The Issue Whether Respondent Corporation, Southern Insight, Inc., failed to secure payment of workers' compensation coverage as required by Chapter 440, Florida Statutes, and the Florida Insurance Code, and if so, whether the Department of Financial Services, Division of Workers' Compensation (Department) has lawfully assessed the penalty against Respondent in the amount of $27,805.11.
Findings Of Fact The Department is the state agency responsible for enforcing Section 440.107, Florida Statutes, which requires that employers secure the payment of workers' compensation coverage for their employees and otherwise comply with the workers' compensation coverage requirements under Chapter 440, Florida Statutes. Respondent has been a Florida corporation, actively involved in the construction industry providing framing services, during the period of February 16, 2006, through August 17, 2007 (assessed penalty period). At all times material, Respondent has been an "employer," as defined by Chapter 440, Florida Statutes. At all times material, John Cauley has been Respondent's president and sole employee. At no time material did Respondent obtain workers' compensation insurance coverage for John Cauley. On August 17, 2007, Department Investigator Lynise Beckstrom conducted a random workers' compensation compliance check of a new home construction site in Palm Coast, Florida. At that time, Ms. Beckstrom observed four men, including John Cauley, framing a new home. Utilizing the Department's Compliance and Coverage Automated System (CCAS) database, which contains all workers' compensation insurance policy information from the carrier to an insured and which further lists all the workers' compensation exemptions in the State of Florida, Ms. Beckstrom determined that for the assessed penalty period, Respondent did not have in effect either a State of Florida workers' compensation insurance policy or a valid, current exemption for its employee, John Cauley. During the assessed penalty period, Respondent paid remuneration to its employee, John Cauley. John Cauley admitted that during the assessed penalty period he was not an independent contractor, as that term is defined in Section 440.02(15)(d)(1), Florida Statutes. Section 440.05, Florida Statutes, allows a corporate officer to apply for a construction certificate of exemption from workers' compensation benefits. Only the named individual on the application is exempt from workers' compensation insurance coverage. On or about April 15, 2006, John Cauley, as Respondent's President, applied for such an exemption. That application was denied. Mr. Cauley received neither an exemption card nor a denial of exemption from the Department. During the assessed penalty period, Respondent was a subcontractor of the contractor, Mass Builders, Inc. 9. Sections 440.107(3) and 440.107(7)(a), Florida Statutes, authorize the Department to issue stop-work orders to employers unable to provide proof of workers' compensation coverage, including proof of a current, valid workers' compensation exemption. Based on the lack of workers' compensation coverage and lack of a current, valid workers' compensation exemption for Respondent corporation's employee, John Cauley, the Department served on Respondent a stop-work order on August 17, 2007. The stop-work order ordered Respondent to cease all business operation for all worksites in the State of Florida. Immediately upon notification by Investigator Beckstrom of his lack of valid exemption, Mr. Cauley submitted a new exemption application, which was granted, bringing Respondent corporation into compliance. However, in order to have the stop-work order lifted so that he can work as a corporation again, Mr. Cauley must pay a percentage of the penalty assessment and enter into a payment plan with the Agency. In the meantime, Mr. Cauley cannot pay the percentage required by the Department if he cannot find work as someone else's employee, which he had been unable to do as of the date of the hearing. Herein, it is not disputed that Respondent was inadvertently out of compliance. Mr. Cauley seeks merely to reduce the amount of the penalty assessment so that removal of the stop-work order against Respondent corporation can be negotiated. On the day the stop-work order was issued, Investigator Beckstrom also served Respondent with a "Request for Production of Business Records for Penalty Assessment Calculation," in order to determine a penalty under Section 440.107(7), Florida Statutes. Pursuant to Florida Administrative Code Rule 69L-6.015, the Department may request business records for the three years preceding the date of the stop-work order. Logically, however, Ms. Beckstrom only requested business records dating back to February 14, 2006, Respondent's date of incorporation in Florida. The requested records included payroll, bank records, check stubs, invoices, and other related business records. Ms. Beckworth testified that, "Business records requests usually consist of payroll, bank records, taxes, check stubs, invoices, anything relating to that business." This is a fair summation of a much more detailed listing of records required to be kept pursuant to Rule 69L-6.015, Florida Administrative Code, which was in effect at all times material. In response to the Request for Production, Respondent provided Southern Insight Inc.'s corporate bank statements for the assessed penalty period, detailing corporate income and expenses through deposits and bank/debit card purchases. However, Investigator Beckworth did not deem the corporate bank statements produced by Respondent to be an adequate response, and she did not base her calculations for penalty purposes thereon. Mr. Cauley expected that the Department would, and has argued herein that the Department should, have subtracted from the total deposits to Respondent's corporate account (the minuend) the total corporate business expenses (the subtrahend) in order to determine the Respondent's payroll to Mr. Cauley (the difference), upon which difference the Department should have calculated his workers' compensation penalty. In fact, the Department, through its investigator, did not utilize the total amount deposited to Respondent's corporate account, because some deposits "could" have come from a family member of Mr.Cauley. That said, there are no individual names on the account; the account is clearly in the name of the Respondent corporation; and there is no proof herein that any deposits to Respondent's corporate bank account were derived from anyone other than Mr. Cauley, as Respondent's President. Ms. Beckstrom testified that if the Agency had accepted the total of the deposits to this corporate account for the assessed penalty period as Respondent's payroll, the result would have been more than the total amount actually determined by her to constitute Mr. Cauley's payroll, but that statement was not demonstrated with any specificity. The Department also did not use any of the subtracted amounts shown on the corporate bank statements, even though the bank statements listed the same information as would normally be found on a corporate check, including the transaction number, recipient of the money, the date, and the amount for each bank/debit card transaction. All that might be missing is the self-serving declaration of the check writer on the check stub as to what object or service was purchased from the recipient named on the bank statement. Ms. Beckstrom testified that if Mr. Cauley had provided separate receipts for the transactions recorded on the bank statements as bank/debit card entries, she could have deducted those amounts for business expenses from the corporation's income, to arrive at a lesser payroll for Mr. Cauley. In other words, if Mr. Cauley had provided separate receipts as back-up for the transactions memorialized on the corporate bank statements, the Department might have utilized the bank/debit card transactions itemized on Respondent's corporate bank statements as the amount deducted for Respondent corporation's business expenses, so as to obtain the payroll (difference) paid to Mr. Cauley. It is the amount paid to Mr. Cauley as payroll, upon which the Department must calculate the workers' compensation penalty. The reason Ms. Beckworth gave for not using Respondent's bank statements was that without more, the transactions thereon might not be business expenses of the corporation. However, she also suggested that if, instead of submitting bank/debit card statements, Mr. Cauley had submitted checks payable to third parties and if those corporate checks showed an expenditure for a deductible business expense, like motor vehicle fuel, she might have accepted the same expenditures in check form (rather than the statements) in calculating Respondent's payroll. Ultimately, Ms. Beckworth's only reasons for not accepting the bank statements showing recipients, such as fuel companies like Amoco, was "agency policy," and her speculation that Amoco gas could have been put into a non-company truck or car. She also speculated that a prohibition against using bank statements showing deductions might possibly be found in the basic manual of the National Council on Compensation Insurance (NCCI) or in a rule on payrolls (Rule 69L-6.035) which became effective October 10, 2007, after the assessed penalty period. However, the NCCI manual was not offered in evidence; a rule in effect after all times material cannot be utilized here; and no non-rule policy to this effect was proven-up. In addition to not using