The Issue Whether or not the Petitioners are responsible for the payment of tax, penalty and interest under the terms of the Respondent's Notice of Proposed Assessment of February 9, 1978, as revised June 12, 1978, which assessment was made pursuant to Chapter 212, Florida Statutes.
Findings Of Fact This cause comes on for consideration based upon the Petition for Administrative Hearing filed in behalf of the Petitioners, Housing by Vogue, Inc., and Mobile Home Industries, Inc., against the State of Florida, Department of Revenue, as Respondent. The case was subsequently referred to the State of Florida, Division of Administrative Hearings, for formal hearing in accordance with the terms of Subsection 120.57(1), Florida Statutes. Mobile Home Industries, Inc., is a Florida corporation and Housing by Vogue, Inc., is a wholly-owned subsidiary of the former-named corporation. The Respondent, State of Florida, Department of Revenue, is an agency of the State which has as its responsibility the investigation and enforcement of the tax laws of the State of Florida, to include Chapter 212, Florida Statutes. The facts reveal that on October 2, 1974, the Petitioners submitted a bid to the State of Florida, State Board of Education, for the purpose of contracting to execute and complete construction of the project identified as, "Relocatable InstructIonal Space for the Department of Education, Tallahassee, Florida." A copy of that bid proposal is found as Petitioners' Exhibit No. 2 admitted into evidence. The specifications and drawings of that project may be found as Petitioners' Exhibit Number 1 admitted into evidence. In accordance with the instructions of the owner, the bid proposal stated a lump-sum bid price in the amount of $119,250.00 and, in addition, contained certain itemized costs. The Petitioners' bid was accepted and a contract was entered into between the Petitioners and the State of Florida, State Board of Education. A copy of that contract and other contract items may be found as the Petitioners' Composite Exhibit No. 3 admitted into evidence. The contract was modified by proposal of the project engineer, upon suggestion of the contractor. A copy of this statement of suggested changes may be found in the Petitioners' Exhibit Number 4 admitted into evidence. The suggested changes were allowed and certain change orders were entered as shown through the Petitioners Exhibit Number 5 admitted into evidence. The project went forward as contemplated and under the terms and conditions of the contract, modules were fabricated by the Petitioners in their plant at Lake City, Florida. These modules were subsequently transported from the plant at Lake City to a location at Woodville, Florida, which is located in Leon County, Florida. The method of transportation was by the process of towing, with the modules being moved on the highway by virtue of a series of wheels and axles attached to the module proper. Once the modules were placed in the location in Woodville, Florida, the wheels and axles were removed and the modules were "set up," utilizing two methods to accomplish this task. Some of the modules were put on traditional footings and foundations similar to those involved in the "set up" of mobile homes, in the sense that footings were prepared and the modules were placed on concrete blocks and tie-down straps were attached to the bottom cross beams and secured by hellical anchors. The second method for placing the modules was to utilize a large hellical anchor device in lieu of the concrete blocks and tie downs. The modules themselves had fixed floors with interchangeable wall panels to allow assembly and re-assembly in various configurations for the purpose of instructional classroom space. After the modules had been arranged in an initial configuration, in accordance with the terms and conditions of the contract the modules were disassembled and placed in a different configuration at the site location in Woodville, Florida. The realty upon which these modules were located was a school ground and plant owned by the Leon County School Board, Leon County, Florida. The ownership of the modules was in the State of Florida, State Board of Education. The testimony in the course of the hearing did not indicate in any way that the Leon County School Board either was a party to the contract between the Petitioners and the State of Florida, State Board of Education, nor in any sense was granted ownership of the subject modules. Section 212.05, Florida Statutes, provides for the imposition of a four percent (4 percent) sales tax on the sale of articles of tangible personal property at retail within the State of Florida. The sale of the modules under the terms and conditions of the contract constituted a sale of tangible personal property by the Petitioners to the State of Florida, State Board of Education. Therefore, absent some specific exemption to the contrary, a sales tax was due. There does exist in law a partial exemption. This conclusion is reached after examination of the language of Subsection 212.08(6), Florida Statutes, which states: "212.08 Sales, rental, storage, use tax; specified exemptions.--The sale at retail, the rental, the use, the consumption, the distribution, and the storage to be used or consumed in this state of the following tangible personal property are hereby specifically exempt from the tax imposed by this chapter. (6) EXEMPTIONS; POLITICAL SUBDIVISIONS, COMMUNICATIONS.--There shall also be exempt from the tax imposed by this chapter sales made to the United States Government, the state, or any county, municipality or political sub- division of this state; provided this exemption shall not include sales of tangible personal property made to contractors employed either directly or as agents of any such government or political subdivision thereof when such tangible personal property goes into or becomes a part of public works owned by such government or political subdivision thereof, except public works in progress or for which bonds or revenue certificates have been validated on or before August 1, 1959; . . ." Under the language of the introductory portion of Section 212.08, Florida Statutes, and the specific provisions of Subsection 212.08(6), Florida Statutes, the sale which has been made to the State of Florida is exempt from tax implications, with the exception that the materials and supplies necessary for the fabrication of the modules, transportation of those modules and installation of the modules were tangible personal property which went into public works owned by the State of Florida, and as such were not exempt from taxation. (A public works is defined as "such works as are by statute authorized to be constructed for public purposes by the State or its agencies are generally regarded as public works." 26 Fla.Jur.section 2, citing to 43 Am. Jur., Public Works and Contracts section 2 as annotated at 92 ALR 835. From this definition, the modules which are used as instructional classroom space are considered to be public works within the meaning of Subsection 212.08(6), Florida Statutes.) It is unclear what the specific costs were on the question of the increments of expense for materials and supplies incurred by the Petitioners in carrying out their contract; however, it would be necessary for the Respondent to impose a tax together with a penalty and interest premised upon calculations made after determining Petitioners' cost items. This opinion is held notwithstanding the stipulation on the part of the parties (at the beginning of the hearing) to the effect that $4,048.57 in tax was in dispute, together with interest of $794.32 effective June 12, 1978, and additional interest at 47 cents per day from June 13, 1978, plus a penalty. In summary, there would be due tax, a penalty of 25 percent (such penalty being subject to further reduction) and interest on the amount which is the aggregate of the cost of materials and supplies used in the fabrication, transportation and installation of the subject modules. See Subsections 212.12(2) and (3), Florida Statutes. One final item should be considered. The parties in the course of their presentation and argument relied on various interpretations to be given Rule l2A-1.5l Florida Administrative Code, as a basis for their contention of tax liability or no liability. That provision would not have application to the facts sub judice, because the rule only applies to "sales to or by contractors who repair, alter, improve and construct real property". The installation of these modules which are the property of the State of Florida, State Board of Education, on realty which is owned by the Leon County School Board, of Leon County, Florida, does not constitute an action in which sales are made to or by contractors involved in the repair, alteration, improvement or construction of real property. While the modules as installed do constitute public works, they do not constitute repair, alteration, improvement or construction to real property. To consider this project to be one governed by Rule12A-1.5l, Florida Administrative Code, it would be necessary for the modules to be owned by the same entity which owns the property on which they are installed, as opposed to the facts in this case whereby ownership of the modules and real property are held by separate entities. In their present status, the modules are merely items of tangible personal property owned by the State of Florida, State Board of Education, which may be utilized at any location in accordance with the terms of their ownership.
