Findings Of Fact Stipulated Facts The following facts, 1-36, are taken as established by stipulation of the parties in their Prehearing Stipulation filed April 7, 1987. Southland presently holds and held, on the date of issuance of the Notice to Show Cause issued in this case, 704 non-temporary Florida alcoholic beverage license. On or about September 13, 1983, Eugene DeFalco, then a Southland employee, pled guilty to conspiring to bride an official of the New York State Tax Commission in violation of 18 U.S.C. Section 371. On or about September 27, 1983, Southland terminated its employment relationship with DeFalco. In 1977 and 1978, Eugene DeFalco was the manager of all 7-Eleven Stores in Southland's Northeast Division. DeFalco, Eugene Mastropiere, who in 1977 was a practicing attorney in New York City and a New York City Councilman, and John Kelly, a corporate security consultant, agreed that Mastropiere would submit a fictitious legal bill to Southland for $96,500. After receiving Mastropiere's bill, Southland issued a check in that amount payable to Mastropiere. Upon receipt of the check, Mastropiere turned over the proceeds of that check to Kelly and DeFalco. DeFalco and Kelly undertook those actions to facilitate their misappropriation of Southland funds. DeFalco and Kelly did ultimately misappropriate the entire $96,500 for their personal use. DeFalco was aware that Southland would deduct the $96,000 as a business expense and issue Mastropiere an IRS Form 1099, thereby concealing from the Internal Revenue Service and others DeFalco's and Kelly's conversion of the money. On or about June 8, 1984, a jury convicted Southland of conspiring to defraud the Internal Revenue Service. On or about June 11, 1984, the same jury was unable to reach a verdict as to Dole, and the judge declared a mistrial. On August 2, 1984, the judge entered a Judgment and Conviction Order, convicting Southland of conspiring to defraud the Internal Revenue Service in violation of 18 U.S.C. Section 3371, a felony under the laws of the United States. On or about December 28, 1984, Southland paid the $10,000 fine imposed by a federal district court judge in the Eastern District of New York on the basis of that conviction. Southland's August 2, 1984 conviction was upheld by a three-judge panel of the United States Court of Appeals, Second Circuit, on April 23, 1985, United States vs. Southland Corp., 760 F.2d 1366 (1985), which determined that the trial record contained sufficient evidence to support the jury's verdict. On or about February 27, 1985, a jury acquitted S. Richmond Dole of conspiring (1) to bribe an official of the New York Tax Commission and (2) to defraud the Internal Revenue Service in violation of 18 U.S.C. Section 371. On or about February 27, 1985, a jury acquitted Clark J. Matthews, II, then Executive Vice President and Chief Financial Officer of Southland, of conspiring (1) to bribe an official of the New York Tax Commission and (2) to defraud the Internal Revenue Service in violation of 18 U.S.C. Section 371. On or about January 27, 1985, a jury convicted Clark J. Matthews, II, of violating the federal securities laws, 15 U.S.C. Section 78n(a), but on March 27, 1986, a unanimous panel of the United States court of Appeals for the Second Circuit reversed his conviction and ordered the indictment dismissed. At the conclusion of the second trial, United States vs. Dole and Matthews, CR 84-00461 (E.D.N.Y. 1985), the trial judge instructed the jury that it could not, as a matter of law, consider Southland employees John Thompson, Michael Davis, Frank Kitchen, or Eugene Pender as members of any conspiracy. Eugene DeFalco directly contributed to Southland's 1984 conviction in the United States District Court for the Eastern District of New York. For the purposes of this proceeding, the Division takes the position that Clark J. Matthews, II, and S. Richmond Dole are the only present employees of Southland that directly contributed to Southland's conviction in United States vs. Southland, et al., 83-CR-515 (E.D.N.Y.) On or about February 15, 1977, S. Richmond Dole and Eugene DeFalco discussed hiring Eugene Mastropiere as outside counsel on certain New York sales tax cases and at that time, discussed charging Masterpiere's fee to a corporate account in Dallas rather than directly to the Northeast Division. Later that night, on February 15, 1977, Dole, DeFalco, Frank Kitchen and John Thompson met informally and discussed, among other matters, the Northeast Division and its progress. At this meeting, they discussed DeFalco's proposal to have Eugene Masteropiere as outside counsel on the New York sales tax cases. Following this meeting, on February 15, 1977, Dole and Kitchen discussed the proposed retention of Eugene Mastropiere, and Dole told Kitchen not to worry about the sales tax cases--that Eugene DeFalco would handle them. United States of America vs. S. Richmond Dole & Ano., 84 CR 00461 (E.D.N.Y.), tr. at 2493-94. In correspondence from S. Richmond Dole to Eugene DeFalco dated February 23, 1977, Dole stated, "Be sure to send me the bill on the sales tax case so that I can see that it's paid from the corporate office. Hopefully, it will hit one of Clark's legal accrual accounts." In or about May 1977, Eugene DeFalco asked S. Richmond Dole whether Mastropiere's legal fee could be submitted and paid in the form of an airplane lease. United States of America vs. S. Richmond Dole and Ano., 84 CR 00461 (E.D.N.Y.), tr. at 2493-94. Matthews also told DeFalco that Southland would only pay a bill for legal services as a bill for legal services. At some point in time in mid-1977, S. Richmond Dole asked Eugene Pender, Southland's Controller, who was responsible for accounting and payroll, to process the Mastropiere legal fee. United States vs. S. Richmond Dole and Clark Matthews, 84 CR 00461 (E.D.N.Y.), tr. at 2493-94. The legal bill for $96,500 submitted to Southland by Mastropiere indicates services rendered from October, 1976 to May, 1977. Southland's normal procedure for payment of outside legal fees requires approval from the General Counsel's Office. On or a about June, 1977, management of The Southland Corporation undertook a Business Ethics Review. Clark J. Matthews, II, then Vice President and General Counsel for Southland, was in charge of that review under the supervision of the Audit Committee of the Southland Board of Directors. When Matthews learned of the size of the Mastropiere legal fee he recalled the airplane lease suggestion and directed Michael Davis, the staff attorney assisting him, to add the Mastropiere fee to the list of items to be investigated in the Business Ethics Review. The handwriting notes that Clark Matthews prepared prior to the meeting at which the Board of Directors was briefed on the Mastropiere matter contain the words "NY-Mastropiere Div. Mg. Thought Payment Outside Usual Controls" and "for $40M to spread among moms tax comm." In 1978, prior to the filing of Southland's 1977 federal income tax return, Matthews and Davis discussed with Stanley Simon, Southland's outside tax counsel, whether the Mastropiere fee was a deductible expense for purposes of Southland's tax return. No written discussion of the Mastropiere legal fee was contained in the final written report prepared at the conclusion of the Business Ethics Review. Gate Petroleum, Inc., Eastern Oil Co. and Cargo Gasoline Co. were convicted in May 1980 of violations of Section 1 of the Sherman Annatitrust Act, 15 U.S.C. Section 1. As a result of these convictions, Gate Petroleum, Inc., paid a civil penalty of $100.00 for each license held (total of $2100.00); Eastern Oil Co. and Cargo Gasoline Co. each paid a civil penalty of $500 per license. The Division and Southland stipulate that Responses Nos. 1 and 2 to Petitioner's First Set of Interrogatories accurately set forth the actions taken by state licensing agencies with respect to Southland's licenses based on Southland's federal conviction in New York. The following additional facts, 37-172, are based upon the record herein. The Sales Tax Cases What has come to be known as the "New York sales tax cases" began in 1972 when New York asserted a sales tax deficiency against one of Southland's franchise 7-Eleven stores. In the next few years, additional deficiency notices were issued. By 1977, New York State contended that Southland owed between $150,000 and $300,000. The New York State Tax Commission asserted that unless Southland gave the state sufficient notice when it terminated a franchise, the Tax Commission could audit that store and hold Southland secondarily liable for any sales tax deficiencies discovered. Southland believed it had a meritorious defense based on a specific exemption provided that there was no transferee liability upon the foreclosure of security interest, and Southland's franchise agreement gave it such an interest in the inventory and assets of the franchises in question. In 1976 and 1977, S. Richmond Dole was Southland's Vice President in charge of franchise stores. He is presently Executive Vice President in charge of 7-Eleven stores. In 1977, Clark J. Matthews, II, was Vice President and General Counsel of Southland. He is today Senior Executive Vice President and Chief Financial Officer. In 1977, John P. Thompson was Chairman of the Board of Southland and its Chief Executive Officer. He today holds the position of Chairman of the Board. In 1977, Frank Kitchen was Regional Manager of the Northeast Region. He is today a Regional Vice President at Southland. The Retention of Mastropiere In 1976, S. Richmond Dole and Eugene DeFalco discussed the New York sales tax cases. In the course of this discussion, DeFalco expressed to Dole his dissatisfaction with the performance of Thomas Dougherty, the outside counsel that Southland had hired to handle the New York sales tax cases. DeFalco stated in substance that he felt that another attorney should be hired since the cases were not moving and additional assessments by New York continued to be made. At the end of 1976 or the beginning of 1977, Dole called Clark J. Matthews, II, and told him that DeFalco was dissatisfied with the progress of the sales tax cases. Dole stated that DeFalco would be giving Matthews a call. DeFalco subsequently called Matthews to discuss the New York sales tax cases. DeFalco stated that he was dissatisfied with Dougherty, Southland's local counsel, because the New York sales tax cases were not moving forward. DeFalco told Matthews that John Kelly, a Southland supplier, had recommended that Eugene Mastropiere be retained to help Southland in the sales tax cases. DeFalco asked Matthews if it would be all right to retain Mastropiere. Matthews told DeFalco that he would check on Masterpiere and get back to him. Matthews reviewed Mastropiere's listing in Martindale Hubbell, and then called Southland's local counsel, Thomas Dougherty, for additional information. Dougherty called Matthews back later and told him that, as far as he could ascertain, Mastropiere was a reputable attorney. Matthews then called DeFalco and told him that he could engage Mastropiere as counsel, but that Matthews wanted Dougherty retained as co- counsel. Matthews also told DeFalco to ascertain what the fee arrangement would be. DeFalco later called Matthews and told him that Mastropiere would require a retainer of $30,000 - $40,000. On or about February 15, 1977, at a Northeast Division sales meeting in Hartford, Connecticut, Dole and DeFalco met in the lobby or coffee shop of the hotel at which the sales meeting was being held. DeFalco told Dole that he wanted to hire Mastropiere as outside counsel on the New York sales tax cases. During the conversation in the hotel lobby, DeFalco again stated that he was not satisfied with Dougherty's handling of the sales tax cases and that the cases were not moving fast enough. DeFalco expressed concern that a negative decision in New York might set a precedent in other states. He stated that he had found a number of stores were undercollecting their taxes and he feared that, because of these stores and the possibility of a bad precedent, Southland faced a potential liability of over one million dollars. DeFalco proposed to Dole the retention of Mastropiere as an attorney in the sales tax cases. He stated that, based on his conversations with Mastropiere and their review of the files, Mastropiere could be helpful to Southland. DeFalco also mentioned to Dole that Mastropiere was a New York City Councilman and a practicing attorney. Dole questioned whether there might be a possible conflict of interest, but DeFalco indicated that there was no conflict since the sales tax cases were disputes with the state and Mastropiere's responsibilities as Councilman involved the city. DeFalco told Dole that there would be an unusual fee arrangement--a one-time payment of $90-100,000, to include appeals. DeFalco never said anything to Dole about a bride or improper payment. DeFalco also proposed charging Mastropiere's fee to a corporate legal accrual account in Dallas rather than directly to the Northeast Division. By charging the fee to a corporate legal accrual account, the expense would not be considered part of the operating expenses of DeFalco's division and thus would not reduce the bonus paid to him and others in the division. Later that night, on February 15, 1977, Dole, DeFalco, Frank Kitchen and John P. Thompson met informally and discussed, among other matters, the Northeast Division and its progress, including the sales tax cases. Such informal gatherings between senior executives from Dallas and field personnel are common at Southland's periodic sales meetings. At that meeting, DeFalco stated that the cases were not moving along and that he had recommended hiring another attorney, by the name of Eugene Mastropiere, who was both a practicing attorney and a City Councilman in New York. DeFalco noted that Mastropiere might be expensive. Thompson replied that all lawyers are expensive, that DeFalco should be sure to get a good one, but that if DeFalco and others thought it was a good idea to hire this man, they should do so. Thompson also told DeFalco to check with Matthews, who ran Southland's Legal Department, about hiring Mastropiere. No mention of a bribe or payoff was made at the meeting. The term "entertainment" may have been used, but if it was used, it did not signify to those present that a bribe was to be paid. Immediately following his meeting, on February 15, 1977, Kitchen expressed concern to Dole about the proposed retention of Mastropiere and asked Dole whether they had just agreed to give $100,000 to a politician, i.e., to Mastropiere. Dole said no and told Kitchen not to worry about the sales tax cases, because DeFalco was fully familiar with these cases, and Kitchen was new to his position and had other priorities to worry about in the region. Following the Hartford meeting, Dole spoke to Matthews about DeFalco's desire to hire Mastropiere. Matthews stated that he had already spoken to DeFalco and that Mastropiere had been retained as co-counsel. Following this meeting, Dole confirmed in a letter to DeFalco that he would attempt to have the bill charged to the corporate legal accrual account. Payment of Mastropiere In or about May 1977, Dole received a phone call from DeFalco, in which DeFalco stated that he had talked with Mastropiere who had suggested that Southland could reduce Mastropiere's bill by 50 percent if it paid him in cash. Dole rejected this proposal. In that conversation or a subsequent conversation, DeFalco asked Dole whether Mastropiere's legal fee could be submitted and paid in the form of an airplane lease. When Dole asked about these unusual payment proposals, DeFalco explained that Mastropiere was having problems with his law partner. Dole told DeFalco that he wanted no part of Mastropiere's partner problems and that DeFalco should send Mastropiere's legal bill to Dole right away. Dole also told DeFalco to tell Matthews about Mastropiere's proposal. DeFalco later called Matthews and told him of the proposal that Mastropiere's fee be paid in the form of an airplane lease. Matthews rejected the suggestion and told DeFalco that Southland would only pay a bill for legal services as a bill for legal services. Because of his concerns about the airplane lease proposal, Matthews arranged to talk to Mr. Dougherty about Mastropiere on a trip to New York in June 1977. When Matthews asked Dougherty in New York about Mastropiere's participation in the sales tax cases, Dougherty indicated that Mastropiere was involved and performing substantive work on the cases. Matthews told Dougherty of the airplane lease proposal. Dougherty acknowledge that the request was peculiar, but added that he had