Respondent's bank statements to calculate a penalty, the Department also did not "impute" the statewide average weekly wage to Respondent for Mr. Cauley. Ms. Beckworth testified that to impute the statewide average weekly wage would have resulted in a higher penalty to Respondent. As to the amount of the statewide average weekly wage, she could only say she thought the statewide average weekly wage was "about $1,000.00". Instead of using Respondent's corporate bank statements or imputing the statewide average weekly wage, Investigator Beckstrom determined that Mass Builders, Inc., was the prime contractor on the jobsite being worked by Respondent, and that Mass Builders, Inc., had not produced proof of securing workers' compensation coverage for Respondent, its sub- contractor. Therefore, she sought, and received, Mass Builders, Inc.'s "payroll records" of amounts paid by the prime contractor, Mass Builders, Inc., to Respondent Southern Insight, Inc., via a separate site-specific stop-work order and business records request directed to Mass Builders, Inc. The only "payroll records" that Mass Builders, Inc., offered in evidence were Mass Builders, Inc.'s check stubs, which Ms. Beckstrom utilized to come up with an income/payroll amount for Respondent Southern Insight, Inc. Mr. Cauley did not know until the hearing that Mass Builders, Inc.'s check stubs had been utilized in this fashion by the Department. However, he ultimately did not dispute the accuracy of the check stubs and did not object to their admission in evidence. In calculating Respondent's total payroll for the assessed penalty period, Investigator Beckstrom considered only the total of the check stubs from Mass Builders, Inc. It is unclear whether or not she reviewed Mass Builders, Inc.'s actual cancelled checks. No one from Mass Builders, Inc., appeared to testify that the stubs represented actual cancelled checks to Respondent or Mr. Cauley. The Department also did not deduct from the total of Mass Builders, Inc.'s check stubs any of the bankcard deductions made by John Cauley from Respondent's corporate bank account, for the same reasons set out above. Mr. Cauley testified, without refutation, that some of the expenses noted on Respondent's bank statements, paid by bank/debit card, most notably expenses for gasoline for his truck, constituted legitimate business expenses of Respondent corporation, which should have been deducted from either the bank statement's total income figure or from the amounts paid by Mass Builders, Inc., to Respondent corporation, before any attempt was made by the Department to calculate the amount paid by Respondent corporation to Mr. Cauley as payroll. Utilizing the SCOPES Manual, which has been adopted by Department rule, Ms. Beckstrom assigned the appropriate class code, 5645, to the type of work (framing) performed by Respondent. In completing the penalty calculation, Ms. Beckstrom multiplied the class code's assigned approved manual rate by the payroll (as she determined it) per one hundred dollars, and then multiplied all by 1.5, arriving at an Amended Order of Penalty Assessment of $27,805.11, served on Respondent on August 22, 2007. Subsequent to the filing of its request for a disputed-fact hearing, in an effort to have the penalty reduced, Respondent provided the Department with additional business records in the form of portions of Southern Insight, Inc.'s 2006 and 2007 U.S. Income Tax Returns for an S Corporation (2006 and 2007 income tax returns). However, neither itemized deductions nor original receipts for Respondent's business expenses were provided to Ms. Beckworth at the same time, and she determined that without itemized deductions, there was no way to calculate Respondent's legitimate business deductions so that they could be deducted from the total of Mass Builders, Inc.'s, check stubs to determine a lesser payroll applicable to Mr. Cauley. Investigator Beckstrom testified that the tax returns, as she received them, did not justify reducing Respondent's payroll used in calculating the penalty. The vague basis for this refusal was to the effect that, "The Internal Revenue Service permits different business deductions than does the Department." Itemization pages (schedules) of Respondent's income tax returns were not provided until the de novo disputed-fact hearing. Confronted with these items at hearing, Ms. Beckworth testified that ordinary business income is not used by the Department to determine payroll, but that automobile and truck expense and legitimate business expenses could be deducted, and that she would probably accept some of the deductions on Respondent's 1020-S returns. Also, if Respondent's bank statement corresponded to the amount on the tax form, she could possibly deduct some items on the bank statements as business expenses before reaching a payroll amount. However, she made no such calculations at hearing. Ms. Beckworth testified that if she had Respondent's checks or "something more" she could possibly deduct the motor fuel amounts. Although Respondent's 2006, and 2007, income tax returns reflected Respondent corporation's income minus several types of business deductions, Ms. Beckstrom testified that the tax deductions were not conclusive of the workers' compensation deductions, because the Internal Revenue Service allows certain deductions not permissible for workers' compensation purposes, but she did not further elaborate upon which tax deductions were, or were not, allowable under any Department rule. She did not "prove up" which deductions were not valid for workers' compensation purposes. Respondent's 2006, tax deductions for "automobile and truck expense" were $2,898.00, and for 2007, were $4,010.00. There was no further itemization by Respondent within these categories for fuel. Other business deductions on the tax returns were also listed in categories, but without any further itemization. The only supporting documentation for the tax returns admitted in evidence was Respondent's bank statements. Respondent believed that the tax returns and possibly other documentation had been submitted before hearing by his accountant. It had not been submitted. The Department never credibly explained why it considered a third party's check stubs (not even the third party's cancelled checks) more reliable than Respondent's bank statements or federal tax returns. Even so, at hearing, the Department declined to utilize the business deductions itemized on Respondent's tax forms or any bank/debit card deductions on its bank statements so as to diminish the amount arrived-at via the Mass Builders, Inc.'s check stubs, and ultimately to arrive at a difference which would show a lesser payroll to Mr. Cauley. Although Mr. Cauley's questions to Ms. Beckstrom suggested that he would like at least all of the fuel company deductions on his bank statements to be considered as business deductions of Respondent Southern Insight, Inc., and for those fuel company expenditures to be subtracted from either the total deposits to the corporate bank account or deducted from the payroll total as calculated by Ms. Beckstrom from Mass Builders, Inc.'s check stub total, he did not testify with clarity as to which particular debits/charges on the bank statements fell in this category. Nor did he relate, with any accuracy, the debits/charges on the bank statements to the corporate tax returns. Upon review by the undersigned of Respondent's bank statements admitted in evidence, it is found that the bulk of Respondent's bank/debit card deductions during the assessed penalty period were cash withdrawals or ATM debits which cannot be identified as being paid to fuel companies or purveyors of construction material. As Investigator Beckstrom legitimately observed, "Big Al's Bait" is not a likely source of motor fuel. "Publix" and "Outback Steak House" are likewise unlikely sources of fuel or construction material, and cannot stand alone, without some other receipt to support them, as a legitimate corporate business entertainment expense. Other debits/charges on the bank statements are similarly non-complying, ambiguous, or defy categorization. However, the undersigned has been able to isolate on the corporate bank statements purchases from the known fuel distributors "Amoco" and "Chevron" on the following dates: 7/09/07, 7/10/07, 6/04/07, 6/04/07, 6/11/07, 5/03/07/ 4/09/07, 4/10/07, 4/13/07, 4/16/07, 3/02/07, 3/05/07, 3/13/07, 3/15/07, 3/20/07, 1/29/07, 5/01/06, 6/02/06, 8/02/06, 11/03/06, totaling $556.98.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, that affirms the stop-work order and concludes that a penalty is owed; that provides for a recalculation of penalty to be completed, on the basis set out herein, within 30 days of the final order; and that guarantees the Respondent Southern Insight, Inc., a window of opportunity to request a Section 120.57 (1) disputed-fact hearing solely upon the recalculation. DONE AND ENTERED this 1st day of July, 2008, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 1st day of July, 2008. COPIES FURNISHED: Anthony B. Miller, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 John Cauley, President Southern Insight, Inc. Post Office Box 2592 Bunnell, Florida 32110 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue Whether the Respondent, the Health Care Cost Containment Board, should waive the requirement that Golden Glades Regional Medical Center file its audited actual experience or was the Respondent correct in declining to review the Petitioner's fiscal year 1990 proposed budget?
