The Issue The central issue in this case is whether Petitioners' applications for registration should be approved or denied.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: On January 26, 1988, KC Securities, Inc. (KC) filed an application for broker-dealer registration. Ted Casey Kata was identified as the president and principal owner of KC. Question 7E. of the application asked: Has any self-regulatory organization or commodities exchange ever: * * * (2) found the applicant or a control affiliate to have been involved in a violation of its rules? The answer KC gave to question 7E.(2) was "yes". Question 7G. of the KC application asked: Is the applicant or a control affiliate now the subject of any proceeding that could result in a "yes" answer to parts A-F of this item? The answer KC gave to question 7G. was "yes." The "control affiliates" whose conduct caused KC to answer in the affirmative to the questions noted above are Ted C. Kata and Mary S. Kata. KC has not previously been registered as a broker-dealer. Petitioner, Mary S. Kata, filed an application for securities industry registration and requested registration as a general securities principal, financial and operations principal, and municipal securities principal. According to the application, Mary S. Kata has been unemployed since October, 1985. Previously, Mary S. Kata was the financial principal for TK Securities. Prior to working for TK, Mrs. Kata worked for Cooper Investments, Inc. and Southeast Securities of Florida, Inc. Mrs. Kata later amended her request to seek registration as an associate with KC. Petitioner, Ted C. Kata, filed an application requesting registration as a general securities principal and a municipal securities principal. According to the application, Ted C. Kata has been unemployed since October, 1985. Previously, Mr. Kata had owned and been the principal for TK Securities, he had managed Cooper Investments, Inc., and had owned and managed Southeast Securities of Florida, Inc. The National Association of Securities Dealers, Inc. (NASD) is a self- regulatory organization comprised of securities dealers of which Ted C. Kata and Mary S. Kata were members. Ted C. Kata, entered the securities business as a registered associate in 1965. In 1973, he purchased a general securities business known as First Broward Securities, Inc. Later, Mr. Kata changed the name of First Broward to Southeast Securities of Florida, Inc. (Southeast). On March 3, 1976, Ted C. Kata, as registered principal of Southeast, and Southeast were censured and fined by NASD based upon a violation of Article III, Sections 1 and 32 of the NASD Rules of Fair Practice. This violation was based upon Southeast's failure to obtain and maintain a blanket fidelity bond as prescribed by NASD requirements. The amount of the fine assessed against Mr. Kata was $400 plus costs in the amount of $20. Mr. Kata considered this a minor infraction but took steps to correct the situation and did obtain the required bond. On November 17, 1978, the NASD filed a complaint against Southeast and Ted C. Kata, the registered principal. This complaint alleged Southeast and Kata had violated several provisions of Article III of the Rules of Fair Practice which were set forth in six separate causes. After hearing on the issues, NASD entered findings which determined Kata had operated in a deceptive manner, had presented a false accounting of the firm's income and capital, and had taken excessive mark-ups. As a result, Mr. Kata was censured and fined $500 and was required to pay costs totaling $1,636. Mr. Kata paid this fine but felt that the investigators had not understood the true facts of the case. On October 9, 1986, the NASD filed a complaint against TK Securities, In., Ted C. Kata and Ruth Elaine Berry. Mr. Kata was charged as the sole general securities principal for TK. This complaint alleged violations related to a failure to maintain sufficient net capital, failure to make and keep current records, and failure to file a correct FOCUS report. In accepting an offer of settlement, the NASD censured Mr. Kata and fined him in the amount of $1000. Again, Mr. Kata paid the fine as required. In the latter part of 1985, James Stibal sued Ted C. Kata and alleged, among other complaints, that Mr. Kata had represented the Stibals in their stock transactions and that Mr. Kata had made numerous false or misleading statements to induce the Stibals to invest. According to Mr. Kata this case was settled when he agreed to pay approximately $22,000 to the Stibals. On December 14, 1987, the Securities and EXCHANGE Commission (SEC) took action against Mary S. Kata. The SEC had charged that Mrs. Kata had willfully aided and abetted violations of the Securities EXCHANGE Act by failing to make and keep current books and records for a company for which she served as the financial principal. The settlement, offered by Mrs. Kata and accepted by the SEC, suspended Mrs. Kata for a period of six months from association in a proprietary or supervisory capacity with any broker, dealer, municipal securities dealer, investment company or investment advisor. It should be noted that the acts complained of against Mrs. Kata in the SEC action and the acts complained of by the NASD against Mr. Kata and Berry resulted from errors allegedly committed at TK. According to Mr. and Mrs. Kata, TK was sold two months prior to the incidents which gave rise to these complaints. The Katas maintained that the acts complained of occurred while Mrs. Berry was operating TK. However, the record is clear that Mr. Kata remained as the principal for TK and Mrs. Kata remained as the financial principal for TK during all periods in question. In fact, the Katas remained employed at TK despite the change in ownership. Further, Mr. Kata continued to advise Mrs. Berry and the staff from time to time on matters regarding the business. Approximately two months after the sale of TK, the company went into liquidation by the Securities and Investor Protection Corporation (SIPC). During the liquidation period, Mrs. Kata assisted the trustee to locate and process records. Leonard Simons has known Ted C. Kata since 1968. Mr. Kata handled Mr. Simons' investment account for a number of years. Mr. Simons found that his sales and purchases were promptly confirmed, that he was always paid correctly, and that Mr. Kata's brokerage rates were competitive. If given the opportunity, Mr. Simons would trade with Mr. Kata again. Mr. Simons was unaware of the NASD actions against Mr. Kata. George Brown has known Ted C. Kata since 1964. Mr. Brown and Mr. Kata studied to become NASD members at the same time, and Mr. Brown subsequently worked both with and for Mr. Kata. Mr. Brown stated that Mr. Kata has always confirmed trades accurately and promptly, has always been fair and considerate, and brought to the attention of salesmen in his employ the applicable rules and regulations. Mr. Brown intends to register with Mr. Kata again if the applicant is approved and considers Mr. Kata worthy to be in the securities business. Christopher Constable has known Ted C. Kata since 1972. Mr. Constable worked for Mr. Kata as an associate of all of the brokerage firms for which Kata served as principal for the period 1973-1985. Mr. Kata required that Mr. Constable and the other sales associates review all new rules and regulations. Mr. Constable knows of no complaints from customers while he was associated with Mr. Kata. Mr. Constable believes Mrs. Kata to be an excellent bookkeeper and believes both Katas to be worthy to engage in the securities business. Mr. Constable was not aware of the NASD actions against Mr. Kata. Don Saxon is the director of the Division of Securities and Investor Protection. According to Mr. Saxon, the NASD actions against Mr. Kata are the type which would result in revocation of registration since the violations were related to failures in books and records keeping, illegal markups, and since the Katas were principals of the company which went into SIPC liquidation.