STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LYNX AIR INTERNATIONAL, INC., )

)

Petitioner, )

)

vs. ) Case No. 97-0635

)

DEPARTMENT OF BANKING AND )

FINANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to Notice, this cause was heard by Linda M. Rigot, the assigned Administrative Law Judge of the Division of Administrative Hearings, on June 24, 1997, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Michael A. Noto, Esquire

505 South Flagler Drive, Suite 1001 West Palm Beach, Florida 33401

For Respondent: Robert Alan Fox, Esquire

Office of the Comptroller The Fletcher Building

101 East Gaines Street, Suite 526 Tallahassee, Florida 32399-0350

STATEMENT OF THE ISSUE

The issue presented is whether Petitioner's application for registration as a funds transmitter should be granted.

PRELIMINARY STATEMENT

The Department denied Petitioner's application for registration as a funds transmitter, and Petitioner timely

requested an evidentiary proceeding regarding that denial. This cause was thereafter transferred to the Division of

Administrative Hearings to conduct that evidentiary proceeding.

Petitioner presented the testimony of C. A. Southerland,

1. C. Blackburn, and Fred Emanuel Leveille. The Department presented the testimony of Pam Henley. Additionally, Petitioner's Exhibits numbered 1-6 and the Department's Exhibits numbered 1-3 were admitted in evidence.

   Both parties submitted post hearing proposed recommended orders. Those pleadings have been considered in the entry of this Recommended Order.

   Pursuant to Section 560.129(2)(a), Florida Statutes, the record in this cause has been sealed to maintain the required confidentiality.

   FINDINGS OF FACT

   
   

   1. Petitioner is a scheduled, commercial airline, certified by the Federal Aviation Administration. Its base of operations in the United States is Fort Lauderdale Executive Airport. Its passenger flights depart from and arrive at Fort Lauderdale International Airport, traveling to Haiti, the Dominican Republic, the Turks and Caicos Islands, and the Bahamas.

   2. Petitioner transports passengers, which constitutes ninety percent of Petitioner's business, and transports cargo and mail, which constitutes seven to eight percent of Petitioner's business. Petitioner also acts as a funds transmitter, which

      constitutes approximately one to two percent of Petitioner's business.

   3. Petitioner has performed funds transmittal since 1989 when Petitioner was founded. It started that service at the request of a Haitian who lived and worked in the United States and wanted to send money to his family in Haiti. Since then and currently, Petitioner only transmits funds to Haiti.

   4. Petitioner has in place detailed procedures for funds transmittal. Petitioner receives such funds in cash. Petitioner then writes a check made payable to the recipient. The check is then placed in an envelope, which is placed in a courier pouch, which is then placed on the aircraft. The pilot signs a receipt for the funds and delivers the pouch to Petitioner's receiving agent in Haiti, who signs for the pouch. Petitioner's agent then delivers it to a company Petitioner contracts with for giving out the pouches. The recipient of the check goes to that company, presents identification with a photograph, and is given the check. Petitioner charges only a three percent fee for this service, a cost which is substantially below the industry's prevailing charge.

   5. Petitioner deposits daily funds received for transmittal in a separate account in a different bank from the bank in which Petitioner maintains its operating funds. The majority of the customers for whom Petitioner transmits funds are repeat customers.

   6. The parties stipulated that Chapter 560, Florida Statutes, known as the Money Transmitter's Code, became effective on July 1, 1994.

   7. Petitioner had no knowledge of the existence of the Money Transmitter's Code or the effective date thereof.

   8. Petitioner's first knowledge of the requirement that a money transmitter pay a fee to, and register with, the Department occurred in May of 1996 when one of the Department's investigators made an unannounced visit to Petitioner's place of business. He advised Petitioner of the registration requirement and left an application form with Petitioner. Petitioner filed that application for registration with the Department on June 4.

   9. Question numbered 7 on that application reads as follows: "Provide a description of the corporate structure of applicant, including the identity of any parent or subsidiary of applicant." Petitioner's answer states: "Lynx Air International is the only corporation engaged in funds transmittal and is not owned by any other entity." Petitioner's senior vice president, who answered that question on behalf of Petitioner, misunderstood the question; he thought the question only sought information regarding subsidiaries involved in funds transmittal.

   10. As he understood the question, he answered it truthfully. Petitioner has no subsidiaries involved in the business regulated by the Department. However, Petitioner does have two subsidiaries which it owns and a third subsidiary in

       which Petitioner owns a fifty percent interest. The three subsidiaries own the aircraft which Petitioner leases.

   11. Petitioner's senior vice president, who is not an accountant, also filed with the Department monthly income statements since Petitioner's yearly financial statement was not yet completed. Petitioner's C. P. A. subsequently submitted to the Department Petitioner's annual financial statement which was prepared according to generally-accepted accounting principles. Petitioner's net worth is in excess of $100,000.

   12. The transmittal of funds is only ancillary to Petitioner's business as a commercial airline. The maximum amount of funds transmitted does not exceed $5,000 to $6,000 per flight.

   13. Petitioner wishes to continue serving as a funds transmitter because the service is beneficial to Petitioner and to the public. Petitioner benefits because offering the service is a method of bringing "the customer in the door." The customer who uses Petitioner's service is also likely to purchase a ticket from Petitioner when that customer needs to travel. When Petitioner properly performs the funds transmittal service, the customer obtains a level of trust in Petitioner. Similarly, the customer benefits because Petitioner offers a safe method for the customer to send money to help support his or her family in Haiti.

