Findings Of Fact At all times material to these proceedings, Respondent, Sandra K. Linton, was a licensed real estate broker in Florida, holding license number 0419502. Ms. Linton was the owner and qualifying broker for Respondent Key Realty Co. of Pensacola, Inc. (Key Realty). Key Realty was a licensed real estate brokerage company in Florida, holding license number 0244319. Both Respondents, and in particular Ms. Linton, have excellent character references from other active members of the real estate community. On November 7, 1989, Petitioner entered a Final Order against Respondents for escrow account violations of Chapter 475, Florida Statutes. Among other things, the Final Order required Respondents to submit monthly escrow account status reports. From November 7, 1989, through March 27, 1990, the Respondents did not file any escrow account status reports as required by the Final Order. Ms. Linton had turned the responsibility of filing those reports over to her accountant. However, Ms. Linton did not check to see if the escrow reports were filed by her accountant. Her accountant's full-time employment was as a contract auditor for the U.S. Navy. In October, 1989, the accountant was assigned to audit a contract in the Pacific and moved to the Pacific island which was the site of the contract. The accountant advised Ms. Linton that he would be leaving in October. After' October, 1989, the accountant no longer did any accounting work for Respondent. However, Ms. Linton did not make arrangements for the filing of the escrow account reports required by the Final Order after her accountant left the country. No sufficient excuse was offered by Ms. Linton for her failure to file or ensure the filing of these escrow reports. The Respondents' rental escrow account revealed a shortage of $2,008.14 as of March 21, 1990. The money to cover the shortage was placed in a desk drawer in the Respondent's office for deposit while the Respondent was on vacation. Her employees failed to make the deposit. Given these facts, the resultant shortage was a very minor transgression of Chapter 475, Florida Statutes, and Rule 21-V, Florida Administrative Code. Additionally, Bank charges totaling $328 were debited from the rental escrow account from June 1989 to February 1990. The Respondent's bank, Barnett Bank of Pensacola, had erroneously charged the rental escrow account for these bank charges despite instructions from the Respondent not to do so. All of the debited bank charges were either replaced by the bank or Ms. Linton. Since it was the bank's actions which caused these charges to be made to Respondents' rental escrow account and not Respondents' actions, no violation of Chapter 475, Florida Statutes, can be attributed to either Respondent. Several checks totaling $3,605.15 were written by Respondent, Sandra K. Linton, from the rental escrow account and later returned due to nonsufficient funds. The checks were returned for nonsufficient funds due to the bank's hold policy. Since Respondent had consummated numerous transactions with Barnett Bank of Pensacola in which the hold policy was not applied to her account, Respondent had no knowledge that the bank's hold policy would be applied to her account. No reliable evidence was presented that this set of facts constituted bad accounting methods on the part of Respondents or otherwise violated the provisions of Chapter 475, Florida Statutes. In the course of operating a rental management business, Respondents, on October 25, 1989, entered into a rental property management agreement with Richard and Susan Vigeant. The agreement called for monthly rental statements and disbursements. Respondents collected rental funds on behalf of the Vigeants from November, 1989, to February, 1990. However, Respondents did not provide monthly statements or deliver net rental funds to the Vigeants until March 6, 1990. Respondents were under the impression that the Vigeant's funds were to be held by the Respondents for minor repairs to the Lessor's property. The Vigeants were not under such an impression and, after numerous phone calls for more than a month, the Vigeants' requested disbursement of the net rental funds on February 20, 1990. The funds were disbursed to the Vigeants on March 6, 1990. Respondents failure to give the Vigeants monthly accounting reports as required by the rental management agreement violates Section 475.25 (1)(d), Florida Statutes. However, this violation, while not minor, is also not overly serious and should not receive severe discipline. None of the evidence demonstrates that Ms. Linton or her business were guilty of any fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence or breach of trust in a business transaction. The evidence did show that Ms. Linton is not very good at maintaining the rental escrow account or at seeing that the rental escrow account was properly maintained. Respondents' recordkeeping is poor and in disarray. The evidence was clear that Ms. Linton does not have the inclination, desire, or capability to maintain her broker's escrow account. The strongest evidence to support this conclusion is that all of Respondent's latest difficulties with her escrow account occurred after she had already been disciplined for escrow account violations which occurred prior to the events under consideration here. 1/ Given this inability, Respondent cannot be entrusted to properly handle escrow funds given to her. Since Respondents are not competent to handle escrow matters Respondents' licenses should be revoked. The Respondent does not currently have the financial ability to pay any fines and such a penalty would not be appropriate in this case.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: The Division enter a Final Order finding Respondents guilty of four violations of Chapter 475, Florida Statutes, and revoking Respondents' real estate broker's licenses. DONE and ENTERED this 24th day of September, 1990, at Tallahassee, Florida. DIANE 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 24th day of September, 1990.
Findings Of Fact Petitioner is a state licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints against real estate professionals pursuant to the laws of the State of Florida, in particular Section 20.30 and Chapters 120, 455, and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent, Eugene A. Oathout, is now and at all times pertinent to this proceeding has been a duly licensed real estate broker in the State of Florida. Mr. Oathout's license number is 0064983. The last license issued to him was as a broker in care of C I Associates, Inc., trading as C I, 5075 N. A1A, Post Office Box 3070, Vero Beach, Florida 32964-3070. Respondent, C I Associates, Inc., trading as C I, is now and at all times pertinent to this proceeding has been a duly licensed real estate broker in the State of Florida. C I's license number is 0232366. The last license issued to it was for the address 5075 N. A1A, Post Office Box 3070, Vero Beach, Florida 32964-3070. At all times pertinent to this proceeding, Respondent Oathout was licensed and operating as the qualifying broker and officer of Respondent C I. On August 30, 1994, Dawn R. Luchik, an investigator employed by Petitioner, paid an unannounced visit to Respondents' real estate brokerage office for the purpose of performing a random audit of Respondents' escrow accounts. Respondent Oathout was present at the Respondents' office on August 30, 1994, but because his secretary was not there, he had difficulty finding all the files and records Ms. Luchik wanted to review. At that time, Respondents maintained two escrow accounts, one for real estate sales matters (the sales account) and one for rental and property management matters (the management account). After her review of the records on August 30, 1994, Ms. Luchik tentatively concluded that there was no problem with the sales account but that there existed a shortage in the management account of $4,111.00. Ms. Luchik testified that Mr. Oathout appeared shocked at her tentative finding as to the management account. An appointment was scheduled for Ms. Luchik to return to complete her audit on September 6, 1994. This second appointment was made so Respondent Oathout could, with the assistance of his secretary, attempt to locate certain files and determine how a deficiency in the escrow account occurred. Rule 61J2-14.012(2), Florida Administrative Code, requires real estate brokers to reconcile escrow accounts monthly. Respondent Oathout attempted to reconcile this account by comparing the liabilities of the account with the monthly bank balance that reflected the actual amount in the account at the end of each month. At all times pertinent to this proceeding, Respondent Oathout determined the liabilities of the account from computer generated data using a computer data base contained in a commercial software computer program known as "Ability". Respondents had purchased and installed this software program between five and six years prior to the audit and used it until the audit. This software program determined the liabilities against the