The Issue Whether Petitioner carried his burden of proving his good moral character and entitlement to a yacht salesperson's license under chapter 326, Florida Statutes.
Findings Of Fact Based on the stipulations of the parties, the oral and documentary evidence, and the record as a whole, the following Findings of Fact are made: Stipulated Facts Respondent is the state agency charged with enforcing chapter 326, the Yacht and Ship Brokers Act, and the administrative rules promulgated thereunder. On June 8, 2016, Petitioner submitted to Respondent an application for a yacht salesperson's license. On Petitioner's application, the application question, number 14, relating to criminal history, was answered "yes." Petitioner failed to attach a complete and signed statement of the charges and facts, together with the dates, names, and location of the court in which the proceedings were held or were pending, as required by the application for the yacht salesperson's license. On October 12, 2012, Petitioner entered a plea of guilty to conspiracy to commit bank and wire fraud, a felony, in the United States District Court, Southern District of Florida, Miami Division, in case number 1:1220156CR-UNGARO. On October 12, 2012, Petitioner was adjudicated guilty of conspiracy to commit bank and wire fraud in case number 1:1220156CR-UNGARO. On October 12, 2012, Petitioner was sentenced to 57 months' incarceration in the custody of the United States Bureau of Prisons in case number 1:1220156CR-UNGARO. On October 12, 2012, Petitioner was sentenced to three years of supervised release following incarceration in case number 1:1220156CR-UNGARO. On October 12, 2012, Petitioner was ordered to pay $6,567,496.00 in restitution in case number 1:1220156CR-UNGARO. On April 22, 2016, Petitioner was released from incarceration and placed under supervised release, set to expire on or about April 21, 2019. Petitioner failed to certify to Respondent that Petitioner has never been convicted of a felony in Petitioner's application for a yacht salesperson's license. Petitioner timely received a copy of Respondent's Notice of Intent to Deny License Application on July 19, 2016. Petitioner completed programs in Residential Drug Abuse Treatment Program, the Wellness Program, and the Community Treatment Services Program at Dollan Mental Health Clinic. Petitioner served his time without issue. Petitioner has been sponsored by a South Florida yacht broker who is going to supervise his activity as a yacht salesman. Facts Adduced at the Hearing Pursuant to chapter 326, Respondent has regulatory jurisdiction over yacht and ship licensees and is responsible for the approval or denial of applications for licensure for yacht salespersons and yacht brokers. Petitioner's younger sister, Beatriz Llorente, who is a practicing real estate and criminal defense attorney, testified. She described Petitioner as a "father figure" to her. She testified that Petitioner's conviction for conspiracy to commit bank fraud "devastated" her, because she felt that her reputation was being questioned.1/ When she drove him to federal prison, Petitioner "asked her for forgiveness." She was familiar with his prison experience. As far as she knew, Petitioner had no disciplinary problems in prison and was awarded maximum gain time. Furthermore, his 57-month sentence was reduced to less than two and one-half years. Despite his incarceration and current probation status, she stated that he is very active with his children and shares a great deal of time with them. He told her, "I will work for the rest of my life to regain your trust." His sister is convinced that Petitioner has overcome his faults, and she emphatically stated he is of good character. On cross-examination, she testified that Petitioner had no drug or alcohol problems when he was growing up, but they arose during the years preceding his conviction. An attorney friend of Petitioner's, Francisco Pines, testified. Pines has known Petitioner since 1988. They attended school together. More recently, their families have interacted and spent time together. They participated together in recreational activities, such as boating and fishing, before Petitioner's incarceration for the federal crime. Since Petitioner was released from prison, Pines has had contact with him three or four times. Pines was also asked about Petitioner's character. In his view, Petitioner knows that what he did was wrong and has made changes to get his life in order. Pines testified that Petitioner is very loving, caring and nurturing with his children. The witness has seen a "change for the better." According to him, Petitioner has always demonstrated a strong work ethic, more so now than before the criminal incident. A licensed mental health counselor, Sandra Rico, was also called by Petitioner. Beginning in 2011, she provided mental health therapy and counseling to Petitioner related to his anxiety due to a crisis in his marriage. She determined that he used and abused alcohol to relieve this anxiety. She treated him on and off until 2013. She also emailed him while he was in federal prison to make sure that he was getting continued treatment for his anxiety and alcohol abuse issues. After he was released from prison, Rico counseled him once a month from July 2016 through the fall of 2016. Her current treatment with him is more in the nature of prevention and maintenance, and to help him develop coping skills. She testified that the therapy he received in prison helped him and that Petitioner changed while in prison. As examples, she cited that he is more involved and willing to do more of her treatment assignments and that he now journals his feelings. Rico related that she is surprised by Petitioner's progress and that she believes he is no longer drinking. He is making better choices and being more careful. She opined that he gathers his thoughts more deliberately now, primarily because he wants to impress his children and reach "goals" he has set for himself. In her opinion, he is of good character now. His treatment with her continues "as needed." Lazaro R. Navarro is the chief executive officer at Florida Yachts International and manages approximately ten sales associates. He has known Petitioner's family for over 15 years. When Petitioner was released from federal prison, the family asked Navarro if he would consider employing Petitioner and sponsoring him. He gave Petitioner a job doing "online marketing," which involved managing leads and performing back office work. Navarro characterized Petitioner as a great asset to his company and trustworthy. He has no doubts about Petitioner and his work habits. Petitioner arrives at work early and is usually the last one to leave. Petitioner has exceeded all of his expectations, and is a very dedicated employee. As the employing yacht broker, Navarro supervises Petitioner and ensures that all of his work is done correctly. Although no details were offered, Navarro testified that Petitioner has accepted full responsibility for his criminal conduct and is a great father. Based upon the financial procedures and protocols used at Navarro's yacht company, he testified that Petitioner would not need to handle or accept any cash as a part of his sales responsibilities. Instead, finances and money exchanges are handled and processed by a closing specialist and the chief financial officer.2/ Navarro commented that he would trust Petitioner with money handling, if that occasion arose. Petitioner offered his own testimony. He received a Florida real estate license in February 2005 and worked for his cousin as a real estate salesperson until 2008. He was indicted for conspiracy to commit bank and wire fraud in March 2012. This federal indictment stemmed from activities in 2006 while he worked as a licensed real estate salesperson. He confirmed that he visited with Rico for mental health counseling related to problems with his wife, as well as anxiety related to the government's criminal investigation of him in 2009. Although his prison sentence did not include mandatory alcohol or drug treatment, he followed the advice of a psychiatrist at the prison and voluntarily enrolled in a residential drug and alcohol abuse treatment program. He also participated in a health and nutrition wellness class for nine weeks. He completed both programs successfully. While in prison, he took several foreign language classes, thinking they would be useful for the yachting business. He also participated in a hazmat (hazardous materials) program outside the prison on a naval base. Apparently, a Navy Admiral retained him for the program. Also, while in prison, he was hired on the naval base to provide cleaning and maintenance services at a dormitory. He was allowed to serve a reduced prison sentence-- 32 months of his 57-month sentence, and he was released six months early to go to a halfway house. While there, he became eligible for home confinement. He was released from home confinement in April 2016. Although he is still under supervised release (probation), he is no longer required to make personal visits and can report to his probation officer remotely through the Internet. He is jointly and severally liable for over $6 million in restitution with the other defendants in his criminal case. It was undisputed that he is current with his restitution payments of $151.00 each month. Petitioner is active in his Catholic Church and gave "his testimony" at a recent church retreat. He characterizes his relationship with his children as being one of honesty and emphasized that it is important to have God in his life. When Respondent called requesting additional information for his application, he promptly provided his federal Termination Report and Certificates of Completion. Pet. Exs. 3, 4, and 5. Petitioner expressed a passion for boating and believes he is good at sales. He wants the yacht salesperson's license, in part, so that he can pay off the criminal restitution more quickly. He claims to no longer act impulsively and believes that his children are the most important thing in his life. On June 8, 2016, Petitioner submitted to Respondent an application for a yacht and ship salesperson's license. On Petitioner's application, he answered question number 14 "Yes," indicating that he had a criminal history.3/ Applicants who answer "Yes" to question number 14 on the application are directed to attach a complete and signed statement of the charges and facts, together with the dates, names, and location of the court in which the proceedings were held or are pending.4/ However, Petitioner failed to submit this statement. When asked about this omission, Petitioner testified, "I turned back for the next one (question), and I didn't bother looking. It shows part of impulsive behavior." Petitioner thought the information request at the bottom of the page he overlooked was simply a part of the next question.5/ Respondent obtained a Florida Department of Law Enforcement criminal background check on Petitioner, which indicated that, on October 12, 2012, Petitioner pled guilty to conspiracy to commit bank and wire fraud. Resp. Ex. 4. Certified court records obtained by the Division indicated that Petitioner was adjudicated guilty of conspiracy to commit bank and wire fraud in violation of 18 U.S.C. § 1349, a felony, and sentenced to 57 months' incarceration in the custody of the United States Bureau of Prisons with three years of supervised release following incarceration. Petitioner was ordered to pay $6,567,496.00 in restitution.6/ Notably, Petitioner's federal "Judgment In A Criminal Case" included Special Conditions of Supervision. This included a "Related Concern Restriction." Petitioner testified that this provision prohibited him from "touch[ing] funds" while under supervised release. His employer at Florida Yacht International wrote a letter, ultimately filed with the probation office, that Petitioner "would not be dealing with any funds." Resp. Ex. 1, pp. 1-7.7/ Petitioner certified on his application that, in February 2005, he was licensed as a real estate sales associate in the state of Florida, having been issued license number SL3111375. Petitioner testified that, in order to become a real estate sales associate, he completed a pre-licensing course; applied with and was approved to take the state licensing