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Banking and Finance, Division of Securities and Investor Protection, Office of the Comptroller enter a final order denying the registration applications of the Petitioners. DONE and RECOMMENDED this 22nd day of December, 1988, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 22nd day of December, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-2493 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY PETITIONERS: Paragraphs 1 through 9 are accepted. With regard to paragraph 10, the first sentence is accepted. The remainder of paragraph 10 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. No conclusion is reached as to whether Mrs. Berry exercised control over TK after the sale since the Katas remained as principals with the company. With regard to paragraph 11, that TK went into liquidation approximately two months after the sale is accepted. All other conclusions reached in paragraph 11 are rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. Paragraphs 12 and 13 are accepted. Paragraph 14 is rejected as contrary to the weight of the evidence, irrelevant or immaterial to the findings made herein. The evidence established that at all periods in question, before the sale of TK and until its liquidation, that Mrs. Kata was the financial principal for the company. Paragraph 15 is accepted. Paragraph 16 is accepted. The first two sentences of paragraph 17 are accepted. The third sentence is rejected as contrary to the weight of the evidence. Mr. Kata remained as principal for TK after its sale, he continued to work there, and he advised staff regarding business matters. Whether he or Mrs. Berry exercised final control over the business is immaterial since Mr. Kata was the sole registered principal. There is no conclusion that the shortcomings were committed after the sale. Paragraphs 18-20 are accented. Paragraphs 21-22 are rejected as hearsay or not supported by the record. Paragraphs 23 and 24 are accepted. Paragraphs 25 and 26 are rejected as a recitation of testimony not findings of fact. Mr. Kata may not have agreed with the ultimate findings reached by the NASD; however, the censure was issued as found in the findings of fact. With regard to paragraph 27, see the findings of fact, otherwise rejected as contrary to the weight of the evidence. Paragraphs 28-33 are accepted but are irrelevant or immaterial to the conclusions reached herein. Paragraph 34 is accepted to the extent that it describes the NASD action taken against Kata. Those portions of the paragraph which suggest Kata did not have control over the company after its sale are rejected as contrary to the weight of the evidence, irrelevant or immaterial. Kata remained as principal for the company after the sale and continued to advise the staff. That he might have allowed the new owner to exercise poor judgment does not excuse Kata of all liability. Paragraph 35 is rejected as contrary to the weight of the evidence, irrelevant or immaterial. Paragraph 36 is accepted only to the extent that it describes the penalty Kata agreed to accept. The action was resolved without hearing. Paragraph 37 is rejected as immaterial and irrelevant. The first sentence of paragraph 38 is accepted. The second sentence is rejected since the record is clear that the total of the fines and costs associated with the NASD actions exceeded the amount of the fines alone, consequently, it would be erroneous to consider only the fine portion. To his credit, Mr. Kata paid all amounts owed by him for the various violations. Paragraph 39 is accepted only to the extent that it finds that TK went into liquidation two months after the sale. The rest of the paragraph is rejected as speculation, unsupported by the record, or contrary to the weight of credible evidence presented. Paragraph 40 is accepted. Paragraph 41 is accepted but is irrelevant and immaterial to the conclusions reached herein. Mr. Kata's self-serving testimony both as to the denials of all wrongdoing and the reasons for either agreeing to pay fines or settlements has not been credited. Paragraph 42 is accepted. Paragraph 43 is accepted. Paragraphs 44 and 45 are rejected as self-serving comment, Mr. Kata's testimony having not been credited. Paragraph 46 is accepted but is irrelevant to the conclusions reached herein. Paragraph 47 is accepted to the extent it relates charges against Mrs. Kata; however, it should be noted that Mrs. Kata was the financial principal for her husband during the periods in which he was censured for problems relating to bookkeeping. Paragraph 48 is accepted but is irrelevant and immaterial to the conclusions reached herein; Mrs. Kata's self-serving comments have not been credited. Paragraph 49 is accepted. Paragraph 50 is accepted. Paragraph 51 is accepted. Paragraph 52 is rejected; Mrs. Kata remained as financial principal for the company after its sale. Whether she should have discovered the errors or whether she could have discovered the errors is immaterial. The sale does not excuse the responsibility for the errors of the company. Thus, paragraph 52 is immaterial, irrelevant or contrary to the weight of credible evidence submitted. Paragraph 53 is rejected as speculation but in any event, if true, would be irrelevant or immaterial to the conclusions reached. Paragraph 54 is accepted but, again, is irrelevant or immaterial to the conclusions reached. Paragraph 55 is rejected; see comment to p. 53. Paragraph 56 is rejected as contrary to the weight of the evidence; Mrs. Kata remained as a principal throughout all periods. Paragraphs 57-68 are accepted. Paragraph 69 is accepted to the extent that it expresses one witness' perception. However, that witness' testimony conflicted with another's and was given little weight in light of the self-interest and long-term friendship involved. Paragraphs 70-80 are accepted. Paragraph 81 is rejected as argumentative, irrelevant or immaterial to the issues in this case. Paragraph 82 is rejected as contrary to the record. Paragraph 83, the first sentence is accepted. The remainder of paragraph 83 is rejected as contrary to the record. Paragraphs 84-86 are rejected as contrary to the record. Paragraph 87 is rejected as argumentative, irrelevant or immaterial. Paragraph 88 is rejected as argumentative, irrelevant or immaterial. Paragraph 89 is rejected as contrary to the record in its entirety. Paragraph 90 is rejected as argumentative. Paragraph 91 is rejected as a recitation of testimony, argument, or irrelevant. Paragraphs 92-93 are rejected as argument, irrelevant, or immaterial. Whether the Division may properly rely on a rule which establishes prima facie evidence of unworthiness for registration has not been challenged. Such a challenge would have been pursuant to Section 120.56, Florida Statutes. These Petitioners have challenged the denial of their registration pursuant to 120.57, Florida Statutes, and the rule by which they are governed is presumed valid for purposes of this review. RULINGS ON RESPONDENT'S PROPOSED FINDINGS OF FACT: 1. Paragraphs 1-26 are accepted. COPIES FURNISHED: Thomas N. Holloway 2101 W. Commercial Boulevard Suite 5300 Fort Lauderdale, Florida 33306 Charles E. Scarlett Assistant General Counsel Office of the Comptroller Department of Banking and Finance Legal Section, The Capitol Tallahassee, Florida 32399 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Charles L. Stutts General Counsel Plaza Level The Capitol Tallahassee, Florida 32399-0350
