Findings Of Fact Forbes, Walsh & Kelly is a New York corporation licensed to deal in securities under the laws of New York. The company through its secretary, Mr. Robert E. Kelly, contacted the Division of Securities on March 2 and 21, 1979 concerning the procedure for registering to be a securities dealer in Florida. After receiving the appropriate application forms and a copy of the relevant Florida Statutes, Forbes, Walsh & Kelly filed its application on March 26, 1979, to be licensed in Florida as a securities dealer. On April 2, 1979, FWK was notified that its application as a dealer was being held in abeyance, pending receipt of the corporate by-laws, a branch office application, and other materials. Subsequently, on April 20, 1979, FWK applied for a branch office license with Respondent, Carl F. Bailey, Jr. to be the company's "principal" and branch manager in Florida. Between March 26, 1979 and June 26, 1979, while Mr. Carl F. Bailey was not licensed as a securities salesman and while FWK was not registered as a securities dealer, FWK through Bailey executed approximately 774 security sales transactions on behalf of their customers. On June 27, 1979, the Division told FWK that its registration as a security broker-dealer had been approved. At the same time notice was also given that the application for a branch office in Orlando was approved as was the transfer of Carl F. Bailey's registration as a salesman for FWK. Between March 26, 1979 and August 14, 1979, in the course of its business, FWK through Carl F. Bailey "introduced" approximately 263 security transactions on a fully disclosed basis to Robb, Peck, McCooey & company, Inc., which though registered as a securities dealer in New York was not at that time so registered in Florida. Aside from the instant order of suspension, neither Carl F. Bailey, Jr. nor FWK has ever been charged with previously violating the Florida Securities Act. FWK and Carl F. Bailey, Jr., have at least two very satisfied customers, Mr. A.J. Rusterholtz and Mr. Richard W. Baker. They testified in support of Respondents at the final hearing. No evidence was presented to show that either Carl F. Bailey or FWK ever made any inquiry with the Division about when they would be eligible to engage in securities transactions in Florida after submitting their applications for registration. FWK through its Orlando branch office serves approximately 500 securities customers, many of whom are in direct daily contact with the office.
Recommendation In light of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the registration of Forbes, Walsh, Kelly & Company, Inc., as a dealer and to operate a branch office and the registration of Carl F. Bailey, Jr., as an associated salesman, with Forbes, Walsh, Kelly & Company, Inc. be suspended for a period of 65 business days from the effective date of the Department's final order. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 5th day of October, 1980, in Tallahassee, Florida. MICHAEL P. DODSON Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Philip J. Snyderburn, Esquire Director, Division of Securities Office of Comptroller The Capitol, Suite 1402 Tallahassee, Florida 32301 Patrick T. Christiansen, Esquire AKERMAN SENTERFITT & EIDSON 17th Floor, CNA Building Post Office Box 231 Orlando, Florida 32802
The Issue The issue for consideration in this hearing is whether the Respondent's licenses as an insurance agent in Florida should be disciplined because of the matters set forth in the Administrative Complaint filed in this case.
Findings Of Fact At all times pertinent to the allegations contained herein, the Department of Insurance was the state agency in Florida responsible for the licensing of insurance professionals and the regulation of the insurance industry in this state. Respondent, Harold R. Leiffer, was licensed by the state as a life and health (debit) agent, a life agent, a life and health agent, a general lines agent, and a public adjuster (for fire and allied lines, including marine casualty and motor vehicle damage and mechanical breakdown insurance), and was engaged in the practice of the insurance profession under those licenses in Florida. In January, 1991, Donna L. Devor, at the time, the owner of Cobra Construction Co., a corporation, was contacted by the Respondent after she received a bid for the construction of a fire station in Florida. Ms. Devor had previously known the Respondent as an insurance agent through a company she was associated with to which he had provided construction bonds in the past. On this occasion, in January, 1991, according to Ms. Devor, Respondent called to say he was with a new company and could get her the bond she needed to support the bid she had been awarded. Ms. Devor invited him over to talk about it and they discussed it. Again, he indicated he would be able to get her the bond she needed. The next day, when he came back with the preliminary paperwork, he asked for a check in the amount of $850.00. According to Ms. Devor, he indicated that of that sum, $500.00 was to cover setup fees and other fees by the bonding company and $300.00 was to go to DSI, his agency. In response, Ms. Devor gave him a check for $850.00 made payable, at his request, to ICI, Respondent's other company, after which he left with the forms she had signed, some in blank. When he left, he promised to process the paperwork immediately in response to her stressing the urgency of the need for the bond. After several days passed with no response, Ms. Devor attempted to contact Respondent by phone but was unable to reach him. When she finally was able to speak with him, he asked her to come to his office to discuss the bonding company's requirement that she place her house as collateral for the bond. Ms. Devor immediately declined to do this but nonetheless went to his office at DSI to talk with him. When she arrived, he immediately called the bonding company which again requested she place her house as security, and she again refused. When this happened, Respondent asked her to come back the next day as he would try another source for the bond. When she contacted him the following day, he indicated he could get the bond from an Atlanta firm but she would have to go there to pick it up. She agreed to do this and Respondent, in addition, asked for a financial statement which she arranged to have provided. Ms. Devor flew to Atlanta and was met there by Respondent who drove her to the bonding company's office. When she met with company officials, she was told they imposed a coinsurance requirement of $100,000.00 in the company's name be put up by her and she did not have this cash available. Respondent, she claims, knew this. Nonetheless, she was furnished an office and a telephone to try to get the money but was unable to do so and as a result, the bonding company declined to issue the bond. After that failure, she returned to Orlando and, realizing that Respondent was apparently unable to help her, started to look for another bonding company. She called Respondent's secretary several times attempting to reach him to get her money back but, when she was unable to do so, finally sent him a letter requesting the return of her $850.00 payment. Respondent failed to respond to that letter and she continued to try to reach him, unsuccessfully, by phone. Finally, she was able to contact DSI's owner who indicated she had never heard of Ms. Devor and asked she be shown proof that the bond premium was paid. When Ms. Devor sent a copy of the check she had given to Respondent, the owner evidenced some dissatisfaction with Respondent but failed to refund the money. Ms. Devor continued to try to reach Respondent by phone without success. When she found where he lived, she wrote him another letter asking not only for the return of the amount she had paid him but also for reimbursement of expenses she had incurred in flying to Atlanta. She received neither. However, about a week or so later, she received a call from Respondent on her answering machine which left no return number. She was thereafter unable to again contact Respondent nor did she ever receive reimbursement of her payment to him. The $850.00 check was endorsed by Respondent with his own name and deposited to his personal account, Number 1307004115, at the Orange Bank in Winter Park, Florida. According to Mr. Leach, Vice-President of security operations for Pinnacle Insurance in Carrolton, Georgia, the company to which Ms. Devor flew at Respondent's request, the company file for Cobra Corporation shows no bond was ever issued to that company. Florida does not allow a charge for setup fees in any case, and he would not have received one in connection with this application even if the bond had been issued. It is company policy not to charge a fee of any kind if a bond is not issued. Only if the application is approved and the applicant then withdraws is a fee charged. In any case, the premium on a $100,000.00 bond such as that sought here would be $2,500.00. Respondent at one point owned Statewide Insurance and sold it to DSI, the company with whom he was associated at the time he took the bond application from Ms. Devor. His story of the transaction differs somewhat from that of Ms. Devor, however, in that he denies calling her to solicit her business. Instead, he claims, she called him and begged that he get her the bond she needed for this contract. In fact, he claims, she said she'd do anything she had to do, or pay any fee necessary, to get the bond. When he explained what the fees would be, she agreed to them. Respondent