exam by the Department of Business and Professional Regulation; and passed the Florida Real Estate Sales Associate Examination. Petitioner stated that, at the time, he was familiar with the laws regulating the profession of real estate contained in chapter 475, Florida Statutes.8/ Petitioner testified that between 2005 and 2008, he worked as a real estate sales associate for Llorente Realty Group, under a supervising broker, Petitioner's cousin. While employed there as a Florida licensed real estate sales associate, Petitioner engaged in an illegal real estate fraud scheme which lead to his 2012 federal criminal conviction. On several occasions, Petitioner provided up to $150,000.00 of his own funds to make seven or eight improper short-term loans of approximately ten to 15 days each. Petitioner made a profit of approximately eight to ten percent per loan.9/ Petitioner testified that these transactions involved buying houses under an individual's name (the straw buyer) and, after closing, executing a quitclaim deed to transfer title of the property to one of the co-conspirators, to whom Petitioner had made the loan. The property was subsequently transferred to the co-conspirator's family trust, leaving the outstanding mortgage in the name of the straw buyer. When the straw buyer failed to pay the outstanding mortgage, the lender would initiate foreclosure proceedings against the straw buyer who was no longer in possession of the property. This fraudulent scheme was carried out against several lending institutions. After the lenders became aware of the scheme, a criminal investigation was initiated. The government characterized his involvement as a breach of his fiduciary duty. In mid-2009, Petitioner was notified that he was under federal investigation for his involvement in the "straw buyer" scheme. After finding out about the investigation, Petitioner began to have relationship problems with his wife and to abuse alcohol. This prompted him to see Rico, a licensed mental health counselor. On March 8, 2012, Petitioner was indicted on eight counts related to the bank fraud scheme. On October 12, 2012, Petitioner entered a plea of guilty and was adjudicated guilty of conspiracy to commit bank and wire fraud, a felony, in the United States District Court, Southern District of Florida, Miami Division, in case number 1:1220156CR-UNGARO. Resp. Ex. 1. Petitioner was incarcerated at Pensacola Prison Camp beginning March 1, 2013. Petitioner earned eight months' "gain time" off of his sentence. Additionally, while incarcerated, Petitioner completed the RDAP, Residential Drug and Alcohol Treatment Program, which qualified Petitioner for a 12-month reduction in his sentence. Due to these reductions and good behavior, Petitioner served only 32 months of his 57-month sentence in federal prison. During his incarceration, Petitioner also completed a nine-week wellness course on various subjects such as nutrition and exercise and worked at Naval Air Station Pensacola, Corry Station Naval Technical Training Center, and the Pensacola Prison Camp. On October 27, 2015, Petitioner was released to a halfway house and shortly thereafter began working for Navarro at Florida Yacht International as a clerk. On November 10, 2015, Petitioner became eligible for home confinement, and, by April 18, 2016, Petitioner completed TDAPT, a transition recovery program. On April 21, 2016, Petitioner was released from custody, and, on April 22, 2016, he was placed under supervised release, currently set to expire on April 21, 2019. Petitioner testified that he has paid $6,000.00 towards the restitution he owes in the amount of $6,567,496.00. As previously mentioned, this restitution is owed with several co- conspirators who are jointly and severally liable with him. Resp. Ex. 1, p. 5. Petitioner testified that he is up to date on required payments pursuant to the order of restitution. Navarro monitors and supervises Petitioner's work and is ultimately responsible for Petitioner under his own yacht broker license. Petitioner is also currently employed as a part- time driver for Uber. In compliance with the Related Concern Restriction of his criminal conviction, Petitioner has not been placed in a position of trust or responsibility over sums of money at Florida Yachts International. Petitioner stated that upon obtaining a job as a clerk with Florida Yachts International, Navarro was required to certify to Petitioner's supervisors through the halfway house that Petitioner "would not be dealing with any funds," pursuant to the "Related Concern Restriction" of Petitioner's Special Conditions of Supervision.10/ Resp. Ex. 1, p. 4; Resp. Ex. 4, p. 51. Following his release from incarceration, Petitioner continues to see Rico for therapy sessions on a monthly basis. Rico provided a letter of recommendation for Petitioner. As mitigation and in an effort to show his good moral character, Petitioner testified that he is not abusing alcohol anymore, has made substantial efforts to reconnect with his children, and has maintained a close relationship with his sister both before and after his incarceration. Licensed yacht salespersons are not restricted and may work under any licensed yacht broker. They may also switch their registered broker if they wish to work for someone else. Additionally, salespersons become eligible to apply for their own yacht and ship broker license after two years as a salesperson. A representative of Respondent, Chelisa Kirkland, testified for Respondent. A yacht salesperson's license is only required for the sale of used or pre-owned vessels in excess of 32 feet. Vessels less than 32 feet and new vessel sales of any size do not require a license. Kirkland confirmed that Petitioner's probation, or court supervision, does not end until April 2019. Applying the statutory and rule criteria, Respondent denied Petitioner's application for a yacht salesperson's license. More specifically, Respondent was concerned about the nature and seriousness of the federal crime, particularly because Petitioner held a professional real estate license at the time the criminal bank fraud offenses were committed. Additionally, as of the date of the application, Petitioner's government supervision and probation had not been completed, and there was a very significant amount of restitution still owed, in excess of $6,000,000.00. Finally, Respondent felt that there had not been a significant passage of time since the conviction in 2012. As a result of the totality of these circumstances, Kirkland recommended that Petitioner's application be denied. She acknowledged that her recommendation was based solely on the conviction for conspiracy to commit bank and wire fraud. She conceded that Florida law does not impose an "automatic" denial just because Petitioner owes restitution, is still under supervision, or was convicted of a federal crime.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Florida Condominiums, Timeshares, and Mobile Homes, confirm its previous denial and enter a final order denying Petitioner's application for a yacht salesperson's license. DONE AND ENTERED this 13th day of February, 2017, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE 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 13th day of February, 2017.
The Issue The issue presented for decision herein is whether or not Respondent's real estate license should be disciplined based on conduct, set forth hereinafter in detail, which is specifically alleged in an Administrative Complaint filed herein dated June 24, 1987.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, I make the following relevant factual findings. At all times pertinent to the charges herein, Respondent was the holder of a Florida Real Estate license and operated as a real estate broker. (Petitioner's Composite Exhibit 1 and Stipulation of the parties). On October 17, 1985, Respondent obtained four exclusive listing agreements from John S. Blosnick (Blosnick) for warehouses he owned located in Miami, Florida. (Petitioner's Composite Exhibit 2). Respondent was unable to find a buyer for the units and instead leased them to Jim Gardner and V.I.P Car Care pursuant to a business lease entered into on July 22, 1986. During the time, Blosnick was experiencing financial difficulties and needed someone to either purchase or lease the premises. The lease specified that Mr. Gardner would use the premises for the manufacture and repair of cars and boats. (Petitioner's Exhibit 3). During the fall of 1986, a company that Respondent was affiliated with and served as President, Reaction Marine, Inc., took over the rental units and began constructing boat hulls from fiberglass resin. At this time, Reaction Marine erected a sign outside the warehouses where it remained during the time of the instant hearing. (Petitioner's Exhibit 4). On January 6, 1987, Respondent's bookkeeper, a Mrs. Bryant, issued a check for payment of rent drawn on the account of Reaction Marine, Inc. to John Blosnick for $945.00. The check was subsequently returned for insufficient funds. That check remains unpaid as of the date of hearing. After Reaction Marine began occupancy of the Blosnick warehouses, Respondent and Jim Gardner had a dispute and Gardner is no longer affiliated with Reaction Marine. Respondent who owned the molds for boat manufacturing, continued to store the molds in the leased warehouses. During the time when Respondent obtained the exclusive listing agreement to sell the warehouses for Blosnick, they were good friends and Blosnick frequented Respondent's office and home two to three times per week. Respondent is an entrepreneur of sorts and owns three bars and various and sundry other businesses in the Miami area. Respondent and Blosnick often talked about different business ventures as Blosnick was interested in pursuing business ventures with Respondent. As early as the fall of 1986, Blosnick was aware that Respondent was affiliated with Reaction Marine, Inc., and that Reaction Marine thereafter occupied the subject warehouse. Respondent has offered to make good on the check which was returned for insufficient funds against the account of Reaction Marine, Inc., however that offer is contingent upon Blosnick's tender of the check to Respondent upon payment. Blosnick has requested that payment be made to a third party and has not offered to tender the check to that third party simultaneous with Respondent's tender of payment to make good on the returned check. Respondent has attempted to clean the floors of the warehouses by removing the resins, epoxys, and gel coats caused by Reaction Marine, Inc. This was done during January and February, 1987 by Respondent using the assistance of an acquaintance, Heather Rockcastle, who was involved with the cleaning of the warehouse and restoration of the floors to their original condition. The cleanup process took more than one day. In Respondent's second attempt to gain entry to the warehouses, Blosnick had hired a locksmith to change the locks and thereby prevented Respondent from gaining entry. The lease agreement entered into by Blosnick and VIP Car Care specifies that the property was to be used and occupied as a place for car and boat manufacture/repair. (Petitioner's Composite Exhibit 3). Pursuant to the terms of that business lease, VIP Car Care was authorized to assign or sublet the premises for the usage here which was consistent with the usage for which VIP Car Care leased the premises. (Petitioner's Composite Exhibit 3, first stipulation and condition of the business lease).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Administrative Complaint filed herein be DISMISSED. RECOMMENDED this 11th day of May 1988, in Tallahassee, Florida. JAMES E. BRADWELL 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 11th day of May, 1988. COPIES FURNISHED: Steven W. Johnson, Esquire Contract Attorney DPR-Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Mark Weissman, Esquire Katz and Weissman 300 Aragon Avenue Suite 330 Coral Gables, Florida 33134 William O'Neil Esquire General Counsel Department of Professional Regulation 101 East Gaines Street Tallahassee, Florida 32301
The Issue The issue in this case is whether the taxpayer owes use tax, penalty and interest on the purchase of tangible personal property under Chapter 212, Florida Statutes.
