Findings Of Fact The Agency Awards Program of the Department of Revenue (DOR) was established to recognize and reward employees who make exceptional contributions which lead to improved effectiveness and efficiency within the Department; increased revenue to the state; enhanced employee morale and teamwork; or greater ease of voluntary compliance for the taxpayer. (Ex. R-14). The Suggestion Award is a component of the Agency Awards Program. Suggestions are written proposals for procedures or ideas aimed at eliminating or reducing state expenditures, improving state government operations, or generating additional revenues to the state. (Ex. R-14). The back of the suggestion form states that "all awards are at the discretion of the agency head." The Petitioner is an employee of the Department of Revenue. On July 15, 1991, Petitioner submitted a suggestion to the Agency Awards Coordinator for the DOR. (Ex. R-1). Petitioner proposed that corporate taxpayers, who notified DOR that their corporate tax returns had been amended, be required to file amended state returns; and that, pending the aforementioned change, notifications by corporate taxpayers to DOR of changes in the taxpayer's federal returns be forwarded to the Tax Audit Section which would prepare a dummy return indicating the tax and interest due. This, in turn, would cause a bill for the taxes and interest to be generated and sent to the taxpayer. The Petitioner's suggestion was rejected by the suggestion awards committee because the committee felt that a change in the law was necessary to require taxpayers to prepare amended returns. The Petitioner requested re-evaluation of his suggestion on the basis that it was a two-part suggestion, and a portion of the suggestion did not require a legislative change. One of the evaluators, Louis Panebianco, re-evaluated Petitioner's suggestion in December 1991, and recommended non-adoption because he thought the department has both a procedure and a work flow set up to handle amended returns and collection of the taxes due. (Ex. R-3). Another of the evaluators, Rayfae Swart, re-evaluated Petitioner's suggestion in January 1992, and recommended adoption of the suggestion and a $100.00 cash award for the Petitioner. (Ex. R-4). Swart was unaware of any claims about the amount of money this suggestion would generate. Jay Friedman asked Charles Martin, Petitioner's supervisor, to implement the portion of the suggestion requiring the notifications to be sent to Martin's section where dummy returns would be generated and Petitioner's suggestion would be evaluated. Martin did as he was requested and began tracking corporate taxpayer accounts requiring adjustments because of Revenue Agent Reports (RAR's) generated by the Internal Revenue Service. (Ex. P-1). Martin identified procedures and problems in the existing system and set forth proposed procedures for handling notifications of "amended" returns with and without payments from corporate taxpayers. (Ex. P-2). Martin believed that Petitioner's suggestion had merit based upon the amount of the taxes and interests which the dummy returns recorded and billed in files which were closed. Records maintained by Martin and Petitioner indicated $881,000 of taxes and interest were billed under the system put forth by Petitioner. The committee turned over the technical evaluation of the proposal to the affected Division Directors, Glenn Bedonie and Jim Evers. On April 4, 1994, Directors Bedonie and Evers issued a memorandum discussing Petitioner's suggestion and recommending that Petitioner be awarded the sum of $100.00 for identifying a systemic weakness. (Ex. R-5). On April 11, 1994, Jim Zingale, Assistant Executive Director, signed the Evaluation Form for Adopted Suggestions. (Ex. R-6). Petitioner was offered a non-measurable award of $100.00 net, plus $55.40 for payment of taxes. The Executive Director notified Petitioner of his award (Ex. R-7), but Petitioner refused the award. (Ex. R-8). Petitioner asserted that his suggestion was responsible for the collection of $881,000, the amount of taxes tracked by Petitioner from the notices of amended federal returns, and that he was entitled to 10 percent of that amount. DOR controverts Petitioner's claim on four grounds: (1) that its procedures would have ultimately resulted in collection of the amounts due from the taxpayers; (2) that the amount of Petitioner's claim is excessive and includes one unusually large transaction which makes up a significant portion of the total; (3) that the procedures suggested by Petitioner were a reinstitution of procedures which had existed prior to institution of DOR's computerized system; and (4) the agency has absolute discretion in determining the nature and the amount of the award under the rules. In 1989, the Respondent began changing from a manual or ledger tax processing system to one that was fully automated. As a result, the procedure of setting up tax returns (dummy returns) by the audit group was discontinued. (Ex. R-12). Prior to Petitioner's suggestion, the Review & Math Audit Section corresponded with taxpayers to ensure that taxpayers notifying the Respondent of necessary changes and taxpayers affected by RAR adjustments filed amended corporate income tax returns. (Ex. R-13). Prior to July 1991, the procedures outlined in the RMA Corporate Tax Quality Check List (Ex. R-15) also ensured that the taxpayer accounts tracked by Petitioner would be flagged for the factors summarized by Marsha Lammert's research. (Ex. R-10, "Comments" column). Marsha Lammert researched the accounts tracked by Petitioner to determine the validity of his claims. (Ex. R-10, 11). For the past two years, Lammert has been the Senior Revenue Examiner in the Corporate Income Tax Section of Revenue & Math Audit, a bureau of the Division of Tax Processing. Prior to this position, Lammert served over six years as Revenue Examiner Supervisor of the Corporate Income Tax Section. At the time the suggestion was made, DOR had various tax processes in effect that were triggered by certain audit selection criteria which resulted in establishing an audit trail for collection of taxes due by the corporate taxpayers. Each of the thirty-six accounts tracked by Petitioner would have triggered between two and six individual audit selection criteria by the automated tax processing system. (Ex. R-10). This information is collected by the Review & Math Audit Section and transmitted to Audit Selection, Division of Audits through the automated tax data processing system. The purpose of the data is to accord an audit priority to be used by Audit Selection in scheduling tax auditor assignments. Rayfae Swart performed a post audit to determine if Petitioner's suggestion had resulted in additional revenues. Her audit revealed that the amounts claimed by the Petitioner were gross amounts and did not reflect any amounts due the taxpayer as refunds. Further, DOR's audit procedures would have eventually picked up the returns through audits which review even "closed" files. Her testimony indicated that these audits would have revealed the taxes due in these accounts within sufficient time for the Department to collect the taxes before the statute of limitations ran. Marsha Lammert identified in the $881,000 claimed by the Petitioner one taxpayer who received refunds of $332,566.00 and $6,619.00. (Taxpayer P, Respondent's Ex. R-11). Further, Taxpayer "O" received a refund of $73,930.00. (Ex. R-11, "O"). These amounts would have been an offset to the amounts identified by the Petitioner; however, identifying the amounts the taxpayers owed in taxes reduced the refunds which the state had to pay the taxpayers in refunds.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is, RECOMMENDED: That the Department of Revenue enter a Final Order finding that the $100 cash award to Petitioner was within the agency head's discretion under the State Awards Program. DONE and ENTERED this 23rd day of March, 1995, in Tallahassee, Florida. STEPHEN F. DEAN 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 23rd day of March, 1995. APPENDIX TO RECOMMENDED ORDER The parties submitted proposed findings which were read and considered. The following states which of their findings were adopted, and which were rejected, and why: Petitioner's Recommended Order Findings Paragraphs 1-5 Paragraphs 2-6 Paragraphs 6,7 Subsumed in paragraphs 7-10 Paragraphs 8-11 Petitioner tracked $881,000 in taxes reported on amended returns; however, there was no evidence that this would have been uncollected in the absence of the suggested changes. Paragraph 12 Rejected as being contrary to unrefuted evidence that these taxes would have been collected anyhow. Paragraph 13 Subsumed in Paragraph 3. Paragraph 14 True, but unnecessary. Paragraph 15 See comments to Paragraph 11 and 12. Paragraph 16 Conclusion of Law. Respondent's Proposed Order Findings Paragraph 1 Paragraph 1 Paragraph 2 Paragraph 3 Paragraphs 3-5 Subsumed in Paragraph 4 Paragraph 6 Subsumed in Paragraph 5 Paragraphs 6-8 The fact Martin participated in keeping track of the taxes is unnecessary to the decision. The other findings are subsumed in Paragraph 8. Paragraphs 9,10 Paragraph 9,10 Paragraph 11 Paragraph 12 Paragraph 12 Paragraph 13 Paragraph 13 Paragraph 14 Paragraph 14 Paragraph 16 Paragraph 15 Subsumed in Paragraph 17 Paragraph 16 Subsumed in Paragraph 18 COPIES FURNISHED: Gabriel Mazzeo, Esquire Post Office Box 12907 Tallahassee, FL 32317-2907 Tom Barnhart, Esquire Department of Revenue Post Office Box 6668 Tallahassee, FL 32314-6668 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
