The Issue The issue posed for decision herein is whether or not Respondent was selling "polluted" gasoline in violation of the standards set forth in Chapter 525.06, Florida Statutes (1980), and Rule Chapter 5F-2, Florida Administrative Code.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received and the entire record compiled herein, the following relevant facts are found. The Petitioner, State of Florida, Department of Agriculture and Consumer Services, is an agency of State government which has the obligation to inspect petroleum products in keeping with the provisions of Chapter 525, Florida Statutes (1980). 2/ The Respondent is a corporation which sells products in the State of Florida at an outlet located at 1050 U.S. 98 North in Brooksville, Florida. On November 11, 1981, a sample of three (3) petroleum products, i.e., regular gasoline, unleaded and diesel fuel was taken from Respondent's location which is known as Chuck's Car Wash. A laboratory analysis by Petitioner revealed that the unleaded gasoline showed a lead content above .110 grams per gallon. This reading is above the .05 gram per gallon maximum allowable lead content as set forth in Rule Subsection 5F-2.01(1)5(j), Florida Administrative Code. An analysis of the regular gasoline revealed an End Point of 494 degrees F. This reading is above the 446 degrees F maximum allowable End Point as set forth in Rule Subsection 5F-2.01(1)(c)4, Florida Administrative Code. Finally, an examination of the diesel product revealed a Flash Point below 60 degrees F. This reading is below the 120 degrees F allowable Flash Point as set forth in Rule Subsection 5F-2.01(3)(b), Florida Administrative Code. The results of these analyses were made known to Respondent and he was afforded the option of either immediately halting the sale of the products or to post a cash bond in the amount of $1,000.00 for 5,900 gallons sold of the above- referred products in lieu of confiscation of the remaining 1,681 gallons of the products. (See Release Notice or Agreement dated November 12, 1981.) Respondent posted a bond in the amount of $1,000.00. In the Release Notice, Respondent was advised that all three (3) products were to be removed from its tanks and new products dropped. Respondent was also afforded the opportunity to remove the no-lead which could he sold as leaded regular with the remaining two (2) products to be used in Respondent's private equipment. Petitioner's inspector who works out of portable laboratory No. 3, Jamie Gillespie, removed the samples from Respondent's tanks and conducted the analyses of the products. Inspector Gillespie made Respondent aware of his findings and his decision to post a Stop Sale Notice of the subject products. Inspector Gillespie obtained the cash bond from Respondent. Use of the above-referred products may cause catalytic converters to become contaminated; restrict exhaust systems and release excessive pollutants in the atmosphere. Use of these products also may clog fuel filters and carburetors. The low Flash Point from the diesel product may cause an engine to "run away" and in some instances may blow the head assembly from a diesel engine. Additionally, use of diesel with such a low Flash Point may contaminate dry injector nozzles and shorten the life of a diesel engine. (Testimony of Gillespie and Morris, inspectors and chemists employed by Petitioner, who conducted analyses of the subject products.) As stated, Respondent did not appear at the hearing to contest or otherwise rebut the charges alleged by Petitioner.
Recommendation Based on the foregoing Findings of Fact, Conclusions of Law and the entire record compiled herein, it is RECOMMENDED: That a final order be entered finding the Respondent in violation of Rule Subsections 5F-2.01(1)5(j), 5F-2.01(1)(c)4, and 5F-2.01(3)(b), Florida Administrative Code, and thereby, Respondent should be subjected to the penalties set forth in Section 525.06, Florida Statutes (1980), and the $1,000.00 bond posted be estreated. RECOMMENDED this 16th day of April, 1982, in Tallahassee, Florida. JAMES E. BRADWELL, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of April, 1982.
Findings Of Fact Prior to July 10, 1984, Son-Mar Propane, Inc. (Son-Mar) was licensed by the Department as a dealer in liquefied petroleum gas, in appliances and in equipment for use of such gas and installation. Virgil Berdeaux was the president of Son-Mar and he and his wife were the sole stockholders. Virgil Berdeaux passed the competency exam which qualified Son-Mar for licensure. Sonny Wade Berdeaux Virgil Berdeaux's son, was the manager of Son-Mar. Son- Mar's business address and place of operation was 16034 U.S. Highway 19 North in Hudson, Florida. Virgil Berdeaux and his wife owned the property located at that address and leased it to Son-Mar. A propane pumping station and a building was located on the property at 16034 U.S. Highway 19. The building housed a pawn shop and supply store for mobile home and RV equipment. Son-Mar operated the pumping station and the stores. It also installed tanks and delivered gas to customers. 1/ On July 10, 1984, a final order was entered by the Department which ordered "[t]hat any and all of [Son-Mar's] licenses issued by the State Fire Marshal Division of Liquefied Petroleum Gas and eligibility to hold said licenses are hereby revoked." The revocation of Son-Mar's licenses was due to its violation of certain safety standards and rules. Specifically, it was found that an employee of Son-Mar, Mr. John Delham, filled a cylinder that had not been recertified, that he lay it horizontally in the customer's van, and that he failed to secure the tank in the van. While the van was still parked at Son-Mar an explosion occurred which destroyed the van and killed its occupant. On July 19, 1984, nine days after Son-Mar's licenses were revoked, Virgil Berdeaux submitted an application for licensure as a dealer in appliances and equipment for use of liquefied petroleum gas, listing the business address as 16034 U.S. Highway 19, Hudson, Florida, and listing the business name as Son- Mar Pawn Shop. On August 3, 1984, twenty-four days after the revocation of Son- Mar's licenses, Sonny Wade Berdeaux submitted an application for licensure as a dealer in liquefied petroleum gas, listing the business address as 16034 U.S. Highway 19, Hudson, Florida. The Department issues several different types of liquefied petroleum gas licenses. A Type 06, Class 02 license, known as a 602 license, is issued to a dealer in appliances and equipment for use of liquefied petroleum gas. The 602 license allows the holder to sell propane appliances and equipment, such as stoves, heaters, and gas grills but it does not permit the holder to install appliances or sell propane gas. A competency examination is not required for this type of license, and there is no inspection of the place of business prior to issuance of the license. Virgil Berdeaux applied for a 602 license. He completed the application and submitted the required fee. The application listed W. C. Johnson, Virgil Berdeaux's son-in-law, as the manager of the business. Bill Johnson had run the pawn shop for Son-Mar. Sonny Wade Berdeaux applied for a Type 06, Class 04 license known as 604 license, which is issued to a dealer in liquefied petroleum gas. This type of license permits the holder to pump liquefied petroleum gas for sale to the public. An applicant for this type of license must pass a competency test and file a surety bond or certificate of insurance. Further, if the licensee has a dispensing station, an inspection of the business location must be performed to ensure that it is in compliance with all safety regulations. Sonny Wade Berdeaux passed the competency examination, filed a certificate of insurance, and submitted the proper fee. Son-Mar held a Type 06, Class 01 license (a 601 license) as a dealer in liquefied petroleum gas, in appliances and in equipment for use of such gas and installation. A 601 license permits the holder to pump liquefied petroleum gas for sale to the public, to sell appliances and equipment for use of liquefied petroleum gas, and to install such appliances and equipment. In essence, it is a combination of a 602 license, a 604 license, and a license to install equipment. Both Sonny Wade Berdeaux and Virgil Berdeaux received letters dated October 8, 1984, which informed them that their applications for licensure had been denied. Both letters referred to the revocation of Son-Mar's licenses and pointed out that the applicants would be operating on the same premises and employing the same staff as Son-Mar. Both letters concluded as follows: Thus, it would appear that your application is seeking licensure for essentially the same entity that has only recently had its liquefied petroleum gas licenses revoked. Therefore, in the interest of public safety, this Bureau cannot permit an Order of Revocation to be obviated by a mere procedural reapplication in your name. The applications for licensure both list the business address as 16034 U.S. Highway 19 in Hudson, Florida. At the time of application Virgil Berdeaux owned that property and Sonny Wade Berdeaux had leased the pumping station. However, on July 1, 1985, the property at 16034 U.S. Highway 19 was sold. The pumping station was moved out along with the inventory that remained in the pawn shop. Neither Virgil Berdeaux or Sonny Wader Berdeaux retained any interest in the property, and at this time neither could operate a business at that location. Although there was testimony concerning the manner in which the business would have been operated and controlled had licensure been granted at the time of applications there was no testimony indicating where or how the business would now be operated. There was no attempt to amend either application to reflect a current business address, and the certificate of insurance entered into evidence lists 16034 U.S. Highway 19, Hudson, Florida, as the location covered. 2/
Recommendation Based on the foregoing findings of fact and conclusions of law; it is RECOMMENDED that a Final Order be entered denying petitioners' applications for licensure. DONE and ENTERED this 21st day of May, 1986, in Tallahassee, Florida. DIANE A. GRUBBS Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of May, 1986.