Findings Of Fact On or about September 26, 1989, the Petitioner filed its proposed budget for its fiscal year beginning January 1, 1990, and ending December 31, 1990, with the Respondent. The Petitioner's proposed 1990 budget was submitted pursuant to Section 407.50(3), Florida Statutes. The Respondent determined that the Petitioner's proposed 1990 budget should not be approved. The Respondent proposed in its preliminary findings and recommendations to hold the Petitioner to its 1988 budget levels of gross revenue per adjusted admission of $8,532.00 and net revenue per adjusted admission of $5,835.00. About the same time that the Petitioner filed its proposed 1990 budget, the Petitioner filed unaudited financial statements for its fiscal year ending December 31, 1988, with the Respondent. The financial statements were not accompanied by an audit opinion letter from the Petitioner's certified public accountants. Therefore, the statements did not constitute "audited actual experience" or "audited actual data". The Respondent rejected the Petitioner's proposed 1990 budget because of the Petitioner's failure to file audited actual experience. Hospitals subject to Chapter 407, Florida Statutes, are required to file audited actual experience which is used by the Respondent in reviewing hospital budgets. In February or March, 1989, the Petitioner retained an independent, Florida licensed certified public accountant (hereinafter referred to as the "Auditors"), to prepare audited financial statements for its 1988 fiscal year. The Auditors completed all the field work they could complete in April or May, 1989. An audit opinion letter must be included with an audit report pursuant to generally accepted auditing standards. The Auditors have delayed issuing an audit opinion letter for the Petitioner's 1988 fiscal year, which is required in order to issue audited financial statements. Audit opinion letters typically contain a description of the scope of the work performed by the auditors, a description of the audit process and an opinion concerning whether the financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles. The Auditors have been requested by the Petitioner to withhold issuance of their final audit report for the Petitioner's 1988 fiscal year. As of the date of the formal hearing of this case, the Auditors had not issued an audit opinion letter, and thus an audit report, because they needed to be provided by the Petitioner with information concerning the restructuring of the Petitioner's debt, updated legal letters from the Petitioner's attorneys and a management representation letter from the Petitioner. The Petitioner's source of working capital for its daily operations has been a line of credit with First American Bank. The line of credit expired during 1989. A new source of working capital has not been arranged by the Petitioner. Therefore, the Auditors could not issue an audit opinion letter concluding that the Petitioner is viable as a "going concern." Unless the Petitioner can restructure its debt or find another source of debt-financing, increase its equity capital or achieve profitable operations, the Auditors will not be able to opine that the Petitioner is a going concern. This problem has been in existence almost since the inception of the Petitioner's ownership of the hospital. The Petitioner has requested three extensions of time to file its proposed 1990 budget. It did not inform the Respondent of the debt restructuring problem in any of the extension requests. Without resolving the debt restructuring problem of the Petitioner, the Auditors cannot determine what effect a renegotiation of the Petitioner's debt may have on the Petitioner's financial statements for its 1988 fiscal year. There will be uncertainty concerning the 1988 fiscal year financial statements of the Petitioner until the Auditors issue their final audit report. If the Auditors issued an opinion letter as of the date of the formal hearing, they would have to issue a "disclaimer" letter. In issuing a disclaimer, an auditor declines to render an opinion concerning the financial statements. To avoid a disclaimer opinion letter, the Petitioner requested that the Auditors not issue their final audit report. Whether the Petitioner is a going concern does not impact on the calculation of its operational revenues and expenses as represented in the Petitioner's unaudited 1988 fiscal year financial statements. If the Petitioner is not considered a going concern the Petitioner would be considered on a liquidation basis for purposes of its financial statements. Therefore, the question of whether the Petitioner is a going concern does impact the manner in which its assets would be valued and the determination of the Petitioner's liabilities. A management representation letter, which the Auditors also need to complete their audit of the Petitioner, is a letter from the management of a business, such as a hospital, representing that management has made available all of the books and records of the hospital, that management understands generally accepted accounting principles and the financial statements of the hospital have been prepared in accordance with such principles, that all liabilities have been accrued and that proper disclosures have been made in the financial statements. A management representation letter is required by the American Institute of Certified Public Accountants before an audit opinion letter may be issued. A management representation letter should provide assurances to the auditors that management has made available all financial records and related data, and minutes of the meetings of the stockholders and directors, if a corporation, and that there are no irregularities involving management employees that could have a significant effect on the financial statements. Without a management representation letter there are no assurances that a hospital such as the Petitioner's has engaged in related-party transactions or, if so, the nature and impact on expenses of such transactions. In addition to submitting unaudited financial statements to the Respondent, the Petitioner provided the Respondent with a "comfort letter" from the Petitioner's Auditors. The Respondent needs audited actual experience in order for it to perform a full budget review of a hospital's proposed budget submitted pursuant to Section 407.50(3), Florida Statutes. The financial data contained in the audited actual reports of a hospital is used in the methodologies and formulas utilized by the Respondent in its budget review. The purpose of conducting a budget review is to determine the recommended levels of charges that a hospital may impose upon its patients in the budget year. Audited actual experience provides the starting point for determining whether a hospital's proposed budget is reasonable. A comfort letter merely indicating that the information on the financial statements should not change is not sufficient to provide the reliability the Respondent should demand of a hospital's financial statements. The Respondent's budget review includes an analysis of a hospital's ability to earn a reasonable rate of return. This analysis requires reliance upon the financial data contained in the hospital's balance sheet and income statement. The data must be reliable. Accuracy of the data can only be assured if it is part of an auditor's final report. As part of the audited actual experience of a hospital such as the Petitioner's hospital, it is reasonable for the Respondent to require that an audit opinion letter be provided. Without an audit opinion letter the Respondent cannot determine whether there are any disclaimers, qualifying statements or notes about subsequent events of the hospital. The Respondent does not have the resources necessary to perform its own audit of hospitals. Therefore, it is reasonable for it to require that hospital's provide audited actual experience to the Respondent. The rules of the Respondent allow it to waive the requirement that a hospital file audited financial statements. Rule 10N-1.006, Florida Administrative Code. The Respondent grants waivers pursuant to Rule 10N-1.006, Florida Administrative Code, if it is "impossible" for a hospital to file audited financial statements. The Petitioner did not file a request for such a waiver. The evidence failed to prove that the Respondent was prejudiced by the Petitioner's failure to file a request for a waiver. The Petitioner has failed to prove that the information necessary for it to file audited financial statements for its 1988 fiscal year was "not available at the time nor can be reasonably developed by the hospital " Unaudited financial statements may be relied upon for some purposes. The Respondent relies upon unaudited data for some purposes. But not for full budget review purposes. The weight of the evidence failed to prove that it is unreasonable for the Respondent to refuse to rely upon the Petitioner's 1988 fiscal year unaudited financial statements to complete the budget review the Respondent is required to conduct for 1990.