management escrow account by adding four columns of numbers. The program then added together the sums of the four columns and the resulting number was supposedly the total liabilities against the management escrow account. In reviewing his records in an effort to determine the existence and extent of any problem with the management account, Respondent Oathout determined that this "Ability" computer program had regularly misadded two of the four columns summaries that he prepared monthly. The two columns erroneously totalled by the computer program were the one for last month's rental deposits and the one for security deposits. No pattern or reason for the miscalculations by the accounting program is apparent. Unlike other recurring monthly income and expense items, disposition of these payments occurred only on the termination of a tenancy. Consequently, Respondent Oathout did not regularly review or reconcile the entries in these columns. Because the two incorrect columns consistently under-reported Respondents' liability for last month's and security deposit payments, Respondents' balances showed a lower escrow account liability than actually existed. In addition to managing rental properties for clients, Respondent Oathout had his own rental properties. Respondents maintained in the management account deposits made by tenants of Respondent Oathout in addition to deposits made by their clients. Each month, near month's end, Respondent Oathout would take a trial balance of the management account. Based on the information contained in the computer printout and after accounting for uncleared and outstanding checks and unrecorded current deposits, he would determine whether there existed a surplus in the management account. Because the calculation of liabilities was consistently understated, his calculation of the surplus was consistently overstated. Respondent Oathout would thereafter assume that any surplus reflected in the account belonged to him and he would withdraw the excess from the account. Respondents' reconciliation statements contained small discrepancies that were inadequately explained and failed to provide the corrective action that Respondents would take to resolve the discrepancies. Because the computer software error had gone undetected for so long, Respondents' accounting records had been overstated a total of $27,992.30 with a corresponding shortage in the management bank account in the sum of $23,482.97. When Ms. Luchik returned to Respondents's office on September 6, 1994, Respondent Oathout told her that he calculated the shortage in the management account as being $23,482.97 as opposed to $4,111.00, showed her his records, and explained that he had detected an error in the computer program. Ms. Luchik amended her final investigation report to reflect that the amount of shortage in the management account was the amount calculated by Respondent Oathout. When the existence of a shortage was verified and the amount confirmed, Respondent Oathout promptly corrected the shortages. On September 6, 9, and 12, 1994, he made deposits from his own funds into the management account in the respective amounts of $12,000, $2,500, and $8,982.97. There was no evidence that Respondent Oathout knew of this computer problem or that he was aware that a shortage existed before Ms. Luchik's audit. The software problem was a glitch that was not caused by Respondents or manipulated by them.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order that adopts the findings of fact and conclusions of law contained herein, dismisses the charges alleged in Counts One and Two, finds Respondents guilty of the charges alleged in Counts Three, Four, Five, and Six. It is recommended that Respondent Oathout be placed on probation for a period of one year for these violations. 1/ Administrative fines in the total amount of $500.00 should be imposed against the Respondents for the violations of Counts Three and Four. Administrative fines in the total amount of $2,000.00 should be imposed against the Respondents for the violations of Counts Five and Six. DONE AND ENTERED this 29th day of March, 1996, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON, 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 March 1996.
The Issue Whether Respondents violated Subsections 475.25(1)(b),(e), and (q), Florida Statutes, and Rules 21V-10.033, 21V-14.012(2) and (3) and 21V-14.014, Florida Administrative Code.
Findings Of Fact Respondent, Rhoda Kurzman (Kurzman), is currently and was at all times relevant to this proceeding a licensed real estate broker in this state. Respondent, Security Realty Investments, Inc. (Security), is currently and was at all times relevant to this proceeding a licensed real estate broker corporation in this state. Security is a small company which deals primarily with the property management of its own properties. Ms. Kurzman is the president of and broker for Security. In April, 1992, Respondents came up for a routine audit. Joseph L. Wilson, then an investigative auditor for Petitioner, Department of Professional Regulation (DPR), conducted an office inspection and escrow/trust account audit on April 14, 1992. The inspection and the audit were in four areas: 1) office 2) required office sign 3) agency disclosure and 4) broker's records, including reconciliation statements and escrow/trust accounts. Respondents maintained a trust account in an interest bearing savings account with County National Bank of South Florida. Respondents received quarterly statements from the bank. As part of the audit, Mr. Wilson asked Ms. Kurzman to produce the reconciliation statements for Security's escrow/trust account. She gave him a running journal (Pet. Exhibit 2) which she had prepared in her own handwriting. The journal was entitled " Escrow Account # 0120056458-20, County Bank, Miami, Florida 33164." There were entries beginning June 29, 1988 through December 31, 1991. The dates listed on the left side of the journal represented the dates for either deposits or withdrawals. The last deposit in the account other than interest was on March 20, 1991. There were double check marks on the right side which represented the amounts reconciled with the bank statements. The entire document contained five double check marks. Petitioner's Exhibit 2 does not reflect the dates the reconciliations took place. Petitioner's Exhibit 2 was not signed and dated by Ms. Kurzman each time the account was reconciled. Petitioner did not reconcile the account on a monthly basis. The bank statement for the period ending December 31, 1991 showed a balance of $375.54, as did the balance in the December 31, 1991 entry of the journal. The bank statement for the period ending March 31, 1992 showed a balance of $379.83. Respondents did not have any escrow security liability on these dates; thus these balances represented overages in the escrow account. Petitioner's Exhibit 2 did not contain a description or explanation for the overages. Mr. Wilson discussed the overages with Ms. Kurzman, and she indicated that the balance in the bank account resulted from accumulated interest from 1988. Mr. Wilson advised her that prior to March, 1992, an escrow account could carry an overage of only $100, but that after March 1992, overages of up to $200 could be carried in escrow accounts. Ms. Kurzman agreed to withdraw sufficient funds from the account to bring it in compliance with the allowed overage. By letter dated April 14, 1992, Ms. Kurzman advised Mr. Wilson that she had withdrawn $300 from the escrow account, bringing the balance to $79.83, and included a copy of the withdrawal slip with the letter. All the sales made by the Respondents are listed in the journal maintained by the Respondents. There have been eight sales since 1988. Some of the transactions did not result in a contract. From September 1, 1991 through October 1, 1992, Mr. Wilson conducted approximately 300 audits, 40 of which were done during the month of April, 1992. The audit of Respondents was approximately two to four hours long. Ms. Kurzman produced one sales contract during the audit, the other contracts were stored in a different location. During the audit, Mr. Wilson prepared an Office Inspection and Escrow/Trust Account Audit Form, which he and Ms. Kurzman signed. After the audit he prepared an investigative report. No specific transactions were mentioned in either document. Mr. Wilson destroyed the specific notes or tic sheets that he made during the audit. At hearing he admitted that if someone showed him one of the contracts for the transactions appearing in the journal, he would not be able to recall if he had looked at the contract during the audit. Ms. Kurzman specifically recalls the audit and her recollection of the audit is much clearer than Mr. Wilson's. At hearing Mr. Wilson was unable to recall specific transactions dealing with the alleged failure to disclose that escrow funds were being placed in an interest bearing account. He believes that they discussed names of contracts or types of situations, but can't recall because of the length of time that had passed