The Issue Whether Respondents violated Subsections 475.25(1)(b),(e), and (q), Florida Statutes, and Rules 21V-10.033, 21V-14.012(2) and (3) and 21V-14.014, Florida Administrative Code.
Findings Of Fact Respondent, Rhoda Kurzman (Kurzman), is currently and was at all times relevant to this proceeding a licensed real estate broker in this state. Respondent, Security Realty Investments, Inc. (Security), is currently and was at all times relevant to this proceeding a licensed real estate broker corporation in this state. Security is a small company which deals primarily with the property management of its own properties. Ms. Kurzman is the president of and broker for Security. In April, 1992, Respondents came up for a routine audit. Joseph L. Wilson, then an investigative auditor for Petitioner, Department of Professional Regulation (DPR), conducted an office inspection and escrow/trust account audit on April 14, 1992. The inspection and the audit were in four areas: 1) office 2) required office sign 3) agency disclosure and 4) broker's records, including reconciliation statements and escrow/trust accounts. Respondents maintained a trust account in an interest bearing savings account with County National Bank of South Florida. Respondents received quarterly statements from the bank. As part of the audit, Mr. Wilson asked Ms. Kurzman to produce the reconciliation statements for Security's escrow/trust account. She gave him a running journal (Pet. Exhibit 2) which she had prepared in her own handwriting. The journal was entitled " Escrow Account # 0120056458-20, County Bank, Miami, Florida 33164." There were entries beginning June 29, 1988 through December 31, 1991. The dates listed on the left side of the journal represented the dates for either deposits or withdrawals. The last deposit in the account other than interest was on March 20, 1991. There were double check marks on the right side which represented the amounts reconciled with the bank statements. The entire document contained five double check marks. Petitioner's Exhibit 2 does not reflect the dates the reconciliations took place. Petitioner's Exhibit 2 was not signed and dated by Ms. Kurzman each time the account was reconciled. Petitioner did not reconcile the account on a monthly basis. The bank statement for the period ending December 31, 1991 showed a balance of $375.54, as did the balance in the December 31, 1991 entry of the journal. The bank statement for the period ending March 31, 1992 showed a balance of $379.83. Respondents did not have any escrow security liability on these dates; thus these balances represented overages in the escrow account. Petitioner's Exhibit 2 did not contain a description or explanation for the overages. Mr. Wilson discussed the overages with Ms. Kurzman, and she indicated that the balance in the bank account resulted from accumulated interest from 1988. Mr. Wilson advised her that prior to March, 1992, an escrow account could carry an overage of only $100, but that after March 1992, overages of up to $200 could be carried in escrow accounts. Ms. Kurzman agreed to withdraw sufficient funds from the account to bring it in compliance with the allowed overage. By letter dated April 14, 1992, Ms. Kurzman advised Mr. Wilson that she had withdrawn $300 from the escrow account, bringing the balance to $79.83, and included a copy of the withdrawal slip with the letter. All the sales made by the Respondents are listed in the journal maintained by the Respondents. There have been eight sales since 1988. Some of the transactions did not result in a contract. From September 1, 1991 through October 1, 1992, Mr. Wilson conducted approximately 300 audits, 40 of which were done during the month of April, 1992. The audit of Respondents was approximately two to four hours long. Ms. Kurzman produced one sales contract during the audit, the other contracts were stored in a different location. During the audit, Mr. Wilson prepared an Office Inspection and Escrow/Trust Account Audit Form, which he and Ms. Kurzman signed. After the audit he prepared an investigative report. No specific transactions were mentioned in either document. Mr. Wilson destroyed the specific notes or tic sheets that he made during the audit. At hearing he admitted that if someone showed him one of the contracts for the transactions appearing in the journal, he would not be able to recall if he had looked at the contract during the audit. Ms. Kurzman specifically recalls the audit and her recollection of the audit is much clearer than Mr. Wilson's. At hearing Mr. Wilson was unable to recall specific transactions dealing with the alleged failure to disclose that escrow funds were being placed in an interest bearing account. He believes that they discussed names of contracts or types of situations, but can't recall because of the length of time that had passed since he performed the audit. Ms. Kurzman specifically recalls that other than the transaction in which she was the seller they only discussed one sales contract. He believes that Ms. Kurzman said that she had made oral disclosure in some but not all transactions in which there were principals other than the broker, and that there were no written disclosures. In one of the sales listed in the escrow account journal, Ms. Kurzman was the seller and had divested herself as broker during that transaction. In the Baldoria transaction, the contract required that Ms. Baldoria receive interest and the interest was paid to her. Obviously there was disclosure to Ms. Baldoria, and it appears that the disclosure was in writing. Ms. Kurzman and Mr. Wilson discussed the issue of the disclosure of interest bearing accounts during the audit. There was a disagreement between them as to when such disclosure had to be made. Having judged the credibility of the witnesses and in particular having considered Mr. Wilson's difficulty in recalling specifics of the audit, I find that the evidence is insufficient to conclude that the Respondents failed to disclose that escrow/trust funds were being placed in an interest-bearing account. Mr. Wilson was unable to recall any contracts in which Respondents were alleged to have failed to make agency disclosure. There have been no prior audits of Respondents. No prior disciplinary actions have been taken by Petitioner against Respondents.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered dismissing Counts I, II, V, VI, VII, and VIII of the Administrative Complaint, finding Respondents guilty of violating Rule 21V-14.012, Florida Administrative Code and Section 475.25(1)(e), Florida Statutes, reprimanding each Respondent, imposing against Rhoda Kurzman an administrative fine of $100, and requiring Rhoda Kurzman to provide within six months after the date of the Final Order satisfactory evidence to the Florida Department of Business and Professional Regulation, Division of Real Estate, Legal Section, Hurston Building, North Tower, Suite N-308, 400 West Robinson Street, Orlando, Florida 32801-1772, of having completed a 30-hour postlicensure broker management course. DONE AND ENTERED this 20th day of January, 1994, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 20th day of January, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-5542 To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact Paragraphs 1-6: Accepted in substance. Paragraph 7: Rejected as not demonstrated by clear and convincing evidence. Paragraph 8: Accepted. Respondent's Proposed Findings of Fact Paragraph 1: Accepted. Paragraphs 2-3: Rejected as subordinate to the facts actually found. Paragraph 4: Accepted in substance. Paragraph 5: Rejected as subordinate to the facts actually found. Paragraphs 6-7: Accepted in substance. Paragraph 8: Accepted in substance. Paragraph 9: Accepted. Paragraph 10: Accepted in substance. Paragraphs 11-13: Accepted. Paragraphs 14-19: Rejected as subordinate to the facts actually found. Paragraphs 20-26: Accepted in substance. Paragraph 27: Rejected as not supported by the evidence. Paragraph 28: Accepted in substance. Paragraph 29: Rejected as subordinate to the facts actually found. Paragraph 30: Accepted. Paragraph 31: Rejected as subordinate to the facts actually found. Paragraph 32: Accepted. Paragraphs 33-34: Rejected as subordinate to the facts actually found. Paragraphs 35-37: Accepted in substance. 20 Paragraphs 38-40: Rejected as subordinate to the facts actually found. COPIES FURNISHED: Michael J. Kurzman, Esquire Grand Bay Plaza, Suite 702 2665 South Bayshore Drive Coconut Grove, Florida 33133 Theodore Gay, Senior Attorney Department of Business and Professional Regulation Division of Real Estate 401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128 Darlene F. Keller Divison Director 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Jack McRay Acting General Counsel Department of Business Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399
The Issue This issues in this case are: (1) Whether Respondent failed to maintain trust funds in the real estate brokerage escrow bank account or some other property depository until disbursement thereof was properly authorized in violation of Section 475.25(1)(k), Florida Statutes; (2) Whether Respondent is guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealings by trick, scheme or device, culpable negligence, or breach of trust in a business transaction in violation of Section 475.25(1)(b), Florida Statutes; and (3) If so, what penalty should be imposed on her real estate license.