Recommendation It is recommended that the Petitioners, Housing by Vogue, Inc., and Mobile Home Industries, Inc., be required to pay tax, a penalty of 25 percent and interest for those items of materials and supplies incidental to the fabrication, transportation and installation of the modules which are the subject matter of the contract in this dispute. DONE AND ENTERED this 2nd day of April, 1979, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings Room 101, Collins Building MAILING ADDRESS: 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: John C. Cooper, Esquire Douglass, Powell & Davey Post Office Box 1674 Tallahassee, Florida 32302 Linda C. Procta, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA HOUSING BY VOGUE, INC., and MOBILE HOME INDUSTRIES, INC., Petitioner, vs. CASE NO. 78-1637 STATE OF FLORIDA, DEPARTMENT OF REVENUE, Respondent. /
The Issue This proceeding commenced upon the Application for Attorneys' Fees and Costs filed by Petitioners pursuant to Section 57.111, Florida Statutes. The Respondent filed an Answer and requested an evidentiary hearing. The Petitioners and Respondent entered into a Prehearing Stipulation identifying the issues of fact to be litigated as (1) whether or not the actions of the Department of Banking and Finance were substantially justified, and (2) whether or not it would be unjust to award attorneys' fees against the Department. The issues of law identified by the Parties were (1) if the actions of the Department of Banking and Finance were not substantially justified, should the attorneys' fees and costs be apportioned between DOAH Case No. 86-1553 and DOAH Case NO. 86-1336, and (2) whether or not Monica Iles and Robert Iles are "small business parties." The Prehearing Stipulation also contains six paragraphs of facts that are admitted by all parties. At the hearing all parties presented testimony and exhibits and following the hearing a transcript of the proceedings was filed with the Hearing Officer. Thereafter, all parties filed proposed orders containing proposed findings of fact and conclusions of law. Specific rulings on all findings proposed by all parties are contained in the Appendix which is attached to and incorporated into this Final Order.
Findings Of Fact Based on the admissions of the parties and on the evidence received at the hearing, I make the following findings of fact. Findings Based on Admissions The attorney's fees and costs itemized in the petition were for the preparation of both DOAH Case Nos. 86-1336 and 86-1553. DOAH Case Nos. 86-1336 and 86-1553 were consolidated for hearing and were tried together before Hearing Officer Michael M. Parrish. DOAH Case No. 86-1336 resulted in a Final Order suspending the registration of Structured Shelters Financial Management, Inc., (hereinafter "SSFM") and vacating the order revoking the registration of Structured Shelters Securities, Inc. (hereinafter "SSSI"). The Department initiated the administrative action against the two corporations and the two individuals by serving them with a Cease and Desist Order. The case was tried before Hearing Officer Michael M. Parrish. Structured Shelters Financial Management, Inc., and Structured Shelters Securities, Inc., are "small business parties." The Petitioners were the prevailing parties in DOAH Case No. 86-1553. Finding Based on Evidence Presented at Hearing Robert Iles' profession is that of a business consultant. Mr. Iles files a Schedule C with his federal income tax return which identifies his business income and expenses. Mr. Iles' business office is in Edgewater, Florida. Mr. Iles has not more than 25 full-time employees, nor a net worth of more than two million dollars. Monica Iles is a business consultant who files a Schedule C with her federal income tax return separate from that of Robert Iles. Mrs. Iles has no more than 25 full-time employees, nor has she a net worth of more than two million dollars. The attorney for Petitioners submitted an itemized statement of attorneys' fees and costs incurred in defending against Respondent's Cease and Desist Order. The invoices rendered are reasonable and substantiated. The hourly rate of $125.00 per hour billed by the attorney for Petitioners is reasonable. The total amount billed for Petitioner's attorney's fees was $8,375.00, plus costs in the amount of $1,180.73, for a grand total of attorney's fees and costs in the amount of $9,555.73. The Department of Banking and Finance was not a nominal party in DOAH Case No. 86-1553. The initial decision to take action against the Petitioners was made by the Director of the Division of Securities, who in turn referred the case to the Department legal section. The case was then referred to the Orlando office where it was reviewed by Mr. Robert Good. Mr. Good has been with the Department for eight and a half years. He is an attorney in charge of the Department's Orlando office. He is an expert in the field of securities law. In this particular case, Mr. Good initially questioned whether the corporate business plans being sold by the Petitioners were securities. Therefore, he carefully evaluated the evidence presented to him by the Department's securities examiners and investigators in light of the applicable case law. He relied on a Report of Examination and a Report of Investigation in reaching his conclusion that the corporate business plans being sold by the Petitioners were securities. These reports were compiled during investigations of SSFM, SSSI, and Structured Shelters, Inc., by Department securities examiners and investigators. Although the Report of Investigation dealt with a corporation named Structured Shelters, Inc. (a corporation different from the Petitioner corporations), Mr. Good concluded that the report was relevant to the activities of the Petitioners for reasons which included the following. Robert Iles was the President and/or a Director of Structured Shelters, Inc., SSFM, and SSSI. Monica Iles was the Treasurer, Secretary, Director, and/or registered agent of Structured Shelters, Inc., SSFM and SSSI. Structured Shelters, Inc., offered at least one corporate investment program, the children's cassette master recordings, which was very similar to the children's cassette master recording program being offered by SSFM. The Report of Investigation included a Final Order entered by the State of Alaska against Structured Shelters, Inc., and Robert Iles, which Final Order was issued after an administrative hearing at which testimony was presented and the parties were represented by legal counsel. The Alaska Final Order concluded that the children's classic cassette recording program was a security. The Report of Investigation also included an Order from the Ohio Division of Securities against Structured Shelters, Inc. The Ohio Order discussed the children's classic cassette recording program offered by Structured Shelters, Inc., in the State of Ohio and concluded that the program was a security. The programs which were the subjects of the Alaska and Ohio Orders were very similar to the corporate business plans being offered by the Petitioners. The Report of Investigation also contained a letter from the Ohio Division of Securities which listed about 48 investors in the various corporate business plans of Structured Shelters, Inc. Department investigators contacted these investors and received eleven responses indicating that Florida investors had invested in various corporate business plans of Structured Shelters, Inc. Mr. Good also reviewed and relied upon the Report of Examination prepared by the Division of Securities. This report included numerous documents obtained from the business records of the Petitioners which indicated that SSFM, SSSI, Robert Iles, and Monica Iles were selling corporate business plans or offering to sell corporate business plans in the State of Florida. These documents included such things as an Investment Advisory Agreement between investors, SSFM, and SSSI, a description of the children's cassette recording program corporate business plan, the cover letters mailed to potential investors, an SSFM ledger book containing a list of numerous sales of corporate business plans by SSFM to investors in the State of Florida, a memo on the stationery of Monica Iles listing the names of numerous Florida investors, and numerous letters on SSFM's letter head sent to Florida investors. The Report of Examination also included information from the Florida Secretary of State's office which showed that SSFM and SSSI had the same address and that Robert Iles and Monica Iles were both officers and/or directors in both corporations. After reviewing the Report of Investigation and the Report of Examination, Mr. Good researched the applicable law. Based on his review of the information in the two reports and on his legal research, Mr. Good concluded that the corporate business plans being sold through SSFM were "securities" and that those securities were being sold to Florida investors. The Cease and Desist Order was filed against SSFM because all of the sales of the subject business plans were made through that corporation, because the corporation had officers in the State of Florida, and because correspondence, invoices, and the corporate ledger book provided additional documentation that sales were being made from Florida. The Cease and Desist Order was filed against Robert Iles due to the fact that he was actively involved in selling the subject business plans to the investors. The matter of whether to also file the Cease and Desist Order against Monica Iles was a close call and the files were carefully examined to determine whether there was sufficient evidence of sales activity by Monica Iles to warrant including her in the Cease and Desist Order. Based on correspondence and invoices contained in the Report of Examination, Mr. Good concluded there was sufficient evidence of sales activity by Monica Iles to include her in the Cease and Desist Order. The Cease and Desist Order was filed against SSSI on the basis of documents contained within the Report of Examination and Report of Investigation establishing the commonality of corporate officers and directors in SSSI, SSFM, and Structured Shelters, Inc., and on the basis of the investment advisory agreement entered into between investors, SSFM and SSSI. The Investment Advisory Agreement set forth the rights and responsibilities of the investor and SSFM. According to this agreement, SSSI would act as a securities broker for its client, SSFM. It appeared from the agreement that SSFM was able to bind SSSI to perform for SSFM's benefit. The only corporate signature provided for on the agreement was for a signature on behalf of SSFM; no signature appeared on behalf of SSSI. Thus, it appeared that SSFM and SSSI were being operated as one company. Based on the Investment Advisory Agreement and the commonality of corporate officers and directors, it appeared that SSFM had the power to act on behalf of SSSI and, therefore, the Cease and Desist Order was also filed against this corporation. Prior to filing the Cease and Desist Order against SSFM, SSSI, Robert Iles, and Monica Iles, all of the evidence in the possession of the Department was carefully reviewed by Mr. Good, an expert in securities law, to determine whether there was a reasonable basis for taking action against the Petitioners. Mr. Good concluded that the evidence in the possession of the Department was sufficient to warrant the filing of a Cease and Desist Order against the Petitioners. For reasons not clearly explained in the record of this proceeding, the attorney who represented the Department at the formal hearing regarding the Cease and Desist Order (an attorney other than Mr. Good) failed to present all of the evidence the Department had available.
