Findings Of Fact Seaton made application to the Division under the provisions of Section 517.12, Florida Statutes, for registration as a salesman of securities. Subsequently, the Division issued its intent to refuse or deny license or registration along with administrative charges and complaint alleging that Seaton was unworthy to transact the business of a salesman. On February 22, 1977, the Securities Commissioner of the State of South Carolina issued his order to cease and desist directed to Seaton on the dual grounds that Seaton engaged in conduct inconsistent with just and equitable principles of trade in that he offered for sale limited partnerships constituting securities while failing to register them as required and that Seaton failed to register as a broker, dealer or agent in South Carolina. On June 7, 1977, the District Business Conduct Committee for District number 4 of the National Association of Securities Dealers, Inc., issued its complaint against Seaton for violations of Article III, Sections 1, 18 and 27 of the Rules of Fair Practice of the National Association of Securities Dealers, Inc.
The Issue Whether the Petitioner is entitled to licensure in Florida as a Non-resident Life and Variable Annuity Agent?
Findings Of Fact The Petitioner, Linda C. Ballou, applied for a license as a Non-resident Life and Variable Annuity license by application completed on October 30, 2003. The Department denied her license by letter dated March 18, 2004. There is no explanation of why there was a delay in issuing the March 18, 2004 denial letter. There was no apparent request for additional information to complete the application after October 30, 2004, or information requested to resolve qualification issues. The Department denied the Petitioner's application on the basis that the Petitioner was not trustworthy or competent based upon her having been enjoined from violating the Federal Securities and Exchange Law and being barred from associating with any broker or dealer for three years after which she could reapply for association. The Department introduced and properly authenticated Respondent's Exhibits 3, 5, 6, and 7, together with a copy of the Petitioner's statement, Respondent's Exhibit 4, regarding the action of the Securities and Exchange Commission (SEC). The Petitioner testified regarding the events that were the subject of the SEC action. The Petitioner was counseling persons, particularly seniors, on purchasing life and annuity contracts primarily for long term care. She was an agent for CNA and New York Life, both of which were insurance companies. She was required to possess a "6-63 license" by her employer that authorized her to sell mutual funds and other instruments, which would be classed as securities. She carried errors and omissions (O & E) coverage with New York Life and paid the premium for O & E coverage for one year. While so employed, she was introduced by the president of CNA to his father, who told her about bonds payable in full in nine (9) months. He explained to her that these bonds were not securities, which are instruments payable in year or longer. There were several of these bonds available; however, the only one that she sold was one issued by Sebastian International Enterprises (SIE), a Florida-based television production company. These bonds paid very high rates of interest, and appeared to be a good investment. The Petitioner called the local bank and found that SIE was a viable company engaging in the business of producing films for television. She visited the company and saw them making television shows. The company had contracts to make additional television shows, and the company remained at all times pertaining to this case a viable company. After checking into the company, she invested in the company's bonds; she sold the bonds to members of her family; and members of the public. She never had any problems with the payment of premiums by the company. After selling SIE bonds for approximately a year, she saw a news story about one of the other companies, which had been presented to her by the father of the president of CNA, being investigated for being a "Ponzi" scheme. She checked with her attorney about the sale of SIE bonds, and, thereafter, contacted the Federal Bureau of Investigation (FBI) on his advise. The FBI referred the matter to the SEC, which opened an investigation of SIE. The Petitioner cooperated fully with this investigation. Ultimately, the financial records of SIE were seized, and the SEC determined that the sale of the nine-month bonds was a "Ponzi" scheme. Although no action was ever taken against SIE or the Petitioner's broker, the Petitioner and two others holding SEC licenses were disciplined. Although as a result of the aforementioned, the Petitioner surrendered her California license to sell insurance, she has been reinstated, and was able to seek an SEC securities broker's license after the three years ran. The administrative proceeding SEC brought against the Petitioner alleged that the Petitioner violated the Federal Securities and Exchange Act. The SEC order and complaint is based upon admissions by the Petitioner and recites that the Petitioner consents to the entry of the anticipated injunction without admitting or denying the allegations of the complaint. See Respondent's Exhibit 3. The complaint filed against the Petitioner in the United States District Court, Middle District of Florida is Respondent's Exhibit 5. This complaint states that the funds from the sale of the subject bonds were to fund the operations of SIE. The Petitioner testified that the proceeds were used to fund the daily operation of the company. This complaint also makes various allegations of misconduct and fraud against the Petitioner; however, no evidence was received at hearing in support of any of the SEC allegations, and the consent agreement signed by the Petitioner specifically states that she does not admit or deny the allegations contained in the complaint. By signing the agreement, the Petitioner avoided litigation on the issue and, although she voluntarily agreed to repay all commissions she earned from the sale of these notes (approximately $156,000), the agreement recites that she would not have to repay the money in light of her bankruptcy unless her statement were determined to be false. 77 United States Code 77c provides in pertinent part regarding items that are exempted as securities as follows: (3) Any note, draft, bill of exchange, or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited[.] (Emphasis supplied.)