contends he got the bond through United American Security in Boston, which charges a setup fee of $500.00. When Ms. Devor, however, could not live with the company's conditions, indicating she could not get the required additional credit from her bank, she rejected that condition and Respondent agreed to try with Pinnacle. It is, he claims, Ms. Devor, who suggested they go to Atlanta where Mr. Mathieson, the representative of the insurance company at the time, imposed the requirement for collateral. He also contends she agreed to this. Afterwards, he asserts, Ms. Devor claimed to have gotten a bond without collateral from a company in Ft. Lauderdale which she presented to the contracting party. From the check for $850.00 which Respondent received from Ms. Devor, he paid $500.00 to United American as its setup fee, and $250.00 to Pinnacle for its fees. Respondent did not provide a cancelled check as evidence of either payment, however. He cannot account for the additional $100.00. In any case, he contends, after Ms. Devor requested a refund, he contacted both United American and Pinnacle to request reimbursement, but both refused because, they claimed, they had accepted her and had done credit checks on her. Respondent claims that Ms. Devor was offered two bonds, both of which she rejected because she did not want to put up the collateral or security requested by the bonding companies. He went to the companies under those conditions because, he contends, she had previously stated she would accept conditions, implying she would do anything necessary to get the bonds. In support of Mr. Leiffer's assertions, he introduced an enrollment form with United American Contractor's Association signed by Ms. Devor which indicates Cobra Construction Corp. applied for enrollment in the association and submitted a check for $500.00 as an enrollment fee. He also introduced a contractor's questionnaire reflecting the payment of a $250.00 application setup fee with Pinnacle to cover underwriting reviews and efforts in establishing a bond account. Ms. Devor, however, while admitting her signature appears thereon, does not recall having signed either document, contending that they may have been among those documents Respondent asked her to sign at the beginning of their relationship regarding this bond, some of which she signed in blank. Respondent, who had previously been with DSI and had just recently gone with ICI, nonetheless could give no reasonable justification for placing the $850.00 fee paid to him by Ms. Devor in his personal bank account and not in the account of one of the two companies.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Administrative Complaint in this case, alleging misconduct by Respondent, Harold Rush Leiffer, be dismissed. RECOMMENDED this 10th day of December, 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 10th day of December, 1992. APPENDIX TO RECOMMENDED ORDER 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: - 5. Accepted and incorporated herein. Accepted and incorporated herein. & 8. Accepted and incorporated herein. Accepted and incorporated herein. First sentence not a FOF. Second sentence accepted but evidence was presented by Respondent to show that Respondent signed an application for membership in UACA ($500.00) and with some other unspecified concern for 1 $250.00 setup fee. Balance of paragraph accepted. Rejected as unproven by clear and convincing evidence. FOR THE RESPONDENT: No Proposed Findings of Fact submitted. COPIES FURNISHED: James A. Bossart, Esquire Department of Insurance 412 Larson Building Tallahassee, Florida 32399-0300 Harold R. Leiffer 2026 St. George Avenue Winter Park, Florida 32789 Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Bill O'Neill General Counsel Department of Insurance The Capitol, PL-11 Tallahassee, Florida 32399-0300
The Issue The issues are whether Respondent has violated Florida Administrative Code Rule 61J2-14.010(1) and section 475.25(1)(e) and (k), Florida Statutes, by failing to place immediately into escrow a security deposit of $5482; violated section 475.25(1)(u) by not being involved with the daily operations of Advantage International Realty, Inc. (AIR), by being hired to qualify AIR and receiving payment from AIR, and failing to direct, control or manage Jennifer Briceno, a sales associate employed by Respondent, while she provided real estate services to two individuals; and violated section 475.25(1)(d)1. by failing to refund $5308 upon demand by Mr. Mansour and Ms. Haddad on December 20, 2011. If so, an additional issue is the penalty that should be imposed.
Findings Of Fact At all material times, Respondent has been a licensed real estate broker, holding license numbers 69234 and 3093422. He has never been disciplined. Licensed as a sales associate since 2000, Respondent served as a sales associate with three brokers. Licensed as a real estate broker in 2002, Respondent served as a broker associate with two brokers until, in August 2002, Respondent served as the broker for his first real estate brokerage. He served as a broker for two brokerages, much of the time simultaneously, from 2002-05 and 2007-09. For the last five months of 2008, Respondent worked as a broker sales associate for a third brokerage, and, from 2009-11, Respondent was registered as a sole proprietorship broker. From November 14, 2011, through January 6, 2012, Respondent served as the broker for AIR. On November 7, 2011, Respondent was listed as a director of AIR with the Department of State, Division of Corporations. AIR became licensed as a Florida real estate brokerage on November 14, 2011, holding license number 104302. Respondent was the qualifying broker of AIR from November 14, 2011, to January 6, 2012. No longer a brokerage after Respondent resigned as its qualifying broker, AIR resumed operations as a brokerage on March 1, 2012, when Jennifer Briceno served as the qualifying broker. She served in this capacity until March 4, 2013, at which point Petitioner suspended the licenses of AIR and Ms. Briceno by separate emergency orders. Ms. Briceno was first licensed as a sales associate in 2008. She served as a sales associate with an unrelated corporation in Tamarac, Florida from May 28, 2008, to October 24, 2011. Her license was inactive until November 14, 2011, on which date she became a sales associate with AIR. On February 17, 2012, she became licensed as a broker and served as a broker associate with AIR until March 1, 2012, at which time she served as its qualifying broker. As noted in paragraph four, from January 6 to March 1, 2012, AIR's brokerage license became invalid due to the lack of a qualifying broker. As noted in paragraph five, Ms. Briceno served at AIR as a sales associate from January 6, 2012, and then as a broker associate from February 17, 2012, until March 1, 2012--an eight-week period during which AIR's brokerage license was invalid due to its lack of a qualifying broker. On November 7, 2011, Respondent was listed as a director of AIR with the Department of State, Division of Corporations. At no time was Respondent ever a signatory on the operating account of AIR. Jackie and Sam Haddad and Morris Mansour are residents of Canada and friends. They decided that they wanted to enter into a lease of a residence in Fort Lauderdale for a vacation during the winter of 2011-12. They agreed that Mr. and Ms. Haddad would occupy the residence for two months, and Mr. Mansour would occupy the residence for the ensuing two months. For the sake of simplicity, they agreed that Mr. Mansour would take in his name the lease for the entire four months, which was to run from December 15, 2011, through April 15, 2012. Ms. Haddad found the subject property on the Internet and got in touch with Ms. Briceno at an unspecified point in time. At some point, Ms. Briceno sent to Mr. Mansour a blank Agreement to Enter into a Lease and asked him to complete, sign, and return the form to her with a check for the entire rent. Mr. Mansour objected to paying the entire rent and asked that he be allowed to pay half at that time and half upon occupancy. Ms. Briceno agreed. Accordingly, on November 12, 2011, Mr. Mansour wired $5500 to AIR and faxed to Ms. Briceno a completed Agreement to Enter into a Lease. AIR did not have an escrow account. Although there was a listing broker for the rental property, Ms. Briceno did not give the deposit check to her. Nor did Ms. Briceno present the funds to AIR's qualifying broker. It appears that Ms. Briceno conducted this real estate business and received the funds prior to AIR's obtaining a qualifying broker. In any event, it appears that Ms. Briceno deposited the funds in AIR's operating account. However, on November 12, 2011, Ms. Briceno faxed the signed Agreement to Enter into a Lease to a sales associate of the listing broker. The net of $5482 posted on AIR's general operating account on November 16. On the same day, AIR's bank statement shows a "counter debit" of $5010. From November 16 through the end of January 2012, this account never had sufficient funds to repay the $5500 or net $5482. After receiving the offer to lease from Ms. Briceno, the sales associate of the listing broker spoke with the owner and learned that the cost of short-term insurance precluded a lease for less than one year. By email dated December 1, the sales associate informed Ms. Briceno that the owner would not accept the offer. After not hearing from Ms. Briceno for some time, Ms. Haddad and Mr. Mansour tried to reach Ms. Briceno, but repeated calls to her business and cellphone numbers went