STATE OF FLORIDA, DEPARTMENT ) OF PROFESSIONAL REGULATION, ) BOARD OF ACCOUNTANCY, )
vs. ) CASE NO. 80-142
Respondent. )
Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings. This hearing was conducted on March 13, 1980, in the City Commission Room, City Hall, 2600 Hollywood Boulevard, Hollywood, Florida.
At the conclusion of that day of hearing, the case had not been concluded and it was, therefore, necessary to set aside a further date for hearing.
The date established for a further session in this matter was July 23, 1980. Prior to that date, the parties entered into a stimulation calling for the cancellation of the July 23, 1980, session and closure of the case. It was further repeated that they be granted ten (10) days from the date of the order of cancellation within which time they would be allowed to present their proposed Findings of Fact, Conclusions of Law and any Memoranda of Law to be considered by the Hearing Officer in preparing the Recommended Order. An order was entered on July 23, 1980, cancelling the hearing and closing the case and granting the parties tan (10) days from the date of the order within which time they would he allowed to submit their Proposed Findings of Fact, Conclusions of Law and Recommendations, together with Memoranda. At that time, it was indicated in the course of the order that the Recommended Order would be entered within thirty (30) days of July 23, 1980.
Counsel for the Respondent subsequently requested that he be given an additional ten (10) days beyond the time allowed by the July 23, 1980, order within which time ha could offer his Proposed Findings of Fact, Conclusions of Law and Recommendation, together with any memorandum, and the Petitioner's counsel agreed to this extension, which made the due date for these proposals August 12, 1980. Having extended the time for the submission of the proposals and memoranda, this Recommended Order is being entered within thirty (30) days of August 2, 1980.
For Respondent: Jonathan P. Rose, Esquire
The Petitioner in this action has accused the Respondent of violating Sections 473.04 and 473.251, Florida Statutes (1977); Pules 21A-4.01 and 21A- 7.01, Florida Administrative Code, as succeeded by Subsection 473.315(2) and Section 473.323, Florida Statutes (1979) and Rule 21A-22.01, Florida Administrative Code. Specifically, the Respondent is accused of undertaking an engagement in the practice of public accounting which he could not reasonably expect to complete with professional competence and that the Respondent committed acts discreditable to the profession with respect to accounting services provided to Mr. and Mrs. John E. Cholette.
The Respondent, Frank Berman, is a certified public accountant and is so licensed by the Petitioner, State of Florida, Department of Professional Regulation, Board of Accountancy. He held this license at all times pertinent to the case in inquiry.
This is an action by the Petitioner brought against the Respondent in the way of an Administrative Complaint charging the Respondent with these violations alluded to in the issues statement of this Recommended Order.
The Despondent requested that a formal hearing be conducted to consider this matter and the case was referred to the Division of Administrative Hearings and the hearing conducted on March 13, 1980.
The facts reveal that the Respondent began to provide services for a client, Inn on the Park, Inc., beginning in March of 1976. These services were provided while the Respondent was associated with Donald F. Powell, Certified Public Accountant, and the arrangement for the services was made by correspondence of Mr. Powell indicating that the Respondent would substitute for Powell in servicing the account of the aforementioned corporation.
The Respondent continued in his association with Powell in the year 1970 and in his involvement with the service of the account of that corporate client. His primary contact with the Corporation was with Nadine Cholette, who together with her husband, John Cholette, was the co-principal in this closely- laid Florida corporation.
By 1977 Frank Berman was no longer associated with accountant Powell but he continued to do accounting work for the Corporation, Inn on the Park, Inc. The services provided in the year 1977 were in keeping with the arrangement which the Cholettes had with Mr. Powell and are as reflected in the Petitioner's Composite Exhibits 1 and 2 and the Respondent's Composite Exhibits 1 and 2, admitted into evidence.
On February 6, 1978, the Respondent wrote Mrs. Cholette setting forth certain services he was prepared to provide her Corporation in that calendar year. This included provision for semiannual financial reports; filing intangible and tangible personal property tax returns for the Cholettes; preparing the annual corporate report for 1978 and preparation of individual United States income tax returns for the Cholettes, all for a fee of $400.00. This correspondence may be found in the Petitioner's Composite Exhibit 1. The
$400.00 fee was paid by the Cholettes, with the last installment of that amount being paid by check dated November 13, 1978, in the amount of $200.00.
In the year 1978, the Cholettes determined to sell the principal asset of their corporation, which was a motel owned by the Corporation. In contemplation of this sale of the asset, the Cholettes attempted to contact Berman to discuss the implications of this sale from an accounting point of view. These attempted contacts were in the form of telephone communications initially and when the Cholettes were unsuccessful in reaching the Respondent in that way, Mr. Cholette eventually went to Berman's office to determine if Berman would be available to attend the closing of the real estate. At that time a conference was held between Cholette and Berman.