Findings Of Fact 1. On January 13, 1975, 6500 gallons of gasoline was stop-saled by the Petitioner under the authority of Section 525.06, Florida Statutes. That section gives the Petitioner the right to confiscate and sell substandard gasoline. In lieu of having its gasoline confiscated, the Respondent previously posted a $2700 bond which prevented its retail outlet from being closed while confiscation proceedings would have been held. This hearing was convened to consider whether said bond should be` confiscated. At this hearing it was announced that there were no substantial disputes of material fact and that the Respondent admitted that said gasoline had been substandard. It was agreed among the parties that the Respondent should pay unto the Department of Agriculture and Consumer Services a sum in the amount of $908.54, which represented the amount of substandard gasoline which had been sold by the Respondent before the quality of its gasoline was discovered. It was not alleged that the cause of the substandard product was intentional on the part of the Respondent and it was assumed that negligence or lack of care on the part of the Respondent was the reason for this contamination.
Recommendation It is, therefore, recommended that the Petitioner in settlement of this matter retain the amount of .$908.54 from the $2700.00 bond that was posted by the Respondent. DONE and ORDERED this 20th day of August, 1975, in Tallahassee, Florida. KENNETH G. OERTEL, Director Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Albert H. Stephens, Esquire 125 South Gadsden Street Tallahassee, Florida Attorney for Respondent Robert Chastain, Esquire General Counsel Florida Department of Agriculture & Consumer Services Mayo Building Tallahassee, Florida 32304 Attorney for Petitioner
The Issue Whether Petitioner's site, Hughes Supply, Inc. located at 2920 Ford Street, Fort Myers, Lee County, Florida is eligible for restoration under Section 376.3072, Florida Statutes.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: Hughes is a Florida Corporation in good standing and authorized to do business in the State of Florida. The Department's facility no. 36-8519331 (the Facility), owned and operated by Hughes and the subject matter of this proceeding, is located at 2920 Ford Street, Ft. Myers, Lee County, Florida, and is a "Facility" as defined in Section 376.301(5), Florida Statutes. The Facility consisted of (a) two underground storage tanks (USTs), one 4000 gallons UST (gasoline tank) and one 8000 gallons UST (diesel tank), and (b) four monitoring well, and is a "petroleum storage system" as defined in Section 376.301(15), Florida Statutes. At all times material to this proceeding, Hughes held, and was the name insured of, an effective third party pollution liability insurance policy (No. FPL 7622685 - Renewal No. FPL 7621566) applicable to the Facility that was issued in accordance with, and qualified under, Section 376.3072, Florida Statutes. Hughes paid annual premiums exceeding $20,000.00 for the above insurance. In accordance with Sections 376.3072, Florida Statutes, and Chapter 17- 769, Florida Administrative Code; the Department issued to Hughes a Notice of Eligibility pertaining to the Facility and the third party pollution liability insurance referred to in Finding of Fact 4 above. Lee County, Florida has a local program approved by the Department pursuant to Section 376.3073, Florida Statutes, to provide for the administration of the Department's responsibilities under certain sections of Chapter 376, Florida Statutes. Diesel fuel was placed into the diesel tank at the Facility on August 12, 1991, and no diesel fuel has been placed in the diesel tank at the Facility since that date. On Thursday, August 29, 1991, a contractor bidding on the removal of the tanks detected free product in one of the monitoring wells at the Facility and told Larry Carman, the Warehouse Manager for Hughes. Mr. Carman told Phillip Ross, the Branch Manager for Hughes, who in turn informed Gene Kendall, the Operations Coordinator for Hughes. All of this occurred on August 29, 1991. On Friday, August 30, 1991, an employee of IT Corporation, acting upon the request of Gene Kendall, sampled the four monitoring wells at the Facility and found six inches of free product in the northwest monitoring well. On Tuesday, September 3, 1991, Fred Kendall discussed the discharge with Bill W. Johnson, Supervisor, Lee County Storage Tank Local Program. During this discussion, Johnson learned that the diesel tank had not been emptied. Johnson advised Kendall that the diesel tank had to be emptied of its product and placed out of service. On Tuesday, September 3, 1991 Mr. Kendall completed the Discharge Reporting Form (DRF) pertaining to the discharge and mailed the DRF to Johnson on September 4, 1991. The DRF indicated August 30, 1992, the day that IT Corporation confirmed the discharge, as the day of discovery of the discharge. The discharge was diesel fuel as indicated by the DRF and a "petroleum product" as defined in Section 376.3-1(14), Florida Statutes. The discharge reported in the DRF constitutes a "discharge" as defined in Section 376.301(4), Florida Statutes, which constitutes an "incident" as defined in Section 376.3072(2)(c), Florida Statutes, and as described in Rule 17-769.600, Florida Administrative Code. On Wednesday, September 4, 1991, Mr. Kendall also mailed a letter to Johnson stating Hughes' intent to seek restoration coverage for the Facility, pursuant to Policy No. FPL 762285, Renewal No. FPL 7621566. On September 13, 1991 when Hooper, Inspector for the Lee County Storage Tank Local Program, inspected the Facility the diesel tank contained a total of 39 5/8 inches of diesel and water, of which 4 3/4 inches was water. On September 16, 1991 when Hooper again inspected the Facility, the diesel tank contained a total of 36 1/2 inches of diesel and water, of which 4 1/2 inches was water. On this date, Hooper advised Hughes that the diesel tank had to be emptied of its product. The inspection report issued on September 16, 1991 by Hooper advised Hughes that the Facility was not in compliance with Chapter 17-761, Florida Administrative Code. On September 17, 1991, Hughes had the diesel tank emptied of all its product. Although Hughes was in the process of emptying the diesel tank by giving diesel away, at no time between August 30, 1991 and September 16, 1991 was the diesel tank completely empty of its product. Between August 30, 1991 and September 16, 1991 Hughes did not test the diesel tank to determine if the diesel tank was leaking and, if so, to pinpoint the source of the leak. There was no evidence that either the Department or Lee County Storage Tank Local Program personnel ever informed Hughes before September 16, 1991 that there was a time frame within which the diesel tank had to be emptied of all of its product, and placed out of service in order for Hughes to be in compliance and eligible for reimbursement for restoration under the FPLIRP. Likewise, Hughes did not request any information from the Department or the Lee County Local Program personnel concerning any time frames within which the diesel tank had to be tested for leaks or emptied of its contents to prevent any further discharge in order to be eligible for reimbursement for restoration under the FPLIRP. Between August 29, 1991 and September 17, 1991 Hughes bailed the monitoring wells at the Facility on a daily basis, removed the free product from the monitoring wells, and placed the free product in a sealed 55-gallon drum. When the discharge was discovered, Hughes made the decision to close the Facility by tank removal, and at this point did not intend to repair or replace the Facility. As a result of an inspection of the Facility by the Lee County Local Program personnel in May, 1991, Hughes was made aware that the Facility was not in compliance with Chapter 17-761, Florida Administrative Code, since the gasoline tank had not been used in over three years, and there had been no closure of the gasoline tank. This noncompliance with Chapter 17-761, Florida Administrative Code, concerning the gasoline tank was also a portion of the noncompliance report filed by Hooper on September 16, 1991. The gasoline tank comes within the definition of "unmaintained" as defined by Rule 17-761.200(2), Florida Administrative Code. Both the diesel tank and the gasoline tank were removed on October 28, 1991 by a Florida licensed storage tank system removal contractor, and the Facility permanently closed by IT Corporation on October 29, 1991. In December, 1991, Hughes filed a tank closure assessment report pertaining to the removal of the diesel and gasoline tanks from, and closure of, the Facility. The tank closure assessment report was prepared by IT Corporation upon a request made by Hughes to IT Corporation on September 3, 1991 for a tank closure assessment proposal which was submitted by IT Corporation to Hughes on September 4, 1991. In April or May, 1992, Hughes filed with Lee County a contamination assessment report prepared by IT Corporation pertaining to the removal of the USTs from and closure of the Facility. Subsequent to discovery of the discharge. Hughes has expended approximately $60,000.00 as of June 10, 1992, on the Facility in connection with the USTs. Site rehabilitation costs for the Facility have been estimated in a range of $220,000.00 to $245,000.00 as of June 10, 1992. In the early part of 1991 water was present in the diesel tank, and approximately six months before discovering the discharge in August, 1991, Hughes had the water pumped out of the diesel tank. Hughes gave no explanation for the presence of water in the diesel tank. Neither the Department nor the Lee County Local Program personnel were notified of this unexplained presence of water in the diesel tank.