Findings Of Fact Pabrey holds certificate number R-0211 as a Certified Public Accountant practicing in the State of Florida and held such certificate in good standing on January 1, 1974. At that time, Pabrey was subject to professional certification require- ments set forth in Chapter 473, Florida Statutes. The records of the Board reflect that Pabrey provided no evidence of the completion of any courses or studies that would give him credit towards the reestablishment of his professional competency in the period between January 1, 1974, and April 2, 1977. On October 15, 1976, Pabrey sat for an examination which was approved by the Board and given to practicing Certified Public Accountants pursuant to applicable law requiring reestablishment of professional competency. Pabrey received a score of 57 out of a possible score of 100. The established passing grade for the examination is 75. On December 31, 1976, Pabrey tendered his check to the Board in the amount of forty dollars ($40.00) as the required license fee. On May 13, 1977, the Board suspended Pabrey's certificate R-0211 as a Certified Public Accountant for failing to comply with requirements for the reestablishment of his professional knowledge and competency to practice public accounting. The check was returned to Pabrey by the Board on May 18, 1977, along with a copy of the Administrative Complaint and Order of Suspension. The questions to be answered in the uniform written professional examination administered to Pabrey on October 15, 1976, were based upon "Current Authoritative Literature' which included Accounting principles Board's Opinions, Accounting Research Bulletins, Statements and Interpretations of the Financial Accounting Standards Board, Statements on Auditing standards, and the Laws and Rules of the Florida State Board of Accountancy. Pabrey challenges thirty-six of these one hundred questions on the grounds that the approved answers are incorrect and that the answer selected by Pabrey is the proper choice. The questions attacked by Pabrey are numbers 5, 7, 11, 15, 18, 19, 22, 28, 29, 30, 31, 35, 36, 37, 42, 45, 53, 54, 55, 57, 59, 62, 63, 65, 66, 70, 72, 74, 76, 78, 86, 87, 88, 91, 92, and 98. The title of the uniform written professional examination is "Examination of Current Authoritative Accounting and Auditing Literature and Rules of the Florida State Board of Accountancy. The approved answer to each of the questions on the examination is that which is mandated by the "Current Authoritative Literature." The examination does not purport to seek answers outside of the requirements of the Current Authoritative Literature. Each of the approved answers in the thirty-six questions listed above are consistent with the demands of the Current Authoritative Literature. None are vague, misleading, unfair or improper. Each of Pabrey's answers is contrary to the provisions of the Current Authoritative Literature. Accordingly, the answers selected by Pabrey are not the best answers and were properly graded incorrect on his examination answer sheet.
The Issue Whether Petitioner is entitled to recover attorney's fees and costs against Respondent and, if so, in what amount.
Findings Of Fact At all times relevant to this proceeding, Petitioner, Ron D. Baker (Petitioner), was the personnel director for Indian River County (County or Indian River County). Petitioner was hired to this position by Respondent, James E. Chandler (Respondent), the administrator for Indian River County, on March 18, 1996. As personnel director for Indian River County, Petitioner is a public employee and, thus, subject to the Code of Ethics. Prior to Petitioner's being hired as personnel director for Indian River County, he had served as personnel director for the City of Melbourne from 1989 to 1996. On May 15, 1997, Respondent was contacted by a reporter of the Vero Beach Press Journal and asked to comment on allegations of impropriety that had surfaced with respect to Petitioner. The allegations were that improper procedures had been followed in the County's awarding a contract to Brevard Drug Screening; that Petitioner had requested that the owner of Brevard Drug Screening, Jon Peterson, hire Petitioner's son; and that Petitioner had directed a subordinate to call the City of Melbourne to obtain personal information about the director of aviation of the Melbourne International Airport. With one exception, Respondent was unfamiliar with the allegations. The one allegation raised by the newspaper reporter that had previously been brought to Respondent's attention involved Petitioner's utilizing the services of his subordinate, Colleen Peterson, to make inquiries to the City of Melbourne for personal information about the aviation director for the Melbourne International Airport. The day after the news reporter met with Respondent, in the May 16, 1997, edition of the Press Journal, Indian River County's local newspaper, an article was published that made allegations of impropriety against Petitioner. The allegations included in the newspaper article were the same ones the newspaper reporter discussed with Respondent the preceding day. Because the allegations appeared to relate to Petitioner's employment with Indian River County, after Respondent received information regarding alleged improprieties by Petitioner from the newspaper reporter, he immediately conferred with Assistant County Attorney Terry O'Brien. Later that same day, because of the seriousness of the allegations, O'Brien set up a meeting for Respondent with Indian River County Assistant State Attorney Lynn Park, to review the information that had been provided. Thereafter, Respondent met with both Assistant State Attorney Park and Assistant County Attorney O'Brien concerning the allegations raised by the newspaper reporter. After Respondent conferred with Assistant County Attorney O'Brien and Assistant State Attorney Park, a recommendation was made that the allegations against Petitioner be investigated by the Indian River County Sheriff's Office because of potential criminal violations. On May 22, 1997, Detective Lewis Beckerdite of the Indian River County Sheriff's Office was assigned to investigate the allegations involving Petitioner. Prior to commencing the investigation, Detective Beckerdite requested that Respondent Chandler prepare a memorandum summarizing the information and allegations relative to the matter. In response to Detective Beckerdite's request, Respondent prepared a memorandum detailing the information and allegations that had been presented to him regarding Petitioner and other parties. The memorandum stated that on May 15, 1997, a newspaper reporter raised three issues of alleged impropriety by Petitioner. First, the memorandum noted that the reporter advised Respondent that according to Jon Peterson, Petitioner had requested that Peterson hire Petitioner's son. This was possibly significant because Peterson was owner of Brevard Drug Screening Services, Inc., a firm that had a contract with Indian River County. A second issue raised by the newspaper reporter and addressed in the memorandum was whether proper purchasing procedures were followed in issuance of the Brevard Drug Screening contract. Third, Respondent's memorandum noted that the reporter had made an inquiry concerning Petitioner's directing Colleen Peterson, the County's personnel assistant and his subordinate, to call the City of Melbourne's personnel office to obtain personal information about the director of aviation at the Melbourne International Airport for potential litigation involving Petitioner's wife. With regard to the issuance of the contract to Brevard Drug Screening, Respondent's May 22, 1997, memorandum indicated that he had previously looked into the matter and determined that there was no violation of County policies. Further, the memorandum noted that Respondent had spoken to Petitioner about the call made to the City of Melbourne seeking personal information about the aviation director. According to the memorandum, during that discussion, Petitioner had agreed that it was improper to use County personnel for