practiced before the Tax Commission for a long time and knew the individual Commissioners to be reputable people. Dougherty assured Matthews that there was nothing improper going on with the Tax Commission. In or about June 1977, DeFalco called Dole to tell him that the bill was in the mail and that he would appreciate it if Dole would expedite the payment for the bill and ensure that it was charged to a corporate account DeFalco also requested that the check be sent to him personally so that he could hand-deliver it to Mastropiere. In the past, other division manager had asked Dole to allow them to deliver a check personally, for various reasons, and Dole saw nothing improper in DeFalco's request. After receiving the bill, Dole took it to Eugene Pender, Southland's Controller, who was responsible for accounting and payroll. Dole told Pender that he had a bill from the attorney working on the sales tax cases in New York. Dole stated that Pender might recall this attorney because the attorney had suggested that his bill be paid in cash or in some form of an airplane lease. Dole indicated that he wanted the bill paid and charged against the corporate legal accrual account. Pender noted that it was a Division expense and should be charged to the Division, but Dole stated that he had promised DeFalco that the bill would be charged to the corporate legal accrual account and that if Pender had any questions he should check with the Legal Department. Dole also told Pender to send the check directly to DeFalco so that DeFalco could hand-deliver it to the attorney. In 1977, it was not unusual for Pender to be asked to expedite the payment of a bill. Although Southland's normal procedure for payment of outside legal fees requires approval from the General Counsel's office, it was not unusual for the Controller to process a legal or other bill based on the oral authorization of a senior executive such as Dole. Dole did not suggest anything improper to Pender. Pender would not have processed the Mastropiere fee if he had felt that the bill was improper. Upon receipt of the check, Mastropiere turned over the proceeds of that check to Kelly and DeFalco. DeFalco and Kelly ultimately misappropriated the entire $96,500 for their personal use. Business Ethics Review Investigation In or about June 1977, Southland's management undertook a Business Ethics Review (BER). Clark J. Matthews, II, then Vice President and General Counsel, was in charge of that review under the supervision of the Audit Committee of the Board of Directors. Michael Davis, then a staff attorney at the Legal Department, handled most of the day-to-day work on the BER. In conducting the investigation, Matthews, Davis and the Audit Committee relied on the advice of an outside attorney, John Fedders. Fedders helped draft the BER questionnaire, consulted with Matthews and Davis concerning responses and follow-up strategy, helped prepare the presentation of these findings to the Audit Committee (a committee comprised of outside directors) and assisted in the drafting of the final written BER report. In or about July 1977, Southland distributed BER questionnaires to over 300 employees to elicit information on possibly questionable payments. Independent of the BER, in August 1977, Matthews learned that the size of the Mastropiere fee was $96,500 rather than the $30-$40,000 that he expected. The size of the fee and the earlier airplane lease suggestion led Matthews to direct Michael Davis to add the mastropiere fee to a list of items to be investigated in the Business Ethics Review. When the BER questionnaires were returned in August or September 1977, Davis prepared a summary of the positive responses, i.e., those responses that reported information which might require further investigation. In his response to the BER questionnaire, Pender denied any direct knowledge of improprieties, but raised questions about a legal fee in the Northeast Division. Pender cannot recall today what led him to mention the legal fee on his questionnaire, but he is certain that he was not suggesting that the fee might include a payoff or bribe. Davis interviewed Pender about his BER questionnaire response but Pender could provide no information beyond what was contained in his questionnaire. On September 22, 1977, Davis Fedders, and Matthews met to review the summary and to determine how to proceed with the BER investigation. At the September 22, 1977 meeting, Davis, Fedders and Matthews discussed the Mastropiere fee and the Pender questionnaire response, and prepared a list of people to be interviewed, which included DeFalco and Kitchen. On or about September 27, 1977, Matthews and Davis reported to the Audit Committee on the status of the BER investigation, including the investigation of the Mastropiere fee. As part of their investigation, on October 17 or 18, 1977, Matthews and Davis interviewed Eugene DeFalco about the Mastropiere fee. This interview took place in DeFalco's room at a Dallas hotel, where he was staying while in Dallas for a meeting. Matthews and Davis drove to the hotel in separate cars and met DeFalco at the hotel. In the interview, DeFalco provided some background information concerning the retention of Mastropiere, including the involvement of John Kelly in DeFalco's negotiations with Mastropiere over his fee. However, DeFalco did not tell Matthews and Davis that he and Kelly had begun to embezzle the funds, and he never suggested that any part of the fee was intended as a pay-off or bribe. DeFalco did not try to prevent Matthews or Davis from interviewing Matropiere. After the interview, Matthews and Davis walked to their cars together. DeFalco remained in his room and did not speak separately with Matthews. DeFalco did not advise Matthews in a parking lot conversation or on the way to the car of any alleged bribe conspiracy or that any improper payment had been made. The next day, Davis interviewed Frank Kitchen. Kitchen told Davis that he surmised that a payoff had been discussed at the Hartford meeting with Thompson, DeFalco and Dole. When pressed by Davis for more information, Kitchen listed four factors that led him to this conclusion: (a) the name Mastropiere was Italian; (b) the cases involved a New York state agency; (c) the attorney was said to be "expensive", and (d) entertainment was mentioned. Kitchen could provide no more specific information and cannot recall the details of that conversation today. Davis thereupon recommended that Kitchen amend his BER questionnaire, which Kitchen eventually did. Based on the results of this interview, Davis Fedders and Matthews decided that Thompson and Dole--the other two persons present at the Hartford meeting--should be interviewed. Matthews subsequently interviewed Dole and Thompson; both denied that any payoff or bribe had been discussed at Hartford. In December 1977, Matthews and Davis again reported to the Audit Committee the status of the Mastropiere investigation, including that there had been a suggestion that the Mastropiere fee be paid as an airplane lease, that the actual fee was substantially greater than Matthews had anticipated, that Kelly had been involved in the alternative payment suggestions, that Kitchen had indicated in an amendment to his questionnaire responses that he felt that at a meeting in Hartford a payoff had been discussed, and that Thompson, Dole and DeFalco all had denied any such conversation. During December, 1977, and January, 1978, Matthews consulted with the Audit Committee and with Fedders and one of his law partners, Bud Vioth, as to how to proceed with the investigation of the Mastropiere fee. It was agreed that Matthews should interview Mastropiere. Matthews' meeting with Mastropiere was arranged for late afternoon, January 9, 1978, in New York. Because of a snowstorm, Mastropiere never showed up for the meeting. Matthews and Mastropiere later talked by telephone. During their telephone conversation, Mastropiere demonstrated knowledge of the cases and was conversant with the theory of Southland's defense. Matthews questioned Mastropiere about his legal fee. Matthews asked if Mastropiere received the entire fee, to which Mastropiere responded yes. Matthews asked if any of the money had been paid or was intended to be paid to anybody else, to which Mastropiere responded no. Matthews followed the interview protocol that Fedders had