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent issue a Final Order dismissing the Petitioner's Petition for Administrative Hearing. DONE and ENTERED this 31st day of May, 1990, in Tallahassee, Florida. LARRY J. SARTIN 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 31st day of May, 1990. APPENDIX TO RECOMMENDED ORDER The parties have 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. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1-7 and hereby accepted. The last two sentences of proposed finding of fact 6 is not supported by the weight of the evidence. 8 2. 9 1-2. 10 3 and 10. See 29. Not relevant. Hereby accepted. The proposed finding of fact that the data on the financial statements "will not change" and the last sentence are not supported by the weight of the evidence. 11-14. The last sentence is not relevant. See 26. 16 See 27-28. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 2. 3 4. Hereby accepted. 2 and 4. 6 6. 7 6-7 and 9. 8 8. 9 9-11. 10 12. 11-12 15. 13 12. 14 21. 15 3, 22 and 29. 16 21-22. 17 22-23. 18 16-19. 19 25. 20 Not relevant. The Intervenor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 3. 3 2. 4-8 Hereby accepted. 9-11 10. 12 16. 13 18. 14 16-19. 15 11-12. 16 11 and 13. 17 10, 14-15 and hereby accepted. 18 15. 19 Hereby accepted. 20 11. 21 14. 22 Hereby accepted. 23-26 8 27 20 and 22. 28 Hereby accepted. 29 9 and 14. 30 Hereby accepted. 31 8. 32 Not supported by the weight of the evidence. 33 21 and 24. 34 13. 35 12. 36 9. 37 12. 38 13. 39 29. 40 Hereby accepted. 41 26-27. 42 Hereby accepted. 43 9. 44 8 and hereby accepted. 45 21. 46 23. 47 24. 48 25. 49 22. 50 23 and hereby accepted. COPIES FURNISHED: James M. Barclay, Esquire Suite 500 315 South Calhoun Street Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Jack Shreve Public Counsel David R. Terry Associate Public Counsel Peter Schwarz Associate Public Counsel c/o The Florida Legislature 812 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1400 Stephen Presnell, General Counsel Health Care Cost Containment Board Woodcrest Office Park 325 John Knox Road Building L, Suite 101 Tallahassee, Florida 32303
The Issue The issue is whether the Department of Corrections' decision to select Intervenor as construction manager on Project No. VO- 04-CM was clearly erroneous, contrary to competition, arbitrary, or capricious, as alleged by Petitioner.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background In September 1998, Respondent, Department of Corrections (Department), issued a Request for Qualifications and Evaluations Procedures (RFQ) to select a construction manager for Project No. VO-04-CM, which involved an $18 million expansion and renovation of the Florida Correctional Institution in Lowell, Florida. The RFQ was directed to qualified minority construction firms as a "minority set aside." The successful firm would serve as a general contractor for the job, guarantee the price, and assume responsibility for any cost overruns on the project. All firms were to submit their qualifications with the Department by 4:00 p.m., October 20, 1998. After a pre-proposal meeting held on October 6, 1998, but prior to October 15, 1998, Addendum No. 1 to the RFQ was issued and clarified that all proposals must be filed by October 15, rather than October 20, that each firm have a bonding capacity of $6,000,000.00 for each of the three phases of the project, and that each firm must submit its bonding and insurance costs. The RFQ required that each firm file a letter of interest detailing the firm's qualifications to meet the selection criteria; an experience questionnaire and contractor's financial statement; resumes of proposed staff and staff organizations; examples of project reporting manuals, schedules, past experience, and examples of similar projects completed by the firm; references from past clients; and a reproduction of the firm's current state contractor's license, corporation charter, and Minority Business Enterprise (MBE) certification. Under the selection process established by the Department pursuant to Rule 60D-5.0082, Florida Administrative Code, a five-member selection committee, including four from the Division of Design and Construction, would "review all properly submitted proposals, and determine the three (3) firms with the highest score using the selection criteria established for the project." These criteria included experience, financial, schedule and cost control, office staff, site staff, information system, and location. The highest ranked firm would then be selected to negotiate a contract for the services. On October 15, 1998, applications were filed by five construction firms: Petitioner, Rattler Construction Contractors, Inc. (Rattler or Petitioner); Intervenor, A. D. Morgan Corporation (Intervenor); Linda Newman Construction Company, Inc. (Newman); Ajax Construction Company, Inc. (Ajax); and Freeman and Freeman Construction Company (Freeman). After an evaluation was conducted by the selection team, the applicants were assigned the following scores: Intervenor (85.6), Newman (75.2), Petitioner (66.2), and Freeman (20.8). Ajax was disqualified as being non- responsive on the ground it was not certified as a MBE. At a later point in the process, Freeman was disqualified for the same reason. Accordingly, as the highest ranked applicant, Intervenor was determined to be the most qualified firm, and the Department issued a letter on November 20, 1998, advising all contractors of its decision. Claiming that its submission was the only "compliant and responsive bid received" by the Department, Petitioner filed its protest on December 2, 1998. In its Formal Written Protest filed on December 14, 1998, as later amended on January 19, 1999, and then narrowed by the parties' prehearing statement, Petitioner contended that Intervenor had failed to comply with two material requirements: that it file audited financial statements and a current MBE certification. It further alleged that the second ranked applicant, Newman, had also failed to submit audited financial statements. Finally, it claimed that one of the members on the selection team was biased against Rattler. Because of the foregoing irregularities, Petitioner asserts that the Department's actions were "clearly erroneous, arbitrary, capricious, and illegal" in proposing to select Intervenor as its construction manager. As relief, Petitioner asks that Intervenor and Newman be disqualified as non-responsive, and because Rattler filed the "only complete and responsive bid," that the Department select Petitioner as its construction manager. Each of the alleged irregularities will be discussed below. Did the Department Err in Awarding Intervenor the Contract? Audited Financial Statements The RFQ, as amended, required that each minority contractor file, no later than October 15, 1998, an application and a "Contractor's Financial Statement as referenced in Chapter 60D-05 [sic], Florida Administrative Code." More specific instructions as to this latter requirement were found on page 5 of 21 of the Request for Qualification and Experience Questionnaire, which accompanied the RFQ. That document contained general and specific instructions. There, each applicant was directed to file a Financial Statement, which was described as follows: Financial Statement. This statement will be an audited report with comments, and not older than one (1) year. If the most current report has not yet been audited, the previous audited report with comment shall accompany the most recent financial statement. The RFQ described the foregoing requirement as one of the "REQUIRED SUBMITTALS." In response to this provision, an employee of Intervenor retyped its audited financial statements to conform with the format contained in the RFQ. In doing so, rather than copying the entire set of statements, she inadvertently copied only three pages, including a cover sheet. The first page was entitled "The A.D. Morgan Corporation Financial Statements, December 31, 1997 and 1996," and it reflected that the statements were prepared by Valiente, Hernandez & Co., P.A. (Valiente), a certified public accounting (CPA) firm. Testimony at hearing established that Valiente had in fact prepared audited financial statements for Intervenor for those two years. Attached to the cover sheet were Balance Sheets for the years ending December 31, 1996 and December 31, 1997. Absent, however, were the opinion letter by the CPA firm, notes to financial statements, income statement, and statement of cash flow. All of these items normally accompany audited financial statements. Even though Intervenor had audited financial statements prepared by a CPA firm, and the three pages submitted with its proposal were drawn from those statements, it is undisputed that the incomplete statements submitted by Intervenor were not "audited financial statements" as that term is commonly understood by accounting professionals. In the case of Newman, it submitted financial statements that had been reviewed, but not audited, by a CPA firm. In a review, there is no testing; no observation of inventory; no requirement for independent verification of cash balances or investment