STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, ) DIVISION OF ALCOHOLIC BEVERAGES ) AND TOBACCO, )

)

Petitioner, )

)

vs. ) Case No. 10-4974

)

S. T. COMPLEX, LLC, d/b/a FUN ) HOUSE NIGHTCLUB, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on October 8, 2010, by video teleconference, with the Petitioner appearing in Tallahassee, Florida, and the Respondent appearing in Lauderdale Lakes, Florida, before Patricia M. Hart, a duly- designated Administrative Law Judge of the Division of Administrative Hearings, who presided in Tallahassee, Florida.

APPEARANCES

For Petitioner: Jaakan A. Williams, Esquire

Department of Business and Professional Regulation

1940 North Monroe Street Tallahassee, Florida 32399-2202

For Respondent: Dean L. Wilbur, Jr., Esquire

11380 Prosperity Farms Road Suite 110A Palm Beach Gardens, Florida 33410

STATEMENT OF THE ISSUE

Whether the Respondent committed the violation alleged in the Administrative Complaint dated April 12, 2010, and, if so, the amount of surcharge, late penalties, and interest owed, and the administrative penalty, if any, that should be imposed.

PRELIMINARY STATEMENT

In an Administrative Complaint dated April 12, 2010, the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco ("Division"), charged S.T. Complex LLC, d/b/a Fun House Nightclub ("S.T. Complex"), with having failed to remit to the Division the surcharge on the sale of alcoholic beverages during the audit period extending from August 1, 2006, through June 30, 2007,("audit period"), in violation of sections 561.501(2) and 561.29(1)(a), Florida Statutes (2007).1 The Division sought in its Administrative Complaint the payment by S.T. Complex of $11,076.13, which includes surcharge principal in the amount of $7,129.90, surcharge interest in the amount of $512.53, and surcharge penalties in the amount of $3,433.70, as well as the imposition of administrative penalties.

S.T. Complex timely disputed issues of fact alleged in the Administrative Complaint and requested an administrative hearing. The Division transmitted the matter to the Division of Administrative Hearings for assignment of an administrative law

judge. Pursuant to notice, the final hearing was held on October 8, 2010.

At the hearing, the Division presented the testimony of Yvonne McNaughton, Robert Lerman, and Cesar Torres, and Petitioner’s Exhibits 3 and 5 were offered and received into evidence. S.T. Complex presented the testimony of Frank Garcia but did not offer any exhibits into evidence.

The one-volume transcript of the proceedings was filed with the Division of Administrative Hearings on October 25, 2010.

The Respondent’s request for an extension of time to file its proposed recommended order was granted, and the parties timely filed their findings of fact and conclusions of law, which have been considered in the preparation of this Recommended Order.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made:

1. The Division, within the Department of Business and Professional Regulation, is the state agency responsible for regulating the distribution and sale of alcoholic beverages within the State of Florida. § 561.02, Fla. Stat.

2. Pertinent to this proceeding, the Division maintained a district office located in Margate, Florida, which, in turn, had

   
   

   satellite offices located in Fort Myers, Florida, and West Palm Beach, Florida.

3. At the times material to this proceeding, S.T. Complex held a 4COP Quota License, number 60-13059, which was issued by the Division and which, among other things, allowed S.T. Complex to sell alcohol by the drink for consumption on the its premises.

4. In a letter dated October 11, 2007, the Division advised S.T. Complex that it was initiating a desk audit of S.T. Complex’s surcharge reports for the period extending from September 1, 2004, through June 30, 2007, using distributor sales information. The audit period was subsequently changed to the period extending from August 1, 2006, through June 30, 2007, because an audit of S.T. Complex’s surcharge reports had been completed for the period ending July 30, 2006.

5. The audit period ended with June 30, 2007, because the surcharge on the sale of alcoholic beverages had been repealed as of that date.

6. A questionnaire was enclosed with the October 11, 2007, letter, and S.T. Complex was asked to submit the completed questionnaire to the office of the Division located in Margate, Florida, no later than October 25, 2007. S.T. Complex was further directed to contact Yvonne McNaughton, the Division auditor assigned to conduct the audit of S.T. Complex’s

   
   

   surcharge reports, at the Division's Margate office if S.T. Complex had any questions about the audit; a phone number for Ms. McNaughton was provided in the letter.

7. S.T. Complex did not return the questionnaire enclosed with the October 11, 2007, letter and did not contact

   Ms. McNaughton regarding the audit. Consequently,

   
   

   Ms. McNaughton used the questionnaire submitted by S.T. Complex for the previous audit.