recommended. On or about January 12, 1978, the Audit Committee held another meeting at which Matthews shared the details of the Mastropiere conversation with Fedders and his law partner, Vieth, and with the Audit Committee. At this meeting, the Audit Committee also interviewed Dole about the Mastropiere fee. After the Mastropiere and Dole interviews, the Audit Committee, Fedders, Vieth, and Matthews and Davis reviewed the evidence and concluded that they had no proof that there had been a bride or any improper use of the money. In making this determination, they took into consideration that New York was continuing to file sales tax cases and that there had been no unusual activity in the course of that litigation or its pace. Because there was no evidence of any impropriety and because of the possibility of libel, it was agreed that the matter would not be discussed in the final written BER report. It was also agreed that a detailed oral report on the matter would be made to the Board of Directors. On or about January 25, 1978, Matthews made an oral report to the Southland Board of Directors on the finding of the BER, including the investigation of the Masteropiere fee. At the conclusion of the BER investigation, Southland's Board of Directors adopted a "Code of Business Conduct," which it now requires all employes to follow. The Legal Department's investigation of the Mastropiere fee was a good faith effort to determine whether there was any impropriety connected with the retention and payment of Mastropiere. Matthews and Davis completely and accurately disclosed to outside counsel, the Audit Committee and the Board of Directors the steps taken to investigate the Mastropiere fee and the results of that investigation. In fact, according to one Audit Committee member, Matthews was the motivating force behind the Mastropiere investigation and brought it to the Audit Committee's attention on a number of occasions. DeFalco engaged in a conspiracy with Kelly and Mastropiere to misappropriate $96,500 from Southland. DeFalco was aware that Southland would deduct the $96,500 as a business expense on its federal corporate income tax return and issue Mastropiere an IRS Form 1099, thereby concealing from the Internal Revenue Service and others DeFalco's and Kelly's intended use of that money. Neither Dole nor Matthews knew of any facts that would require them to prevent the deduction of the Mastropiere fee on Southland's 1977 income tax. Neither Matthews nor Dole had an any involvement in the preparation of filing of Southland's 1977 federal income tax return or in the deduction of the paid to Eugene Mastropiere. In December 1977 and January 1978, Matthews discussed with Stanley C. Simon, Southland's outside tax counsel, a number of issues arising out of the BER investigation, including the Mastropiere fee. Simon stated that Southland should deduct the fee unless it had proof of a bribe or of any other improper use of the money. Based on this advise, Matthews and Davis determined that no action need be taken with respect to the deduction of the Mastropiere fee. Inasmuch as DeFalco embezzled the entire sum, the Mastropiere fee deduction by Southland was in any event properly deductible as a theft loss. The IRS has never challenged Southland's deduction of the Mastropiere fee. In connection with an IRS audit of Southland's 1974 and 1975 tax returns, Southland volunteered to the IRS that it had conducted a Business Ethics Review and it made available to the IRS all of the questionnaires requested. Davis' secretary was told by Davis to make the BER questionnaires available to the IRS and personally saw the IRS take the boxes of questionnaires to their work area, but the IRS agent does not recall seeing the Kitchen questionnaire. He concedes that he does not recall seeing other questionnaires that his records indicate that he did in fact review. DeFalco's Credibility Eugene DeFalco was the only witness in either the Southland trial or the Dole and Matthews trial who testified that there was a conspiracy to bribe a New York State tax official or to defraud the Internal Revenue Service, or that Matthews and Dole were knowledgeable of or participated in any conspiracy. Even DeFalco's confederate, John Kelly, who testified with immunity, while admitting participating in DeFalco's scheme to defraud Southland, denied that he was a party to or aware of a conspiracy to bribe an official of the New York Tax Commission. The record of these proceedings shows that DeFalco has lied repeatedly to serve his own interests. DeFalco admitted in the Southland and Dole and Matthews trials that he was both a liar and a thief. DeFalco admitted that he lied to the FBI in 1980 by telling them that he had a B.S. in marketing from the University of San Diego and that he had attended one semester of law school--when he had not. DeFalco admitted at trial that he stole Southland's money, and that he lied to the FBI in July 1980 on how he spent the money, falsely stating that a substantial part of the fee ($18,000 - $20,000) went for business expenses. DeFalco admitted lying on various occasions to federal government officials. DeFalco told the FBI that no portion of the Mastropiere fee money went to his then future wife, Kathy Burton. Later he admitted at trial that this was not true. DeFalco repeatedly lied to Southland about his use of the money. Prior to pleading guilty, DeFalco denied that there was any conspiracy to bribe and denied that he had embezzled any of Southland's funds. Upon pleading guilty, DeFalco changed his story. On a loan application to the Union Trust Company in April 1979, DeFalco listed as assets certain WD-40 stock wit the value of $150,000. DeFalco admitted at trial that this was a lie, that his largest holding was $6,000 - $8,000. On the same application, DeFalco claimed to have an interest of over $100,000 in a trust called Falcon Investment Trust, even though he admitted at trial that he had no present interest in the trust. On a loan application to the Southern Ocean State Bank in June 1979, DeFalco claimed to have an interest in the Falcon Investment Trust of $1.5 million, even though he had no present interest in the trust. He also claimed to have $81,000 worth of WD-40 stock, which he admitted at trial was a lie. DeFalco perjured himself even after pleading guilty in September 1983. In November 1983, two months after pleading guilty to a felony and while awaiting sentencing, DeFalco lied on a California residential loan application. He listed a company called "Coast-to-Coast" as his employer for the preceding three years at an annual income of $140,000, even though Coast-to-Coast was not yet generating any income. On the same application, DeFalco listed as assets 1,371 shares of Southland stock at a value of $54,840, even though DeFalco had sold these shares in September 1983. DeFalco admitted that he lied throughout his career at Southland, including falsely claiming on his personnel form in 1969-70 that he had a B.S. in marketing. DeFalco admitted that he lied to get ahead in the corporation. DeFalco even admitted lying under oath at the Southland trial. He claimed in that trial that the false statements on the California residential loan application were mistakes made by the person who typed the application. When confronted with an earlier handwritten version containing the same statements, he admitted that the statements were his. DeFalco's lies are so numerous and pervasive as to render all of this testimony unbelievable. His testimony is rejected as lacking in credibility and as self-serving. DeFalco's Direct Contribution to Southland's Conviction In 1983, DeFalco was indicted and charged with one felony count of conspiracy to bribe an official of the New York State Tax Commission in violation of 18 U.S.C. Section 371 and three felony counts relating to his misappropriation of Southland's funds. On or about September 13, 1983, Eugene DeFalco who was then on administrative leave from Southland, pleaded guilty to the conspiracy charge. In return for pleading guilty, the government agreed to dismiss the three counts of fraud pending against him relating to his misappropriation of $96,500 from Southland. As a result, DeFalco's potential prison sentence was reduced from 20 years to 5 years. Up until the time he pleaded guilty, DeFalco denied the existence of any conspiracy to bribe. Up