personal matters and had said it would not happen again. In addition to information described in paragraph 10 above, Respondent's memorandum indicated that on May 16, 1997, he received a call from a County employee who said that he had heard that Jon Peterson had either sold Human Resource Health Care Group or his client list to Mackie Branham of O'Neil, Lee, and Wood, the County's health insurance firm, and that Petitioner was allegedly involved and may have received some monetary gain. The County employee also told Respondent he had heard that Petitioner had made a trip to North Carolina and stayed at a cabin or condominium either paid for or owned by Markie Branham. After receiving Respondent's May 22, 1997, memorandum, Detective Beckerdite commenced an investigation which included his interviewing and taking sworn statements from various persons, including Petitioner, Colleen Peterson, and her husband, Jon Peterson. In addition to giving sworn statements, the Petersons provided Detective Beckerdite with documents to support the allegations that they made against Petitioner. Detective Beckerdite also interviewed James "Jaime" Carraway and County employees, Beth Jordan, Tobi Erts, and Joe Baird. Detective Beckerdite presented his preliminary investigative report, including the documents obtained during the course of the investigation, to the Indian River County State Attorney's Office. The report was reviewed by State Attorney Bruce Colton and Assistant State Attorney Park, who determined that there was insufficient evidence to charge Petitioner with any criminal violation. In light of this determination, Detective Beckerdite concluded his investigation and finalized the investigative report, which included attached documents. The Beckerdite report recommended that Indian River County conduct either an internal investigation of the allegations involving Petitioner or refer the matter to the Ethics Commission. After consulting with legal counsel for the County, Respondent determined that the matter should be referred to the Ethics Commission. The primary reason for this decision was that the Ethics Commission, unlike Indian River County, had the power to subpoena witnesses and documents. Respondent believed that by having subpoena power, the Ethics Commission could address the contradictory and conflicting testimony and statements of individuals by compelling the testimony of witnesses and the production of documents that might support or refute the allegations. Respondent prepared a formal ethics complaint on the form required by and obtained from the Ethics Commission. A narrative was prepared by Respondent and a specification of charges, based upon the Code of Ethics, was prepared by Deputy County Attorney Will Collins. These two parts were combined into one document titled, "Narrative Addendum to Sworn Statement." The narrative portion prepared by Respondent detailed the events that resulted in the decision to file the complaint with the Ethics Commission and expressly stated the basis upon which the allegations against Petitioner were made. In the "Narrative Addendum to Sworn Statement," Respondent stated: On May 15, 1997, I received information regarding allegations concerning Personnel Director Ron D. Baker. The information is reflected in the attached investigative report generated by Indian River County Sheriff's Department. * * * The report summarizes the statements taken by the Sheriff's Department. I believe the report is self-explanatory. In essence there are strong allegations with respect to Mr. Baker and various individuals or firms doing business with Indian River County. As reflected in the report Mr. Baker denies the allegations. The report draws no conclusions other than it is being transmitted to me to determine whether to handle this matter internally or to contact the Florida Commission on Ethics. After a thorough review of the report, it is my opinion and our attorney's office that the allegations are very serious and, if true, would be a violation of [the Code of Ethics]. * * * As a result, as County Administrator, I am requesting an investigation by the State of Florida Commission on Ethics. The Complaint consisted of the complaint form, the "Narrative Addendum to Sworn Statement," a copy of the Beckerdite report and attachments thereto, and a copy of a May 16, 1997, article from the Press Journal. The Complaint form and these attachments were filed with the Ethics Commission on June 30, 1997. Respondent did not publicize the filing of the Ethics Complaint or desseminate it to anyone other than County employees involved in its preparation and to County commissioners. Since no criminal prosecution was to ensue and the Sheriff's Department's investigation was complete, the Beckerdite report became a public record. In light thereof, a copy of the Beckerdite report was provided to Petitioner and to a newspaper reporter. Although the newspaper reporter was provided with a copy of the Beckerdite report, Respondent did not discuss the Beckerdite report with any reporter. After Petitioner received a copy of the Beckerdite report, he requested and was granted an administrative leave of absence with pay. Several weeks after filing the Complaint, Respondent contacted the Ethics Commission Office and asked about the status of resolution of the Complaint. Respondent was advised that it would be a matter of months before a determination would be made as to whether an investigation would proceed. Because Petitioner's administrative leave with pay was scheduled to end in August 1997, Respondent believed immediate action needed to be taken to resolve the issues before that time. To accomplish this, Respondent enlisted the assistance of Robert Von Buelow, a fire investigator employed by the County, to pursue further investigation of the allegations and charges against Petitioner. Investigator Von Buelow immediately commenced his investigation by conferring with Detective Beckerdite and reviewing the Beckerdite report. As a part of his investigation, Investigator Von Buelow took sworn statements and/or interviewed several individuals and reviewed documents. Investigator Von Buelow took sworn statements from both Colleen Peterson and her husband, Jon Peterson. The Petersons also provided Investigator Von Buelow with numerous documents which appeared to substantiate their claims or allegations. However, Von Buelow's investigation was limited because of his inability to compel statements of individuals who did not want to provide statements or produce documents. On or about August 1, 1997, the results of Investigator Von Buelow's investigation were presented to Respondent for review. Based upon the investigations of Investigator Von Buelow and Detective Beckerdite and the evidence collected, Petitioner was notified of Respondent's intent to terminate his employment with the County. Petitioner was also provided with all information collected as of that date. After receiving the notice regarding the County's intent to terminate his employment, Petitioner requested a pre- determination hearing. On August 13, 1997, a nine-hour pre- determination was held during which sworn testimony and documentation pertinent to the allegations were presented. This included the sworn testimony of Petitioner, Investigator Von Buelow, Detective Beckerdite, Jon Peterson, Colleen Peterson, Lea Keller, Zander Carraway, and Ron Baker, Jr. Also, a number of evidentiary documents were received into evidence at the proceeding. On August 15, 1997, Respondent determined to terminate the employment of Petitioner based upon the evidence, the documents and sworn testimony, received and reviewed at the pre- termination hearing. However, in his decision on termination, Respondent found that there was insufficient evidence to sustain several of the charges against Petitioner and thus, those charges were not the basis of Petitioner's being terminated. After the decision to terminate Petitioner was rendered, pursuant to County personnel procedures, Petitioner requested a post-termination hearing. The post-termination hearing was held on October 16, 1997, before an appointed hearing officer. At this hearing, sworn testimony was taken from Petitioner, Mackie Branham, James Carraway, Douglas Wright, Elizabeth Jordan, Deborah Archer, Colleen Peterson, and Jon Peterson. The deposition testimony of Dr. Leo Bradman was submitted and a number of exhibits were introduced and received into evidence, including documentary evidence that had been obtained between the pre-termination hearing and post-termination hearing. On November 17, 1997, the hearing officer who presided at the post-termination hearing issued his opinion in which he found that there was insufficient evidence to terminate Petitioner. The Indian River County Commission appealed this decision to the Circuit Court of Indian River