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department issue the Petitioner a Non-resident Life and Variable Annuity Agent license. DONE AND ENTERED this 18th day of October, 2004, in Tallahassee, Leon County, Florida. S STEPHEN F. DEAN 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 18th day of October, 2004. COPIES FURNISHED: Linda C. Ballou 1001 Bridgeway No. 314 Sausalito, California 94965 Michael T. Ruff, Esquire Department of Financial Services 612 Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 Pete Dunbar, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Tom Gallagher, Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Recommendation Based upon the finding of facts and conclusions of law recited above, it is recommended that the agency's action in denying the Petitioner's application for registration as an electronic service dealer be sustained. DONE and ENTERED this 18th day of February, 1977, in Tallahassee, Florida. JAMES E. BRADWELL, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Lawrence D. Winson, Esquire Department of Business Regulation Division of Beverage The Johns Building Tallahassee, Florida 32304 William C. Kimberl, Director Division of General Regulation Department of Business Regulation The Johns Building Tallahassee, Florida 32304 Mr. Arthur Resnick Pompano Beach Club Towers 111 Briny Avenue, Apt. 1105 Pompano Beach, Florida 33062
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing the following facts are found: On or about November 24, 1976, the Petitioner, Department of Banking and Finance, Division of Securities, filed and served a Notice of Intent to Suspend or Revoke License and accompanying Administrative Charges and Complaint on Respondent. The Notice of Intent and Administrative Charges and Complaint were received by Respondent on November 26, 1976. Thereafter, Respondent, by and through his counsel, timely requested a Section 120.57 hearing. The Petitioner referred the Respondent's request for hearing to the Division of Administrative Hearings and the undersigned Hearing Officer was assigned to conduct the hearing. On or about March 17, 1978, Petitioner filed a Motion to Amend Administrative Charges and Complaint seeking to withdraw the prior allegations contained in the complaint and substituting paragraphs eight (8) and nine (9) which respectfully alleged that Respondent was adjudicated guilty on or about March 6, 1978, to the felony charges of two (2) counts of sale of unregistered securities, and that such adjudication of guilt is prima facie evidence of unworthiness to transact a business of a securities salesman in the State of Florida. Petitioner's Motion to Amend was granted without objection by Respondent. Counsel for Petitioner introduced into evidence certain "admissions" of Respondent to certain questions propounded to Respondent by the Petitioner's Request for Admissions filed on or about March 21, 1977. The two "admissions" admitted into evidence were number 1 and number 2, which admitted that Respondent was registered as a security salesman on or about July 30, 1971 and that he held license no. 64590 as a salesman at the time the Administrative Charges and Complaint was filed. The supervisor for the licensing and registration of securities dealers and agents testified that Respondent was registered as a securities salesman on or about July 30, 1971 and that Respondent did hold license no. 64590 as a securities salesman at the time the Administrative Complaint was filed. Counsel for Petitioner introduced into evidence a certified copy of Judgment of Guilt/Order of Probation of Respondent, which had been filed with the Hearing Officer on or about March 27, 1978, pursuant to a proper Notice of Filing. The certified copy of the Judgment of Guilt of the Respondent concerned the case of State of Florida v. Jay Aten, Jr., in the Circuit Court of Lee County Florida, Case No. 76-239 CF. According to that document on or about March 6, 1978, Respondent tendered to the court a plea of nolo contendere to the offense of sale of unregistered securities. Respondent was adjudicated guilty, and the imposition of a five (5) year prison sentence was withheld and the Respondent placed on a five (5) year period of probation. Respondent was required to pay the sum of $5,000 fine within six (6) months. Counsel for Petitioner requested the Hearing Officer to take official recognition of Section 517.16(1)(h), Florida Statutes, and Rule 3E-30.10(1), Florida Administrative Code, pursuant to Rule 221-2.25 of the Model Rules. The Hearing Officer officially recognized the statute and rule cited above.
