The Issue Whether petitioner's application for registration as a principal with Monvest Securities, Inc., should be granted by the Department of Banking and Finance, Division of Securities (Department).
Findings Of Fact The petitioner was registered with the Department as an associated person pursuant to Chapter 517, as follows: DATE COMPANY 9/22/82 to 9/19/83 Blinder, Robinson & Co. 11/23/83 to 6/26/84 First Interwest Securities Co. 9/4/84 to 12/27/84 Wall Street West, Inc. 3/11/85 to 10/3/85 R. H. Stewart & Co., Inc. 9/25/85 to 12/3/85 Allied Capital Group, Inc. Petitioner has not been registered with the Department in any capacity since December 3, 1985. The Department uses the forms adopted and approved by the National Association of Securities Dealers (N.A.S.D.) and filed with the Central Registration Depository (C.R.D.). Customarily, the registration application, Form U-4, is filled out by the applicant and given to the Broker-Dealer with whom the applicant is to be licensed. The Broker-Dealer then completes the form with the information concerning that Broker-Dealer and sends the completed form to the C.R.D. After Form U-4 has been filed with the C.R.D., the information is transmitted to the Department. The Broker-Dealer is advised when the applicant has been approved, and the Broker-Dealer informs the applicant that he can begin selling securities. It generally takes between one and two weeks for an applicant to be approved. No license or other paper is transmitted to the applicant from the Department to inform the applicant of his registration. However, the applicant can telephone the Department and determine his status. When an individual leaves the employ of a Broker-Dealer, the Broker- Dealer is required to send a Form U-5 to the C.R.D. within 30 days of termination. The individual never receives a copy of this form from either the C.R.D. or the Department or knows when it has been sent or received. Again, the associated person relies on the Broker-Dealer to advise him of his status. There is a procedure whereby an individual registered with one Broker- Dealer can transfer to another Broker-Dealer. This procedure, known as T.A.T., allows the individual to sell securities for 30 days while his application for registration with the new Broker-Dealer is pending. However, this procedure applies only to individuals who transfer their affiliation. It does not apply to individuals who terminate their affiliation with one company and then apply for registration with another company. Petitioner's registration as an associated person with Allied Capital terminated on December 3, 1985, and petitioner was advised by Allied Capital of his termination around December 1, 1985. Petitioner was terminated by Allied Capital due to insufficient business. On or about December 16, 1985, petitioner traveled to New York and spoke with representatives of Monvest Securities, Inc. (Monvest), regarding his registration through that company to open a branch office in Apopka, Florida. The same day he filled out a portion of a Form U-4 and gave it to the company for them to complete and send on to the C.R.D. Monvest also agreed to prepare the necessary documents to register the branch office in Apopka. Generally, the Broker-Dealer submits the application for the branch office. The application was submitted by Monvest on January 8, 1986. According to the application, petitioner was to be employed with Monvest in their office at 116-C East 5th Street, Apopka, Florida. There is no branch office of Monvest registered with the Department at that address. Petitioner stated in the employment history section of the application that from September of 1984 through November of 1984 he was unemployed. However, from September 4, 1984, until December 27, 1984, petitioner was registered as an associated person with Wall Street West. Petitioner made this error because he merely copied the employment history section from the previous application submitted for registration with Allied Capital. However, there was not a satisfactory explanation given as to why Wall Street West was omitted from the employment history listed on the Allied Capital application. Petitioner also stated in his employment history that he worked for R. H. Stewart & Company as a branch manager from December 1984 until August 1984. Petitioner was actually registered with R. H. Stewart from March 11, 1985 until October 3, 1985. However, because of the way the registration and termination systems work, it is not surprising that an individual's employment dates might be somewhat different from the dates of his official registration. When petitioner filled out the application form and left it with Monvest, he though that the application would be routinely processed, as all his others had been, and that approval would be forthcoming. In the meantime, petitioner had been involved in another business venture known as Global 2000 along with two other individuals. The group retained a law firm in Miami versed in securities regulations which prepared a document called "Confidential Private Placement Memorandum, Global 2000, Inc., and Global 2000 Securities Company" and a "Supplement to Private Offering". Petitioner is a principal in Global 2000, Inc., and Global 2000 Securities Company (collectively known as the Global 2000 Group). The number of investors in the Global 2000 Group is limited to no more than thirty-five, and the total offering is less than $500,000.00. Petitioner testified that the offering was a "Regulation D" offering, and therefore formal registration was not required. At the time of the hearing, petitioner was unaware of any sale of Global 2000 Group stock. On January 1, 1986, the Global 2000 Group published a "Supplement to Private Offering Memorandum, Global 2000, Inc., and Global 2000 Securities Corporation." The supplement had been sent to the printers on or about December 1, 1986, but was dated January 1, 1986. The last page of this supplement contains a picture of Woerz and the following: Melvin W. Woerz President Global 2000 Securities Company (Age 55) Licensed General Securities Principal and Registered Representative with the Division of Securities, Department of Banking and Finance, State of Florida; Securities and Exchange Commission, Washington, D.C.; NASD (National Association of Securities Dealers . . . In the bottom right corner of this page was the following: Global 2000 Securities Company 116-C East Fifth Street Apopka, Florida 32708 1-800-782-7710 This supplement was sent to all individuals who received the Private Placement Memorandum for Global 2000, Inc., and ten or fifteen other individuals. The Private Placement Memorandum and supplement were mailed shortly after January 1, 1986. At the time the supplement was mailed, petitioner was not registered with the Department nor was Global 2000 Securities Company. On or about January 22, 1986, petitioner mailed to forty or fifty individuals copies of a three page publication entitled "Our Recommendations." This publication advocates the purchase of various over the counter securities. The bottom of page three of this publication reads as follows: WE ARE WAITING TO HEAR FROM YOU!!! TAKE CARE MEL WOERZ AND ART BESCH SECURITIES BROKERS 116-C East Fifth Street Apopka, Florida 32703 PHONE: (305) 886-2288 COLLECT (800) 782-7710 IN FLORIDA (800) 423-0219 OUTSIDE FLORIDA There was no Broker-Dealer registered with the Department by the name of Mel Woerz and Art Besch. When "Our Recommendations" was mailed, petitioner was not sure whether his application for registration with Monvest had been approved in Florida. However, since Monvest had notified petitioner of his approval in six states, but not Florida, petitioner should have known that his application had not yet been approved in Florida. "Our Recommendations" was sent to prior clients of petitioner and Art Besch. Both Besch and petitioner stated that the intent of the communication was merely to keep in touch with their customers while awaiting approval. Petitioner has not sold any securities since leaving Allied Capital. On the application filed with the Department, petitioner agreed "to abide by, comply with, and adhere to all the provisions, conditions, and covenants of the statutes . . . and rules and regulationns of the states. "
