STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WARREN H. NEWELL,

vs.

Petitioner,

Case No. 13-2008

DEPARTMENT OF MANAGEMENT SERVICES, DIVISION OF RETIREMENT,

Respondent.

/

RECOMMENDED ORDER

On November 4, 2013, a duly-noticed hearing was held in Tallahassee, Florida, before June C. McKinney, an Administrative Law Judge assigned by the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Warren H. Newell, pro se

5123 Elpine Way

Palm Beach Gardens, Florida 33418

For Respondent: Geoffrey M. Christian, Esquire

Department of Management Services 4050 Esplanade Way, Suite 160

Tallahassee, Florida 32399 STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner has forfeited his rights and benefits under the Florida Retirement System pursuant to section 112.3173, Florida Statutes, when he pled

guilty to conspiracy to commit honest services fraud in violation of title 18, United States Code, section 371.

PRELIMINARY STATEMENT

In a certified letter dated May 19, 2010, Department of Management Services, Division of Retirement (“Respondent” or “DOR”) notified Warren H. Newell (“Petitioner” or “Newell”), a former Palm Beach County Commissioner for District 3, that his rights and benefits under the Florida Retirement System (“FRS”) were forfeited as a result of his plea of guilty in a United States District Court proceeding. A Petition for Formal Administrative Hearing dated June 4, 2010, was filed with DOR challenging the forfeiture and the matter was transferred by the Respondent on May 31, 2013, to the Division of Administrative Hearings (“DOAH”) for assignment of an administrative law judge.

The hearing was noticed for hearing on October 9, 2013. The parties stipulated to continue the final hearing and the hearing was rescheduled and conducted in Tallahassee on November 4, 2013.

At hearing, Petitioner testified on his own behalf.

Petitioner’s Exhibits numbered 6a, 10, 43, 50, 54, 57, 59, 67, and 68 were admitted into evidence. Newell was granted official recognition of sections 62.075, 112.3173, and 121.021;

Commissioner v. Smith, 324 U.S. 177 (1945); Florida Attorney

General Opinion 86-99 (1986); and Gaffney v. Gaffney, 965 So. 2d

1217 (Fla. 4th DCA 2007).

Respondent presented the testimony of two witnesses: Newell and Charlene Fansler, a Division Benefits Administrator. Respondent’s Exhibits numbered 1 through 10, 12, and 13 were admitted into evidence. DOR’s Motion to Limit Evidence, filed on September 18, 2013, was granted. The DOR was granted

official recognition of the following seven documents related to United States of America v. Warren H. Newell, Case 9:07-cr- 80121, from the United States District Court, Southern District of Florida: the Information; the Waiver of Indictment; the Plea Agreement; the Transcript of the Change of Plea Hearing; the Amended Plea Agreement; the Judgment; and the Order Denying Defendant’s Motion for Relief Pursuant to 28 U.S.C. § 2255 and

28 U.S.C. § 1651 (All Writs-Coram Nobis).

At the conclusion of the hearing, the parties agreed to file their proposed recommended orders within 45 days of the filing of the transcript. The proceedings were transcribed and the parties availed themselves of the right to submit proposed recommended orders after the filing of the transcript. The Transcript of the formal hearing was filed with DOAH on November 19, 2013. The parties stipulated to an extension to file their proposed recommended orders. Both parties timely

filed Proposed Recommended Orders, which have been considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The FRS is a public retirement system as defined by Florida law.

2. The Florida Division of Retirement is charged with governing, managing, and administering the FRS on behalf of the Florida Department of Management Services.

3. Newell was first elected to a four-year term as Palm Beach County Commissioner representing District 3 in 1992 and he was reelected in 1996, 2000, and 2004.

4. By reason of his employment, Newell was enrolled in the FRS because the Palm Beach County Board of County Commissioners is a FRS-participating employer.

5. On or about November 20, 1996; November 21, 2000; and November 17, 2004, Newell executed oaths of office and swore to uphold the Constitutions and Governments of the United States of America and State of Florida pursuant to article II, section 5(b), Constitution of Florida.

