Findings Of Fact Primary Service Area (PSA) The proposed association will be located in the Paddock Plaza adjacent to the Paddock Mall Regional Shopping Center, both of which are currently under construction. The site is in the vicinity of the intersection of Southwest 27th Avenue and State Road 200 in the southwest portion of Marion County. The PSA encompasses the southwestern portion of Marion County, including a part of Ocala which is a concentrated residential community. Beyond the city limits, there are schools, recreational areas, an airport, horse farms, a community college, and light industrial type firms in the surburban area. The proposed site is located in the northeastern part of the PSA. The PSA is in a developmental stage with current plans of residential and commercial development which should make the area the fastest growing sector in Marion County. The home offices of Fidelity Federal Savings and Loan Association and Midstate Federal Savings and Loan Association, and a satellite office of the latter association are located near the northeast boundary of the PSA some three miles from the proposed site. The northern and eastern boundaries of the PSA follow well-defined highways. The southern boundary follows the Marion County line, and the western boundary is drawn due north from the intersection of State Road 200 and the Marion County line. (Testimony of Starke, Exhibit 1) Standards (a) Public convenience and advantage. One commercial banking facility, the main office of Citizens First Bank of Ocala, is located in the northeast corner of the PSA approximately two and one-half miles from the proposed site. It provides full banking services to its customers. Two savings and loan associations have received approval to operate in the PSA. One will be a branch of Midstate Federal Savings and Loan Association which will be located at the Paddock Mall adjacent to the proposed site. The other will be a limited facility of the First Federal Savings and Loan Association of Mid-Florida (Volusia County) which will he situated approximately 11.3 miles south of the proposed site in a residential community. Neither of these approved institutions have commenced operations. The proposed site is readily accessible from all sectors of the market area. State Road 200 is a primary artery for northeast/southwest travel. Southwest 27th Avenue is a primary north/south thoroughfare. There are numerous other feeder streets which connect with those two roads to bring traffic to the new mall and plaza area. In addition, Interstate Highway 75 intersects State Road 200 approximately one mile southwest of the proposed site. An extension to Southwest 17th Street is currently proposed which would provide direct access from the northeast to the proposed site. The location of the proposed association at a large regional shopping center will provide an opportunity for residents of the PSA to combine shopping and financial business. This will be facilitated through the utilization of a drive-in facility at the site. Ample parking will be provided in the plaza area, and the network of roads in and around the shopping center will facilitate use of the applicant's services. It will provide a convenient location to conduct savings and loan business for residents and businessmen in the southwestern portion of the county without the necessity of traveling to the more congested downtown area of Ocala. The fact that the proposed association will be a home office rather than a branch office will tend to attract a greater number of individuals within the PSA than a satellite office, and undoubtedly will induce persons outside the PSA to use the institution's services. In 1960, the City of Ocala had a population of 13,598. It increased 66.1 percent to 22,583 by 1970. The 1978 city population was estimated to be 32,652, a 44.6 percent increase over 1970. An April 1, 1979 estimate placed the population at 34,034. In 1960, Marion County had a population of 51,616. It increased 33.7 percent to 69,030 in 1970 and was estimated at 102,722 in 1978, an increase of 48.8 percent over 1970. The population was estimated to be 106,852 in April 1979 and is scheduled to reach 164,400 by 1990. It is estimated that the population of the PSA was about 7,700 in 1960 and increased to 10,500 or 36.4 percent by 1970. It is now estimated to be some 17,000 and projected to reach over 19,000 by 1982. This projection is based on the area's recent growth history, current housing developments in the area, and projected growth within Marion County. The 45 to 64 year group of the population of Marion County has shown a modest increase since 1960 from 21 percent to 22.6 percent in 1978. At that time, the state percentage was 22 percent. Those 65 years of age and over in Marion County increased from 10.6 percent in 1960 to 15.7 percent in 1978. This was lower than the statewide average of 17.5 percent in that category. It is anticipated that those 45 years and older will continue to show a steady increase in the future due to the fact that most of the county increase in population has been due to continuing in-migration of retirees. These individuals normally bring cash assets which are available for deposit in savings and loan associations, and they ordinarily would have no prior connection with other banks or savings and loan associations in the immediate area. The per capita personal income in Marion County in 1969 was $2,646 and increased to $5,157 in 1977. Per capita personal income in Florida in 1977 was $6,697. In 1969 the mean family income of residents of Ocala was $9,775, as compared with $8,062 in Marion County and $10,120 throughout the State of Florida. It is estimated that the current mean family income in Ocala is approximately $17,506, as compared to $14,438 in the county and $18,123 in the state. The unemployment rate in Marion County in January 1980 was 6 percent whereas the rate in the State of Florida was 5.2 percent. Residential building permits issued in the City of Ocala in 1975 rose from 156 units for a total of 3.5 million dollars to 511 permits in 1979 for a total of 10.7 million dollars. For Marion County, 872 permits were issued in 1975 for a total of 14.3 million dollars and 1,706 in 1979 for a total of 44.5 million dollars. It is currently estimated that the median value of owner occupied housing units in Ocala is $32,775 and $26,173 in Marion County. Local Conditions There are seven commercial banks with approval to operate a total of 18 offices in Marion County. In June 1975, the commercial banks headquartered in Marion County held combined time and savings deposits of some 104 million dollars and by mid-1979, such deposits totaled over 176 million dollars, an increase of about 69.5 percent. From December 1978 to December 1979, time and savings deposits in those banks rose from 161.4 million dollars to 199.8 million dollars, an increase of 23.8 percent. Total deposits in all Marion County Banks increased from 204.8 million dollars in 1975 to 304.9 million in 1979, a 48.9 percent increase. There are currently 16 savings and loan association offices approved for operation in Marion County. Three of the associations have their home office in Ocala. These are Fidelity Federal, Mid-State, and United Federal of Ocala. Fidelity Federal operates a total of five offices within the county, one of which is not yet open. Mid-State Federal has seven offices approved within the county and its office in the PSA is not as yet open. United Federal, an association which opened in January 1979, has its only office within the county. Both First Family Federal (Lake County) and First Florida Federal Savings and Loan Association (Alachua County) have recently received approval to operate branch offices within Marion County. First Federal of Mid-Florida (Volusia County) has received approval to operate an office in the southern part of the PSA but has not yet opened. In 1975, savings and loan associations headquartered in Marion County reported combined savings of $162,177,000. By the end of June 1979, their combined savings totaled $312,508,000, an increase of 92.7 percent. The combined savings accounts of the three Marion County associations totaled $312,508,000 in midyear 1979, as compared to June, 1975 savings of $162,177,000, representing an increase of $150,331,000 or 92.7 percent, during the subject four-year interval. Mid-State Federal, with an office approved at the Paddock Mall, held June, 1979 savings of $207,770,000, and those accounts represented an increase of $96,475,000, or 86.7 percent, over its savings reported June, 1975. First Federal of Mid-Florida, a Volusia County association with an office approved in the PSA, had June, 1975 savings of $199,843,000, and those savings increased by $150,637,000, or 75.4 percent, to reach a total of $350,480,000 in June, 1979. The smallest savings and loan association in Marion County is United Federal, which opened in 1975. In June, 1975, it reported savings of $6,881,000, and its midyear 1979 statement showed savings of $27,830,000. United Federal, operating only one office in Ocala, had growth in savings of $20,949,000, or 304.5 percent, during the stated interval. In the opinion of the applicant's economic consultant, approval of the applicant's application would not have an adverse effect on the other financial institutions in the area due to the steady growth of the community and anticipated growth in the future. He further is of the opinion that the proposed savings and loan association will be able to successfully operate in the PSA in view of the presence of the Paddock Mall and the general growth of population and business establishments in the area. He feels that the current national economic situation will not have a great impact on a new institution which will be able to obtain variable interest rates. He further sees an advantage to the fact that the proposed association will be the first state chartered capital stock form of organization in Marion County, and that it will provide an opportunity for public purchase of shares in the association. During the first three years of operations, the applicant projects its net profits at $75,648 for the first year, $88,335 for the second, and $103,340 for the third. These amounts were arrived at by including known cost items and estimating various income and expense amounts. The applicant anticipates acquiring accounts from new residents of the PSA and those current residents who may wish to transfer savings accounts from commercial banks in the Ocala area due to convenience and the higher rate of interest paid by savings and loan associations. The applicant does not anticipate the acquisition of a significant number of customers from existing savings and loan associations in the area. It also will look to employees at the new shopping mall who may utilize the conveniently located new institution for savings transactions. The applicant intends to compete vigorously for new business with these individuals and from those who presently do not have accounts in any existing associations. The applicant estimates that the institution will attain savings of five million dollars at the end of the first year, $9,500,000 at the end of the second year, and $14,500,000 at the end of the third year of operation. In arriving at those estimates, consideration was given to past experience of existing association offices in the Ocala area, and that of established associations in similar competitive situations. The eight organizers of the proposed association will also serve as the directors. They represent a diversity of occupations, including businessmen, attorneys, real estate broker, a physician, and a dentist. All but three reside in the Ocala area. All have been residents of Florida for over a year and none has been adjudicated a bankrupt or convicted of a criminal offense involving dishonesty or breach of trust. Their employment and business histories show responsibility in the handling of financial affairs. One of the proposed directors has served as an attorney to a large savings and loan association in Miami Beach, and is a member of the board of directors of Barnett Bank of Miami. Another serves as legal counsel for a local bank in Ocala. The proposed officers of the association have not been named as yet. The proposed association will be capitalized at $2,000,000. This capital will be divided into common capital of $1,000,000 in surplus and reserves of $1,000,000. The association intends to issue 200,000 shares of stock with a par value of $5.00 and the selling price of $10.25, plus a $.25 share organizational expense fund contribution. The proposed directors of the association have subscribed to 25,000 shares each. This is a preliminary stockholder list and it is the intention of those individuals to redistribute the stock to a minimum of 400 persons in accordance with FSLIC requirements. It is the organizers' intention to acquire pledges from 700 persons for the deposit of $1,000,000 in withdrawable savings accounts. It is intended that the majority of the stock will be sold to persons residing in Marion County, and the organizers anticipate no difficulty in this respect. (Testimony of Starke, Hastings, Bitzer, Berman, Casse, Hicks, Williams (Deposition - Exhibit 5), Broad (Deposition - Exhibit 6), Carter, Exhibits 1-3) Name As heretofore found above, the applicant amended its application to change the proposed name to Allstate Savings and Loan Association. Although the descriptive word "Allstate" is not used in the corporate name of any other savings and loan association in this state, the Office of the Comptroller received a letter, dated February 22, 1980, from Allstate Savings and Loan Association, Glendale, California, an affiliate of Sears Roebuck and Company, objecting to the use of the word "Allstate" in that the public may be misled to believe that the proposed association is in some way affiliated with Sears Roebuck and Company. (Testimony of Starke, Exhibit 1) Site and Quarters. As heretofore found, it is the organizers intention to locate the proposed association in the Paddock Plaza, adjacent to the Paddock Mall, a new shopping center to be constructed in Ocala. The applicant has an option to lease 5,000 square feet of space for a period of fifteen years for a rental price of $12.00 per square foot for 2,000 square feet and $10.00 per square foot for 3,000 square feet, plus common area maintenance. The option provides that on the fifth year of tenancy, the total annual rental will be increased by the cost of living as determined by the consumer price index. The leased area will include a two-car drive-in facility. There will be adequate parking at the site. The applicant plans to sublease 2,000 square feet of the leased premises on a short-term basis to reduce operating costs in the initial years of operation. An appraisal of the proposed association quarters establishes that the proposed leased premises are suitable for a savings and loan association and that the lease price compares favorable to current leasing arrangements for similar business property. (Testimony of Starke, Exhibit 1) Proposed Findings of Fact filed by the parties have been fully considered and those findings which have not been adopted herein are considered to be either unnecessary, or unsupported in fact and are specifically rejected. Some of the proposed findings state conclusions which properly should be considered by the Comptroller. Pursuant to Section 120.57(1)(b)(12), Florida Statutes, this REPORT does not include conclusions of law and recommendations. DONE and ENTERED this 25 day of April, 1980, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301 William L. Lyman, Esquire Assistant General Counsel The Capitol Tallahassee, Florida 32301 Daniel Hicks and Randolph Tucker, Esquires Post Office Drawer 1969 Ocala, Florida 32670 Merritt C. Fore, Esquire Post Office Box 1507 Ocala, Florida 32670
The Issue The issues for determination in this proceeding are whether Respondents, Samuel T. Henson and DuPont Funding Corporation, committed multiple acts in violation of applicable statutes and administrative rules and, if so, what, if any, penalties should be imposed.
Findings Of Fact Petitioner is the administrative agency charged with responsibility for administering and enforcing the provisions of Chapter 494, Florida Statutes.3 Respondent, DuPont Funding Corporation ("DuPont") is a Florida corporation engaged in the mortgage brokerage business at a single location at 7300 West Camino Real Drive, Boca Raton, Florida 33442. DuPont is registered with Petitioner under registration number HB 592710662. Respondent, Samuel T. Henson, ("Henson"), is the principal mortgage broker for DuPont. Henson is licensed by Petitioner as a mortgage broker pursuant to license number HA 247542864. As the mortgage broker for DuPont, Henson is responsible for his compliance with Chapter 494, Florida Statutes, as well as that of DuPont. Petitioner examined and investigated Respondents in response to five complaints received by Petitioner. The investigation involved events allegedly occurring between January 1, 1989 through August 31, 1990. Misuse And Misapplication Of Deposits The Smith Transaction Respondents failed to refund a deposit in the amount of $1,493.00 to Mr. J. W. Smith (the "Smith transaction"). Mr. Smith deposited $1,493.00 with Respondents to pay the costs of a mortgage applied for by the purchaser of commercial property owned by Mr. Smith. According to the terms of the Mortgage Loan Agreement and Application, the deposit was refundable if Respondents were unable to obtain financing for the proposed transaction. After Respondents were unable to obtain the financing applied for, they refused to refund Mr. Smith's deposit. Mr. Smith owned the Esmeralda Inn in Chimney Rock, North Carolina (the "Inn"). The Inn was listed for sale with Daniel Murr of First Commercial Brokers in Asheville, North Carolina, in the amount of $650,000.00. In October, 1989, Mr. Smith received a full price offer to purchase the Inn from Mr. and Mrs. William C. Robeck. Mr. and Mrs. Robeck were represented by a Mr. Castaldi as the their agent. The terms of the offer required Mr. and Mrs. Robeck to pay $25,000.00 and for Mr. Smith to carry a second mortgage in the amount of $185,000.00. The balance of the purchase price was to be paid in the form of a first mortgage in the amount of $440,000.00. Mr. Smith did not accept the offer of purchase from Mr. and Mrs. Robeck because he considered the amount of the cash invested by the purchasers to be insufficient. Sometime in December, 1989, Mr. Smith received a full price offer to purchase the Inn from Mr. Andrew Okpych. The terms of the offer required Mr. Okpych to pay $100,000.00 and for Mr. Smith to carry a second mortgage in the amount of $200,000.00. The Branch Bank and Trust Company in Asheville, North Carolina agreed to provide a first mortgage in the amount of $350,000.00. Mr. Smith wanted to minimize the amount of his second mortgage. He was advised by Mr. Daniel Murr that Respondents had represented to Mr. Murr that they could obtain a first mortgage for the purchase in the amount of $440,000.00 to finance the Smith-to-Okpych transaction. This financing proposal would reduce the second mortgage held by Mr. Smith to $110,000.00. Mr. Smith authorized Mr. Murr to contact Respondents. Henson contacted Mr. Smith by telephone to discuss the proposed financing in the amount of $440,000.00 on or about December 19, 1989. During that telephone conversation, Henson represented to Mr. Smith that Henson had located a lender which had already approved the needed $440,000.00 loan. Henson refused repeated requests by Mr. Smith to identity the lender. Henson insisted that Mr. Smith sign an agreement to pay the costs of the loan transaction and deposit $1,500.00 with Respondents before Henson would identify the lender which had pre-approved the loan in the amount of $440,000.00. Mr. Smith and Mr. Okpych signed a Mortgage Loan Agreement and Application (the "agreement") with Respondents on January 5, 1990. Mr. Okpych signed the agreement as borrower and Mr. Smith signed as the person responsible for all expenses incurred in connection with the agreement. The agreement was signed by Henson on January 5, 1992, and sent by facsimile to Mr. Smith and Mr. Okpych from the office of Mr. Smith's attorney. Mr. Smith and Mr. Okpych made several changes to the agreement and initialed the changes. One such change made the deposit from Mr. Smith a refundable deposit by deleting the prefix "non-" from the word "non-refundable" in the typed form of the agreement. Mr. Smith and Mr. Okpych sent the modified agreement to Henson by facsimile on the same day. Mr. Smith telephoned Henson on January 5, 1992, to advise Henson that the modified agreement had been sent by facsimile. Henson stated that he had received the agreement and stated that the modifications were acceptable. Henson directed Mr. Smith to wire transfer the $1,500.00 deposit. Mr. Smith wired $1,500.00, less the $7.00 charge for the wire transfer, on January 10, 1990. The wire transfer in the amount of $1,493.00 was sent to the account of Dupont Funding Corporation, account number 3601345943, NCNB, Deerfield Beach, Florida. Henson notified Mr. Smith by telephone on or about January 15, 1992, that he could not procure the needed financing. The reason given by Henson was that the lender did not want to make the loan because the property was located in North Carolina. Henson still refused to identify the lender to Mr. Smith, but suggested that the needed financing may be obtainable from "General Electric." See Exhibit 12 at 24. The next day, Henson telephoned Mr. Smith and stated that the loan was not available from any lender and that the deposit of $1,493.00 would be refunded to Mr. Smith later in the week. After repeated requests and written demands, Mr. Smith's deposit in the amount of $1,493.00 has not been refunded. The Robeck Transaction Respondents failed to refund a deposit in the amount of $2,500.00 to Mr. and Mrs. William C. Robeck (the "Robeck transaction"). Mr. and Mrs. Robeck deposited $2,500.00 with Respondents when the Robeck's applied for a mortgage in the amount of $440,000.00 on October 11, 1989, in their unsuccessful attempt to purchase the Inn from Mr. Smith. When Mr. Robeck questioned whether the deposit was refundable, Henson changed the typed form of the Mortgage Loan Agreement and Application (the "loan application") by deleting the prefix "non-" in the typed word "non-refundable". The modified loan agreement was signed by the Robeck's and Henson. Respondents were unable to obtain financing for the proposed transaction. After the Robecks were unable to obtain financing, Respondents refused to refund the Robeck's deposit. Mr and Mrs. Robeck made an offer to purchase the Inn from Mr. Smith sometime in October, 1989. The offer was rejected, and the Robeck's asked Henson to refund their deposit sometime in January, 1990. Henson refused to refund the deposit and told Mr. Robeck to find another bed and breakfast inn. Mr. Robeck found another bed and breakfast inn for sale in Franklin, North Carolina. He offered to acquire the inn by lease-purchase. His offer was accepted, but Mr. Robeck later found approximately $1,000,000.00 in stolen property on the premises. The owner was arrested, and the lease-purchase transaction was not consummated. Mr. Robeck again requested the refund of his deposit, and Henson again refused the request. Mr. Robeck has never been refunded any portion of his deposit. The Shuster Transaction Respondents failed to refund a deposit in the amount of $2,500.00 to Mr. Sanford Shuster (the "Shuster transaction"). Mr. Shuster deposited $2,500.00 with Respondents when he applied for a mortgage in the amount of $3,500,000.00 on February 8, 1990, to finance the acquisition of an Assisted Care Living Facility ("ACLF"). Henson changed the typed form of the Mortgage Loan Agreement and Application (the "mortgage application") by deleting the prefix "non-" in the typed word "non-refundable". The modified mortgage application was signed by Mr. Shuster and Henson. Mr. Shuster was unable to obtain financing, and Respondents refused to refund Mr. Shuster's deposit. Mr. Shuster made repeated attempts to obtain his refundable deposit from Respondents including several telephone conversations with Henson and two written demands for payment on April 10, 1990, and on June 2, 1990. In every instance, Henson agreed to refund the deposit but never did so. Mr. Shuster and Henson entered into a compromise agreement on September 10, 1990. Pursuant to the terms of the compromise agreement, Henson agreed to pay Mr. Shuster $2,000.00 in full settlement of the $2,500.00 claim by Mr. Shuster. Henson paid none of the $2,000.00 required under the settlement agreement with Mr. Shuster. Mr. Shuster sued Henson in Palm Beach County Court and obtained a Final Judgment against Henson on January 31, 1992, in the amount of $2,058.75. On May 7, 1991, Henson paid Mr. Shuster $100.00 toward the amount due under the Final Judgment, but made no other payments. Mr. Shuster has never received the balance of the deposit owed to him and has a claim pending