The Issue Whether Respondent, an appraiser, committed the offenses alleged in Counts I, II, and IV of the Amended Administrative Complaint1 and, if so, the penalties that should be imposed.
Findings Of Fact Petitioner is the agency of the State of Florida charged with regulating and enforcing the statutory provisions pertaining to persons holding licenses as real estate appraisers. Petitioner is charged with the duty to prosecute administrative complaints pursuant to Chapters 20, 120, 455, and 475, Florida Statutes, and the rules promulgated pursuant thereto. The Report was dated November 30, 1998. At that time, Respondent was a registered appraiser who could only perform appraisals under the supervision of a certified appraiser. As of November 30, 1998, Mr. Mesa served as the certified appraiser who supervised Respondent. Respondent’s expert witness described Respondent’s status while he worked for Mr. Mesa as being a “trainee,” “apprentice,” or “journeyman.” Both Respondent and Mr. Mesa signed the Report. Above Respondent’s signature is the designation “Appraiser.” Under Respondent’s signature is his state license number and a designation indicating his status as a registered real estate appraiser. Above Mr. Mesa’s signature is the designation “Supervisory Appraiser.” Under Mr. Mesa’s signature is his state license number and a designation indicating his status as a certified real estate appraiser. At the top of the Report were the words “Mesa Appraisals.” On the bottom of the Report were the words “Mesa Appraisals, Inc.” Petitioner failed to prove the factual predicate set forth in paragraph 5(a) of the Amended Administrative Complaint. The testimony of Ms. DeFonzo established that there was adequate documentation contained within the Report to support the negative adjustment to comparable sale 1 because that comparable had a swimming pool and the subject property did not. Petitioner failed to prove the factual predicate set forth in paragraph 5(b) of the Amended Administrative Complaint. The testimony of Ms. DeFonzo established that there was adequate documentation contained within the Report to support the negative adjustments to comparable sales 1, 2, and 3 because those comparable sales were sited on larger lots than the subject property. Petitioner failed to prove the factual predicate set forth in paragraph 5(c) of the Amended Administrative Complaint. The testimony of Ms. DeFonzo established that there was adequate documentation contained within the Report to support the values reached under the cost approach methodology. Petitioner failed to prove the factual predicate set forth in paragraph 5(d) of the Amended Administrative Complaint. The testimony of Ms. DeFonzo established that the Report reflected the intended use of the Report and the intended users of the Report. The Report reflects that it was for lending purposes and identifies the lender/client. As to paragraph 5(e), the testimony of Ms. DeFonzo established that industry practice was for the certified appraiser to maintain the original appraisal file and for the registered appraiser not to keep a copy of the original file because of the confidential and proprietary information that may be contained in appraisal file. There was no competent evidence that Respondent acted inconsistently with that industry practice.3
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Petitioner enter a Final Order finding Respondent not guilty of each of the counts set forth in the Amended Administrative Complaint. DONE AND ENTERED this 14th day of November, 2006, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON 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 14th day of November, 2006.
The Issue Whether the underlined portions of Respondent's proposed Rule 12D-10.0044(4)(b) are invalid exercises of delegated legislative authority: (b) If the property appraiser does not provide the information within the time required by subsection (3) and at least five calendar days before the hearing, the taxpayer shall be entitled to reschedule the hearing. If the property appraiser provides the information within the time set forth in subsection (5) but less than five calendar days before the hearing, the petitioner's submission of the information shall qualify as a written request for rescheduling as provided in subsection (9). In such circumstances, the clerk shall reschedule the hearing upon being so advised by the petitioner. Whether the underlined portion of Respondent's proposed Rule 12D-10.0044(5) is an invalid exercise of delegated legislative authority: (5)(a) The exchange in subsection (2) and (3) shall be delivered by regular or certified U.S. mail, personal delivery, overnight mail, FAX or email. It shall be sufficient if at least three FAX or email attempts are made to such address (sic). If more than one FAX number is provided, three (3) attempts must be made for each number to satisfy this requirement. The taxpayer and property appraiser may agree to a different timing and method of exchange. "Provided" means made available in the manner designated by the property appraiser or by the petitioner in his/her submission of information, as via email, facsimile, U.S. mail, or at the property appraiser's office for pick up. If the petitioner does not designate his/her desired manner for receiving the property appraiser's information, the information shall be provided by the property appraiser by depositing it in the U.S. mail. Whether Respondent's proposed Rule 12D-10.0044(8) is an invalid exercise of delegated legislative authority: (8) The information shall be in writing and may be delivered by regular or certified U.S. mail or personal delivery so that the information shall be received timely.
Findings Of Fact Mr. Robbins is the property appraiser for Miami-Dade County. The VAB is the duly-constituted value adjustment board for Miami-Dade County. Both Petitioners will be substantially affected if Respondent adopts the challenged portions of the proposed rule at issue in this proceeding. Both Petitioners have standing in this case. DOR has the responsibility to aid and assist property appraisers, tax collectors and value adjustment boards with respect to the assessment and collection of property taxes pursuant to Chapters 192-197, Florida Statutes. In that capacity, DOR promulgates rules implementing relevant legislation ever year. DOR promulgates rules in many areas, generally issues advisement letters, and interacts with local officials involved in the assessment and value adjustment board process. Every year, each county property appraiser is required to determine the value of all property in the county that is subject to ad valorem taxation. The valuation is as of January 1 of each year. See §§ 192.011 and 192.042, Fla. Stat. Each property appraiser is required to provide each taxpayer a notice containing the information required by Section 200.069, Florida Statutes.3 This notice is referred to as the TRIM notice, which is an acronym for Truth in Millage. The TRIM notice is typically mailed to the taxpayer before the end of August of each year. The TRIM notice includes the property appraiser's valuation of the property. For years Florida taxpayers have had the right to challenge a property appraiser's valuation and other issues pertaining to ad valorem taxation. Value adjustment boards, created by Section 194.015, Florida Statutes, serve as a forum to resolve disputes between taxpayers and county property appraisers regarding the appropriate value of real property or tangible personal property for ad valorem taxation purposes.4 Section 194.011(3)(d), Florida Statutes, sets a deadline for a taxpayer to file a petition for a hearing before a value adjustment board. A petition challenging the valuation of property must be filed before the 25th day following the mailing of the TRIM notice. Petitions involving other issues must be filed on or before the 30th day following the mailing of the TRIM notice. Because of these deadlines, a value adjustment board typically knows by the end of September the maximum number of petitions that will have to be resolved for that annual cycle. Pursuant to Section 194.015, Florida Statutes, a value adjustment board consists of three members of the governing body of the county and two members of the school board. Section 194.011, Florida Statutes, provides certain procedures to be followed in the event a taxpayer challenges an assessment. Section 194.011(2), Florida Statutes, provides as follows: (2) Any taxpayer who objects to the assessment placed on any property taxable to him or her may request the property appraiser to informally confer with the taxpayer. Upon receiving the request, the property appraiser, or a member of his or her staff, shall confer with the taxpayer regarding the correctness of the assessment. At this informal conference, the taxpayer shall present those facts considered by the taxpayer to be supportive of the taxpayer's claim for a change in the assessment of the property appraiser. The property appraiser or his or her representative at this conference shall present those facts considered by the property appraiser to be supportive of the correctness of the assessment. However, nothing herein shall be construed to be a prerequisite to administrative or judicial review of property assessments. If the dispute is not resolved, the taxpayer may file a petition with and have a hearing before the county's value adjustment board. The full value adjustment board can hear and decide a petition, or it can appoint a special master to hear the petition. Typically in large counties, including Miami-Dade County, a group of special masters are appointed to hear cases for the county's value adjustment board. In Miami-Dade County, the clerk of the VAB schedules the hearings before each special master. A special master typically hears between 50 and 60 petitions in a day. The series of hearings before a special master for a particular day is referred to as a board. A board is similar to a court docket, where one case is heard after the other. As is apparent from the number of petitions heard in a day by a special master, a hearing before the VAB typically lasts less than 15 minutes. Even with typically brief hearings, the value adjustment board process in Miami-Dade County has in recent years required four to six boards each business day over a period of nine to ten months to hear all petitions filed with the VAB. Mr. Robbins usually has an employee (referred to as an official) to represent his office at a board before a special master. In all, Mr. Robbins has approximately 20 employees who serve as officials plus support staff dedicated to VAB proceedings. It usually takes an official five to six working days to prepare his or her presentations for one board. Typically, an official is assigned a new board every six to seven business days. The value adjustment board process has a large impact on taxpayers and local governments in Miami-Dade County. In 2001, the VAB removed from the certified tax roll of Miami-Dade County over $1,600,000,000 in assessment dollars, which translated to approximately $39,500,000 fewer tax dollars. In 2002, the VAB removed from the certified tax roll of Miami-Dade County over $1,900,000,000 in assessment dollars, which translated to approximately $44,600,000 fewer tax dollars. The VAB heard approximately 24,500 petitions for tax year 2002 and it is estimated that 28,500 petitions will be heard for tax year 2003. Prior to 2002, the taxpayer had to disclose his or her evidence to the property appraiser prior to the hearing, but there was no requirement that the property appraiser had to provide his or her evidence to the taxpayer prior to the hearing. Frequently, the taxpayer would see the property appraiser's evidence for the first time at the hearing itself. In 2002, the Florida Legislature enacted Chapter 2002- 18, Laws of Florida, which amends portions of the law referred to as the “Taxpayers Bill of Rights,” including portions of Chapter 194, Florida Statutes. Referring to hearings before a value adjustment board, Section 2 of Chapter 2002-18 created subsection (4) and (5) of Section 194.011, Florida Statutes, to read as follows: (4)(a) At least 10 days before the hearing, the petitioner [the taxpayer] shall provide to the property appraiser a list of evidence to be presented at the hearing, together with copies of all documentation to be considered by the value adjustment board and a summary of evidence to be presented by witnesses.