The Issue Whether Respondents acted as a loan broker by assessing or collecting advance fee payments from borrowers in violation of sections 687.14(4)(a) and (b) and 687.141(1), Florida Statutes, and, if so, the appropriate penalty to be imposed against Respondents.
Findings Of Fact OFR is responsible for the administration and enforcement of chapter 687, Florida Statutes. On December 13, 2010, First Solutions, Inc. (“First Solutions”), was incorporated in the state of Florida. At all times material hereto, Andrew Mangini has been the sole officer/director of First Solutions. The mailing address of First Solutions and Mr. Mangini are the same: 830 Hawthorn Terrace, Weston, Florida 33327. At all times material hereto, First Solutions has been the sole owner of the fictitious name, Credit One. Credit One was registered as a fictitious name with the State of Florida, Department of State, on December 22, 2010. The mailing address for the fictitious name of Credit One is 830 Hawthorn Terrace, Weston, Florida 33327. On July 20, 2010, Unsecured Loan Source II, Inc., was incorporated in the state of Florida. At all times material hereto, Michael Puglisi has been the sole officer/director of Unsecured Loan Source II, Inc. The mailing address of Unsecured Loan Source II, Inc., is 5340 North Federal Highway, Suite 201, Lighthouse Point, Florida 33064. On January 22, 2009, Internet Transaction Center, Inc., was incorporated in the state of Florida. At all times material hereto, Mr. Mangini and Mr. Puglisi have been officers/directors of Internet Transaction Center, Inc. The mailing address of Internet Transaction Center, Inc., is 830 Hawthorn Terrace, Weston, Florida 33327. During the time in which Mr. Puglisi was an officer/director of Internet Transaction Center, Inc., his mailing address was 5340 North Federal Highway, Lighthouse Point, Florida 33064. At all times material hereto, Respondents operated and conducted business as Unsecured Loan Source and Credit One Total. On December 24, 2010, Mr. Mangini opened a business bank checking account at TD Bank, N.A., in the name of First Solutions, Inc., d/b/a Credit One. In early 2012, Nicole Gentry sought to obtain an unsecured personal loan over the internet. Ms. Gentry’s internet search led her to Unsecured Loan Source. Ms. Gentry contacted Unsecured Loan Source by telephone and spoke with a representative named “Ed” about securing an unsecured personal loan. Ms. Gentry provided “Ed” with certain personal, credit, and bank account information to withdraw a loan fee of $499.00. Ms. Gentry paid the $499.00 loan fee in order to obtain a personal loan from Unsecured Loan Source. The $499.00 fee was debited from Ms. Gentry’s bank account shortly after she submitted her online application for the loan, and the fee was deposited directly into the TD business bank checking account of First Solutions, Inc., d/b/a Credit One. Subsequently, Ms. Gentry received an email requesting additional information, and she provided the information requested. However, Ms. Gentry never received a loan. In August 2011, Rosa Saenz of Taft, California, attempted to obtain an unsecured personal loan. Ms. Saenz’s internet search led her to Credit One Total. Ms. Saenz contacted Credit One Total and spoke with a representative named “Nick” about securing an unsecured personal loan in the amount of $5,000. Ms. Saenz completed a form titled “Credit One Total Payment by Check Authorization Form” and faxed it to Credit One Total. The form reflects that Credit One Total is located at “5340 North Federal Hwy #201 Lighthouse Point, FL 333064 Ph. 312-554-5980 Fax 954-531-1440.” In the form, Ms. Saenz provided Credit One Total with certain personal, credit, and bank account information, so that Credit One Total could withdraw an initial installment loan fee of $267.00. Ms. Saenz made the initial installment fee payment of $267.00, and, within a couple of weeks, she made a second installment fee payment to Credit One Total. Ms. Saenz did not specify the amount of the second installment. No direct evidence was presented that the two payments made by Ms. Saenz were, in fact, deposited into the First Solutions business bank checking account at TD bank. The bank records received in evidence do not include records from the year 2011, and begin with the year 2012. However, the business checking account of First Solutions was utilized by Credit One Total. The TD bank records reflect that checks made payable to Credit One Total were deposited directly into the business bank checking account of First Solutions, Inc., d/b/a Credit One. Both payments were made by Ms. Saenz as an advance fee in order that she would obtain the loan from Credit One Total, and so that Credit One would repair her credit report. The credit repair, however, was ancillary to Ms. Saenz’s principal reason for making the advance fee payments--to obtain a personal loan. Although Ms. Saenz paid the two installment fee payments to Credit One Total for a loan, she never received a loan. The persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents assessed or collected advance fee payments from two borrowers, Ms. Gentry and Ms. Saenz. The clear and convincing evidence adduced at hearing establishes that Respondents acted as a loan broker by assessing or collecting advance fee payments from Ms. Gentry and Ms. Saenz. Respondents did not have an exemption from section 687.14 in order to be considered a loan broker. OFR failed to prove by persuasive, credible, and clear and convincing evidence that Respondents acted as a loan broker with regard to anyone other than Ms. Gentry and Ms. Saenz.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Office of Financial Regulation, enter a final order finding Respondents operated as a “loan broker” by assessing or collecting advance fees in two instances in violation of section 687.141(1), Florida Statutes; imposing a total fine not to exceed $10,000; and ordering Respondents to cease and desist from all such activity. DONE AND ENTERED this 15th day of February, 2016, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 15th day of February, 2016.
The Issue The issue is whether petitioner's average final compensation and retirement service credit were properly calculated.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Dr. Michael Kasha, is a former professor in the School of Arts and Sciences at Florida State University. His most recent stint of employment occurred during school year 1995-96 when he was employed in the Institute of Molecular Biophysics. He retired at the end of December 1995, and counting several years of out-of-state service, he had a total of 50.58 years of creditable service. In November 1995, petitioner contacted respondent, Division of Retirement (DOR), for the purpose of determining his Average Final Compensation (AFC) for retirement purposes. That agency has the statutory responsibility of performing all retirement related calculations. In making its calculations, DOR determined petitioner's service credit for his last fiscal year of service (1995-96) by using a nine-month work year divided by six months of actual service (July-December 1995), or a .67 service credit. When this factor was applied to his compensation received for the six months of service, it produced a much lower annualized salary for ranking purposes than petitioner expected. Contending that a twelve-month work year should have been used, rather than the nine months used by DOR, petitioner filed a request for a hearing to contest DOR's action. During petitioner's last fiscal year of service, he was contracted to work from July 1 to July 28, 1995, by a Summer Supplemental Employment Contract. In addition, he was employed under a Nine Month Employment Contract from August 8, 1995, to May 6, 1996. On January 23, 1996, however, this contract was mutually revised by the parties to provide that petitioner's employment would terminate on December 29, 1995. Between July 1, 1995, and December 29, 1995, the parties agree that petitioner received $67,290.22 in total compensation from the university. To determine a member's appropriate service credit, DOR rule 60S- 2.002(4)(a) provides that if a member earns service credit for fewer months than comprise his work year, he shall receive a fraction of a year of service credit, such fraction to be determined by dividing the number of months and fractions thereof of service earned by the number of months in the approved work year. Since petitioner worked only six months during his last work year, the rule requires that this period of time be divided by "the number of months in the approved work year" to calculate his appropriate service credit. Members of the retirement system are employed for either nine, ten or twelve months each fiscal year, depending on the nature of their jobs. As to university instructional/academic members, such as petitioner, DOR rule 60S- 2.002(4)(b) defines the work year to be the number of months in the full contract year or nine months, whichever is greater, as specified by the contract between the employee and the school system. Because university faculty members normally work under a nine-month contract, DOR used that time period to establish petitioner's work year. In doing so, DOR excluded petitioner's Supplemental Summer School Contract on the theory it was "supplemental to (his) regular 9 month contract." That is to say, petitioner earned a maximum full year of creditable service during the nine months, and the three months in the supplemental contract would not add any additional creditable service. This determination is in conformity with the rule. Since petitioner's actual service credit for fiscal year 1995-96 was six months, that is, he worked full-time from July 1 through December 29, 1995, the computation under rule 60S-2.002(4)(a) produced a service credit of .67. Petitioner's compensation of $67,290.22 was then divided by the .67 factor and resulted in an annualized salary for ranking purposes of $100,433.16. Since the salary was not one of petitioner's highest fiscal years of salary, it was excluded from his AFC. Petitioner contends, however, that his work year is actually twelve months, rather than nine, if his Supplemental Summer School Contract is included. He points out that the university has always required that he and other science professors be on campus twelve months a year, unlike most other faculty members. Despite this requirement, the university has never used a twelve-month contract for this group of professors. Instead, it has relied on a combination of regular and supplemental contracts. If a twelve month work year had been used for petitioner's last fiscal year, this would have produced a service credit of .50, which if applied to his compensation, would have produced an annualized salary for ranking purposes of $134,580.44. This in turn would increase petitioner's retirement benefits by more than $1,200 per year. There is no provision in the DOR's rules which permits the use of a twelve-month work year in calculating the service credit for any person who is employed under a nine-month contract. While this may be unfair to members who find themselves in petitioner's circumstances, until the rule is changed, it must be uniformly applied. Therefore, the request should be denied.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division of Retirement enter a final order denying petitioner's request to have his retirement benefit calculated using a twelve- month work year for his last fiscal year of employment. DONE AND ENTERED this 22nd day of January, 1997, in Tallahassee, Florida. DONALD R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of January, 1997. COPIES FURNISHED: Dr. Michael Kasha 3260 Longleaf Road Tallahassee, Florida 32310 Stanley M. Danek, Esquire Division of Retirement 2639-C North Monroe Street Tallahassee, Florida 32399-1560 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560