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints pursuant to the laws of the State of Florida, in particular, Chapters 455 and 475, Florida Statutes, and Chapter 61J2, Florida Administrative Code. Respondent Marjorie Koutroubis, is and was at all times material hereto, a licensed Florida real estate broker having been issued License No. BK-039112. Respondent Prestige International Realty Corporation (Prestige International Realty), is and was at all times material hereto, a corporation registered as a Florida real estate broker having been issued Registration CQ-0274989. The business is located at 1111 North Westshore Boulevard, No. 212, Tampa, Florida 33607. At all times material hereto, Respondent Koutroubis was licensed and operating as qualifying broker and officer of Prestige International Realty. On or about September 11, 1997, Michael Day, an investigator with the Department, went to the office of Prestige International Realty to conduct an audit of escrow accounts being held by Respondents. However, Mr. Day was unable to complete the audit on that day because the company's records were unavailable as a result of a computer problem. On January 12, 1998, Mr. Day returned to the office of Prestige International Realty, and performed an audit of two escrow accounts being held by Respondents, the security deposit account, and the disbursement account. In conducting the audit, Mr. Day used and relied upon information contained in documents provided to him by Respondent Koutroubis or her employees. The audit of Respondents' escrow accounts revealed that the security deposit account was balanced but the disbursement account had a shortage. According to Prestige International Realty's December 1997 escrow reconciliation statement, the closing balance or the broker's trust liability was $2,700.00 and the adjusted account balance was $996.15. The difference between the broker's trust liability and adjusted account balance reflected a shortage of $1,703.85 in the escrow account being maintained by Respondents. The subject Prestige International Realty's reconciliation statements contained no description or explanation to explain the discrepancy described in paragraph 9. Moreover, neither Respondent Koutroubis nor Mr. Ricci could explain the reason for the apparent shortage. The subject reconciliation form was prepared by Mr. Ricci and signed by Respondent Koutroubis. Prior to signing the reconciliation sheet, Respondent Koutroubis did not question the figures on the sheet. Rather she accepted the figures provided on the form by Mr. Ricci. After the January 12, 1998, audit of Prestige International Realty's escrow accounts, Mr. Day met with Respondent Koutroubis and discussed the findings of the audit. Mr. Day told Respondent Koutroubis that the only way to correct or resolve the problem of the shortage of funds in the escrow account was to deposit $1,703.85 into Prestige International Realty's account. Respondent Koutroubis did not know why there was a shortage in the escrow account. Nevertheless, in an effort to resolve the problem, she immediately wrote a check for $1,7903.85 and deposited it into the Prestige International Realty's bank account. Mr. Day recorded the findings of the Audit on the Department's Office Inspection and Escrow/Trust Account Audit Form (Audit Form). In the "Remarks" section of the form, Mr. Day noted that in one instance, the improper reconciliation form had been used. With regard to the shortage in the rental distribution account. Mr. Day wrote, "Broker to transfer shortage for rental distribution." In the "Corrective Action" section of the form, Mr. Day wrote, "see above" and "use correct reconciliation sheet." The Audit Form also included items which required the investigator to indicate what, if any, action was taken in a case. The investigator was to respond "yes" or "no" to each of the following: (1) Was a citation issued; (2) Was a notice of noncompliance issued; and (3) Was a complaint docketed. On the Audit Form, Mr. Day indicated that no citation or notice of noncompliance was issued to Respondents but that a complaint was docketed. Respondent Koutroubis and Mr. Day signed the Audit Form on January 14, 1998. After Respondent Koutroubis signed the Audit Form and wrote a check for the amount of the shortage, she mistakenly believed that no further action would be taken with regard to the cited violations. Respondent Koutroubis' belief was based on the fact that no citation or notice of noncompliance was issued and on her understanding of Mr. Day's comments concerning how to resolve the shortage in the escrow account. Neither Mr. Day nor any other Department employee told Respondent Koutroubis or Mr. Ricci that if a check were written to cover the shortage in the escrow account, that the Department would take no further action. Mr. Day believed that the likely reason for the shortage in the disbursement account was that proceeds were disbursed prior to checks clearing. After the subject audit of Respondents' 1997 records, Respondent Koutroubis began using a new form to prepare Prestige International Realty's monthly reconciliation statements. As of the date of the hearing, there is no indication that there have been shortages or overages in the Prestige's escrow accounts since the January 1998 audit.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that a final order be entered finding Respondents guilty of violating Section 475.25(1)(k), Florida Statutes; imposing an administrative fine of $1,000.00 on Respondent Koutroubis; issuing a reprimand to Respondent Prestige International Realty; and dismissing Counts II and IV of the Administrative Complaint. DONE AND ENTERED this 9th day of February, 2000, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 9th day of February, 2000. COPIES FURNISHED: Ghunise Coaxum, Esquire Department of Business and Professional Regulation Division of Real Estate 400 West Robinson Street, Suite N-308 Orlando, Florida 32801 Stephen F. Ricci, Qualified Representative Prestige International Realty Corporation 1111 North Westshore Boulevard Tampa, Florida 33607 Barbara D. Auger, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Herbert S. Fecker, Division Director Florida Real Estate Commission 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900
Findings Of Fact The Department rules on the Proposed Findings of Facts and Exceptions, submitted by the parties as follows: APPLICANT'S PROPOSED FINDINGS AND CONCLUSIONS Applicant's Proposed Findings numbers 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 23, 24, 27, 28, and 29 are accepted to the extent that they are not inconsistent with the Findings of Fact rendered by the Hearing Officer. Applicant's Proposed Finding number 22 is accepted to the extent that factual matters are discussed. However, to the extent that it suggests that "public convenience and advantage" will be promoted by establishment of the trust company, the Department rejects this conclusionary statement as inconsistent with the Department's conclusion as to this criterion based on the reasons as discussed in paragraph three (3) contained in the Conclusions of Law of the Final Order. Applicant's Proposed Finding number 25 concerning the telephone survey has been dealt with in the Hearing Officer's Finding number 13, as adopted by the Department. Applicant's Proposed Finding number 26 concerns several counter- arguments addressing contentions proposed by the Protestants. As to (1) "Concentration", (2) "Dual Banking", and (3) "Siphoning of Capital". To the extent that no significant findings of fact, if any, were premised on these contentions, there is no necessity to respond. A portion of the Hearing Officer's Finding of Fact number 10, was excepted to, concerning the "concentration" argument, and will be treated below in paragraph 9. Number 4 concerning injury to existing institutions has been dealt with in the Final Order in paragraph 4 of the Conclusions of Law, as to the "reasonable promise". The Applicant's Conclusions of Law numbers 1, 4, 5, 6, 7 are accepted. Numbers 2, 3, and 8 are rejected as contrary to the Conclusions of the Final Order. PROTESTANT'S (FLORIDA BANKERS ASSOCIATION) PROPOSED FINDINGS Protestant's Proposed Findings numbers 1, 2, 3, 4, 5, 13, 18, 19, 20, 21, 23, 29, 30, 34, and 35 are accepted to the extent that they are generally consistent with the Hearing Officer's Findings or with the Final Order. Protestant's Proposed Findings numbers 6, 7, 8, 9, 10, 12, 14, 15, 16, 17, 22, 24, 25, 26, 27, 28, 31, 32, 33, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, and 47 are rejected to the extent that they are inconsistent with the Hearing Officer's Findings or with this Final Order, or are otherwise irrelevant or immaterial. APPLICANT'S EXCEPTIONS The Applicant's Exceptions numbers 1, 2, 3, 4, 5, 6, and 10 concern Proposed Findings that were not specifically referenced in the Hearing Officer's Report. However, they are generally consistent with the Hearing Officer's Findings and have been accepted by the Department to the extent that they are consistent with the Final Order. Exception 7, concerning Proposed Finding number 18, has been discussed above in paragraph 1. Exception 8, concerning Proposed Finding number 22, has been discussed above in paragraph 2. Exception number 9, concerning objection to portions of Finding of Fact number 10, is rejected. The first sentence of the Finding may speak in terms of "national trust business", but is viewed in terms of trust business throughout the nation. In no wise does it imply that there is a national market for personal trust business. The language should be viewed in the context of the overall finding. Exception number 10 is duly noted and reflected in the Final Order. Exception number 11 has been addressed in the Final Order in paragraph 4 of the Conclusions of Law as to "resonable promise." CERTIFICATE OF SERVICE I HEREBY CERTIFY that the original of the foregoing was filed with the Clerk of the Department of Banking and Finance and that a true and correct copy of the foregoing was sent by Certified U.S. Mail, Return Receipt Requested, to: Thomas J. Cardwell, Esquire, Post Office Box 231, Orlando, Florida 32802; Robert A. White, Esquire, Aubrey Kendall, Esquire, and Paul Brenner, Esquire of the firm Mershon, Sawyer, Johnston, Dunwoody and Cole, 1600 Southeast First National Bank Building, Miami, Florida 33131; Howard A. Setlin, Esquire, 1111 Lincoln Road Mall, Suite 600, Miami Beach, Florida 33139; Bruce Culpepper, Esquire, 350 East College Avenue, Tallahassee, Florida 32301; Robert Asti, Esquire, 2400 First Federal Building, Miami, Florida 33131; Richard R. Paige, Esquire, Alfred I. DuPont Building, Miami, Florida 33131; Charles Cane, Esquire, 801 Hallandale Beach Boulevard, Hallandale, Florida 33009; and G. Kenneth Kemper, Esquire, 9999 N.E. 2nd Avenue, Suite 200, Miami Shores, Florida 33138, on this 24 day of January, 1980. FRANKLYN J. WOLLETT Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 (904) 488-9886
The Issue In this disciplinary proceeding, the issues are whether Respondents, who are licensed real estate brokers, failed to preserve and make available certain records relating to trust accounts and real estate transactions, and/or obstructed or hindered Petitioner's investigators in an official investigation, as alleged by Petitioner in its Administrative Complaint. If Petitioner proves one or more of the alleged violations, then an additional question will arise, namely whether disciplinary penalties should be imposed on Respondents, or either of them.