County. In November 1997, after the post-termination hearing, Thomas Reaves, the investigator with the Ethics Commission assigned to investigate the Complaint, requested that Respondent provide him with a list of potential witnesses and any documentation relevant to the Complaint. In response to this request, on December 22, 1997, County representatives delivered to Investigator Reaves all the information generated since the Complaint was filed in June 1997. This information included the Von Buelow investigative report and attached documents, transcripts of the pre-determination and the post-termination hearings, depositions, and documentary evidence presented at those hearings or other legal proceedings. Additionally, copies of the hearing officers' decisions in both the pre-determination hearing and the post-determination hearing were provided to Investigator Reaves. Some of the information provided to Investigator Reaves on December 22, 1997, contained information that had not been developed or known at the time the initial complaint was filed. Accordingly, that information was not included in the initial Complaint. After the records had been delivered to Tallahassee, Florida, Respondent spoke to Investigator Reaves by telephone and was advised that allegations or information not included in the original complaint could not be investigated unless an amended complaint was filed. Respondent informed one of the assistant County attorneys of his conversation with Investigator Reaves and discussed the apparent necessity of filing an amendment to the Complaint. Following his discussion with one of the County's assistant attorneys, Respondent prepared an amendment to the Complaint. The Amended Complaint, filed on January 28, 1998, included additional allegations and information based on Investigator Von Buelow's report, depositions, and transcripts of the pre-termination and post-termination hearings. The Amended Complaint included a completed Ethics Commission complaint form and a letter to Investigator Reaves, both which were prepared and signed by Respondent. The letter listed several additional allegations not included in the Complaint that represented potential violations of the Ethics Code. Each of the allegations was based on the testimony or statements of individuals given during the pre-determination or post-determination hearings, depositions, or Investigator Von Buelow's investigation and on documents received during the aforementioned proceedings or investigation. Prior to listing the allegations and the basis thereof, the letter stated: By letter dated November 7, 1997, you advised that the complaint had been forwarded to the Investigative Section. Additionally, a list of potential witnesses and any relevant documentation was requested. Since the original June 30, 1997, transmittal to the Commission, a substantial amount of information and documentation has been developed. This information was presented to you by County Representatives at the December 22, 1997, meeting at your office in Tallahassee. The entire file was presented including additional investigative reports, transcripts, depositions, etc. The files include information that was not known or confirmed at the time the original complaint was filed. This information and documentation appear to represent potential violation of F.S. 112.313(2), (4), (6), (7), and (8). . . . The Ethics Commission determined that the Complaint and Amended Complaint were legally sufficient. On September 29, 1997, Bonnie Williams, Executive Director of the Ethics Commission, entered a Determination of Investigative Jurisdiction and Order to Investigate which authorized Investigator Reaves to investigate allegations in the Complaint. Thereafter, on February 9, 1998, an Amended Determination of Investigative Jurisdiction and Order to Investigate was entered authorizing Investigator Reaves to investigate the allegations in the Amended Complaint. In conducting the investigation, Investigator Reaves took sworn statements from witnesses who had not been questioned during the pre-determination and post-termination proceedings, including Catherine Wendt and Christopher Matteson. He also reviewed and considered the investigative reports of Detective Beckerdite and Investigator Von Buelow; the pertinent transcribed testimony and evidence presented in the nine-hour pre- determination hearing conducted on August 13, 1997; the testimony presented in the ten-hour post-termination hearing on October 16, 1997; the sworn deposition testimony given by Petitioner in a civil action between Jon Peterson and James Carraway; and a sworn statement that Investigator Reaves obtained from Petitioner. Investigator Reaves' findings were summarized in a single-spaced typed, 60-page Report of Investigation which included numerous attached exhibits. At its June 3, 1999, meeting, the Ethics Commission concluded that there was no probable cause found that Petitioner had violated the Code of Ethics. The Ethics Commission's public report memorializing its decision was rendered on June 8, 1999. In this proceeding, the presentation of Petitioner's case centered mainly on the assertion that the alleged violations of the Ethics Code were not proven. However, the standard for this proceeding is not whether a violation of the Ethics Code has been proven. That issue has already been determined by the Ethics Commission in its dismissal of the Complaint and Amended Complaint. Rather, the issue is whether Respondent filed the Complaint and Amended Complaint with a malicious intent to injure the reputation of Petitioner by filing the Complaint and Amended Complaint with knowledge that they contained one or more false allegations, or with reckless disregard for whether they contained false allegations of fact material to a violation of the Ethics Code. Respondent did not file the Complaint or Amended Complaint to injure the reputation of Petitioner, but to carry out the responsibilities of the job as appointed County administrator. As County administrator, Respondent could not reasonably nor justifiably ignore the serious allegations of impropriety made against Petitioner merely because Petitioner denied or disputed the allegations. As described below, the allegations included in the Complaint and Amended Complaint were based upon sworn testimony, interviews, and documents obtained during investigations by trained investigators and confirmed by documentary evidence and sworn testimony presented at official proceedings. One of the allegations in the Complaint was that James Carraway, who had an ownership interest in a company providing contractual services to the County, provided Petitioner's daughter with an airline ticket to travel from Colorado to Florida. Although Baker initially denied that this occurred, in a sworn statement to Detective Beckerdite, Jon Peterson swore that this occurred. During Investigator Reaves' investigation and in this proceeding, Catherine Wendt, secretary to James Carraway, stated under oath that she arranged such a trip in the spring of 1996 using Carraway's frequent flyer miles. This fact was significant because Petitioner admitted that at or near this time, he had contacted Jon Peterson and requested that he submit a bid for the Indian River County drug screening contract and that Peterson, who was a partner with James Carraway in Brevard Drug Screening, was awarded the contract. Thus, the allegation that Peterson made and included in the Complaint, was not false, but was corroborated by Wendt. A second allegation in the Complaint was that Petitioner used a cabin, chalet, or condominium in North Carolina owned by James Carraway. In a sworn statement to Beckerdite and at the pre-determination hearing, Jon Peterson testified that arrangements had been made for Petitioner to use the Carraway cabin or chalet in North Carolina. Although, Petitioner denied that this occurred, Investigator Reaves determined that Carraway owned a cabin, chalet, or condominium in North Carolina that was available for use by friends and associates and that a request was made for Petitioner to use it. Thus, there was evidence to support this allegation. The Complaint also alleged that Petitioner received stock car race tickets from James Carraway. Jon Peterson gave sworn statements to Detective Beckerdite and testified under oath that he had received stock car race tickets from James Carraway and had given the tickets to Petitioner. James Carraway admitted to Investigator Reaves that he had given stock car race tickets to Peterson and that such tickets may have been given to Petitioner. Thus, there was evidence to support this allegation. The Complaint contained an allegation related to the hiring of Petitioner's son, Ron Baker, Jr., by James and Zander Carraway and Jon Peterson. This allegation was based on sworn statements made by Colleen and