Recommendation Revoke the license no. 64590 held by the Respondent as a securities salesman. DONE AND ENTERED this 22nd day of June, 1978, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Franklyn J. Wollett, Esquire Jay Aten, Jr. Office of the Comptroller 4178 Erindale Drive The Capitol North Ft. Myers, Florida Tallahassee, Florida 32304 M. W. Schryver, Esquire 600 Fifth Avenue South, Suite 306 Naples, Florida 33940
Findings Of Fact During all times material to the Complaint Respondent Genaro O. DiDiego was licensed as a real estate broker under Chapter 475, Florida Statutes. From May 1, 1976 until February 7, 1977, Mr. DiDiego did business under the trade name "Lauderdale Realty" in the Miami Beach Area. In the spring of 1976 Ms. Arlene Channing through a salesman, Anita Kandel, employed by Lauderdale Realty met the Respondent. Ms. Channing was naive about the real estate business and any related transactions. After their initial meeting the Respondent attempted to interest Ms. Channing in a variety of business ventures. Eventually she became involved in two. One was the Choice Chemical Company loan and the other was the Qualk Building purchase. On May 10, 1976, Ms. Channing loaned Mr. DiDiego $30,000.00 for his purchase of stock in the Choice Chemical Company. This loan was to be secured by a note and mortgage from Mr. DiDiego to Ms. Channing in the principal sum of $30,000.00 with interest at 10 percent until the principal was paid. The note and mortgage were due and payable within 18 months. Specifically, the security was 50 percent of the outstanding stock of Choice Chemical Corporation and also Lauderdale Realty's lots and telephone land operation. The security was to be held in escrow by Gerald S. Berkell, who at that time was counsel to Mr. DiDiego. In fact no such security was ever delivered into escrow. From the facts and circumstances of the transactions between Ms. Channing and Mr. DiDiego, it is found that Mr. DiDiego never intended to secure the $30,000.00 loan. That security was a material inducement to Ms. Channing for the loan. The principal sum of the loan, $30,000.00, was deposited into the account of Lauderdale Realty, account number 60-943-7 at County National Bank of North Miami Beach. Subsequently on April 18, 1978, Ms. Channing filed an action in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida, against Mr. DiDiego for the unlawful conversion of her $30,000.00. On June 19, 1978, a final judgement by default was entered against Mr. DiDiego in the amount of $30,000.00 plus legal interest. The Qualk Building purchase concerned a building represented to Ms. Channing to cost $700,000.00. Mr. DiDiego induced her to invest $150,000.00 in the purchase of the Qualk Building. To effect the purchase, Mr. DiDiego and Ms. Channing entered into a limited partnership agreement in which Mr. DiDiego would be the general partner, investing $1,000.00 and Ms. Channing would be a limited partner, investing $150,000.00. Subsequently Ms. Channing deposited $150,000.00 into the Lauderdale Realty escrow account. Her check dated June 18, 1976, in the amount of $150,000.00 was deposited in Account number 60-944-8 for Lauderdale Realty. In fact, the total purchase price for the Qualk building was $585,000.00. The building was however encumbered by first and second mortgages totaling $535,855.90. The total amount therefore required to close was less than $33,000.00. These facts were known to Respondent but were not disclosed to Ms. Channing. From the facts and circumstances of this transaction, it is found that the facts were misrepresented to Ms. Channing for the purpose of inducing her to part with her $150,000.00. Ms. Channing never received any accounting for her investment and she subsequently brought an action in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida. On July 8, 1977, final judgment was entered against Respondent, Genaro O. DiDiego in the amount of $150,000.00 less $32,662.84, which were actually applied to the purchase price of the Qualk building, and less $9,780.00 which represents a portion of the income of the Qualk Building paid by Respondent to Ms. Channing. In entering its final judgment, the Court found that Respondent breached His fiduciary duty to Ms. Channing. This judgment has never been satisfied.