Findings Of Fact The Parties Respondent Nestor G. Mendoza ("Mendoza") is a licensed real estate broker subject to the regulatory jurisdiction of the Florida Real Estate Commission ("Commission"). Respondent Diamonds Realty of Miami Beach, Inc. ("Diamonds Realty") is and was at all times material hereto a corporation registered as a Florida real estate broker subject to the regulatory jurisdiction of the Commission. Mendoza is an officer and principal of Diamonds Realty, and at all times relevant to this case he had substantial, if not exclusive, control of the corporation. Indeed, the evidence does not establish that Diamonds Realty engaged in any conduct distinct from Mendoza's in connection with the charges at issue. Therefore, Respondents will generally be referred to collectively as "Mendoza" except when a need to distinguish between them arises. Petitioner Department of Business and Professional Regulation ("Department"), Division of Real Estate, has jurisdiction over disciplinary proceedings for the Commission. At the Commission's direction, the Department is authorized to prosecute administrative complaints against licensees within the Commission's jurisdiction. On January 15, 2008, Veronica Hardee, who was then employed by the Department as an investigator, conducted an audit of Mendoza's records at Mendoza's real estate brokerage office, which was located in Miami Beach. Ms. Hardee was accompanied by her supervisor, Brian Piper. Ms. Hardee knew Mendoza because, in the latter part of 2007, she had investigated a consumer complaint against him, which arose from a transaction that had taken place in the fall of that year. In the course of that investigation, which focused on the period from August 20, 2007 through November 30, 2007, Mendoza had provided Ms. Hardee with business records, including bank statements and documents relating to the brokerage's escrow account. Ms. Hardee's previous investigation had not resulted in charges of wrongdoing being brought against Mendoza. During the audit, Ms. Hardee asked to review some of Mendoza's business records. She testified about this on direct examination as follows: Q. All right. Did you tell [Mendoza] what he would need to bring——or what he could expect from an audit? A. I don't remember, but usually procedure [sic], I would tell them we need to see older escrow accounts, older operating accounts, deposit slips, deposit checks, anything that has to do with their financial matters. Final Hearing Transcript ("TR.") 40-41 (emphasis added). On cross examination, Ms. Hardee elaborated: Q. (BY MR. MENDOZA) . . . I remember quite well that you did not ask me for the whole year of——for instance, of 2004, you never asked me for whole year, you asked me for a certain month; is that correct? * * * THE WITNESS: During the investigation I requested certain documents, yes. You're correct, I asked you for certain months, you had different issues with the Department that I was looking at. . . . * * * You didn't provide all the months requested and we came to the audit, you didn't provide——at that time, we asked you to see all of your accounts, it just wasn't for the investigation, we wanted to see your escrow account so you should have had for——I don't remember the——we wanted 1-15-08, we would have done from January of '08 to six months prior, let's just say. I don't remember what dates we gave you at the time. But then you would have a file with those documents in your escrow reconciliation statement, with all of your checks, all of your deposits with the bank statement attached, you know, organized. But it wasn't so and you said that you wanted to organize it properly and that's why we allowed you to organize it. So the question, did you provide me documents, yes, you provided me documents in the investigation but not all of the documents requested. TR. 58-60 (emphasis added). The undersigned attempted to elicit from Ms. Hardee a more detailed description of the materials requested during the audit, giving rise to the following exchange: THE HEARING OFFICER: Okay. And can you describe for me what it was in particular that you did request on that day in January of 2008? What did you ask [Mendoza] for? THE WITNESS: Yeah. We asked him for his escrow documents, reconciliation statements, such as the one that you see in [Petitioner's Composite] Exhibit 3. We asked about those months that were missing. We asked him——I don't know if we asked him for six months or one year. I don't remember the time frame we gave him, but pretty much when we go in to do an audit, we get the last six months, usually the months that are particularly discussed, the checks or the deposits that we're looking into for an investigation. * * * So pretty much that's what we asked, all of his escrow operating account that we had for the company, which includes the reconciliation statement, bank statement, deposit checks, as the statute statues here. THE HEARING OFFICER: Okay. You're standard procedure would have been you say in an audit like this, to have asked for the last six months of records right? So you're nodding your head, that's a yes? THE WITNESS: Yes. In this case we asked for the months that I was missing and plus I wanted to do a whole——we were going to do a whole audit. I don't remember right now if I asked him for six months or twelve months, I don't remember that part, but usually we ask for all the documents. THE HEARING OFFICER: And if I could just ask you to clarify do there's no mistake about this, when you say the months that are missing, what months are you referring to? THE WITNESS: I'm sorry, November of '04 and December of '04. TR. 73-75 (emphasis added). The Department did not, at the time of the audit, reduce its request for records to writing, which is unfortunate for the Department because, as the above-quoted testimony shows, Ms. Hardee's memory of specifically what Mendoza had been asked to produce was spotty. Although Ms. Hardee did identify two particular months——November and December of 2004——for which contemporaneous records were sought, this detail is practically random (because no context was given to explain the description of these periods, which predated the audit by more than three years, as "missing" months) and, in any event, fails to make the testimony as a whole explicit or distinctly remembered. The undersigned finds that Ms. Hardee's testimony was insufficiently precise to constitute clear and convincing evidence concerning the particular items that the Department wanted to see. Even if Ms. Hardee's testimony were sufficient on the previous point, however, the proof regarding Mendoza's alleged failure to produce records, which is a separate issue, is less compelling. Ms. Hardee's testimony was that Mendoza made available some but not all of the documents she and Mr. Piper wanted to see. (Actually, a fairer characterization of Mendoza's relative compliance, accepting Ms. Hardee's testimony as true, would be that he produced most of the documents requested, namely six-to-12 or 13 months' worth, failing only to make available documents associated with the last two or three months of 2004.) Mendoza then requested, and was given, additional time to assemble the rest of the materials. For some reason, Mendoza never contacted the Department thereafter to produce the items he could not locate on January 15, 2008, which caused the Department to initiate the instant proceeding. The undersigned largely credits Ms. Hardee's testimony regarding this overview of the events, with the qualification that Mendoza's compliance, while less than 100 percent, was nevertheless substantial. (He might, after all, have produced satisfactorily as much as 13 months' worth of documents, according to Ms. Hardee's testimony.) Given that Mendoza is alleged to have failed only to produce specific documents relating to the particular period from October through December 2004, the undersigned infers that he produced everything else that the Department wanted to see. The Department did not, however, at the time of the audit (or later), prepare an inventory of the records Mendoza made available (or failed to produce), take copies of the materials Mendoza produced, or otherwise reduce to writing the particulars of his noncompliance (e.g. by sending him a letter, soon after the audit, reminding him of the obligation to produce the materials that were not accessible on January 15, 2008, and listing or describing those materials). The absence of a contemporaneous written record of Mendoza's alleged failure to make documents available at the audit is unfortunate for the Department because, on the question of what Mendoza did and did not produce, Ms. Hardee testified as follows: THE HEARING OFFICER: All right. And when you went back in January of 2008 to see the ——Mr. Mendoza at his office and audit his books and records, he produced nothing to you and your supervisor whatsoever on that date in response to the things that you requested to see? THE WITNESS: He may have provided certain documents but were incomplete. I do not remember which documents he provided. * * * I'm not saying he didn't provide me with anything. He didn't provide us with all of the documents we requested. TR. 71-72 (emphasis added). In sum, the evidence against Mendoza consists of the testimony of Ms. Hardee, who in a nutshell says that, while she cannot clearly remember exactly what the Department asked Mendoza to produce, she knows that she requested documents relating to November and December of 2004, and that, while she cannot remember what documents Mendoza made available, she is sure he did not produce everything associated with the fourth quarter of 2004. Assuming for argument's sake that the Department requested the specific documents Mendoza is charged with failing to produce (which is not entirely clear), and accepting that Mendoza did not produce everything that the Department asked to see, the Department's evidence is still too conclusory to support disciplinary action, in view of Ms. Hardee's testimony that the temporal scope of the Department's request for documents was not limited to the three-month period comprising the fourth quarter of 2004 and indeed might have covered 15 months or more. Because, as found above, Mendoza did produce a substantial, albeit indeterminate, amount of documentation, and because there is no clear proof regarding the contents of the records that Mendoza made available, the undersigned is unable to find, based on clear and convincing evidence as the law requires, that Mendoza failed to produce the documents he has been accused of failing to produce. The Charges In Counts I and V of the Administrative Complaint, the Department alleges that Mendoza and Diamonds Realty are guilty of failing to preserve and make available to the Department all deposit slips and bank statements associated with the broker's trust account(s), in violation of Florida Administrative Code Rule 61J2-14.012(1), which is a disciplinable offense under Section 475.25(1)(e), Florida Statutes. In Counts II and VI, it is alleged that Mendoza and Diamonds Realty failed to prepare written monthly statements comparing the broker's total trust liability to the bank balance(s) in the broker's trust account(s), in violation of Florida Administrative Code Rule 61J2-14.012(2)-(3). This alleged violation