STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS ) AND PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) Case No. 93-4027

) WILLIAM P. SHAUGHNESSY, CONIFER ) CONSULTING GROUP, INC. and ) CONIFER REALTY GROUP, INC., )

)

Respondents. )

)

RECOMMENDED ORDER

The final hearing was conducted on March 28, 1994, in Naples, Florida, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Steven W. Johnson

BPR, Division of Real Estate

400 West Robinson Street North 308 Orlando, Florida 32802

For Respondents: Leonard P. Reina

Forsyth, Brugger

600 Fifth Avenue, South Number 210

Naples, Florida 33940 STATEMENT OF THE ISSUE

The issues in the case are whether Respondents are guilty of failing to maintain an escrow account, make monthly escrow- account reconciliations, maintain the proper signage, and possess a current license while engaging in brokerage activities, and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

By Administrative Complaint filed June 16, 1993, Petitioner alleged that Respondents Shaughnessy and McClaran were licensed real estate brokers and Respondents Conifer Consulting Group, Inc. and Conifer Realty Group, Inc. were corporations registered as real estate brokers.

The Administrative Complaint alleges that Respondent McClaran was the broker for Respondents Conifer Consulting Group, Inc. and Conifer Realty Group, Inc. between August 24, 1991, and February 1992. The Administrative Complaint

alleges that, during this time, Respondents McClaran, Conifer Consulting Group, Inc. and Conifer Realty Group, Inc. failed to maintain an escrow account and failed to make monthly escrow account reconciliations.

The Administrative Complaint alleges that Respondent Conifer Realty Group, Inc. failed to maintain the required office entrance sign at its registered address in Bokeelia.

The Administrative Complaint alleges that Respondent Shaughnessy was hired in February 1992 to be the qualifying broker. The Administrative Complaint alleges that Respondents Shaughnessy, Conifer Consulting Group, Inc. and Conifer Realty Group, Inc. engaged in brokerage activities after February 1992 without a current license. The Administrative Complaint alleges that during this time Respondents Shaughnessy, Conifer Consulting Group, Inc., and Conifer Realty Group, Inc. failed to maintain an escrow account and failed to make monthly escrow account reconciliations.

Based on the foregoing, the Administrative Complaint alleges that Respondents are guilty of culpable negligence or breach of trust in any business transaction, in violation of Section 475.25(1)(b), Florida Statutes; the failure to maintain trust funds in an escrow account or other proper depository, in violation of Section 475.25(1)(k); the failure to make monthly escrow account reconciliations, in violation of Rules 21V- 14.012(2) and (3), Florida Administrative Code; and the failure to maintain an office entrance sign, in violation of Section 475.22(1) and Rule 2IV-10.024.

The Administrative Complaint alleges that Respondents Shaughnessy, Conifer Consulting Group, Inc., and Conifer Realty Group, Inc. are guilty of operating as a broker without holding a valid and current license, in violation of Sections 475.42(1)(a) and 475.25(1)(e). The Administrative Complaint alleges that Respondent McClaran is guilty of the failure to direct, control, or manage the acts of another, in violation of Sections 475.01(1)(c) and (d) and Section 475.25(1)(e).

Respondents demanded a formal hearing.

The parties offered evidence against all Respondents except Respondent McClaran, who settled the allegations against her. This recommended order therefore does not address Respondent McClaran as a party, and further references to her will be to "Ms. McClaran."

At the hearing, Petitioner called four witnesses and offered into evidence five exhibits. Respondents called one witness and offered into evidence one exhibit. All exhibits were admitted.

Neither party ordered a transcript. Each party filed a proposed recommended order, and rulings on the proposed findings are in the appendix.

FINDINGS OF FACT

1. Respondent Shaughnessy is a licensed real estate broker in Florida, holding license number 0079279 at all material times. He has been a real estate broker for 18 years.

   
   

2. Respondents Conifer Consulting Group, Inc. and Conifer Realty Group, Inc. are corporations registered as real estate brokers, holding license numbers 0271201 and 0271202, respectively.

3. In January 1992, Mr. Shaughnessy answered a want ad seeking a sales manager for single-family and condominium sales for Respondent Conifer Consulting Group, Inc.

   
   

4. Mr. Shaughnessy received an interview with Scott Spence, the minority owner of both Conifer corporations. Following a successful interview, Mr. Shaughnessy interviewed with Bruce Houran, the majority owner of the Conifer corporations.