The Issue Whether Petitioners are liable for the payment of amounts set forth in Respondent's Notice of Assessment for fiscal fund years 1977-78, 1979-80, 1980- 81, and 1981-82, dated November 9, 1984, pursuant to Chapter 768, Florida Statutes. This proceeding arose as a result of petitions filed by two groups of hospitals contesting Notice of Assessment issued by the Department of Insurance on November 9, 1984, based upon the certification by the Board of Governors of the Florida Patient's Compensation Fund to the Insurance Commissioner of a deficiency in the amount of money available to pay claims for the 1977-78, 1979- 80, 1980-81, and 1981-82 fiscal Fund Years. The proposed assessment seeks payment of the alleged deficiency in the total amount of some 57 million dollars from health care providers who were members of the Fund during the fund years in question, pursuant to Section 768.54, Florida Statutes. Two groups of hospitals subsequently filed petitions contesting the proposed assessment. They consist of Tallahassee Memorial Regional Medical Center and 42 other hospitals (Case No. 34-4398), and Southeast Volusia Hospital District and 64 other hospitals (Case No. 85-4399). A third petition was filed by Miami General Hospital, Inc. shortly before the final hearing herein (Case No. 85-0992). The three cases were consolidated for hearing. An additional petition filed by Harborside Hospital was merged with the petition of Tallahassee Memorial Regional Hospital, et al. Mount Sinai Medical Center of Greater Miami, Inc., one of the petitioners in Case No. 84-4398, filed a "Supplemental Petition" raising additional disputed issues, including the question of whether the Department of Insurance was required to consider the impact of the loss of Medicare reimbursement on individual member hospitals in allocating the proposed assessment to such hospitals. Intervention as a party respondent was granted to the Florida Patient's Compensation Fund. By prehearing orders, it was determined that questions involving Medicare reimbursement, the setting of fees for various classes of health care providers, and the repeal of the "statutory cap" by Chapter 83-206, Laws of Florida, amending Section 768.54, Florida Statutes, were not properly in issue in this proceeding. The parties entered into a prehearing stipulation that set forth certain agreed facts. However, Respondents reserved the right to object to their relevance or materiality. Such of the agreed facts as are deemed relevant are included hereinafter. The following issues of law remain for determination: Whether the Fund and the Department properly applied Section 768.54, Florida Statutes, in certifying and approving a deficit and assessment for each of the subject Fund years based on the reserving practices and procedures employed by the Fund; particularly: (a) in failing to adjust or write down reserves to reflect the amounts of known settlements and verdicts, plus accrued interest as of the certification date. (b) by the manner in which claims supervisors and the claims committee for the Fund posted or set reserves on individual cases. (c) in that the reserves set by the Fund on known cases are redundant. Whether the Fund and the Department properly applied the $15 million maintenance cap with respect to the actual assessment for each Fund Year. At the hearing, Petitioners presented the testimony of Lee M. Smith, who was accepted as an expert in actuarial science, and Catherine M. Sims, Administrative Manager of the Florida patient's Compensation Fund. Additionally, petitioners submitted deposition testimony of Michael Rinehart, Administrator for Automobile and General Liability Claims for the Division of Risk Management, Department of Insurance, and excerpts of prior testimony of John W. Odem. Petitioners submitted 16 exhibits in evidence which are numbered according to the exhibit list contained in the Prehearing Stipulation. Respondents presented the testimony of Ms. Sims, Charles Portero, Claims Manager of the Florida Patient's Compensation Fund, who was accepted as an expert in claims handling and reserving practices, and Jerome Vogel, an actuary with the Department of Insurance who was accepted as an expert in that field. Respondents also submitted the deposition testimony of Ward Johnson, Vice President of Claims for Alexsis Risk Management, and James O. Wood, a Consultant Actuary employed by Tillinghast, Nelson and Warren, Inc. Respondents submitted 18 exhibits, including supplemental excerpts of the prior testimony of John W. Odem and Michael Rinehart. Respondents' exhibits also follow the numbers set forth in the Prehearing Stipulation, except for exhibits which were not listed therein. At the conclusion of the hearing, certain of Respondents' answers to Petitioners' request for admissions were received in evidence. Certain other answers were proffered, as were a number of Petitioners' exhibits, as reflected on the record. The parties have submitted proposed recommended orders that have been fully considered. All matters therein have been ruled on directly or indirectly herein, except for proposed findings of fact that have been rejected as subordinate, cumulative, immaterial, or unnecessary.
Findings Of Fact The Florida Patient's Compensation Fund (Fund) is established under Chapter 768, Florida Statutes, for the purpose of paying claims against member health care providers, including hospitals, in amounts exceeding statutory limits which must be maintained by the health care provider as primary coverage. The Fund is operated subject to the supervision and approval of a Board of Governors which consists of members representing the insurance industry, the legal and medical professions, hospitals and the general public. Annually, each health care provider electing to become a member of the Fund pays certain fees established by statute for deposit into the Fund. Each fiscal year of the Fund operates independently of preceding fiscal years and participants are only liable for assessments for claims from years during which they were members of the Fund. If the Fund determines that the amount of money in an account for a given fiscal year is insufficient to satisfy claims, it certifies the amount of projected excess or insufficiency to the Insurance Commissioner with a request that he levy an assessment against Fund participants for that fiscal year. Subsection 768.54(3)(c), Florida Statutes (1981), which was the statutory language applicable during all fund years in question, provides that the Insurance Commissioner shall levy such assessment against the participants in amounts that "fairly reflect the classifications prescribed above and are sufficient to obtain the money necessary to meet all claims for said fiscal year." For all years at issue in this proceeding, a statutory limitation was in effect on the amount physician members of the Fund could be assessed. Petitioner hospitals were members of the Fund during one or more of Fund Years 1977-78, 1979-80, 1980-81, and 1981-82 (Stipulation). Each month, the Administrative Manager of the Fund follows a prescribed procedure to determine if an assessment is required for a particular Fund Year, utilizing what is termed a "retrospective rating plan." The plan provides that assessments will not be levied in any year until the cash available for paying claims in that membership year is down to 33 percent of the loss and expense reserves for all known losses. It further provides that the amount should be sufficient to create enough cash flow to pay known reserved claims for the year showing such deficit. In reviewing the Fund's monthly financial report of March 31, 1984, it was determined that a sufficient deficit existed to warrant the levy of an assessment. Thereafter, an outside audit of the Fund accounts was conducted and presented to the Fund Board for certification. At a meeting of the Fund Board of Governors on May 12, 1984, the Board approved the verifications that assessments had been triggered for the 1978, 1980, 1981, and 1982 fiscal years and voted to submit the deficit certification to the Insurance Commissioner for assessment. Thereafter, by letter of May 23, 1984, the proposed assessment was certified to the Insurance Commissioner. (Respondents' Exhibits 2 a, b, c, 4-5, 7, 9, 17; Testimony of Sims.) Prior to the issuance by the Department of an assessment order, the 1982 Fund Year triggered an additional deficit in excess of nine million dollars. The Fund's Board of Governors, at their October 25, 1984 meeting, accepted the audit substantiating the need for the additional amount to be added to the 1982 Fund Year assessment. On November 9, 1984, the Department issued a Notice of Assessment for Fund Years 1977-78, 1979-80, 1980-81, and 1981-82. The Notice of Assessment announced that the Insurance Commissioner intended to levy and authorized the Fund to collect an assessment in accordance with the Fund's certification of deficits as follows: 1977-78 Membership Year $ 7,467,603.00 1979-80 Membership Year 3,952,812.00 1980-81 Membership Year 18,448,460.00 1981-82 Membership Year 16,154,699.00 (amount certified May 23, 1984) 1981-82 9,047,785.00 (amount certified October 29, 1984) The Notice of Assessment of November 9, 1984, further provided that the assessment shall be divided among the various classes of health care providers for each year as follows: CLASS OF HEALTH CARE PROVIDERS AMOUNT OF ASSESSMENT Class 1977-78 1979-80 1980-81 1981-82 Physicians & Surgeons (a) Class 1 0 0 0 $ 1,370,677 (b) Class 2 0 0 0 1,974,946 (c) Class 3 0 0 0 6,476,422 2. Hospitals 7,467,603 3,924,941 18,309,420 14,668,665 3. HMO 0 9,764 44,203 97,207 4. Ambulatory Surg. Center 0 18,107 94,837 38,555 5. Professional Assoc. 