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GRAPHIC DATA SYSTEMS CORPORATION vs DEPARTMENT OF TRANSPORTATION, 94-000905BID (1994)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida Feb. 21, 1994 Number: 94-000905BID Latest Update: May 10, 1994

The Issue Whether the Respondent, State of Florida, Department of Transportation, (the "Department"), acted arbitrarily or illegally in deciding to award the Intervenor, Intergraph Corporation, the contract for RFP-DOT-93/94 9008? The parties stipulated that the Department did not act fraudulently or dishonestly in issuing its notice to award the contract to Intergraph.

Recommendation It is, accordingly, RECOMMENDED: That the Department enter a Final Order which dismisses the bid protest brought by GDS. DONE and ORDERED this 10th day of May, 1994, in Tallahassee, Florida. DAVID M. MALONEY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of May, 1994. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 94-905BID The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Graphic Data Systems Corporation. Petitioner's findings of fact Nos. 1-15, 17, 18, 20, 21, 25- 29 have been adopted, in substance, insofar as material. With respect to petitioner's proposed finding of fact 16, the evidence did not establish clearly whether Data Voice's participation is limited solely to supplying software. With respect to petitioner's proposed finding of fact 19, the evidence established that the products referred-to are not kept in stock by Data Voice, but that a "just-in-time" system is used by Data Voice. Petitioner's proposed findings of fact 22, 23 and 24 are rejected. Data Voice has sold before to the general public at least Oracle RDMS base product. (Petitioner's Exhibit No. 17, Deposition of James Witherspoon, p. 18, lines 6-10. Specific Rulings on Proposed Findings of Fact Submitted by Intervenor, Department of Transportation Intervenor's proposed findings of fact 1-16 are accepted, in substance, insofar as material. With respect to Intervenor's proposed finding of fact 17, the first sentence is a conclusion of law. The second sentence is not accepted. It was not clearly established that Data Voice will provided services, only that it is standard procedure for Data Voice to do so. The proposal indicates Intergraph will provide services related to software but it may be that the proposal simply recognizes Intergraph's ultimate responsibility as the prime contractor for providing those services. It was not clearly established that Data Voice will not provide services either. The third sentence is accepted insofar as it is both useful and common in the industry for Data Voice to provide software directly to the Department at a lower price than would Intergraph. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Intergraph Corporation Respondent's findings of fact 1-17, and 20-24, in substance, are accepted insofar as material. With respect to finding of fact 18, see the ruling on Intervenor's finding of fact 17, above. COPIES FURNISHED: John O. Williams, Esquire Lindsey & Williams 1343 East Tennessee Street Tallahassee, Florida 32301 Ellen T. Chadwell, Esquire Beck, Spalla, & Barrios 1026 East Park Avenue Tallahassee, Florida 32301 Charles G. Gardner, Esquire Thomas H. Duffy, Esquire Department of Transportation 605 Suwannee Street Tallahassee, Florida 32399 Martha Harrell Chumbler, Esquire Paul Vazquez, Esquire Carlton, Fields, et al. 215 South Monroe Street Suite 500 Tallahassee, Florida 32302 Ben G. Watts, Secretary Department of Transportation ATTN: Eleanor F. Turner Haydon Burns Building 605 Suwannee Street Tallahassee, FL 32399-0450 Thornton J. Williams General Counsel Department of Transportation 562 Haydon Burns Building 605 Suwannee Street Tallahassee, FL 32399-0450

Florida Laws (6) 120.53, 120.57, 287.084, 287.092, 287.0943, 76.03

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IN RE: BERNARD HART vs *, 91-001890EC (1991)

Division of Administrative Hearings, Florida Filed:Fort Lauderdale, Florida Mar. 25, 1991 Number: 91-001890EC Latest Update: Aug. 13, 1992

The Issue Whether the Respondent, Bernard Hart, violated Section 112.313(4), Florida Statutes, by accepting free cable television service from a company holding a franchise with the City of Tamarac, Florida? Whether the Respondent violated Section 112.313(6), Florida Statutes, by using his official position to obtain such free cable television services? Whether the Respondent violated Section 111.011, Florida Statutes (1987), by failing to disclose such free cable television service?

Florida Laws (12) 104.31, 112.312, 112.313, 112.3148, 112.317, 112.320, 112.322, 112.324, 120.57, 120.68, 775.082, 775.083 Florida Administrative Code (1) 34-5.010

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IN RE: SENATE BILL 26 (STACIE WAGNER) vs *, 07-004279CB (2007)

Division of Administrative Hearings, Florida Filed:Longwood, Florida Sep. 17, 2007 Number: 07-004279CB Latest Update: May 02, 2008

Conclusions Mr. Klein had a duty to operate the van he was driving on the day of the accident with reasonable care. See ss. 316.183(1), 316.1925(1), F.S. Mr. Klein breached that duty when he was distracted by a cellular phone call at or around the time of the accident or otherwise not paying full attention to the road at the time of the accident. Mr. Klein’s negligent operation of the van was a proximate cause of the accident that resulted in Angelica’s death. Mr. Klein was acting within the course and scope of his employment at the time of the accident. Therefore, the County is responsible for Mr. Klein’s negligence. Angelica violated s. 316.130(10) and/or (11), F.S., when she attempted to run across SR 436 in the middle of the block rather than at a cross-walk and, as a result, Angelica’s own negligence contributed to her death. The percentage of fault allocated to Angelica by the jury -- 39 percent -- is reasonable under the circumstances. Ms. Wagner’s failure to supervise Angelica on the night of the accident was, in my view, irresponsible and unreasonable. Ms. Wagner knew or should have known that Angelica might cross SR 436 based upon prior instances of her crossing the road without permission. Furthermore, it is irresponsible and unreasonable for Ms. Wagner to allow an 11-year-old child to be unsupervised and to stay out on her own until 9:00 p.m., which was after dark. Ms. Wagner’s negligent supervision of Angelica contributed to her death because if she had been supervised she would not have gone across SR 436 in the first place. Thus, notwithstanding the jury verdict on this issue, I find that a portion of the fault for Angelica’s death should be apportioned to Ms. Wagner and, in my view, a figure of 10 percent is reasonable. In summary, I conclude that liability for Angelica’s death should be apportioned as follows: 51 percent to the County; 39 percent to Angelica; and 10 percent to Ms. Wagner. As to the damages, I find the amounts awarded by the jury -- $8,000 in funeral expenses and $1.4 million in non-economic damages -- to be reasonable. The amount of the claim bill should be reduced to reflect a set-off of the $8,000 received by Ms. Wagner from another source (i.e., Angelica’s uncle) to pay the funeral expenses and to reflect the allocation of a portion of the fault to Ms. Wagner. As adjusted, the claim bill should be for $652,080, which is calculated as follows: $1,408,000 (verdict) x 51% (County’s revised share of liability) = $718,080 + $42,000 (taxable costs) - $100,000 (partial satisfaction by County) - $8,000 (set-off for funeral expenses paid by uncle). ATTORNEY’S FEES AND LOBBYIST’S FEES: The claimant’s attorney provided an affidavit stating that that attorney’s fees will be capped at 25 percent in accordance with s. 768.28(8), F.S. The attorney’s fees will be $163,020 if the bill is approved at the amount recommended. The lobbyist’s fees are in excess of the 25 percent attorney’s fee, and according to the contract between the claimant’s attorney and the lobbying firm, the lobbyist’s fees will be an additional 5 percent of the final claim. Thus, the lobbyist’s fees will be approximately $32,604 if the bill is approved at the amount recommended. The bill, as filed, provides that payment of attorney’s fees, costs, and lobbyist’s fees are limited to 25 percent of the final claim. If that language remains in the bill and the claim is paid in the amount recommended, the claimant will receive $489,060 and the balance of $163,020 will go towards attorney’s fees, costs, and lobbyist’s fees. If that language was not in the bill, the claimant would receive only $456,456. LEGISLATIVE HISTORY: This is the second year that this claim has been presented to the Legislature. Last year’s bill, SB 62 (2007), was not referred to committee. RECOMMENDATIONS: For the reasons set forth above, I recommend that Senate Bill 26 (2008) be reported FAVORABLY, as amended. Respectfully submitted, T. Kent Wetherell Senate Special Master cc: Senator Gary Siplin Faye Blanton, Secretary of the Senate House Committee on Constitution and Civil Law Counsel of Record

Florida Laws (3) 316.130, 316.183, 768.28

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SOUTHERN COMMUNICATIONS GROUP vs. DEPARTMENT OF GENERAL SERVICES, 88-006294CVL (1988)

Division of Administrative Hearings, Florida Number: 88-006294CVL Latest Update: Oct. 23, 1989

The Issue The issues to be resolved in this proceeding concern whether Petitioner materially failed to comply with certain state contract conditions and whether, pursuant to pertinent rules, the Petitioner should be removed from the approved "vendor's list" and thereby precluded from bidding on proposed procurements of the Respondent agency.