with the Mortgage Brokerage Guaranty Fund. The Linker Transaction Respondents failed to refund deposits totaling $22,500.00 to Mr. Gerald Linker (the "Linker transaction"). Mr. Linker deposited $22,500.00 with Respondents when he applied for a mortgage in the amount of $1,250,000.00 in May, 1990, to finance the acquisition of an alcohol and drug abuse center (the "center"). Henson obtained a written loan commitment from Nationwide Funding, Inc. ("Nationwide"), on May 23, 1990. Neither Nationwide nor Respondents performed in accordance with the terms of the commitment. Mr. Linker never received his loan and never received his deposits. Mr. Linker's attorney made repeated attempts to have Mr. Linker's deposits refunded to him. Mr. Linker's attorney filed suit in the Circuit Court of the 15th Judicial Circuit in Palm Beach County, Florida, and obtained separate judgments against Henson and Dupont in the respective amounts of $69,023.01 and $69,520.78. Respondents paid none of the $138,543.79 owed to Mr. Linker. Mr. Linker has a claim pending with the Mortgage Brokerage Guaranty Fund. The Barth Transaction Respondents failed to return a refundable deposit in the amount of $10,000.00 to Mr. Andrew J. Barth (the "Barth transaction"). Mr. Barth deposited $10,000.00 with Respondents when he applied for financing in connection with the purchase of the Cardinal Retirement Village in Bradenton, Florida, on November 17, 1989. Mr. Barth was to assume an existing mortgage of approximately $9,800,000.00 in the transaction. Respondents agreed to arrange the assumption. The owners of the Cardinal Retirement Village refused to proceed and Respondents never refunded Mr. Barth's deposit. The agreement between Mr. Barth and Respondents provided in relevant part: The deposit will be refunded no later than thirty (30) days from this date if this real estate and mortgage transaction is not successfully completed and closed. Mr. Barth made repeated attempts to have his deposit refunded to him. In May, 1990, Mr. Barth's attorney negotiated a Pay Back Agreement with Respondents in which Respondents agreed to pay $1,500.00 a month to Mr. Barth to refund the deposit with interest. Respondents paid only $3,000.00 to Mr. Barth. Mr. Barth has never received the balance owed to him for his refundable deposit. Failure To Maintain Escrow Accounts Respondents failed to maintain an escrow account during 1988 and 1989 and failed to place deposits in escrow. Respondents failed to place deposits in escrow for the Smith, Robeck, Shuster, Linker, and Barth transactions. The accounts to which the monies were deposited by Respondents were not escrow accounts. Respondents failed to place deposits from numerous other transactions in escrow. Respondents failed to deposit in escrow the following amounts: an appraisal fee of $250.00 and a credit report fee of $150.00 collected from Mr. Eric Jason prior to closing a mortgage for $101,650.00 on November 30, 1989; an appraisal fee of $250.00 and a credit report fee of $50.00 collected from Francis J. and Barbara A. Lynch prior to closing a mortgage for $50,000.00 on February 5, 1990; a deposit of $2,000.00 in part payment of the brokerage fee collected from Mr. Nicholas A. Paleveda and Ms. Marjorie Ewing prior to closing a mortgage for $356,400.00 on April 20, 1990; a deposit of $350.00 collected from Mr. Richard L. Trombley prior to closing a mortgage for $40,000.00 on November 2, 1990; and a deposit of $350 collected from the Sun Bay Development Corporation prior to closing a mortgage for $292,500.00 on February 6, 1990. Excessive, Duplicate, And Undisclosed Charges Respondents imposed excessive, duplicate, or undisclosed charges in numerous mortgage transactions. The costs itemized and collected from borrowers in these transactions were not supported by actual expenditures. Respondents collected $625.00 from Mr. and Mrs. Ernest L. Sego for an appraisal that cost $250.00. Mr. and Mrs. Sego paid $325.00 for an appraisal report at the time they executed a Mortgage Brokerage Agreement on August 17, 1988, for a mortgage in the amount of $151,000.00. At the closing on April 7, 1989, Mr. and Mrs. Sego were charged an additional $300.00. Respondents collected $50.00 from Mr. and Mrs. Sego for a credit report at the time the Mortgage Brokerage Agreement was executed. At the closing, Mr. and Mrs. Sego were charged an additional $45.00 for a credit report. Respondents underestimated the closing costs for: Mr. Jason in the amount of $590.00; The Lynch's in the amount of $492.50; and Mr. and Mrs. Sego in the amount of $1,140.00. Failure To Disclose Respondents failed to disclose costs incurred by numerous borrowers. Respondents failed to disclose changes in the cost of title insurance which occurred between the time the borrowers signed Good Faith Estimate forms and the time the mortgage transactions closed. The estimated cost for title insurance for the Lynch's was $460.00 while the actual cost was $637.50. The estimated cost of title insurance for Mr. and Mrs. Sego was $200.00 and the actual cost was $263.00. The Mortgage Brokerage Agreement/Good Faith Estimate was not signed by two borrowers in separate transactions. Neither Mr. and Mrs. Knowlton nor Mr. Trombley signed those documents. Respondents failed to disclose payments made to a co- broker in two separate transactions. Mr. Nicholas Cancel was hired by Respondents to process loans. Loan processing is limited to preparing the documentation necessary to close a loan. Mr. Cancel is a licensed mortgage broker who was employed by a broker other than Respondents. Respondents failed to disclose payments made to Mr. Cancel in his capacity as an independent broker in the mortgage loans to the Lynch's and Mr. Jason. Failure To Maintain Books And Records And Failure To Cooperate Respondents failed to maintain books and records at the principal place of business. Respondents maintained only one business location. When Petitioner's investigator visited Respondents' office and asked for the books and records, Henson told the investigator that there were no books and records at the office. Petitioner subsequently served Respondents with a subpoena to produce Dupont's books and records. Respondents produced 57 mortgage files and some banking records. The files produced by Respondents were incomplete. Most contained only brochures. No files were produced on the Shuster and Linker transactions. During the investigation Henson represented to the investigator that he was neither president nor a corporate officer of Dupont. However, Henson repeatedly signed loan application and loan closing documents as president of Dupont including the Smith, Robeck, and Shuster transactions. Henson also entered into numerous co-brokerage arrangements as president of Dupont including arrangements with Mr. Cancel and Ms. Patricia Towers, president of Towers Mortgage Corporation, 6971 North Federal Highway, Boca Raton, Florida 33487. Fraud, Deceit, Misrepresentation, And Gross Negligence Respondents' intent to defraud and deceive the public is evidenced by a consistent pattern and practice of incompetence, gross negligence, misrepresentation, and failure to disclose material facts in multiple transactions over an extended period of time. Respondents knew or should have known that the acts committed by them constituted violations of law. Respondents violations resulted in financial loss to numerous individuals and to the public generally. Respondents failed to comply with agreements voluntarily executed by them and failed to pay amounts due under judgments duly entered against them by Florida courts. Respondents failed to cooperate with state investigators and failed to maintain books, records, and escrow accounts required by law.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: Petitioner issue a final order revoking the license of Respondent, Henson, and revoking the registration of Respondent, Dupont. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 29th day of September 1992. DANIEL MANRY 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 29th day of September 1992.
The Issue Whether the Florida Department of Environmental Protection‘s (Department) notice of intent to issue an environmental resource/mitigation bank permit, and notice of intent to grant a variance waiving the financial responsibility requirements for the construction and implementation activities of the mitigation bank to Respondent, CRP/HLV Highlands Ranch, LLC (Highlands Ranch) should be approved, and under what conditions.
Findings Of Fact The Parties Petitioner is a Florida not-for-profit corporation in good-standing, originally incorporated in 1946, with its corporate offices currently located at 2545 Blairstone Pines Drive, Tallahassee, Florida. Petitioner‘s corporate purposes include, among others, ?the cause of natural resource conservation and environmental protection, to perpetuate and conserve the fish, wildlife, mineral, soil, water, clean air and natural resources of Florida.? The Department is an agency of the State of Florida having concurrent jurisdiction with the state‘s water management districts for permitting mitigation banks pursuant to chapter 373, Part IV, Florida Statutes. Highlands Ranch is a Delaware limited-liability corporation registered with the State to do business in Florida, with its corporate offices located at 9803 Old St. Augustine Road, Suite 1, Jacksonville, Florida. Highlands Ranch was the applicant for the SJRWMD Permit, and is the applicant for the DEP Permit and Variance that are at issue in this proceeding. The Property The property designated to become the HRMB (the Property) comprises approximately 1,575 acres, which includes 551.99 acres of wetlands, 990.90 acres of uplands, and 32.60 acres of miscellaneous holdings, including easements and a hunt camp. The Property is bounded by the Jennings State Forest on the eastern boundary, the conservation lands of Camp Blanding Joint Training Center on the southern boundary, and a titanium mine on the western boundary. The upland communities consist of mesic and xeric pine plantations. The wetland communities consist of 260.30 acres of hydric pine flatwoods, 80.26 acres of bay and bottomland, and 211.43 acres of floodplain. The wetland areas of the HRMB are generally associated with two creeks that traverse the property, Boggy Branch on the northern portion of the property, and Tiger Branch, which is a series of streams and branches in the southeastern and eastern portion of the property. Boggy Branch and Tiger Branch feed into the north fork of Flat Creek, some of which encroaches onto the eastern side of the property. In addition to Boggy Branch and Tiger Branch and their tributaries, there are isolated wetlands scattered throughout the HRMB property. Most of the uplands, and much of the wetlands have been altered from their native plant communities by historic and on- going silvicultural activities. The uplands currently consist largely of pine plantation planted in slash pine of various ages and densities, with one small area planted in longleaf pine. The property has an elevation gradient of approximately 90 feet, which extends generally from the higher xeric pine flatwoods, sloping down to the creek systems. A gradient of 90 feet over an area as small as the HRMB is a significant elevation change in Florida. Mitigation Banks A mitigation bank is ?a project permitted under 373.4136 undertaken to provide for the withdrawal of mitigation credits to offset adverse impacts authorized? by an Environmental Resource Permit (ERP) issued under Part IV, chapter 373, Florida Statutes. § 373.403(19), Fla. Stat. A mitigation bank permit is a type of ERP. The Department and the water management districts are legislatively authorized to require permits to establish and use mitigation banks. § 373.4136(1), Fla. Stat. Mitigation banks act as repositories for wetland mitigation credits that can be used to offset adverse impacts to wetlands that occur as the result of off-site ERP projects. Mitigation banks are intended to ?emphasize the restoration and enhancement of degraded ecosystems and the preservation of uplands and wetlands as intact ecosystems rather than alteration of landscapes to create wetlands. This is best accomplished through restoration of ecological communities that were historically present.? They are designed to ?enhance the certainty of mitigation and provide ecological value due to the improved likelihood of environmental success associated with their proper construction, maintenance, and management,? often within larger, contiguous, and intact ecosystems. § 373.4135(1), Fla. Stat. A mitigation credit is a "standard unit of measure which represents the increase in ecological value resulting from restoration, enhancement, preservation, or creation activities." Fla. Admin. Code R. 62-345.200(8). Ecological value is defined as the value of functions performed by uplands, wetlands, and other surface waters to the abundance, diversity, and habitats of fish, wildlife, and listed species. Included are functions such as providing cover and refuge; breeding, nesting, denning, and nursery areas; corridors for wildlife movement; food chain support; natural water storage, natural flow attenuation, and water quality improvement which enhances fish, wildlife, and listed species utilization. Fla. Admin. Code R. 62-345.200(3). When an ERP permit requires wetland mitigation to offset adverse impacts to wetlands, the permittee may purchase wetland credits from a mitigation bank and apply them to meet the mitigation requirements. When the permittee has completed the agreement with the mitigation bank and paid for the credits, those mitigation credits are debited from the mitigation bank's ledger. Every mitigation bank has a ledger that reflects how many credits have been released for use, and how many have been sold for use as mitigation. Uniform Mitigation Assessment Method Rule A mitigation bank is to be awarded mitigation credits ?based upon the degree of improvement in ecological value expected to result from the establishment and operation of the mitigation bank as determined using a functional assessment methodology.? § 373.4136(4), Fla. Stat. Section 373.414(18), Florida Statutes, provides, in pertinent part, that: The department and each water management district responsible for implementation of the environmental resource permitting program shall develop a uniform mitigation assessment method for wetlands and other surface waters. The department shall adopt the uniform mitigation assessment method by rule no later than July 31, 2002. The rule shall provide an exclusive and consistent process for determining the amount of mitigation required to offset impacts to wetlands and other surface waters, and, once effective, shall supersede all rules, ordinances, and variance procedures from ordinances that determine the amount of mitigation needed to offset such impacts. Once the department adopts the uniform mitigation assessment method by rule, the uniform mitigation assessment method shall be binding on the department, the water management districts, local governments, and any other governmental agencies and shall be the sole means to determine the amount of mitigation needed to offset adverse impacts to wetlands and other surface waters and to award and deduct mitigation bank credits . . . . It shall be recognized that any such method shall require the application of reasonable scientific judgment. The uniform mitigation assessment method must determine the value of functions provided by wetlands and other surface waters considering the current conditions of these areas, utilization by fish and wildlife, location, uniqueness, and hydrologic connection, and, when applied to mitigation banks, the factors listed in s. 373.4136(4). The uniform mitigation assessment method shall also account for the expected time lag associated with offsetting impacts and the degree of risk associated with the proposed mitigation. The uniform mitigation assessment method shall account for different ecological communities in different areas of the state . . . . In 2004, the Department adopted the Uniform Mitigation Assessment Method (UMAM) rule, Florida Administrative Code Chapter 62-345. In general terms, the UMAM is designed to assess impacts and wetland functions associated with projects that impact wetlands, along with necessary mitigation required to offset those impacts. As it pertains to this proceeding, the UMAM establishes the standards for evaluating mitigation banks and calculating the credits that may be awarded to a mitigation bank, and provides a standardized wetland assessment methodology that may be applied across community types. Permitting of a mitigation bank first involves a qualitative characterization of the property, known as a Part I evaluation. The Part I evaluation is conducted by dividing the subject parcel of property into assessment areas for wetlands and uplands. An assessment area is ?all or part of a . . . mitigation site, that is sufficiently homogeneous in character . . . or mitigation benefits to be assessed as a single unit.? Fla. Admin. Code R. 62-345.200(1). Each mitigation assessment area must be described with sufficient detail to provide a frame of reference for the type of community being evaluated and to identify the functions that will be evaluated. When an assessment area is an upland proposed as mitigation, functions must be related to the benefits provided by that upland to fish and wildlife of associated wetlands or other surface waters. Information for each assessment area must be sufficient to identify the functions beneficial to fish and wildlife and their habitat that are characteristic of the assessment area‘s native community type . . . Fla. Admin. Code R. 62-345.400. After the assessment areas have been established, a Part II assessment is performed using the scoring criteria established in the UMAM "to determine the degree to which the assessment area provides the functions identified in Part I and the amount of function lost or gained by the project.? Under the Part II evaluation, each mitigation assessment area is evaluated under its current condition --or for areas subject to preservation mitigation, without mitigation -- and its ?with mitigation? condition. The difference in those conditions represents the improvement of ecological value referred to as the ?delta? or the ?lift.? Fla. Admin. Code R. 62-345.500. The ?delta? for an enhancement or restoration area is subject to modification by applying any applicable time lag factor and risk factor to arrive at the numeric relative functional gain (RFG). The RFG is multiplied by the number of acres of the assessment area to determine the number of mitigation bank credits to be awarded. Fla. Admin. Code R. 62- 345.600. Time Lag Factor Section 373.414(18) provides, in pertinent part, that ?[t]he uniform mitigation assessment method shall also account for the expected time lag associated with offsetting impacts . . . .? Florida Administrative Code Rule 62-345.600(1) establishes the UMAM criteria for applying the time lag factor and provides, in pertinent part, that: Time lag shall be incorporated into the gain in ecological value of the proposed mitigation as follows: The time lag associated with mitigation means the period of time between when the functions are lost at an impact site and when the site has achieved the outcome that was scored in Part II. In general, the time lag varies by the type and timing of mitigation in relation to the impacts. Wetland creation generally has a greater time lag to establish certain wetland functions than most enhancement activities. Forested systems typically require more time to establish characteristic structure and function than most herbaceous systems. Factors to consider when assigning time lag include biological, physical, and chemical processes associated with nutrient cycling, hydric soil development, and community development and succession. There is no time lag if the mitigation fully offsets the anticipated impacts prior to or at the time of impact. * * * For the purposes of this rule, the time lag, in years, is related to a factor (T- factor) as established in Table 1 below, to reflect the additional mitigation needed to account for the deferred replacement of wetland or surface water functions. The ?Year? column in Table 1 represents the number of years between the time the wetland impacts are anticipated to occur and the time when the mitigation is anticipated to fully offset the impacts, based on reasonable scientific judgment of the proposed mitigation activities and the site specific conditions. TABLE 1. Year T-factor <or=1 1 2 1.03 3 1.07 4 1.10 5 1.14 6-10 1.25 11-15 1.46 16-20 1.68 21-25 1.92 26-30 2.18 31-35 2.45 36-40 2.73 41-45 3.03 46-50 3.34 51-55 3.65 >55 3.91 The time lag factor is a discounting process which adjusts the future value of the mitigation to a present value at the time credits are released, and is intended to account for the difference between the time that the impacts that the mitigation is to offset have occurred and the time that the final success upon which the credits are based is achieved. The application of the time lag factor is required when mitigation credits are released prior to the mitigation bank achieving the scored final "with-mitigation" condition. Risk Factor Section 373.414(18) provides, in pertinent part, that ?[t]he uniform mitigation assessment method shall also account for the . . . degree of risk associated with the proposed mitigation.? Florida Administrative Code Rule 62-345.600(2) establishes the criteria for applying the time lag factor and provides, in pertinent part, that: (2) Mitigation risk shall be evaluated to account for the degree of uncertainty that the proposed conditions will be achieved, resulting in a reduction in the ecological value of the mitigation assessment area. In general, mitigation projects which require longer periods of time to replace lost functions or to recover from potential perturbations will be considered to have higher risk that those which require shorter periods of time. The assessment area shall be scored on a scale from 1 (for no or de minimus risk) to 3 (high risk), on quarter- point (0.25) increments. A score of one would most often be applied to mitigation conducted in an ecologically viable landscape and deemed successful or clearly trending towards success prior to impacts, whereas a score of three would indicate an extremely low likelihood of success based on the ecological factors below. A single risk score shall be assigned, considering the applicability and relative significance of the factors below, based upon consideration of the likelihood and the potential severity of reduction in ecological value due to these factors. As with the time lag factor, the risk factor is a discounting process which is designed to account for the possibility that there may be occurrences that interfere with the ability of the mitigation bank to replace the ecological functions and values lost when wetland impacts are permitted prior to the final success or evidence that the mitigation bank is clearly trending towards success. DEP/SJRWMD Operating Agreement Sections 373.4135 and 373.4136 establish that the mitigation banking program was created to be jointly administered by the Department and the water management districts. In order to facilitate that joint administration, and to ?further streamline environmental permitting, while protecting the environment,? the Department and the SJRWMD have entered into a written Operating Agreement to ?divide[] responsibility between the DISTRICT and the DEPARTMENT for the exercise of their authority regarding permits . . . under Part IV, Chapter 373, F.S.? By that Operating Agreement, the Department expressly delegated its ?duties and responsibilities? under chapter 373 and Title 62, F.A.C. to the SJRWMD. The Operating Agreement has been adopted by rule by the Department, in rules 62-113.100(3)(x) and 62-300.200(2)(b), and by the SJRWMD in rule 40C-4.091(1)(b). The Department and the SJRWMD are clearly in privity with one another for projects that are subject to the written Operating Agreement. HRMB Permitting History On January 5, 2009, Highlands Ranch submitted an application to the SJRWMD for approval of the HRMB to be located on a 1,575.5-acre parcel of property in Clay County, Florida, specifically in Sections 9, 10, 15, and 16, Township 5 South, Range 23 East (the Property). The application was appropriately submitted to the SJRWMD pursuant to the terms of the Operating Agreement. The Mitigation Service Area (MSA) for the proposed HRMB incorporated portions of Baker, Clay, St. Johns, Putnam, and Duval Counties. The land area and MSA that was the subject of the SJRWMD Permit is identical to the Property encompassed by the proposed DEP Permit at issue in this proceeding. As established in the proceeding that resulted in the issuance of the SJRWMD permit: Highlands Ranch is proposing to place a conservation easement over the mitigation bank property and to conduct enhancement activities in those areas of the property needing improvement as a result of current land uses. Generally, it proposes to