This conference was held subsequent to the time the Cholettes received a deposit from the purchaser, with that deposit being made on September 7, 1978. Berman responded to the request by stating that he would be available to attend the closing on several days' notice. There was no formal letter of request for Berman's attendance at the real estate closing and no payment was made to Berman to secure his attendance at the closing.
The attorney for the Cholettes representing then at the real estate closing subsequently contacted the Respondent about being present at the closing, and the Respondent returned the call of the attorney and indicated to the attorney's secretary that he could not make the closing and did not understand why the Cholettes wanted him at the closing. The closing took place on October 13, 1978.
Mrs. Cholette wrote Berman on October 16, 1978, and in the course of that correspondence advised Berman that the "establishment" had been sold on October 13, 1978, which was the closing date. The letter went on to say that Mrs. Cholette would be in touch with the Respondent reference the closing of the "account" as soon as the October, 1978, month-end bank statement was received.
On October 18, 1978, Mrs. Cholette again wrote to Respondent and requested at that time to be advised in writing about the necessary steps to be taken if the Cholettes decided to close the Corporation, Inn on the Park, Inc., and specifically, what the fees would be to keep the Corporation active or inactive.
Following the October 18, 1978, correspondence, the Cholettes asked the Respondent to prepare their payroll tax returns for the Corporation in the third quarter of 1978 for filing. This was prepared on October 30, 1978, and a billing of $75.00 was made, which was paid by the Cholettes.
The Cholettes met with Berman on November 6, 1978, and in the course of that meeting the tax implications of the sale of the corporate asset, i.e., realty, were discussed with Berman with a view in the mind of the Cholettes toward the future investment of the net proceeds of this sale. At the time of the meeting, Berman had already responded to the inquiry of Mrs. Cholette in reference applicable fees for maintaining the Corporation in an active or
inactive state and did so by his correspondence of October 30, 1978, suggesting the fee schedule both that of the State of Florida and of Berman in his individual charges. There was further discussion at the conference on the subject of liquidation of the Corporation and Berman agreed to assist in those necessary steps to facilitate this end.
To close out the Corporation, it was necessary to have available the bank records of the Corporation including all outstanding disbursements by the Corporation, and on November 8, 1978, the Cholettes brought part of those records to the Respondent. This did net constitute all outstanding disbursements because checks were still being written by the Corporation after that date in November.
Some of the aforementioned checks are listed in the correspondence of Mrs. Cholette directed to the Respondent on November 23, 1978. This correspondence also again reminds the Respondent that the Cholettes are anxious to knew about the tax implications of the sale of the corporate asset in order to plan for future investments.
The Cholettes not having heard from the Respondent for a period of time, wrote him by registered letter on December 8, 1978, and following a series of telephone calls which the Respondent had not returned. The correspondence of December 8, 1978, asked when the Cholettes might pick up those papers related to the closing of their company's books. It was followed by another letter of January 9, 1979, from Mrs. Cholette to Herman asking when the "papers" would be ready and attaching a list of checks and deposits made by the Corporation after October, 1978, including checks drawn in January, 1979.
Another letter was written on January 13, 1979, from John E. Cholette to the Respondent recounting the matters of prior correspondence and advising the Respondent that the Cholettes intended to complain to the "Board of Accountancy" for Berman's delays.
The Cholettes did complain about the Respondent's service by a letter dated January 13, 1979.
Following that complaint the Respondent and the Cholettes met to try to reconcile their differences and to clear up pending matters. This meeting was at the instigation of the Respondent.
The meeting took place on February 7, 1979, and out of the meeting an arrangement was entered into in which $175.00 was paid to the Respondent in additional fees, $100.00 being for preparation of the payroll tax returns for the fourth quarter ending December 31, 1978, and $75.00 for setting up corporate books for the period August 1, 1978, through October 31, 1978. At the time of the meeting, Berman assured the Cholettes that the corporate books could be closed within one week and not later than February 16, 1979.
February 16, 1979, came and the Respondent called Mrs. Cholette and informed her that unless the Cholettes sent a letter of apology to the State Beard of Accountancy which retracted the grievances against him, the Respondent would not finish their work.
The following day, Mr. Cholette contacted the Respondent and reminded the Respondent of the discussions of February 7, 1979, between the Respondent and the Cholettes and also stated that by prior agreement (the agreement of February 6, 1978), the Cholettes had paid the Respondent to prepare the
Cholettes' individual income tax returns and for the preparation of a mid-year financial statement for the year 1978, neither of which had been delivered.