0 0 0 576,012 The notice further provided that each health care provider that was a member of the Fund during one or more of the specified Fund Years shall pay a pro rata portion (based on premium paid) of the total amount assessed against the class of health care providers for each year of which the health care provider was a member. It further stated that each health care provider failing to pay its share of the assessment within 21 days of date of receipt of the order or its publication in the Florida Administrative Weekly, whichever date is earlier, shall pay an additional amount in interest of 12 percent per year. (Respondents' Exhibits 3 a-d, 6, 11-12, Stipulation, Testimony of Sims.) The Fund used the same procedure in preparation of Certification to the Department in this fifth assessment since the inception of the Fund as it used in the first four assessments. The Department used the same procedure and methodology (indicated rate method), in allocating the assessment among the various classes as it used in the first four assessments. The Fund levies assessments based on the amount needed to pay known claims. Usually, the Fund becomes aware of a claim by service of process incident to a civil action. The Fund's reserves are estimates of the amount needed to pay known claims. The Fund follows standard industry reserving practices, as modified in several respects by its particular needs and procedures. Each claim is assigned to a claims supervisor who obtains information concerning the claims incident from the primary insurance carrier. The initial reserve on a claim is based on a variety of factors, including the type of injury, potential damages, liability considerations, geographic location, and the particular attorney for the claimant. After a determination that a reserve is needed on the file, the claims supervisor makes an initial determination of the amount which is referred to the claims manager for approval. Final approval of the posted reserve lies in the hands of the Claims Committee of the Fund. The figure is usually fixed at a sum for which it is believed that the claim could be settled and the potential liability arising from a jury verdict. The necessity of obtaining approval of the Claims Committee for the initial reserve and any subsequent changes creates a certain amount of delay in obtaining such decisions. Changes may be effected in the reserve when injuries are found to be greater than anticipated, or because of the discovery of additional facts affecting potential liability. It is not unusual for a particular claim to be submitted three or four times to the Claims Committee before it is settled. In recent years, the Fund has not had sufficient cash available to pay all the required settlements or verdicts due to the lack of ability to collect prior assessments which have been in litigation. The Fund has found that such delays have increased the settlement value of claims, and plaintiffs unwilling to wait for payment of a settlement amount have gone on to trial and obtained verdicts in excess of what the case could have been settled for if the funds had been available. The reserve for a particular case is normally adjusted following settlement or verdict within a period of approximately 90 days. Although such an adjustment includes anticipated interest, interest is not taken into consideration in setting initial reserves. Past experience has shown that a lag time of about two years will elapse before funds are available to pay settled claims and, accordingly, interest is projected for a substantial period when reserves are adjusted. (Testimony of Portero.) Although individual claims have been found to be "over-reserved" at a particular point in time, it is also true that other claims are sometimes "under-reserved." The setting of reserves is based upon past experience and is necessarily subjective to a certain extent. As indicated above, changes in the status of a claim may require an increase or decrease in the amount of reserve. Additionally, a number of claims settled shortly before certification of the deficit for the assessment herein reflected that the Fund did not reduce the reserves to the amount of settlement prior to the certification dates. Several such instances were brought to the attention of the Fund in a claims audit made by an independent firm in March 1984. However, the audit report also noted that although the claims staff recognized the potential of large exposure claims, the Claims Committee was not allowing them to set a sufficient reserve on the "million dollar plus exposure claims." The auditor found that overall, the file reserves were in line by the time a case went to trial, but that the reserves could probably have been established more promptly if traditional claims handling procedures had been employed. The report found that there were many cases of reserve requests being made by the claims personnel which were turned dawn or drastically cut by the Claims Committee, and recommended that the claims staff should be allowed to set the reserves to properly reflect the exposure that the claim had at the time the file is examined. It was the opinion of the individual who conducted the claims audit, Ward W. Johnson, Vice President Of Claims, Alexsis Risk Management Services, Inc., that the number of cases that were under-reserved exceeded the cases that had potential of being over- reserved. He was of the further opinion that generally the Fund did a "good job of reserving." (Respondents' Exhibits 13, 23, (Deposition of Ward Johnson); Petitioners' Exhibits 23, 58.) Conflicting expert testimony and statistical data concerning the reasonableness of the Fund's reserving practices in general and for the Fund Years in question were presented by the parties at the hearing. Based on the totality of the evidence presented, it is found that the Fund's procedures conform generally to standard insurance industry practices. Although there is evidence as indicated heretofore that individual cases have been both "over- reserved" and "under-reserved," and that required adjustments to reserves have not always been made in a timely manner, the evidence does not show that the reserves as a whole or as to the instant assessment are unreasonable. (Petitioners' Exhibits 10-13, 62-63; Respondents' Exhibits 13, 18, 20-24; Testimony of Wood (deposition), Johnson (deposition), Vogel, Smith, Portero, Rinehart (deposition), Odem (prior testimony).) It is further found that the present assessment was prepared in accordance with standard procedures, that the amounts proposed to be levied as an assessment for each Fund Year in question represent a deficiency in the Fund Account for such years, and that the proposed allocations of such amounts among the specified health care providers are appropriate. (Respondents' Exhibits 2- 3, 5-7, 9, 11-12, 17, 29; Joint Exhibit 1 (Stipulation) testimony of Sims, Vogel.) 12. During Fund Years 1979-80, 1980-81, and 1981-82, Section 768.54, Florida Statutes, provided that the Fund shall be "maintained" at no more than $15 million per fiscal year. There was a $25 million maintenance cap applicable to Fund Years prior to 1979-1980. The limitation was removed by statutory amendment in 1982 (Chapter 82-236, Laws of Florida). Petitioners contend that the present assessment exceeds the $15 million "can" for Fund Years 1980-81 and 1981-82, but failed to submit competent substantial evidence to support such contention. The Fund apparently used the limitation as applicable to membership fees and not to assessments. The letter of the Fund to the Department, dated May 23, 1984, certifying the assessment, stated in part as follows: During the 1981-82 membership year the Fund's membership fees exceeded the $15 million cap and, by your Order, the excess was returned to those members. We are requesting that your Order of Assessment for the 1982 membership year include an Order for the overage refunds to be repaid to the Fund. In any other respects, the Fund did not take the monetary limitation into consideration with regard to the present assessment. (Petitioners' Exhibit 24; Respondents' Exhibit 2b; Testimony of Sims, Vogel.)
Recommendation In view of the foregoing, it is recommended that a final order be entered by the Department of Insurance levying assessments in accordance with the Notice of Assessment, dated November 9, 1984, for the Fund Years specified therein. DONE and ENTERED this 9th day of May, 1985, in Tallahassee, Florida. THOMAS C. OLDHAM 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 9th day of May, 1985. COPIES FURNISHED: Honorable William Gunter Treasurer and Insurance Commissioner The Capitol Legal Division Tallahassee, Florida 32301 William C. Owen and Doug Hall, Esquires Carlton, Fields, Ward, Emmanuel, Smith and Cutler Post Office Drawer 190 Tallahassee, Florida 32302 Cathi C. O'Halloran, Esquire Pennington, Wilkinson and Dunlap Box 3985 Tallahassee, Florida 32315-0985 James Wing, Esquire Myers, Kenin, Levingson, Frank and Richards 1428 Brickel Avenue Miami, Florida 33131 Louis F. Robinson, III, Esquire Barnett and Alagia 250 South County Road Suite 201 Palm Beach, Florida 33480 David A. Yon and Dennis S. Silverman, Esquires Department of Insurance Legal Division Room 413-B Larson Building Tallahassee, Florida 32301 E. Clay McGonagill, Jr., Esquire 241 East Virginia Street Tallahassee, Florida 32301
The Issue What amount should be awarded Petitioners as attorney's fees and costs in the underlying case in this matter, Savona et al. v. AHCA, Case No. 97-5909RU (DOAH Amended Final Order On Remand issued November 6, 1998).
Findings Of Fact Petitioners challenged a non-rule statement and policy of Respondent which limited physicians' Medicare cost-sharing reimbursement to the rate for Medicaid. Petitioners submitted an itemized statement of the requested hours, a summary of hours by stages of the case, and a summary of total hours, rates, and expenses requested. The hours and rates are supported by the testimony of Petitioners' counsel, David K. Miller, and corroborated by testimony of Attorney Samatha Boge and Attorney Nancy Linnan. An affidavit of Attorney Barry Richard in a related case adds further corroboration to hourly rates submitted by Petitioners' counsel. Respondent did not present independent evidence concerning proper number of hours, rates or expenses. Respondent did challenge some portions of the hours claimed by Petitioners' counsel and opposed the claim for fees and costs in its entirety. As established by testimony of David K. Miller, Samantha Boge, and Nancy Linnan, all attorneys licensed and practicing in Florida, the time spent by Petitioners’ attorneys in the initial proceeding and their hourly rates were reasonable. Further corroboration of testimony regarding hourly rates was presented by an affidavit from Barry Richard, an attorney in a related case. Petitioners have revised the number of hours properly allocated to this case and reduced same by 1.9 hours from hours allocated to M. Stephen Turner, one of the Petitioners’ attorneys. Respondent also challenges 3.9 hours charged by Petitioners' attorneys for monitoring of legislation, specifically senate bill 384, amending the law governing Petitioners rights to payment on crossover claims. The claim of counsel for Petitioners that this 3.9 hours (performed by Attorney Jody Chase) is relevant to proceedings in the underlying action, is not credited and these hours are also deducted from Petitioners’ claim for fees and costs. Petitioners request as adjusted is summarized as follows: M. Stephen Turner 73.7 hours@ $300/hr.= $22,110.00 David K. Miller 240.4 hours@ $225/hr.= 54,090.00 15.0 hours@ $225/hr.= 3,375.00 Other Partners .10 hours@ $225/hr.= 22.50 Associate .3 hours@ $175/hr.= 52.50 Paralegals 2.4 hours@ $ 75/hr.= $180.00 Fees $79,830.00 Expenses 2,280.00 Total $82,110.00 As modified above, the hours and rates requested are found to be reasonable in view of the novelty and complexity of issues, level of legal skills required, and the amount potentially at stake to Petitioners. Particularly, the amount awarded is justified in view of customary amounts charged or awarded for comparable services. The requested expense reimbursement is also reasonable. The expenses are of the kind typically billed to clients in addition to the hourly rate charged.