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is recommended that the Department enter a Final Order denying Hughes application for restoration coverage under the Florida Petroleum Liability Insurance and Restoration Program. DONE and RECOMMENDED this 24th day of September, 1992, at Tallahassee, Florida. WILLIAM R. CAVE, 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 24th day of September, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 91-8334 The following constitutes my specific rulings, pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case. Rulings on Proposed Findings of Fact Submitted by the Petitioner The following proposed findings of fact are adopted in substance as modified in the Recommended Order. The number in parenthesis is the Finding(s) of Fact which so adopts the Proposed Finding(s) of Fact:(1); 2-3(2); 4-5(3); 6- 8(4); 9(5); 10(6); 11(8,9); 12(10,11); 14(15,22); 15(10); 16(19); 18(10); 19(13); 20-21(7); 22-23(24); 24(21); 25(17); 26-29(20); 30(15); 31(16); 32(22); 33(23); 35(23); 36(7); 37(23); 38(24); 39(25); 40(26); 41(27); 42-43(27); and 44(15,22). Proposed Findings of Fact 13, 17 and 34 are neither material nor relevant to the conclusion reached in the Recommended Order. Rulings on Proposed Findings of Fact Submitted by the Respondent 1. The following Proposed Findings of Fact are adopted in substance as modified in the Recommended Order. The number in parenthesis is the Finding(s) of Fact which so adopts the Proposed Finding(s) of Fact:1-2(2); 3(3); 4-6(5); 7(6); 8(22); 9(7); 10(8); 11(9); 12(10); 13-16(11); 17(12); 18(13): 19(18); 20(17); 21-22(14); 23-24(15); 25-26(28); 27(16); and 28(23). COPIES FURNISHED: Scott E. Wilt, Esquire Maguire, Voorhis and Wells 2 South Orange Plaza Orlando, Florida 32801 Brigette A. Ffolkes, Esquire Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Carol Browner, Secretary Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Daniel H. Thompson, Esquire General Counsel Department of Environmental Regulation 2600 Blair Stone Road Tallahassee, Florida 32399-2400
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found. On January 15, 1980, Nick Pappas, a petroleum inspector with respondent's Division of Standards, took samples of regular and no lead gasoline from petitioner's station No. 582 located at 3130 Gulf to Bay Boulevard in Clearwater, Florida. An analysis of the samples was performed in the Tallahassee lab showing lead contents in the amount of 0.56 grams per gallon in the no lead gasoline sample. The standard for unleaded gasoline offered for sale in Florida is 0.05 gram of lead per gallon. A second sampling and analysis was performed approximately eleven days later because more gasoline had been dumped into the tank since the first sampling. Test results indicated essentially the same level of lead content in the unleaded gasoline. The respondent thereupon issued a "stop sale notice" on January 26, 1980, due to the high content of lead in the product. Tom Nestor, the station manager, was informed that he had several alternatives, including confiscation of the product, with the petitioner posting a bond in the amount of $1,000.00 for the release of the product to be sold as regular gasoline. Having elected this alternative, a "release notice or agreement" was entered into on January 28, 1980. Respondent received a bond in the amount of $1,000.00 from Petitioner, and this amount was deposited into the Gasoline Trust Fund. Tom Nestor admitted the truth of the above facts and admitted that he did not check the product after it was dumped into the tank. He stated that the driver of the delivery truck delivered the product to the wrong gasoline tank. According to Mr. Nestor, the tanks at his station were not properly marked at the time the delivery was made. The "premium" tank was being used to dispense "unleaded" gas, and the deliverer dumped "regular" gasoline into the "unleaded" tank.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the petitioner's request for a return of the cash bond be DENIED. Respectfully submitted and entered this 28th day of July, 1980, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301
Findings Of Fact On June 3, 1982, William Cate, an inspector for Petitioner Department of Agriculture and Consumer Services, obtained a sample of the product identified as 500 Ethohol from a pump at the United 500 station owned by Respondent in Brooksville, Florida. The sample was shipped to Petitioner's laboratory in Tallahassee where it was analyzed under the supervision of John Whitton, Chief Bureau of Petroleum Inspection, using standard methods, and found to be in violation of Petitioner's Rule 5F-2.01(c)2 in that the 50 percent evaporated temperature of the product was 1580F which did not comply with the rule's requirement that such temperature not be less than 1700F. On June 11, 1982, a stop sale notice was issued against Respondent directing it to immediately stop the sale of the product listed below pending further instructions from Petitioner. Inspector Cate sealed the pump in question, and Respondent elected to post a $1,000 cash bond in order that he could return the product for upgrading in lieu of confiscation and sale. The stop sale notice was directed to 2475 gallons of the product which had a value of over $1,000. "Ethohol" is a blend of regular leaded gasoline which contains a percentage of alcohol, and sometimes is known as "gasohol." (Testimony of Cate, Whitton, Petitioner's Composite Exhibit 1) On June 14, 1982, Curtis E. Hardee, an inspector for Petitioner, took samples of 500 Ethohol from a pump located at Respondent's United 500 station at 6815 Sheldon Road, Tampa, Florida. The samples were sealed and shipped to Petitioner's laboratory in Tallahassee where they were analyzed under the supervision of John Whitton, Chief Bureau of Petroleum Inspection, and found to be in violation of Rule 5F-2.01(-1)(c)2, Florida Administrative Code, in that the 50 percent evaporated temperature of the product was l520F, and therefore violated the rule's requirement that such temperature not be less than l700F. A stop sale notice was issued against sale of the product on June 17, 1982, and Respondent elected to post a cash bond in lieu of confiscation or sale of 3,449 gallons of the product. The amount of the bond was $625 which represented 481 gallons of the product that had been sold since the last time a load of gas had been delivered to the station. Under the provisions of the release notice, Respondent agreed to pump the remaining product out of its storage tank and return it to their bulk plant for upgrading. (Testimony of Hardee, Whitton, Petitioner's Composite Exhibit 2) Although Respondent's representative did not dispute the foregoing facts, he maintained that forfeiture of the entire amount of the cash bonds would be excessive. (Testimony of McRae)
Recommendation It is recommended that a Final Order be issued assessing Respondent the sum of $625 to be effected by forfeiture of the bond posted in the same amount pursuant to stop sale notice issued on June 17, 1982 at Tampa, Florida, and that the $1,000 bond posted by Respondent to gain release of the gasoline product which was the subject of the stop sale notice of June 11, 1902 at Brooksville, Florida also be forfeited. DONE and ENTERED this 24th day of September, 1982, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings The Oakland Building 1230 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 1982. COPIES FURNISHED: Robert A. Chastain, Esquire Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 T.D. McRae, President United Petroleum, Inc. 680 South May Avenue Brooksville, Florida 33512 Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32301
The Issue The issues to be resolved in this proceeding concern whether the Petitioner should be assessed special fuel taxes together with interest thereon and a penalty relating to an audit period of from August 1, 1977 through July 31, 1980. In order to resolve that ultimate question, it must be decided whether proper notice of the transfer of the business of Mattick Oil Company to the Petitioner, pursuant to Section 206.18, Florida Statutes was given the department, such that the transferee, the Petitioner, would not be liable for the taxes, interest and penalty incurred by the transferor Mattick Oil Company. Regardless of the question of the timeliness of the notice to the Department of the transfer of the business, it must be decided whether Reid B. Hughes is indeed a "transferee" as contemplated by Section 206.18, Florida Statutes, and is therefore liable for the tax, interest and penalty, if timely notice of the transfer was not given the department.