unreturned. Mr. Mansour, who intended to occupy the subject property first, finally contacted the sales associate of the listing broker and learned that the offer had not been accepted. At some point, Darwin Briceno, Ms. Briceno's husband, became involved. By email to Ms. Mansour dated November 29, 2011, Mr. Briceno sent a release covering a refund of $5308, net wire fees and an application fee. On December 8, Ms. Haddad sent an email to someone at AIR stating that they were still waiting for their refund of $5308. Getting no response and having learned Respondent's name in the interim Ms. Haddad re- sent the December 8 email to the administrator of AIR-- attention: Respondent--and warned that they would retain counsel if they did not hear from Respondent within 24 hours. No one heard from Respondent, who cashed AIR checks on January 31 and May 1 in the amounts of $1610 and $3225, respectively. On February 24, 2012, Mr. Briceno sent Mr. Mansour an AIR check in the amount of $5308, but it bounced. The Haddads and Mr. Mansour have never recovered any of their deposit. During the investigation, Respondent admitted to Petitioner's investigator that he was not involved with the day- to-day operation of AIR, and he did not know anything about how AIR had handled the money that Mr. Mansour had sent. Respondent specifically admitted that he was a "broker for hire" at AIR, meaning that he had rented his broker's license to qualify AIR as a real estate brokerage. Respondent's lack of involvement in the business of AIR is confirmed by Karrell Brett, whom Mr. Briceno hired, on behalf of AIR, as a sales associate, as of December 9, 2011, Ms. Brett interviewed with Mr. Briceno, not Respondent. While employed by AIR, Ms. Brett did not know Respondent and believed her broker was Mr. Briceno. Although Ms. Brett decided on her own to advise her clients to deposit any escrow funds with a title company, she never received any instruction from Respondent to deposit escrow funds with a title company. Respondent never made any attempt to supervise any sales associate or other employee of AIR in the conduct of real estate business on behalf of the corporation that Respondent had qualified as a real estate brokerage. Respondent had been the qualifying broker for two days when the deposit was posted to AIR's account; he was responsible for AIR's failure to account for this money from the point of deposit forward until his resignation. Likewise, Respondent had been the qualifying broker for about six weeks when he received the latter of Ms. Haddad's emails demanding a refund of the deposit. Respondent did not ensure that AIR refunded the deposit at that time.
Recommendation It is RECOMMENDED that the Florida Real Estate Commission enter a final order finding Respondent guilty of Counts 2, 3, and 4, dismissing Count 1 as duplicative of Count 2, and revoking Respondent's real estate broker's license. DONE AND ENTERED this 10th day of September, 2013, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 10th day of September, 2013. COPIES FURNISHED: Nancy Pico Campiglia, Esquire Your Towne Law, P.A. 5465 Lake Jessamine Drive Orlando, Florida 32839 Daniel Brackett, Esquire Department of Business and Professional Regulation Suite 42 1940 North Monroe Street Tallahassee, Florida 32399 J. Layne Smith, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Darla Furst, Chair Real Estate Commission Department of Business and Professional Regulation 400 West Robinson Street, N801 Orlando, Florida 32801
The Issue Whether Rules 3E-600.013(1)(f), 3E-(300.013(1)(p) and 3E-600.013(2)(g), Florida Administrative Code are invalid exercises of delegated legislative authority.
Findings Of Fact Respondent is the state agency charged with the administration and enforcement of Chapter 517 Florida Statutes, which is referred to as the Florida Securities and Investor Protection Act. Rulemaking authority is conferred on Respondent by the provisions of Section 517.03, Florida Statutes. Pursuant to its rulemaking authority, Respondent filed documents on November 15, 1979, with the Florida Secretary of State to adopt the challenged paragraphs as part of Rule 3E- 600.13, Florida Administrative Code. This rule became effective on December 5, 1979, and was subsequently renumbered as 3E- 600.013, Florida Administrative Code. The summary of the public hearing held by the Respondent on November 7, 1979, as part of the rulemaking process makes no mention of the specific provisions at issue here. Section 517.l61(1)(h), Florida Statutes, provides, in pertinent part, as follows: Registration under S. 517.12 may be denied or any registration granted may be revoked, restricted, or suspended by the department if the department determines that such applicant or registrant: * * * (h) Has demonstrated his unworthiness to transact the business of dealer, investment adviser, or associated person; Rule 3E-600.013, Florida Administrative Code, provides, in pertinent part, as follows: The following are deemed demonstrations of unworthiness by a dealer under Section 517.161(1)(h), Florida Statutes, without limiting that term to the practices specified herein: * * * (f) Extending, arranging for, or participating in arranging for credit to a customer in violation of the Securities Exchange Act of 1934 or the regulations of the Federal Reserve Board; * * * Violating any rule of a national securities exchange or national securities association of which it is a member with respect to any customer, transaction or business in this state: * * * The following are deemed demonstrations of unworthiness by an agent under Section 517.161(1)(h), Florida Statutes, without limiting that term to the practices specified herein: * * * Engaging in any of the practices specified in subsections (1) ... (f)... (p) ... Thomas James Associates, Inc. is a securities dealer as defined in Section 517.021(9)(a)1., Florida Statutes, and is registered with Respondent. Section 517.12(16), Florida Statutes, requires securities dealers to be registered as a broker or dealer with the Securities and Exchange Commission. The other Petitioners are or were associated persons of Thomas James Associates, Inc. within the meaning of Section 517.021(4), Florida Statutes. Each Petitioner has been charged in a pending disciplinary proceeding with having demonstrated his unworthiness to transact business in the State of Florida by having committed one or more violations of the foregoing rules either as a dealer or as an agent. More specifically, Respondent's charge of unworthiness to transact business in the State of Florida is based on the allegations that Petitioners have violated certain Rules of Fair Practice of the National Association of Securities Dealers (NASD), the rules of the Securities and Exchange Commission (SEC), the Securities and Exchange Act of 1934, and the rules of the Federal Reserve Board. Section 517.161(6), Florida Statutes, gives the Respondent the authority to deny an application for registration or to suspend or restrict any registration granted pursuant to Section 517.12, Florida Statutes, if the applicant or registrant is charged in a pending enforcement action, including any proceeding brought by the SEC or NASD, with any conduct that would authorize denial or revocation under Section 517.161(1), Florida Statutes. None of the challenged provisions of Rule 3E-600.013, Florida Administrative Code, have been amended since originally adopted in 1979. None of the statutes, regulations or rules referred to in Rules 3E-600.013(1)(f),(p), Florida Administrative Code, have been filed with the Department of State, with the following exception. On August 30, 1982, Respondent filed with the Department of State certain rules of the Securities and Exchange Commission and of the Municipal Securities Rulemaking Board. Respondent has not prepared or filed with the Department of State any other certification describing this referenced material and specifying other rules to which the referenced material applies. Some of the rules which are incorporated by reference by Rule 3E- 600.013(1)(p), Florida Administrative Code, have been changed since its adoption in 1979 by Respondent. Respondent does not maintain a copy of all rules that are incorporated by reference either in the form as they existed in 1979 or as subsequently amended. Respondent has taken no action to amend its rules to reflect changes that may be made from time to time in rules that have been incorporated by reference. Petitioners are members of NASD who have voluntarily agreed to comply with the rules of NASD as they are or may from time to time be adopted, changed, or amended by NASD. Petitioners are likewise required to comply with the rules of the SEC, the Securities and Exchange Act of 1934, and the rules of the Federal Reserve Board as those rules or laws are or may from time to time be adopted, changed or amended. Respondent makes its own factual determination as to whether an applicant or registrant has demonstrated its unworthiness by violating rules proscribed by Rules 3E-600.013(1)(f) and (p) and 3E600.0l3(2)(q), Florida Administrative Code. Respondent does not wait to bring disciplinary action against a registrant or applicant until there has been a formal and final determination by a national securities exchange or by a national securities association that a violation of its rules has occurred. For example, Respondent does not wait for NASD to bring disciplinary action against an applicant or a registrant if Respondent has determined on its own that the applicant or registrant has violated NASD rules.