Findings Of Fact Iseaseal, LLC, a Delaware corporation, has its principal place of business at 695 East Main Street, Suite 103, Stamford, Connecticut. Its federal employer identification number is 06-1600000. On November 22, 2000, the taxpayer purchased a 1982, 72-foot, Hatteras CPMY yacht, named “Windcrest,” with hull number HATBN3270182 and 60 net tons of admeasurement. The purchase was made through a registered yacht broker. The yacht’s sales price was $725,000. On November 21, 2000, at the closing for the yacht, the taxpayer’s managing member, Paul Bakker, signed an Affidavit for Exemption of Boat Sold for Removal from the State of Florida by a Nonresident Purchaser. The yacht was also registered with the Coast Guard. However, to date, the yacht has not been registered or titled in Florida or any other U.S. state or territory. The taxpayer took possession of the yacht at Pier 66, in Fort Lauderdale, Florida, on November 22, 2000. Also, on November 22, 2000, the taxpayer was issued a 90-day decal known as a “cruising decal.” A cruising decal, with certain restrictions, exempts the purchase of a yacht from sales tax if the purchaser agrees to remove the yacht from Florida within 90 days after the date of purchase and does remove the purchased yacht. On December 28, 2000, the taxpayer removed the yacht from Florida to the Bahamas. The removal occurred within 90 days after the purchase date. As a result, the sale became exempt from Florida sales tax and the Petitioner did not pay Florida sales tax on the purchase of the yacht. On January 15, 2001, the taxpayer returned the yacht to Florida for repairs. A repair bill shows that the yacht remained at the repair facility for four and a half hours on January 16, 2001. The repair visit was within six months after the departure date of December 28, 2000. There was no evidence that the repair facility was registered with the Department of Revenue or how long the boat remained in Florida waters. The yacht also returned to Florida for repairs on May 21, 2001. Again there was no evidence that the repair facility was registered or how long the boat remained in Florida waters. The evidence did not establish that the tax exemption related to use of Florida waters for 20 days or repairing a boat in Florida apply. Since the purchase date, the Petitioner has leased mooring space in Florida. The Petitioner’s insurance policy also indicates that the yacht was moored in Florida and includes a Florida endorsement for such mooring. Additionally, the Petitioner reported to Connecticut’s Department of Revenue that the yacht was exempt from Connecticut sales tax because the yacht was purchased and berthed in the State of Florida. Based on copies of the bill of sale, closing statement, banking statements, credit card statements, mortgage documents, insurance agreements, mooring agreements, repair and parts receipts and a chronological listing of the yacht’s whereabouts since the date of purchase, the yacht has operated, and continues to operate, in Florida waters. Indeed, the yacht remained in Florida for more than 183 days from July 1, 2002 through December 31, 2002. Moreover, since September 11, 2002, the yacht has been moored or stored in Florida the majority of the time because the main users of the yacht lost interest in sailing the yacht and travel after the terrorist attack on the twin towers in New York City. The Department found that the Petitioner was liable for use tax on its use and storage of the yacht here in Florida. On May 5, 2004, the Department issued an enforcement billing to the Petitioner for use tax, penalty and interest, pursuant to Sections 212.05(1)(a)2 and 212.06(8), Florida Statutes. The Department assessed the Petitioner use tax and interest based on the sales price of the yacht. The Department also assessed the Petitioner a mandatory penalty equal to the tax because it returned the yacht to Florida within six months of the departure date. The Petitioner admitted that, through ignorance of Florida’s tax exemption law, he violated Chapter 212, but argues that the assessment of tax, interest and mandatory penalty is excessive. On May 24, 2004, the Department issued the Petitioner a Notice of Final Assessment for Sales and Use Tax, Penalty and Interest Due. The Notice set forth the basis for the assessment of tax, in the sum of $43,500, penalty, in the sum of $43,500, and interest, in the sum of $14,759.84, plus additional interest that accrues at the rate of $10.73 per day. The Department issued the Petitioner the Final Assessment because it returned the yacht to Florida within six months of the departure date and the yacht remained in Florida for more than 183 days in a calendar year. Since the Petitioner returned the yacht to Florida within 6 months of the purchase date and allowed the yacht to remain in Florida for more than 183 days in a calendar year, the Petitioner is liable for use tax, penalty and interest in the use and storage of the yacht in Florida.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Revenue enter a final order upholding the assessment of use tax, penalty and interest against the Petitioner. DONE AND ENTERED this 31st day of January, 2005, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 31st day of January, 2005. COPIES FURNISHED: Paul Bakker Iseaseal, LLC 695 East Main Street Stamford, Connecticut 06901 Carrol Y. Cherry, Esquire Assistant Attorney General Office of the Attorney General Revenue Litigation Section Plaza Level 01, The Capitol Tallahassee, Florida 32399-1050 Bruce Hoffman, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether Petitioner owes sales and use tax (plus penalties and interest) to the Department of Revenue (Department), as alleged in the Department's December 22, 1999, Notice of Decision.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the numerous stipulations set forth in the parties' Joint Stipulation of Facts and Second Joint Stipulation of Facts: 23/ Mr. Wheeler is a very successful entrepreneur, who has numerous investments and businesses. His interest in Petitioner represents only a small fraction of his wealth, and, consequently, he pays little or no attention to its business operations. He has let Captain Ernest exercise day-to-day control over these operations. No one other than Captain Ernest has been delegated such authority. When the "Destiny" was purchased by Petitioner, Mr. Wheeler intended for it to be used, for a time, as a charter boat (on a bare boat basis) and then sold, hopefully for a profit. From the time that Petitioner purchased the "Destiny" until the end of the Audit Period, Petitioner was not "involved in any business other than chartering the 'Destiny.'" Captain Ernest was the one who "picked [the "Destiny"] out." He did so pursuant to Mr. Wheeler's instructions that he "make sure" to select a "good charter platform." Aside from giving Captain Ernest these instructions, Mr. Wheeler did not participate in the selection process. The "Destiny" had a "perfect" configuration for chartering. In fact, it was "originally designed as a charter boat." It had last been used for chartering approximately five years before it was purchased by Petitioner. Rob Maas (the "Mr. Maas" referred to in the parties' Stipulation of Fact 26) is the attorney who represented Petitioner at the time the "Destiny" was purchased. At the request of Mr. Wheeler, who was "interested in satisfying all conditions for the Florida use tax exemption," Mr. Maas advised Mr. Wheeler and Captain Ernest as to "what was necessary to maintain the exemption." He told them that "bare boat charter forms" needed to be used when the vessel was chartered and that "any time the boat ever moved . . . [it had to be for] a business reason." After being given such advice, Mr. Wheeler specifically instructed Captain Ernest to use the "Destiny" exclusively for bare boat chartering and no other purpose, instructions that Captain Ernest followed. Captain Ernest accepted delivery of the "Destiny" on behalf of Petitioner in the Bahamas, 1/ notwithstanding that the purchase agreement between Petitioner and the seller indicated that delivery of the vessel was to be made at Pier 66 in Fort Lauderdale, Florida. Petitioner did not pay any sales tax on its purchase of the boat. Mr. Wheeler was not present at the time delivery of the vessel was accepted. After accepting delivery, Captain Ernest brought the boat to Fort Lauderdale. He did so because Fort Lauderdale was "the easiest place to get repairs done," a "good place to pick up crew . . . and finding things that you need for boats," and "the place you want to be" to charter a boat; however, he "probably [would] not" have entered Florida waters if had known that doing so would subject Petitioner to use tax liability. Upon arriving in Fort Lauderdale, Captain Ernest took the "Destiny" directly to Bradford Marine Shipyard (Bradford Marine), a Fort Lauderdale repair facility, where it was "outfitted . . . specifically for charter." On those occasions that Mr. Wheeler was on the "Destiny" during the Audit Period, he was aboard in the capacity of a paying charterer pursuant to a bare boat charter agreement that he and Petitioner had entered into on July 21, 1995. This bare boat charter agreement provided that Petitioner (as the "Owner") would make the "Destiny" available to Mr. Wheeler (as the "Charterer") "for charter on a 'stand-by' basis" and further provided, in pertinent part, as follows: Vessel Availability. Charterer understands the Vessel is scheduled to undergo significant repairs and improvements during 1995 and will not be available when such work is scheduled. Charterer further understands and agrees its charter is on a non-exclusive basis and Owner intends to charter the Vessel through the use of a charter broker to other parties. In the event of a scheduling conflict between Charterer and another charterer, Charterer agrees Owner may "bump" Charterer from using the Vessel during the conflicting period. Charter Broker. Owner and Charterer acknowledge that this is a direct charter without a charter broker. Accordingly, the charter rate is a discounted rate. Term, Hire, & Payment. Subject to the Vessel's availability, Owner agrees to let, and Charterer to hire, the Vessel on such days and for such term as Owner and Charter[er] agree at the rate of $3,000.00 per day, plus state sales tax, if applicable. There will be an accounting at the end of each calendar year to determine Charterer's usage during the preceding year. Due to the Vessel's repair schedule in 1995, the first accounting shall occur at the end of 1996 for Charterer's usage from the date of this Agreement. Charterer shall pay Owner the charter hire determined by the accounting by January 31st of next year. In addition to the charter hire, Charterer shall be responsible for all remaining expenses during charter, including but not limited to food, beverage, fuel, dockage, and accommodations. . . . 