8. The questionnaire indicated that S.T. Complex had chosen the "purchase method" for the computation of the surcharge owed on its sales of alcoholic beverages, and S.T. Complex listed five distributors from which it purchased its supply of alcoholic beverages.

9. Under the purchase method for calculating the alcoholic beverage surcharge in effect at the times material to this proceeding, a business reported its beginning inventory and paid the surcharge on the full inventory. The business was required to send in monthly reports disclosing the amount of alcoholic beverages, by category, that the business purchased the previous month to replenish the original inventory. The business was required to remit the surcharge monthly on the amount of alcoholic beverages purchased. The business would then provide the Division its ending inventory and would receive a credit against the total surcharges paid throughout the year.

   
   

10. Pertinent to this proceeding, distributors of alcoholic beverages in Florida were required to report to the Division each month a detailed listing of the sales of alcoholic beverages in Florida. The distributors reported the name of the business, the amount in gallons of the various categories of alcoholic beverages sold to that business during the month, and the invoice number for each sale. This information was put into a database maintained by the Division, and the information in the database was used by the Division to compare the amount of purchases reported by a business with the amount of sales to that business reported by the distributors.

11. In conducting the audit of S.T. Complex,

    
    

    Ms. McNaughton discovered that it had not submitted any surcharge reports during the audit period and had not remitted any surcharge on the purchase of alcoholic beverages during the audit period. Ms. McNaughton, therefore, relied on the information provided by the distributors reporting sales of alcoholic beverages to S.T. Complex for the audit period. The amount of alcoholic beverages the distributors reported selling to S.T. Complex during the audit period was 2604 gallons of beer, 138.68 gallons of wine, and 1724 gallons of liquor. After Ms. McNaughton deducted an allowance for spillage, she calculated that the amount of alcoholic beverages subject to the

    
    

    surcharge was 2473.81 gallons of beer, 131.74 gallons of wine, and 1552.01 gallons of liquor.

12. Ms. McNaughton then calculated that S.T. Complex owed a total surcharge on alcoholic beverages purchased during the audit period of $7,129.90, which included a surcharge of

    $346.34 for beer; $140.96 for wine; and $6,642.60 for liquor purchased. Because S.T. Complex had not paid any surcharge during the audit period, a reporting penalty in the amount of

    $3,433.70 was added to the amount of the surcharge due, together with interest in the amount of $512.53, for a total statutory liability of $11,076.13.

13. A letter dated April 22, 2008, was prepared by the Division advising S.T. Complex of the amount of statutory liability owed as a result of the audit. Prior to sending the audit letter to S.T. Complex, the audit was reviewed by another Division auditor to determine if Ms. McNaughton had completed the audit properly and to verify her calculations. This review was completed on June 4, 2008, and no errors were found.

14. The April 22, 2008, letter was sent to S.T. Complex by certified mail on June 11, 2008, and the return receipt shows that it was received on June 12, 2008. S.T. Complex was advised that, if it disagreed with the audit findings, it had 30 days from the date the letter had been received to contact

    Ms. McNaughton, the auditor in charge of the audit.

    
    

    Ms. McNaughton's phone number and fax number were included on the letter, as well as the address for the Division's Margate, Florida, office.

15. Ms. McNaughton did not receive any communication from

    
    

    S.T. Complex about the audit, and the matter was forwarded to Captain Carol Oswiany on August 28, 2008, with a request that she file an administrative case against S.T. Complex for failure to pay the amounts stated in the surcharge audit for August 1, 2006, through June 30, 2007.

16. At the times material to this proceeding, Frank Garcia was the owner of S.T. Complex, and he managed the Fun House Nightclub, which was located in West Palm Beach, Florida.

17. Mr. Garcia was current with his surcharge payments as of the end of July 2006, and he was aware that the surcharge would be terminated as of June 30, 2007. Mr. Garcia believed that, because he would have an inventory of alcoholic beverages on June 30, 2007, he would receive a substantial offset against the surcharge he owed for the period extending from August 1, 2006, through June 30, 2007. Consequently, anticipating that his surcharge liability would be small and that it would be better to get a credit against the surcharge owed than to wait for a refund of the surcharge paid during the audit period,

    Mr. Garcia decided not to submit monthly reports on the purchases of alcoholic beverages for the nightclub during the

    
    

    audit period or to remit the surcharge due on these monthly purchases.