Recommendation Having considered the foregoing findings of fact, conclusions of law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a Final Order be entered by the Department of General Services removing Southern Communications Group, a division of Tabco Enterprises, Inc. from the State approved vendor list, until such time as that entity identifies and replaces all re-manufactured instruments which it sold under the subject contract or reimburses the Respondent for the costs of cover and re-procurement. DONE and ENTERED this 23rd day of October, 1989, at Tallahassee, Florida. P. MICHAEL RUFF 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 23rd day of October, 1989.

Florida Laws (5) 120.57, 287.042, 672.513, 672.602, 672.607

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DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES vs HEALTHY HOME OF ALLERGY AND INDOOR AIR POLLUTION PRODUCTS, INC., 19-004485 (2019)

Division of Administrative Hearings, Florida Filed:Tampa, Florida Aug. 21, 2019 Number: 19-004485 Latest Update: Oct. 03, 2024

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HEALTHPLAN SOUTHEAST, INC. vs AGENCY FOR HEALTH CARE ADMINISTRATION, 93-002721RX (1993)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida May 19, 1993 Number: 93-002721RX Latest Update: Nov. 30, 1993

The Issue Whether or not existing rule 59A-12.006(3)(d) F.A.C., the Health Maintenance Organization (HMO) rule, constitutes a valid agency exercise of delegated legislative authority.

Findings Of Fact Existing Rule 59A-12.006(3)(d) F.A.C. provides: 59A-12.006 Quality of Care. Each HMO or PHC shall: Ensure that the health care services it provides or arranges for are accessible to the subscriber with reasonable promptness. Such services shall include, at a minimum: (d) Average travel time from the HMO geographic services area boundary to the nearest primary care delivery site and to the nearest general hospital under arrangement with the HMO to provide health care services of no longer than 30 minutes under normal circumstances. Average travel time from the HMO geographic services area boundary to the nearest provider of specialty physician services, ancillary services, specialty inpatient hospital services and all other health services of no longer than 60 minutes under normal circumstances. The AHCA shall waive this requirement if the HMO provides sufficient justification as to why the average travel time requirement is not feasible or necessary in a particular geographic service area; The existing rule in final form, supra, was adopted in February 1992 following extensive "workshopping" and other public hearing procedures. There is no suggestion herein that there are any enacting defects with regard to this rule. Validity of the rule is challenged solely under Sections 120.52(8)(c), (d), and (e) F.S. [1992 Supp.]. The grounds of invalidity alleged are that: The rule enlarges, modifies, or contravenes the specific provisions of the law implemented, i.e., Section 641.49, Section 641.495(3) and Section 641.56, F.S.; The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or The rule is arbitrary and capricious. Petitioner, Healthplan Southeast, Inc., (Healthplan), is a Florida corporation based in Tallahassee, Florida, and is a health maintenance organization (HMO) which provides comprehensive health care services to its subscribers. Petitioner has requested a waiver under the challenged rule. The agency's denial of that request for a waiver is the subject of DOAH Case No. 93- 2606, and involves disputed issues of material fact. Respondent, Agency for Health Care Administration (AHCA), is the state agency charged with the responsibility of implementing, interpreting, and enforcing the rules adopted pursuant to the authority set forth in Section 641.56, F.S. The Department of Health and Rehabilitative Services, (HRS), adopted Rule 10D-100.006(2)(a), the predecessor to Rule 59A-12.006(3)(d) as an agency rule in 1988. At the time of adoption of Rule 10D-100 in 1988, Ralph Gray was Unit Manager of the Managed Care Unit at HRS and was responsible for promulgating and implementing the rule. At the time Mr. Gray inherited the responsibility of promulgating Rule 10D-100, some preliminary work had already been performed and a draft rule existed which already included a requirement that the average travel time to the nearest primary care delivery site or the nearest institutional service site be thirty minutes or less. Mr. Gray accepted the draft that he inherited and moved forward with the rule adoption process without doing any independent investigation to determine the origin or validity of the thirty minute average time requirement. The rule as it was originally adopted in 1988, provided that HMOs should ensure that health care provided for subscribers was accessible with reasonable promptness by ensuring that the average travel time from an HMO geographic service area boundary to the nearest primary care delivery site or to the nearest institutional service site would be no longer than thirty minutes under normal circumstances. The specific language of the rule, as it existed from 1988 until February 1992, simply required an HMO to ensure that a subscriber had access to either a primary care delivery site or an institutional service site within an average travel time of thirty minutes. The rule as it was applied by the agency from 1988 until February 1992 did not require that an HMO provide a subscriber access to both a primary care delivery site and an institutional service site within thirty minutes. Neither did the rule as applied from 1988 to 1992 require that the institutional service site be under contract with the HMO. Amendments to Rule 10D-100 were proposed in 1991 in response to amendments to Chapter 641, Part IV, F.S. enacted by the 1991 Legislature and to establish additional quality of care standards for HMOs and Prepaid Health Clinics (PHCs). In 1991-1992, Ralph Gray was again the person in charge of implementing amendments to Rule 10D-100 that were necessary in order to comply with the statutory changes in 1991. Mr. Gray assembled a team to assist him in the rule adoption process. In addition to Mr. Gray, the team consisted of Linda Enfinger, Registered Nurse Specialist with the agency's HMO Unit and Dr. James Conn, M.D., Consultant to the Agency Office of Licensure and Certification. The rule amendments at issue herein included a change from "or" to "and" in the language of the rule which resulted in the thirty minute average travel time requirement being applicable to both primary care delivery sites and general hospitals under arrangement with the HMO to provide health care services. This change was not specifically mandated by the changes to Chapter 641 F.S. adopted by the Legislature in 1991. The change from "or" to "and" came about because of concern informally expressed to team members about HMO subscribers in northern Dade County and in Broward County having to travel long distances over considerable periods of time in congested traffic situations to obtain hospital services, and focused upon the Miami--Ft. Lauderdale population concentration corridor which is complex in roadways and traffic patterns and in its number of people and motor vehicles. There were no formal written complaints espousing the foregoing concept of traffic congestion and excessive distance to HMO provider hospitals in Dade and Broward counties, and the agency neither conducted nor commissioned any specific formal review or study to verify the presence or absence of such a problem either in Dade--Broward or in any other geographic area of the state. However, Mr. Gray reviewed listings of their providers supplied to the agency by HMOs and determined for himself that there were accessibility problems in the Dade--Broward area. No issue or concern clearly in opposition to the thirty minute average travel time restriction was raised in any workshop or public hearing during the 1991-1992 rule amendment process. Petitioner did not appear at the December 19, 1991 public hearing. Letters from the public in response to that public hearing did not contain adverse comments regarding the thirty minute travel requirement. Letters from the public during this process generally supported the time requirement upon accessibility grounds. A concomitant thrust of the public comment letters was to the effect that the agency should encourage HMOs to sign- up licensed local general hospitals in rural areas such as Madison County because of the need for such services from the HMOs. Opinion testimony offered at formal hearing herein that the thirty minute average travel time requirement as included in the predecessor rule was probably originally based on federal regulation 42 CFR 5 was speculative and unpersuasive. However, it is clear that the time limit, at least, was carried over from the 1988 HRS rule. No witness knew with certainty that the 1983 version of 42 CFR 5, dealing with the federal criteria for designating geographic areas having shortages of primary medical care professionals, was taken into consideration at the time the state's 1988 HMO rule was drafted. The 1992 version of 42 CFR 5 apparently applies to correctional institution populations who must usually have care providers travel to them, and became effective in October 1992, eight months after the new rule amendments were finally promulgated. On the other hand, the use of the thirty minute average travel time figure in CFR from 1983 to date is indicative of a continuing industry standard. Mr. Gray and Dr. Conn each had the "sense" or "impression" that thirty minutes average travel time was an industry standard. Mr. Gray's opinion in this regard was based on an absence of any serious question or challenge to this provision at any of the public meetings during the 1991-1992 rule amendment process. Dr. Conn's opinion was partly based on the same factor. However, his opinion is more persuasive because it is based, in part, upon his personal experience in the private health industry sector as Medical Director of the Capital Health Plan HMO from 1981 through 1982. During the amendment process, the agency did not conduct any formal studies to determine whether the thirty minute average travel time requirement had any validity or in any way satisfied the statutory mandate to ensure access to health care services with reasonable promptness. However, at formal hearing, the consistent and unrefuted expert medical and nursing testimony was to the effect that excessive travel time can exacerbate bone fracture, shock, and hemorrhaging. Dr. Conn specifically testified that there are many medical conditions that need to be evaluated capably within thirty minutes of the onset of symptoms. Medical physician Conn and nurse administrator Enfinger, as experts in their fields, recited factual examples from their own professional experience of emergency room protocols and general hospital "on-call" physician rosters which require response time ranging from 15 minutes to 45 minutes of notification of the occurrence of trauma. Dr. Conn testified as an acknowledged expert in managed health care that the rule's thirty minutes average travel time provision is a good and adequate interpretation of the statutory mandate of the enabling legislation at Section 641.495(3) F.S., to ensure that HMOs provide health care services to their subscribers with reasonable promptness with respect to geographic location. According to Mr. Gray, the 1991-1992 rule amendment changing the words "institutional service site" to "general hospital under arrangement with the HMO" occurred because the term "general hospital" was thought by agency personnel to be synonymous with "institutional service site" and because "general hospital" was thought to be less confusing due to generally understood industry perceptions of the term. There is no evidence in this record to the contrary. The change of terms within the rule from "institutional service site" to "general hospital under arrangement with the HMO," did not draw comments or raise concern during the rule amendment process, and Dr. Conn testified convincingly at formal hearing that a primary care physician's office would probably not have the technical equipment or personnel capabilities of treating severe emergencies, capabilities that would be present at a general hospital. HMO subscribers are in the nature of a captive audience in that they are not free to select from any provider if they wish to continue to enjoy the reduced cost benefits of the HMO provider contract. Emergency-type treatment for a subscriber must be paid for by his HMO even if that treatment was rendered in a health care facility not signed up with the HMO. Roberta Agner, administrator of Madison County Memorial Hospital, testified that the rule as amended acts to protect those subscribers receiving HMO services and the HMO itself by insuring adequate health care through the HMO. Ms. Agner's foregoing opinion is colored by the fact that without the new rule in effect, the Petitioner's HMO subscribers in Madison County may come to Ms. Agner's hospital, which is currently not signed up with Petitioner's HMO, only for life and death situations if they are to remain assured of payment of their fees by their HMO. Nonetheless, Ms. Agner's testimony is credible that HMO subscribers sometimes perceive symptoms such as acute chest pain as an emergency situation and utilize a local non-HMO facility only to discover after diagnosis and treatment that the HMO does not acknowledge the situation as a compensable emergency (life or death situation) because upon medical hindsight, the precipitating symptom is not, in fact, a heart attack. She gave several similar medical conditions that routinely result in such disputes. The greater weight of all the evidence is that prudent patients and hospital emergency rooms must treat these symptoms initially as emergencies. From this, the undersigned reasonably infers that the absence of the thirty mile rule could have a life- threatening "chilling effect" on HMO subscribers promptly seeking truly necessary emergency health care for fear of making an expensive wrong self- diagnosis. Without the challenged rule provision, a subscriber to Petitioner's HMO living in Madison County, Florida could have to travel from as far away as the Suwannee River (the eastern boundary) to Tallahassee in Leon County to receive hospital services. Without the rule, such a subscriber would have to travel sixty minutes average travel time (distance divided by legal speed limit equals time) from downtown Madison, which is not at the eastern boundary, to either provider hospital in Tallahassee. This trip's average travel time in unusual circumstances could be more than sixty minutes. As found supra, many conditions routinely require medical attention in a general hospital within 15 to 45 minutes. The rule as currently written has demonstrable impact on subscribers living in rural areas receiving health care services from their HMO promptly. Petitioner presented no evidence specifically attacking the portion of the rule providing for the sixty minute average travel time for specialty physician services, specialty inpatient hospital services, and all other health services. Petitioner complained that the agency has no uniform interpretation or guidelines for interpreting the rule's terms, "average travel time" and "normal circumstances." Despite such assertion, the rule is clear on its face. Each witness who was asked to apply the rule used standard dictionary definitions and elementary school mathematical formulas. Each witness uniformly started with the premise that distance calculated by existing roadways, divided by legal speed limits, would equal "average travel time" under "normal circumstances." All witnesses were able to list numerous hypothetical factual situations, including but not limited to weather and traffic conditions, which might render a travel time "not normal," but which would have to be weighed and considered on a case by case basis. The rule provides that the agency shall waive the average travel time requirement if an HMO provides "sufficient justification" as to why the requirement is not "feasible" or "necessary" in a particular geographic service area. Thus, an HMO which cannot meet the average travel time requirement of the rule still has the opportunity to prove the requirement ought not to apply to it, bearing the burden to go forward and the burden of proof. This is clearly a flexible standard designed to accommodate a variety of "not normal" circumstances. Petitioner's assertion that the rule is invalid because it does not establish a uniform interpretation or guidelines to supplement or explain "feasible" or "necessary," is not persuasive since, as used in the rule, these terms are clearly susceptible of interpretation by dictionary and of being applied on a case by case factual basis. Some types of evidence which agency personnel or the HRS consultant, Dr. Conn, advanced as probably going to prove "sufficient justification" were improved medical techniques, modes of transportation such as rescue flights, and unavailability of any accredited or licensed general hospitals in a given geographic service area. In such situations, the rule's waiver provision provides balance to the rule's initial thirty minute travel requirement.