Jon Peterson and supporting documentation provided by the Petersons, both of which were included in the Beckerdite report. According to the sworn statements given by the Petersons, Petitioner asked Jon Peterson to hire Baker, Jr. and Peterson had agreed to do so. Furthermore, Jon and Colleen Peterson told Beckerdite that they hired Baker, Jr., to work for Brevard Drug Screening. However, the Petersons admitted that in lieu of paying Baker, Jr., a salary for his services, they paid the rent on his apartment, his utility bills and phone bill, and provided him with spending change. The Petersons provided cancelled checks to substantiate these statements. Petitioner's statement to Detective Beckerdite conflicted with the statements given by the Petersons. Contrary to the Petersons' statements, Petitioner denied that he ever asked Peterson to hire Baker, Jr., but indicated that he had asked James Carraway to "help" his son so he could "get on his feet." Notwithstanding Petitioner's denying that he asked Jon Peterson to hire his son, the statements of the Petersons, and the documents they furnished provided some evidence to support the allegation concerning the hiring of Petitioner's son. Another allegation in the Complaint related to Petitioner's potential involvement in a joint venture with James Carraway, owner of a County vendor, and his son, Zander Carraway, and Dr. Leo Bradman. Based on Jon Petersons's statements to Detective Beckerdite and documents Jon Peterson gave to Investigator Beckerdite, it appeared that the joint venture between the aforementioned parties contemplated and would result in their taking over the County's Employee Assistance Program (EAP) contract. The allegation involving the possible joint venture was based on the Beckerdite report, which included Peterson's sworn statement relative to that matter and the substantiating documentation provided by Peterson. Moreover, as noted in the Amended Complaint, the allegation concerning the possible joint venture appeared to be confirmed by the testimony of Dr. Leo Bradman taken on October 13, 1997, and a letter from Zander Carraway to Dr. Bradman. There was evidence to support this allegation at the time the Complaint was filed, as well as additional evidence that appeared to substantiate the allegation at the time the Amended Complaint was filed. The Amended Complaint alleged that, in a deposition taken in a civil action on September 5, 1997, Petitioner admitted that while serving as Personnel Director for Indian River County, he negotiated for the purchase of the EAP business from James Carraway. At the time of these negotiations, Petitioner knew that James Carraway and Jon Peterson were owners of Human Resource Health Care Group, the County's EAP provider, and Brevard Drug Screening, the County's drug screening contractor. Although Petitioner initially claimed to have been a mediator in the negotiations, Peterson testified that if Carraway agreed to sell his interest in the business to Peterson, Peterson and Petitioner would be partners in the EAP. In light of Petitioner's admission and Peterson's sworn statement that Petitioner was, in fact, negotiating a deal involving the purchase of the vendor providing the EAP to Indian River County, there was evidence to support this allegation. The Amended Complaint also alleged that Petitioner co- signed on a credit card application with Colleen Peterson, Petitioner's subordinate and the County's personnel administrator and wife of Jon Peterson, owner of Brevard Drug Screening, a Indian River County vendor. This allegation was based on sworn statements made by Colleen Peterson as well as documents provided by the Petersons to Investigator Von Buelow reflecting that such an application was completed. One of the documents provided by the Petersons was a copy of the completed credit card application. The application appeared to be signed by Petitioner and listed Petitioner's address as the business address of Florida Occupational Health Group in Melbourne, Florida, the entity owned by the Petersons that was vying for the Indian River County EAP contract. According to sworn statements made by the Petersons to Investigator Von Buelow, the application for the credit card was made to fund a joint venture between Petitioner and the Petersons to obtain employee assistance provider contracts, including the one for Indian River County. Notwithstanding Petitioner's testimony at this proceeding that the credit card was never issued, the statements of the Petersons and the substantiating documents they provided to Investigator Von Buelow provided a reasonable basis for Respondent's including this allegation in the Amended Complaint. The Amended Complaint alleged that Petitioner hired Colleen Peterson as personnel assistant and advised her not to disclose that she was married to Jon Peterson, a County vendor. Furthermore, it was alleged that prior to hiring Colleen Peterson to this position, Petitioner directed her to change her resume knowing that she had insufficient experience to meet the advertised job requirements and hired her without interviewing other applicants who had substantial education, qualifications, and experience. These allegations were based on statements made by Colleen Peterson and documents provided to Investigator Von Buelow during his investigation. According to Mrs. Peterson, after Petitioner became personnel director for Indian River County, he invited her to apply for the position of personnel administrator for Indian River County. In her statement, Colleen Peterson indicated that she later met with Petitioner and asked him to review her cover letter and resume; that he reviewed her resume and cover letter; and upon such review, he directed her to change her resume and/or cover letter to be misleading as to her qualifications. Petitioner was aware of Mrs. Peterson's professional experience because she had worked for Petitioner when he was personnel director for the City of Melbourne. In addition to Mrs. Peterson's statements, a review of Mrs. Peterson's resume compared to her actual experience indicated she may not have met the advertised job requirements, education, or experience as a grievance adjudicator. Also, a review of the applications of other applicants for the position of personnel assistant reflected that some of those individuals, none of whom were interviewed, had the required education and experience. Based on the findings in paragraphs 48 and 49, there was evidence to support the allegation relative to Petitioner's hiring of Colleen Peterson. The Amended Complaint further alleged that Petitioner directed an Indian River County employee with a substance abuse problem to Heritage Hospital for an in-patient treatment program at a cost of $12,930.61. This allegation was based on statements Jon Peterson made to Investigator Von Buelow. According to Jon Peterson, when a County employee required an in-patient treatment program for substance abuse, the employee was given three facilities from which to select. However, in this instance, Peterson stated that his job was to convince the employee to go to Heritage Hospital, even though that facility was not pre- certified by Blue Cross/Blue Shield, the County's insurance company; was not on the County's preferred provider list; and was approximately 200 miles from Vero Beach. A facility not on the preferred provider list was allowed to charge 20 percent more than a facility on the list. At the time the County employee was referred to Heritage Hospital, James Carraway was owner of and had a financial interest in Heritage Hospital and Petitioner was aware of Mr. Carraway's ownership interest in that facility. The apparent significance of the referral was that, as noted above, it had been alleged that Petitioner had been negotiating with James Carraway about a possible joint venture involving an EAP and the purchase of an EAP which may have served Indian River County. The allegation in the Amended Complaint relative to Petitioner's referring a County employer to Heritage Hospital was based on statements Jon Peterson made to Investigator Von Buelow and the deposition testimony of Dr. Leo Bradman. Accordingly, there was evidence to support this allegation. Additional allegations in the Amended Complaint concerned Petitioner's requesting that Peterson and the Carraways, both County vendors, make certain payments to Petitioner or Petitioner's relatives. First, it was alleged that Petitioner was paid to perform certain construction work on a bathroom at the Brevard Drug Screening Office. Second, it was alleged that Peterson's company, Brevard Drug Screening, paid medical expenses for Petitioner's wife. These allegations were based on statements Jon Peterson made to Investigator Von Buelow and on substantiating documents that Peterson provided, both of which were included in Investigator