until the time he pleaded guilty, DeFalco denied that he had embezzled any of Southland's money. After pleading guilty, DeFalco testified at both Southland's trial and the trial of Dole and Matthews that one objective of his agreement with Kelly and Mastropiere was bribery, and that ultimately he and Kelly embezzled from Southland all of the $96,500 fee. Eugene DeFalco directly contributed to Southland's 1984 conviction in the United States District Court for the Eastern District of New York. At Southland's trial, the jury was instructed that a "corporation is liable for the acts of its agents within the scope of his employment as long as the agent acted in substantial part and [sic] with the specific intent of benefiting the corporation." The jury was also instructed that if DeFalco had that intent "[i]t does not matter that [he] . . . may have also had another purpose in mind which may have involved personal gain for himself. Mitigation Southland's conviction in 1984 is the first and only felony conviction against Southland in the 53 years the company has been in business. The DABT offered no evidence to suggest that Southland's conviction for conspiring to defraud the IRS was anything more than an isolated incident or that it cast doubt on Southland's qualifications to hold beer and wine licenses in Florida. Southland holds beer and wine licenses in 39 states. No other state has revoked Southland's alcoholic beverage licenses based on this conviction, and approximately 29 of the 39 states in which Southland holds licenses took no action whatsoever. The record in this proceeding establishes that Southland has been a good corporate citizen both nationally and in the State of Florida. In the past 11 years, Southland has raised millions of dollars for the Muscular Dystrophy Association, contributing up to a million dollars each year in advertising alone for the Association's fund raising campaign. Southland was the March of Dimes first corporate sponsor and remains its leading sponsor today. Southland strongly encourages its employees to participate in the March of Dimes "Walk America" and has developed a manual for its employees on how they can best promote the March of Dimes effort. Southland was a major corporate sponsor of the Olympic Games in Los Angeles in 1984 and of the United States Olympic Committee. Southland funded the construction of the $3,000,000 7-Eleven Velodrome in Los Angeles for the Olympic Cycling events and also built a similar Velodrome for the Olympic committee at the Olympic Training Center in Colorado Springs, Colorado. Prior to the Olympics, Southland created and funded the Olympia Awards, awards given by a panel of past Olympic competitors to young athletes. This program continues today. Beginning in August 1974, Southland co-sponsored the Save a Living Thing project with the National Wildlife Federation. The project was designed to generate funds for the purchase of nesting grounds for the American Bald Eagle. As a result of the Save a Living Thing project, Southland raised two hundred thousand dollars for the National Wildlife Association, and, with that, purchased 1,123 acres of eagle nesting grounds. Southland and the National Wildlife Federation transferred the deed to the property to the Department of the Interior, which now maintains the refuge as part of the National Parks System. Southland is active in efforts to reduce crime and has hired an ex- convict to conduct seminars and clinics on how best to deter robberies. Southland has signed an agreement with two minority organizations, Operations PUSH and LULAC, committing Southland to seek a greater representation of minorities in its corporate and franchise operations. Southland sponsors at a local level in Florida many of the organizations it helps nationally. In addition, it sponsors organizations and events indigenous to Florida. Southland has developed and underwirtten child abuse prevention programs in New York, Texas, and Florida. The Florida program, called "Child Abuse, It's A Crying Shame," was launched in January 1986 by Governor Graham. As part of this program, all Florid 7-Eleven stores made available, at no charge the public, Child Abuse Awareness and Prevention bumper stickers supporting the 1-800-FLA-LOVE telephone number--a hotline number for those who need help or who want information concerning child abuse. Southland also paid for the creation of similar placards for buses. Since 1984, Southland has sponsored Florida's Sunshine State Games, encouraging people from across the state to compete in the amateur Olympic-type events. In 1981, Southland established the Come of Age Program and became the first retailer in the country to initiate an in-house employee training program to prevent the sale of alcoholic beverages to minors. This program continues today. Southland has received numerous letters from public officials and law enforcement officers in Florida and elsewhere praising the Come of Age Program and its efforts to prevent the sale of alcoholic beverages to minors. In addition, Southland sponsors various community programs designed to combat drug and alcohol abuse among minors. In 1985, Southland developed an educational packet on drug and alcoholic abuse, which it has now sent to 40,000 junior high schools across the country. Southland also sponsors a program called Operation Prom/Graduation, designed to encourage alcoholic-free events for minors, and has developed and sent to communities across the country a manual on how to sponsor such events." DABT'S Policy DABT has never previously revoked or suspended a corporation's license when the corporation was convicted of a felony. Mr. Barry Schoenfield is the Bureau Chief of Licensing and Records for the DABT. Based on his nearly 20 years with the DABT and his review of final agency documents, he could identify only four DABT actions against corporate license holders based on the felony convictions of the corporations themselves--all of which stem from a common indictment. The DABT settled with the corporations and, for three of the corporations, imposed fines of $1,000, to $7,500. The fourth company agreed to divest itself of its license. Ms. Louisa Hargrett is a staff attorney who has been with the DABT for the past 3 1/2 years and has dealt with literally hundreds of cases. Ms. Hargrett presented the representatives cases that he had discovered in a search of her files. None of these cases involved corporations who themselves have been convicted of a felony. The DABT admits that it has no procedure for determining whether corporations that hold alcoholic beverage licenses have been convicted of a felony within the last fifteen years. DABT does not even require corporations applying for a license to list prior criminal convictions. Actions by Other States Against Southland Other states have imposed penalties against Southland for its 1984 conviction. California accepted an offer of compromise in the amount of $157,680 in lieu of a 30-day suspension. There was also a probationary period of one year. Colorado agreed to a ten-day suspension, with the suspension held in abeyance for a one-year probationary period. This penalty applied to both alcoholic beverage and lottery licenses. Connecticut agreed to an offer of compromise in the amount of $250 per license, for a total of $6,750. Hawaii accepted payment of a penalty of $500 per business for a total of $15,500. Illinois was paid a penalty of $27,000 for restitution. Iowa agreed to a accept a 30-day suspension with 27 days remitted and cancelled. Southland also paid a penalty of $12,500 in Iowa. In Michigan, Southland paid a penalty of $22,600. In New York, Southland paid a penalty of $46,000 plus an additional fine of $10,000 for the conviction of Matthews which subsequently was reversed. Oregon agreed to impose a penalty of $455 per license, for a total of $8,190, and a suspension of 3 days per license.
The Issue Whether or not the Respondent, Evers & Associates, Inc. and Dovard J. Evers, its President, a licensed mortgage broker in the State of Florida, has charged and accepted fees and commissions in excess of the maximum allowable fees or commissions on the transactions set forth in the administrative complaint, Exhibit "A," in violation of Sec. 494.08(4), F.S., and thereby subjected the Respondent to a possible suspension under the terms of 494.05(1)(g), F.S.