6. On July 17, 2007, Newell notified then-Governor Charlie Crist by letter of his resignation from his position as County Commissioner effective the same day. The letter stated:

   As an elected official, I fully understand my fiduciary relationship to the public. I also understand how I breached that

   
   

   relationship. I take full responsibility for my conduct. It is my intention to cooperate with the Federal Government, and, in the coming weeks, I intend to plead guilty to a criminal offense.

   
   

7. On or about July 23, 2007, Newell voluntarily signed a Statement of Uncontested Facts detailing his actions regarding his pending federal criminal prosecution.

8. On or about August 9, 2007, after Newell was advised of the nature of the charge(s) and accusations of conspiracy against him, he waived, in open court, prosecution by indictment and consented to proceeding by information.

9. That same day, Newell was charged, by Information, in the United States District Court, Southern District of Florida, in case number 9:07-cr-80212, with a single count, two-object conspiracy to commit offenses against the United States, in violation of 18 U.S.C. § 371.

10. The first object charged Newell with conspiring to commit honest services fraud, in violation of 18 U.S.C. §§ 1341, 1343, and 1346.

11. The second object charged Newell with conspiring to file a false federal income tax return for calendar year 2004, in violation of 26 U.S.C. § 7206(1).

12. At all times relevant to the Information, Newell served as a Palm Beach County Commissioner.

    
    

13. On or about September 11, 2007, pursuant to a written Plea Agreement, Newell pled guilty to the single count, two- object conspiracy alleged in the Information, wherein he agreed to the facts the government outlined as a basis for the charge against him for the plea of guilty. He was adjudicated guilty.

14. The Information detailed the scheme and alleged in relevant part, the following:

    * * *

    
    

    1. Beginning as early as in or around January 2002 and continuing through in or around May 2006, defendant WARREN H. NEWELL, kept his personal motor vessel at PBYC [Palm Beach Yacht Center] at a 50% reduced dockage rate.

       
       

    2. From in or around January 2002 and continuing through in or around May 2006 defendant WARREN H. NEWELL paid only a very small portion of his expenses with PBYC, accumulating a debt of approximately

       $48,092.

       
       

    3. As early as in or around March 2004, defendant WARREN H. NEWELL publicly advocated for a bond resolution securing public funds to preserve waterfront access for the people of Palm Beach County.

       
       

       * * *

       
       

       1. In November 2004, the citizens voted for the issuance of the $50,000,000 bond to preserve their access to, and the preservation of, waterfront properties. The bond gave the discretion to the BCC to find suitable public and private investment on behalf of the citizens to achieve those goals. With regard to private investment, the bond required the passing of a real

          
          

          property interest to the public to make the bond award valid.

          
          

       2. Defendant WARREN H. NEWELL advocated on numerous occasions, both in public and to PREM [Property and Real Estate Management for Palm Beach County], for the PBYC to receive a substantial portion of the waterfront bond money to purchase partial development rights for the citizens of Palm Beach County. The purchase of development rights is not a recognized interest in real property.

       
       

       * * *

       
       

       50. After PBYC received $14,000,000 in waterfront bond monies in or around March 2006, defendant WARREN H. NEWELL agreed with

       L.B.B. and K.D.S. to create a false and fraudulent SFRN [SFRN, Inc.] invoice to PBYC which was designed and intended to create an appearance that defendant NEWELL, paid his outstanding PBYC bill, however, in actuality he paid PBYC with monies generated from the fraudulent invoice and paid PBYC with PBYC’s monies.

       
       

       * * *

       
       

       64. It was the object of the scheme to defraud to unjustly enrich defendant WARREN

       H. NEWELL and others by having defendant NEWELL use his public position to advance ventures and relationships in which he had concealed financial interest and to continue to conceal those financial interest and relationships.

       
       

       * * *

       
       

       1. Defendant WARREN H. NEWELL used his elected position to advocate the payment of

          $14 million of taxpayer monies to his business partner and benefactor, L.B.B. without disclosing his true financial relationship with L.B.B., and his

          
          

          significant financial debt to L.B.B. and the PBYC.

