The Issue The issue to be resolved in this proceeding concerns whether the Respondent's Florida Real Estate Broker's License should be the subject of sanctions, based upon the charges alleged in the Administrative Complaint, wherein it is contended that the Respondent has violated Section 475.25(1)(k), Florida Statutes, and Rules 61J2-14.012(2) and (3), Florida Administrative Code, and derivatively, Section 475.25(1)(e), Florida Statutes (1998 and 1999).
Findings Of Fact The Petitioner is an agency of the State of Florida charged with regulating and enforcing the statutory provisions pertaining to real estate licensure and practice in the State of Florida. It is charged with the duty to prosecute Administrative Complaints against perceived violations and violators of the Florida Real Estate Practice Act, Chapter 475, Florida Statutes, and the rules promulgated pursuant thereto, as well as in the manner envisioned in Chapter 455, Florida Statutes, and Chapter 120, Florida Statutes. The Respondent, at all times pertinent hereto, has been a licensed Florida real estate broker, holding License 0596898. The Respondent was last licensed as an inactive broker due to non-renewal. He has not been charged or found guilty of any violations of the statutes and rules pertaining to real estate licensure and practice in the past. His last known address is 212-B Sudduth Place, Parker, Florida 32404. The Petitioner's investigator John Hentz conducted an office inspection and an audit of the Respondent's escrow accounts and broker's trust accounts on April 2, 1999. The audit was conducted at the office of the Respondent, trading as George H. Smith Real Estate. The Respondent maintained an account with Bay Bank of Panama City entitled "Rental escrow account." This was actually the "owners' distribution escrow account." The account number is 2603100501. An audit of that escrow account revealed a total trust account liability of $16,861.51, meaning the total amounts of escrows the Respondent and his firm were liable to pay out if the account was entirely paid-out to those for whom it was held in trust. The reconciled bank balance, however, was for $4,001.82. This resulted in an apparent shortage of $12,858.69. The Respondent and his company also maintained an account entitled "escrow rental deposit account." This account was maintained at Regions Bank of Panama City. The account will be described as the "security deposit escrow account." The security deposit escrow account bears account number 55-022- 9270. An audit of that account revealed that the total trust liability for that account was $22,525.00. The reconciled bank balance for that account was $21,277.50. This resulted in an apparent shortage in the amount of $1,247.50. Mr. Hentz established that the audit disclosed that the Respondent failed to prepare written monthly reconciliation statements for both of the accounts from at least May of 1998 forward. The Respondent, however, asserted that he had prepared a written reconciliation for the February 1999 time period, but admitted that he had not provided the required explanation on the reconciliation form. The evidence also shows that the Respondent began operating as the managing or operating broker of George H. Smith Real Estate sometime in the period March through May of 1999. The records maintained by the Petitioner show that the qualifying broker was George H. Smith, the Respondent's father. George H. Smith and the Respondent provided the Petitioner with the corrective documentation registering the Respondent as the operating broker, however. Mr. Hentz obtained the broker's records from the Respondent during the course of his audit, including, but not limited to, bank statements, lists of balances for the owners' accounts, and the security deposit accounts, as well as a list of clients and a record of outstanding checks. Mr. Hentz reviewed the Respondent's "owner balance" list and the "checks pending" list for the owner's distribution account for the period up to February 28, 1999. Through this procedure he was able to determine the broker's trust liability for the account. Mr. Hentz calculated the broker's trust liability of $16,861.51, by adding the positive balance as identified on the Respondent's owner balance sheet as the amount of money that should be held on behalf of the property owners for the properties the Respondent managed. He then added the list of any outstanding checks or deposits. Mr. Hentz then compared the broker trust liability to the actual bank balance of $4,001.82 for the owners distribution account in order to determine whether the account was in balance and concluded that it was not. The difference between the broker liability and the bank balance reflected a shortage of at least $12,858.69. this indicated the amount of funds the Respondent did not properly maintain in the owners' distribution escrow account. Mr. Hentz also admitted that he should not have subtracted one particular negative balance and that the shortage should have actually been $532.00 greater than what was stated on the audit form. Mr. Hentz stated that the properties listed on the owners' sheet for John Green and Avalon Real Estate should only have been added in the calculations as a positive balance, and not any negative balance, since the same client owned the properties for both accounts with George H. Smith Real Estate. Mr. Hentz was not of the opinion, and found no evidence, that the Respondent had taken and used any of the funds for his personal use. Rather, the shortage reflected, in essence, a situation where the brokerage had used certain owners' funds to cover other owners' expenses, when the owners with the expenses had accounts which did not contain sufficient funds to cover their own rental property management expenses. Typically these situations occurred where the owners who had expenses, such as repair work for their properties, were slow in issuing checks to the Respondent's brokerage to cover such repairs or other expenses or, in infrequent instances, where the checks issued by the owners to the Respondent's brokerage did not clear because of insufficient funds. This situation occasioned more delay in rectifying shortages caused in the brokerage-maintained account because of the necessity of obtaining reimbursement from the owners issuing insufficient checks for their expense assessments. There was no intentional conversion of funds in the owners' distribution escrow account or in the security deposit escrow account for the Respondent's own use or for any improper use or use detrimental to any client's interest. Mr. Hentz followed the same steps in auditing the security deposit escrow account. The audit revealed that the Respondent's tenant list balanced and therefore, the broker trust liability for the account as of February 28, 1999, to be $22,525.00. There were no outstanding checks or deposits. The bank statement indicated that the security deposit escrow account balance as of that date was actually $21,277.50, resulting in a shortage of $1,247.50. Mr. Hentz was unable to recall if the Respondent provided an explanation for that shortage in the security deposit account, however, he testified that the former broker and owner, George H. Smith, immediately took corrective action the same day by depositing funds in the escrow account to cover the shortage. Mr. Hentz also established that during the audit the Respondent told him that the shortage in the owners distribution account resulted from owners' failure to reimburse George H. Smith Real Estate for expense payments made on behalf of the properties owned by those property owners, or for payments an owner or tenant may have made to George H. Smith Real Estate that were returned for insufficient funds. George H. Smith admitted in his testimony that a broker should not use funds from an escrow account to "loan money" to another owner but rather should use the a brokerage's own funds and that a monthly reconciliation statement review should identify any shortages for correction. The Respondent admitted in his testimony that the audit revealed that the escrow accounts were not in accordance with properly maintaining trust and liability. The Respondent also asserted that the information provided to Mr. Hentz at the time of the audit may not have accurately provided the status of each account, as to the owner balance sheet, but he did not provide any documentation to dispute the allegations. The Respondent admitted that he was unable to provide an explanation on the reconciliation statements when the trust liability did not actually match the balance on the bank statement.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore, RECOMMENDED that a final order be entered by the Florida Real Estate Commission finding the Respondent guilty of violating Section 475.25(1)(k), Florida Statutes; Rules 61J2-14.012(2) and (3), Florida Administrative Code; and, derivatively, Section 475.25(1)(e), Florida Statutes. In light of the facts found and conclusions reached hereinabove concerning the Respondent's candor in admitting responsibility for the shortages, that the brokerage took immediate corrective action, that no client was harmed and that the Respondent did not use any funds involved in the shortages for personal use or fraudulent purposes, it is recommended that a one-year suspension, with a co-extensive year of probation, be imposed, together with a $1,000.00 fine. It is further recommended that the suspension be abated and, if during the one-year of probation the Respondent successfully completes a 30-hour broker management course, that the suspension be cancelled. DONE AND ENTERED this 6th day of November, 2001, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF 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 Clerk of the Division of Administrative Hearings this 6th day of November, 2001. COPIES FURNISHED: Sunia Y. Marsh, Esquire Department of Business and Professional Regulation 400 West Robinson Street Suite N-308A Orlando, Florida 32801-1772 Andre Carlos Smith 212-B Sudduth Place Parker, Florida 32404 Buddy Johnson, Division Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe street Tallahassee, Florida 32399-2202
