STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

COMPUTER SERVICE CONCEPTS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 94-5127

) COMMISSION ON MINORITY ECONOMIC ) AND BUSINESS DEVELOPMENT, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in this case in New Port Richey, Florida on February 7, 1995, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Brenda Willett, pro se

Computer Service Concepts, Inc. 7616 Industrial Avenue, Suite 3 New Port Richey, Florida 34668

For Respondent: Susan P. Stephens, Esquire

Office of the Attorney General PL-01 The Capitol

Tallahassee, Florida 32399-1050 STATEMENT OF THE ISSUES

The issue for consideration in this hearing was whether Petitioner should be certified as a Minority Business Enterprise.

PRELIMINARY MATTERS

By letter dated August 24, 1994, Marsha Nims, Certification Manager for the Minority Business Advocacy and Assistance Office of the Commission on Minority Economic and Business Development, (Commission), notified Ms. Willett that her application for the certification of Petitioner, Computer Service Concepts, Inc., (Computer Service), had been denied for various reason stated therein.

Thereafter, counsel for Petitioner filed its Notice of Appeal and Request for Administrative Hearing and this hearing followed.

At the hearing, Petitioner presented the testimony of Brenda Willett, its President. Respondent presented the testimony of Ms. Willett and Hector A. DeLaO, a certification officer with the Commission. Respondent also introduced Respondent's Exhibits 1 through 3.

No transcript was provided. Only Respondent submitted Proposed Findings of Fact which have been accepted and are incorporated in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times pertinent to the issues herein, the Respondent, Commission, was the state agency responsible for the certification of Minority Business Enterprises in Florida.

   
   

2. Petitioner, Computer Service, was founded by Ronald E. Willett in January, 1987. It is a computer maintenance and repair company of which Brenda Willett is currently President and Chairman of the Board and owner of a 51 percent share of the capital stock issued on December 15, 1993. Ronald E. Willett is the Executive Vice-president, a Director, and owner of a 49 percent share of the capital stock. Mr. Willett was the sole owner and Chairman of the Board until May, 1994, at which time he gave 51 percent of the stock to his wife, Ms. Willett, and the Board elected her Chairman.

   
   

3. Ms. Willett has been in the data processing field for 13 years. Before she began working with the Petitioner, she was a computer programmer for the State Attorney's office. She uses computer software to help with managing the affairs of the company, but she is neither a programmer nor a technician. She does not do any repair work for the company because she is not trained to do it. Most of the repair work is done by her husband and two computer engineers employed by the company. A fifth employee works in the warehouse and repairs printers.

   
   

4. Of the non-family employees, Ms. Willett interviewed one and hired another. Now she is responsible for all interviewing and hiring. Because of the technical nature of the work, however, she does the initial screening interview after which either Mr. Willett or one of the engineers evaluates the candidates' technical qualifications. She completes the evaluations of her employees' performance by relying on her customers to evaluate the employees' technical performance. In addition, she notes when an employee orders an inordinate amount of parts for a job instead of doing repair work because that generally indicates the employee is not performing properly.

   
   

5. Ms. Willett is paid $1,500 every two weeks. Her husband is paid $6,500 per month, and each of the engineers is paid $40,000 per year. Ms. Willett is primarily in charge of the business administration. The inventory of repair parts is maintained at the company warehouse and at the various work sites where the company has contracts to maintain the equipment. Each repairman notifies her of the parts needed. She gets prices and orders the needed parts.

   
   

6. The company does not have a line of credit with suppliers. Ms. Willett has, in the past, personally signed for a line of credit which was used for the company. The company presently owes $18,000 to a power supply company under a contract which she negotiated. For the past year, she has been the only company official to sign to commit the company on loans.

   
   

7. In addition, Ms. Willett negotiates the company's contracts with customers and she works as a team with the engineers on pricing. The company works on a basis of 35 - 50 percent off IBM prices for similar service. Though her husband helps her decide on what machines the company can buy and repair, she would not need to replace him if he should retire. He is currently working only 18 -20 hours per week.

8. The company submitted its application for minority business enterprise certification on April 18, 1994. Ms. Willett indicated she did not know about the program until it was mentioned to her by an instructor in a course she was taking, and she felt it would help her secure business. As a woman, she was finding it difficult to be taken seriously by the male business officers and managers she dealt with in soliciting business, and she understood that the minority certification would help her qualify for state contracts.