The Issue The issue is whether respondent's certified public accountant's license should be disciplined for the alleged violations set forth in the administrative complaint.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Respondent, Flanagan & Baker, P. A. (respondent or firm), was a certified public accounting firm having been issued license number AD 0006179 by petitioner, Department of Professional Regulation, Board of Accountancy (Board). When the events herein occurred, the firm's offices were located at 2831 Ringling Boulevard, Suite E-118, Sarasota, Florida, and John R. Flanagan and Michael L. Baker, both certified public accountants (CPA), were partners in the firm. In addition, Thomas A. Menchinger, also a CPA, was a junior partner. The firm has since been dissolved, and Flanagan and Menchinger have now formed a new firm known as Flanagan & Menchinger, P. A., at the same address. It is noted that Flanagan, Baker and Menchinger are not named as individual respondents in this proceeding, and at hearing respondent's representative assumed that only the firm's license was at risk. Whether license number AD 0006179 is still active or valid is not of record. In 1987, respondent, through its partner, Flanagan, accepted an engagement to prepare the 1986 calendar year financial statements for Ballantroe Condominium Association, Inc. (BCA or association), an owners' association for a fifty unit condominium in Sarasota. Financial statements are a historical accounting of what transpired for an entity during a particular period of time as well as the status of its assets, liabilities and equity on a given date. They are prepared for a variety of persons who rely upon them to see what transpired during that time period. If the statements are not properly prepared, the possibility exists that harm or other problems may accrue to the users of the statements. After the statements were prepared and issued, a unit owner made inquiry with respondent in August 1987 concerning two items in the statements. When he did not receive the desired response, the owner wrote the Department in September 1987 and asked for assistance in obtaining an opinion regarding the two items. Eventually, the matter was turned over to a Board consultant, Marlyn D. Felsing, and he reviewed the statements in question. Although Felsing found no problems with the two items raised by the owner, he noted what he perceived to be other errors or irregularities in the statements. This led to the issuance of an administrative complaint on September 29, 1988 charging the firm of Flanagan & Baker, P. A., with negligence in the preparation of the statements and the violation of three Board rules. That precipitated the instant controversy. The engagement in question represented the first occasion that the firm had performed work for BCA. The association's annual financial statements from its inception in 1980 through calendar year 1983 had been prepared by Touche Ross & Company, a national accounting firm, and for the years 1984 and 1985 by Mercurio and Bridgford, P. A., a Sarasota accounting firm. Some of these statements have been received in evidence. As a part of the Board investigation which culminated in the issuance of a complaint, Felsing visited respondent's firm, interviewed its principals, and reviewed the work papers and financial statements. A formal report reflecting the results of his investigation was prepared in June 1988 and has been received in evidence as petitioner's exhibit 1. In preparing his report, Felsing relied upon a number of authoritative pronouncements in the accounting profession which underlie the concept of generally accepted accounting principles (GAAP). These included various opinions issued by the Accounting Principles Board (APB), Statements on Auditing Standards (SAS) issued by the Auditing Standards Board, and Accounting Research Bulletins (ARB) issued by the Committee on Accounting Procedure. The three organizations are a part of the American Institute of Certified Public Accountants (AICPA). With regard to the concept of materiality, which requires an accountant to consider the relative importance of any event, accounting procedure or change in procedure that affects items on the statements, Felsing did not exclude any matters on the ground they were immaterial. Rather, he included all possible irregularities, regardless of their materiality, on the theory that the probable cause panel (for which the report was initially prepared) should consider all items in the aggregate. According to Felsing, a number of irregularities or errors were found in the financial statements prepared by respondent. These are discussed separately in the findings below. The first alleged deficiency noted by Felsing concerned a change by the association from accelerated to the straight-line method of depreciation. According to APB 20, such a change is considered to be significant, and "the cumulative effect of changing to a new accounting principle on the amount of retained earnings at the beginning of the period in which the change is made should be included in net income of the period of the change." In other words, APB 20 requires the cumulative effect of the change to be reported in the net income of the current year. However, respondent accounted for the change as a prior period adjustment on the statement of members' equity. Respondent justified its treatment of the item on the ground the prior year's statements prepared by Mercurio and Bridgford, P. A., did not show any accumulated depreciation. Thus, respondent asserted it was merely correcting an error because the other firm had not reported depreciation on the balance sheet. In addition, respondent noted that the effect on the balance sheet was only $721, deemed the item to be immaterial, and concluded its treatment of the item was appropriate. However, APB 20 requires the auditor to address the cumulative effect of the change ($2,072) rather than the effect of only the current year ($721), and therefore the cumulative effect should have been reported in current income. By failing to do so, respondent deviated from GAAP. The association had designated several cash accounts as being reserve accounts for deferred maintenance and replacements. Under ARB 43, such accounts must be segregated in the balance sheet from other cash accounts that are available for current operations. This would normally be done in a separate classification called "other assets" so that the user of the statements would be aware of the fact that the reserves were not available for current operations. However, the statements reflect that three such reserve accounts were placed under the classification of current assets. It is noted that these accounts totaled $25,514, $18,550 and $30,927, respectively. While respondent recognized the difference between cash available for current operations and reserves for future use, and the requirements of ARB 43, it noted that the association's minute book reflected the association regularly withdrew funds from the accounts throughout the year to cover current operations. Also, the prior year's statements prepared by Mercurio and Bridgford, P. A., had classified the item in the same fashion. Even so, if respondent was justified in classifying the accounts as current assets, it erred by identifying those accounts as "reserves" under the current assets portion of the balance sheet. Therefore, a deviation from GAAP occurred. One of the most important items in a condominium association's financial statements is how it accounts for the accumulation and expenditure of reserves, an item that is typically significant in terms of amount. The accounting profession does not recommend any one methodology but permits an association to choose from a number of alternative methods. In this regard, APB 22 requires that an entity disclose all significant accounting policies, including the choice made for this item. This disclosure is normally made in the footnotes to the financial statements. In this case, no such disclosure was made. Respondent