Recommendation Upon the foregoing Findings of Fact and Conclusions of Law recited herein, it is ORDERED that Existing Rule 59A-12.006(3)(d) F.A.C. constitutes a valid exercise of delegated legislative authority. DONE AND ORDERED this 19th day of November, 1993, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The De Soto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of November, 1993. APPENDIX TO FINAL ORDER 93-2721RX The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: 1-15 Accepted, but material unnecessary, subordinate or cumulative to the facts as found has not been adopted. 16 Rejected as not supported by the record and as unpersuasive legal argument 17-21 Accepted in part and rejected in part upon the record evidence as a whole and as covered in FOF 32-34. What is rejected is not dispositive or controlling for the reasons set out in the FOF and COL. 22 Accepted in FOF 20. Respondent's PFOF: 1-5 Accepted, but material unnecessary, subordinate or cumulative to the facts as found has not been adopted. More specifically, the excessive wordiness of the proposals as to who examined the witness or whether oral testimony was given upon direct or cross examination or upon redirect examination has been excluded as irrelevant. 6-18 These proposals amount to identification of various exhibits by a witness. The exhibits are in evidence and were considered. Immaterial matters have not been adopted. The material substance of those exhibits and the oral evidence and stipulations concerning them are covered in FOF 3, 18-21. 19-20 Rejected as stated because misleading as stated. However, official recognition was taken of 42 CFR 5 in both its forms. Its significance is covered in FOF 19- 21. Accepted, but material unnecessary, subordinate or cumulative to the facts as found has not been adopted. Rejected as stated because not comprehensive of all testimony as stated. Covered in FOF 5, 32, and 34 as supported by the record as a whole. 23-30 Accepted, but material unnecessary, subordinate or cumulative to the facts as found has not been adopted. More specifically, the excessive wordiness of the proposals as to who examined the witness or whether oral testimony was given upon direct or cross examination or upon redirect examination has been excluded as irrelevant. Additionally, proposals which amounted to no more than identification of exhibits were excluded as subordinate. The exhibits themselves together with relevant testimony have been considered and facts found accordingly. 31-32 Rejected as stated because misleading as stated. However, official recognition was taken of 42 CFR 5 in both its forms. Its significance is covered in FOF 19- 21. 33-35 Accepted, but material unnecessary, subordinate or cumulative to the facts as found has not been adopted. More specifically, the excessive wordiness of the proposals as to who examined the witness or whether oral testimony was given upon direct or cross examination or upon redirect examination has been excluded as irrelevant. COPIES FURNISHED: Michael O. Mathis, Esquire Agency for Health Care Administration 325 John Knox Road, Suite 301 The Atrium Building Tallahassee, Florida 32303 John C. Pelham, Esquire Pennington, Haben, Wilkinson, Culpepper, Dunlap, Dunbar, Richmond, and French, P.A. Post Office Box 13527 Tallahassee, Florida 32317-3527 Carroll Webb, Executive Director Administrative Procedures Committee Holland Building, Room 120 Tallahassee, Florida 32399-1300 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium Building, Suite 301 Tallahassee, Florida 32303