Findings Of Fact Evers & Associates, Inc. through the parson of Dovard J. Evers, its President, was a licensed mortgage broker in the State of Florida, during the time period contemplated by the administrative complaint. Subsequent to the time of receiving the mortgage brokers-license, Dovard J. Evers, on behalf of Evers & Associates, Inc., entered into an agreement with several other parties to sell notes secured by mortgages on real estate. One of the agreements was with David Edstrom, of a corporation known as S.E.T., Inc., Mr. Edstrom being the President of said corporation, and the location of that corporation being in Fort Lauderdale, Florida. A similar agreement was held with one Gary George of the Mortgage Consultants, Inc., Ocala, Florida. The agreement with Gary George involved a sale of mortgages for the benefit of the mortgagor, Washington Development Corporation. The third such agreement was with Phil Swan of Southeast Florida Corporation. The written conditions of the S.E.T., Inc. arrangement with Mr. Evers can be found in Respondent's Exhibits No. 2 through No. 5. Essentially, the arrangement was to have Mr. Evers, through Evers & Associates, act as a salesman for the benefit of S.E.T., Gary George and Phil Swan. Their agreement envisioned that Mr. Evers would be afforded a percentage discount varying from 14 percent to 16 percent of the amount of a mortgage loan which was a note secured by real estate. In actual , the contact was made between S.E.T., Gary George and Phil Swam Mr. Evers for purposes of placing notes that were for sale. The apparatus worked by having Mr. Evers contact mortgagees/investors who made a check payable to Evers & Associates for the full amount of the mortgage loan, whose price had been quoted by the intermediary; S.E.T., Gary George and Phil Swan. This amount was held in escrow until such time as the note and mortgage which secured the note could be drawn. The executed note and mortgage went directly to the third party mortgagee/investor without ever having the name of Mr. Evers or Evers & Associates, Inc., affixed to such documents. After this note and mortgage had been executed in behalf of the third party investor, Mr. Evers deducted a fee in favor of Evers & Associates, Inc., according to the percentage agreement with S.E.T., Gary George and Phil Swan and sent the balance of the money to S.E.T., Inc.; Washington Development Corporation through the person of Gary George and to Phil Swan of the Southeast Florida Corporation. The arrangement with Washington Development Corporation changed at a later date because Gary George was no longer involved and payments subsequent to his involvement were sent directly to Washington Development Corporation. The facts show that in the transactions found in Petitioner's Exhibit "A," the complaint, charges were made in behalf of Evers & Associates in the person of Mr. Evers which exceed the statutory allowance for fees and commissions in the amount stated in the column entitled overcharges. These overcharges are according to the percentage agreement between Mr. Evers and S.E.I., Inc., Gary George, and Phil Swan, minus adjustments made in behalf of the third party investor/mortgagee, as indicated in the testimony. This finding of facts, excludes the mortgage by M. Berkell which was stipulated between the parties as not being a matter for further consideration in the hearing. There was no evidence offered of the charge, if any, between S.E.T., Inc., Gary George, and Phil Swan in their dealings with their developer/mortgagors. At present the Respondent, Evers & Associates, Inc., and Dovard J. Evers, its President, have failed to renew the license in the current license period and, as of the moment of the hearing, have expressed no further interest in such renewal.
Recommendation It is recommended that the license of Evers & Associates, Inc., by Dovard J Evers, its President, be suspended for a period not to exceed 30 days. DONE and ENTERED this 8th day of June, 1976, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Fred O. Drake, III, Esquire Office of the Comptroller The Capitol Tallahassee, Florida 32304 Earl M. Barker, Esquire 218 East Forsythp Street Jacksonville, Florida 32202
The Issue Whether Respondents discriminated against Petitioner on the basis of sex when Respondents denied Petitioner's application to rent an apartment.
Findings Of Fact Mizner Park, located in Boca Raton, Florida, is a mixed use complex, consisting of apartments, retail stores, and offices. The apartment complex is owned and managed by Crocker Downtown Development Associates. Ms. Terrill Jaroszewicz (Jaroszewicz) is the property manager for Mizner Park. Ms. Mary Sims, who reports to Jaroszewicz, is in charge of the residential apartments in the complex. At the time in question, Ms. Jan Pratt (Pratt) was a leasing consultant for the apartments. Pratt's duties included taking applications from prospective tenants, processing the applications, and gathering the necessary information needed to make a decision on whether to approve the application. When Pratt had completed processing the application, she would take the application package to Sims, who would review the package and make a decision on whether to approve the application. Respondents, collectively referred to as Mizner, required that prospective tenants fill out an application form, agree to have a credit check performed, provide sufficient information to verify their current income, agree to a check of the tenants' residency history for the past two years, pay a $50, nonrefundable fee for processing the credit check, and provide a security deposit. Mizner wanted to rent its apartments to tenants who had a good credit history, had a monthly annual income of at least three times the amount of the lease amount, and had a good history as a tenant. On June 15, 1994, Petitioner, Sanford J. Gubernik (Gubernik), who is a male, met with Pratt and filled out an application to lease an apartment at Mizner Park. Gubernik had omitted his social security number when he completed the application. Pratt advised him that it would be necessary to have his social security number in order to do the credit check. Gubernik was reluctant to give Pratt his social security number and to have a credit check done. He gave Pratt a check for $50 for the credit check and a check for $885 as a security deposit. Gubernik is an independent contractor who works for a number of sunglass and eyewear companies. His annual income varies each year. When he filled out the application, Pratt asked Gubernik to provide her copies of his income tax returns for the last two years so that she could verify his income for the last two years. Pratt had a credit check run on Gubernik. Mizner's computers were down on the day that the credit check was performed so the company performing the credit check mailed her a copy of the credit report rather than having her receive the report via the computer, which was the normal method that Pratt received credit reports on prospective tenants. Gubernik had two federal income tax liens, which showed up on his credit report. One lien was dated October, 1993 in the amount of $10,058, and the other lien was dated February, 1991 for $36,829. Pratt advised Sims of the tax liens. Sims told Pratt that she should contact Gubernik and advise him that his credit was a problem. She further advised Pratt that if the credit report was correct and that Gubernik had not satisfied the liens or was not in good standing with the Internal Revenue Service that his application would be denied. Gubernik had traveled to New Orleans to visit clients. While there he received a message on his cellular telephone that Pratt needed to talk to him. He called Pratt and she advised him that there was a problem with his credit report and he should call the credit reporting company and get a copy of the report. Gubernik advised Pratt that the problem was two tax liens. Pratt advised him that they would hold the apartment but that he needed to come in and get the issue of the tax liens resolved by showing that he was trying to pay off the liens. When Gubernik returned from New Orleans he took copies of his income tax returns to Pratt. She advised him that she needed verification that he was making payments on the liens. Gubernik became very irate and told Pratt that he had never had a problem because of the tax liens and that he had no intention of paying them. Pratt advised Gubernik that his application was denied because of the tax liens. Still upset, Gubernik requested to see the manager. Sims was not in the office on that day so Pratt took the application file to Jaroszewicz and told her that a gentleman wanted to talk to her about the denial of his lease application. Jaroszewicz reviewed the application and immediately saw that the problem was the tax liens that