STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN P. CASTAGNA, )

)

Petitioner, )

)

vs. )

) FLORIDA REAL ESTATE COMMISSION, )

)

Respondent. )

Case No. 10-1538

)

RECOMMENDED ORDER

This case came before Administrative Law Judge John G. Van Langingham for final hearing by video teleconference on May 14, 2010, at sites in Tallahassee and West Palm Beach, Florida.

APPEARANCES

For Petitioner: Daniel Villazon, Esquire

Law Office of Daniel Villazon 1420 Celebration Blvd., Suite 200

Celebration, Florida 34747

For Respondent: Thomas Barnhardt, Esquire

Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner's application for licensure as a real estate sales associate should be granted despite Petitioner's conviction, in 2008, for misappropriation of insurance premiums, a first-degree felony.

PRELIMINARY STATEMENT

By a Notice of Intent to Deny dated March 2, 2010, Respondent Florida Real Estate Commission informed Petitioner John P. Castagna that it planned to deny his application for licensure as a real estate sales associate. Attached to the notice was a Key for License Denials, in which Respondent identified the several reasons behind its intended action; at bottom, these grounds were predicated on Mr. Castagna's record as a convicted felon, which he properly had disclosed, and the fact (also disclosed) that his license as an insurance agent previously had been revoked, owing to the crime (misappropriation of premiums) that the applicant had committed while transacting insurance in the state of Florida.

Mr. Castagna timely requested a formal hearing, and on March 22, 2010, the commission referred the matter to the Division of Administrative Hearings, where an Administrative Law Judge was assigned to conduct a formal hearing.

The hearing took place as scheduled on May 14, 2010, with both parties present. Mr. Castagna testified on his own behalf and called one character witness, Maurice J. Stigliano. The commission called no witnesses, but offered Respondent's Exhibit 1, which was received in evidence without objection.

The final hearing was recorded but not transcribed. Proposed Recommended Orders were due on June 4, 2010, in

accordance with the deadline established at the conclusion of the hearing. Each party timely filed proposed orders, and the undersigned has considered them.

Unless otherwise indicated, citations to the Florida Statutes refer to the 2009 Florida Statutes.

FINDINGS OF FACT

1. Respondent Florida Real Estate Commission ("FREC") is authorized to certify for licensure persons who are qualified to practice as real estate brokers and sales associates in the state of Florida.

2. In November 2009, Petitioner John P. Castagna ("Castagna") applied for licensure as a real estate sales associate.

3. In his application, Castagna truthfully answered the question asking whether he had ever been convicted of a crime. Castagna disclosed that in 2008, he had pleaded guilty to, and been convicted of, one count of misappropriation of insurance premiums, a first-degree felony for which he had been sentenced to 25 years' probation and ordered to pay restitution in the amount $710,247, of which $100,000 was to have been paid within

   10 days of the sentencing. (Castagna is required to pay the balance in monthly installments based on 10 percent of his net income.) In addition, the court had ordered Castagna to complete 16 hours of community service; be evaluated and, if

   
   

   necessary, treated for alcohol abuse; and not to travel outside Miami-Dade, Broward, and Palm Beach Counties without notifying his probation officer.

4. At the final hearing, Castagna testified credibly, albeit in general terms, about the circumstances surrounding the criminal offense for which he was convicted. The following findings on this subject are drawn from Castagna's testimony, which was not rebutted.

5. In 1978, after graduating from high school, Castagna began working with his father in the family's insurance agency, which operated in Connecticut. In 1992, Castagna moved to Florida, where he ran his own company, Castagna Specialty Risk, Inc. Castagna obtained the appropriate licenses to engage in insurance transactions in this state. In 1993, Castagna became licensed, as well, as a Florida real estate sales associate; he held such license without incident until 1997, when he opted not to renew it.

6. In or around 2001, Castagna began experiencing a series of losses, including a divorce, an illness requiring treatment with chemotherapy, and the death of his father. He drank heavily and his business suffered. To keep his company afloat, Castagna started in November 2001 to steal some of the funds that his clients had entrusted to him as their fiduciary, which

   
   

   funds he, in turn, was supposed to remit in payment of his clients' insurance premiums.