USC (1) 42 CFR 5 Florida Laws (8) 120.52, 120.54, 120.56, 120.68, 641.19, 641.49, 641.495, 641.56 Florida Administrative Code (1) 59A-12.006

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DEPARTMENT OF BANKING AND FINANCE vs PHILIP E. MEHL, SR. AND SUSAN E. MEHL, 02-000526 (2002)

Division of Administrative Hearings, Florida Filed:West Palm Beach, Florida Feb. 13, 2002 Number: 02-000526 Latest Update: Jan. 23, 2004

The Issue The issues are whether Respondents are guilty of selling or offering for sale securities in Florida that were not exempt under Section 517.051, Florida Statutes, were not sold in an exempt transaction under Section 517.061, Florida Statutes, were not a federally covered security, or were not registered pursuant to Chapter 517, Florida Statutes, in violation of Section 517.07(1), Florida Statutes; or whether Respondents are guilty of acting as unregistered dealers, associated persons, or issuers and selling or offering for sale any securities from this state, in violation of Section 517.12(1), Florida Statutes. If so, an additional issue is what penalties should be imposed.

Findings Of Fact At all material times, neither Respondent Philip E. Mehl, Sr. (Mr. Mehl), nor Respondent Susan E. Mehl (Ms. Mehl) has been licensed or registered to sell securities. However, Mr. and Ms. Mehl, who are married to each other, were licensed to sell securities from 1993 through mid-1996. During this period of time, they were registered with three different brokers. Both Mr. and Ms. Mehl were registered with the same broker at the same time. The interests in, or obligations of, the products or investments that were the subject of programs sponsored by ETS Payphones, Inc. (ETS), Eagle Capital Management One U.S. Estate Group, LLC (Eagle), and MP3 Entertainment.com, Inc. (MP3) were never registered as securities pursuant to Chapter 517, Florida Statutes. All sales described below took place in Florida. The ETS payphone program evolved out of the ownership and operation of payphones by ETS, starting in 1992. Offering materials prepared by National Communications Marketing, Inc. (NCMI), offer to sell installed payphones to individuals for $7000. These materials provide each payphone purchaser three options: owner operation, in which the payphone owner maintains, services, and collects coins from the payphone; "turn-key maintenance," in which the payphone owner pays a monthly fee for a payphone management company to maintain, service, and collect coins from the payphone; and a lease, in which the payphone owner leases the payphone to a management company that will pay monthly rent of $82 for a five-year term-- at the end of which the payphone owner may assume the maintenance and operation responsibilities, attempt to renegotiate the lease, or sell the payphone for the original purchase price to the management company. The materials provide that self-directed individual retirement accounts, Keogh plans, simplified employee pension plans, and Section 401K plans may purchase payphones, but only under the third option, in which they lease them to a management company. Mr. Mehl learned of ETS and NCMI in 1996 through Michael Bugelman, who visited Mr. Mehl's office and explained the ETS payphone program. Mr. Bugelman described his business relationship with NCMI, which was one of four ETS affiliates formed by ETS or its chief executive officer, Charles B. Edwards. Mr. Mehl later met Mr. Edwards. From these men, Mr. Mehl learned that NCMI sold the payphones, ETS leased them from the purchasers, and Mr. Mehl could earn commissions if he procured purchasers of ETS payphones. Before agreeing to market ETS payphones, Mr. Mehl contacted numerous persons who had purchased payphones and determined that they were satisfied with the operation of the program. Mr. Mehl also visited the main plant in Georgia where over 200 persons were working in shipping and maintaining payphones. Eventually, Mr. Mehl decided to participate in the marketing of ETS payphones, and his first sales took place in mid-1997. By Sales Representative Agreement dated January 1, 1998, between NCMI and Mr. Mehl or Mehl & Mehl, Inc. (the agreement identifies the sales representative as Mr. Mehl once and Mehl & Mehl, Inc., once), NCMI appointed Mr. Mehl or Mehl & Mehl, Inc., as its sales representative for customer-owned payphones. Among the sales representative's responsibilities was to "[d]evelop and implement a marketing program and plan for maximum sales . . .." In return, NCMI would pay a 10 percent commission with a bonus of a free payphone for sales of at least 15 payphones in a single month. An undated addendum, signed only by Mr. Mehl, raises the commission to 12 percent. Another undated addendum, again signed only by Mr. Mehl, changes the commission to 10-16 percent, based on sales volume. Contemporaneous with the developments, Mr. Mehl was aware of a complaint from a purchaser concerning the sale of four payphones by David R. Fuller. A March 30, 1999, memorandum prepared by Marsha A. Perkins, financial investigator, criminal enforcement, West Central Florida Regional Office, Department of Banking and Finance, states that "[initial review of the offer [including the "offering material"] revealed that [the purchaser] purchased a leasing agreement from ETS Payphones to lease pay phones, which was not within the scope of F.S. 517." The memorandum notes that ETS refunded the purchaser her entire purchase price and that Mr. Fuller may have violated the Florida Deceptive and Unfair Trade Practices Act by representing an annual yield of 15 percent. At some point, Mr. Mehl formed the opinion that Mr. Bugelman was unreliable and decided that he wanted to sever their business relationship. Mr. Bugelman maintained a commission override on all of Mr. Mehl's commissions, so Mr. and Ms. Mehl formed ETI Enterprise Telephone Industries, Inc. (ETI). Although Mr. Mehl remained responsible for selling the payphone program, the addition of Ms. Mehl as a sales agent enabled them to eliminate Mr. Bugelman's commission override. From this point, NCMI and/or ETS paid ETI all commissions due on the sale of ETS payphones. Notwithstanding the assertions contained in his proposed recommended order, Mr. Mehl contends, as he stated in his answers to interrogatories, "I acted more in the nature of a broker. The purchase of payphones was from an unrelated third- party." (Ms. Mehl makes the same contention in her answers to interrogatories.) The Eagle program consists of the sale of membership units in the U.S. Estate Group, LLC. As explained in the Operating Agreement, the business of the limited liability company is "limited to the purchase and collection of defaulted consumer debt that lending institutions have written off, and such other activities as are incidental to [this b]usiness . . .." The Eagle Operating Agreement provides: "all profits and losses of [Eagle] and all income, deductions and credits shall be allocated to the Members in the percentages as set forth in Exhibit 'A.'" The Operating Agreement states that the Manager is to conduct the business of the company, unless removed by a 60 percent vote of the Members or unless a majority of Members vote to override a business decision of the Manager. The Eagle Operating Agreement provides that the company will pay each Member a monthly sum equal to two percent of the Member's investment until the Member receives an amount equal to his or her original investment. The Operating Agreement conditions these payments upon the presence of sufficient operating net cash flow. The Operating Agreement provides that 34 months after the commencement of the two- percent monthly payments, a Member may elect to require the company to repurchase the Member's original investment for the original price.1 Mr. Mehl contends, as he stated in his response to interrogatories, that he "merely conveyed onto individuals the information [about the Eagle program] that was provided to me by the Eagle Program managers. . . . I contest that I was the 'seller' with regard to this alleged investment. I acted as . . . 'broker' in the transaction. I conveyed certain information to interested individuals and they made the decision whether or not they wished to purchase the investment from the Eagle Program itself." (Ms. Mehl makes the same contention in her answers to interrogatories.) The MP3 program consists of the sale of nine-month promissory notes issued by MP3 with an eleven-percent annual return. On certain conditions, including the payment of $4 per share over a specified period of time, the note is convertible to equity. The MP3 offering material adds that these "obligations are fully guaranteed by United Assurance Company Ltd. [w]ith $41 million in assets listed in the A.M. Best International Directory of Insurance Companies." On a candid note, the offering material notes: The company is a public company, listed on the NASD Bulletin Board . . ., formed in 1983, with a $2,000,000 tax loss carry forward, and no assets or liabilities from its former publishing business. Company is receiving $5,000,000 in assets from its new major shareholder. . . . Mr. Mehl holds licenses to sell health, life, annuities, and insurance contracts. He is a certified senior advisor and a certified estate planner. At all material times, he maintained an office in Stuart, Florida, staffed with nine support employees and adjoining a law office, whose attorneys were available to Mr. Mehl's clients. Publishing flyers in the local newspaper, Mr. Mehl solicited interested persons to attend monthly workshops or seminars that he would sponsor in the Stuart area. Persons obtained by Mr. Mehl would present investment options at the workshops or seminars. Two or three times, Mr. Edwards