5. Control. The Vessel is chartered on a demise basis. Owner hereby transfers to Charterer full authority regarding operation and management of the Vessel for the charter terms. Charterer is solely responsible for retaining a master and crew and it is agreed that said Captain and/or crew are agents and employees of Charterer and not Owner. . . . On July 21, 1995, Mr. Wheeler and Petitioner also entered into a separate agreement for the services of the "Destiny's" captain and crew. This agreement between Mr. Wheeler (as "Charterer") and Petitioner (as "Contractor") for use of the "Destiny's" captain and crew provided, in pertinent part, as follows: Term, Hire & Payment. Charterer hereby retains Contractor to provide crew services to the Vessel during the charter period at the rate of $500.00 per day. In addition, Charterer shall provide the master and crew with food and quarters aboard the Vessel while retained. There will be an accounting at the end of each calendar year to determine Charterer's usage during the preceding year. Due to the Vessel's repair schedule in 1995, the first accounting shall occur at the end of 1996 for Charterer's usage from the date of this Agreement. Charterer shall pay Owner the charter hire determined by the accounting by January 31st of the next year. Provisions. Charterer, before any charter use, shall advance an expense deposit for running expenses. The master shall use these funds to pay for food, liquor, laundry, fuel and lubricants, harbor fees, communication expenses, and any other required supplies or services. If the deposit is insufficient to cover all charges, Charterer shall advance further funds, as needed, during the charter. Upon conclusion of a charter, the master shall provide an accounting to the Charterer of sums received and disbursed. Crew Services. Contractor, on those days Charterer is to use the Vessel, shall provide a full-time, qualified captain and crew. Each crew member shall hold any required license and shall be properly uniformed. . . . Navigation. The master shall act at the Charterer's direction; provided, however, that the master shall not have to carry out any order that jeopardizes the safety of the Vessel or those on board. Relationship. Contractor is retained by Charterer only for the purposes and to the extent set forth in this Agreement, and Contractor's relationship to Charterer shall be that of an independent contractor. Neither the execution or performance of this Agreement shall render the parties partners or co-venturers for any purposes. . . . Mr. Wheeler chartered the "Destiny" pursuant to the July 21, 1995, bare boat charter agreement (and utilized the services of the "Destiny's captain and crew pursuant to the separate July 21, 1995, employment agreement) on the following dates during the Audit Period: September 12, 1995, through September 15, 1995; December 21, 1995, through January 4, 1996; March 4, 1996, through March 7, 1996; July 21, 1996, through July 28, 1996; and August 19, 1996, through August 25, 1996. 2/ These charters all occurred outside of Florida. Mr. Wheeler was billed (in accordance with his agreements with Petitioner) for his use of the "Destiny," for the services performed for him by the "Destiny's" captain and crew, and for all "running expenses" incurred during his charters, and he paid Petitioner the full amount he was billed. Mr. Wheeler was not the only one to charter the "Destiny" during the Audit Period. There were seven other charters: by Ryder Systems, Inc., of Miami, Florida, from 2:00 p.m. to 7:00 p.m. on January 22, 1996; by Barry Zekelman, from noon on April 6, 1996, to noon on April 13, 1996; by William Boardman, from noon on May 20, 1996, to noon on May 31, 1996; by David Cole, from noon on June 29, 1996, to noon on July 7, 1996; by the Robert E. Morris Company, from 4:00 p.m. on July 9, 1996, to 4:00 p.m. on July 12, 1996; by Thomas Russell, from 9:00 a.m. to 8:00 p.m. on July 30, 1996; and by Richard Dvorak, from 3:00 p.m. on August 4, 1996, to 3:00 p.m. on August 18, 1996. Each of these charters, like Mr. Wheeler's charters of the "Destiny," occurred pursuant to a bare boat charter agreement (on a form containing provisions standard in the bare boat chartering industry, including, among others, one obligating the charterer to pay all "running expenses" during the charter), with the captain and crew being provided in accordance with the terms of a separate employment agreement entered into by the charterer. (These separate employment agreements, unlike Mr. Wheeler's agreement for the services of the "Destiny's" captain and crew, were with Captain Ernest, not Petitioner.) The arrangements made for the payment of the "Destiny's" captain and crew for services performed by them while the "Destiny" was under charter during the Audit Period were "customary in the industry." Only one charter during the Audit Period, the Ryder Systems, Inc., of Miami, Florida, charter, took place in Florida. Florida is not considered a preferred destination in the bare boat chartering industry. A considerable amount of time was spent during the Audit Period marketing and promoting the "Destiny" to rebuild the reputation it had previously enjoyed as a charter boat. 3/ It was not until 1997 that Petitioner's bare boat chartering business "really took off as far as . . . charter numbers went." Although the "Destiny" was under charter only for a small portion of the Audit Period, at no time during the remainder of the Audit Period (when it was not under charter) was it used for any purpose unrelated to Petitioner's bare boat chartering business. The "Destiny" was used to house 4/ and feed Captain Ernest and the other members of the crew 5/ at all times during the Audit Period, whether the "Destiny" was under charter or not. Such use of the "Destiny" was in furtherance of Petitioner's bare boat chartering operations. Having a full-time captain and crew aboard a "mega" yacht available for bare boat charter, even when the yacht is not under charter, is essential to conduct successful chartering operations. The captain and crew must be available, on the vessel, to host the charter brokers and prospective charterers who come aboard between charters (sometimes with little or no advance notice) and to perform those everyday tasks necessary to maintain the vessel. To attract and keep qualified onboard personnel, it is necessary to provide them with, as part of their compensation package, free room and board on the "mega" yacht. Doing so is the standard practice in the bare boat chartering industry. When it was not under charter during the Audit Period, the "Destiny" was heavily promoted and marketed in an attempt to attract bare boat charter business. "[A] lot of promotion" and marketing was needed because the "Destiny" was reentering the charter market after a five year hiatus and Captain Ernest "was new to the charter industry." The promotional and marketing efforts included entering the "Destiny" in boat shows, hosting luncheons for charter brokers aboard the "Destiny," taking charter brokers and their guests on "fam" trips on the "Destiny," and showing the "Destiny" to prospective clients. Captain Ernest and the crew always tried to make the "Destiny" look its best when charter brokers and prospective charterers came aboard. Flowers were purchased and used to enhance the appearance of the "Destiny." When charter brokers came aboard the "Destiny," they were wined and dined and otherwise shown the type of service Captain Ernest and the crew were capable of delivering to charterers. (The reputation of the captain and crew for quality service determines "what charters [a "mega" yacht bare boat chartering business is] going to get and how [the] business is going to go.") It was particularly important "in the early days" for Captain Ernest and his crew to "make an impression on the brokers" because they were not known in the broker community. During the Audit Period, when not under charter, the "Destiny" was stocked with supplies and provisions purchased for use in connection with Petitioner's bare boat chartering operations. These supplies and provisions included fuel and various food and beverage items. Some of the food and beverage items were for use during promotional and marketing activities aboard the vessel. The chef (who specialized in European-style dishes) would often serve rack of lamb or roast duck (as a main course) to visiting charter brokers. There were also food and beverage items on the vessel for the members of the crew. In addition, items that could not readily be obtained in the Caribbean islands (at a reasonably competitive price) were purchased before the "Destiny" departed for the Caribbean. These items were stored on the vessel so that they would be available for any charter that Captain Ernest might be able to obtain while the vessel was located in Caribbean. (Charterers paid Petitioner for the items they and their guests consumed during the charter.) It was "common" for Petitioner to buy large quantities of meats and seafood and store these items for later use in the seven freezers on the "Destiny." For example, on one occasion, Petitioner bought 71.49 pounds of leg of lamb (from a company that would "cryovac" the meat so that it would keep for a very long time). There were many occasions during the Audit Period, when the "Destiny" was not under charter, that it was moved from one location to another. All such movements, however, were in furtherance of Petitioner's bare boat chartering operations. For example, it was moved from time to time to attend boat shows and to pick up charter brokers and prospective charterers who wanted to look at the vessel. On other occasions, it was taken to repair facilities and other places ("mainly . . . in Florida"), such as Pier 66, to have repair and maintenance work done. It was also taken out on "quite a few" sea trials. In addition, there were times it was moved to avoid the problems that can arise if a boat just "sit[s] at the dock." "It's very important for a boat to stay moving and stay running" in order for it to remain in good working order. Another reason it was moved was to be in "the prime areas for [charter] pick-ups." 6/ In summary, during the Audit Period, the "Destiny" was either chartered on a bare boat basis (with captain and crew furnished under a separate employment agreement) or used in a manner reasonably designed to further Petitioner's bare boat chartering business, and for no other purpose. Furthermore, every tax-free Florida purchase of tangible personal property made by Petitioner under its Florida sales tax exemption certificate from the time of its acquisition of the "Destiny" until the end of the Audit Period (including the purchase of Yamaha WaveRunners on August 14, 1995, for $12,770.00 7/) was made in furtherance of Petitioner's bare boat chartering business. 8/ By letter dated October 11, 1996, the Department informed Petitioner that it was going to audit Petitioner's "books and records" for the Audit Period. Petitioner was selected for audit because it had reported only a relatively small amount of taxable charter revenue on the Florida sales and use tax returns it filed during the Audit Period. The Department began its review of Petitioner's "books and records" on January 23, 1997, at Mr. Maas' office. The Department's "audit findings" were that the "Destiny" "was purchased for [a] dual purpose, for leasing and to be used by the shareholder" and therefore "the vessel and other purchases [made by Petitioner during the Audit Period under its sales tax exemption certificate] are taxable at the cost price." Based upon these audit findings, the Department issued a Notice of Intent to Make Audit Changes, in which it advised Petitioner that Petitioner owed $250,744.18 in sales and use taxes, $125,325.07 in penalties, and $56,948.55 in interest through July 18, 1997, for a total of $433,017.80, "plus additional interest of $82.44 per day . . . from 07/18/97 through the date [of] payment." By letter dated April 22, 1998, Petitioner protested the Department's proposed assessment. On December 22, 1999, the Department issued its Notice of Decision sustaining the proposed assessment and announcing that, as of December 22, 1999, Petitioner owed the Department $506,142.08, with "interest continu[ing] to accrue at $82.44 per day from 12/23/99." Petitioner subsequently filed a Petition for Chapter 120 Administrative Hearing on the Department's proposed action.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order finding that its assessment against Petitioner is incorrect in its entirety. DONE AND ENTERED this 24th day of September, 2002, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of September, 2002.
