STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FIRST ENVIRONMENTAL LABORATORIES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 93-2051CVL

) DEPARTMENT OF MANAGEMENT SERVICES, )

)

Respondent. )

)

FINAL ORDER

The above matter came before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, after the parties waived their right to a hearing and submitted a stipulated record.

APPEARANCES

For Petitioner: Robert E. Wangard, Esquire

150 North Michigan Avenue, Suite 2500 Chicago, Illinois 60601

For Respondent: Terry A. Stepp, Esquire

Knight Building, Suite 312 2737 Centerview Drive

Tallahassee, Florida 32399-0950 STATEMENT OF THE ISSUE

The issue is whether petitioner should be placed on the convicted vendor list pursuant to Section 287.133, Florida Statutes.

PRELIMINARY STATEMENT

This matter began on March 15, 1993, when respondent, Department of Management Services, issued a notice of intent to petitioner, First Environmental Laboratories, Inc., advising of its intent to place petitioner on the Florida convicted vendor list. Such intended action was based on the fact that petitioner's president had been convicted in federal court of a public entity crime. On April 8, 1993, petitioner requested a formal hearing to contest this preliminary action. The matter was then forwarded by respondent to the Division of Administrative Hearings on April 12, 1993, with a request that a Hearing Officer conduct a formal hearing.

At the request of the parties, the matter was abated to July 30, 1993, and then again to November 1, 1993. On October 26, 1993, the parties advised that they had entered into a joint stipulation of fact thereby obviating the need for a formal hearing. They also stipulated into evidence exhibits A-N. A proposed final order was filed by respondent on November 16, 1993. A ruling on each proposed finding of fact is made in the Appendix attached to this Final Order.

FINDINGS OF FACT

Based upon all of the evidence, including the stipulation of counsel, the following findings of fact are determined:

1. Petitioner, First Environmental Laboratories, Inc. (FEL), is a Delaware corporation organized on April 10, 1989, for the purpose of owning, operating and carrying on an environmental laboratory testing business. It has no divisions or subsidiaries. Its principal place of business is located at 2 Stewart Court, Bridgeview Business Park, Denville, New Jersey.

   
   

2. The corporation was issued a certificate of authority to transact business in the state of Florida on September 1, 1989. Under that certificate, FEL has engaged in business operations and transactions with public entities as defined by Section 287.133, Florida Statutes. One such entity is the Department of Environmental Protection for whom FEL has provided services and bid on contracts.

   
   

3. FEL commenced active business operations on May 1, 1989. Effective the same date, Richard D. Posner was employed by FEL to be president of the company and to manage its business. Prior to joining FEL, Posner had been employed for many years by a company named United States Testing Corporation (USTC) in a senior management position. USTC also provides environmental laboratory testing services and is registered to do business with the state of Florida.

   
   

4. Posner caused FEL to employ certain other individuals who worked for him at USTC. Among others, they included Jane Dunn, Stephen Pevera, Seyed Dastgheyb, Hossein Behzadi and Eliezer Patxot (Posner associates).

   
   

5. In August 1989, FEL was served with a complaint in a civil lawsuit filed by USTC in Superior Court of New Jersey. Named as defendants were Posner, the Posner associates, FEL and Inchcape Inspection & Testing Services Limited, an affiliate of FEL located in England. The lawsuit alleged, among other things, that Posner and the Posner associates, while employed at USTC, had committed certain wrongful acts at issue in a government investigation of USTC.

   
   

6. FEL received a notice of temporary suspension from the Environmental Protection Agency (EPA) dated June 15, 1990, for a period of one year. The notice was based on what Posner and the Posner associates were alleged to have done while with USTC and the fact that they were subsequently employed by FEL. The EPA determined that FEL and Posner and his associates were "affiliates." The notice did not cite, however, any wrongdoing on the part of FEL, nor was it alleged that Posner and the associates committed any wrongful acts while employed by FEL.

   
   

7. By notice dated May 17, 1991, FEL's notice of temporary suspension by the EPA was amended to include allegations with respect to certain laboratory testing work performed by FEL in connection with a contract being performed by a company named EG&G for the Air Force. Subsequently, the suspension period was extended for a period of six months.

   
   

8. Posner and the Posner associates received individual notices of temporary suspensions from the EPA on June 19, 1990. The suspensions were for a period of one year and were based on acts committed by them while with USTC. None of the improper activities contained in the notices involved FEL.

9. FEL has not had any fines or damages imposed against it which would require payment. Moreover, FEL has cooperated with the EPA and the Department of Justice. More specifically, it submitted proposals to restructure the company, realign positions and duties, terminate certain personnel, including Posner and the Posner associates, and institute new quality assurance procedures. In addition, when it learned of the federal criminal investigation, it cooperated by providing copies of documents in its possession to the federal government.

   
   

10. The federal government's investigation centered on the activities of Posner and the Posner associates while with USTC, and included inquiry into the activities of Posner and the others while they were with FEL. The inquiry also focused on FEL's laboratory testing work in connection with the EG&G/Air Force contract. No charges were ever brought against FEL in connection with this investigation. Posner was later convicted in Federal District Court on two counts of violating Title 18, United States Code, Sections 1001 and 1002, a public entity crime. He was thereafter placed on the Florida convicted vendor list on May 17, 1993, by order of respondent, Department of Management Services (DMS).