balances; no requirement for an attorney's letter; and no requirement that the accountants review the corporate minutes and other matters. In short, reviewed financial statements are not audited financial statements as that term is defined by accounting professionals. The Department did not view this requirement as being a material requirement, and thus it determined that Intervenor's and Newman's failure to file audited financial statements was a minor irregularity. This is because the Department measures the financial capability of a firm by looking collectively at its financial statements, bonding capacity, insurance costs, bonding costs, account receivables, and assets and liabilities. In other words, the Department wants sufficient information to verify that a contractor has the financial ability to undertake and complete the job. In making the above verification, the Department viewed a contractor's ability to secure a bond as one of the most important indicators of financial stability since bonding companies typically make a thorough analysis of a firm's financial capability before issuing a bond on a particular project. This was consistent with the instructions in paragraph B on page 6 of 21 of the RFQ, which stated that, in addition to the financial statement, the "financial capability" of a firm "should also include the bonding capacity of the firm." In the case of Intervenor, it was able to secure a bond capacity in excess of $20 million for single projects and in excess of $40 million for aggregate projects. When viewing all of the financial indicators submitted by Intervenor, the selection team was satisfied that Intervenor clearly had the necessary resources, working capital, and financial stability to perform the project. The Department has not strictly enforced the requirement that audited financial statements be filed with a proposal, and there is no record evidence that a vendor has ever been disqualified on this ground. Even so, the filing of audited financial statements is a "required submittal" by the RFQ's own terms, and the failure to do so renders Intervenor's and Newman's submissions as non-responsive. MBE Certification Intervenor has been a certified MBE since 1991. In its proposal, Intervenor submitted a copy of its MBE certification for the year ending September 24, 1998. To independently verify this representation, a member of the selection committee then contacted the Minority Business Advocacy and Assistance Office (MBAAO) of the Department of Labor and Employment Security, which issues certifications, to confirm that Intervenor was certified on a current basis. In response to that inquiry, the member received a list of all current MBE certified contractors. Intervenor was on that list. Petitioner points out, however, that the certification submitted with Intervenor's proposal expired on September 24, 1998, or before the application was filed, and thus the Department waived a material requirement. Relevant to this contention are the following facts. On September 11, 1998, or before its current certification had expired, Intervenor filed an affidavit for recertification with the MBAAO. Because of "computer glitches" and six office moves "in a very short time period," the MBAAO was unable to process all recertification applications before the date on which some certifications expired. However, it considered all businesses as being certified until a decision was made on all pending recertification applications. In Intervenor's case, the MBAAO granted its application for recertification on November 6, 1998, and issued Intervenor a new certification for the one-year period from September 24, 1998, to September 24, 1999. Given the foregoing circumstances, it is found that Intervenor had a current MBE certification when it filed its application, and the Department did not waive a material requirement in accepting Intervenor's certification which reflected an expiration date of September 24, 1998. Bias by a Selection Team Member James R. Ervin, a Department architect, was a member of the selection team. Ervin had served as project administrator on an earlier Department project in Wakulla County on which George Register, III, and his father, George Register, Jr., were involved. Because of two complaints filed against him by the younger Register, Ervin was taken off the Wakulla County project while the Department's Inspector-General conducted an investigation. George Register, III, is listed on Petitioner's application as one of its consulting engineers. Ervin discovered this mid-way through the evaluation process, and he initially considered recusing himself from the team. After mulling over the matter, he decided that he could fairly evaluate Petitioner's proposal. Contrary to Petitioner's assertion, there is no credible evidence that Ervin was biased against Petitioner during the evaluation process, or that he gave higher scores to Intervenor and Newman because of Register's complaints. Indeed, his scores were comparable to those of the other four evaluators. Even if Ervin's scores were discarded, the scores of the other four evaluators would still result in the same order of ranking. Therefore, the evidence does not support a finding that Ervin's participation on the selection committee was improper, as alleged in the Amended Formal Written Protest. The remaining allegation that certain members of the selection committee exhibited favoritism towards Intervenor and Newman, and bias against Petitioner, is without merit and has been rejected. Defects in Petitioner's Proposal Addendum No. 1 to the RFQ added Items 62 and 63, which required that each contractor provide its bonding and insurance costs. This "important information" was added to Addendum No. 1 at the specific request of the Department of Management Services (DMS), from whom many of the RFQ's provisions were drawn. As noted earlier, these items are two of the six items that the Department considers in determining the overall financial capability of a firm. In the Department's view, they are no less significant than the other items, including the financial statements. Intervenor's proposal included these costs. Petitioner, however, did not provide such costs in its proposal. In fact, Petitioner's representative was not aware of this requirement until after his proposal had been filed. Like the audited financial statements, the Department considered the failure to file this information to be a minor irregularity, and it waived Rattler's and Newman's omission. Because the Department considers these items to be as equally important as audited financial statements, and because they were so significant that the DMS specifically requested that they be placed in the RFQ, the items are found to be material, and a failure to file such information renders Petitioner's and Newman's proposals as non-responsive.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Corrections enter a final order withdrawing its proposed action, rejecting all proposals as being non-responsive, and advising that it will solicit new proposals for Project No. VO-04-CM. DONE AND ENTERED this 4th day of March, 1999, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 4th day of March, 1999. COPIES FURNISHED: Michael W. Moore, Secretary Department of Corrections 2601 Blair Stone Road Tallahassee, Florida 32399-2500 H. Richard Bisbee, Esquire Theresa M. Bender, Esquire Post Office Box 11068 Tallahassee, Florida 32302-3068 Scott E. Clodfelter, Esquire Obed Dorceus, Esquire Department of Corrections 2601 Blair Stone Road Tallahassee, Florida 32399-2500 Mark K. Logan, Esquire 403 East Park Avenue Tallahassee, Florida 32301 Louis A. Vargas, General Counsel Department of Corrections 2601 Blair Stone Road Tallahassee, Florida 32399-2500
The Issue This proceeding commenced upon the Application for Attorneys' Fees and Costs filed by Petitioners pursuant to Section 57.111, Florida Statutes. The Respondent filed an Answer and requested an evidentiary hearing. The Petitioners and Respondent entered into a Prehearing Stipulation identifying the issues of fact to be litigated as (1) whether or not the actions of the Department of Banking and Finance were substantially justified, and (2) whether or not it would be unjust to award attorneys' fees against the Department. The issues of law identified by the Parties were (1) if the actions of the Department of Banking and Finance were not substantially justified, should the attorneys' fees and costs be apportioned between DOAH Case No. 86-1553 and DOAH Case NO. 86-1336, and (2) whether or not Monica Iles and Robert Iles are "small business parties." The Prehearing Stipulation also contains six paragraphs of facts that are admitted by all parties. At the hearing all parties presented testimony and exhibits and following the hearing a transcript of the proceedings was filed with the Hearing Officer. Thereafter, all parties filed proposed orders containing proposed findings of fact and conclusions of law. Specific rulings on all findings proposed by all parties are contained in the Appendix which is attached to and incorporated into this Final Order.
