The Issue Whether proposed Rule 69O-186.013 is an invalid exercise of legislatively delegated authority as defined in Section 120.52(8), Florida Statutes.
Findings Of Fact Pursuant to Section 20.121(3), Florida Statutes, the Financial Services Commission (the Commission) serves as the agency head for the Office of Insurance Regulation for the purpose of rulemaking. On May 26, 2006, the Office of Insurance Regulation issued a Notice of Development of Rulemaking to amend existing Florida Administrative Code Rule 69O-186.013. A workshop was held pursuant to this notice on June 15, 2006. On August 15, 2006, the Commission approved for publication a notice of proposed rule amendments to Rule 69O- 186.013. A Notice of Proposed Rulemaking was published in the Florida Administrative Weekly on October 6, 2006. A public hearing was held October 31, 2006. On November 22, 2006, a second notice of hearing was published in the "Notices of Meetings, Workshops and Public Hearings" section of the Florida Administrative Weekly, advising of "an additional public hearing on the proposed amendments to Rule 69O-186.013, Title Insurance Statistical Gathering, published on October 6, 2006, in Vol. 32, No. 40, of the F.A.W." A public hearing was conducted as noticed December 5, 2006. Petitioners filed their Petition to Determine Invalidity of Proposed Rule December 21, 2006. On June 7, 2007, the Respondent filed its Motion to Dismiss for Lack of Subject Matter Jurisdiction. Included in its Motion are several statements relevant to the Petitioners' position regarding dismissal of these proceedings: [The December 5, 2006, hearing] of course, was not the "final public hearing," was not noticed as a hearing at which any action would be taken and never intended to be the "final public hearing" as that term is used in Section 120.56(2)(a), Florida Statutes. In fact, the "final public hearing" would have been held before the FSC as the collegial body responsible for rulemaking for the Office. When it is appropriate, the FSC will hold such a "final public hearing" prior to adoption of a proposed rule. As in every other instance in which the FSC intends to adopt a rule, notice will be provided in the Florida Administrative Weekly (sample attached as Exhibit E). In this instance, the final hearing has not yet been held, or even scheduled. * * * 11. Therefore, this case must be dismissed as the Petition to Determine Invalidity of Proposed Rule was untimely filed. The Petitioners may, if they desire, challenge the proposed rule after the final public hearing. Nevertheless, they may not maintain this action at this time. Petitioners have responded to the Motion to Dismiss by consenting to dismissal of these proceedings, "in reliance on representations made by the State of Florida, Financial Services Commission/Office of Insurance Regulation (the Respondent) in paragraphs 5, 6, and 11 of Respondent's Motion to Dismiss for Lack of Subject Matter Jurisdiction (the Motion to Dismiss) filed on June 7, 2007, that no 'final public hearing' within the meaning of Section 120.54 . . . has been held . . . and that no 'final public hearing' shall be held unless Respondent has first provided to Petitioners proper notice and an opportunity to contest the validity of the Proposed Rule." Petitioners assert, however, that the Petition should be dismissed without prejudice, and that should Respondent attempt to promulgate the Proposed Rule without first holding a "final public hearing" with proper notice, they reserve the right to reinstate this proceeding.
The Issue Whether Petitioner proved that Respondent failed to obtain workers' compensation insurance that met the requirements of chapter 440, Florida Statutes, thus warranting issuance of a Stop-Work Order and Penalty Assessment against Respondent.
Findings Of Fact Petitioner is the state agency responsible for enforcing the Florida Workers' Compensation Law, chapter 440, Florida Statutes, including those provisions that employers shall be liable for, and shall secure and maintain payment of compensation for their employees who suffer work-related injuries. Respondent was, on September 12, 2011, an active Florida for-profit corporation. On September 12, 2011, Petitioner's investigator, Daniel G. Pfaff, conducted an inspection of a worksite at 333 Pablo Road, Ponte Vedra Beach, Florida. Mr. Pfaff did not testify at the hearing, and neither the Order nor the Request for Production provide a description of who Mr. Pfaff observed at the site or what they were doing, if anything. The record is silent as to the process by which Mr. Pfaff performed his investigation to determine Respondent’s status in the workers’ compensation system, or by which he received authorization to issue the Order and Request for Production. The Order required Respondent to cease all business operations statewide, and assessed a penalty equal to 1.5 times the amount the employer would have paid in premiums when applying the approved manual rates to the employer's payroll for the preceding three-year period, pursuant to section 440.107(7)(d). The Request for Production required Respondent to produce business records for the period from September 13, 2008, through September 12, 2011. At the hearing, Petitioner offered into evidence more than 1,200 pages of documents that were alleged to have been produced by Respondent in response to the Request for Production, consisting of, among other things, information provided by subcontractors and vendors, insurance certificates, tax forms, and bank records. The record contains no information regarding the date on which the documents were produced, the identity of the recipient of the documents, or the path the documents traveled before coming to rest on the desk of Mr. Mason two weeks prior to the final hearing. Although the pages are consecutively numbered, from page 0091 through page 1307, there was no indication of who numbered the pages, or when they were numbered.1/ The documents were used by Petitioner to prove the truth of the matters asserted therein, e.g., identity of employees, dates of employment, salaries, and workers’ compensation coverage. As will be discussed in the Conclusions of Law to follow, the documents are hearsay. The documents were received in evidence because they were reviewed by Mr. Mason in the performance of his duty as a penalty calculator. Mr. Mason, the only witness testifying, was not identified as Petitioner’s records custodian, and offered no testimony to suggest that he served in that capacity. The 1,200+ pages of documents were unaccompanied by any form of certification or declaration that might have substantiated their authenticity. Since Respondent did not appear at the final hearing, the documents were not authenticated, nor is there a foundation for determining that the records meet any exception to the hearsay rule. The undersigned has no doubt that Mr. Mason diligently performed his duty in reviewing the records that were provided to him and applying the various manuals and class codes that are routinely used by the Division in imputing income and calculating penalties for an employer’s failure to secure the payment of workers' compensation. However, given the lack of any contemporaneous or documented evidence as to the manner in which those documents were produced, or how they were stored, kept, and maintained by Petitioner, it is found that the documents introduced in evidence, without more, do not provide clear and convincing evidence that Respondent violated the Workers' Compensation Law during the period of September 13, 2008, through September 12, 2011, as alleged in the 3rd Amended Order. See Hunter v. Aurora Loan Servs., LLC, 137 So. 3d 570 (Fla. 1st DCA 2014); Mazine v. M&I Bank, 67 So. 3d 1129 (Fla. 1st DCA 2011); Scott v. Dep’t of Prof’l Reg., 603 So. 2d 519 (Fla. 1st DCA 1992); Doran v. Dep’t of HRS, 558 So. 2d 87 (Fla. 1st DCA 1990); Juste v. Dep’t HRS, 520 So. 2d 69 (Fla. 1st DCA 1988). Finally, the records introduced by Petitioner include a document entitled “Answer,” which contains a number of hearsay statements that, if proven to be from Respondent, could be construed as an admission of liability for penalties in the amount of $7,324.98. However, the document does not bear a signature and, as with the other records described herein, has an insufficient evidentiary foundation upon which to base a finding that the document is authentic.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order dismissing the Stop-Work Order and 3rd Amended Order of Penalty Assessment against Respondent, The Ford Company Construction, Inc., for its failure to secure and maintain required workers’ compensation insurance for its employees. DONE AND ENTERED this 23rd day of September, 2015, in Tallahassee, Leon County, Florida. S E. GARY EARLY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of September, 2015.
The Issue Whether Respondent committed the violation alleged in the Administrative Complaint, and, if so, what disciplinary action should be taken against him.