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints against real estate professionals pursuant to the laws of the State of Florida, in particular Section 20.30 and Chapters 120, 455, and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent, Eugene A. Oathout, is now and at all times pertinent to this proceeding has been a duly licensed real estate broker in the State of Florida. Mr. Oathout's license number is 0064983. The last license issued to him was as a broker in care of C I Associates, Inc., trading as C I, 5075 N. A1A, Post Office Box 3070, Vero Beach, Florida 32964-3070. Respondent, C I Associates, Inc., trading as C I, is now and at all times pertinent to this proceeding has been a duly licensed real estate broker in the State of Florida. C I's license number is 0232366. The last license issued to it was for the address 5075 N. A1A, Post Office Box 3070, Vero Beach, Florida 32964-3070. At all times pertinent to this proceeding, Respondent Oathout was licensed and operating as the qualifying broker and officer of Respondent C I. On August 30, 1994, Dawn R. Luchik, an investigator employed by Petitioner, paid an unannounced visit to Respondents' real estate brokerage office for the purpose of performing a random audit of Respondents' escrow accounts. Respondent Oathout was present at the Respondents' office on August 30, 1994, but because his secretary was not there, he had difficulty finding all the files and records Ms. Luchik wanted to review. At that time, Respondents maintained two escrow accounts, one for real estate sales matters (the sales account) and one for rental and property management matters (the management account). After her review of the records on August 30, 1994, Ms. Luchik tentatively concluded that there was no problem with the sales account but that there existed a shortage in the management account of $4,111.00. Ms. Luchik testified that Mr. Oathout appeared shocked at her tentative finding as to the management account. An appointment was scheduled for Ms. Luchik to return to complete her audit on September 6, 1994. This second appointment was made so Respondent Oathout could, with the assistance of his secretary, attempt to locate certain files and determine how a deficiency in the escrow account occurred. Rule 61J2-14.012(2), Florida Administrative Code, requires real estate brokers to reconcile escrow accounts monthly. Respondent Oathout attempted to reconcile this account by comparing the liabilities of the account with the monthly bank balance that reflected the actual amount in the account at the end of each month. At all times pertinent to this proceeding, Respondent Oathout determined the liabilities of the account from computer generated data using a computer data base contained in a commercial software computer program known as "Ability". Respondents had purchased and installed this software program between five and six years prior to the audit and used it until the audit. This software program determined the liabilities against the management escrow account by adding four columns of numbers. The program then added together the sums of the four columns and the resulting number was supposedly the total liabilities against the management escrow account. In reviewing his records in an effort to determine the existence and extent of any problem with the management account, Respondent Oathout determined that this "Ability" computer program had regularly misadded two of the four columns summaries that he prepared monthly. The two columns erroneously totalled by the computer program were the one for last month's rental deposits and the one for security deposits. No pattern or reason for the miscalculations by the accounting program is apparent. Unlike other recurring monthly income and expense items, disposition of these payments occurred only on the termination of a tenancy. Consequently, Respondent Oathout did not regularly review or reconcile the entries in these columns. Because the two incorrect columns consistently under-reported Respondents' liability for last month's and security deposit payments, Respondents' balances showed a lower escrow account liability than actually existed. In addition to managing rental properties for clients, Respondent Oathout had his own rental properties. Respondents maintained in the management account deposits made by tenants of Respondent Oathout in addition to deposits made by their clients. Each month, near month's end, Respondent Oathout would take a trial balance of the management account. Based on the information contained in the computer printout and after accounting for uncleared and outstanding checks and unrecorded current deposits, he would determine whether there existed a surplus in the management account. Because the calculation of liabilities was consistently understated, his calculation of the surplus was consistently overstated. Respondent Oathout would thereafter assume that any surplus reflected in the account belonged to him and he would withdraw the excess from the account. Respondents' reconciliation statements contained small discrepancies that were inadequately explained and failed to provide the corrective action that Respondents would take to resolve the discrepancies. Because the computer software error had gone undetected for so long, Respondents' accounting records had been overstated a total of $27,992.30 with a corresponding shortage in the management bank account in the sum of $23,482.97. When Ms. Luchik returned to Respondents's office on September 6, 1994, Respondent Oathout told her that he calculated the shortage in the management account as being $23,482.97 as opposed to $4,111.00, showed her his records, and explained that he had detected an error in the computer program. Ms. Luchik amended her final investigation report to reflect that the amount of shortage in the management account was the amount calculated by Respondent Oathout. When the existence of a shortage was verified and the amount confirmed, Respondent Oathout promptly corrected the shortages. On September 6, 9, and 12, 1994, he made deposits from his own funds into the management account in the respective amounts of $12,000, $2,500, and $8,982.97. There was no evidence that Respondent Oathout knew of this computer problem or that he was aware that a shortage existed before Ms. Luchik's audit. The software problem was a glitch that was not caused by Respondents or manipulated by them.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order that adopts the findings of fact and conclusions of law contained herein, dismisses the charges alleged in Counts One and Two, finds Respondents guilty of the charges alleged in Counts Three, Four, Five, and Six. It is recommended that Respondent Oathout be placed on probation for a period of one year for these violations. 1/ Administrative fines in the total amount of $500.00 should be imposed against the Respondents for the violations of Counts Three and Four. Administrative fines in the total amount of $2,000.00 should be imposed against the Respondents for the violations of Counts Five and Six. DONE AND ENTERED this 29th day of March, 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 29th day of March 1996.
The Issue The issues in this case are whether S. Dudley Carson, the Respondent (1) failed to comply with a lawful order of the Florida Real Estate Commission; (2) deposited or intermingled personal or operating funds in the broker's trust account; (3) concealed a violation during the course of an investigation; (4) improperly disbursed funds from the broker's trust account; (5) engaged in fraudulent or dishonest dealing in a business transaction; and (6) is guilty of a course of conduct to the extent that he is not trustworthy. If yes, to one or more of the foregoing, what penalty should be imposed.