Findings Of Fact Mattick Oil Company, Inc. is a wholesaler and retailer of fuel oil, motor oil, gasoline and other petroleum products and auto accessories. On May 8, 1980, Mattick Oil Company, Inc. entered into a contract called an "Agreement for Sales and Purchase of Business" with Hughes Oil Company, also a Florida corporation. By this agreement, Reid B. Hughes, doing business as Hughes Oil Company was to purchase certain assets of Mattick Oil Company. It was stipulated by the parties that for the period of August 1, 1977 through July 31, 1980, Mattick Oil Company, Inc. failed to pay certain special fuel taxes in the amount of $5,411.04 of actual tax, $4,428.70 of interest through August 12, 1985 with interest accruing from that day forward at a rate of $1.78 per day. It was also stipulated that the relevant penalty, if applicable, would be $541.10. The purchase price pursuant to the agreement, was $225,900, with the buyer to pay the seller's actual delivered cost of inventory. The agreement provided that Hughes would purchase assets consisting of real estate and a bulk storage facility on South Seagrave Street in South Daytona, Florida; certain real estate and a service station located in New Smyrna Beach, as well as miscellaneous pumps, tanks, and other equipment, consumer and customer accounts and customer lists. The agreement to purchase also included certain contractual distributorship rights with Gulf Oil Company and Phillips Petroleum Company, prepaid expenses, vehicles and leasehold improvements, any covenants against competition which the seller held as transferrable rights, all jobberships, supply sale and purchase agreements owned by the seller, as well as city and county licenses, furniture, fixtures, signs, hoses, meters, registers and other personal property. The agreement also provided that the buyer, Hughes, would assume the seller's commitment for the 1980 yellow page advertising already purchased and the seller agreed not to engage in any business activity which involves the wholesale distribution of petroleum products and other auto accessories in Volusia County for a period of five years from the date of closing of the sale. This transfer of assets took effect on June 1 or June 2, 1980. Thereafter, on June 9, 1980, a notice was sent from Gene L. Mattick of Mattick Oil Company to the Department notifying it that he had sold his business to Hughes, giving the address and informing the Department that Hughes would be doing business as "Mattick Oil". Mr. Mattick indicated in the notice that this was his "final return". He also requested that a sales tax certificate be cancelled. In fact, Mr. Mattick had not sold his entire business to Mr. Hughes and Hughes Oil Company. Mattick Oil Company, Inc. continued to do business in other parts of Florida, especially the Tampa Bay area. It only sold to Hughes its distributorship contracts with Phillips Petroleum Company and Gulf Oil Company and the other assets described above. Hughes did not buy Mattick's distributorship contracts with Eastern Oil Company, Ashland Oil Company, or Colonial Oil Company. Hughes only purchased the Volusia County assets from Mattick Oil Company, Inc., in which location Mattick had been Hughes' competitor. In fact, Mr. Hughes was primarily interested in purchasing the service station in New Smyrna Beach in Volusia County. Mattick Oil Company, Inc. continued to engage in the petroleum business in its own right and, with the transfer of the Volusia County assets at issue, it did not cease to do business in Florida. It is true that the Department received a surety bond (Bond NO. 112789) bearing the name "Reid B. Hughes, d/b/a Mattick Oil of Daytona Beach, Florida, as principal, d/b/a Mattick Oil". Mr. Hughes testified that he had not executed the signature shown on that bond, purporting to be his signature. That possibly was done by a former controller of the company, who was terminated. In any event, it was offered to show that Reid B. Hughes was using the Mattick Oil Company name or variation thereof and was operating and using the assets purchased from Mattick Oil Company, Inc. and had essentially supplanted that entity entirely. The mere fact of the filing of the surety bond, aside, from the question of who actually executed the bond, does not establish, even with the use of the Mattick name, that Mattick Oil Company, Inc. had ceased doing business in Florida, and had transferred its entire assets and business operations to Hughes. In fact, Mattick Oil Company, Inc. continued thereafter to do business in Florida and did not transfer all its assets to Hughes, as found above. The same consideration is true concerning the document entitled "Gasoline Distributor-Confidential Questionnaire and Required Sales Information" which was provided to the Department on July 8, 1980 with a notarized signature of Reid B. Hughes depicted thereon. This document indicated that the business would operate as Mattick Oil Company, but the operations under the Mattick name were for the Volusia County area only and this, again, does not establish that Mattick Oil Company had ceased engaging in the petroleum business in Florida and transferred all assets and operations to Reid B. Hughes, the Petitioner. A new special fuel license, license No. 9454 was issued on June 18, 1980 to Reid B. Hughes, d/b/a Mattick Oil, with an alternate principal place of business listed thereon as South Daytona Florida, County of Volusia. The record does not establish that any special fuels license held by Mattick Oil Company, Inc. was correspondingly cancelled, however. Only the specific sales tax certificate number 74252470445 was returned for cancellation with the notice mentioned above, filed by Gene A. Mattick as president of Mattick Oil Company, Inc. on June 9, 1980. In summary, none of the above-mentioned facts establish that Mattick Oil Company, Inc. ceased doing business elsewhere in the state of Florida. In fact, the Petitioner established that Mattick Oil Company, Inc. is still doing business in the state, specifically the Tampa Bay area. The Petitioner never negotiated the purchase or purchased any of the business rights or assets owned and operated by Mattick in the Tampa Bay area. In any event, an audit was conducted by the Department for the period August 1, 1977 through July 31, 1980. A "Notice of Decision" was ultimately issued by the Department on September 30, 1985 and a petition for reconsideration of that decision, which had assessed the above-mentioned tax and interest, was filed on October 30, 1985. Finally, pursuant to a "Notice of Reconsideration" dated May 19, 1988, the Department sought to assess Reid B. Hughes, d/b/a Mattick Oil Company for the above-discussed unpaid taxes and interest due originally from Mattick Oil Company, Inc., and representing a period of time and audit period occurring before the transfer to Reid B. Hughes of the above-mentioned assets. The tax period involved thus ended July 31, 1980. It was at this point that the Petitioner then sought a formal proceeding pursuant to Section 120.57, Florida Statutes.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is therefore, RECOMMENDED that a Final Order be entered finding that the Petitioner, Reid B. Hughes, is not liable to pay the tax, accrued interest and related penalty, referenced above and that his petition to be relieved of this assessment be GRANTED. Case No. 88-3562 DONE AND ENTERED this 5th day of September, 1989, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of September, 1989. APPENDIX PETITIONER'S PROPOSED FINDINGS OF FACT: 1-5. Accepted. Rejected as not materially dispositive and subordinate to the Hearing Officer's findings of fact on the subject matter. Rejected as constituting a recitation of the statute instead of a finding of fact. Accepted. Accepted. Accepted. Accepted. 12-14. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. RESPONDENT'S PROPOSED FINDINGS OF FACT: 1-3. Accepted. 4-7. Accepted. 8. Accepted. 9-10. Rejected as subordinate to the Hearing Officer's findings of fact on the subject matter. 11. Accepted, but not itself dispositive of material issues. 12. Accepted. Accepted. Accepted, but not dispositive. Accepted, but not dispositive. Accepted, although not at issue. COPIES FURNISHED: Steven T. Vasilaros, Esq. Post Office Drawer 2140 Daytona Beach, FL 32015 Ralph R. Jaeger, Esq. Department of Legal Affairs The Capitol - Tax Section Tallahassee, FL 32399-1050 William D. Moore, General Counsel Department of Revenue 203 Carlton Building Tallahassee, FL 32399-0100 Katie D. Tucker, Executive Director Department of Revenue 104 Car1ton Building Tallahassee, FL 32399-0100 =================================================================
The Issue The issue in this case is the amount of reimbursement to which Petitioners are entitled under the Petroleum Cleanup Reimbursement Program. Petitioners--supported by the Intervenor, Environmental Corporation of America (ECA)--seek reimbursement of contractor markups; Respondent, the Department of Environmental Protection (Respondent, DEP, or the Department), seeks to recover alleged overpayments related to interest payments.