conceded that it failed to include a footnote but pointed out that when the statements were prepared by Touche Ross & Company, one of the world's largest accounting firms, that firm had made no disclosure on the basis of immateriality. However, reliance on a prior year's statements is not justification for a deviation from GAAP. It is accordingly found that APB 22 is controlling, and footnote disclosure should have been made. The financial statements contain a schedule of sources and uses of cash for the current fiscal year. According to APB 19, all transactions in this schedule should be reported at gross amounts irrespective of whether they utilize cash. However, respondent reported all transactions in the schedule at their net amount. In justifying its action, respondent again relied upon the prior years' statements of Touche Ross & Company and Mercurio and Bridgford, P. A., who reported the transactions in the same manner. It also contended the item was immaterial and that a detailed explanation of the item is found in the statement of members' equity. Despite these mitigating factors, it is found that the schedule was inconsistent with APB 19, and a deviation from GAAP occurred. Felsing's next concern involved the language used by respondent in footnote 6 to the statements. That footnote pertained to the unfunded reserve and read as follows: NOTE VI - UNFUNDED RESERVE As of December 31, 1986, the Association reserves amounted to $103,953 consisting of $18,931 as a reserve for depreciation and statutory reserves of $85,022. The amount funded was $95,422 leaving an unfunded balance of $8,531 due to the reserves from the operating funds. Felsing characterized the footnote as "confusing" because it referred to depreciation as a part of a future reserve for replacements. Felsing maintained the footnote contained inappropriate wording since depreciation relates to assets already placed in service and not to their replacements. Respondent agreed that the footnote, taken by itself, might be confusing. However, it contended that if the user read the preceding footnote, which he should, there would be no possible confusion. That footnote read as follows: NOTE V - RESERVE FOR DEPRECIATION The Association funds the reserves for depreciation through its operating budget. These funds are to be used for the replacement of property and equipment as the need arises. As previously noted, the Association changed its method of computing depreciation to conform with generally accepted accounting principles. As of December 31, 1986, the reserve for depreciation totaled $18,931. According to respondent, the above footnote made clear to the user that the firm was not referring to depreciation as a reserve but rather was setting aside funds equal to depreciation in an effort to have sufficient cash to purchase assets in the future. While the deficiency here is highly technical and minute in nature, it is found that the footnote is not sufficiently clear and that the user might be confused. Felsing next observed that the footnotes did not disclose how the association accounted for lawn equipment or other capital assets. According to APB 22, such a choice is considered a significant accounting policy and, whatever policy is utilized, the same must be disclosed in the footnotes to the statements. In response, Flanagan pointed to a footnote in Note I of the statements which read in part as follows: Property and Equipment and Depreciation Property and equipment capitalized by the Association is stated at cost. During 1986, the Association changed its method of depreciation from the accelerated cost recovery method to a straight line method in which property and equipment is depreciated over its estimated useful life in accordance with generally accepted accounting principles. According to respondent, this footnote was adequate in terms of explaining the method of depreciation. Also, a number of other statements were introduced into evidence to show that other entities routinely used a corresponding footnote. Flanagan's testimony is accepted as being the most credible and persuasive evidence on this issue, and the footnote is accordingly deemed to be adequate disclosure on this policy. In the statement of members' equity, there is an item in the amount of $1,730 described as "capitalization of lawn equipment expensed in previous year." Although Felsing did not question the amount shown, he faulted respondent for not properly describing whether the item was a change in accounting principle or an error correction. According to APB 20, the disclosure of an error correction is required in the period in which the error was discovered and corrected. Although respondent considered the footnote described in finding of fact 11 to constitute adequate disclosure, it is found that such disclosure falls short of the requirements of APB 20. Work papers are records and documentary evidence kept by the accountant of the procedures applied, tests performed, information obtained and pertinent conclusions reached in the engagement. They serve the purpose of documenting the work performed and provide verification for the accountant. In addition, another important, required tool is the audit program, a written plan for how the auditor intends to perform the audit. The plan serves the purpose of documenting the accountant's mental process of deciding what procedures are necessary to perform the audit and to communicate those procedures to the persons actually conducting the audit. The audit plan should include in reasonable detail all of the audit procedures necessary for the accountant to perform the audit and express an opinion on the financial statements. Although a variety of checklists have been prepared by the AICPA and other organizations, each audit program must be tailored to fit the needs of a particular client. Felsing noted what he believed to be a number of deficiencies with respect to respondent's work papers, audit program, and engagement planning. In reaching that conclusion, Felsing relied upon various SAS pronouncements which govern that phase of an auditor's work. Those pronouncements have been received in evidence as petitioner's exhibits 7-14. Although the work papers themselves were not introduced into evidence, Felsing stated that his review of them reflected they were "deficient" in several respects. For example, he did not find a planning memorandum, time budget, checklist or other evidence that planning procedures were performed as required by SAS 22. In this regard, Flanagan corroborated the fact that no formal planning memorandum to the file was prepared. Although respondent's audit program was written for a condominium association, Felsing found it "extremely brief" and was not tailored to this particular client. He opined that such a program should have included reasonable detail of all audit procedures necessary to accomplish the audit and to express an opinion on the financial statements. In particular, it was noted that some required procedures were not on the list while some procedures actually used by respondent were not included. Through conversations with respondent's members, Felsing learned that much of the audit work was performed by Menchinger, the junior partner in the firm. In addition, "a few" other work papers were prepared by an unknown assistant. Although Menchinger reviewed all work performed by the assistant, Felsing found no evidence that the papers were reviewed by the supervising partner, Flanagan. Such review, which is a required step in the audit process, is generally evidenced by the supervising partner placing check marks or initials on the individual work papers. Felsing noted further that the decision to rely on the testing of internal controls was not documented in the work papers by respondent. He added that the amount of time budgeted by respondent