Findings Of Fact In 1975 the Florida Legislature passed the Medical Malpractice Reform Act, Chapter 75-9, Laws of Florida, now codified in Chapter 768, Florida Statutes. Part of this legislative package included the creation of the Fund. This legislation was passed in response to a medical malpractice insurance crisis which arose when the primary underwriter for the Florida Medical Association sought to stop issuing medical malpractice policies in Florida, thus making it difficult, if not impossible, for physicians or hospitals to obtain medical malpractice insurance coverage at reasonable rates. As a result of this problem, many physicians began to practice defensive medicine, curtail or abandon their practices or practice without coverage of any kind. The Fund is a private not-for-profit organization, participation in which is totally voluntary for its member health care providers. Insofar as Petitioners are concerned, membership in the Fund is but one of several options available to provide legally required evidence of financial responsibility in order to obtain licensure as a hospital facility in Florida. In fact, of the approximately 260 hospitals in Florida, only 125 satisfy their financial responsibility requirement via membership in the Fund. Physicians, hospitals, health maintenance organizations and ambulatory surgical centers who become members of the Fund must maintain at least $100,000 in primary professional liability insurance. Membership in the Fund grants to each participant a limitation of liability above the $100,000 in primary coverage. To the extent that any settlement or judgment exceeds the primary coverage of the participant, it is paid by the Fund without limitation. The Fund is operated subject to the supervision and approval of a board of governors whose membership is required by law to consist of representatives of the insurance industry, the legal and medical professions, physicians' insurers, hospitals, hospitals' insurers and the general public. The Department is charged by statute with certain regulatory functions concerning the Fund. The base fee for Fund membership is set by statute at $500 for physicians, after an initial $1,000 enrollment fee for the first year of participation, and at $300 per bed for hospital members. The statute requires the Department to set additional fees based upon the classifications of health care providers contained in the statute. In the event that base fees are insufficient to pay all claims asserted against the Fund for a given Fund year, the Department is empowered, upon request of the Board of Governors of the Fund, to order additional assessments against Fund participants to meet any such deficiency. Under the original legislation, all classes of health care providers could be assessed unlimited amounts to make up any deficiencies. As a result of legislative amendments in 1976, however, the amount which participants, other than hospitals, could be assessed was limited to the amount each Fund member had paid to join the Fund for that particular coverage year. 1976 legislative amendments also required that each fiscal year of the Fund be operated independently of preceding fiscal years, and further required that occurrences giving rise to claims in a particular Fund year be paid only from fees or investment income on these fees collected for that particular year. Thus, it is entirely possible for the Fund to experience deficits in a given year, and yet hold surplus funds for other years. The dispute in these consolidated proceedings arises from assessments for deficits incurred for the Fund years 1977-1978 and 1978-1979. Each of the hospitals named as Petitioners in the Petition for Administrative Proceedings in Case No. 82-776 were members of the Fund during the Fund year 1977-1978. Each of the hospitals named in the style and listed on Exhibit "A" to the Amendment to Petition for Administrative Proceedings in Case Nos. 82-530 and 82-571 were members of the Fund during the Fund year 1978-1979. On October 31, 1981, the Fund certified to the Department a deficiency in the amount of $1,350,672 for the Fund year 1977-1978. On January 18, 1982, the Fund certified to the Department an additional deficiency for the Fund year 1977-1978 in the amount of $1,759,591. On January 18, 1982, the Fund certified to the Department a deficiency of $13,935,927 for the Fund year 1978-1979. On January 13, 1982, the Department issued an "order" assessing various classes of health care providers the deficiency originally certified by the Fund for the Fund year 1977-1978. The "order" of January 13, 1982, was amended by the "order" of February 1, 1982, for the Fund year 1977-1973. The amended order contained the same dollar amount of assessments, but altered the amount charged to various classes of Fund members. On February 17, 1982, the Department issued its "order" granting the second assessment for the Fund year 1977-1978. On January 22, 1982, the Department issued its "order" granting the assessment for the 1978-1979 Fund year. The Department has not promulgated any rules pursuant to Chapter 120, Florida Statutes, pertaining to its regulation of or duties in conjunction with the Fund under Section 768.54, Florida Statutes. As members of the Fund, each of the Petitioners' interests are substantially affected by the Orders of January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982. For the Fund year 1977-1978 the total assessment ordered by the Department is $3,110,263. The total assessment for the Fund year 1978-1979 is $13,935,972. For the Fund year 1977-1978, physicians and professional association members are proposed to be assessed $1,730,207. During the Fund year 1977-1978, hospital members paid into the Fund, exclusive of interest earned on the fees, the amount of $5,292,498. For the Fund year 1977-1978, physicians and professional association members paid into the Fund the sum of $2,326,541. For the Fund year 1978-1979, hospital members paid into the Fund, exclusive of interest earned on their fees, the sum of $5,627,553. Interest earned through December 31, 1981, on these fees is $1,725,845. For the Fund year 1978-1979, physicians and professional association members paid into the Fund, exclusive of interest earned on their fees, the sum of $2,411,205. Interest earned through December 31, 1981, on the fees contributed by physicians and professional associations is $739,463. For the Fund year 1977-1978, the proposed assessments against hospital members of the Fund is $1,374,827. For the Fund year 1978-1979, the Fund retained the services of an independent actuarial firm to study and recommend appropriate additional fees to charge its members. The following table reflects the statutory base fees, the fees recommended by the actuary, the fees sought by the Fund and the fees ordered by the Department of Insurance for the 1977-1978 Fund year. Base Fees Actuary's Additional Additional Paid Recommended Fees Fees Pursuant Additional Requested Ordered to Stat. Fees by FPCF By DOI Class I Physicians $ $ $ $ Dade/Broward Co. 500.00 2,233.00 2,233.00 -0- Rest of State 500.00 l,749.00 1,749.00 -0- Class II Physicians Dade/Broward Co. 500.00 4,420.00 4,420.00 -0- Rest of State 500.00 3,549.00 3,549.00 -0- Class III Physicians Dade/Broward Co. 500.00 12,619.00 12,619.00 -0- Rest of State 500.00 10,297.00 10,297.00 -0- Hospitals (per occupied bed) 300.00 222.00 222.00 -0- Ambiatory Surgical Centers -0- 22.00 22.00 -0- (per 100 patients) Health Maintenance Organizations -0- 150.00 150.00 -0- (per 100 subscribers) Professional -0- 20 percent of additional (SAME) -0- fee to be paid by each individual member For the Fund year 1978-1979, the Department made no independent actuarial study of the recommended fees proposed by the independent actuary employed by the Fund, and no member of the Casualty Actuarial Society evaluated the Fund's recommendations on behalf of the Department. The independent actuary employed by the Fund was the only actuary who presented any evidence at the hearing conducted by the Department on the Fund's fee increase request for the Fund year 1978-1979. Each year since the Fund year 1977-1979 the Fund has employed the services of an actuary who, among other things, projected the expected losses above the claims previously paid and reserves established for known claims. These expected losses are reported as IBNR ("incurred but not reported") for each Fund year. The IBNR projected by the actuary employed by the Fund in the most recent report (October 1981) for the Fund year 1977-1978 is $6,306,036, and for the Fund year 1978-1979 is $15,965,324. The Department computed the portion of the assessment to be paid by the different classes of health care providers for the Fund year 1977-1978 based upon an approach known as the "indicated rate method." It is concluded from the record that this method is the most feasible of all suggested alternatives under existing law for reflecting the statutory classifications and, at the same time, providing immediate funds necessary to meet all claims against the Fund. This method is represented by the following formula: The Department started with rates which should have been charged each class in 1981-1982. This is called the "indicated rate by class." (The indicated rates were taken from the October, 1980 report by the Fund actuary.) The Department then applied the following formula for each class: Indicated Rate by Class x Number of Members in the Class = Total indicated fees by Class Total Indicated Fees by Class - Total Indicated Fees for ALL Classes Percentage of Indicated Fees by Class. Percentage of Indicated Fee by Class x Total Expected Loss for ALL Classes Expected Loss by Class. (Expected loss is all losses for the fund year included claims previously paid, reserves established on claims asserted and IBNR (incurred but not reported) Expected Loss by Class - Actual Fees paid by Class = Potential Loss Assessment by Class. Potential Loss Assessment by Class - Potential Loss Assessment for ALL Classes Percentage of Potential Loss Assessment by Class. Percentage of Potential Loss Assessment by Class x Total Assessment to be Ordered by the DOI = Amount of Assessment by Class. The following chart shows the amount each class would have paid under the "indicated rate method" for the Fund year 1977-1978, and the amount actually proposed to be assessed in the "orders" of the Indicated Rate Assessment Department: Actual Assessment a) Class I Physicians $ 146,487.00 $ 138,000.00 b) Class II Physicians 213,502.00 438,297.00 c) Class III Physicians 2,195,383.00 813,048.00 d) Hospitals 521,560.00 1,374,827.00 e) HMO 614.00 Surgical Centers 1,381.00 79,953.00 Professional Associations 28,336.00 Based upon the "indicated rate method" and based upon the application of Section 768.54, Florida Statutes, employed by the Department, assessments for the Fund year 1977-1978 which would otherwise be attributable to physician members of the Fund in the approximate amount of $1,500,000 were not charged to any class of physician. Based upon the "indicated rate method" and based upon the application of Section 768.54, Florida Statutes, employed by the Department, assessments for the Fund year 1978-1979 