Findings Of Fact The claim imposed by the Department of Revenue stems from an audit conducted by Mr. George Thomas Lloyd, Jr., an employee of the Department of Revenue. Mr. Lloyd examined the books of the corporation and the receipts for items purchased and compiled a ledger of particular items which, in Mr. Lloyd's opinion, were not parts of the ship and upon which a use tax was due. At the hearing on this case this ledger was introduced as Joint Exhibit No. 1. It is a composite exhibit consisting of 157 pages. This ledger reflects purchases in the amount of $1,953,426.13 upon which the Department of Revenue claims tax is due. The total tax claimed by the Department of Revenue is $72,630.19 for taxes, penalties, and interest through February 16, 1976. The Petitioner is a Norwegian corporation with principal offices located in Oslo, Norway, and an office in Miami at Biscayne Boulevard. Petitioner owns three cruise vessels of Norwegian ownership and registration which sail out of the port of Miami, Florida to ports in the Caribbean. These cruises last several days. The parties have agreed that the Petitioner is in the exclusive business of transporting passengers and goods in foreign commerce. Mr. Lloyd, who conducted the audit above mentioned, testified that he prepared Joint Exhibit No. 1 by evaluating the items described in the corporation's records and used his own independent judgment in a determination as to whether those items were, or were not, parts of a vessel. If he determined they in fact were not parts of the vessel, he concluded that a use tax was owed to the State on the purchase price of those items. Mr. Lloyd stated that his determination as to whether a particular item was indeed a part of a ship was based on his independent judgment which was largely a question of whether the item was physically attached to the vessel. The individual items are far too numerous to describe in any detail herein, but they range from napkins, stirrers, postage meters, paper products, grinding wheels, coffee pots, towels, party favors, games, sandpaper, repairs to a shotgun, movie rentals, hardware items, batteries, flowers, bug spray. The items in question were delivered to Petitioner's warehouse on Dodge Island, Miami, Florida for lading on board one of Petitioner's three cruise vessels. The cruise vessels tie up next to the warehouse where the goods are stored and from time to time these goods are brought aboard each of the vessels. The items in question are all used aboard each vessel during the vessels' passenger cruises. The only time the cruise vessels spend within the territorial limits of Florida are for a period of time on Saturday of each week for the purpose of embarking and disembarking passengers for each weekly cruise. These articles, somewhat above described, are all used in connection with the ship's operation which is the conduct of weekly pleasure cruises from Miami to the Caribbean. The question of whether a particular item is a part of a vessel is one of definition and common sense. The auditor, Mr. Lloyd, appeared to accept a definition similar to what one would use in determining whether or not an item was a fixture in regard to realty. However, there are all types of vessels and it appears to this Hearing Officer that what may be a part of one type of vessel would have no function on another. There is really no relationship between what may be considered a part of real estate and what may be considered a part of a ship. There also appears to be no logic behind a definition which limits "parts of a ship" to those items which are physically attached to the vessel. Most would agree that pumps are parts of a ship; even though they may not be attached and can be easily removed, they are necessary in keeping a vessel afloat. Similarly, a compass and other navigational equipment may be removed, but that would hardly make them any less a part of a ship. As the Petitioner points out in its Memorandum, the most logical approach to a finding as what is truly a part of a vessel must ultimately hinge on the nature of the vessel, and a broad definition of seaworthiness. What are clearly parts of some ships have no purpose on others. A cargo freighter would need hoists and cranes which are not required on a tug. Each type of vessel uses equipment suited to that ship's purpose and type of cargo. While a tanker may be in the business of transporting oil, a very specialized cargo, a cruise ship is in business of transporting people and catering to their needs and entertainment. Therefore the equipment of a cruise ship would appear more frivolous to those accustomed to ships transporting basic raw materials. Both vessels, however, are in the shipping business. Since the parts of a ship must be defined as those items which serve a useful purpose to the operation of the ship, the decision then depends not on the nature of the item, but of the vessel. An oil tanker might conceivably have equipment or parts which are so specialized that they could serve no other useful purpose except aboard that type of vessel. The cruise ships in question in this case, however, use equipment which are apparently commonplace and equally useful on land as on sea. What items may properly be considered parts of a cruise ship depend on how those items relate to the operation of the vessel. While the equipment of an oil tanker would hardly be expected to be directed toward mirth; likewise, it is unreasonable for the equipment of a cruise ship to be limited to the bare necessities of a spartan voyage. As the testimony on behalf of Petitioner indicated, all the items listed on Joint Exhibit No. 1 do serve a purpose aboard the vessel and all items were purchased for use aboard the company's three vessels. It is therefore concluded that all the items listed on that schedule are in fact parts of the vessels owned by the Petitioner. The Petitioner has raised several other issues in its defense to tax assessment of the Department of Revenue. Among other things the Petitioner claims that the items in question are not stored for use in Florida. The facts above indicated that the items were purchased by the corporation and no sales or use tax has yet been paid upon them. The items are stored at the Dodge Island Warehouse owned by the Petitioner and are from time to time placed aboard vessels operated by the Petitioner corporation. From the facts presented at this hearing, the ships only spend several hours in the port of Miami each Saturday of every week. The items, therefore, are principally used while the vessels in question are on the high seas or in foreign ports. Except for this period of time on each Saturday when the vessels are in port, these items are used while the vessels are in engaged in foreign commerce.
Recommendation For reasons that the items in question are parts of the vessels and that they are used and consumed outside the state of Florida the tax assessed by the Department of Revenue should be disallowed. ENTERED this 20th day of October, 1976, in Tallahassee, Florida. KENNETH G. OERTEL, Director Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Daniel G. LaPorte, Esquire 150 Southeast Second Avenue Miami, Florida 33131 E. Wilson Crump II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Ed Straughn, Executive Director Department of Revenue Carlton Building Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA DEPARTMENT OF REVENUE KLOSTERS REDERI A/S, d/b/a NORWEGIAN CARIBBEAN LINES, Petitioner, vs. CASE NO. 76-428 DEPARTMENT OF REVENUE OF THE STATE OF FLORIDA, Respondent. /
The Issue Whether Petitioner owes the assessment for sales and use tax as alleged by the Department of Revenue.