since he performed the audit. Ms. Kurzman specifically recalls that other than the transaction in which she was the seller they only discussed one sales contract. He believes that Ms. Kurzman said that she had made oral disclosure in some but not all transactions in which there were principals other than the broker, and that there were no written disclosures. In one of the sales listed in the escrow account journal, Ms. Kurzman was the seller and had divested herself as broker during that transaction. In the Baldoria transaction, the contract required that Ms. Baldoria receive interest and the interest was paid to her. Obviously there was disclosure to Ms. Baldoria, and it appears that the disclosure was in writing. Ms. Kurzman and Mr. Wilson discussed the issue of the disclosure of interest bearing accounts during the audit. There was a disagreement between them as to when such disclosure had to be made. Having judged the credibility of the witnesses and in particular having considered Mr. Wilson's difficulty in recalling specifics of the audit, I find that the evidence is insufficient to conclude that the Respondents failed to disclose that escrow/trust funds were being placed in an interest-bearing account. Mr. Wilson was unable to recall any contracts in which Respondents were alleged to have failed to make agency disclosure. There have been no prior audits of Respondents. No prior disciplinary actions have been taken by Petitioner against Respondents.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered dismissing Counts I, II, V, VI, VII, and VIII of the Administrative Complaint, finding Respondents guilty of violating Rule 21V-14.012, Florida Administrative Code and Section 475.25(1)(e), Florida Statutes, reprimanding each Respondent, imposing against Rhoda Kurzman an administrative fine of $100, and requiring Rhoda Kurzman to provide within six months after the date of the Final Order satisfactory evidence to the Florida Department of Business and Professional Regulation, Division of Real Estate, Legal Section, Hurston Building, North Tower, Suite N-308, 400 West Robinson Street, Orlando, Florida 32801-1772, of having completed a 30-hour postlicensure broker management course. DONE AND ENTERED this 20th day of January, 1994, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-5542 To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact Paragraphs 1-6: Accepted in substance. Paragraph 7: Rejected as not demonstrated by clear and convincing evidence. Paragraph 8: Accepted. Respondent's Proposed Findings of Fact Paragraph 1: Accepted. Paragraphs 2-3: Rejected as subordinate to the facts actually found. Paragraph 4: Accepted in substance. Paragraph 5: Rejected as subordinate to the facts actually found. Paragraphs 6-7: Accepted in substance. Paragraph 8: Accepted in substance. Paragraph 9: Accepted. Paragraph 10: Accepted in substance. Paragraphs 11-13: Accepted. Paragraphs 14-19: Rejected as subordinate to the facts actually found. Paragraphs 20-26: Accepted in substance. Paragraph 27: Rejected as not supported by the evidence. Paragraph 28: Accepted in substance. Paragraph 29: Rejected as subordinate to the facts actually found. Paragraph 30: Accepted. Paragraph 31: Rejected as subordinate to the facts actually found. Paragraph 32: Accepted. Paragraphs 33-34: Rejected as subordinate to the facts actually found. Paragraphs 35-37: Accepted in substance. 20 Paragraphs 38-40: Rejected as subordinate to the facts actually found. COPIES FURNISHED: Michael J. Kurzman, Esquire Grand Bay Plaza, Suite 702 2665 South Bayshore Drive Coconut Grove, Florida 33133 Theodore Gay, Senior Attorney Department of Business and Professional Regulation Division of Real Estate 401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128 Darlene F. Keller Divison Director 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Jack McRay Acting General Counsel Department of Business Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399
The Issue The issue for consideration in this case is whether the Respondents' licenses as real estate broker and brokerage corporation, respectively, should be disciplined because of the matters set out in the Administrative Complaint filed herein.
Findings Of Fact At all times pertinent to the issues herein, the Florida Real Estate Commission was the state agency responsible for the licensing and regulation of real estate salespersons, brokers, and brokerage operations in Florida. The Respondents, Arthur B. Karns and Karns Real Estate Inc., were a licensed real estate broker and brokerage corporation, respectively. Sharon Thayer has been an investigator with the Florida Department of Professional Regulation's Division of Real Estate for over 3 1/2 years. As a part of her duties, she is required to conduct random, no-notice inspections of real estate brokerage offices in Florida. As a part of these inspections, she conducts audits of the broker's escrow account and over time has conducted approximately 1,000 audits. In her audits, she follows a standard audit procedure to reconcile the trust liability of the broker with the escrow account bank balance. In early September, 1991, Ms. Thayer conducted an escrow audit and office inspection of the Respondent's company. During her initial visits, on September 3 and 5, 1991, she requested he furnish her with the office records pertinent to his trust escrow account. Respondent promptly provided most of the records excepting only the account reconciliation forms required by the Commission. When Respondent provided Ms. Thayer with the records, including what he felt were the reconciliations, she reviewed them and then discussed them with him, indicating wherein they were deficient and what, in addition, she would need. In her initial report, completed on the conclusion of the initial visit, she indicated there was an overage of $3,452.75 in the Respondent's escrow account. This figure was in error. She also noted that Respondent was not accounting for his trust liability and indicated he had 5 days in which to take corrective action and provide documentation of the action taken. When she returned for a follow-up visit on September 20, 1991, Ms. Thayer noted that the original note of overage had been in error and that the account now balanced. To achieve balance, however, she referred to the original $500.00 in seed money Respondent had used to open the escrow account. This covered errors in the account as of December, 1990 and service charges. Without this, she noted, the account would have been short by $446.45. Ms. Thayer determined that the Respondent had opened his escrow account with $500.00 of his own funds as seed money. She contend this was improper as the Department allows only $200.00 of seed money which is to be reported each month on the account reconciliation. The $200.00 "limit" is relatively recent. At the time in issue, she claims, the "limit" was set, by unwritten, unpublished Department policy, at $100.00. The only evidence of the existence of such a policy is an article in the Fall, 1991 FREC newsletter, written by Howard M. Gunter, Jr., then Chairman, which notes: There is an unwritten rule that currently allows a broker to keep a minimum amount in his escrow account to cover bank charges, .... The April, 1992 edition of the Central Palm Beach County Association of Realtors' Realtor Review advises of new FREC rules, one of which allows a broker to maintain up to $200.00 of his own or the company's funds in the escrow account to keep it open or to pay for bank monthly service charges. Ms. Thayer's investigation also appeared to indicate that in January, 1991, Respondent disbursed an $850.00 security deposit to lessors of a rented unit when the actual deposit collected was only $500.00. This was also determined to be in error. The evidence demonstrates that on January 3, 1991, Respondent drew check number 1040 on his escrow account to open an escrow account for the Alexandre to Livingston rental. The deposit of $1,700.00 in that case included an $850.00 security deposit. This money was not disbursed to the client, however, as it was placed in an escrow account for that lease. In any case, the security deposit should have been only $500.00 as that was all that had been collected by the prior agent and transferred to the Respondent. When the deposit was made here, Respondent, whose practice was to collect the first and last month rent in advance, along with a security deposit of one month rent, mistakenly assumed the prior agent had done the same. When he learned of his mistake, by letter dated September 13, 1991, he notified the Alexandre's of the mistake and noted the excess $350.00 would be paid back to Karns Real Estate, Inc. Therefore, the extra $350.00 in the trust account had been placed there by Respondent from his own funds, not from any client funds and was due back. Since the $96.45 in bank charges were also accounted for previously and deducted, there was in actuality no shortage. Ms. Thayer also discovered that with regard to two contracts for the sale of real property, both dated in early May, 1991, between E. Buwalda