otherwise attributable to physician members of the Fund in the approximate amount of $9,000,000 were not charged to any class of physicians. The assessments described in the "orders" of the Department for the Fund year 1977-1978 which could not be applied to physician members, based upon the Department's interpretation of Section 768.54, Florida Statutes, were spread among the other classes of health care providers based upon their percentage of "expected losses." The Petitioners in this case, each of whom are members of the Fund, consist of 30 government hospitals, 43 private, nonprofit hospitals, and seven private, for-profit hospitals. During the Fund years 1977-1978 and 1978-1979, the Fund consisted of the following classes and numbers of members: 1977-1978 1978-1979 a) Class I Physicians 1392 1516 b) Class II Physicians 814 971 c) Class III Physicians 1584 1690 d) Hospitals 120 130 e) HMO 2 3 f) Surgical Centers 11 14 g) Professional Associations 572 855 The "orders" of the Department dated January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982, were the first time any member of the Fund has been assessed under Section 768.54, Florida Statutes. The fees paid into the Fund; the investment income earned through December 31, 1981, on such fees; the expenses incurred through December 31, 1981; the amounts paid on claims through December 31, 1981; reserves established through and the IBNR for each Fund year for 1975-1976 through 1980-1981 are reflected on the table on page 10a. (IBNR figures are projections of future losses prepared by the Fund's actuary in October 1981.) The rates applicable to physicians and hospital members of the Fund for the years 1977-1978 and 1978-1979 were the base fees provided in Section 768.54, Florida Statutes. No additional fees were set for those Fund years. The rate order for the 1978-1979 year entered by the Department on June 9, 1978, was not appealed. The Fund in fact experienced deficits in both Fund years in controversy in this proceeding. The Fund certified to the Department the amount of its projected deficit for the years in question. The amount of money ultimately certified by the Fund to the Department accurately reflects the amounts derived from the following formula: FUND YEAR: 1975-1976 1976-1977 1977-1978 FEES PAID $2,928,672 $6,303,257 $7,467,605 INTEREST EARNED 1,475,41 3,000,118 2,592,179 ADMINISTRATIVE EXPENSES (54,846) (95,002) (148,113) NET FUNDS AVAILABLE 4,349,227 9,208,373 9,911,671 TO PAY LOSSES LOSSES PAID TO DATE (3,004,273) (6,869,395) (8,271,696) INDEMNITY EXPENSES (300,334) (343,433) (391,858) RESERVED LOSSES (971,733) (4,249,604) (3,663,348) RESERVED EXPENSES (57,584) (111,466) (172,869) PRESENT SURPLUS/DEFICIT (14,697) (2,365,525) (2,588,100) LOSSES INCURRED NOT YET REPORTED (IBNR) (AS OF 6/30/81) (1,189,136) (3,878,887) (7,970,235) FUND YEAR: 1978-1979 1979-1980 1980-1981 FEES PAID $8,060,374 $9,836,157 $11,225,275 INTEREST EARNED 2,543,698 2,589,547 1,882,319 ADMINISTRATIVE EXPENSES (128,556) (279,838) (406,641) NET FUNDS AVAILABLE 10,475,506 12,145,866 12,700,953 TO PAY LOSSES LOSSES PAID TO DATE (9,760,650) (3,410,358) (37,500) INDEMNITY EXPENSES (532,197) (206,616) (32,619) RESERVED LOSSES (13,782,271) (6,445,000) (3,750,000) RESERVED EXPENSES (267,932) (342,787) (114,417) PRESENT SURPLUS/DEFICIT (13,867,544) (1,741,105) (8,766,417) LOSSES INCURRED NOT YET (14,979,237) (28,295,428) (51,500,564) REPORTED (IBNR) (AS OF 6/30/81) FUND YEAR: TOTALS FEES PAID $45,821,340 INTEREST EARNED 14,083,262 ADMINISTRATIVE EXPENSES (1,113,006) NET FUNDS AVAILABLE 58,791,596 TO PAY LOSSES LOSSES PAID TO DATE (31,353,872) INDEMNITY EXPENSES (1,837,057) RESERVED LOSSES (32,861,956) RESERVED EXPENSES (1,067,055) PRESENT SURPLUS/DEFICIT (8,328,344) LOSSES INCURRED NOT YET (107,813,487) REPORTED (IBNR) (AS OF 6/30/81) Total fees paid during the Fund Year + Investment Income attributable to the Fund Year Expenses allocated to that Fund Year Amount paid on claims for that Fund Year Amount reserved for all known claims for that Fund Year. The Department entered orders levying the assessments on January 13, 1982; January 22, 1982; February 1, 1982; and February 17, 1982. The parties to this proceeding stipulated that the assessments entered by the Department for 1977-1978 and 1978-1979 are to be considered to be proposed agency action as to such parties. The Department limited the amount assessed against any physician member to an amount equal to the annual membership fee paid by the physician for the year giving use to the assessment. According to the "orders" of the Department for the Fund year 1977- 1978, Class III physicians' share of the assessment, based upon the assessment formula utilized, was in excess of the amount of membership fees paid by that group, and the balance was spread over the rest of the classes of health care providers. According to the "orders" of the Department for the Fund year 1978- 1979, Class I, II, and III physicians' share of the assessment, based upon the assessment formula utilized, was in excess of the amount of membership fees paid by those groups, and the balance was spread among those health care providers described in Section 768.54(1)(b)l.,5.,6., and 7., Florida Statutes. The Department, by order dated June 9, 1978, denied the Fund's request for additional fees for the year 1978-1979. In April 1981, at the request of the Department, the Fund filed a "Retrospective Rating Plan." This plan provided that at such time as the Fund dropped below 25 percent of the original fees paid in any fund year an assessment would be triggered. The plan further provided for the assessment to be based upon all settlements or final judgments entered but unpaid at the time of the assessment, and all reserves established by the Fund at the time of the assessment. This "Retrospective Rating Plan" was approved by the Department, but not adopted pursuant to Chapter 120, Florida Statutes. Although the Fund sought to amend the plan both before and after the assessments now at issue, the original plan remained in effect at all times material to this cause. Although Petitioners have not disputed the amount of the reserves set by the Fund, such reserves constitute a substantial portion of the assessment amounts requested by the Fund. The Department has not made any evaluation of the accuracy of the case reserves, nor has the Department made any analysis of the method employed by the Fund in setting case reserves. There was some evidence that the cash shortages experienced by the Fund for the Fund years 1977-1978 and 1978-1979 may have been caused in part by the manner in which the Fund has paid claims. In 1976 the Florida Legislature limited the amount which the Fund could payout on claims to $100,000 per person, per year. In addition, the law provides that reasonable attorneys' fees and costs shall be paid to a successful claimant within the first 90 days following a judgment or settlement. In most instances, the Fund does not inquire into the fee arrangement between plaintiffs and their attorneys. Moreover, no claim for attorneys' fees is required to be submitted to the Fund or the trial court to set a reasonable percent fee for such services. The Fund has indicated that for claims paid for the Fund years 1977-1978 and 1978-1979, the Fund simply assumed that attorneys' fees and costs equalled 40 percent of the amount of the settlement or judgment. In most cases, the Fund does not consider any portion of the attorneys' fees as having been paid by the primary insurance carrier. In some instances, it appears that payments made by the Fund may have disregarded the $100,000 per person, per year payout limitation, and in other instances the Fund has been ordered to pay amounts in excess of the statutory limit and has not pursued an appeal of such orders. In still other instances the Fund has purchased annuities to fund settlements or judgments, the cost of which annuities exceeded the $100,000 payout limitation. The Fund does not consider such payments to be subject to the payout limitation although no rights of ownership in the annuities are retained by the Fund. It is possible that the cumulative effect of these practices has been significant. Petitioners adduced evidence estimating "excess payments" by the Fund for 1977-1978 over the statutory limit could be as high as $2,684,737. For the Fund year 1978-1979 these "excess payments" could be as high as $4,827,690. Under the Department's application of Section 768.54, Florida Statutes, no physician member will again be assessed for the Fund years 1977- 1978 and 1978-1979. Yet, based upon the latest estimates by the Fund's consulting actuary, additional claims for those two years which have not yet been reported could reach as high as $22,949,472. Under the Department's construction of the statute, hospital members will have to pay all of these additional losses, if the actuary's projections prove correct.
The Issue Whether the Petitioners are entitled to benefits as joint annuitants of the deceased employee.
Findings Of Fact Petitioners are the adult, nondependent children of the deceased, Leonora Chapin. Respondent is the state agency charged with the responsibility of managing the Florida Retirement System (FRS). Leonora Chapin was a vested member of the FRS with over ten years of service as a teacher with the Miami Dade County School District. The exact number of years of her service was not established nor is it dispositive of the issues of this case. In February of 1991, Ms. Chapin became extremely ill. This illness prevented her from returning to work but she did not formally retire. Instead, Ms. Chapin continued as an active member of the FRS until her death, April 14, 1991. At the time of her death, Ms. Chapin had designated "according to will" as her beneficiary to receive benefits, if any, which would be payable at her death. This Personal History Record form is the only record of any designation by the deceased received by the FRS. Based upon the foregoing designation, the Respondent determined that the deceased's two sons would share the deceased's personal contributions to the FRS account. This amount totaled $4,305.17. The Petitioners have disputed this determination and claim they are entitled to benefits as joint annuitants.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division of Retirement enter a Final Order denying Petitioners' claim for benefits and returning the member's contributions in the amount of $4,305.17. DONE AND ENTERED this 14th day of January, 1999, in Tallahassee, Leon County, Florida. J. D. Parrish Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (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 14th day of January, 1999. COPIES FURNISHED: A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Larry D. Scott, Esquire Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Robert Chapin 14014 Northwest Passage Unit 240 Marina Del Ray, California 90292 Stuart Chapin 10729 Westminster Avenue Los Angeles, California 90034 Barry M. Brant, C.P.A. Berkowitz, Dick, Pollack & Brant, LLP One Southeast Third Avenue, Suite 150 Fifteenth Floor Miami, Florida 33131
The Issue Whether or not Respondent has correctly computed Petitioner's retirement pay.