for this engagement (around thirty hours) was inadequate given the fact that it was the first year the firm had prepared this client's statements. Finally, Felsing concluded that the violations were not peculiar to a condominium association but were applicable to all enterprises. Respondent pointed out that the association was a small client with less than five hundred line items, and the audit program and engagement planning were planned within that context. Respondent introduced into evidence its audit program which contained the steps taken by the firm in planning for the engagement. Testimony that all steps contained therein were followed was not contradicted. Similarly, Flanagan testified without contradiction that he reviewed all work performed by Menchinger but did not evidence his review with tick marks on each page. According to Flanagan, on a small audit such as this, he considered the signing of the tax return and opinion letter evidence that he had reviewed the work papers. However, Flanagan acknowledged that someone examining the papers would not know they had been reviewed by the supervising partner. Based upon the above findings, and after reconciling the conflicting testimony, it is found that respondent violated GAAP by failing to have a planning memorandum, time budget, and evidence of testing of internal controls within its work papers. All other alleged violations are found to without merit. Respondent has continued to represent the association since the Board issued its complaint. Indeed, Flanagan noted that the association is pleased with the firm's work, and this was corroborated by a letter from the association's board of directors attesting to its satisfaction with the firm. There was no evidence that the association or any other third party user of the statements was injured or misled by relying on the statements.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of the violations discussed in the conclusions of law portion of this Recommended Order, and that license number AD 0006179 be given a reprimand. All other charges should be dismissed. DONE and ENTERED this 30th day of October 1989, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 30th day of October 1989.
The Issue The issue in this case is whether Petitioner's application for licensure as real estate sales associate should be granted.
Findings Of Fact On February 28, 2011, Mr. Poppell filed with the Commission an application for licensure as a real estate sales associate. In his application, Mr. Poppell stated that he was pleading not guilty to current charges of "trafficking, possession and receiving stolen property." By letter dated April 7, 2011, Mr. Poppell sent to the Commission the Alabama Uniform Incident/Offense Report relating to his arrest in Tuscaloosa, Alabama, on September 12, 2010, for trafficking in illegal drugs and unlawful possession of a controlled substance. At the time of his arrest, Mr. Poppell was a student at the University of Alabama. The criminal case against Mr. Poppell is currently pending, and Mr. Poppell does not anticipate that it will be resolved until 2012. Mr. Poppell, who is 22 years old, posted bail of $175,000. He currently lives in Florida and owns a pizza and sub restaurant with his mother in Niceville, Florida. On July 14, 2011, the Commission filed a Notice of Intent to Deny Mr. Poppell's application. The Commission's denial was based on Mr. Poppell's criminal history as revealed in his application and the unpersuasive testimony or evidence presented by Mr. Poppell as an explanation or mitigating factors. The Commission cited the following statutory basis for denying Mr. Poppell's application: Failing to demonstrate: honesty, truthfulness, trustworthiness and good character, a good reputation for fair dealing competent and qualified to conduct transactions and negotiations with safety to others. 475.17(1)(a), 475.181 F.S. Having engaged in conduct or practices which would have been grounds for revoking or suspending a real estate license. 475.17(1)(a), 475.181, F.S. * * * F. Found guilty of a course of conduct or practices which show applicant is so incompetent, negligent, or dishonest that money, property and rights of others may not safely be entrusted to applicant. 475.25(1)(o), 475.181 F.S. * * * M. The Commission concludes that it would be a breach of its duty to protect the health, safety and welfare of the public to license this applicant and thereby provide him/her easy access to the homes, families or personal belongings of the citizens of Florida. 455.201, F.S. Additionally, the Commission cited section 455.213(3), Florida Statutes (2011),1/ as an additional ground for denial.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order denying Mr. Poppell's application. DONE AND ENTERED this 1st day of December, 2011, in Tallahassee, Leon County, Florida. S SUSAN BELYEU KIRKLAND 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 1st day of December, 2011.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: At all times relevant hereto, respondent, Columbus Equities International, Inc. (Columbus Equities), was registered as a broker/dealer with petitioner, Department of Banking and Finance, Division of Securities and Investor Protection (Division), having been issued broker/dealer registration number 30936. The business address of the firm was 6321 East Livingston Avenue, Reynoldsburg, Ohio. Respondent, Roger L. Parsons, was registered with the Division as an agent with Columbus Equities. He was also registered with the National Association of Securities Dealers (NASD) as the financial and operations principal, general principal and representative of Columbus Equities. As such, Parsons was responsible for supervising the employees of Columbus Equities. Similarly, under the terms of Rule 3E-600.002(4), Florida Administrative Code, Columbus Equities was also responsible for the acts of its employees. Prior to June 1990, Columbus Equities was known as Parsons Securities, Inc. The business was originally formed in 1978 by Parsons, who is majority stockholder and serves as its president, secretary and director. In June 1990, the firm's name was changed to Columbus Equities International, Inc. In January 1991, Columbus Equities filed for protection under Chapter 7 of the Federal Bankruptcy Law. When the events herein occurred, Vincent C. Lombardi was registered with the NASD as general securities principal, representative and registered options principal of Columbus Equities. Lombardi's business address was 450 Tuscarora Road, Crystal Bay, Nevada, where he managed the Nevada branch office of Columbus Equities. Except for Ohio, Lombardi was not registered to sell securities in any other state, including Florida. In the fall of 1990, a Division financial analyst, Joanne Kraynek, received a letter from the Nevada Securities Commission. Based upon that letter, Kraynek wrote a letter on November 21, 1990, to "Parsons Securities/Columbus Equities International, Inc." regarding that firm's alleged sale of unregistered securities to a Florida resident. The letter requested various items of information. On December 6, 1990, Lombardi replied to Kraynek's letter on behalf of Columbus Equities and enclosed a number of documents in response to her request. Based upon this information and a subsequent investigation by the Division, the following facts were determined. On May 31, 1990, Charles D. Flynn conducted a transaction on behalf of his wife, Susan, for the purchase of 4,933 shares of World Videophone, an unregistered security. On June 22, 1990, Flynn purchased 2,500 shares of White Knight Resources Limited on behalf of his wife. That security was also not registered in the State of Florida. On July 9, 1990, Flynn purchased an additional 2,000 shares of White Knight Resources Limited on behalf of his wife. In each transaction, the