Findings Of Fact Based on the stipulation of the parties, on the exhibits received in evidence and on the testimony of the witnesses at the hearing, I make the following findings of fact. Petitioner H. A. Kenning, Jr. ("Kenning"), a Georgia resident, has been in the securities business since May 1, 1972, serving in various capacities including that of registered representative and vice president of sales. Kenning was first registered in Florida in 1972. Kenning has an extensive history of registration in the state of Florida as a registered representative. Kenning was last registered in the state of Florida as an associated person from February of 1982 to June of 1983. Petitioner H. A. Kenning Investments, Inc., ("Company"), a Georgia corporation, is registered as a securities broker/dealer in the states of Georgia, Louisiana, and Illinois, as well as with the National Association of Securities Dealers, Inc., the U.S. Securities and Exchange Commission, and the Securities Investor Protection Corporation. Such registrations were effective prior to Petitioners' submission of their applications for registration as a broker/dealer and principal thereof. In an effort to pursue his chosen profession in the state of Florida and to service clients now residing in Florida, on October 29, 1985, Kenning filed an application and supporting documentation for registration as a securities principal. On that same date, the Company filed its application and supporting documentation for registration as a broker/dealer. The Respondent received Petitioners' applications on October 30, 1985. The applications took the form of Form BD for the broker/dealer and Form U-4 for the principal, H. A. Kenning, Jr. Following various exchanges of correspondence between the Department and the Petitioners, by letter dated August 8, 1986, the Department notified the Petitioners that it intended to deny their applications. The first paragraph of the letter included the following: These denials are based upon the Depart- ment's determination that you have demon- strated your unworthiness to transact the business of a dealer and principal. The denial letter of August 8, 1986, went on to state at length the specific factual and legal bases for the denials and concluded with a statement advising the Petitioners of their right to request a hearing. In an Exchange Hearing Panel decision 80-70, entered November 12, 1980, the New York Stock Exchange found that H. A. Kenning, Jr.: engaged in conduct inconsistent with just and equitable principles of trade in that he failed to follow customer instructions; and violated Exchange Rule 408(a) in that he exercised discretionary power in a customer's account without first obtaining the written authorization of the customer. The Hearing Panel found Kenning guilty of the above-stated charges and as a penalty, imposed a bar on him from employment in any capacity with any member or member organization for a four (4) month period. In Exchange Hearing Panel decision 82-72, entered July 6, 1982, the New York Stock Exchange found that H. A. Kenning, Jr., violated Exchange Rule 408(a) in that he accepted orders for the account of a customer of his member organization employer from a person other, than the customer without first obtaining the written authorization of the customer. The Exchange Hearing Panel found Kenning guilty of the aforesaid charge and, as a penalty, in a consent order censured Kenning, imposed a fine of $10,000 against him, and suspended him from employment or association in any capacity with any member or member organization for a period of two (2) months. In June 1983, Kenning's employment with J. C. Bradford & Co. was terminated for depositing checks into his personal securities account which were later returned for insufficient funds. The New York Stock Exchange admonished Kenning's conduct and cautioned him with respect to any further misconduct. The events described in paragraphs 4 and 5, above, took place while Kenning was registered in the state of Florida. The Department did not revoke his registration or take any action against him. After the first disciplinary action against Kenning, the Department allowed Kenning to transfer brokerage firms two times without revoking, or in any manner restricting, his registration. Except for the reasons stated in the Department's denial letter dated August 8, 1986, (which are the incidents described in paragraphs 4, 5, and 6, above,) the Petitioners are otherwise eligible for registration. Moreover, Petitioners were registered in the states of California and Texas subsequent to the Department's denial on August 8, 1986. Since the last disciplinary action entered July 1982, no federal, state, or self-regulatory organization has found Kenning to be in violation of any disciplinary rule. The Company has never had a disciplinary action filed against it by any federal, state, or self-regulatory agency. During 1985, the staff of the Department's Division of Securities was almost tripled in size. Shortly after the increase in staff size, a Task Force recommended that the Division devote more time and energy to the review of applicants with disciplinary history in order to more carefully screen such applicants. As a result of the increase in staff size and the increased emphasis on review of applicants with disciplinary history, the Department is now rejecting applications that previously might have gotten through a cursory review.
