STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, DIVISION OF ) REAL ESTATE, )

)

Petitioner, )

)

vs. ) CASE NO. 87-2585

)

FRANK FOGLIANO, )

ROBERT JON CASAZZA and )

INTERVAL SALES AND )

PUBLISHING, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, W. Matthew Stevenson, held a formal hearing in this cause on June 25, 1987, in Vero Beach, Florida. The following appearances were entered:

For Petitioner: James H. Gillis, Esquire

Department of Professional Regulation Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

For Respondent: Michael J. Garavaglia, Esquire

3111 Cardinal Drive

Vero Beach, Florida 32963 PROCEDURAL BACKGROUND

By an Order of Emergency Suspension of Real Estate Licenses issued on May 29, 1987, by the Department of Professional Regulation, the licenses of Respondents, Frank Fogliano, Robert Jon Casazza and Interval Sales and Publishing, Inc., (hereinafter Interval Sales and Publishing) were immediately suspended pursuant to Section 120.60(8), Florida Statutes. On June 3, 1987, the Petitioner filed its formal Administrative Complaint charging that Respondents violated certain provisions of Chapter 475, Florida Statutes, as enumerated in the complaint. The Respondents disputed the allegations of fact contained in the complaint and requested a formal administrative hearing pursuant to Chapter 120, Florida Statutes. In addition, on June 26, 1987, Respondents filed Notice of an Appeal to the Florida Fourth District Court of Appeal, of the Order of Emergency Suspension entered on May 29, 1987, by the Department of Professional Regulation.

At the final hearing, the Petitioner presented the testimony of seven (7) witnesses. Petitioner's Exhibits 1-6 were duly offered and admitted into evidence. Respondents Fogliano and Casazza testified in their own behalf and presented the testimony of two (2) additional witnesses. Respondents' Exhibit 1 was duly offered and admitted into evidence. The parties have submitted post- hearing Proposed Findings of Fact. A ruling has been made on each Proposed Finding of Fact in the Appendix to this Recommended Order.

FINDINGS OF FACT

Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received and the entire record compiled herein, I hereby make the following Findings of Fact:

1. Respondent, Frank Fogliano, is now and was at all times material hereto, a licensed real estate broker in the State of Florida having been issued license numbers 0249363 and 0247571. The last licenses issued were as a broker with Interval Sales, Co., Inc., 606 North U.S. 1, Fort Pierce, Florida, and with Treasure Coast Business Consultants, Inc., 100 Avenue A, Fort Pierce, Florida.

   
   

2. Respondent, Robert Jon Casazza, is now and was at all times material hereto, a licensed real estate salesman in the State of Florida having been issued license number 0379594. The last license issued was as a salesman with Interval Sales Co., Inc., (hereinafter Interval Sales) 606 North U.S. 1, Fort Pierce.

   
   

3. Respondent, Interval Sales and Publishing, Inc. is now and was at all times material hereto a corporation registered as a real estate broker in the State of Florida having been issued license number 0246183. The last license issued was placed in limbo on January 29, 1987, when Respondent Fogliano, the qualifying broker, gave notice that he would no longer be associated with the corporation.

   
   

4. From September 8, 1986, to January 29, 1987, Respondent Frank Fogliano was licensed and operating as the sole qualifying broker for Respondent Interval Sales and Publishing. From October 1, 1986, to January 29, 1987, Respondent Casazza was licensed as a real estate salesman in the employ of Respondent, Interval Sales and Publishing.

   
   

5. At all times alleged herein, Respondents Fogliano and Casazza held a one-third interest each in Respondent Interval Sales and Publishing.

   
   

6. From August 8, 1986, through March 11, 1987, the Respondents have been engaged in the business of offering for sale condominium timeshare units owned by individual unit owners.

   
   

7. Respondents Fogliano and Casazza believed that the only effective way to stimulate buyer interest in the resale of timeshare units was through a marketing program and through the creation of lead generations. Conventional real estate operations will not normally list and sell timeshare units offered by individual unit owners.