In fact, the individual income tax forms for the tax year 1978 and the mid-year corporate financial statement for the year 1977-78 had not been completed by the Respondent, notwithstanding the payment for these services. Nonetheless, the Respondent returned the papers and materials to the Cholettes on February 17, 1978, and terminated his arrangement to provide accounting services to the Cholettes.
Subsequent to the parting of the ways, the Cholettes employed the accounting firm of Marine, Andrews and Fisher, who in addition to other work, completed the individual income tax forms for the Cholettes at an additional cost to the Cholettes ever and above the amount of money that they had paid the Respondent to do this work.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this action.
At the conclusion of the case in chief of the Petitioner, the Respondent in the person of his counsel moved to dismiss bills action and ruling was reserved on that motion pending the opportunity to examine the evidence as submitted by the Petitioner. Upon consideration of that evidence, the Motion to Dismiss is DENIED.
It has been requested that official recognition be taken of former Rules 21A-4.01 and 21A-7.01, Florida Administrative Code, and current Rule 21A- 22.01, Florida Administrative Code, and in keeping with that request official recognition is taken of those Rules provisions.
The Petitioner has accused the Respondent of violating Sections 473.04 and 473.21, Florida Statutes (1977); Rules 21A-4.01 and 21A-7.01, Florida Administrative Code, as succeeded by Subsection 473.315(2) and Section 473.323, Florida Statutes (1979), and Rule 21A-22.01, Florida Administrative Code. Quoting from the Administrative Complaint, the factual allegation concerning the Respondent is to the effect that:
"He undertook an engagement in the practice of public accounting which he could not reasonably expect to complete with professional competence and committed acts discreditable to
the profession with respect to accounting services provided to Mr. and Mrs. John E. Cholette."
The Administrative Complaint in this cause mailed on December 20, 1979, sets forth Sections 473.04 and 473.251, Florida Statutes (1977), and Rules 21A-4.01 and 21A-7.01, Florida Administrative Code, as being the basis on which this Administrative Complaint is grounded. These statutory and rules provisions had been repealed prior to the institution of the Administrative Complaint, but they were in effect during the time of the business relationship between Berman and the Cholettes.
Sections 473.315 and 473.323, Florida Statutes (1979), and Rule 21A- 22.01, Florida Administrative Code, are present provisions dealing with some of the subjects addressed in the prior statutes and rules. Under the circumstances, the former statutory references and rules having been repealed, they do not form a heals for disciplinary action and it is the successor statutory references and provisions currently in effect which tide Respondent is called to answer, to the extent that the new statutory references and rules provisions are sufficiently similar in nature to the focus of the former statutory and rules provisions.
The present Section 473.315, Florida Statutes, and in particular, Subsection 473.315(2), Florida Statutes, states that:
"A certified public accountant shall not undertake any engagement in the practice of public accounting which he or his firm cannot reasonably expect to complete with professional competence."
This language is essentially the same as the former Rule 21A-4.01, Florida Administrative Code, which reads:
"A practitioner shall not undertake any engagement in the practice of public accounting which he or his firm cannot reasonably expect to complete with professional competence."
The word "competence" is more particularly discussed in Rule 21A- 22.01, Florida Administrative Code, which states:
"(1) A licensee shall comply with the following general standards end must justify any departures therefrom.
Professional competence. A licensee shall undertake only those engagements which he or his firm can reasonably expect to complete with professional competence.
Due professional care. A licensee shall exercise due professional care in the performance of an engagement.
Planning and supervision. A licensee shall adequately plan and supervise an engagement.
Sufficient relevant data. A licensee shall obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to an engagement.
A licensee who accepts a professional engagement implies that he has the necessary competence to complete the engagement according to professional standards, applying his knowledge and skill with reasonable care and diligence, but he does not assume a responsibility for infallibility of knowledge or judgment.
Competence in the practice of public
accounting involves both the technical qualifications of the licensee and his staff and his ability to supervise and
evaluate the quality of the work performed. Competence relates both to knowledge of the profession's standards, techniques and the technical subject matter involved, and to the capability to exercise sound judgment in applying such knowledge to each engagement.
The licensee may have the knowledge required to complete an engagement professionally before undertaking it. In many cases, however, additional research
or consultation with others may be necessary during the course of the engagement. This does not ordinarily represent a lack of competence, but rather is a normal part of the professional conduct of an engagement."
There was no counterpart to the provision in effect at the time of Respondent's employment by the Cholettes. As a consequence, while a violation of the terms and conditions of Subsection 473.315(2), Florida Statutes (1979), is tantamount to establishing a violation of the former provision Rule 21A-4.01, Florida Administrative Code, there can be no showing that the Respondent violated Rule 21A-22.01, Florida Administrative Code, per se, because this Rule or a reasonable facsimile did net exist at the time of the alleged violations. This later Rule may be used for describing what accounting "competence" means.