Recommendation Based on all of the foregoing, it is recommended that the Department of Banking and Finance issue a final order in this case which denies the application of both Petitioners. DONE AND ENTERED this 31st day of March, 1987, at Tallahassee, Florida. M. M. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3569 The following are my specific rulings on all of the findings of fact proposed by the parties. Findings proposed by Petitioner's The findings of fact proposed by the Petitioners are found in a series of eleven unnumbered paragraphs. The ordinal numbers which follow correspond to the sequence of those eleven unnumbered paragraphs. I have treated as the beginning of a paragraph each indented unnumbered line. First paragraph: Accepted. Second paragraph: First ten lines accepted. The remainder of this paragraph is rejected as irrelevant or as constituting subordinate and unnecessary details. Third paragraph: Rejected as irrelevant or as constituting subordinate and unnecessary details. Fourth paragraph: Rejected as irrelevant or as constituting subordinate and unnecessary details. Fifth paragraph: Rejected as irrelevant or as constituting subordinate and unnecessary details. Sixth paragraph: Accepted in substance with modifications in the interest of clarity and accuracy. Seventh paragraph: Rejected as constituting procedural details that are not in dispute. (These details are covered in the introductory material and not in the findings of fact.) Eighth paragraph: Rejected as constituting procedural details that are not in dispute. (These details are covered in the introductory material and not in the findings of fact.) Ninth paragraph: Accepted in substance (with some modifications) except for the sequence of events. Sequence of events is only partially consistent with the evidence. Tenth paragraph: Rejected as irrelevant or as constituting subordinate and unnecessary details. Eleventh paragraph: Accepted. Findings proposed by Respondent The numbers which follow correspond to the numbers of the paragraphs in the findings of fact portion of the Respondent's proposed recommended order. Paragraph 1: Rejected as constituting a conclusion of law rather than a finding of fact. Paragraph 2: First two and a half lines accepted. Portion beginning "...and is therefore" is rejected as Paragraph 3: First three and a half lines accepted. Portion beginning"...and is therefore" is rejected as constituting a conclusion of law rather than a finding of fact. Paragraph 4: Accepted. Paragraph 5: Accepted. Paragraph 6: Accepted. Paragraph 7: First sentence accepted in substance along with additional findings about Mr. Kenning's Florida registration history. Second sentence rejected as subordinate or unnecessary details in light of other evidence. Paragraph 8: Rejected as subordinate commentary rather than proposed findings. (This paragraph might make good footnote material for the findings proposed in paragraphs 4, 5, and 6.) Paragraph 9: Rejected as constituting argument or legal conclusions rather than proposed findings of fact. Paragraph 10: Rejected as constituting argument or legal conclusions rather than proposed findings of fact. COPIES FURNISHED: H. Richard Bisbee, Esquire Assistant General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 A. Keith Logue, Esquire 900 Rhodes-Haverty Building 134 Peachtree Street Atlanta, Georgia 30303 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305 =================================================================
The Issue The issue is whether the proposed disqualification of Petitioner’s bid is contrary to the agency's governing statutes, rules, or policies or contrary to the bid solicitation specifications within the meaning of Subsection 120.57(3)(f), Florida Statutes (2007).1
Findings Of Fact Petitioner is a closely held Florida corporation licensed in the state as a general contractor. Mr. Milton “Mitt” Fulmer is the owner, sole director, and only stockholder. Respondent is a state agency. Respondent regularly solicits bids for construction services to build and maintain its facilities. On August 3, 2007, Respondent issued an invitation to bid identified in the record as Bid No. 03-07/08 (the ITB). The ITB solicited bids to construct a new headquarters for the Apalachicola National Estuarine Research Reserve, commonly referred to in the record as ANERR. Four companies responded to the ITB. Petitioner submitted the lowest bid. Intervenor submitted the next lowest bid. Intervenor is a Florida corporation licensed in the state as a general contractor. The ITB required bidders to submit a bid bond in an amount equal to five percent of the amount of the bid, plus alternates. A bid bond is not a performance bond. A bid bond is customarily provided for gratis or a nominal charge, and variations in bid bonds do not result in a competitive advantage among bidders. A bid bond merely insures the successful bidder will enter into the contract and provide whatever payment and performance bonds (performance bond) the ITB requires. The Instructions to Bidders for the ITB required all bonds to be issued by a surety company that “shall have at least the following minimum rating in the latest issue of Best’s Key Rating Guide (Best's): 'A'” (the bond rating requirement). The bond rating requirement was a bid solicitation specification required for a bond to be acceptable to Respondent. Petitioner submitted a bid bond issued by a surety identified in the record as International Fidelity Insurance Company (IFIC). IFIC has Best's rating of "A-." Respondent proposes to reject Petitioner's bid for failure to satisfy the bond rating requirement and to award the bid to Intervenor as the second lowest bidder. The bond rating for the surety company that issued the bid bond for Intervenor is not in evidence. For reasons stated in the Conclusions of Law, Petitioner has the burden of proof. The parties provided the trier of fact with a wealth of evidence during the final hearing. However, judicial decisions discussed in the Conclusions of Law confine the purpose of this proceeding to a review of the proposed disqualification of Petitioner's bid at the time Respondent exercised that agency discretion. This proceeding is not conducted to formulate final agency action that determines which bidder should receive the contract or whether all of the bids should be rejected. The review of proposed agency action is limited to a determination of whether the proposed action violates a statute, rule, or specification. If a violation occurred, the review must then determine whether the violation occurred because Respondent exercised agency discretion that was clearly erroneous, contrary to competition, or an abuse of discretion. A preponderance of evidence does not show that the proposed agency action violates a statute, rule, or specification. That finding ends the statutorily authorized inquiry. In the interest of completeness and judicial economy, however, the trier of fact also finds that the exercise of agency discretion that led to the proposed agency action is not clearly erroneous, contrary to competition, or an abuse of discretion. It is undisputed that the proposed agency action does not violate a statute or rule. Petitioner implicitly argues that the proposed agency action violates the bond rating requirement in the bid specifications because an "A-" rating is equivalent to an "A" rating. The Best's ratings of surety companies are not equivalent. Before discussing the differences, however, it is important to note that Respondent did not base its proposed rejection of Petitioner's bid on an independent evaluation of the data used to distinguish the two ratings. The failure to conduct an independent evaluation of the differences in Best's ratings criteria was neither clearly erroneous, contrary to competition, nor an abuse of discretion. The differences in Best's ratings criteria are complex and proprietary. Respondent lacks sufficient staff and expertise to evaluate the data underlying the Best's ratings or the quality of surety companies. Respondent relied on its own experience, custom and practice in the surety industry, and advice of counsel. Respondent also took into account the unusual size and complexity of the ANERR project, time constraints, and the added risk aversion to any delay in starting the project. The proposed rejection of Petitioner's bid is consistent with Respondent's past practice. Respondent has consistently required compliance with bond rating requirements for bid bonds in previous projects. In the course of bidding 500 to 600 projects over approximately an eight-year period, only one of the apparent low bidders offered Respondent a bid bond from an "A-" rated surety when an "A" was required by the bid specifications. Respondent disqualified that bid, which was for a project of approximately four million dollars; the only previous project that approaches the $5-$6 million cost of the ANERR project. All other low bidders complied with the specification as written. Respondent reasonably inferred that the surety company for the bid bond would be the same for the performance bond. Respondent's experience with industry practice in the 500 to 600 previous projects suggests the surety company that writes the bid bond will also write the performance bond. It is also customary for a surety company to provide the bid bond for gratis or for a nominal charge because the surety company collects its premium upon writing the subsequent payment and performance bonds. Respondent's experience also shows that contractors must qualify for their surety bonds, and not all contractors succeed in qualifying for surety bonds. Moreover, not all contractors can succeed in procuring surety