is a disciplinable offense under Section 475.25(1)(e), Florida Statutes. In Counts III and VII, the Department accuses Mendoza and Diamonds Realty of having failed to preserve and make available to the Department books, accounts, and records pertaining to the brokerage business, in violation of Section 475.5015, Florida Statutes. This alleged violation constitutes a disciplinable offense under Section 475.25(1)(e), Florida Statutes. In Counts IV and VIII of its Administrative Complaint, the Department asserts that Respondents obstructed or hindered the enforcement of Chapter 475, Florida Statutes, in violation of Section 475.42(1)(i), Florida Statutes, which is a disciplinable offense under Section 475.25(1)(e), Florida Statutes. Ultimate Factual Determinations As found and explained above, the evidence is insufficient to prove, clearly and convincingly, that Respondents failed to make available the specific records they are alleged to have withheld. At most the evidence establishes that Respondents were unable, on January 15, 2008, to produce an imprecisely identified (and not clearly proved) subset of the universe of documents that the Department's investigators sought to examine during the audit. This is insufficient to prove, much less clearly and convincingly to demonstrate, that Respondents failed to keep or preserve any particular documents. There is no persuasive evidence that Respondents obstructed or hindered the Department's audit. To the contrary, the evidence shows that Mendoza cooperated with the Department's investigators and substantially complied with their demands. Ultimately, therefore, it is found that Respondents are not guilty of the offences charged in Counts I through VIII of the Administrative Complaint.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission enter a final order finding Mendoza and Diamonds Realty not guilty of the offenses charged in the Administrative Complaint. DONE AND ENTERED this 30th day of June, 2009, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM 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 30th day of June, 2009. COPIES FURNISHED: Patrick J. Cunningham, Esquire Department of Business and Professional Regulation 400 West Robinson Street Hurston Building-North Tower, Suite N801 Orlando, Florida 32801 Nestor G. Mendoza Diamonds Realty of Miami Beach 12501 Southwest 26th Street Miami, Florida 33175 Thomas W. O'Bryant, Jr., Director Division of Real Estate 400 West Robinson Street, Suite 802, North Orlando, Florida 32801 Reginald Dixon, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue Whether Respondents' license as real estate brokers in the state of Florida should be revoked, suspended or otherwise disciplined based upon the allegations of misconduct in the Administrative Complaint.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: At all times material to this proceeding, the Respondent, Deering, was licensed as a real estate broker in the state of Florida, having been issued license number 0563366. At all times material to this proceeding, Respondent, Advantage, was licensed as a real estate broker, having been issued license number 0273342. At all times material to this proceeding, Respondent, Deering, was licensed and operating as the qualifying broker for Respondent, Advantage. On October 22, 1992, Petitioner conducted an office inspection and audit of Advantage. The audit reflected what appeared to be a shortage in Advantage's security deposit escrow account (Number 027000122700) in the amount of $580.00, calculated as $6,600.00 in total trust liability, but only $6,020.00 as a reconciled bank balance. The audit also reflected what appeared to be a shortage in Advantage's rental distribution escrow account (Number 27000121900) in the amount of $369.40, calculated as $3,174.82 in total trust liability, but only $2,805.42 as reconciled bank balance. The audit also reflected that Deering, as the qualifying broker, failed to sign and properly reconcile Advantage's escrow accounts by comparing the total trust liability with the reconciled bank balance of the escrow accounts for the months of September and October, 1992. Marie Deering, Respondent, Deering's, wife and a corporate officer of Respondent, Advantage, signed the reconciliation form for the months of September and October, 1992. It appears from the record (Petitioner's Exhibit 1, Respondents' Licensure file) that Roger J. Kathman was the Broker of Record for Respondent, Advantage until August 21, 1992, when he resigned. Apparently, part of the problem stemmed from using a form developed by the previous real estate agency which was not the form suggested by the Petitioner for this purpose. Since being advised about the form and that comparing the total trust liability of each escrow account with the reconciled the bank balance of each escrow account and signing the reconciliation form was the responsibility of the broker of record, Deering has been properly fulfilling that responsibility and reporting on the correct form. The total trust liability of Advantage's security deposit escrow account should have been $5,700.00 rather than the $6,600.00 indicated by the audit because the $900.00 included in the audit figure from the San Juan lease should not have been included since this amount was not to be escrowed pursuant to the lease. This was a verbal agreement between the parties that was later executed as an addendum to the lease. Advantage's reconciled bank balance for the security deposit escrow account should also be $5,700.00, calculated as $6,020.00 reflected in the audit, minus $1,000.00 that was erroneously disbursed from the Rental distribution escrow account (also called the property management escrow account) instead of the security deposit escrow account , plus $680.00 that was erroneously deposited into the rental distribution escrow account instead of the security deposit escrow account ( $6,020.00 - $1,000.00 + $680.00 = $5,700.00). The total trust fund liability of the rental distribution escrow account should be $3,175.42, calculated as $3,174.82 as reflected in audit plus $0.60 to correct bookkeeping error ($3,174.82 + $0.60 = $3,175.42). The reconciled bank balance for the rental distribution escrow account should be $3,175.42, calculated as $2,805.42 reflected in the audit, plus $1,000.00 transferred from the security deposit escrow account as reflected in Finding of Fact 8, minus $680.00 transferred to the security deposit escrow account as reflected in Finding of Fact 8, plus a deposit of $50.00 to correct an error made in crediting a tenant account with $50.00 more than was deposited from tenant ($2,805.42 + $1,000.00 - $680.00 + $50.00 = $3,175.42). Although there were clerical or bookkeeping errors made in the handling of Advantage's escrow accounts, there was no evidence that Deering failed to immediately deposit funds received in trust in an escrow account, albeit not always the correct one. After the audit, Respondent, Deering promptly and properly corrected the escrow accounts and accounted for the funds resulting in balanced escrow accounts. While the Respondents were negligent in the handling of the escrow accounts, there is insufficient evidence to establish facts to show that Respondents were culpably negligent or that there was a breach of trust. The Respondents' license as real estate brokers in the state of Florida has never been disciplined.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Commission enter a Final Order finding Respondent Deering and Respondent Advantage guilty of technical violations of Section 475.25(1)(e) and (k), Florida Statutes. For such violations, Respondent Advantage should be given a written reprimand and Respondent Deering should be given a written reprimand and required to complete a 30-hour broker management course. Counts I and II of the Administrative Complaint should be dismissed. In making this recommendation, consideration has been given to the mitigating factors in relation to the disciplinary guidelines set out in Chapter 21V-24, Florida Administrative Code. Also, taken into consideration was the purpose of regulating any profession, the protection of the public by requiring compliance with those laws governing the profession. In this case, the recommended penalties will serve that purpose, the public has not been harmed, compliance has been accomplished and the penalty sufficient to remind the Respondents to be more diligent in the future. Adding any further penalty, including an administrative fine, would be unduly punitive. DONE AND ENTERED this 12th day of October, 1993, in Tallahassee, Florida. WILLIAM R. CAVE 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 12th day of October, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-0606 The following constitutes my specific rulings, pursuant to Section 120.59(2), Florida Statutes, on all of the proposed findings of fact submitted by the parties in this case. Petitioner's Proposed Findings of Fact. 1. Unnecessary. 2.-12. Adopted in substance as modified by Findings of Fact 1 through 13. Respondent's Proposed Findings of Fact. Adopted in substance as modified in Findings of Fact 4, 5 and 8 through 13. Adopted in substance as modified in Findings of Fact 6 and 7. Adopted in Finding of Fact 15. COPIES FURNISHED: Steven W. Johnson, Esquire Department of Professional Regulation, Division of Real Estate Hurston North Tower #308A 400 West Robinson Street Orlando, Florida 32801 Albert R. Deering, Pro se c/o Advantage Realty of Sarasota, Inc. t/a Century 21 Advantage 4121 Bee Ridge Road Sarasota, Florida 34233 Darlene F. Keller, Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Jack McRay, Esquire Acting General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-1900
The Issue Whether the Respondents' Florida real estate licenses should be disciplined based upon the following charges, as alleged in the administrative complaint: COUNTS I and II: Whether Respondent Richard Michael Regazzi ("Regazzi") is guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in any business transaction in violation of Section 475.25(1)(b), Florida Statutes. COUNT III: Whether Respondent Regazzi is guilty of failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. COUNT IV: Whether Respondent Atlantic Rentals Realty, Inc. is guilty of failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. COUNT V: Whether Respondent Regazzi is guilty of failure to prepare the required written monthly escrow statement- reconciliations in violation of Rule 61J2-14.012(2) and (3), Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. COUNT VI: Whether Respondent Atlantic Rentals, Inc. is guilty of failure to prepare the required written monthly escrow statement-reconciliations in violation of Rule 61J2-14.012(2) and (3), Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. COUNT VII: Whether Respondent Regazzi is guilty of having been found guilty for a third time of misconduct that warrants his suspension or has been found guilty of a course of conduct or practices which shows that he is so incompetent, negligent, dishonest, or untruthful that the money, property, transactions, and rights of investors, or those with whom he may sustain a confidential relation, may not safely be entrusted to him in violation of Section 475.25(1)(o), Florida Statutes.