[5] (b) No later than 5 days after the petitioner provides the information required under paragraph (a), the property appraiser shall provide to the petitioner a list of evidence to be presented at the hearing, together with copies of all documentation to be considered by the value adjustment board and a summary of evidence to be presented by witnesses. The evidence list must contain the property record card if provided by the clerk. The department shall by rule prescribe uniform procedures for hearings before the values adjustment board which include requiring: Procedures for the exchange of information and evidence by the property appraiser and the petitioner consistent with s. 194.032[6]; and That the value adjustment board hold an organizational meeting for the purpose of making these procedures available to petitioners. In response to the mandate found in Section 194.011(5), Florida Statutes, Respondent proposes, pertinent to this proceeding, to adopt Rule 12D-10.0044, which provides, in pertinent part, as follows. Subsequent to the mailing or sending of the hearing notice, and at least 10 days before the scheduled hearing, the petitioner shall provide the property appraiser with a list and summary of evidence to be presented at the hearing. The list and summary must be accompanied by copies of documentation to be presented at the hearing. No later than 5 days after the property appraiser receives the petitioner's documentation, the property appraiser shall provide the petitioner with a list and summary of evidence to be presented at the hearing. The list and summary must be accompanied by copies of documentation to be presented at the hearing. The evidence list must contain the property record card if provided by the clerk. In computing the 5 day period prescribed in this subsection, intermediate Saturdays, Sundays, and legal holidays shall be excluded in the computation. See Rule 1090(a), Florida Rules of Civil Procedure, entitled Time.[7] (4)(a) If the taxpayer does not provide the information to the property appraiser at least ten days prior to the hearing pursuant to subsection (2), the property appraiser need not provide the information to the taxpayer pursuant to subsection (3). (b) If the property appraiser does not provide the information within the time required by subsection (3) and at least five calendar days before the hearing, the taxpayer shall be entitled to reschedule the hearing. If the property appraiser provides the information within the time set forth in subsection (5) but less than five calendar days before the hearing, the petitioner's submission of the information shall qualify as a written request for rescheduling as provided in subsection (9). In such circumstances, the clerk shall reschedule the hearing upon being so advised by the petitioner. (5)(a) The exchange in subsection (2) and (3) shall be delivered by regular or certified U.S. mail, personal delivery, overnight mail, FAX or email. It shall be sufficient if at least three FAX or email attempts are made to such address (sic). If more than one FAX number is provided, three attempts must be made for each number to satisfy this requirement. The taxpayer and property appraiser may agree to a different timing and method of exchange. "Provided" means made available in the manner designated by the property appraiser or by the petitioner in his/her submission of information, as via email, facsimile, U.S. mail, or at the property appraiser's office for pick up. If the petitioner does not designate his/her desired manner for receiving the property appraiser's information, the information shall be provided by the property appraiser by depositing it in the U.S. mail. The information shall be sent to the address listed on the petition form; however, it may be submitted to an email or FAX address if given. In computing any period of time prescribed or allowed by these rules, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included unless it is a Saturday, Sunday, or legal holiday, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday, or legal holiday. If the tenth day before a hearing is a Saturday, Sunday, or legal holiday, the information under subsection (2) shall be provided no later than the previous business day. * * * Hearing procedure: . . . A property appraiser shall not appear at the hearing and use undisclosed evidence that was not supplied to the petitioner as required. The normal remedy for such noncompliance shall be a rescheduling of the hearing to allow the petitioner an opportunity to review the information of the property appraiser. The information shall be in writing and may be delivered by regular or certified U.S. mail or personal delivery so that the information shall be received timely. The petitioner may reschedule the hearing one time by submitting a written request to the clerk of the board no less than 5 calendar days before the scheduled appearance. This rule provides procedures for information and evidence exchange between the petitioner and property appraiser, consistent with s. 194.032 F.S., subject to the provisions of 194.034(1)(d), F.S., and subsection 12D-10.003(4), F.A.C., relating to a request by a property appraiser for information from the petitioner in connection with a filed petition, which information need not be provided earlier than ten days prior to a scheduled hearing pursuant to subsections (2) and (5). The value adjustment board shall hold an organizational meeting and must make the uniform procedures available to petitioners. Such procedures shall be available a reasonable time following the organizational meeting and shall be available a reasonable time before the commencement of hearings in conformance with this rule. The Board [sic] shall be deemed to have complied if it causes petitioners to be notified in writing, along with or as part of the notice of hearing, of the evidence and availability of its procedures and include notice as to the exchange of information contained in this rule. The Board [sic] is authorized to use other additional or alternative means of notification directed to the general public or specific taxpayers, as it may determine. The taxpayer is entitled to notice of the hearing of his or her hearing by a value adjustment board (or a special master on behalf of the value adjustment board) of no less than 20 calendar days. See § 194.032 (2), Fla. Stat.8 The taxpayer must provide the property appraiser with the taxpayer's evidence no less than ten calendar days before the scheduled hearing to trigger the requirement that the property appraiser provide his evidence to the taxpayer prior to the hearing. If the taxpayer does not provide its evidence to the property appraiser at least ten days prior to the hearing, the exchange of evidence requirement is not triggered and the taxpayer is not entitled to the property appraiser's evidence prior to the hearing. If the exchange of evidence requirement is timely triggered by the taxpayer, Section 194.011(4)(b), Florida Statutes, requires the property appraiser to provide his or her evidence to the taxpayer within five days after receiving the taxpayer’s information. Pursuant to Section 3 of the proposed rule (which is not being challenged in this proceeding) this five-day period consists of business days. Pursuant to Section 194.032(2), Florida Statutes, the taxpayer has the right to one continuance of the hearing if the request for the continuance is made at least five calendar days before the scheduled hearing (the so-called "freebie"). In addition to the freebie, the VAB typically grants a taxpayer’s motion for continuance based on one or more of the following grounds: A recent death within the immediate family of the taxpayer or his representative; A medical emergency; Proper notification was not afforded the taxpayer pursuant to the provisions of Rule 12D-10.0004(2). A clerical error was made by the county's staff that precluded the appearance of the taxpayer before the board as scheduled. The taxpayer or the taxpayer's agent is scheduled to appear before another governmental entity on the same date and within the same time frame as the scheduled appearance before the board. The taxpayer's scheduled appearance falls on a religious holiday. The taxpayer has not been afforded reasonable notice of the requirement to have the professional appraiser who prepared the taxpayer's appraisal report physically present at the hearing to testify. The taxpayer is unable to submit an appraisal report of other documentary evidence to the property appraiser prior to the scheduled hearing if reasonable cause exists for failure to do so. The property appraiser failed to comply with the evidence exchange requirements of Section 194.011(4), and the taxpayer requests a consequence of that failure. The proposed rule creates an additional ground for the taxpayer to request that a hearing be rescheduled. Pursuant to the portion of Section (4)(b), Florida Statutes, of the proposed rule being challenged in this proceeding, the taxpayer has a right to a continuance of the scheduled hearing (a) if the taxpayer has triggered the requirement for the exchange of evidence set forth in both Section 194.011 and the proposed rule and (b) the taxpayer does not receive the property appraiser’s evidence at least five calendar days before the hearing. It is realistic to anticipate that many taxpayers will trigger the exchange of evidence provision on the tenth day before the scheduled hearing. In most of those cases, the taxpayer will not receive the property appraiser's evidence five calendar days before the scheduled hearing even if the property appraiser provides his or her evidence to the taxpayer on the fifth business day following receipt of the taxpayer's evidence. In virtually all of those cases, the taxpayer will not receive the property appraiser's evidence five calendar days before the hearing if the property appraiser mails that evidence to the taxpayer or if the property appraiser needs time to gather rebuttal evidence.9 The number of hearings that will have to be rescheduled before the VAB has not been quantified, but the number is substantial and additional costs will be incurred. While it is clear that the rescheduling of a substantial number of hearings before the VAB will increase the workload for Mr. Robbins's office and for the VAB staff, the evidence did not establish that the proposed rule places an impossible burden on either Mr. Robbins or the VAB. With appropriate planning both Petitioners should be able to manage the rescheduling of a large number of value adjustment board hearings. DOR drafted the proposed rule with the intent that the interests of the taxpayer and the property appraisers be balanced to the fullest extent possible within the authority granted by Section 194.011(4) and (5), Florida Statutes. The addition of the non-statutory ground for a continuance is intended to provide the taxpayer a reasonable period of time to review the property appraiser's evidence prior to a hearing. In determining what would constitute a reasonable period of time for a taxpayer to have to review the property appraiser’s evidence, DOR considered several factors. DOR considered the statutes and the legislative intent. DOR considered the type of evidence the property appraiser would typically have to provide the taxpayer and the availability of such evidence. DOR considered that Section 194.034(1)(d), Florida Statutes,10 has been historically interpreted as requiring the taxpayer to provide his evidence to the property appraiser "a reasonable time" before the value adjustment board hearing, and that “a reasonable time" has been historically interpreted to be five business days before the hearing. DOR considered that the taxpayer must exercise the freebie continuance no less than five calendar days before the hearing. DOR considered input from representatives of taxpayers and property appraisers during the rulemaking process. In drafting the provision that delivery by mail would be the default method of delivery, DOR considered that the rule will be of statewide applicability, that delivery by mail is the most common default method of delivery, and that not all taxpayers or property appraisers have the capabilities to receive or send information by facsimile, e-mail, or hand delivery. DOR entered into a long rule-promulgation process, which gave all interested parties, including Mr. Robbins and the VAB, an opportunity to provide input into the rules that would govern the process of exchange of information prior to VAB hearings. Mr. Robbins and the VAB actively participated in the rule-making process and made their views known throughout the process. The promulgation of the proposed rule was delayed to give interested parties an opportunity to seek to have the legislation amended, but no amendments were passed during the 2003 Legislative Session. The Notices of Proposed Rulemaking for the proposed rule contained the summary of statement of estimated regulatory costs, which requested that any person who wishes to provide information regarding the regulatory costs or who wished to provide a proposal for a lower cost regulatory alternative must do so within 21 days of the notice. No comments or proposals were received on the regulatory cost statement at any point during the rule promulgation process. Neither Mr. Robbins nor the VAB submitted a statement of alternative regulatory costs during the rule promulgation process or at the final hearing. Neither Petitioner established at the final hearing that a less costly alternative to the proposed rule would substantially accomplish the statutory objectives.