bonds from an A-rated company. The temporal exigencies between the award of the bid and the provision of a performance bond also supported Respondent's inference that the surety company for the bid bond would be the surety company for the performance bond. The General Conditions of the contract required Petitioner to submit evidence of its ability to provide the requisite performance bond within two working days of being notified of a successful bid. Petitioner had ten days to actually furnish the bond. Establishing a surety is not perfunctory but entails a prequalification process. Petitioner had to supply its bonding agent with information including project history, credit references, reviewed financial statements, personal financials, and details on its assets. Any delay in the ANERR project, in contrast to its previous projects, for reasons of contractor default or otherwise, would expose Respondent to greater risk and greater expense. Respondent reasonably experienced a heightened risk aversion for the ANERR project than the risk aversion Respondent experienced during previous projects. The $5 or $6 million price tag for the ANERR project is about 400 percent greater than all but one previous project in Respondent's experience. Unusual aspects of the project, including its design elements and its environmentally sensitive location, could be irreparably harmed in the event of default or delay. The nature of the project's funding, part of which is a federal construction grant that expires on a date certain and part of which involved taxes paid by Floridians, contributes to the unique qualities of the project that support Respondent's greater risk aversion in connection with the ANERR project. At the time Respondent had to make a decision to reject or accept Petitioner's bid, Respondent believed in good faith a distinction existed between Best's "A" and "A-" ratings. The Best's ratings publication is a summary based on data, much of which is proprietary. It would be pointless for Respondent to "cross examine" a summary before rejecting Petitioner's bid if significant portions of the data underlying the summary are proprietary and unavailable to the cross-examiner. If Respondent were to have sufficient staff and expertise to independently evaluate the data underlying the Best's ratings, if some of the data were not proprietary, and if such an evaluation were the basis for the proposed rejection of Petitioner's bid, the outcome would not alter the proposed rejection of Petitioner's bid. The Best's ratings are based, in relevant part, on Best's Capital Adequacy Ratio, commonly referred to in the record as BCAR. The BCAR score estimates the ability of a surety company to pay claims. The minimum BCAR score for an "A" rating is 145, meaning the value of a surety company's assets exceed its estimated claims by a minimum of 45 percent. The minimum BCAR score for a surety with an "A-" rating is 130, meaning the value of its assets exceed its estimated claims by 35 percent. Although a 15-percent differential may appear small, Best's states the differentials by reference to a range of scores. The actual differential between individual sureties with an "A" rating and an "A-" rating may be as little as one percent or as great as 29 percent. An independent evaluation by Respondent would have revealed a margin of error as large as 29 percent in the standard used to evaluate a surety company's ability to pay claims. If the proposed rejection of Petitioner's bid were based on an independent evaluation of the data underlying the Best's rating summaries, it would have been reasonable for Respondent to reject Petitioner's bid. It would have been reasonable for Respondent to reject a 29-percent margin of error for a surety company in a project that is 400 percent larger than the typical project and for which Respondent reasonably has a greater risk aversion due to the temporal limit on the availability of funds, the complexity of the project, and its environmental sensitivity. Much of the data underlying Best’s published ratings is proprietary information. However, the available evidence shows that Best's adjusts BCAR values based on qualitative factors such as: business plan, management quality, liquidity of assets, liabilities, and other operational aspects of the surety company. A qualitative analysis shows that ratings of "A" and "A-" are not the “functional equivalent” of each other. Petitioner submitted evidence that Best's "bands" surety companies with ratings of "A" and "A-" together in the Best's rating guide. However, the relevant specification in the ITB did not express the bond rating requirement in terms of a band or category. Rather, Respondent requested an "A" or better rating according to Best’s Key Rating Guide. An independent evaluation by Respondent would have provided a reasonable basis for an inference that the surety company for the bid bond and performance bond would be the same company. Petitioner has used IFIC for more than one year. During that time, IFIC has issued all of Petitioner’s bid bonds. IFIC issued Petitioner two payment and performance bonds. Petitioner was unable to identify any other surety company that had issued its payment and performance bonds within the time period during which Petitioner has used IFIC. Petitioner did not ask its insurance broker to obtain a bid bond from a company other than IFIC. When Petitioner sent a bid bond order form to its broker, Petitioner provided information to the broker about the project and the amount of the bid and Respondent’s surety requirements. The Bid Bond Order Form does not indicate the minimum bond rating requirement specified in the ITB. Mr. Fulmer had a conversation with his broker about Respondent’s bid security requirements, but it is unclear whether the relevant specifications were faxed to the broker or whether Mr. Fulmer saw the Bid Bond Order Form before it was provided to the broker. In response to the Bid Bond Order Form, the broker generated a bid bond and sent the bond to Petitioner for signature. At the time Petitioner received the bid bond, Petitioner did not consult Best’s Key Rating Guide to confirm that its surety met the minimum bond rating requirement in the ITB. It is unnecessary to determine whether the bond rating requirement was a material or immaterial requirement. If it were material, Respondent had no discretion to waive it. If it were non-material, within the meaning of Florida Administrative Code Rule 60D-5.002(9)(Rule), evidence discussed in previous Findings in this Order shows that the exercise of agency discretion underlying the refusal to waive the bond rating requirement was reasonable and was not clearly erroneous, contrary to competition, arbitrary, or capricious. Petitioner's bid protest is not, in substance, a challenge to the bid solicitation specification identified in this Order as the bond rating requirement. If the substance of the bid protest were deemed to be a challenge to a bid specification requirement, the challenge is untimely. On October 30, 2007, Respondent opened the bids, identified Petitioner as the apparent low bidder, consulted Best's for information on the "A-" rating, consulted with counsel, and disqualified Petitioner's bid. Petitioner filed a Notice of Intent to Protest on November 8, 2007, and a Petition to Protest on November 13, 2007. A deemed challenge to the specification for the minimum bond rating requirement was untimely within the meaning of Subsection 120.57(3)(b).
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Respondent issue a final order dismissing the protest. DONE AND ENTERED this 21st day of March, 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 21st day of March, 2008.
Findings Of Fact Respondent has been employed in the securities industry since approximately 1957. He has worked for a number of broker/dealers over the years and is familiar with the procedures involved in transferring employment from one broker to another. It is the custom in the securities industry that when a securities salesperson changes employment, forms U-4 and U-5 are filed with the National Association of Securities Dealers. As registration is approved by that organization and by the various states involved, the states give that information to the National Association of Securities Dealers, which in turn gives that information to the securities firm which employs the associated person seeking registration, and that brokerage firm in turn notifies the applicant. Respondent began to work at Alison Baer Securities, Inc., in September, 1988, and remained employed there until February, 1989. When he associated himself with Alison Baer, Respondent applied for registration as an associated person with that company. As is the proper procedure, he submitted a U to the National Association of Securities Dealers. While waiting for his registration to be approved, Respondent maintained telephone and personal contact with his own clients. He did not, however, sell or offer to sell securities until after he was sure his registration was approved. Respondent's application for registration as an associated person with Alison Baer Securities, Inc., was approved by the National Association of Securities Dealers and was also approved by the states of New York, Texas, Georgia, Florida, and Oklahoma. In late October of 1988, Jeffrey Britz, the President and Chief Executive Officer of Alison Baer Securities, told Respondent that his registration as an associated person with Alison Baer Securities had been approved by the state of Florida. In fact, Respondent was not registered as an associated person by the state of Florida until December 7, 1988. Respondent did not attempt to directly confirm with the Department of Banking and Finance his registration as an associated person with Alison Baer Securities. Respondent has applied for registration with the Department as an associated person with Shamrock Partners, Ltd. The Department denied that application based solely on the allegations which are the subject matter of this proceeding.