Findings Of Fact Petitioner is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaint pursuant to the laws of the State of Florida, in particular Section 20.165, Florida Statutes, and Chapters 120, 455 and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent Regazzi is, and was at all times material hereto, a licensed Florida real estate broker. License number 0273453 was issued in accordance with Chapter 475, Florida Statutes. The last license issued was as a broker in care of Atlantic Rentals, Inc., 6811 North Atlantic Avenue, No. B, Cape Canaveral, Florida. Respondent Atlantic Rentals, Inc. is, and was at all times material hereto, a corporation registered as a Florida real estate broker having been issued license number 0273444 in accordance with Chapter 475, Florida Statutes. The last license issued was at the address of 6811 North Atlantic Avenue, No. B, Cape Canaveral, Florida. At all times material hereto, Respondent Regazzi was licensed and operating as the qualifying broker and officer of Respondent Atlantic Rentals, Inc. On January 28, 1997, Petitioner's Investigator Maria Ventura ("Investigator Ventura") conducted an audit of Respondents' escrow account #3601612291, maintained at NationsBank and titled Atlantic Rentals, Inc., Multi Unit escrow Account (escrow account). On January 28, 1997, Respondents had a reconciled bank balance of $46,166.93. As of January 28, 1997, Investigator Ventura determined that Respondents had a total trust liability of $84,586.77. By comparing Respondents' reconciled bank balance with Respondents' trust liability, it was determined that Respondents had a shortage of $38,419.84 in their escrow account. In addition, Respondents were not performing monthly reconciliations of their escrow account. On January 28, 1997, Respondent Regazzi prepared a monthly reconciliation statement (reconciliation statement) for December 1996, and provided it to Petitioner on the same day. Respondent Regazzi's reconciliation statement indicated that there was shortage of $28,885.36 in the escrow account. Respondent Regazzi's reconciliation statement is not signed, and does not indicate what month was being reconciled. The statement indicates that the reconciled bank balance and trust liability agree when, in fact, the reconciliation statement indicates a shortage of $28,885.36. Respondent Regazzi's explanation of how the funds were removed from the escrow account by a third party is not credible. Even if this account were credible, it does not lessen Respondent Regazzi's culpability. On April 21, 1992, the Florida Real Estate Commission ("FREC") issued a final order whereby Respondent Regazzi was found guilty of misconduct and was fined $200, and placed on probation for one year with a requirement to complete and provide satisfactory evidence to the Department of having completed an approved 30-hour broker management course. Respondent successfully completed the terms of probation. On November 12, 1996, the FREC issued a final order whereby Respondent Regazzi was fined $250 for misconduct and Respondent Atlantic Rentals, Inc. was reprimanded.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent Regazzi be found guilty of violating Sections 475.25(1)(b), (e), (k), and (o), Florida Statutes (1995), as charged in the Administrative Complaint. Respondent Atlantic Rentals, Inc. be found guilty of having violated Sections 475.25(1)(b), (k), and (e), Florida Statutes, as charged in the Administrative Complaint. That Respondents Regazzi's real estate license be revoked and that he be ordered to pay restitution in the amount of $38,419.84, plus interest. That Respondent Atlantic Rentals, Inc.'s corporate brokerage registration be revoked. RECOMMENDED this 23rd day of December, 1997, at Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE 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 23rd day of December, 1997. COPIES FURNISHED: Daniel Villazon, Esquire Department of Business and Professional Regulation 400 West Robinson Street, Suite N-308 Orlando, Florida 32801 Richard Michael Regazzi, pro se Atlantic Rentals, Inc. 6811-B North Atlantic Avenue Cape Canaveral, Florida 32920 Henry M. Solares, Division Director Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Respondent (all references to Respondent are to Respondent Simmonds) is a licensed real estate broker in the State of Florida holding license numbers 0404486 and 0245930. His most current licenses are as a broker, c/o the corporate Respondent. He has been licensed about six years in Florida. The corporate Respondent (all references to the corporate Respondent are to Respondent L. G. Simmonds Realty, Inc.) is a corporation registered as a real estate broker in the State of Florida holding license number 0245825. At all material times, Respondent was licensed and operating as a qualifying broker and officer of the corporate Respondent. He is the sole shareholder of the corporate Respondent and the only broker employed by the corporate Respondent. Respondents were brokers in three sales transactions in which they received competing claims for earnest money deposits that they held in trust. The three contracts are the sale from Durant to Durant by contract dated February 13, 1987, and amended December 7, 1987; the sale from Dyer to James by contract dated August 27, 1988; and the sale from Kollar and Nilands Bar & Package, Inc. to Hamilton by contract dated October 11, 1988. Each of the three contracts is on a standard printed form. Each contract requires the corporate Respondent to hold the earnest money deposit in escrow and disburse it at closing, at which time the corporate Respondent earns its commission. Each contract provides that the corporate Respondent may interplead the funds in circuit court in the event of a dispute and further provides that the corporate Respondent shall comply with Chapter 475, Florida Statutes. The Durant contract provides for the corporate Respondent to hold a $1000 earnest money deposit. A dispute between the parties to the Durant contract arose, and Respondent contacted the Florida Real Estate Commission for advice. By letter dated November 22, 1988, Respondent informed the Florida Real Estate Commission of a demand by the seller for the deposit because the buyer had failed to follow through on his mortgage application. The letter states that Respondent is convinced that the seller is entitled to the deposit and that Respondent intends to pursue interpleader. By Notice dated February 2, 1989, the Florida Real Estate Commission informed Respondents that it could not issue an Escrow Disbursement Order because of the unenforceability of certain contractual language. Referring to Rule 21V-10.32, the letter advised Respondents that, within 30 days of receipt of the letter, they must pursue arbitration, with the consent of all parties, or a judicial adjudication, such as through interpleader. At some point, Respondents obtained an application for arbitration and sent it to the parties. By letter dated June 12, 1989, Respondents informed the Florida Real Estate Commission that they had sent an arbitration contract on March 21, 1989, to the seller, who had not yet responded to the request to arbitrate. Subsequently, Respondents retained counsel at their expense to discuss interpleading the funds in circuit court. Counsel advised them that the relatively modest sum involved, as a practical matter, precluded the judicial remedy because the attorneys' fees would exceed the amount in dispute. Eventually, the parties to the Durant contract settled their dispute, and Respondents disbursed the funds pursuant to the parties' stipulation. There is no evidence of a complaint about Respondents' handling of the earnest money deposits, nor is there any evidence that Respondent failed to account or deliver the deposit to any person as required by law. The Dyer contract also involved an earnest money deposit of $1000, which was later increased by addendum to a total of $3000. The Dyer contract, which also failed to close, provides for the corporate Respondent to hold the earnest money deposit. By letter dated March 2, 1989, Respondents informed the Florida Real Estate Commission that, as of the same day, they had received conflicting demands for the earnest money deposit. By Notice dated August 28, 1989, the Florida Real Estate Commission informed Respondents that it could not issue an Escrow Disbursement Order because of factual disputes that the Commission is not empowered to resolve. The Notice states that Respondents must "immediately" choose one of the remaining alternatives--arbitration or interpleader in circuit court. By letter dated September 8, 1989, Respondents informed the Florida Real Estate Commission that they would seek help through the Arbitration Society of Florida, Inc. It is unclear whether Respondents sent an arbitration application to the parties in the Dyer contract, but no arbitration ensued. The parties to the Dyer contract resolved their dispute in March, 1990, and Respondents disbursed the funds pursuant to the parties' stipulation. There is no evidence of a complaint about Respondents' handling of the earnest money deposits, nor is there any evidence that Respondents failed to account or deliver the deposit to any person as required by law. The Kollar contract resulted in the receipt by the corporate Respondent of an earnest money deposit of $10,000. This contract also failed to close. By letter dated January 19, 