| May 20, 1997 | Initial Order issued. |
| May 13, 1997 | Agency Action Letter; Agency referral letter; Request for Administrative Hearing, letter form filed. |
| Issue Date | Document | Summary |
|---|---|---|
| Apr. 14, 1998 | Agency Final Order | |
| Mar. 06, 1998 | Recommended Order | Application for alcoholic beverage license should be denied where applicant is alien excluded from USA, applications are incomplete, applicant fails to furnish requested info, and application contains false statement. |