   14. Petitioner has not caused any problems or losses to, or

       received any complaints from, any persons who have used Petitioner as a funds transmitter.

   15. Petitioner has not yet posted the bond required for registration with the Department because the Department advised Petitioner it was not necessary for Petitioner to incur that expense until its application for registration was approved.

       CONCLUSIONS OF LAW

       
       

   16. The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Sections 120.569 and 120.57(1), Florida Statutes.

   17. Chapter 560, Florida Statutes, which became effective on July 1, 1994, provides that money transmitters operating in this state on the effective date were required to file an application for registration by December 31, 1994. Those entities which did so were permitted to continue operating until April 30, 1996, unless the Department denied the application before that date. Section 560.122, Florida Statutes.

   18. Chapter 560, Florida Statutes, provides the Department with an arsenal of enforcement weapons. It provides for criminal penalties. It allows the Department to issue cease and desist orders or apply for injunctive relief. It allows the Department to deny an application for registration based on the grounds set forth in Section 560.114, Florida Statutes. The Department issued its amended notice of intent to deny Petitioner's application for registration for three reasons.

   19. The first reason was the Department's allegation that Petitioner failed to meet the minimum net worth requirement of Section 560.209(1), Florida Statutes. The Department agrees in its proposed recommended order that Petitioner does in fact meet the statutory requirement.

   20. The second reason was the Department's allegation that Petitioner knowingly failed to identify the existence of its subsidiaries. The person who answered question numbered 7 of the application testified that he simply misunderstood the question, interpreting the question to only call for the identification of subsidiaries involved in money transmittal, the business regulated by the Department and for which Petitioner was submitting an application for registration. That witness' testimony was credible.

   21. The failure to identify the subsidiaries which own the aircraft leased by Petitioner can only be considered a harmless omission under the facts of this case. Further, while Section 560.205(3)(c), Florida Statutes, does require disclosure of subsidiaries, Section 560.114(1)(a) upon which the Department relies prohibits only knowingly failing to disclose.

   22. The third reason for the Department's intended denial of Petitioner's application is the Department's allegation that Petitioner violated Section 560.114(1)(a), Florida Statutes, by knowingly failing to comply with Section 560.204(1) which requires a funds transmitter to register with the Department. No

       evidence was offered to show that Petitioner knew that an activity it had engaged in for years had become regulated, requiring registration.

   23. The Department relies on cases which hold that knowledge can be imputed to Petitioner, and Petitioner relies on cases which hold that it cannot be. The Department also argues the public purpose to be served by the regulatory scheme, a concept which Petitioner does not dispute. The dispositive fact in this case, however, is that Petitioner lawfully and without loss to the public engaged in an unregulated activity for years and then the activity became regulated, a fact not involved in the myriad of cases relied upon by the parties.

   24. Chapter 560 vests a substantial amount of discretion in the Department. See, for example, Sections 560.105(3), 560.106(2), 560.108(1), 560.209(6), and 560.210(4), Florida Statutes. Further, the Department is not required to issue an administrative complaint against a person who may be violating Chapter 560, but may do so, and is not required to impose administrative fines, but may do so. Lastly, Section 560.108(1) provides that the Department in imposing administrative penalties shall consider such factors "as justice may require."

   25. In the case at bar, Petitioner did not know its funds transmittal activities had become regulated. The Department's investigator came to Petitioner's place of business, advised Petitioner of the requirement, and told Petitioner to apply for

       registration. Petitioner did so, and the Department then denied Petitioner's application because Petitioner had engaged in funds transmittal activities without being registered.

   26. Had the Department considered the engaging in unregistered activity per se to require denial of an application for registration, it could have simply issued a cease and desist order. Instead, the Department encouraged the submittal of an application.

   27. Petitioner argues that the Department has waived its ability to deny Petitioner's application by telling Petitioner to file one. However, Petitioner has failed to establish the elements required for a waiver, and its argument is not persuasive.

   28. Since the evidence in this cause reveals that Petitioner has the required assets, that the failure to name the subsidiary corporations which own the aircraft Petitioner leases is a harmless and unintentional omission, and that Petitioner did not know about the registration requirements until advised by the Department's investigator, approval of Petitioner's application is the only fair and reasonable conclusion to the Department's exercise of discretion "as justice may require" in this proceeding. See the Administrative Enforcement Guidelines found in Section 560.108(1), Florida Statutes.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED THAT a final order be entered granting Petitioner's application for registration and requiring Petitioner to post the requisite bond prior to issuance of the registration.

DONE AND ENTERED this 28th day of October, 1997, at Tallahassee, Leon County, Florida.

LINDA M. RIGOT

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 1997.

COPIES FURNISHED:

Michael A. Noto, Esquire

505 South Flagler Drive Suite 1001

West Palm Beach, Florida 33401

Robert Alan Fox, Esquire Office of the Comptroller The Fletcher Building

101 East Gaines Street, Suite 526 Tallahassee, Florida 32399-0350

Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399

Honorable Robert F. Milligan Comptroller, State of Florida Department of Banking and Finance The Capitol, Plaza Level Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of 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: 97-000635

Orders for Case No: 97-000635