   
   

8. In an attempt to develop a viable program for the resale of timeshare units, Respondents Fogliano and Casazza formed two separate companies, Respondent Interval Sales and Publishing, and Interval Sales. Interval Sales and Publishing was formed for the purpose of marketing timeshare units and

   Interval Sales was formed for the purpose of obtaining listings and effecting the resale of the timeshare units. Respondent Fogliano was the qualifying broker for both corporations.

   
   

9. Respondent Interval Sales and Publishing was conceived by Casazza and Fogliano as a marketing organization with the purpose of obtaining lead generations through the use of promotional devices such as vacations, cruises and social functions. Respondents believed that face-to-face sales presentations were the most effective way of attempting to resell timeshare units.

   
   

10. From August 8, 1986 through March 11, 1987, Respondent Interval Sales & Publishing mailed thousands of postcards and other publications to individual timeshare unit owners. The letters advised the timeshare unit owners that Respondent Interval Sales & Publishing had a timeshare resale program available and needed additional units in its "sales" inventory. When interested timeshare unit owners called the toll-free number listed on the mailings, they were advised that Respondent Interval Sales & Publishing would assist them in the resale of their units for a $199.00 promotional fee. After interested owners entered the program, their "listing" was given either to Interval Sales or Respondent Fogliano as real estate broker. The $199.00 fee went directly to Respondent Interval Sales & Publishing. Approximately 1,000 individual time share unit owners entered the program and paid Respondent Interval Sales & Publishing, the $199.00 fee.

    
    

11. Respondent Interval Sales & Publishing informed the timeshare owners that the $199 fee was for the purpose of paying the expenses of advertising, promotion, and giving of gifts to prospective purchasers.

    
    

12. In an attempt to lure potential buyers and create a market for the resale of the timeshare units, Respondent Interval Sales & Publishing offered mini-vacations, gifts, cruises and sponsored social events. In addition, Respondent Interval Sales & Publishing contracted with various companies such as Vacation Time and Vacation International that would provide potential buyers in exchange for a fee and the opportunity to use the offered timeshare units as part of vacation package plans.

    
    

13. The promotional activities of Respondent Interval Sales & Publishing resulted in approximately five to eight hundred prospective buyers visiting the various units. The prospective buyers were then given sales presentations by real estate sales personnel employed by Interval Sales.

    
    

14. The $199 fee was not placed into an escrow or trust account maintained by Respondent Interval Sales & Publishing. The money was deposited into a bank account maintained by Respondent Fogliano as "real estate broker" and then delivered to Respondent Interval Sales and Publishing.

    
    

15. Respondent Interval Sales & Publishing maintained a staff of approximately eight employees, including two secretaries. In addition, Respondent Interval Sales & Publishing employed the services of Larry Meadow, a certified public accountant who kept an accounting of all of the funds which came and went through the company. All of the funds obtained by Respondent Interval Sales & Publishing were expended on promotional activities, advertising, office expenses and salaries.

    
    

16. Respondent Interval Sales and Publishing expended the money without having provided a formal accounting to the owners or to the Florida Real Estate

    Commission. Respondents Fogliano and Casazza were aware of the advance fee provisions of Chapter 475, Florida Statutes (discussed in Conclusions of Law Section) but did not consider the fees received by Interval Sales and Publishing to be advance fees as contemplated by the statutes because they were used for "marketing."

    
    

17. Effective January 29, 1987, Fogliano terminated his licensing status with Respondent Interval Sales and Publishing but continued to hold a one-third interest in the company. Thereafter, Respondent Interval Sales and Publishing and Respondent Casazza continued with business as usual in the marketing of the timeshare units, i.e., soliciting $199 promotional fees from timeshare owners and attempting to create a cadre of interested buyers.

    
    

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings. Section 120.57(1), Florida Statutes.