          
          

       2. After the PBYC and L.B.B. received

       $14 million from the BCC, in order to avoid the true appearance of a $40,000 kickback debt forgiveness for his motor vessel from the PBYC, defendant WARREN H. NEWELL used his financial relationship with K.D.S. and

       L.B.B. to cause the issuance of a bogus invoice to PBYC from SFRN. PBYC’s payment to SFRN on that fraudulent invoice was immediately disbursed by K.D.S. to defendant NEWELL as a “bonus,” and defendant NEWELL subsequently used most of that “bonus” to make a substantial payment on his PBYC debt.

       
       

15. On or about November 20, 2007, the federal court adopted and amended Newell’s plea agreement to which the parties had agreed to the amended terms. Newell pled guilty and entered an amended plea agreement with the United States to the offense of conspiracy to commit honest services fraud in violation of 18

    U.S.C. § 371. In the amended plea agreement, the United States dismissed the second object of the conspiracy relating to filing a false income tax return.

16. On or about January 11, 2008, the United States District Court adjudicated Newell guilty and sentenced him to the United States Bureau of Prisons for 60 months imprisonment, two years of supervised release, and payment of a $100.00 special assessment. Newell also forfeited $135,000.00.

17. In May 2009, the United States moved the court to reduce Defendant’s sentence based on substantial assistance he

    
    

    provided to the Government. As a result, Newell’s sentence of imprisonment was reduced and amended to a term of 36 months.

18. Newell has completed his sentence and term of supervised release.

19. Newell was notified by certified letter dated May 19, 2010, of the Division’s proposed action to forfeit his FRS rights and benefits pursuant to the Florida Constitution, article II, section 8(d), and sections 112.3173 and 121.091(5), Florida Statutes. The notice provided the following basis for the proposed action:

    as a result of your guilty plea in the United States District Court for the Southern District of Florida for acts committed in connection with your employment with the Palm Beach County Board of County Commissioners. Specifically, on or about July 23, 2007, in Case Number 9:07-cr-80121, you pled guilty to one count of conspiracy to commit honest services fraud, in violation of 18 U.S.C. § 371. On or about January 11, 2008, you were adjudicated guilty of this crime.

    
    

20. By Petition dated June 4, 2010, Newell contested the notice and challenged the forfeiture.

21. Newell is not retired from the FRS and is not receiving FRS retirement benefits.

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this

    
    

    action pursuant to sections 120.569, 120.57(1), and 112.3173(5),

    
    

    Florida Statutes (2013).

    
    

23. Respondent has the burden of proving by a preponderance of evidence that Petitioner has forfeited his FRS retirement benefits. Wilson v. Dep’t of Admin., Div. of Ret.,

    538 So. 2d 139 (Fla. 4th DCA 1989).

    
    

24. Article II, section 8(d) of the Florida Constitution provides:

    Section 8. Ethics in government—A public office is a public trust. The people shall have the right to secure and sustain that trust against abuse. To assure this right:

    
    

    * * *

    
    

    (d) Any public officer or employee who is convicted of a felony involving a breach of public trust shall be subject to forfeiture of rights and privileges under a public retirement system or pension plan in such manner as may be provided by law.

    
    

25. Section 112.3173 provides in relevant part:

    
    

    (3) FORFEITURE.—Any public officer or employee who is convicted of a specified offense committed prior to retirement . . . shall forfeit all rights and benefits under any public retirement system of which he or she is a member, except for the return of his or her accumulated contributions as of the date of termination.

26. Section 112.3173(2)(a) provides in relevant part: “Conviction” and “convicted” mean an

    adjudication of guilty by a court of competent jurisdiction; a plea of guilty or of nolo contendere; a jury verdict of guilty

    
    

    when adjudication of guilt is withheld and the accused is placed on probation; or a conviction by the Senate of an impeachable offense.

