Findings Of Fact Both Respondent, Terry A. Kilgore (Kilgore), and Respondent, Karen C. Obluck (Obluck), are duly licensed Florida real estate brokers holding license numbers 0317402 and 0387822, respectively. Starting June 1, 1983, both were registered as employees of Florida Leasing Services, along with a third friend, Karen Kolander. It was understood among the parties to the employment agreement that the three friends intended to form their own brokerage company as soon as one of them obtained a broker license. Obluck got her broker license first on or about July 26, 1983, and Kilgore placed her salesman's license with Obluck on or about August 22, 1983. Obluck then attempted to qualify the new corporation the three had formed, "National Investment Properties, Inc." (emphasis added), as a corporate real estate broker. But, due in part to unfortunate technical errors in the application process and in part to Obluck's inadequate appreciation for the significance of legal technicalities, on or about August 19, 1983, Obluck instead qualified "National Investment Properties" as the corporate broker. Starting approximately August 19, 1983, the three began operating their new real estate brokerage business, sometimes using the name "National Investment Properties," as technically officially registered, but more often using the full corporate name, "National Investment Properties, Inc." (emphasis added.) But they omitted to have Kilgore's salesman's license transferred to the corporate broker license until she got her broker's license and tried to place it under the corporate broker license on March 14, 1984. Because of the technical errors in qualifying the corporate broker, the Department placed Kilgore's broker license under Obluck, an individual broker trading as National Investment Properties. By the time Obluck was notified in March, 1986, that the corporate broker had not been registered properly, Kilgore was no longer working with Obluck's company. On or before June 23, 1983, while still employed by Florida Leasing Services but anticipating the formation of the new business under the name Obluck had reserved at the time (Investment Properties of Central Florida, Inc.), Kilgore contacted fellow licensee, Robert R. Elkin (Elkin), an employee of Sun-Tan Realty, Inc. 1/ in an effort to help a client, U.S. Homes Corporation, find real property to buy. Elkin had an exclusive listing on five acres of property owned by Manor Care, Inc., and he and Kilgore negotiated a deal between the parties on June 23. On June 24, Kilgore and Elkin signed a "Cooperation Agreement Between Brokers" on the Manor Care property, providing that the two brokers involved would divide equally any brokerage commission. But when Elkin presented U.S. Homes' signed offer to his client, Manor Care rejected it, asking for more money. U.S. Homes refused to increase its offer. Kilgore passed this information on the Elkin, and the deal fell through. Kilgore then asked Elkin if he knew of any other land available for sale that might be of interest to U.S Homes. Elkin gave her the name of Dr. Michael Tedone as the owner of approximately 16 acres at County Road 581 and Skipper Road for sale at approximately $972,000. Trying to generate business, Elkin had located Tedone's name as owner of the 16 acres on microfiche records in his office and first spoke to Tedone by telephone in approximately October, 1982. Elkin asked if the property was for sale. Tedone said it was for sale for the right price, $972,000, but that it was not actually on the market. Elkin asked if Tedone would pay a commission if Elkin found a buyer. Tedone said he would but it would have to be negotiated. Elkin asked for some information about the property and asked for a survey. Elkin picked up a survey from Tedone's office and put together an information packet on the property for use in crying to find a buyer. Between October, 1982, and July, 1983, Elkin distributed the packet to a handful of builders and land developers he thought might be interested in the property or know a prospective buyer. Elkin spoke to Tedone about three more times by telephone before approximately April, 1983, confirming that the property was still for sale at $972,000. He never met Tedone and did not have any contact with him in May or June, 1983. He was never even aware that there was a co-owner of the property, a James Carlstedt. Because of what had happened on the Manor Care deal, Kilgore asked if the price was firm. Elkin replied that he had not verified the price in several months and would have to check. He said he would give her an information packet on the property and verify the price. Kilgore got part of the information packet on or about July 5, 1983, but Elkin told her that Tedone was out of town and that Elkin had not yet been able to verify the price. At this point, the evidence began to diverge sharply. The Department attempted to prove through Elkin's testimony that Elkin got Kilgore to agree to co-broker this property under the same terms as the "Cooperation Agreement Between Brokers" for the Manor Care property. He says he added the Tedone property to the list of properties covered on his copy of the agreement shortly after July 5, 1983. He also says he asked Kilgore not to show the information to U.S. Homes until he had a chance to verify the price. But, he says, Kilgore disregarded his request and, on the following Monday (three days later), Kilgore called back to say U.S. Homes was ready to sign a contract at $972,000. Elkin says he then was able to contact Tedone to relay the offer and was told that the price was too low and the Tedone wanted $70,000 an acre for the property. Elkin says he relayed this to Kilgore and that he never heard back. Kilgore, on the other hand, testified that she never agreed to co-broker the Tedone property and that Elkin never asked her not to show U.S. Homes the information on the property. She says she waited for Elkin to verify the price but that he kept making excuses why he had not been able to contact Tedone. Kilgore says finally she went to Tedone herself to get the information. She testified that she made an appointment to see Tedone and showed him the information Elkin had given her. She says Tedone's response was: "I don't know who this [Elkin and Sun-Tan] is but the information is wrong." Kilgore says Tedone never acknowledged that he knew Elkin or had any agreement with him to broker the property. Kilgore says she therefore negotiated the deal for U.S. Homes directly with Tedone and Carlstedt, completely independent of Elkin, and successful concluded negotiations on July 20, 1983. The sales price for the property was $1.1 million; the brokerage commission to National Investment Properties, Inc., was 2 1/2 percent or $27,500. Kilgore testified that she never heard from Elkin again until approximately March, 1984, after the January 9, 1984, closing of the deal, and that she assumed Elkin had abandoned the deal. The key to resolution of the sharp differences between the testimony of Elkin and Kilgore is Tedone. But, for reasons not explained, Tedone did not testify. Without Tedone's testimony to corroborate Elkin's testimony, the Department's case was insufficient to prove the truth of the facts to which Elkin testified. Elkin brought Tedone another prospective buyer in August, 1983. Tedone told him he already had a contract. Elkin did not ask for details. Instead, he began to try to locate Kilgore, who by this time was working for National Investment Properties, Inc., (National) under Obluck. He did not confront Kilgore and Obluck until approximately March, 1984. They confirmed that the property had been sold to U.S. Homes. Elkin demanded a share of the brokerage commission. Kilgore replied that he had abandoned the deal, leaving Kilgore to try to complete the deal herself, and that he was not entitled to any share of the brokerage commission. Obluck knew generally that Kilgore had negotiated a deal between U.S. Homes and Tedone and Carlstedt and that, after a short delay, the deal closed in January, 1984. But Obluck knew none of the details of what had transpired between Kilgore and Elkin. On the other hand, Kilgore knew generally that Obluck had taken steps to properly qualify National as a corporate broker. But she did not know or inquire into any of the details of the qualification process. She left National on or about August 23, 1985, long before the Department notified Obluck in March, 1986, that National was not properly registered. Kilgore, however, must take personal responsibility for failing to take any steps between August 19, 1983, and March 11, 1984, to have her salesman's license transferred from Obluck, individual broker, to National. See Finding Of Fact 1, above. The technical licensure errors made by Obluck and Kilgore, referred to in Findings Of Fact 1 and 12, above, should have come to the Department's attention before March, 1986. On March 11, 1984, Kilgore applied to place her new broker license under "National Investment Properties, Inc.," and the Department accepted the application and placed it under Obluck, trading as National Investment Properties. On March 1, 1985, Kilgore applied to change her personal mailing list, showing her employing broker as "National Investment Properties, Inc.," and the Department accepted the application. The Department did not take either of these opportunities to notify Obluck and Kilgore that the corporate broker had not been properly qualified and registered. On November 13, 1984, the Department received notification from Obluck, "doing business as National Investment Properties, Inc.," that she had lost her license. The Department simply struck through the "Inc." on the notification but did not give Obluck any explanation why. The technical licensing errors referred to in Findings Of Fact 1 and 12, above, were not intentional or intended to deceive. They were inadvertent oversights that Obluck and Kilgore would have cured if they were aware of them. When the Department notified Obluck of the oversights in March, 1986, she immediately had National properly qualified and registered as a corporate broker.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Florida Real Estate Commission enter a final order: (1) holding both Respondent, Karen C. Obluck, and Respondent, Terry A. Kilgore, guilty of a technical violation of Sections 475.42(1)(b) and 475.25(1)(a), Florida Statutes (1985); (2) imposing a $500 administrative fine against Respondent, Karen C. Obluck, for her violation; (3) reprimanding Respondent, Terry A. Kilgore, for her violation; and (4) dismissing all other charges. RECOMMENDED this 16th day of January, 1987, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of January, 1987.
Findings Of Fact The Respondent, John L. Nuccitelli, is a licensed real estate broker, having been issued License Number 0064764, and he was so licensed at all times material to the issue in this proceeding. On August 20, 1979, an arrest warrant was issued in Lancaster County, South Carolina, directing that the Respondent be arrested on the charge of possession of marijuana with intent to distribute, in that he flew into the Lancaster County Airport in a Douglas DC4 four engine aircraft with approximately 131 bales of marijuana. The Respondent was subsequently indicted for this offense, and on December 4, 1979, he was found guilty in the Court of General Sessions in and for Lancaster County, South Carolina, of the crime as charged. Thereafter, the Respondent was sentenced to imprisonment for a term of five years, and a fine of $5,000, with the provision that the prison term would be reduced to probation for five years upon payment of the $5,000 fine. On July 29, 1982, the Respondent having paid the fine imposed and having fulfilled the conditions of his probation, the Court entered its Order relieving the Respondent from the sentence previously imposed, and discharging him from further probation. The Respondent had not been involved with the law prior to the incident in question, and has not been so involved since this incident. He realizes that he made a serious mistake, one which has adversely affected both himself and his family. He is the sole support of his wife and five children, and he has only done work in the real estate field since leaving the Air Force. The Respondent and his wife have been married eight years. They have two children of their own, and three children by a prior marriage. The Respondent is a caring husband and father. He is trusted by those persons in the community who know him.