Findings Of Fact The Findings of Fact set forth in paragraph 1 are accepted. The Findings of Fact set forth in paragraph 2 are accepted. The Findings of Fact set forth in paragraph 3 are accepted. The Findings of Fact set forth in paragraph 4 are rejected as not supported by competent, substantial evidence, except for the finding that Mr. wade was re-employed at a much lower rate of pay. Mr. Wade terminated his employment with the Legislature on August 8, 1986, and received salary through that date. He was re-employed by the Department of Banking and Finance and not the Department of Agriculture as stated in the Recommended Order. In addition, although Mr. Wade terminated his employment for retirement reasons on August 31, 1990, his effective date of retirement was September 1, 1990, as provided by the FRS law and rules. The Findings of Fact set forth in paragraph 5 are rejected as not supported by competent, substantial evidence. Petitioner was paid in September 1986 for his accrued annual leave, which also included leave credits earned in July and August 1986 before his termination on August 8, 1986. Mr. Wade was employed with the Department of Banking and Finance effective August 11, 1986, and began to earn additional leave credits which he continued to accrue until he retired effective September 1, 1990. The Findings of Fact as set forth in paragraph 6 are rejected as not supported by competent, substantial evidence. Petitioner's annual leave includes leave earned in July and August 1986, which could not be paid until he terminated employment in August 1986. Further, in Chapter 650, Florida Statutes, the Division of Retirement is named as the state agency with the authority for administering Social Security for public employees and the Federal Insurance Contributions Act (FICA) in Florida, including adoption of rules for the reporting of FICA contributions which are due when paid, not when earned. In addition, the Hearing Officer also incorrectly cited Rule 22B-3.0l1(1), F.A.C., which reads: "contributions" and not "benefits." The Findings of Fact set forth in paragraph 7 are accepted. The Findings of Fact as set forth in paragraph 8 are accepted in part and rejected in part. That portion of the Findings concluding that $11,286.00 should be added to the Petitioner's salary compensation for the 1985 - 86 fiscal year to obtain a higher AFC is rejected as not supported by competent, substantial evidence. In addition, the 1986 lump sum annual leave payment ($11,286) was not paid to Mr. Wade until after he was separated from state employment effective August 8, 1986. Payment was made in September 1986 and this payment cannot be added to the Petitioner's salary compensation for the 1985 - 86 fiscal year. The Findings of Fact set forth in paragraph 9 are accepted. The Findings of Fact as set forth in paragraph 10 are accepted in part and rejected in part as not supported by competent, substantial evidence. The Petitioner was employed by the Legislature through August 8, 1986. In addition, payment for accrued annual leave credits cannot be made to a state employee until his employment has been terminated which did not occur until August 8, 1986. That portion of the paragraph regarding the application of Generally Accepted Accounting Principles (GAAP) in the computation of retirement benefits pursuant to Chapter 121, Florida Statutes, and the FRS rules, in addition to not being relevant, is rejected as not supported by competent, substantial evidence. GAAP is not applicable as this case is governed by the rules of the Division of Retirement. The Petitioner was terminated in August 1986; therefore, the September 1986 lump sum annual leave payment ($11,286) is a part of the Petitioner's salary compensation for the 1986 - 87 fiscal year. The Findings of Fact set forth in paragraph 11 are accepted. The Findings of Fact set forth in paragraph 12 are accepted in part and rejected in part. The Petitioner's employment did not terminate with the Legislature until August 8, 1986, and he did not receive the payment ($11,286) for his accrued annual leave, which included leave accrued as of June 30, 1986, as well as leave earned in July and August 1986, until September 1986. The payment was calculated for fiscal year 1986 - 1987 which was not one of Mr. Wade's highest fiscal years. The Findings of Fact set forth in paragraph 13 are accepted. However, these findings are irrelevant as GAAP is not applicable to this case. The Findings of Fact set forth in paragraph 14 are accepted.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Administration, Division of Retirement, enter a final order adding $11,286.00 to Petitioner's $64,172.00 salary as already calculated for fiscal year 1985-1986, and using that figure together with Petitioner's fiscal years 1981-1982, 1982-1983, 1983-1984, 1984-1985 salaries so as to calculate Petitioner's average final compensation for retirement purposes. DONE and ENTERED this 14th day of May, 1991 in Tallahassee, Florida. ELLA JANE P. DAVIS, 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 14th day of May, 1991. APPENDIX TO RECOMMENDED ORDER The following constitute specific rulings pursuant to Section 120.59(2) F.S. upon the parties' respective proposed findings of fact (PFOF): Petitioner's PFOF: There are no PFOF 1-4. 5, 5a Covered in the COL. 6 Covered in FOF 5 and 10. 7, 8, 10, 13 The recitation of the witnesses' qualifications and how exhibits came to be admitted is subordinate or unnecessary to the facts as found. The disputed material facts are resolved within the RO. Accepted that the 360 hours of annual leave accrued to Petitioner or obligated the State in 1985-1986 but that the monies therefor were not paid until the 1986-1987 fiscal year. Petitioner's choice of language utilized in this PFOF is confusing and misleading and is not adopted for those reasons. 9, 11 Covered in FOF 10 and 12-14 except for subordinate and unnecessary material which is rejected. Mere recitation of testimony is likewise rejected. 12, 16 Subordinate and cumulative. Accepted in FOF 13, but not dispositive. Accepted but unnecessary and not dispositive of the properly raised issues herein. Respondent's PFOF: 1 Largely subordinate and unnecessary. Covered as necessary in the Preliminary Statement and the COL. 4-8 Covered in FOF 1 and 2 and the COL. 9 Unnecessary and unproven. COPIES FURNISHED: Mr. Thomas L. Wade 602 Concord Road Tallahassee, Florida 32308 Larry D. Scott Assistant Division Attorney Division of Retirement Legal Office 2639 North Monroe Street, Building C Tallahassee, Florida 32399-1560 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, FL 32399-1560 John A. Pieno, Secretary Department of Administration 435 Carlton Building Tallahassee, FL 32399-1550
The Issue The issues considered at both the grievance level and at Administrative Hearing were whether the Petitioner is entitled by contract or law to a secure source of salary support and to annual department support in the amount of $25,000.00 for research conducted by him at the University of South Florida.
Findings Of Fact Petitioner received his Ph.D. from the University of Florida sometime after 1970, specializing in the role of the brain in fighting disease. In December, 1979 Respondent began employment with George Washington University, (GWU), in Washington, D.C. as an assistant professor in the Department of Biochemistry. Approximately 85 to 90 percent of his time was spent in research with some teaching additional. His research was sponsored by pharmaceutical companies both in the United States and Japan and by the National Institutes of Health, (NIH), and the Office of Naval Research, (ONR). He became an associate professor at GWU in 1985, and prior to that time had had no research ties to the University of South Florida, (USF). The initial contact regarding the potential for Petitioner to bring his research program to the USF was with Dr. Herman Friedman, Chairman of the USF College of Medicine's Department of Microbiology and Immunology who was serving with Petitioner on a national commission. According to Petitioner, Dr. Friedman invited Petitioner to come to the USF to present a seminar. During this period, Petitioner claims, Dr. Friedman asked him if he would relocate to USF. At that time, Petitioner declined and expressed no interest in leaving GWU. However, he claims, Dr. Friedman invited him back again in late 1986. Petitioner came to Tampa in either January or February, 1987, and was seduced by the warm climate. On one of these visits, Dr. Friedman, whose department was without resources to support any additional programs, introduced Petitioner to Dr. Reading, the Chairman of the Department of Psychiatry and Behavioral Sciences at USF and to several other members of the faculty of the College of Medicine. After the initial contact with Dr. Reading, the majority of subsequent contacts were with him and Petitioner ultimately made a presentation to the Department of Psychiatry. Dr. Friedman, on the other hand, claims he first met Petitioner wile on a grant site visit at the University of Miami, at which, during general discussions, Petitioner indicated he had heard of a budding project at USF and wanted to know if there were any openings in Friedman's department or in the Department of Psychiatry. Friedman had none. He recalls that Petitioner's approach was one of interest in a move to Florida because he liked the climate; he had family nearby; and he had gone to school in Florida and was partial to it. As a result of Petitioner's interest, Friedman contacted Dr. Reading on Petitioner's behalf and when Reading indicated an interest in Petitioner, called Petitioner on Reading's behalf to see if Petitioner would come down for a visit. Petitioner was very interested in doing so when Friedman called, he relates. As a result of the prior contacts and visits Petitioner made to USF, on April 20, 1987, Dr. Reading contacted Petitioner with an offer in writing which formalized their prior discussions. These discussions, according to Petitioner, pertained to the security of the position, (would it be totally dependent on grants or would it be backed by state funds), space, and resources available through sources other than the NIH. These issues were important to Petitioner because he was already in a grant dependent position at GWU and could see no reason to leave for another "soft" spot. Further, his career and reputation are dependent upon his research and writing and he could not afford to be in a position without reasonable opportunities for them to continue. In this April 20, 1987 letter offering Petitioner a position at USF, Dr. Reading clearly advised Dr. Hall that at the time, he was completely unable to offer a tenured line, but would be willing and able to place him in such a position after three yearly renewable contracts, Petitioner could move onto a tenure earning track. Most specifically, relating to funds, Dr. Reading noted: I will do my best to provide whatever additional support you need to get your program under way, but I need to know more specifically what this would amount to before I can make a definite commitment. Petitioner contends this language referred to the $25,000.00 per year to support his research program and the possibility of a large sum of money for setup costs including lab items and refrigerators. It would appear, however, that Petitioner reads more into Dr. Reading's language than is there. No promise of more than effort to support financially is indicated. On August 12, 1987, Petitioner wrote to Dr. Reading to accept the position offered and to verify his understanding of the items they had discussed when Petitioner was in Tampa. Petitioner had not made any commitment to move prior to that time even though he had been in continuing contact with both Reading and Friedman. After dispatching his acceptance letter, Petitioner spoke with Dr. Altman at the National Institute of Mental Health, (NIMH), concerning the potential transfer of his grant from GWU to USF. When told this could not be done, Petitioner agreed to re-apply when situated at USF. This NIMH grant constituted approximately 80 percent of Petitioner's salary and on January 21, 1988 he submitted the grant application. To properly submit the application, it was necessary for USF to participate in the process, which it did. At this point, Petitioner had committed to come to USF but had not actually made the move. This grant application was for a continuation of work started by Petitioner at GWU. In Section 2, of the background information submitted as a part of the grant application, the university, (Department), "... has made a commitment to develop a secure source of salary support for [Petitioner] by the time his RCDA terminates." This is, Petitioner claims, consistent with the agreement he had with USF, He understood that while all tenure positions were then full, he would be put on a tenure accruing line. The reference to $25,000.00 and secure salary source is, to him, also correct. He asserts Dr. Reading had indicated the funds, if needed, would come from his UMSA funds. (UMSA, not otherwise defined, is, in reality, a non-appropriated source of funds available for untilization within the medeical school.) Petitioner claims Dr. Reading also indicated he would work to set up a charitable fund to support Petitioner and that 20 