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints pursuant to the laws of the State of Florida; in particular, Chapters 455, and 475, Florida Statutes, and Rule Chapter 61J-2, Florida Administrative Code. Respondent, S. Dudley Carson, is now and was at all times material hereto a licensed real estate broker in Florida having been issued license number 3001085 and 3004369 in accordance with Chapter 475, Florida Statutes. On or about April 19, 1994, the Commission entered a Final Order against Respondent whereby Respondent's real estate license was placed on probation for one year. Furthermore, the Final Order required Respondent to complete a 30-hour broker management course within one year of the filing of the Final Order. The Final Order was filed on May 6, 1994, and provided in pertinent part: The licensee shall enroll in and satisfactorily complete a 30-hour broker management course within one (1) year of the filing date of this Order. These course hours are in addition to any other education required to maintain a valid and current license. Failure to complete all conditions of probation may result in a new complaint being filed. This Order shall be effective 30 days from date of filing with the Clerk of the Department of Business and Professional Regulation. (emphasis supplied) In accordance with the provisions of the Final Order, Respondent had until May 6, 1995, in which to satisfactorily complete a 30-hour broker management course. When Respondent read the Final Order, he mistakenly believed that he had one year from the effective date of the Final Order rather than one year from the filing date of the Final Order to complete the required course. Respondent initially registered for a 30-hour management course to be offered in March 1995, but was unable to take the course due to a business conflict. At that time, Respondent did not realize that the next 30-hour course would not be offered until June 1995. In May 1995, Respondent registered for the next available course that was offered in June 1995. After registering for the June course, but prior to taking it, Respondent received a letter from Petitioner requesting that Respondent provide proof of having completed the required 30-hour course. Thereafter, Respondent immediately contacted Petitioner by telephone inquiring to how he could request an extension. Based on information obtained by telephone from Petitioner's staff, by letter dated May 18, 1995, Respondent requested an extension of time to complete the course. On May 23, 1995, Petitioner placed Respondent's request for an extension of time to comply with the educational requirement on the Commission's June 20, 1995, agenda for consideration. Thereafter, Petitioner advised Respondent's attorney, Steven Voigt, that the matter had been tabled and no formal action was taken by the Commission. Respondent completed the 30-hour broker management course on June 30, 1995, and on that same day so advised Petitioner by letter. Respondent had no further contact from Petitioner regarding his request for an extension until eleven months after the request was made and almost ten months after the Commission tabled the matter. That communication was by Administrative Complaint I that Petitioner filed against Respondent on April 21, 1996. As to the Administrative Complaint II, Respondent was licensed at all times material herein as a real estate broker for Crescent Management, Inc., and for RE/MAX on the Key. The broker is the person ultimately responsible for properly maintaining and reconciling all escrow and trust accounts. Further, the broker is charged with knowledge of and compliance with applicable laws and rules relative to trust accounts. Petitioner interprets governing regulations to preclude a broker from keeping retained earnings or commissions in an escrow account, and to remove such earnings or commissions when they accrue, but never less than at least once a month. Moreover, Petitioner interprets certain relevant provisions as prohibiting real estate brokers from maintaining "personal funds" in their escrow or trust account to pay personal or office expenses. Where an escrow or trust account has a deficit, if everyone who had funds in that account made a demand for the same, there would be insufficient funds to satisfy all claims. At all times material hereto, Respondent maintained account number 1622184907 at Barnett Bank in the name of Crescent Management, Inc. (Crescent Management Account). Rental security deposits and owners' funds were kept in the Crescent Management Account. The checks drawn on this account were styled "operating escrow." Stephanie Aucoin was employed by Respondent as an officer manager for Respondent from August 1992 through April or May 1995. While employed as the officer manager and in regard to Crescent Management, Ms. Aucoin's duties included determining which bills and expenses were to be paid and to whom and the amount to be paid. Ms. Aucoin was also responsible for preparing checks via computer and presenting the checks to Respondent for his review and signing. Respondent trusted Stephanie Aucoin and relied upon her to properly prepare the checks. The following checks drawn on the Crescent Management Account between January 1994 and February 1995 are the subject of the instant case: Check No. 5458 dated January 3, 1994, made payable in the amount of $246.40 to Pelican Press; Check No. 5460 dated January 3, 1994, made payable in the amount of $74.67 to Prestige Printing; Check No. 5347 dated January 21, 1994, made payable in the amount of $11,100.91 to RE/MAX on the Key; Check No. 5391 dated February 2, 1994, made payable in the amount of $82.00 to the Division of Real Estate; Check No. 6439 dated July 25, 1994, made payable in the amount of $237.83 to Sarasota Board of Realtors; Check No. 7388 dated December 31, 1994, made payable in the amount of $19,700.11 to RE/MAX on the Key; and Check No. 7005 dated February 16, 1995, made payable in the amount of $4,119.29 to American Express. Respondent signed and authorized five of the seven checks noted in the above paragraph. The checks signed by Respondent were Check Nos. 5458, 5460, 5347, 5391, and 6439. It is undisputed that Check No. 7388 dated December 31, 1994, made payable in the amount of $19,700.11 to RE/MAX on the Key, contained Respondent's forged signature and that Stephanie Aucoin had forged Respondent's signature. Contrary to Ms. Aucoin's testimony, Respondent did not request or authorize Ms. Aucoin to issue the check or sign his name to the check. Respondent had not seen this check prior to Petitioner's Investigator Hayes showing him a copy of the check during the May 1996 audit. The last check in question is Check No. 7005 dated February 16, 1995, made payable in the amount of $4,119.29 to American Express. Although she was not an authorized signatory on the Crescent Management Account, Stephanie Aucoin signed her own name on this check. Respondent never authorized or directed Ms. Aucoin to pay his American Express bill using the Crescent Management Account. Stephanie Aucoin's testimony lacks credibility. After Ms. Aucoin's employment was terminated, she filed a claim for unemployment compensation benefits. The claim was denied by the appeals referee by decision dated August 17, 1995, finding that she "had been signing checks without the owner's permission and had forged the owner's signatures on some of the checks . . . claimant was using company funds to pay her personal bills." On May 16, 1996, Stephanie Aucoin made the following statement in her sworn Petition For Injunction For Protection Against Repeat Violence filed against the Respondent: "Dudley Carson is under investigation for commingling of funds (escrow) and tax fraud . . . the chief investigator (Marie Hayes) had informed me that these charges are of a valid nature and that I could possibly be in danger by Mr. Carson." The statement of Ms. Aucoin is false in that Marie Hayes never made such a statement to Stephanie Aucoin. During the course of Stephanie Aucoin's employment as officer manager for Respondent, Ms. Aucoin and Respondent developed a romantic relationship, beginning in November 1993. The personal relationship was an intermittent one, with Respondent terminating the relationship with Ms. Aucoin three different times, first in late February 1994, next in late November 1994, and finally in early March 1995. Eventually, Respondent believed that Ms. Aucoin had been diverting business funds for her personal use. Based on this belief, Respondent fired Ms. Aucoin on or about April 28, 1995. Soon after he fired Stephanie Aucoin, Respondent employed Chip Harris to review the Crescent Management escrow records and bank statements. The records were in poor order, and it was determined that there was a shortage of escrow funds in the bank account. As soon as practicable, Respondent deposited personal funds into the Crescent Management Account to cover the shortage: $25,000 on July 10, 1995, and $20,063.09 on July 13, 1995. Respondent has made no claim to the $45,063.09 that he deposited into the Crescent Management Account for the benefit and protection of those persons entitled to the trust funds. The proper course of action to be taken by a broker upon discovery a shortage in an escrow account is to replace the missing funds as soon as possible. On July 25, 1995, Petitioner audited Respondent's escrow account's maintained by Respondent for Carson and Associates Ltd., Inc., t/a RE/MAX on the Key and Crescent Management, Inc. Petitioner found that all accounts were in good order and balanced. The two deposits of $25,000 and $20,063.09 had been made into the Crescent Management Account on July 10, 1995, and July 13, 1995, respectively, and prior to the July 25, 1995, audit. Nevertheless, the investigator did not question Respondent about the deposits nor did Respondent volunteer information concerning the deposits. On May 10, 1996, Petitioner completed an audit of the escrow accounts maintained by Respondent for Carson and Associates Ltd., Inc., t/a RE/MAX on the Key and found that all accounts balanced. On May 15, 1996, Petitioner completed an audit of the escrow account maintained by Respondent for Crescent Management, Inc., and found the account to be in good order and balanced. During the time period pertinent to this proceeding, Crescent Management, Inc. earned a 15 percent rental management fee on all rental funds collected. The Crescent Management Account was labeled as an "operating escrow account" and the source of all funds in this account consisted of rent payments by tenants. Of the rents deposited into the account, 15 percent belonged to Respondent as an earned rental management fee and the balance belonged to the owners after deducting payment of the owners' expenses. As each check from the Crescent Management Account was issued, either the "Owners'" account was charged or the "Fee, Property" account was charged. The "Fee, Property" account consisted solely of the funds generated by the 15 percent management fees. Each month, the accounts were reconciled and if there was a shortage or overage of funds, corrective action was taken. The accounting procedure implemented by Respondent and described in paragraph 30 above utilized real estate property management software program, RPM. This program had been recommended to Respondent by one of Petitioner's investigators in 1993. Under