1989, Respondents informed the Florida Real Estate Commission of conflicting demands received the same day. The Commission issued an Escrow Disbursement Order on August 16, 1989, with which Respondents promptly complied. There is no evidence of a complaint about Respondents' handling of the earnest money deposit, nor is there any evidence that Respondents failed to account or deliver the deposit to any person as required by law. On January 30, 1990, Petitioner's investigator visited Respondents' office pursuant to a complaint that never provided any basis for disciplinary action. Respondent said that he was ill and asked her to reschedule the visit. They agreed to reset it for February 6, 1990. On February 6, 1990, Petitioner's investigator met Respondent at his office and asked for copies of all pending contracts, bank statements, deposit slips, cancelled checks, and similar materials so that she could reconcile the trust account. Respondent supplied her with all of these materials except for the cancelled checks, which he said were at the accountant's office. Respondent gave the investigator access to his office copier so that she could copy whatever she needed. She apparently copied various documents, but failed to copy the pending contracts. From February, 1988, through February, 1990, Respondents held 6-10 earnest money deposits. On February 6, Respondents had only three pending contracts for which they held deposits. These were the Dyer contract and two unidentified contracts with $3500 and $500 earnest money deposits. Respondents did not handle other trust funds, such as property management funds. Petitioner's investigator determined that the trust account was short $2897.73. She found pending contracts indicating that Respondents should be holding a total of $7000 in earnest money deposits, but she found a bank balance of only $4102.27, which included a deposit of $1392.26 made on February 5. Respondents' trust account has been short previously. For example, in August, 1989, the Dyer, Durant, and Kollar contracts, which were still outstanding, generated a trust account liability of $14,000, but the account balance was as low as $700. Respondent admits that he improperly removed funds from the trust account, without the parties' knowledge, to apply toward personal medical expenses that he had incurred. In the fall of 1989, he deposited into the trust account proceeds from a loan he had recently received. However, he removed additional trust funds when he later incurred more medical expenses. By February 6, Respondent knew that the trust account was short, but evidently did not know precisely by how much. His repeated vagueness concerning the specifics of trust account withdrawals and deposits from August, 1989, through February, 1990, discredits his testimony that he never withdrew more than the amounts of pending commissions, which were unearned in any event when withdrawn by Respondent. On February 7, Respondent deposited $2897.73 into the trust account to eliminate the deficiency found by Petitioner's investigator. During the following week, the investigator returned to Respondents' office. She requested Respondent to produce the same documents that she had examined previously, but Respondent refused on the grounds that he had already produced all the documents once and he was seeking legal counsel. The investigator contacted Respondent a couple more times concerning the requested documents, but Respondent continued to refuse to cooperate. Petitioner next tried to compel the production of the requested documents by service of an administrative subpoena. By subpoena duces tecum issued February 19, 1990, and served February 21, 1990, Petitioner demanded that Respondents produce, on February 26, 1990: All current pending sales contracts, on L. G. Simmonds Realty Escrow Account #144100004792 all bank deposit slips from 2/1/88-2/1/90, the check book for account #14410004792. Upon receipt of the subpoena, Respondent contacted his attorney, who prepared a petition to invalidate subpoena, which was served by mail on February 25, 1990, and received by Petitioner on February 28, 1990. The basic objections are that the subpoena is "unreasonably broad in scope and/or requires the production of irrelevant material" and that Respondents are entitled to know what complaint is being investigated prior to producing the information. Petitioner issued another administrative subpoena on March 12, 1990, which was served upon Respondents on March 26, 1990, and requested, by March 30, 1990: On L. G. Simmonds Realty Escrow Account #14410004792: All sales contracts for which L. G. Simmonds Realty, Inc. is holding escrow deposits, the 1/90 and 2/90 bank statements, cancelled checks, number 177 through 270. On March 29, 1990, Respondents' attorney served the same objections to the petition, and Petitioner received the objections on April 4, 1990.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Florida Real Estate Commission enter a final order reprimanding Respondents; imposing on each Respondent an administrative fine of $3000 (for a total from the two Respondents of $6000); requiring Respondent to complete an approved 60-hour course; suspending the licenses of both Respondents for a period of six months, commencing retroactive to when their licenses were revoked pursuant to the emergency order; placing both licenses on probation for a period of three years commencing the conclusion of the suspension; and requiring, during the period of suspension, that Respondents provide the Florida Real Estate Commission, or its signated representative, with escrow account status reports at such intervals as the Commission shall require. DONE and ORDERED this 9th day of October, 1990, in Tallahassee, Florida. ROBERT E. MEALE 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 9th day of October, 1990. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-4438 Treatment Accorded Proposed Findings of Petitioner 1-7: adopted. 8: rejected as subordinate. 9-10 (first sentence): adopted. 10 (second and third sentences): rejected as unsupported by the greater weight of the evidence. In fact, Respondent supplied the investigator with copies of the contracts on February 6, but refused subsequent requests to produce them. He indicated that he wanted to obtain advice of counsel. 11: rejected as subordinate. In addition, the implication that files of the Division of Real Estate were the sole source of information regarding the contracts is rejected as unsupported by the greater weight of the evidence. The investigator found in the EDO files of the Division of Real Estate a copy of the Dyer contract, which, as noted in the recommended order, was one of the three contracts generating the escrow account liability that the investigator calculated on February 6. Although she saw the other two contracts (in order to generate the liability), she never received copies of them, even through the final hearing. 12-19: adopted or adopted in substance. 20-21 (with respect to each paragraph, first sentence and first clause of second sentence): adopted. 20-21 (with respect to each paragraph, remainder): rejected as irrelevant. 22: adopted. 23: rejected as irrelevant. 24-27 and 30-33: adopted. 28 and 34: rejected as unsupported by the greater weight of the evidence and unnecessary. 29: rejected as unsupported by the greater weight of the evidence. Treatment Accorded Proposed Findings of Respondents 1-12: adopted or adopted in substance. 13: rejected as subordinate. 14-15: adopted. 16 and 19: rejected as unsupported by the greater weight of the evidence and legal argument. 17: rejected as unsupported by the greater weight of the evidence. 18: adopted. 20: rejected as irrelevant. 21: rejected as subordinate. 22: adopted. 23-24 and 26-27: rejected as recitation of testimony. 25: rejected as unsupported by the greater weight of the evidence. 28-33 (first clause of second sentence): adopted. 33 (second clause of second sentence): rejected as unsupported by the greater weight of the evidence and legal argument. 33 (remainder): adopted. 34-35: except as to the fact of the issuance of the subpoena and petition to invalidate, rejected as unnecessary. 36: rejected as unclear. Respondent gave the investigator a chance to see the three pending contracts generating the February 6 trust account liability, but never gave her copies of any of them when she later discovered that she had failed to copy them. She found a copy of the Dyer contract in the EDO file, but she never received copies of the other two contracts, even at the final hearing. The last sentence is rejected as unnecessary. The determination in the recommended order on this point was not dependent upon Respondents' handling of the subpoenas, but on their handling of repeated and reasonable requests for relevant information. 37: rejected as irrelevant. 38: adopted. 39: rejected as unnecessary. 40-43: adopted or adopted in substance. 44: adopted. 45: rejected as unnecessary. 46-49: adopted or adopted in substance. COPIES FURNISHED: Attorney Thomas V. Infantino Infantino and Berman Post Office Drawer 30 Winter Park, Florida 32790-0030 Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Attorney James H. Gillis Division of Real Estate Florida Real Estate Commission 400 W. Robinson St. Orlando, Florida 32801-1772 Kenneth E. Easley General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 *Previously assigned DOAH Case No. 90-4319 closed as a duplicate.