Findings Of Fact Based upon the evidence adduced at the final hearing and the record as a whole, including the admissions made by Respondent in the Joint Response to Pre-Hearing Order, the following findings of fact are made: At all times material to the instant case, Respondent was a Florida-licensed real estate salesperson. Since June of 2002, Respondent has been a Florida- licensed real estate broker. Respondent is a convicted felon as a result of a single felony conviction. 3/ In 2000, Respondent was involved in a real estate transaction in which he was the buyer. The property that was the subject of the transaction was located at 119 Hammocks Drive in West Palm Beach, Florida. The transaction was closed through a title company, Cypress Title Company (Cypress). The closing took place on May 15, 2000. Cypress was represented at the May 15, 2000, closing by Susan Anderson, a marketing representative with Cypress who conducted closings (approximately five or six a month) as part of her job responsibilities. Ms. Anderson had two years experience conducting closings at the time of the May 15, 2000, closing. At each closing at which she represented Cypress, Ms. Anderson was responsible for, among other things, collecting the funds necessary to effectuate the closing and making the appropriate disbursements. It was Ms. Anderson's routine practice, before turning a closing file over to Cypress' "post closer" following a closing, to "make sure [that] everything [that needed to be in the file was] there." Prior to the May 15, 2000, closing, Respondent was contacted by "someone from Cypress" and instructed to bring to the closing a cashier's check in the amount of $3,684.64 made payable to himself. Respondent was advised that the $3,684.64 represented an "estimate" of the amount he needed to pay from his own funds to close the transaction. On May 15, 2000, prior to the time of the closing, Respondent went to Bank United, where he had an account, and purchased a cashier's check in the amount of $3,684.64 made payable to himself, as he had been instructed to do. Respondent brought the cashier's check to the closing. At the closing, Respondent endorsed the check with his signature, underneath which he wrote, in accordance with his routine practice when endorsing checks, the number of his account at Bank United. He then handed the cashier's check to Ms. Anderson. The actual amount due from Respondent was $3,670.04, $14.64 less than the amount of the cashier's check. Accordingly, Ms. Anderson gave Respondent a check for $14.64. Following the closing, Ms. Anderson examined the closing file (in accordance with her routine practice). In doing so, it did not "come to [her] attention that the [cashier's] check [that Respondent had brought to the closing] was not there." After conducting such an examination, she gave the closing file to the "post-closer." The cashier's check that Respondent had given to Ms. Anderson at the May 15, 2000, closing was cashed at Bank United on May 17, 2000, by someone other than Respondent or Ms. Anderson. Pursuant to Bank United policy, "[o]nly the payee can cash [a cashier's] check." Bank United tellers are supposed to ask for a "picture ID" when a cashier's check is presented for cashing. There have been tellers at the bank, however, who have not followed this policy and, as a result, have been counseled or disciplined. 4/ Approximately, two months after the May 15, 2000, closing, Cypress' owner approached Ms. Anderson and told her that there was no proceeds check from Respondent in the closing file. Ms. Anderson was asked to contact Respondent to inquire about the matter, which she did. Respondent was initially "very cooperative." He gave Ms. Anderson his "account number [at Bank United] and [the name of a person] to call at the bank." Using the information Respondent had provided, Ms. Anderson was able to obtain a copy of the cashier's check that Respondent had given to Ms. Anderson at the closing and that subsequently had been cashed at Bank United. Kevin Wilkinson, an attorney acting on behalf of Cypress, also contacted Respondent. Mr. Wilkinson's tone, in Respondent's view, was accusatory and threatening. Respondent's response to Mr. Wilkinson's "aggressive[ness]" was to stop cooperating with Cypress.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Commission issue a final order dismissing the instant Administrative Complaint. DONE AND ENTERED this 28th day of January, 2003, in Tallahassee, Leon County, Florida. STUART M. LERNER 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 28th day of January, 2003.
The Issue The issue is whether Petitioner properly issued a Stop-Work Order and 2nd Amended Order of Penalty Assessment against Respondent for failing to obtain workers’ compensation insurance that meets the requirements of chapter 440, Florida Statutes.
Findings Of Fact The Division is a component of the Department of Financial Services. It is responsible for enforcing the workers’ compensation coverage requirements pursuant to section 440.107. Escobar Marbol is a Florida company specializing in the installation of marble and tile, founded approximately 15 years ago. Escobar Marbol’s office is located at 20792 Southwest 129th Place, Miami, Florida 33177. Respondent was actively engaged in performing tile installation during the two-year audit period from March 4, 2013, through March 3, 2015. On March 3, 2015, while Escobar Marbol was working on a construction jobsite, the Division issued Respondent a Stop-Work Order for Respondent’s failure to secure the required workers’ compensation insurance coverage. Petitioner also served Respondent a Request of Business Records for Penalty Assessment Calculation (“Request”) asking for documentation to enable the Division to determine the appropriate penalty owed by Escobar Marbol. Escobar Marbol responded to the Request for records and provided the Division with SunTrust bank statements and check images. Nathaniel Hatten (“Hatten”), penalty auditor for the Division, was assigned to Escobar Marbol’s investigation. Hatten reviewed the business records provided and properly determined that Respondent paid Edgar Betanco, Odir Garcia, Raynaldo Remero, Daniel Escobar, Edwin Castro, and Luis Oswaldo Rodriquez for assisting with or installing tile for Escobar Marbol during the penalty period of March 4, 2013, through March 3, 2015. Hatten also concluded that Respondent failed to pay the workers’ compensation premium during the penalty period, two years prior to the Stop-Work Order. Hatten properly calculated the workers' compensation amount Escobar Marbol owed in workers’ compensation insurance for the audit period using the Class Code 5348 for tile installation work. Hatten applied the approved manual rates and methodology specified in section 440.107(7)(d) and concluded Escobar Marbol owed a penalty amount of $18,439.68. On June 10, 2015, the Division served Respondent the 2nd Amended Order of Penalty Assessment in the amount of $18,439.68. At the hearing, Escobar testified he thought an exemption was in place to cover Escobar Marbol because on March 18, 2013, Escobar had submitted an electronic Notice of Election to Be Exempt application with the Division’s online system requesting an exemption from chapter 440. Respondent paid $51.00 by credit card and received a receipt bearing the transaction confirmation number 145485197 upon applying. Respondent’s March 18, 2013, electronic application incorrectly listed the scope of business as a licensed building contractor. The incorrect scope caused the Division to deem the application incomplete, and it was not approved. According to the Division’s online application event summary, the Division generated an incomplete exemption application letter on March 20, 2013, to mail to and inform Respondent that his exemption application was not complete and therefore not approved. On September 3, 2013, Respondent submitted a completed application that corrected and changed the scope from licensed building contractor to marble, tile and flooring, which matched Escobar Marbol’s old exemption scope. The Division determined that the application was complete in its entirety and met the requirements of being issued an exemption. On September 4, 2013, the Division processed and issued Escobar an exemption. Respondent was without an exemption from April 13, 2013, to September 3, 2013. On June 30, 2015, Respondent challenged the Stop-Work Order and 2nd Amended Order of Penalty Assessment and requested a formal hearing.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services, Division of Workers’ Compensation, issue a final order affirming the Stop-Work Order and 2nd Amended Order of Penalty Assessment in the amount of $18,439.68. DONE AND ENTERED this 24th day of November, 2015, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of November, 2015. COPIES FURNISHED: Laureano Cancio, Esquire Law Office of Laureano Cancio 815 Ponce de Leon Boulevard, Suite 317 Coral Gables, Florida 33134 (eServed) Alexander Brick, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
The Issue The issue in this case is whether StorageTek or Memorex was the lowest responsive and responsible bidder for the BOR's Invitation to Bid No. K-1178-3, issued as agent for the Northwest Regional Data Center for the purchase of certain data processing equipment.