was the featured speaker. Although other speakers did not highlight any of the three programs that are the subject of this case, they discussed many investment topics. At some point, attendees would have an opportunity to sign up to meet Mr. Mehl at his office to discuss investment possibilities. Ten persons testified that they invested money based on Mr. Mehl's advice in one of the three subject programs. Sterling Tyndall has been retired for six years. Formerly an electrician, he had little investment experience, mostly in some mutual funds and major stocks like Intel and Oracle. A friend, Richard Granger, who had done business with Mr. Mehl, recommended that Mr. Tyndall discuss with Mr. Mehl investment options. Although he met Ms. Mehl inconsequentially while in the office, Mr. Tyndall's contact was with Mr. Mehl. When Mr. Tyndall asked for an investment that would provide him a good return, Mr. Mehl recommended ETS payphones. Mr. Mehl assured Mr. Tyndall that the principal would be guaranteed for five years and he would receive 14 percent annually on his investment. Mr. Mehl explained the three management options for the payphones, and Mr. Tyndall chose the lease option. Mr. Tyndall invested $28,000 in ETS payphones three years ago. Mr. Mehl was the sales agent on the sale. After receiving several monthly payments, he stopped receiving any money. His sole chance of recovering any more of his investment lies with the trustee in bankruptcy. Mr. Tyndall also invested $99,000 in the Eagle membership units, apparently in a single transaction. Acting as the sales agent in this transaction, Mr. Mehl assured Mr. Tyndall that the investment was risk-free, and Mr. Tyndall would receive a guaranteed annual return of 24 percent. After receiving two payments, Mr. Tyndall received notification from the Commonwealth of Pennsylvania that it had attached the accounts and hoped to be able to return two-thirds of his original investment. Mr. Granger has been retired 16 years after a career with General Motors as Senior Buyer in charge of the Fisher Body Division. Mr. Granger has no investment experience and learned of Mr. Mehl through a flyer in the Stuart News. During the seminar that he attended, Mr. Granger made an appointment to meet Mr. Mehl at his office. During that meeting, Mr. Mehl sold him three annuity contracts. About one year later, Mr. Granger visited Mr. Mehl again; the annuities that had originally paid eight percent annually were now paying only 4.25 percent annually. Mr. Mehl suggested that Mr. Granger cash in his annuities and invest in a higher-returning investment--ETS payphones. Mr. Granger originally bought two or three ETS payphones. Later, he purchased ten more ETS payphones. His total investment was $84,000. Mr. Mehl was the sales agent. Although Ms. Mehl and Mr. Granger became friends, she did not participate in the sales. Mr. Granger received payments for about six months, but has received no more income or return of principal on this investment. Mr. Granger also invested in MP3 notes, on Mr. Mehl's recommendation. Mr. Mehl told Mr. Granger that this was an "insured" investment, and he would earn 11 percent over nine months, if he accepted a single payment at the end of the term, or 10 percent over nine months, if he preferred monthly payments. Mr. Granger invested $60,000 with Mr. Mehl as the sales agent. Mr. Granger has lost his entire investment in MP3. Robert A. Cook is a freelance contractor engaged in structural and architectural design work. He has no investment experience. When looking for insurance, Mr. Mehl was recommended to Mr. Cook. At some point, Mr. Cook learned that Mr. Mehl was also a financial advisor. In a discussion, Mr. Mehl recommended that Mr. Cook diversify his investments to include ETS payphones. Assuring Mr. Cook that the ETS payphone investment was secure, Mr. Mehl said that it was a five-year guaranteed contract at a certain interest rate. Mr. Mehl praised the investment highly. Mr. Cook understood that, if something happened to "his" payphone, ETS would assign him another, and he could deduct his expenses in visiting "his" payphone. Mr. Cook invested over $120,000 in ETS payphones. Mr. Mehl served as the sales agent. He was not told of the three management options or that a separate company would lease the phones. At some point, Mr. Cook met Mr. Edwards at a seminar and was impressed with Mr. Edwards down-to-earth quality. Mr. Edwards even mentioned how they had returned the money of one purchaser who had suffered some financial problems. When Mr. Cook first encountered interrupted payments, he trusted Mr. Mehl's assurances that Mr. Cook would get his payments. Mr. Cook lost nearly all of his investment. Naomi Schounard is a retired teacher without much investment experience. She first met Mr. Mehl when he served as her Sunday school teacher. Three years prior to her ETS investment, Ms. Schounard visited Mr. Mehl at his office and received good advice on stocks. When Ms. Schounard heard about the ETS payphones, she asked Mr. Mehl if they were not securities. He responded that problems with the state concerning the ETS program had been taken care of. He told her that the ETS payphones carried only a "little bit" of risk and that she would get her money back in five years. Ms. Schounard kept wondering about the impact of cell phones and why all the payphones she saw were rundown. Mr. Mehl replied that one-third of all persons did not have a phone. He assured her that Mr. Edwards was a good friend and a "fine Christian gentleman," on whom she could depend. Mr. Mehl added, "I wouldn't think of offering to sell something to those wonderful people at the church that I knew wasn't a good investment." Eventually, Ms. Schounard invested $38,000 in ETS payphones with Mr. Mehl as the sales agent. No one told her about the three management options. She lost her entire investment except for six monthly checks that she received from January through June 2000. As late as July 2000, Mr. Mehl tried to sell Ms. Schounard more ETS payphones. Ms. Schounard also invested in MP3 notes. Commenting on how hesitant she had been in making the ETS investment, Mr. Mehl told Ms. Schounard that he had another investment that is guaranteed by an offshore insurance company also licensed in California. Mr. Mehl asked her if she had anything to cash in to buy these notes. Ms. Schounard replied that she had a single premium life insurance policy. Mr. Mehl told her that that was a bad investment, so she cashed in two of three or four policies. She and her husband invested a total of $116,350, including $25,000 from the cashed-in life policies and the rest from their individual retirement accounts. Mr. Mehl was the sales agent on this investment, and Mr. and Ms. Schounard lost every penny of the money they spent on MP3 notes. Ms. Mehl did not participate in Ms. Schounard's transactions. However, Ms. Schounard heard Ms. Mehl assure an elderly woman in the office lobby about her ETS payphone investment, "Don't worry. Everything will be great. Wait until you get your first check." Mary Louise Smick is a retired customer service representative for a utility company. She has no investment experience. Ms. Smick first met Mr. Mehl in late 1998 through her income-tax preparer, who had advised Ms. Smick that she was paying too much income tax. When she met Mr. Mehl, he told her that he had researched ETS for two years before presenting it to clients. Ms. Smick invested $110,600 in ETS payphones with Mr. Mehl as the sales agent through purchases of $7000 in May 1999, $77,000 in August 1999, and $26,600 in March 2000. Mr. Mehl assured her that the investment had no risk and was liquid. No one told Ms. Smick about the management options. She lost her total investment except for payments of $11,414. Ms. Mehl did not take part in any transaction with Ms. Smick. Ms. Smick also invested $86,000 in Eagle and MP3. Her Eagle investment appears to have been a single transaction. Again, Mr. Mehl assured her that he had researched Eagle for two years and she could not lose money in Eagle membership interests. Mr. Mehl told Ms. Smick that the MP3 notes were ideal for her desire for short term return on $20,000 that she wanted to invest; he guaranteed her that she would have her money back plus interest in nine months. Ms. Smick lost her entire investment. She has since been forced to sell her apartment. Arthur Hayes is retired from Allstate Insurance Company and has no previous investment experience, except for rolling over a profit-sharing account and retirement pay into an AG Edwards account. Mr. Hayes first met Mr. Mehl two years ago after seeing an advertisement for a trust for $365. Mr. Hayes visited Mr. Mehl's son, Shawn, who suggested that Mr. Hayes speak with Mr. Mehl. When he visited Mr. Mehl, Mr. Hayes learned from Mr. Mehl that ETS payphones were paying 14 percent annually. Mr. Mehl told Mr. Hayes that Mr. Mehl had $500,000 in ETS payphones, and the investment was very safe and secure. Mr. Hayes knew that one of his neighbors had been collecting for 12-18 months on an ETS payphone purchase through Mr. Mehl. With Mr. Mehl as the sales agent, Mr. Hayes invested $280,000 in ETS payphones in early June 2000. Mr. Hayes had no dealings with Ms. Mehl. No one discussed the three management options. Mr. Hayes lost his entire investment. At Mr. Mehl's suggestion, Mr. Hayes purchased $328,000 in MP3 notes. Mr. Mehl assured him that the notes were bonded and he would receive nine percent, if he wanted monthly payments, or 10 percent, if he would accept a single payment at the end of a year. Mr. Mehl did not reveal that the surety, if any, was offshore. Mr. Haynes lost his entire investment, as to which Mr. Mehl was the sales agent. George