Findings Of Fact The Petitioner is Barbara Clark and Company, a CPA firm. Barbara Clark owns and operates the company. The Respondent issued a Request for Proposal, RFP Number 7112, for CPA audit services. The Petitioner responded to the RFP along with four other proposers. The award for RFP Number 7112, CPA audit services, was to be made to the two (2) companies who received the highest number of points based on individual evaluations by four (4) people selected for the RFP review committee. The evaluation criteria to be used by the review committee members was specified in Section 1.16 of the RFP and involved review of the management and technical aspects of a given proposal. The committee members for the RFP were instructed by the FAMU Purchasing Director to use the criteria as outlined in Section 1.16 in the process of evaluating the management and technical plans of the respective proposals and that each member should evaluate and score each proposal independent from the other committee members. The evaluations by each member were placed in a sealed envelope. The proposals submitted in response to RFP Number 7112, CPA audit services, were reviewed by the evaluation committee members. After the members completed their review, they met as a group with the Purchasing Director. The sealed envelopes which contained the individual committee members' evaluation sheets for each proposal were opened and the points for each proposer were determined by adding the points for each respective proposal. The evaluation of RFP Number 7112, CPA audit services, occurred pursuant to the evaluation criteria in RFP Number 7112, CPA audit services. No committee member testified. There was absolutely no evidence submitted by Petitioner which demonstrated that the committee members did not follow the specifications of the RFP. Likewise, there was a lack of evidence that the evaluation process established in the RFP was arbitrary or capricious. The two (2) proposers that received the highest number of points were recommended for the award of RFP Number 7112, CPA audit services. Petitioner's proposal was not evaluated as having either of the highest point totals for RFP Number 7112, CPA audit services and therefore did not receive an award of the contract. The FAMU Purchasing Director, Oscar Martinez, sent to each proposer by certified letter, return receipt, notification of the intended award of RFP Number 7112, CPA audit services, to the two proposers with the highest number of points. The FAMU Purchasing Director, Oscar Martinez, discussed the results of RFP Number 7112, CPA audit services, with Barbara Clark after he mailed the intended award notification to the proposers. A mathematical error in the calculation of points for one of the proposers was discovered and corrected. The error had no effect on the rankings of the proposers and was therefore an immaterial discrepancy in the award of the RFP. Petitioner utterly failed to establish that the intended award pursuant to RFP Number 7112, CPA audit services, was not in good faith and not the result of a fair, full and honest exercise of the agency's discretion in making such an award. Likewise Petitioner utterly failed to establish that Respondent acted arbitrarily or capriciously in its intended award of RFP Number 7112, CPA audit services. After a review of the evidence Petitioner's protest of the intended award of RFP Number 7112, CPA audit services, was clearly without merit and lacked factual or legal support and was therefore frivolous and improper. Indeed the barest attempt was made by Petitioner to prepare or pursue evidence for the hearing in this matter. Although Respondent consulted with Petitioner and provided Petitioner information regarding RFP Number 7112, CPA audit services, Petitioner persisted in pursuing its protest of the intended award of the RFP. Petitioner continued its protest of RFP Number 7112, CPA audit services, long after it was or should have been aware that it had no factual or legal grounds for such a protest causing Respondent's attorney to spend 13 hours in preparation for this case. However, Respondent did not submit an affidavit from another attorney who reviewed the file and number of hours spent by Respondent's attorney and attested to the reasonableness of the hours spent or the fee charged. Therefore, Respondent's motion for attorney's fees is denied.
Recommendation Based upon the findings of fact and the conclusions of law, it is, RECOMMENDED: That the protest be dismissed. DONE and ENTERED this 29th day of May, 1996, in Tallahassee, Leon County, Florida. DIANNE CLEAVINGER, 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 May, 1996. APPENDIX CASE NO. 96-1371 1. The facts contained in paragraphs 1-28 of Respondent's proposed findings of fact are adopted, in substance, in so far as material. COPIES FURNISHED: George W. Butler, Esquire Florida Agricultural and Mechanical University Office of the General Counsel 300 Lee Hall Tallahassee, Florida 32307 Barbara A. Clark Barbara A. Clark and Company 270 First Avenue South, Suite 101 St. Petersburg, Florida 33701 Frank T. Brogan, Commissioner Department of Education The Capitol Tallahassee, Florida 32399-0400 Michael Olenick, Esquire Department of Education The Capitol, Plaza Level 08 Tallahassee, Florida 32399-0400 Bishop Holifield, Esquire Florida Agricultural and Mechanical University 300 Lee Hall Tallahassee, Florida 32307-3100
The Issue An administrative complaint filed January 19, 1994, alleges that Respondent, Rafael Feliu, violated various provisions of Chapter 475, F.S. by diverting commission funds to himself, by operating as a broker without a valid broker's license and by collecting money in a real estate brokerage transaction without the consent of his employer. The issue in this case is whether those violations occurred, and if so, what discipline is appropriate.
Findings Of Fact Respondent, Rafael Feliu (Feliu) is now and was at all times material a licensed real estate broker-salesperson in the State of Florida, having been issued license number 0538613 pursuant to Chapter 475, F.S. His most recent license was issued, effective 5/3/93, c/o Century 21 Progressive Realty, Inc., 11301 So. Orange Blossom Trail, Orlando, Florida. Between May 1990 and March 1993, Feliu was engaged as a broker- salesperson with Angel Gonzalez of Century 21 Nuestro Realty Co., in Orlando, Florida. The parties' independent contractor agreement, dated May 29, 1990, provides for a sixty percent sales commission to Feliu. On November 28, 1992, Feliu solicited and obtained a contract for the purchase of vacant land and the construction of a house. The real estate commission was to be paid in installments. The buyer under the contract was a friend of Feliu, Luis Rodriguez. Feliu and Rodriguez made an arrangement that Rodriguez would receive a rebate of the commission. While the broker, Angel Gonzalez, denies that he agreed to the arrangement, he does admit that he saw a break-down of disbursement of the commission provided by Feliu and that he signed a letter, prepared by Feliu, describing that break-down, including the rebate to Rodriguez. The first commission check, in the amount of $8,750.00 is made to Century 21 Nuestro and is dated June 4, 1993. Feliu delivered the check to Angel Gonzalez with a handwritten break-out of disbursement, including a $1000 rebate and a $2500 rebate (one-half the agreed $5000) to Luis Rodriguez. Gonzalez refused to disburse the commission as indicated on the break- out, but rather sent Feliu a check on June 8, 1993, for $4554.30, representing his usual share of the commission. The second installment of the commission was paid approximately ten days later. Feliu went to the contractor responsible for paying the commission and asked him to make the check to him, Rafael Feliu. Thus, the second check in the amount of $8750.00 is dated June 18, 1993 and is made out to Rafael Feliu. By this time Feliu had left Century 21 Nuestro and was working with another company. Feliu cashed the check and made the disbursements to Luis Rodriguez. He also retained his share of the balance along with sums of $449.93 and $128.00 that he claimed Nuestro Realty owed him on other sales. He sent the balance, $274.77, to Angel Gonzalez with a letter describing in detail the disbursement of the $8750.00 and explaining that he, Feliu, handled the disbursement because Gonzalez had not complied with regard to the first half of the commission.