    
    

19. The Petitioner, Florida Real Estate Commission, within the Department of Professional Regulation, is charged with the responsibility of enforcing the provisions of Chapter 475, Florida Statutes, as they relate to the imposition of licensure standards and standards for the practice of the real estate profession in its various forms in the State of Florida.

    
    

20. Section 475.25(1), Florida Statutes, provides that the Florida Real Estate Commission may take appropriate disciplinary action against a licensee if it finds that the licensee:

    
    

    (b) Has been guilty of fraud, misrepresent- ation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business trans- action.

    * * *

    1. Has failed to account ... to any person

       ... at any time ... as required by law

    2. Has violated any of the provisions of this Chapter or any lawful order or rule made or issued under the provisions of this Chapter or Chapter 455, F.S. ...

    
    

21. Section 475.452, Florida Statutes, provides in part that:

    
    

    1. It is unlawful for any broker to contract for or collect any advance fee for the

       listing of real property from any principal without depositing 75 percent of said amount, when collected, in a trust account with a bank or other recognized depository. Such funds shall be held as trust funds and may not be co- mingled with the funds of the broker who has collected the fee. Prior to the withdrawal of any fees from the trust account, the broker shall furnish a

       statement to the principal itemizing how the advance fees are to be expended and the amounts thereof ...

       
       

    2. The Commission may adopt such rules as are necessary to regulate the method of accounting to be complied with by all brokers in relation to advanced fees for the listing of real property.

       
       

22. Rule 21V-10.029 (Advanced Fee Accounting and Reporting Procedures), Florida Administrative Code, outlines the methods of accounting to be complied with by brokers in relation to advanced fees. Expenses such as "telephone calls, office supplies, rental, automobiles, commissions, controlled publications and etc.," are considered overhead of the broker and may not be paid from advanced fees.

    
    

23. In Counts I, II and III of the Administrative Complaint, Respondents Fogliano, Casazza and Interval Sales and Publishing are charged with fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction in violation of Section 475.25(1)(b), Florida Statutes.

    The Petitioner failed to prove by clear and convincing evidence that the Respondents are guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and/or breach of trust in a business transaction. The Respondents believed that they could re-sell the timeshare units, but felt that it was impossible to do so in the same manner that conventional real estate interests are sold, such as newspaper advertisements and signs. The Respondents made a bona fide attempt to sell the timeshare units. The Respondents informed the timeshare unit owners of their intent to use the $199 fee for promotional activities in an attempt to create a market for the timeshare units. The Respondents expended the money obtained from the $199 fee, as agreed to by the timeshare owners, on items and activities intended to lure potential buyers and create a market for the resale of the timeshare units. Respondents are not guilty as charged in Counts I, II and III of the Administrative Complaint.

    
    

24. In Counts IV and V of the Administrative Complaint, the Petitioner charges that Respondents Fogliano and Interval Sales and Publishing respectively, failed to place and maintain trust funds in a trust account in violation of Section 475.452(1), Florida Statutes, and Rule 21V-10.029, Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. The evidence established that, contrary to Fogliano's belief, the so- called "promotional fees" were in effect advance fees which were required to be placed and maintained in a trust or escrow account with strict accounting and expenditure procedures. Respondents Fogliano and Interval Sales and Publishing are guilty as charged in Counts IV and V of the Administrative Complaint.

    
    

25. In Counts VI and VII of the Administrative Complaint, Respondents Fogliano and Interval Sales and Publishing respectively, are charged with failing to account and deliver trust funds to the owners, the Petitioner and the Florida Real Estate Commission as required by Section 475.452, Florida Statutes, and Rule 21V-10.029, Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. The evidence established that the promotional "advance fees" collected by Respondent Interval Sales and Publishing were not maintained in a trust account and no "accountings" were provided as

    required because no trust account existed. Respondents Fogliano and Interval Sales and Publishing, Inc. are guilty as charged in Counts VI and VII of the Administrative Complaint.