as seller and Ronald Cecere as buyer on one, and Cecelia Barraclough as seller and Jeanne Cecere as buyer on the other, $100.00 in cash was accepted as a partial down payment on each, with each contract calling for an additional deposit of $2,900.00. A special clause in each contract provided: The purchaser will post a Certificate(s) of Deposit with a face amount of at least $3,000.00 with Karns Real Estate, Inc. to be held in escrow as and for the $2,900.00 additional deposit. The Certificate(s) of Deposit can be returned to the Purchaser if and when the Purchaser posts $2,900.00 in cleared funds to cover the additional deposit. In fulfillment of that clause requirement, the Ceceres deposited with the Respondent CD Numbers 020002358756 and 020002359408, from Nova Savings Bank, each in the amount of $2,000.00, the former dated October 24, 1990 and the latter dated December 3, 1990, both showing Jeanne A. Cecere as trustee for Patrick J. and Ronald P. Cecere. The certificates also reflected they were "Not Transferable except on the books of Nova Savings Bank." By his own admission, at no time did Respondent notify either of the sellers that the certificates he held on their behalf as additional deposit were not transferable outside the Nova Savings Bank. At the same time he received the certificates as deposit on the Barraclough property, Respondent also received an additional $1,000.00 in cash to constitute the balance of the $3,000.00 deposit called for in the contract. Aside from a letter from the Ceceres' chastising the Department for its action against Respondent and expressing outrage that the agency should have a negative opinion as to the propriety and legality of the Respondent's activities, there is no independent evidence of any additional deposit placed with regard to the Buwalda contract. In any event, when the matter was noted by Ms. Thayer, the Ceceres, by checks dated September 5, 1991 in the amounts of $1,900.00 each, made payable to Karns Realty, Inc., replaced the two certificates. When Ms. Thayer discussed this matter with Mr. Karns, he seemed surprised at her concern. He indicated he felt accepting the certificates was the same as taking jewelry as security. However, he promised to get replacement security and, as was seen, did so immediately. Ms. Thayer was also concerned about the Respondent's apparent inability to properly reconcile his escrow account with the related bank balance. Her audit revealed he was using a lengthy, self-developed form to balance the checking account statement but this is not enough. There is no requirement that any particular form be used, but the Commission had developed a sample form which contains all the information required in a proper reconciliation and Department rules set out those requirements. On May 13, 1991, the Department of Professional Regulation, in a letter to all real estate brokers, indicated the concern of the Commission that brokers be aware of and comply with their responsibilities regarding monthly escrow account reconciliation. The letter cited the provisions of Commission Rule 21V-14.012 which, while noting there is no official form to be used, reminds brokers the reconciliation must contain certain required information. The sample form, referenced above, requires a bank reconciliation and, in addition, a trust liability reconciliation. Ms. Thayer concluded Respondent had, indeed, completed a full bank reconciliation, but had not completed the additionally required trust liability reconciliation and merged the two. Notwithstanding Respondent's continuing protestations that he had done a complete reconciliation, the evidence indicates rather that he has not. As Respondent's own exhibit, an extract from the 1991 Gaines & Coleman continuing education book points out at paragraph 23 on page 7, the provisions of the rule on escrow reconciliation "is much more than a mere balancing of checkbook accounts." The evidence demonstrates Respondent did no more than that and his reconciliations were not adequate. Mr. Geil, who assisted Ms. Thayer in the audit, has reviewed between 100 and 150 offices in addition to Respondent's office. Of all of these, he would rate Respondent among the 5 or 6 brokers who did the most detailed reconciliations, but he cannot say, from what he saw of Respondent's records, whether Respondent was making a bona fide effort to do an accurate reconciliation. It is clear, however, that, as Respondent repeatedly asserted at hearing, everyone makes mistakes, and Respondent's delicts, established by the evidence, do not show any fraudulent or criminal intent. As Ms. Thayer noted, she found no evidence of fraud, theft or an abuse of trust money for Respondent's own purposes, and the Commission has received no complaints about him from any of his clients.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that a Final Order be entered in this case by the Florida Real Estate Commission dismissing Counts I through VI of the Administrative Complaint, but placing the licenses of Respondents, Arthur B. Karns and Karns Real Estate, Inc. on probation for a period of one year under such terms and conditions, specifically including post licensure education, as the Commission may require, and imposing a reprimand on the Respondent, Arthur B. Karns. RECOMMENDED this 21 day of August, 1992, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 23 day of August, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-1266 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 to this case. FOR THE PETITIONER: - 4. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated except for the word shortage which should be prefaced by the work "apparent." Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. First three sentences accepted. Balance is a comment on the evidence. FOR THE RESPONDENT: & 2. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and resolved in favor of Respondent. Accepted and resolved in favor of Respondent. 6A -C. Accepted and discussed within the body of the Order. 6D. Not a Finding of Fact but a discussion of the evidence. 6E & F. Not relevant. 7A - C. Not a Finding of fact but a statement of evidence presented. COPIES FURNISHED: James H. Gillis, Esquire DPR - Division of Real Estate Hurston Building, N-308 400 West Robinson Street Orlando, Florida 32801-1772 Arthur B. Karns,. pro se Karns Real Estate, Inc. 6346-63 West Lantana Road Lake Worth, Florida 3343 Jack McRay General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Darlene F. Keller Division Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900
The Issue The issue in this case is whether the Respondents' real estate licenses should be disciplined based upon charges set forth in the Administrative Complaint which allege violations of Sections 475.25(1)(b),(e), and (k), Florida Statutes.
Findings Of Fact The Petitioner is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaints which allege, in particular, violations of Chapters 455 and 475, Florida Statutes, and rules promulgated thereunder. Respondent David Shihada is now and, at all times material hereto, has been licensed as a real estate broker in the State of Florida, having been issued license number 0239798. His most recent broker's license was issued to him at Shihada Real Estate, Inc., 959 S.W. 87th Avenue, Miami, Florida 33174. Respondent Shihada Real Estate, Inc., is now and, at all times material hereto, has been a corporation registered as a real estate broker in the State of Florida, having been issued license number 0239797. The last license issued was at the address of 959 S.W. 87th Avenue, Miami, Florida 33174. At all times material hereto, Respondent David Shihada was licensed and operating as the qualifying broker for Respondent Shihada Real Estate, Inc. From May 3, 1990 to May 10, 1990, Petitioner's investigator, Hector F. Sehwerert, conducted an audit of Respondents' escrow accounts. This audit revealed that Respondents' pending sales escrow account #0103005236-06 had a total current liability of $22,050, with a current bank balance of $20,596.56, thereby reflecting a shortage of $1,453.44. In a sworn affidavit dated May 10, 1990, Respondent David Shihada stated that the shortage was a bank "mistake". On or about May 10, 1990, the Respondents deposited sufficient funds, by check numbered 1931, to cover the $1,453.44 shortage in their escrow account. On or about May 8, 1990, Gabriel Sanchez, Respondents' salesman who is also an officer at Westchester Bank where Respondents maintain their escrow account, signed a sworn affidavit stating that he had just completed an attempted reconciliation of the aforementioned escrow account from May 1989 to May 2, 1990. Sanchez was unable to find any shortage in Respondents' escrow account. He will be doing monthly reconciliations for the Respondents from May 1990 forward. From May 31, 1989 to May 2, 1990, the Respondents failed to complete and sign written monthly reconciliation statements comparing their total trust liability with the reconciled bank balance of all trust accounts as required by the rules of the Florida Real Estate Commission.