cease all pine production practices and cutting of cypress and hardwood trees after the permit is issued. It has also proposed to improve hydrologic conditions on the property by removing a trail road, installing four low water crossings, and removing pine bedding and furrows within all areas planted with pine on the property. Finally, supplemental plantings of appropriate canopy species will be conducted. The project will be implemented in three phases . . . . CRP/HLV Highlands Ranch, LLC v. SJRWMD, Case No. 10-0016, ¶20, (Fla. DOAH May 26, 2010; SJRWMD July 16, 2010). The general project description and phases were substantially identical to the phased proposal in the instant DEP Permit. When Highlands Ranch made its 2009 application to the SJRWMD, the District performed a review of the application, conducted multiple site inspections, met with the applicant's consultants, submitted requests for additional information, and reviewed other appropriate resources. On November 19, 2009, the SJRWMD issued its notice of intent to approve the application, and to approve 204.91 mitigation credits for the HRMB. The credits were calculated by the SJRWMD by applying the UMAM rule. Highlands Ranch filed a petition to challenge the number of credits with the SJRWMD, and requested a formal administrative hearing before the Division of Administrative Hearings. By the time of the final hearing, Highlands Ranch had modified its request to 425 credits, and the SJRWMD had modified its proposed agency action to reduce the number of credits to 193.56. A primary issue of contention in the SJRWMD permit hearing was whether the UMAM preservation adjustment factor (PAF) should be separately applied in areas proposed for enhancement activities in conjunction with preservation afforded by the conservation easement, or whether preservation should be considered as a subsumed element of the enhancement. The PAF is a process that assigns a value to the preservation of the property, and is scored on a scale from zero (no preservation value) to one (optimal preservation value) on one-tenth increments. Fla. Admin. Code R. 62-345.500(3)(a). Thus, preservation at anything less than optimal preservation will result in a downward adjustment of the RFG upon which credits for the acres in an assessment area are ultimately calculated. Under the ?two-step? process, after the functional gain associated with the preservation of the wetland assessment areas is determined, the second step of scoring the functional gain that would be achieved from the enhancement activities, which includes consideration of time lag and risk associated therewith, is performed. The preservation and enhancement scores are considered as separate forms of mitigation, and are each applied as multiples of the delta to arrive at the RFG. In contrast to the SJRWMD approach, Highlands Ranch used a "one-step approach," which scored any area that would be both preserved and enhanced/restored only as ?with mitigation? under UMAM and did not conduct a separate analysis for preservation or apply a separate preservation factor multiple. Neither the ?two-step? PAF nor the ?one-step? PAF is specifically described in the UMAM rule, and both are allowable interpretations of the rule. After the formal hearing, the administrative law judge entered a recommended order in which he determined that the SJRWMD‘s application of the UMAM standards, including its application of the ?two-step approach? was appropriate and correct, thus warranting an award of 193.56 mitigation credits for the HRMB. Neither Highlands Ranch nor the SJRWMD filed exceptions to the recommended order. On July 14, 2010, the SJRWMD entered its final order, which adopted the recommended order ?in its entirety as the final order of this agency.? The final order was not appealed. The SJRWMD permit, Permit Number 4-019-116094-2, was thereafter issued on August 4, 2010, and is currently valid. Development of the June 15, 2011 DEP Guidance Memo During the 2011 legislative session, a bill was proposed to amend the statutes governing mitigation banks. The legislation failed to pass. After the conclusion of the 2011 legislative session on May 7, 2011,1/ more than nine months after the issuance of the SJRWMD permit, counsel for Highlands Ranch contacted Mr. Littlejohn, who had been hired in March, 2011 as the Department‘s Deputy Secretary for Regulatory Programs, to express Highlands Ranch‘s ?frustration with . . . what they considered not an objective review at the [SJRWMD].? Mr. Littlejohn understood that Highlands Ranch believed the SJRWMD review of the application that led to the issuance of the SJRWMD Permit ?was not impartial.? After the telephone conversation, Mr. Littlejohn instructed Department staff to work with counsel for Highlands Ranch to develop guidance to interpret the UMAM rule. Counsel for Highlands Ranch prepared and provided drafts of a guidance document for the Department. There was no evidence of any private individual, other than counsel for Highlands Ranch, being given an opportunity to provide input or otherwise participate in the development of the guidance document. On June 15, 2011, the Department released its final ?Guidance Memo on Interpreting and Applying the Uniform Mitigation Assessment Method? (Guidance Memo). The Guidance Memo was designed to establish ?nuanced interpretations of the UMAM rule? in order to ?provide a uniform method throughout the state.? The Guidance Memo consisted of eight numbered paragraphs. According to Mr. Littlejohn, ?some of these paragraphs are completely unaltered from the [failed 2011] legislation, but I believe that most of them probably had some minor alteration in the subsequent review by the Office of General Counsel and during our own review internally, but . . . some form of Paragraphs 2 through 8 existed in . . . that legislation.? It was the intent of the Department that the Guidance Memo would reflect the current Department interpretation and direction to others in the application of the UMAM. The Guidance Memo was provided to the program administrators for each of the Department‘s six district offices, to the ERP program administrators for each of the water management districts, and to Broward County, which administered the only delegated local ERP program, with the intent that it be uniformly applied by each of them. The Guidance Memo is, and was intended to be, a Department-issued statement of general applicability that implements, interprets, or prescribes law or policy. The practical effect of the Guidance Memo was to reject the ?two-step? preservation adjustment factor (PAF) as applied by the SJRWMD, and establish the ?one-step? PAF as the only interpretation and application allowed by the UMAM rule. The development of the Guidance Memo would have made an appropriate subject for rulemaking, at which all affected stakeholders could have participated. Instead, the Department chose to limit participation to Highlands Ranch, offering no opportunity for other views, either in favor of or in opposition to the terms of the Guidance Memo. Notably, despite the legislature‘s encouragement, if not requirement, of cooperation between the Department and the water management districts in the development and implementation of the UMAM, the Guidance Memo, which was designed to override the method by which UMAM standards were applied by at least two of the water management districts, was developed without water management district knowledge or participation. SJRWMD Application for Modification On September 14, 2011, Highlands Ranch submitted an application for a modification of the SJRWMD permit to the SJRWMD. The application requested that the SJRWMD reconsider the permitted mitigation bank plan in light of the DEP Guidance Memo and, based thereon, modify the number of mitigation credits awarded. No other changes were made to the mitigation bank as permitted. Based on the application of the Guidance Memo alone, Highlands Ranch calculated that 425 mitigation credits was the appropriate number for the development and implementation activities presented in the original SJRWMD permit application. Highlands Ranch withdrew the application for a modification of the SJRWMD permit prior to November 2011. DEP Application for Modification On November 2, 2011, Highlands Ranch submitted an application to the Department for a modification of the SJRWMD Permit (the DEP modification application). In addition to a request that the Guidance Memo be applied, the modification made changes to the plan permitted by the SJRWMD, including supplemental planting of seedling longleaf pine, modification to the prescribed burn schedules, and modification of the monitoring plans and ?success criteria? for demonstrating ecological progress. The application proposed that 426.05 credits be awarded for the HRMB as modified. The DEP modification application was assigned for permit review to Constance Bersok who was, at the time, the Environmental Administrator for the Wetlands Mitigation Program. Ms. Bersok had been involved in the process of applying the UMAM since shortly after the 2000 legislative session, when she ?was in charge of the Department's part of [the UMAM rule] development and coordination? along with the water management districts and other affected entities. Ms. Bersok was identified as the primary Department contact for ?questions and other feedback? regarding the UMAM rule in the June 15, 2011 Guidance Memo. Ms. Bersok is knowledgeable and experienced regarding the interpretation and application of the UMAM rule. Thus, she was the appropriate staff person for primary oversight of the application. Special Cases Agreement The Department determined that it would process the modification application despite the assignment of such projects to the SJRWMD under the Operating Agreement. In order to assume control over the permitting of the HRMB, the Department entered into a ?Written Agreement Pursuant to the Special Cases Section of the Operating Agreement? with the SJRWMD (Special Cases Agreement). Section II, Part D. of the Operating Agreement provides that: By written agreement between the DISTRICT and the DEPARTMENT, responsibilities may deviate from the responsibilities outlined in II. A., B., or C. above. Instances where this may occur include: An extensive regulatory history by either the DISTRICT or the DEPARTMENT with a particular project that would make a deviation result in more efficient or effective permitting; Simplification of the regulation of a project that crosses water management district boundaries; The incorrect agency has begun processing an application or petition and transfer of the application or petition would be inefficient; or Circumstances in which a deviation would result in the application being more efficiently or effectively processed. The specific provisions of paragraphs 1-3 being inapplicable, the Department assumed control over the modification application by relying on the generic ?catch-all? reason set forth in paragraph 4. The basis for the Department‘s determination that it could ?more efficiently or effectively process[]? the application -- despite the fact that the HRMB Property was literally in the SJRWMD‘s back yard, that the SJRWMD had a recent permitting history regarding the Property, and that the SJRWMD had extensive existing knowledge of the condition of the Property -- is not apparent and was not explained. The Special Cases Agreement became effective on December 13, 2011, upon Mr. Littlejohn‘s signature. DEP Permit Application On November 22, 2011, Highlands Ranch submitted a second package to Ms. Bersok, which converted the HRMB application from one for a modification of the SJRWMD permit, to one for a new permit to be issued by the Department. The permit application made certain changes to the terms and conditions for the development of the mitigation bank established in the SJRWMD Permit, but otherwise encompassed the same boundary and service area of the SJRWMD Permit. Highlands Ranch proposed 426.05 mitigation credits as the appropriate number of credits for the activities in the DEP permit application. There has been no other instance in which the Department accepted, processed, or issued a second mitigation bank permit when there was an existing and valid permit issued by a water management district for the same property. Thus, this application is unique in that regard. The Special Cases Agreement provided that it was designed to allow the Department to process the ?[a]pplication for a modification of the Highlands Ranch Mitigation Bank wherein the applicant seeks to revise the mitigation plan.? Despite its apparent limitation to a modification of the SJRWMD permit, the Special Cases Agreement cites to the application number of the DEP Permit that is the subject of this proceeding, and became effective after the submission of the new permit application. There is no evidence of the SJRWMD having objected to the Department‘s continued processing of the application. Thus, although irregular, the Special Cases Agreement was broad enough in its scope to encompass the conversion of the application for modification to a separate permit application. In addition to the foregoing, the scope of the Special Cases Agreement is a matter between the Department and the SJRWMD. There is no question that both agencies have legislatively conferred authority with regard to permitting mitigation banks. The decision between those agencies as to which would have responsibility going forward with the HRMB is not one that affects the substantial interests of Petitioner. Creation of the New ?Performance-driven? Approach On or about February 10, 2012, Ms. Bersok was advised by Mr. Littlejohn that the Department was going to implement a new and previously untried ?performance-driven? approach to permitting the HRMB. Mr. Littlejohn testified that this performance-driven approach is an interpretation of existing mitigation banking rules, and was to provide greater certainty in environmental performance, mitigation success, and provide for a more consistent, predictable, and repeatable permitting process.2/ The more practical effect of the ?performance-driven? approach, as stated by Mr. Littlejohn, is that ?there may be some increase in credits upon not applying a risk or a time lag factor. Those are both discount factors which attach to the raw scoring. So there may be an increase in credits.? Mr. Littlejohn testified that under his ?performance- driven? approach, the current condition of the Property and the final ?success criteria? were the only relevant factors, not how the applicant chose to meet those criteria. Consistent with that approach, Ms. Bersok was instructed that there was no need to issue a request for additional information as to the details by which the performance goals would be met, as was the normal procedure for environmental resource permits, including mitigation bank permits.3/ Under the performance-driven approach as applied to the HRMB, mitigation credits are subject to interim release and available for use upon the satisfaction of ?success criteria? set forth in the permit. Pursuant to the credit release schedule set forth in the DEP Permit, credits may be released upon recording the conservation easement(s), posting the required financial responsibility instrument and providing site security, and thereafter upon meeting one of five ?interim release? milestones. The interim credit releases authorize the release of mitigation credits for use to offset wetland impacts well before the time when the site has achieved the outcome that was scored in the Part II assessment. Although Highlands Ranch will have performed the bulk of the active construction and implementation activities before being entitled to an interim release, the ecological benefit of the interim ?success criteria? does not represent the achievement of the structure and function that will be necessary for final success, nor does it guarantee that that final structure and function will ultimately be achieved. Complete Application Though instructed not to request additional information, Ms. Bersok sent an e-mail to the agent for Highlands Ranch that contained a recitation of what she would have sent the applicant in a request for additional information. On February 14, 2012, Highlands Ranch submitted supplemental information in support of the permit application to Ms. Bersok. The supplemental information contained some, though not all, of the information requested by Ms. Bersok. The submittals of November 1, 2011; November 22, 2011; and February 14, 2012, along with the application check, constitute the application to DEP. There were no written submittals designed to supplement, alter, or amend the proposed activities to enhance or preserve the Property after February 14, 2012. Thus, those documents constituted the complete application. The application contained Highlands Ranch‘s description of historic and existing vegetative communities. There was no suggestion that the description provided by Highlands Ranch was not accurate. The goal of the HRMB as reflected in the DEP application was to convert a silviculture operation to the appropriate native target communities. Mitigation activities proposed in the complete application included restoring or enhancing longleaf pine/xeric oak sandhill, mesic flatwoods, hydric or wet flatwoods, baygall/bay swamp, floodplain swamp/stream or lake swamp and bottomland forest/wetland forest mixed communities, generally through reversal of the existing silvicultural impacts and implementing hydrologic enhancement activities. Each phase of the HRMB would be subject to a conservation easement granted to the Department and the SJRWMD for preservation of the Property in its existing or enhanced condition. The complete application provided that enhancement and restoration would be accomplished through canopy thinning in existing upland and wetland pine plantation areas; control of nuisance and invasive exotic vegetative species; vegetative enhancement, including replanting thinned pine areas with appropriate species where necessary, and supplemental planting of historic native trees and ground cover; prescribed fire; and hydrologic enhancements. Ongoing management of the HRMB site would primarily involve monitoring; prescribed fire; and control of nuisance and invasive exotic vegetative species. Draft Permits As information regarding the application was submitted by Highlands Ranch, Ms. Bersok undertook to calculate the number of mitigation credits warranted by the complete application. She performed several calculations between December 8, 2011 and February 22, 2012. On February 22, 2012, Ms. Bersok performed her final written analysis of the application using the information contained in the November 22, 2011, submittal, including the mitigation activities and target levels and methodologies described by Highlands Ranch, and the information contained in the February 14, 2012, submittal. Thus, her assessment and review was based upon the complete application. In addition to the information regarding site conditions from the permitting file, Ms. Bersok had ?a couple of meetings? to discuss the application, made a site visit, and reviewed additional aerial images obtained on-line. Although her site visit was not comprehensive, Ms. Bersok felt that she had adequate information regarding the current condition for each of the different types of assessment areas that were on the site. Since her review was based in large measure on information and site descriptions regarding the current conditions provided by Highlands Ranch, her belief as to the sufficiency of the information regarding the assessment areas upon which she based her review is warranted and accepted. The November 22, 2011, submittal included the following mitigation activities that differed from the conditions of the SJRWMD permit: All areas subjected to prescribed burning would be burned on a 2-8 year rotation. Two burns necessary to reach final success criteria. Communities defined by both FLUFCS classification and FNAI classification. Basal area targets of less than 60 square feet per acre in U1 and 80 square feet per acre in U2 (perpetual management only). A total of 426.05 credits proposed. No credit withholding by phase. Completion of Construction and Implementation tasks results in 20% of credit release. Target levels and methodologies to determine percent cover and composition of canopy, shrub, and groundcover. The February 14, 2012, submittal included the following description of mitigation activities that differed from the conditions of the SJRWMD permit: The expected fire frequency for the hydric pine restoration areas to be a 1-3 year cycle, with actual burn frequency to be in the professional judgment of the burn manager and team ecologists. Further description of the low water crossings and structures. Since Ms. Bersok utilized the November 22, 2011, submittal, along with the information provided by Highlands Ranch on February 14, 2012, her review and analysis necessarily included the above-listed mitigation activities and target conditions. Ms. Bersok made assumptions designed to produce high quality outcomes that, at the time of her review, had not yet been incorporated as conditions to any proposed permit. Her assumptions/recommendations included the following: In those locations without sufficient pyrogenic groundcover, mechanical means of shrub reduction to carry a fire, and planting or seeding of the native ground cover to achieve and sustain the target community type. Planting of longleaf pine in the xeric (U1) and mesic (U2) communities, and similar mitigation in the hydric pine restoration (W1 and W2) assessment areas. Ms. Bersok‘s assumptions were ultimately incorporated in the DEP draft permit. Ms. Bersok‘s analysis included the ?one-step? approach to application of the preservation factor, wherein preservation was included as an element of enhancement in restoration or enhancement assessment areas, rather than as a separate factor, consistent with the approach outlined in the June 15, 2011 Guidance Memo. Thus, for the assessment areas that were not exclusively bay or floodplain preservation, the ?P-Factor? score was listed as ?n/a.? Ms. Bersok utilized the ?performance-driven? approach as instructed by Mr. Littlejohn. Therefore, her February 22, 2012, assessment assigned a score of 1.00 for both time lag and risk. As a result of her calculations, Ms. Bersok arrived at a total of 280.33 mitigation credits for the HRMB. Ms. Bersok‘s February 22, 2012, score of 280.33 credits incorporated all of the material changes to the SJRWMD permit that were proposed by Highlands Ranch in its complete application, and the material specific conditions that were ultimately included in the DEP proposed permit. The only changes to the SJRWMD permit that were not explicitly part of Ms. Bersok‘s calculation, either as a proposal by the applicant or as an assumption, were: two consecutive burns within a period of 1-3 years in the xeric, mesic, and hydric pine restoration areas to demonstrate final success. monitoring and recording of shrub height to meet success criteria. control of oak species ?to obtain the abundance appropriate to the sandhill community condition.? Those relatively minor changes are not significant in light of the overall information presented in the complete application and Ms. Bersok‘s accepted assumptions, and do not materially affect the final target conditions for the mitigation. Several days prior to May 8, 2012, Ms. Bersok met with Mr. Rach and Mark Thomasson to discuss progress on the application and draft permits. At that time, she reviewed a UMAM assessment that assigned 333 mitigation credits to the HRMB. She was instructed ?to look for some more credits, that [333 credits] wasn't enough.? Ms. Bersok advised Mr. Rach and Mr. Thomasson that 333 mitigation credits was more than could be ecologically supported.4/ On May 8, 2012, Mr. Rach presented Ms. Bersok with a draft pilot permit that called for the award of 424 mitigation credits for the HRMB. Mr. Rach was unable to identify who in the Department calculated the UMAM credits, but that ?the credits which were the result of the UMAM were one of the last things filled in in the permit. So I'm not sure at that point in time who it was.? On May 9, 2012, Ms. Bersok prepared a ?status memo? in which she expressed her opinion that she could not ecologically support the award of 424 mitigation credits for the HRMB, and expressed her ?objection to the intended agency action and refusal to recommend this permit for issuance.? On May 11, 2012, Ms. Bersok was removed from further involvement in the review of the HRMB permit application. Issuance of the DEP Permit and Variance Over the course of the next three months, the Department and Highlands Ranch had several meetings in which they developed the performance standards and ?success criteria? that would be applied to allow for the release of mitigation credits. The meetings included additional site visits. There was no evidence that the additional site visits revealed conditions of the site that were inconsistent with those set forth in the complete application. During the course of the hearing, it was suggested that ?additional activities [were] proposed? during the period when the permit application was being processed. There were, in this case, no requests for additional information, no written submittals memorializing any such additional activities, and no evidence of any alteration or amendment of the complete application. Those ?additional activities? were not specified or described during the final hearing. To the extent that the Department or Highlands Ranch purports to rely on unspecified ?additional activities? that are not contained in the application or the permitting file, or otherwise presented as evidence to support issuance of the permit, they may not be considered as part of the record of this proceeding. On August 17, 2012, the Department issued its Notice of Intent to Issue Environmental Resource/Mitigation Bank Permit and Variance (Notice) and draft permit that awarded 424.81 mitigation credits for the HRMB. The number of credits awarded by the Department ?was a collaborative effort with the Applicant over the course of several meetings,? with Mr. Thomasson ultimately signing off and agreeing to the final scores. The Notice provided that the UMAM assessment of the HRMB Property showed ?a potential of 424.81 total freshwater credits: 207.31 Hydric Flatwoods/Wet Prairie credits and 217.50 Freshwater Forested wetlands credits.? Thus, the credits awarded to the HRMB may be purchased and applied at impact sites in the MSA to offset 207.31 units of functional loss associated with hydric flatwoods and wet prairies, and 217.50 units of functional loss associated with freshwater forested wetlands. The 426.05 credits proposed by Highlands Ranch in the November 22, 2011 application were derived by calculating 291.99 credits for restoration of the upland pine assessment areas, 73.78 credits for restoration of the hydric pine assessment areas (thus 365.77 credits for restoration of overall pine assessment areas), 15.40 total credits for enhancement and restoration of floodplain, bottomland, and bay assessment areas, and 37.65 credits for preservation of floodplain and bay assessment areas. The 425.81 credits awarded by the Department were derived by calculating 317.64 credits for restoration of the upland pine assessment areas, 52.06 credits for restoration of the hydric pine assessment areas (thus 369.70 credits for restoration of overall pine assessment areas), 15.35 total credits for enhancement and restoration of floodplain, bottomland, and bay assessment areas, and 39.75 credits for preservation of floodplain and bay assessment areas. The number of credits awarded by the Department is roughly identical to the number requested by Highlands Ranch in the 2010 SJRWMD proceeding (425 credits), the number requested by Highlands Ranch in the November 1, 2012, application for modification of the SJRWMD permit (426.05 credits), the number requested by Highlands Ranch in the November 22, 2011 DEP permit application (426.05 credits), and the number preliminarily calculated by the Department and provided to Ms. Bersok on May 8, 2012 (424 credits). Credit Release Schedule Section 373.4136(5) provides that: SCHEDULE FOR CREDIT RELEASE.