    
    

27. In this matter, Newell pled guilty in Federal Court to the single count, two-object conspiracy alleged in the Information. The terms were later jointly amended by the parties and Newell then pled guilty to conspiring to commit a single object of “conspiracy to commit honest services fraud” and the conspiracy object relating to filing a false income tax return was dismissed. He was adjudicated guilty by the Federal Court. This constitutes being “convicted” pursuant to section 112.3173(2)(a).

28. A specified offense is defined in the statute in part to include certain felonies under chapter 838, as well as certain felonies relating to embezzlement and theft of public funds, bribery, and impeachable offense(s) committed. See

    section 112.3173(2)(e)1.-5. Newell was not convicted of any of these offenses.1/

29. Even though section 112.3173(2)(e)1.-5. does not specifically address Newell’s federal crime, the undersigned must consider section 112.3173(2)(e)6., which further defines a “specified offense” to include:

    The committing of any felony by a public officer or employee who, willfully and with intent to defraud the public or the public agency for which the public officer or

    
    

    employee acts or in which he or she is employed of the right to receive the faithful performance of his or her duty as a public officer or employee, realizes or obtains, or attempts to realize or obtain, a profit, gain, or advantage for himself or herself or for some other person through the use or attempted use of the power, rights, privileges, duties, or position of his or her public office or employment.

    
    

30. By this language, any felony can qualify as a specified offense so long as the remaining conditions in the statute have been met. Based on the facts herein, the record shows that Newell was a public officer or employee as a Commissioner, a member of the FRS, and that prior to retirement, Petitioner pled guilty to the federal felony, conspiracy to commit honest services fraud. Therefore, the issue here is whether the other conditions of section 112.3173(2)(e)6. have been met.

31. The record demonstrates Newell’s conspiracy to commit honest services fraud stemmed from Petitioner using his public position of employment and power as Commissioner to willfully advance passage of waterfront bond monies in the amount of

    $14,000,000.00 to the Palm Beach Yacht Center to further his private interest of forgiveness of his $48,000.00 debt. The forgiveness of the debt served as a profit or kickback directly related to his public position. Therefore, the evidence shows Petitioner’s underlying conduct for his federal felony meets the

    
    

    remaining conditions to qualify for a specified offense since Petitioner’s gain to himself, the kickback, was affected through his position as Commissioner.

32. Accordingly, Newell’s public office during all times material to this proceeding, and his pleading guilty to a specified offense committed prior to retirement, requires the forfeiture of his rights and benefits under FRS pursuant to section 112.3173.

RECOMMENDATION

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

RECOMMENDED that the Department of Management Services, Division of Retirement enter a final order finding that Petitioner pled guilty to a crime which requires forfeiture of his FRS rights and benefits pursuant to section 112.3173.

DONE AND ENTERED this 28th day of March, 2014, in Tallahassee, Leon County, Florida.

S

JUNE C. MCKINNEY

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 28th day of March, 2014.

ENDNOTE

1/ Newell asserts that since the federal crime to which he was found guilty, conspiracy to commit honest services fraud, has no corresponding Florida statute that it is improper to consider such in this matter. The undersigned rejects such assertion.

Petitioner also contends that a violation of the equal protection clause exists. The undersigned does not have jurisdiction over constitutional issues.

Petitioner further argues that a part of his FRS is a marital asset. Newell is neither retired nor receiving FRS retirement benefits. Therefore, the matter is not ripe.

Petitioner also contends that the FRS is a property not a right or benefit and that DOR is proposing an excessive fine. The undersigned rejects such a position.

COPIES FURNISHED:

Geoffrey M. Christian, Esquire Department of Management Services 4050 Esplanade Way, Suite 160

Tallahassee, Florida 32399

Warren H. Newell 5123 Elpine Way

Palm Beach Gardens, Florida 33418

Dan Drake, Director Division of Retirement

Department of Management Services Post Office Box 9000

Tallahassee, Florida 32315

Josefina M. Tamayo, General Counsel Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 160

Tallahassee, Florida 32399

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: 13-002008

Orders for Case No: 13-002008