this system, one account is set up on computer and all transfers are made internally. Respondent is no longer using this accounting method, but now uses Quick Books, a recognized bookkeeping system, without any apparent problems. In regard to the checks noted in paragraph 16 above, Petitioner alleges that these seven checks were "unauthorized disbursements" in that Respondent used the escrow account to directly pay personal and office overhead and related expenses. However, Petitioner acknowledged that if earned fees in the escrow account were used for third party payments, there is no misappropriation. Furthermore, Petitioner's investigator supervisor testified that where there is no shortage of the escrow funds, the practice implemented by Respondent is just "very poor bookkeeping." In January 1994, the following checks referenced above were issued: Check No. 5458 for $246.40 to Pelican Press, Check No. 5460 for $74.67 to Prestige Printing and Check No. 5347 for $11,108.91 to RE/MAX on the Key. All three of these checks are listed on the January 1994 Trust Account Reconciliation form prepared on February 8, 1994, and signed by Respondent. At the end of January 1994, there was an overage of $1,532.09, representing "Management Fees." The corrective action taken was to remove the $1,532.89 overage and put it in the operating account. Thus, the funds used for payment of these checks were not trust funds, but fees earned by Respondent and to which he was entitled. Check No. 5391 dated February 2, 1994, for $82.00 was payable to the Division of Real Estate for payment of renewal fees. The check cleared the Crescent Management Account on February 18, 1994. The bank statement for February reflects that on February 1, 1994, the account had a beginning balance of $52,109.45, eighteen deposits and credits totaling $95,676.64, and 135 checks and debits totaling $71,799.87. At the end of the statement period, on February 28, 1994, the Crescent Management Account had a balance of $75,986.22. The funds used to pay the $82.00 check when it cleared the bank came from the "Fee, Property" split of the operating account and represented funds generated from the broker's 15 percent rental commission fee. Accordingly, trust funds were not used in regard to payment of this check. Check No. 6439 dated July 25, 1994, for $237.83 and payable to the Sarasota Board of Realtors cleared the Crescent Management Account on August 2, 1994. The bank statement for the period August 1, 1994, through August 31, 1994, reflects that the account had a beginning balance of $45,409.21, 15 deposits totaling $50,287.19; 102 checks and debits totaling $37,184.09; and an ending balance of $58,512.31. The funds used to pay the $237.83 check came from the "Fee, Property" split of the operating account and represented funds generated by the broker's 15 percent rental commission. Trust funds were not used to pay this check. Check No. 7388 dated December 31, 1994, for $19,700.11 payable to RE/MAX on the Key for overhead expenses cleared the Crescent Management Account on January 31, 1995, with funds from the "Fee, Property" split of the operating account with funds generated by the broker's 15 percent rental commission. The bank statement for the period ending January 31, 1995, reflects a beginning balance of $177,991.84; 15 deposits totaling $137,308.35; and 111 checks and debits totaling $116,469.67, resulting in an ending balance of $197,830.52. Trust funds were not used to pay this check. This check appears on the Trust Account Reconciliation form for the month of January 1995, performed on February 9, 1995, and signed by Respondent on that date. According to the Reconciliation Statement, there was a shortage in the trust account of $961.97, resulting from an overpayment to a customer. The amount of the shortage is the difference between the broker's trust liability of $179,159.46 and the adjusted account balance of $178,197.49. The Reconciliation statement further noted under "corrective action taken" that the "customer will reimburse." Check No. 7005 dated February 16, 1995, for $4,119.29, payable to American Express appears on the Trust Reconciliation Statement for the period ending February 28, 1995, performed on March 10, 1995, and signed by Respondent. The Reconciliation Statement shows that the account was in balance with no overages or shortages. The monthly bank statements for the period ending February 28, 1995, reflects a beginning balance of $197,830.52; 13 deposits of $95,753.08; 115 checks and debits totaling $75,951.56, with an ending balance of $217,632.40. The check cleared the Crescent Management Account on February 17, 1995, with funds from the "Fee, Property" split of the operating account with funds generated by the broker's 15 percent rental commission. Trust funds were not used to pay this check. Respondent has been disciplined on two prior occasions. In Case Nos. 92-83432 and 92-84338, Petitioner entered a Final Order on July 20, 1993, which adopted a Stipulation between Respondent and Petitioner. Pursuant to the Stipulation, Respondent neither admitted nor denied the allegations, but was reprimanded, fined $300, and required to take a 30-hour broker management course. The underlying administrative complaint in this matter, based on an August 7, 1992, audit by Petitioner, alleged that (1) Respondent's escrow account was not properly reconciled and had an overage of approximately $661.50; (2) Respondent failed to inform clients that a certain escrow account was an interest bearing account; and (3) Respondent's required office sign was incorrect in that letters were not all at least an inch in height and the words "Lic. Real Estate Broker" were not included. On May 6, 1994, a second Final Order was entered against Respondent in FDBPR Case Nos. 93-84352 and 93-5419. This Final Order required Respondent to pay a fine of $300 and placed Respondent on probation for a year. The administrative complaint which served as the basis for the final order was filed on January 25, 1994, and was based on a September 20, 1993, audit and investigation performed by Petitioner at Respondent's request. The Administrative Complaint alleged that Respondent had failed to properly reconcile his rental escrow accounts for July and August 1993 and had a total escrow shortage of $842.31. The September 20, 1993, audit was performed at the request of Respondent. During May of 1993, the Respondent had concerns as to the proper handling of the rental property management escrow account by his bookkeeper. As a result of these concerns, Respondent contacted Petitioner and requested that Petitioner conduct an audit. In response to Petitioner's request, Petitioner conducted an audit on September 20,1993, which revealed a shortage in the escrow account of $842.31. It was determined that this was due to errors by the bookkeeper. Therefore, the bookkeeper immediately replaced the escrow account funds. The Respondent then terminated the bookkeeper's employment. Nonetheless, the Petitioner filed an eight-count Administrative Complaint on January 20, 1994, against the Respondent charging escrow violations. The Respondent admitted the facts alleged in the January 20, 1994, Administrative Complaint and requested an informal hearing. The Commission heard the matter on April 19, 1994, and a Final Order was filed on May 6, 1994, providing for a reprimand, a $300 fine and completion of a 30-hour broker management course. The Respondent paid the fine and timely completed the course.
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 finding that Respondent has violated Section 475.25(1)(e) Florida Statutes, as alleged in the Administrative Complaint filed on April 21, 1996, and imposing an administrative fine of $1,000. RECOMMENDED that all counts of the Administrative Complaint issued September 23, 1996, be dismissed. DONE AND ENTERED this 7th day of October, 1997, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUMCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 7th day of October, 1997. COPIES FURNISHED: Geoffrey T. Kirk, Senior Attorney Department of Business and Professional Regulation Division of Real Estate 400 West Robinson Street Orlando, Florida 32802 Frederick Wilsen, Esquire Gillis and Wilsen, P.A. 1415 East Robinson Street, Suite B Orlando, Florida 32801 Lynda L. Goodgame, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Henry M. Solares, Division Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900
The Issue Whether the Respondents committed the violations alleged and, if so, what penalty should be imposed.
Findings Of Fact Petitioner is the state agency charged with the responsibility of regulating real estate licensees. At all times material to the allegations of this case, Respondent, Harold E. Hicks, was licensed as a real estate broker, license number 0136248. At all times material to the allegations of this case, Mr. Hicks was the qualifying broker for the Respondent corporation, Service First Realty, Inc. (the corporation), whose address is 9715 N. W. 27th Avenue, Miami, Florida 33147. The Respondent corporation holds license number 0223295. Mr. Hicks was responsible for the day-to-day business operations of the corporation. Mr. Hicks was responsible for the financial records kept and maintained by the corporation. All financial records at issue in this proceedings were in the name of the corporation. In 1996, an investigator employed by the Petitioner, Kenneth G. Rehm, attempted to conduct an audit of the Respondents' financial records. This audit was in response to a complaint not at issue in this proceeding. Mr. Rehm went to the Respondents' place of business and asked for the financial records for all real estate accounts. Mr. Hicks provided the investigator with records which established a negative escrow bank balance of $761.00. Moreover, there was no monthly reconciliation for the escrow account. Based upon the bookkeeping method used, the Respondents' records did not show how much money was being held in trust for individual clients. Respondents pooled money for different rental properties into one escrow account without establishing that they maintained accurate ledger balances per client. When Mr. Rehm was unable to reconcile the accounts, he elected to offer Respondents additional time to gather the records and to prepare for a complete audit. Such audit was assigned to Petitioner's investigator, Roberto Castro. Mr. Castro attempted to complete the follow-up audit of Respondents' financial records on February 13, 1996. Once again, the audit was hampered due to the lack of escrow account records. Based upon the records that were provided by Respondents, Mr. Castro computed that Respondents had $3,922.45 in outstanding checks from the rental distribution trust account but only $2,241.58 in the account. This calculation resulted in a shortage of $1,680.87. Mr. Castro also determined that Respondents were not completing monthly escrow account reconciliations in accordance with the rule promulgated by the Florida Real Estate Commission. On May 3, 1996, Respondents were served with a subpoena to provide Mr. Castro with all escrow records from February 1995 to February 1996. Respondents did not respond to the subpoena. As of the date of hearing, Respondents have not shown monthly escrow account reconciliations in accordance with the rule promulgated by the Florida Real Estate Commission.