Findings Of Fact Petitioners funded efforts to rehabilitate (clean-up) petroleum and petroleum product contamination at the Joy Food Store (some, former Coastal Mart) facilities involved in these cases. As such, they were the persons responsible for conducting site rehabilitation (PRFCSR) at those sites. Cloyd Toney, Case No. 98-2021, funded a contamination assessment report (CAR) at former Coastal Mart #688 in Fort Lauderdale, Florida. James Scelfo, Case No. 98-4535, funded a CAR at former Coastal Mart #430 in Gainesville, Florida. Leo Cohen and Mark Grosby, Case No. 98-4537, funded a remedial action report (RAP) at Joy Food Store #669 in Kissimmee, Florida. Leo Cohen and John H. Roth, Case No. 98-4538, funded a CAR at Joy Food Store #667 in Kissimmee, Florida; Cloyd Toney, Case No. 98-4540, funded a CAR at Joy Food Store #662 in Eaton Park, Florida. Luella R. Ceaser, Case No. 98-4541, funded a CAR at former Coastal Mart #684 in Pompano Beach, Florida. Peter D. Kleist, Case No. 98-4543, funded a RAP and Remediation Action (RA) at Joy Food Store #704 in Cocoa, Florida. As PRFCSR's, Petitioners filed applications with the Department of Environmental Protection (DEP, Department, or Respondent) for reimbursement under an amnesty program created by Section 376.3071, Florida Statutes, for owners who notified the Department that their property was contaminated by petroleum or petroleum products. Under the statutory reimbursement program someone (usually the site owner) typically would hire a contractor to rehabilitate petroleum-contaminated sites. All contractors performing site rehabilitation tasks would have to file a Comprehensive Quality Assurance Plan ("CompQAPP") with the Department. Field work not performed under and in accordance with the CompQAPP would not be accepted by the Department. The contractor would then perform up to four rehabilitation program tasks, often through subcontractors and suppliers. The first potential program task would be an Initial Remedial Action (IRA). In an IRA, site-contaminated soil at the site would be identified by taking soil samples (soil borings), the contaminated soil would be removed, and the excavation would be backfilled with uncontaminated soil. The next step would be preparation of a Contamination Assessment Report (CAR). The purpose of the CAR would be to define the vertical and horizontal extent of groundwater contamination. Definition of groundwater contamination would require installation and sampling of groundwater wells. Additional soil samples sometimes would be necessary. The third step would be the Remedial Action Plan (RAP). In a RAP, a system to remediate the groundwater at a site is designed and approved. The final program task would be the Remedial Action (RA), which would implement the system designed in the RAP. Upon completion of a program task, the site owner, operator, or his designee would submit a reimbursement application to the Department for payment for the costs of the rehabilitation activities. Petitioners each claimed a 15% "second-tier" markup on the amount they funded (i.e., paid) the Intervenor, Environmental Corporation of America (ECA), a company owned and operated by Jack Ceccarelli. The amount each paid to ECA included ECA's 15% "first-tier" markup on amounts it said it paid subcontractors for site rehabilitation work. Ceccarelli's Initial Involvement in Clean-up Projects Ceccarelli worked for Joy Food Stores from December 1980 until August 1992. Joy, which sold gasoline at its stores, was owned and operated by Mike Hughey. Hughey hired Ceccarelli, who worked his way up from lower-echelon positions to eventually become responsible for overall operations of Joy Food Stores (Joy). In 1986, Joy leased some of its retail facilities to a competitor doing business under the name Coastal Mart. After petroleum contamination was discovered at these and numerous other Joy locations, Coastal Mart sued Joy in early 1992. Meanwhile, Joy began to rehabilitate (assess and clean-up) its sites under the amnesty program created by Section 376.3071, Florida Statutes. Joy initiated its clean-up projects under the so-called "state-lead" program. Under this program, the Department would contract directly with a private contractor to perform the rehabilitation work at an eligible site and pay the contractor monthly for work performed. However, the Department only had ten approved contractors doing work under the "state-lead" program. As a result, clean-up progressed slowly state-wide, and a large backlog of work developed. Clean-up of the Joy sites was at a standstill. When Ceccarelli left Joy in August 1992, he formed a petroleum clean-up company called Environmental Directions Incorporated ("EDI"). Subsequently, he approached Hughey with a proposal to clean-up the Joy and Coastal sites, using the reimbursement program, third-party financing, and multiple subcontractors. Hughey agreed with Ceccarelli that Ceccarelli's proposal could be a way to settle the Coastal Mart lawsuit. In February 1993, Ceccarelli secured a financing agreement from Clean America Corporation (CAMCOR) and environmental consulting services from Environmental Solutions and Services, Inc. (ESSI) based in Longwood, Florida. Under the arrangements made by EDI, ESSI contracted directly with Joy and agreed to compensate EDI as "Project Coordinator." EDI was to be compensated at an hourly rate of $100 for project coordination (described as "client/funder coordination), with a minimum of 50 hours per week for the Coastal/Hughey (i.e., Joy) sites; EDI also was to receive 2% of ESSI's 15% contractor markup. Joy settled the Coastal Mart lawsuit in February or March 1993 by taking back the Coastal Mart locations. These sites were included in the seven applications at issue in these cases. Clean-up work proceeded on the basis of those contractual agreements, with some amendments, but CAMCOR never provided funding, and ESSI reluctantly made only a partial payment to EDI in August 1993. In October 1993, ESSI was bought by Omega Environmental Services (Omega). Omega confirmed the prior contractual arrangements and continued with the clean-up work begun by ESSI. But since CAMCOR never funded the enterprise, Omega was not paid for its work and did not pay EDI under the prior contractual provisions. In October 1994, Omega bought Gurr and Associates (Gurr), another environmental consulting firm. Initially, Omega operated Gurr as a subsidiary but later dissolved Gurr and operated it as a division of Omega. Gurr/Omega initially continued under Omega's prior contractual arrangements, but Gurr/Omega still was not being paid by CAMCOR, and Gurr/Omega still was not paying EDI. When lack of financing began to threaten the continued viability of the clean-up projects, Ceccarelli sought alternative funding through another company he incorporated under the name Environmental Corporation of America (ECA). An immediate problem confronted by ECA in getting financing was that a prospective funder's anticipated profit was at risk of erosion by passage of time between funding and reimbursement from the Department, which was taking anywhere from eight months to two, even three years. From August 1993 through August 1994, the law allowed the Department to pay interest to claimants pending processing of reimbursement applications. These interest payments compensated funders for the time value of money and protected their anticipated profit from being eroded by passage of time during which reimbursement applications remained pending. After August 1994, interest payments from the Department ceased. See Conclusion 70, infra. The practical effect was to put the funders' rate of profit at risk. As a result, to help entice funders, other contractual means were devised to replace the interest previously paid by the Department. Eventually, ECA entered into contracts with funders to provide funding for the Joy and Coastal Mart sites. Each Agreement to Fund between ECA and the funders of these sites provided: INTEREST "Contractor" agrees to pay "Funder" a rate of interest equal to the published prime interest rate (Nations Bank) fixed at time of funding on such funds advanced by "Funder". Interest shall be payable twelve (12) months in advance. An additional five percent (5%) will be deposited in a reserve account to be paid to the Funder as follows: two and one-half percent (2 1/2%) at the end of month fifteen and two and one-half percent (2 1/2%) at the end of month eighteen. Reimbursement by the State in less than eighteen months may result in an interest adjustment due "Contractor" from "Funder" or reserve account. Any interest paid by the State of Florida under Section 62-773.650 will accrue to "Contractor" on the same basis as it was paid "Contractor" to "Funder" and shall be paid by "Funder" to "Contractor" within five(5) days of funders [sic] receipt of disbursement from the State of Florida to "Funder". Reimbursement by the State which takes more than eighteen (18) months will result in an interest adjustment due "Funder" from "Contractor" at the rate of prime fixed at the time of funding plus three percent (3%) for months 19 and beyond, paid quarterly in advance to the escrow account and paid to the Funder quarterly in arrears. ECA also entered into a series of agreements with Gurr/Omega, each called a Participation Agreement for Rehabilitation of Petroleum Contamination Site. Under these agreements, ECA was said to be acting for "its investors." Gurr/Omega was identified as having "heretofore entered into contracts with reimbursement eligible site owners or operators to fund, manage and rehabilitate specific sites." Gurr/Omega was required to "provide all labor, equipment and materials and [was to have] performed all work needed to complete certain specified sites selected and approved by ECA." Gurr/Omega was to "complete such performance in strict compliance with all applicable statutes rules and regulations and to the satisfaction of FDEP." Gurr-Omega would submit its invoices for remediation work to ECA, which would pay Gurr/Omega with money obtained from third-party investors. ECA would receive an assignment of Gurr/Omega's right to reimbursement from the State of Florida. In effect, Gurr/Omega gave up its contractor markup on invoices submitted by its subcontractors and suppliers; instead, ECA charged