Recommendation Based upon the foregoing, it is recommended that a Final Order be issued concluding that Respondents' actions as found above constitute a violation of Section 475.25(1)(b), Florida Statutes, and further: Imposing an administrative fine in the total amount of $500; Placing the Respondents' real estate licenses on probation for a period of one year, provided that the Respondents shall not be required to retake any state licensure examination as a result of this proceeding, and provided further that Respondent David Shihada shall provide quarterly escrow account activity reports, including evidence of compliance with Rule 21V-14.012, Florida Administrative Code, as well as evidence of successful completion of the sixty hour post-licensure examination course for brokers in addition to other continuing education required to be completed by licensees in order to maintain their active and current licensure status; Requiring the Respondent David Shihada to appear before the Florida Real Estate Commission at the last meeting of the Commission preceding termination of his period of probation; and Dismissing Counts III through VI of the Administrative Complaint. DONE AND ENTERED this 21st day of November 1990 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 21st day of November 1990. APPENDIX (DOAH CASE NO. 90-4939) Rulings on Petitioner's Proposed Findings of Fact: Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3. Adopted in Finding 4. Adopted in Finding 5. Adopted in Finding 6. Adopted in Finding 7. Adopted in Finding 8. 9-10. Adopted in Finding 9. 11. Adopted in Finding 10. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate P. O. Box 1900 Orlando, FL 32802-1900 John H. Duhig, Esquire 702 City National Bank 25 West Flagler Street Miami, FL 33130-1770 Kenneth E. Easley, Esquire 1940 North Monroe Street Tallahassee, FL 32399-0792 Darlene F. Keller, Director Division of Real Estate P. O. Box 1900 Orlando, FL 32801
The Issue The issues in this case are framed by the Administrative Complaint filed against the Respondent on November 1, 1991. In it, the Petitioner, the Department of Professional Regulation, Division of Real Estate, charges in six counts that the Respondent: committed dishonest dealing by trick, scheme or device, culpable negligence or breach of trust in business transactions, in violation of Section 475.25(1)(b), Fla. Stat. (Counts I and III); operated as a broker under a trade name without causing the name to be noted in the records of the Florida Real Estate Commission and placed on his license, or operated as a member of a partnership or as a corporation, or as an officer or manager thereof, without the partnership or corporation being the holder of a valid current registration, in violation of Section 4775.42(1)(k) and, therefore, Section 475.25(1)(e), Fla. Stat. (Count II); failed to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized, in violation of Section 475.25(1)(k), Fla. Stat. (Count IV); failed to preserve and make available to the Petitioner all books, records, and supporting documents, and failed to keep an accurate account of all trust fund transactions, together with such additional data as good accounting practice requires, in violation of F.A.C. Rule 21V-14.012(1) and, therefore, Section 475.25(1)(e), Fla. Stat. (Count V); and failed to prepare and sign required written monthly escrow reconciliation statements, in violation of F.A.C. Rule 21V-14.012(2) and, therefore, Section 475.25(1)(e), Fla. Stat. (Count VI). The issues are whether the evidence sustains the charges and, if so, how the Respondent should be disciplined.
Findings Of Fact The Petitioner, the Department of Professional Regulation, Division of Real Estate, prosecutes violations of the licensing laws and regulations governing real estate brokers in the State of Florida. The Respondent, John A. Rorabacher, is now and was at all times material to this case, a licensed real estate broker in the State of Florida, having been issued license number 0254845 in accordance with Chapter 475, Florida Statutes. The last license issued to the Respondent, effective November 12, 1991, was as a broker, in limbo, and was issued to his home address. Upon application filed in February, 1988, the Respondent registered The Ladysmith Group, Inc., as a real estate brokerage, effective March 1, 1988. The Respondent was the corporation's sole officer, director and shareholder. Operating through The Ladysmith Group, Inc., through October, 1991, the Respondent acted as property manager and agent for the Spring Hill Executive Center, owned by Nimit and Cattaliya Talvanna. He secured tenants and prepared leases for office space at the Spring Hill Executive Center that provided for lease payments to be made to the Talvannas "c/o The Ladysmith Group, Inc., 5467 Spring Hill Drive, Spring Hill, Florida 34606." He corresponded with tenants on the letterhead of The Ladysmith Group, Inc. He placed lease payments he received on behalf of the Talvannas into an escrow account maintained by The Ladysmith Group, Inc. He arranged for repairs and maintenance and renovations to the Talvanna property on their behalf. 2/ While maintaining the registration of The Ladysmith Group, Inc., the Respondent applied in March, 1988, to also register his broker license with Consumers Aid Realty, Inc. (Consumers Aid), which registration became effective on May 9, 1988. 3/ In addition to being a broker for the company, the Respondent also was a part owner. He was a signatory on the company's rental escrow account. In December, 1989, the Respondent had the Florida Real Estate Commission cancel the registration of The Ladysmith Group, Inc., and the cancellation became effective January 5, 1990. However, the Respondent continued to operate through The Ladysmith Group, Inc., as described in Finding 3, above. He did this in part to minimize confusion among tenants, who were used to making their lease payments through The Ladysmith Group, Inc., and in part to shield the payments from liens and/or seizure by the IRS, to which the Respondent owed back taxes. Sometime in May or June, 1990, Winston Griffith acquired an ownership interest in Consumers Aid. Griffith did not then possess and never has possessed a real estate license in the State of Florida. The Respondent remained with the company as a part owner and as a broker for the company. He continued to be a signatory on the company's rental escrow account. 4/ However, by the end of July, 1990, the Respondent secured other full-time employment and changed his status with the company from that of an active broker (involved primarily in sales and listing) to that of a consultant. Another broker remained with the company full-time. In late October, 1990, the remaining broker at Consumers Aid gave notice of her intention to resign and cancel her registration with the company. Griffith informed the Respondent, who cooperated in Griffith's search for a replacement. The Respondent agreed to be fully responsible for the brokerage in the interim. After approximately four to six weeks, a replacement named Mr. Foster was secured in December, 1990, supposedly to act as the full-time broker for the company so that the Respondent could continue in his status as consultant. But the evidence suggests that Mr. Foster never actually served as the full-time broker and that the Respondent nonetheless continued in the status of consultant. It is not clear from the evidence who, if anyone, performed the function of broker for the company during the time Mr. Foster was the nominal full-time broker. In April, 1991, the Respondent returned to the brokerage on a more or less full-time basis for about three months. During this time, there was no discussion of Mr. Foster, or his status with company, or whether he was ever there, or whether he would ever be back. It is clear the Respondent knew that he was the company's only broker and that he was fully responsible for the brokerage during those three months. In June, 1991, the Respondent, acting for the Talvannas as described in Finding 3, above, prepared a lease for office space at the Spring Hill Executive Center for execution by Griffith, for Consumers Aid, as tenant. The lease is dated June 27, 1991. Among other things, the lease provided, on the first page, that the lessee would be responsible for a pro rata share of insurance and real estate taxes. When informed of the provision for payment of a pro rata share of insurance and real estate taxes, Griffith protested that he was unaware of the provision, notwithstanding the terms of the lease, and refused to pay those items. At the beginning of August, 1991, the Respondent's status with Consumers Aid changed again. He secured full-time employment elsewhere and ceased acting as a broker for the company. The Respondent knew that the company had no other broker, but only two real estate sales persons and Griffith, who had no real estate license. Nonetheless, he allowed Griffith to use his license until Griffith could hire another broker. In late August, 1991, the Respondent prepared a notice to the Florida Real Estate Commission that he was cancelling his registration with Consumers Aid. The evidence is not clear when this notification was sent to the Commission. The cancellation was not made effective until November 12, 1991. On or about August 20, 1991, the Respondent, acting for the Talvannas as described in Finding 3, above, sent a letter to Griffith demanding unpaid rents less the pro rata share of insurance and property taxes. The letter was on the letterhead of The Ladysmith Group, Inc. On or about August 22, 1991, Griffith paid a portion of the monies demanded in the August 20, 1991, letter and made a note of the payment in the upper right-hand corner of the letter. Still acting for the Talvannas as described in Finding 3, above, the Respondent continued to collect rents due under the Consumers Aid lease in the name of The Ladysmith Group, Inc., and deposited them in the escrow account maintained by The Ladysmith Group, Inc. On September 27, 1991, an investigator with the Department conducted a review and audit of the rental escrow account maintained by Consumers Aid. Normally, in conducting such an audit, lease agreements are reviewed to determine the trust liability, which is compared to the reconciled bank balance. But all lease agreements, bank statements and cancelled checks for the rental escrow account of Consumers Aid were not available at the time of the audit. Instead, the company's accountant provided figures representing the amount which should have been held in escrow and totalling $11,470. The reconciled bank balance on closure of the company's rental escrow account on September 26, 1991, was $2,399.77, showing a shortage of $9,070.23. The September 27, 1991, audit also showed that monthly reconciliation reports for the Consumers Aid rental escrow account were not being prepared despite a detailed explanation of the requirement during an audit performed approximately one year earlier. The Respondent was present, along with others from Consumers Aid, during parts of the earlier audit. At the time of the September 27, 1991, audit, the Commission records still indicated that the Respondent was registered as a broker for Consumers Aid and showed his address as being 5467 Spring Hill Drive, Spring Hill, Florida 32606-4597, the location of Consumers Aid. For reasons not revealed by the evidence, Griffith did not give the DPR investigator the Respondent's home address, and the investigator left word at the home of the Respondent's parents for him to contact the investigator. The Respondent never contacted the investigator.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Florida Real Estate Commission enter a final order: (1) suspending the Respondent, John A. Rorabacher, for two (2) years; (2) conditioning reinstatement upon either successful completion of the required broker's course or approved Real Estate Commission continuing education, including in the area of escrow accounts, to be specified by the Commission; and (3) fining the Respondent $1,000 to be paid within 30 days. RECOMMENDED this 28th day of February, 1992, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 28th day of February, 1992.