   
   

5. Mr. Spence was the marketing director of the Conifer corporations. A civil engineer, Mr. Houran had provided the money for the businesses and relied on Mr. Spence's expertise in a wide variety of business matters, including the real estate operations.

   
   

6. Following a successful interview with Mr. Houran, Mr. Shaughnessy had a final interview with Mr. Spence and Mr. Houran. At the conclusion of the third interview, the three men agreed that Mr. Shaughnessy would join the Conifer corporations as a sales manager, devoting his efforts to managing the sole salesperson working for the Conifer corporations at Bocilla Island Club in Bokeelia. In return for his efforts, the Conifer corporations agreed to pay Mr. Shaughnessy the sum of $350 weekly plus certain expenses.

   
   

7. During the course of the interviews, Mr. Shaughnessy mentioned that he was a licensed real estate broker. The Conifer corporations were employing Ms. McClaran as their registered broker, but she had in reality only lent her license to the Conifer corporations in return for a portion of the sales and rental commissions.

   
   

8. Following the interviews, and outside the presence of Mr. Shaughnessy, Mr. Houran expressed interest to Mr. Spence in replacing Ms. McClaran with Mr. Shaughnessy. Pursuant to this plan, Mr. Houran sent a letter to Ms. McClaran, with a copy to Mr. Spence but not Mr. Shaughnessy, terminating her employment with the Conifer corporations. The letter states that they have hired Mr. Shaughnessy as a "sales manager with a Broker's license" and adds that he will be providing his license to the Conifer corporations. Pursuant to the employment contract with Ms. McClaran, the letter gives her 90 days' notice, and she continued to earn commissions on sales contracts executed during that time.

   
   

9. Unfortunately, no one told Mr. Shaughnessy that he was the new broker for the Conifer groups. Ms. McClaran's name continued to appear on the door to the real estate offices, even after the 90 days had expired. The Conifer corporations never had business cards printed up showing Mr. Shaughnessy as the broker, nor did Mr. Shaughnessy or anyone else hold Mr. Shaughnessy out as the broker for the companies.

   
   

10. In late October 1992, the Conifer real estate salesperson contacted the Florida Real Estate Commission to inquire as to the status of her pending application to become a broker. She learned that the Conifer corporations were no longer properly licensed, as their license had expired in March 1992.

    
    

11. The salesperson contacted Mr. Houran and told him about what she had learned. Mr. Houran called Mr. Shaughnessy and informed him of the licensing situation. Mr. Shaughnessy immediately began the process of placing his broker's license with Conifer Realty Group, Inc. (Mr. Houran decided not to continue to involve Conifer Consulting Group, Inc. in real estate activities.)

    Mr. Houran appointed Mr. Shaughnessy as an officer of Conifer Realty Group, Inc. on October 23, 1994. On November 4, 1992, Mr. Shaughnessy filed with Petitioner a Request for Change of Status to effect the necessary change.

    
    

12. Only when Mr. Shaughnessy filed the paperwork with Petitioner did his rate of compensation change. His old pay rate of $350 weekly was replaced by a new arrangement in which he received an equity interest in future developments created by either Conifer corporation.

    
    

13. In late October or early November 1992, Mr. Shaughnessy also began the process of creating an escrow account for Conifer Realty Group, Inc.

    Previously, all escrow monies had been deposited in the general operating account of the corporation. No one performed monthly reconciliations of escrow monies, although no monies were ever lost. Working as quickly as possible to transfer sales and rental escrow monies into the new account, Mr. Shaughnessy received the first bank statement for the account around December 6, 1992, performed the required reconciliation, and determined that the escrow account was in good order and balanced.

    
    

14. By the time of an inspection from one of Petitioner's investigators on December 4, 1992, there was no sign on the door of the real estate office at Bocilla Island Club. However, at that time, neither Conifer corporation had any relationship with the developer of the units, nor was either Conifer corporation conducting business of any sort out of this office. The salesperson who had discovered the problem had resigned, had formed a new company, had assumed Conifer's responsibilities for sales and rentals, and was using the old office at the Bocilla Island Club.