trade was executed by Lombardi from the Nevada branch office of Columbus Equities. When the sales occurred, Flynn and his wife resided at 2045 Parkside Circle South, Boca Raton, Florida. In finding that the Flynns were Florida residents at the time of the trades, the undersigned has rejected a contention by Parsons that Flynn purchased the stocks while residing in Canada and thus the transactions were not subject to the Division's jurisdiction. Evidence of these transactions and the Flynns' Florida domicile is confirmed by the deposition testimony of Mr. Flynn, admissions by Lombardi, and copies of the order tickets from the Nevada branch office. The order tickets reflect the code "MM" (market maker), which means that Columbus Equities held the securities in its own inventory and did not have to go to an outside source to obtain the stocks. Thus, Parsons (on behalf of Columbus Equities) should have been familiar with these securities. However, at hearing he acknowledged that he was not. This in itself is an indication that Parsons was not properly supervising his employees. Finally, there was no evidence that the three transactions were exempt within the meaning of Sections 517.051 and 517.061, Florida Statutes, and thus were beyond the Division's jurisdiction. As the principal for Columbus Equities, Parsons was responsible for supervising the activities of both Lombardi and the Nevada branch office. Indeed, section 27, article III of the NASD Rules of Fair Practice requires that a NASD member such as Parsons supervise the activities of all associated persons to insure that those persons are complying with all securities laws and regulations. In order to fulfill this duty, Parsons should have reviewed on a timely basis the monthly statements generated by the Nevada office as well as that office's new account applications. For the reasons stated hereinafter, Parsons' review of Lombardi's activities was neither complete nor timely. The Flynn account was opened by Lombardi in April 1990 and Lombardi was the only employee who dealt with the Flynns. Parsons had no knowledge that the Flynn account had been opened because he did not review new account applications. This failure to review new account applications prevented Parsons from detecting whether Lombardi was selling securities in states such as Florida where he was not registered. Lombardi was required to send Parsons a monthly statement reflecting the activity of the branch office. During his review of the May statement in the second or third week of June 1990, Parsons became aware of the first Flynn transaction. Just prior to that, Parsons had learned that Lombardi had also engaged in another illicit trade. In addition, Parsons subsequently became aware of at least four other transactions (including two more with the Flynns) involving the sale of securities by Lombardi in states where he was not registered. However, except for a verbal warning given to Lombardi to discontinue that type of trade, Parsons took no disciplinary action against Lombardi until September 13, 1990, when Lombardi was terminated as an employee and the Nevada branch office closed. By failing to review the new account applications and to take prompt action against Lombardi after having learned of his indiscretions, Parsons failed to properly supervise his employees. Rule 3E-600.014(6), Florida Administrative Code, requires that each member establish, maintain and enforce written procedures governing the conduct of its employees to ensure compliance with all security laws and regulations. To this end, Parsons developed a policy (compliance) manual which was to serve as a guide in the conduct of all employees of Parsons Securities, Inc. and its successor, Columbus Equities. A copy of this manual should have been given to each employee, including Lombardi, for his or her review. However, Parsons did not know if Lombardi ever received and reviewed the manual. In addition, the manual itself was deficient in that it failed to indicate whether employees were to be given a copy for review, and it contained no provisions for taking disciplinary action against an agent if he violated a manual proscription. By failing to develop and utilize an appropriate manual, respondents violated the above cited rule.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered by petitioner finding respondents guilty of all violations alleged in the administrative complaint, ordering respondents to cease and desist all unlawful activities, and imposing a $5,000 fine, jointly and severally, against them. DONE and ENTERED this 26th day of May, 1992, in Tallahassee, Florida. DONALD R. ALEXANDER 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 26th day of May, 1992.
The Issue Whether Respondent Corporation, Southern Insight, Inc., failed to secure payment of workers' compensation coverage as required by Chapter 440, Florida Statutes, and the Florida Insurance Code, and if so, whether the Department of Financial Services, Division of Workers' Compensation (Department) has lawfully assessed the penalty against Respondent in the amount of $27,805.11.
Findings Of Fact The Department is the state agency responsible for enforcing Section 440.107, Florida Statutes, which requires that employers secure the payment of workers' compensation coverage for their employees and otherwise comply with the workers' compensation coverage requirements under Chapter 440, Florida Statutes. Respondent has been a Florida corporation, actively involved in the construction industry providing framing services, during the period of February 16, 2006, through August 17, 2007 (assessed penalty period). At all times material, Respondent has been an "employer," as defined by Chapter 440, Florida Statutes. At all times material, John Cauley has been Respondent's president and sole employee. At no time material did Respondent obtain workers' compensation insurance coverage for John Cauley. On August 17, 2007, Department Investigator Lynise Beckstrom conducted a random workers' compensation compliance check of a new home construction site in Palm Coast, Florida. At that time, Ms. Beckstrom observed four men, including John Cauley, framing a new home. Utilizing the Department's Compliance and Coverage Automated System (CCAS) database, which contains all workers' compensation insurance policy information from the carrier to an insured and which further lists all the workers' compensation exemptions in the State of Florida, Ms. Beckstrom determined that for the assessed penalty period, Respondent did not have in effect either a State of Florida workers' compensation insurance policy or a valid, current exemption for its employee, John Cauley. During the assessed penalty period, Respondent paid remuneration to its employee, John Cauley. John Cauley admitted that during the assessed penalty period he was not an independent contractor, as that term is defined in Section 440.02(15)(d)(1), Florida Statutes. Section 440.05, Florida Statutes, allows a corporate officer to apply for a construction certificate of exemption from workers' compensation benefits. Only the named individual on the application is exempt from workers' compensation insurance coverage. On or about April 15, 2006, John Cauley, as Respondent's President, applied for such an exemption. That application was denied. Mr. Cauley received neither an exemption card nor a denial of exemption from the Department. During the assessed penalty period, Respondent was a subcontractor of the contractor, Mass Builders, Inc. 9. Sections 440.107(3) and 440.107(7)(a), Florida Statutes, authorize the Department to issue stop-work orders to employers unable to provide proof of workers' compensation coverage, including proof of a current, valid workers' compensation exemption. Based on the lack of workers' compensation coverage and lack of a current, valid