a contractor markup on Gurr/Omega's invoices. ECA would then be responsible for preparing reimbursement packages for submission to the Department. Each Participation Agreement for Rehabilitation of Petroleum Contamination Site also contained a provision requiring Gurr/Omega to pay ECA a share of what ECA was required to pay the funders under the corresponding Agreement to Fund. ECA hired Restoration Assistance, Inc., to prepare reimbursement applications for all of the Joy and Coastal sites, including the sites funded by Petitioners in these cases. (In addition to preparing reimbursement applications, Restoration Assistance had a subcontract with Halliburton NUS, which had a contract with the Department to review reimbursement applications filed by others for completeness and entitlement to reimbursement.) ECA would send Restoration Assistance a package of invoices and technical documentation for each application. Restoration Assistance would compare the invoices with the technical documentation to determine whether costs in the invoices were allowable and to categorize the costs and enter the costs and other required information in the appropriate places on the reimbursement applications. In some cases, Restoration Assistance noted costs not believed to be allowable and recommended their deletion. In some cases, ECA required invoices to be adjusted so that they only included allowable costs. In other cases, ECA required Gurr/Omega to pay portions of payments it received from ECA into a retention account for "anticipated denials." The packages sent to Restoration Assistance included invoices from Gurr/Omega and from ECA. ECA's invoices included a 15% contractor markup on Gurr/Omega's invoices. In some cases, Gurr/Omega also marked-up subcontractor and subcontractor invoices it paid for rehabilitation work. Sometimes, after review by Restoration Assistance, the funders paid the invoices, and the application packages were returned to Restoration Assistance with certifications from the funders and an attestation from a certified public accountant (CPA) that the costs reflected in the invoices had been "incurred," i.e., in fact paid. Restoration Assistance would then file the completed application with the Department. After application packages were completed, ECA's "investors" would "fund" (pay) all invoices and markups. At approximately the same time, ECA would pay Gurr/Omega's invoices, and ECA and Gurr/Omega would make the initial interest payments required under the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. However, the reimbursement packages did not include any evidence of the interest payments by Gurr/Omega and ECA or their agreements to make interest payments, respectively, to ECA and Petitioners. Nor were the interest payments or agreements to pay interest made a part of the CPA's attestation that all costs were "incurred." ECA began filing reimbursement applications for "its investors" in November 1994. The Scelfo application was filed in February 1995; the Ceaser application was filed in March 1995; the Toney and Grosby applications were filed in March 1996; and the Roth and Kleist applications were filed in May 1996 (among 30 applications filed that month, which were the last filings by ECA, except for a handful filed in September 1996.) At about the time ECA began filing applications for "its investors," the Department was trying to decide how to deal with serious problems that had arisen in the reimbursement program. It had come to the Department's attention that entities known as Environmental Trust, Inc. (ET) and Sarasota Environmental Investors, Inc. (SEI), together with other entities related through interlocking ownership and directorship arrangements, were filing reimbursement applications claiming "first-tier" markups for a so-called contractor called Gator Environmental, Inc. (Gator), who was not involved until after rehabilitation work already had been completed by Tower Environmental, Inc. (Tower). It seemed Gator's primary function actually was to perform a "due diligence" site inspection for the funders. In addition, participants at various levels of the rehabilitation efforts in these applications, including the ultimate funders, ET and SEI, were claiming reimbursement for the full amount of invoices when they only paid a discounted portion of the invoices, which were being factored by a related financing company called American Factors Group (AFG). The Department began to devise a means of addressing problems like these in the context of the applicable statutes and rules. In September 1994, the Department began to require reimbursement applicants to provide documentation showing that entities claiming contractor markups "added value" to the rehabilitation effort. Specifically with respect to Gator, the Department wanted to know the date and duration of its involvement; if Gator came on the scene after the CAR submittal for which reimbursement was being claimed, no markup would be allowed for Gator. In October and November 1994, the Department held meetings to discuss the ET case in general and the "factoring" (discounting) of invoices in particular. It was decided at these meetings that Gator's charge for a CPA's due diligence was not "integral" to site rehabilitation since it was related to financing, not rehabilitation. It also was decided that the Department would not reimburse the difference between invoices and the factored (discounted) amount paid since the difference between the two represented carrying charges (i.e., interest) not reimbursable under applicable rules. In time, the Department denied these portions of approximately 46 reimbursement applications filed by ET and a related entity, Sarasota Environmental Investors, Inc. (SEI). At about the time these decisions were being made on the ET and SEI applications, the Department informed its contract application reviewers (such as Restoration Assistance), orally and later in writing, that additional documentation would be required to support claims for contractor markups to determine whether the contractor's activities were "integral to site rehabilitation associated with active management and oversight of subcontractors and vendors." Reviewers were informed that, in asking for additional information, they should inform applicants: Costs integral to site rehabilitation associated with active management and oversight of subcontractors and vendors may include: negotiation of contracts with subcontractors and vendors; development of specifications and solicitation of quotes for equipment and supplies; scheduling and coordination of subcontractor activities; and on-site supervision of activities performed by subcontractors. The following are examples of activities that are not considered integral to site rehabilitation: . . . activities performed as due diligence on behalf of the funding entities. Reviewers also were advised that they could deny contractor markups for the following reasons: Although the activities performed appear to include some amount of active management and oversight of subcontractors and vendors, they can not be differentiated from non- reimbursable activities and/or activities that appear not to be integral to site rehabilitation. Therefore, these activities do not constitute sufficient responsibility and participation to warrant the 15% markup claimed . . . . The documentation provided does not demonstrate a sufficient level of effort integral to site rehabilitation . . . in actively managing and overseeing subcontractors and vendors to warrant the 15% markup. The activities documented do not show any active management and oversight of subcontractors and vendors and do not constitute sufficient responsibility and participation integral to site rehabilitation to warrant the 15% markup claimed . . . . In December 1994, John M. Ruddell, Director of Waste Management for the Department, submitted a draft revision of Florida Administrative Code Rules Chapter 62-773 (the rules for the reimbursement program), which included elimination of markups entirely. However, the draft revision never went to rulemaking. In January 1995, the Department instructed Restoration Assistance, acting in the role of the Department's contract reviewer, to act in accordance with the decisions made at the Department's staff meetings in September, October, and November 1994. Specifically, Restoration Assistance was instructed not to allow a markup for Gator, not to allow the cost of the CPA's due diligence for funding purposes, and not to pay the difference between invoices and the factored (discounted) amounts actually paid. As reflected in an April 1995 intra-office memorandum, the Department continued to take the positions that factored (discounted) general contractor invoices could not be paid in full and that: II. The next tier entity (e.g., management company) may be allowed claims for actual project management work and value-added services; services provided by the general contractor and duplicated by the management company should not be claimed by the management company. Management company claims (e.g., markups) would be denied if the general contractor's claims simply passed through (e.g., one month time period) the management company to the responsible party without any services provided. However, if the management company only provided cash flow services for a majority of the program task period and no other service was provided, then a markup on the general contractor's claims would be allowable. In August 1995, the Department instructed its reviewers as to an application involving Gator. The reviewers were told not to allow Gator a markup if it did not become involved until after the work was completed. They were told that if Gator was involved in rehabilitation work, not to pay for management costs duplicative of "services provided by the subs or the resp[onsible] party." They also were instructed that Gator's non-duplicative management, if any, "counts towards the total project management percentage of personnel time." ET and SEI filed approximately 46 petitions for formal administrative proceedings on their application denials between September 1995 and February 1996. These cases were referred to DOAH. In October 1995, Charles Williams, the Administrator of the Department's Petroleum Clean-Up