— After awarding mitigation credits to a mitigation bank, the department or the water management district shall set forth a schedule for the release of those credits in the mitigation bank permit. A mitigation credit that has been released may be sold or used to offset adverse impacts from an activity regulated under this part. The department or the water management district shall allow a portion of the mitigation credits awarded to a mitigation bank to be released for sale or use prior to meeting all of the performance criteria specified in the mitigation bank permit. The department or the water management district shall allow release of all of a mitigation bank‘s awarded mitigation credits only after the bank meets the mitigation success criteria specified in the permit. The number of credits and schedule for release shall be determined by the department or water management district based upon the performance criteria for the mitigation bank and the success criteria for each mitigation activity. The release schedule for a specific mitigation bank or phase thereof shall be related to the actions required to implement the bank, such as site protection, site preparation, earthwork, removal of wastes, planting, removal or control of nuisance and exotic species, installation of structures, and annual monitoring and management requirements for success. In determining the specific release schedule for a bank, the department or water management district shall consider, at a minimum, the following factors: Whether the mitigation consists solely of preservation or includes other types of mitigation. The length of time anticipated to be required before a determination of success can be achieved. The ecological value to be gained from each action required to implement the bank. The financial expenditure required for each action to implement the bank. Notwithstanding the provisions of this subsection, no credit shall be released for freshwater wetland creation until the success criteria included in the mitigation bank permit are met. Florida Administrative Code Rule 62-342.470(3) allows for the release of credits prior to final success criteria having been met, and provides that: Some Mitigation Credits may be released for use prior to meeting all of the performance criteria specified in the Mitigation Bank Permit. The release of all mitigation credits awarded will only occur after the bank meets all of the success criteria specified in the permit. The number of credits and schedule for release shall be determined based upon the performance criteria for the Mitigation Bank, the success criteria for each mitigation activity, and a consideration of the factors listed in subsection 373.4136(5), F.S. However, no credits shall be released until the requirements of Rules 62-342.650 and 62.342.700, F.A.C., are met. Additionally, no credits awarded for freshwater creation shall be released until the success criteria included in the Mitigation Bank Permit are met. Prior to achieving the final success criteria, Highlands Ranch will be eligible for interim credit releases when the ?success criteria? for each phase as set forth in the permit are met. The mitigation credits are scheduled for release as follows: Conservation Easement/Financial Assurance/Security Phase 1 - 23.45 credits Phase 2 - 21.78 credits Phase 3 - 18.49 credits Interim Criteria I Phase 1 - 39.09 credits Phase 2 - 36.29 credits Phase 3 - 30.82 credits Interim Criteria II-A Phase 1 - 9.38 credits Phase 2 - 8.71 credits Phase 3 - 7.40 credits Interim Criteria II-B Phase 1 - 3.13 credits Phase 2 - 2.90 credits Phase 3 - 2.47 credits Interim Criteria III Phase 1 - 32.83 credits Phase 2 - 30.49 credits Phase 3 - 25.89 credits Interim Criteria IV Phase 1 - 28.14 credits Phase 2 - 26.13 credits Phase 3 - 22.19 credits Final Success Criteria by Phase Phase 1 - 12.51 credits Phase 2 - 11.61 credits Phase 3 - 9.86 credits Final Bank Success Criteria - 21.25 credits The tasks related to Phase 1 are targeted to commence upon permit issuance, with active management activities -- i.e., recording the conservation easement, providing title insurance, executing financial assurance mechanisms, and providing security; and enhancement activities, e.g., tree thinning, crushing bedding rows, planting, and activities relating to trail roads and culverts -- to be completed within one year. The evidence indicates that some of the management activities, including tree thinning and crushing bedding rows were completed prior to the submission of the application for the DEP Permit. The tasks related to Phase 2 and Phase 3 are targeted to commence upon ?phase implementation,? with active management and enhancement activities within one year of the implementation of each phase. The application provides that the implementation date for Phase 2 and Phase 3 ?will be based upon market demand for mitigation within the mitigation service area.? Thus, the phases could be implemented immediately, or not at all, at the sole discretion of Highlands Ranch. The HRMB mitigation milestones that allow for interim releases of mitigation credits prior to the final success of the target communities and measures for which the bank was scored under the Part II assessment do not materially differ from standards for interim releases applicable to all mitigation banks pursuant to section 373.4136(5) and Florida Administrative Code Rule 62-342.480(3). In addition to the foregoing, though not dispositive of the issue, is the fact that the ?success criteria? in the HRMB permit are, in many cases, vague and non-quantifiable. Thus, in the absence of specific standards and comparators, the HRMB success criteria may allow for the release of credits to offset present wetland impacts without any specific or measurable ecological benefit. Application of the Time Lag Factor The Department calculated the credits for the HRMB using a time lag score of 1.00 for all assessment areas. Thus, in keeping with the UMAM, the Department necessarily made the decision that at the time of the interim releases, ?the mitigation fully offsets the anticipated impacts prior to or at the time of impact.? Meeting the ?success criteria? for an interim release of credits does not mean that the mitigation bank has met the success measures for which the bank was scored under the Part II assessment. Rather, meeting the ?success criteria? serves only to recognize that the project is meeting interim goals that show general progress towards the target goals if continued and successful into the future. In this case, there is a time difference between the achievement of the ecological benefits of the final target community, and the interim release of mitigation credits and their use to offset impacts at sites requiring mitigation. There is little practical ecological difference between releasing credits before final target communities are achieved based on ?success criteria? that are the result of implementing described activities, and releasing credits based on the physical implementation of those described activities. The effect in both cases is that mitigation credits are to be released during the ?time between when the functions are lost at an impact site and when the site has achieved the outcome that was scored in Part II.? There was testimony offered at the final hearing that the Department‘s time lag and risk scores of 1.00 were appropriate because the credit release schedule represents functional ecological improvement that must be achieved before credits are released. For the reasons set forth above, the undersigned finds that the functional ecological improvement represented by the ?success criteria? is not materially dissimilar from the means by which the ecological value of interim release milestones has been calculated for previously permitted and implemented mitigation banks. Thus, testimony that the success criteria as proposed in the DEP Permit warrants time lag and risk scores of 1.00 is not credited. Contrary to the evidence referenced in the preceding paragraph, Mr. Hull testified convincingly that there is a sizable percentage of credits released prior to the mitigation bank reaching the success proposed for many of the restoration assessment areas without time lag or risk. An example of time lag that should be applicable to the HRMB is the fact that final success for all assessment areas includes, among other criteria, the requirement that all plants, except those targeted for control or eradication, be reproducing naturally. In the case of longleaf pine, which is to be planted throughout the Property, the period before the achievement of that outcome is approximately 30 years. Furthermore, Ms. Bersok testified credibly that when starting with a community that has few ecological functions, the time necessary to ultimately achieve a high community structure score can take much longer than 15 to 20 years. That period before final success should have been reflected as time lag in the UMAM assessment, but was not. In accordance with the schedule proposed by Highlands Ranch, a significant number of the total credits awarded for the three phases may be released within one year of permit issuance. In that regard, the ?CE/Financial Assurance/Security? interim release allows for a three-phase total of 63.72 credits to be released for that interim step, estimated to occur within 30 days of permit issuance or phase implementation, while Interim Criteria I allows for a three-phase total of 106.20 credits to be released for that interim step, estimated to occur within one year of permit issuance or phase implementation. Thus, 169.92 of 425.81 credits, or 40 percent of the total, are potentially eligible for release within a short period, and years before any reasonable expectation of final target community success. It is that circumstance that squarely meets the standards for the application of the time lag factor. Based on the testimony and evidence adduced at the final hearing, the calculation of credits for the HRMB without accounting for the time lag before final success produces an unreasonable result, regardless of the application of the "performance-driven" approach that was created for the HRMB by the Department.5/ Thus, the decision to assign a time lag score of 1.00 to each of the restoration assessment areas is contrary to the facts of this case, and the plain language of the UMAM rule and its requirements. Application of the Risk Factor The Department calculated the credits for the HRMB using a risk score of 1.00 for all assessment areas. Thus, pursuant to the UMAM, the Department made the decision that the mitigation projects require no significant ?periods of time to replace lost functions or to recover from potential perturbations,? and that the mitigation activities are being ?conducted in an ecologically viable landscape and deemed successful or clearly trending towards success prior to impacts.? As set forth in preceding paragraphs, there is a sizable period of time between the interim release of credits - and their availability to replace lost functions at permitted impact sites -- and the time at which the mitigation has been established and monitored to the point at which it is ?clearly trending towards success.? Thus, a risk score of 1.00, meaning that there is essentially no risk, is not warranted. The risk in this case is that associated with the fact that the ?mitigation projects . . . require longer periods of time to replace lost functions or to recover from potential perturbations.? Although there were concerns expressed that the proposed activities might have heightened risk inherent in the mitigation methods, the testimony on that issue was vague and non-specific, and is not accepted. Based on the testimony and evidence adduced at the final hearing, the failure to account for the risk associated with the extended period of time expected before final restoration and enhancement success is not warranted, regardless of the application of the "performance-driven" approach. Thus, the decision to assign a risk score of 1.00 to each of the restoration assessment areas is contrary to the facts of this case, and the plain language of the UMAM rule and its requirements. Application of the Preservation Adjustment Factor The DEP Permit applied the preservation factor as a ?one-step? process as described above. Under that method, the PAF was not separately applied in any restoration or enhancement assessment area. That method was applied by Ms. Bersok in her February 22, 2013, UMAM scoring of the HRMB complete application. A PAF of 0.70 was applied to both of the preservation assessment areas. That score was also applied by Ms. Bersok in her February 22, 2013, UMAM scoring of the HRMB complete application. The ?one-step? application of the PAF was an allowable method under the UMAM rule. Petitioner failed to prove that the score of 0.70 for the preservation assessment areas was not warranted. Variance from Construction and Implementation Financial Responsibility Requirement Section 373.4136 provides that, in order to obtain a mitigation bank permit, an applicant must meet the financial responsibility requirements established by rule. § 373.4136(10), Fla. Stat. As it relates to financial responsibility for the construction and implementation of a mitigation bank, Florida Administrative Code Rule 62-342.700(4) provides, in pertinent part, that: Financial Responsibility for Construction and Implementation. No financial responsibility shall be required where the construction and implementation of the Mitigation Bank, or a phase thereof, is completed and successful prior to the withdrawal of any credits. * * * . . . When the bank (or appropriate phase) has been completely constructed, implemented, and is trending toward success in compliance with the permit, the respective amount of financial responsibility shall be released. The financial responsibility mechanism shall become effective prior to the release of any mitigation credits. Section 120.542(2) provides that: (2) Variances and waivers shall be granted when the person subject to the rule demonstrates that the purpose of the underlying statute will be or has been achieved by other means by the person and when application of a rule would create a substantial hardship or would violate principles of fairness. For purposes of this section, ?substantial hardship? means a demonstrated economic, technological, legal, or other type of hardship to the person requesting the variance or waiver. For purposes of this section, ?principles of fairness? are violated when the literal application of a rule affects a particular person in a manner significantly different from the way it affects other similarly situated persons who are subject to the rule. On July 16, 2012, Highlands Ranch filed a petition with the Department for a variance from the financial responsibility requirements of rule 62-342.700 for the construction and implementation activities of Highlands Ranch Mitigation Bank.6/ In its ?Petition for Variance from Rule Subsections 62-342.700(1)(a), (2), (3) and (4), F.A.C.?, Highlands Ranch requested that the variance be granted on the basis that the application of the rule would create a substantial hardship. Highlands Ranch did not assert that the application of the financial responsibility rule would violate principles of fairness. As indicated previously, the proposed permit authorizes a release of credits when Highlands Ranch records the conservation easement, provides title insurance, executes financial assurance mechanisms, and provides security. Thus, the proposed HRMB permit authorizes the release of mitigation credits prior to any construction being commenced, much less completed. Although certain interim criteria must be met in order for additional mitigation credits to be released, those interim steps do not constitute success of the target conditions scored under the Part II Assessment or, without more, demonstrate that the mitigation is ?trending toward success? in meeting those final target conditions. Financial assurance is required for construction and implementation activities at all mitigation banks, and may not be released until the mitigation ?is trending toward success in compliance with the permit.? Highlands Ranch asserts that the unique ?performance-driven? approach that has been applied to the HRMB warrants a deviation from the requirement that it financially guarantee the work. To the contrary, the financial responsibility required by rule provides assurance that the active construction and implementation is performed and, as would be the case with the ?performance-driven? approach, may be released only when the expected outcomes are trending towards success. Without question, any time a permitee is required to provide financial responsibility, it will have a financial effect on the permittee. However, the standard for a variance requires that the financial effect constitute a hardship to the person requesting the variance. In this case, Highlands Ranch failed to demonstrate that meeting the financial responsibility requirements applicable to all mitigation bank permittees would constitute an economic, technological, legal, or other type of hardship as applied to it. Highlands Ranch did not request a variance on the basis that the application of the financial-responsibility rule would violate principles of fairness. Nonetheless, the Department determined that ?principals of fairness? warranted its grant of the variance. For the reasons set forth herein, including the fact that the financial-responsibility instruments required of all permittees may be released only when the mitigation ?is trending toward success in compliance with the permit,? the undersigned finds that the financial-responsibility rule does not affect Highlands Ranch in a manner significantly different from the way it affects other similarly situated persons who are subject to the rule. Highlands Ranch failed to demonstrate that the application of Florida Administrative Code Rule 62-342.700(4) would create a substantial hardship or would violate principles of fairness as applied to Highlands Ranch and the HRMB. Highlands Ranch‘s Motion for Attorney‘s Fees and Costs Based on the evidence adduced in this proceeding, the undersigned finds that Petitioner did not participate in this proceeding for an improper purpose. In that regard, Petitioner is found to have prevailed on certain issues that substantially changed the outcome of the proposed agency action which is the subject of this proceeding regarding both the DEP Permit and the Variance. Furthermore, despite the evidence provided as to the source of payment for certain of Petitioner‘s costs and attorney‘s fees, there was insufficient evidence to support a finding that Petitioner brought this action ?primarily to harass or to cause unnecessary delay or for frivolous purpose or to needlessly increase the cost of litigation, licensing, or securing the approval of an activity.? § 120.595(1)(e)1., Fla. Stat. Ultimate Findings of Fact Based on the totality of the facts adduced at the final hearing, having weighed the evidence introduced by each of the parties, and having gauged the demeanor and credibility of the witnesses, the undersigned accepts the testimony of Ms. Bersok as constituting the most credible and reliable application of reasonable scientific judgment, resulting in an accurate calculation of the allowable credits (except as modified below) that may be awarded under the standards established by the UMAM rule. The competent and substantial evidence available to Ms. Bersok, including the complete application submitted by Highlands Ranch, and her assumptions that were ultimately incorporated in the DEP proposed permit, are found to have been sufficient to allow her to formulate reasoned opinions and conclusions regarding the number of mitigation credits that could be ecologically justified in this case. Therefore, the undersigned finds that the application of the UMAM standards to the HRMB property and the restoration, enhancement, and preservation activities to take place thereon, warrants an award of a maximum of 280.33 mitigation credits. Based on the testimony and evidence adduced at the final hearing, and as set forth herein, the undersigned finds that the facts of this case, including the ?performance-driven? approach that was developed for and applied to the HRMB application, do not warrant a determination that there is no time difference between the time wetland impacts being mitigated by released mitigation credits are anticipated to occur and the time when the mitigation is anticipated to fully offset the impacts. Based thereon, the application of a time lag score of 1.00 in the UMAM assessment was in error. Thus, the 280.33 mitigation credits that reflect the maximum allowable number should be revised by applying an appropriate time lag modifier to the ?delta? for each restoration and enhancement assessment area as calculated by Ms. Bersok, with the RFG and final credits calculated based thereon. Based on the testimony and evidence adduced at the final hearing, and as set forth herein, the undersigned finds that the facts of this case do not warrant a determination that there is no uncertainty that there may be a reduction in the ecological value of the mitigation assessment area. That finding is based on the length of time expected before final success, rather than any inherent vulnerability of the target communities. Based thereon, the application of a risk score of 1.00 in the UMAM assessment was error. Thus, the 280.33 mitigation credits that reflect the maximum allowable number should be revised by applying an appropriate risk modifier to the ?delta? for each restoration and enhancement assessment area as calculated by Ms. Bersok, with the RFG and final credits calculated based thereon. For the reasons set forth herein, Highlands Ranch failed to demonstrate that it was entitled to a variance from the financial responsibility requirements of Florida Administrative Code Rule 62-342.700.