   
   

9. The initial review of Petitioner's application was accomplished by Mr. DeLaO, who requested and received from Petitioner matters needed in clarification or amplification of the information contained in the application. Mr. DeLaO also conducted a telephone interview with Ms. Willett to determine how the business was operated and to reaffirm the accuracy of the documentation.

   Mr. DeLaO did not look elsewhere for information. Based on the information listed above, he recommended denial of the Petitioner's certification.

   
   

10. Mr. DeLaO's recommendation was based on several factors, all of which are listed in the recommendation submitted in writing to his supervisor. The problems he found included:

    
    

    1. The risk of the minority owner, as weighed against the risk of the non-minority owner indicated Ms. Willett, who had received her shares as a gift, had no investment in the corporation to lose. Mr. DeLaO felt the risk of the minority owner should be greater than

       that of the non-minority owner. Risk was defined as the amount of investment capital put in to start the company or to purchase ownership.

    2. The minority owner's wages were not commen- surate with her percentage of ownership. Here, Mr. Willett, the non-minority owner, was making more than she was, as were both engineers.

    3. The Board of Governors of the corporation was not controlled by the minority owner. At the time of the review, only Mr. Willett was on the Board. Now that she is on the Board, she still does not control it because she one of only two Directors.

    4. Ms. Willett does not appear to have the technical expertise and capability to control the business of the company. She does not appear to have the technical education or experience to do the work of the company herself or to properly evaluate how her employees are performing it - computer repair. Her contribution appeared to

       be only administrative.

       
       

11. Ms. Willett admits her ownership of the 51 percent of the shares of the company was a gift from her husband who felt she deserved it. She claims, however, that the initial cash infusion to the company, when it was first started, came from jointly owned funds utilized to purchase the necessary tools to start Mr. Willett in business. From that initial investment the corporation grew. It should be noted, however, that the actual transfer of stock ownership to Ms. Willett took place just four months prior to the filing of the

    application for certification, and Ms. Willett's election to the Board came in May, 1994, after the application was filed.

    
    

12. The allegation regarding Ms. Willett's salary relative to that of her husband and two of the three other employees is correct. By the same token, the comments regarding her Board membership are also correct. In addition, it is clear her technical competence is insufficient to permit her to accomplish a majority of the computer repair functions completed by her employees. Whether she must be qualified to perform all tasks done by each employee is debatable. She must, however, have a general knowledge of the business which would make her supervision and management meaningful, and it is not at all clear she possesses either those skills or that knowledge. She is quite correct in her claim, however, that if she did not get the contracts, the workmen would have no work to do.

    
    

13. Mr. DeLaO's supervisor, to whom his recommendation for denial of certification was addressed, on August 24, 1994 concurred with his recommendation and notified Ms. Willett, on behalf of the Petitioner, that the request for certification as an MBE was denied. The letter of denial contained the Commission's basis for denial.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.

    
    

15. The burden of proof is upon the Petitioner, Computer Service, to establish its entitlement to the requested certification by a preponderance of the evidence. Florida Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

    
    

16. A minority Business Enterprise is defined by Section 288.703, Florida Statutes, as:

    
    

    (2) 'Minority Business Enterprise' means any small business concern as defined in subsection

    (1) which is organized to engage in commercial transactions, which is domiciled in Florida,

    and which is at least 51 percent owned by minority persons who are members of an insular group that is of a particular racial, ethnic, or gender

    makeup or national origin, which has been subjected historically to disparate treatment due to identification in and with that group resulting

    in an under-representation of commercial enter- prises under the group's control and whose management and daily operations are controlled by such persons.

    
    

17. Here there can be no question that Brenda J. Willett is a minority person, (woman), or that she owns more that 50 percent of the company at the present time and at that time the company applied for MBE certification. By the same token, there is no question that she holds the title and position claimed in the application. There is, however, a definite question as to whether her ownership of the controlling interest, (51 percent), which was admittedly given

    to her by her husband, qualifies as a bona fide transaction or is merely a subterfuge to meet a technical requirement of the statute.

    
    

18. The Department has promulgated Rule 60A-2.001(2), F.A.C., which provides that the ownership exercised by minority persons shall be real, substantial and continuing and shall go beyond mere pro forma ownership as reflected in the company documents. Not only should the ownership interest be based on an exchange of capital which is real and substantial, but the minority owner should be able to show that she receives income, earnings and benefits which are commensurate with her percentage of ownership. She must also share in business risks commensurate with her percentage of ownership.