The Issue The issue in this case is whether StorageTek or Memorex was the lowest responsive and responsible bidder for the BOR's Invitation to Bid No. K-1178-3, issued as agent for the Northwest Regional Data Center for the purchase of certain data processing equipment.
Findings Of Fact Based on the stipulations of the parties, the testimony of the witnesses, and the exhibits admitted into evidence, I make the following findings of fact: The Florida State University Purchasing Department, acting as agent for the Northwest Regional Data Center ("NWRDC") issued an Invitation to Bid for a contract to supply and service certain computer memory storage equipment to NWRDC. NWRDC is a data processing center under the direct jurisdiction of the BOR. StorageTek and Memorex are both vendors of data processing equipment such as that specified in the BOR's Invitation to Bid No. K-1178-3 ("the ITB"). StorageTek is presently operating --its business as a going concern and a debtor- in-possession under Chapter 11 of the Bankruptcy Code. Memorex is a wholly owned subsidiary of the Burroughs Corporation. In addition to the specification of certain data processing equipment, the ITB required 5 years of maintenance for the equipment to be supplied by the vendor. StorageTek and Memorex both filed timely responses to the ITB which were responsive to the technical portions of the ITB. Both bids contained a warranty of the bidder's ability to perform. The total prices of the StorageTek and Memorex bids were $892,293.00 and $1,026,919.00, respectively. The BOR preliminarily disqualified the StorageTek bid for failure to satisfy the financial capability requirements of the ITB and proposed to award the contract to Memorex. StorageTek timely filed its Notice of Protest and Formal Written Protest, asserting it met the financial capability requirements of the ITB and challenging the responsiveness of the Memorex bid to those same requirements. Section II, Paragraph B, of the ITB provides with regard to financial capability: Financial Capability of Prospective Vendors: The successful vendor must be financially sound and well managed, in accordance with Paragraph I. of this section. Prospective vendors are required to supply certified annual report(s) or statement(s) of their financial position for the last two years as part of their bids. These statements must be certified by an independent auditor's report as to their completeness and accuracy. Any other relevant references or documentation may also be supplied. Paragraph I, which is incorporated by reference in this financial capability provision of the ITB, provides: Vendor Warranty of Ability to Perform: Vendor warrants that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or, to the best of vendor's knowledge, threatened which would in any way prohibit, restrain or enjoin the execution or delivery of the vendor's obligations or diminish the vendor's financial ability to perform the terms of the proposed contract. In addition, the ITB makes it the responsibility of each vendor to "provide adequate documentation to substantiate all claims for . . . compliance" with the specifications and requirements of the ITB. In response to the request for statements of their financial position in the financial capability portion of the ITB, StorageTek supplied the Form 10- K Annual Reports filed with the Securities and Exchange Commission for the fiscal years ended December 28, 1984, and December 27, 1985, ("the 1984 and 1985 10 K Reports"). Although StorageTek had more current information than that contained in the 1984 and 1985 10-K Reports regarding the status of its Chapter 11 proceeding and other pending legal actions at the time it submitted its bid to the BOR, StorageTek chose not to supply that information in its bid even though such information could have been included pursuant to Section II, B.1, of the ITB. The 1984 and 1985 10-K Reports were prepared by StorageTek management and included consolidated financial statements of StorageTek and its subsidiaries. These financial statements, which were certified by the Denver, Colorado, office of Price Waterhouse, indicate: StorageTek has incurred net losses over the last three fiscal years aggregating $603,758,000. As of December 27, 1985, StorageTek had an accumulated deficit of $318,413,000. StorageTek is presently operating its business as a going concern and a debtor in possession under Chapter 11 of the Bankruptcy Act. StorageTek is involved in a number of legal proceedings, several of which "could have a material adverse effect on the Company's financial position and operations" if the plaintiffs' claims are sustained. The Securities and Exchange Commission is conducting a private investigation to determine whether StorageTek or any of its officers, directors or agents engaged in fraudulent or deceptive acts, practices or courses of business in connection with the issuance of any of its securities, the filing or publication of any of its periodic reports to stockholders or reports filed with the Securities and Exchange Commission or the keeping and maintaining of its books and records. The Internal Revenue Service ("IRS") is examining StorageTek's federal income tax returns for the years 1979 through 1984. If all issues presently under discussion between the IRS and StorageTek were to result in assessments, and if such assessments were ultimately sustained, the resulting liability for additional tax and interest would be substantially higher than the recorded liabilities. Also, any IRS claims that are ultimately sustained would be priority claims pursuant to Section 507 of the Bankruptcy Code. As a result of StorageTek's "financial diffi- culties" and its Chapter 11 proceedings, StorageTek may be subject to additional lawsuits or governmental proceedings, the effect of which cannot be determined at this time. The consolidated financial statements were prepared on the basis of generally accepted accounting principles applicable to a going concern, which assume realization of assets and payment of liabilities in the normal course of business. There are a number of "significant uncertainties" that threaten StorageTek's continued existence and, therefore, its ability to realize its assets and to discharge its liabilities in the ordinary course of business. Using generally accepted auditing standards, Price Waterhouse rendered an opinion on February 28, 1986, which provides in pertinent part: As shown in the consolidated financial state- ments, during the three years ended December 27, 1985 the Company incurred net losses aggregating $603,758,000 and at December 27, 1985 had an accumulated deficit of $318,413,000. These factors, among others including those discussed in the preceding paragraph, indicate that the Company may be unable to continue in existence. In rendering the above-quoted opinion, Price Waterhouse considered all of the information contained in the 1985 10-K Report, including the fact that the information in that report did not reflect the effects of the Chapter 11 proceedings. Price Waterhouse also considered other factors made known to it, such as: Certain financial information regarding StorageTek from its operations in early 1986; StorageTek's 1985 fourth quarter profits; StorageTek's unencumbered cash balance of $202 million at the end of 1985; StorageTek's ability to generate cash from its various operations; The lack of a formulated and confirmed plan for StorageTek's reorganization in its Chapter 11 bankruptcy proceedings; and The fact that it would be fairly difficult for StorageTek to obtain long-term financing given its present financial condition. Although the directors' and officers' liability insurance and partnership liability insurance may diminish the impact on StorageTek of several of the pending legal actions, the existence of those insurance policies is reflected in the 1985 10-K Report and was considered by Price Waterhouse when rendering its opinion that the company may be unable to continue in existence. Also, StorageTek admits that it cannot give an assurance that the pending litigation will not have a material adverse effect on its financial position and operations. The most significant uncertainty which formed a basis for the opinion of Price Waterhouse quoted in paragraph 12 above is that StorageTek's historical information results in uncertainty as to whether StorageTek will be able to return to profitable operations. If StorageTek did not continue to exist, the 5 years of maintenance required by the ITB could not be performed by StorageTek and spare parts for the data processing equipment may not be available. In response to the request for statements of its financial position in the financial capability portion of the ITB, Memorex supplied annual reports of its parent, the Burroughs Corporation, for 1984 and 1985 (the "1984 and 1985 Annual Reports"). The 1984 and 1985 Annual Reports contain consolidated financial statements of Burroughs Corporation, and its subsidiaries, including Memorex. These financial statements, which were certified by the Detroit, Michigan, office of Price Waterhouse, indicate: Burroughs and its subsidiaries have earned net income over the last three fiscal years aggregating $690,000,000. As of December 31, 1985, Burroughs and its subsidiaries had accumulated retained earnings of $1,872,400,000. There are no outstanding legal actions or claims that are material to the consolidated financial position of Burroughs and its subsidiaries. Using generally accepted auditing standards, Price