Findings Of Fact Based on the admissions of the parties and on the evidence received at the hearing, I make the following findings of fact. Findings Based on Admissions The attorney's fees and costs itemized in the petition were for the preparation of both DOAH Case Nos. 86-1336 and 86-1553. DOAH Case Nos. 86-1336 and 86-1553 were consolidated for hearing and were tried together before Hearing Officer Michael M. Parrish. DOAH Case No. 86-1336 resulted in a Final Order suspending the registration of Structured Shelters Financial Management, Inc., (hereinafter "SSFM") and vacating the order revoking the registration of Structured Shelters Securities, Inc. (hereinafter "SSSI"). The Department initiated the administrative action against the two corporations and the two individuals by serving them with a Cease and Desist Order. The case was tried before Hearing Officer Michael M. Parrish. Structured Shelters Financial Management, Inc., and Structured Shelters Securities, Inc., are "small business parties." The Petitioners were the prevailing parties in DOAH Case No. 86-1553. Finding Based on Evidence Presented at Hearing Robert Iles' profession is that of a business consultant. Mr. Iles files a Schedule C with his federal income tax return which identifies his business income and expenses. Mr. Iles' business office is in Edgewater, Florida. Mr. Iles has not more than 25 full-time employees, nor a net worth of more than two million dollars. Monica Iles is a business consultant who files a Schedule C with her federal income tax return separate from that of Robert Iles. Mrs. Iles has no more than 25 full-time employees, nor has she a net worth of more than two million dollars. The attorney for Petitioners submitted an itemized statement of attorneys' fees and costs incurred in defending against Respondent's Cease and Desist Order. The invoices rendered are reasonable and substantiated. The hourly rate of $125.00 per hour billed by the attorney for Petitioners is reasonable. The total amount billed for Petitioner's attorney's fees was $8,375.00, plus costs in the amount of $1,180.73, for a grand total of attorney's fees and costs in the amount of $9,555.73. The Department of Banking and Finance was not a nominal party in DOAH Case No. 86-1553. The initial decision to take action against the Petitioners was made by the Director of the Division of Securities, who in turn referred the case to the Department legal section. The case was then referred to the Orlando office where it was reviewed by Mr. Robert Good. Mr. Good has been with the Department for eight and a half years. He is an attorney in charge of the Department's Orlando office. He is an expert in the field of securities law. In this particular case, Mr. Good initially questioned whether the corporate business plans being sold by the Petitioners were securities. Therefore, he carefully evaluated the evidence presented to him by the Department's securities examiners and investigators in light of the applicable case law. He relied on a Report of Examination and a Report of Investigation in reaching his conclusion that the corporate business plans being sold by the Petitioners were securities. These reports were compiled during investigations of SSFM, SSSI, and Structured Shelters, Inc., by Department securities examiners and investigators. Although the Report of Investigation dealt with a corporation named Structured Shelters, Inc. (a corporation different from the Petitioner corporations), Mr. Good concluded that the report was relevant to the activities of the Petitioners for reasons which included the following. Robert Iles was the President and/or a Director of Structured Shelters, Inc., SSFM, and SSSI. Monica Iles was the Treasurer, Secretary, Director, and/or registered agent of Structured Shelters, Inc., SSFM and SSSI. Structured Shelters, Inc., offered at least one corporate investment program, the children's cassette master recordings, which was very similar to the children's cassette master recording program being offered by SSFM. The Report of Investigation included a Final Order entered by the State of Alaska against Structured Shelters, Inc., and Robert Iles, which Final Order was issued after an administrative hearing at which testimony was presented and the parties were represented by legal counsel. The Alaska Final Order concluded that the children's classic cassette recording program was a security. The Report of Investigation also included an Order from the Ohio Division of Securities against Structured Shelters, Inc. The Ohio Order discussed the children's classic cassette recording program offered by Structured Shelters, Inc., in the State of Ohio and concluded that the program was a security. The programs which were the subjects of the Alaska and Ohio Orders were very similar to the corporate business plans being offered by the Petitioners. The Report of Investigation also contained a letter from the Ohio Division of Securities which listed about 48 investors in the various corporate business plans of Structured Shelters, Inc. Department investigators contacted these investors and received eleven responses indicating that Florida investors had invested in various corporate business plans of Structured Shelters, Inc. Mr. Good also reviewed and relied upon the Report of Examination prepared by the Division of Securities. This report included numerous documents obtained from the business records of the Petitioners which indicated that SSFM, SSSI, Robert Iles, and Monica Iles were selling corporate business plans or offering to sell corporate business plans in the State of Florida. These documents included such things as an Investment Advisory Agreement between investors, SSFM, and SSSI, a description of the children's cassette recording program corporate business plan, the cover letters mailed to potential investors, an SSFM ledger book containing a list of numerous sales of corporate business plans by SSFM to investors in the State of Florida, a memo on the stationery of Monica Iles listing the names of numerous Florida investors, and numerous letters on SSFM's letter head sent to Florida investors. The Report of Examination also included information from the Florida Secretary of State's office which showed that SSFM and SSSI had the same address and that Robert Iles and Monica Iles were both officers and/or directors in both corporations. After reviewing the Report of Investigation and the Report of Examination, Mr. Good researched the applicable law. Based on his review of the information in the two reports and on his legal research, Mr. Good concluded that the corporate business plans being sold through SSFM were "securities" and that those securities were being sold to Florida investors. The Cease and Desist Order was filed against SSFM because all of the sales of the subject business plans were made through that corporation, because the corporation had officers in the State of Florida, and because correspondence, invoices, and the corporate ledger book provided additional documentation that sales were being made from Florida. The Cease and Desist Order was filed against Robert Iles due to the fact that he was actively involved in selling the subject business plans to the investors. The matter of whether to also file the Cease and Desist Order against Monica Iles was a close call and the files were carefully examined to determine whether there was sufficient evidence of sales activity by Monica Iles to warrant including her in the Cease and Desist Order. Based on correspondence and invoices contained in the Report of Examination, Mr. Good concluded there was sufficient evidence of sales activity by Monica Iles to include her in the Cease and Desist Order. The Cease and Desist Order was filed against SSSI on the basis of documents contained within the Report of Examination and Report of Investigation establishing the commonality of corporate officers and directors in SSSI, SSFM, and Structured Shelters, Inc., and on the basis of the investment advisory agreement entered into between investors, SSFM and SSSI. The Investment Advisory Agreement set forth the rights and responsibilities of the investor and SSFM. According to this agreement, SSSI would act as a securities broker for its client, SSFM. It appeared from the agreement that SSFM was able to bind SSSI to perform for SSFM's benefit. The only corporate signature provided for on the agreement was for a signature on behalf of SSFM; no signature appeared on behalf of SSSI. Thus, it appeared that SSFM and SSSI were being operated as one company. Based on the Investment Advisory Agreement and the commonality of corporate officers and directors, it appeared that SSFM had the power to act on behalf of SSSI and, therefore, the Cease and Desist Order was also filed against this corporation. Prior to filing the Cease and Desist Order against SSFM, SSSI, Robert Iles, and Monica Iles, all of the evidence in the possession of the Department was carefully reviewed by Mr. Good, an expert in securities law, to determine whether there was a reasonable basis for taking action against the Petitioners. Mr. Good concluded that the evidence in the possession of the Department was sufficient to warrant the filing of a Cease and Desist Order against the Petitioners. For reasons not clearly explained in the record of this proceeding, the attorney who represented the Department at the formal hearing regarding the Cease and Desist Order (an attorney other than Mr. Good) failed to present all of the evidence the Department had available.