percent of another fund source would be devoted to his work. Dr. Reading, however, categorically denies that he at any time promised Petitioner $25,000.00 in USF funds or a secure salary support system without condition, either in person, in writing, or by phone. He contends that while he supported Petitioner's NIMH and National Oceanographic and Space Administration grant applications, the above quoted comment in the January 1988 application was incorrect and got through by error. It was corrected in a subsequent grant renewal application. Petitioner did not receive a pay check from USF until September, 1988. As of July 1, 1988, he still had not received a written contract from the university. However, in August, 1988, Dr. Hall received a letter from Dr. Nicolosi, USF's Executive Vice President for Health Sciences, offering him a position of Visiting Associate Professor, effective July 1, 1988, and carrying an annual salary of $10,000.00 and a FTE of 20 percent derived from one grant, along with an additional salary of $40,000.00 and a FTE of 80 percent, derived from another grant. The letter stipulated clearly that renewals of this appointment would be contingent upon renewals of the grants from which the salary was to be paid. The letter also noted clearly that positions funded trough grant sources, such as this one, are non-tenure earning. In response, Petitioner wrote a letter accepting the offer. At this point, no written contract had been signed between Petitioner and USF. None of the contracts ultimately signed between Petitioner and USF made any reference to support for Petitioner's research program. Careful review of those documents indicates their specifics dealt with length of appointment, salary, tenure status and FTE percentage. Petitioner claims, however, that at no time did he understand the contracts, executed after the fact, contained all facets of his agreement with USF and the issues of space, equipment and grant shortfalls were to be negotiated independently with the department chairman. The $25,000.00 he claims he was to receive for those items was, he believed, not included in his compensation but in addition to his compensation. In late August, 1989, Petitioner received a letter from Dr. Bunch, then the Dean of the College of Medicine, advising him he was being appointed to a tenure earning position with an FTE of 20 percent. By this time, he was already at USF and running experiments on programs he had initiated in January, 1989. When Petitioner initially started at USF he had no problems with funding. The problems did not start until 1989 when, having submitted an expense item to be paid from the $25,000.00 research funds he was expecting, he was told it was not available. When, in an interview with Dr. Reading, he inquired if the university intended to honor its prior promises, he was told there had been a misunderstanding; that there never had been any intention to guarantee the $25,000.00 research portion for more than one year. After that, it was touch and go. This position was confirmed in a December 7, 1989 budget memo to Petitioner from Dr. Reading. In this memo, Dr. Reading refers to a letter from Petitioner in which Petitioner states the $25,000.00 research money was allegedly promised. Reading then asserts he orally corrected Petitioner's misunderstanding of this point, but could not find any record of the conversation. To prevent any further misunderstanding, however, Reading thereafter suggested they adopt as the Department's position the terms accepted by Petitioner in his August 12, 1988 letter which dealt specifically and exclusively with salary, tenure, and FTE. In addition, however, Reading added an offer to extend to Petitioner: ... a $25,000.00 line of credit (interest free) for the first two years of your operation here in order to provide needed start-up funds while awaiting grant support. This grant was not the only one Dr. Hall was seeking. He had several others in the works at the time and all were granted. They all required USF input and all were administered by the Department of Psychiatry. The school's input in another grant application submitted by Petitioner in April, 1990 referred to its commitment to fund $25,000.00 annually for Petitioner in addition to other expenses depending upon fund availability. A similar inclusion appeared in most, if not all, grant applications until June, 1992 when the $25,000.00 commitment ended. Even then, Petitioner claims, he had no indication there was a problem. However, in February, 1992 Dr. Reading informed Petitioner by letter that non-renewal of his faculty contract would be one of the expenditure reduction measures utilized to achieve a reduction in expenses mandated by the Dean. When Petitioner received this letter he consulted with the University's Vice President for Research, Dr. Newcomb, to see what options were available to him. The issue was ultimately resolved, however, when Dr. Reading modified his reduction proposal to eliminate the salary reduction, but not the cut of the $25,000.00 subsidy. It must be noted here that at no time was any indication given that the reduction was related to a dissatisfaction with Petitioner's work. It is found that there was no relationship. Petitioner's work was not in issue and was completely satisfactory. In discussions with Dr. Reading at that time Petitioner was advised the school could make no funding commitment beyond the first year but that he should submit the next year's grant applications anyway. At that point, four years remained on the Research Scientist Development Award grant set to terminate in May, 1996, which provided 80 percent of his salary. After receipt of the March 17, 1992 Reading letter which reinstituted salary but still cut the $25,000.00 subsidy, Petitioner filed a letter of grievance against Dr. Reading. One point of the grievance, dealing with his promotion, is now moot as the promotion was effected. However, the remainder, dealing with salary support and grant subsidy is still in effect. After the grievance was filed with the Dean of the Medical School, Petitioner met with Dean Dunn who went over it with him, point by point. Dunn suggested Petitioner meet with Dr. Reading again and he did. Reading, while sympathetic to Petitioner's arguments, indicated there was nothing he could do to satisfy Petitioner. When this was reported to Dean Dunn, he asked Petitioner to allow him to try to resolve the problem by means less formal than a grievance. Petitioner agreed and let the matter rest over the ensuing summer. Ultimately, however, in May, 1993 Dean Dunn advised Petitioner that after careful review of the matter, he was satisfied Hall had received everything he could have expected and, in essence, denied the grievance. Petitioner then initiated Step II grievance procedures through counsel. In June, 1993, Petitioner received the decision of the university's Health Sciences Vice President, Dr. Kaufman, upholding the denial of the grievance. Petitioner has not received the $25,000.00 subsidy since June, 1992, and this has forced him to reduce his secretarial help by 50 percent. This has impaired his ability to submit grant applications. He has also lost the services of a graduate student who was concerned over the uncertainty surrounding the research and another assistant as well. More recently, Dr. Menzies, a key researcher, has relocated, as has a career technician. Also, a Ph.D. who works for Petitioner has been reduced to 30 percent of prior salary. Together, this all has adversely affected Petitioner's ability to continue his research activity. It has required him to do a lot of his own administrative work which interferes with and cuts down on his time to do research, and he has not been able to publish as he used to do. Therefore, a substantial interest of the Petitioner is involved. The removal of the secure source of salary support is a concern to Petitioner because the NIH does not award grants to short term scientists. Institutional support is necessary. Petitioner has informally notified the NIH of the termination of his salary support but is awaiting the outcome of this hearing to make formal notification, if necessary. Petitioner admits that nowhere in any of the communications from USF does the term, "secure source", appear except in the school's documentation in support of Petitioner's grant applications. That may have come about because to assist in preparing it, Petitioner gave Dr. Reading a copy of a prior application prepared at GWU which might have contained those words. In any case, they were deleted by Dr. Reading from later applications for Dr. Hall. It never occurred to Dr. Hall that the financial condition of the university would ever be such that the $25,000.00 subsidy could not be paid continually. Only the grant application contain any suggestion of ongoing payments. All other documents admitted into evidence which relate to terms and conditions of employment either expressly or by implication indicate the payments would be made on an "if available" basis. The university claims, and such claim is found reasonable, that language means, "as long as the university has the funds available to support a viable immunology program." Dr. Friedman was not present at any of the formal negotiating sessions between Dr. Reading and Petitioner. He did attend some of the preliminary meetings and heard Reading indicate to Hall he would "do his best" to provide supplemental money, but he does not know what promises subsequently may have been made by Reading. However, at no time during the preliminary talks he, Friedman, had with Dr. Hall did he make any promises about salary. In fact, he claims to have told Hall that in a state institution such as USF, no promises, even if made, can be formalized unless in writing and signed by the institutional head. All he could do was allow a Hall assistant to work in his laboratory and to provide up to $10,000.00 is supplies and equipment to be reimbursed at a later date. This did not happen because the money for Petitioner's grant never came. Dr. Reading unequivocally denies ever committing to fund $25,000.00 of Petitioner's research costs annually though he supported Petitioner's grant applications. He recruited Petitioner to join the faculty at USF and as a part of that process discussed with him funding for research projects in general terms on an annual basis. Reading does not recall Petitioner ever having requested he commit to a certain level of funding for those projects. They had a number of conversations about what Petitioner would need and what the university could provide. What was finally settled on was different than what was contained in the initial letters. The negotiations were give and take and while Petitioner wanted support, Dr. Reading had to know what was needed so he would not commit resources he did not have. As Reading recalls it, the ultimate conditions were that Petitioner was to get $25,000.00 in start-up funds and then up to $25,000.00 in a "Visa- like" fund which would be replenished. Dr. Reading asserts he could not offer Petitioner $25,000.00 on a recurring basis because he did not have it to offer. Dr. Reading admits that after several years operation on that basis, it might be reasonable to interpret the relationship as Petitioner does because it became apparent Petitioner could never repay the overspending in his accounts. In any case, it was not considered a problem then because Petitioner's research was bringing in large sums ("millions") in commercial funding. Dr. Reading is adamant he can expend only so much UMSA funds as he has available. He cannot commit to future funding for which he has not yet received money. The UMSA funds derive from monies paid in by patients treated in the medical school clinics. This source is neither guaranteed nor uniform. Reading also has funds coming in from foundations, which, too, are neither guaranteed nor predictable in amount. Finally, he has a departmental allocation of appropriated funds, little of which may be used in a discretionary fashion. As such, he is in no position to guarantee future payment of funds, the reliability of receipt of which cannot be guaranteed. In that regard, Dr. Dunn, the Medical School dean, pointed out that department chairmen do not have the authority to guarantee research funds for the duration of employment nor to guarantee salary support beyond state salary, and Dr. Reading, as department chairman, could not have done so. The only situation which could guarantee continuing payments would be a dedicated endowment fund and even then, these funds generally carry conditions on their use. If a federal grant is supporting a faculty member's research, the university is not legally obligated to continue the research or salary support for the principal investigator if the grant terminates. The term "secure salary support" has no meaning other than tenure, but even tenure is not guaranteed. Tenure "accruing" and tenure "earning" lines are not synonymous. Dunn knows of no such term as "tenure accruing." Tenure does not require the expenditure by the candidate of or the passage of any period of time. As a custom, however, certain criteria exist and tenure is earned only by holding a position on a tenure earning line. There are written guidelines as to what department chairmen can commit to in recruitment. There are, as well, limits as to what commitments may be made regarding payments and salaries. Some of these are UMSA rules and some are university rules. Any promise as to salary or payment of any funds are always subject to availability of funds. This is the way it has always been in academic circles. The sine qua non on salary support, other than from appropriated funds or federal grant funds, is availability. Without available funds, neither grants nor salary support can be paid. A department chairman can expend or commit only those funds available. These may include UMSA funds, appropriated funds, and grant funds. He or she cannot, however commit monies which are not available. The university has lived up to the terms of its agreement with Petitioner and has provided all he can reasonable expect in funding and salary support.