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint, dismissing the Administrative Complaint filed against him in this cause, and granting his application for registration with the Department as an associated person with Shamrock Partners, Ltd. DONE and ENTERED this 14th day of February, 1992, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1992. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed finding of fact numbered 27 has been adopted in this Recommended Order. Petitioner's proposed findings of fact numbered 1-5, 11-14, 16-18, 23- 26, 28, 29, and 31-34 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Petitioner's proposed findings of fact numbered 6-10, 15, 19, and 30 have been rejected as being subordinate to the issues involved in this proceeding. Petitioner's proposed findings of fact numbered 20-22 have been rejected as not being supported by any competent evidence. COPIES FURNISHED: Deborah Guller, Esquire Assistant General Counsel Office of the Comptroller Suite 211 111 Georgia Avenue West Palm Beach, Florida 33401 Richard Doggett, Esquire 808 Northeast 3rd Avenue Fort Lauderdale, Florida 33304 Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350
Findings Of Fact Petitioner filed application for registration with respondent a a securities agent with First Florida Securities Inc., Pompano Beach, Florida, on March, 1977. Although he met the various statutory and regulatory procedural requirements for registration, on or about May 19, 1977, he was advised by the Director, Division of Securities, of intended denial of his application and advised of his right to petition for an administrative hearing. Petitioner did so request a hearing on June 2, 1977. The stated ground for the proposed denial of the application in accompanying "Administrative Charges and Complaint" was as follows: "The license application of respondent was refused or denied by the Division of Securities, Department of Banking and Finance, State of Florida, by stipulation and consent on February 18, 1976. Said denial constitutes prima facie of unworthiness to transact the business of a securities salesman In the State of Florida." The above-mentioned "Stipulation and Consent" resulted from a prior application denial by respondent of an application by MFP Petroleum Exploration and Investment, Inc., its officers and salesman, including petitioner. The grounds for denial of petitioner's application in that instance were that he had sold unregistered securities in the form of shares in oil drilling ventures in violation of Section 517.07, F.S., while not registered as a securities salesman in further violation of Section 517.12(1), F.S. The various parties in that administrative proceeding consented to the denial of their applications by stipulation without admitting the allegations of respondent. (Exhibits 1, 2, 4, 5) Petitioner has never been registered with respondent as a securities dealer, agent or salesman. He testified that when he joined MFP sometime in 1974, its president, Mark F. Preddy, led him to believe that one selling interests in oil drilling ventures need not register as a salesman in Florida. Consequently, he sold such interests to clients for several months before he learned that it was necessary for him to be so registered. Some nine months after commencing employment with MFP, he went to Shreveport, Louisiana, to take securities examinations for Florida and the NASD. After waiting approximately three months more to obtain the results of the MFP application for registration, he resigned from the firm. He admitted selling during the entire nine-month period in which he had been associated with MFP, even though he knew during a substantial portion of that period that registration was required. After his resignation, he authorized an attorney to execute the "Stipulation and Consent" which authorized respondent to deny his application for registration. (Testimony of Weber, Exhibits 2, 3, 5) A client of petitioner testified as to the latter's honesty and conscientiousness. (Testimony of Hansis) Respondent's Assistant Director, Division of Securities, stated the Division's position that although it felt justified in denying petitioner's current application, it would be amenable to reevaluate any application submitted one year from the final order in this proceeding and, if petitioner's record was clear and he otherwise met requirements for registration, it would issue the same on a supervised basis for a period of one year. (Testimony of Brandi)
Recommendation That petitioner Paul Anthony Weber be issued a certificate of registration as a securities salesman pursuant to Chapter 517, Florida Statutes. DONE and ENTERED this day of August, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Ryland Terry Rigsby, Esquire Assistant General Counsel Office of the Comptroller Legal Annex Tallahassee, Florida 32304 Paul Anthony Weber 1745 Northeast Fifty-Second Street Ft. Lauderdale, Florida 33308
Findings Of Fact By Prehearing Stipulation entered into by the parties on August 30, 1990, the parties agreed, and it is so found, that: Petitioner, Edward T. Strehlau, is President and control person of Deerfield Securities, Inc. On or about February 3, 1989, Petitioners filed an application, (Form BD), for registration as a broker/dealer, which was signed by Mr. Strehlau. On or about March 15, 1989, Petitioners filed with the Division an amendment to that Form BD. On or about April 19, June 22, and July 20, 1989, Petitioners filed additional amendments to the Form BD initially signed and submitted on behalf of the Petitioners by Mr. Strehlau. All of the Forms BD and amendments filed by Petitioner, Strehlau, with the Division were represented by him as true and complete. On February 3, 1989, Petitioner, Strehlau, also filed the Articles of Incorporation of Deerfield Securities, Inc., with the Florida Secretary of State. These Articles listed Edward T. Strehlau, Patericia O'Dell, William Manger, and Patricia Strehlau as Directors. The Division of Securities requires the filing of the Articles of Incorporation along with the dorm BD. This requirement is outlined in Section 517.12, Florida Statutes. Neither William Manger nor Patricia Strehlau were listed as Directors of Deerfield Securities, Inc., on the Form BD or on any amendments thereto which were filed with the Division. Mr. Manger is the subject of a complaint relating to securities violations committed by Eiffel Securities, Inc., Mr. Manger, a Mr. Riddle, and a Mr. Ashbee, in the State of Tennessee. On or about February 23, 1989, Mr. Strehlau, as President of Deerfield, withdrew the application for registration of Deerfield Securities, Inc., as a broker dealer with the State of Tennessee, and further agreed not to reapply for registration as a broker/dealer in that State, and not to sell Deerfield Investments, Inc.'s investment units in Tennessee. Deerfield Securities, Inc. is a wholly owned subsidiary of Deerfield Investments, Inc. Edward T. Strehlau is a control person and President of Deerfield Investments, Inc. The principal place of business of Deerfield Securities, Inc. is Sarasota, Florida. William Manger, at all times pertinent hereto, was President and a control person of the aforementioned Eiffel Securities, Inc., a Tennessee corporation. Petitioner, Edward T. Strehlau, was a control person of Eiffel Securities, Inc., during the period June 1, 1988 through September 21, 1988. Eiffel Securities, Inc. was a wholly owned subsidiary of Tennessee Investments Marketing Enterprises, (TIME), and Edward T. Strehlau was vice-president of TIME between June, 1988 and September, 1988. On February 3, 1989, Petitioner Strehlau paid $200.00 in filing fees for Deerfield Securities, Inc. with the Florida Division of Securities. On February 10, 1989, The Division of Securities notified Deerfield of several deficiencies in its application for registration as a securities dealer. These deficiencies included a requirement for: the officer or partner names of the parent firm; registration as a foreign corporation or a legal opinion indicating no need therefor;+ a clearing agreement from a dealer in Florida signed by both firms; Articles of Incorporation or partnership agreement; proof of securities effectiveness and compliance with SIPC (Securities Investors Protection Corporation). Thereafter, on February 27, March 16, April 20, June 22, and July 18, 1989, Mr. Strehlau sent letters to the Division of Securities in which he attempted to convince the Division of his compliance with the requirements set forth in the February 10, 1989 deficiencies letter. The Petitioner's efforts, however, were not supported by facts in some particulars. For example, the clearing agreement with OTRA, to be signed by both parties, was signed only by Petitioner Strehlau as President of Deerfield Securities, Inc., and attested by Patericia O'Dell of the firm. No signature from any responsible party of OTRA appears on the document. By letter dated December 2, 1988, Mr. Strehlau submitted this unilaterally executed clearing agreement. By letter dated February 22, 1989, the vice- president for finance of the SIPC attested that Deerfield Securities, Inc. was, as of that date, registered with the Securities and Exchange Commission, (SEC), as a securities broker under Section 15(b), of the 1934 Securities Investor Protection Act, and by operation of that Act, the