workers' compensation exemption for Respondent corporation's employee, John Cauley, the Department served on Respondent a stop-work order on August 17, 2007. The stop-work order ordered Respondent to cease all business operation for all worksites in the State of Florida. Immediately upon notification by Investigator Beckstrom of his lack of valid exemption, Mr. Cauley submitted a new exemption application, which was granted, bringing Respondent corporation into compliance. However, in order to have the stop-work order lifted so that he can work as a corporation again, Mr. Cauley must pay a percentage of the penalty assessment and enter into a payment plan with the Agency. In the meantime, Mr. Cauley cannot pay the percentage required by the Department if he cannot find work as someone else's employee, which he had been unable to do as of the date of the hearing. Herein, it is not disputed that Respondent was inadvertently out of compliance. Mr. Cauley seeks merely to reduce the amount of the penalty assessment so that removal of the stop-work order against Respondent corporation can be negotiated. On the day the stop-work order was issued, Investigator Beckstrom also served Respondent with a "Request for Production of Business Records for Penalty Assessment Calculation," in order to determine a penalty under Section 440.107(7), Florida Statutes. Pursuant to Florida Administrative Code Rule 69L-6.015, the Department may request business records for the three years preceding the date of the stop-work order. Logically, however, Ms. Beckstrom only requested business records dating back to February 14, 2006, Respondent's date of incorporation in Florida. The requested records included payroll, bank records, check stubs, invoices, and other related business records. Ms. Beckworth testified that, "Business records requests usually consist of payroll, bank records, taxes, check stubs, invoices, anything relating to that business." This is a fair summation of a much more detailed listing of records required to be kept pursuant to Rule 69L-6.015, Florida Administrative Code, which was in effect at all times material. In response to the Request for Production, Respondent provided Southern Insight Inc.'s corporate bank statements for the assessed penalty period, detailing corporate income and expenses through deposits and bank/debit card purchases. However, Investigator Beckworth did not deem the corporate bank statements produced by Respondent to be an adequate response, and she did not base her calculations for penalty purposes thereon. Mr. Cauley expected that the Department would, and has argued herein that the Department should, have subtracted from the total deposits to Respondent's corporate account (the minuend) the total corporate business expenses (the subtrahend) in order to determine the Respondent's payroll to Mr. Cauley (the difference), upon which difference the Department should have calculated his workers' compensation penalty. In fact, the Department, through its investigator, did not utilize the total amount deposited to Respondent's corporate account, because some deposits "could" have come from a family member of Mr.Cauley. That said, there are no individual names on the account; the account is clearly in the name of the Respondent corporation; and there is no proof herein that any deposits to Respondent's corporate bank account were derived from anyone other than Mr. Cauley, as Respondent's President. Ms. Beckstrom testified that if the Agency had accepted the total of the deposits to this corporate account for the assessed penalty period as Respondent's payroll, the result would have been more than the total amount actually determined by her to constitute Mr. Cauley's payroll, but that statement was not demonstrated with any specificity. The Department also did not use any of the subtracted amounts shown on the corporate bank statements, even though the bank statements listed the same information as would normally be found on a corporate check, including the transaction number, recipient of the money, the date, and the amount for each bank/debit card transaction. All that might be missing is the self-serving declaration of the check writer on the check stub as to what object or service was purchased from the recipient named on the bank statement. Ms. Beckstrom testified that if Mr. Cauley had provided separate receipts for the transactions recorded on the bank statements as bank/debit card entries, she could have deducted those amounts for business expenses from the corporation's income, to arrive at a lesser payroll for Mr. Cauley. In other words, if Mr. Cauley had provided separate receipts as back-up for the transactions memorialized on the corporate bank statements, the Department might have utilized the bank/debit card transactions itemized on Respondent's corporate bank statements as the amount deducted for Respondent corporation's business expenses, so as to obtain the payroll (difference) paid to Mr. Cauley. It is the amount paid to Mr. Cauley as payroll, upon which the Department must calculate the workers' compensation penalty. The reason Ms. Beckworth gave for not using Respondent's bank statements was that without more, the transactions thereon might not be business expenses of the corporation. However, she also suggested that if, instead of submitting bank/debit card statements, Mr. Cauley had submitted checks payable to third parties and if those corporate checks showed an expenditure for a deductible business expense, like motor vehicle fuel, she might have accepted the same expenditures in check form (rather than the statements) in calculating Respondent's payroll. Ultimately, Ms. Beckworth's only reasons for not accepting the bank statements showing recipients, such as fuel companies like Amoco, was "agency policy," and her speculation that Amoco gas could have been put into a non-company truck or car. She also speculated that a prohibition against using bank statements showing deductions might possibly be found in the basic manual of the National Council on Compensation Insurance (NCCI) or in a rule on payrolls (Rule 69L-6.035) which became effective October 10, 2007, after the assessed penalty period. However, the NCCI manual was not offered in evidence; a rule in effect after all times material cannot be utilized here; and no non-rule policy to this effect was proven-up. In addition to not using Respondent's bank statements to calculate a penalty, the Department also did not "impute" the statewide average weekly wage to Respondent for Mr. Cauley. Ms. Beckworth testified that to impute the statewide average weekly wage would have resulted in a higher penalty to Respondent. As to the amount of the statewide average weekly wage, she could only say she thought the statewide average weekly wage was "about $1,000.00". Instead of using Respondent's corporate bank statements or imputing the statewide average weekly wage, Investigator Beckstrom determined that Mass Builders, Inc., was the prime contractor on the jobsite being worked by Respondent, and that Mass Builders, Inc., had not produced proof of securing workers' compensation coverage for Respondent, its sub- contractor. Therefore, she sought, and received, Mass Builders, Inc.'s "payroll records" of amounts paid by the prime contractor, Mass Builders, Inc., to Respondent Southern Insight, Inc., via a separate site-specific stop-work order and business records request directed to Mass Builders, Inc. The only "payroll records" that Mass Builders, Inc., offered in evidence were Mass Builders, Inc.'s check stubs, which Ms. Beckstrom utilized to come up with an income/payroll amount for Respondent Southern Insight, Inc. Mr. Cauley did not know until the hearing that Mass Builders, Inc.'s check stubs had been utilized in this fashion by the Department. However, he ultimately did not dispute the