Von Buelow's investigative report. Although it was later determined that the alleged payments were not improperly made, at the time the Amended Complaint was prepared and filed, there was evidence to support these allegations. The Amended Complaint alleged that the Carraways, County vendors, had advanced Petitioner's son, Baker, Jr., $2,000 to move from Jacksonville to Melbourne. This allegation was based on statements made by Jon Peterson during the Von Buelow investigation and during the August 1997 pre-determination hearing. Thus, there was evidence to support this allegation. The Amended Complaint alleged that Jon Peterson, a County vendor, paid the cellular telephone bill for Petitioner and expressly noted that this allegation was based on "testimony" of Colleen Peterson. In addition to Mrs. Peterson's statement, this allegation was supported by Jon Peterson's testimony at the August 13, 1997, pre-determination hearing and by a copy of a canceled check given to Detective Beckerdite by the Petersons. At hearing, Petitioner testified that Jon Peterson had, in fact, paid his cellular bill as indicated by the cancelled check provided by the Petersons. However, Petitioner explained that Jon Peterson asked to borrow Petitioner's cellular phone and that he had allowed Peterson to do so on the condition that Peterson pay the bill for the time period that he had the telephone in his possession. Notwithstanding Petitioner's testimony explaining the reason for the payment, at the time Respondent completed the Amended Complaint, there was evidence to support this allegation. Another allegation in the Amended Complaint was that Petitioner directed Colleen Peterson, a County employee, to prepare personal letters for him during business hours using County equipment. This allegation was based on statements Colleen Peterson made to Investigator Von Buelow and on supporting documentation, copies of the letters, that Mrs. Peterson gave to Investigator Von Buelow. In view of Mrs. Peterson's statements and the substantiating documentation, there was evidence to support this allegation at the time the Amended Complaint was filed. Finally, the Amended Complaint alleged that Petitioner utilized the research resources of the Indian River County Attorney's Office to obtain information and materials for his son for a project unrelated to Indian River County business. This allegation was based on statements Jon Peterson gave to Investigator Von Buelow and documents Peterson provided to Investigator Von Buelow. The documents that Petitioner provided were WestLaw documents and research materials which Peterson stated were found in Petitioner's son's office at Brevard Drug Screening after he was no longer employed there. Investigator Von Buelow interviewed a legal assistant in the County Attorney's Office who confirmed that she had conducted the subject research for and at Petitioner's request. The allegations in the Complaint and Amended Complaint could not be substantiated and/or did not constitute violations of the Code of Ethics. Nonetheless, the inclusion of those allegations were reasonably based on information that Respondent obtained from reliable sources, including the Beckerdite and Von Buelow's investigative reports, the records of the pre- determination and the post-termination hearings; and depositions from other legal proceedings. On or about July 9, 1997, Respondent retained Jack B. Nichols, Esquire, to represent him in the defense of the Ethics Complaint and Amended Complaint 97-103. Mr. Nichols' regular hourly rate is $225. However, trial time is billed at $450 an hour and travel time is billed at one-half of the hourly rate or $112.50 an hour. For the period July 9, 1997, through March 23, 2000, Mr. Nichols has expended 233.70 hours on this matter. As a result of Mr. Nichols' representation, Petitioner has incurred total attorney's fees and costs of $55,576.25 and $10,296.83, respectively. These attorney's fees and costs are reasonable. However, based on the foregoing findings, it is clear that Respondent did not file the Complaint and the Amended Complaint against Petitioner with a malicious intent to injure the reputation of Petitioner by filing such complaints with knowledge that the complaints contained one or more false allegation or with reckless disregard for whether the complaints contained false allegations of fact material to a violation of the Ethics Code. Therefore, Petitioner is not entitled to an award of attorney's fees and costs from Respondent.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby: RECOMMENDED that a Final Order be entered finding that Respondent, James E. Chandler, is not liable for attorney's fees and costs and dismissing the Petition for Attorney's Fees. DONE AND ENTERED this 29th day of June, 2000, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2000. COPIES FURNISHED: Jack B. Nichols, Esquire 801 North Magnolia Avenue Suite 414 Orlando, Florida 32803 George P. Roberts, Jr., Esquire Roberts and Reynolds, P.A. 470 Columbia Drive Suite 101C West Palm Beach, Florida 33409 Sheri L. Gerety, Complaint Coordinator and Clerk Florida Commission on Ethics 2822 Remington Green Circle, Suite 101 Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Philip C. Claypool, General Counsel Florida Commission on Ethics 2822 Remington Green Circle Post Office Drawer 15709 Tallahassee, Florida 32317-5709
Findings Of Fact Basic is a general contractor specializing in asphalt resurfacing and related construction activities. Its principal offices are in Orlando, Florida. Basic is not currently qualified to bid on construction projects to be let by DOT. Its certificate of qualification expired on June 30, 1984. Until the expiration, Basic had been continuously qualified by DOT to bid on such jobs since 1975. During the time it was qualified, Basic successfully performed approximately fifty state jobs. In early September, 1984, Basic received its annual audited financial statement from its accountants, Fox and Company (Fox), which reflected Basic's financial condition for the year ending on March 31, 1984. On or about September 14, 1984, Basic filed its application for renewal of its certificate of qualification. With the application, Basic filed the audited financial statement prepared by Fox and Company and an additional financial statement prepared by Basic's new accountants, Colley, Trumbower and Howell (Colley). This Colley financial statement was merely a compilation and covered the period April 1, 1984 through June 30, 1984. The audited statement of Fox contained the opinion of a certified public accountant; the compilation of Colley contained no opinion. The audited statement preceded the date of filing by approximately 170 days. DOT reviewed the application and denied it on the ground that the financial statements submitted were of a date more than 120 days prior to the application DOT did not perform a fiscal analysis or further review of the application after it determined that the application did not contain what it believed to be the necessary financial statements. In response to the denial, Basic had Colley prepare an additional financial statement which reflected its financial condition through September 30, 1984. This financial statement was a review and did not contain an opinion of a certified public accountant (See transcript p 47, lines 22 and 23). DOT declined to accept this review. An "audited" financial statement is a financial statement that has been subjected to full audit scrutiny and verification. A compiled financial statement is merely a compilation of financial information as supplied by the client. A reviewed financial statement consists of inquiries and compilation of financial data with application of analytical procedures and is less in scope than an audited financial statement. An "opinion" is a term of art in the field of accounting and refers to an opinion that the basic financial information taken as a whole is fairly stated in all material respects and is in accordance with generally accepted accounting principals. A qualified opinion is subject to the same definition and level of scrutiny, but is qualified as it relates to one or more items in the financial statement. DOT only accepts audited financial statements which express an opinion. The financial information in the reviewed financial statement, when read in conjunction with the audited financial statement reflects that Basic is in an adequate financial situation with positive current rates and a substantial adjusted net worth. Basic is making a profit.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying the application of Basic for a certificate of qualification. DONE and ORDERED this 8th day of February, 1985, in Tallahassee, Florida. DIANE K. KIESLING 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 8th day of February, 1985.