Recommendation From the foregoing findings of fact and conclusions of law, it is RECOMMENDED that License No. 0064764 held by the Respondent, John L. Nuccitelli, be REVOKED. THIS RECOMMENDED ORDER entered on this 1st day of November, 1982. WILLIAM B. THOMAS, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of November, 1982. COPIES FURNISHED: John L. Huskins, Esquire Department of Professional Regulation - Legal Section Post Office Box 1900 Orlando, Florida 32802 Richard J.R. Parkinson, Esquire 603 East Central Boulevard Orlando, Florida 32801 William M. Furlow, Esquire Department of Professional Regulation - Legal Section Post Office Box 1900 Orlando, Florida 32802 Carlos B. Stafford, Executive Director Florida Real Estate Commission 400 West Robinson Street Orlando, Florida 32801 Samuel R. Shorstein, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301
Findings Of Fact Respondent has been employed in the securities industry since approximately 1957. He has worked for a number of broker/dealers over the years and is familiar with the procedures involved in transferring employment from one broker to another. It is the custom in the securities industry that when a securities salesperson changes employment, forms U-4 and U-5 are filed with the National Association of Securities Dealers. As registration is approved by that organization and by the various states involved, the states give that information to the National Association of Securities Dealers, which in turn gives that information to the securities firm which employs the associated person seeking registration, and that brokerage firm in turn notifies the applicant. Respondent began to work at Alison Baer Securities, Inc., in September, 1988, and remained employed there until February, 1989. When he associated himself with Alison Baer, Respondent applied for registration as an associated person with that company. As is the proper procedure, he submitted a U to the National Association of Securities Dealers. While waiting for his registration to be approved, Respondent maintained telephone and personal contact with his own clients. He did not, however, sell or offer to sell securities until after he was sure his registration was approved. Respondent's application for registration as an associated person with Alison Baer Securities, Inc., was approved by the National Association of Securities Dealers and was also approved by the states of New York, Texas, Georgia, Florida, and Oklahoma. In late October of 1988, Jeffrey Britz, the President and Chief Executive Officer of Alison Baer Securities, told Respondent that his registration as an associated person with Alison Baer Securities had been approved by the state of Florida. In fact, Respondent was not registered as an associated person by the state of Florida until December 7, 1988. Respondent did not attempt to directly confirm with the Department of Banking and Finance his registration as an associated person with Alison Baer Securities. Respondent has applied for registration with the Department as an associated person with Shamrock Partners, Ltd. The Department denied that application based solely on the allegations which are the subject matter of this proceeding.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint, dismissing the Administrative Complaint filed against him in this cause, and granting his application for registration with the Department as an associated person with Shamrock Partners, Ltd. DONE and ENTERED this 14th day of February, 1992, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of February, 1992. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed finding of fact numbered 27 has been adopted in this Recommended Order. Petitioner's proposed findings of fact numbered 1-5, 11-14, 16-18, 23- 26, 28, 29, and 31-34 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Petitioner's proposed findings of fact numbered 6-10, 15, 19, and 30 have been rejected as being subordinate to the issues involved in this proceeding. Petitioner's proposed findings of fact numbered 20-22 have been rejected as not being supported by any competent evidence. COPIES FURNISHED: Deborah Guller, Esquire Assistant General Counsel Office of the Comptroller Suite 211 111 Georgia Avenue West Palm Beach, Florida 33401 Richard Doggett, Esquire 808 Northeast 3rd Avenue Fort Lauderdale, Florida 33304 Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves, General Counsel Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350
The Issue The issue to be resolved herein concerns whether the Petitioners are entitled to an award of attorney's fees in this proceeding. Embodied in that general issue are questions concerning whether the Petitioners are the prevailing parties; whether they meet the definition of "small business" parties, including the net worth amounts, enumerated in Section 57.111, Florida Statutes, as well as whether the disciplinary proceeding against both Petitioners was "substantially justified". See Section 57.111(3)(e) , Florida Statutes.
Findings Of Fact The Respondent is an agency of the State of Florida charged with licensing and regulating the practices of real estate salesmen and brokers by the various provisions of Chapter 475, Florida Statutes. Included within those duties is the duty to investigate conduct by realtors allegedly in violation of Chapter 475 and related rules and to prosecute administrative penal proceedings for which probable cause is found as a result of such investigations. At times pertinent hereto, both Ms. Maxwell and Ms. Cosyns, (then Pauline Sealey) were licensed realtors working as independent contractors for Mariner Properties, Inc. and V.I.P. Realty Inc. The complete file of the underlying proceeding DOAH Case No. 86-0140, was stipulated into evidence. That file included the Administrative Complaint filed against these Respondents and the Recommended and Final Order, which Final Order adopted the Recommended Order. The findings of fact in that Recommended Order are incorporated by reference and adopted herein. During the Petitioner's case, counsel for Petitioner voluntarily reduced the attorney's fees bills for both Petitioners such that Ms. Maxwell's bill is the total amount of $2,695.50 and Ms. Cosyns' bill is $17,200, rather than the original amounts submitted in the affidavit. Respondent acknowledged in its proposed Final Order that the fees and costs submitted by the Respondent were thus reasonable. The testimony the Petitioners presented through depositions, transcripts of which were admitted into evidence into this proceeding, was unrefuted. That testimony demonstrates that both Ms. Cosyns and Ms. Maxwell were prevailing parties in the administrative proceeding referenced herein brought by the Respondent, Department of Professional Regulation. They were individually named as Respondents in the Administrative Complaint whereby their professional licenses were subjected to possible suspension or revocation for alleged wrong doing on their part. There is no dispute that they were exonerated in that proceeding and are thus prevailing parties within the meaning of Section 57.111, Florida Statutes. The Petitioners are also "small business parties". In that connection, they both were independently licensed Real Estate professionals during times pertinent to the underlying proceeding and were acting in the capacity of independent contractors for all the activities with which the administrative complaint was concerned. Each established that her net worth is below the limit provided by Section 57.111 as an element of the definition of "small business party". The reasonableness of the fees having been established in the manner found-above and the Petitioners having established that they meet the definitional requirements of prevailing small business parties, there remains to be determined the issue of whether the proceedings against the two Petitioners were "substantially justified", that is, whether the proceeding had a "reasonable basis in law and fact at the time it was initiated by a State agency." See Section 57.111(3)(e), Florida Statutes. The facts concerning each Petitioner's case regarding the three counts of the Administrative Complaint relating to them are as found in the Recommended Order incorporated by reference herein. Respondent Maxwell was charged in the complaint with having worked in conjunction with an office manager, Mr. Hurbanis of V.I.P. Realty, in conspiring with him to submit a fraudulent real estate sales contract to a lending institution for purposes of financing. This allegedly involved submitting a contract to the lending institution with an inflated purchase price in order to secure one hundred percent financing, the scheme being more particularly described in that portion of the findings of fact in the Recommended Order related to Jean Maxwell. In fact, Ms. Maxwell did not work in the realty office as charged in the Administrative Complaint, but rather was employed by Mariner Properties, which may have been a related company. The contract in question, although alleged to be fraudulent was, in fact, a bona fide contract which was a legitimate part of the Real Estate transaction submitted to the bank for financing purposes, about which the bank was kept fully advised. All details of the transaction were disclosed to the lender. Maxwell was specifically charged with concealing the true contract from the lender in order to enhance the percentage of the purchase price that the bank would finance, done by allegedly inflating the purchase price in a second contract submitted to the bank. It was established in the disciplinary proceeding that no such concealment ever took place. In fact, Ms. Maxwell was purchasing a lot from her own employer, Mariner Properties. Two contracts were indeed prepared for the purchase of Lot 69, a single family lot on Sanibel Island. In fact, however, the difference of $42,875 and $49,500 in the stated purchase price, as depicted on the two contracts, was the result of continuing negotiations between Ms. Maxwell and the seller, who was also her employer. The difference in the two prices depicted on the contracts was the result of, in effect, a set-off to the benefit of Ms. Maxwell, representing certain employee discounts and real estate commission due from the employer and seller to Ms. Maxwell, the purchaser. As Petitioners' composite Exhibit 5 reflects, the lender involved, North First Bank of Ft. Myers, Florida, was fully apprised of all the details concerning this transaction at the time it was entered into and the loan commitment extended and closed. Mr. Allan Barnes, the Assistant Vice President of North First Bank revealed, in the letter contained in this exhibit in evidence, that there was no concealment or misrepresentation of the facts to his institution by Ms. Maxwell. This letter is dated April 18, 1984. The other related letter in that exhibit, of May 2, 1984 from attorney Oertel to attorney Frederick H. Wilson of the Respondent agency, thus constitutes notice to the agency well before the complaint was filed, that no concealment or misrepresentation to the lender involved had occurred and the charges were requested to be dismissed. In spite of the fact that the agency was on notice of this turn of events well before the filing of the Administrative Complaint, it proceeded to file the complaint and to prosecute it all the way up to the date of hearing, requiring Ms. Maxwell's attorney to attend the hearing to defend her interests. At the hearing, counsel for the Department acknowledged that there was no basis for prosecuting Ms. Maxwell and voluntarily dismissed the complaint as to her. The Respondent's witness, Investigator Harris, in his deposition taken September 11, 1984, acknowledged that he did not discuss any details concerning the investigation, with attorney Frederick Wilson, who prepared the complaint, nor did he confer with him by telephone or correspondence before the filing of the complaint. Therefore, the complaint was prepared solely on the basis of the investigative report. The investigative report came into evidence as Respondent's Exhibit 1. It reveals that Mr. A. J. Davis the president of Mariner Group and Mariner Properties, who was Jean Maxwell's employer and the owner of the lot in question, signed one contract and his Executive Vice President signed the other. In spite of this, the investigative report does not reveal that the investigator conferred with either Ms. Maxwell, or the sellers concerning this transaction. He conducted a general interview of A.J. Davis concerning the alleged "problem" in his office of "double contracting," but asked him no questions and received no comment about the Jean Maxwell transaction whatever. Nor did the investigator confer with Mr. Allen Barnes or any other representative of North First Bank. If the investigation had been more complete and thorough, he would have learned from Mr. Barnes, if from no one else, that the bank had knowledge of both contracts and all details of the transaction underlying them and there had been no concealment or misrepresentation of the