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered denying petitioner's application for registration pursuant to Section 517.161(1)(a), Florida Statutes, in that petitioner has violated Sections 517.12(1) and 517.311(2), Florida Statutes, and pursuant to Section 517.161(1)(b), Florida Statutes, in that petitioner's application contains a material false statement. It is also recommended that petitioner's application be denied because it designates as petitioner's place of employment a branch office that has not been registered. DONE and ORDERED this 15th day of October 1986 in Tallahassee, Florida. DIANE A. GRUBBS 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 15th day of October 1988. APPENDIX TO RECOMMENDED ORDER IN CASE No. 86-1785 Petitoner's Proposed Findings of Fact and Conclusions of Law 1 & 2. Accepted in Paragraph 3. Accepted in Paragraph 7. Accepted in Paragraph 3. Accepted in Paragraph 4. Accepted in Paragraph 3. Accepted in Paragraph 5. 8 & 9. Accepted that petitioner's employment history did not correlate with his registration in Paragraph 10. Remainder rejected as unnecessary. 10-12. Rejected as unnecessary. Accepted as stated in Paragraph 6. Accepted in Paragraph 1. Accepted, Paragraph 7. 16-18. Accepted in Paragraph 8. 19. Accepted in Paragraph 11. 20-22. Accepted generally in Paragraphs 12 and 13, last sentence and date of mailing rejected as not supported by competent evidence. Accepted generally in Paragraph 14. Accepted generally in Paragraph 17'. Accepted in Paragraph 15. Accepted in Paragraph 1. First sentence accepted in Paragraph 9, second sentence rejected for reason stated in Paragraph 9, last sentence rejected as irrelevant and not supported by credible evidence. Respondent's Proposed Findings of Fact and Conclusions of Law 1-3. Accepted in Paragraph 8, except date changed to January 8th because that is when Monvest signed application. Accepted in Paragraph 1. Accepted generally in Paragraph 13. 6 & 7. Accepted in Paragraph 1. 8. Accepted generally in Paragraphs 14 and 16. 9. Accepted in Paragraph 15. 10. Accepted in Paragraph 1. 11. Accepted in Paragraphs 9 and 10. 12. Accepted in Paragraph 1. 13. Accepted in Paragraph 3. 14. Accepted in Paragraph 5. 15. Accepted generally in Paragraphs 1 and 3. COPIES FURNISHED: Robert W. Kieffer, Esquire Post Office Box 2021 Orlando, Florida 32801 Robert K. Good, Esquire Office of the Comptroller 400 W. Robinson Street Suite 501 Orlando, Florida 32801 Honorable Gerald Lewis, Comptroller Department of Banking and Finance The Capitol Tallahassee, Florida 32301 Charles Stutts, Esquire General Counsel Department of Banking and Finance The Capitol Tallahassee, Florida 32301
Findings Of Fact Petitioner is the governmental agency responsible for issuing real estate licenses and regulating licensees on behalf of the state. Respondent, Gregory T. Franklin ("Franklin"), is licensed in the state as a real estate broker; license number 0314387. The last license issued was as a real estate broker, c/o Equity Realty of South Florida, Inc., t/a Equity Realty, 5809 Southeast Federal Highway #200, Stuart, Florida 34997. Respondent, Equity Realty of South Florida, Inc. ("Equity"), is a corporation registered as a real estate broker; license number 0229264. Respondent, Franklin, is the qualifying broker for Respondent, Equity. On or about January 26, 1990, Mr. Robert Warren (the "buyer") entered into a contract to purchase real estate from Ms. J. Zola Miller and Ms. Adrianne Miller Hill (the "sellers"). The buyer gave Respondent an earnest money deposit in the amount of $1,000. On or about April 17, 1990, a second contract was executed by the buyer and sellers. The buyer gave Respondents a second earnest money deposit in the amount of $24,000. Both earnest money deposits were timely deposited to Respondents' escrow account, number 0194101404, Florida Bank, Stuart, Florida. The buyer and sellers had difficulty in closing the contract due to disagreements concerning conditions in the contract. At the buyer's request, Respondents used the earnest money in the amount of $25,606.04 to purchase a certificate of deposit ("CD") in the name Robert Warren Century 21 Equity Realty Escrow Account #050-215-76, located at the First Marine Bank of Florida, Palm City, Florida ("First Marine"). Respondents received the sellers' verbal approval, but not written approval, for the purchase of the CD. Respondents notified the Florida Real Estate Commission (the "Commission") on August 28, 1990, that there were conflicting demands for the $25,000 earnest money deposit. Respondents stated their intent to claim a portion of the earnest money as an earned commission and stated that they were preparing to file an interpleader action to resolve the parties' dispute over the earnest money deposit. The Commission acknowledged Respondents' notification. Negotiations between the buyer and sellers continued until December 12, 1990. At that time, the parties reached an impasse, and each made written requests for the escrow deposit. Respondents maintained the earnest money in the CD until February 8, 1991. On February 8, 1991, Respondents were notified by First Marine that the buyer was attempting to obtain the escrow monies directly from First Marine. Respondents opened a CD in the name of Robert Warren Escrow Account for Equity Realty by Gregory Franklin, Account #200-517-7320, First Union Bank of Florida, Stuart, Florida. When the CD matured on May 15, 1991, the amount of the deposit was $25,989.57. On May 15, 1991, Respondents removed the earnest moneys and invested them in CD #10696954 at Community Savings Bank. On June 19, 1991, Respondents withdrew $500, paid a penalty of $6.21, and closed the CD. The remaining balance was used to open CD #10707413 at Community Savings Bank. On June 21, 1991, Respondents withdrew $600 and paid a penalty in the amount of $8.67. Respondents used half of the $600 withdrawal to pay an attorney to initiate a civil interpleader action without the knowledge or consent of either the buyer or seller. On August 23, 1991, Respondents closed the CD and withdrew the balance. On August 23, 1991, Respondents opened CD 310725647 in the name of Equity Realty, Inc., with the balance at Community Savings Bank. On October 30, 1991, Respondents made a withdrawal in the amount of $175. On November 23, 1991, the CD was renewed. The account was closed on November 27, 1991, with a balance of $25,456.94, and deposited into the court registry. The interpleader action was ultimately resolved pursuant to a settlement agreement between the parties. Respondents obtained the consent of both parties, though not the written consent of both parties, before placing the escrowed funds into an interest bearing account on August 15, 1990. The uncontroverted testimony of Respondent, Franklin, concerning this issue was credible and persuasive. Neither the sellers nor the buyer ever revoked their consent. Respondents deposited the earnest moneys into an interest bearing account without designating who was to receive the interest from such an account without the consent of both parties. Respondents took appropriate action to resolve the conflicting demands made upon the earnest moneys deposited with Respondents but failed to take such action in a timely manner.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding Respondents guilty of placing escrow funds in an interest bearing account without designating who is to receive the interest in violation of Florida Administrative Rule 21V- 14.014. It is further recommended that Petitioner should issue a written reprimand to Respondents and require Respondent, Franklin, during the next 12 months, to document to the satisfaction of Petitioner that he has completed 14 hours of the Brokerage Management Course. RECOMMENDED this 22nd day of January, 1993, in Tallahassee, 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 22nd day of January, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3323 Petitioner's Proposed Findings Of Fact. 1.-6. Accepted in Finding 1. 7.-8. Accepted in Finding 2. 9.-11. Accepted in Finding 3. Accepted in Finding 4. Accepted in Finding 5. Accepted in Finding 3. Accepted in Finding 6. Accepted in Finding 7. 17.-20. Accepted in Finding 8. 21.-22. Accepted in Finding 9. 1.-6. Accepted in Finding 1. 7.-8. Accepted in Finding 2. 9.-11. Accepted in Finding 3. 12. Accepted in Finding 4 13. Accepted in Finding 5. 14. Accepted in Finding 3. 15. Accepted in Finding 6. 16. Accepted in Finding 7 17.-20. Accepted in Finding 8. 21.-22. Accepted in Finding 9. 23.-24. Accepted in Findings 10.-11. Respondents' Proposed Findings Of Fact. 23.-24. Accepted in Findings 10.-11. COPIES FURNISHED: Darlene F. Keller, Director Division of Real Estate Department of Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Jack McRay, Esquire General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 James H. Gillis, Esquire Department of Professional Regulation, Division of Real Estate Legal Section - Suite N 308 Hurston Building North Tower 400 West Robinson Street Orlando, Florida 32801-1772 Gregory T. Franklin, pro se %Equity Realty of South Fla., Inc. 5809 S.E. Federal Highway, #200 Stuart, Florida 34997 APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-3323 All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
The Issue Whether Saxon Business Products, Inc.'s ("Saxon") response to the Department of General Services' invitation to bid for walk-up convenience copiers should be disqualified on grounds that: Saxon's omission of a supply price list was a material deviation from the bid specifications and conditions; and Saxon's walk-up convenience copier, model "Saxon 300," failed to prove two-sided copy capability.