Recommendation Based on the evidence presented and discussed above, it is hereby, RECOMMENDED: That the Florida Real Estate Commission enter its final order dismissing the allegations of violation of section 475.25(1)(b), F.S. (Count I), finding Respondent Rafael Feliu guilty of the remaining counts of the complaint, and issuing a reprimand. DONE AND RECOMMENDED this 18th day of August, 1994, in Tallahassee, Leon County, Florida. MARY CLARK 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 18th day of August, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-0856 The following constitute specific rulings on the findings of fact proposed by the parties. Petitioner's Proposed Findings Rejected as unnecessary. & 3. Adopted in paragraph 1. Adopted in paragraph 2. & 6. Adopted in paragraph 3. Adopted in paragraphs 5 and 6. Rejected as contrary to the weight of evidence. Adopted in part in paragraph 4; otherwise rejected as unsupported by clear and convincing evidence. Respondent's Proposed Findings Adopted in substance in paragraph 4. Adopted in paragraph 6. Adopted in paragraph 8. Rejected as immaterial. Adopted in substance in paragraph 4. Rejected as contrary to the law (see paragraph 13). - 14. Rejected as unnecessary. COPIES FURNISHED: Steven W. Johnson, Esquire Department of Business and Professional Regulation 400 West Robinson Street Orlando, Florida 32802 Rafael S. Feliu 2260 Whispering Maple Drive Orlando, Florida 32837 Darlene F. Keller, Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Jack McRay, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue The issue is whether the guidelines set forth in the Specialty Product Administration Field Examination Policy Procedures (SPA Field Exam Policy), Viatical Settlement Provider Examination Manual (VSP Manual), Viatical Settlement Provider Examination Procedures (VSP Exam Procedures), and notice-of- examination letters constitute agency statements defined as rules but not adopted as such, in violation of Section 120.54, Florida Statutes.
Findings Of Fact OIR has the statutory duty to enforce the provisions of the Florida Insurance Code, to investigate any violation of the Florida Insurance Code, and to regulate insurance activity in Florida, including the licensure, examination, and monitoring of insurers and other risk-bearing entities such as VSPs. See § 624.307, Fla. Stat. Petitioner is a foreign corporation, licensed to do business in Florida as a VSP. See § 626.9911(12), Fla. Stat. Therefore, it is subject to OIR's regulation. Section 626.9911(10), Florida Statutes, defines a viatical settlement contract as follows in pertinent part: (10) "Viatical settlement contract" means a written agreement entered into between a viatical settlement provider, or its related provider trust, and a viator. The viatical settlement contract includes an agreement to transfer ownership or change the beneficiary designation of a life insurance policy at a later date, regardless of the date that compensation is paid to the viator. The agreement must establish the terms under which the viatical settlement provider will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the viator's assignment, transfer, sale, devise, or bequest of the death benefit or ownership of all or a portion of the insurance policy or certificate of insurance to the viatical settlement provider. Section 626.9922, Florida Statutes, provides OIR explicit authority to examine any books and records, without limitation to Florida-only files, of Florida-licensed VSPs. Section 626.9922, Florida Statutes, states as follows in pertinent part: The office or department may examine the business and affairs of any of its respective licensees or applicants for a license. The office or department may order any such licensee or applicant to produce any records, books, files, advertising and solicitation materials, or other information and may take statements under oath to determine whether the licensee or applicant is in violation of the law or is acting contrary to the public interest. The expenses incurred in conducting any examination or investigation must be paid by the licensee or applicant. Examination and investigations must be conducted as provided in chapter 624, and licensees are subject to all applicable provisions of the insurance code. Section 626.9925, Florida Statutes, states as follows: Rules.--The commission may adopt rules to administer this act, including rules establishing standards for evaluating advertising by licensees; rules providing for the collection of data, for disclosures to viators, for the registration of life expectancy providers; and rules defining terms used in this act and prescribing recordkeeping requirements relating to executed viatical settlement contracts. Florida law specifically addresses viatical settlement contracts entered into between a VSP domiciled in Florida and a non-Florida resident in Section 626.99245, Florida Statutes, as follows: A viatical settlement provider who from this state enters into a viatical settlement contract with a viator who is a resident of another state that has enacted statutes or adopted regulations governing viatical settlement contracts shall be governed in the effectuation of the viatical settlement contract by the statutes and regulations of the viator's state of residence. If the state in which the viator is a resident has not enacted statutes or regulations governing viatical settlement agreements, the provider shall give the viator notice that neither Florida nor his or her state regulates the transaction upon which he or she is entering. For transactions in those states, however, the viatical settlement provider is to maintain all records required as if the transactions were executed in Florida. The forms used in those states need not be approved by the office. There is no similar statute that specifically requires a non- domestic VSP, such as Petitioner, to produce records for OIR's review on transactions with viators who are not Florida residents. Nevertheless, OIR reviews out-of-state transactions of licensed VSPs, domestic and non-domestic, to verify compliance with Section 626.99275(1)(d), Florida Statutes, which states as follows: It is unlawful for any person: * * * (d) To knowingly or intentionally facilitate the change of state of residency of a viator to avoid the provisions of this chapter. Except as provided in Section 626.99275(1)(d), Florida Statutes, OIR does not apply Florida law to a foreign VSP's non-Florida transactions. OIR's examiners spend significantly less time reviewing non-Florida transactions, than Florida transactions. The examiners only review non-Florida transactions to determine whether the non-Florida transaction is actually a Florida transaction. Florida transactions, on the other hand, are put through a rigorous review process to ensure compliance with Florida law. There have been instances during an examination of a VSP whereby OIR has discovered a file represented as a Florida file that was actually a non-Florida file. OIR also has discovered instances whereby a file represented to be from another state was later revealed to be a Florida transaction. Alan Buerger, Petitioner's founder, Chief Executive Officer, and Treasurer, provided testimony during deposition and final hearing. During deposition, Mr. Buerger testified there have been instances where Petitioner has misplaced or mislabeled a viator’s state of residence. Section 624.316(1)(c), Florida Statutes, governing examination of insurers, gives the Commission discretion to adopt a specified rule as follows: (c) The office shall examine each insurer according to the accounting procedures designed to fulfill the requirements of generally accepted insurance accounting principles and practices and good internal control and in keeping with generally accepted accounting forms, accounts, records, methods, and practices relating to insurers. To facilitate uniformity in examination, the commission may adopt, by rule, the Market Conduct Examiners Handbook and the Financial Condition Examiners Handbook of the National Association of Insurance Commissioners, 2002, and may adopt subsequent amendments thereto, if the examination methodology remains substantially consistent. The Commission has not exercised its discretion to adopt the NAIC Market Conduct Examiner's Handbook (currently known as the "Market Regulation Handbook") or any other rule relating to procedures or methodologies for market conduct examinations carried out pursuant to Chapter 624, Florida Statutes. Petitioner alleges that the following documents contain statements that should be adopted by a rule: (1) SPA Field Exam Policy, (2) VSP Manual, and (3) VSP Exam Procedures. OIR's examiners receive these documents from their supervisors as guidelines to use in the examination of VSPs. The SPA Field Exam Policy is an internal management memorandum that is a flexible guide used to train examiners. The document does not directly or indirectly require a VSP to comply with any statement contained therein or take any action, and it is not a procedure that is important to the public. It is only directed to OIR's field examiners. The SPA Field Exam Policy includes the following policy statement: "Statement of Policy: Field examination shall be conducted in a professional manner in accordance with statutes governing Specialty Insurers." The SPA Field Exam Policy also states as follows: "Purpose or Objective: To establish policies and procedures governing the travel and conduct of the examinations and the review, issuance and distribution of reports of examinations." Its overall objective "is to verify compliance with the specific statutory requirements governing the type of entity under examination." OIR gives the SPA Field Exam Policy to new and existing examiners to tell them how to conduct an examination. The SPA Field Exam Policy includes the following procedures: (a) scheduling of examination; (b) scope and objective of examination; (c) conduct of examination; (d) working paper standards; (e) draft reports of examination; (f) exit conferences; (g) review and issuance of reports of examination; (h) corrective action plans; and (i) travel and administrative matters. According to the SPA Field Exam Policy, an examiner is required to perform an examination using the standard audit program in effect at the start of the examination unless instructed otherwise. The policy states that the scope of the examination is to correspond to that contained in the engagement letter. The VSP Manual is an internal management memorandum that is directed to OIR's examiners. It is a training tool and guideline for examiners that are conducting