The Issue The issue is whether Mr. Carlson is guilty of misconduct in his practice as a certified public accountant by making personal use of trust fund monies or by his firm's issuance of an audit report on a bank while one of the firm's partners was a shareholder in the bank.
Findings Of Fact Mr. Carlson has been licensed as a certified public accountant in Florida, holding license #AC0002345. His address is 930 North Chrome Avenue, Suite 2B, Homestead, Florida 33030. Mr. Carlson became a partner in an accounting firm known as Brown, Carlson, and Derrer in 1985. Prior to Mr. Carlson's association with Richard Brown, one of the partners in that firm, the Islamorada Bank was a major client of Mr. Brown. Brown had issued audit opinions on the financial statements of the bank without disclosing that Brown was a stockholder of the bank, and therefore lacked independence with respect to the bank. Financial statements for the year ending December 31, 1986, were issued on the letterhead of Brown, Carlson, and Derrer, and signed by Richard Brown, along with an audit opinion with respect to the financial statements of the Islamorada Bank. Brown's lack of independence was not disclosed in the audit opinion letter. Mr. Carlson had specifically asked Mr. Brown on all audits, including the audit of the Islamorada Bank, whether Brown was independent of the client, and Brown unequivocally told Carlson that he (Brown), was independent. Other members of the firm, including Roger Infante, also specifically inquired about Brown's independence and was assured that Brown was independent with respect to the Islamorada Bank. After the audit report on the financial statements of the Islamorada Bank for 1986 was issued, the firm of Brown, Carlson, and Derrer broke up in April, 1987. In connection with the breakup, Carlson discovered that Brown had held stock in the Islamorada Bank, and was not independent with respect to the bank. At that time, Mr. Carlson's lawyer advised him that: If he notified all shareholders of the bank, this would be improper because Carlson was currently in acrimonious litigation with Brown over the breakup of the accounting firm, and such action could be viewed as harassment; Brown still denied the lack of indepen- dence despite the appearance of shares in the bank on Brown's personal financial statements, and If Carlson failed to notify anyone, he might be guilty of a potential violation of his professional responsibility. Thus, Carlson's lawyer told him that no matter what he did, he could be guilty of wrongdoing. In order to resolve this problem, Carlson reported the situation to the Department of Professional Regulation. He did not attempt to recall the audit that Brown had done on the bank. A certified public accountant who owns even one share of stock in a company for which he issues financial statements lacks independence. Because Brown lacked independence and the financial statements were issued on the letterhead of Brown, Carlson, and Derrer, the firm also lacked independence. Willard Teft, a client of Mr. Carlson, established an educational trust fund known as a Clifford Trust. Those trust funds were delivered to Mr. Carlson and held in Carlson's trust account. Mr. Carlson failed to post and reconcile the Teft trust account from January 1, 1985 until May, 1988. The failure to perform the posting and reconciliations resulted in overdrafts against the Teft trust. These overdrafts consisted of payments to clients and fees paid to the accounting firm. Only after the Teft trust was reconciled did Mr. Carlson realized he had used money that was not his. The Teft trust should have had a balance of $7,500-10,000 at all times. Mr. Carlson should have known by looking at the balance of his trust account that he was misusing trust fund money. Mr. Carlson's misuse of the trust fund money constitutes misconduct in the practice of public accounting. The Teft trust account had been reconciled and posted to date before the Department began its investigation. All monies due to the trust because of overdrafts had been returned to the account before the Department's investigation. Mr. Carlson provided full and complete cooperation in the investigation conducted by the Department.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered finding Mr. Carlson guilty of violation of Section 473.323(1)(g), Florida Statutes, that he be reprimanded, and placed on probation with the usual probationary terms for a period of one year. RECOMMENDED this 22nd day of June, 1990, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 22nd day of June, 1990. COPIES FURNISHED: Tobi C. Pam, Esquire Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Victor K. Rones, Esquire MARGULIES AND RONES 16105 Northeast 18th Avenue North Miami Beach, Florida 33162 Kenneth E. Easley, General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Martha Willis, Executive Director Department of Professional Regulation Board of Accountancy Suite 16 4001 Northwest 43rd Street Gainesville, Florida 32606
The Issue The issue is whether Respondent failed to maintain his trust account properly, failed to examine and sign monthly reconciliation statements for his trust account, and failed to respond appropriately to disputes concerning escrow deposits that he held. If so, an additional issue is the penalty to be imposed.
Findings Of Fact Since 1994, Respondent has been a licensed real estate broker, at all times serving as the broker of record for Castles By The Sea (Castles). The Arnston transaction involves a contract dated August 30, 2000, in which Michael Arnston is the buyer, Advanced Builders is the seller, and Castles is the real estate broker. The contract contains a financing contingency that gives Mr. Arnston 20 days to obtain financing, acknowledges that Mr. Arnston has paid $42,800 in earnest money to Castles, calls for a closing on October 1, 2000, and provides Advanced Builders with 30 days from post-closing notice to cure any title defects. As pleaded by Petitioner and admitted by Respondent, on September 11, 2000, Mr. Arnston's attorney wrote a letter to Advanced Builders, with a copy to Jennifer McCrary, who is an employee of Respondent. In the letter, Mr. Arnston's attorney withdrew Mr. Arnston's offer to purchase and demanded the return of his earnest money. The stated reason is that the offer was never accepted by the owners of record, who were Michael Mucha, as owner of a two-thirds interest in the property, and Carolyn Kline, as owner of a one-third interest in the property. Although Mr. Mucha signed the contract, apparently in an individual capacity, Ms. Kline never signed the contract. As pleaded by Petitioner and admitted by Respondent, on September 14, 2000, Advanced Builder's attorney wrote a letter to Mr. Arnston's attorney stating that Ms. Kline was a beneficial owner of Advanced Builders, Ms. Kline had authorized Advanced Builders to enter into the Arnston contract, and Ms. Kline, Advanced Builders, and Mr. Mucha were prepared to convey good title to Mr. Arnston at closing. Treating the September 11 letter as an anticipatory breach, the September 14 letter, a copy of which was furnished Castles, demands the $42,800 earnest money deposit. As pleaded by Petitioner and admitted by Respondent, on September 25, 2000, Mr. Arnston filed a complaint with Petitioner concerning Respondent's handling of the earnest money deposit. This complaint led to the office audit in 2000 described below. The Sims transaction involves a contract dated March 26, 2000, in which Stephen and Claire Sims are the buyer, Jacqueline Bardach is the seller, and Castles is the real estate broker. The contract contains a financing contingency that runs through closing, defines the contingency in part as the buyers' ability to acquire 75 percent financing, acknowledges that the Simses have paid $10,000 in earnest money to Castles, calls for the Simses to pay Castles an additional $20,000 in earnest money within 10 days, and calls for a closing within 90 days. As pleaded by Petitioner and admitted by Respondent, on May 2, 2000, Stephanie McCauley, an agent of Castles, wrote Ms. Bardach and informed her that the Simses had been unable to acquire the 75 percent financing and were withdrawing from the contract and requesting the return of their earnest money. As pleaded by Petitioner and admitted by Respondent, on May 8, 2000, Ms. Bardach's attorney wrote Ms. McCauley and the other broker at Castles, with a copy to the Simses, and stated that the cancelation of the contract and release of the escrow money was premature. In the letter, the attorney informed Castles and the Simses of alternative financing sources for 75 percent of the contract price consisting of a lender for 60 percent and the seller holding a purchase money note and mortgage for the remaining 15 percent. On May 18, 2000, Ms. Bardach's attorney wrote another letter to Ms. McCauley and the other Castles broker formally declaring a default on the part of the Simses for their failure to exercise due diligence to obtain financing and demanding the $30,000 in earnest money. The letter offers Castles the option of interpleader in circuit court. On July 20, 2000, Ms. Bardach's attorney wrote a letter to Respondent stating that Castles had taken no action since his letter of May 18 and authorizing him to submit the dispute to circuit court or the Florida Real Estate Commission. On November 29, 2000, Petitioner received a complaint from Ms. Bardach concerning Castle's handling of the earnest money deposit. Since early 1996, Respondent had employed Chris McMahel as a comptroller/bookkeeper in his real estate office. Prior to employing Ms. McMahel, who was a licensed real estate salesperson, Respondent had been acquainted with her from her employment in an ERA office in Boynton Beach and as the executive vice-president of the local Board of Realtors. At the time of the events described