Findings Of Fact I. Invitation to Bid On June 10, 1981, DGS issued invitation to Bid No. 544-600-38-B ("ITB") entitled, "Walk-Up Convenience Copiers; Bond Paper and Magazine Finish Bond Paper." The ITB proposes an annual contract under which state agencies and institutions can purchase copying machines. It contains general and special conditions and specifications, and warns vendors that bids that do not comply with such conditions "are subject to rejection." (Testimony of Celnik) The ITB specifications divide copiers into two groups: Group I, plain bond copiers, Group II, magazine finish copiers. The copiers are further categorized by type: Type I indicates minimum features; Type II indicates two- sided copying capability; Type III indicates one reduction capability; and Type IV indicates two or more reduction capabilities. These types are further separated into 12 classes on the basis of speed and volume (P-1.) The ITB special conditions instruct bidders to submit bid sheets 2/ breaking down all copying costs to a per-copy basis. Bids are to be evaluated and contracts awarded to bidders submitting the, lowest cost per copy in each category of copier. Cost per copy is calculated by using a specific cost formula. (P-1.) The ITB cost formula contains three components: machine cost, labor cost, and supply cost. DGS proposes to disqualify Saxon's bid in several categories of copiers for failure to supply a supply price list required by the supply cost component. This component provides, in relevant part: C) SUPPLY COST - The bidder shall compute supply costs on the Manufacturer's Brand. If there is an existing state con- tract for supplies for the manufacturer's brand equipment, the state contract price may be substituted. Supply costs will be rounded to six (6) decimal points. All other costs will also be rounded off to six (6) decimal points. The volume price used by the vendor to compute supply cost shall be based on the monthly median vol- ume of the type and class being bid. Supply cost submitted shall be firm for the contract period, except for paper, and all supply costs shall be current market price, verifiable. Vendor must submit supply price lists with his bid to substantiate that correct price vol- umes were used, unless state contract prices were used. A contract award may include supplies if deemed in the best interest of the State. By electing to substitute state contract supplies, the vendor is certifying that his equipment, using said supplies, will meet all per- formance requirements of this bid and of the equipment manufacturer. NOTE - All cost formulas will be verified by the Division of Purchasing and errors in extension will be corrected. In the event incorrect supply cost volumes are used by a bidder, the Division of Purchas- ing will adjust these costs to the median volume range. (e.s.)(P-1.) The purpose of the supply price list requirement, included in DGS's 1980 and 1981 ITB for convenience copiers, is to enable DGS to verify the supply cost figures shown on a vendor's bid sheets; in this way, DGS can insure that all vendors are using correct quantity pricing on their bid sheets. 3/ (In the past, some bidders had used lower supply prices, which were tied to high volume purchases; but those volumes frequently exceeded the state's needs and the median volumes specified by the ITB for each category of copier.) The verification procedure followed by DGS in both 1980 and 1981 involves checking the vendor's bid sheets against the prices shown on the supply price list. 4/ If DGS finds an inconsistency between the two, it "corrects" the bid sheet supply cost upward or downward to reflect the price shown on the supply price list. 5/ Such a bid sheet correction would also change the total median cost per copy, the factor used to evaluate competing bids. DGS also checks the supply list to determine whether it contains current market prices. (Testimony of Hittinger, Eberhard.) If a vendor fails to submit a supply price list, DGS cannot verify that the supply prices used on the bid sheet (to compute total median cost per copy) accurately reflect the median volumes specified in the ITB. Neither can DGS determine whether the supply prices used on the bid sheet are set prices, which do not vary with volume, or volume prices, which do; the bid sheets, on their face, do not reveal which type of pricing is being used. (Testimony of Eberhard; P-1.) After sealed bids are publicly opened, DGS has an established practice of not allowing any bidder to submit additional material which could alter price or other information previously submitted on bid sheets. DGS does, however, accept late information if it can be corroborated by an independent source. For example, a bidder might -- after bid opening -- supply its corporate charter number, which can be easily verified by contacting the Department of State. (Testimony of Hittinger, Eberhard.) The ITB special conditions also require DGS to test and approve copiers prior to bid opening. Copiers which are not tested and accepted by DGS are ineligible for a contract award: EQUIPMENT APPROVAL - Each item of equipment bid shall have been tested by the Division of Purchasing prior to the bid opening time and date for performance and reliability under normal working con- ditions. Any bidder whose equipment has not been tested shall provide a model of the equipment on which he intends to bid to a specified testing station, complete with all supplies, at no expense to the State. Testing will extend for a period of twenty (20) working days. In the event evaluation and acceptance of untested ma- chines has not been accomplished prior to the bid opening date and time, such machine shall not be eligible for an award. (P-1.) II. Bid Opening: Saxon's Failure to Submit Supply Price List Prior to the 1981 bid opening, Saxon failed to submit a supply price list in connection with its bid. This was apparently an oversight on its part; a year earlier, it had furnished a supply price list in response to a similar ITB for convenience copiers. Because of Saxon's omission, DGS was unable to verify the supply prices used by Saxon on its bid sheets or determine whether Saxon was utilizing set or volume prices. (Testimony of Eberhard, Celnik, Hittinger.) After bid opening, Saxon notified DGS that the supply prices shown on its bid sheets were set supply prices -- unit prices which do not vary with volume -- and confirmed that they are the supply prices which it now offers to the state. (Testimony of Celnik.) In its evaluation of the bids, DGS applied the requirement of a supply price list equally to all bidders. All bidders who omitted a supply price list were informed that they were disqualified. Saxon's bid was disqualified in five copier categories: Group I, Type I, Class I; Group I, Type I, Class II; Group I, Type I, Class IV; Group I, Type II, Class I; and Group I, Type II, Class II. At least 11 vendors, however, did submit supply price lists with their bid sheets; approximately one-third were set price lists, the remaining were volume price lists. (Testimony of Eberhard; P-3.) If a vendor could submit a supply price list after the bid opening, it could effectively decrease or increase its bid. (This is so because, in case of a conflict between the bid sheet supply price and the supply price list, the price list value will prevail. A change in the bid sheet supply price will change the cost per copy figure the determining factor in awarding contracts.) A vendor submitting a late supply price list would have an unfair advantage since it could change its bid after bid opening while its competitors could not. The competitive nature of the bidding process would be impaired. (Testimony of Hittinger, Eberhard.) Furthermore, if late submittal of a supply price list was allowed, a bidder could disqualify itself by refusing to provide it; the bidder would then have the advantage of revisiting its bid and -- if it chose -- withdrawing it after bid opening. The opportunity to withdraw a bid -- after bid opening -- would be an advantage not enjoyed by those who timely submitted supply price lists with their bids. (Testimony of Hittinger, Eberhard.) In some copier categories, the vendors who omitted supply price lists were the low bidders. If DGS disqualifies them for their omission, it must award the contract to the next highest bidder. The difference between those low bids and the next higher bid is substantial -- in some cases exceeding 23 percent. 6/ (Testimony of Celnik, Eberhard, Nee, Reinhart.) III. Failure of "Saxon 300" to Demonstrate Two-Sided Copying Capability In accordance with the ITB, Saxon submitted its "Saxon 300" copier to DGS for evaluation and testing. Prior to bid opening, DGS conducted a 20-day test of the machine. The "Saxon 300" machine which DGS tested lacked two-sided copying capability. It could reproduce clearly on one side, but not on the other. The "Saxon 300" sales literature and instruction manual submitted with the machine did not represent that the machine had two-sided copying capability. (Testimony of Nee; 1-5, 1-6, 1-7, R-2.) The "Saxon 300" may have two-sided copying capability, but only after special modifications are made to the copier. These modifications include removal of a roller device, replacement of the heating element, and replacement of the blower system. Saxon did not indicate at the time of testing, or in its bid, that the "Saxon 300" required such modification for two-sided copying capability. Neither did it indicate what, if any, additional costs would be charged for such modifications. (Testimony of Nee, Wallace; R-3.) After DGS tested the "Saxon 300," it sent Saxon a form letter indicating that the copier met minimum operating requirements. The letter did not inform Saxon that the machine lacked two-sided copying capability because DGS did not consider the lack of such capability a major malfunction in the equipment. (Testimony of Nee.) If a machine malfunctions, DGS has -- in the past -- allowed vendors to correct the deficiency or substitute another machine. (Testimony of Nee.) The Group I, Type II, Class I category of copiers, requires two-sided copying capability. Saxon bid its "Saxon 300" as a copier which meets this requirement. (Testimony of Celnik, Nee; P-1.)
Recommendation Based on the foregoing, it is RECOMMENDED: That Saxon's bids in Group I, Type I, Class I; Group I, Type I, Class II; Group I, Type I, Class IV; Group I, Type II, Class I; and Group I, Type II, Class II be disqualified; and That Saxon's bid in Group I, Type II, Class I be disqualified. DONE AND RECOMMENDED this 26th day of February, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of February, 1982.
The Issue The issue presented is whether Petitioner's application for licensure as a real estate salesperson should be granted.