7. Castagna engaged in this criminal conduct for about two-and-a-half years. In January 2004, after receiving complaints about him, the Florida Department of Financial Services ("DFS") filed an Administrative Complaint against Castagna, charging him with various violations of the Florida Insurance Code. Castagna disputed the allegations. Meantime, he kept taking money from his clients for a couple more months, until April 2004. Ultimately, in February 2005, Castagna waived his right to a hearing on the administrative charges and surrendered his insurance licenses, effectively acquiescing to their revocation. Although DFS agreed that, after two years, Castagna would be able to apply for another insurance license, which might be issued if he could prove that the circumstances for which his previous licenses were revoked no longer exist, the conditions of his probation prohibit him from seeking employment in the insurance industry.

8. In March 2006, Castagna was arrested on criminal charges stemming from his misappropriation of clients' funds. This arrest led to the conviction described above.

9. As of November 2009, Castagna had paid approximately

   
   

   $101,000 in restitution. Because Castagna had no net income at the time of the final hearing, he was paying little or nothing

   
   

   toward the obligation to repay the money he wrongfully appropriated. Castagna hopes to have a career in commercial real estate, which is why he submitted the application that is the subject of the instant dispute. To that end, Castagna took an unpaid training position in December 2009 with Marcus & Millichap, which is a commercial real estate investment company, and he continued to work for the firm at the time of the hearing.

10. Castagna offered some evidence of rehabilitation. In particular, he testified that he had remarried; quit drinking in 2005 and has remained sober; started a company called CR Technologies, which, though unsuccessful, gave him access to customers' credit card information and required him to process thousands of financial transactions, all of which he handled without incident or complaint; and engaged in no misconduct since April 2004, a period of more than six years. The undersigned finds these facts, on which the evidence is not in conflict, to be true.

11. Castagna pointed out that, if he were to commit another criminal act, he would be subject to incarceration for violation of probation. He noted, as well, that if he were to receive a real estate license, he would be better able to make restitution to the persons from whom he stole premium funds. The undersigned accepts this testimony.

    
    

12. Castagna's brother in law, Maurice Stigliano, testified at hearing that Castagna is a good family man. The undersigned credits this testimony.

13. FREC maintains that Castagna cannot sufficiently demonstrate rehabilitation and, accordingly, presented no proof that, due to Castagna's past misconduct, Castagna would pose a danger to the public if he were granted a license to do business as a real estate salesperson.

14. The ultimate factual question, namely whether the public and investors would not likely be endangered were Castagna to be issued a license, is a close one. On the one hand, the undersigned believes there is little chance that Castagna would use his real estate license, were he to receive one, to commit crimes or other wrongs against persons with whom he would transact business. This is because, first, Castagna actually seems to have turned his life around. Second, at age 51, Castagna will probably be on probation for the rest of his working life; the threat of incarceration (for violating probation), if nothing else, seems likely to keep him in line.

15. On the other hand, the particular nature of Castagna's criminal behavior concerns the undersigned. He stole funds that clients had entrusted to him in a fiduciary capacity. See § 626.561(1), Fla. Stat. ("All premiums, return premiums, or other funds belonging to insurers or others received by an agent,

    
    

    customer representative, or adjuster in transactions under his or her license are funds received by the licensee in a fiduciary capacity."). This was a grave breach of trust. The unfortunate fact is that, when Castagna was under pressure, from serious, but not uncommon, losses (divorce, illness, death), he buckled and took advantage of others whose trust he had secured.

16. Castagna's crime, moreover, was not an isolated act, the product of a momentary lapse of reason and good judgment, but an ongoing course of criminal activity that lasted for more than two years and continued for a while even after complaints about his behavior had triggered an administrative investigation and disciplinary prosecution. In other words, once Castagna started stealing, he kept at it until he finally got caught.

17. Under the circumstances, the undersigned concludes, as a matter of ultimate fact, that six years of good conduct following the involuntary cessation of a multi-year pattern of criminality involving the theft of clients' funds held in a fiduciary capacity is an insufficient lapse of time to overcome the statutory disqualification from eligibility for licensure as a real estate salesperson that attaches to a prior finding of the applicant's guilt with regard to a crime or practice involving fraudulent or dishonest dealing.

    
    

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has personal and subject matter jurisdiction in this proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

19. As an applicant for licensure, Castagna bore the burden at hearing of going forward initially with proof of his qualifications; he was also required to shoulder the ultimate burden of persuasion. See Department of Banking & Fin., Div. of Sec. & Investor Protection v. Osborne Stern & Co., 670 So. 2d 932, 934 (Fla. 1996). Additionally, the burden of proving rehabilitation was on Castagna. See Antel v. Department of Prof'l Regulation, 522 So. 2d 1056, 1057, 1058 (Fla. 5th DCA 1988).