facts regarding the transaction by Ms. Maxwell. This information was learned by attorney Oertel as early as April 18, 1984 by Mr. Barnes' letter, referenced above, and it was communicated to the agency by Mr. Oertel on May 2, 1984. Nevertheless, the complaint was filed and prosecuted through to hearing. Therefore, the prosecution and filing of the Administrative Complaint were clearly not substantially justified. If the Department had properly investigated the matter it would have discovered the true nature of the transaction as being a completely bona fide real estate arrangement. Former Respondent, Pauline Sealy Cosyns was charged with two counts, III and V, in the Administrative Complaint at issue. One count alleged, in essence, that Ms. Sealey had engaged in a similar fraudulent contract situation regarding the sale of her residence to a Mr. and Mrs. Thomas Floyd. The evidence in that proceedings revealed no concealment of any sales contract occurred whatever with regard to the lending institution or anyone else. The facts as revealed at hearing showed Ms. Cosyns and the Floyds, through continuing negotiations after the original sales contract was entered into, amended that contract and executed a second one, in order to allow Ms. Cosyns to take back a second mortgage from the Floyds. This was necessary because Mr. Floyd, an author, was short of the necessary down payment pursuant to the terms of the original contract, because his annual royalty payment from his publishers had not been received as the time approached for closing. The second contract was executed to allow for a second mortgage in favor of the seller, Ms. Cosyns, in order to make up the amount owed by the Floyds on the purchase price agreed upon, above the first mortgage amount. The testimony and evidence in the disciplinary proceeding revealed unequivocally that the lending institution, Amerifirst Mortgage Company, was fully apprised of the situation and of the reason for the two contractual agreements. The $24,000 second mortgage in question is even depicted on the closing statement issued by that bank. There was simply no concealment and no effort to conceal any facts concerning this transaction from the lender or from anyone else. The investigation conducted was deficient because the investigator failed to discuss this transaction with the lender or with the purchasers. He discussed the matter with Ms. Sealy-Cosyns and his own deposition testimony reveals, as does his investigative report, that he did not feel that he got a complete account of the transaction from her. She testified in her deposition, taken prior to the instant proceeding, that she indeed did not disclose all facts of the transaction to him because she was concerned that he was attempting to apprehend her in some "legal impropriety". Therefore, she was reluctant to be entirely candid. The fact remains, however, that had he conducted a complete investigation by conferring with the lender and the purchasers, he would have known immediately, long before the Administrative Complaint was filed and the matter prosecuted, that there was absolutely no basis for any probable cause finding that wrong-doing had occurred in terms of Section 475.25(1)(b), Florida Statutes. Thus, the facts concerning the prosecution as to Count III against Pauline Sealy-Cosyns, as more particularly delineated in the findings of fact in the previous Recommended Order, reveal not only that Ms. Cosyns was totally exonerated in the referenced proceeding, but that there was no substantial basis for prosecuting her as to this count at all. Concerning Count V against Ms. Cosyns, it was established through the evidence at the hearing in the disciplinary case that she was merely the listing agent and did not have any part to play in the drafting of the contract nor the presenting of it to the lender. Because there was no evidence adduced to show that she had any complicity or direct involvement in any fraudulent conduct with regard to the transaction involved in Count V of the Administrative Complaint at issue she was exonerated as to that count as well. It is noteworthy here that a statement was made by counsel for the agency, appearing at pages 20 and 21 of the transcript of the proceeding involving the Administrative Complaint, which indicates that the agency, based upon its review of certain documents regarding Counts III and V, before hearing, felt that indeed there might not be a disputed issue of material fact as to Mrs. Cosyns. The agency, although acknowledging that a review of the documents caused it to have reason to believe that it was unnecessary to proceed further against Ms. Cosyns nevertheless did not voluntarily dismiss those counts and proceeded through hearing. Be that as it may, the investigation revealed that Ms. Cosyns acknowledged that she knew that there were two contractual documents involved, but the investigation also revealed that Ms. Cosyns was only the listing agent. The selling agent was Mr. Parks. The investigation revealed through interviews with Ms. Cosyns, Mr. Parks and Mr. Hurbanis, the office Manager of V.I.P. Realty, that Ms. Cosyns, as listing agent, was merely present when the offer from the buyers was communicated to the office manager, Mr. Hurbanis, and ultimately to the sellers, the Cottrells. There was no reason for the investigator to believe that Ms. Cosyns had anything to do with the drafting of the contracts nor with the communication of them to the lending institution involved. That was done by either Mr. Parks or Mr. Hurbanis or by the buyers. The investigation (as revealed in the investigative report) does not show who communicated the contract in question to the lender. The investigation was simply incomplete. If the investigator had conferred with the buyers, the sellers and especially the lender, he could have ascertained-whether the lender was aware of all the facts concerning this transaction and whether there was any reason to believe that Ms. Cosyns had anything to do with the arrangement and the details of the transaction. It was ultimately established, by unrefuted evidence at hearing, that indeed Ms. Cosyns did not have anything to do with the transaction, nor the manner in which it was disclosed to the lender. The fact that she was aware that two contracts had been prepared did not give a reasonable basis for the investigator to conclude that she had engaged in any wrong-doing. The report of his interviews with Ms. Cosyns, Mr. Hurbanis and Mr. Parks, as well as Donna Ross, does not indicate that he had a reasonable basis to conclude that Ms. Cosyns had engaged in any fraudulent conduct with regard to the transaction, including the conveyance of a bogus contract to the lending institution involved, nor for that matter, that Mr. Hurbanis or Mr. Parks engaged in such conduct. In order to ascertain a reasonable basis for concluding whether Ms. Cosyns was involved in any wrongful conduct, he would have had to obtain more information than he did from these people or confer with the lender, the buyer or the seller, or all of these approaches, before he could have a reasonable basis to recommend to the prosecuting agency that an Administrative Complaint be filed against her concerning this transaction. In fact, he did not do so, but the Administrative Complaint was filed and prosecuted through hearing anyway, causing her to incur the above-referenced attorney's fees. It thus has not been demonstrated that there was any substantial basis for the filing and prosecution of Count V of the Administrative Complaint against Ms. Cosyn. Thus she is entitled to the attorneys fees referenced above with regard to the prosecution of the Administrative Complaint in question.
Findings Of Fact Respondent Santaniello holds real estate broker license number 0186475, and was so licensed at all times relevant to this proceeding. Santaniello is the active broker for Respondent, Sunair Realty Corporation, which holds license number 0213030. Mr. Don M. and Mrs. Agnes C. Long own two lots in Port Charlotte which they purchased as investments. By letter dated June 8, 1981, Respondents forwarded a "Deposit Receipt and Contract for Sale and Purchase" on each of these lots to the Longs. The documents established that Anni Czapliski was the buyer at a purchase price of $1200 per lot. Respondent Sunair Realty Corporation was to receive the greater of $120 or ten percent of the felling price for "professional services." The letter and documents were signed by Respondent Santaniello. Anni Czapliski was Bernard Santaniello's mother-in-law at the time of the proposed sale. This relationship was not disclosed by Respondents and was not known to the Longs at the time they were invited to contract with Respondents for sale of the lots. The Longs rejected the proposed arrangement for reasons not-relevant here.
Recommendation From the foregoing findings of fact and conclusions of law it is RECOMMENDED that Petitioner enter a Final Order finding Respondents guilty of violating Subsection 475.25(1)(b), Florida Statutes (1979), and fining each $500. DONE and ENTERED this 16th day of April, 1982, in Tallahassee, Florida. COPIES FURNISHED: Salvatore A. Carpino, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Robert J. Norton, Esquire Suite 408 First National Bank Building Punta Gorda, Florida 33950 Mr. C.B. Stafford Executive Director Board of Real Estate Post Office Box 1900 Orlando, Florida 32801 Frederick Wilsen, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 R.T. CARPENTER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of April.
Findings Of Fact At all times relevant hereto, Petitioner was licensed as a real estate broker by the Florida Real Estate Commission. In May 1988, he was working as a broker-salesman with G.V. Stewart, Inc., a corporate real estate broker whose active broker is G.V. Stewart. On April 20, 1989, Respondent submitted a Contract for Sale and Purchase to the University of South Florida Credit Union who was attempting to sell a house at 2412 Elm Street in Tampa, Florida, which the seller had acquired in a mortgage foreclosure proceeding. This offer reflected a purchase price of $25,000 with a deposit of $100 (Exhibit 2). The president of the seller rejected the offer by striking out the $25,000 and $100 figures and made a counter offer to sell the property for $29,000 with a $2000 deposit (Exhibit 2). On May 9, 1989, Respondent submitted a new contract for sale and purchase for this same property which offer reflected an offering price of $27,000 with a deposit of $2000 held in escrow by G.V. Stewart (Exhibit 3). This offer, as did Exhibit 2, bore what purported to be the signature of William P. Murphy as buyer and G. Stewart as escrow agent. In fact, neither Murphy nor Stewart signed either Exhibit 2 or Exhibit 3, and neither was aware the offers had been made at the time they were submitted to the seller. This offer was accepted by the seller. This property was an open listing with no brokerage firm having an exclusive agreement with the owner to sell the property. Stewart's firm had been notified by the seller that the property was for sale. Respondent had worked with Stewart for upwards of ten years and had frequently signed Stewart's name on contracts, which practice was condoned by Stewart. Respondent had sold several parcels of property to Murphy, an attorney in Tampa, on contracts signed by him in the name of Murphy, which signatures were subsequently ratified by Murphy. Respondent considers Murphy to be a Class A customer for whom he obtained a deposit only after the offer was accepted by the seller and Murphy confirmed a desire to purchase. Respondent has followed this procedure in selling property to Murphy for a considerable period of time and saw nothing wrong with this practice. At present, Respondent is the active broker at his own real estate firm.
Recommendation It is RECOMMENDED that William H. McCoy's license as a real estate broker be suspended for one year. However, if before the expiration of the year's suspension Respondent can prove, to the satisfaction of the Real Estate Commission, that he fully understands the duty owed by a broker to the seller and the elements of a valid contract, the remaining portion of the suspension be set aside. ENTERED this 29th day of November, 1989, in Tallahassee, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of November, 1989. COPIES FURNISHED: John Alexander, Esquire Kenneth E. Easley 400 West Robinson Street General Counsel Orlando, Florida 32802 Department of Professional Regulation William H. McCoy 1940 North Monroe Street 4002 South Pocahontas Avenue Suite 60 Suite 106 Tallahassee, Florida 32399-0792 Tampa Florida 33610 Darlene F. Keller Division Director 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 =================================================================
The Issue The issues in the case are whether Respondent's real estate broker's license had been revoked when he applied for a mortgage broker's license and whether Respondent falsely answered certain questions on his application for a mortgage broker's license.