Findings Of Fact On July 14, 1989, a Final Judgment was entered in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, against Petitioner and in favor of Kandace Dimas, the Plaintiff in that action. That Final Judgment contained specific findings that Petitioner had acted as a mortgage broker without a license in a transaction which "was infested with usury." That Final Judgment awarded to the Plaintiff the sum of $29,700, together with interest at the rate of 12 percent. A Supplemental Final Judgment was entered against Petitioner on August 24, 1989, requiring Petitioner to pay the Plaintiff an additional sum of $7,728.90 to reimburse her for her attorney's fees and costs. Because Petitioner was a real estate broker licensed in the State of Florida at the time, the matter, and those final judgments, were brought to the attention of the Florida Real Estate Commission. On February 20, 1990, the probable cause panel of the Commission determined that probable cause existed, and an Administrative Complaint against Petitioner was issued by the Department of Professional Regulation on February 22, 1990, alleging that Petitioner had also violated the law regulating his conduct as a licensed real estate broker by his conduct in the mortgage transaction involving Kandace Dimas. In order to resolve the issues raised in that Administrative Complaint, Petitioner and the Department of Professional Regulation entered into a Stipulation whereby Petitioner neither admitted nor denied the facts contained in the Administrative Complaint but agreed that the Commission should take the following disciplinary action against him: 7. The [Petitioner] shall be reprimanded, pay restitution in the amount of $5,000 and pay an administrative fine of $300, which fine shall be made payable to the Department of Professional Regulation, Division of Real Estate within thirty (30) days from the date of filing of the Final Order. [Petitioner] shall also be placed on probation for a period of 1 year at which time the [Petitioner] shall complete a 45 hour salesman's course and work only as a salesman. If any of the above conditions are not met, the [Petitioner's] license shall be revoked. The Florida Real Estate Commission approved that Stipulation in a Final Order entered March 5, 1991. Over the next year, Petitioner continued with his licensed real estate activities. He did not pay the administrative fine. Petitioner made no effort to pay the required $5,000 as restitution and made no effort to take the required 45-hour salesman's course. At the time that the Final Order approving the Stipulation was entered, Petitioner was employed at Amber Realty, Inc., d/b/a Re/Max Dynamic, and he continued his employment there until June of 1991. He then became employed by Re/Max Dovesway Realty, Inc., where he worked until January of 1992. He then returned to Amber Realty and worked there until he was terminated on October 2, 1992. While Petitioner was employed performing licensed real estate activities, he was also employed in the mortgage business. He began working as a loan originator for Paragon Mortgage Company in late 1991 and was employed there until April or May of 1993. He was terminated from that employment for several reasons, one of which was the branch manager's belief that Petitioner was also operating an outside business selling time shares out of Paragon's offices. After Paragon, Petitioner was employed by First Financial of Boston in the mortgage business until the end of 1993. He is currently employed by Pakmail Centers of America with duties described vaguely as franchise development and working with new franchise applicants. By letter dated April 24, 1992, Respondent notified Petitioner of the imminent revocation of his license as follows: You were placed on probation in 1991 and ordered to submit proof of completion of a 45 hour salesman's course before April 5, 1992. This you have failed to do. Unless I receive proof within 10 days that you complied with the Florida Real Estate Commission's order, and paid the ordered restitution, your real estate license will be revoked forthwith. Petitioner did not respond to that letter/notice within 10 days. On May 11, 1992, Respondent received from Petitioner a "written request for an extension to complete my educational requirements for probation." That correspondence made no mention of the requirement for restitution. The Commission considered Petitioner's request on June 16, 1992, and entered an Order denying it. The Order specifically recited that Petitioner's probation expired March 5, 1992, that Petitioner's request for an extension was filed more than two months after the probationary period had ended, that Petitioner had failed to comply with the terms of the Stipulation, and that Petitioner had not paid the restitution or the administrative fine although Petitioner had alleged that he had enrolled in a course. Petitioner subsequently requested that the Commission reconsider its order denying his request to extend probation. That request came before the Commission on July 21, 1992, and was denied. The Order entered August 4, 1992, concluded that Petitioner had sufficient time to comply with the terms he had agreed to, that Petitioner had chosen to not comply with the requirements of his probation until after a year had passed, and that Petitioner had stated no grounds for extending his probation. On September 1, 1992, Petitioner filed with the Florida Real Estate Commission a Notice of Appeal of the August 4, 1992, Order. On May 19, 1993, that appeal was dismissed for lack of prosecution by the Fourth District Court of Appeal. On October 2, 1992, someone advised Stan Amber, the real estate broker employing Petitioner at that time, that a notice had been published in the Florida Association of Realtors magazine that Petitioner's real estate license had been revoked. Amber looked in the magazine and verified that information. He also called the Department of Professional Regulation and again received verification. Amber terminated Petitioner's employment that day. On October 29, 1992, Petitioner filed with Respondent an application for licensure as a real estate salesperson. Section (a) of question numbered 13 reads as follows: Has any license, registration or permit to practice any regulated profession, occupation or vocation been revoked, annulled or suspended in this or any other state, province, district, territory, possession or nation, upon grounds of fraudulent or dishonest dealing or violations of law, or is any proceeding now pending? Petitioner answered that question in the affirmative. In explanation of his affirmative answer to question numbered 13 (a), Petitioner wrote the following: I entered into a stipulated agreement in 1991 with FREC wherein I was to pay a 300.00 fine serve one year as a salesman only and take a 40 hr. cont. education course I complied with all of the above except taking the 40 hour course within the 1 year probationary period. I appealed to FREC for more time to take the course and was denied. My licence was revoked. I have been working since then as loan officer for PMC Mgt. I am now completing the entire 63 hour FREC I course and would like to apply to retake the state exam and get a new salesman's lic. I was told by the Chairman of FREC after the hearing that if I did take FREC I, state exam, and reapply for a new license, then I probably would be granted that new license as I will have completed more than the original requirement of my stipulated agreement. Petitioner's explanation is not truthful since it omits mention of the requirement that he make restitution in the amount of $5,000. Between April 5, 1992, and at least October 2, 1992, Petitioner engaged in real estate activities requiring licensure although his license had been revoked. During that time, Petitioner knew that he had not complied with the conditions of his probation and that his license had been revoked. It is not certain that Petitioner has refrained from engaging in real estate activities requiring licensure since October 2, 1992. By the time of the final hearing in this cause, Petitioner had still not attempted to make restitution as required by the Stipulation accepted by Respondent on March 5, 1991. In approximately May of 1990, Petitioner gave his attorney $500 to apply toward the final judgment Kandace Dimas had obtained against Petitioner. After some time, Petitioner authorized his attorney to apply that money to the outstanding fees Petitioner owed to his attorney instead. No other attempt has been made by Petitioner either to satisfy that final judgment or to pay the restitution amount ordered by the Florida Real Estate Commission. Instead, Petitioner has attempted to avoid his obligation to Dimas by filing for bankruptcy approximately a year ago. Between June or July 1991 and January 1992, while Petitioner was employed at Re/Max Dovesway, he obtained $10,000 from the broker at that office for some investment purpose. Although Petitioner repaid some of that money, he has not repaid all of it. When attempts to collect the money from Petitioner pursuant to the final judgment he had obtained proved too stressful, that broker "cancelled" the remaining approximate $2,000 that Petitioner still owed in order to rid himself of that source of stress. Petitioner has not demonstrated that he is of good character. He is not financially responsible and has not lived up to his legal obligations. He has demonstrated an unwillingness to comply with the licensure laws of a regulated profession. Petitioner has not demonstrated rehabilitation since the revocation of his real estate license. He continued engaging in activities requiring licensure. He has still made no attempt to live up to his agreement, which became a legal requirement, to pay $5,000 in restitution. Petitioner maintains that his real estate license was revoked and his application for relicensure was denied because of one single mistake that he made in 1985 relating to Kandace Dimas. Petitioner fails to acknowledge that his license was revoked and his application for a new license denied for his own failure to comply with the conditions of probation to which he had agreed.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying Petitioner's application for licensure as a real estate salesperson. DONE and ENTERED this 30th day of June, 1994, at Tallahassee, Florida. Hearings 1550 LINDA M. RIGOT Hearing Officer Division of Administrative The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399- Hearings (904) 488-9675 Filed with the Clerk of the Division of Administrative this 30th day of June, 1994. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 93-2115 Respondent's proposed findings of fact numbered 1-4 and 9 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed findings of fact numbered 5-8 and 10-21 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony. COPIES FURNISHED: Edward Scott Kies, pro se 2452 Northwest 98th Lane Coral Springs, Florida 33065 Steven D. Fieldman, Esquire Assistant Attorney General Suite 107, South Tower 400 West Robinson Street Orlando, Florida 32801 Darlene F. Keller, Director Department of Business and Professional Regulation Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Jack McRay, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue Whether the Petitioner is entitled to licensure in Florida as a Non-resident Life and Variable Annuity Agent?