Section, e-mailed a memorandum to its contract reviewers reiterating instructions regarding contractor markups. The memorandum also noted a claim for reimbursement of a 15% contractor markup where the work of the so-called general contractor "was limited to a 1 hour meeting with the sub." In January 1996, the Department referred another 37 related cases to DOAH, each having two counts--one challenging reimbursement application denials, and another challenging the Department's alleged use of unadopted rules (the Department's various memoranda regarding factoring and markups) in denying the applications. These and other related cases were consolidated for final hearing in April 1996. In internal correspondence of contract reviewer Halliburton NUS, sent through the Department's contract manager, Grace Rivera, in May 1996, Halliburton's reviewers were instructed to apply an "8-hour" benchmark for gauging contractor participation. Part of the internal correspondence stated: Middle Man Markup: A funders [sic] service is funding, so pay the 15% markup. Also allow a 15% markup to a "middleman" who has done work for the site for at least 8 hours during the time that the work was going on. Do not allow the 15% if the middleman did not do any value added services while the site work was going on, or if their [sic] was no funding. Before you deny a markup because there was no work done by the middleman while site work was going on, call the PR [person responsible] and ask if "any information was not included in the application" to see if they had hours they did earlier but did not claim. In October 1996, a Recommended Order was entered in the ET and SEI cases upholding the application denials. The Department entered a Final Order adopting the ALJ's Recommended Order, and ET and SEI appealed to the District Court of Appeal, First District. In October 1996, Charles Williams sent Sewell, Todd, and Broxton, Inc. (STB), which reviewed reimbursement applications filed by Restoration Assistance, a letter providing "Written Confirmation of Verbal Guidance for Review of Reimbursement Claims with General Contractor Markups." The letter referred to a meeting of September 18, 1996, and Williams' October 1995 e-mail. It also referred to the Department's January 1996 decision to have reviewers request "additional documentation of general contractor activities that may have been performed beyond those billed in the claim prior to denying their markup." It stated: "This was done because several firms had indicated that they did not bill all of their activities due to the management time limitations in the rule." It referred to the Department's guidance in February 1996 as to the wording of such requests for additional documentation. Finally, it noted that the contractor markup issue was discussed at a public workshop in July 1996 on proposed clarifications to Florida Administrative Code Rules Chapter 62-773. Prior to October 1996, the Department only entered a few orders of determination (OOD's) on the reimbursement applications submitted by ECA for "its investors." Out of 29 OOD's, contractor markups were paid on 12 applications and denied on 17. Meanwhile, as to the other applications, the Department requested more documentation and information as to ECA's involvement in these and other projects. ECA responded to this request and provided the Department with a variety of documents, but the Department delayed its determination. After the Recommended Order in the ET and SEI cases in October 1996, the Department entered 41 more OOD's; 45 more OOD's were entered in November 1996. All denied ECA's markups. Subsequently, another 117 OOD's were entered on the applications filed by ECA for "its investors." Of these, ECA's markups were paid on 32 applications; the rest were denied. Petitioners' applications were denied in October 1996 or later. With respect to the Petitioners in these cases, the Department disallowed the following amounts of ECA markup: Toney (Case No. 98-2021), $8,120.80; Scelfo (Case No. 98-4535), $6,495.29; Cohen and Grosby (Case No. 98-4537), $5,302.33; Cohen and Roth (Case No. 98-4538), $10,303.12; Toney (Case No. 98- 4540), $9,293.40; Ceaser (Case No. 98-4541), $4,231.91; and Kleist (Case No. 98-4543), $13,446.66. These amounts included ECA's 15% markups, plus Petitioners' 15% markups on ECA's markups. The Department did not reduce any ECA claims by the interest payments required under the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. By the time of the presentation of evidence during the hearing in the ET and SEI cases in April 1996, the Department had information that many rehabilitation efforts were arranging to replace the post-application interest the Department no longer was paying. See Conclusion 75, infra, Findings of Fact 120-121. Certainly, by the summer of 1996, the Department was aware of these kinds of arrangements. But the Department was not looking beyond the contents of the application packages to ascertain whether such arrangements were involved, and the ECA application packages contained no evidence of the interest payments being made in accordance with the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. During discovery in these cases, the Department obtained evidence that interest payments were made in accordance with the applicable Agreement to Fund and Participation Agreement for Rehabilitation of Petroleum Contamination Site. At that point, the Department sought to recover those interest payments, together with any markups on them. Subsequently, Petitioners stipulated to receipt of the following interest payments from ECA under the Agreement Petitioner to Fund: DOAH Case Interest Amount Cloyd Toney 98-2021 $6,282.52 James Scelfo 98-4534 $6,670.50 Cohen/Grosby 98-4537 $4,030.68 Cohen/Roth 98-4538 $7,783.00 Cloyd Toney 98-4540 $7,160.79 Luella Ceasar 98-4541 $4,135.42 Peter Kliest 98-4543 $8,469.25 There also was evidence that Gurr/Omega paid ECA : $3,688.56 of interest under the Participation Agreement for Rehabilitation of Petroleum Contamination Site for Cohen and Grosby, Case No. 98- 4537, Joy Food Store #669; and $2,789.72 of interest under the Participation Agreement for Rehabilitation of Petroleum Contamination Site for Luella Ceaser, Case No. 98-4541, Coast Mart #684. (There was no evidence of other interest payments from Gurr/Omega to ECA with respect to these cases.) However, under the Participation Agreement for Rehabilitation of Petroleum Contamination Site, those payments constitute part of the interest payments from ECA to Petitioners. The documentation and evidence establish that, in all the Joy/Coastal clean-up projects, including the seven funded by Petitioners in these cases, ESSI-Omega-Gurr/Omega was a full service contractor employing all the licensed geologists and engineers, draftsman, project coordinators, field technicians, and support staff necessary to rehabilitate theses sites. ESSI- Omega-Gurr/Omega personnel planned, performed, supervised, and supported all field activities performed at these sites--e.g., preparation of field work plan, including locating, scheduling, drilling, installing and sampling of soil borings and monitoring wells; designing monitoring well and remedial action system specifications, disposal of contaminated soil; measuring monitoring well water levels and conductivity. (All field work was performed under the ESSI-Omega-Gurr/Omega CompQAPP.) ESSI-Omega-Gurr/Omega personnel contracted and interacted with laboratories obtaining all soil and water sampling test kits and sampling results. ESSI-Omega-Gurr/Omega personnel analyzed all soil and water sampling test results and re-directed the scope of the rehabilitation of these sites accordingly. ESSI-Omega-Gurr/Omega personnel obtained permission and access from neighboring property owners to install monitoring wells on their property. ESSI-Omega-Gurr/Omega personnel interacted with local state and county officials securing permits, responding to their inquiries, and requesting permission to conduct additional remediation activities. ESSI-Omega-Gurr/Omega owned, rented, or bought all equipment, vehicles, instruments, tools, and materials used to remediate these sites. ESSI-Omega-Gurr/Omega office personnel performed, supervised, reviewed, and supported all activities necessary to produce the CAR's and RAP's for these sites. They wrote, reviewed, edited, and typed the reports; they drafted all figures, maps, tables, and indexes. ESSI-Omega-Gurr/Omega office personnel recorded, tracked, and invoiced all their work, the work of all their subcontractor activities, and their costs. At the outset of rehabilitation work on the Joy/Coastal site, Ceccarelli and Hughey discussed the overall rehabilitation effort on the sites. Hughey wanted the clean-up to proceed as quickly as reasonably possible. He also wanted work at the various sites to be timed and performed so as to disrupt retail operations as little as possible. Hughey expected EDI to communicate his concerns and desires with ESSI and make sure that ESSI's performance of the Joy-ESSI contract would conform with those concerns and desires. At the outset, Ceccarelli met with ESSI's executives in Orlando, Florida, to carry out Hughey's desires. EDI also assembled helpful historical information on the sites, including information Joy developed in connection with the Coastal Mart lawsuit. As ESSI became Omega, and Omega became Gurr/Omega, and EDI became ECA, Ceccarelli continued in his role as liaison between ESSI-Omega-Gurr/Omega and Joy and general overseer of the projects. In addition to meeting with ESSI-Omega-Gurr/Omega's executives, Ceccarelli discussed various aspects of the projects with ESSI-Omega-Gurr/Omega personnel, especially those housed in their Tampa office, which was in the same building as EDI/ECA; Ceccarelli, in turn, discussed these things with Hughey on a regular basis. Ceccarelli also had ESSI-Omega-Gurr/Omega prepare monthly summary progress reports, which Ceccarelli reviewed and went over with Hughey. Ceccarelli also usually visited the sites, including at least six of the seven sites at issue in these cases. (The invoice for Joy Food Store #669 in Kissimmee was missing from Petitioners' Exhibit 4, and no other documentation evidenced a site visit.) Sometimes, Hughey accompanied Ceccarelli on a site visit. ECA's