examinations of VSPs. The manual includes an outline of items to look for during the examinations. The outline tracks the language in the statute. One purpose of the VSP Manual is to ensure that examiners go through all sections of the statute that relate to VSPs and to make sure they test OIR's issues of concern. The VSP Manual states that "[i]n conducting examinations of VSPs, the examiner will use the current audit program (see Attachment A) and follow the guidance offered in this manual." According to the VSP Manual, examiners should review a list of all in-force policies and select a sample of completed settlement contracts. The sample of in-force contract includes Florida and non-Florida contracts. The VSP Manual directs examiners to review the selected policies to verify compliance with twelve bullet points. The twelve bullet points apply only to Florida policies. Out-of- state policies are reviewed only to determine whether there is a violation of Section 626.99275, Florida Statutes. The examiner may deviate from the guidelines in the VSP Manual without receiving approval from management. The VSP Manual does not confer any requirements upon a VSP. It does not establish a procedure that could be used to impose a penalty on a licensed VSP. The VSP Exam Procedures is an internal management memoranda used as a flexible guide to the examiners on how to conduct an examination in accordance with the statutes. It assists the examiners in determining what steps to perform while doing an examination. However, the examiners are allowed to deviate from the document. The information in the document tracks the language of the statutes. OIR's VSP Exam Procedures is the "current audit program" referenced in the SPA Field Exam Policy and the VSP Manual. The first page of the VSP Exam Procedures sets forth the following objectives: Ensure examinations are conducted in accordance with established policies and procedures (examination procedure step 1), Gain an understanding of the company's operations (steps 2,3 and 5), Verify the viatical settlement provider ("VSP") is complying with the provisions of Chapter 626, Part X, Florida Statutes, and in accordance with the terms of its viatical settlement agreements (steps 4 and 6 through 12), Ensure the company is keeping the Office informed of developments that are of interest to it (steps 4 and 6), and Prepare a Report of Examination available to the public (step 15). In step 8, examiners are instructed to select and review a sample of in-force policies for compliance with twelve bullet points. The twelve-point review would apply only to Florida policies. The VSP Exam Procedures does not direct Petitioner or any other VSP to take any sort of action. It is directed exclusively to OIR's examiners. It does not establish a procedure that could be used to impose a penalty on a VSP. During deposition and final hearing, Mr. Buerger was asked how Petitioner was substantially affected by the OIR’s internal management memoranda. Mr. Buerger testified that the requirement to prepare documents and data on a nationwide—rather than Florida-only basis—had a substantial affect on Petitioner. However, Mr. Buerger could not identify any of Petitioner's private interests that are affected by the SPA Field Exam Policy, the VSP Manual, and the VSP Exam Procedures. Mr. Buerger had not read any of the three documents that Petitioner claims constitute unpromulgated rules. OIR provides courtesy letters to VSPs prior to examinations. OIR uses the engagement letters to advise VSPs about upcoming triennial or market conduct/target examinations and to notify them that an examiner will expect to review all of the company's books and records. Notification of upcoming examinations is not required by statute. The engagement letters do not place any requirements upon VSPs. As early as March 15, 2004, engagement letters have contained requests for certain records. However, requests for information in letters may vary on a case-by-case basis depending on a VSP’s licensure history and business practices. Currently, OIR's financial examiner/analyst supervisor, Janice Davis, drafts the letters. Ms. Davis has prepared the letters using the same format since 2007, but an insurance examiner could draft a letter without supervisory approval. The drafter of the courtesy letters can change the letters at any time without approval from upper management and without internal ramifications from the Office. Ms. Davis's letters request VSPs to have the following records available: Copy of latest audited financial statement, if any. Copy of most recent unaudited financial statements. Chart of accounts. Bank statements along with receipt and disbursement journals for all bank accounts for the past 24 months. Documentation supporting ownership interest in the company, together with the complete corporate record book, minutes, corporate resolutions or similar documentation of organizational meeting and resolutions. Copies of all licenses obtained by the company and status of any pending applications for licensure. Copies of all approved forms, disclosures, and contracts, as well as advertising, sales and investment literature. Copies of all contracts or agreement between the company and all persons (including other entities and investors) related to the conduct of business. Listing of all broker and agent commissions paid during exam scope. All contracts with viators, in which the company participated, in primary or secondary market, whether as provider, broker, originator, agent or purchaser. Database of all policies reviewed or considered for purchase. Insured tracking records and files. Premium payment records and files. All viator files, including but not limited to: applications, offers, contracts or agreements, insurance policies, medical records, etc. All complaint and litigation files (and any resolutions thereto. Because VSPs must pay all expenses associated with examinations, advance listing of the specific records that need to be available facilitates examinations. The letters do not require VSPs to provide documentation in a database or spreadsheet in Excel format. It is an option provided to the company. Ms. Davis' letter to Petitioner dated August 14, 2008, states as follows in relevant part: Additionally, to facilitate an expeditious review of the files, please provide the examiner with a database or spreadsheet file in Excel format including, but not limited to, the following documentation . . . . Please provide the following information on all policies purchased, to date: contract identifier viator name viator State of residence insured name insured State of residence settlement amount original viatical settlement provider broker(s) broker commission(s) date of contract date of closing insurer name policy number policy issue date type of coverage (individual, group, term, whole life, etc.) death benefit life expectancy projected maturity date original premium escrow and current escrow balance current status (active vs. matured, sole vs. available) date of death (if applicable) date death claim filed (if applicable (Emphasis in original). If the licensee is responsible for the payment of premiums, please provide a listing (include: unique viator identifier, insurer, policy number, policy face value, frequency of payment, next payment due date and amount due) for all policies purchased since inception for which premiums are due during the next 12 months. The engagement letters make it clear that OIR expects VSPs to provide information as required by Section 626.9922, Florida Statutes. In giving OIR authority to examine all books and records, the statute does not differentiate between in-state and out-of-state records. If a VSP does not produce documents as requested in the courtesy letters, OIR could take disciplinary action against its license. To date, OIR has not taken any such action against a company for not providing the requested documentation. If the company does not provide a database or Excel spreadsheet, OIR will create a database for the documentation by going though paper files at the VSP's expense. During deposition, Mr. Buerger, Petitioner's corporate representative, was asked if Petitioner preferred not to have a letter that provided notice of an upcoming examination and whether Petitioner would prefer an examiner show up to conduct an examination without prior notice. Mr. Buerger responded: “If we are going to have an exam, we’d like to know when somebody’s coming.” OIR has a pending examination of Petitioner's books and records. OIR expects Petitioner to produce documentation and information listed in the engagement letter, including information relating to out-of-state settlement transactions. In the course of an examination that took place in 2005, OIR advised Petitioner that its license would be suspended summarily under an emergency order if it failed to provide out-of-state information. The requirement to produce in-state and out-of-state records creates a financial burden for Petitioner because the majority of Petitioner's records involve out-of-state transactions. For example, in 2005, Petitioner had approximately 1,760 policies nationwide in the three-year period covered by the examination. Only 13 percent of these policies involved Florida residents. OIR billed Petitioner approximately $33,000 for the examination. Petitioner incurred other expenses associated with the 2005 examination such as the following: (a) legal expenses; internal costs for software engineering, accounting and contract services to prepare the database; and (c) substantial time for staff to coordinate information from various departments to prepare the nationwide information. Petitioner's staff spent six to seven hours of time for each of the approximately 517 hours that OIR billed for the 2005 examination. Finally, the request for out-of-state documents required Petitioner to spend a substantial amount of time and resources to ensure the security of personal financial and health information of viators. OIR currently has issued a second notice of triennial examination to Petitioner. The August 14, 2008, engagement letter requires Petitioner to provide documents and information for its policies on a nationwide basis. For the period covered by the second triennial examination, Petitioner has approximately 4,500 to 4,600 policies. Thus, Petitioner expects a substantial increase in the cost of complying with OIR's document review and data requests from the costs it incurred in 2005.
The Issue The issues to be determined are whether Respondent committed the violations alleged in the Amended Administrative Complaints and if so, what penalty should be imposed?