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 finding the Respondents guilty of violating Sections 475.25(1)(b), (e), and (k), Florida Statutes, and imposing an administrative fine in the amount of $1,500.00. It is further recommended that the Commission suspend Respondents' licenses until the Respondent Hicks has completed a seven-hour course in real estate escrow management and that such suspension be followed by a probationary period with monitoring of the Respondents' financial records to assure compliance with all Commission rules. DONE AND ENTERED this 25th day of November, 1997, 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 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 25th day of November, 1997. COPIES FURNISHED: Henry M. Solares Division Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Daniel Villazon, Esquire Department of Business and Professional Regulation Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900 Harold E. Hicks, pro se Service First Realty, Inc. 9715 Northwest 27th Avenue Miami, Florida 33147
The Issue Whether Respondent committed the offenses set forth in the Administrative Complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Louis M. Loguercio (Respondent) was licensed in the State of Florida as a real estate salesperson, having been issued license number 0609113. From March 11, 1996, through July 13, 1997, Respondent was a salesperson for CMT Holding Ltd., a partnership trading as The Prudential Florida Realty. Martha Meloni and her husband, Mario Meloni, (Sellers) owned residential property located at 6412 Southwest 127 Court, Miami, Florida. The Sellers' property was listed for sale with Jorge "Ivan" Salomon, a broker operating his own company, Real One Realty Corporation. On May 1, 1997, Carlos Castellanos and his wife, Daritza Jiminez, a/k/a Daritza Jiminez-Castellanos, (Buyers) met Respondent at his office at The Prudential Florida Realty. They were referred to Respondent by one of his clients. The Buyers were from Venezuela and had had no contact with Respondent prior to this transaction. On May 1, 1997, Respondent prepared a draft Residential Sale and Purchase Contract (Contract) for the purchase of the Sellers' property for $150,000 by the Buyers. Respondent drafted the Contract on behalf of the Buyers and prepared the contract while the Buyers were in his office. The terms of the Contract required an initial deposit of $2,000 from the Buyers to be held in escrow by Steven Greenspan Law Office, as "Escrow Agent." The Contract also required a $13,000 additional deposit to be made within ten (10) days of the date of the Contract. While the Buyers were in Respondent's office, they wrote two checks, and signed them, for deposits on the property: one for $2,000 dated May 1, 1997, and one for $13,000 dated May 15, 1997. The checks were made payable to Alan Greenspan, P.A. The Buyers wrote both checks with Respondent's assistance. The Buyers wanted to personally take the $2,000 deposit check to Alan Greenspan, the escrow agent. The Buyers permitted Respondent to photocopy the checks while they were in Respondent's office. Once the checks were photocopied, Respondent returned the checks to the Buyers. Respondent advised the Buyers to deliver the $2,000 check to the escrow agent that day and to mail the second check by the due date. Mr. Greenspan's office was in the same building as the mortgage company that the Buyers were using for the purchase of the property. His office was also in close proximity to Respondent's office. The Buyers failed to deliver the $2,000 deposit check to Mr. Greenspan on May 1, 1997. Respondent did not know that the check had not been given to Mr. Greenspan by the Buyers. Mr. Greenspan received a copy of the Contract. He did not contact any of the parties to the Contract regarding the escrow monies. As an escrow agent, Mr. Greenspan's office handles a large volume of closings and it is possible, according to him, that his staff assumed that the escrow monies had been received. No one in Mr. Greenspan's office verified that the monies had been received. Prior to the due date for the payment of the second deposit of $13,000, Respondent contacted the Sellers' listing agent, Mr. Salomon, and informed him that the Buyers were having problems paying the second deposit. Shortly after the due date for the payment of the second deposit, Mr. Salomon contacted Respondent, who informed Mr. Salomon that the Buyers had the money. Respondent also faxed Mr. Salomon a copy of the two checks for the two deposits, which were written on May 1, 1997. Mr. Salomon faxed a copy of those checks to the Sellers. Respondent did not inform Mr. Salomon that the Buyers had not given the deposit checks to him. Unbeknownst to Respondent, the Buyers had also failed to mail the second deposit of $13,000 to Mr. Greenspan. Mr. Salomon, having received the fax copy of the checks, assumed that the escrow agent had the Buyers' deposits. The Sellers, having received the fax copy of the checks, assumed also that the escrow agent had the Buyers' deposits. Mr. Greenspan became aware that his office did not have the Buyers' deposits in escrow when the mortgage company requested that he provide an escrow letter. He contacted the Sellers' attorney, who faxed a copy of the Buyers' checks. At that time, Mr. Greenspan became concerned regarding the Contract because the Contract made it appear that he, as the escrow agent, had deposits that he did not have. Mr. Greenspan contacted Respondent regarding the absence of the escrow deposits. Respondent was apologetic and responded to Mr. Greenspan that he (Respondent) was sorry that the Buyers had not given him (Mr. Greenspan) the deposits as they had indicated that they would do. After being contacted by Mr. Greenspan, Respondent attempted to contact the Buyers. He was unsuccessful. The Sellers did not become aware that none of the deposits were in escrow until the day before the scheduled closing on the property. In the manner in which Respondent handled the Buyers' deposits, he failed to follow office policy and practice of The Prudential Florida Realty. According to the office policy and practice, the sales associate handling the transaction has the duty to ensure that the buyer's deposit(s) are deposited with the designated person or entity at the designated time or date. Respondent also failed to advise the Sellers' agent, Mr. Salomon, or the escrow agent, Mr. Greenspan, the Sellers' attorney, or the Sellers that the Buyers had not given him any deposits.
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 dismissing the Administrative Complaint against Louis M. Loguercio. DONE AND ENTERED this 29th day of April, 1999, in Tallahassee, Leon County, Florida. ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of April, 1999.