below, Ms. McMahel had had 20 years' experience in real estate. Each month while employed by Respondent, Ms. McMahel, who had placed her real estate license with Castles, prepared the reconciliation statements for the Castles escrow account. For some time prior to the events described below, Respondent was not signing these reconciliation statements. With Respondent's consent, and presumably at his direction, Ms. McMahel stamped the monthly statements with Respondent's facsimile signature. Ms. McMahel had similar authority to stamp Respondent's facsimile signature on trust account checks, and she routinely exercised this authority. The last monthly reconciliation statement that Respondent saw was for July 2000. Petitioner's investigator had conducted an office audit in August 1999 and had met with Ms. McMahel. Although the investigator had found the real estate records poorly kept, he did not find anything in violation of applicable law and did not attempt to communicate directly with Respondent about the audit or the audit findings. The investigator's findings and actions were identical with respect to the 1998 audit. On October 23 or 24, 2000, Respondent received a telephone call from a title insurance company informing him that a Castles trust account check in the amount of $54,000 had failed to clear. Respondent called Ms. McMahel, who assured him that there had been some sort of mistake and she would call the bank to clear up the problem. Ms. McMahel later called Respondent back and told him that she had given the title insurance company a new check. However, this check also failed to clear. Upon learning that the second check had failed to clear, Respondent immediately approached Ms. McMahel and told her to produce the books and records. She did so, and Respondent found that the books and records were in disarray. Respondent demanded an explanation from Ms. McMahel, but she remained silent and offered no excuse. Respondent also contacted SunTrust, which held the trust funds, and confirmed that the account balance was insufficient to pay the trust account check. Upon learning of this shortage, Respondent contacted a representative of the Division of Real Estate and was told to document the problem and deposit sufficient money into the account as soon as possible. Respondent immediately borrowed $50,000 from a friend and deposited it into the trust account, so that the twice- dishonored check could be paid. The next day, Respondent went to Ms. McMahel's home to discuss the matter, but found that she had fled. Neither Respondent nor Petitioner was able to find her subsequently. Respondent formally fired Ms. McMahel at this time. Eventually, Respondent pieced together much of what had happened. The ultimate shortage in the trust account was about $658,000. Ms. McMahel had paid herself, as payee on numerous trust account checks, almost $400,000. She had used additional trust account funds to pay off her obligations, such as credit card debts, although it is unclear if these fraudulent transactions account for the remaining $258,000. By October 30, 2000, Respondent sold 25 percent of Castles, which he owned, for $250,000, and he deposited the sale proceeds into the trust account. Still needing over $350,000 to eliminate the shortfall, Respondent offered for sale the remaining interest in Castles. At the same time, Respondent decided not to file a police report against Ms. McMahel because he believed that such an action would reduce the price for which he could sell the company. Pending the sale of Castles, Respondent borrowed $200,000 personally and deposited this money into the trust account to pay off outstanding trust account liabilities. In late November 2000, Respondent found a buyer for Castles. Following a closing in January 2001, Respondent deposited sufficient funds into the trust account to eliminate any shortage. Respondent continued to work with Castles for a month after the closing, at which time the new owners fired him. Respondent filed a police report in April or May 2001. However, the Delray Police Department, with which Respondent filed the complaint, never found Ms. McMahel. Respondent never filed suit against Ms. McMahel or SunTrust. At the time of these events, Castles was closing 35-50 sales per month. With respect to contracts for which Castles held the escrow money, all closings took place as scheduled without delays, and no one lost any money due to the theft from Respondent's trust account.
Recommendation RECOMMENDED that the Florida Real Estate Commission enter a final order finding Respondent guilty of one violation of Section 475.25(1)(k), Florida Statutes; one violation of Section 475.25(1)(e), Florida Statutes, by virtue of a violation of Florida Administrative Code Rule 61J2-14.012(2); and one violation of Section 475.25(1)(e), Florida Statutes, by virtue of a violation of Florida Administrative Code Rule 61J2-10.032(1)(a); and imposing a penalty of one year's suspension and a fine of $3000. DONE AND ENTERED this 23rd day of June, 2005, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 23rd day of June, 2005. COPIES FURNISHED: Juaan Carstarphen Watkins, Acting Director Division of Real Estate Department of Business and Professional Regulation Hurston Building, North Tower Suite N801 400 West Robinson Street Orlando, Florida 32801 Leon Biegalski, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202 Gary J. Nagle, Esquire 14255 U.S. Highway 1, Suite 223 Juno Beach, Florida 33408
The Issue The ultimate issue for determination at the formal hearing was whether disciplinary action should be taken against Respondent's real estate broker's license for failing to obey a lawful order of the Florida Real Estate Commission.
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints pursuant to the laws of the State of Florida. Respondent is now and was at all times material hereto a licensed real estate broker in the State of Florida. A Final Judgment was entered against Richard B. Abel, P.A., in the case of Mark Freeman v. Richard B. Abel, P.A., Case No 85-5678CA-JRT, on August 17, 1986, in the Circuit Court of the Twentieth Judicial Circuit, Lee County, Florida. The Final Judgment was for an amount of $6,839 representing real estate commissions owed by Richard B. Abel, P.A. to Mark Freeman, plus interest and attorney's fees. A two count Administrative Complaint was filed by the Florida Department of Professional Regulation, Division of Real Estate, against Respondent on June 27, 1988. The Complaint alleged inter alia that Respondent: (a) failed to satisfy a Final Judgment in Circuit Court for the payment of a real estate commission; and (b) failed to maintain trust funds in his real estate brokerage trust account or some other proper depository until disbursement in violation of Section 475.25(1)(d), (k), Florida Statutes. A Final Order was entered by the Florida Real Estate Commission (the "Commission") on December 6, 1988, accepting a Stipulation between Respondent and the Commission in settlement of the Administrative Complaint filed on June 27, 1988 (the "Final Order"). The terms of the Final Order provided that: Richard B. Abel, P.A., was reprimanded for failing to pay the Final Judgment entered against it in Circuit Court and was required to pay the amount due Mark Freeman within 45 days from the entry of the Final Order; Respondent, in his individual capacity, personally guaranteed the amount owed by Richard B. Abel, P.A., to Mark Freeman, and further agreed not to violate any provision of Chapters 455 and 475, Florida Statutes; and Respondent waived his right to contest the validity and enforcement of either the Final Order or Stipulation accepted in the Final Order. Neither Richard B. Abel, P.A., nor Respondent has paid the sums due pursuant to the terms of the Final Order entered by the Commission on December 6, 1988. The evidence submitted by Petitioner was uncontroverted. Respondent admitted that he placed the monies owed by Richard B. Abel, P.A., to Mark Freeman in the escrow account of Richard B. Abel, P.A., and disbursed the funds to himself, the sole owner, operator, director and officer. Respondent stated that he fully intended to pay Mr. Freeman when Respondent was able to do so. Respondent's sole defense was that the original debt was that of a corporation rather than a personal debt of Respondent. Respondent is in violation of the Final Order of the Comission entered on December 6, 1988.
Recommendation Based upon the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that Respondent be found guilty of failing to obey a lawful order of the Florida Real Estate Commission in violation of Section 475.25(1)(e), Florida Statutes, fined $1,000, and placed on probation for a period not to exceed 5 years. The conditions of probation may include any of those prescribe in Florida Administrative Code Rule 21V-24.001(2)(a) except those prescribing re-examination or being placed on broker-salesman status. In the event Respondent fails to pay in full any fine imposed on Respondent or to complete the terms of any probation imposed on Respondent, it is recommended that Respondent's license be suspended for 8 years. DONE and ENTERED this 4th day of December, 1989, in Tallahassee, Leon County, Florida. 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 4th day of December, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-3727 Petitioner has submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. Respondent did not submit proposed findings of fact. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection Included in Finding 1 Included in Finding 2 Included in Finding 4 Included in Finding 5 5-6 Included in Finding 6 7-8 Included in Finding 7 9 Included in Finding 9 COPIES FURNISHED: James H. Gillis, Esquire Departmen of Professional Regulation 400 West Robinson Street Orlando, Florida 32801 Mr. Richard B. Abel 2478 Inagua Avenue Miami, Florida 33133