Findings Of Fact The Petitioner, Linda C. Ballou, applied for a license as a Non-resident Life and Variable Annuity license by application completed on October 30, 2003. The Department denied her license by letter dated March 18, 2004. There is no explanation of why there was a delay in issuing the March 18, 2004 denial letter. There was no apparent request for additional information to complete the application after October 30, 2004, or information requested to resolve qualification issues. The Department denied the Petitioner's application on the basis that the Petitioner was not trustworthy or competent based upon her having been enjoined from violating the Federal Securities and Exchange Law and being barred from associating with any broker or dealer for three years after which she could reapply for association. The Department introduced and properly authenticated Respondent's Exhibits 3, 5, 6, and 7, together with a copy of the Petitioner's statement, Respondent's Exhibit 4, regarding the action of the Securities and Exchange Commission (SEC). The Petitioner testified regarding the events that were the subject of the SEC action. The Petitioner was counseling persons, particularly seniors, on purchasing life and annuity contracts primarily for long term care. She was an agent for CNA and New York Life, both of which were insurance companies. She was required to possess a "6-63 license" by her employer that authorized her to sell mutual funds and other instruments, which would be classed as securities. She carried errors and omissions (O & E) coverage with New York Life and paid the premium for O & E coverage for one year. While so employed, she was introduced by the president of CNA to his father, who told her about bonds payable in full in nine (9) months. He explained to her that these bonds were not securities, which are instruments payable in year or longer. There were several of these bonds available; however, the only one that she sold was one issued by Sebastian International Enterprises (SIE), a Florida-based television production company. These bonds paid very high rates of interest, and appeared to be a good investment. The Petitioner called the local bank and found that SIE was a viable company engaging in the business of producing films for television. She visited the company and saw them making television shows. The company had contracts to make additional television shows, and the company remained at all times pertaining to this case a viable company. After checking into the company, she invested in the company's bonds; she sold the bonds to members of her family; and members of the public. She never had any problems with the payment of premiums by the company. After selling SIE bonds for approximately a year, she saw a news story about one of the other companies, which had been presented to her by the father of the president of CNA, being investigated for being a "Ponzi" scheme. She checked with her attorney about the sale of SIE bonds, and, thereafter, contacted the Federal Bureau of Investigation (FBI) on his advise. The FBI referred the matter to the SEC, which opened an investigation of SIE. The Petitioner cooperated fully with this investigation. Ultimately, the financial records of SIE were seized, and the SEC determined that the sale of the nine-month bonds was a "Ponzi" scheme. Although no action was ever taken against SIE or the Petitioner's broker, the Petitioner and two others holding SEC licenses were disciplined. Although as a result of the aforementioned, the Petitioner surrendered her California license to sell insurance, she has been reinstated, and was able to seek an SEC securities broker's license after the three years ran. The administrative proceeding SEC brought against the Petitioner alleged that the Petitioner violated the Federal Securities and Exchange Act. The SEC order and complaint is based upon admissions by the Petitioner and recites that the Petitioner consents to the entry of the anticipated injunction without admitting or denying the allegations of the complaint. See Respondent's Exhibit 3. The complaint filed against the Petitioner in the United States District Court, Middle District of Florida is Respondent's Exhibit 5. This complaint states that the funds from the sale of the subject bonds were to fund the operations of SIE. The Petitioner testified that the proceeds were used to fund the daily operation of the company. This complaint also makes various allegations of misconduct and fraud against the Petitioner; however, no evidence was received at hearing in support of any of the SEC allegations, and the consent agreement signed by the Petitioner specifically states that she does not admit or deny the allegations contained in the complaint. By signing the agreement, the Petitioner avoided litigation on the issue and, although she voluntarily agreed to repay all commissions she earned from the sale of these notes (approximately $156,000), the agreement recites that she would not have to repay the money in light of her bankruptcy unless her statement were determined to be false. 77 United States Code 77c provides in pertinent part regarding items that are exempted as securities as follows: (3) Any note, draft, bill of exchange, or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited[.] (Emphasis supplied.)
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department issue the Petitioner a Non-resident Life and Variable Annuity Agent license. DONE AND ENTERED this 18th day of October, 2004, in Tallahassee, Leon County, Florida. S STEPHEN F. DEAN 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 18th day of October, 2004. COPIES FURNISHED: Linda C. Ballou 1001 Bridgeway No. 314 Sausalito, California 94965 Michael T. Ruff, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Tom Gallagher, Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact In 1973 Petitioner was in the process of acquiring small construction companies in which it intended to subsequently sell stock at a public offering. In carrying out this project an agreement (Exhibit 4) was entered into whereby Petitioner paid the shareholders of Celebrity Homes Corporation $50,000 at closing for 9045 shares of Celebrity Homes, Inc. with the balance of $1,028,375 to be paid in two equal payments with $190,875 payable on September 30, 1974 and the final payment on December 31, 1975. By supplemental agreements dated October 18, 1973 (Exhibit 5) and December 3, 1973 (Exhibit 6) the purchase price was modified to $945,380 and the provisions of paragraph 9 which provided for repurchase of the stock by Celebrity was deleted. On its intangible property tax return dated January 1, 1974 Petitioner listed the Celebrity stock at a total just value of $310,786. Around mid-1974 Petitioner realized the economic conditions were unfavorable for a public offering of a new stock issue (the proceeds of which were to pay the balance owed on Celebrity stock) and entered into negotiations with Celebrity which led to the resale of the stock to Celebrity for $50,000, the amount initially paid by Petitioner as the down payment. An attempt by Petitioner to collect an additional $15,000 "interest" from Celebrity for reorganization work done by Petitioner apparently was not successful. As a result of the Petitioner not being able to carry out the public offering of the stock in Celebrity it filed an amended intangible tax return in which the value of Celebrity stock was reduced to $65,000. No testimony was presented regarding the book or other value of the Celebrity stock on January 1, 1974. During the same period Petitioner was in the process of acquiring other companies in the home construction industry which it intended to reorganize into a group and go public. After entering into agreements with several of these companies, the owner of one of these companies, W. Harrison Merrill, decided he would not go forward with the reorganization and wanted out of the deal with Rutenberg. To release Merrill from his agreement to sell his company to Rutenberg, Petitioner required Merrill to sign a note dated September 24, 1973 promising to pay Rutenberg $2,490,000 (Exhibit 7). This note purported to be in payment for 360.5 shares of Vanguard Properties, Inc. stock which were being sold back to Merrill. At the time Merrill had a net worth of approximately $130,000 and Petitioner knew the maker would be unable to pay the note. By modification agreement dated July 25, 1975 (Exhibit 8) Merrill and Rutenberg agreed to reduce the purchase price of this stock and the September 24, 1973 note to $145,000, $10,000 of which had been paid by Merrill on September 24, 1973. By endorsement to the note dated July 25, 1974 the note was made nonnegotiable and reduced to $135,000. This note was never paid by Merrill but was subsequently traded for property subject to a mortgage, and the mortgagee foreclosed on the mortgage. Similar deals had been made with other companies Rutenberg acquired to go public but which were "resold" back to their previous owners when economic conditions in 1974 militated against any public offering. These various notes for which Petitioner established high reserves are listed on Exhibit 9. By far the largest of these involves Merrill where some $2,355,000 was carried as a reserve.
The Issue Whether or not Petitioner's application for registration as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer & Associates, Inc. should be approved.