Findings Of Fact Based on the stipulations of the parties, the testimony of the witnesses, and the exhibits admitted into evidence, I make the following findings of fact: The Florida State University Purchasing Department, acting as agent for the Northwest Regional Data Center ("NWRDC") issued an Invitation to Bid for a contract to supply and service certain computer memory storage equipment to NWRDC. NWRDC is a data processing center under the direct jurisdiction of the BOR. StorageTek and Memorex are both vendors of data processing equipment such as that specified in the BOR's Invitation to Bid No. K-1178-3 ("the ITB"). StorageTek is presently operating --its business as a going concern and a debtor- in-possession under Chapter 11 of the Bankruptcy Code. Memorex is a wholly owned subsidiary of the Burroughs Corporation. In addition to the specification of certain data processing equipment, the ITB required 5 years of maintenance for the equipment to be supplied by the vendor. StorageTek and Memorex both filed timely responses to the ITB which were responsive to the technical portions of the ITB. Both bids contained a warranty of the bidder's ability to perform. The total prices of the StorageTek and Memorex bids were $892,293.00 and $1,026,919.00, respectively. The BOR preliminarily disqualified the StorageTek bid for failure to satisfy the financial capability requirements of the ITB and proposed to award the contract to Memorex. StorageTek timely filed its Notice of Protest and Formal Written Protest, asserting it met the financial capability requirements of the ITB and challenging the responsiveness of the Memorex bid to those same requirements. Section II, Paragraph B, of the ITB provides with regard to financial capability: Financial Capability of Prospective Vendors: The successful vendor must be financially sound and well managed, in accordance with Paragraph I. of this section. Prospective vendors are required to supply certified annual report(s) or statement(s) of their financial position for the last two years as part of their bids. These statements must be certified by an independent auditor's report as to their completeness and accuracy. Any other relevant references or documentation may also be supplied. Paragraph I, which is incorporated by reference in this financial capability provision of the ITB, provides: Vendor Warranty of Ability to Perform: Vendor warrants that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or, to the best of vendor's knowledge, threatened which would in any way prohibit, restrain or enjoin the execution or delivery of the vendor's obligations or diminish the vendor's financial ability to perform the terms of the proposed contract. In addition, the ITB makes it the responsibility of each vendor to "provide adequate documentation to substantiate all claims for . . . compliance" with the specifications and requirements of the ITB. In response to the request for statements of their financial position in the financial capability portion of the ITB, StorageTek supplied the Form 10- K Annual Reports filed with the Securities and Exchange Commission for the fiscal years ended December 28, 1984, and December 27, 1985, ("the 1984 and 1985 10 K Reports"). Although StorageTek had more current information than that contained in the 1984 and 1985 10-K Reports regarding the status of its Chapter 11 proceeding and other pending legal actions at the time it submitted its bid to the BOR, StorageTek chose not to supply that information in its bid even though such information could have been included pursuant to Section II, B.1, of the ITB. The 1984 and 1985 10-K Reports were prepared by StorageTek management and included consolidated financial statements of StorageTek and its subsidiaries. These financial statements, which were certified by the Denver, Colorado, office of Price Waterhouse, indicate: StorageTek has incurred net losses over the last three fiscal years aggregating $603,758,000. As of December 27, 1985, StorageTek had an accumulated deficit of $318,413,000. StorageTek is presently operating its business as a going concern and a debtor in possession under Chapter 11 of the Bankruptcy Act. StorageTek is involved in a number of legal proceedings, several of which "could have a material adverse effect on the Company's financial position and operations" if the plaintiffs' claims are sustained. The Securities and Exchange Commission is conducting a private investigation to determine whether StorageTek or any of its officers, directors or agents engaged in fraudulent or deceptive acts, practices or courses of business in connection with the issuance of any of its securities, the filing or publication of any of its periodic reports to stockholders or reports filed with the Securities and Exchange Commission or the keeping and maintaining of its books and records. The Internal Revenue Service ("IRS") is examining StorageTek's federal income tax returns for the years 1979 through 1984. If all issues presently under discussion between the IRS and StorageTek were to result in assessments, and if such assessments were ultimately sustained, the resulting liability for additional tax and interest would be substantially higher than the recorded liabilities. Also, any IRS claims that are ultimately sustained would be priority claims pursuant to Section 507 of the Bankruptcy Code. As a result of StorageTek's "financial diffi- culties" and its Chapter 11 proceedings, StorageTek may be subject to additional lawsuits or governmental proceedings, the effect of which cannot be determined at this time. The consolidated financial statements were prepared on the basis of generally accepted accounting principles applicable to a going concern, which assume realization of assets and payment of liabilities in the normal course of business. There are a number of "significant uncertainties" that threaten StorageTek's continued existence and, therefore, its ability to realize its assets and to discharge its liabilities in the ordinary course of business. Using generally accepted auditing standards, Price Waterhouse rendered an opinion on February 28, 1986, which provides in pertinent part: As shown in the consolidated financial state- ments, during the three years ended December 27, 1985 the Company incurred net losses aggregating $603,758,000 and at December 27, 1985 had an accumulated deficit of $318,413,000. These factors, among others including those discussed in the preceding paragraph, indicate that the Company may be unable to continue in existence. In rendering the above-quoted opinion, Price Waterhouse considered all of the information contained in the 1985 10-K Report, including the fact that the information in that report did not reflect the effects of the Chapter 11 proceedings. Price Waterhouse also considered other factors made known to it, such as: Certain financial information regarding StorageTek from its operations in early 1986; StorageTek's 1985 fourth quarter profits; StorageTek's unencumbered cash balance of $202 million at the end of 1985; StorageTek's ability to generate cash from its various operations; The lack of a formulated and confirmed plan for StorageTek's reorganization in its Chapter 11 bankruptcy proceedings; and The fact that it would be fairly difficult for StorageTek to obtain long-term financing given its present financial condition. Although the directors' and officers' liability insurance and partnership liability insurance may diminish the impact on StorageTek of several of the pending legal actions, the existence of those insurance policies is reflected in the 1985 10-K Report and was considered by Price Waterhouse when rendering its opinion that the company may be unable to continue in existence. Also, StorageTek admits that it cannot give an assurance that the pending litigation will not have a material adverse effect on its financial position and operations. The most significant uncertainty which formed a basis for the opinion of Price Waterhouse quoted in paragraph 12 above is that StorageTek's historical information results in uncertainty as to whether StorageTek will be able to return to profitable operations. If StorageTek did not continue to exist, the 5 years of maintenance required by the ITB could not be performed by StorageTek and spare parts for the data processing equipment may not be available. In response to the request for statements of its financial position in the financial capability portion of the ITB, Memorex supplied annual reports of its parent, the Burroughs Corporation, for 1984 and 1985 (the "1984 and 1985 Annual Reports"). The 1984 and 1985 Annual Reports contain consolidated financial statements of Burroughs Corporation, and its subsidiaries, including Memorex. These financial statements, which were certified by the Detroit, Michigan, office of Price Waterhouse, indicate: Burroughs and its subsidiaries have earned net income over the last three fiscal years aggregating $690,000,000. As of December 31, 1985, Burroughs and its subsidiaries had accumulated retained earnings of $1,872,400,000. There are no outstanding legal actions or claims that are material to the consolidated financial position of Burroughs and its subsidiaries. Using generally accepted auditing standards, Price Waterhouse rendered the following opinion on January 20, 1986: In our opinion, the accompanying consolidated financial statements [in the 1985 Annual Report] present fairly the financial position of Burroughs Corporation and subsidiary companies . . . in conformity with generally accepted accounting principles consistently applied. Memorex is a substantial subsidiary of the Burroughs Corporation. If there were any pending or threatened legal actions or claims against Memorex, the outcome of which would threaten Memorex's ability to perform under the contract described in the BOR's Invitation to Bid No. K-1178- 3, Price Waterhouse would have been required by generally accepted auditing standards to ensure that appropriate disclosure was made of that contingency in the consolidated financial statements of the Burroughs Corporation and its subsidiaries, unless the auditors were satisfied that the contingency was provided for otherwise, such as through a guaranty by the parent corporation. Financial statements for Memorex, other than in consolidated form with Burroughs Corporation and its subsidiaries, are usually confidential and not available to the public. The ITB expressly instructs vendors not to submit confidential information since bid responses become public documents after the bid opening. It is a common practice in the industry for a wholly owned subsidiary to submit the consolidated financial statements of its parent when an invitation to bid requests the subsidiary vendor to provide financial information.