corporation would be a member of SIPC unless its business consisted exclusively of various activities which are not pertinent to this hearing. It would appear, therefore, that Deerfield Securities, Inc. was, at the time of application at least, a member of SIPC. It is also found, however, that the application for registration submitted by Mr. Strehlau on behalf of himself and Deerfield Securities, Inc. contained what appears to be a material misrepresentation of fact in that it did not list Mr. Manger and Mrs. Strehlau as Directors. Mr. Manger had a disciplinary history in the industry in Tennessee and his omission was material. Article VI of Deerfield Securities' Articles of Incorporation filed with the Florida's Secretary of State's office listed Mr. Manger as one of the original Directors of Deerfield Securities, Inc. as of February 3, 1989. However, when Mr. Strehlau submitted the application for registration for Deerfield, (Form BD), neither that form nor any of the subsequent amendments listed Manger as a Director or affiliated person even though the form required that all Directors be listed. Mr. Strehlau contends that Manger and Mrs. Strehlau were omitted because neither were to take an active part in the management of Deerfield's operations. The Division, however, considered the omission to be a false material statement since the Directors of an applicant are considered to be pertinent to its operation. In this, the Division is correct. The Division also took the position that the pending Tennessee disciplinary action against Mr. Manger was significant. It surmised that Manger, seeing he could not be licensed in Florida on his own, was attempting to achieve this end through Mr. Strehlau, and the Department was concerned there was still a relationship between Manger and Deerfield. There is no evidence, direct or otherwise, to support that suspicion. When an application form is sent to an applicant, upon the applicant's request, an instruction sheet is sent with it which outlines the basic requirements for filing. These instructions are not, however, all inclusive or controlling. The statutes and Rules of the Department, pertinent to criteria for application and registration, constitute the ultimate guidelines over who is approved for registration. When Division analysts review an application, they check it against a requirements check list to insure that all requirements are met. If required information is not included with the application, the Division must notify the applicant of the omitted information within 30 days. If the requested information is received within 60 days, the Division then has an additional 90 days in which to rule on the application. If the omitted information is not timely received, however, the Division can deny the application for incompleteness or approve it if appropriate. On the other hand, when all required information is received timely, if the Division does not act on the application within 90 days, the application is automatically approved and if a discrepancy is thereafter noted, corrective action must be through disciplinary action rather than denial. The Division's denial action here was based on two grounds. The first was the failure to list Mr. Manger as a Director on the original Form BD or any of the amendments thereto. The second was Mr. Manger's prior and pending disciplinary record. Even if the pending action were not considered, the Division would still have denied the Petitioner, Deerfield's, application based on the prior, completed disciplinary actions against Mr. Manger in Tennessee. Petitioner claims that the Division did not request a second time those items listed on the initial deficiency letter and which were not thereafter provided by him. It is the Division's policy that once the initial deficiency letter is sent, calling for additional information, if the applicant submits only a part of those items identified, it will not send out another notification reminding the applicant of the still- missing items. It is not required that such follow-up notification be sent. If, however, the applicant calls and inquires if its application is complete, the Division will advise the applicant which of the previously noted deficiencies have not yet been corrected. Here, no such inquiry by the Petitioner was made. In this case, the Division took the position that Petitioner's application was never complete since there was no clearing agreement signed by the required parties prior to approval. Further, Mr. Strehlau's application as a principal failed to include a proper copy of his personal disciplinary history regarding a dismissed charge of felonious pointing a fire arm in Oklahoma in 1981. Under Florida law, every securities dealership must have a registered principal and Mr. Strehlau was to fill that capacity for Deerfield. Since his application could not be deemed complete because of the failure to provide all the required information, neither could Deerfield's be deemed complete. The State of Florida will not approve the application of a broker/securities dealer without approval of the National Association of Securities Dealers, (NASD). It is normal practice for NASD and Florida approval to be at the same time. There is an attempt at coordination, but Florida cannot approve a dealer for registration without the approval of the SEC and NASD. As of March 8, 1989, the state had been advised that NASD was prepared to approve Deerfield Securities, Inc., though it had some reservations about the firm which were insufficient to support denial. Even had NASD granted approval, however, NASD registration and membership does not guarantee Florida registration. The standards for registration are different. No doubt Mr. Strehlau made many phone calls to the Division in an effort to get approval of these applications. Without question he submitted numerous amendments to the Form BD in an effort to provide that information that the Division asked for in a timely and proper manner. His claims that neither Mr. Manger nor Mrs. Strehlau were listed as Directors on any of the forms because they were not involved in the operation of the business, and that had it been intended for them to work in an operational capacity, they would have been listed are not persuasive, however. Notwithstanding his argument that if the Division had any questions about that, it should have inquired, clearly, that is not the Division's responsibility to do.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore recommended that the application of Deerfield Securities, Inc. to be registered as a broker/dealer, and the application of Edward T. Strehlau to be registered as an associated person/principal of Deerfield Securities, Inc., in Florida be denied. RECOMMENDED this 5th day of October, 1990, 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 5th day of October, 1990. COPIES FURNISHED: Edward T. Strehlau, pro se 13122 Woodington Drive Houston, Texas 77038 R. Beth Atchison, Esquire Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 William G. Reeves General Counsel The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
The Issue The issues in the case are whether the allegations of the Administrative Complaint are correct, and, if so, what penalty should be imposed.
Findings Of Fact At all times material to this case, Respondent Clifford Altemare (Mr. Altemare) was a licensed real estate broker, holding Florida license BK-3062479. At all times material to this case, Respondent Altema Consulting Co., LLC (ACC), was a licensed real estate brokerage, holding Florida license CQ-1024239. Clifford Altemare was the owner, qualifying broker, and officer for ACC. On August 21, 2006, Mr. Altemare signed an agreement to represent for sale hotel property owned by Sweet Hospitality, LLC. The agreement stated that Mr. Altemare would receive an unidentified commission based on the sales price. On December 12, 2006, Mr. Altemare received an escrow deposit of $25,000 from Rakesh Rathee, who signed an agreement to purchase the hotel. The $25,000 deposit was transferred by wire from Rakesh Rathee into a corporate operating account of ACC. Mr. Altemare failed to place the $25,000 escrow deposit into an ACC escrow account. Apparently, because the seller decided not to sell the property, the proposed sale did not close, and the buyer demanded the return of the $25,000 deposit. There is no credible evidence that the seller has made any claim upon the deposit. Mr. Altemare has refused to return the $25,000 deposit to Rakesh Rathee. At the hearing, Mr. Altemare asserted that the deposit has not been returned to the buyer because of uncertainty as to whom the deposit should be refunded. There was no credible evidence offered at the hearing to support the assertion that someone other than Rakesh Rathee should received a refund of the $25,000 deposit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Real Estate, enter a final order, stating that the Respondents violated Subsections 475.25(1)(b), (d), and (e), Florida Statutes (2006), and Florida Administrative Code Rule 61J2-14.010 and imposing a $15,000 administrative fine and a five-year suspension of licensure. DONE AND ENTERED this 12th day of May, 2010, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 12th day of May, 2010. COPIES FURNISHED: Patrick J. Cunningham, Esquire Department of Business and Professional Regulation 400 West Robinson Street, Suite N801 Orlando, Florida 32801 Clifford Altemare Altema Consulting Co., LLC 1047 Iroquois Street Clearwater, Florida 33755 Reginald Dixon, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Thomas W. O'Bryant, Jr., Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street, Suite N802 Orlando, Florida 32801