The Issue Whether Respondent committed the offenses set forth in the Notice to Show Cause and, if so, what action should be taken.
Findings Of Fact Petitioner is the state agency charged with regulating yacht and ship brokers and salespersons pursuant to Chapter 326, Florida Statutes. At all times material hereto, Respondent was a licensed yacht and ship broker salesman. He has been licensed since 1990. In December 1990, Respondent was issued license number 1322, as a yacht and ship broker salesman for Seafarer Brokerage, Inc. (Seafarer). In October 1998, he renewed his license, which had an expiration date of October 28, 2000. On July 31, 1997, Lorraine Woods, the President of Seafarer, wrote to Peter Butler, section head of the yacht and ship section of the Department of Business and Professional Regulation, notifying him that Respondent was the broker of record for Seafarer. Ms. Woods' license had been suspended, and Respondent knew that her license had been suspended prior to his becoming broker of record for Seafarer. As the broker of record, Respondent knew that he was solely responsible for safeguarding the money of all clients in the brokerage's escrow account. Respondent did not know the details involving the suspension of Ms. Woods' license. He was not aware that Ms. Woods had abused the control of Seafarer's escrow account for her own benefit by taking client funds from the escrow account to pay for Seafarer's operating expenses. Mr. Butler was very concerned with the abuse of Seafarer's escrow account committed by Ms. Woods. He demanded assurance from Respondent that Ms. Woods would not have access to the escrow account, and Respondent provided that assurance. On August 4, 1997, Respondent wrote to Mr. Butler confirming that he (Respondent) was the broker of record for Seafarer. In his written communication, Respondent confirmed certain details of the escrow account of Seafarer, including that he was broker of record and that the account was located at First Union National Bank of Florida, with the address and account number listed. Moreover, Respondent indicated that, as of July 30, 1997, he became the sole signatory on the account. Respondent personally provided the signatory card, showing that he was the sole signatory on the account, to the bank. Even though the bank did not have a record of such a signatory card, the undersigned is persuaded that Respondent's testimony is credible and that he provided the signatory card to the bank. Even though Respondent was the broker of record for Seafarer, Respondent looked upon Ms. Woods as the employer and himself as the employee, resulting in an employer-employee relationship. Seafarer consisted of two persons, Respondent and Ms. Woods. If Respondent was unavailable for a situation in which a check had to be written and executed, he would prepare a blank check with his signature on it and give it to Ms. Woods. She continued to maintain the business records. Ms. Woods maintained all the operating and escrow records, checks, and bank statements in a locked drawer for which she had the only key; Respondent did not have free and unobstructed access to these documents even though he was Seafarer's broker of record. Respondent and Ms. Woods continued this procedure for over a year without incident. On April 2, 1999, Warren Scott made an offer on a 1974 CAL2-46, a 46-foot yacht, with Seafarer. He placed a $6,000.00 deposit on the yacht. Mr. Scott's dealings, regarding the yacht, were with Ms. Woods. He had dealt with Seafarer and Ms. Woods on a prior occasion, had made a deposit, and had his deposit refunded. As a result, Mr. Scott felt comfortable dealing with Seafarer and Ms. Woods even though he had not purchased a yacht from Seafarer. On April 5, 1999, Mr. Scott's check was deposited in Seafarer's escrow account. On April 5, 1999, check numbered 1144, made payable to cash for $4,305.00, bearing Respondent's signature was written. The check bore the notation at the bottom left corner at the "FOR" space: "CAL2-46 (illegible) Enterprises." This check cleared Seafarer's escrow account on April 7, 1999, leaving a balance of $2,512.34. Respondent had signed the check and left it for Ms. Woods to fill-in the details. The check was signed by Respondent in March 1999 for a closing that was taking place at the end of March, but the check was not used at the closing in March. Ms. Woods had written the check to pay the rent for Seafarer. Even though Respondent had signed the check, the undersigned is persuaded that he did not know that Ms. Woods was going to use the check for a purpose other than for what it was written. On April 27, 1999, Respondent signed a check for $100.00, payable to Complete Yacht Service for engine repair to the CAL2-46. This check cleared Seafarer's escrow account on April 30, 1999, leaving a balance of $5,796.36. After a sea trial and survey, Mr. Scott wrote to Ms. Woods on April 30, 1999, indicating that he had decided not to purchase the 1974 CAL2-46 pursuant to their arrangement of April 2, 1999. On May 3, 1999, Mr. Scott again wrote to Ms. Woods that his offer to purchase the 1974 CAL2-46 for $55,000.00 in the conditional acceptance of vessel agreement, dated April 29, 1999, was expiring on May 3, 1999, at 9:00 p.m. Mr. Scott went to Seafarer on May 4, 1999, to obtain a refund of his deposit from Ms. Woods. Respondent informed him that Ms. Woods was out and that they would have to wait for her return, which was going to be in about an hour. Mr. Scott was unable to wait. He left Fort Lauderdale, returning to Nevada, with the understanding that his deposit, less $100.00 for the engine survey, would be returned to him. Mr. Scott expected the monies within a week to ten days. On May 5, 1999, a deposit of $4,700.00 was made to Seafarer's escrow account, leaving a balance of $9,136.36. On May 5, 1999, Seafarer's escrow account contained sufficient monies to give Mr. Scott a full refund of his deposit, less the $100.00. Respondent left for a vacation to the United Kingdom on May 17, 1999, with his return on June 15, 1999. Prior to his leaving, Respondent signed two blank checks, numbered 1153 and 1154, from Seafarer's escrow account. The checks were written for an upcoming business transaction during his absence, regarding a closing and Respondent's commission on the closing. On May 18, 1999, Seafarer's escrow account balance fell to $5,192.21, after three checks cleared the account. Two of the three checks, signed by Respondent, were payable to Seafarer in the amount of $1,360.00 for "comm.-37'Irwin." During May 1999, checks totaling $6,900.00, which were signed by Respondent, cleared Seafarer's escrow account. Mr. Scott made several telephone calls to Seafarer regarding the return of his deposit. Each time Mr. Scott spoke with Ms. Woods and he was not provided with a satisfactory response from her. On June 16, 1999, Mr. Scott received a check, check numbered 1153, for $5,900.00 from Seafarer. He also received a telephone call that same day from Ms. Woods requesting him not to deposit the check until the end of the month; Mr. Scott agreed. Respondent was not aware that check numbered 1153 was going to be used to refund Mr. Scott's deposit. Respondent was unaware that the check was used for a purpose other than for what it was intended. On June 17, 1999, check numbered 1154, made payable to Seafarer for $1,000.00 for "petty cash" cleared Seafarer's escrow account. The check was used by Ms. Woods to pay Seafarer's telephone and utility bills. Respondent was unaware that check numbered 1154 was going to be used for a purpose other than for what it was written. When Respondent returned from his vacation, he was contacted by Mr. Scott who advised Respondent of the problem with the return of his refund. Respondent checked the bank statements for Seafarer's escrow account and discovered that Ms. Woods had not used the checks for their intended purpose and that she had used funds from the escrow account for improper purposes. On June 25, 1999, Mr. Scott deposited the check that he received from Seafarer. The check, payable to Mr. Scott, was posted to Seafarer's escrow account on June 29, 1999, leaving a negative balance of $2,667.22. For 67 days, between April 5, 1999, when Mr. Scott's deposit of $6,000.00 was deposited in Seafarer's escrow account, and June 29, 1999, the date Mr. Scott's refund of $5,900.00 cleared, Seafarer's escrow account did not have sufficient funds to pay the refund. The period between May 5, 1999, and May 17, 1999, was the only time period, during the 67-day period, that Seafarer's escrow account had sufficient funds to pay the refund. Mr. Scott indicates that his refund was received in his account in July 1999. Respondent remained with Seafarer long enough to ensure that Mr. Scott received his refund. On July 8, 1999, Respondent notified Mr. Butler that he was no longer the broker for Seafarer. Respondent has no prior disciplinary action.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Florida Land Sales, Condominiums, and Mobile Homes, enter a final order: Sustaining the Notice to Show Cause and finding that John Scales violated Subsections 326.002(1) and 326.005(1), Florida Statutes (1997). Suspending Respondent's license for three years. Imposing a civil penalty of $5,000.00. DONE AND ENTERED this 14th day of February, 2001, in Tallahassee, Leon County, Florida. ERROL H. POWELL 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 February, 2001. COPIES FURNISHED: Janis Sue Richardson, Esquire Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-2202 Tracy J. Sumner, Esquire 1307 Leewood Drive Tallahassee, Florida 32312 Ross Fleetwood, Director Division of Florida Land Sales, Condominiums, and Mobile Homes Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Barbara D. Auger, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue The issue to be resolved in this proceeding concerns whether the Respondent's Florida Real Estate Broker's License should be the subject of sanctions, based upon the charges alleged in the Administrative Complaint, wherein it is contended that the Respondent has violated Section 475.25(1)(k), Florida Statutes, and Rules 61J2-14.012(2) and (3), Florida Administrative Code, and derivatively, Section 475.25(1)(e), Florida Statutes (1998 and 1999).