accuracy of the check stubs and did not object to their admission in evidence. In calculating Respondent's total payroll for the assessed penalty period, Investigator Beckstrom considered only the total of the check stubs from Mass Builders, Inc. It is unclear whether or not she reviewed Mass Builders, Inc.'s actual cancelled checks. No one from Mass Builders, Inc., appeared to testify that the stubs represented actual cancelled checks to Respondent or Mr. Cauley. The Department also did not deduct from the total of Mass Builders, Inc.'s check stubs any of the bankcard deductions made by John Cauley from Respondent's corporate bank account, for the same reasons set out above. Mr. Cauley testified, without refutation, that some of the expenses noted on Respondent's bank statements, paid by bank/debit card, most notably expenses for gasoline for his truck, constituted legitimate business expenses of Respondent corporation, which should have been deducted from either the bank statement's total income figure or from the amounts paid by Mass Builders, Inc., to Respondent corporation, before any attempt was made by the Department to calculate the amount paid by Respondent corporation to Mr. Cauley as payroll. Utilizing the SCOPES Manual, which has been adopted by Department rule, Ms. Beckstrom assigned the appropriate class code, 5645, to the type of work (framing) performed by Respondent. In completing the penalty calculation, Ms. Beckstrom multiplied the class code's assigned approved manual rate by the payroll (as she determined it) per one hundred dollars, and then multiplied all by 1.5, arriving at an Amended Order of Penalty Assessment of $27,805.11, served on Respondent on August 22, 2007. Subsequent to the filing of its request for a disputed-fact hearing, in an effort to have the penalty reduced, Respondent provided the Department with additional business records in the form of portions of Southern Insight, Inc.'s 2006 and 2007 U.S. Income Tax Returns for an S Corporation (2006 and 2007 income tax returns). However, neither itemized deductions nor original receipts for Respondent's business expenses were provided to Ms. Beckworth at the same time, and she determined that without itemized deductions, there was no way to calculate Respondent's legitimate business deductions so that they could be deducted from the total of Mass Builders, Inc.'s, check stubs to determine a lesser payroll applicable to Mr. Cauley. Investigator Beckstrom testified that the tax returns, as she received them, did not justify reducing Respondent's payroll used in calculating the penalty. The vague basis for this refusal was to the effect that, "The Internal Revenue Service permits different business deductions than does the Department." Itemization pages (schedules) of Respondent's income tax returns were not provided until the de novo disputed-fact hearing. Confronted with these items at hearing, Ms. Beckworth testified that ordinary business income is not used by the Department to determine payroll, but that automobile and truck expense and legitimate business expenses could be deducted, and that she would probably accept some of the deductions on Respondent's 1020-S returns. Also, if Respondent's bank statement corresponded to the amount on the tax form, she could possibly deduct some items on the bank statements as business expenses before reaching a payroll amount. However, she made no such calculations at hearing. Ms. Beckworth testified that if she had Respondent's checks or "something more" she could possibly deduct the motor fuel amounts. Although Respondent's 2006, and 2007, income tax returns reflected Respondent corporation's income minus several types of business deductions, Ms. Beckstrom testified that the tax deductions were not conclusive of the workers' compensation deductions, because the Internal Revenue Service allows certain deductions not permissible for workers' compensation purposes, but she did not further elaborate upon which tax deductions were, or were not, allowable under any Department rule. She did not "prove up" which deductions were not valid for workers' compensation purposes. Respondent's 2006, tax deductions for "automobile and truck expense" were $2,898.00, and for 2007, were $4,010.00. There was no further itemization by Respondent within these categories for fuel. Other business deductions on the tax returns were also listed in categories, but without any further itemization. The only supporting documentation for the tax returns admitted in evidence was Respondent's bank statements. Respondent believed that the tax returns and possibly other documentation had been submitted before hearing by his accountant. It had not been submitted. The Department never credibly explained why it considered a third party's check stubs (not even the third party's cancelled checks) more reliable than Respondent's bank statements or federal tax returns. Even so, at hearing, the Department declined to utilize the business deductions itemized on Respondent's tax forms or any bank/debit card deductions on its bank statements so as to diminish the amount arrived-at via the Mass Builders, Inc.'s check stubs, and ultimately to arrive at a difference which would show a lesser payroll to Mr. Cauley. Although Mr. Cauley's questions to Ms. Beckstrom suggested that he would like at least all of the fuel company deductions on his bank statements to be considered as business deductions of Respondent Southern Insight, Inc., and for those fuel company expenditures to be subtracted from either the total deposits to the corporate bank account or deducted from the payroll total as calculated by Ms. Beckstrom from Mass Builders, Inc.'s check stub total, he did not testify with clarity as to which particular debits/charges on the bank statements fell in this category. Nor did he relate, with any accuracy, the debits/charges on the bank statements to the corporate tax returns. Upon review by the undersigned of Respondent's bank statements admitted in evidence, it is found that the bulk of Respondent's bank/debit card deductions during the assessed penalty period were cash withdrawals or ATM debits which cannot be identified as being paid to fuel companies or purveyors of construction material. As Investigator Beckstrom legitimately observed, "Big Al's Bait" is not a likely source of motor fuel. "Publix" and "Outback Steak House" are likewise unlikely sources of fuel or construction material, and cannot stand alone, without some other receipt to support them, as a legitimate corporate business entertainment expense. Other debits/charges on the bank statements are similarly non-complying, ambiguous, or defy categorization. However, the undersigned has been able to isolate on the corporate bank statements purchases from the known fuel distributors "Amoco" and "Chevron" on the following dates: 7/09/07, 7/10/07, 6/04/07, 6/04/07, 6/11/07, 5/03/07/ 4/09/07, 4/10/07, 4/13/07, 4/16/07, 3/02/07, 3/05/07, 3/13/07, 3/15/07, 3/20/07, 1/29/07, 5/01/06, 6/02/06, 8/02/06, 11/03/06, totaling $556.98.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Financial Services, Division of Workers' Compensation, that affirms the stop-work order and concludes that a penalty is owed; that provides for a recalculation of penalty to be completed, on the basis set out herein, within 30 days of the final order; and that guarantees the Respondent Southern Insight, Inc., a window of opportunity to request a Section 120.57 (1) disputed-fact hearing solely upon the recalculation. DONE AND ENTERED this 1st day of July, 2008, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of July, 2008. COPIES FURNISHED: Anthony B. Miller, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 John Cauley, President Southern Insight, Inc. Post Office Box 2592 Bunnell, Florida 32110 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