Recommendation Based on all of the foregoing, I recommend the entry of a Final Order awarding the contract for BOR Invitation to Bid No. K-1178-3 to Memorex. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-2229BID The following are my specific rulings on each of the proposed findings of fact submitted by each of the parties. Rulings on findings proposed by Petitioner Paragraphs 1, 2, 3, 4, 5, 6, 11, and 16: The findings proposed in these paragraphs have all been accepted. Paragraph 7: Accepted in part and rejected in part. Rejected portions are irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraph 8: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Unnumbered paragraph between paragraphs 8 and 9: Accepted. Paragraph 9 and the two unnumbered paragraphs between paragraphs 9 and 10: The majority of the findings proposed in this paragraph are rejected as irrelevant and subordinate to the extent they deal with matters not incorporated into Petitioner's bid response. Paragraph 10: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraph 12: Accepted in substance. Paragraph 13: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Paragraphs 14 and 15 and intervening unnumbered paragraph: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Also rejected in large part because it incorporates inferences not warranted by the greater weight of the evidence. Paragraph 17: Rejected as constituting irrelevant and subordinate details that are unnecessary to the disposition of this case. Also rejected in large part because it incorporates inferences not warranted by the greater weight of the evidence. Paragraph 18: Rejected as irrelevant and unnecessary. Rulings on findings proposed by Respondent The Respondent adopted the proposed findings of fact submitted by the Intervenor and did not propose any additional findings. Rulings on findings proposed by Intervenor All of the proposed findings of fact submitted by the Intervenor have been accepted with a few minor editorial modifications. DONE AND ORDERED this 4th day of September, 1986, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of September, 1986. COPIES FURNISHED: F. Perry Odom, Esquire ERVIN, VARN, JACOBS, ODOM & KITCHEN P. O. Drawer 1170 Tallahassee, Florida 32302 Patti A. Jackson, Esquire Assistant General Counsel Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 Carolyn S. Raepple, Esquire HOPPING BOYD GREEN & SAMS Post Office Box 6526 Tallahassee, Florida 32314-6526 Mr. Charles Reed, Chancellor Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 Mr. George Bedell Executive Vice-Chancellor Board of Regents 107 West Gaines Street Tallahassee, Florida 32301-8033 ================================================================= AGENCY FINAL ORDER =================================================================
The Issue Whether Respondent's sales and use Certificate of Registration should be revoked for failure to abide by the repayment terms agreed to in a Compliance Agreement entered into with Petitioner on August 29, 2013, as alleged in the Amended Administrative Complaint for Revocation of Certificate of Registration.
Findings Of Fact The Department is the state agency charged with administering and enforcing Florida's revenue laws, including the laws related to the imposition and collection of sales and use tax pursuant to chapter 212, Florida Statutes (2014). Respondent is a Florida Profit Corporation doing business at 90791 Old Highway, Unit 1, Tavernier, Florida 33037. Respondent is a "dealer" as defined in section 212.06(2) and is required to comply with chapter 212. Respondent holds Certificate of Registration number 54- 8013269710-0 issued by the Department. A certificate of registration is required in order to do business in the state of Florida and authorizes its holder to collect and remit sales tax pursuant to chapter 212. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. Prior to such revocation, the Department is required by statute to schedule a conference with the dealer. The dealer is required to attend the informal conference and may either present evidence to refute the Department's allegations of noncompliance or to enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. The Department issued and recorded warrants in the public records of Monroe County to secure collection of delinquent sales and use tax, plus penalties, filing fees, and interest from Respondent.1/ The Department initiated the process of revoking Respondent's Certificate of Registration by sending Respondent a Notice of Conference on Revocation of Certificate of Registration (Notice of Conference). The Notice of Conference advised that the informal conference would be held on August 29, 2013, and that the Department had initiated the process to revoke Respondent's Certificate of Registration for failure to remit sales and use tax and pay the reemployment tax that was determined to be due. The notice also informed Respondent that it would have the opportunity to make payment or present evidence to demonstrate why the Department should not revoke Respondent's Certificate of Registration. Respondent's President and Registered Agent, Spencer Slate, attended the informal conference on behalf of Respondent and entered into a Compliance Agreement with the Department. During the informal conference, Mr. Slate admitted to using the collected tax to pay for Respondent's payroll, fuel, and other business expenses instead of remitting the tax to the State. The Compliance Agreement states that due to Respondent's failure to timely file returns and pay all taxes due, Respondent admits to a past due sales and use tax liability of $51,506.55, consisting of tax, penalty, interest, and fees. The Compliance Agreement requires Respondent to make a down payment of $16,349.14 by August 29, 2013, and to make 12 monthly payments. The Compliance Agreement also provides that: IN CONSIDERATION for the Department refraining from pursuing revocation proceedings at this time, the taxpayer agrees: * * * To accurately complete and timely file all required returns and reports for the next 12 months, beginning with the first return/report due for 08/31/2013, payable on or before 09/20/2013. To timely remit all taxes due for the next 12 months, following the date of this agreement. Respondent made the down payment of $16,349.14, as required by the Compliance Agreement, and the first four scheduled payments, but defaulted on the terms of the Compliance Agreement as follows: Failed to make the monthly payments due, beginning with the fifth payment. Failed to timely remit taxes due for September 2013, October 2013, and November 2013. In addition, the payment for sales tax due September 2013 was returned due to insufficient funds. Failed to timely file sales and use tax returns and remit the taxes due for the tax periods May 2014, June 2014, and July 2014. The Compliance Agreement provides that "[i]f the taxpayer fails to comply with any obligation under this agreement, the Department has the right to pursue revocation of the taxpayer's certificate of registration." As provided by the Department's revocation worksheet dated December 5, 2014, Respondent currently has an outstanding sales and use tax liability in the amount of $67,501.98 and reemployment tax liability of $667.08, including tax, penalty, interest, and fees.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Revenue revoking the Certificate of Registration issued to and held by Respondent. DONE AND ENTERED this 30th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of January, 2015.
The Issue The issues are whether Respondents committed the offenses set forth in the Administrative Complaint, and if so, what disciplinary action should be taken.
Findings Of Fact Based on the evidence presented at the hearing, the undersigned makes the following findings of fact: At all times material to this proceeding, Mrs. Bashant held a Florida real estate salesperson license, number 0551150, which was involuntarily inactive. At all times material to this proceeding, Mr. Bashant held a Florida real estate broker license, number 0419768, which was involuntarily inactive. At all times material to this proceeding, Mr. Bashant was the broker of record for The Real Estate Group, Inc., a corporation which was no longer in business and which had no escrow accounts. The corporation's license to do business as a real estate agency has been inactive since May 12, 1993. Florida's Department of State, Division of Corporations, administratively dissolved the corporation on August 13, 1993. On December 8, 1993, Mr. Bashant executed a written offer to purchase a house belonging to John and Carolyn DelPrete (Sellers). The Bashants wanted to buy the house, located at 194 North East Blairwood Terrace, Jensen Beach, Martin County, Florida, as their personal residence. Mr. Bashant gave the written offer to Stacy Mathias (Mathias), who was the Sellers' exclusive listing agent. The offer called for an initial cash deposit of $1,000 and an additional payment of $9,000 in the form of a promissory note, payable at closing. The $1,000 cash deposit was to be held in trust by the Real Estate Group, Inc. This first offer reflects that the buyers rather than the sellers would pay for title insurance. Mr. Bashant never intended to make a $1,000 cash deposit in any escrow account or to make and deliver a $9,000 promissory note at closing. Instead, he only intended to execute and deliver a $10,000 promissory note at closing. He executed a $10,000 promissory note but did not deliver it to anyone until he gave it to his attorney in January of 1994. Sometime between December 8, 1993 and December 14, 1993, Mathias presented the offer to the Sellers. They would not agree to accept the $9,000 promissory note at closing. The Sellers also wanted to make certain other changes and additions to the contract. Mathias prepared a second draft of the original offer which required an initial cash deposit of $1,000 to be held in escrow by The Real Estate Group, Inc. It also required an additional $9,000 cash deposit to be placed in escrow within ten (10) days after the effective date of the contract. The second draft of the offer did not include any language referring to a promissory note payable at closing. In the second draft, seller was responsible for providing title insurance. After receiving the second draft of the contract, the Bashants added and initialed a change in paragraph II(b) stating that a $9,000 promissory note would be paid at closing. The Bashants also made and initialed three other changes: (a) They added the master bedroom bedspread to the list of personalty in paragraph I(c); (b) They added "+ or -" to the finance amount in paragraph II(e); and (c) They added "+ or -" to the finance amount in IV(a). The Bashants signed and returned the contract to Mathias. They did not date their signatures. Mathias presented the contract to the Sellers who initialed the changes in paragraphs II(e) and IV(a). However, the Sellers struck through the language adding the master bedroom bedspread in paragraph I(c) and the promissory note language in paragraph II(b). The Sellers changed the party responsible for providing title insurance to buyer rather than seller and