Findings Of Fact The Petitioner is an agency of the State of Florida charged with regulating and enforcing the statutory provisions pertaining to real estate licensure and practice in the State of Florida. It is charged with the duty to prosecute Administrative Complaints against perceived violations and violators of the Florida Real Estate Practice Act, Chapter 475, Florida Statutes, and the rules promulgated pursuant thereto, as well as in the manner envisioned in Chapter 455, Florida Statutes, and Chapter 120, Florida Statutes. The Respondent, at all times pertinent hereto, has been a licensed Florida real estate broker, holding License 0596898. The Respondent was last licensed as an inactive broker due to non-renewal. He has not been charged or found guilty of any violations of the statutes and rules pertaining to real estate licensure and practice in the past. His last known address is 212-B Sudduth Place, Parker, Florida 32404. The Petitioner's investigator John Hentz conducted an office inspection and an audit of the Respondent's escrow accounts and broker's trust accounts on April 2, 1999. The audit was conducted at the office of the Respondent, trading as George H. Smith Real Estate. The Respondent maintained an account with Bay Bank of Panama City entitled "Rental escrow account." This was actually the "owners' distribution escrow account." The account number is 2603100501. An audit of that escrow account revealed a total trust account liability of $16,861.51, meaning the total amounts of escrows the Respondent and his firm were liable to pay out if the account was entirely paid-out to those for whom it was held in trust. The reconciled bank balance, however, was for $4,001.82. This resulted in an apparent shortage of $12,858.69. The Respondent and his company also maintained an account entitled "escrow rental deposit account." This account was maintained at Regions Bank of Panama City. The account will be described as the "security deposit escrow account." The security deposit escrow account bears account number 55-022- 9270. An audit of that account revealed that the total trust liability for that account was $22,525.00. The reconciled bank balance for that account was $21,277.50. This resulted in an apparent shortage in the amount of $1,247.50. Mr. Hentz established that the audit disclosed that the Respondent failed to prepare written monthly reconciliation statements for both of the accounts from at least May of 1998 forward. The Respondent, however, asserted that he had prepared a written reconciliation for the February 1999 time period, but admitted that he had not provided the required explanation on the reconciliation form. The evidence also shows that the Respondent began operating as the managing or operating broker of George H. Smith Real Estate sometime in the period March through May of 1999. The records maintained by the Petitioner show that the qualifying broker was George H. Smith, the Respondent's father. George H. Smith and the Respondent provided the Petitioner with the corrective documentation registering the Respondent as the operating broker, however. Mr. Hentz obtained the broker's records from the Respondent during the course of his audit, including, but not limited to, bank statements, lists of balances for the owners' accounts, and the security deposit accounts, as well as a list of clients and a record of outstanding checks. Mr. Hentz reviewed the Respondent's "owner balance" list and the "checks pending" list for the owner's distribution account for the period up to February 28, 1999. Through this procedure he was able to determine the broker's trust liability for the account. Mr. Hentz calculated the broker's trust liability of $16,861.51, by adding the positive balance as identified on the Respondent's owner balance sheet as the amount of money that should be held on behalf of the property owners for the properties the Respondent managed. He then added the list of any outstanding checks or deposits. Mr. Hentz then compared the broker trust liability to the actual bank balance of $4,001.82 for the owners distribution account in order to determine whether the account was in balance and concluded that it was not. The difference between the broker liability and the bank balance reflected a shortage of at least $12,858.69. this indicated the amount of funds the Respondent did not properly maintain in the owners' distribution escrow account. Mr. Hentz also admitted that he should not have subtracted one particular negative balance and that the shortage should have actually been $532.00 greater than what was stated on the audit form. Mr. Hentz stated that the properties listed on the owners' sheet for John Green and Avalon Real Estate should only have been added in the calculations as a positive balance, and not any negative balance, since the same client owned the properties for both accounts with George H. Smith Real Estate. Mr. Hentz was not of the opinion, and found no evidence, that the Respondent had taken and used any of the funds for his personal use. Rather, the shortage reflected, in essence, a situation where the brokerage had used certain owners' funds to cover other owners' expenses, when the owners with the expenses had accounts which did not contain sufficient funds to cover their own rental property management expenses. Typically these situations occurred where the owners who had expenses, such as repair work for their properties, were slow in issuing checks to the Respondent's brokerage to cover such repairs or other expenses or, in infrequent instances, where the checks issued by the owners to the Respondent's brokerage did not clear because of insufficient funds. This situation occasioned more delay in rectifying shortages caused in the brokerage-maintained account because of the necessity of obtaining reimbursement from the owners issuing insufficient checks for their expense assessments. There was no intentional conversion of funds in the owners' distribution escrow account or in the security deposit escrow account for the Respondent's own use or for any improper use or use detrimental to any client's interest. Mr. Hentz followed the same steps in auditing the security deposit escrow account. The audit revealed that the Respondent's tenant list balanced and therefore, the broker trust liability for the account as of February 28, 1999, to be $22,525.00. There were no outstanding checks or deposits. The bank statement indicated that the security deposit escrow account balance as of that date was actually $21,277.50, resulting in a shortage of $1,247.50. Mr. Hentz was unable to recall if the Respondent provided an explanation for that shortage in the security deposit account, however, he testified that the former broker and owner, George H. Smith, immediately took corrective action the same day by depositing funds in the escrow account to cover the shortage. Mr. Hentz also established that during the audit the Respondent told him that the shortage in the owners distribution account resulted from owners' failure to reimburse George H. Smith Real Estate for expense payments made on behalf of the properties owned by those property owners, or for payments an owner or tenant may have made to George H. Smith Real Estate that were returned for insufficient funds. George H. Smith admitted in his testimony that a broker should not use funds from an escrow account to "loan money" to another owner but rather should use the a brokerage's own funds and that a monthly reconciliation statement review should identify any shortages for correction. The Respondent admitted in his testimony that the audit revealed that the escrow accounts were not in accordance with properly maintaining trust and liability. The Respondent also asserted that the information provided to Mr. Hentz at the time of the audit may not have accurately provided the status of each account, as to the owner balance sheet, but he did not provide any documentation to dispute the allegations. The Respondent admitted that he was unable to provide an explanation on the reconciliation statements when the trust liability did not actually match the balance on the bank statement.