Findings Of Fact George Schoenrock is a resident of the State of Florida. His address is 7600 Miami View Drive, Northgate Village, Miami, Florida. Mr. Schoenrock is the owner of a company known as Action Marine. This company is located in the State of Florida and manufactures and sells new boats. In 1996 Mr. Schoenrock also formed a company in North Carolina called Action Boatworks. This company, Action Boatworks, is the Petitioner in this cause. In 1996 Petitioner purchased a boat made in Wanchese, North Carolina and named it the "Action Lady." The boat was purchased to re-sell for profit by Petitioner, a dealer in North Carolina. Action Boatworks is not registered in Florida to sell boats nor does it possess a Florida sales tax dealer's license or a tax number from the Florida Department of Revenue. At the time of purchase Mr. Schoenrock considered the "Action Lady" unfinished as it lacked canvas, fishing equipment, chair rigging, and electronic equipment for navigation. The total paid to Davis Boatworks, Inc. (the manufacturer) for the "Action Lady" was in excess of $571,000.00. The invoice for this purchase, dated May 21, 1996, did not list Petitioner as the purchaser of the vessel but identified a "Barney Schoenrock." After the purchase of the boat, Mr. Schoenrock brought the "Action Lady" to South Florida where he intended to complete the installation of the items noted above and re-sell it. The vessel entered the State of Florida by the end of May 1996, and proceeded down the coast to a dock at Mr. Schoenrock's residence. One deterrent to the re-sale of the "Action Lady" was immediately discovered by Mr. Schoenrock. That is, the diesel engines did not pass a "P.I.D." inspection required for the warranty to be effective. This inspection required Detroit Diesel to complete the P.I.D. test and to certify the engines were acceptable. The vessel eventually passed this inspection some eight or nine months after Mr. Schoenrock had received the boat. The first effort to repair the vessel in order to pass the P.I.D. test was in June of 1996 when it was taken to a repair facility known as Safety Harbor. The "Action Lady" remained at Safety Harbor until August 7, 1996, when it returned to Mr. Schoenrock's residence. Thereafter, on or about October 24, 1996, the vessel went back to Safety Harbor for additional repairs which lasted approximately two weeks. After the repairs were completed, sometime in November 1996, the boat was returned to Mr. Schoenrock's residence. In October 1996 Mr. Schoenrock listed the "Action Lady" for sale with Walsh Yachts. The asking price was noted at $695,520.00. Also at this time it was placed in the Fort Lauderdale boat show. Except for the time the boat was in repairs or on exhibition during the October boat show, the "Action Lady" remained docked at Mr. Schoenrock's residence. Eventually, Petitioner sold the vessel in South Florida to Joseph Gregory in March of 1997. According to Mr. Schoenrock the boat was not used for his own personal use. It was not used by others for personal use. It was subject to repairs, testing, and demonstration the entire time it was in Florida prior to its sale. According to Mr. Schoenrock, when he purchased the boat in North Carolina, he paid sales tax in that state totaling $2500.00. Mr. Schoenrock's company, Action Marine, was never in any way an owner of the "Action Lady." Mr. Schoenrock insured the vessel for its value and was the beneficiary of the policy. From June 1, 1996, through its resale in March 1997, the "Action Lady" did not leave the State of Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a Final Order affirming the use tax assessment. DONE AND ENTERED this 5th day of May, 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 5th day of May, 1999. COPIES FURNISHED: Eric J. Taylor, Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Eric Taylor, Assistant Attorney General 401 Northwest Second Avenue, N607 Miami, Florida 33128 Jack Stein, Esquire Arthur Rosenberg, Esquire Stein, Rosenberg & Winikoff Seventh Floor 4875 North Federal Highway Fort Lauderdale, Florida 33308 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether Respondent, a licensed yacht broker, committed the offenses set forth in the Notice to Show Cause dated June 20, 1994, and the penalties, if any, that should be imposed.
Findings Of Fact Petitioner is the agency of the State of Florida charged with the responsibility to administer and to enforce the Florida Yacht and Ship Brokers' Act, Chapter 326, Florida Statutes. At all times pertinent to this proceeding, Respondent has been a licensed Yacht and Ship Broker pursuant to the provisions of Chapter 326, Florida Statutes. Respondent resides in and has his principal place of business in Martin County, Florida. Respondent's corporation, Rampage of Stuart, Inc., has been licensed by Petitioner at all times pertinent to this proceeding. The parties stipulated that Respondent's corporation was, at times pertinent to this proceeding, doing business as Stuart Cay Marina, a fictitious name that had not been registered with the Petitioner. The parties stipulated that Respondent was guilty of violating the provisions of Section 326.004(2), Florida Statutes, as alleged in the Notice to Show Cause dated June 20, 1994. The parties also stipulated that the appropriate penalty for this violation is an administrative fine in the amount of $500.00. James Withers began working for Respondent at Stuart Cay Marina in January 1994. At the time he began working at Stuart Cay Marina, Mr. Withers was not licensed under the Yacht and Ship Brokers' Act. Respondent knew or should have known that Mr. Withers was not licensed when he first became employed at Stuart Cay Marina. On January 27, 1994, Mr. Withers attended an educational seminar sponsored by Petitioner where the attendees received instruction as to the requirements for licensure as a salesman or a broker under the Yacht and Ship Brokers' Act. The successful applicant must submit a completed application form, a completed fingerprint card, the proper application fee, and a surety bond. The Petitioner's processing of the application includes having the Federal Bureau of Investigation (FBI) run a fingerprint check on the applicant. The attendees of the educational seminar were told that the application fee had increased from $538.00 to $539.00 as of December 20, 1993, due to a $1.00 increase in the fee charged by the FBI to process fingerprint cards. Mr. Withers and the Respondent knew, or should have known, that Mr. Withers could not act as a salesman until after his license had been issued. In late January 1994, Mr. Withers applied for licensure as a salesman pursuant to the Yacht and Ship Brokers' Act. Because the application form used by Mr. Withers reflected the old application fee, Mr. Withers submitted a check in the amount of $538.00 with his application and fingerprint card. There was no evidence as to where Mr. Withers had obtained this application form. Mr. Wither's application package was received by Petitioner's Finance and Accounting Office on February 4, 1994. The check for the application was deposited and the application forwarded for further processing. On February 7, 1995, Mr. Withers was advised by mail that his application was deficient since the application fee was short by $1.00. This letter, from the Petitioner's Yacht and Ship Section, advised Mr. Withers that the $1.00 was needed to continue the application process. Mr. Withers forwarded his $1.00 check, dated February 9, 1994, to the Petitioner to correct this deficiency. This check was received and deposited by Petitioner's Finance and Accounting Office, which is located in the John's Building in Tallahassee, on February 17, 1994. The Finance and Accounting Office released the application package for further processing on February 18, 1994. From the Finance and Accounting Office, the application package went to the Division Director's Office located in the Warren Building in Tallahassee. From that office the application package was sent to the Yacht and Ship Section located in the Bloxham Building in Tallahassee, where it was received February 21, 1994. Licenses are not completely processed until after the Yacht and Ship Section receives notification that the entire application fee has been paid. Processing of Mr. Withers' application was completed by the Yacht and Ship Section and his license was issued on February 21, 1994. Mr. Withers and the Respondent knew, or should have known, that Mr. Withers had not received his license from the Petitioner as of February 18, 1994. 1/ There was no evidence that either man had reason to believe as of February 18, 1994, that the license had been issued and was being forwarded by mail. Both men correctly believed that Mr. Withers had substantially complied with the licensure requirements as of February 18, 1994, and that the license would be issued at some juncture since the only deficiency had been corrected. Mr. Withers represented Respondent at the Sixth Annual Miami Brokerage Yacht Show on February 18, 1994, where he acted as a salesman within the meaning of the Yacht and Ship Brokers's Act. Respondent permitted Mr. Withers to use his company name at this show. On Friday, February 18, 1994, James Courchaine and Peter Butler, in their official capacities as employees of the Petitioner, located Mr. Withers at the boat show and inquired as to whether he was licensed. Mr. Withers told them that he had completed his application package and was merely waiting to receive his license in the mail. Mr. Butler thereafter called his office in Tallahassee and learned that Mr. Withers' check for $1.00 may have been received, but that the application had not been received by the Yacht and Ship Section and that the license had not been issued. Mr. Butler informed Mr. Withers that the earliest his license could be issued was Monday, February 21, 1994.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order adopting the findings and conclusions contained herein, that imposes an administrative fine in the amount of $500.00 against Respondent for the violation of Section 326.004(2), Florida Statutes, and that imposes an additional administrative fine in the amount of $500.00 against Respondent for the violation of Section 326.06(2)(e)7, Florida Statutes. DONE AND ENTERED this 8th day of January 1996 in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON, 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 8th day of January 1996.
The Issue Whether Respondent committed five violations of the Yacht and Ship Brokers' Act, including the following counts: 1) failing to have the license of each salesperson in his employ prominently displayed in his principal place of business; 2) failing to place deposits received from clients pursuant to transactions involving yachts into a broker's trust account; 3) allowing a person licensed only as a salesperson to act as a broker and to use the broker's name to evade the provisions of the Yacht and Ship Brokers' Act; 4) failing to deposit funds into the broker's trust account within three working days of receipt of funds pursuant to a purchase contract by a salesperson licensed under him; 5) allowing a salesperson licensed under him to carry out acts which if committed by the broker would place him in violation of the Yacht and Ship Brokers' Act and the rules thereunder, such as violating the Notary Public Law, failing to exercise due professional care in the performance of brokerage services, and making substantial and intentional misrepresentations with respect to transactions involving yachts, as alleged in the Amended Notice to Show Cause, in violation of the Yacht and Ship Brokers' Act, Chapter 326, Florida Statutes, and if so, what penalty should be assessed.