Waterhouse rendered the following opinion on January 20, 1986: In our opinion, the accompanying consolidated financial statements [in the 1985 Annual Report] present fairly the financial position of Burroughs Corporation and subsidiary companies . . . in conformity with generally accepted accounting principles consistently applied. Memorex is a substantial subsidiary of the Burroughs Corporation. If there were any pending or threatened legal actions or claims against Memorex, the outcome of which would threaten Memorex's ability to perform under the contract described in the BOR's Invitation to Bid No. K-1178- 3, Price Waterhouse would have been required by generally accepted auditing standards to ensure that appropriate disclosure was made of that contingency in the consolidated financial statements of the Burroughs Corporation and its subsidiaries, unless the auditors were satisfied that the contingency was provided for otherwise, such as through a guaranty by the parent corporation. Financial statements for Memorex, other than in consolidated form with Burroughs Corporation and its subsidiaries, are usually confidential and not available to the public. The ITB expressly instructs vendors not to submit confidential information since bid responses become public documents after the bid opening. It is a common practice in the industry for a wholly owned subsidiary to submit the consolidated financial statements of its parent when an invitation to bid requests the subsidiary vendor to provide financial information.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order awarding the contract for BOR Invitation to Bid No. K-1178-3 to Memorex. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2229BID The following are my specific rulings on each of the proposed findings of fact submitted by each of the parties. Rulings on findings proposed by Petitioner Paragraphs 1, 2, 3, 4, 5, 6, 11, and 16: The findings proposed in these paragraphs have all been accepted. Paragraph 7: Accepted in part and rejected in part. Rejected portions are irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraph 8: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Unnumbered paragraph between paragraphs 8 and 9: Accepted. Paragraph 9 and the two unnumbered paragraphs between paragraphs 9 and 10: The majority of the findings proposed in this paragraph are rejected as irrelevant and subordinate to the extent they deal with matters not incorporated into Petitioner's bid response. Paragraph 10: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraph 12: Accepted in substance. Paragraph 13: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraphs 14 and 15 and intervening unnumbered paragraph: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Also rejected in large part because it incorporates inferences not warranted by the greater weight of the evidence. Paragraph 17: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Also rejected in large part because it incorporates inferences not warranted by the greater weight of the evidence. Paragraph 18: Rejected as irrelevant and unnecessary. Rulings on findings proposed by Respondent The Respondent adopted the proposed findings of fact submitted by the Intervenor and did not propose any additional findings. Rulings on findings proposed by Intervenor All of the proposed findings of fact submitted by the Intervenor have been accepted with a few minor editorial modifications. DONE AND ORDERED this 4th day of September, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of September, 1986. COPIES FURNISHED: F. Perry Odom, Esquire ERVIN, VARN, JACOBS, ODOM & KITCHEN P. O. Drawer 1170 Tallahassee, Florida 32302 Patti A. Jackson, Esquire Assistant General Counsel Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 Carolyn S. Raepple, Esquire HOPPING BOYD GREEN & SAMS Post Office Box 6526 Tallahassee, Florida 32314-6526 Mr. Charles Reed, Chancellor Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 Mr. George Bedell Executive Vice-Chancellor Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 ================================================================= AGENCY FINAL ORDER =================================================================
The Issue The issue for determination in this proceeding is whether Respondent should deny Petitioner's application for licensure as an agent authorized to sell resident life, variable annuity, and health insurance.
Findings Of Fact Respondent is the state agency responsible for the licensure of insurance agents in the State of Florida, pursuant to Chapter 626, Florida Statutes (2003). On June 12, 2003, Petitioner electronically filed (on-line) a completed application for licensure as an agent authorized to sell resident life, variable annuity, and health insurance (the license). Petitioner answered "no" to the following question on the on-line license application that Petitioner submitted to Respondent on June 12, 2003: [h]ave you ever been charged, convicted, found guilty, or pled guilty or nolo contendere (no contest) to a crime under the laws of any municipality, county, state, territory or country, whether or not adjudication was withheld or a judgment of conviction was entered? Petitioner was convicted of a crime in Tennessee in 1973. Petitioner pled guilty to multiple felony charges relating to the sale of drugs and was sentenced to prison for more than one year. Petitioner's failure to disclose the criminal conviction in Tennessee is a material misstatement within the meaning of Subsection 626.611(2), Florida Statutes (2003). Petitioner failed to show by a preponderance of the evidence that the failure to disclose his criminal history on the application was inadvertent. Petitioner knew, or should have known, the importance of accurate answers to questions on the license application. The final section of the online application, entitled "Step 8: Summary," contained the following language: Applicant Affirmation Statement I do solemnly swear that all answers to the foregoing questions and statements are true and correct to the best of my knowledge and belief . . . . * * * Under penalties of perjury, I declare that I have read the foregoing application for license and that the facts stated in it are true. I understand that misrepresentation of any fact required to be disclosed through this application is a violation of The Florida Insurance and Administrative Codes and may result in the denial of my application and/or the revocation of my insurance license(s). Petitioner signed the foregoing statement, but did not send the signed statement to Respondent for several months. The on-line license application at issue in this proceeding was the second application that Petitioner filed with Respondent. In December 2001, Petitioner filed an application with Respondent's predecessor agency, the Department of Insurance (the Department), for licensure as a resident legal expense sales representative. The question regarding criminal history did not appear on the first application. The Department issued a legal expense sales representative license to Petitioner on December 19, 2001. After the Department issued the legal expense license to Petitioner, Respondent received Petitioner's criminal history report. On January 7 and March 12, 2002, and on July 15, 2003, Respondent wrote letters to Petitioner asking him for documentation and information concerning his criminal history. Petitioner received all three letters in a timely manner. Petitioner's testimony that he responded to the requests for information concerning his criminal history is neither credible nor persuasive. Rather, Petitioner ignored both requests in 2002, and did not respond to the request in 2003 until after Respondent notified Petitioner of Respondent's proposed denial of the license application. The disclosure by Petitioner was not timely and forthcoming. The material misstatement of Petitioner's criminal history on the license application was an intentional, false statement. Petitioner had knowledge that his answer to the criminal history question was not true. Petitioner's failure to disclose his criminal history on the license application was a reckless and careless act. The false statement demonstrates a "lack of fitness or trustworthiness to engage in the business of insurance" within the meaning of Subsection 626.611(7), Florida Statutes (2003).
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order denying the license application without prejudice for Petitioner to reapply in accordance with Respondent's rules. DONE AND ENTERED this 28th day of May, 2004, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 2004. COPIES FURNISHED: Dana M. Wiehle, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Robert Joseph McGuire 8464 Matanzas Road Fort Meade, Florida 33912 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether Petitioner should be granted a refund of sales tax, penalty and interest paid under Chanter 212, Florida Statutes, pursuant to Section 215.26, Florida Statutes. This proceeding was conducted without the appearance of witnesses. The parties stipulated to the facts and issues in the case and said stipulation agreed that the record would further consist of the pleadings, interrogatories, requests for admission, and affidavits. Five exhibits were received in evidence as follows: stipulation (Exhibit 1), affidavit of Neal J. Burmeister (Exhihit 2), affidavit of Lewis O. Ward (Exhibit 3), service contract and invoice (Exhibit 4), affidavit for attorney's fees (Exhibit 5).