Kitchen is a retired ophthalmic lens designer. His investment experience is limited to mutual funds, such as those offered by Fidelity Investment. Mr. Kitchen first met Mr. Mehl in 1998 when Mr. Kitchen attended a seminar for which he had seen an advertisement in the newspaper. The subject of the seminar was investing and trusts. Mr. Mehl later recommended to Mr. Kitchen the ETS payphones. Mr. Mehl assured him that the investment was liquid, risk-free, and interest-bearing. With Mr. Mehl as the sales agent, Mr. Kitchen and his wife invested a total of $233,000. Although he recalls that Ms. Mehl had him sign some papers, Mr. Kitchen cannot recall whether the papers were connected to the ETS purchase. Mr. Mehl explained the three management options. Mr. Kitchen and his wife lost their entire investment. In what appears to have been a single transaction, Mr. Kitchen also invested in Eagle through Mr. Mehl as the sales agent. Mr. Mehl described the investment as an opportunity to earn 24 percent interest annually. Mr. Kitchen invested $100,000 in Eagle membership interests, but hopes to receive 86 percent of this investment back through the efforts of Pennsylvania officials. With Mr. Mehl as the sales agent, Mr. Kitchen also invested $30,000 in MP3 notes. Mr. Mehl told Mr. Kitchen that these notes would pay nine percent annually and were ironclad because they were insured. Lengi Dominissini is a retired plasterer without investment experience. He first met Mr. Mehl at a seminar to protect money from a nursing home. During the seminar, Mr. Dominissini made an appointment to meet Mr. Mehl at his office. Mr. Mehl and Ms. Mehl described the ETS payphone program to Mr. Dominissini during several office visits. Mr. Mehl assured Mr. Dominissini that the investment was "rock solid." On the last visit, when Mr. Dominissini purchased $56,000 of ETS payphones, his wife walked out of the office in disgust. To make the purchase, Mr. Dominissini paid a $17,000 penalty on an early withdrawal, based on Mr. Mehl's advice that his five percent annual return was insufficient. With Mr. Mehl as the sales agent, Mr. Dominissini received three monthly checks before losing the remainder of his investment. Mr. Mehl also served as the sales agent when Mr. Dominissini purchased $86,000 in MP3 notes. Mr. Mehl assured Mr. Dominissini that this investment was safe. Mr. Dominissini lost his entire investment in MP3 notes. Martha Fritz is a housewife with no investment experience. She first met Mr. Mehl in 1997 when she saw one of his advertisements as a financial advisor. She attended one of Mr. Mehl's financial seminars. She later went to his office for financial advice and to obtain a living trust. As the sales agent, Mr. Mehl sold Ms. Fritz $72,000 in ETS payphones. She based her investment decision on her trust of Mr. Mehl and his assurance that he had invested in the ETS payphones for a couple of years. Mr. Mehl mentioned the three management options. Ms. Fritz lost her entire investment. Raymond Joseph Sweeney is a retired manager of New York Telephone, who had invested previously only in his company's stock. Mr. Sweeney met Mr. Mehl two and one-half years ago through word-of-mouth. He sought Mr. Mehl's advice for the investment of retirement funds at a return that would better current returns in the stock market. Mr. Mehl suggested ETS payphones, assuring Mr. Sweeney that he would receive 14 percent annually, risk-free, and ETS would collect the coins from his payphones. With Mr. Mehl as the sales agent, Mr. Sweeney invested $114,000 and lost all of it except for $41,000. Again with Mr. Mehl as the sales agent, Mr. Sweeney and his wife, each using his or her individual retirement account and both using a joint account, purchased $103,203.38 in Eagle membership interests. Mr. Mehl told Mr. Sweeney that he could get 24-25 percent annual interest. Instead, Mr. and Ms. Sweeney lost their entire investment in these three Eagle transactions. An employee of Petitioner posing as a potential investor spoke with Ms. Mehl about ETS payphones. She told him that the ETS payphone purchases could be determined to be securities, but they were not. She said that ideal locations would be in places like the South Bronx, where residents could not afford home telephones. She told the employee that he needed to make an appointment for a one to one and one-half hour presentation on the ETS program, and she mailed him ETS payphone offering materials. Mr. Mehl's 181 sales of ETS payphones constituted 181 sales of unregistered securities and 181 sales of securities by an unregistered associated person or dealer. The ETS payphone sales by NCMI with simultaneous leases from the purchasers to ETS constitute investment contracts because the payphone purchasers are investing money in a common enterprise induced by the expectation of profit solely from the efforts of other persons. As for the common enterprise, the ETS payphone program bears all the indicia of a Ponzi scheme, in which early investors are paid not with earned income, but with the investments made by later investors, often acting in reliance upon the positive returns experienced by the early investors. By definition, such a scheme requires the pooling of investors' funds, despite any contrary indications in the offering materials. Even if not a Ponzi scheme, the ETS payphone program constitutes a common enterprise because the economic return of the investors in based on the managerial efforts of the promoters. Each payphone purchaser chose the lease option from among the three management options or one of the Respondents chose the lease option for the payphone purchaser. Regardless of the documentation, when the ETS payphone program went down, all purchasers went down at the same time. Nor does the ETS payphone lease leave purchasers with significant control over "their" payphones. The lease provides that ETS has the "right and sole authority" to move payphones to a new location if the original location proves unprofitable or subject to vandalism. The lease adds that the payphones remain under the "sole and absolute control" of ETS with the lessor having only a right to inspect the payphones. The present record does not support the characterization of the sale-and-lease transactions as a financing arrangement. No evidence suggests that ETS relied on the investments of ETS payphone purchasers in order to conduct normal business. Instead, the record, including the offering materials, is replete with evidence that the motivating force for these purchases was the payphone purchasers' search for superior, safe returns on their investments. The record amply demonstrates that the role of ETS was to provide managerial expertise to assist the purchasers in realizing their investment objectives, and the role of the purchasers was not to provide financing for ETS to expand its payphone business. Thus, the sale-and-lease transaction was an investment contract, not a financing arrangement. Mr. Mehl's six sales of Eagle membership interests constituted six sales of unregistered securities and six sales of securities by an unregistered associated person. The Eagle membership interests constitute investment contracts because the purchasers are investing money in a common enterprise induced by the expectation of profit solely from the efforts of other persons. Unlike the situation with the ETS payphone purchases, in which the focus is on the common enterprise, the focus in the Eagle membership interests is on whether the purchasers are relying solely on the efforts of other persons. In the Eagle operating agreement, the Manager exerts the efforts, in buying accounts receivable, on which the Members rely for their profits. Although it is true that Members may override decisions of the Manager and replace the Manager, these rights are illusory as a practical matter. The purchasers in this case, for instance, had no clear idea what they were buying. They sensed vaguely (and incorrectly) that they held some form of debt, not equity. The Eagle purchasers had no idea that the form of their purchase was not a promissory note, but a membership interest in a form of entity that did not even exist in Florida 25 years ago. It follows that the Eagle purchasers had no idea that they had any rights in the management of Eagle and no idea how to exercise such rights. In sum, the Eagle purchasers had no effective rights in the management of Eagle, but relied completely on the Manager to provide a return on their investment, and, when he failed to do so, the Eagle purchasers in this case had no idea what to do but to wait for Pennsylvania to try to return a portion of their investments. Mr. Mehl's 52 sales of MP3 notes constituted 52 sales of unregistered securities and 52 sales of securities by an unregistered associated person. The MP3 notes constitute a security because they are option contracts that are convertible to equity at a fixed price within a specified period of time. The notes also constitute a security because they are investment contracts. Ms. Mehl participated substantially in the sale of ETS payphones to an unnamed elderly woman and Mr. Dominissini and participated substantially in the offer to sell ETS payphones to one of Petitioner's employees. These sales and offer to sell constitute three sales or offers to sell an unregistered security and three sales or offers to sell a security by an unregistered associated person. Additionally, Petitioner proved that Ms. Mehl was the sales agent on 285 purchases involving ETS payphones. Petitioner established this sales activity by the 285 COCOT [Coin-Operated, Customer-Owned Telephones] Purchase Agreements signed by Ms. Mehl (Petitioner Exhibit 12) and other evidence in the record.