Recommendation In light of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That the license of Genaro O. DiDiego as a real estate broker be revoked by the Board of Real Estate, Department of Professional Regulation. DONE and RECOMMENDED this 3rd day of November, 1980, in Tallahassee, Florida. MICHAEL P. DODSON Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of November, 1980. COPIES FURNISHED: Tina Hipple, Esquire Staff Attorney Department of Professional Regulation 2009 Apalachee parkway Tallahassee, Florida 32301 C. B. Stafford Board Executive Director Board of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Genaro O. DiDiego 3745 N.E. 171st Street North Miami Beach, Florida 33160
The Issue The issues are whether Respondent is guilty of violating a lawful order of the Florida Real Estate, in violation of Sections 475.42(1)(e) and 475.25(1)(e); committing fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in any business transaction, in violation of Section 475.25(1)(b) (two counts); failing to account for or deliver funds, in violation of Section 475.25(1)(d)1; failing to maintain trust funds in a real estate brokerage escrow bank account or some other proper depository until disbursement is authorized, in violation of Section 475.25(1)(k); failing to provide a written agency disclosure, in violation of Section 475.25(1)(q); being found guilty for a second time of any misconduct that warrants suspension or of a course of conduct or practices that show such incompetence, negligence, dishonesty, or untruthfulness as to indicate that Respondent may not be entrusted with the property, money, transactions, and rights of investors or others with whom Respondent may maintain a confidential relation, in violation of Section 475.25(1)(o); and failing to preserve and make available to Petitioner all books, records, and supporting documents and failing to keep an accurate account of all trust fund transactions together with such additional data as good accounting practice requires, in violation of Rule 61J-14.012(4) and Section 475.25(1)(e).
Findings Of Fact At all material times, Respondent has been a licensed real estate broker, holding license numbers 0489551 and 3000384. Respondent is the qualifying broker for Buyers Realty of Naples, Inc., of which Respondent was a principal. Respondent has been disciplined once previously. On December 8, 1994, the Florida Real Estate Commission entered a final order, pursuant to a stipulation, ordering Respondent to pay an administrative fine of $500 and complete 30 hours of professional education. In late 1993, Respondent, Armand Houle, and Svein Dynge formed DSA Development, Inc. (DSA). Respondent, Houle, and Dynge were directors of the corporation. On December 1, 1993, Respondent, Houle, and Dynge formed Gulf Southwest Developers, Ltd. (GSD). DSA served as the sole general partner of GSD, whose original limited partners included Houle and several foreign investors represented by Dynge, but not Respondent or Houle. The investors formed GSD to assemble a vast tract of land in Collier County, through numerous purchases, for purposes of mining, development, and speculation. The initial investors contributed or agreed to contribute over $4 million to GSD. Respondent's role was to find suitable parcels of land and negotiate their purchase by GSD or its agent. GSD agreed to pay Respondent $1000 weekly for these services. GSD also authorized Respondent to take a broker's commission of 10 percent of the sales price for each fully executed contract presented to the closing agent. This is the customary broker's commission in the area for transactions of this type. Respondent's claim that he was entitled to a commission of 20 percent is rejected as unsupported by the evidence. There is some dispute as to whether the seller or the buyer was to pay the commission. The contracts provide that the commission was to be deducted from the seller's proceeds. However, regardless of the source of the commission, Respondent was entitled only to 10 percent, not 20 percent. Respondent knew that he was not entitled to 20 percent when he took the additional sum from GSD funds. Thus, the act of taking the funds constituted no less than concealment (due to his failure to disclose his withdrawals), dishonest dealing, culpable negligence and breach of trust, if not actual fraud. There is some evidence that Respondent took substantial sums from GSD without authorization. Without doubt, part of these sums represented the additional ten percent commission described in the preceding paragraph. Petitioner has attempted to prove that Respondent took sums in excess of the extra ten percent commission without authorization. However, as to such sums in excess of the additional ten percent commission, Petitioner has failed to prove by clear and convincing evidence either that Respondent took such additional sums or, if he did so, that these withdrawals were not authorized or at least ratified. As agent for GSD, Houle entered into numerous contracts in the second half of 1994 and first half of 1995. In each of these contracts, Respondent signed the contract below printed language stating that he, as broker, and Buyers Realty of Naples, Inc. had received the initial escrow deposit under the conditions set forth in the contract. At no time did Respondent or Buyers Realty of Naples, Inc. hold the escrowed funds in an escrow account under the name of Respondent or Buyers Realty. Respondent maintains that he transferred the funds to the title company to hold in escrow. The record does not permit a finding, by clear and convincing evidence, that he did not do so, although there is some evidence indicating that the title company did not hold such funds. However, it is sufficient that Petitioner has shown by clear and convincing evidence that neither Respondent nor Buyers Realty held these escrow funds, despite clear misrepresentations by Respondent in each contract that he or his company held these escrowed funds. Respondent's misrepresentations constitute fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing, and breach of trust. Petitioner failed to prove by clear and convincing evidence that Respondent did not make the required agency disclosures in a timely fashion or that Respondent did not make available to Petitioner's investigator the books and records that he is required to maintain. Likewise, Petitioner did not prove by clear and convincing evidence that Respondent failed to complete the education required by the prior final order or participated in the fraudulent endorsement of Houle's signature on checks by a secretary, who later obtained Houle's consent to the act.