Recommendation Based on the findings of fact and conclusions of law, it is RECOMMENDED that the Department of Environmental Protection enter a final order consistent with the findings of fact and conclusions of law set forth herein. DONE AND ENTERED this 11th day of April, 2013, in Tallahassee, Leon County, Florida. S E. GARY EARLY 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 11th day of April, 2013.
The Issue The central issue in this case is whether the Respondents are guilty of the violations alleged in the Amended Administrative Complaint; and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: The Department of Banking and Finance, Division of Finance, is charged with the responsibility of administering the provisions of Chapter 494, Florida Statutes. At all times material to the allegations in this case, Diko Investments, Inc. ("Diko") conducted business as a mortgage broker in Palm Beach County, Florida. At all times material to the allegations in this case, Dieter Kolberg ("Kolberg") was an officer, director, and acted as principal mortgage broker for Diko. Kolberg passed the mortgage broker's examination on May 28, 1985. Diko was issued a license as a mortgage broker with Kolberg as its principal broker on June 26, 1985 (license NO. HB-16568) Prior to May 28, 1985, Diko ran advertisements soliciting investors for mortgage opportunities. These ads included Kolberg's home telephone number. Prior to May 28, 1985, Kolberg/Diko entered into a business relationship with Michael D. Cirullo, a licensed mortgage broker, to "co-broke" mortgage transactions. Pursuant to their agreement, Cirullo represented the borrower/mortgagor while Kolberg obtained and represented the lender/mortgagee. Kolberg and Cirullo solicited and negotiated at least two loans prior to May 28, 1985. Kolberg acted in expectation of being paid as a mortgage broker. Cirullo remitted 50 percent of the commissions earned on these transactions to Diko. Diko stationery included the phrase "Licensed Mortgage Bankers." Neither Diko nor Kolberg has been licensed as a "mortgage banker." In August and September of 1985, investors, Marcel and Ida Barber, responded to a Diko advertisement which offered a 16 percent interest mortgage loan secured by prime residential real estate. The Barbers were interested in a safe, high interest yielding investment and requested more information from Diko. On September 23, 1985, Kolberg wrote to the Barbers to outline the following business policies of Diko: The first objective of the Diko lending program was "The Safety of the Investor's Capital." Any investment was to be secured by a mortgage on prime residential real estate clear of all liens with the exception of a first mortgage where a second mortgage would be given. Investors would be issued mortgagee title insurance to insure against loss due to defects in title to the mortgaged property. Investors would be issued fire and hazard insurance to cover any losses in the event of fire or storm. Subsequent to the receipt of the aforesaid letter, the Barbers decided to invest $25,000 in a mortgage through Diko/Kolberg. This initial transaction proceeded satisfactorily and the objectives addressed in paragraph 10 above were met. In late December, 1985, the Barbers advised Kolberg that they would be willing to invest an additional $50,000 in early January, 1986. The Barbers expected the transaction to be handled in the same manner as their prior investment through Diko. After reviewing two or three loan proposals, the Barbers chose to invest in a loan to Tony Medici/Automatic Concrete, Inc. The loan was to be secured by a second mortgage on property at 713-717 "L" Street, West Palm Beach, Florida. The "L" Street property consisted of a 24-unit apartment complex and an adjacent laundry facility. Kolberg accompanied the Barbers to view the property. During discussions with the Barbers regarding the proposed investment, Kolberg made the following false material representations: That the property had a high occupancy; That rental payments were guaranteed or subsidized by a government program; That the asset-to-debt ratio for the property was acceptable; and That a proposed expansion of the laundry facility would further enhance the security of the loan. Financial statements of the borrower (Medici/Automatic Concrete, Inc.) did not include all obligations against the "L" Street property. Diko/Kolberg did not give the Barbers an accurate or complete statement of the financial condition of the "L" Street investment. Kolberg knew the information on the statement was incomplete. Diko/Kolberg did not disclose to the Barbers the high rate of crime in the area which compromised the security of the "L" Street investment. Kolberg knew of the crime problem in the area. Diko/Kolberg did not disclose to the Barbers that foreclosure proceedings had been instituted against the "L" Street property. Kolberg knew of the foreclosure action as well as the delinquency on other obligations. Kolberg did not disclose to the Barbers that he represented, as trustee, a Kolberg family company which would directly benefit from the Barber loan. The Barber loan would satisfy a mortgage held by Kolberg, as trustee, on the subject property, which mortgage was in default and in the process of foreclosure (the Ropet Anlagen foreclosure). Kolberg did not disclose to the Barbers that another mortgage held on the "L" Street property (David Marsh loan) was also in default. A subordination agreement was required to be executed by Marsh in order for the Barber/Medici loan to close. Marsh agreed to subordinate his mortgage position for approximately $3,000 in arrear payments. Marsh was owed approximately $125,000 but chose to subordinate because by doing so he was able to recoup a small amount of what he considered a lost investment. Kolberg knew of Marsh's situation and did not advise the Barbers. The Barber loan to Medici/Automatic Concrete, Inc. closed on January 18, 1986. The Barbers delivered a check for $53,000 payable to the title company chosen by Diko. Neither Diko nor Kolberg gave the title company, Manor Title, closing instructions to protect the lenders' interests. Kolberg did, however, instruct the title company to list expenses relating to the Ropet Anlagen foreclosure against the Medici loan. Proceeds from the closing, in the amount of $50,000 were paid to Kolberg, as trustee for "Ropet Anlagen," and deposited to an account by that name. The name "Ropet Anlagen" translates to "Ropet Investments." Kolberg handles all transactions for this Kolberg family company in the United States. (Kolberg has two sons, Robin and Peter, from a former marriage. The name "Ropet" may derive from their names.) Kolberg's former wife, Patricia Kolberg, owns an interest in Ropet Anlagen. Regular monthly payments were made by Kolberg to Patricia Kolberg on a Ropet Anlagen account. Many of the checks drawn on the Ropet Anlagen account were for personal expenses of Kolberg or his business. The first mortgage on the "L" Street property was 45 days overdue on January 13, 1986. Kolberg knew of this delinquency but did not advise the Barbers. To the contrary, Diko gave the Barbers an estoppel notice from a prior closing showing the first mortgage to be current. The first mortgagee ultimately foreclosed its mortgage and the Barbers lost their entire investment. The Barbers did not receive a fire and hazard insurance policy to cover losses in the event of fire or storm for the "L" Street property. The Barbers did not receive a mortgagee title insurance policy until March, 1986, by which time the first mortgage was further in default. Additionally, the mortgagee policy disclosed a financing statement and a collateral assignment of rents recorded prior to the Barbers' mortgage.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Banking and Finance, Office of the Comptroller, enter a Final Order revoking the mortgage broker license issued to Dieter Kolberg and Diko Investments, Inc. DONE and RECOMMENDED this 30th day of November, 1987, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of November, 1987. APPENDIX Rulings on proposed Findings of Fact submitted by Petitioner: Paragraphs 1, 2, 3, 4 and 5 are accepted. Paragraph 6 is accepted; however, Kolberg's interest when financing with funds he controlled was only on a temporary, interim basis. The activities were conducted with Diko to receive a commission, therefore requiring a license. Paragraphs 7-15 are accepted. Paragraph 16 is accepted to the extent addressed in findings of fact paragraphs 12, 13. Paragraphs 17-18 are accepted to the extent addressed in findings of fact paragraphs 14, 18, 22. Paragraphs 19-27 are accepted. Paragraph 28 is rejected as immaterial and unnecessary. Paragraphs 29-42 are accepted. The detail of Petitioner's finding is unnecessary to the conclusions reached herein. Paragraphs 43-45 are accepted but unnecessary. Paragraph 46 is accepted. Paragraph 47 is rejected as unnecessary and immaterial. Paragraphs 48-52 are accepted. Paragraph 53 is rejected as unnecessary. Paragraph 54 is accepted. Paragraph 55 is accepted to the extent found in findings of fact paragraphs 20, 21. Paragraphs 56-57 are accepted. Paragraph 58 is accepted to the extent addressed in finding of fact paragraph 21. Paragraphs 59-63 are accepted but unnecessary. Paragraphs 64-65 are accepted. Rulings on proposed Findings of Fact submitted by Respondents: Paragraph 1 is accepted. Those portions of paragraph 2 which set forth Respondent's dates of testing and licensure are accepted, the balance is rejected as an erroneous conclusions of law. Paragraph 3 is rejected as contrary to the weight ofevidence. Paragraph 4 is accepted but irrelevant to the issue. Paragraph 5 is rejected as the transaction was solicited with Kolberg's company, Diko, participating as a mortgage broker. Paragraph 6 is accepted but irrelevant to the issue. Paragraph 7 is rejected as contrary to the weight of theevidence and law. Paragraph 8 is accepted but does not mitigate, as a matter of law, Respondent's improper useage of the phrase. Paragraphs 9-11 are accepted; however the detail of thefindings is unnecessary and immaterial to the issues of thiscause. Paragraphs 12-14 are accepted to the extent addressed in findings of fact paragraphs 12, 13 the balance is rejected as unnecessary and immaterial. Paragraph 15 is rejected as unnecessary, relevant portions having previously been addressed. Paragraph 16 is accepted. Paragraph 17 is accepted but is unnecessary. Paragraph 18 is rejected to the extent it qualifies Barber as a "Sophisticated Investor." The record is clear Mr. Barber was experienced in the laws of France; however, he relied on Kolberg completely as to both transactions which took place in Palm Beach. Moreover, Mr. Barber's useage and understanding of the English language was suspect. He could hardly be considered a "sophisticated investor" in light of the total circumstances. Paragraph 19 is rejected as contrary to the weight of the evidence. Paragraph 20 is accepted to the extent addressed in finding of fact paragraph 13, the balance is rejected as contrary to the weight of evidence. Moreover, it is found that the only times of capacity occupancy (which were limited) were due to temporary, transient, undesirable tenants who may have directly affected the crime problem. Paragraph 21 is accepted. Paragraph 22 is rejected as contrary to the weight of evidence. Paragraphs 23-24 are rejected as contrary to the weight of evidence. Paragraph 25 is accepted but is unnecessary. The crime problem was there prior to closing and was undisclosed to Barber. That it worsened after closing only assured the disclosure should have been made. Paragraphs 26-35 are rejected as contrary to the weight of the evidence. Many of the facts asserted here are based on testimony given by Kolberg. Respondents presume that testimony to be truthful, accurate, and candid. I found the opposite to be true. Paragraph 36 is accepted but does not mitigate Respondents' responsibilities to have completed the items at closing. Paragraph 37 is accepted with same proviso as above paragraph 36, ruling #22). Paragraphs 38-39 are rejected. See ruling #21. Paragraph 40 is accepted. Paragraph 41 is accepted but see findings of fact paragraph 21 as to Kolberg's useage of Ropet funds for personal expenses. Paragraphs 42-43 are rejected as contrary to the weight of the evidence. COPIES FURNISHED: Lawrence S. Krieger, Esquire 111 Georgia Avenue, Suite 211 West Palm Beach, Florida 33401 Keith A. Seldin, Esquire 1340 U.S. Highway #1, Suite 106 Jupiter, Florida 33469 Honorable Gerald Lewis Comptroller, State of Florida Department of Banking and Finance The Capitol Tallahassee, Florida 32399-0350
Findings Of Fact Respondent is currently licensed, and as of the date of the Administrative Charges and Complaint, held license No. HB-0008511 as a mortgage broker and was president and principal broker of Bay Area Financial Services, Inc. He has held such license since November 1979. He sold the business in April 1980 and has reapplied within six months for an individual license. The application was received on May 16, 1980. Pursuant to Rule 3D-40.03(3), Florida Administrative Code, Respondent is treated as a current licensee, and as an applicant. From October 25, 1977, until June 12, 1979, Respondent was employed as vice-president and principal mortgage broker by United Companies Mortgage and Investment of St. Petersburg, Inc., hereinafter UCMI, a mortgage brokerage firm. United Companies Financial Corporation, hereinafter UCFC, is a Louisiana corporation, authorized to do business in Florida. The company engages in the business as a mortgage lender. On August 31, 1978, UCMI by and through its broker, Respondent, made a loan to "James G. Anderson" and "Lorraine Anderson, his wife," and accepted a note in the amount of $14,500.00 made by "James G. Anderson and Lorraine Anderson," together with a first mortgage also made by "James G. Anderson and Lorraine Anderson, his wife," as security for the repayment of the loan. The first mortgage purported to encumber Lot 25, Oak Harbor Subdivision, according to the plat thereof as recorded in Plat Book 5, page 94, Public Records of Pinellas County, Florida. On August 31, 1978, UCMI, for value, assigned the note and mortgage to UCFC. The Respondent has no objection as to the authenticity and genuineness of Exhibit 11, a copy of a contract for sale of real estate which, on its fact, was executed by "James G. Anderson and Lorraine Anderson," as purchasers of certain real property from the seller, Linda Carol Querry, a/k/a L. C. Querry. The document reflects that the purchase price be $18,500.00, payable $100.00 in cash as a deposit, $900.00 cash within twenty-four hours, $4,500.00 additional deposit at time of closing, and $13,000.00 mortgage balance. (Exhibit 2). Anderson acknowledged his signature on this document but has no recollection of signing it. On August 31, 1978, a Notice to Customers, required by federal law, was executed by "James G. Anderson and his wife Lorraine," setting forth the disclosure requirements of Regulation Z. The lender is reflected as UCFC and the broker as UCMI of St. Petersburg. Respondent Hughes executed such document as a witness to the signatures of "Mr. and Mrs. Anderson." On August 31, 1978, a promissory note was executed by "James G. Anderson and Lorraine Anderson" promising to pay UCMI the sum of $14,500.00. (Exhibit 3). On August 31, 1978, a document entitled Consummation of Loan Secured by Real Property, was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 4). On August 31, 1978, a document entitled Notice to Customer Required by Federal Law was executed by "James G. Anderson and Lorraine Anderson," as the borrowers. (Exhibit 5). On August 31, 1978, a document regarding the loan transaction was executed by "James G. Anderson and Lorraine Anderson," acknowledging receipt of the "Good Faith Estimates," and certain other materials. (Exhibit 6). On August 31, 1978, a Notice to Purchaser-Mortgagor was executed by "James G. Anderson and his wife, Lorraine Anderson" acknowledging receipt of such notice. (Exhibit 7). On August 31, 1978, an Owner's Affidavit was executed by "James G. Anderson and his wife, Lorraine." (Exhibit 8). On August 28, 1978, a loan application was executed by "James G. Anderson" for the $14,500.00 to be secured by a first mortgage. Respondent personally handled the application as indicated on the application itself. (Exhibit 1). On August 31, 1978, check No. 15-39091 was executed by Respondent Hughes, as authorized representative of United Companies, Inc., as payor, to James G. Anderson and Title Consultants, as payees, in the amount of $11,014.58. The check was endorsed by "James G. Anderson and Lorraine Anderson." (Exhibit 10). On August 31, 1978, a Warranty Deed was executed by Linda Carol Querry, a/k/a L. C. Querry, as seller of certain real property to "James G. Anderson and Lorraine Anderson, his wife." Respondent Hughes executed the document as a witness to Linda Querry's signature and execution. The property described in the Warranty Deed is the identical property mortgaged by "James G. Anderson and Lorraine Anderson" to secure the loan from UCMI and UCFC. (Exhibit 13). On August 31, 1978, a Mortgage Deed was executed by "James G. Anderson and Lorraine Anderson, his wife," as mortgagors, to UCMI of St. Petersburg, as mortgagee, as security for the repayment of the loan. Respondent Hughes executed the Mortgage Deed as a witness to the signatures of "Mr. and Mrs. Anderson." (Exhibit 9). On August 31, 1978, UCMI, by and through its principal broker and vice president, Respondent Hughes, assigned the Anderson mortgage and note to UCFC. The applicable Florida law governing this matter is Chapter 494, Florida Statutes (1977), and as amended in the 1978 Supplement, and Chapter 3D- 40, administrative rules regulating mortgage brokerage, Florida Administrative Code. In August 1978, James G. Anderson, who worked in the Sanitation Department of the City of St. Petersburg, also worked part-time repainting houses purchased for resale by Vic Vogel, a speculator. While so employed, Anderson had seen Respondent a few times in the company of Vogel, but had never formally met Respondent. Vogel offered to sell one of these houses to Anderson on terms that would require no down payment by Anderson, who would thereafter make monthly payments similar to the rental payments he was then making. Further, there would be no "red tape" and Anderson would be buying a home rather than renting one. Anderson trusted Vogel, who assured Anderson he would take care of all the details. The house Anderson agreed to buy was on 11th Street and 20th Avenue South in St. Petersburg and was one of the houses Anderson had worked on in his part-time job with Vogel. In the contract to purchase signed by Anderson (Exhibit 11) the block for the legal description of the property is blank. The various other spaces on the form now showing the purchase price, down payment, etc., were blank when signed by Anderson. For several years prior to 1977 Anderson had been living with Lorraine Walker but never held her out as his wife. The signature "Lorraine Anderson" on all exhibits except Exhibit 14, the quitclaim deed from Anderson to United Companies Financial Corporation, were signed by someone other than Lorraine Walker. At the instigation of his attorney, Anderson and Lorraine Walker signed Exhibit 14 to clear up foreclosure proceedings that had been instituted against Anderson. The closing of the sale of property to Anderson took place at the offices of United Companies at 300 S. Duncan Street, Clearwater, Florida on 31 August 1978. Anderson was picked up by Vogel and driven to the closing. Accompanying Vogel was Mike Robertson, an associate of Vogel; Linda Querry, Vogel's girl friend, who signed the deed conveying the property to Anderson; and an unidentified black woman. While awaiting Respondent's arrival for the closing, Vogel took the group to lunch. At the closing, Anderson signed numerous documents and other people, including the black woman who obviously signed "Lorraine Anderson," also signed these documents as witnesses and/or notary. Anderson does not recall having seen Verona Krnjaich, who notarized his signature on the documents he signed at the closing and Ms. Krnjaich does not recall a closing at which Anderson was present. However, she testified that her normal practice is to notarize only documents notarized in her presence, and that she follows this practice at all closings. On the other hand, she has good recall of faces seen at closings but does not believe she ever saw Anderson before this hearing. Anderson testified that he trusted Vogel and signed whatever documents Vogel asked him to sign; that all the documents bearing his signature were blank when he signed them; that he did not know the black woman in the room at the closing or that when she signed these documents she did so in the name of Lorraine Anderson; that the closing took place on the second or third floor of a building just off U.S. 19 between Clearwater and St. Petersburg; that he doesn't know the address of this building but could return to it, and in fact, a few months prior to this hearing, took one of Petitioner's agents to the building where the closing took place; that he received no copy of any document signed by him at the closing; that he thought he was buying a house from Vogel; and that he expected Vogel to notify him after the closing when he could move in and how much he would pay each month. Vogel did not again contact Anderson and apparently has left the area. A few months prior to this hearing Anderson accompanied one of Petitioner's agents to show the agent where the closing occurred. The building to which the agent was taken by Anderson is two-storied and occupied by Ellis National Bank. In August 1978 there was no other occupant of this building and the second floor was unfinished but contained restrooms and some offices occupied by bank employees. Anderson made no cash payment before, at, or after the closing on this house; nor did he ever move into it. The legal description on the deed conveying the property to Anderson is for property located at 626-27th Avenue South, St. Petersburg, Florida, and not for the house at 11th Street and 20th Avenue South which Anderson thought he was buying. After Anderson became delinquent on his mortgage payments Respondent went to Anderson's home one Sunday afternoon demanding payment of the delinquent monthly payments owed by Anderson. The latter told Respondent he hadn't bought any house from the lender, owed no money, and wasn't going to pay. Respondent shortly thereafter turned the case over to the United Companies' attorney, who instituted foreclosure proceedings. When served with these papers Anderson took them to his lawyer. After some of the facts surrounding this transaction became apparent, the assignee of the mortgagee accepted a quitclaim deed to the mortgaged property from Anderson. Lorraine Walker accompanied Anderson to the lawyer's office and signed the quitclaim deed "Lorraine Anderson" (Exhibit 14). The deed signed by L. C. Querry conveying Lot 25 to Anderson (Exhibit 13) conveyed the property to "James G. Anderson and Lorraine Anderson, his wife." Respondent had known Vic Vogel for five or six years prior to August 1977 and had been involved in ten or twelve transactions in which Vogel had picked up distressed property, refurbished it and sold it. Anderson had few debts and readily qualified for the mortgage loan without considering the income of Lorraine or his income from his part-time work. He understood he was buying the house without any down payment, and, in fact, Anderson paid nothing down when he signed the contract and he produced no cash at the closing. The only disbursement made at closing was by the mortgagee, whose check for $11,014.58 (Exhibit 10) was payable to Title Consultants and Anderson. The latter endorsed this check and presumably Title Consultants disbursed to the seller. Closing statements for the buyer and seller were not in the files of UCMI or Title Consultants, nor was a contract to purchase in which the description of the property to be bought was shown. Respondent's witness testified that she reviewed all documents prior to a closing; that she recalls the Anderson transaction; doesn't recall who prepared those documents but believes she typed them; that documents were never signed in blank and the blanks subsequently completed; that she did the credit check on Anderson; and that all documents used in the closing were completed in full before the closing at which they were signed by Anderson and the person signing as Lorraine Anderson. A check with the credit bureau should have disclosed Anderson's marital status as not married and this witness was unable to explain the failure to pick this up when Exhibit 1, the loan application, was verified with the credit bureau. Respondent testified that he recalled the Anderson transaction on 31 August 1978 but later in his testimony stated he did not recall this specific transaction. He believes he followed his usual procedure and explained the various documents to Anderson before the latter signed them. Prior to 1978 he had closed many transactions for UCMI without a contract to purchase having been executed. The loan application is mailed to the main office of United Companies in Baton Rouge, Louisiana and telephonic approval is given by Baton Rouge. Accordingly, it was not unusual for Anderson's loan application to be prepared 28 August 1978, the original mailed to Baton Rouge and approval received in time to close the transaction on 31 August 1978. The contract upon which this house was conveyed, and the closing statements of buyer or seller, were not presented at this hearing. Witnesses testified these documents were missing from the files in which they would be expected to keep. Regardless of this, it is uncontradicted that Anderson made no payment at closing and, if any payment was made prior to closing, any such payment would have been accounted for by the escrow agent. It is also evident that no such accounting was made. By signing a note and mortgage for $14,500.00 Anderson purported to purchase a house for slightly more than $11,000.00, which is the amount of the check endorsed by Anderson at closing and which sum presumably went to the seller. Some $3,000.00 was retained by the lender as prepaid finance charges ($1,567.67) and brokerage fee ($1,545.45). (Exhibit 2.) Accordingly, the mortgage of $14,500 represented approximately 130% of the amount paid for this house. This fact was known, or should have been known, to Respondent, who presumably was representing his principal, UCMI, the lender at this closing. Respondent was paid a fixed salary by UCMI and did not receive additional compensation for each transaction he closed. UCMI suffered a financial loss on the repossession of the house from Anderson and filed suit against Industrial Valley Title Insurance Company (Exhibit 15).