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 by the Florida Real Estate Commission finding the Respondent guilty of violating Section 475.25(1)(k), Florida Statutes; Rules 61J2-14.012(2) and (3), Florida Administrative Code; and, derivatively, Section 475.25(1)(e), Florida Statutes. In light of the facts found and conclusions reached hereinabove concerning the Respondent's candor in admitting responsibility for the shortages, that the brokerage took immediate corrective action, that no client was harmed and that the Respondent did not use any funds involved in the shortages for personal use or fraudulent purposes, it is recommended that a one-year suspension, with a co-extensive year of probation, be imposed, together with a $1,000.00 fine. It is further recommended that the suspension be abated and, if during the one-year of probation the Respondent successfully completes a 30-hour broker management course, that the suspension be cancelled. DONE AND ENTERED this 6th day of November, 2001, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF 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 Clerk of the Division of Administrative Hearings this 6th day of November, 2001. COPIES FURNISHED: Sunia Y. Marsh, Esquire Department of Business and Professional Regulation 400 West Robinson Street Suite N-308A Orlando, Florida 32801-1772 Andre Carlos Smith 212-B Sudduth Place Parker, Florida 32404 Buddy Johnson, Division Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe street Tallahassee, Florida 32399-2202
Findings Of Fact Respondent, Robert D. Donovan, is a licensed real estate broker in the State of Florida, holding license number 0169298. Mr. Donovan is the owner of and the qualifying broker for Respondent, Robert Donovan Realty, Inc. Respondent, Robert Donovan Realty, Inc., is a corporation registered as a real estate brokerage company in the State of Florida, holding license number 0195250. The last license issued to the realty company was voluntarily placed on inactive status by Mr. Donovan. On July 24, 1989, the Petitioner's Investigator, Elaine M. Brantley, conducted an audit of Respondents' escrow/trust accounts. The audit included the time period of July, 1988, through June 30, 1989. The audit revealed that Respondents' rental escrow account #134740 maintained at First National Bank and Trust, Fort Walton Beach, Florida, had a current liability of $4,679.00 and a current bank balance of $3,113.51, resulting in an escrow shortage of $1,565.49. The $1,565.49 in missing escrow funds were replaced the following day by Mr. Donovan. The audit further revealed that the Respondents, through other agents, were inadvertently making improper disbursements from the rental escrow account #134740. The improper disbursements consisted of casual employee pay, postage and an improper security deposit refund. The agents responsible for the rental escrow accounts were experienced in the proper maintenance of such accounts. The disbursals were inadvertently made by these agents from the rental escrow account. Respondents were the brokers responsible for the maintenance of and disbursements from the rental escrow account. In maintaining the rental escrow account, Respondents were, from July, 1988, through June 30, 1989, reconciling the rental escrow checking account with the bank statement on a monthly basis . However, the Respondents failed from July, 1988, through June 30, 1989, to reconcile either the individual owners' or a total of the individual owners' rental escrow ledger balance with the rental escrow checking account on a monthly basis . Had the individual reconciliation been made, they would have revealed the shortages and improper disbursements made by Respondent's employees. Such individual reconciliations are required by good accounting practice and Rule 21V-14.012, Florida Administrative Code. On these facts and since Respondents were the brokers responsible for the rental escrow account, Respondents failed to use good accounting practices in the maintenance of their rental escrow account and allowed improper disbursements to be made from their trust accounts. Therefore, Respondents have violated Sections 475.25 (1)(e) and 475.25(1)(k), Florida Statutes. There was no substantial evidence which suggested that Respondent was guilty of fraud, misrepresentation, breach of trust or culpable negligence.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Board enter a Final Order finding the Respondents guilty of violating Section 475.25(1)(e) and (k), Florida Statutes and imposing a fine of $250.00 on each Respondent for the two violations. It is further recommended that Respondents' real estate licenses be placed on probation until Respondent Robert D. Donovan complete and show evidence to the Petitioner of having successfully completed, sixty (60) hours of post licensure education for brokers of which at least thirty (30) hours shall concern real estate management and/or accounting methods, and that Respondents be ordered to comply with the provisions of Rule 21V-24.001(2)(b), Florida Administrative Code, by scheduling an attendance at and attending the first meeting of the Florida Real Estate Commission after completion of the required coursework in order to terminate the probation of his license. RECOMMENDED this 1st day of October, 1990, in Tallahassee, Leon County, Florida. DIANE 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 1st day of October, 1990. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-3006 The facts contained in paragraphs 2, 3, 4, 5, 6 and 7 of Petitioner's Proposed Findings of Fact are adopted in substance, in so far as material. The facts contained in paragraph 1 of Petitioner's Proposed Findings of Fact are subordinate. The facts contained in paragraph 8 of Petitioner's Proposed Findings of Fact are adopted except for the last sentence which was not shown by the evidence. COPIES FURNISHED: James H. Gillis, Esquire Department of Professional Regulation Legal Section Hurston Building - North Tower Suite N-308 Post Office Box 1900 Orlando, Florida 32802-1900 Kenneth E. Easley, Esquire Department of Professional Regulation 1940 North Monroe Street Suite 60 Tallahassee, Florida 32399-0750 Darlene F. Keller Division Director 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32801 Robert D. Donovan Robert Donovan Realty, Inc. 507 Mooney Road Fort Walton Beach, Florida 32458