Findings Of Fact Respondent is currently licensed as a mortgage broker in the State of Florida. He holds license number HA 056265422-5P. He had been licensed continuously since August 5, 1986. Respondent previously has been licensed as a real estate salesman in the State of Florida. By Administrative Complaint filed March 1, 1985, the Department of Professional Regulation, Division of Real Estate, alleged, among other things, that Respondent was guilty of fraud, misrepresentation, concealment, and breach of trust, among other things, in connection with an improper disbursement from an escrow account. Following a hearing on January 17, 1986, a Recommended Order entered April 18, 1986, found that Respondent was, as to the above-described allegations, guilty "at least of culpable negligence and breach of trust" and recommended that Respondent's license be suspended for one year. After a hearing on June 17, 1986, the Division of Real Estate entered a Final Order June 30, 1986, effective 30 days thereafter, adopting the findings of fact and conclusions of law of the Recommended Order, but revoking rather than suspending Respondent's license. By Application for Registration as a Mortgage Broker signed by Respondent on March 22, 1986, Respondent applied for a mortgage broker's license (March Application). The application was filed on March 25, 1986. Question 19 of the March Application asks: Has any judgement or decree of a court or other judicial, administrative or quasi-judicial tribunal been entered against you, or is any such case pending in this or any other state, province, district, territory, possession or nation, in which you were charged in the petition, complaint, declaration, answer, counterclaim or other pleading with any fraudulent or dishonest dealing? (If your answer is in the affirmative, attach complete signed notarized statement of the charges and facts, together with the name and location of the court in which the proceedings were had or are pending.) Respondent answered this question, "no." By Application for Registration as a Mortgage Broker signed by Respondent on July 1, 1986, Respondent applied for a mortgage solicitor's license (July Application). The application was filed on July 9, 1986, and approved by Petitioner on July 31, 1986. Question 16 on the July Application asks whether the applicant is currently licensed in any state as a real estate broker or salesman. Respondent answered this question, "no." Question 17 on the July Application asks: "Has your license of any kind ever been denied, suspended or revoked?" The question then asks for a complete signed statement of the charges and facts in full detail. Respondent answered Question 17, "no." On July 28, 1986, Respondent sent a notarized letter to Petitioner concerning the July Application. In the letter, he elaborated upon the circumstances surrounding the answer to an unrelated question, but did not elaborate upon the above-described answers Respondent did not answer accurately Question 19 on the March Application. Over a year earlier, Respondent had been charged with fraudulent dealing. Respondent had no basis for omitting this item from the application because, even though he had not received the recommended order, the case obviously was still pending at the time of submitting the March Application. Respondent's incorrect answer was an intentional attempt to conceal from Petitioner the license-revocation proceeding. Although Respondent's answer to Question 16 on the July Application may have been accurate because he had relinquished his license, his answer to Question 17 was inaccurate. Respondent testified that he understood that the Final Order, which had just been issued, had not yet taken effect, so that his license had not yet been revoked. However, without further elaboration, the answer to Question 17 was incomplete and misleading, regardless of Respondent's understanding of the technical status of his license. Respondent knew that his answer was incomplete and would mislead Petitioner.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Banking and Finance, Division of Finance, enter a Final Order revoking the mortgage broker's license of Respondent. DONE and ENTERED this 26th day of June, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of June, 1989. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 88-4380 Treatment Accorded Petitioner's Proposed Findings 1-7 Adopted or adopted in substance. 8 Rejected as irrelevant. 9-29 Adopted or adopted in substance. 30-32 Rejected as subordinate and recitation of testimony. 33-34 Rejected as legal argument. 35-36 Adopted. 37-38 and 40 Rejected as legal argument. 39 and 41-42 Adopted or adopted in substance. Rejected as legal argument. Rejected as irrelevant. 45-50 Rejected as recitation of testimony. Treatment Accorded Respondent's Proposed Findings 1-7 Adopted or adopted in substance. 8 Rejected as irrelevant. 9-13 Adopted. 14 Rejected as against the greater weight of the evidence. 15-21 Adopted or adopted in substance. 22-23 Rejected as against the greater weight of the evidence. 24-29 Adopted or adopted in substance. 30-31 Rejected as recitation of testimony. Adopted in substance. Rejected as against the greater weight of the evidence. 34-38 Rejected as irrelevant. 39 Rejected as against the greater weight of the evidence. COPIES FURNISHED: Michael J. James 258 East Altamonte Drive Altamonte Springs, FL 32701 Elise M. Greenbaum Assistant General Counsel Office of the Comptroller 400 West Robinson Street, Suite 501 Orlando, FL 32801 Hon. Gerald Lewis Comptroller The Capitol Tallahassee, FL 32399-0350 Charles L. Stutts General Counsel The Capitol, Plaza Level Tallahassee, FL 32399-0350
The Issue At issue in this proceeding is whether Petitioner is entitled to registration as an associated person of Brookstone Securities, Inc. ("Brookstone"), either by virtue of the default provision of Subsection 120.60(1), Florida Statutes, or by virtue of the substantive merits of his application.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Parties The Office of Financial Regulation, a part of the Financial Services Commission, is the state agency charged with regulation of the securities industry. § 20.121(3)(a)2., Fla. Stat. Chapter 517, Florida Statutes, is the "Florida Securities and Investor Protection Act." § 517.011, Fla. Stat. Pursuant to Section 517.012, Florida Statutes, OFR is responsible for the registration of persons associated with broker-dealers. Victor Alan Lessinger is 62 years old. He has been involved in the securities industry since 1976. He was registered with the State of Florida as an associated person from April 23, 1991, until October 31, 1994. He was later registered as an associated person with the State of Florida from June 5, 1997, through April 29, 2006, with the exception of the eight-day period between January 23, 2002, and February 1, 2002. This eight-day lapse was caused by Mr. Lessinger's changing jobs, which necessitated that he re-apply for registration. An associated person must be registered through the broker-dealer that employs him. From February 2005 until April 2006, Mr. Lessinger was a broker associated with Archer Alexander Securities Corporation, and was registered as such with the State of Florida. Archer Alexander went out of business in April 2006, and Mr. Lessinger accepted an offer of employment from Brookstone, a company based in Lakeland. Mr. Lessinger was to work as an associated person in Brookstone's Coral Springs branch. The Application Process and the Notice On July 5, 2007, Mr. Lessinger submitted his application for registration as an associated person with Brookstone to OFR through Web CRD, the central licensing and registration system for the U.S. securities industry operated by the Financial Industry Regulatory Authority ("FINRA").2 Mr. Lessinger's initial application for registration as an associated person with Brookstone disclosed the following disciplinary events: a 1993 Consent Order that Mr. Lessinger entered into with the relevant authorities in the State of Maine; a 1998 "Division Order" from the State of Ohio denying Mr. Lessinger's application for a securities salesman license; a 2000 letter of acceptance, waiver and consent ("AWC") issued by the National Association of Securities Dealers ("NASD"), the predecessor to FINRA; a 2002 arbitration award issued by NASD Dispute Resolution, Inc.; and two related actions taken by the Securities and Exchange Commission ("SEC") in 2005. The 2000 AWC letter, the 2002 arbitration award, and the 2005 SEC actions all related to incidents and/or transactions that occurred in 1999. By letter dated July 18, 2007, Justin Mills, a financial analyst for OFR, notified Mr. Lessinger as follows: In order for the application to be deemed complete, it will be necessary to provide this office with a complete response to the following [sic] a copy of the complete Form U-4, as amended, and all documents pertaining to disciplinary matters, whether disclosable on the U-4 or not.[3] Documentation submitted must be certified by the issuer of such documents. Additionally, explain in detail the status of each pending action, and for each final action, summarize the action and the disposition. Specifically, but not limited to the following: * Certified copies of any regulatory actions by any state or federal regulator, or any self-regulatory organization, including but not limited to, the complaint, answer or reply, and final order or sanction. Certified documentation must be certified by the appropriate agency. Also, provide a brief narrative describing the causes that lead [sic] to the actions. Pursuant to Rule 69W-301.002(3), Florida Administrative Code, additional information shall be submitted within sixty (60) days after a request has been made by the Office. Failure to provide all the information may result in the application being denied. Mr. Lessinger responded with a package of documents and a cover letter dated July 23, 2007. OFR received the package and letter from Mr. Lessinger on July 24, 2007. On October 9, 2007, Ryan Stokes, a financial analyst supervisor for OFR, sent an e-mail to David Locy, then the executive vice president and compliance officer of Brookstone. Mr. Stokes requested the following documents in order to complete Mr. Lessinger's application: Certified copies of the complaint, Lessinger's answer/reply, and resolution for the actions taken by the SEC, State of Maine, State of Pennsylvania,[4] NASD, and State of Ohio. Certified copies of the statement of claim, Lessinger's response, settlement/arbitration panel's decision, and proof of payment of any awards/settlement for the arbitrations filed by Joseph Orlando and Muriel Hecht. Certified copy of the petition for bankruptcy and a discharge of bankruptcy. If any of the documents are unavailable due to age, a statement from the appropriate regulator/court to that effect, will suffice. At the hearing, Pamela Epting, chief of OFR's regulatory review bureau, testified that an e-mail such as that sent by Mr. Stokes is not OFR's usual method of doing business. OFR typically sends only an initial deficiency letter such as that sent by Mr. Mills on July 18, 2007. Richard White, director of OFR's division of securities, described Mr. Stokes' e-mail as a "courtesy" that provided Mr. Lessinger "with a reminder and greater detail as to what had not yet been provided." Mr. Lessinger responded with a package of documents and a cover letter dated November 5, 2007, which were received by OFR on November 6, 2007. The cover letter stated as follows, in relevant part: As requested, I am enclosing certified copies of all of the following: SEC, State of Maine (with additional prior correspondence), NASD. Joseph Orlando and Muriel Hecht (there were no payments made since Orlando was dismissed in its entirety with regard to me and Hecht was absolved as a result of my bankruptcy). Certified copy of the Petition for Bankruptcy and Discharge. I believe the State of Pennsylvania will be submitting directly to your office. I have not yet received the certification from the State of Ohio yet [sic]. I have enclosed the original Division Order which is signed and sealed by the Commissioner of Securities. If needed, I will forward the certification as soon as I receive the documents. . . . OFR did not respond in writing to Mr. Lessinger's November 