Findings Of Fact The stipulation of the parties (Exhibit 1) reads as follows:
Recommendation That Petitioner's claim for refund of taxes, penalty and interest paid pursuant to Chapter 212, Florida Statutes, be denied by Respondent Comptroller of the State of Florida. DONE and ENTERED this 19th day of July, 1979, in Tallahassee, Florida. COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Post Office Box 5557 Tallahassee, Florida 32301 Robert S. Goldman, Esquire Thompson, Wadsworth, Messer, Turner, and Rhodes 701 Lewis State Bank Building Post Office Box 1876 Tallahassee, Florida 32302 Office of Comptroller State of Florida Attn: Eugene J. Cella General Counsel The Capitol Tallahassee, Florida 32301 Department of Revenue Attn: John D. Moriarty Room 104 Carlton Building Tallahassee, Florida 32301 THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675
Findings Of Fact Petitioner is the state agency responsible for licensure and regulation of Florida real estate brokers. Respondent is, and at all material times has been, licensed by Petitioner as a real estate broker, license number 0025968. On or about November 22, 1988, the Respondent presented, to Dr. Samir Najjar, a parcel of land which was available for purchase. The Respondent identified the location of the property on a map and represented that the property could subsequently be resold for a profit. The doctor was familiar with the location and agreed to participate in the purchase transaction. The doctor provided, to the Respondent, a check in the amount of $25,000, dated November 22, 1989. Without Dr. Najjar's knowledge or consent, the Respondent deposited the $25,000 check into his personal account, and converted the funds for personal use. The funds were not used to purchase the land parcel. The Respondent claims to have used the funds to operate his personal real estate publishing and advertising business. Dr. Najjar did not authorize such use. On or about January 20, 1989, the Respondent presented, to Dr. Najjar, a house which was available for purchase. The Respondent represented that the house could subsequently be resold for a profit. After seeing several photographs of the house, the doctor agreed to participate in the purchase transaction. On January 20, 1989, Dr. Najjar provided to the Respondent, a check in the amount of $15,000. Without Dr. Najjar's knowledge or consent, the Respondent deposited the $15,000 check into his personal account, and converted the funds for personal use. The funds were not used to purchase the house. The Respondent claims to have used the funds to operate his personal real estate publishing and advertising business. Dr. Najjar did not authorize such use. On or about February 28, 1989, Dr. Najjar, Dr. Najjar's brother, and the Respondent entered into an agreement with G. R. Thornton, to purchase a warehouse/office property owned by Thornton. The first paragraph of the contract for sale, which was signed by all parties, states, "Receipt is hereby acknowledged by Raymond S. Farris, hereinafter called agent, of the sum of $3,000 as binder deposit..." from the Najjar brothers. The contract states that an additional deposit of $17,000 was due within five days of the contract's acceptance by all parties. Contrary to the sales contract representation, the Respondent did not receive the initial $3,000 binder deposit from the Najjar brothers. Upon presentation of the contract to the seller, the Respondent failed to inform the seller that no binder deposit had been made. The seller learned that the deposit had not been made when, six or seven days later, the seller contacted Mr. Farris to ascertain the whereabouts of the deposit, including the additional $17,000. At that time, the seller was informed by the Respondent that no binder deposit had been made and that the purchase transaction would not be completed.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: that the Department of Professional Regulation, Division of Real Estate, enter a Final Order revoking the licensure of Raymond S. Farris. DONE and ENTERED this 6th day of July, 1990, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 6th day of July, 1990. APPENDIX TO RECOMMENDED ORDER CASE NO. 90-0511 The following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified in the Recommended Order except as follows: 4. The date of the check indicates that the transaction occurred on November 22, 1988, rather than November 27, 1988. Respondent The Respondent did not file a proposed recommended order. COPIES FURNISHED: Raymond S. Farris 5711 Richard Street, Suite #1 Jacksonville, Florida 32216 James H. Gillis, Esq. Division of Real Estate Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Darlene F. Keller, Director Division of Real Estate Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Kenneth E. Easley General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Petitioner purchased the facilities of a bankrupt chemical recovery plant and on May 13, 1987, was issued a temporary tax exemption (Exhibit 1) for sales taxes on equipment purchased for the production or processing of tangible personal property for resale. Petitioner essentially operates a distillation plant where products are distilled and certain chemicals are produced. The plant also operates as a servicing facility in removing impurities from products submitted for distillation. Because the materials received at the plant were not as clean as originally anticipated, there was less product for resale and more servicing provided than originally intended. The items on which sales tax refunds are requested were used to ,repair and/or refurbish the distillation plant, and the business qualifies as new business under Section 212.08(5)(b)(1), Florida Statutes. In 1987, Petitioner had receivables totaling $824,819 of which only $63,474 (7.7%) was in the account for sale of tangible personal property (Exhibit 3). Petitioner's witness testified that the other receivable accounts (Exhibit 3) are not service accounts. Petitioner now has an inventory of tangible personal property for sale in excess of $100,000 which was produced through the distillation plant. Although Respondent's auditor initially contended that Petitioner had failed to produce all invoices and bills to justify the exemptions claimed, on cross-examination he acknowledged that the refund for sale taxes paid on the equipment purchased was denied solely on the basis that the equipment and plant was not used principally for the production of tangible personal property for sale. The Notice of Intent (Exhibit 6) denied Petitioner's application for a sales tax refund in the amount of $12,592.75 for the reason that: Business is primarily a service organiza- tion and tangible personal property is only a minute show (sic) of the operation. Records were incomplete. The witness who signed the Notice of Intent understands the denial of the refund of sales taxes was because the sale of tangible personal property produced by Petitioner was not the primary or a substantial part of the revenues generated by the plant.
The Issue Whether Respondent's license as a registered securities salesman/agent should be suspended or revoked for alleged violations of Sections 517.07 and 517.16(1)(a), Florida Statutes, as set forth in the Administrative Complaint. At the commencement of the hearing, it was noted that the Notice of Hearing was styled incorrectly in showing David R. Edstrom as Petitioner rather than Respondent. This clerical error was harmless in view of the language contained in the body of the notice which identified the word "Respondent" as being a registered securities salesman/agent. Notice of Hearing was issued on September 15, 1976, by the Hearing Officer. Neither the Respondent nor any representative in his behalf-appeared at the hearing. Accordingly, the matter was heard as an uncontested proceeding, pursuant to Rule 28-5.25(5), Florida Administrative Code. On October 6, 1976, Respondent informed the Hearing Officer that he had forgotten the hearing and inquired as to the possibility of another hearing. (Supp. Exhibit 1). By letter of October 12, 1976, counsel for Petitioner objected to Respondent's request, citing the trouble and expense of preparing for and attending the hearing, together with the difficulty encountered in securing witnesses. (Supp. Exhibit 2) On October 14th, Respondent renewed his request, and in the alternative, requested that his license be suspended temporarily until the outcome of an appeal of a criminal conviction. (Supp. Exhibit 3) Rule 28-5.25(9), F.A.C., provides that a hearing officer shall not grant a Motion for re-hearing or reconsideration. Although this Rule admits of no exception, it does not necessarily preclude the agency involved from authorizing a new proceeding in the interests of substantial justice, upon good cause shown. In this instance, Respondent's absence admittedly was due solely to his own negligence and therefore he is not entitled to the requested relief. It is noteworthy that the Notice of Hearing included the following sentence: "The right is reserved to take such action as the law permits if either party fails to appear at the time and place set for their hearing."