invoice for Joy Food Store #688 in Ft. Lauderdale (Case No. 98-2021) billed for eight hours for travel and a site visit, plus another 6.75 hours of general contractor management and administration time for such things as: review of well installations; review of the scope of work for the CAR with Omega; review with the Broward Natural Resources Department; estimate of the cost to complete and scheduling work; and review the CAR after preparation by ESSI-Omega-Gurr/Omega. Of this time, only 8.75 hours was claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Coastal Mart Store #430 in Gainesville (Case No. 98-4535) billed for four hours for travel and a site visit, plus another 7.5 hours of general contractor management and administration time for such things as: reviewing the file for a work plan; reviewing monitor well installations; reviewing a drilling well report (or soil borings); reviewing the CAR after preparation by ESSI-Omega-Gurr/Omega; and reviewing of invoices/billings. Of this time, only 11.5 hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. As mentioned in Finding 50, supra, ECA's invoice for Joy Food Store #669 in Kissimmee (Case No. 98-4537) was missing from Petitioners' Exhibit 4. But Restoration Assistance's Personnel Supplementary Form for Management/Project Management time shows 12 hours of general contractor management time. ECA's invoices for Joy Food Store #667 in Kissimmee (Case No. 98-4538) billed for four hours for travel and a site visit, plus another 26.25 hours of general contractor management and administration time for such things as client consultation (probably with Hughey); sorting site data and review of site file; review of wells with client (possibly due to problems with well installation); review with senior project manager; review of well installation; and review of CAR and CAR addendum after preparation by ESSI-Omega-Gurr/Omega. Of this time, 26.25 hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Joy Food Store #662 in Eaton Park (Case No. 98-4540) billed for three hours for travel and a site visit, plus another 17.25 hours of general contractor management and administration time for such things as reviewing scope of work and budget; copying and data and setting up files; reviewing hand auger data; coordinating well installation; reviewing additional wells; reviewing groundwater results; reviewing site access requests and data; reviewing the CAR and CAR addendum after preparation by ESSI-Omega-Gurr/Omega. Of this time, only three hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Coastal Mart Store #684 in Pompano Beach (Case No. 98-4541) billed for 2.5 hours for pro rata share of travel and a site visit, plus another 11.25 hours general contractor management and administration time for such things as data reviewing and compiling information for CAR; reviewing the CAR; project coordination in Broward County; reviewing billings; and reviewing general project coordination. All of this time was claimed as management time on the reimbursement application forms prepared by Restoration Assistance. ECA's invoice for Joy Food Store #704 in Cocoa (Case No. 98-4543) billed for 6.5 hours for travel and a site visit, plus another 24.5 hours of general contractor management and administration time for such things as client consultations; the sorting and review of file data; review with senior project manager; financial review and tracking; review of RAP with client and sub; review of file and prepare invoice; and review of and response to Brevard County RAP questions with sub. Of this time, only 13.5 hours were claimed as management time on the reimbursement application forms prepared by Restoration Assistance. The Department contends that part of ECA's invoice for Joy Food Store #662 is not legitimate because it records Ceccarelli's review of the CAR addendum on February 10, 1995, the same day the CAR addendum was signed and sealed by the project geologist in Orlando. The Department also contends that another part of ECA's invoice for Joy Food Store #662 is not legitimate because it records the review of a well drilling report on March 7, 1994, the same day the wells were installed. The installation of these wells took eleven hours, and the Department contends that the chances of generating a well-drilling report that day under these circumstances are minimal. The explanation for these discrepancies probably lies in the way in which Ceccarelli prepared his invoices. Ceccarelli admittedly was far from meticulous in keeping track of the time he spent on these projects, in part because of his personal disinclination and in part because of ECA's understanding that meticulous time-keeping was not critical for reimbursement of a markup. To the contrary, it was ECA's understanding that the Department would not reimburse for excessive management time for ECA when ECA was being compensated in the form of the 15% markup on ESSI-Omega-Gurr/Omega's invoices. Indeed, Restoration Assistance reduced ECA's management time in at least five of the seven claims for reimbursement at issue in these cases. (This could not be ascertained for Joy Food Store #669 without the invoice for that store.) For the most part, the activities listed in ECA's invoices were not recorded contemporaneously with the performance of the listed activity. Rather, the invoices were created based on Ceccarelli's review of his personal calendar, telephone bills, and reports generated by ESSI-Omega- Gurr/Omega. The Department contends also that part of ECA's invoice for Joy Food Store #684 is not legitimate because it indicates a total of 4.25 hours for project coordination activities on July 1, 1994, November 14, 1994, and January 31, 1995, while the CAR for this facility was finalized on April 15, 1994. This length of time appears to be erroneous; it probably represents time spent on the RAP phase of rehabilitation at that site, not the CAR phase. The CAR reimbursement claim should be reduced by $488.25 for ECA's time, and by $73.24 for Ceaser's 15% markup. The evidence on Joy Food Store #684 also was that Gurr/Omega paid ECA $649.00 for anticipated denials. These moneys were deposited in an escrow account, and the record is void as to whether these costs were denied by the Department or whether ECA ever returned these moneys to Gurr/Omega. But the disposition of the escrow fund would be a matter for ECA and Gurr/Omega to resolve; it would not affect Ceaser's reimbursement application. The Department criticizes the lack of documentation evidencing what Ceccarelli claims he did on these projects; the lack of such documentation contributed to the Department's doubts as to the veracity of the invoices. But in the numerous cases of Ceccarelli's review of work by ESSI-Omega-Gurr/Omega recorded in the invoices, no EDI/ECA work product was generated, so none could be produced. Documentation supplied to the Department supported ECA's claims that ESSI-Omega-Gurr/Omega sent EDI/ECA reports to review and supported some other claims of time spent on the projects, as well as ECA's claim that a considerable amount of time spent on these projects was not recorded in ECA's invoices. There also came a point in time when ECA stopped responding to Department requests for additional information because ECA came to believe that the Department intended to deny ECA's markups regardless what documentation was produced. ECA came to this belief based in part on learning during a meeting with Department staff that Charles Williams had issued notices of intent to deny ECA's markups in some cases without even looking at documentation produced by ECA. When the parties began to litigate, documents were produced only in response to discovery requests. Ceccarelli testified that his telephone records were not produced because the Department did not ask for them. The Department also criticized Ceccarelli's inability to recall in detail from memory what he did during the time recorded in the invoices for these projects. But, under the circumstances, it was understandable for him not to have such a clear, detailed recollection. It was not proof of dishonesty.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection enter a final order: granting Petitioners' claims for ECA's 15% markups, together with Petitioners' 15% markups on ECA's markups, as follows: Petitioner DOAH Case Amount Cloyd Toney 98-2021 $8,120.80 James Scelfo 98-4534 $6,495.29 Cohen/Grosby 98-4537 $5,302.33 Cohen/Roth 98-4538 $10,303.12 Cloyd Toney 98-4540 $9,293.40 Luella Ceasar 98-4541 $4,231.91 Peter Kliest 98-4543 $13,446.66 requiring recovery of overpayments of interest paid from ECA to Petitioners, plus ECA's 15% markups on the interest payments, plus Petitioners' 15% markups on ECA's markups, as follows: ECA's Interest Overpayments Petitioner DOAH Case Interest Amount Cloyd Toney 98-2021 $6,282.52 James Scelfo 98-4534 $6,670.50 Cohen/Grosby 98-4537 $4,030.68 Cohen/Roth 98-4538 $7,783.00 Cloyd Toney 98-4540 $7,160.79 Luella Ceasar 98-4541 $4,135.42 Peter Kliest 98-4543 $8,469.25 ECA's Markups on ECA's Interest Cloyd Toney 98-2021 $942.38 James Scelfo 98-4534 $1,000.58 Cohen/Grosby 98-4537 $604.60 Cohen/Roth 98-4538 $1,167.45 Cloyd Toney 98-4540 $1,074.12 Luella Ceasar 98-4541 $620.31 Peter Kliest 98-4543 $1,270.39 Petitioners' Markups on ECA's Markups on ECA's Interest Cloyd Toney 98-2021 $141.36 James Scelfo 98-4534 $150.09 Cohen/Grosby 98-4537 $90.69 Cohen/Roth 98-4538 $175.12 Cloyd Toney 98-4540 $161.12 Luella Ceasar 98-4541 $93.05 Peter Kliest 98-4543 $190.56 requiring recovery of the $561.49 overpayment on the Ceasar reimbursement application (Case No. 98-4541) reflected in Finding 61, supra. DONE AND ENTERED this 16th day of December, 1999, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of December, 1999. COPIES FURNISHED: J. A. Spejenkowski, Esquire Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Bradford C. Vassey, Esquire Environmental Corporation of America 205 South Hoover Street, Suite 101 Tampa, Florida 33609 Carter B. McCain, Esquire MacFarlane, Ferguson & McMullen 400 North Tampa Street, Suite 2300 Tampa, Florida 33601 Kathy Carter, Agency Clerk Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Teri Donaldson, General Counsel Department of Environmental Protection Douglas Building, Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000