Findings Of Fact Respondent, Department of Banking and Finance, is the state agency charged with the administration and enforcement of Chapter 517, Florida Statutes, The Florida Securities and Investor Protection Act and the administrative rules promulgated thereunder. On or about October 30, 1990, Petitioner submitted a Form U-4, Uniform Application for Securities Industry Registration or Transfer, seeking transfer as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer, Inc. On or about January 25, 1991, Respondent denied Petitioner's application for registration based upon its determination that Petitioner had filed a form U-4, which contained material misstatements and had demonstrated prima facie evidence of unworthiness by engaging in prohibited business practices. Petitioner was previously registered as an associated person with the St. Petersburg, Florida branch office of Smith Barney from March 1987 until July 25, 1990, when he was permitted to resign from the firm for ordering securities from the "over the counter" desk without prior client orders. Petitioner was also registered with the NASD and is charged with knowledge of their Rules of Fair Practice. On or about May 9 1990, Ronald Padgett filed a written complaint with Respondent alleging that Petitioner was engaging in unauthorized trading in his account and that the account was trading on margin without a signed margin agreement. Mr. Padgett also alleged that the signed margin agreement on file with Smith Barney was a forgery. After receiving Mr. Padgett's complaint, Respondent commenced its investigation in Petitioner's activities and requested that Smith Barney provide it with information regarding Padgett's complaint. Respondent also requested and was provided with copies of all other customer complaints that had been filed against Petitioner with Smith Barney. Smith Barney provided Respondent with copies of customer complaints that had been filed against Petitioner by Dorothy Juranko, Wayne Schmidt, Mark Madison, Michael Russo, Gloria Fallon, Patricia Schoenberg and William & Verna Bankhead. All of these individuals were investor clients of Petitioner. Prior to his employment with Smith Barney, Petitioner had not been the subject of a customer complaint or industry disciplinary proceeding or licensure revocation, suspension, or denial. Wayne Schmidt Sr. the owner of Suncoast Chrysler-Plymouth (Suncoast) opened his account at Smith Barney in 1985. Initially, the account executive assigned to Schmidt's account at Smith Barney was Steve Ellis. Schmidt maintained two accounts with Smith Barney and Steve Ellis, namely, a profit- sharing account for Suncoast Chrysler-Plymouth and a joint account with his wife. Schmidt exercised no control of the Suncoast account, but rather allowed his associate, Gloria Fallon to initially monitor the transactions in that account. Afterwards, Schmidt started overseeing the trading activities in the Suncoast account. Schmidt had no knowledge of any unauthorized transactions in the Suncoast account after he began monitoring it. Gloria Fallon did not testify at the proceeding. In connection with the maintenance of his joint account at Smith Barney, Schmidt executed a "Securities Account Agreement." During the time Schmidt maintained his account at Smith Barney, the Securities Account Agreement was utilized by Smith Barney as a margin contract. The Securities Account Agreement qualifies as a margin account agreement/margin contract as to form, and is consistent with industry standards, custom and usage. Although Florida Statutes proscribes certain procedures relative to margin agreements, neither the Florida Securities Act nor the rules promulgated thereunder require a broker/dealer to characterize a margin contract as a "margin agreement." The gravamen of Schmidt's complaint against Petitioner was that certain shares of stock were not liquidated from the joint account maintained by him in contravention of his directions to Petitioner. There was no proof submitted to support any conclusion that Petitioner failed to place an order for the liquidation of such securities for Schmidt's account. Likewise, there was no evidence of any unauthorized trading in the Schmidt's joint account. While Petitioner was assigned as account executive to the Schmidts joint account, a profit of approximately $10,000.00 was generated for that account in 1988 and in 1989, a net gain of approximately $15,000.00 was generated. Schmidt conceded at hearing that Petitioner probably did a better job handling his account than his prior broker, Steve Ellis. During the year 1988, Smith Barney generated and sent to Schmidt, monthly statements and confirmation statements regarding every transaction in his joint account. The monthly statements sent to Schmidt for the joint account contained entries regarding margin interest being charged to the account. For the year 1989, Smith Barney also generated and sent to Schmidt, monthly statements and confirms regarding every transaction in his joint account. The 1989 monthly statements sent to Schmidt also showed margin interest. For the years 1988 and 1989, Schmidt deducted from his individual tax returns, the margin interest charged to his account. Also, during 1988 and 1989, Schmidt did not complain to Petitioner or Smith Barney that the use of margin account was unauthorized. During his tenure at Smith Barney, Petitioner was the account executive assigned to the account of Michael Russo (Russo). Petitioner was assigned to the Russo account in approximately May of 1990, an account which was formerly serviced by an account executive whose last name is Dudenhaver. Michael Russo matriculated at City College of New York where he received a Bachelor of Business Administration degree and was a certified public accountant for approximately 30 years. Russo has been in the accounting business for approximately 40 years and during this time period, he operated his own accounting practice. Russo maintained three (3) accounts at Smith Barney which included an account with his wife, an individual account and an IRA account. Russo opened his first brokerage account in the early 1980s with Merrill Lynch, Pierce, Fenner & Smith. Russo has a history is investing in real estate and by mid 1990, he had accumulated a net worth of approximately $750,000.00. On or about July 13, 1990, Russo presented Petitioner a check in the amount of $26,000.00 which was to be deposited into Russo's accounts. The $26,000.00 check was deposited by Petitioner into Russo's accounts but were returned for non-sufficient funds (NSF). Russo then replaced the NSF check with a $22,000.00 check. The funds derived from the $26,000.00 of Russo originated from an interest-bearing money market account from the Fidelity- Spartan Mutual Funds Family. During the period July 13-20, 1990, Russo was on vacation and was away from his home visiting relatives in the Melbourne, Florida area. During that week, Russo spoke by telephone with Petitioner regarding his account on more than one occasion. Russo specifically recalls speaking with Petitioner on July 15, 1990, regarding his account. During that week, Russo spoke with Respondent about selling certain shares of stock in his account and his specific recall is that one of those conversations occurred on July 15, 1990. The shares were to be sold "at market." Russo again spoke with Petitioner on July 21, 1990, regarding transactions in his account. On July 24, 1990, Russo told Larry Youhn, the branch manager at Smith Barney, that he was very happy with Petitioner as his broker. The July 1990 month-end statement for the Russo account indicate that funds were deposited into the Russo accounts in an amount sufficient to satisfy security purchases made in his account during July 1990. Although these transactions appear at month-end in a type-2 margin account, a review of such statements indicate that the transactions initially occurred in a cash account and were mistakenly journaled to the margin account by Smith Barney as a result of an NSF check presented by Russo as payment for the purchase transactions. The individual account of Russo reflects the purchase of 500 shares of Wiley Laboratories on July 16, 1990, for $7,702.00. On that same day, $10,500.00 from the $26,000.00 NSF check was received into the account. The July 1990 monthly statement for Russo's individual account reflected that there would have been a $2,800.00 net credit in the account if Russo had not presented the NSF check. During his tenure at Smith Barney, Petitioner also served as the registered representative for an account maintained by Nicholas and Dorothy Juranko (Juranko). The Jurankos have a substantial history of business experience, having currently owned a service station in the Ohio area and Mrs. Juranko currently owns her own drapery shop and manages eight (8) apartment/rental units that they jointly own. The Jurankos opened their first securities brokerage account in approximately 1962. They have held accounts at several brokerage firms including Merrill Lynch, Blinder-Robinson and First Jersey Securities prior to opening their account at Smith Barney. At Blinder-Robinson, the Jurankos engaged in the purchase of several "Penny" stocks and fully realized that they were speculating. The Blinder- Robinson account was opened by the Jurankos so that Mr. Juranko would "have something to do." The Jurankos maintained a securities brokerage account at First Jersey Securities prior to Petitioner's employment with First Jersey. Petitioner was assigned as account executive for the Juranko account at First Jersey in approximately 1985. When the Jurankos opened their account at Smith Barney, their net worth was approximately $220,250.00. Although Mrs. Juranko maintains that unauthorized trades occurred in her account during the month of December 1987, when asked to identify which trade which unauthorized, she could not do so. This was so, despite an effort to refresh her recollection by presenting her the December 1987 monthly account statement which depicted all securities holdings and transactions generated in their account. Mrs. Juranko also alleged that she was losing money and did not want to deposit any additional funds into her account. However, Mrs. Juranko wanted to have profits generated from the funds that were then existing into her account as of year-end December, 1987. Respecting the December 1987 trades, the Jurankos received confirms for every transaction that occurred during the month. Through December 1987, while Petitioner was assigned to manage the Juranko account, the account generated a net profit. Also, continuing through January 1988, Petitioner had effected trades which produced a net profit for the Juranko account. As testified by Mrs. Juranko, "All I could see...greed, all I could see was $14,200.00 some dollars and $9,900.00 some dollars, and I thought, wow... I thought "wow", he's making me money." Although Mrs. Juranko complained that she was losing money, an analysis of the account revealed that during the two years that Petitioner was assigned her account, it made a net profit. Notwithstanding the documentary evidence to the contrary, Mrs. Juranko admitted that she was upset and complained to Smith Barney's compliance officer, a Mr. Singer, because of her unfounded belief that she had lost money. Mrs. Juranko identified anger as the basis for her inability to understand a letter which was sent by Larry Youhn, Smith Barney's branch manager, which show the activity that had been generated into her account. Notwithstanding the clear language of that letter, Mrs. Juranko maintained that she did not understand it. This is so, despite the fact that Mrs. Juranko did not telephone Smith Barney to complain because she "didn't want to get [Petitioner] in trouble." 