18. At the times material to this proceeding, Mr. Garcia kept his weekly inventory on a form he had devised for his own use. He used the point system for determining how much of each category of alcoholic beverages had been used during a given period of time. Mr. Garcia compared this information with the amount of alcoholic beverages in his stockroom, and he was able to determine how much of the various categories of alcoholic beverages he needed to purchase to replenish his inventory.

19. The information on the Mr. Garcia's forms was handwritten, and it was not transferred into a computer database. Mr. Garcia routinely discarded these inventory forms; they were used only for determining how much alcoholic beverages he needed to purchase for a given period of time and were essentially useless after the alcoholic beverages were ordered.

20. The nightclub was located a few blocks from the Division's West Palm Beach office, which was a satellite office of the district office in Margate. Because of its close proximity to Mr. Garcia's place of business, he routinely dealt with that office and had rarely had contact with the Division's Margate or Tallahassee, Florida, offices.

21. After he received the letter dated April 22, 2008, Mr. Garcia went to the Division's West Palm Beach office and

    
    

    spoke with Captain Carol Owsiany. According to Mr. Garcia, Captain Owsiany told him how to handle the matter.

22. Mr. Garcia then prepared a letter and went back to the West Palm Beach office and spoke with a Mr. Wilson. Mr. Wilson telephoned the Division's Tallahassee office, and Mr. Garcia assumes that Mr. Wilson was told how to proceed. Mr. Garcia provided Mr. Wilson with his explanation of why he believed the audit was wrong and told Mr. Wilson he wanted an informal hearing. Mr. Garcia observed Mr. Wilson type something into the office computer and assumed that he was transmitting the pertinent information to Tallahassee.

23. Although Mr. Garcia's testimony on this point is vague and somewhat confusing, he insisted that he provided the Division with the ending inventory of June 30, 2007, although it is unclear to whom he provided the inventory. It is clear, however, that Mr. Garcia had no contact with Ms. McNaughton.

24. Mr. Garcia heard nothing further from the Division until he was served with the Administrative Complaint dated April 12, 2010, which was signed by then Major Owsiany.

25. At the time he received the Administrative Complaint and at the time of the final hearing, Mr. Garcia did not have in his possession a copy of the ending inventory for June 30, 2007.

    
    

    
    

    Ultimate findings of fact

    
    

26. The evidence presented by the Division is sufficient to establish with the requisite degree of certainty that S.T. Complex failed to file monthly reports on the quantities of the alcoholic beverages it purchased during the audit period and failed to remit the surcharge due on its purchases of alcoholic beverages for the audit period. The testimony of Mr. Garcia that, upon receiving the April 22, 2008, letter, he went to the Division's West Palm Beach office for instructions on how to proceed and that he thought the matter had been resolved as a result of the actions of the Division's West Palm Beach office is credited. Significantly, however, Mr. Garcia failed to follow the explicit instructions in the April 22, 2008, letter that he contact Ms. McNaughton regarding any disagreement he had with the audit and explain to her the reasons for contesting the findings. For this reason, Mr. Garcia's defense that he timely advised the Division of his disagreement with the audit and provided the Division with the ending inventory for June 30, 2007, is not persuasive.

    CONCLUSIONS OF LAW

    
    

27. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and of

    
    

    the parties thereto pursuant to sections 120.569 and 120.57(1), Florida Statutes (2010).

28. In its Administrative Complaint, the Division seeks to collect from S.T. Complex surcharges due to be paid during the audit period, together with penalties and interest, and to revoke or suspend S.T. Complex's license or impose administrative fines on S.T. Complex. Therefore, the Division has the burden of proving by clear and convincing evidence that

    S.T. Complex committed the violations alleged in the Administrative Complaint. Dep't of Banking & Fin., Div.of Section. & Investor Prot. v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996); Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

29. Section 561.501, Florida Statutes, entitled "Surcharge on sale of alcoholic beverages for consumption on the premises," provides in pertinent part:

    1. The vendor shall report and remit payments to the division each month by the 15th of the month following the month in which the surcharges are imposed. For purposes of compensating the retailer for the keeping of prescribed records and the proper accounting and remitting of surcharges imposed under this section, the retailer shall be allowed to deduct from the payment due the state 1 percent of the amount of the surcharge due. Retail records shall be kept on the quantities of all liquor, wine, and beer purchased, inventories, and sales. However, a collection allowance is not allowed on any collections that are not timely remitted.

       If by the 20th of the month following the

       
       

       month in which the surcharges are imposed, reports and remittances are not made, the division shall assess a late penalty in the amount of 10 percent of the amount due per month for each 30 days, or fraction thereof, after the 20th of the month, not to exceed a total penalty of 50 percent, in the aggregate, of any unpaid surcharges. The division shall establish, by rule, the required reporting, collection, and accounting procedures. Records must be maintained for 3 years. Failure to accurately and timely remit surcharges imposed under this section is a violation of the Beverage Law.