Recommendation It is RECOMMENDED that the Department of Banking and Finance enter a final order directing Respondents to cease and desist from further violations of Sections 517.07(1) and 517.12(1), Florida Statutes; imposing an administrative fine of $2,390,000 against Mr. Mehl; and imposing an administrative fine of $2,880,000 against Ms. Mehl. DONE AND ENTERED this 16th day of July, 2002, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 16th day of July, 2002.

Florida Laws (8) 120.57, 517.021, 517.051, 517.061, 517.07, 517.12, 517.171, 517.221

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AUDIO LABS, INC. vs. DEPARTMENT OF GENERAL SERVICES, 87-004912BID (1987)

Division of Administrative Hearings, Florida Number: 87-004912BID Latest Update: Jan. 05, 1988

The Issue The central issue in this case is whether Petitioner should be awarded Bid No. 432-730-310-W for configurations 1, 2, and 3, Service Area 1.

Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, I make the following findings of fact: The ITB for Bid No. 432-730-310-W consisted of three sections: general conditions, special conditions, and technical specifications. Bidders were evaluated on their technical and non-technical responses to the ITB. Once the Department determined the bidders to be compliant with their non-technical responses, they were ranked according to the evaluation award criteria described in Appendix F of the ITB. Once ranked, the Department forwarded the bid responses to the engineering staff of the Division of Communications for a technical review. This technical review consisted of verifying a lowest compliant bidder and a competitive compliant bidder. To complete the technical review the engineering staff considered the responses submitted on the ITB forms, technical literature provided by the bidder, and technical responses submitted to supplement other information. To the extent that an ambiguity in one response was satisfactorily explained elsewhere in the bid documentation, the bidder was given the benefit of the doubt and found to be responsive to the ITB. Prior to submitting bids, all bidders were given an opportunity to raise questions regarding the ITB at a pre-bid conference conducted by the Department. Petitioner's representative attended the conference and received a copy of the specimen bid. The ITB required specific mandatory responses. Failure to include the mandatory information resulted in the disqualification of the bid. An equipment list for the baseline system was a mandatory requirement of the ITB. Identification of the manufacturer and the part number, if any, were required to be provided. Another mandatory feature required by the ITB was a "handsfree" intercom. The ITB defined this feature as follows: Handsfree answer and talk back on intercom: Enables a station user to answer an intercom call through the station instrument's internal speaker/microphone without lifting the instruments handset. (This feature shall not be controlled by the calling party instrument intercom button.) Speed-dialing was another mandatory feature of the ITB. This feature could be provided at the station (an individual telephone) or by the system. If at the station, there was no requirement that the instrument retain memory in the event of a power outage. The central memory of the system, however, had to retain its memory in the event of a power failure. The ITB prohibited a method of programming which required access to the inside of the Key Service Unit (KSU) to make switch settings or set a switch to enter and/or leave the program mode. All mandatory operational service features of the ITB were listed on page 27, Section 3.4. Optional operational service features and equipment were listed on page 34, Section 3.16.8 of the ITB. An optional operational feature listed was "Station Message Detail and Equipment." The bidding of an SMDR or an option for an SMDR was not required. No bidder was disqualified because it failed to bid an SMDR or an SMDR option. All bidders were required to submit a spare parts price list. Any bidder failing to submit the list was disqualified. Any bidder which submitted the list automatically met the requirement. The lists were not evaluated as art of the bid criteria and no bidder was disqualified based upon the content of the information supplied on the list. Configuration 1 The Department determined Petitioner to be the seventh lowest bidder for configuration 1. Lower bidders, in order of their ranking, were Henkels & McCoy, Southern Bell Advanced, St. Joe Communications, Inter-Tel, Lanier Business, and Tel-Plus Communications. Tel Plus was considered the low compliant bidder and Inter-Tel was the competitive compliant bidder. Following a complete review of the bid responses, the parties agreed that Southern Bell Advanced, St. Joe Communications, and Lanier Business were non-compliant for configuration 1. The Henkels & McCoy bid provided a "handsfree" feature as described above in paragraph 8. The Henkels & McCoy bid did not provide an SMDR or an SMDR option. The Inter-Tel bid did not provide an SMDR or an SMDR option. The Tel Plus bid included a spare parts price list. The Tel Plus bid included an equipment list for the baseline system, however, such list did not completely and accurately describe the baseline system. The discrepancies with the equipment list were fully explained elsewhere in Tel Plus' bid response. Configuration 2 The Department determined Petitioner to be the fourth lowest bidder for configuration 2. Lower bidders, in order of their ranking, were Inter-Tel, Tel Plus Communications, and St. Joe Communications. St. Joe was determined to be non-compliant, leaving Tel Plus as the low compliant bidder and Inter-Tel as the competitive compliant bidder. The Inter-Tel bid provided a statement indicating the equipment bid would be modified to relocate a "DIP" switch to the outside of the KSU. This modification was necessary to comply with the requirement described in paragraph This modification is a minor, simple procedure done by many technicians. No documentation was provided as to how Inter-Tel intended to make the modification. The parties agreed, however, that the modification could be done. The Inter-Tel bid provided the speed-dialing feature described in paragraph 9 at the station. The findings of fact relating to configuration 1 and the Tel Plus bid are applicable to configuration 2. Configuration 3 The Department determined Petitioner to be the seventh lowest bidder for configuration 3. Lower bidders, in order of their ranking, were Business Telephone Systems, Henkels & McCoy, Marcom Telecommunications, Lanier Business, Tel Plus Communications, and Inter-Tel. Inter-Tel was determined to be the low compliant bidder with Henkel & McCoy the competitive compliant bidder. Following a complete review of the bid responses, the parties agreed that Marcom, Tel Plus and Lanier were non- compliant for configuration 3. The Business Telephone bid included a spare parts price list. The Business Telephone bid failed to include on the baseline equipment list the surge protector part number, however, such information was provided elsewhere in the bid response. The Business Telephone bid failed to include a part number for wiring, however, the part number for wiring was not required. The Henkels & McCoy bid included a spare parts price list. The Henkels & McCoy bid failed to list a console card on the baseline equipment list, however, this was to be provided with the console which was properly described elsewhere in the bid response. The findings of fact relating to configuration 2 and the Inter-Tel bid are applicable to configuration 3. Petitioner's bid for configuration 1 was $3641.08. The lowest responsive bid was $2343.00. Petitioner's bid for configuration 2 was $5407.97. The lowest responsive bid was $4723.00. Petitioner's bid for configuration 3 was $12,136.90. The lowest responsive bid was $9271.00. The parties stipulated that Petitioner timely filed its notice of intent to protest and the formal protest of bid award.

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MCI TELECOMMUNICATIONS CORPORATION vs. DEPARTMENT OF GENERAL SERVICES, 87-005338BID (1987)

Division of Administrative Hearings, Florida Number: 87-005338BID Latest Update: Feb. 11, 1988

Florida Laws (4) 120.53, 120.56, 287.012, 287.042

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IN RE: ROBERT M. JOHNSON vs *, 94-002390EC (1994)

Division of Administrative Hearings, Florida Filed:Sarasota, Florida May 05, 1995 Number: 94-002390EC Latest Update: Oct. 18, 1995

The Issue Whether Respondent violated Section 112.313(6), Florida Statutes.