Findings Of Fact At all times material to these proceedings, Respondent, Sandra K. Linton, was a licensed real estate broker in Florida, holding license number 0419502. Ms. Linton was the owner and qualifying broker for Respondent Key Realty Co. of Pensacola, Inc. (Key Realty). Key Realty was a licensed real estate brokerage company in Florida, holding license number 0244319. Both Respondents, and in particular Ms. Linton, have excellent character references from other active members of the real estate community. On November 7, 1989, Petitioner entered a Final Order against Respondents for escrow account violations of Chapter 475, Florida Statutes. Among other things, the Final Order required Respondents to submit monthly escrow account status reports. From November 7, 1989, through March 27, 1990, the Respondents did not file any escrow account status reports as required by the Final Order. Ms. Linton had turned the responsibility of filing those reports over to her accountant. However, Ms. Linton did not check to see if the escrow reports were filed by her accountant. Her accountant's full-time employment was as a contract auditor for the U.S. Navy. In October, 1989, the accountant was assigned to audit a contract in the Pacific and moved to the Pacific island which was the site of the contract. The accountant advised Ms. Linton that he would be leaving in October. After' October, 1989, the accountant no longer did any accounting work for Respondent. However, Ms. Linton did not make arrangements for the filing of the escrow account reports required by the Final Order after her accountant left the country. No sufficient excuse was offered by Ms. Linton for her failure to file or ensure the filing of these escrow reports. The Respondents' rental escrow account revealed a shortage of $2,008.14 as of March 21, 1990. The money to cover the shortage was placed in a desk drawer in the Respondent's office for deposit while the Respondent was on vacation. Her employees failed to make the deposit. Given these facts, the resultant shortage was a very minor transgression of Chapter 475, Florida Statutes, and Rule 21-V, Florida Administrative Code. Additionally, Bank charges totaling $328 were debited from the rental escrow account from June 1989 to February 1990. The Respondent's bank, Barnett Bank of Pensacola, had erroneously charged the rental escrow account for these bank charges despite instructions from the Respondent not to do so. All of the debited bank charges were either replaced by the bank or Ms. Linton. Since it was the bank's actions which caused these charges to be made to Respondents' rental escrow account and not Respondents' actions, no violation of Chapter 475, Florida Statutes, can be attributed to either Respondent. Several checks totaling $3,605.15 were written by Respondent, Sandra K. Linton, from the rental escrow account and later returned due to nonsufficient funds. The checks were returned for nonsufficient funds due to the bank's hold policy. Since Respondent had consummated numerous transactions with Barnett Bank of Pensacola in which the hold policy was not applied to her account, Respondent had no knowledge that the bank's hold policy would be applied to her account. No reliable evidence was presented that this set of facts constituted bad accounting methods on the part of Respondents or otherwise violated the provisions of Chapter 475, Florida Statutes. In the course of operating a rental management business, Respondents, on October 25, 1989, entered into a rental property management agreement with Richard and Susan Vigeant. The agreement called for monthly rental statements and disbursements. Respondents collected rental funds on behalf of the Vigeants from November, 1989, to February, 1990. However, Respondents did not provide monthly statements or deliver net rental funds to the Vigeants until March 6, 1990. Respondents were under the impression that the Vigeant's funds were to be held by the Respondents for minor repairs to the Lessor's property. The Vigeants were not under such an impression and, after numerous phone calls for more than a month, the Vigeants' requested disbursement of the net rental funds on February 20, 1990. The funds were disbursed to the Vigeants on March 6, 1990. Respondents failure to give the Vigeants monthly accounting reports as required by the rental management agreement violates Section 475.25 (1)(d), Florida Statutes. However, this violation, while not minor, is also not overly serious and should not receive severe discipline. None of the evidence demonstrates that Ms. Linton or her business were guilty of any fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence or breach of trust in a business transaction. The evidence did show that Ms. Linton is not very good at maintaining the rental escrow account or at seeing that the rental escrow account was properly maintained. Respondents' recordkeeping is poor and in disarray. The evidence was clear that Ms. Linton does not have the inclination, desire, or capability to maintain her broker's escrow account. The strongest evidence to support this conclusion is that all of Respondent's latest difficulties with her escrow account occurred after she had already been disciplined for escrow account violations which occurred prior to the events under consideration here. 1/ Given this inability, Respondent cannot be entrusted to properly handle escrow funds given to her. Since Respondents are not competent to handle escrow matters Respondents' licenses should be revoked. The Respondent does not currently have the financial ability to pay any fines and such a penalty would not be appropriate in this case.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: The Division enter a Final Order finding Respondents guilty of four violations of Chapter 475, Florida Statutes, and revoking Respondents' real estate broker's licenses. DONE and ENTERED this 24th day of September, 1990, at Tallahassee, Florida. DIANE CLEAVINGER, 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 24th day of September, 1990.
Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made. At all pertinent times, Respondent, Karen A. Mason, was a licensed real estate broker in the State of Florida having been issued license no. 0432242 in accordance with Chapter 475, Florida Statutes. The license issued to Respondent was as a broker t/a Mason Realty and Mortgage Company, 4538 Gardenette, West Palm Beach, Florida 33406. Respondent's real estate office was a small operation that handled strictly rental properties. Respondent established her real estate office to handle rentals as a sideline to a property maintenance business that she owned. In 1987, there were two other people who worked in Respondent's real estate office. One of the employees, Linda Bennett, received a $2,200 deposit with respect to a lease agreement for certain property owned by Chris Jimenez on Scottdale Road in West Palm Beach, Florida. That lease agreement was evidenced by a Receipt for Deposit and Contract to Lease (the "Contract") that was signed Mr. Jimenez and by Frank Kontis on behalf of the lessee, Angelo Geragonis. The $2,200 deposit was paid by check from Mary Kontis, the wife of Frank Kontis who was related to the lessee, Mr. Geragonis, and was acting as his agent. Mr. Geragonis did not sign the Contract. The $2,200 deposit was placed in an escrow account maintained by Respondent at Barnett Bank on January 13, 1987. The Contract called for the lease term to run from February 1, 1987, to February 1, 1988, at a monthly rental of $850.00 per month. By checks dated January 14, 1987, part of the deposit ($850.00) was distributed to Respondent and Linda Bennett. On January 30, 1987, another $550.00 of the deposit was distributed to Chris Jimenez. The basis for these disbursements is not clear. The evidence did not establish that the distributions were unauthorized. In any event, as of January 30, 1987, only $800 of the deposit remained in escrow. Shortly after the contract was executed, Mr. Kontis died. Mr. Geragonis traveled to Florida and decided not to rent the Scottdale Road property and requested a return of the deposit. Mr. Jimenez, the owner of the property, had already moved out of the house and rented a new residence in reliance upon the Contract. He claimed that he was entitled to all or a portion of the deposit. By letter dated January 23, 1987, the Respondent requested instructions from the Florida Real Estate Commission (the "Commission") regarding how to handle the dispute and the conflicting claims to the deposit. Respondent also discussed the matter by phone with employees of the Commission. By letter dated February 10, 1987, Jack King, Chief Investigator for the Florida Real Estate Commission, advised Respondent of her options. In his February 10, 1987 letter, Mr. King advised Respondent that she had to either (1) arrange for arbitration, (2) place the matter before a civil court or (3) request an Escrow Disbursement Order from the Florida Real Estate Commission. By letter dated February 17, 1987, the Respondent requested an Escrow Disbursement Order from the Florida Real Estate Commission. By letter dated June 17, 1987, Manuel Oliver, an attorney for the Florida Real Estate Commission, wrote to Respondent and advised her that, because of the existence of factual disputes between the parties, the Florida Real Estate Commission would not issue an Escrow Disbursement Order. Respondent was advised to use one of the other alternatives described in Mr. King's February 10, 1987 letter. Respondent denies ever receiving the June 17, 1987 letter. No further action was taken on the matter until the fall of 1988. On September 2, 1988, an attorney for Mr. Geragonis contacted the Respondent and inquired as to the status of the money being held in escrow. By letter dated September 16, 1988, Respondent inquired of Mr. King as to the status of her request for an Escrow Disbursement Order. By letter dated October 27, 1988, Manuel Oliver advised Respondent of the