The Issue Whether Petitioner's "change of status" application should be denied for the reasons set forth in the Notice of Intent to Deny.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Petitioner has an undergraduate and master's degree in civil engineering from the Georgia Institute of Technology (received in 1962 and 1964, respectively) and a law degree from Emory University (received in 1980). In 1968, Petitioner went into the consulting business, and he has had his own business ever since. Since 1968, Petitioner has been licensed as a professional engineer, at one time or another, in approximately 20 different states, including Florida. He has held his Florida license since 1970. The other states in which he is currently licensed are Georgia, Alabama, New York, and Maryland. Petitioner is licensed to practice law in Georgia, but is on inactive status. Petitioner has been licensed as a real estate broker in Florida since 2001 or 2002. Petitioner has been certified as a general contractor in Florida since 1980. He was the qualifier for McKinney Drilling Company from 1980 until 1994. Since 1994, he has been the qualifier for Pressure Concrete, Inc. (Pressure), which approximately a year ago was purchased by Proshot Concrete, Inc. (Proshot). Petitioner has never received any discipline in connection with any of the professional licenses he has held over the years, including the certification allowing him to engage in general contracting in Florida; nor does he have any criminal record. Petitioner has not undertaken any construction or consulting project that has resulted in a lawsuit, judgment, or lien being filed. Petitioner has not been involved in any project where there has been a default triggering a claim against a payment or performance bond. All of the vendors and suppliers he has used on construction projects have been paid. Petitioner has never filed for bankruptcy. There are no lawsuits now pending against Petitioner. In or around September 2006, Petitioner completed and submitted an application to the Board seeking a "change of status" in his certification to enable him (as a general contractor) to qualify Proshot instead of Pressure. Petitioner used a Board-generated form, DBPR CILB 4363-Change of Status Application From One Business Entity to Another (Form), to apply for such a "change of status." The "Financial Responsibility" section of the Form contained the following questions and accompanying instructions: NOTE: If you answer "Yes" to any of the questions below, you must provide an explanation on DBPR 0060-General Explanatory Description form and attach legal documentation, i.e., satisfaction of lien, judgment, payment schedule, etc. If you have been convicted of a felony, you must submit proof of reinstatement of civil rights. The following persons must answer the financial responsibility questionnaire: Qualifying Agent All Owners/Partners Have you, or a partnership in which you were a partner, or an authorized representative, or a corporation in which you were an officer or an authorized representative ever: Undertaken construction contracts or work that a third party, such as a bonding or surety company, completed or made financial settlements? Had claims or lawsuits filed for unpaid past-due bills by your creditors as a result of construction operations? Undertaken construction contracts or work which resulted in liens, suits, or judgments being filed? (If yes, you must attach a copy of Notice of Lien and any payment agreement, satisfaction, Release of Lien or other proof of payment.) Had a lien filed against you by the U.S. Internal Revenue Service or Florida Corporate Tax Division? Made an assignment of assets in settlement of construction obligations for less than the debts outstanding? Been charged with or convicted of acting as a contractor without a license, or, if licensed as a contractor in this or any other state, been subject to any disciplinary action by a state, county, or municipality? (If yes, you must attach a copy of any state, county, municipal or out- of-state disciplinary order or judgment.) Filed for or been discharged in bankruptcy within the past five years? (If "yes," you must attach a copy of the Discharge Order, Order Confirming Plan, or if a Corporate Chapter 7 case, a copy of the Notice of Commencement.) Been convicted or found guilty of or entered a plea of nolo contendere to, regardless of adjudication, a crime in any jurisdiction? Note: If you, the applicant/licensee, have had a felony conviction, proof that your civil rights have been restored will be required prior to Licensure. Petitioner answered "No" to all of these questions, believing, in good faith, that such information was accurate. The final page of the Form contained the following "Attest Statement," which Respondent signed: I have read the questions in this application and have answered them completely and truthfully to the best of my knowledge. I have successfully completed the education, if any, required for the level of licensure, registration, or certification sought. I have the amount of experience required, if any, for the level of licensure, registration, or certification sought. I pledge to comply with the applicable standards of practice upon licensure, registration, or certification. I understand the types of misconduct for which disciplinary proceedings may be initiated. As part of the application process, Petitioner made the necessary arrangements with Advantage Information Services, LLC (Advantage) to directly provide the Board with a credit report. On or about October 26, 2006, Advantage sent the Board a two-page Transunion credit report (Transunion Report) containing Petitioner's "credit profile," along with a one-page report of the results of a "check[]" of public records at the "local, statewide, and national level" (Records Check Report). The Transunion Report revealed a federal tax lien in the amount of $35,100.00 that had been filed against Petitioner in 1997 for unpaid personal income taxes. Petitioner was aware of this lien at the time he filled out the Form, but did not report it in response to Question 4 of the "Financial Responsibility" section because he did not understand the question to ask about liens such as this one which were unrelated to his business activities. The Internal Revenue Service is withholding 15% of Petitioner's monthly Social Security benefit and applying it to reduce the amount Petitioner owes for his unpaid personal federal income taxes. The Records Check Report read as follows: Public records have been checked on a local, statewide, and national level and are incorporated within the report. Additional records are as follows: Cheatham Register of Deeds, TN - Federal Tax Lien Release, 01/11/2005, Case #74147 - Book/Page 131/552 - $30,908.00 - Not Paid. Plaintiff: IRS Walton County Superior Court GA - County Tax Lien, 03/12/1998, $387.00 - Not Paid. Case Number - B3P253C, Book/Page - 3/253 Plaintiff: County Tax Assessor Dekalb County State Court, GA - Civil Judgment, 05/01/1991, $49,283.00 - Not Paid. Case Number - 814497 Plaintiff: Bank South The 1998 Walton County Tax lien noted in the Records Check Report concerned an assessment made on tangible personal property in the form of an airplane owned, not by Petitioner, but by a corporation of which he was the president. The lien did not arise out of any activities in which Petitioner was engaged as a general contractor. The 1991 Dekalb County civil judgment noted in the Records Check Report required Petitioner to repay a bank loan Petitioner had co-signed for a friend. It too had nothing to do with his activities as a general contractor. It was only after the Board had provided Petitioner with a copy of the Records Check Report that Petitioner first became aware of the existence of the 1998 Walton County Tax lien and the 1991 Dekalb County civil judgment.2 As noted above, on April 18, 2007, the Board issued its Notice of Intent to Deny Petitioner's "change of status" application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Board find Petitioner qualified for the "change of status" for which he has applied. DONE AND ENTERED this 1st day of November, 2007, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 1st day of November, 2007.