5, 2007, submission. At some point in December 2007 or January 2008, Ms. Epting spoke to Mr. Locy by telephone. She told Mr. Locy that the agency intended to deny Mr. Lessinger's application and offered him an opportunity to withdraw the application in lieu of outright denial. In an e-mail to Ms. Epting dated February 4, 2008, Alan Wolper, attorney for Brookstone and Mr. Lessinger, wrote that his clients had decided not to withdraw the application, "notwithstanding the fact that you have indicated OFR's intent to deny that application." Mr. Wolper requested that Ms. Epting send a written notice of intent to deny, stating the particular grounds for the denial of Mr. Lessinger's application. At some point after writing the February 4, 2008, e-mail, Mr. Wolper wrote a letter to OFR asserting that Mr. Lessinger's registration should be deemed granted by default due to CFR's failure either to notify Mr. Lessinger of the application's incompleteness within 30 days of his November 5, 2007, submission or to act upon the completed application within 90 days of the November 5, 2007, submission, as required by Subsection 120.60(1), Florida Statutes. In a letter dated April 23, 2008, OFR assistant general counsel Jennifer Hrdlicka responded to Mr. Wolper with the assertion that the statutory default provision had not been triggered because Mr. Lessinger had yet to submit a completed application: Mr. Lessinger's application is still deficient. He has not provided to the Office the information requested in its July 18, 2007, letter to him. Still missing from his application are: Certified copies of the complaint, Lessinger's answer/reply, and resolution for the actions taken by the SEC; Certified copies of the resolution for the actions taken by the State of Ohio; and Certified copies of the statement of claim, Lessinger's response, settlement/arbitration panel's decision, and proof of payment of any awards/settlement for the arbitrations filed by Joseph Orlando. Mr. Lessinger did submit a certified copy of the Notice of Intent to Deny Application for Securities Salesman License from the State of Ohio, dated July 9, 1997. However, he did not submit any document, certified or not, regarding the resolution from that Notice of Intent of July 9, 1997, such as a Final Order. * * * Mr. Lessinger was timely notified of deficiencies in his application on July 18, 2007, thirteen days after submittal of his application and well within the thirty (30) day period set by the Administrative Procedures [sic] Act and the Office's corresponding Rule [Florida Administrative Code Rule 69W-301.002]. Your interpretation of Florida's Administrative Procedure Act and the Office's Rules contemplates an additional thirty day time period from Mr. Lessinger's November 6, 2007, submittal of additional information; this is a mistaken interpretation of Florida statutes. Mr. Lessinger's application was not considered complete on December 5, 2007. In fact, he has not yet delivered to the Office all requested information and so his application is currently not considered complete. His application will not be considered complete until such time as all requested information is received by the Office. . . . (Emphasis added.) On April 30, 2008, Mr. Lessinger submitted to Ms. Epting an affidavit attesting that the additional documents requested by Mr. Stokes on October 9, 2007, had been submitted to the agency on November 6, 2007. At the hearing, OFR continued to assert that Mr. Lessinger's November 6, 2007, submission did not contain all the information requested by Mr. Stokes. OFR submitted into evidence a sheaf of documents purporting to be Mr. Lessinger's November 6, 2007, submission. The documents had been unstapled for copying and re-stapled, and bore no consistent marks of date stamping or numbering that would allow a fact finder to conclude with confidence that the documents had been maintained in the form they were submitted by Mr. Lessinger. Ms. Epting could testify only as to OFR's general practice in maintaining its files, not as to the manner in which this particular file had been maintained. At the hearing, Mr. Lessinger stated under oath that he had provided OFR with every document it had asked for with the exception of the final order in the 1998 Ohio denial of his application. Mr. Lessinger conceded that he had only provided OFR with the notice of intent to deny in that case. Ms. Epting testified that OFR obtained the final order directly from the State of Ohio some time during the Spring of 2008. The only other item that OFR asserted was missing from the November 6, 2007, submission was a certified copy of the SEC's 2005 order barring Mr. Lessinger from association in a supervisory capacity with any broker or dealer for a period of two years. Mr. Lessinger's November 6, 2007, submission contained what appeared to be a non-certified copy of the order. The faint image of a seal is visible on the last page, with Mr. Lessinger's notation: "Raised seal unable to make darker." Ms. Epting testified that Mr. Lessinger submitted a certified copy of the order some time around May 2008. It is found that Mr. Lessinger submitted a certified copy of the SEC's 2005 order with his November 6, 2007, submission. On May 5, 2008, OFR issued the Notice to Mr. Lessinger. In the Notice, OFR identified a third "completeness" issue that Ms. Epting testified she discovered only during her inquiry to the State of Ohio regarding the final order in the 1998 denial. As to this issue, the Notice recited as follows under heading, "Statement of Facts": On October 3, 2007, the State of Ohio, Department of Commerce, Division of Securities, issued a Notice of Intent to Deny Application for Securities Salesperson License for Lessinger, Order No. 07-387. On April 7, 2008, the State of Ohio, Division of Securities issued a Final Order against Lessinger Denying the Application for a Securities Salesperson License, Order No. 08-052. The Final Order states that on October 15, 2007, Lessinger requested an adjudicative hearing of the Notice of Intent to Deny; the Final Order further states that such a hearing was held on December 18, 2007, and on January 23, 2008, the Hearing Examiners Report and Recommendation was issued, upholding the Division's Notice of Intent. The Final Order states that the Division found that Lessinger was not of "good business repute" as that term is used in Ohio Revised Code 1707.19(A)(1) and Ohio Administrative Code 1301:6-3-19(D)(2),(6),(7),(9), and (D)(11) . . ." Notice was not given to the Office of these administrative actions by the State of Ohio. Lessinger did not update his Form U-4 until April 23, 2008, and subsequent to the Office's inquiry as to this matter; further, his update to his Form U-4 is misleading in that it cites that the date of initiation of this matter was April 7, 2008. Under the heading "Conclusions of Law," the Notice states that Mr. Lessinger's failure to update his Form U-4 constitutes a violation of Florida Administrative Code Rule 69W-600.002(1)(c)5 and therefore a basis for denial pursuant to Subsection 517.161(1)(a), Florida Statutes, which provides that violation of any rule promulgated pursuant to Chapter 517 constitutes grounds for denial of registration. The parties agreed that Mr. Lessinger's application file at OFR was complete at the time of the hearing. The Notice cited additional grounds for denial based on Subsections 517.161(1)(h) and (m), Florida Statutes, which provide: (1) Registration under s. 517.12 may be denied or any registration granted may be revoked, restricted, or suspended by the office if the office determines that such applicant or registrant: * * * (h) Has demonstrated unworthiness to transact the business of dealer, investment adviser, or associated person; * * * (m) Has been the subject of any decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order by any court of competent jurisdiction, administrative law judge, or by any state or federal agency, national securities, commodities, or option exchange, or national securities, commodities, or option association, involving a violation of any federal or state securities or commodities law or any rule or regulation promulgated thereunder, or any rule or regulation of any national securities, commodities, or options exchange or national securities, commodities, or options association, or has been the subject of any injunction or adverse administrative order by a state or federal agency regulating banking, insurance, finance or small loan companies, real estate, mortgage brokers or lenders, money transmitters, or other related or similar industries. For purposes of this subsection, the office may not deny registration to any applicant who has been continuously registered with the office for 5 years from the entry of such decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order provided such decision, finding, injunction, suspension, prohibition, revocation, denial, judgment, or administrative order has been timely reported to the office pursuant to the commission's rules. . . . As the basis for OFR's conclusions that Mr. Lessinger had demonstrated "unworthiness" as described in Subsection 517.161(1)(h), Florida Statutes, and that Mr. Lessinger was the subject of decisions, findings, injunctions and/or prohibitions as set forth in Subsection 517.161(1)(m), Florida Statutes, the Notice cited the 1993 Maine consent order, the 1998 Ohio final order denying Mr. Lessinger's application for a securities salesman license, the 2000 AWC letter from NASD, the 2002 arbitration award issued by NASD Dispute Resolution, Inc., the 2005 SEC actions, and the April 7, 2008, Ohio final order denying Mr. Lessinger's application for a salesperson's license. Petitioner's Disciplinary History During his career, Mr. Lessinger has been employed in various capacities: as a broker/registered representative, a supervisor, and a general securities principal. He has lived and worked in Florida since 1997. From November 1976 through October 1994, Mr. Lessinger was employed by First Investors Corporation ("First Investors") in New York, working his way up to senior vice president and director of the company. On December 20, 1993, Mr. Lessinger entered into a Consent Agreement with the Attorney General of the State of Maine, "for the sole purpose of effecting a settlement of the civil action against Lessinger," First Investors and other individual defendants commenced by the Attorney General and the Maine Securities Administrator in 1991. Mr. Lessinger did not admit or deny that his conduct violated the Revised Maine Securities Act. The Consent Agreement does not provide the details of the grounds for the civil action. Mr. Lessinger testified that First Investors sold mutual funds, one of which was a junk bond fund that lost a great deal of money for investors in the late 1980s. First Investors had an office in Maine, and the Attorney General instituted a civil action against First Investors and certain supervisory personnel, including Mr. Lessinger, for failure to disclose to investors the risk inherent in these bond funds. Mr. Lessinger had no customers in Maine and did not personally sell the junk bond fund to any of his clients. Under the Consent Agreement, Mr. Lessinger agreed not to apply for a license as a sales representative in Maine for a period of one year. Mr. Lessinger also agreed to pay the sum of $50,000 to the State of Maine; First Investors paid the money for Mr. Lessinger. He eventually reapplied and was approved as a sales representative in the State of Maine. In mid-1997, Mr. Lessinger moved from New York to Boca Raton, becoming president of Preferred Securities Group, Inc. ("Preferred"). Mr. Lessinger was obliged to seek licensure in the states in which Preferred had brokers, which included Ohio. In March 1998, the State of Ohio, Department of Commerce, Division of Securities issued a "Division Order" denying Mr. Lessinger's application for securities salesman license. The Division Order found that Mr. Lessinger was not of "good business repute" under the Ohio statutory and rule provisions named in the quotation portion of Finding of Fact 20, supra. The only factual basis stated for the Division Order's "good business repute" finding was the 1993 Consent Agreement with the State of Maine. On November 16, 2000, Mr. Lessinger entered into the NASD AWC letter