    
    

19. Here, the evidence shows that though she is the President of the company and owns 51 percent of the stock, she receives a salary less than half than that paid to her husband. Her initial investment in the tools used by her husband when he started the company does not constitute a valid contribution justifying 51 percent of the stock, especially when such ownership comes years after the initial investment and only after a decision was made to apply for MBE certification.

    
    

20. The major issue for resolution, deals not with form or ownership or position, but to the substantive question of whether Ms. Willett possesses the technical training, experience and skills required to exercise functional control over the company and its assets.

1. The Department has promulgated several rules on the subject which assist in making that determination. Rule 60A-2.005(3), F.A.C., provides:

   
   

   ... the minority owner shall control the purchase of goods, equipment, business inventory and services needed in the day-to day operation of the business. [Her] control of purchasing shall be evidence of [her] knowledge of products, brands, manufacturers, types of equipment and products and their uses, etc., rather than merely reflective of [her] ministerial execution of the ordering/acquisition of goods.

   
   

2. Ms. Willett testified that her purchasing of parts and equipment was based on input from the service technicians and she purchased what they ordered without questioning it other than if a particular technician unjustifiably ordered more parts than others. This does not meet the criteria outlined in the rule provision cited.

   
   

3. Similarly, the rule requires the minority owner to control the hiring, firing and supervision of all employees. Granted, the rule permits the delegation of the hiring and firing of employees to others, but the minority owner must still demonstrate that her knowledge and capability are sufficient to evaluate the employees' performance. Again, while Ms. Willett may initially interview prospective employees, by her own testimony, she defers to her husband or the other engineers on the prospective employee's qualification. By the same token, he evaluation process is based on what she is told by other employees and her customers. This does not meet the criteria.

   
   

4. The ultimate issue is that addressed in Rule 60A-2.002(3), F.A.C., which requires the minority owner to have the managerial and technical capability, knowledge, training, education and experience required to make

   decisions regarding the particular type of work. In addition, Rule 60A-2.005(3) requires the minority owner to show "personal direction and actual involvement with all major aspects of the ... business." Recognizing that management and technical responsibilities might be delegated to others, the rule requires the minority owner to substantiate she has caused the direction of the management of the business and each phase of the business through her demonstrable knowledge of and capability in the delegated areas.

   
   

5. To be sure, to qualify Ms. Willett need not demonstrate that she repairs computer equipment. What she must demonstrate, however, is that she has the background to understand and work with the technical and other specialized areas of the operation. There can be little dispute that Ms. Willett is a good business woman, a good manager, and a good contractor. However, the evidence presented by Petitioner does not satisfy the burden to establish that she runs this business.

   
   

6. Certainly, Ms. Willett runs the front office. She enters contracts for the business to perform. She is involved to some degree in the hiring and firing of personnel. However, she has not shown that she can run the business without her husband or someone of his qualifications assisting, and the degree of her compensation, less than half of what he receives and less than any of the computer technicians receives, is indicative of the relative positions of the parties. What is clear is that this is Mr. Willett's business. He built it up, developed it and gave Ms. Willett her majority stockholder position. She does her share, but he runs the business.

RECOMMENDATION

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

RECOMMENDED that Respondent enter a Final Order in this case denying Computer Service Concepts, Inc.'s request for certification as a minority business enterprise.

RECOMMENDED this 28th day of February, 1995, in Tallahassee, Florida.

ARNOLD H. POLLOCK

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 this 28th day of February, 1995.

COPIES FURNISHED:

Brenda J. Willett, pro se Computer Service Concepts, Inc. 7616 Industrial Avenue, Suite 3 New Port Richey, Florida 34668

Susan P. Stephens, Esquire Office of the Attorney General The Capitol, Suite PL-01 Tallahassee, Florida 32399-1050

Crandall Jones Executive Administrator

Commission on Minority Economic and Business Development

Knight Building

2727 Centerview Drive

Tallahassee, Florida 32399-0950

General Counsel

Commission on Minority Economic and Business Development

Knight Building

2727 Centerview Drive

Tallahassee, Florida 32399-0950

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 consult with the agency which will issue the Final Order in this case concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency which will issue the Final Order in this case.

Docket for Case No: 94-005127

Orders for Case No: 94-005127