The second ground for action in this Administrative Complaint deals with the contention that the Respondent has committed acts discreditable to the accounting profession. Although former Rule 21A-7.01, Florida Administrative Code, held that this type of conduct on the part of the certificate holder was cause for disciplinary action, there is no contemporary statute or rule to that effect and the Respondent is no longer held to answer for that alleged violation and may not be disciplined under the theory that he has violated Rule 21A-7.01, Florida Administrative Code, repealed effective December 4, 1979.
In considering the remaining charge, the allegations set forth in the Complaint do not specify with particularity what aspect or aspects of the accounting services that the Respondent provided to Mr. and Mrs. Cholette were contrary to acceptable professional competence. Nonetheless, from the facts presented, it would appear that the Administrative Complaint deals with the Respondent's treatment of the Cholettes' sale of real estate and the attendant closing of their Corporation; and, secondly, the failure to provide those services set forth in the engagement letter of February 6, 1978, dealing with the preparation of semiannual financial reports for that tax year and the preparation of individual income tax returns for the Cholettes.
It may well be that the sequence followed in the sale of the principal corporate asset, i.e., the motel, and the subsequent liquidation of the Corporation owned by the Cholettes, was not In keeping with sound financial planning and good accounting principals as was suggested by the successor accounting firm of Marine, Andrews and Fisher; however, this determination cannot be made from the facts presented at the hearing. There were no legal references made and argued in the course of the hearing which would allow the trier of the fact to ascertain whether the opinion held by the successor
accounting firm was efficacious. Mere importantly, there was no competent, expert testimony to establish that it would be contrary to prevailing accounting practices in the community for the Respondent to fail to recognize the potential less to the Cholettes if the matters of their sale and liquidation were not wall considered, especially in view of the fact that no moneys were paid for this service.
On the other hand, the Respondent's participation in the closeout of the Cholettes' financial affairs related to the Inn on the Park, Inc., following the meeting of November 6, 1978, did not evidence the due professional care and the requisite qualities of planning and supervision envisioned by Rule 21A- 22.01, Florida Administrative Code, which discusses competence. His response to their needs was dilatory and did not evidence the necessary professional competence required by Subsection 473.315(2), Florida Statutes (1979).
The Respondent's failure to complete and render the semiannual financial report called for by his engagement letter of February 6, 1978, and the failure to complete the personal income tax returns of the Cholettes called for by the engagement letter was a unilateral act of abandonment of responsibility, and again, evidenced the lack of due professional care in the performance of the engagement within the meaning of Rule 21A-22.01, Florida Administrative Code, and for that reason the Respondent was not competent in providing these services. This failure to complete the subject two items found in the engagement letter of February 6, 1978, shows that he did not evince the requisite professional competence required by Subsection 473.315(2), Florida Statutes (1979).
Having found the Respondent to be in violation of Subsection 473.315(2), Florida Statutes (1979), the Respondent is subject to a disciplinary penalty in keeping with the authority of Subsections 473.323(1)(a) and (3), Florida Statutes (1979). This holding is reached in view of the fact that both the former disciplinary provision 473.251, Florida Statutes (1977) and the succeeding disciplinary provision, Section 473.323, Florida Statutes (1979), state that a violation of Chapter 73, Florida Statutes, subjects the certificate holder to disciplinary action. In this connection, the penalty imposed may not exceed five (5) years in length in view of the fact the former penalty provisions found in Section 473.251, Florida Statutes (1977) which were in effect at the time of the alleged violation did not allow the imposition of a penalty to exceed that length of time and even though the current disciplinary provision found in Section 473.323, Florida Statutes (1979), allows for total revocation, this penalty provision may not be applied ex poste facto.
Upon consideration of the facts found herein and the legal conclusions reached, it is RECOMMENDED that the Respondent, Frank Berman, have his Certified Public Accountant's license held with the State of Florida, Department of Professional Regulation, Board of Accountancy, suspended for a period of six (6) months. 1/
DONE AND ENTERED this 29th day of August, 1980, in Tallahassee, Florida.
CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
filed with the Clerk of the Division of Administrative Hearings this 29th day of August, 1980.
1/ The parties were given the opportunity to file Proposed Findings of Fact, Conclusions of Law and Recommendations and the Respondent in the person of his counsel has made such a filing. Prior to the entry of this Recommended Order, that proposal has been examined and to the extent that it is consistent with the Recommended Order, it has been utilized in preparation of the Recommended Order. To the extent that the proposal is inconsistent with the Recommended Order, it is rejected.
Jonathan P. Rose, Esquire Hubbart, Pitts & Wilson Biscayne Building, Suite 824
Nancy Kelley Wittenberg, Secretary Department of Professional Regulation 2009 Apalachee Parkway