changed the time for acceptance from December 14, 1993 to December 15, 1993. On December 14, 1993, the Sellers initialed their changes and deletions, signed the contact, and returned it to Mathias. Mathias called Mr. Bashant on the telephone to discuss each of the changes. She specifically told Mr. Bashant that the Sellers would not accept a promissory note at closing. Mr. Bashant responded that he had no problem eliminating the promissory note language because he had just sold some cars and had the money to make the cash deposits. He agreed to initial the changes and pick up the contract. On December 15, 1993, Mathias delivered the contract to the Bashants. They initialed the change crossing out the bedspread in paragraph I(c). They did not initial the change eliminating the promissory note language in paragraph II(b), the change requiring the buyer to pay for title insurance in paragraph V, or the change setting December 15, 1993, as the time for acceptance in paragraph III. The Bashants added and initialed a provision requiring the Seller to pay $500 towards the cost of the title insurance in paragraph V. On December 16, 1993, the Bashants returned the contract to Mathias. Mathias told the Sellers about the last change requiring them to pay $500 towards title insurance. The Sellers would not agree to this provision. Therefore, Mathias agreed to pay $500 towards the cost of the title insurance to save the sale. With that understanding, the Sellers initialed the final change in the title insurance provision. Mathias never reduced to writing the agreement that she would pay $500 towards the cost of title insurance; however, she informed Mr. Bashant of her responsibility and he expressed no objection. The contract was contingent on the Bashants obtaining financing and being able to construct a 15' by 30' pool on the property. As of December 16, 1993, Mathias and the Sellers assumed that the contract was bilateral. Mathias never specifically asked the Bashants to initial the deleted promissory note language, the change in the time for acceptance, or the change in the party responsible for providing title insurance. Mr. Bashant told Mathias he would provide her with copies of the checks that he had deposited in escrow. He did nothing to correct the false impression that he had made the cash deposits. Sometime during December of 1993, the Sellers returned a cash deposit to potential buyers who had a preexisting right of first refusal to buy the Sellers' home. The record does not reveal a specific reason for the couple's decision not to exercise their option to purchase the Sellers' home. On December 23, 1993, Mrs. Bashant took several members of her family to see the Sellers' home. Mr. Bashant was not present at the time they made the visit. Shortly after January 1, 1994, the Bashants picked up a survey of the Seller's home from Mathias's office. The Bashants needed the survey to assist them in determining whether they could construct a 15' by 30' pool on the property. On January 4, 1994, Mr. Bashant faxed a message to Mathias stating that the pool could not be built as suggested by the Sellers because of a 25' buffer on the back side of the property. The message stated that Mr. Bashant would check on alternatives but that he wanted Mathias to be aware of the problem. Mr. Bashant also asked Mathias to send him a copy of the "bilateral contract." On or before January 5, 1994, Mathias talked to Mr. Bashant who said he would pick up a copy of the "bilateral contract" and give her a copy of the checks he had deposited in escrow. Later that day, a friend of the Bashants, Al Fontaine, picked up a copy of the contract for Mr. Bashant. Mr. Fontaine informed Mathias that he did not have the deposit check copies but that Mr. Bashant would furnish them. On January 13, 1994, Mr. Bashant told Mathias he would apply to the county for a variance to construct the pool. Mathias informed Mr. Bashant that another real estate agent, Carol Pierson, had clients who were interested in buying the property. Mr. Bashant replied that he was willing to step aside if someone else wanted to purchase the property. Carol Pierson took her clients to view the house. These clients were former prospective buyers who had recently received a settlement and were interested in purchasing a home immediately. They knew about the contract between the Bashants and the Sellers. Either no one ever informed the prospective buyers that the Bashants were willing to step aside or they were not interested in buying the house. In any event, they never made an offer. On January 19, 1994, Mathias sent Mr. Bashant a letter informing him that the prospective buyers had not made an offer. She assumed Mr. Bashant was working on the variance for the pool and reminded him that he had not produced copies of the checks deposited in escrow. On January 22, 1994, Mathias sent Mr. Bashant another letter demanding evidence that he had deposited the funds into the escrow account. Mathias advised Mr. Bashant that she intended to file a complaint with the Florida Real Estate Commission (Commission) failing the production of such evidence. On January 24, 1994, Mathias received a letter from Mr. Bashant stating that he understood the contract to be void when Carol Pierson's clients viewed the house. He informed Mathias of his attorney's opinion that the contract was null and void because of certain dates and signatures. Mr. Bashant enclosed a copy of a letter from Coral Gables Federal denying approval of the loan due to insufficient income. On January 27, 1994, the Sellers' attorney sent letters to the Bashants and The Real Estate Group, Inc., demanding a closing date or $10,000. On February 8, 1994, the Bashants' attorney responded claiming that contract contingencies had not been met and that the parties never agreed to the form of deposit. After Mathias filed a complaint with the Commission, Jonathan Platt, Petitioner's investigator, called the Bashants. He spoke with Mrs. Bashant who referred him to her husband. Mr. Bashant admitted that The Real Estate Group, Inc., was inactive and that naming it as the escrow agent was his mistake. He admitted that he had not deposited any funds in escrow. The record does not contain clear and convincing evidence that the Sellers lost potential buyers as a result of dealing with the Bashants. For some unspecified reason, one couple declined to exercise their option to buy and requested a refund of their deposit; however, no one contacted this couple when it became apparent that the sale to the Bashants would not close. Carol Pierson's clients looked at the house but, for some unknown reason, did not make an offer. Mathias never told Ms. Pierson that her clients could not make an offer or that the Bashants were willing to step aside. 34 During the period from December 16, 1993 through January 24, 1994, Mr. Bashant misrepresented and concealed his intentions concerning the contract. He never intended to deposit funds in escrow but he let Mathias believe he had made the deposits. The contract was improperly executed because the parties had not agreed in writing on the form of the escrow deposits. However, Mr. Bashant knowingly made false promises and operated under false pretenses by telling Mathias he would furnish her with copies of checks that did not exist. Mrs. Bashant signed the contract but never had any discussions with Mathias concerning the terms. There is no record evidence that Mrs. Bashant was aware of or participated in her husband's representations and promises to Mathias. On May 31, 1991, the Commission entered a final order against Mr. Bashant and the Real Estate Group, Inc. The Commission reprimanded Mr. Bashant's license, fined him, and placed him on one (1) year of probation for violation of Sections 475.25(1)(b), 475.25(1)(e), and 475.25(1)(k), Florida Statutes (1989). The basis of this disciplinary action included Mr. Bashant's failure to maintain trust funds and depositing and intermingling personal funds with trust funds.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Commission enter a Final Order finding that: (1) Respondent Diana L. Bashant is not guilty of violating any Florida statute; and (2) Respondent Gregory J. Bashant is guilty of violating Sections 475.24(1)(b) and 475.24(1)(o), Florida Statutes. It is further recommended that the Commission require Respondent Gregory J. Bashant to pay an administrative fine of $2,000 and revoke his license. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 19th day of December,1994. SUZANNE F. HOOD, Hearing Officer 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 19th day of December 1994. APPENDIX The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact (FOF) submitted by the parties to this case. Petitioner's Proposed Findings of Fact 1-2. Accepted in FOF 1-2 except for subordinate information. 3-4. Accepted in FOF 4-5 except for subordinate information. 5. Accepted in FOF 3. 6-7. Accepted as modified in FOF 6. Accepted in FOF 7-8. Accepted in FOF 11 except as to placement in sequence of events 10-13. Accepted in substance in FOF 12-16. 14-25. Accepted in substance in FOF 19-32. Rejected. Accepted as modified in FOF 34. Accepted in FOF 36. Considered as an argument concerning the credibility of a witness. Respondent's Proposed Findings of Fact 1-2. Accepted in FOF 1-2. Accepted in substance in FOF 4-5. Accepted as subordinate information. There is no competent substantial evidence that Mr. Bashant ever presented a copy of Respondent's Exhibit 1 to Mathias. Rejected; no persuasive competent substantial evidence. Accepted in FOF 3. Accepted as subordinate information. Accept that Mr. Bashant prepared Petitioner's Exhibit 1 in FOF 4-5; balance of proposed finding not supported by persuasive competent substantial evidence. 9-13. Accepted in substance in FOF 8-13. Accepted in FOF 22-23. Accepted in substance in FOF 20. Accepted in FOF 21. Accepted in substance in FOF 24-25. Accepted in substance in FOF 24-25 except there is no persuasive competent substantial evidence that Mr. Bashant disclosed a financial problem at that time. 19-20. Accepted in substance in FOF 24-25. 21-22. Accepted in FOF 28 except for accuracy of January 29 date. Accepted in FOF 30. Accepted in FOF 35. COPIES FURNISHED: Theodore R. Gay, Esquire Senior Attorney Department of Business and Professional Regulation 401 North West 2nd Avenue, N607 Miami, Florida 33128 William D. Anderson, Esquire Anderson & Galante Post Office Box 288 Stuart, Florida 34995 Darlene F. Keller Division Director Division of Real Estate Department of Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Jack McRay General Counsel Department of Business and Professional Regulation Suite 60 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue Whether Commercial Carrier Corporation (Petitioner), has the financial strength necessary to ensure the timely payment of all current and future workers' compensation claims in the State of Florida; Whether Petitioner has maintained a net worth of at least $1 million during the period 1999 to 2004; and Whether Petitioner shall post an additional qualifying security deposit to remain qualified to self-insure and the amount of the additional security deposit to be posted.