June 17, 1987 letter and also advised her that, because of her failure to promptly implement one of the other alternatives outlined in Mr. King's letter of February 10, 1987, he was going to refer the matter to the Complaint Section of the Florida Real Estate Commission for investigation of a possible violation of the licensure law. In December of 1988, Respondent resolved the dispute by paying $1100.00 to Mr. Geragonis and $550.00 to Chris Jimenez. The money to settle the dispute was paid from a new escrow account opened by Respondent at Carney Bank in October of 1987. The evidence did not establish when the Barnett Bank escrow account was closed and/or how much money was transferred from that account to the new escrow account at Carney Bank. In the meantime, in February of 1987, Respondent was involved in a business dispute with her employee, Linda Bennett. Ms. Bennett ended up leaving the company. In the process, she took some of the office equipment, files and other paperwork including ledgers. She also caused two unauthorized checks to be written on the Barnett Bank escrow account. The unauthorized disbursements from the escrow account totaled at least $1100. In January of 1989, an investigator from the Department attempted to conduct an audit of Respondent's business pursuant to the referral from Mr. Oliver as set forth in Findings of Fact 12 above. Respondent objected to the tactics and approach of the investigator and complained to the Department. The audit of Respondent's records was halted pending a review of the Respondent's complaints. In October of 1989, another investigator from the Department met with Respondent to review her records. By the time this audit was conducted in October of 1989, Respondent's real estate office had essentially closed. The only business activity being conducted by the office was the management of certain properties owned by the Respondent. The Department's investigator requested to see all of the Respondent's records regarding her escrow accounts. Respondent produced her records regarding the escrow account at Carney Bank. However, because that account was not opened until October of 1987, there were no records regarding the Geragonis Contract. The Department's investigator specifically inquired as to the records regarding the escrow deposit on that Contract. Respondent investigated her records in an attempt to determine how that deposit had been handled. Because the office had essentially been shut down, all of the records were in storage and were not readily accessible. Initially, Respondent informed the Department's investigator that the money had been deposited into a Merrill Lynch money market account that she used for a variety of personal and business purposes. Respondent provided the investigator with some of the statements related to that money market account. However, upon further review and investigation, the Respondent determined that the deposit had actually been deposited in the escrow account at Barnett Bank. The records regarding that deposit at Barnett Bank were introduced at the hearing in this case, but had not previously been provided to the Department's investigator. Because the records of the Barnett Bank account were not previously provided to the Department's Investigator, no audit of those records has been conducted. At the hearing, the bank statements for the Barnett Bank escrow account were provided from December of 1986 through April of 1987. As noted above, there were certain unauthorized disbursements made from the Barnett Bank escrow account by one of Respondent's employees. Thus, it is difficult to draw any conclusions regarding the balance in the Barnett Bank Escrow Account during the period ending April, 1987. A review of those bank statements indicates, that, except for March 4, 1987 when a $1350.00 check was returned unpaid and again on March 23 when the balance of the account dipped to $685.00 following the return of an unpaid check in the amount of $275.00 on March 13, there was always at least $800 in the account. Respondent has not provided any records regarding the Barnett Bank account subsequent to April of 1987. The Carney Bank escrow account was not opened until October of 1987. It is not clear where or if the remainder of the Geragonis deposit was held in escrow during the period from April of 1987 through October of 1987. Moreover, Respondent has not produced any records demonstrating that the remaining deposit was being held in escrow at Carney Bank subsequent to October of 1987. While Respondent apparently believes that the remainder of the Geragonis deposit was stolen by her former employee, Respondent did not provide any documentation regarding the money that remained in the escrow account and failed to produce any evidence that she attempted to reconcile that account with the various claims on those funds. Respondent argues that, given the lapse of time between the events in question and the filing of the Administrative Complaint, she can not realistically be expected to have records on these matters. However, it is clear that the dispute over the Geragonis Contact was not resolved until December of 1988. When the Department's investigators conducted their audit in October of 1989, Respondent should have had available any and all records related to that Contract including documentation regarding the remaining escrow funds. While Respondent contends that some of her business records and ledgers were stolen by her former employee, the evidence indicates that the employee in question left around February of 1987. The absence of records subsequent to April of 1987 can not be attributed to theft by this former employee. The Department's investigators testified that the records of the Carney Bank escrow account indicated that on a couple of occasions that escrow account was overdrawn. The circumstances and specific facts surrounding those instances were not established in this proceeding. The records of Respondent's escrow account at Carney Bank reflect a number of disbursements made from the escrow account to her or her company. Respondent contends that those disbursements were for commissions and other monies owed to her. Insufficient records were provided to document these transactions. There is no indication that any client or other member of the public lost any money and/or that Respondent was unable to timely disburse money from her escrow account as required in connection with a particular transaction. There is no indication that Respondent ever used the escrow account for improper purposes or withdrew money from the escrow account for her own personal or business use. No persuasive evidence was presented that Respondent's own funds were commingled with escrow funds in either of her escrow accounts. While one of the Department's investigators claimed that Respondent told him that she was depositing money from another business that she owned into one of her accounts, any such reference would appear to have been to the money market account and not the escrow accounts. No persuasive evidence was presented to establish that the Respondent commingled personal funds with the money in the Barnett Bank or Carney Bank escrow accounts.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Petitioner enter a Final Order finding Respondent not guilty of the allegations contained in Counts II and III of the Administrative Complaint, finding Respondent guilty of Counts I and IV, and reprimanding her, suspending her license for a period of three months and imposing a fine of $500.00. RECOMMENDED in Tallahassee, Leon County, Florida, this 16th day of May, 1991. J. STEPHEN MENTON 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 16th day of May, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-5966 Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Rejected as unnecessary. Adopted in substance in Findings of Fact 1. Rejected as unnecessary. 4.(a) Adopted in substance in Findings of Fact 3. Adopted in substance in Findings of Fact 13. However, the evidence established that there was a prior escrow account at Barnett Bank. Rejected as not established by competent substantial evidence. The subject matter is addressed in Findings of Fact 18. Rejected as irrelevant. See Findings of Fact 18. Rejected as irrelevant. See Findings of Fact 18. Rejected as irrelevant. See Findings of Fact 18. Rejected as irrelevant. See Findings of Fact 4 and 18. Adopted in substance in Findings of Fact 24. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Rejected as a mischaracterazation of the evidence. The audit conducted by the Department's investigator was not limited to the Escrow Disbursement Order Request. Rejected as constituting legal argument rather than a finding of fact. Rejected as constituting legal argument and as irrelevant. Rejected as irrelevant. This subject matter is addressed in Findings of Fact 8 and 9. Rejected as irrelevant. This subject matter is addressed in Findings of Fact 14. Rejected as constituting legal argument rather than a finding of fact. Rejected as irrelevant. Rejected as irrelevant. This subject matter is addressed in Conclusions of Law 12. Rejected as constituting legal argument rather than a finding of fact. Subordinate to Findings of Fact 22. Rejected as constituting legal argument. Rejected as irrelevant. COPIES FURNISHED: James H. Gillis, Esquire Department of Professional Regulation Division of Real Estate Legal Section 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Karen Mason 4538 Gardnette West Palm Beach, Florida 33406 Darlene F. Keller Division Director 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Jack McRay General Counsel Department of Professional Regulation 1940 North Monroe Street Suite 60 Tallahassee, Florida 32399-0792
The Issue The issue for consideration in this case is whether the Respondents' licenses as real estate broker and brokerage corporation, respectively, should be disciplined because of the matters set out in the Administrative Complaint filed herein.