Findings Of Fact Respondent is a registered securities salesman/agent under license issued on October 3, 1972, by the Petitioner. (Admin. Complaint). Respondent was president of S.E.I., Inc., Miami, Florida at the time of the alleged statutory violations. (Testimony of Campbell, Exhibit 3). In the summer of 1973, Carl Eigner of Boynton Beach, Florida, having seen newspaper advertisements of Hartwell and Associates, Inc., concerning investments in promissory notes, contacted the firm and met one of its salesman, Bill Taylor. Taylor in formed Eigner that investments in promissory notes issued-by the 2609 corporation, a real estate developer, were safe and that the value of land covered by mortgages which secured the promissory notes, by law, had to be worth twice the cost of any investment. He further stated that the directors of S.E.I., Inc. investigated developers and if found to be in sound condition, recommended sale of their notes. Taylor also told him that he would receive a "valid registered mortgage" in Polk County. Eigner thereupon withdrew money to purchase a $10,000 promissory note issued by the 2609 Corporation, secured by a mortgage deed on 4 lots. Eigner paid $9,850.00 for the note by check to Taylor. The difference of $150.00 represented interest that Eigner otherwise would have received if he had left his funds on deposit. At the time of purchase, Taylor told Eigner that he had nothing to worry about because the land value had been checked by S.E.I., Inc. At no time did Taylor advise him that the note or mortgage was registered with or exempt from registration with the State Division of Securities. The promissory note provided for monthly interest payments at the rate of 12 percent per annum, commencing December 1, 1973. It also provided that the note or any payments thereunder could not be transferred by the holder to anyone who is not a bona fide resident of Florida without the prior consent of S.E.I., Inc. The note further provided. that it would be valid only upon approval by S.E.I., Inc., as sales/agent for the 2609 Corporation. In addition to the signature of the President of 2609 Corporation on the face of the note, it also contained the following: "Sale approved: S.E.I., Inc. by David R. Edstrom, President." This block showed the signature of Respondent. (Testimony of Eigner, Exhibit 3) The securities of 2609 Corporation have never been registered with the Petitioner pursuant to Chapter 517, Florida Statutes. (Exhibit 4) Petitioner submitted in evidence certified copies of an Information and verdicts in criminal proceedings in Palm Beach County, Florida against Respondent, Case No. 75-1242-CF. These proceedings resulted in the conviction of Respondent for the sale of unregistered securities to Carl Eigner and/or Edith Eigner, Robert S. Cox and/or David F. Cox, and Michael J. Leonardi and/or Diana Leonardi, and others in violation of Sections 517.07 and 517.302, Florida Statutes. The conviction is presently on appeal. Although received in evidence, the evidence of criminal convictions is not competent evidence to establish the facts upon which they were rendered and therefore cannot be used as a basis for a finding of fact in these proceedings. (See Boshnack v. World Wide Rent-A-Car, Inc., 195 So.2d 216 (Fla., 1967).
Recommendation That the registration of Respondent, David R. Edstrom as a registered securities salesman/agent be revoked for violation of Section 517.07, Florida Statutes, as authorized by Section 517.16(1)(a), Florida Statutes. DONE and ENTERED this day of October, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Richard Gentry, Esquire Division of Securities Department of Banking and Finance 239 Carlton Building Tallahassee, Florida 32304 Mr. David R. Edstrom 5748 Northeast 16th Avenue Ft. Lauderdale, Florida 33334
The Issue Whether either Petitioner is entitled to Unclaimed Property Account Number 108502717.
Findings Of Fact The Department receives unclaimed property and disburses that property from the State of Florida Treasury to the rightful owners. During the last fiscal year, the Department's Bureau of Unclaimed Property received in excess of $300,000,000 of unclaimed property, and paid claims in excess of $212,000,000. The Department has the duty to evaluate the merits of each claim for unclaimed property and to pay only those claimants who can establish, by a preponderance of the evidence, that they are the rightful owners of the unclaimed property. Anja Sova was born in 1921 in Finland, but resided in Lake Worth, Florida. Her husband's brother was married to Iina Sova, who resided in Finland. Anja Sova opened several accounts with different banks during her lifetime; two of those accounts were opened at Washington Mutual Bank, and she designated Iina Sova, her sister-in-law, and Silja Lappalainen, her grand-niece and Iina's granddaughter, as joint pay-on-death beneficiaries. In January 2001, at the age of 79, Anja Sova opened a Certificate of Deposit (CD) account with Sterling Bank, depositing $95,000.00 in the account. The CD designated the pay- on-death beneficiary as Silja Sova. Anja Sova signed the signature card for this CD three times, once right next to the name of the designated beneficiary, Silja Sova. The bank had no other information as to the beneficiary. Anja Sova died in a car accident in 2002. The accounts with Washington Mutual were paid to the designated beneficiaries, her sister-in-law, and her grand-niece. Unclaimed Property Account Number 108502717 consists of the matured Sterling Bank CD, worth $127,031.97, and designates Silja Sova as the pay-on-death beneficiary. It had been held by Sterling Bank until its remittance to the Department as unclaimed property. American Research is a corporate claimant representative, and represents the residual heirs of Anja Sova's estate. Choice Plus is also a corporate claimant representative, and represents Silja Lappalainen, Anja Sova's grand-niece. American Research ran searches through various private, social, and governmental databases in the United States, and found no person named Silja Sova. In 2013, American Research also requested and received an Extract from the Population Information System in Finland. This database was created in 1969. The Extract revealed one person named Silja Sova; that person is a child born in 2009, who lives in Finland. No credible evidence was presented on whether the Extract includes only living persons, or if it also includes deceased persons (persons who were born between 1969 and 2001 and died before November 2013, when the search was done through the Extract). American Research argued that Silja Sova simply does not exist. It is unknown, however, whether Anja Sova's husband had more brothers with the surname Sova, or whether Anja Sova's father-in-law had brothers. The undersigned cannot find, given the scant evidence presented, that Silja Sova does not exist, and never existed, in Finland. American Research also proposed the theory that Anja Sova purposely created a fictitious name when designating Silja Sova as the beneficiary. There was no credible evidence presented to support this theory, either; it was mere speculation. An Order for Subsequent Administration was entered by a probate court in Palm Beach County, Florida, on April 11, 2013. It establishes the residual beneficiaries of Anja Sova's estate, but it does not include Silja Lappalainen, Anja Sova's surviving grand-niece. Choice Plus was also unable to locate a person named Silja Sova, and argued that the CD mistakenly designated the pay-on-death beneficiary as Silja Sova when it should have read Silja Lappalainen, Anja's grand-niece who had also been a beneficiary on the Washington Mutual accounts. Curiously, Choice Plus represents Silja Lappalainen, but did not offer testimony from her at the hearing.1/ Instead, Choice Plus offered into evidence an affidavit from Iina Sova, the deceased's sister-in-law, disclaiming any interest in the account. The affidavit is not found credible or reliable; it is written in a language that the affiant did not speak, there is no indication that a certified translator was present while the statement was being made, and the affidavit is replete with hearsay. Unfortunately, there was no credible evidence presented to support Choice Plus's argument that the designation of Silja Sova as the pay-on-death beneficiary was indeed a mistake that a then 79-year-old great-aunt made. The record is void of any credible evidence which meets the preponderance of the evidence standard, entitling either Petitioner to Unclaimed Property Account Number 108502717.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that American Research and Investigations, Inc.'s claim for Unclaimed Property Account Number 108502717 be DENIED. It is also RECOMMENDED that Choice Plus, LLC's claim for Unclaimed Property Account Number 108502717 be DENIED. DONE AND ENTERED this 18th day of April, 2014, in Tallahassee, Leon County, Florida. S JESSICA E. VARN 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 18th day of April, 2014.