Recommendation From the foregoing it is concluded that Respondent was guilty of concealing material facts from UCMI involving the transaction with Anderson at which UCMI was mortgagee, and that, as a result, UCMI suffered injury. It is therefore RECOMMENDED that Robert E. Hughes' license as a mortgage broker be suspended for a period of six (6) months. DONE AND ENTERED this 17th day of October 1980. COPIES FURNISHED: Franklyn J. Wollett, Esquire Assistant General Counsel Office of the Comptroller Room 1302, The Capitol Tallahassee, Florida 32301 George W. Greer, Esquire 302 South Garden Avenue Clearwater, Florida 33516 K. N. AYERS Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of October 1980.
The Issue The Respondents have been charged with multiple violations of Chapter 494, (1987), the Florida Mortgage Brokerage Act, and administrative rules promulgated pursuant to the act. The violations, described in an amended administrative complaint dated April 16, 1990, are as follows: Rule 3D-40.006(5), F.A.C.: Respondents failed to issue a statement signed by both parties, when receiving a deposit on a mortgage loan, regarding disposition of the deposit and other matters. Section 494.08(10), F.S. and Rule 3D-40.091(2), F.A.C.: Respondents failed to provide a written statement with a summary of limits and conditions for recovery from the Mortgage Broker Guaranty Fund. Section 494.055(1)(b), F.S. and Rule 3D-40.008(1), F.A.C.: Respondents assessed fees for credit reports, phone calls, appraisals and courier services, which fees were not supported by the files. Section 494.055(1)(0), F.S. and Rule 3D-40.006(4), F.A.C.: The department had to issue a subpoena for compensation records. Section 494.055(1)(g) and (p), and Section 494.08(5), F.S.: Borrowers were required to pay higher closing costs than were disclosed on the good faith estimate form. Section 494.08(5), F.S.: Respondents failed to secure executed modified mortgage loan applications from the borrowers or to return excess monies to the borrowers. Section 494.08(5), F.S. and Rule 3D-40.091(1), F.A.C.: Respondents accepted deposits from loan applicants but failed to obtain executed mortgage broker agreements which would disclose the cost of the loans. Sections 494.055(1)(b) and (g), and Sections 494.093(3)(a), (b), (c), and (4), F.S.: Respondents failed to disclose that they would retain both origination fees and discount points as their compensation, and failed to disclose compensation received from the lender in addition to brokerage fees assessed the borrowers on the closing statements. Section 494.055(1)(b), F.S., Section 494.08(5), F.S. and Sections 494.093(3)(a), (b), (c) and (4), F.S.: Respondents collected a servicing release fee from the borrowers when the Respondents were not the lender, and failed to disclose the collection. Section 494.055(1)(e), F.S. and Rule 3D-40.006(b)(a), F.A.C.: Respondents failed to maintain an escrow account.
Findings Of Fact Inlet Mortgage Company, Ltd. ("IMC") is a mortgage brokerage business operating under license #HB65002147500. Its place of business is 700 Virginia Avenue, Suite 105, Ft. Pierce, Florida 34982. John Davis is the principal mortgage broker of Respondent IMC, operating under license #HA246700273. He has been licensed in Florida since approximately 1987, and opened his business in February 1988. As authorized by Section 494.065(1), F.S. (1987), the Department of Banking and Finance ("department") conducted an examination of the affairs of the Respondents for the time period February 1988 through June 1, 1988. The examination was completed on July 5, 1988, with a written report. At the time of the examination Respondents had closed only four loans and had another six in progress. The audit was conducted because a loan processor working for IMC had applied for her mortgage broker license, and her application seemed to imply that she was already practicing mortgage brokering. The audit cleared up this question and the processor was not found to be operating improperly. However, Timothy Wheaton, the department examiner, found other violations by IMC. When an audit or review is conducted by the department, the agency staff first interviews the person in charge to explain the review and to learn about the company. The staff then looks at the licenses, reviews files of closed and active loans, and examines books and accounts, payroll records, and the like. Generally, a sampling of loan files is selected from the broker's loan log, but in this first review all loans were reviewed, as so few existed. The staff writes a preliminary report and conducts an exit interview to let the broker know its findings. Later, a formal report is completed and provided to the broker, who has thirty days to respond. Timothy Wheaton conducted his review of IMC and John Davis at the company office in Ft. Pierce on June 3, 1988 and June 7, 1988. At some point on June 3rd, Wheaton was reviewing compensation records to determine how the broker, his partner and the loan processor were paid. Davis had checkbooks available, but the accountant had not prepared his books as the office had just opened. Wheaton had questions as to whether the checkbooks were all that was available; when he asked for the payroll records, Davis told him he would have to subpoena them. Wheaton returned on Monday with a subpoena and was given the same records as before. Davis admits that he made the demand for the subpoena. He was piqued because he was very busy when the audit staff arrived, and when he suggested they return later, he felt they wrongfully impugned his motives and accused him of hiding something. Respondent Davis has admitted to several "technical" violations or oversights in the loan files at the time of the first review. A summary of the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund was not being provided, but has been provided since the first audit. Deposits for credit report, appraisal fees and other costs were collected from the borrowers, but the files did not include a statement, signed by the borrowers, describing disposition of the funds in the event that the loan was not consummated, or the term of the agreement. After the first audit Davis has provided such a form statement and has included it in each file. On three closed loans, and one that was still pending, the files did not include documentation to support minimal (i.e., $25.00, $10.00, $6.56) fees for phone calls and courier fees, or fees were collected which exceeded the documentation in the file. Davis explained that these are charges made by the closing attorney, and the files now document those expenses. The difference between what was collected for a credit report and what was spent was returned to the borrower. (For example, $20.30 was returned to borrower, G. Stewart). In three loans closed at the time of the first audit, Davis and IMC received as compensation both the origination fee and a portion of the discount points. In the McCurdy loan, IMC received its 1 percent origination fee ($600.00), plus one half of the 1 percent discount fee ($300.00). In the Alexander loan, IMC received its 1 percent origination fee ($469.00), plus a .75 percent discount fee ($351.75). In the Stewart loan, IMC received its 1 percent origination fee ($612.00), plus 1/2 percent discount fee ($306.00). In each case, the Good Faith Estimate form provided to the borrowers disclosed the fees separately and did not break out which portion of the loan discount would be paid to the lender and which portion would be paid to IMC. The origination fee is sometimes called the broker's fee, although some banks also collect the fee when a mortgage broker is not involved. Discount points are a one-time payment to a lender to increase its yield on the loan. They are a percentage of the loan, paid up front, to reduce the interest rate over the term of the loan. These are distinctly different forms of charges to the borrower. Davis claims that he explained orally to each borrower how much compensation he would receive. The borrowers do not remember the specifics of that explanation, but rather consider the total origination fee and discount fee as their cost of the loan. They knew that the broker was going to be compensated for his services and understood that compensation would come from those fees in some unspecified manner. Davis claims that he checked with some lenders who told him that it was standard practice for part of the broker's compensation to be called a "discount" fee. He considered it a tax advantage to the borrower, as discount fees could be deductible, just as interest is deductible. During the audit, Davis discussed his compensation practice with the agency staff, who explained that, whatever it is called, the broker's compensation had to be fully disclosed to the borrower at the time of application on the Good Faith Estimate form. Between June 3rd and June 7th, Davis attempted to redisclose his compensation to the borrowers, but this resulted in unsigned disclosure forms in the file when the agency review staff returned on June 7th to complete the audit. At the time of the first audit, Davis and IMC maintained an escrow account for the deposits received from applicant/borrowers for audit reports, appraisal fees and other costs. Davis later closed his escrow account because he felt it was costing him money and because he did not consider the funds he received at the time of application to be escrow deposits. In most cases, the credit report and appraisal and other relevant services were ordered the same day as the loan application. Whether the loan was eventually consummated, the customer was still responsible for paying the charge if the services were provided. This is disclosed in a statement at the bottom of the Good Faith Estimate form and in a separate "Notice to Borrower", signed by the applicant which, since the first audit, is maintained in the loan file. According to the Notice to Borrower, if the loan is cancelled or denied, and the services have not been performed, the funds will be returned to the customer, less any cancellation charge by the appraisal or credit firm. These funds are deposits. When the escrow account was closed, Davis deposited the money for appraisals and credit report in his operating account. After services were rendered and an invoice received, he would pay the bill. Barbara Janet (Jan) Hutchersien, conducted the department's second audit of IMC in January 1990. This review covered the period from July 1, 1988 through December 31, 1989. John Davis provided the boxes of loans and bank records and loan log. The auditor used the logs to review a sample of loans from each lender with whom IMC works. The bank records were used to trace funds reflected in the loan files. Ms. Hutchersien found, and noted in her examination report, that no escrow account was maintained, although deposits were received in a sample of loan applications. In the Fishman loan, which closed on 4/11/89, closing costs were disclosed by IMC as $1,822.00 on the Good Faith Estimate form dated 1/12/89, yet those costs actually amounted to $2,075.00, disclosed at closing on the U.S. Housing and Urban Development (HUD) Settlement form, for a difference of $253.00. In determining consistency between a good faith estimate and actual closing costs, the agency staff looks at items which are predeterminable costs. In the Fishman case, the estimate for survey was $225.00, but the actual cost was $400.00, due, according to John Davis, to an oddly-shaped lot. In two loans financed by Greentree Mortgage Corporation, IMC received a substantial fee from the lender, which fee was not disclosed on the Good Faith Estimate form, on the HUD Settlement form, or anywhere in writing to the borrower. File documents call these fees "discount for pricing". In the Meslin loan, closed on 8/11/89, the fee from the lender to broker was $432.00; in the Krueger loan, closed on 7/21/89, the payment was $820.00. These paybacks are called "par plus pricing", a relatively new (within the last five years) form of loan pricing. Par plus pricing allows a borrower who does not wish to pay cash at closing, but who would qualify for a higher interest rate in terms of monthly payments, to avoid paying discount points fee at closing. Instead, the lender pays the points to the broker, and the borrower gets a higher interest rate. This is contrasted with the discount point system where the borrower pays cash points at closing in return for a lower interest rate. Par plus pricing can work to the advantage to all parties: The borrower avoids a large cash outlay at closing, the lender enjoys a higher interest rate over the term of the loan, and the broker receives his money from the lender. The borrower, however, should understand his options, including the option to pay cash at closing for a lower interest rate. Davis did not disclose the payback from the lender in writing because that is the way he says he was told to handle the loan by Greentree's representative. Davis told the borrowers that he was getting his money from the lender. He did not, however, explain that the borrower would be paying a higher interest rate in return, and Roger Krueger did not understand why his loan was at 10 1/4 percent, rather than 9 3/4 percent, which he thought was the going rate at the time of closing. IMC also received funds from the lender in the Barnes loan, closed on 12/30/88. Cobb Financial Partners was the original lender, yet they paid IMC a service release fee ordinarily paid by one lender to another for release of servicing a loan. Although the fee from Cobb to IMC was not disclosed in writing to the borrowers, the Barnes' were told that the fee for IMC's services would come from the lender, rather from them. They were told, and it is disclosed on the Good Faith Estimate form, and on the HUD Settlement Form, that Cobb Partners Financial was paid $900.00 (1.25 percent loan discount) by the borrowers. Of this, $810.00 was returned by Cobb to IMC. John Davis concedes that Cobb, not IMC, was the lender and was not "comfortable" with how Cobb told him to handle his fee. He has not done business with Cobb since this loan and was simply trying to avoid having to charge his fee to Barnes, who had just arrived in town to become the newspaper editor. The borrowers who were the subject of the files in which the agency found violations generally did business with Davis and IMC because they thought he would get the best deal for them. They were financially unsophisticated and trusted him to represent them. They understood that he was being paid for his services and felt that he should be paid. Except for Mr. Krueger, they were generally satisfied with their mortgage rates. The mortgage broker's fiduciary responsibility is to the borrower, rather than the lender, although he must deal fairly and honestly with the lender. The service that the broker provides to the borrower is his knowledge and his ability to shop for the best product. Par plus pricing and other mechanisms by which the broker receives his fee in whole or part from the lender are not considered by the department to be a violation of standards governing the practice of mortgage brokerage, so long as the customer is fully apprised of his options and is informed of the role of those payments in the product or service they are receiving. The Barnes' and Kruegers clearly were not so apprised, nor does the record establish that the Meslins were informed, although they did not testify. Categorizing brokerage fees or compensation as "discount points" is patently misleading, as discount points are used to buy down an interest rate. When the points are diverted instead to the broker, the consumer does not receive the loan for which he has paid. John Davis admits certain technical violations, but unequivocally denies that he wilfully misled his customers or committed fraud. Since the second audit, he has restored his escrow account. He now discloses his compensation as brokers fees rather than discount points, and has learned how to disclose in writing the par plus pricing loans. In considering certain violations as "technical", and in recommending a penalty in this case, the undersigned has considered Respondents' willingness to correct the errors addressed by the department and Respondents' inexperience at the time of the first audit. Although he was involved in banking, insurance, and accounting, John Davis had not practiced mortgage brokering before moving to Florida and starting his business. In his early practice, as evidenced by his own testimony, he was willing to rely on the advice of lenders, rather than to seek guidance from his licensing authority. He misconceived his role as being jointly responsible to the borrowers and lenders with whom he worked, rather than a primary fiduciary duty to the borrowers, his clients. Although the concealment of compensation as discount points was a willful misrepresentation, the record establishes a pattern of ignorance, albeit inexcusable, rather than fraud.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED That a Final Order be entered, finding that Respondents violated Sections 494.055(1)(e), (o), and (q), F.S. (1987); Sections 494.08(5) and (10), F.S. (1987); and Section 494.093(4), F.S. (1987), and imposing a penalty of $1,000.00 fine, and one year probation, with the conditions that Respondent Davis successfully complete a specified amount and type of professional short course work and undergo periodic review and supervision by the agency. DONE AND RECOMMENDED this 30th day of July, 1990, in Tallahassee, Leon County, Florida. MARY CLARK, 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 30th day of July, 1990. APPENDIX The following constitute specific rulings on the findings of fact proposed by the parties. Petitioner's Proposed Findings of Facts Rejected as unnecessary. Adopted in paragraphs 3 and 6. Adopted in paragraphs 5 and 6. Rejected as redundant. - 8. Rejected as unsupported by the weight of evidence except as found in paragraph 6. The department was required to obtain a subpoena due to Respondents' feigned or real refusal to produce certain records. Rejected as unnecessary. Adopted in substance in paragraph 13. Adopted in substance in paragraph 7. Adopted in substance in paragraph 7. - 18. Rejected as unnecessary. Adopted in summary in paragraph 8. Rejected as immaterial. The telephone charges were incurred by the closing agent, not Respondents. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Adopted in summary in paragraph 7. and Rejected as unnecessary and - 48. Adopted in summary in paragraph 8. 49. - 52. Adopted in summary in paragraph 14. Adopted in paragraph 15. Rejected as unnecessary. Adopted in paragraph 13. and Rejected as unnecessary. Adopted in paragraphs 16 and 20. 59 - 74. Adopted in summary in paragraphs 16-19. Rejected as unnecessary. The conclusion that the handling of "par plus pricing" was fraudulent is rejected as contrary to the weight of evidence. 77. - 81. Adopted in summary in paragraphs 20 and 21. 82. Rejected as contrary to the weight of evidence. 83. Adopted in paragraphs 10 and 12. 84. Adopted in paragraph 10. 85. - 89. Rejected as unnecessary. 90. Adopted in paragraph 22. 91. - 93. Rejected as unnecessary. 94. Adopted in part in paragraph 26. Respondent's Proposed Findings of Fact Adopted in paragraphs 1 and 2. Rejected as unnecessary. Adopted in paragraph 6. Rejected as contrary to the weight of evidence. Adopted in paragraph 3. Adopted in paragraph 13. - 9. Adopted in summary in paragraph 7. Rejected as contrary to the evidence. Liability for payment occurs when the service is rendered, as reflected in Respondent's "Notice to Borrower". Rejected as unnecessary. Adopted in paragraph 12. Rejected as unnecessary and immaterial. Rejected as unnecessary. - 19. Adopted in summary in paragraph 8. 20. - 22. Rejected as unnecessary. Adopted in paragraph 14. Adopted in substance in paragraph 13. Adopted in substance in paragraph 16. Adopted in substance in paragraph 19. Rejected as unnecessary. - 29. Rejected as contrary to the weight of evidence. Included in conclusion of law number 9. Rejected as immaterial. - 33. Rejected as contrary to the evidence. The terms implied that the loans would be at a discounted rate, but were not, because the "discount" (partial) went to the broker. Adopted in paragraphs 19 and 20. Rejected as immaterial. COPIES FURNISHED: Elise M. Greenbaum, Esquire Office of the Comptroller 400 W. Robinson St., Suite 501 Orlando, FL 32801 John O. Williams, Esquire Renaissance Square 1343 East Tennessee St. Tallahassee, FL 32308 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, FL 32399-0350 William G. Reeves General Counsel Dept. of Banking & Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350 =================================================================
The Issue Whether the Respondent is indebted to Petitioner as alleged in the Complaint filed with the Department of Agriculture and Consumer Services.