Findings Of Fact Petitioner, Wood-Hopkins Contracting Company, is a general contractor specializing in heavy industrial and water-related construction activities. Its principal offices are located at 1901 Hill Street, Jacksonville, Florida. On February 8, 1982, Petitioner filed an application for a certificate of qualification with Respondent, Department of Transportation. A certificate of qualification is necessary in order for any person or firm to bid on road and bridge work to be let by the Department. The application included, inter alia, financial statements for the forty weeks ending October 3, 1981. The statements were prepared by Coopers and Lybrand, an independent accounting firm. On February 10, 1982, Respondent advised Petitioner by certified mail that its application was being denied on the ground "[t]he financial statements submitted (were) of a date of more than 120 days prior to the application." The letter of denial precipitated the instant proceeding. Petitioner is currently qualified to bid on construction projects to be let by the Department. However, its certificate of qualification expires on March 27, 1982. It is also qualified to bid on contracts let by the Department of General Services and the University System for the State of Florida. Prior to 1981, Petitioner's fiscal year-end was the Saturday nearest December 31 of each year. Therefore, its financial statements for 1980 were based upon the fifty-two weeks ended December 28, 1980. Sometime during 1981, Petitioner's parent company, Rowe Corporation, changed the fiscal year-end to the Saturday nearest September 30 of each year. Consequently, its most recent financial statements under the new fiscal year were based upon the forty weeks ended October 3, 1981. Department rules and applicable statutory provisions require that financial statements submitted with an application reflect the financial position of the applicant as of a date not more than one hundred twenty days prior to the date of filing of the application. Petitioner's financial statements preceded the date of filing by one hundred twenty-eight days, or eight days more than the law allows. Petitioner contends that it has been qualified to bid for a number of years, and its financial position has not materially changed even though its statements are more than four months old. It argues that the application of the rule in this case is arbitrary given the fact that it was only eight days late in filing its statements, and that the denial of its right to bid is harsh treatment for such a minor violation of the rule. Respondent processes approximately five hundred applications for certificates of qualification each year. Many of these are not timely filed, thereby prompting requests for waiver of the rule. However, it has a uniform policy of not waiving the rule in any cases, and to require strict compliance with the rule.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner's application for a certificate of qualification be DENIED. DONE and ENTERED this 24th day of March, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER 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 24th day of March, 1982.
The Issue Whether the Respondent committed the violations alleged in the Administrative Complaint dated February 5, 1999, and, if so, what penalty should be imposed. The Respondent maintains that the instant action is barred by laches and violates Section 455.225, Florida Statutes.
Findings Of Fact Petitioner is the state agency charged with the responsibility of regulating the practice of certified public accountants licensed within the state. At all times material to the allegations of this case, the Respondent, Robert Jarkow, has been licensed in Florida as a certified public accountant, license number AC0010963. On or about December 1996, the Respondent orally agreed to provide accounting services for an individual named Kasman who was doing business as Traditions Workshop, Inc. (Traditions). Traditions manufactured uniforms and listed the federal government among its clients. Revenues to the company from the sale of uniforms were presumably posted in accordance with written contracts. Although the Respondent participated in the monthly completion of financial records for the company, the exact description of his responsibilities for the company and the individual are not known. It is undisputed that Ms. Kasman asked the Respondent to provide a financial statement for the company as part of an effort to secure a line of credit from a bank in New York. It is also undisputed that Ms. Kasman refused to pay for the statement. According to the Respondent, based upon that refusal, he declined to prepare the instrument. Nevertheless, a document entitled "Financial Statements" was generated with a notation "MANAGEMENT USE ONLY-NOT FOR DISTRIBUTION." The Respondent maintains that the document was not prepared as a financial report and that if generated using his data disk it was done without any intention on his part for the product being used to secure a line of credit. The document did not comply with provisions of accounting practice. The Respondent admitted that when his relationship with the party deteriorated, and payment for services was not rendered, he did not release information to a succeeding accountant. Ms. Kasman needed the information, depreciation schedules, in order to accurately complete tax records for Traditions. The Respondent attempted to locate Ms. Kasman and her bookkeeper for hearing but was unable to do so. Ms. Kasman filed a complaint with the Petitioner against the Respondent that was not investigated until several months after it was filed. The Respondent obtained a civil judgment against Traditions for unpaid accounting fees. The Administrative Complaint filed in this case was submitted over a year after the consumer complaint. Neither party presented testimony from the complainant, her bookkeeper, or her succeeding accountant.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation enter a final order finding the Respondent violated Rule 61H1-23.002, Florida Administrative Code, as set forth in Count II of the Administrative Code; imposing an administrative fine in the amount of $1000; and placing the Respondent on probation for one year subject to terms as may be specified by the Board of Accountancy. DONE AND ENTERED this 4th day of December, 2001, in Tallahassee, Leon County, Florida. ___________________________________ J. D. PARRISH Administrative Law Judge Division of Administrative Hearings 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 this 4th day of December, 2001. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-2202 Victor K. Rones, Esquire Law Offices of Rones & Navarro 16105 Northeast 18th Avenue North Miami Beach, Florida 33162 Martha Willis, Division Director Division of Certified Public Accounting Department of Business and Professional Regulation 240 Northwest 76 Drive, Suite A Gainesville, Florida 32607 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