Findings Of Fact On, or about, November 20, 1991, HRS released ITB 92-18BC. ITB 92-18BC was an invitation to bid on HRS' procurement of a data processing cartridge tape subsystem for Unisys computers. Prior to the issuance of the ITB, HRS conducted a bidder's conference. The bidders' conference was attended by representatives of HRS, Unisys and StorageTek. Vendor representatives at the bidders' conference were informed that HRS would "attempt to answer the questions in the best" possible manner. Vendors were also instructed that the answers received at the bidders' conference were "not binding, are not official, and must be submitted in writing to receive an official answer." Additionally, the ITB contains language stating that any questions concerning specifications or conditions were to be submitted in writing to HRS and that no interpretation shall be binding on HRS unless it is in writing. StorageTek and Unisys submitted written questions pursuant to the above mentioned instructions. The only relevant inquiry submitted by Unisys had to do with the requirement of "one (1) dual path controller with redundant paths for each string." Pursuant to Unisys' request, HRS modified that requirement to read "At least one (1) dual path controller with redundant paths for each string." The only relevant written inquiry submitted by StorageTek is found on page 14 of the written inquiries of the ITB. The written inquiry by StorageTek asked whether HRS would consider the total automation through an RFP rather than only a small piece of total automation through an ITB. HRS responded negatively stating that the success of this ITB will be based on using current allocations to fund the change to cartridge tape. Following the issuance of ITB 92-18BC, StorageTek filed a notice of intent to protest the specifications of the ITB. StorageTek never filed a formal notice of protest and subsequently withdrew the notice of intent to protest the bid specifications. The ITB as finally issued states its "Purpose" as "The purpose of this Invitation is to obtain competitive bid prices for a data processing cartridge tape subsystem, with installation components and maintenance, to be attached to Unisys A17-L and A15-I computers located at the HRS Technology Centre, 1940 North Monroe Street, Tallahassee, Florida." The ITB also contains the following hardware "Quantities and Technical Specifications": The following minimum specifications shall govern any equipment offered: Twenty-eight (28) cartridge tape drives configured as follows: One (1) string of sixteen (16) tape drives One (1) string of eight (8) tape drives One (1) string of four (4) tape drives At least one (1) dual path controller with redundant paths for each string In the General Conditions, the ITB states Any questions concerning conditions and specifications shall be directed in writing to this office for receipt no later than ten (10) days prior to the bid opening. Inquiries must reference the date of bid opening and bid number. No interpretation shall be considered binding unless provided in writing by the State of Florida in response to requests in full compliance with this provision. In bold print at the bottom of the "General Conditions" is found: "NOTE: ANY AND ALL SPECIAL CONDITIONS AND SPECIFICATIONS ATTACHED HERETO WHICH VARY FROM THESE GENERAL CONDITIONS SHALL HAVE PRECEDENCE." The ITB also contains the following "Special Conditions": The Office of Management Systems intends to acquire robotic tape units within 24 months to manage approximately 20,000 tapes. The future value of the cartridge tape drives toward this goal will be a consideration in this bid. If the purchased tape drives will directly attach to the robotic units then 100% of the value is maintained. However, if the tape drive unit must be replaced then a trade-in value must be bid (see Cost Table). Auto load trays are considered part of the tape drive unit. The Office of Management System also must be able to connect these tape drives to an IBM computer in the future. This capability is mandatory and must be stated with supporting documentation. The hardware/software to accomplish this goal is not part of this bid, but associated cost should be identified in the documentation provided. The ITB also specified that "[t]he award will be made to the responsive bidder with the lowest bid price for 'Net Future Cost'." Finally, the ITB contains the following pricing sheet formula for calculating cost, the blanks of which were to be completed by the bidder: CARTRIDGE TAPE SUBSYSTEM COST $ Includes all costs for specified 28 cartridge tape drives . . . . LESS TRADE-IN ALLOWANCE ( ) (see specified Bid Condition #5 and 13) SUPPLIES MAINTENANCE NET COST . . . . . . . . FUTURE VALUE OF TAPE EQUIPMENT (See Notes A and B below) * ( ) NET FUTURE COST $ Note to Bidders: (A) If the tape drives directly attach to the robotics unit, the future value of tape equipment shall equal to [sic] the amount entered for item 1 above. (B) If the tape drives must be replaced in accordance with section 6 of this ITB, the amount entered will be the trade-in value of the equipment in October 1993. HRS received two bids for ITB 92-18BC. The bids that were submitted were bids by StorageTek and Unisys. The two bids were publicly opened at Winewood and transported to Management Systems for evaluation. When the bids arrived at Management Systems they were evaluated by an evaluation team consisting of Joe Duggar, Marilyn VanDusseldorp and Dick Bradley. The evaluation team concluded that both bids that were submitted were materially responsive to the ITB. However, review of the StorageTek bid showed that StorageTek failed to subtract line six from line five on the bid pricing sheet and had placed a zero for the cost on line seven of the bid pricing sheet. HRS reworked the numbers and entered a price on line seven in accordance with the mathematical requirements of the pricing sheet. HRS corrected StorageTek's entry on line seven and found that StorageTek's bid for line seven was over $300,000. Unisys' bid for line seven was for $243,454. HRS concluded that Unisys was the lowest responsive bidder for ITB 92- 18BC. As such, Management Systems reported these findings to Secretary Robert B. Williams, Secretary, Department of Health and Services, on January 2, 1992. After, reviewing the Unisys bid, StorageTek raised concerns about whether the Unisys bid satisfied the mandatory requirements of the ITB. StorageTek was concerned with whether Unisys had met the requirement of "At least one dual path controller with redundant paths for each string." Larry Smith, an employee of StorageTek, contacted Tom Johnson, Assistant Deputy Secretary for Management Systems, about the contents of the Unisys bid. Mr. Johnson, after listening to Larry Smith's concerns, asked Marilyn VanDusseldorp to check into StorageTek's allegations. Ms. VanDusseldorp and Mr. Duggar met with Mr. Greg Priest and Mr. John Thompson of the Unisys Corporation. Mr. Priest and Mr. Thompson went over the bid with the HRS evaluators. At this meeting, a conversation took place about the number of controllers that StorageTek and Unisys had bid and the cross coupling cables between those controllers. Unisys informed HRS that if HRS wanted that cable for strings B and C, Unisys could make that cable available at no additional charge. However, HRS would not avail itself of this crosscabling until after the acceptance period for the hardware as bid. The ability to cross cable strings B and C is not a requirement of or part of this ITB. Ms. VanDusseldorp and Mr. Duggar were convinced that they understood the Unisys bid and their original understanding of the Unisys bid's responsiveness did not change because of these conversations. Ms. VanDusseldorp reported back to Tom Johnson that the allegations by StorageTek were unfounded and that Unisys was responsive as bid in Unisys' response to the ITB. HRS awarded the bid to Unisys on January 16, 1992. StorageTek filed a timely notice of protest and formal written protest. As framed by StorageTek's amended formal written protest and the parties' Prehearing Stipulation, StorageTek contended that the award to Unisys was improper because: Unisys did not meet the requirement of providing "at least one dual path controller with redundant paths for each string"; Unisys allegedly failed to prove equipment capable of connecting the tape drives to an IBM computer without the loss of redundant paths; and Unisys allegedly failed to accurately represent net future costs. DISPUTED TECHNICAL REQUIREMENTS At Least One Dual Path Controller With Redundant Paths for Each String The ITB contained the following pertinent hardware requirements: Quantities and technical specifications: The following minimum specifications shall govern any equipment offered: (28) Cartridge tape drives configured as follows: One (1) string of sixteen (16) tape drives One (1) string of eight (8) tape drives One (1) string of four (4) tape drives At least one (1) dual path controller with redundant paths for each string . . . StorageTek bid equipment to provide two controllers for string A, two controllers for string B and two controllers for string C. Unisys bid two controllers for string A, one controller for string B and one controller for string C. StorageTek interpreted the requirement "at least one dual path controller with redundant paths for each string" as calling for dual or redundant controllers and complete redundancy from the mainframe or host computers to the tape drives. StorageTek's interpretation is contrary to the plain language of the specification and the common usage in the industry. In determining the common usage in the industry, the testimony of Dr. Fred J. Taylor is given great weight. He is an expert in configuration and design of I/O subsystems. He is an independent expert in that he is not an employee of any party and he had no involvement in the bid proceedings. A "path" is an unidirectional connection between two points. The word "path" has a different meaning depending on whether it is being used in reference to software or hardware. In the software context a "logical path" is the artificial path which exists only within the software configuration. The "physical path" is a hardware path along which information is actually communicated. It is the wires themselves. ITB 92-18BC is seeking a hardware system, not a software system. Therefore, the requirement