Findings Of Fact Petitioner is the agency of the State of Florida charged with the responsibility to administer and enforce the Florida Yacht and Ship Brokers' Act, Chapter 326, Florida Statutes. The purpose of the Yacht and Ship Brokers' Act is to protect the consumer. A yacht broker is an individual who, in expectation of compensation, sells used boats in excess of 32-feet in length for other persons. In order to obtain a license to act as a yacht broker, an individual must submit an application, undergo a background check for moral character, submit a surety bond, and demonstrate to the Division that he has a trust account to place funds received in pending yacht transactions. Before being able to independently perform yacht brokering services as a yacht broker, an individual must spend two consecutive years as a yacht salesperson in a mentorship working under a broker. At all times relevant to this action, Respondent held a license with Petitioner to operate as a yacht broker. Respondent continues to be licensed as a yacht broker. In late 1995 and early 1996, Respondent operated his yacht brokerage business, Greg and Associates, from two locations. His main office was located in Rockledge, Florida, and a branch office was located in Sarasota, Florida. No brokers were present at the Sarasota location. Respondent operated the Sarasota branch office from his main office in Rockledge, Florida. He never visited the Sarasota branch office. Respondent viewed his relationship to the Sarasota branch office as an "escrow agent." Bullock, a salesman, had complete autonomy to run the Sarasota branch office. Respondent met Bullock only once, and he never met any of the other salesmen who operated out of the branch office. Respondent had only a commission arrangement with Bullock. Respondent sent checks for all commissions to Bullock, who deposited them in Bullock's company, Friar Tuck, Inc's., Barnett Bank business account. Respondent allowed Bullock to hire the other salesmen, to determine a commission arrangement with the other salesmen, and to disburse commissions to the other salesmen. Respondent did not know the commission arrangement with most of the salesmen in the branch office. On April 16, 1996, Respondent was interviewed in his office about some complaints that had been received concerning the operation of his Sarasota branch office. Among the salesmen working under Respondent's broker's license in his Rockledge office at that time were Darrell Lawson and Mark Salmuller. Respondent did not have the licenses of either of these two salesmen displayed. Both men were listed as active employees by Respondent. At all times relevant to this proceeding, Respondent maintained a broker's trust account, entitled Greg and Associates, d/b/a Yacht Brokerage USA, in the Rockledge branch of the Barnett Bank. At all times relevant to this proceeding, Chester Bullock, a yacht salesperson working for Respondent in Respondent's Sarasota branch office, maintained a business checking account entitled Friar Tuck, Inc., d/b/a Yachtmasters, in a Sarasota branch of the Barnett Bank. Bullock was listed as president of the company and was identified as a signatory on the account. This was not a proper broker's trust account, as Bullock, being a yacht salesman, could not have established such an account. In July 1995, Chester Bullock and Jeff Webb, salesmen in the Sarasota branch office, took an offer and received a $1,000.00 deposit from David and Cynthia Cislo, on a 1979 34-foot Marine Trade Trawler. Respondent's salesmen did not deliver the deposit to Respondent's trust account within three days of its receipt. The funds were deposited in Bullock's business checking account at the Sarasota branch of the Barnett Bank. Sometime later, the money was redeposited in Respondent's trust account. Bullock notarized the vessel bill of sale at the time of the closing, and received a commission on the sale. In November 1995, Bullock took an offer and received a $5,350.00 deposit from a Louisiana client, Charles Cosgrove, on a 1964 38-foot Chris-Craft Commander yacht. Respondent's salesman did not deliver the deposit to Respondent's trust account within three days of its receipt. On November 27, 1995, Bullock and Jeff Webber, Respondent's salespeople, acted as listing broker and salesperson, respectively, on the lease-purchase of the 1964 38-foot Christ Craft Commander by Cosgrove. Respondent never signed the brokerage sales record, which is the closing statement given to the lease-purchaser, Cosgrove, and was never identified as broker of record on any of the sales documents. Instead, the purchase-sale agreement lists Bullock as the broker, and the closing statement lists Bullock as the broker. Bullock acted as the notary public for the lease-purchase agreement. In January 1996, Bullock and Harold Raines, yacht salesmen in the Sarasota branch office, took an offer and received a $1,700.00 deposit from a client, Michael Hill, on a 1973, 53-foot Huckins yacht. The letterhead of the draft purchase and sales agreement, which stated "Yachtmasters" and a phone number for the Sarasota area, further indicated that Hill's offer was made through yacht salesmen at the Sarasota branch office. Respondent's salesmen did not deliver the $1,700.00 deposit to Respondent's trust account within three days of its receipt. Instead of delivering the $1,700.00 deposit to Respondent for deposit in Respondent's Rockledge broker's trust account, the check was delivered to Friar Tuck, Inc's., Sarasota account. Hill's deposit, which was supposed to be held in a trust account, intermingled with the other business funds of Bullock's account. Hill requested and received an oral extension from Bullock on his closing date to purchase the yacht. About a month later, Bullock notified Hill that the yacht was sold to another party. It was only after Hill threatened to sue Respondent, the responsible broker, and after Hill filed a complaint with Petitioner that Respondent refunded Hill his deposit. The Yacht and Ship Brokers' Act does not permit licensed salespeople to perform certain acts. It requires the employing broker to do them. An employing broker, a broker who holds the license of his salesperson, must make all trust account deposits and withdrawals of monies involved in a transaction brokered by the salesman. An employing broker is required to supervise the yacht transactions brokered by his salespeople and to sign closing statements, which itemize all charges and credits of the transaction for the client. Respondent minimized his own involvement in his Sarasota branch office and permitted his salesman, Bullock, to operate it. This enabled Bullock to sign as the broker a closing statement of the sale of a yacht, which is an action that should have been performed only by a broker. During the same time period that Respondent granted Bullock autonomy to supervise the Sarasota branch office, Bullock operated another business from the same location, Sarasota Marine and Maintenance Services, which did boat surveys and cleaned boats. Bullock was the president of Sarasota Marine and Maintenance Services. In early 1996, Wittman, a Colorado resident at that time, telephoned Bullock about the 1988, 34-foot Wellcraft Grandsport in the magazine advertisement placed by Bullock. Bullock sent Wittman a videotape of the yacht. After reviewing the videotape, Wittman did not think that it was the same yacht advertised in the magazine. Bullock admitted that the yacht in the videotape was not the same yacht advertised in the magazine, but claimed that it was a sister ship. Based upon Bullock's assurances that the sister yacht was in good condition and the results of a survey done by Bullock's company stating that the yacht was in good condition, Wittman purchased the yacht. Bullock acted as both the listing broker and the selling broker in the sale of the 1988, 34-foot Wellcraft Grandsport yacht to Boyd Wittman, the purchaser. Notwithstandng the fact that he was representing the seller, Bullock did not obtain the written consent of Wittman, the purchaser. Wittman wanted a registered surveyor to do a survey of the condition of the yacht, because Wittman lived out-of-state and wanted to avoid spending money to fly to Florida to inspect it. Bullock arranged for his own company, Sarasota Marine and Maintenance Services, to perform the survey. The survey was signed by Ernest Shaffer, who was identified as a Certified Marine Surveyor and Consultant with the Society of Accredited Marine Surveyors, the National Association of Marine Surveyors, and the National Marine Investigators. Ernest Shaffer was someone that Bullock hired to wash boats. He was not a certified surveyor, as he was held to be. When the yacht was delivered to Wittman in Colorado, he was shocked by the poor condition of the yacht. The interior, the cockpit, the exterior, the bilge, and the mufflers were all in poor condition. Wittman was expecting a yacht that he could take someone out on a lake with, and it was not in good enough condition. Wittman had to pay another $15,000 to $20,000 to repair the yacht to improve it to good condition. Repairs included replacing all of the interior of the cabin, replacing the port windshield, putting new mufflers in, fixing a transmission leak, fixing the air-conditioning, rebuilding the water pumps so that the engines cooled properly, and replacing the dry-rot wood on the main deck on the cockpit. In sum, Wittman purchased the yacht for $38,000, spent another $15,000 to $20,000 in repairs, and eventually sold it for $37,000. Bullock also quoted to Wittman a fee for shipping the yacht from Florida to Colorado for $1,500. Wittman thought the price was reasonable. When the yacht was finally shipped, it cost Wittman approximately $3,800, which he paid, because he had already bought the yacht and had to finish the transaction. Bullock acted as both the listing broker and the selling broker in the sale of a 1973, 34-foot Nautiline yacht to Ernest C. Shaffer, the purchaser. Bullock arranged for his company, Sarasota Marine and Maintenance Services, to perform the survey. The survey was signed by Ted Williams, who was identified as a Certified Marine Surveyor and Consultant with the Society of Accredited Marine Surveyors (SAMS), the National Association of Marine Surveyors (NAMS), and the National Marine Investigators. Neither Bullock, Ernest Shaffer, nor Ted Williams, his employees who signed the surveys of the yachts described above, was certified with NAMS or SAMS, two marine surveys accreditation associations. In the case of a 1973, 53-foot Huckins yacht, Bullock tried to sell the boat three times and took three simultaneous contacts on the same vessel. He took a contract from Michael Hill, a prospective purchaser, extended the closing date for Hill to March 6, 1996, and simultaneously had contracts for the same boat with the prospective purchasers Sam Bankester and Steven Kenneally, with the closing dates of February 29, 1996, and March 2, 1996, respectively. Ultimately, Steven Kenneally purchased the yacht. The terms of the contracts did not provide for simultaneous contracts on the same vessel. The prospective purchaser who did not come up with the money first lost out on the opportunity to purchase the yacht. In addition, the Hills, the prospective purchasers, had a difficult time obtaining their earnest money back from Bullock. In January of 1996, Raines, Respondent's salesman, showed Chris June, a North Carolina resident, a 1970, 42-foot Trojan Sea Voyager yacht named "Fantasia." June liked the 42- foot Trojan Sea Voyager and entered into a contract to purchase it through Raines and Bullock. Bullock recommended a surveyor, John Pomeroy, in St. Petersburg, Florida, to complete the survey. Pomeroy was, in fact, not certified with NAMS or SAMS. Bullock told June that the boat was in very good condition and that it was a great