    
    

11. FEL fully cooperated with DMS in connection with this investigation. It has disassociated itself from Posner, the Posner associates, and certain other employees hired by Posner by terminating their employment. Their termination occurred prior to Posner's conviction of a public entity crime and thus Posner was not active in the management of FEL after being convicted.

    
    

12. FEL's temporary suspension by the EPA expired on December 20, 1991. The EPA did not seek to extend or reimpose the suspension of FEL or to debar or otherwise preclude FEL from bidding on or performing government contracts. FEL is not now subject to any suspension, debarment or other similar action by any federal, state or local government department or agency.

    
    

13. Placing FEL on the convicted vendor list will reduce competition in the procurement of laboratory testing services. Also, both parties agree that FEL has demonstrated good citizenship by voluntarily terminating Posner's employment after it became evident that there was apparent substance to the charges against him by the EPA and the Justice Department, and by cooperating with investigations by those agencies and DMS.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to Subsections 120.57(1) and 287.133(3), Florida Statutes.

    
    

15. Subparagraph 287.133(3)(e)4., Florida Statutes, governs this controversy and provides as follows:

    
    

    4. In any proceeding under this section, the department shall be required to prove that it is in the public interest for the person to whom it has given notice under this section to be placed on the convicted vendor list. Proof of a conviction of the person or that one is an affiliate of such person shall constitute a prima facie case that it is in the public interest for the person or

    affiliate to whom the department has given notice to be put on the convicted vendor list. Prompt payment of damages or posting of a bond, cooperation with investigation, and termination of the employment or other relationship with the employee or other natural person responsible for the public entity crime shall create a rebuttable presumption that it is not in the public interest to place a person or affiliate on the convicted vendor list. Status as an affiliate must be proven by clear and convincing evidence. If the hearing officer determines that the person was not convicted or is not an affiliate of such person, that person or affiliate shall not be placed on the convicted vendor list.

    
    

    Although named as the respondent in this case, under the foregoing statutory scheme, the agency has the ultimate burden of proving that it is "in the public interest" for FEL to be placed on the convicted vendor list. A prima facie case as to this requirement can be made by showing "proof of conviction of the person or that one is an affiliate of such person." Here, DMS must prove "by clear and convincing evidence" that FEL was an "affiliate" of Posner, the individual convicted of a public entity crime. Once a prima facie case is established, FEL can create a rebuttable presumption to the contrary by demonstrating compliance with all or any of the mitigation criteria enumerated in the subparagraph. If this showing is satisfied, the burden then shifts back to the agency to overcome that presumption.

    
    

16. In order for the agency to prevail in this dispute, it must first show by clear and convincing evidence that FEL was an affiliate of Posner. An affiliate is defined in relevant part in paragraph 287.133(1)(a) as follows:

    
    

    1. "Affiliate" means:

       1. A predecessor or successor of a person convicted of a public entity crime; or

       2. An entity under the control of any natural person who is active in the management of the entity and who has been convicted of a public entity crime.

       
       

       Since the evidence does not support a conclusion that FEL is a "predecessor" or "successor" of Posner, nor is Posner a "predecessor" or "successor" of FEL, the first part of the statutory definition does not apply. Further, since the stipulated facts show that the offenses for which Posner was convicted were committed before he became employed by FEL, and he was terminated by FEL prior to the time of his conviction, FEL was never "under the control of any natural person who (was) active in the management of (FEL) and who has been convicted of a public entity crime." (Emphasis added) Put another way, Posner was not active in the management of FEL after being convicted, a necessary requirement under the law. Therefore, the second part of the statutory definition is also inapplicable. This being so, FEL cannot be deemed to be an affiliate of Posner and thus should not be placed on the convicted vendor list.

17. Assuming arguendo that DMS has established a prima facie case, both parties have stipulated that FEL has created a rebuttable presumption that it is not in the public interest to place FEL on the convicted vendor list. Since no proof was submitted to overcome that presumption, it is concluded that petitioner's name should not be placed on the convicted vendor list.

    
    

18. Respondent's motion to correct and substitute its exhibit list is hereby granted.

Based on the foregoing findings of fact and conclusions of law, it is ORDERED that petitioner not be placed on the Florida convicted vendor list. DONE AND ENTERED this 22nd day of November, 1993, in Tallahassee, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 22nd day of November, 1993.

APPENDIX TO FINAL ORDER, CASE NO. 93-2051

Respondent's proposed findings have been adopted in substance in this Final Order except where they have been deemed to be unnecessary, cumulative, irrelevant or a conclusion of law.

COPIES FURNISHED:

Robert E. Wangard, Esquire

150 North Michigan Avenue, Suite 2500 Chicago, Illinois 60601

Terry A. Stepp, Esquire Knight Building, Suite 312 2737 Centerview Drive

Tallahassee, Florida 32399-0950

Sylvan W. Strickland, Esquire Acting General Counsel

Knight Building, Suite 309 2737 Centerview Drive

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate procedure. Such proceedings are commenced by filing one copy of a notice of appeal with the agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the district court of appeal in the appellate district where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 93-002051CVL

Orders for Case No: 93-002051CVL