appeared on the credit report. Pratt showed Gubernik to Jaroszewicz' office. Gubernik was visibly upset. Jaroszewicz told him that there was a problem with his credit report and that Mizner could not approve his lease application. Gubernik offered to pay his rent in advance. However, prepayment of rent was against Mizner's policy because of accounting reasons and the possibility of poor payment in the future when the prepayment amount was depleted. Gubernik offered to have his rent deducted from his monthly checks that he received from a sunglass company. Mizner's policy was not to have the rent deducted from the tenant's paycheck because the employee could change employers. Gubernik became more and more upset as the conversation with Jaroszewicz continued. Finally Jaroszewicz told Gubernik that there was no need to discuss the matter any further and showed him to the door. The apartment which Gubernik tried to rent was leased to a male in August, 1994. On June 2, 1994, a female applied to Mizner to rent an apartment. A credit check was done and revealed that the prospective tenant had two tax liens totalling approximately $36,000. The female's application was denied by Mizner because of the tax liens. In 1994, Mizner's first time rentals were divided about equally between single males, single females, and families. Gubernik claims that his application was denied not because he had tax liens but because he was a man. Mizner contends that the only reason that Gubernik's application was denied was because he had two tax liens for over $40,000 which represented meant to Mizner that Gubernik had a bad credit history.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding that Crocker Downtown Development Associates, Terrill Jaroszewicz, and Mizner Associates, Ltd. did not commit a discriminatory housing practice against Sanford J. Gubernik and denying his petition for relief. DONE AND ENTERED this 21st day of January, 1997, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 21st day of January, 1997. COPIES FURNISHED: Sanford J. Gubernik 212 Northwest 4th Avenue Boca Raton, Florida 33432 Patrick M. Muldowney, Esquire Shutts & Bowen 20 North Orange Avenue Orlando, Florida 32801 Sharon Moultry, Clerk Commission on Human Relations 325 John Knox Road, Building F, Suite 240 Tallahassee, Florida 32303-4149 Dana Baird, General Counsel Commission on Human Relations 325 John Knox Road, Building F, Suite 240 Tallahassee, Florida 32303-4149
Findings Of Fact FHFC administers the Multifamily Mortgage Revenue Bond Program (Bond Program) as set forth in Chapter 420, Part V, Florida Statutes, and related administrative rules. Worthwhile timely filed an application in the 1999 Bond Program cycle which was assigned number 99-040 to finance a development called Heritage Apartments in Collier County, Florida. FHFC initially deemed said application to be incomplete for the reasons set forth in a letter dated February 4, 1999. Worthwhile timely filed a Petition for Formal Hearing challenging FHFC's determination that application number 99-040 was incomplete, which Petition was referred to the Division of Administrative Hearings (DOAH) and assigned Case No. 99-1518. Upon further review by FHFC and in consideration of the deposition testimony of FHFC representatives in this cause, the parties stipulate and agree that: Worthwhile's application number 99-040 was not incomplete as initially determined by FHFC; Worthwhile's application number 99-040 is complete and must now be further processed pursuant to appropriate rules and procedures; and If it qualifies after further processing, application number 99-040 is to be funded with the next uncommitted bond proceeds made available to FHFC for allocation.
Recommendation Based upon the foregoing, it is hereby RECOMMENDED that FHFC enter a Final Order which finds and concludes that: Worthwhile's application number 99-040 was not incomplete as initially determined by FHFC; Worthwhile's application number 99-040 is complete and must now be further processed pursuant to appropriate rules and procedures; and If it qualifies after further processing, application number 99-040 is to be funded with the next uncommitted bond proceeds made available to FHFC for allocation. DONE AND ENTERED this 8th day of October, 1999, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1999. COPIES FURNISHED: James C. Hauser, Esquire Skelding, Labasky, Corry, Hauser, Jolly & Metz, P.A. 318 North Monroe Street Tallahassee, Florida 32301 David A. Barrett, Esquire Barrett & Pelham, P.A. Post Office Box 930 Tallahassee, Florida 32302-0930 Brad Baker, Executive Director Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32399-1329 Stephen M. Donelan, General Counsel Florida Housing Finance Corporation 227 North Bronough Street, Suite 5000 Tallahassee, Florida 32399-1329 Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Tallahassee, Florida 32301
Findings Of Fact Klingshirn Corporation executed and delivered a mortgage dated February 1, 1974 as security for a loan from Petitioner. This mortgage was recorded March 1, 1974 in Official Records of Palm Beach County. Klingshirn Corporation executed and delivered a mortgage deed on the same property and an assignment of leases, rents, and profits for this property dated March 1, 1974 to Fulton and Goss. This mortgage was recorded March 5, 1976. Klingshirn Corporation was in the process of building condominiums for which the mortgages were executed. In 1976 Klingshirn experienced financial setbacks and became delinquent on the mortgage payment. By deeds dated November 16, 1976 Klingshirn conveyed the property that was subject to the above mortgages to Boca Village Realty, Inc., a shell corporation, for the purpose of eliminating the thught-to-be-unrecorded mortgage held by Fulton and Goss. Boca Village Realty, Inc. by deeds dated December 17, 1976 (Exhibits 1 and 2) transferred the property to Petitioner by warranty deed which expressly stated the intent of the parties that there be no merger of grantee's mortgage with the fee. Documentary stamps in excess of $6,000 were placed on this deed to cover the value of the mortgage and minimal surtax stamps of 55 cents were placed on this deed. On March 7, 1977 Petitioner filed Complaint in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County against Fulton and Goss and another to foreclose the mortgage executed to Petitioner by Klingshirn. The parties stipulated that if surtax is due the required tax, plus interest is on the balance due on the mortgage of $2,248,774.
Findings Of Fact On October 14, 1985, Petitioner, Nicholas Cozzo, entered into a Stock Purchase Agreement for the sale of sixty (60) shares of the issued and outstanding capital stock of C & S Deli Sandwich and Fish, Inc., a Florida corporation, (the Company) to Robert A. Krueger and Joe Ellen Krueger (collectively, the Kruegers). As a result of the sale, Petitioner retained ownership of no further stock of the Company. (Exhibit A) On October 14, 1985, the Kruegers executed two (2) promissory notes in the amounts of $53,000.00 and $5,000.00, respectively, to Petitioner and a Security Agreement securing payment of the notes. (Composite Exhibit B and Exhibit C) On October 14, 1985, Petitioner tendered his resignation as Director, President and Treasurer of the Company. (Exhibit D) Petitioner's security interest to the furniture, furnishings, fixtures, equipment and inventory of the Company (the "collateral") was duly perfected by the filing of a Uniform Commercial Code Financing Statement with the Uniform Commercial Code Bureau, Florida Department of State, on October 21, 1985. (Exhibit E) A Uniform Commercial Code Financing Statement was recorded by the Petitioner in the Public Records of Pasco County, State of Florida, on October 15, 1985, in Official Records Book 1451, page 0493. (Exhibit F) In early 1987, the Kruegers defaulted under the terms of the promissory notes. Prior to April 24, 1987, Petitioner repossessed the furniture, furnishings, fixtures, equipment and inventory of the Company. No consideration was paid by Petitioner to the Company or the Kruegers upon his repossession of the foregoing described collateral. At no time did ownership of any of the capital stock of the Company revert back to Petitioner. On May 5, 1987, Petitioner by private sale disposed of the collateral to Vincent Lopez and Glen Delavega. (Exhibits G, H, and I) No surplus funds resulted from the sale of the repossessed collateral by Petitioner to Vincent Lopez and Glen Delavega. At no time material hereto did the Florida Department of Revenue issue a tax warrant against the Company respecting any unpaid sales tax. On or about May 6, 1987, Petitioner paid under protest to the Respondent Department of Revenue the delinquent unpaid sales tax of the Company in the amount of $1392.53. The Department is still