The Issue Whether Petitioner, Bans N. Persaud, should be awarded a passing grade on the "Financial Accounting" part of the Certified Public Accounting examination given on May 7-8, 1997.
Findings Of Fact Petitioner, Bans N. Persaud, took the Certified Public Accountant Exam in May of 1997. The Department of Business and Professional Regulation's Bureau of Testing notified Petitioner by Examination Grade Report dated August 4, 1997, that he had earned a score of 75.00 which was a passing grade on three parts of the exam: Audit, Accounting & Reporting, and Law Exam. The report informed him that, "CREDIT ON PASSED PARTS HAS BEEN GRANTED." The report also informed Mr. Persaud that he had failed the Financial Accounting Part of the exam. On that part, he received a score of 62.00 when a minimum passing score was 75. Petitioner, "very certain that [he] passed this examination," filed a letter of appeal with the Department, treated by the Department as request for a formal administrative hearing. During the course of pre-hearing procedures, Mr. Persaud requested that he be allowed to audit the grading of the examination. The Department responded by pointing to Section 455.217(2), Florida Statutes, which states in pertinent part, The board . . . shall make available an examination review procedure for applicants . . . . Unless prohibited or limited by rules implementing security or access guidelines of national examinations, the applicant is entitled to review his examination questions, answers, papers, grades, and grading key . . . and the following language of Rule 61-11.012(6), Florida Administrative Code: In order to preserve the security and integrity of the examination, such candidate shall be permitted to review only the questions and answers missed on the examination. Furthermore, the Department pointed to the following excerpt of Section 119.07(3)(a), a provision of the public records law, Examination questions and answer sheets of examinations administered by a governmental agency for the purpose of licensure, certification, or employment are exempt from the provisions of subsection (1) and s.24(a), Art. I of the State Constitution [provisions which require disclosure of public record]. In light of the response, the ruling was made at hearing that the Department was not required to allow Petitioner to conduct the requested audit. In fact, it was determined that the requested audit was a prohibited act under the force of law through the operation of Rule 61-11.012(6), Florida Administrative Code. Mr. Persaud claimed that without an audit, he would not be able to prove that he had, in fact, passed the examination. The examination was developed by the American Institute of Certified Public Accountants, a national organization of certified public accountants whose function it is to develop, prepare and grade the "in-force CPA exam." (Tr. 74). As such, the exam is considered a "national examination," id., developed by a national organization. About such exams, the following is stated in the rules of the Department of Business and Professional Regulation, Bureau of Testing: If the examination being challenged is an examination developed by or for a national board, council, association or society, (hereinafter referred to as national organization) the Department shall accept the development and grading of such examination without modification. Rule 61-11.012(1), Florida Administrative Code. The examination consisted of six questions, two of which (Questions five and six) were essays. Mr. Persaud received 36 points out of the 60 points available for question one, 2.15 out of five points available for question two, 4.38 out of five available for question three, 3.68 out of five for question four, 8.5 out of ten for question five, and 5.5 out of ten for question six, for a total of 62 points. Mr. Persaud pointed to his background as a person of Indian descent (that is, from the subcontinent of India) who immigrated from Georgetown, Guyana, to the United States where, in 1984, he received U.S. citizenship. Mr. Persaud felt that lack of points on the essay for English composition, grammar and expression were due to prejudice and incorrect because of the excellent state of his English. During the hearing, it was obvious that Mr. Persaud's spoken English, although at times difficult to understand because of pronunciation, is otherwise of high quality. Whatever the state of his written English, however, had he received all points available for the essay questions he still would have failed the Finance and Accounting part of the exam with a score of 68 when a passing score of 75 was necessary. It was therefore incumbent on Mr. Persaud to show more than just that improper grading of English (which he did not show) in the essay portion of the exam led to the failing grade. Mr. Persaud made no attempt to do so. To the contrary, Mr. Persaud did not show that the examination was faulty, or that it was arbitrarily worded, or that the answers to challenged questions were capriciously graded or that he was arbitrarily denied credit through a grading process of the challenged questions devoid of logic or reason. In fact, Mr. Persaud does not appear to have ever identified the questions among those that he missed that were under challenge. He simply insisted that he had passed the exam. Rather than challenge specific questions for which he was not given credit or the grading of the answers to those questions, Mr. Persaud took a different tack. He testified that immediately after passing parts 3 and 4 of the CMA in 1996, he was suddenly bombarded on a daily basis by the noise of planes from the international Airport who were assisted in some way by a Village Inn not far from his house. When he complained to the authorities, they stated that they did not fly anywhere near his house. He complained of other noises and pressures to which he was subject while trying to study and identified them as "[p]lanes at four o'clock," (Tr. 48) and a "12 part air conditioner." Id. He also complained that his computer had been sabotaged and produced documents he had composed where the word "and" appeared in a sentence when his choice, and the more appropriate word, would have been "but." (Tr. 55). After this line of the challenge to the exam had been exhausted at hearing, Mr. Persaud was asked to identify the questions among those he missed that he now challenges as well as any of their answers. Aside from testimony about written English on the Essay questions, Mr. Persaud made no reference to individual questions. He chose to maintain his position that he had passed the test.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that a final order be entered denying Petitioner's challenge to the grade he received on the Financial Accounting part of the CPA Exam administered in May of 1997. DONE AND ORDERED this 16th day of September, 1998, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 16th day of September, 1998. COPIES FURNISHED: R. Beth Atchison, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-1007 Bans N. Persaud 310 Ninety-Second Avenue North St. Petersburg, Florida 33702 Lynda L. Goodgame, General Counsel Office of the General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Martha Willis, Executive Director Division of Certified Public Accounting Department of Business and Professional Regulation 4001 Northwest 43rd Street, Suite 16 Gainesville, Florida 32606
The Issue The basic issue in this case is whether the Petitioner's application for registration as an associated person in the state of Florida with Value Equities Corporation should be granted or denied. The Department proposes to deny the application on the basis of Section 517.161(1)(h) and (k), Florida Statutes, contending that the Petitioner has demonstrated his unworthiness to transact the business of an associated person and is of bad business repute. The Petitioner has little, if any dispute with the facts relied upon by the Department, but offered evidence in mitigation and asserts that, on the facts in this case, he is entitled to registration. Subsequent to the hearing in this case, a transcript was filed on March 4, 1987, and, pursuant to ruling at the close of the hearing, the parties were allowed until March 16, 1987, within which to file their proposed recommended orders. Both parties filed timely post-hearing documents, containing proposed findings of fact. A specific ruling on all proposed findings of fact is contained in the Appendix attached to and incorporated into this recommended order.