       
       

       * * *

       
       

       (3) If any vendor fails to remit the surcharge, or any portion thereof, by the 20th of the month following the month in which the surcharges are imposed, there shall be added to the amount due interest at the rate of 1 percent per month of the amount due from the date due until paid. Interest on the delinquent tax shall be calculated beginning on the 21st day of the month following the month for which the surcharge is due.

       
       

30. Based on the findings of fact herein, the Division has proven by clear and convincing evidence that, because S.T. Complex failed to file monthly reports on the quantities of the alcoholic beverages it purchased during the audit period and failed to remit the surcharge due on its purchases of alcoholic beverages for the audit period, it violated section 561.501(1).

31. S.T. Complex, through Mr. Garcia, timely requested a hearing to dispute the facts alleged in the Administrative Complaint on May 11, 2010, but it failed to provide the Division

    
    

    with a copy of its inventory for the period ending June 30, 2007, even though it was required by section 561.501(1) to keep such records for a period of three years, or, in this case, until June 30, 2010. Accordingly, S.T. Complex is not entitled to a credit against the principal amount of surcharge owed for any inventory it might have had on June 30, 2007. S.T. Complex is, therefore, liable to pay the principal balance of the late surcharge in the amount of $7,129.90.

32. In addition to the principal balance of the surcharge owed for the audit period of August 1, 2006, through June 30, 2007, S.T. Complex owes the penalty specified in

    section 561.501(1) in the amount of $3,433.70, together with the interest specified in section 561.501(3) in the amount of

    $512.53, for a total amount owed to the Division of $11,076.13.

    
    

33. Section 561.501(1) provides that the "[f]ailure to accurately and timely remit surcharges imposed under this section is a violation of the Beverage Law," and, therefore,

    S.T. Complex, by failing to report and remit surcharges for the audit period, committed a violation of section 561.29(1)(a), which provides, among other things, that the Division has the authority to discipline any licenseholder if it was found that the licenseholder had violated any of the laws of Florida.

    Although the Division is given the authority in

    
    

    section 561.29(1) to revoke or suspend a license for violation

    
    

    of the Beverage Law, the Division is also given discretion in section 561.29(3) to impose an administrative fine in lieu of revocation or suspension.

34. In this case, the Division has proposed the imposition of an administrative fine against S.T. Complex for the violation of sections 561.501(1) and 561.29(1)(a). The administrative fine for such violation is set forth in the table attached to Florida Administrative Code Rule 61A-2.022, which rule specifies the penalty guidelines to be followed by the Division. The administrative fine specified for a first-offense violation of section 561.501 is 25 percent of the total late surcharge principal. In this case, 25 percent of $7,129.90 is $1,782.47.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco, enter a final order:

1. Finding S.T. Complex LLC, d/b/a Fun House Nightclub, guilty of having failed to report and remit the surcharge on alcoholic beverages consumed on its premises during the period extending from August 1, 2006, through June 30, 2007, in violation of section 561.501(1)(a), Florida Statutes;

2. Requiring S.T. Complex LLC to remit to the Division

   
   

   $11,076.13, which is composed of the principal balance of the

   
   

   surcharged owed for the period extending from August 1, 2006, through June 30, 2007, in the amount of $7,129.90, late penalties in the amount of $3,433.70, and interest in the amount of $512.53.

3. Finding that, as a consequence of its violation of section 561.501(1)(a), S.T. Complex violated the Beverage Law and, therefore, section 561.29(1)(a); and

4. Imposing an administrative fine in the amount of

$1,782.47, as specified in the table attached to Florida Administrative Code Rule 61A-2.022

DONE AND ENTERED this 26th day of January, 2011, in Tallahassee, Leon County, Florida.

S

PATRICIA M. HART

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 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 2011.

ENDNOTE

1/ All references herein to the Florida Statutes are to the 2007 edition unless otherwise specified.

COPIES FURNISHED:

Jaakan A. Williams, Esquire Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-2202

Dean L. Wilbur, Jr., Esquire

11380 Prosperity Farms Road Suite 110A Palm Beach Gardens, Florida 33410

Reginald Dixon, General Counsel Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

John R. Powell, Director Division of Alcoholic Beverages

and Tobacco

Department of Business and Professional Regulation

1940 North Monroe Street Tallahassee, Florida 32399

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: 10-004974

Orders for Case No: 10-004974