Findings Of Fact Upon careful consideration, it is found and determined as follows: Petitioner, Commercial Carrier Corporation, is a privately-owned trucking company headquartered in Auburndale, Florida, which has been in business for over 50 years. Petitioner is one of five operating subsidiaries of Comcar Industries, Inc. (Comcar), whose primary business is truckload transportation of general and specialized commodities in the continental United States. Comcar routinely prepares consolidated financial statements reflecting the operations of all five subsidiary companies. Although Petitioner is the nominal Petitioner, Comcar is the de facto Petitioner in this proceeding. All of Comcar’s subsidiaries operate as self- insured in Florida. Petitioner has been self-insured for workers’ compensation in Florida since January 1, 1973. Pursuant to Florida law, Respondent has jurisdiction over Petitioner as a self-insured employer for purposes of workers’ compensation. Under Florida law, the general requirement is that employers must obtain and maintain workers’ compensation insurance coverage. The exception of this general requirement is found in Subsection 440.38(1)(b), Florida Statutes (2004), whereby an employer can seek to qualify to self-insure by "furnishing satisfactory proof to the Florida Self-Insurers Guaranty Association, Inc., . . . that it has the financial strength necessary to ensure the timely payment of all current and future claims[.]" FSIGA is a not-for-profit corporation established by Section 440.385, Florida Statutes (2004), to guarantee payment of the covered workers’ compensation claims by employees of self-insurers that become insolvent. Other than governmental entities and public utilities, all self-insurers, including Petitioner, must be members of FSIGA. FSIGA pays the covered claims of current and former insolvent self-insurer members to the extent an insolvent self-insurer’s security deposit is insufficient. An insolvency fund is established and managed by FSIGA for the purpose of meeting the obligations of insolvent members after exhaustion of any security deposit. The insolvency fund is funded by assessments from members of FSIGA. Accordingly, FSIGA and all of its members share an interest in ensuring adherence to the legislative standard that only financially strong employers are granted the privilege to self- insure. To maintain self-insurer status, an employer must submit annual financial statements no later than four months following the end of the self-insured’s fiscal year and furnish satisfactory proof to FSIGA that it has the financial strength necessary to ensure timely payment of all current and future claims. The financial statements that must be submitted to FSIGA for financial analysis must be prepared in accordance with the United States Generally Accepted Accounting Principles (GAAP). GAAP-prepared financial statements must show, at all times, a net worth of $1 million. The requirements of furnishing proof of the requisite financial strength and maintaining a net worth of at least $1 million, as shown on the employer’s financial statements, are continuing annual requirements to become and remain qualified to self-insure, and those requirements are applied equally to applicants and current members. FSIGA is required to review the financial strength of its current members. It makes recommendations to Respondent regarding the members’ continuing qualification to self-insure and the amount of security deposit that should be required of each member. If FSIGA determines that a current member does not have the financial strength necessary to ensure the timely payment of all current and estimated future claims, it may recommend that Respondent require an increase in the member’s security deposit. FSIGA operates under a statutorily-approved plan of operations. FSIGA’s plan of operation provides that its executive director has the responsibility to make FSIGA’s recommendations to Respondent. FSIGA’s recommendations are based upon a review of the financial information collected from member employers. It may include recommendations regarding the appropriate security deposit amount necessary for a self-insured employer to demonstrate that it has the financial strength to ensure timely payment of all current and future claims. Respondent is required to accept FSIGA’s recommendations unless it finds, by clear and convincing evidence, that the recommendations are erroneous. 2002 Financial Review of Petitioner Petitioner is currently a member of FSIGA and has posted a qualifying security deposit of $2,500,000.00. On October 2, 2002, Brian D. Gee, C.P.A., who is now FSIGA’s executive director, completed a review of Petitioner’s audited financial statements for 1999, 2000, and 2001. Gee was FSIGA's financial analyst, responsible for conducting financial reviews and developing information for FSIGA's executive director, to determine the financial strength of self-insured members and make recommendations to Respondent. Gee’s review of Petitioner’s financial statement consisted of an assessment of Petitioner’s liquidity, profitability, degree of leverage, liabilities compared to net worth, and cash flow generated by operations. He also reviewed the financial statements to determine if Petitioner was maintaining a net worth of at least $1 million. Gee concluded that Petitioner did not have the financial strength necessary to ensure the timely payment of current and estimated future workers’ compensation claims. On October 8, 2002, FSIGA's executive director forwarded a letter to the Division of Workers’ Compensation, Department of Insurance (now Respondent). He recommended to Respondent that Petitioner be ordered to increase its security deposit to 150 percent of actuarially determined loss reserves. FSIGA’s recommendations were reviewed by Cynthia Shaw, assistant general counsel for the Division of Workers’ Compensation. Shaw drafted a letter for signature by Mark Casteel, General Counsel for Respondent, which adopted FSIGA's recommendations. Casteel signed that letter dated October 28, 2002, without revision or discussion. Shaw, an attorney, has no financial background or expertise. Shaw did not perform any additional financial analysis. Additionally, since Respondent did not have a CPA firm under contract, FSIGA’s recommendation was not reviewed by anyone with financial background before being transmitted to Petitioner. Petitioner responded to the October 28, 2002, directive from Respondent by filing a petition requesting a formal administrative hearing. Petitioner failed to file financial statements with FSIGA within four months following the end of its 2000 and 2001 fiscal years. Petitioner’s failure to timely file financial reports for 2000 and 2001 was due to the fact that it was in default on certain loan covenants and was engaged in negotiations with its lenders. In 1999 and 2000, Petitioner incurred additional long-term debt to finance the purchase of a new fleet of trucks. Petitioner’s creditors had exercised their right for accelerated payment of the outstanding loan balances, which by the end of 2001, was approximately $205 million. In 2001 and 2002, Petitioner entered into negotiations with its creditors to amend and restate its loan agreements. In 2002, Petitioner implemented a business plan calling for the sale of non-core assets, reduction of long-term debt, and transition from purchasing to leasing truck tractors. In July 2002, Petitioner entered into amended and restated loan agreements with its creditors. In order to secure the amended and restated loan agreements, Petitioner was required to pay increased interest, pledge substantially all of its property to secure the loans, pay the lenders $3.3 million, provide certain lenders with warrants to acquire an equity interest in Petitioner under certain conditions and agree to restrictions on how it could use cash generated by its operations and asset sales. Petitioner timely made all principal and interest payments due pursuant to the restated credit agreement and maintained compliance with all required financial ratios and standards. Furthermore, Petitioner continued to timely pay all claims for current and estimated future claims under its workers’ compensation system. Following execution of the amended and restated loan agreements, Petitioner’s auditors prepared the financial statements of 2001, which Petitioner then filed with FSIGA. Separate audited financial statements for 2000 were never filed with FSIGA, although prior-year financial results were shown (without footnotes) on the audited 2001 financial statements. With respect to liquidity, Petitioner’s financial statements showed a current ratio (current assets divided by current liabilities) of 1.41 at December 28, 2001. It did not disclose that Petitioner had any available funds under its revolving credit line as of December 28, 2001. Although Petitioner’s current ratio was acceptable, further analysis raised serious concern regarding Petitioner’s financial strength. With respect to Petitioner’s capital structure, the financial statement review showed that Petitioner’s total liabilities-to-book-equity ratio deteriorated from 4.91 at December 1999 to 30.46 at December 28, 2001. This deterioration reasonably raised concern because Petitioner became much more heavily leveraged from 1999 to 2001, relying