Findings Of Fact Petitioner is the state agency charged with the licensing and regulation of real estate appraisers in the State of Florida pursuant to section 20.165 and chapters 455 and 475, part II, Florida Statutes. At all times material to the allegations in the Amended Administrative Complaints, Respondent has been a certified residential real estate appraiser, and has been issued license number RD 1226. Respondent has been licensed since 1991 and has no history of disciplinary action taken against his license. He trades as Rhea Appraisals, Inc., located in Gainesville, Florida. For the period from October 23, 2009, through May 12, 2010, Respondent was the supervising appraiser for registered trainee appraiser Leslie Corey Bullard. From October 8, 2009, through at least July 2011, he also supervised registered trainee appraiser Beverly Sanders Archer. Respondent was Mr. Bullard's first supervising appraiser. The Program Alachua County elected to participate in the federally- funded Neighborhood Stabilization Program ("NSP"), which is administered on the state level by the Department of Community Affairs. To that end, Alachua County contracted with Meridian Community Services Group ("Meridian") to assist in the implementation of the program. In a nutshell, the NSP is a program by which the Department of Housing and Urban Development provides funding for local governments to acquire properties in order to rehabilitate them and re-sell them to low-to-moderate-income households, or to rent them to very low-income households. As explained at hearing, properties that are acquired through the program cannot be sold for more than the costs of acquisition, rehabilitation, and "soft costs." As a result, the local government can only purchase the property at one percent or below the appraised value. In 2010, Alachua County solicited bids for appraisers to appraise properties that it considered buying through the NSP. Rhea Appraisals, Inc., obtained a contract to appraise 20 of the properties for the program. Corey Bullard was involved in the procurement of the contract to perform the appraisals. The listing price for the properties was generally the price listed in the multiple listing service ("MLS"). Alachua County had instructed that the offer for the properties considered for purchase was to be at the listing price. Once the appraisal was performed, if it appraisal did not come in at within one percent of the listing price, then the offer is amended to reflect one percent below the appraisal. If the seller does not agree to the change, that property is not purchased. Rhea Appraisals, Inc., was to be paid $225.00 for each property appraised. Payment for the appraisal was not dependant on the results of the appraisal. At issue in these cases are the appraisals for three properties. For each of these properties, two appraisals were actually performed. The Initial Appraisals An appraisal was communicated by Rhea Appraisals, Inc., for a property located at 3009 NE 11th Terrace, Gainesville, Florida (Property 1, related to Case No. 11-3007), on April 8, 2010 (Petitioner's Exhibit 13). The appraisal report is signed by Cory Bullard and by Respondent as his supervisor, and the front summary sheet lists Corey Bullard as the appraiser. The appraisal indicates that the inspection of the property and of the comparable sales took place on April 2, 2010, which is listed as the effective date of the report, and the appraisal is signed by both Mr. Bullard and Respondent on April 8, 2010. The appraisal report provides an opinion of value of $52,000. The list price for the property, and thus the offer made by the County, was $65,000. The Comments on Appraisal and Report Identification state that "Corey Bullard provided assistance in the gathering of data, photographing and entering data into this report." Included in the appraisal's certification are the following statements: My employment and/or compensation for performing this appraisal or any future or anticipated appraisals was not conditioned on any agreement or understanding, written or otherwise, that I would report or present analysis supporting a predetermined specific value, a predetermined minimum value, a range or direction in value, a value that favors the cause of any party, or the attainment of a specific result or occurrence of a specific subsequent event (such as approval of a pending mortgage loan application). I personally prepared all conclusions and opinions about the real estate that were set forth in this appraisal report. If I relied on significant real property appraisal assistance from any individuals in the performance of this appraisal or the preparation of this appraisal report, I have named such individual(s) and disclosed the specific tasks performed in this appraisal report. I certify that any individual so named is qualified to perform the tasks. I have not authorized anyone to make a change to any item in this appraisal report; therefore any change made to this appraisal is unauthorized and I will take no responsibility for it. An appraisal report for a property located at 12017 NW 164th Terrace, Alachua, Florida (Property 2) was communicated on April 6, 2010 (Petitioner's Exhibit 5, related to Case No. 11- 3008). The appraisal report is signed by Corey Bullard and by Respondent as his supervisor, and the front summary sheet lists Mr. Bullard as the appraiser. The appraisal indicates that the inspection of the property and of the comparable sales took place on April 2, 2010, which is listed as the effective date of the appraisal, and the appraisal is signed by both Respondent and Mr. Bullard on April 6, 2010. This appraisal report provides an opinion of value of $75,000. The list price for the property, and thus the offer made by the County, was $105,000. The Comments on Appraisal and Report Identification state that "Corey Bullard provided assistance in the gathering of data, photographing and entering date into this report. Appraiser won the bid for 20 properties from Meridian Community Services for $225 each." Like the report for Property 1, the appraisal certification contained the statements identified in finding of fact 15. Rhea Appraisals, Inc., also issued an appraisal report for property located at 2923 NE 11th Terrace, Gainesville, Florida (Property 3, related to Case No. 11-3009), signed by Respondent on April 8, 2010 (Petitioner's Exhibit 10). The report indicates that the date of the inspection of the property and of the comparable sales, and effective date of the report, is April 5, 2010. This appraisal report provides an opinion of value of $54,000. The list price for the property, and thus the offer made by the County, was $69,900. The Comments on Appraisal and Report Identification state that "Beverly Archer, state registered trainee appraiser #RT2255 provided assistance in the gathering of data, measuring and photographing the subject dwelling, and drafting information into the URAR." Like the report for Properties 1 and 2, the appraisal certification contained the statements identified in finding of fact 15. The Second Appraisals Subsequently, a second appraisal was developed by Rhea Appraisals, Inc., for each of these properties. Property 1 (11-3007) A second report developed for Property 1 (Petitioner's Exhibit 14), has an invoice attached to the front, and the summary sheet lists Hugh Rhea as the appraiser. The appraisal gives an opinion of value of $66,000, compared to the County's offer of $65,000. The second appraisal lists the effective date of the appraisal as April 2, 2010, and the date of the signature and report as April 8, 2010. These dates are the same as those listed on the appraisal with value of $52,000. There are no notations in the Comments on Appraisal and Report Identification section of the report, and while the appraiser's certification includes the same statement quoted as paragraph 19 in finding of fact 15, the first statement, although similar, states: 6. I was not required to report a predetermined value or direction in value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of a specific result, or the occurrence of a subsequent event in order to receive my compensation and/or employment for performing the appraisal. I did not base the appraisal report on a requested minimum valuation, a specific valuation, or the need to approve a specific mortgage loan. No explanation is given as to why the second report was generated. However, the second report contains the following additional differences: On page one of the report, in response to the question, "[a]re there any physical deficiencies or adverse conditions that affect the livability, soundness, or structural integrity of the property?", the statement "[s]ubject is not functional in the current state as of inspection date" has been deleted in the second appraisal. In the first report, the condition of comparable sale 1 is listed as "superior." In the second report, it is listed as "inferior." In the first report, the condition for comparable sale 2 is listed as "average." In the second report, it is listed as "inferior." In the first report, the condition of comparable sale 4 is listed as "superior." In the second report, it is listed as "average." In the first report, the condition of what was described as comparable sale 6 is listed as "average." In the second report, the original comparable sale 5 is deleted and comparable sale 6 is listed as comparable 5. Its condition is described as "inferior." Respondent's work papers to not provide an explanation for the changes made from the first report to the second report for this property. Property 2 (No. 11-3008) The second appraisal for Property 2 has an invoice for $225 attached to the front, and the summary sheet lists Hugh Rhea as the appraiser, as opposed to Corey Bullard. The opinion of value is $105,000, which matches the initial offer by the County. The report contains two different effective dates: on page 2 the report states that the effective date is April 2, 2010, while the signature block on page 6 indicates that the effective date is April 6, 2010. The date of the signature and report is April 14, 2010. The Comments on Appraisal and Report Identification are the same as those listed in the initial report, and the appraiser's certification includes the same statements quoted in paragraph 15. No explanation is given as to why the second report was generated. However, the second report contains the following differences: In the first report, the estimated cost to cure the stated deficiencies was listed as $20,000.00. In the second report, this amount is reduced to $15,000.00. In the first report, the condition adjustment for comparable sale 1 is -$27,389.00, for a gross adjustment of 41 percent. In the second report, the condition adjustment was -$6,389, for a gross adjustment of 23.2 percent. The location adjustment for comparable sale 1 is changed from -$10,000 in the first report to no adjustment at all in the second report. The condition adjustment in the first report for comparable sale 2 is -$40,000.00. In the second report, it is listed as -$25,000.00. The location description for comparable sale 2 is listed in the first report as "urban/sup." In the second report, it is listed as "suburban/sup." The location adjustment for comparable sale 2 is listed in the first report, as -$20,000.00. In the second report, it is listed as -$10,000.00. The condition for comparable sale 3 is changed from "superior" in the first report to "average" in the second report. The condition adjustment for comparable sale 3 is listed in the first report as -$20,000.00. It is changed in the second report to no adjustment. The room adjustment for comparable sale 3 is listed in the first report as -$4,000.00. It is changed in the second report to -$2,000. The location description for comparable sale 4 is listed in the first report as "suburban/sup" and changed in the second report to "suburban." The location adjustment for comparable sale 4 is listed as -$10,000.00. It is changed in the second report to no adjustment. The room adjustment