along with Preferred and Kenneth Hynd, Preferred's financial operations principal ("FINOP"). The recipients of the AWC letter agreed that the letter would become part of their permanent disciplinary record and may be considered in any future actions brought by NASD against them. They also agreed to the following: We may not take any action or make or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any allegation in this AWC or create the impression that the AWC is without factual basis. Nothing in this provision affects our testimonial obligations or right to take legal positions in litigation in which the NASD is not a party. Only one of the allegations that prompted the AWC letter directly involved Mr. Lessinger. Without admitting or denying the alleged violation, Mr. Lessinger and Preferred consented to the entry of the following finding by NASD Regulation, Inc.: During the period from about March 22, 1999, until about April 21, 1999, Respondent [Preferred], acting through Respondent Lessinger, allowed an inactive registered representative to effect three securities transactions for customers, in violation of NASD Membership and Registration Rule 1120 and Conduct Rule 2110. Mr. Lessinger and Preferred also consented to the entry of a $3,000 fine, imposed jointly and severally. Mr. Lessinger paid the fine. Mr. Lessinger testified that the representative who effected the improper transactions was in Preferred's Pompano Beach branch office, which was open only from March to June 1999. The manager on premises had not notified Mr. Lessinger that a registered representative in the office was deemed "inactive" for failure to complete mandatory continuing education. On April 30, 2002, a NASD Dispute Resolution, Inc.6 arbitration panel issued an award against Mr. Lessinger in a case that had been filed by a former Preferred customer against Preferred, Mr. Lessinger, and three other individuals associated with the firm, including the owner, Anthony Rotonde, and two brokers. The initial statement of claim in the matter was filed in 1999. The claims included misrepresentation, unsuitability, breach of fiduciary duty, failure to supervise, violations of Section 517.301, Florida Statutes, and common law fraud and negligence. Mr. Lessinger was not the broker of record for the complaining customer and never had anything directly to do with her account. He did not know her. She had been a client of the two brokers for several years. As president of the company, Mr. Lessinger was ultimately responsible for supervision of the brokers, though he was not their direct supervisor. Preferred, Mr. Rotonde, and Mr. Lessinger were found jointly and severally liable on the claims of suitability and failure to supervise and were required to pay damages of $42,294.90, plus interest, costs, and attorneys' fees. The liability for attorneys' fees was expressly based on Sections 517.301 and 517.211, Florida Statutes. Section 517.301, Florida Statutes, generally prohibits fraud and deception in connection with the rendering of investment advice or in connection with securities transactions. Section 517.211, Florida Statutes, sets forth the remedies available for unlawful sales, including those in violation of Section 517.301, Florida Statutes. Subsection 517.211(6), Florida Statutes, provides for attorneys' fees to the prevailing party unless the court finds that the award of such fees would be unjust. After the arbitration award, Preferred went out of business. Mr. Rotonde was a non-licensed owner and simply walked away from the matter. Thus, Mr. Lessinger was left on the hook for the entire arbitration award. He was unable to pay it, and was forced to declare bankruptcy. In April 2004, Mr. Lessinger was named in a civil action filed by the SEC in the United States District Court for the Southern District of Florida. The SEC alleged that Preferred's Pompano Beach office was opened in March 1999 to operate as a boiler room for a "pump and dump" operation involving a penny stock, Orex Gold Mines Corporation ("Orex"). Orex claimed to be in the business of extracting gold from iron ore by means of an environmentally safe process. The SEC alleged that Orex was in fact a shell corporation owned by a "recidivist securities law violator and disbarred attorney." Though its promotional video, literature, and website touted Orex as an active, established company with gold mines, employees, and a revolutionary gold extraction process, Orex in fact owned no mines or mining equipment and had never commercially tested its claimed extraction process. As to Mr. Lessinger, the SEC's complaint alleged as follows: According to Preferred's written supervisory procedures, the form prohibited the solicitation of "penny stocks" as defined under Exchange Act Rule 3a51-1, and restricted the purchase of penny stocks unless it received an unsolicited letter, signed by the investor, requesting to purchase a particular penny stock. Despite the firm's prohibition against soliciting transactions in penny stocks, Lessinger authorized the Pompano Beach branch office's request to solicit transactions in Orex. Prior to authorizing the firm's solicitation of Orex, Lessinger simply reviewed the Orex brochure, the Orex private placement memo, and an Orex press release. He did not conduct any independent research or assessment regarding Orex's officers, assets, or prospects for success. Orex quickly accounted for a high percentage of the overall transactions conducted by Preferred's Pompano Beach branch. Although Lessinger retained responsibility for reviewing, authorizing, and approving customers' transactions in Orex stock, and although he was the senior official of Preferred and functioned as a compliance officer, he failed to exercise appropriate supervision and to take the necessary steps to ensure that Preferred, and the personnel operating out of Preferred's Pompano Beach branch in particular, complied with applicable procedures, securities laws and regulations in connection with transactions in Orex stock. The brokers in the Pompano Beach branch sold more than $3 million in Orex stock between March and July 1999 through fraudulent representations regarding the company, forgery of penny stock disclosure forms, bait and switch tactics, refusal to execute sell orders, or delaying sell orders until a buyer for the shares could be found. The stock ballooned to a value of $7.81 in late May 1999. By late July, it was trading for pennies per share. To his credit, Mr. Lessinger closed the Pompano Beach branch of Preferred after a site visit in June offered him a glimpse of the office's actual operations. However, had Mr. Lessinger showed more curiosity at the outset, or had he merely enforced the company policy against soliciting penny stock sales, the situation in Pompano Beach might never have developed. On September 7, 2005, the court entered final judgment as to Mr. Lessinger. He was permanently restrained and enjoined from: violating the fraud provisions of the Securities Exchange Act of 1934; violating the NASD Conduct Rule regarding supervision of the activities of registered representatives and associated persons; and participating in any offering involving penny stocks. He was also ordered to pay a civil penalty of $20,000. On September 23, 2005, the SEC also issued an Administrative Order making findings and imposing remedial sanctions in connection with the Orex matter. The order barred Mr. Lessinger from association in a supervisory capacity with any broker or dealer for two years, with a right to reapply at end of the two-year period. The SEC's Administrative Order left Mr. Lessinger free to continue to act as a registered representative. However, the two SEC actions rendered Mr. Lessinger statutorily disqualified from membership in the securities industry under FINRA rules. To remain active in the industry, Mr. Lessinger was required to go through the MC-400, or "Membership Continuance," process with FINRA. The Form MC-400 must be filed by a member firm on behalf of the disqualified person. In this case, Archer Alexander Securities, Mr. Lessinger's employer at the time of his disqualification, filed the MC-400 application on his behalf. However, Archer Alexander went out of business before the application could be considered. Mr. Lessinger was hired by Brookstone in April 2006. Brookstone filed a Form MC-400 with FINRA on Mr. Lessinger's behalf on May 15, 2006. Brookstone is owned by Antony Turbeville, a certified financial planner who has been licensed in the securities industry since 1987. Mr. Turbeville has never been the subject of disciplinary actions by the SEC, NASD, or the State of Florida. David Locy is currently the president of Brookstone. At the time Brookstone filed the MC-400 application for Mr. Lessinger, Mr. Locy was Brookstone's chief compliance officer. He has been a certified public accountant since 1974, licensed in the securities industry since 2003, and has never been the subject of regulatory or disciplinary action by any professional or licensing entity. Michael Classie is the branch manager and supervisor of Brookstone's Coral Springs office, where Mr. Lessinger works.7 He has been licensed to sell securities since 1995 and has never been the subject of disciplinary actions by the SEC, NASD, or the State of Florida. In its MC-400 application, Brookstone stated that Mr. Lessinger did not seek licensure as a supervisor or control person, and that Brookstone would not allow him to work in a supervisory capacity. Brookstone agreed that Mr. Lessinger would work only as a registered representative, and then only under highly controlled supervisory conditions. FINRA's Department of Member Regulation, which conducts the initial review of all MC-400 applications, recommended that Brookstone's application on behalf of Mr. Lessinger should be denied. By order dated December 13, 2006, following an evidentiary hearing, FINRA's National Adjudicatory Council ("NAC") disagreed with the recommendation of the Department of Member Regulation and granted the application, subject to approval by the SEC. The NAC's order provided as follows: After considering all of the facts, we approve Lessinger as a general securities representative with Brookstone, supervised by Classie and Locy, and subject to the following terms and conditions of employment: Classie and Locy will review, initial, and date all of Lessinger's order tickets on a daily basis; Classie will review all of Lessinger's incoming correspondence daily and will review all of Lessinger's outgoing correspondence prior to its being sent. Lessinger will print out a daily log of faxes from the fax machine for Classie to review; Classie and Locy will review every new account form for Lessinger and, if approved, sign such form; Classie will be in the office with Lessinger at least four times per week from 8:00 a.m. until 5:00 p.m. If Classie is not in the office, Lessinger will be prohibited from effecting trades on the computer and will, instead, call them in to Locy for approval; Locy will make random unannounced office visits to Lessinger's home office at least once during each calendar quarter; Brookstone will amend its written supervisory procedures to state that Classie is the primary responsible supervisor for Lessinger, and that Locy is the backup supervisor; Lessinger will provide a list of all sales contacts to Classie, including the nature of the contacts, on a daily basis; Classie will review Lessinger's written sales contacts and investigate any irregular activity; Locy will conduct five random telephone calls per quarter to Lessinger's customers to verify information or ascertain the customers' level of satisifaction; Lessinger will not participate in any manner, directly or indirectly, in the purchase, sale, recommendation, or solicitation of penny stocks (this is defined in the Court Judgment as "any equity security that has a price of less than five dollars, except as provided in Rule 3a5-1 under the Exchange Act [17 C.F.R. 240.3a51-1]"); Classie must certify quarterly (March 31st, June 30th, September 30th, and December 31st) to the Compliance Department that Lessinger and Classie are in compliance with all of the above conditions of heightened supervision; and For the duration of Lessinger's statutory disqualification, Brookstone must obtain prior approval from Member Regulation if it