1/ The use of margin in the Jurankos account was discussed because Mrs. Juranko believed the account was losing money; she wanted to do whatever was necessary over a period of time to make up for the losses and she refused to deposit additional funds into the account to generate profits in trading the account. In connection with the maintenance of the Juranko account at Smith Barney, Petitioner instructed his sales assistant to send a margin agreement to Mr. and Mrs. Juranko for execution. The use of margin was discussed with the Jurankos in approximately November 1987. Petitioner relied upon the Smith Barney infrastructure to maintain the necessary paperwork for margin accounts, including the Jurankos. This is a customary practice in the securities industry and is utilized by most large brokerage houses. Juranko first complained to Petitioner about the use of margin in January 1988, when she received her monthly account statement which contained an entry for margin interest. Mrs. Juranko explained that she thought the margin charges were too much and that she wanted to reduce the margin charges by liquidating securities from the account. Mrs. Juranko thereafter became uncooperative and it became difficult for Petitioner to transact business in the account consistent with Mrs. Juranko's desired objectives. As a result, in March 1988, Petitioner determined that the only thing he could do for the account was to liquidate positions at or near break-even points. Thereafter, Petitioner never made any other purchase recommendations to the Jurankos. Petitioner also serviced the account of Mark D. Madison while employed at Smith Barney. Madison is a marketing, advertising and management consultant who owns his own business. Madison maintained two (2) accounts at Smith Barney's St. Petersburg branch office, including an individual account and an account in the name of his mother, Mary Jean Madison. Mark Madison was a fiduciary for and conducted all transactions in his mother's account. Prior to Petitioner's assignment as broker to Madison's fiduciary account, it was assigned to broker Steve Ellis. The fiduciary account was maintained as a margin account since its opening in 1984. Commencing on February 13, 1986, broker Ellis and Madison executed several margin transactions in the fiduciary account. Through the period ending October 31, 1987, roughly 95% of the transactions in the fiduciary account were executed on margin. As of year-end 1987, the Madison fiduciary account and Mark Madison's personal account historically traded over-the-counter securities. During this period while Ellis was the broker, margin transactions were executed in both Madison accounts. During this period, broker Ellis actively traded both accounts and generated both profits and losses in the accounts. Mark Madison was familiar with the active trading in both accounts as well as the profit/loss picture. Madison estimated losses in the fiduciary account to be over $20,000.00 while the account was handled by Ellis. These losses all occurred while he was the fiduciary on the account and was in charge of approving trading in the account. When the fiduciary account was transferred from Ellis to Petitioner, Madison expressed his concern about the losses that his mother's fiduciary account had sustained as well as his responsibility for such losses. During his initial conversations with Petitioner, Madison explained his mother's displeasure at the approximately $30,000.00 in losses that had been generated while Ellis was assigned as broker. Madison also explained to Petitioner that his brother had made references to conversations with his mother about suing him as the fiduciary because of the losses generated. During the time that the fiduciary account was handled by Ellis, there were differences in the execution prices of transactions in the same securities which occurred in both the fiduciary account and his (Mark Madison's) personal account. When Petitioner was assigned the account, it became apparent to him that Madison consistently obtained higher prices on liquidating transactions than his mother was obtaining in the fiduciary account for the same securities. Petitioner was concerned with the type of trading in which Madison wanted to engage in for the fiduciary account and brought this trading strategy to the attention of branch manager, Youhn, who explained to Petitioner that it was the fiduciary who had ultimate responsibility for trading the account. In addition to discussing the trading strategy with Youhn, a review of the account history was conducted by Petitioner. Petitioner's review revealed that the account had lost approximately 40% in equity during the time it was handled by account executive Ellis and Mark Madison as fiduciary. As a result of the losses generated, Madison expressed his desire to Petitioner to recoup losses in the account by taking advantage of 2-3 point swings in certain over-the-counter securities. During the months of January through March 1988, Madison, despite his allegations to the contrary, authorized the purchase of a specified number of shares of certain securities and later maintained that certain additional shares of those securities were purchased without his authorization. Throughout this period, Madison maintained continuous telephone conversations with Petitioner regarding such securities. Throughout the period, Madison did not instruct Petitioner to cancel the trades, but rather instructed him that he wanted out of those positions as near as possible to "break even." The Department conducted an investigation of the allegations made by Petitioner's former clients in connection with the denial of his registrations as an associated person an investment advisor. In connection with the investigation, the Department, through its investigative employee, Carol Irizarry (Irizarry), spoke with individuals who had submitted written complaints against Petitioner. In furtherance of her investigation, Irizarry visited the office of William Lyman, Esquire, who represented several of the former customer/complainants, and reviewed the information that Lyman had relative to such complaints. Ms. Irizarry did not testify during the formal hearing herein. Dennis Farrar (Farrar), area financial manager, Division of Securities, Department of Banking and Finance, supervised the writing of the report completed by Irizarry. Farrar's first direct contact with the investors/complainants in this case occurred approximately one (1) week prior to the commencement of the hearing herein. Following Ellis' separation from employment with Smith Barney, several Smith Barney brokers and clients of Petitioner advised him that broker Ellis was out to get him and urged them to file complaints against Petitioner. Specifically, Petitioner received a telephone call from Gloria Fallon, an associate of Wayne Schmidt, who warned Petitioner that Ellis was "trying to stir up trouble for him." In connection with the initial customer complaint received by the Department, a request for information responsive to the complaint was sent to Smith Barney. Among the documents received by the Department was a securities account agreement which contained language normally contained in a margin contract. The securities account agreement is the document utilized by Smith Barney as its margin contract at all time material hereto. A Form U-4, Uniform Application for Securities Industry Registration for Transfer, is a document generated by the National Association of Securities Dealers (NASD) and the North American Securities Administrators Association (NASAA). The Form U-5, Uniform Termination Notice, also is generated by the above entities. The disclosure section of a Form U-4 requires an applicant to respond to the best of his ability. An intentional falsification of information on a Form U-4 will give rise to a violation of Section 517.161, Florida Statutes. It is customary in the securities industry for a registered representative to rely upon his current broker/dealer employer to determine which complaints, if any, are disclosable on the Form U-4. It is customary in the industry for a representative to rely on the Form U-5, termination notice for completion of his U-4 and usually the information on both forms track each other. Also, the prospective applicant filling out his U-4 usually consults with the firm that he separated from to ensure that both Forms U-4 and U-5 are consistent. Petitioner's completion of the Form U-4 on August 30, 1990 in connection with his employment at Brauer & Associates contained a disclosure of customer complaints consistent with the disclosures made by Smith Barney on its amended Form U-5 Termination Notice dated August 17, 1990. Petitioner's reliance on the information contained in his files and that provided by his employers was reasonable and there was no evidence that Petitioner intentionally falsified his Form U-4 application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that Respondent enter a Final Order granting Petitioner's application for registrations as an associated person or broker/dealer of Brauer & Associates, Inc. and investment adviser to G.G. Brauer, Inc. RECOMMENDED this 13TH day of August, 1991, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 13th day of August, 1991.