for comparable sale 4 is listed in the first report as +$4,000.00. It is changed in the second report to +$2,000.00. The basement adjustment for comparable sale 4 is listed as -$10,000.00 in the first report, and as -$5,000.00 in the second report. The condition adjustment for comparable sale 5 is listed in the first report as -$20,000.00. It is changed in the second report to -$15,000.00. The location adjustment for comparable sale 5 is listed in the first report as -$20,000.00. It is changed in the second report to -$10,000.00. The condition of comparable sale 6 is listed in the first report as "superior." It is changed in the second report to "average." The condition adjustment for comparable sale 6 is listed in the first report as -$20,000.00. It is changed in the second report to no adjustment. Respondent's work papers for Property 2 do not provide any explanation for the changes noted above. The second report for Property 3 (Petitioner's Exhibit 11) also has an invoice attached, which states "summary complete." The summary sheet lists Hugh Rhea as the appraiser. The appraisal gives an opinion of value of $71,000, compared to the County's offer of $69,900. The second appraisal lists the effective date of the appraisal as April 5, 2010, and the date of the signature and report as April 8, 2010. These dates are the same as those listed on the appraisal with value of $54,000. The Comments on Appraisal and Report Identification are the same as those listed in the initial report, and the appraiser's certification includes the same statements quoted in paragraph 15. No explanation is given as to why the second report was generated. However, the second report contains the following differences: The first report contains six comparable sales. The second contains only four, and of those four, only two (those with the highest value) from the first report were included in the second report. The property located at 2610 NE 12th Street was listed as comparable sale 4 in the first report and as comparable sale in the second report. The gross living adjustment for this property was listed as -$2,025.00, while in the second report it is listed as -$1,620.00. With respect to this same property, the carport adjustment listed in the first report is +$1,500.00, and is listed as +$2,000.00 in the second report. The property located at 2703 NE 11th Street was listed as comparable sale 6 in the first report and as comparable sale in the second report. The condition adjustment for this property is changed from no adjustment in the first report to +$10,900.00 in the second report. With respect to this comparable sale, the gross living adjustment listed in the first report is -$7,125.00 while it is listed as -$2,340.00 in the second report. In the first report, as part of the cost approach to estimating value, the remaining estimated life for Property 3 is listed as 17 years, while in the second report it is listed as 32 years. Similarly, the depreciation figure listed in the first report is $94,524.00, while in the second report it is listed as $76,797.00. Respondent's work papers for Property 3 provide no explanations for the changes listed above. The Explanations All three of the initial appraisals, as well as all three of the second appraisals, state that the price of the property was to be determined by the appraisals, and that the appraiser had requested a copy of the contract and was told they would be forwarded at a later time. After submission of the first appraisals, Corey Bullard testified that he received a telephone call from Esrone McDaniels from Meridian regarding the opinions of value, indicating that the opinions were too low. Mr. McDaniels does not recall such a conversation. What is clear, however, is that at some point Mr. McDaniels spoke to Mr. Rhea regarding the program to explain the mechanics of the process for the NSP. On April 13, 2010, Mr. McDaniels sent an e-mail to Mr. Rhea with the title "Alachua County Properties." The e-mail contained a table listing nine properties, including Properties 1-3. The table contained columns listing the property addresses; the initial offer amount; the final acquisition amount (if the sale was completed); and the appraised value. The appraised values listed in the chart for Properties 1-3 were the opinions of value listed in the first reports described, i.e., the lower values. Along with the chart was the following message: Mr. Rhea - - per our conversation, please find the information requested. Should you have any questions, please give me a call. As stated, per the program requirements, our properties must be purchased at or below 99% of the appraised value. For example, since HUD won't adjust the purchase price, the initial offer should be a minimum 99% of the appraised value. Therefore, the appraisal should represent 1% above the initial offer price above. Let me know if you have any questions. Thanks. Mr. Bullard was aware of the preparation of the second reports and was not comfortable with them being developed. He made excuses not to return to work, pass protected his electronic signature and filed a complaint against Respondent with the Department. Mr. Bullard also testified that Respondent's electronic signature was not pass-protected, and that all of the office staff had access to it. No evidence was presented to refute this statement. However, there is also no evidence that Mr. Bullard ever used Respondent's electronic signature without his consent, or that he failed to supervise Bullard's work. To the contrary, Mr. Bullard testified that for the two appraisals with which he was involved, Respondent provided supervision and approved the appraisals before they were communicated to the client. While the second appraisal reports for two of the three properties indicate that the date of the signature predated the e-mail from Esrone McDaniels, the only appraisal values listed in the e-mail are for the original, lower values. From the totality of the evidence, it is found that the only plausible explanation is that the appraisals were backdated to reflect an earlier effective date. Mr. McDaniel vehemently denied that he ever told Respondent to "hit a certain value with an appraisal, saying "Absolutely not. I don't have the authority to do that and I would never do that." He believed that the underlined sentence in his e-mail was part of his attempt to "explain the program, period," and was one example to drive across the one-percent federal requirement. Mr. Rhea, on the other hand, in his response to the Department's complaint, stated the following: Let's start with the orders or bids, Alachua County was allotted 3 to 4 million dollars to buy property across all of Alachua County but they had to be foreclosed, bank owned or short sales. . . . The properties in questioned [sic] are HUD or Fannie Mae owned properties. When Fannie Mae has a property listed before it goes on the market, they have 3 BPO's done plus an appraisal, then they set an asking price. Our assignment was to inspect the properties, check the repairs needed and then value the property "as is" knowing the property is contracted at the asking price. With 3 BPO's and appraisal to back it up the Realtor's contracted the house knowing this plus they also knew the county was mandated to purchase at that price. What Mr. Bullard did not understand and still doesn't, the assignment for the 20 appraisals scope of work was to concur with the work and valuation that already had been done. The first appraisal done did not come in at $50,000 and then I change the value. Mr. Bullard said the property is $50,000 and I told him he was wrong and that did not set well with him. . . . * * * About the conversation with Mr. Esrone McDaniel's, [sic] we talk about what the Alachua County Board of County Commissioners was mandated to do with the money. The properties have been contracted and he asked me whether I could come within 1% of the value. I told him I have a range of value of 5% so I said I thought I could. This is when I knew that Mr. Bullard did not get a handle on what the assignment was all about. The e-mail that Mr. Bullard was referring to, stated the program requirements, which is what Esrone and I talked about and Mr. Bullard took it out of context stating that I would help him out. Mr. Bullard told me at the start that he knew what the county wanted and come to find out, he did not have a clue. Although Respondent indicated in his letter that the scope of the project was "to concur with the work and valuation" that had already been performed, this scope is not reflected in the description contained in any of the six appraisals. To the contrary, the appraisals on their face indicate that no predetermined value is at issue. From the totality of the evidence, it is found that Respondent issued the second appraisals in each case for the purpose of confirming a predetermined value, i.e., the list price for each of the properties, as communicated to him in Esrone McDaniels' e-mail of April 13, 2010. The Applicable Standards Property appraisers are required to adhere to the Uniform Standards of Professional Appraisal Practice (USPAP), which are developed by the Appraisal Standards Board of the Appraisal Foundation. The USPAP Ethics Rule is divided into four sections: conduct, management, confidentiality, and recordkeeping. The conduct section provides in pertinent part: Conduct: An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests. An appraiser: must not perform an assignment with bias; must not advocate the cause or interest of any party or issue; must not accept an assignment that includes the reporting of predetermined opinions and conclusions; . . . The management section of USPAP provides in pertinent part: Management: An appraiser must not accept an assignment, or have a compensation arrangement for an assignment, that is contingent on any of the following: the reporting of a predetermined result (e.g., opinion of value); a direction in assignment results that favors the cause of the client; the amount of a value opinion; the attainment of a stipulated result (e.g., that the loan closes, or taxes are reduced); or the occurrence of a subsequent event directly related to the appraiser's opinions and specific to the assignment's purpose. According to Michael Adnot, the Department's expert witness, these USPAP standards require an appraiser to be independent, impartial, and objective, and an appraiser cannot advocate the cause of a client or pre-determine a value. Moreover, concurrence with a prior appraisal cannot be a condition of an assignment. If an appraiser feels pressure to reach a certain result, he or she should not take the assignment. Mr. Adnot's testimony is credited. Based upon the evidence presented, it is found that Respondent developed and communicated the second reports for all three properties with the intent of providing appraisal reports that came within one percent of the selling price, i.e., a predetermined value. The investigative costs for these three cases were as follows: for Case No. 11-3007, costs are $1,303.50; for Case No. 11-3008, costs of investigation are $1,501.50 and for Case No. 11-3009, costs total $1,336.50.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED that the Florida Real Estate Appraisal Board enter a Final Order finding that Respondent violated section 475.624(2) and (15) as alleged in Case Nos. 11-3007, 11-3008, and 11-3009; suspending his license to practice as a certified residential real estate appraiser for a period of 3 years, followed by 5 years of probation; imposing a $6,000 fine and imposing costs in the amounts identified in finding of fact number 49, for a total of $4,141.50 in costs. DONE AND ENTERED this 17th day of February, 2012, in Tallahassee, Leon County, Florida. S Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 2012.
The Issue Whether proposed Rules 69O-175.003, 69O-170.005 through 007, 69O-170.013, 69O-170.0135, 69O-170.014, 69O-170.0141, 69O-170.0142, 69O-170.0143, and 69O-170.0155 (Proposed Rules) are invalid exercises of delegated legislative authority.