Recommendation It is RECOMMENDED that the Florida Real Estate Commission enter a final order suspending Respondent's license for five years. DONE AND ENTERED this 4th day of September, 1997, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 4th day of September, 1997. COPIES FURNISHED: Geoffrey T. Kirk, Senior Attorney Department of Business and Professional Regulation Division of Real Estate 400 West Robinson Street Orlando, Florida 32802 James H. Gillis James H. Gillis & Associates, P.A. Law Offices of Gillis & Wilsen 1415 East Robinson Street, Suite B Orlando, Florida 32801-2169 Henry M. Solares Division Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32802-1900
The Issue Whether the Respondent is guilty of the violations alleged in the Notice of Cease and Desist Order dated March 13, 1989; and, if so, what penalty should be imposed.
Findings Of Fact At all times material hereto, Respondent, Timothy Gibbons, was an associated person and employed by J.B. Hanauer as a sales representative in institutional sales. Each of the subject transactions at issue in this case constituted a purchase and sale of securities. In the summer of 1988, Mr. Gibbons subscribed the City of Daytona Beach, Florida, as a client. Mr. Mike Robertson, as Deputy Finance Director for the City, was charged with investing the City's funds. The subscription was consummated by a written agreement between the City and J.B. Hanauer establishing a non-discretionary account on behalf of the City. Both Mr. Gibbons and Mr. Robertson were designated in the agreement as authorized representatives of their respective employers for the purpose of conducting transactions between the City and J.B. Hanauer. Mr. Gibbons contacted Mr. Robertson on an almost daily basis with numbers for proposed deals at different market levels. In these conversations, Mr. Robertson would give Mr. Gibbons the authority to enter the market for the City when the market reached certain, agreed market levels. The direction to initiate a trade at a certain previously approved market level was the sole "discretion" granted to Mr. Gibbons. Mr. Robertson retained and required the non-discretionary authority to approve all transactions. Mr. Gibbons did not at any time have the authority to encumber the City's funds without the prior approval of Mr. Robertson. Mr. Robertson further limited Mr. Gibbons by placing a $1,000,000 cap on the amount of the City's funds he would risk per trade. Mr. Robertson told Mr. Gibbons about the $1,000,000 trading practice and each of the approved trades was limited to the $1,000,000 amount. Their first trade was executed on August 25, 1988. Then, on August 31, 1988, without the knowledge or consent of the City, Mr. Gibbons executed several trades in the name of the City. Most of the subject trades were in excess of $1,000,000. In fact, they encumbered increments of $5,000,000 and $6,000,000. When these trades were settled, the City's account owed J.B. Hanauer in excess of $29,000. On September 1, 1988, Mr. Gibbons left the employment of J.B. Hanauer, and subsequently, J.B. Hanauer absorbed the City's loss as a result of the subject trades. By trading without the authorization of his client, the City, the respondent misrepresented his authorization to purchase and sell securities for the City and demonstrated his unworthiness to transact the business of an associated person.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Banking and Finance issue a Final Order: Revoking any and all registrations of Timothy Gibbons under Chapter 517, Florida Statutes; and Assessing against Timothy Gibbons an administrative fine of $5,000. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 7th of September 1989. JANE C. HAYMAN 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 7th day of September 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 89-2214 Petitioner's proposed findings of fact are addressed as follows: Addressed in paragraph 1. Addressed in paragraphs 2 through 4. Addressed in paragraphs 3, 4 and 5. Addressed in paragraph 4. Addressed in paragraph 5, and subordinate to paragraph 5. Subordinate to paragraphs 4 and 5. COPIES FURNISHED: Eric Mendelshon, Esquire Office of Comptroller 111 Georgia Avenue, Suite 201 West Palm Beach, Florida 33401 Charles L. Stutts General Counsel Department of Banking and Finance The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 Timothy Gibbons Number 5 Par Drive Maumelle, Arkansas 72118
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.
Conclusions The Office of Financial Regulation ("Office") issued a denial of Petitioner’s application to become licensed as an “associated person”. Petitioner in turn filed a Petition for Administrative Hearing, which the Office referred to the Division of Administrative Hearings ("DOAH"). The assigned Administrative Law Judge ("ALI") held a formal administrative hearing, and entered a Recommended Order thereon. That Recommended Order of November 17, 2604, is attached to this Final Order, and incorporated herein by reference.
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.