    
    

15. Until the time of the filing with Petitioner in November, Mr. Shaughnessy was never aware, nor could he have reasonably been aware, that his broker's license was to be used to qualify the Conifer corporations. Communications had broken down between Mr. Houran and Mr. Spence or Mr. Spence and Mr. Shaughnessy. In any event, Mr. Shaughnessy never agreed to place his license with either Conifer corporation until October 1992. At all material times during which Mr. Shaughnessy's broker's license was placed with the Conifer corporations, the escrow account was maintained and properly reconciled. There is no evidence that the signage was improper at anytime, except possibly in connection with the real estate office operated by the former salesperson.

    
    

16. However, the Conifer corporations are liable for the substantial period of time during which they operated without an escrow account. Although no money was lost or unaccounted for, management's casual attitude toward serious legal responsibilities is manifest in the sloppy way that the Conifer companies handled the transition between brokers and the improper relationship that they earlier maintained with Ms. McClaran. As a result of her involvement in the matter, Ms. McClaran, who was an inexperienced broker and personal friend of Mr. Spence, had her broker's license suspended for 90 days.

    
    

17. It is a matter of some mitigation that Mr. Spence is no longer involved with either Conifer corporation and that Mr. Houran reasonably expected that his noninvesting co-owner would provide something of value to the

    companies--namely, his expertise in real estate matters, including licensing. The absence of injury to the public, although irrelevant to the issue of liability, is another factor in mitigation, as is the quick action taken by the corporations, through Mr. Shaughnessy and at Mr. Houran's direction, to correct the situation as soon as it was brought to their attention.

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes. All references to Rules are to the Florida Administrative Code.)

    
    

19. Section 475.25(1) provides in relevant part:

    
    

    The commission may . . . place a licensee, registrant, or permittee on probation; may suspend a license, registration, or permit for a period not exceeding 10 years; may revoke a license, registration, or permit; may impose an administrative fine not to exceed $1000 for each count or separate offense; and may issue a reprimand, and any or of all of the foregoing, if it finds that the licensee, registrant, [or] permittee:

    * * *

    (b) Has been guilty of . . . culpable negligence . . . or breach of trust in any business transaction . . .; has violated a duty imposed upon him by law . . .; has aided, assisted or conspired with any other person engaged in any such misconduct and in furtherance thereof; or has formed an such intent, design, or scheme to engage in any such misconduct and committed an overt act in furtherance of such intent, design, or scheme. It is immaterial to the guilt of the licensee that the victim or intended victim of the misconduct has sustained no damage or loss . . . .

    * * *

    (e) 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.

    * * *

    (k) Has failed, if a broker, to immediately place, upon receipt, any money, fund, deposit, check, or draft entrusted to him by any person dealing with him as a broker in escrow with a title company, banking institution, credit union, or savings and loan association located and doing business in the state, or to deposit such funds in a trust or escrow account maintained by him with some bank, credit union, or savings and loan association located and doing business in this state, wherein the funds shall be kept until disbursement thereof is properly authorized. The

    commission shall establish rules to provide for records to be maintained by the broker and the manner in which such deposits shall be made.

    
    

20. Section 475.42(1)(a) provides: "No person shall operate as a broker .

    . . without being the holder of a valid and current active license therefor."

    
    

21. Section 475.22(1) provides:

. . . Each active broker shall maintain a sign on or about the entrance of his principal office and each branch office, which sign may be easily observed and read by any person about to enter such office and shall be of such form and minimum dimensions as shall be prescribed by the commission.

22. Rule 61J2-14.012(2) (former Rule 21V-14.012(2)) provides:

At least monthly, a broker shall cause to be made a written statement comparing the broker's total liability with the reconciled bank balance(s) of all trust accounts. . . .

1. Petitioner must prove the material allegations by clear and convincing evidence. Ferris v. Turlington, 510 So. 2d 292 (Fla. 1987).

   
   

2. Petitioner has failed to prove that Mr. Shaughnessy is guilty of culpable negligence or breach of trust in any business transaction or that he operated as a broker without being the holder of a valid and current license. Mr. Shaughnessy was not employed as the broker for the Conifer corporations. There is no clear and convincing evidence that Mr. Shaughnessy knew how the Conifer corporations were handling the escrow monies and escrow reconciliations; likewise, there is no such evidence that Mr. Shaughnessy was responsible for handling the escrow monies or maintaining the escrow account. As far as he knew, Mr. Shaughnessy was the sales manager, and Ms. McClaran was the broker. For these reasons, Mr. Shaughnessy is not responsible for the period of time that the Conifer corporations operated without a license.