Findings Of Fact Robert Sepos is the comptroller for Ben-Bud Growers, Inc. As such Mr. Sepos maintains the company records which document amounts owed to it by others. As to this case, Mr. Sepos presented the invoices and statements due and owing from the Respondent. Based upon the unpaid invoices, Respondent owes Petitioner the sum of $10,471.80. Respondent acknowledged that the sum of $10,471.80 is owed to Petitioner but claimed that such amount was not for the purchase of agricultural products as contemplated by Chapter 604, Florida Statutes. According to Mr. Towell the bulk of the debt owed to Petitioner is for packaging and shipping fees for produce from growers represented by Fantastic Produce. Mr. Towell maintains that packing and shipping fees are not encompassed within Chapter 604, Florida Statutes. Mr. Sepos could not verify what sum, if any, of the total amount claimed was for agricultural products (versus packing or shipping). Based upon the admissions made by Mr. Towell, Respondent owes the Petitioner for agricultural products the sum of $775.00 in this case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a Final Order approving Petitioner's claim in the amount of $775.00 and disallowing the remainder. DONE AND ENTERED this 7th day of November, 1997, in Tallahassee, Leon County, Florida. J. D. Parrish 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 7th day of November, 1997. COPIES FURNISHED: Brenda D. Hyatt, Chief Department of Agriculture and Consumer Services Mayo Building, Room 508 Tallahassee, Florida 32399 Richard Tritschler, General Counsel Department of Agriculture and Consumer Services The Capitol, Plaza 01 Tallahassee, Florida 32399 Ben Litowich, President Ben-Bud Growers, Inc. 6261 West Atlantic Boulevard Margate, Florida 33063 George Towell, President George Towell Distributors, Inc. d/b/a Fantastic Produce Post Office Box 159 Belle Glade, Florida 33430 American Southern Insurance Company Legal Department 3715 Northside Parkway, 8th Floor Atlanta, Georgia 30327
The Issue Is Worldwide Investment Group, Inc. (Worldwide) entitled to apply to the State of Florida, Department of Environmental Protection (the Department) for funds to reimburse Worldwide for costs associated with petroleum clean-up at 500 Wells Road, Orange Park, Florida, Facility ID#108736319? See Section 376.3071(12), Florida Statutes.
Findings Of Fact The Property Howard A. Steinberg is a Certified Public Accountant, (CPA) licensed to practice in Florida. In addition to his work as a CPA, Mr. Steinberg has other business interests. Among those interests is Worldwide, a corporation which Mr. Steinberg formed for the purpose of acquiring certain assets, or properties, from Home Savings Bank and American Homes Service Corporation (Home Savings Bank). Worldwide became a corporation in July 1996. Mr. Steinberg is the sole shareholder of that corporation and has been since the inception of the corporation. In addition to controlling all of the assets within Worldwide, Mr. Steinberg is the sole officer of the corporation. The corporation has no other employees. Worldwide has its office in Hollywood, Florida, in the same physical location as Mr. Steinberg's accounting firm of Keystone, Steinberg and Company, C.P.A. Under its arrangement with Home Savings Bank, Worldwide acquired property known as Save-A-Stop at 500 Wells Road, Orange Park, Florida. Mr. Steinberg engaged the law firm of Burnstein and Knee, to assist Worldwide in the purchase of the Save-A-Stop property. The Save-A-Stop property is a commercial parcel that has experienced environmental contamination from petroleum products. To address that problem the firm of M. P. Brown & Associates, Inc., (Brown) was paid for services in rendering environmental clean-up of that site. Substantial work had been done by Brown to remediate the contamination before Worldwide purchased the property from Home Savings Bank. Home Savings had paid Brown for part of the costs of clean-up before Worldwide acquired the Save- A-Stop property. After the purchase, Mr. Steinberg paid Brown to finish the clean-up. Application for Reimbursement Mr. Steinberg, as owner of Worldwide, understood that the possibility existed that Worldwide could be reimbursed for some of the clean-up costs by resorting to funds available from the Department. On July 29, 1997, Bonnie J. Novak, P.G., Senior Environmental Geologist for Brown, wrote to Mr. Steinberg to provide a cost estimate for preparing a reimbursement application in relation to the Save-A-Stop property. The cost to prepare the application was $1,870.00. On August 27, 1996, Mr. Steinberg accepted the offer that had been executed by Brown by Mr. Steinberg signing a contract, and by calling for Brown to prepare an application, to be presented to the Department for reimbursement of costs expended in the clean-up. In furtherance of the agreement between Worldwide and Brown, $935.00 was paid as part of the costs of preparation of the application. This payment was by a check mailed on August 27, 1996. The balance of the fee was to be paid upon the completion of the preparation of the application. In 1996, outside the experience of his businesses, Mr. Steinberg was having difficulties in his marriage. To address the situation, Mr. Steinberg filed a Petition for Dissolution of Marriage. That Petition was filed in April 1996, at which time Mr. Steinberg assumed custody of the children of that marriage, with no right for their mother to unaccompanied visits. After filing for dissolution, Mr. Steinberg relied on others to assist him in dealing with his personal and business life. From December 1996 through January 6, 1997, Mr. Steinberg was particularly influenced by the upheaval in his personal life. It caused him to request extension of deadlines from the Internal Revenue Service for the benefit of his clients whom he served as a CPA. During December, Mr. Steinberg was only in his office for approximately 10 percent of the normal time he would have spent had conditions in his personal life been more serene. On January 6, 1997, the conditions in Mr. Steinberg's personal life took a turn for the worse when his wife committed suicide. In December 1996, attorney Jerrold Knee, who had assisted Mr. Steinberg as counsel in purchasing the Save-A-Stop property, spoke to someone at Brown concerning the status of the preparation of the application for reimbursement of funds expended in the clean-up. He was told that the application was being worked on. Mr. Knee was aware that the deadline for filing the application was December 31, 1996. Mr. Steinberg was also aware of the December 31, 1996, deadline for submitting the application. In that connection, Mr. Knee was familiar with the difficulties that Mr. Steinberg was having in Mr. Steinberg's marriage in 1996. Mr. Knee knew that Mr. Steinberg was infrequently in the office attending to business. Mr. Knee surmised that Mr. Steinberg was relying upon Mr. Knee to make certain that the application was timely submitted, and Mr. Knee felt personally obligated to assist Mr. Steinberg in filing the application, given the knowledge that Mr. Steinberg was not in the office routinely during December 1996. His sense of responsibility did not rise to the level of a legal obligation between lawyer and client. Although Mr. Knee was aware of the pending deadline for submitting the application for reimbursement, and had inquired about its preparation by Brown, and had discussed it with Mr. Steinberg, Mr. Knee never specifically committed to making certain that the reimbursement application was filed on time. As it had committed to do, Brown prepared the reimbursement application for the Save-A-Stop site. The application was for the total amount of $58,632.85, not including preparation charges and CPA Fees. Written notification of the preparation of the application was provided to Mr. Steinberg on December 12, 1996. The correspondence reminded Mr. Steinberg that the application needed CPA approval, an invoice and registration, and a signed certification affidavit. Most importantly, the notification reminded Mr. Steinberg that an original and two copies of the application must be sent to a person within the Department prior to December 31, 1996. The notification specifically indicated the name of that individual within the Department and set forth that person's address. The notification arrived in Mr. Steinberg's office during the week of December 12, 1996. That notification was not opened until late January or early February 1997. Mr. Steinberg opened the letter at that time. During December 1996 Mr. Steinberg was responsible for opening the mail received in his office. No other person was expected to open that mail for the benefit of Worldwide. Untimely Application On February 6, 1997, Worldwide submitted its application for reimbursement for clean-up at the Save-A-Stop location. That application was received by the Department on February 7, 1997. The Department has consistently interpreted the statutory deadline for submitting reimbursement applications in accordance with Section 376.3071(12), Florida Statutes, (Supp. 1996) to be absolute. Consequently, on February 11, 1997, the Department denied the Worldwide application because it had been filed beyond the December 31, 1996, deadline recognized by the statute. Worldwide contested that proposed agency action by requesting a hearing to examine the issue of the timing of the application submission. Consequences of Untimely Application In Florida, petroleum taxes are deposited for the benefit of the Inland Protection Trust Fund. The Florida Legislature allows monies to be appropriated from those deposited funds. In that budgetary process, the Governor's office serves as liaison in requesting the Legislature to appropriate monies from the Inland Protection Trust Fund in relation to the costs of cleanup of sites contaminated by petroleum products. To assist the Governor's office, the Department identifies the need for covering the costs of the clean-up and makes a recommendation to the Governor to provide to the Legislature concerning the amount to be appropriated for the clean-up. In the history of the clean-up program, in 1995, problems were experienced with fraudulent and inflated claims calling for reimbursement for the cost of clean-up. This led to a debt of approximately $550,000,000.00. There was a concern that that debt could not be repaid in a reasonable time frame. In response, the Department, as authorized by the Legislature in action taken in 1996, negotiated a bond transaction through the Inland Protection Financing Corporation. With the advent of the bond issue, $343,000,000.00, not to include the cost of funding the bond, was made available to pay for petroleum clean-up. That bond issue was designed to fund the payment of reimbursement applications that had been received before the end of the life of the petroleum clean-up reimbursement program in place. During the 1996 session, in which the Legislature approved the bond issue, the Legislature also made changes to the petroleum clean-up program. The changes were fundamental in that applicants were no longer reimbursed for clean-up work that had been performed. With the advent of the legislative changes, petroleum clean-up, under a system calling for payment from the fund, could only be conducted if an applicant was pre-approved to conduct the clean- up. As part of that process of gaining funds pursuant to the bond issue, the Department performed an analysis, as authorized by the Legislature, to determine that amount necessary to pay existing obligations that had accrued under the petroleum clean-up reimbursement program that predated the Legislative change in 1996. To ascertain the existing obligation, the Department totaled the known dollar amount associated with the existing reimbursement applications and a portion of unreviewed reimbursement applications that had been received. The Department adjusted the sum to be paid in association with applications that had not been reviewed to that point, having in mind prior experience in which only 82 percent of claims had been allowed. The overriding concern by the Department was that it needed to determine whether the bond issue would be sufficient to defease the backlog of applications for reimbursement previously filed. Information concerning the reimbursement obligations was made known to the Florida Supreme Court in bond validation proceedings held before that court. The Inland Protection Finance Corporation was also made aware of the reimbursement obligations. In 1997, the Department gave further information to the Inland Protection Financing Corporation, indicating that the amount of bond was sufficient for reimbursement obligations. The Department in association with the terms of the bond transaction agreed that the bond proceeds would not be used to fund claims that were received after January 3, 1997. The deadline for submitting applications had been extended until January 3, 1997, by virtue of a statutory amendment found at Section 376.3071(12), Florida Statutes, (1997). Therefore, consistent with the statutory change, the Department had allowed applications submitted after December 31, 1996, but before January 4, 1997, to be considered on their merits. The December 31, 1996, deadline had existed under Section 376.3071(12), Florida Statutes (Supp. 1996). The statutory change occurred because a number of applications that were filed pursuant to the December 31, 1996, deadline set forth in Section 376.3071(12), Florida Statutes (Supp. 1996) did not meet that deadline. The reason for this failure was due to weather conditions that caused overnight couriers, Federal Express and United Parcel Service, to be unable to deliver parcels to the Tallahassee, Florida, airport. These applications, as other applications, were sent to the Department at a Tallahassee, Florida, address. Based on the inability of the two couriers to deliver applications under the timeline anticipated, the Department did not receive that group of applications until January 2, 1997. Subsequently, the applications were accepted as timely based upon the amendment found in Section 376.371(12), Florida Statutes (1997) which extended the filing deadline until January 3, 1997. As a policy consideration, the Department believes it must strictly enforce the deadline for submission of reimbursement applications, as extended by the Legislature, to avoid the future accrual of debt for applications submitted after January 3, 1997, which the Department cannot reasonably anticipate. Apropos of the present case, the Department does not believe that it is well-advised to allow even a single claim for reimbursement, if that claim was received after January 3, 1997. To date, 64 applications have been received by the Department subsequent to December 31, 1996. All but six of those applications were received no later than January 3, 1997. Two of that six applications for reimbursement are still pending before the Department. Historically 22,000 applications for petroleum clean-up have been received by the Department since 1986. At the time of the hearing, 9,000 applications were pending before the Department. In December 1996, 3,000 applications were received calling for reimbursement of costs. At the time of hearing, approximately $340,000,000 in reimbursement claims had not been satisfied. Petitioner makes its claim to be excepted from the deadline for submitting its application based upon the doctrine of equitable tolling.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is, RECOMMENDED that a Final Order be entered denying the application of Worldwide to participate in the reimbursement program for clean-up expenses as untimely. DONE AND ENTERED this 7th day of May, 1998, in Tallahassee, Leon County, Florida. CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 7th day of May, 1998. COPIES FURNISHED: P. Tim Howard, Esquire P. Tim Howard and Associates, P.A. 1424 East Piedmont Drive, Suite 202 Tallahassee, Florida 32312 Jeffrey Brown, Esquire Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Kathy Carter, Agency Clerk Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 F. Perry Odom, General Counsel Department of Environmental Protection 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Virginia B. Wetherell, Secretary Department of Environmental Protection 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000
Findings Of Fact Upon consideration of the evidence adduced at the hearing, the Report of the hearing officer submitted on December 6, 1979, is hereby adopted and incorporated herein. It should be noted, however, that the total time and savings deposits for commercial banks in Collier County as of June 30, 1979, was $266,668,000 rather than $226,668,000 as indicated in the hearing officer's Report. The idea of establishing another savings and loan association in Naples originated with Robert E. Talley, a banker, and Allan L. McPeak, a lawyer. The name proposed for the new association is Marine Savings and Loan Association. No financial institution operating in Collier County at the time of the hearing had the word "Marine" in its name. All of the savings and loan associations in operation in Collier County at the time of the hearing had the word "federal" in their names. Applicant proposes to establish an office in downtown Naples, within a few blocks of several other financial institutions. Applicant has entered into a lease for the proposed facility, at an annual rental of $50,000, renewable for two three-month periods, during the pendency of Applicant's application. The lease provides for a ten-year term at an annual rental of $50,000, if the application is approved, with the option to renew for two additional five-year terms. The lease also contains an option to purchase which must be exercised within thirty-six months of opening or no later than March, 1983, whichever first occurs, at a purchase price of $600,000. In support of its application, Applicant caused an MAI appraisal to be prepared. According to the appraisal, the leased premises have a fair market value, as of March 14, 1979, of $433,000. According to a second, CCIM appraisal, also prepared at Applicant's instance, the property will be worth $632,400 as of February 26, 1982. Initially, Applicant plans to occupy the northern 4,285 square feet of the 6,700 square foot, single-story building it is leasing. Subleases with two tenants who are to occupy the southern portion of the building will be structured so as to provide additional space for expansion by Applicant. The leased premises include 43 parking spaces. Additional parking is available on adjacent streets. The site is easily accessible. Traffic conditions appear to pose no problems. The proposed savings and loan association would be a full service financial institution and expects to be competitive with the existing savings and loan offices in the primary service area (hereinafter PSA) with respect to interest rates and breadth of services. Some of the services that the proposed savings and loan association plans are a drive-in teller window, a night depository, safety deposit boxes, a walk-up window, extended hours on week days (from 9:00 a.m. to 6:00 p.m.), evening hours on Fridays (from 9:00 a.m. to 7:00 pm.), Saturday hours (from 9:00 a.m. to Noon), and safekeeping facilities. Most of the existing savings and loan associations in the PSA do not offer extended hours, drive-in teller windows or safekeeping facilities. The proposed PSA includes the populated portion of the city of Naples and segments of unincorporated Collier County to the north and east of the city. It is bounded on the north by Pine Ridge Road, 4.7 miles away; on the east by County Barn Road, 4.2 miles away; on the south by Gordon Pass and Holly Avenue, 3 miles away; and on the west by the Gulf of Mexico, .7 miles away. The PSA is roughly rectangular except for an indentation in the northeastern corner. Twelve savings and loan association offices now operate within the PSA. One savings and loan association has headquarters within the PSA. Four of the eleven branch offices in the PSA are limited facilities. The Protestant's main office is located 0.2 miles southeast of the premises Applicant has leased. Protestant has filed an application to relocate its main office to a site in unincorporated Collier County, 4.8 miles north of Applicant's proposed site and to make its present main office a branch office. One branch office is now located 0.2 miles southwest of the proposed site; three are between 1.3 miles and 2.0 miles from it; and one is 8.7 miles to the north. Except for the Protestant, no savings and loan association now operating in Collier County has headquarters in Collier County. There are 14 commercial bank offices, including five main banking offices and nine branch offices in operation within the PSA. Three of the five main bank offices are located within 0.3 miles of the proposed site; one is 2.6 miles away and another is 7.5 miles away. Of the branch offices, one is located one mile southwest of the proposed site; three are 1.3 to 2.0 miles from it; four are between 2.2 and 4.0 miles from it and one is 8 miles away. In addition, there are three approved but unopened branch offices which are to be located between 3.1 and 5.3 miles-from Applicant's proposed site. The main office of Security Trust of Naples, a non-deposit trust company, is located 0.3 miles southwest of Applicant's proposed site. Applicant proposed five million dollars as the initial capitalization for the savings and loan association. The capital accounts would initially consist of $1,500,000 common stock and $3,500,000 paid-in surplus. Eighteen percent of the stock of the proposed savings and loan association has been subscribed to by nine organizers. The remaining 82 percent has been subscribed to by more-than 400 members of the general public, mostly from the Collier County area. Applicant has estimated the permanent 1979 population of the PSA at 47,000. This represents an average annual rate of growth of 11.6 percent from the PSA's 1970 population of 23,000. Applicant estimates the County's 1979 permanent population at 77,900, the seasonal population of the PSA at between 12,000 and 14,000, and the seasonal County population at between 15,000 and 20,000. The Applicant estimated the combined permanent and seasonal populations of the County at between 92,900 and 97,900 and that of the PSA at between 59,000 and 61,000. The Applicant projects for the 1982 permanent population of the PSA a figure of 53,000, representing an average annual growth rate of 4.3 percent from 1979. According to data compiled by the Bureau of Economic and Business Research, Division of Population Studies, at the University of Florida, the population of Collier County on April 1, 1970, was 38,040; on July 1, 1979, 64,761; on July 1, 1977, 68,900; on July 1, 1978, 74,572. According to the same source, the population of Naples on April 1, 1970, was 12,042; on July 1, 1976, 17,425; on July 1, 1977, 17,437; and on July 1, 1978, 17,462. The population of unincorporated areas of Collier County, including Everglade City, according to the same source, was 25,998, on April 1, 1970; 47,336, on July, 1976; 51,463 on July 1, 1977; and on July 1, 1978, The population of Collier County grew at an average annual rate of approximately 11.7 percent between 1970 and 1976. Between 1976 and 1977, the County's population grew at a slower rate, viz., approximately 6.4 percent. The rate of growth increased to approximately 8.2 percent between 1977 and 1978. Between 1970 and 1976, the population of Naples grew at an annual average rate of approximately 7.5 percent. During the years 1976, 1977 and 1978, the population of Naples did not increase significantly. The population of the unincorporated areas of Collier County grew at an average annual rate of approximately 13.7 percent between 1970 and 1976, at a rate of approximately 8.7 percent between 1976 and 1977, and at a rate of approximately 11.0 percent between 1977 and 1978. Almost all (94.14 percent) of the population growth in the County between 1970 and 1978, was the result of net migration. Between 1970 and 1978, the proportion of Collier County's population older than 65 years of age increased from 14.0 percent in 1970, to approximately 17.5 percent in 1978. Recent unemployment data for Collier County show an unemployment rate of 10.2 percent for July, 1979 (revised), and 9.8 percent for August, 1979 (preliminary), in the County as compared to the state averages of 6.6 and 6.1 percent for the same months, respectively. The per capita personal income for Collier County was $6,905 in 1976, and $7,663 in 1977. The 11.0 percent increase from 1976 to 1977, is higher than the 9.8 percent increase in the state average for the same period. Collier County's averages were above the state averages of $6,101 in 1976, and $6,697 in 1977. The proposed board of directors would be composed of nine members, at least seven of whom are full-time Florida residents and at least eight of whom are United States citizens. Robert E. Talley, the proposed president and chief executive officer, has had extensive commercial banking experience. From 1964 to 1972, he served as vice-president and loan officer for the Manatee National Bank; from 1972 through 1973, he was senior vice-president of the National Bank of St. Petersburg; from 1973 through 1977, he was president, chief executive officer, and a director of the Community Bank of Homestead; and from 1977 to 1978, he was executive vice-president and branch manager of the National Bank of Collier County. Proposed director, Roland Erickson, served as president and director of the Guaranty Bank and Trust Company, Worcester, Massachusetts, from 1947 to 1964. Proposed director, Harold S. Smith, served as a director and member of the executive committee of the Bank of Everglades from 1948 through 1951. Proposed director, Hendry P. Albrecht, is president of Gale-Realty, Inc., which is involved in investments, including rental property. Although most of the proposed board of directors appear to be successful businessmen, none of them has had direct savings and loan association experience. On June 30, 1975, commercial banks in Collier County had total deposits of $245,086,000 of which $152,499,000 were time and savings deposits. On June 30, 1976, commercial banks in Collier County had total deposits of $301,664,000, of which $193,488,000 were time and savings deposits. On June 30, 1978, commercial banks in Collier County had total deposits of $369,928,000 of which $224,982,000 were time and savings deposits. On June 30, 1979, commercial banks in Collier County had total deposits of $423,365,000 of which $266,668,000 were time and savings deposits. In March of 1979, Protestant held more than three quarters of all moneys on deposit with savings and loan associations in Collier County. At that time, $141,996,000 was on deposit at the Protestant's home office; $10,890,000 at its Tamiami North branch, even though this office first opened in September of 1977; $26,989,000 at its Lely branch; $4,728,000 at its Tamiami South satellite; and $5,537,000 at its Golden Gate facility. In March of 1979, Coast Federal's Tamiami North branch held $56,667,000. On deposit at First City Federal's Tamiami North branch was $6,855,000 in March of 1979. At the same time, Gulf Federal's Fifth Avenue branch had deposits of $7,018,000. In March of 1979, First Federal of Fort Myers had $10,256,000 on deposit at its Tamiami North branch and $235,000 at its Olde Naples facility, which opened in February of 1979. Time and savings deposits in savings and loan associations and commercial banks in Collier County amounted to $552,839,000 in 1978, up 55.62 percent from 1976. At the time of the hearing, there was commercial activity in Naples and residential development, particularly to the north of the PSA. Some thirteen financial institutions were in operation in the western part of Collier County, north of Applicant's proposed site, at the time of the hearing. Applicant has projected savings deposits at the end of the first, second and third years of operation to be $10,000,000, $15,000,000 and $20,000,000, respectively. Applicant also presented a pro forma budget which projected net profit for the first three years to be $191,700, $256,000 and $319,100, respectively. The Deputy Comptroller, Gerri Raines Dolan, and the Director of the Division of Banking, Ryland Terry Rigsby, as advisory staff members to the Comptroller, reviewed the application and the Department's entire file relating to the application. They assisted and concurred with the Comptroller in the ultimate determination of the application.