of "[a]t least one dual path controller with redundant paths" relates only to the physical connection path. It refers only to the physical path (the wires) between the host computer (the A15 and A17) and the controller. Each controller can control only eight tape drives. Therefore, for string A, two controllers are needed. For Strings B and C, only one controller is required as long as it has two physical paths between the host and the controller and two other redundant physical paths between the same points. The term "redundant" given both its common English language usage and its usage in the industry means "duplicate," "copy," "alternate," or "more than one of that thing." The three string configurations bid by Unisys are responsive to the requirements of the ITB because each string contains dual paths between the host and the controller and each contains redundant paths for each of the requisite dual paths. StorageTek claimed to have asked HRS at the prebid conference and later in a telephone conference with Tom Johnson, Assistant Deputy Secretary for Management Systems, whether HRS intended to require two controllers per string. The evidence does not support this claim. StorageTek also claimed to have orally questioned whether the purpose of requiring at least one dual path controller with redundant paths for each string was to provide for simultaneous data transfers. Again, the competent, substantial, credible evidence does not support this claim. StorageTek did not put any such questions in writing. The ITB provided and StorageTek understood that changes or clarifications to the contract were not binding unless in writing. Nothing in the ITB required each string of tape drives to contain two controllers. Nothing in the ITB required that each string be capable of processing simultaneous data transfers. Nothing in the ITB required complete redundancy from the host computers to the tape drives. Capability to Connect Tape Drives to an IBM Computer in the Future The ITB contained the following special condition: The office of management systems also must be able to connect these tape drives to an IBM computer in the future. This capability is mandatory and must be stated with supporting documentation. The hardware/software to accomplish this goal is not part of this bid, but associated costs should be identified in the documentation provided. StorageTek claimed that Unisys' bid was nonresponsive because it did not demonstrate that the subsystem as bid in its entirety was capable of attaching to an IBM computer without losing one of the redundant paths on string B and string C. Nothing in the ITB required the bidders to demonstrate that the subsystem as bid could attach to an IBM computer without losing one of its redundant paths. To the contrary, the specification was specifically limited to demonstrating the capability of connecting the underlying tape drives to an IBM computer in the future. The purpose of the requirement for demonstrating the capability to attach to an IBM computer was to insure that the tape drives retained some value in the future if HRS no longer used the equipment to attach to the Unisys A series computer. Unisys' bid demonstrated it was capable of attaching the tape drives to an IBM computer and therefore the bid was responsive. NET FUTURE COST The ITB provided that the contract would be awarded to the bidder with the lowest dollar amount for "net future cost." Net future cost was the descriptive term for line item 7 on the ITB pricing information sheet (the pricing sheet). The ITB pricing sheet is set forth in Findings of Fact 14 above. The bidders were to insert the appropriate amount on each line, adding or subtracting as indicated by the presence or absence of parentheses. Unisys and StorageTek both filled out the pricing sheet appropriately with respect to line items 1-6. On line item 7, Unisys entered the difference between line item 5 and line item 6. This resulted in a figure of $243,454.00. StorageTek entered a zero on line item 7. The clear meaning of the pricing sheet was that line item 7 would be the difference between line item 6 and line item 5. StorageTek inserted on line item 7 its proposed cost to HRS in the future to attach the cartridge tape drives bid by StorageTek to robotic units. Line item 2 required bidders to enter one of two numbers. If the bidders' cartridge tapes would be capable of directly attaching to robotic units, the bidder was given a 100% credit for the present cost of the cartridge tapes on the pricing sheet. If the bidders' cartridge tapes would not be capable of directly attaching to robotic units, the bidder was required to insert on line item 2 the amount of the trade-in value the bidder would provide in the future in order to attach to robotic units. Under StorageTek's asserted interpretation of the pricing sheet, there would have been no difference between the information provided on line item 2 and the information provided on line item 7 because, as submitted by StorageTek, the substance of the information provided on both line 2 and line 7 was that there would be no additional change to HRS to attach the StorageTek cartridge tape drives to robotic units. Under StorageTek's asserted interpretation of the requirements of the pricing sheet, the amount of money being expended by HRS today would have had no bearing on the award of the contract. If StorageTek's bid on line item 5 -- the net cost to HRS today -- had been $10 million or $100 million, under StorageTek's theory it still would have been entitled to award of the contract because it would charge zero dollars in the future to attach the tape drives to robotic units. Such an interpretation is both illogical and unreasonable. The ITB did not define net future cost as the cost of attaching the cartridge tape drives to robotic units in the future. During the prebid conference, Larry Smith, the account representative for StorageTek, questioned Karin Morris, the HRS contract administrator for the ITB. Larry Smith suggested to HRS that the cost of attaching to the robotic units "was being totally ignored in this ITB." Karin Morris advised Larry Smith to put his concerns in writing. StorageTek did put its concern in writing requesting HRS to reconsider this acquisition by issuing an RFP (request for proposals) which would include consideration of the cost of converting to automation (robotics). HRS' response to StorageTek's written question was "No. The success of this ITB will be based on using current allocations to fund the charge to cartridge tape. No new appropriations have been requested for this acquisition." Larry Smith testified that he objected to the ITB because it ignored the cost of attaching to robotics, yet he inserted zero on line 7 because he understood net future costs to be the cost of attaching to robotics. The response of HRS to StorageTek's written question no. 11 unequivocally stated that the ITB would be awarded based on current allocations. HRS properly concluded that StorageTek deviated from the bid requirements by placing a zero on line 7. HRS properly waived the irregularity in StorageTek's bid regarding the line item 7 and recalculated StorageTek's pricing sheet to comport with the pricing sheet requirements by subtracting line six from line five to arrive at the net future cost in line 7. After recalculating StorageTek's pricing sheet, HRS correctly found that Unisys submitted lower dollar amounts on line item 5 and line item 7. ULTIMATE FACTS Unisys' bid was responsive to the ITB in all material respects. Unisys' bid was the lowest bid. Unisys' bid was the lowest responsive bid and should be awarded the contract.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order therein: Determine Unisys to be the lowest responsive bidder pursuant to Section 287.057(1). Award the bid for ITB 92-18BC to Unisys. DONE and ENTERED this 31st day of March, 1992, in Tallahassee, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 1992. APPENDIX TO THE RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Storage Technology Corporation 1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1); 2-7(9-14); and 34(43). 2. Proposed findings of fact 8-10, 52-54, 93, 103, 111, 112, 122, 134, 135, 141, 145, 146, 148, 156, and 158 are subordinate to the facts actually found in this Recommended Order. 3. Proposed findings of fact 11-21, 29-32, 39, 40, 47-51, 91, 92, 104-107, 110, 123-129, 131, 132, 136-140, 142, 143, 149, 150, 152, and 153 are irrelevant to the resolution of the issues raised in this case. 4. Proposed findings of fact 22-28, 35-38, 41-43, 55-76, and 113-121 are mere summaries of testimony and to the extent that factual matters recited in them are reflected in the Findings of Fact herein, they are subordinate to those Facts. 5. Proposed findings of fact 33, 44-46, 77-79, 94, 98, 102, 108, 109, 130, 133, 144, 147, 151, 154, 155, 157, 159, and 160 are unsupported by the credible, competent and substantial evidence. 6. Proposed findings of fact 80-90, 95-97, and 99-101 are unnecessary in light of the Findings of Fact and issues herein. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Department of Health and Rehabilitative Services Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-8(1-8); 9-26(15-32); 27(34); 28(41); 29(43); 30(50); 35(52); 37(57); 38(58); 39(63); 40(62); 41(77); 42(78); and 43(82). Proposed findings of fact 31-34 and 36 are subordinate to the facts actually found in this Recommended Order. Specific Rulings on Proposed Findings of Fact Submitted by Intervenor, Unisys Corporation Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(57); 2(58); 3(14&59); 4-23(60-79); 29-33(34-38); 34-40(45-51); 41(41); 43(44); and 45-49(52-56). Proposed findings of fact 24-28, 42, and 44 are subordinate to the facts actually found in this Recommended Order. COPIES FURNISHED: F. Perry Odom Melissa Fletcher Allaman Attorneys at Law Ervin, Varn, Jacobs, Odom & Ervin 305 South Gadsden Street Post Office Drawer 1170 Tallahassee, Florida 32302 Peter A. Lewis Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building one, Room 407 Tallahassee, Florida 32399-0700 W. Robert Vezina, III Mary M. Piccard Attorneys at Law Cummings, Lawrence & Vezina, P.A. 1004 DeSoto Park Drive Post Office Box 589 Tallahassee, Florida 32302-0589 Robert B. Williams, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Slye General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