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that a Final Order be issued by the University of South Florida finding the claims by Petitioner to be without legal merit and dismissing the grievance filed. RECOMMENDED this 18th day of November, 1993, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 18th day of November, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4408 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 to this case. FOR THE PETITIONER: 1. - 3. Accepted and incorporated herein. Accepted with the modification that the evidence does not clearly establish who made the initial contact regarding potential employment. The use of the phrase, "desiring that Dr. Hall relocate", should not be interpreted as meaning the university actively sought Petitioner out to seek his move. Accepted. & 8. Accepted and incorporated herein. 9. & 10. Accepted and incorporated herein. Accepted as Petitioner's interpretation of the comments of Dr. Reading. & 13. Accepted and incorporated herein. 14. & 15. Accepted and incorporated herein. Accepted and incorporated herein. & 18. Accepted and incorporated herein. 19. & 20. Accepted and incorporated herein. Accepted. & 23. Accepted as to authority but not dispositive of the issue of availability of funds. FOR THE RESPONDENT: 1. & 2. Accepted and incorporated herein. 3. - 5. Accepted and incorporated herein. Accepted and incorporated herein. & 8. Accepted and incorporated herein. 9. - 12. Accepted and incorporated herein. 13. - 15. Accepted. Accepted. & 18. Accepted. Accepted but not a proper Finding of Fact. More a statement of the basis of Petitioner's position. & 21. Accepted. Rejected. Accepted and incorporated herein. COPIES FURNISHED: Christopher P. Jayson, Esquire Barry A. Cohen, P.A. 201 East Kennedy Boulevard., Suite 1700 Post Office Box 173077 Tampa, Florida 33672 William W. Wertz, Esquire Office of the Attorney General The Capitol, PA 01 Tallahassee, Florida 32399-1050 Joline Micelli-Mullen, Esquire Office of the General Counsel University of South Florida 4202 East Fowler Avenue, ADM 250 Tampa, Florida 33620-6250
Findings Of Fact The First Variable Rate Fund for Government Income, Inc., (hereinafter referred to as the Fund) is an open-end diversified investment company incorporated under Maryland law. The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management company. The Fund has an authorized capital of 2.5 billion shares of common stock with a par value of $.001 per share which may be issued in classes and are freely transferable. Each outstanding share is entitled to one vote on all matters submitted to a vote of stockholders and to a prorata share of dividends declared and of the Fund's net assets in liquidation. Shares of the Fund are issued and redeemed at their net asset value. It is the Fund's policy to maintain a constant net asset value of $1.00 per share. The net asset value is determined by subtracting liabilities from value of assets and dividing the remainder by the number of outstanding shares. The Fund's shares are sold to the public without a sales charge. The Fund is a money market fund. Its investment goals are high current income, preservation of capital and liquidity. In pursuing these goals, the Fund invests solely in debt obligations issued or guaranteed by the United States, its agencies or instrumentalities, assignments of interests in such obligations, and commitments to purchase such obligations ("U.S. Government- backed obligators"). The fund may invest in U.S. Government-backed obligations subject to repurchase agreements with recognized securities dealers and banks. Some of the U.S. Government-backed securities are supported by the full faith and credit of the U.S. Treasury; others are supported by the right of the issuer to borrow from the Treasury; still others are supported only by the credit of the instrumentality. The Portfolio of Investments of the Fund on December 31, 1982 contains the following types of investments: U.S. Treasury Bills; Student Loan Marketing Association; Certificates of Deposit; Certificates of Deposit Investment Pools with U.S. Government guarantee on the underlying certificates; Repurchase agreements collateralized by securities issued by or guaranteed by the U.S. Government; Variable rate loans guaranteed by agencies of the U.S. Government. The Portfolio of Investments of the Fund on December 31, 1981 contains the following types of investments: U.S. Treasury Bills; Federal Farm Credit Banks; Repurchase agreements substantially collateralized by securities issued or guaranteed by the U.S. Government; Certificate of Deposit Investment pools with U.S. Government guarantee on the underlying certificates; Variable rate loans guaranteed by agencies of the U.S. Government. Repurchase agreements are transactions in which a person purchases a security and simultaneously commits to resell that security to the seller at a mutually agreed upon time and price. The seller's obligation is secured by the underlying security. The resale price reflects the purchase price plus an agreed upon market rate of interest. While the underlying security may bear a maturity in excess of one year, the term of the repurchase agreement is always less than one year. In the event of the bankruptcy of a seller during the term of a repurchase agreement, a substantial legal question exists as to whether the Fund would be deemed the owners of the underlying security or would be deemed only to have a security interest in and lien upon such security. If the Fund's interest is deemed a security interest in and lien upon such security, the Fund may realize a loss or may be delayed in receiving the repurchase price due it pursuant to the agreement or in selling the underlying security. The Fund will only engage in repurchase agreements with recognized securities dealers and banks. In addition, the Fund will only engage in repurchase agreements reasonably designed to secure fully during the term of the agreement the seller's obligation to repurchase the underlying security and will monitor the market value of the underlying security during the term of the agreement. If the value of the underlying security declines, the Fund may require the seller to pledge additional securities or cash or secure the seller's obligations pursuant to the agreement. If the seller defaults on its obligation to repurchase and the value of the underlying security declines, the Fund may incur a loss and may incur expenses in selling the underlying security. Although all the securities purchased by the Fund are Government-backed as to principal or secured by such securities, some of the types of Government securities the Fund buys may be sold at a premium which is not backed by a Government guarantee. The premiums are amortized over the life of the security; however, if a security should default or be prepaid, the fund could realize as a loss the unamortized portion of such premium. Petitioners, R. W. and Joyce S. Aronson remitted $66.56 by check #235 dated April 10, 1982 in payment of Florida Intangible Tax for 1982. If it is determined that the Fund at issue herein is totally exempt from taxation, the aforesaid Petitioners are entitled to a refund in the amount of $3.96. Petitioner, Helen T. Aronson remitted $84.30 by check #138 dated February 28, 1983 in payment of Florida Intangible Tax for 1983. If it is determined that the Fund at issue herein is totally exempt from taxation, the aforesaid Petitioner is entitled to a refund in the amount of $16.73. The Department of Revenue computes intangible tax on shares of corporations on the basis of "just value" which for publicly held corporations, is market value. The Department of Revenue computed the value of the shares of the Fund on the basis of market value. A review of the Prospectus forwarded with the stipulation of facts discloses that in the Prospectus dated March 1, 1982 only $73,186,000 was invested in United States Government obligations of the total of $1,121,285,000 invested by the Fund; and that in Prospectus dated February 28, 1983, $199,387,000 was invested in United States Government obligations of the total of $1,125,500,000 invested by the Fund. Thus, approximately 6.5 percent in 1982 and 17.7 percent in 1983 of the value of the funds were invested in funds exempt from the Florida intangible tax. Six and one-half percent (6-1/2 %) of $3.96 is $0.26 and 17.7 percent of $16.73 is $2.96.
Findings Of Fact Petitioner, St. Joe Paper Company, is a taxpayer subject to the requirements of the Florida Corporate Income Tax. Its principal offices are located at 803 Florida National Bank Building, Jacksonville, Florida. Petitioner filed its 1976 calendar year tax return with respondent, Department of Revenue (Department), on September 23, 1977. Although filings are normally due on April 1, the filing was made pursuant to an extension of time to and including October 1, 1977 which was granted by the Department. Petitioner was subsequently audited by the Internal Revenue Services (IRS) for calendar years 1972 through 1977. Thereafter, petitioner and IRS entered into a settlement in 1982 wherein they agreed that certain adjustments were required for each of the audited tax years. The adjustments resulted in an overpayment of the Florida Income Tax for 1976. Subsection 220.23(2) , Florida Statutes, requires that a taxpayer notify the Department whenever an IRS audit results in adjustments to the taxpayer's net income subject to the Florida corporate income tax for any taxable year. Because the IRS sett1enent affected the years 1972 through 1977, petitioner filed amended returns for those years with the Department on October 8, 1982. According to the amended returns, petitioner owed additional taxes for all years except 1976, when it had made an overpayment. It added these deficiencies, totaling $82,003.03, and subtracted the overpayment for 1976 ($18,174.10), resulting in a net tax owed the Department of $63,828.94. Petitioner also computed interest owed on its deficiencies for the years 1972-1975 and 1977 to be $39,956.58 and offset this amount with a $12,067.40 credit which it claimed was interest owed it by the Department for its overpayment of taxes for calendar year 1976. When the interest was added to the $63,828.94, the total liability was $91,718.42. The record is unclear whether petitioner calculated its 1976 interest using a 12 percent or 6 percent rate. The proper rate to be used is 6 percent. On August 5, 1983 the Department directed petitioner to appear at its Jacksonville office on August 11 to pay $12,067.40 and if it failed to do so, a tax warrant would be issued. Thereafter, on August 9 petitioner paid the deficiency. On August 15, 1983 petitioner filed an Application for Refund Form DR- 26 requesting a refund of its August 9 payment. In its application, it stated chat "(i)nterest computed on the tax refund for 1976 was offset against interest due for other years", and that the Department's refusal to allow this offset was error. On August 19, 1983 the Department's classification officer, audit classification, issued a letter denying the application on the following grounds: Florida Statutes 214.14 requires that interest be paid should the Department take longer than nine (9) months to refund an overpayment of tax. When computing interest, the Department does so under the theory that each year stands alone. Consequently, offsetting of deficiencies and overpayments is not recognized when computing interest. Your letter of October 8, 1982, shows that check number 2400 was sent, with the Amended Florida returns, to pay the net additional tax and interest. Consequently, the 1976 refund would be deemed to have been made within the nine-month period required under Florida Statute 214.14. This letter prompted the instant proceeding.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: that petitioner's application for a refund be GRANTED and that it be computed at a 6 percent rate to run from October 1, 1977. DONE and ENTERED this 18th day of November, 1983, 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 18th day of November, 1983. COPIES FURNISHED: Mr. W. W. Carlson Assistant Vice-President St. Joe Paper Co. 803 Florida National Bank Building Jacksonville, Florida 3220 Barbara Staros Harmon, Esquire Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301 Mr. Randy Miller Executive Director Department of Revenue Carlton Building, Room 102 Tallahassee, Florida 32301 =================================================================