Findings Of Fact FIC is a multi-line insurance trade association. FIC's membership consists of 42 parent companies engaged in the business of writing insurance. These parent company members consist of approximately 250 subsidiary companies who write insurance in Florida. FIC members write approximately seventy percent of the total insurance written in Florida. FIC was organized, and now operates, to represent its members in legislative and regulatory proceedings in Florida. FIC appeared on behalf of its members at the workshops and public hearing held on the Proposed Rules. A large number of FIC's members are substantially affected by the Proposed Rules because the Proposed Rules regulate the process by which insurance rates are approved in Florida and such members will be required to comply with these proposed rules. Clearly FIC has standing to challenge these proposed rules. The Commission was created within the Department of Financial Services pursuant to Section 20.121, Florida Statutes. However, the Commission is not “subject to control, supervision or direction by the Department of Financial Services in any manner.” § 20.121(3), Fla. Stat. The Commission is composed of the Governor and Cabinet, who collectively serve as the agency head of the Commission. Action by the Commission can only be taken by majority vote “consisting of at least three affirmative votes.” Id. OIR is a structural unit of the Commission. Section 20.121(3), Florida Statutes, states in relevant part, as follows: Structure.--The major structural unit of the commission is the office. Each office shall be headed by a director. The following offices are established: 1. The Office of Insurance Regulation, which shall be responsible for all activities concerning insurers and other risk-bearing entities . . . * * * Organization.--The commission shall establish by rule any additional organizational structure of the offices. It is the intent of the legislature to provide the commission with the flexibility to organize the offices in any manner they determine appropriate to promote both efficiency and accountability. Powers.--Commission members shall serve as the agency head for purposes of rulemaking . . . by the commission and all subunits of the commission. . . . (emphasis supplied) Clearly, under the Commission’s and OIR’s organizational structure, only the Commission may promulgate rules for both itself and OIR. The Commission also has control of internal management of OIR and the relationship between OIR and the Commission. Thus, for reasons of efficiency to better utilize staff expertise, the Commission may delegate certain procedural rulemaking steps to its subordinate units such as OIR, as long as, the ultimate product of that process is approved by the Commission prior to publication of a Notice of Rulemaking under Chapter 120. There was no evidence that demonstrated any impact such internal management decisions might have on any interests FIC or its members may have. Therefore, such internal management policies are exempt from required rulemaking under Chapter 120. See § 120.52(15)(a), Fla. Stat. In this case the Commission authorized the Proposed Rules on June 16, 2005, and authorized the re-publication of the Proposed Rules. The Proposed Rules were re-published on July 1, 2005. The Commission’s action occurred during the time FIC’s rule challenge was on-going and the statutory stay of rulemaking under Chapter 120 was in effect. However, Chapter 120’s stay does not divest any agency of jurisdiction to act in areas over which it has been given authority. The stay simply stops a Proposed Rule from taking effect while the rule challenge is pending. An agency may correct any defect that might have occurred during rulemaking or take other rulemaking steps at any time during the pendency of a rule challenge. See § 120.56 (2)(b), Fla. Stat. In this instance, the agency corrected its failure to authorize the language of the proposed rules by approving those proposed rules and re-publishing them. Finally, there was no evidence that the Commission’s post-stay action was in any way detrimental, prejudicial or unfair to FIC or any other person that might be effected by these Proposed Rules. Given these facts, the Commission has complied with the procedural aspects of rulemaking and these Proposed Rules are not invalid for failing to comply with essential rulemaking procedure. As indicated, the Proposed Rules variously deal with electronic filing for a variety of insurance rates through OIR’s I-file system and I-file workbook. The authority listed in the Notices for promulgating the Proposed Rules was Section 624.308(1), Florida Statutes. Section 624.308(1) grants the Department of Financial Services (Department) and the Commission the general authority to adopt rules, pursuant to Sections 120.536(1) and 120.54 in order to implement laws that confer duties upon them. One such grant of authority is contained in Section 624.424(1)(c), Florida Statutes dealing with annual statements and other information, as well as, electronic filing. That Section provides that the Commission may adopt rules that require, “reports or filings . . . . to be submitted by electronic means in a computer-readable form compatible with the electronic data processing equipment specified by the commission.” These proposed rules, in fact, attempt to implement an electronic system of filing known as “I-file.” The evidence demonstrated that the I-file workbook is essentially the format for submitting rate filing data to OIR in electronic form. The workbook provides various sections where an insurer may explain any alternative methods or techniques used by an insurer in developing a rate. The intent of the rules was not to establish additional standards that an insurer must meet to justify a proposed rate. Specifically, Proposed Rule 69O- 175.003(2)(a)3, states that accurate information in the I-file workbook will result in an aggregate average statewide rate indication. A statewide aggregate is used for analytical purposes when an individual insurer submits rates based on territorial considerations. The aggregate is a generally accepted actuarial technique and is used only for analytical purposes. The development of such data, by itself, does not constitute an attempt by OIR to establish rates for an insurer. Additionally, Proposed Rule 69O-170.0135(2)(c), states that an insurer may provide an explanation to OIR as to why “the methodology or technique used in the filing is more appropriate for the filing than the methodology or technique used in the I- file system indications.” The rule clearly states that “use of different data or methods does not create a presumption of . . . inappropriateness . . .” Moreover, OIR is required to analyze the reasonableness of the judgment reflected in the rate filing. § 627.062(2)(b)5, Fla. Stat. To the extent that the Rules and specifically Proposed Rules 690-170.0135(2)(c) and 690-175.003(2)(a)3, implement the I-file system through the I-file workbook the Proposed Rules fall well within the authority granted to the Commission to establish an electronic filing system. Proposed Rule 69O-170.013(2), attempts to define the general content of a rate filing and re-start the review period should any additional information be submitted after OIR has made its decision. Proposed Rule 690-170.013(2) provides as follows: A "rate filing" contains all the information submitted in the filing made by the insurer, plus any supplemental information received during the course of the Office's review, for all purposes of the filing made under Sections 627.062(2)(a) or 627.0651, F.S. and shall be the sole basis for determination of final agency action. Any information provided subsequent to the Office's issuance of a notice of intent to disapprove pursuant to Section 627.062 or 627.0651, F.S. will be a new filing subject to the filing requirements of this rule and chapter and applicable statutes. (Emphasis added.) Sections 627.062 and 627.0651, Florida Statutes, provide a mechanism whereby insurers submit proposed premium rates for OIR's review in the form of rate filings. Filings are required both at the initial use of a policy form and annually. OIR is charged under Sections 627.062(2)(b) and 627.0651(2) with reviewing rate filings to determine whether the rate changes requested are excessive, inadequate, or unfairly discriminatory. In reviewing a rate filing OIR may require an insurer to provide all information necessary to evaluate the condition of the company and the reasonableness of the filing according to the criteria enumerated in Section 627.062, Florida Statutes, dealing with rate standards. OIR must review the rate in accordance with generally accepted and reasonable actuarial techniques. Some of the criteria reviewed by OIR include past and prospective losses and expenses, expected investment income, adequacy of loss reserves, trend factors and “the reasonableness of the judgment reflected in the filing.” § 627.062, Fla. Stat. Because these factors generally involve future predictions based on past information or data, complex mathematical formulas and models are used to support any given rate. Additionally, various categories of data may be combined to demonstrate different trends or factors. It is the validity of this data processing that is governed by a variety of actuarial techniques that hopefully yield reasonably accurate future predictions. Included in this actuarial process is the exercise of judgment, on both OIR’s and the insurer’s part, as to how to process a wide variety of data. Whether a rate filing is adequately supported is often a matter of debate among qualified, credentialed actuaries who can disagree. Indeed, applicable actuarial standards contemplate and recognize the exchange of supplemental information during the rate filing review process. Inherent in OIR’s review of a rate filing is the same application of actuarial techniques or methods utilized by the insurer. Ultimately, OIR is required to notify an insurer of its intent to either approve or disapprove a rate filing within the time prescribed by statute (i.e. within ninety days for property and casualty insurance and sixty days for motor vehicle insurance). §§ 627.062(2)(a)1. and 627.0651(1)(a), Fla. Stat. OIR may, but is not required by statute or rule, to notify an insurer of any perceived deficiency in a rate filing before a notice of intent to deny is issued. However, even though not required, OIR and its predecessor agency, the Department of Insurance, have generally requested explanation of rate filings or additional supporting information prior to issuing notices of intent to deny a rate filing. Importantly, the statutory review period is not tolled if OIR requests supporting information. If the insurer proposing the rate disagrees with OIR’s determination, the insurer may request a hearing under Chapter 120, Florida Statutes, or proceed to arbitration. § 627.062(6), Fla. Stat. In any administrative hearing Section 627.0651(1), Florida Statutes, states that the insurer has the burden to prove the rate is not excessive, inadequate or unfairly discriminatory.” The issue is not, as OIR contends, whether the rate filing, as reviewed by it, demonstrates that it is not excessive, inadequate or unfairly discriminatory. To this end, the insurer is entitled to present any relevant evidence that supports the rate. In this case, Proposed Rule 690-170.013(2) does not simply define the contents of a rate filing, but operates to exclude all evidence offered by the insurer in an administrative hearing on insurance rates that was not previously provided to OIR prior to its notice of intent. Additionally the Rule extends the statutory review period beyond that provided in the relevant statute. The rationale for the Rule was based on OIR’s experience that insurer’s do not willingly provide everything OIR may desire to support its rate filing and the relatively short statutory review period. However, the statute contemplates that OIR may request such information if the desired information is necessary to review the rate, and, if the information is not forthcoming within the statutory review period, OIR may issue a notice of intent to deny. The statute is very clear that the review time period is not tolled and the issue to be resolved in an administrative proceeding. To that extent the Rule contravenes the statute and is an invalid exercise of statutory authority.