much more heavily on debt to fund its operations. FSIGA concluded, Petitioner’s financial statement showed a "very weak capital structure." The impact of the increasing reliance on debt was marked by the end of 2001, when the financial statements showed that Petitioner was in default of its debt covenants at December 28, 2001. To address its defaults, Petitioner entered into an agreement to restructure its debt by which the creditors waived the defaults in return for imposing additional restrictions on Petitioner as described in paragraph 20 above. Although Petitioner maintained a net worth of $11.1 million at the end of 2001, Petitioner’s net worth at the end of 2001 was significantly lower than its net worth of $74.8 million at the end of 2000. In addition, the financial statement review showed that Petitioner had incurred net losses of $24.2 million, $39.5 million, and $5.7 million for the years 2001, 2000, and 1999, respectively. These losses were substantial and raised significant concerns about Petitioner’s financial strength. The 2002 financial review of Petitioner also showed a substantial decline in Petitioner’s cash flow from operations, from positive $32.6 million for 1999 to negative $2.1 million for 2001. This meant that in 2001, Petitioner was spending more cash in its operating activities than it was collecting. At the time FSIGA made its recommendation to Respondent, neither FSIGA nor Respondent had current information from Petitioner regarding the amount of Petitioner’s net outstanding liability for workers’ compensation claims in Florida. This is because Petitioner failed to file the Form SI-20 report that had been due on August 31, 2002. From October 2002 until December 14, 2004, FSIGA and Respondent did not have accurate information in regard to the amount of Petitioner’s outstanding liability for workers’ compensation claims in Florida, because Petitioner did not file its required Forms SI-17 and SI-20 reports or provide an actuarial study. At the final hearing, Petitioner did not present evidence disputing the reasonableness of FSIGA’s 2002 assessment of Petitioner’s financial statements or of FSIGA’s conclusions based thereon regarding Petitioner’s lack of financial strength in 2002. Based on FSIGA’s analysis of Petitioner’s 2001 financial statements and the financial statements for the two preceding years, FSIGA reasonably concluded that Petitioner had not demonstrated that it had the financial strength to ensure payment of current and future workers’ compensation claims. Based on the information then available to it, FSIGA made the correct recommendation to Respondent. There was no clear and convincing evidence available to Respondent that demonstrates FSIGA's recommendation was erroneous, instead, the available evidence supports FSIGA’s recommendation. Accordingly, Respondent’s direction to Petitioner to provide an actuarial report and post additional security was reasonable and appropriate. Continuing Financial Review of Petitioner After 2002. In November 2002, Petitioner challenged Respondent’s determination and requested a formal administrative hearing. Petitioner requested that Respondent hold the petition in abeyance. The request was granted, and the petition was not filed with DOAH until July 9, 2004. During this period, Respondent re-examined Petitioner’s financial strength. Following its business plan, on January 16, 2004, Petitioner refinanced its debt. While there was conflicting testimony regarding whether the actual interest on the refinanced debt was lower than on the debt it replaced, it was undisputed that $30 million of the refinanced debt was carrying an interest rate of 19 percent. This is a higher rate than the nine-percent and 11-percent interest applicable to the earlier debt. It is undisputed that substantially all of Petitioner’s property is pledged to secure the 2004 refinanced indebtedness, and there continues to be restrictions on Petitioner’s use of cash generated by its operations. However, the 19-percent interest on a portion of the January 2004 refinancing has now caused Petitioner to go into the lending market to attempt to refinance its debt once again. Nevertheless, the refinancing of its long-term debt has reduced its financing costs. Since Respondent’s 2002 request that Petitioner provide an actuarial report and post an additional security deposit, FSIGA has reviewed Petitioner’s audited financial statements for the years ended December 27, 2002, and December 26, 2003, as well as Petitioner’s unaudited financial statements for the year ended December 31, 2004. The financial information received from Petitioner since the 2002 review has not resulted in FSIGA changing its 2002 recommendations. Petitioner’s 2002, 2003, and 2004 financial statements revealed that Petitioner’s net worth had fallen below the required $1 million in each of those three years. The 2002 and 2003 financial statements also show that Petitioner continued to experience net losses. Petitioner sustained a net loss of $12.1 million for the year ended December 27, 2002, and a net loss of $9.9 million for the year ended December 26, 2003. Petitioner’s cash flow statement shows a $4.8 million decrease in cash in 2002 and a $2 million decrease in cash in 2003. Petitioner’s 2004 unaudited financial statements indicate net income of $4.1 million for 2004. However, because the 2004 financial statements are unaudited, whether adjustments may be necessary following the audit are unknown at this time. Financial statements prepared without footnotes are not prepared in accordance with GAAP. Even if the unaudited results are confirmed in audited financial statements, 2004 would be the first year that Petitioner has recognized net income since 1998, following a five-year string of annual losses totaling $90 million. Petitioner’s Financial Status Evidenced at Final Hearing At the final hearing, to demonstrate that it had the financial strength necessary to ensure the timely payment of current and future workers’ compensation claims, Petitioner presented testimony of its expert witness, Lawrence Hirsh, C.P.A. He posited that Petitioner's financial strength should be measured by determining its ability to generate cash flow through a calculation of its earnings before interest, taxes, depreciation and amortization (EBITDA). EBITDA is a measure commonly used by financial institutions to evaluate the ability of a company to generate cash flows and in determining whether to extend credit or to make investments. Petitioner’s lenders evaluated its EBITDA before deciding to refinance its credit facility in 2002 and to refinance its long-term debt in 2004. However, EBITDA is not a calculation provided for under GAAP. GAAP provides a method for determining cash flows and that method is used in preparing the portion of a GAAP- compliant financial statement called the "Statement of Cash Flows." Evidence presented by Respondent demonstrated that EBITDA has many limitations and is not a good proxy for cash flow. Application of EBITDA to Petitioner’s known financial performance in the past consistently overstates Petitioner’s ability to generate cash flow from operations. In every year from 1999 through 2003, Petitioner’s cash flow from operations, as shown on Petitioner’s cash flow statement that was prepared in accordance with GAAP, was significantly lower than the amount calculated for EBITDA by Hirsh: Year Petitioner's Cash Flow From Operations as Shown on GAAP-Compliant Cash Flow Statement EBITDA 1999 $32.6 million $61.1 million 2000 $344,000 $21.2 million 2001 ($2.1 million) $40.3 million 2002 $11.9 million $54.8 million 2003 $12.3 million $42.3 million Petitioner's unaudited 2004 cash flow statement showed $18.1 million in cash flow from operations. This is significantly lower than the $52.9 million in EBITDA calculated for 2004. Similarly, each year from 1999 to 2003, Hirsh's EBITDA's calculation grossly exceeds Petitioner's net loss as shown on its financial statements that were prepared in accordance with GAAP: Petitioner's Cash Flow From Operations as Year Shown on GAAP-Compliant Cash Flow Statement EBITDA 1999 (5.7 million) $61.1 million 2000 ($39.5 million) $21.2 million 2001 ($24.2 million) $40.3 million 2002 ($12.1 million) $54.8 million 2003 ($9.9 million) $42.3 million EBITDA is also misleading because it includes gain from the sale of assets. To the extent that Petitioner is selling its operating assets, such as trucks, Petitioner will have to expend cash to replace the assets, either by lease or purchase. To the extent that Petitioner is selling non-core assets, such as its unused real property, Petitioner cannot continue this practice indefinitely. Petitioner will soon run out of assets to sell. Therefore, cash generated from the sale of operating assets and non-core assets should not be considered in determining Petitioner's ability to generate cash from operating activities. Petitioner sought to bolster its evidence of its financial strength through testimony that it had received a credit rating in November 2003 from Standard & Poor's of B-plus. However, a B-rating is not an investment grade rating. It means that while a company currently has the capacity to meet its debt obligations, adverse business, financial, or economic conditions likely will impair the obligor's capacity or willingness to meet its financial