    
    

26. In Counts VIII and IX, Respondents Interval Sales and Publishing and Casazza, respectively, are charged with having operated as a broker without being the holder of a valid and current license in violation of Section 475.42(1)(a), Florida Statutes, and therefore in violation of Section 475.25(1)(a), Florida Statutes.

    
    

27. If the license of at least one active broker is not in force, the registration of the corporation shall be automatically cancelled during that period of time. Section 475.15, Florida Statutes. Likewise, the license of a salesman shall be cancelled in the event a corporation through which the salesman is licensed does not have at least one active broker appointed. See Rule 21V-5.18, Florida Administrative Code.

    
    

28. After Respondent Fogliano withdrew as qualifying broker for Interval Sales and Publishing, Respondents Interval Sales and Publishing and Casazza continued to perform real estate brokerage and/or sales acts or services as previously performed. Although Respondent Casazza considered Interval Sales and Publishing a "marketing" company only and not involved in sales, the acts performed and services provided by the corporation were clearly real estate brokerage or sales acts as defined by Chapter 475, Florida Statutes. Any person or corporation who for a valuable consideration, takes any part in the procuring of sellers, purchasers or prospects for the sale or purchase of real property interests in Florida is operating as a real estate broker. See Section 475.01(c), Florida Statutes. Therefore, Respondents Interval Sales and Publishing and Casazza are guilty as charged in Counts VIII and IX of the Administrative Complaint.

RECOMMENDATIONS

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that:

1. An administrative fine of $3,000 be assessed against Respondent Interval Sales and Publishing, Inc. and the present suspension of license be continued until thirty days after the date of the Final Order.

   
   

2. An administrative fine of $2,000 be assessed against Respondent Frank Fogliano and the present suspension of license be continued until thirty days after the date of the Final Order.

   
   

3. An administrative fine of $1,000 be assessed against Respondent Robert Jon Casazza and the present suspension of license be continued until thirty days after the date of the Final Order.

DONE and ORDERED this 10th day of August, 1987, in Tallahassee, Florida.

W. MATTHEW STEVENSON Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 10th day of August, 1987.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-2585

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

Rulings on Proposed Findings of Fact Submitted by the Petitioner

1. Addressed in Conclusions of Law Section.

2. Adopted in Finding of Fact 1.

3. Adopted in Findings of Fact 2 and 4.

4. Adopted in Findings of Fact 3.

5. Adopted in Findings of Fact 4.

6. Adopted in Findings of Fact 5.

7. Adopted in Findings of Fact 6.

8. Partially adopted in Finding of Fact 10, matters not contained therein are rejected as contrary to the weight of the evidence.

9. Adopted in Finding of Fact 14.

10. Adopted in Finding of Fact 16.

11. Adopted in Finding of Fact 17.

12. Partially adopted in Finding of Fact 17, matters not contained therein are rejected as contrary to the weight of the evidence.

13. Rejected as contrary to the weight of the evidence.

Rulings on Proposed Findings of Fact Submitted by the Respondent

1. Addressed in Conclusions of Law Section.

2. Adopted in Finding of Fact 2.

3. Adopted in Findings of Fact 2 and 4.

4. Adopted in Finding of Fact 5. Adopted in Finding of Fact 4.

1. Adopted in Finding of Fact 5.

2. Adopted in Finding of Fact 8.

3. Adopted in Finding of Fact 9.

4. Adopted in Finding of Fact 11.

5. Adopted in substance in Finding of Fact 7.

6. Adopted in substance in Finding of Fact 10.

7. Adopted in substance in Finding of Fact 7.

8. Rejected as contrary to the weight of the evidence.

9. Adopted in Findings of Fact 10 and 16.

COPIES FURNISHED:

James H. Gillis, Esquire Department of Professional

Regulation

Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801

Michael J. Garavaglia, Esquire 3111 Cardinal Drive

Vero Beach, Florida 32963

Van Poole, Secretary Department of Professional

Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Joseph A. Sole, Esquire General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Harold Huff, Executive Director Division of Real Estate

400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802

Docket for Case No: 87-002585

Orders for Case No: 87-002585