Findings Of Fact Respondent, Robert M. Johnson (Johnson) served as Florida State Senator for District 25 from 1984 to 1992. His local legislative office was located in Sarasota. From 1988 through 1992, Martha Hetrick, Roma Issacs and Donna Peacock were employed by Johnson as executive secretaries. Included among their duties was the preparation of travel reimbursement vouchers. Martha Hetrick, Johnson's executive secretary from December 1984 until June 1988, had previously worked for the state and was familiar with how to complete travel vouchers. She reviewed Johnson's legislative calendar to identify legislative trips. The legislative calendar did not contain any mileage figures for any specific trip or for travel to or from any specific destination. The mileage amounts for a new destination were initially calculated by her by using a street and highway map, together with a ruler. Once a mileage amount for a destination was calculated, it was not remeasured. Instead, previously prepared travel vouchers were used for specific mileages, and recurring destinations and their mileage were put on a chart. This procedure for preparing vouchers for local legislative travel was passed on by Ms. Hetrick to her successor, Roma Issacs, who in turn passed this procedure to her successor, Donna Peacock. When Ms. Hetrick completed a travel reimbursement, it contained information identifying the date, destination, purpose and mileage for each trip. The completed voucher would be placed in Johnson's "to sign" folder. Johnson never asked Ms. Hetrick to falsify any mileage on the travel vouchers when she prepared them for him. Johnson told her to be careful and accurate in the completion of the travel vouchers. Donna Peacock served as Johnson's executive secretary from January of 1990 until April 30, 1992. Her duties included the preparation of travel reimbursement vouchers. Her predecessor, Roma Issacs, trained Ms. Peacock in completing Johnson's travel vouchers. Ms. Issacs gave Ms. Peacock a list of destinations and mileage figures and showed her where the old travel vouchers were kept. Ms. Peacock reviewed Johnson's calendar to determine the destinations for his trips and prepared the voucher with the date and mileage. The mileage utilized came from the list of destinations and mileage figures which were given to her by Ms. Issacs. She placed the completed travel vouchers in a folder for Johnson to take home and sign. Neither Johnson nor anyone in his office asked Ms. Peacock to do anything improper with respect to travel vouchers. From 1988 to 1992, Johnson signed travel reimbursement vouchers and submitted them to the Joint Legislative Management Committee for payment for local legislative travel. These vouchers routinely listed inflated mileage claims for Johnson's local legislative travel. Johnson never personally prepared any travel voucher nor did he provide the specific mileage amounts to his legislative staff to be placed on the individual vouchers. On 22 occasions from July 1988 to December 1990, Johnson submitted travel vouchers for payment listing the round-trip distance from his local legislative office to the Mote Marine Laboratory as 38 miles when the actual round-trip distance is just under nine miles. Between July 1988 and June 1990, Johnson's vouchers contained six round-trips between his local legislative office and St. Armands Circle with distance ranging from 32 miles to 38 miles, while the actual mileage is six miles. Two of Johnson's travel vouchers listed six miles as the round-trip distance between his local legislative office and the Sarasota City Hall. The actual distance is less than one-half mile. Twelve of Johnson's travel vouchers were for trips from his local legislative office to the Asolo Performing Arts Center, the Ringling Museum, and the Sudakoff Center. Johnson's travel vouchers listed the round-trip mileage as 17, 18, and 22 miles, respectively, for those destinations. The farthest trip was to the Sudakoff Center which involves an 8.8 mile round trip from Johnson's office. On 14 occasions, Respondent traveled from his local legislative office to Longboat Key and back. Johnson's travel reimbursement vouchers claimed round-trip mileage ranging from 32 to 35 miles when the actual round-trip mileage from Johnson's office to Longboat Key's Town Hall and back is just over 16 miles. Two of Johnson's travel reimbursement vouchers listed the round-trip mileage between Johnson's office and the Gulf Gate Mall as 22 miles when it is actually only 13 miles. Each travel voucher contained the following statement: I hereby certify or affirm that above expenses were actually incurred by me as necessary traveling expenses in the performance of my official duties; attendance at a conference or convention was directly related to official duties of the agency; any meals or lodging included in a conference or convention registration fee have been deducted from this travel claim; and that this claim is true and correct in every material matter and same confirms in every respect with the requirements of Section 112.061, Florida Statutes. Johnson reviewed the travel vouchers by looking at the "left column of the travel voucher" to make sure that the trips listed related to Senate business. If he noted a trip which involved a political or personal activity, Johnson directed that the trip be deleted from the travel voucher. He did not specifically review the dates listed. Johnson assumed that the mileages listed were correct. His assumption was based on the fact that every employee of the Senate were required to read the Joint Legislative Management Committee policy manual which includes travel policies. In the latter part of 1990, Donna Peacock noticed a discrepancy between the claimed mileage and the actual mileage as a result of driving Johnson to various events and locations. She told Johnson, and he advised her to "fix it." Thereafter Ms. Peacock corrected the travel voucher and her master list of mileages whenever she noted a discrepancy. Sometime in 1991, Johnson told Ms. Peacock not to include claims for less than four miles on the travel vouchers. From mid-year 1991 to the end of 1991, Johnson's claims for local travel claims did decrease; however, his actual travel did not decrease. On September 5, 1992, during Johnson's reelection campaign, a story appeared in the Sarasota Herald Tribune stating that during the period of 1988 through 1990, Johnson routinely filed travel reimbursement vouchers containing erroneous local mileage. The day before the article appeared, Johnson received correspondence from his political opponent, indicating that the voters would not appreciate knowing about the travel vouchers. Johnson thereafter instructed his legislative aides, to review all of his travel vouchers for the years 1987 through 1992 for local mileage accuracy. Johnson instructed his aides to review all claims for local travel, and to identify for refund any inaccuracies. He also instructed his aides to identify for refund any trip shorter than four miles, and to resolve any uncertainties in favor of the State. In a check payable to the Joint Legislative Management Committee, and dated September 11, 1992, Johnson voluntarily remitted the sum of $2,331.16 to reimburse the State for erroneous local travel payments received by him during the years of 1988 through 1992. The State Attorney's office for the Twelfth Judicial Circuit, at Johnson's request, investigated whether there was sufficient evidence to file criminal charges against him for violating Section 112.61(10), Florida Statutes, by submitting fraudulent mileage claims. Although expressing the opinion that Johnson's record keeping and voucher preparation were unquestionably sloppy, the State Attorney's office concluded that there was no evidence to demonstrate that Johnson knowingly committed a criminal act.

Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED a Final Order and Public Report be entered finding that Robert Johnson did not violate Section 112.313(6), Florida Statutes, and dismissing the compliant filed against him. DONE AND ENTERED this 13th day of March 1995, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 13th day of March 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2390EC To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the Respondent's Proposed findings of fact: Respondent's Proposed Findings of Fact. Paragraphs 1-7: Accepted in substance. Paragraph 8: The first half of the first sentence is rejected as subordinate to the facts actually found. The remainder is accepted in substance. Paragraph 9: Accepted in substance. Paragraph 10: Rejected as subordinate to the facts actually found. Paragraphs 11-14: Accepted in substance. Paragraph 15: The second sentence is rejected as subordinate to the facts actually found. The remainder is accepted in substance. Paragraphs 16-18: Accepted in substance. Paragraph 19: Rejected as unnecessary. Paragraphs 20-22: Accepted in substance. Paragraphs 23-24: Rejected as unnecessary. Paragraph 25: The first sentence is accepted in substance. The remainder is rejected as unnecessary. Paragraph 26: Accepted in substance. Paragraph 27: The first sentence is rejected as unnecessary. The remainder is accepted in substance. Paragraph 28: The first sentence is rejected as unnecessary. The second, third, and fourth sentences are rejected as not supported by credible testimony. The fifth and sixth sentences are accepted in substance. The seventh sentence is rejected as not supported by the greater weight of the evidence. The last sentence is accepted in substance. Paragraph 29: The first sentence is accepted in substance to the extent that there was a reduction in the travel claimed from mid 1991 to the end of 1991. The second and third sentences are rejected as not necessary. The fourth and fifth sentences are accepted in substance. The last sentence is rejected as not supported by the greater weight of the evidence. Paragraph 30: The last sentence is rejected as unnecessary. The remainder is accepted in substance. Paragraph 31: Rejected as subordinate to the facts actually found. COPIES FURNISHED: John E. Griffin, Esquire Special Advocate Commission on Ethics 3840 North Monroe Street, Suite 304 Tallahassee, Florida 32303 Mark Herron, Esquire Post Office Box 10555 Tallahassee, Florida 32302-2555 Carrie Stillman Complaint Coordinator Commission on Ethics Post Office Box 15709 Tallahassee, Florida 32317-5709 Bonnie Williams, Executive Director Ethics Commission Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Phil Claypool, General Counsel Ethics Commission Post Office Drawer 15709 Tallahassee, Florida 32317-5709

Florida Laws (7) 104.31, 112.061, 112.312, 112.313, 112.322, 112.61, 120.57 Florida Administrative Code (1) 34-5.0015

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