Conclusions As set forth in Rule 3C-20.45, Florida Administrative Code, when an application for authority to organize and operate a new state savings and loan association is filed pursuant to Chapter 3C-9, Florida Administrative Code, it is the applicant's responsibility to prove that the statutory criteria warranting the grant of authority are met. The Department shall conduct an investigation pursuant to Subsection 665.031(3), Florida Statutes, which was done in this case, and then approve or disapprove the application in its discretion. This discretion is neither absolute nor unqualified, but is instead conditioned by a consideration of the criteria listed in Subsection 655.031(4), Florida Statutes, wherein it is provided that: The Department shall approve the application upon such terms and conditions as it determines necessary to protect the public interest or disapprove the application at its discretion, but it shall not approve such application, unless in its opinion: Public convenience and advantage will be promoted by the establishment of the proposed thrift institution; Local conditions assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community; The proposed officers and directors have good character, sufficient financial standing, and adequate experience and responsibility to assure reasonable promise of successful operation of the thrift institution; and The proposed savings account capital and organization expense fund or capital stock subscriptions comply with the requirements of this chapter. and Subsection 665.051(1), Florida Statutes, wherein it is provided that, The name of every association shall include either the words "savings association" or "savings and loan association." If in the opinion of the Department, any one of the above criteria has not been met and cannot be remedied by the applicant, it cannot approve the application. An applicant can, however, take corrective action in most circumstances to meet the criteria set forth in Subsections 665.031(4)(c), or (d), and 665.051(1), Florida Statutes, if any of these are found to be lacking. For example, if all other statutory criteria are met, the applicant may increase capital, or make certain changes in the board of directors, or change the name, or alter the provisions for suitable quarters, because these factors, at least to some degree, are within its control. It is the Department's policy to allow applicants to make certain changes to meet these criteria if all other criteria are met; to do otherwise would be to subject applicants to unnecessary red tape. However, it is the Department's opinion that there is little, if anything, that an applicant can do to alter its ability to meet the criteria set forth in Subsections 665.031(4)(a) and (b), Florida Statutes, since applicants CANNOT readily change the economic and demographic characteristics of an area. Therefore, if either one or both of these criteria are not met, the Department cannot approve the application. For purposes of applications for authority to organize and operate a new state savings and loan association, Rule 3C-20.45(1), Florida Administrative Code, defines PSA as the "smallest area from which the proposed association expects to draw approximately seventy-five percent of its deposits. It should be drawn around a natural customer base, should not be unrealistically delineated to exclude competing financial institutions or to include areas of concentrated population." Based upon, traffic patterns, natural and manmade geographic barriers and the location of other existing offices of financial institutions in the area, the Department concludes that the Applicant's PSA is realistically delineated. It is the opinion and conclusion of the Department that public convenience and advantage will be promoted by the establishment of the proposed savings and loan association. Therefore, the criterion in Subsection 665.031(4)(a), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(a), Florida Administrative Code, the location and services offered by existing savings and loan association offices in a service area are indicative of the competitive climate of the market and should be considered. Other financial institutions such as banks and credit unions may be considered competing institutions to the extent their services parallel those of a new savings and loan association. Also, the traffic patterns in the area, as well as the general economic and demographic characteristics of the area, must be considered in evaluating this statutory criterion. Because it is recognized that the establishment of a new savings and loan association ANYWHERE would promote the convenience and advantage for at least a few people, SUBSTANTIAL convenience and advantage for a SIGNIFICANT number of people must be shown; otherwise, a new savings and loan association could be justified for every street corner in the state. Clearly, such a result was not the legislative intent in regulating entry into the savings and loan association industry, nor is it in the public interest. Based upon the facts set forth above, the Department has determined that the establishment of the proposed savings and loan association will substantially increase convenience to a significant number of residents of the PSA. This is particularly true in view of the significant growth of the various financial institutions in the area since 1976, as well as the past and projected population growth in the PSA. The Protestant, which is the only other savings and loan association with a main office in Collier County, held more than seventy-five percent of all savings and loan deposits in the County in March, 1979. Consequently, the proposed institution will served as a needed competitive alternative. The site is easily accessible and traffic patterns are favorable. Furthermore, the Applicant intends to offer a variety of new services not generally offered by other financial institutions within the PSA. Therefore, the criterion of public convenience and advantage is met. It is the opinion and conclusion of the Department that local conditions do assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community. Therefore, the criterion in Subsection 665.031(4)(b), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(b), Florida Administrative Code, current economic conditions and, to a lesser extent, the growth potential of the area in which the new savings and loan association proposes to locate are important considerations in determining the association's probable success. Essential to the concept of thrift institution opportunity is that there does and will exist a significant volume of business for which the new savings and loan association can realistically compete. The growth rate, size, financial strength and operating characteristics of savings and loan associations and other financial institutions in the service area are also important indicators of economic conditions and potential business for a new savings and loan association. It is noted that the statutory standards require that " . . . local conditions ASSURE reasonable PROMISE of successful operation of the proposed thrift institution and those thrift institutions already established in the community . . ." (E.S.), NOT merely that local conditions INDICATE a POSSIBILITY of such success. Thrift institutions involve a public trust. Unlike private enterprise establishments generally, a savings and loan association operates on the public's capital and therefore, the Legislature has vested in the Comptroller the responsibility to protect that public interest. Furthermore, the failure of a savings and loan association, as opposed to private enterprise establishments generally, may have an unsettling effect on the overall economic welfare of the community and that is why the Florida Legislature and the United States Congress have imposed stringent requirements for the industry. This Department is responsible for enforcing this legislative standard. Public interest is best served by having a thrift institution system whereby new competition is encouraged where appropriate, yet, at the same time, ensuring that the financial resources of the residents in the community are stable and safe. That was the obvious intent of the Legislature in regulating entry into the thrift institution industry. The Applicant's estimated 1979 PSA population of 47,000 and its projections for the near future seem more than reasonable in view of the latest official estimates by the University of Florida. The population base is healthy, a balanced mixture of residents, local businessmen and commuters, with a steady recent history of growth and projections for significant future growth. Although there are other savings and loan offices already existing in or near the PSA, the Department has concluded that the total savings potential within the PSA will readily support a new institution. The Department further concludes that the extensive deposit and loan growth of the existing financial institutions within the PSA justifies the establishment of another competitive alternative. The increasing population, the high per capita income, and the business and residential mix of the PSA point to an expanding and stimulated economy in the PSA for the present as well as the near future. Clearly, these factors are conducive to assuring the reasonable promise of success for the proposed savings and loan association and for those thrift institutions already established in the community. It is the opinion and conclusion of the Department that the proposed directors, as a group, have good character, sufficient financial standing and responsibility, but do not have sufficient experience in the savings and loan field to assure reasonable promise of successful operation of the proposed association. Therefore, one of the criteria of Subsection 665.031(4)(c), Florida Statutes, IS NOT met. As set forth in Rule 3C-20.45(2)(c), Florida Administrative Code, the organizers, proposed directors and officers shall have reputations evidencing honesty and integrity. They shall have employment and business histories demonstrating their responsibility in financial affairs. At least one member of a proposed board of directors, other than the chief managing officer, shall have experience in the savings and loan field or in a business directly related thereto such as mortgage banking, real estate finance and commercial banking where real property lending has constituted an integral part of such banking experience. The organizers, proposed director's and officers shall meet the requirements of Sections 665.131 and 665.703, Florida Statutes, as applicable. A majority of the organizers and directors of a proposed thrift institution shall be, whenever possible, from the local community and shall represent a diversification of occupation and experience commensurate with the position for which proposed. Members of the initial management group, which includes directors and officers, shall require prior approval of the Department. Changes of directors or chief managing officer during the first year of operation shall also require prior approval of the Department. While it is not necessary that the names of proposed officers he submitted with an application to organize a new savings and loan association, the chief managing officer and operations officer must be named and their names submitted for departmental approval at least sixty (60) days prior to the association' opening. In addition, interlocking directorships involving existing financial institutions competitively near the proposed site of a new institution are discouraged. Such interlocking directorships could possibly restrict competition and create fiduciary problems. Although the proposed directors have, as a group, good character, sufficient financial standing and responsibility, none of the proposed directors has any direct experience in the savings and loan field. Only Robert E. Talley, as a proposed director, has demonstrated that he has the requisite related business experience by virtue of his background in commercial banking, real estate, and mortgage brokerage. Because the selection of directors for a proposed new savings and loan association is generally within an applicant's control, the Department wilt, in this case, allow the Applicant to remedy the above inadequacy in the proposed board of directors by the addition of one director with sufficient experience in the savings and loan field or in a business directly related thereto or by further demonstrating that one of the proposed board members already has the requisite related business experience. While the department has noted that Robert E. Talley has been proposed as the chief managing officer, the Department does not approve or disapprove an applicant's proposed chief managing officer until the association makes an application for insurance of its accounts. It is the opinion and conclusion of the Department that the proposed savings account capital and the organization expense fund or capital stock subscriptions comply with the requirements of Chapter 665, Florida Statutes. Therefore, the criteria of Subsection 665.031(4)(d), ARE met. As set forth in Rule 3C-20.45(2)(d), Florida Administrative Code, capital should be adequate to enable the new savings and loan association to provide the necessary services of promoting thrift and home financing to meet the needs of prospective customers. Capital should be sufficient to purchase, build or lease a suitable permanent facility complete with equipment. Generally, the initial capital (withdrawable savings for a mutual association applicant and total stock and paid-in surplus for a stock association applicant) for a new savings and loan association should not be less than $1.5 million in non- metropolitan areas and $2.0 million in metropolitan areas. To encourage community support, a wide distribution of stock ownership is desirable. A majority of the stock should be issued wherever possible to local residents of the community, persons with substantial business interests in the community, or others who may reasonably be expected to utilize the services of the association. Subscribers to five (5) percent or more of the stock may not finance more than fifty (50) percent of the purchase price if the extension of credit is predicated in any manner on the stock of the new association, whether or not such stock is pledged. Generally, all proposed stock for-a stock savings and loan association shall be subscribed to at the time the application is submitted to the Department. The organizers may initially subscribe to all proposed stock, but should disclose the anticipated amount of individual stock to be retained. It is the opinion and conclusion of the Department that the name, Marine Savings and Loan Association, meets the criterion of Subsection 665.051(1), Florida Statutes, and is not so similar as to cause confusion with the name of an existing financial institution. As set forth in Rule 3C-20.45(4), Florida Administrative Code, the Department will consider the possibility that a name similar to that of another financial institution may cause confusion in the minds of the public or be misleading and may deny the use of such name, with the exception of names specifically authorized under Subsection 665.051(1), Florida Statutes. The Department concludes that the name Maring Savings and Loan Association is not so similar as to cause confusion with the name of an existing financial institution. It is the opinion and conclusion of the Department that provision has been made for suitable quarters. Therefore, the provisions of Rule 3C- 20.45(6)(d), Florida Administrative Code, ARE met. As set forth in Rule 3C-20.45(6)(d), should temporary quarters be contemplated by an applicant until a permanent facility is completed, permission to open in temporary quarters may be granted, generally not to exceed one year. The permanent structure of a new savings and loan association should generally contain a minimum of 5,000 square feet unless the applicant satisfactorily shows that smaller quarters are justified due to the performance of certain auxiliary services off-premises. It shall be of sufficient size to handle the projected business for a reasonable period of time. The facility shall be of a nature to warrant customer confidence in the association's security, stability and permanence. Other pertinent factors include availability of adequate parking, an adequate drive-in facility if such is contemplated and possibilities for expansion. The Applicant presently plans permanent quarters in a building containing 4,285 square feet, which will have adequate parking and drive-in facilities. No temporary quarters are contemplated. Since adequate provision has been made for expansion up to 6,700 square feet, the Department considers that provision has been made for suitable quarters. It is the opinion and conclusion of the Department that the proposed acquisition of the association's proposed site has been fully disclosed and does not constitute an insider transaction. Therefore, the provisions of Rule 3C- 20.45(3) ARE met. Rule 3C-20.45(3), Florida Administrative Code, provides that any financial arrangement or transaction involving the organization of a proposed association and its organizers, directors, officers and shareholders owning five (5) percent or more of the stock, or their relatives, their associates or interests should ordinarily be avoided. Should there be transactions of this nature, they must be fair and reasonable, fully disclosed and comparable to similar arrangements which could have been made with unrelated parties. It is the opinion and conclusion of the Department that the provisions of Rule 3C-20.45(6)(e), Florida Administrative Code, have NOT been met. Pursuant to Rule 3C-20.45(6)(e), Florida Administrative Code, appraisals of land and improvements thereon shall be made by an independent qualified appraiser and be dated no earlier than six months from the filing date of the application. In those instances where the application involves a lease arrangement, the appraisal should be directed to the comparability of the proposed lease with other leasing arrangements for similar business property. The application involves a lease arrangement and, although the Applicant has submitted an acceptable appraisal as to the fair market value of the leased premises, it has not submitted an appraisal directed to the comparability of the proposed lease with other leasing arrangements for similar business property. However, since this is a criterion that is within the control of the Applicant, the Department may approve the application upon the condition that this deficiency is remedied.
Findings Of Fact Robert Sepos is the comptroller for Ben-Bud Growers, Inc. As such Mr. Sepos maintains the company records which document amounts owed to it by others. As to this case, Mr. Sepos presented the invoices and statements due and owing from the Respondent. Based upon the unpaid invoices, Respondent owes Petitioner the sum of $2,626.00. Respondent acknowledged that the sum of $2,626.00 is owed but claimed that such amount was not for the purchase of agricultural products as contemplated by Chapter 604, Florida Statutes. According to Mr. Towell the bulk of the debt owed to Petitioner is for packaging and shipping fees for produce from growers represented by Fantastic Produce. Mr. Towell maintains that packing and shipping fees are not encompassed within Chapter 604, Florida Statutes. Mr. Sepos could not verify what sum, if any, of the total amount claimed was for agricultural products (versus packing or shipping). Based upon the admissions made by Mr. Towell, Respondent owes the Petitioner for agricultural products the sum of $347.25 in this case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a Final Order approving Petitioner's claim in the amount of $347.25 and disallowing the remainder. DONE AND ENTERED this 7th day of November, 1997, in Tallahassee, Leon County, Florida. J. D. Parrish 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 7th day of November, 1997. COPIES FURNISHED: Brenda D. Hyatt, Chief Department of Agriculture and Consumer Services Mayo Building, Room 508 Tallahassee, Florida 32399 Richard Tritschler, General Counsel Department of Agriculture and Consumer Services The Capitol, Plaza 01 Tallahassee, Florida 32399 Ben Litowich, President Ben-Bud Growers, Inc. 6261 West Atlantic Boulevard Margate, Florida 33063 George Towell, President George Towell Distributors, Inc. d/b/a Fantastic Produce Post Office Box 159 Belle Glade, Florida 33430 American Southern Insurance Company Legal Department 3715 Northside Parkway, 8th Floor Atlanta, Georgia 30327