Findings Of Fact Upon consideration of the oral and documentary evidence addressed at the hearing, the following relevant findings of fact are made: The request for sealed bids for the construction of the Project was advertised on October 9, 16 and 23, 1991. There were six addenda to the original bid documents which added, deleted or modified provisions of the original bidding requirements, contract requirements, administrative requirements and technical specifications. The original bid documents plus the six addenda will be referred to herein as the "bid documents". The bid documents required that all bids be in full accord with the contract documents. Sealed bids for the Project were opened on October 30, 1991. Wright submitted the lowest lump sum bid for the Project, with Sovran submitting the second lowest lump sum bid and Kellogg submitting the third lowest lump sum bid. At the time of the bid opening, the bid documents listed only four casework manufacturers that were approved to furnish casework for the Project. Empire Custom Cabinets, Inc. (Empire) was not listed as one of the four approved casework manufacturers in the bid documents. The bid documents did not require the bidder to list the casework manufacturer it intended to obtain the casework from, but only that the bidder name the casework subcontractor. The only work item in the bid documents which requires identifying the name of the manufacturer on the subcontractor's list is the metal roof system. Because Empire's bid on the casework was extremely low compared to other bids received by Wright on the casework, Wright called Empire prior to submitting its bid to confirm that Empire's bid was submitted per plans and specifications. Although Wright did not specifically inquire of Empire at this time as to which manufacturer Empire was obtaining the casework from for the Project, Empire did advise Wright that Empire's bid on the casework was according to plans and specifications. Additionally, Empire did not divulge or advise Wright at this time that the bid was based on Empire manufacturing the casework for the Project. Based on this representation from Empire, Wright listed Empire as its casework subcontractor, and calculated its lump sum bid for the Project using Empire's bid. Although Wright listed Empire as its casework subcontractor in its bid, this did not create an irregularity in Wright's bid since Wright's bid was per plans and specification without exception or exclusion. This would require Wright to furnish casework for the Project manufactured by one of the four approved casework manufacturers listed in the bid documents regardless of which subcontractor Wright listed as the subcontractor for casework. By letter dated November 1, 1991, the Board's architect for the Project requested Wright to have Empire submit written certification by one of the four approved casework manufacturers that its casework was being furnished to Empire for the project. By letter dated November 4, 1991, Empire advised Wright that Empire's bid on the casework for the Project was based on casework to be manufactured by Empire. On the same day, Wright furnished the architect for the Project a copy of Empire's letter of November 4, 1991. In response to a request by the Board, Wright, by letter dated November 7, 1991, advised the Board that Wright would furnish casework manufactured by one of the four approved manufacturers listed in the bid documents for the Project. By letter dated December 3, 1991, Empire advised Wright that Empire would need to withdraw its bid if Empire was required to use casework manufactured by one of the four approved casework manufacturers listed in the bid documents. On that same day, Wright furnished the Board a copy of Empire's letter and requested that the Board allow Wright to remove and replace Empire with Steven Ward and Associates, Inc. (Ward), as the casework subcontractor since Ward would be able to furnish and install casework manufactured by LSI Corporation of America, Inc., one of the four approved casework manufacturers. No Action has been taken on that request. The bid documents provide for a subcontractor to be removed and replaced from the list of subcontractors after the bid is opened if there is a showing of good cause and written approval by the Board and the Project architect is obtained. Although Empire's bid on the casework for the Project submitted to Wright was based on Empire manufacturing the casework, there is competent substantial evidence in the record to establish facts to show that at the time Wright submitted its bid on the Project it had reasonable grounds to believe that Empire's bid on the casework was based on Empire furnishing and installing casework manufactured by one of the four approved casework manufacturers. After determining that Empire could not perform under its bid, Wright obtained a bid from Ward for furnishing and installing the casework for the Project which was less than Ward's original bid submitted to Wright before the bid opening. However, this bid was substantially more than Empire's bid, and if Wright is allowed to substitute Ward for Empire, Wright will have to absorb the additional costs since the bids were lump sum bids. Wright is neither attempting to furnish casework from a manufacturer that is not approved, nor is Wright requesting an increase in the lump sum bid price. The advertisement for Sealed Bids for the Project required that all bidders be prequalified by the Board prior to the bid date. Sovran and one other bidder were not prequalified by the Board prior to the bid date in accordance with Advertisement for Sealed Bids for the Project. Sovran received the bid documents for the Project approximately one month before the bid date but did not file a Notice of Protest of the prequalification requirement contained in the Advertisement for Sealed Bids for the Project. Sovran holds a certificate as a general contractor licensed in the State of Florida in accordance with Chapter 489, Florida Statutes. As a certified general contractor Sovran, pursuant to Section 489.125, Florida Statutes, was authorized to bid on the Project notwithstanding the Board's prequalification requirement. This was explained by the Board's representative at the bid opening. The bid documents required that a subcontractor list be submitted by all bidders, and when submitted with the bid becomes an integral part of the bid. The purpose of the subcontractor list was to prevent bid shopping, and to allow the Board an opportunity to review the subcontractors to determine if any subcontractor on the list had performed unsatisfactorily on previous Board projects. Neither the statutes relating to competitive bidding nor the bid documents prohibit the listing of the general contractor together with a subcontractor on a subcontractor list. The subcontractor list submitted by Sovran indicated "Sovran Constr/Naples" as the name of the subcontractor for the masonry work and "Sovran/Naples" as the name of the subcontractor for the poured-in-place concrete work. "Naples" is Naples Concrete and Masonry Work, Inc. The bid received by Sovran from Naples was for both labor and materials for the poured-in-place concrete and masonry work. Sovran neither requested nor did Naples furnish Sovran a bid to provide labor only for the poured-in-place concrete and masonry work. There was no agreement between Sovran and Naples whereby Sovran would supply the materials and Naples would furnish the labor for the poured-in-place concrete and masonry work. Sovran did request and receive bids from other companies for furnishing materials only for the poured-in-place concrete and masonry work. Sovran listed itself, the general contractor, along with Naples on the subcontractor list for the purpose of supplying the materials for the poured-in- place concrete and masonry work. Sovran's main reason for supplying the materials was that Naples was not bondable. Without a payment bond from Naples, Sovran would be without protection and could be forced into paying double for the materials in the event Naples failed to pay the material suppliers. Although the Superintendent of the Lee County Schools has recommended to the Board that the Board accept Wright's bid for the Project, the Board has not voted on that recommendation. The fact that Wright used Empire's bid to calculate its lump sum bid in no way excuses Wright for the requirement set out in the bid documents that casework used for the Project (when the time comes) be manufactured by one of the four approved casework manufacturers. Wright gains no economic advantage in this regard since the lump sum bid price remains the same. The advertisement for Sealed Bids on the Project provides that the Board reserves the right to waive any and all irregularities of any bid received.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, accordingly RECOMMENDED: That the Board enter a Final Order dismissing the instant bid protest and awarding to Wright the contract for the construction of Elementary School "C", Job No. 91063. DONE and ORDERED this 13th day of February, 1992, 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 13 day of February, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NUMBER 91-7597B1D 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. Rulings on Proposed Findings of Fact Submitted by the Petitioner Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parenthesis is the Finding(s) of Fact which so adopts the proposed finding(s) of fact: 1 - 3(1,2 and 3 , respectively); 4 - 5(6); 6(4); 7 - 9(5); 12(10); 13(11); 15 - 16(12); 17(13); 18 - 19(16); 20(29); 21(18); 23(19); 24 - 25(20); 26(22); 27(23); 28(22); 29 - 30(29); 32 - 33(25); and 34(26). Proposed finding of fact 10 is rejected as not being supported by competent substantial evidence in the record in that Wright's bid was as per plans and specifications without exceptions or exclusions which included the use of casework manufactured by one of the approved casework manufacturers. Proposed finding of fact 11 is rejected as not being supported by competent, substantial evidence in the record in that the Board knew of Empire's bid being based on nonconforming materials prior to issuing its Notice of Intent. However, the only information the Board had in reference to Wright's bid before issuing its Notice of Intent was that Wright had bid as per plans and specifications and would be installing casework manufactured by one of the approved manufacturers. The only question was whether Empire could furnish casework manufactured by one of the approved manufacturers. Proposed finding of fact 14 is neither material nor relevant. How the Board's architect interpreted Wright's bid is neither material nor relevant to this proceeding. Proposed finding of fact 22 is unnecessary to the conclusion reached in the Recommended Order. Proposed finding of fact 31 is more in the way of an argument than a finding of fact. Proposed findings of fact 35 and 36 are covered in the Preliminary Statement. The timeliness of Kellogg's protest is not an issue and therefore, a finding that it was timely is unnecessary. Rulings on Proposed Findings of Fact Submitted by the Respondent While not specifically adopting proposed finding of fact 1, where material or relevant or necessary to this proceeding, and supported by competent, substantial evidence in the record the stipulated facts have been adopted. Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parenthesis is the Finding(s) of Fact which so adopts the proposed finding(s) of fact: 2(4,5); 3(9); 4 - 5(7); 7 - 8(8); 10(16); 11(14); 12(31); 13(21); and 15(23). Proposed finding of fact 6 is more in the way of an argument than a finding of fact. Proposed finding of fact 9 and 14 are neither material nor relevant. Rulings on Proposed Findings of Fact Submitted by the Intervenor See ruling on Respondent's proposed finding of fact Each of the following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parenthesis is the Finding(s) of Fact which so adopts the proposed finding(s) of fact: 2 - 3(21); 4(24); 5 - 6(21); 13(23); 14(24,28); 15(22); 16 - 17(23,24); and 18(28). Proposed findings of fact 7 through 12 are neither material nor relevant to this proceeding. COPIES FURNISHED: David E. Gurley, Esquire Norton, Gurley & Darnell, P.A. 1819 Main Street, Suite 610 Sarasota, FL 34236 Marianne Kantor, Esquire The School Board of Lee County 2055 Central Avenue Fort Myers, FL 33901 James M. Talley, Esquire Fisher, Rushmer, Werrenrath, Keiner, Wack & Dickson, P.A. Post Office Box 712 Orlando, FL 32802 Karl Engel Superintendent Lee County School Board 2055 Central Avenue Ft. Myers, FL 33901 Honorable Betty Castor Commissioner of Education The Capitol Tallahassee, FL 32399-0400