Findings Of Fact Based on the stipulations of the parties, on the testimony of the witnesses at the hearing, and on the exhibits received in evidence, I make the following findings of fact. Petitioner, Kenneth Joseph Whitehead, ("Whitehead") filed a Form U-4 application to be registered as an associated person in the state of Florida with Value Equities Corporation, located at 216 South Fairway Drive, Belleview, Illinois. Said application was received at the Department of Banking and Finance ("Department") in due course on June 21, 1986. By letter dated September 3, 1986, the Department advised the Petitioner that it intended to deny his application for registration for the reasons set forth at length in the letter. Thereafter, the Petitioner filed a timely request for hearing. The National Association of Securities Dealers ("NASD") District Business Conduct Committee, District #4, on July 11, 1978, accepted a "Letter of Admission, Waiver and Consent" against Weinrich, Zitzman & Whitehead, Inc., Kenneth J. Whitehead and others. In said agreement, Whitehead personally consented to a censure, a fine in the amount of $2000, and a ten day suspension from NASD membership. The sanctions imposed by the NASD resulted from violations of Regulation T imposed against Whitehead individually. The State of Missouri issued an order entitled "ORDER TO CEASE AND DESIST" in the matter of: Weinrich, Zitzman and Whitehead, Inc., Kenneth Whitehead, et al., on February 24, 1982, and found Whitehead to have personally made sales of unregistered securities, to have effected Unauthorized transactions, to have distributed promotional materials while not providing a prospectus and to have omitted to purchasers the fact that said securities were unregistered. Further, all respondents in that proceeding, including Whitehead, were found by the State of Missouri to have omitted the fact that unsuccessful attempts were made to register certain stocks, the fact that certain stocks could not justify their offering price, and the fact that the promoter's equity position could not be justified with respect to certain stock. All of the aforementioned were found to have constituted violations of Missouri law. As a result, Whitehead and others were ordered to cease and desist from violating Missouri law. Petitioner was afforded his due process rights to contest said order which was subsequently upheld. On May 31, 1983, the NASD District Business Conduct Committee #4 ("Committee"), entered a "Decision in Complaint No. KC-261" as to Whitehead and others. The Committee found that Whitehead failed to maintain minimum margin equity on certain accounts and failed to deliver securities as required by Article III, Sections 1 and 30, of the NASD Rules of Fair Practice. As a result of said violations, Whitehead was censured, fined $2500 and suspended by the NASD for three days. On September 19, 1985, the Committee issued a second complaint (KC-339) against Whitehead and others alleging violations of Article III of the NASD Rules of Fair Practice by failing to maintain required net capital, proper books, and records. As a result of an offer of settlement, Whitehead was censured and fined $1500. On December 20, 1985, the Committee issued a third Complaint (KC-343) against Whitehead and others for failure to maintain required net capital in violation of SEC Rule 15C3-1 and Article III, Section 1, of the NASD Rules of Fair Practice. The complaint remains pending. In 1982, eleven suits were filed by individual plaintiffs against WZW Financial Services, Inc., Whitehead, and others in the Circuit Court of the City of St. Louis to effect rescission of the sale of unregistered securities in the state of Missouri. The suits were settled for an aggregate of $240,000. The Petitioner was not directly involved in the sales that led to these suits, but he was vicariously liable as an officer of the corporation. In 1984, a suit was filed in the U.S. District Court for the Southern District of Illinois by certain individual plaintiffs against WZW, Inc., Kenneth Whitehead, and others in the sale of limited partnership interests wherein the allegations included violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C 78j(b), Rule 10b-5, involving securities fraud; violations of Section 1964c of the Racketeer Influence and Corrupt Organizations Act ("RICO") of 18 U.S.C. 1962C, 1964c, involving racketeering activity; and violations of 18 U.S.C. 1341, involving mail fraud. The case is currently pending. On January 30, 1986, O. R. Securities, Inc., filed a Form U-5 termination notice in which Whitehead was terminated for violating the firm's policy concerning margin accounts. The termination was investigated by the NASD. Following the investigation, the NASD determined that no further action was warranted.
Recommendation Based on all of the foregoing, it is recommended that the Department of Banking and Finance issue a final order in this case which denies the Petitioner's application for registration as an associated person with Value Equities Corporation. DONE AND ENTERED this 19th day of March 1987, at Tallahassee, Florida. M. M. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4055 The following are my specific rulings on each of the proposed findings of fact submitted by both parties. Findings submitted by Petitioner First unnumbered paragraph: Accepted in substance with unnecessary details omitted. Second unnumbered paragraph: First sentence accepted in substance. Second sentence covered in introductory portion of this recommended order. Paragraph 1: All but last sentence is accepted in substance. Last sentence is rejected as irrelevant because there is no persuasive competent substantial evidence that customers were not hurt or jeopardized. Paragraph 2: First sentence accepted. Second sentence rejected as incomplete. Third sentence rejected as irrelevant in light of other evidence. Fourth and fifth sentences rejected as contrary to the greater weight of the evidence. Sixth sentence accepted. Seventh sentence rejected as contrary to the greater weight of the evidence and as not supported by persuasive competent substantial evidence. Paragraph 3: Accepted in substance. Unnumbered paragraph following paragraph 3: First sentence is rejected as irrelevant in light of other evidence. Second and third sentences are rejected as in part contrary to the greater weight of the evidence and in part not supported by persuasive competent substantial evidence. Paragraph 4: Accepted in substance. Paragraph 5: Accepted in substance. Paragraph 6: The first four sentences are rejected as constituting irrelevant and unnecessary details. The fifth sixth, and seventh sentences are rejected as contrary to the greater weight of the evidence and as not supported by credible competent substantial evidence. Paragraph 7: Accepted in substance with unnecessary details omitted. Findings submitted by Respondent Paragraph 1: Accepted. Paragraph 2: Accepted in substance. Paragraph 3: Accepted. Paragraph 4: Accepted. Paragraph 5: Accepted. Paragraph 6: Accepted. Paragraph 7: Accepted. Paragraph 8: Accepted. Paragraph 9: Accepted. Paragraph 10: Accepted with additional facts for clarity and accuracy. Paragraph 11: Rejected as constituting proposed conclusions of law or legal argument regarding what was not proved, and not constituting findings of fact based on evidence. COPIES FURNISHED: James S. McClellan, Esquire 314 North Broadway, Suite 1930 St. Louis, Missouri 63102 Charles E Scarlett, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305