20. Before the Department of Business and Professional Regulation can issue a real estate license to an applicant, FREC must certify that the applicant is qualified to practice as a broker or sales associate. § 475.181(1), Fla. Stat. In addition to determining whether an applicant meets the qualifications for licensure, FREC has authority to "refuse to certify any applicant who has violated any of the provisions of

    s. 475.42 or who is subject to discipline under s. 475.25."

    
    

    § 475.181(2), Fla. Stat.

    
    

21. Section 475.17(1)(a), Florida Statutes, prescribes the qualifications for licensure to practice as a real estate broker or salesperson, as follows:

    An applicant for licensure who is a natural person must be at least 18 years of age; hold a high school diploma or its equivalent; be honest, truthful, trustworthy, and of good character; and have a good reputation for fair dealing. An applicant for an active broker's license or a sales associate's license must be competent and qualified to make real estate transactions and conduct negotiations therefore with safety to investors and to those with whom the applicant may undertake a relationship of trust and confidence. If the applicant has been denied registration or a license or has been disbarred, or the applicant's registration or license to practice or conduct any regulated profession, business, or vocation has been revoked or suspended, by this or any other state, any nation, or any possession or district of the United States, or any court or lawful agency thereof, because of any conduct or practices which would have warranted a like result under this chapter, or if the applicant has been guilty of conduct or practices in this state or elsewhere which would have been grounds for revoking or suspending her or his license under this chapter had the applicant then been registered, the applicant shall be deemed not to be qualified unless, because of lapse of time and subsequent good conduct and reputation, or other reason deemed sufficient, it appears to the commission that the interest of the public and investors will not likely be endangered by the granting of registration.

    
    

    (Emphasis added.)

    
    

22. FREC contends that Castagna's criminal conviction disqualifies him from eligibility for licensure, in that he was found guilty of conduct or practices which would have warranted the revocation of his real estate license had he held one at the time. FREC urges that denial of Castagna's application is authorized under Section 475.25, Florida Statutes, which provides in pertinent part as follows:

    1. The commission may deny an application for licensure . . . if it finds that the

       . . . applicant:

       
       

       * * *

       
       

       (b) Has been guilty of fraud, misrepresentation, concealment, false premises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence, or breach of trust in any business transaction in this state or any other state, nation, or territory . . . .

       
       

       * * *

       
       

       (f) Has been convicted or found guilty of, or entered a plea of nolo contendere to, regardless of adjudication, a crime in any jurisdiction which directly relates to the activities of a license broker or sales associate, or involves moral turpitude or fraudulent or dishonest dealing.

       
       

       * * *

       
       

       (o) Has been found guilty . . . of a course of conduct or practices which show that she or he is so incompetent, negligent, dishonest, or untruthful that the money, property, transactions, and rights of investors, or those with whom she or he may

       
       

       sustain a confidential relation, may not safely be entrusted to her or him.

       
       

23. That Castagna's criminal conviction for misappropriating his client's insurance premiums is disqualifying pursuant to the plain language of one or more of the foregoing statutory provisions is so obvious a conclusion as to obviate the need for legal analysis. The only question which is open to genuine debate here is whether, "because of lapse of time and subsequent good conduct and reputation, or other reason deemed sufficient, it appears . . . that the interest of the public and investors will not likely be endangered by the granting of registration." See § 475.17(1)(a), Fla. Stat. This is not a legal question, however, but one which requires, for its answer, a determination of ultimate fact. See, e.g., Aquino v. Department of Prof'l Regulation, 430 So. 2d 598, 599 n.3 (Fla. 4th DCA 1983)(hearing officer "misdesignated as a conclusion of law" the finding that applicant had been rehabilitated in the five years that had elapsed from her involvement in selling unregistered securities). The dispositive factual determination is set forth above.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Real Estate Commission enter a final order refusing to certify Castagna for licensure as a real estate sales associate.

DONE AND ENTERED this 29th day of June, 2010, in Tallahassee, Leon County, Florida.

JOHN G. VAN LANINGHAM

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2010.

COPIES FURNISHED:

Daniel Villazon, Esquire

Law Office of Daniel Villazon 1420 Celebration Blvd., Suite 200

Celebration, Florida 34747

Thomas Barnhardt, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399

Reginald Dixon, General Counsel Department of Business and

Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399-0792

Roger P. Enzor, Chair Real Estate Commission

Department of Business and Professional Regulation

400 West Robinson Street, Suite N801 Orlando, Florida 32801

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.

Docket for Case No: 10-001538

Orders for Case No: 10-001538