   
   

3. There is no evidence that Mr. Shaughnessy or the Conifer corporations ever violated the requirement of an entrance sign.

   
   

4. Petitioner has proved by clear and convincing evidence that the Conifer companies are guilty of failing to maintain escrow accounts and operating as a broker without holding a valid and current broker's license. The failure to make monthly escrow account reconciliations is part of the failure to maintain escrow accounts because a nonexistent escrow account cannot be reconciled. Apart from evidence establishing the violations of the requirements of licensure and maintaining an escrow account, there is no evidence of an independent violation by the Conifer corporations of the prohibition against culpable negligence or breach of trust in a business transaction. The acts and omissions upon which discipline is predicated are best described as violations of the requirements of licensure and maintaining an escrow account.

5. Rule 61J2-24.001(3)(1) provides that the penalty range for a violation of Section 475.25(3)(k) is a minimum of a 90 days' suspension and $1000 fine up to a maximum of revocation. Rule 61J2-24.001(1)(u) provides that the penalty range for practice without a valid and current license is up to three years' suspension.

   
   

6. Rule 61J2-24.001(4)(a) permits either party to demonstrate by "clear and convincing evidence" the existence of aggravating or mitigating circumstances to allow deviation from the recommended penalty guidelines. Rule 61J2-24.001(4)(b) lists among aggravating or mitigating circumstances the severity of the offense, degree of harm to the public, number of same offenses committed by the licensee, disciplinary history of the licensee, status of the license at the time of the offense, and degree of financial hardship incurred by the licensee as a result of a fine or suspension.

   
   

7. There are no aggravating circumstances, although the Conifer companies' claim to ignorance is undercut somewhat by the irresponsible manner of their employment of Ms. McClaran. In any event, though, no injury was caused by the acts and omissions of which they have been found guilty, and the Conifer companies acted quickly to clear up the problems. The Conifer companies have no disciplinary history. These factors should ameliorate the penalties imposed for the failing to maintain an escrow account and operating as a broker without holding a valid and current broker's license.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Florida Real Estate Commission enter a final order dismissing the Administrative Complaint against William P. Shaughnessy; finding Conifer Realty Group, Inc. and Conifer Consulting Group, Inc. guilty of failing to maintain an escrow account and operating as a broker without holding a valid and current license as a broker; imposing an administrative fine of $4000 against the Conifer companies, jointly and severally; and issuing a reprimand against both companies.

ENTERED on April 20, 1994, in Tallahassee, Florida.

ROBERT E. MEALE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

FILED with the Clerk of the Division of Administrative Hearings on April 20, 1994.

APPENDIX

Rulings on Petitioner's Proposed Findings

1-8: adopted or adopted in substance.

9: rejected as unsupported by the appropriate weight of the evidence. 10-12: adopted or adopted in substance.

13: rejected as unsupported by the appropriate weight of the evidence and subordinate except for fact that there was no escrow account, which is adopted.

14-15: adopted or adopted in substance.

16: to the extent of implication that the office was that of a Respondent, rejected as unsupported by the appropriate weight of the evidence.

Rulings on Respondent's Proposed Findings

1-8 and 10: adopted or adopted in substance.

9: the state of mind of Respondents, as well as their degree of culpability, has been addressed in the recommended order.

COPIES FURNISHED:

Darlene F. Keller Division Director Division of Real Estate

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

Steven W. Johnson

BPR, Division of Real Estate

400 West Robinson Street N308 Orlando, Florida 32802

Leonard P. Reina Forsyth, Brugger

600 Fifth Avenue, South #210

Naples, Florida 33940

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

ALL PARTIES HAVE THE RIGHT TO SUBMIT WRITTEN EXCEPTIONS TO THIS RECOMMENDED ORDER. ALL AGENCIES ALLOW EACH PARTY AT LEAST 10 DAYS IN WHICH TO SUBMIT WRITTEN EXCEPTIONS. SOME AGENCIES ALLOW A LARGER PERIOD WITHIN WHICH TO SUBMIT WRITTEN EXCEPTIONS. YOU SHOULD CONTACT THE AGENCY THAT WILL ISSUE THE FINAL ORDER IN THIS CASE CONCERNING AGENCY RULES ON THE DEADLINE FOR FILING EXCEPTIONS TO 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: 93-004027

Orders for Case No: 93-004027