value. During the survey, June noticed that wood on the yacht was separating in the bow, and asked Bullock and Pomeroy about it. They explained that this was "wet/dry expansion" which occurs in yachts that sit for a long time and can easily be fixed with some screws and caulking. "Wet/dry expansion" causes wood in wooden yachts to start separating, according to Bullock and Pomeroy, due to the wet wood below the waterline and the dry wood above the waterline. The survey disclosed no substantial problems with the yacht. Relying on the statements of Bullock and Pomeroy, June purchased the "Fantasia" for $22,000, with money loaned to him by a relative. A month after purchasing his yacht, June was informed that his boat was sinking while moored at the dock. June had to hire a marine recovery company to recover the yacht, just before it was about to go completely under water. The yacht took on water in an area near the stern that was not well checked-out, where a basketball-sized wad of putty holding the corner together came loose. As the estimate to repair the boat was more than three times what the boat was worth, June sold it to a salvage yard for $2,500. However, the salvage yard defaulted on that payment. June has been making accelerated payments on his loan, and has the loan down to approximately $19,000. He made a claim against Respondent's surety bond and settled the action for a small amount from the bonding company. Respondent attended two all-day workshops hosted by the Petitioner's Section of General Regulation, which cover in detail how to display a license, to display trust accounts, to display broker's duties and responsibilities, and to display branch offices. Respondent was exposed to the statutes and rules which were violated. Respondent took a cavalier attitude towards following the requirements of the Act. On February 15, 1996, Petitioner entered a Final Order against Respondent in Docket No. YS95397, imposing a fine of $1,500 for Respondent's violation of the Act. Respondent used the name "Yachtmasters" for his Sarasota branch office without having a license issued in that name in violation of Florida law. In the case DBPR v. Chester C. Bullock, Docket No. YS97172 (December 11, 1998), the Petitioner charged Chester Bullock, a registered salesman, with five violations: Charge 1 - The Respondent acted as a broker when he was licensed only as a salesman. Charge 2 - The Respondent made substantial and intentional misrepresentations with respect to transactions involving yachts upon which people have relied. Charge 3 - The Respondent violated other laws governing transactions involving yachts, specifically, he violated Chapter 117, Florida Statutes, by notarizing signatures on documents in which he had a financial interest. Charge 4 - The Respondent failed to immediately deliver deposits received from clients for the purchase of yachts to the broker under whom he was licensed as a salesman. Charge 5 - The Respondent failed to exercise due professional care in the performance of brokerage services, such as recommending his own company as a surveyor to a client and representing it as being an accredited surveyor company, when it was not. Bullock was found guilty on all charges and assessed a civil penalty of $45,000 in that case and had his yacht salesperson's license revoked. The Petitioner has proven each of the violations by clear and convincing evidence. Respondent's explanations for his conduct is not credible.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Division of Florida Land Sales, Condominiums and Mobile Homes enter a final order which: Finds Respondent guilty of the charges set forth in Counts 1, 2, 3, 4 and 5 of the Amended Notice to Show Cause. Respondent's broker's license is hereby revoked. The Division impose a civil penalty of $40,500, which is $500 for Count 1 and $10,000 each for Count 2, 3, 4, and 5. The Respondent shall immediately cease and desist from any violations of Chapter 326, Florida Statutes, and the administrative rules promulgated thereunder. DONE AND ENTERED this 18th day of June, 1999, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of June, 1999. COPIES FURNISHED: William Oglo, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-1007 Gregory Linnemeyer 613 Rockledge Drive Rockledge, Florida 32955 Philip Nowick, Director Division of Florida Land Sales, Condominiums, Mobile Homes Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399 William Woodyard, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399
Findings Of Fact In June 1986, Petitioner purchased a 55 Ft. Ocean Yacht Super Sport from South Jersey Yacht Sales for $577,055 and took delivery in New Jersey. Although Petitioner is not a dealer, a dealer's license was used to purchase this vessel and Petitioner paid no sales tax to New Jersey on this sale. The boat was named "SEABURY", entered Florida waters in November 1986 and remained for 105 days, proceeded to Bahama Islands February 22, 1987 and returned to Florida April 7, 1987, and remained in Florida for 31 additional days before returning north. From bridge logs maintained by bridge tenders over the Intracoastal Waterway and docking receipts at Bahia Mar and other berthing spaces it was concluded the vessel was used in Florida. Respondent established a prima facie case that the M/V SEABURY entered Florida waters within 6 months of its purchase in New Jersey and was used in this state. No evidence to rebut this prima facie case was presented by Petitioner.
Findings Of Fact Petitioner, Florida Housing Affordability, Inc. (FHA) is a private nonprofit corporation which develops, manages and maintains low income housing in Florida. Its corporate office is in Longwood, Florida. The application at issue is dated February 18, 1993 and is seeking funding under the Low Income Housing Tax Credit (LIHTC) program and State Apartment Incentive Loan (SAIL) program. The application proposes a 28-unit apartment complex, Bay Pointe II, in Pasco County, Florida. Under the SAIL program, the Florida Housing Finance Agency (Agency) makes loans to developers of low income housing at interest rates significantly below the market rate. The loans are non-amortizing until maturity. Interest is deferred if the cash flow of the project is insufficient to pay it after meeting certain expenses. Repayments of SAIL funds are used by the agency for subsequent loans to developers. The agency determines which developers will be offered SAIL loans pursuant to a competitive application process and has adopted the SAIL/LIHTC application packet for use in scoring the loan applications. The packet forms must be completed by the applicant and any supporting documentation must be attached. FHA's application for the 1993 funding cycle was scored by the agency committee and was awarded 886.5 points out of a maximum of 1,025 points. FHA claims that it is entitled to an additional 25 points on Form 11, and 2 points on Form 14. SAIL loans are generally issued for a term of 15 years. Form 11 in the application packet is a commitment to repay the loan in a shorter period. An applicant who commits to repay the loan in 10 years or less is awarded 25 points. FHA indicated on Form 11 that it would repay the loan in 10 years or less. The form requires a description of how repayment will be made, and requires supporting documentation. The description and documentation are required to assure the agency that repayment in a shorter period is feasible. FHA's documentation was exhibit 1 to Form 11, "Analysis of Early Repayment of SAIL". This analysis states: LIHTC proceeds are not required for project funding of the Bay Pointe II project. However, we intend to dedicate some or all of the proceeds from sale of LIHTC toward the early repayment of the SAIL. The early repayment of the SAIL will be accomplished by this method as follows: SAIL request $485,000 ANNUAL LIHTC request 103,680 Estimated cash from sale of LIHTC @ .45/dollar 46,656 (Joint Ex. #1, attachment to Form 11) Form 11 in the application packet requires that early retirement of SAIL debt through cash flow must be evidenced by commitment from the developer and exhibited in a pro forma. The operating pro forma attached to Form 10 in FHA's application packet does not reflect that the loan will be paid off in 10 years. Developers are able to use tax credits to generate cash by syndicating or selling those credits. In such cases, the syndication agreement is attached to the application as documentation of the source of cash for early repayment. FHA characterizes its use of the tax credits as an "internal sale". Since it is a multi-asset entity, it plans to repay the SAIL loan early with the tax savings it would realize from its use of tax credits in the future. The tax liability which it expects the credits to reduce would be created by its other assets and operations. The .45 per dollar of credit that is reflected in FHA's analysis described above will not actually be paid by any purchaser of the tax credits. This is a hypothetical sales price. Because the data submitted in the attachment to Form 11 does not state how the .45 per dollar is derived, the documentation is insufficient. As explained by Joseph Savino, the approximate $46,000 a year is an estimate of available equity from the use of the tax credits. FHA, through Mr. Savino, contends that since a commitment letter or syndication agreement is all that is necessary when the funds are generated from outside the applicant entity, the applicant's statement of commitment should be sufficient when it intends to generate the funds from an "internal sale". The more reasonable position of the agency is, however, that a simple statement is not sufficient in this instance, because the documentation does not show where the dollars are coming from internally. The pro forma does not show other assets of the company or the generation of actual tax liabilities. If there is no evidence of an actual sale, then some other documentation must be provided to show that the money will be available to repay the loan in the shorter time. The analysis provided as an attachment to Form 11 is not the required documentation. Moreover, the analysis conflicts with the pro forma that was included elsewhere in the application. That pro forma does not reflect early repayment of SAIL and is based instead on what Joseph Savino characterizes as conservative assumptions. FHA is entitled to an additional 2 points on Form 14, relating to quality of design for an additional safety/security design feature for children. As stipulated by the agency, an "other" blank should have been included on the form so that applicants could add such features. The blank had been on an earlier version of the form, but was dropped inadvertently when Form 14 was revised. Other applicants added their own "other" blank to the form and received points for an additional design feature.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the agency enter its Final Order denying Petitioner's request for 25 points on Form 11, and granting two additional points for Form 14. DONE AND RECOMMENDED this 28th day of October, 1993, in Tallahassee, Leon County, Florida. MARY CLARK 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 28th day of October, 1993. COPIES FURNISHED: Michelle L. Oxman Office of the General Counsel Department of Community Affairs 2740 Centerview Drive Tallahassee, Florida 32399-2100 Joseph J. Savino, President Florida Housing Affordability, Inc. West State Road 434, Suite 1150 Longwood, Florida 32279 Linda Loomis Shelley, Secretary Department of Community Affairs 2740 Centerview Drive Tallahassee, Florida 32399-2100 Daphne E. Jones, Esquire 110 Southeast Sixth Street, 28th floor Fort Lauderdale, Florida 33302 Mark A. Hendrickson, Executive Director Florida Housing Finance Agency Marathon Building, Suite 101 2574 Seagate Drive Tallahassee, Florida 32301-5026