wishes to change Lessinger's responsible supervisor from Classie to another person. On June 29, 2007, the SEC issued a letter approving the NAC's decision to permit Mr. Lessinger to register with Brookstone as a registered representative under the heightened supervisory restrictions set out in the NAC's order. Brookstone and Mr. Lessinger have agreed that they will abide by the same list of heightened supervisory restrictions should the State of Florida approve the application at issue in this proceeding.8 As noted at Findings of Fact 20 and 21, supra, the Notice alleged that Mr. Lessinger failed to timely update his Form U-4 to disclose receipt of a Notice of Intent to Deny Application for Securities Salesperson from the State of Ohio, Department of Commerce, Division of Securities ("Ohio Notice") dated October 5, 2007. The Ohio Notice stated that on July 9, 2007, Mr. Lessinger had applied for a securities salesperson license via submission of his Form U-4, and that his application disclosed the September 23, 2005, SEC order, the April 2004 filing of the SEC complaint in the United States District Court for the Southern District of Florida, the 2000 NASD AWC letter, the NASD Dispute Resolution arbitration award, the 1998 Ohio application denial, and the Maine Consent Agreement. Based on these disclosures, the Ohio Division of Securities alleged that Mr. Lessinger was not of "good business repute" according to Ohio statutes and rules, and stated its intent to issue an order denying Mr. Lessinger's application for a salesperson's license. The Ohio Notice provided that Mr. Lessinger had 30 days in which to request an administrative hearing contesting the agency's intended denial of his application. Mr. Lessinger timely filed the appropriate documents contesting the Ohio Notice and requesting an evidentiary hearing. Immediately after receiving the Ohio Notice, Mr. Lessinger brought it to the attention of Mr. Locy, then Brookstone's chief compliance officer, in order to determine whether his Form U-4 should be amended. Only Brookstone, as the broker/dealer employing Mr. Lessinger, had authority to amend his Form U-4. Mr. Lessinger did not have independent access to the Web CRD database and thus had no ability to amend the document on his own. Mr. Locy considered the situation and decided that the Ohio Notice did not require an amendment to Mr. Lessinger's Form U-4. Because Mr. Lessinger had appealed the intended denial of his Ohio application, Mr. Locy concluded that that matter was not reportable until the Ohio action ripened into a final order. Mr. Lessinger deferred to Mr. Locy's greater expertise regarding compliance issues. Though Mr. Lessinger could not amend his Form U-4, there was no obstacle to Mr. Lessinger's directly informing OFR of the Ohio Notice. However, there was also no evidence that Mr. Lessinger attempted to conceal the existence of the Ohio Notice, or was anything other than forthright in his dealings with employers and regulatory authorities. The credible evidence established that he simply relied on the opinion of Mr. Locy. The State of Ohio issued a final order denying Mr. Lessinger's application on April 7, 2008. Upon receipt of the final order, Mr. Lessinger promptly notified his employer, and Brookstone updated Mr. Lessinger's Form U-4 on April 23, 2008, to reflect the actions of the Ohio regulators. At the hearing, Mr. Lessinger emphasized that he seeks only to act as a registered representative. Most of his clients are retirees invested in fixed-income mutual funds. They are conservative to moderate in their risk tolerance. Mr. Lessinger does not trade in their accounts on margin, and does not have discretion to make trades without express client authorization. Mr. Lessinger gets new customers through referrals. He makes no cold calls to prospective customers. Mr. Lessinger has never been the subject of a complaint by one of his own customers, and had never been disciplined for any actions he has taken as a registered representative. All of the disciplinary proceedings involving Mr. Lessinger concerned his actions in a supervisory capacity. Mr. Lessinger has forsworn any intention to ever again act in a supervisory capacity in the securities industry. Mr. Turbeville and Mr. Locy were emphatic that Mr. Lessinger would not be permitted to act in a supervisory capacity at Brookstone. Mr. Classie convincingly testified that he would closely monitor Mr. Lessinger's actions in accordance with the NAC order, and understood that failure to do so could place his own registration in jeopardy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office of Financial Regulation enter a final order granting Petitioner's application for registration as an associated person with Brookstone Securities, subject to such heightened supervisory restrictions as the Office of Financial Regulation shall deem prudent. DONE AND ENTERED this 15th day of December, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 15th day of December, 2008.
The Issue Whether Petitioner should be granted an equitable adjustment to increase the contract price in the amount of $337,714 for a mistake in bid on project No. BR-7702/8701, Library/Auditorium, Florida International University.
Findings Of Fact In April 1974, Respondent advertised for bids for the construction of a library-auditorium building at Florida International University, Miami, Florida, State Project No. B.R. 7702/8701. Respondent's representative for this project was the architectural firm of Ferendino/Grafton/Spillis/Candela, Coral Gables, Florida. The advertisement for bids specified that sealed bids would be received until 2:00 p.m. on May 16, 1974, at which time they would be publicly opened and read aloud. In fact, the advertised time period was extended until the same hour on May 23, 1974. The advertisement provided that bids must be submitted on the proposal form furnished by the architect/engineer and be accompanied by a bid bond or an equivalent cash amount in a sum not less than five per cent of the amount of the base bid as a guarantee that the bidder would enter into an agreement with the owner if this bid was accepted. It further provided that the bid would remain in force for thirty (30) days after the time of opening. The advertisement also contained the following statement: "The Department of General Services reserves the right to reject any and all bids and to waive informalities in any bid whenever such rejection or waiver is in the interest of the State of Florida." (Exhibit 1a, testimony of Williams) In preparing its bid on the project, Petitioner utilized two company forms. One included columns for the various portions of the work with blocks opposite each portion for the insertion of the names of subcontractors and the amounts of their bids. The other form was a recapitulation of the low subcontractors' bid by the various segments of the contract, and the form also included spaces and amounts for the work to be accomplished by the contractor itself. The normal procedure followed by Petitioner in this and prior projects was to enter subcontractors' bids on the subcontractor's bid tabulation form when received over the telephone and, when all such bids had been received shortly before the deadline for submission of bids by the prime contractors on the project, to enter each low subcontractor bid on the recapitulation form. This would then be totaled to arrive at Petitioner's bid to be submitted to Respondent. (Testimony of Kearns). The subcontractor tabulation form for the instant project listed an item for "PRECAST STRUCTURAL." Opposite this entry in blocks on the form had been printed the names of subcontractors from whom Petitioner expected to receive bids, including Pre-Stressed Systems, Inc. (P.S.I.), Meekins, Stresscon, and Houdaille. However, since there were two different pre-case structural items called for under the specification, i.e., joists under section 3-B and pre-case panels under section 3-C, the words and figures "3B Joists" and "3C panels" were penciled in above and below the printed words "PRE-CAST STRUCTURAL" to show the need for entering bid figures for both items. However, there was no separation of these items in the various blocks for subcontractor's bids. (Exhibits 1b, 1c, Testimony of Kearns) Usually bids of major subcontractors were not received until the morning of the final day for submission of the total bids, and many were not received until immediately prior to the time the bid must be tallied and submitted. On the morning of May 23, 1974, the day for bid opening, Petitioner's employee, Edward A. Kearns, Jr., an estimator, was responsible for preparing Petitioner's bid. The only bid Petitioner had received for precast joists was that submitted by P.S.I. in the base amount of $460,000. This sum was entered on the bid tabulation from in pencil under the printed name P.S.I. Bids for the pre-cast panels were received from two of the subcontractors whose names were printed on the form an the amounts were entered in pencil as follows: "Meekins - 399,800, Stresscon - 400,00." No bid was entered for Houdaille. About 11:00 a.m., a telephonic bid on the panels was received from Cast-Crete Corporation of Kissimmee. This bid was considerably lower than that of Meekins and, because Petitioner had not heard of or dealt with Cast-Crete in the past, it asked all three bidders on the panels to verify the requirements and prices. While awaiting the return of this information, the Cast-Crete bid was not entered on the bid tabulation form. Thereafter, Cast-Crete informed Petitioner that it was raising its bid somewhat and this information was placed on a separate subcontractor bid form for cast-Crete, but not entered on the tabulation form containing all bids. The final Cast-Crete bid was in the amount of $337,714. By this time, Petitioner's office was quite hectic in that other bids were coming in at a fast pace and the phone was ringing continuously. Many bidders sought clarification on items or had to give their bids to Kearns which was time-consuming. As the time for submission by Petitioner to Respondent drew near, Kearns took the low subcontractor bids from the bid tabulation form and transferred them for each category of work to the recapitulation form. On this form, there was a single line for "Precast structural" and, on that line, Kearns entered the bid that had been received from P.S.I. for precast joists, but forgot to include any bid for the precast panes. Since no breakdown for joists and panels was shown on the recapitulation form, he assumed that bids for all portions of the work hand been included. All items on the recapitulation form were added and Petitioner arrived at a total base bid of $3,999,259, which did not include the bid for precast panels in the amount of $337,714. (Testimony of Shafer, Sr., Kearns, Exhibits 1b, 1c, 1f) Petitioner's employee, Ron Shafer, Jr., previously had been sent to the place of bid opening at Florida International University with the formal bid letter with the amounts left blank. Shortly before 2:00 p.m., Petitioner provided him by telephone with the amounts to place on the be bid form and submit to the Respondent's representative. He submitted the formal bid just prior to the deadline. The bids were thereafter opened and, although Ron Shafer, Jr., noted that Petitioner's bid was some $400,000 lower than the next lowest bidder, he was unaware of the circumstances of the mistake and returned to the office. The representative of Respondent had opened the bids and an officer of the architectural firm, Freeman J. Williams, was also present. Nothing was said at the time concerning the large disparity between Petitioner's bid and the other bids, and Williams saw no need to ask Petitioner to verify its bid at that time. (Testimony of Shafer, Jr., Williams, Exhibits 1d, 1v) Meanwhile, after Kearns had tallied the final bid figures and they had been called in to the employee at Florida International University, Petitioner's personnel sat around the office and discussed the job for several minutes. They then started to gather up all the sub-bids to put in a folder when they discovered a "subcontractor's bid form" for Cast-Crete Corporation and realized that it had not been included on the tabulation sheet or on the final recap sheet. Immediate attempts were made to telephone the architect