Findings Of Fact At all times pertinent to the issues herein, the Florida Real Estate Commission was the state agency responsible for the licensing and regulation of real estate salespersons, brokers, and brokerage operations in Florida. The Respondents, Arthur B. Karns and Karns Real Estate Inc., were a licensed real estate broker and brokerage corporation, respectively. Sharon Thayer has been an investigator with the Florida Department of Professional Regulation's Division of Real Estate for over 3 1/2 years. As a part of her duties, she is required to conduct random, no-notice inspections of real estate brokerage offices in Florida. As a part of these inspections, she conducts audits of the broker's escrow account and over time has conducted approximately 1,000 audits. In her audits, she follows a standard audit procedure to reconcile the trust liability of the broker with the escrow account bank balance. In early September, 1991, Ms. Thayer conducted an escrow audit and office inspection of the Respondent's company. During her initial visits, on September 3 and 5, 1991, she requested he furnish her with the office records pertinent to his trust escrow account. Respondent promptly provided most of the records excepting only the account reconciliation forms required by the Commission. When Respondent provided Ms. Thayer with the records, including what he felt were the reconciliations, she reviewed them and then discussed them with him, indicating wherein they were deficient and what, in addition, she would need. In her initial report, completed on the conclusion of the initial visit, she indicated there was an overage of $3,452.75 in the Respondent's escrow account. This figure was in error. She also noted that Respondent was not accounting for his trust liability and indicated he had 5 days in which to take corrective action and provide documentation of the action taken. When she returned for a follow-up visit on September 20, 1991, Ms. Thayer noted that the original note of overage had been in error and that the account now balanced. To achieve balance, however, she referred to the original $500.00 in seed money Respondent had used to open the escrow account. This covered errors in the account as of December, 1990 and service charges. Without this, she noted, the account would have been short by $446.45. Ms. Thayer determined that the Respondent had opened his escrow account with $500.00 of his own funds as seed money. She contend this was improper as the Department allows only $200.00 of seed money which is to be reported each month on the account reconciliation. The $200.00 "limit" is relatively recent. At the time in issue, she claims, the "limit" was set, by unwritten, unpublished Department policy, at $100.00. The only evidence of the existence of such a policy is an article in the Fall, 1991 FREC newsletter, written by Howard M. Gunter, Jr., then Chairman, which notes: There is an unwritten rule that currently allows a broker to keep a minimum amount in his escrow account to cover bank charges, .... The April, 1992 edition of the Central Palm Beach County Association of Realtors' Realtor Review advises of new FREC rules, one of which allows a broker to maintain up to $200.00 of his own or the company's funds in the escrow account to keep it open or to pay for bank monthly service charges. Ms. Thayer's investigation also appeared to indicate that in January, 1991, Respondent disbursed an $850.00 security deposit to lessors of a rented unit when the actual deposit collected was only $500.00. This was also determined to be in error. The evidence demonstrates that on January 3, 1991, Respondent drew check number 1040 on his escrow account to open an escrow account for the Alexandre to Livingston rental. The deposit of $1,700.00 in that case included an $850.00 security deposit. This money was not disbursed to the client, however, as it was placed in an escrow account for that lease. In any case, the security deposit should have been only $500.00 as that was all that had been collected by the prior agent and transferred to the Respondent. When the deposit was made here, Respondent, whose practice was to collect the first and last month rent in advance, along with a security deposit of one month rent, mistakenly assumed the prior agent had done the same. When he learned of his mistake, by letter dated September 13, 1991, he notified the Alexandre's of the mistake and noted the excess $350.00 would be paid back to Karns Real Estate, Inc. Therefore, the extra $350.00 in the trust account had been placed there by Respondent from his own funds, not from any client funds and was due back. Since the $96.45 in bank charges were also accounted for previously and deducted, there was in actuality no shortage. Ms. Thayer also discovered that with regard to two contracts for the sale of real property, both dated in early May, 1991, between E. Buwalda as seller and Ronald Cecere as buyer on one, and Cecelia Barraclough as seller and Jeanne Cecere as buyer on the other, $100.00 in cash was accepted as a partial down payment on each, with each contract calling for an additional deposit of $2,900.00. A special clause in each contract provided: The purchaser will post a Certificate(s) of Deposit with a face amount of at least $3,000.00 with Karns Real Estate, Inc. to be held in escrow as and for the $2,900.00 additional deposit. The Certificate(s) of Deposit can be returned to the Purchaser if and when the Purchaser posts $2,900.00 in cleared funds to cover the additional deposit. In fulfillment of that clause requirement, the Ceceres deposited with the Respondent CD Numbers 020002358756 and 020002359408, from Nova Savings Bank, each in the amount of $2,000.00, the former dated October 24, 1990 and the latter dated December 3, 1990, both showing Jeanne A. Cecere as trustee for Patrick J. and Ronald P. Cecere. The certificates also reflected they were "Not Transferable except on the books of Nova Savings Bank." By his own admission, at no time did Respondent notify either of the sellers that the certificates he held on their behalf as additional deposit were not transferable outside the Nova Savings Bank. At the same time he received the certificates as deposit on the Barraclough property, Respondent also received an additional $1,000.00 in cash to constitute the balance of the $3,000.00 deposit called for in the contract. Aside from a letter from the Ceceres' chastising the Department for its action against Respondent and expressing outrage that the agency should have a negative opinion as to the propriety and legality of the Respondent's activities, there is no independent evidence of any additional deposit placed with regard to the Buwalda contract. In any event, when the matter was noted by Ms. Thayer, the Ceceres, by checks dated September 5, 1991 in the amounts of $1,900.00 each, made payable to Karns Realty, Inc., replaced the two certificates. When Ms. Thayer discussed this matter with Mr. Karns, he seemed surprised at her concern. He indicated he felt accepting the certificates was the same as taking jewelry as security. However, he promised to get replacement security and, as was seen, did so immediately. Ms. Thayer was also concerned about the Respondent's apparent inability to properly reconcile his escrow account with the related bank balance. Her audit revealed he was using a lengthy, self-developed form to balance the checking account statement but this is not enough. There is no requirement that any particular form be used, but the Commission had developed a sample form which contains all the information required in a proper reconciliation and Department rules set out those requirements. On May 13, 1991, the Department of Professional Regulation, in a letter to all real estate brokers, indicated the concern of the Commission that brokers be aware of and comply with their responsibilities regarding monthly escrow account reconciliation. The letter cited the provisions of Commission Rule 21V-14.012 which, while noting there is no official form to be used, reminds brokers the reconciliation must contain certain required information. The sample form, referenced above, requires a bank reconciliation and, in addition, a trust liability reconciliation. Ms. Thayer concluded Respondent had, indeed, completed a full bank reconciliation, but had not completed the additionally required trust liability reconciliation and merged the two. Notwithstanding Respondent's continuing protestations that he had done a complete reconciliation, the evidence indicates rather that he has not. As Respondent's own exhibit, an extract from the 1991 Gaines & Coleman continuing education book points out at paragraph 23 on page 7, the provisions of the rule on escrow reconciliation "is much more than a mere balancing of checkbook accounts." The evidence demonstrates Respondent did no more than that and his reconciliations were not adequate. Mr. Geil, who assisted Ms. Thayer in the audit, has reviewed between 100 and 150 offices in addition to Respondent's office. Of all of these, he would rate Respondent among the 5 or 6 brokers who did the most detailed reconciliations, but he cannot say, from what he saw of Respondent's records, whether Respondent was making a bona fide effort to do an accurate reconciliation. It is clear, however, that, as Respondent repeatedly asserted at hearing, everyone makes mistakes, and Respondent's delicts, established by the evidence, do not show any fraudulent or criminal intent. As Ms. Thayer noted, she found no evidence of fraud, theft or an abuse of trust money for Respondent's own purposes, and the Commission has received no complaints about him from any of his clients.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that a Final Order be entered in this case by the Florida Real Estate Commission dismissing Counts I through VI of the Administrative Complaint, but placing the licenses of Respondents, Arthur B. Karns and Karns Real Estate, Inc. on probation for a period of one year under such terms and conditions, specifically including post licensure education, as the Commission may require, and imposing a reprimand on the Respondent, Arthur B. Karns. RECOMMENDED this 21 day of August, 1992, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23 day of August, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-1266 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: - 4. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated except for the word shortage which should be prefaced by the work "apparent." Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. First three sentences accepted. Balance is a comment on the evidence. FOR THE RESPONDENT: & 2. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and resolved in favor of Respondent. Accepted and resolved in favor of Respondent. 6A -C. Accepted and discussed within the body of the Order. 6D. Not a Finding of Fact but a discussion of the evidence. 6E & F. Not relevant. 7A - C. Not a Finding of fact but a statement of evidence presented. COPIES FURNISHED: James H. Gillis, Esquire DPR - Division of Real Estate Hurston Building, N-308 400 West Robinson Street Orlando, Florida 32801-1772 Arthur B. Karns,. pro se Karns Real Estate, Inc. 6346-63 West Lantana Road Lake Worth, Florida 3343 Jack McRay General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900