attempting to verify that amount at this date. The Petitioner maintains he paid the amount in order for the Department to issue a sales tax certificate and number to Vincent Lopez and Glen Delavega. The Department maintains its procedure at the time was to issue a sales tax number to the new owners and then proceed against them under Section 212.10, Florida Statutes. It is the position of the Respondent that the Petitioner's repossession of the collateral constituted a sale within the purview of Section 212.10(1), Florida Statutes (1985), and Rule 12A-1.055, Florida Administrative Code, which places tax liability on the successor of a business whose previous owner has not satisfied outstanding sales tax obligations. Respondent further notes that the case Petitioner relies on, General Motors Acceptance Corporation v. Tom Norton Motor Corp., 366 So.2d 131 (Fla. 4th DCA 1979) was issued on January 10, 1979, while Section 679.105(5), Florida Statutes, which upholds tax laws when in conflict with security agreements, took effect January 1, 1980. Petitioner on the other hand claims that a lawful repossession of collateral under Florida's Uniform Commercial Code, Section 679.504, Florida Statutes (1985), does not constitute a "sale" of a business making him liable for the Company's unpaid sales tax. Petitioner continues to rely on GMAC, supra, and notes that it was cited by American Bank v. Con's Cycle Center, 466 So.2d 255 (Fla. 5th DCA 1985). A refund application was submitted by Petitioner to the Department of Revenue on June 10, 1987. This application was denied by the Department of Revenue by letter dated January 28, 1988. (Exhibit J)
Findings Of Fact Respondent is an applicant to register as a securities salesman with Realty Income Securities, Inc., said application having been submitted to the Division of Securities on February 2, 1975 and is currently pending (Testimony of Dove). During the period of approximately February through - September, 1973, Respondent, a registered mortgage broker, was employed by Financial Resources Corporation of Fort Lauderdale, Florida, in the sale of promissory notes secured ostensibly by first mortgages upon land located in Highlands County, Florida. These notes and security documents were issued by Equitable Development Corporation of Miami Beach, Florida. The notes were payable to "investors" at 14 percent interest per year, payable monthly for several years at which time the full principal balance would become due. The mortgage deeds recited that Equitable Development Corporation held the land which secured the notes in fee simple, free and clear of all encumbrances except real estate taxes. The mortgage deeds further recited that Equitable reserved the right to convey the land to a purchaser under an installment land contract subject to the lien of the mortgage and would deliver to the National Industrial Bank of Miami, an escrow agent, a copy of any such agreement for deed and a quit-claim deed which would be held in escrow. They also provided a procedure by which under any default of Equitable, the escrow agent would deliver the escrow documents to the investor (Testimony of Dove, Petitioner's Composite Exhibit 1). Respondent's association with Financial Resources Corporation came about as a result of a visit by Mr. Robert Rinehart, President of the firm, who explained the mortgage sales program to him and stated that the security instruments were indeed first mortgages. Additionally, Rinehart supplied Respondent with brochures, letters, and documents containing questions and answers concerning the program and the protection afforded thereby to investors. Respondent personally viewed the property in question at Highland Park Estates and observed that over a hundred homes had been constructed which were of a value from $14,000 to $40,000. He also observed that docks had been built on the lake in the project area and that almost all of the roads had been paved. He was shown the MIA appraisal on the property which stated that Rinehart's representations as to property values were accurate. Equitable further represented to him that the notes in question were exempt securities in that they came within the provisions of Section 517.06(7), F.S., concerning the issuance or sale of notes secured by a specific lien upon real property created by mortgage or security agreement. In fact, Respondent became so convinced of the merits of these transactions that he had his mother invest twenty thousand dollars in the program (Testimony of Respondent, Watts; Respondent's Exhibits 1,2). In September 1973, Respondent formed Florida Income Resources Corporation, a mortgage brokerage firm. He did not sell any of the Equitable notes for a period of some months and, prior to commencing sale of them through his firm in the Spring of 1974, his attorney looked over the various aspects of the Equitable program and advised him that everything seemed "open and above board." Respondent thereafter on April 9 and August 1, 1974 sold to William H. Mott secured promissory notes of Equitable Development Corporation in the amounts of $2,000 and $2,250 respectively (Testimony of Respondent, Zawadsky; Petitioner's Composite Exhibit 1). During the period of these sales, letters of Albert George Segal, attorney, were being sent to investors advising them that he had examined the title to the real property purchased and that it was free and clear of encumbrances and constituted valid first mortgages (Respondent's Exhibit 3, Stipulation). Administrative proceedings were brought against Respondent by the Division of Finance involving sales of the notes in question resulting in a settlement by stipulation whereby Respondent did not acknowledge any wrongdoing, but agreed to a suspension of his mortgage broker's registration for two years. Respondent's firm secured no appraisals or title searches on the property involved in the sales to Mott (Testimony of Respondent).
Recommendation That the allegations be dismissed and that Respondent Edgar A Dove be registered as a securities salesman if he otherwise meets the qualifications set forth in Section 517.12, Florida Statutes and Chapter 3E-30, Florida Administrative Code. DONE and ENTERED this 15th day of March, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Fred O. Drake, III Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 H. Gordon Brown, P.A. 301 W. Camino Gardens Boulevard Suite B P.O. Box 1079 Boca Raton, Florida 33432
Findings Of Fact In the late 1960's Gulf Standard corporation, a corporation wholly owned by William V. Gruman, constructed the Pine Apartments which is the property involved in this hearing. Gulf Standard remortgaged the property in 1973 and in order to obtain the mortgage it was necessary for William V. Gruman and his wife to guarantee payment of the note secured by the mortgage. This unconditional guarantee agreement was entered into evidence with an accompanying letter dated March 15, 1978, as Exhibit 4. Without the Grumans, in effect, cosigning the promissory note for $1,849,000 secured by a mortgage on the property the loan would not have been made. In October 1975 Gulf Standard corporation was dissolved and by quitclaim deed dated October 28, 1975, Gulf Standard corporation transferred the property to William Victor Gruman and Eva Gruman. Minimum documentary stamp tax was placed on this deed. A proposed assessment dated January 20, 1978 (Exhibit 2) was issued on this transfer in the amount of $6,933.38; however this assessment was withdrawn when evidence was presented to the Department of Revenue that the corporation had been dissolved and the property transferred to the sole shareholders who had primary liability on the mortgage before and after the transfer. By quitclaim deed dated 30 September 1976 the Grumans transferred this property to Northwest Liquor Industries, Inc. (Northwest), a corporation wholly owned by Gruman. Minimum documentary stamp tax was placed on this deed. It is this transaction upon which Petitioner claims insufficient documentary stamp tax was paid and which is the basis for the proposed assessment. No issue was raised regarding the accuracy of the amounts alleged to be due in the proposed assessment; Respondent contending only that no consideration passed, therefore only the minimum documentary stamp tax that was placed on the deed was required. At the time of this conveyance the market value of the property was less than the mortgage encumbering the property and the payment of the note secured by this mortgage had been guaranteed by Gruman (Exhibit 4). Subsequent to the transfer to Northwest no more than one mortgage payment was made by Northwest before the loan was defaulted. Thereafter the lender foreclosed on the property and obtained a deficiency judgment against the Grumans based upon their guarantee of the note secured by the mortgage.