about the mistake. When Williams was reached at his office some thirty minutes after he had left Florida International University, Petitioner requested that its bid be withdrawn after explaining the circumstances. Williams suggested that Petitioner immediately send a telegram to Respondent explaining this situation. Petitioner did so in the following language: "In reviewing our bid, we discovered we had omitted the cost of precast panels manufacturers bid from our tabulation sheet, in the amount of $282,714. We, therefor, regretfully must with- draw our bid on the FIU library and auditorium building. We could, however, accept award of contract if this amount could be added to either of our base bids. Please advise. SHAFER AND MILLER, INC. R C Shafer" In the telegram, an additional mistake was made by using the figure of $282,714 which did not include the erection of the panels in the amount of $55,000 that had been the subject of a separate bid by Cast-Crete. After receipt of the telegram, Respondent's representatives requested that Petitioner come to Tallahassee with their pertinent documents relating to the bid to discuss the matter. They did so and thereafter heard nothing further until June 5, 1974, at which time a letter was received from the Department of General Services, dated May 31, 1974, advising that, subject to final approval by the Governor and the Cabinet, it was propose to recommend acceptance of Petitioner's low bid and award the contract to it in the amount of $4,122,000 for Base Bid 1 and Priority 1 Alternate A, Priority 2, Alternate C, and Priority 3, Alternate D. The meeting of the Cabinet at which the award was to be recommended was stated in the letter to be held on June 4, 1975. Since Petitioner did not receive the letter until June 5, it had no opportunity to be present at the time matter was considered. By separate letter of May 31, 1974, the Department of General Services enclosed four copies of a standard form of agreement and performance and payment bond to be executed and returned. (Testimony of Williams, Shafer, Sr., Kearns, Exhibits 1e, 1g, 1h) Petitioner contacted legal counsel, James E. Glass, on June 5. He checked into the matter and found that the contract had already been awarded on June 4 by the Cabinet. He then telephoned Arnold Greenfield, General Counsel for the Department of General Services, and asked if the state could rebid the job at which time Petitioner would submit its original intended bid. Greenfield stated that the project was critical from a budget standpoint and that the state would not rebid it, and insisted that the Petitioner proceed or else forfeit its bid bond and be subject to suit for any excess costs of performance. Glass reminded Greenfield that Petitioner proceed or else forfeit its bid bond and be subject to suit for any excess costs of performance. Glass reminded Greenfield that Petitioner could seek injunctive relief in the matter, and the latter then stated that if Petitioner would proceed with the contract, Respondent would acknowledge its right to claim a modification of the contract. This conversation was confirmed in a letter from Greenfield to Glass, dated June 7, 1974, wherein it was stated "We further understand that your client may wish to seek a modification of such contract, after execution." Glass, in a return letter dated June 12, returned the executed contracts and bonds, stating that Petitioner was doing so in order to act "equitably and in good faith", and was fully reserving its rights to contest the erroneous bid by judicial action for equitable relief. Thereafter, Petitioner received notice to proceed with the work and in due course satisfactorily completed the contract within the required period. This was evidenced by a certificate of acceptance of the building by the using agency, which was approved by Respondent on December 4, 1975. (Testimony of Glass, Exhibit 1e, 1g, 1h, 1i, 1j, 11, 1m, 1s) In December, 1974, Petitioner had submitted its claim for an equitable adjustment in the amount of $337,714 which was the amount of the omitted Cast- Crete bid. During the ensuing year Petitioner submitted audits of its expenses on the job to Respondent and in January, 1976, further audit information was provided at the request of Respondent. On May 6, 1976, Respondent informed Petitioner that it would not approve any increase in the contract amount. Thereafter, on June 11, Petitioner filed its petition herein seeking an equitable adjustment in the amount of $337,714. The petition was referred to the Division of Administrative Hearings by the Respondent on August 2, 1976, and the undersigned Hearing Officer was assigned to conduct the hearing therein. (Exhibit 1r, 2, 4, 5, 6) By a Motion to Abate, dated August 23, 1976, Respondent requested that the matter be held in abeyance pending the submission of the petition to the project architect and his rendering of a determination indicating whether the relief should be granted or denied, as a "condition precedent to the contractor obtaining consideration of said petition in any proceeding authorized by Chapter 120, Florida Statutes." Respondent stated in its motion that the contract clearly provided that nay and all claims or disputes should be first submitted to the architect for determination, and that thereafter, either party could obtain administrative review of the determination by filing a written appeal to the Department of General Services within thirty days. The motion further stated that since this prerequisite had not been accomplished, there was no basis for an administrative appeal at that time. On the same date, Respondent advised the architect of the situation and requested expeditious consideration of the matter. On August 27, the architect issued its determination stating "From our personal knowledge of the events during the bid opening process, and the subsequent events that led to the awarding of the bid, we concur in the contractor's request." In November 1976, Respondent's general counsel advised the Hearing Officer that settlement efforts were in progress but requested that the matter be scheduled for hearing nevertheless. Notice of hearing was issued on December 15, 1976, and the case was heard on January 27, 1977. (Exhibits 1t, 1u, Pleadings) Petitioner's intended total bid, including alternates, amounted to $4,459,714. A change order of $194 was issued during the course of the work, amounting to a total of $4,459,908. Petitioner's direct costs on the project were $4,094,890. Overhead was computed at 2.85 per cent of direct costs in the amount of $116,705, for a total cost of $4,211,595. Overhead was computed based on the ratio of total general and administrative expense to total direct costs incurred on all of Petitioner's jobs in process for the year ending May 31, 1975. However, the audit reports included payment in the amount of $335,634 to Cast-Crete Corporation. The actual amount paid to that firm was $325,234 - difference of $10,400, making Petitioner's actual costs $4,201,195. During the course of the contract, Respondent paid Petitioner $4,122,194, resulting in a net loss to Petitioner of $79,001. An anticipated profit for performance of the contract was computed on the basis of the average profit on other jobs of 4.4 per cent, amounting to the sum of $180,377. The latter two sums total $259,378, and it is found that figure is the reasonable amount of Petitioner's claim. (Exhibits 2-5)
Recommendation That Petitioner's claim for equitable adjustment under Project No. BR- 7702/8701 be granted and that a change order be issued increasing the contract price by $259,378.00. DONE and ENTERED this 21st day of March, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 388-9675 COPIES FURNISHED: Donna H. Stinson and Daniel S. Dearing, Esquires Post Office Box 1118 Tallahassee, Florida 32302 James E. Glass, Esquire 2600 First Federal Building 1 Southeast 3rd Avenue Miami, Florida 33131 John A. Barley, Esquire General Counsel Department of General Services Room 110 Larson Building Tallahassee, Florida 32301
The Issue The issue presented for decision herein is whether or not the Respondent, Frederick L. Lundeen, is guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction by misrepresenting that money he borrowed from a one Julie Couch would be used for the purchase of a lot but, instead, he utilized the money in connection with the purchase of a house for use by his family and for payment of other vacation and travel expenses and refuses to repay the loan, in a manner violative of Section 475.25(1)(b), Florida Statutes.3
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received, and the entire record compiled herein, I hereby make the following relevant factual findings. Respondent, Frederick L. Lundeen, is a licensed real estate salesman and holds license number 0329068. On or about July 13, 1984, Respondent solicited and obtained $3,500 cash from Julie S. Couch (Couch) for the stated purpose of assisting Respondent in purchasing a lot on behalf of Keith and Beverly Rayburn, friends of the Couches. In connection therewith, Respondent executed and delivered to Couch a mortgage note dated July 13, 1984, to secure the $3,500 loan via certain real property owned by Respondent.4 Pursuant to the terms of the note executed by Respondent and given to Mrs. Couch, Respondent was to repay Couch the principal of $3,500 plus $1,000 interest due on or before July 27, 1984. On July 30, 1984, Respondent attempted to repay part of the loan via check dated July 30, 1984 drawn in the amount of $1,000. Respondent's check was returned unpaid by the Drawers Bank with the notification "insufficient funds." (Petitioner's Exhibits 3 and 4) Thereafter, Respondent advised Mrs. Couch that the money was used to pay for his moving, vacation and other relocation costs for his family. Keith Rayburn attempted to buy property from the Respondent which was owned by Southern Standards Corporation. At no time during the attempted purchase by Keith Rayburn did Respondent offer to loan him money to purchase a lot from Southern Standards Corporation. Respondent executed and drafted the terms of the note which was given to Julie Couch which memorialized the loan from Mrs. Couch to Respondent. In this regard, Respondent contends that Julie Couch's ex-husband suggested the terms and the rate of interest which he inserted into the note which memorialized the loan from Julie Couch. On the other hand, Julie Couch testified that it was Respondent who suggested the terms and the interest which he provided with the executed note given her. Based on all of the evidence introduced herein including the fact that Respondent misrepresented the purpose for which the money would be utilized, and his failure to call Gary Couch as a witness to substantiate his claim that it was he, Gary Couch, who suggested the terms under which the loan would be made, the testimony of Julie Couch in this regard is credited.5 Respondent has repaid approximately $1,250 of the $3,500 loan from Julie Couch. Respondent, based on advice of his counsel, refuses to repay any further amounts on this loan contending that the interest rates were usurious and, further, that the State, in the person of Petitioner, is attempting to use its "strongarm tactics" to exact money from Respondent which is a usurious transaction. Respondent also contends that because the interest rate charged by Mrs. Couch was in excess of 45 percent per annum, Mrs. Couch committed a third degree felony. As previously stated, the weight of the evidence reveals that it was Respondent who drafted the note and provided the terms for repayment. It is also clear that Respondent misrepresented to Mrs. Couch the purpose for which he would utilize the money that he borrowed from her. It is therefore concluded that by such acts Respondent engaged in acts of misrepresentation, false pretenses, trick and dishonest dealing in a business transaction.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is, therefore, RECOMMENDED: That the license of Respondent, Frederick L. Lundeen, be suspended for a period of one (1) year and that he be fined $1,000. RECOMMENDED this 21st day of October, 1985, in Tallahassee, Florida.6 JAMES E. BRADWELL , Hearing officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488- 9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of October 1985.