commitment on the obligations in the future. In addition, Petitioner received a lower credit rating of B-3 from Moody's Investment Services. A B-3 rating from Moody's Investment Services is equivalent to a B minus rating from Standard & Poor's. The Standard & Poor's and Moody's credit ratings do not effectively demonstrate that Petitioner has the financial strength necessary to ensure the payment of current and future workers' compensation claims. Respondent's expert witness, Dr. Sondhi, disputed Petitioner's calculation of its EBITDA interest coverage ratio because Petitioner's calculation was based on interest paid as opposed to interest expense, and it failed to adjust for non-recurring items. Petitioner's interest expense is greater than the interest paid partly because Petitioner's loan agreement provides that a portion of the interest payments will accrue monthly with payments deferred until the final prepayment date or other principal payment milestone dates. Petitioner's calculation of the EBITDA interest coverage ratio was not performed in accordance with Standard & Poor's formula for determining the EBITDA interest coverage ratio. Even if the calculation of EBITDA interest coverage ratio was an appropriate measure of Petitioner's financial strength, the formula used by Petitioner to calculate the ratio overstates the results and shows greater financial strength than would be shown if the Standard & Poor's formula had been used. For the reasons noted above, Petitioner's EBITDA calculations are rejected as an inappropriate, overstated method to assess whether a company has the financial strength necessary to ensure the payment of current and future workers' compensation claims. Petitioner also argued that it had the required financial strength because it has paid all workers' compensation claims to-date and because, at the end of 2004, it had a cash balance of $26.6 million in the bank. The ability to currently pay workers' compensation claims does not demonstrate the financial strength to ensure the payment of workers' compensation claims in the future. Current capacity to pay is only part of the statutory standard, which is a risk-based standard requiring a company to ensure payment into the future because of the long period of time that workers' compensation claim payments continue. Likewise, having cash in the bank in the amount of $26.6 million at the end of 2004, does not demonstrate the required financial strength. Current cash balance is not an indicator, by itself, of financial strength to ensure payment in the future. Given Petitioner's extensive operating expenses, $26.6 million represents a very small amount of operating expenses. Petitioner’s consolidated balance sheets list its assets at historical or book cost, the cost at which those assets were purchased, and not at their current fair market value. Petitioner argues that adjusting the book values of assets to current market value would provide the most accurate assessment of Petitioner's net worth. To demonstrate that it has maintained a net worth of $1 million, Petitioner presented testimony that when determining net worth, the fair market value of its assets should be considered in place of the book value of its assets that is reflected on its balance sheet. However, GAAP does not permit the value of assets to be shown at fair market value and instead, requires that assets be shown at book value. Even if GAAP permitted the use of fair market value of assets to be used on a balance sheet, Petitioner did not offer any admissible evidence to prove the current fair market value of its assets for 2002, 2003, and 2004. Consequently, it cannot be determined whether the use of the current fair market value of assets would result in Petitioner's financial statements showing a net worth at all times of at least $1 million. Respondent has interpreted the term "net worth," as it is used in Florida Administrative Code Rule 69L-5.106, to mean the total assets of a company as reflected on the balance sheet, minus the total liabilities of the company as reflected on the balance sheet. Respondent's interpretation of the term "net worth" is a reasonable interpretation, consistent with the interpretation given to the term by accountants and financial analysts. The more credible expert testimony is that net worth appears on the balance sheet as stockholders' or shareholders' equity. Based on the above interpretation of Florida Administrative Code Rule 69L-5.106, for each year from 2002 through 2004, Petitioner has failed to maintain a net worth of at least $1 million. The preponderance of evidence demonstrates Petitioner's net worth was negative $976,000, and negative $10.8 million for the years ended December 27, 2002, and December 26, 2003, respectively. In addition, Petitioner's unaudited financial statements for 2004 show that Petitioner maintained a negative net worth of $6.7 million as of December 31, 2004. Although Petitioner's financial condition has strengthened significantly from year end 2001 to year end 2004, based on the evidence, Petitioner does not now have the financial strength necessary to ensure payment of current and future workers' compensation claims, nor has Petitioner maintained a net worth of at least $1 million. Therefore, an additional security deposit is required for Petitioner to remain qualified as a self-insurer. In May 2002, Thomas Lowe was employed by Petitioner as its vice-president in charge of Risk Management. Lowe instituted a number of risk management practices which have significantly reduced the number and costs of Petitioner's workers' compensation claims. In 2001, Petitioner's workers' compensation claims were adjusted by three separate third-party administrators (TPAs), resulting in three overlapping data bases of claims information. Petitioner was unable to reconcile this overlapping claims information and, consequently, was unable to accurately determine the amount of its workers' compensation reserves for 2001. As a result of its inability to determine its workers' compensation reserves in 2001, Petitioner did not submit the required SI-17 and SI-20 forms to FSIGA in 2002 and 2003. Petitioner informed FSIGA of the difficulty it was having in reconciling its claims data for 2001 and paid the required penalties for its inability to timely submit Forms SI-17 and SI-20 in 2002 and 2003. Failure to submit these forms did not affect Petitioner's ability to make timely payments of all current and estimated future workers' compensation claims. In 2004, Petitioner submitted Forms SI-17 to FSIGA reflecting incurred workers' compensation losses for calendar years 2002 and 2003. On December 14, 2004, Petitioner submitted Form SI-20 to FSIGA, reflecting that the present value of its estimated loss reserves was $6,894,776.00. Anthony Gripps, Sr., an independent actuary who is a member of the American Academy of Actuaries, reviewed Petitioner's workers' compensation claims data pursuant to Respondent's October 28, 2002, directive. Grippa issued two reports, one dated December 1, 2004, and the other dated December 15, 2004. Grippa concluded that the present value of Petitioner's workers' compensation loss reserves as of September 30, 2004, was $6,831,175.00. The parties stipulated to Grippa's finding that the amount of Petitioner's workers' compensation loss reserves as of September 20, 2004, was $6,831,175.00. Petitioner's financial statements for 2004 had not been audited as of the final hearing, but were received into evidence in unaudited form. There was no evidence presented that Petitioner's 2004 financial statements do not accurately represent its financial performance in 2004 and its financial condition as of December 31, 2004. Florida Administrative Code Rule 69L-5.101(4) does not require Petitioner to submit audited financial statements as it has been self-insured since prior to January 1, 1997. Petitioner timely supplied Respondent with unaudited financial statements at least annually as required by Florida Administrative Code Rule 69L-5.101(4). Petitioner currently has a qualified security deposit of $2,500,000.00 deposited with FSIGA. In 2002, FSIGA recommended that in light of Petitioner's "significant net losses and very weak capital structure," Petitioner's security deposit should be increased to 150 percent of the actuarially determined loss reserves. Upon consideration of all of Petitioner's financial statements from 1999 through 2004, FSIGA's recommendation should be followed. Petitioner's actuarially determined loss reserves for all current and estimated future workers' compensation claims are $6,831,175.00. One hundred and fifty percent of the actuarially determined loss reserves of $6,831,175 equals $10,246,762.50. Petitioner presented no evidence of a different amount of security deposit increase that would be sufficient assuming one were to find that Petitioner lacks the financial strength to ensure payment of future workers' compensation claims or that Petitioner has failed to maintain a net worth of at least $1 million.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that The chief financial officer issue a final order determining that: (i) Petitioner does not have the financial strength to ensure the timely payment of all current and future workers' compensation claims; and (ii) Petitioner has failed to maintain a net worth of at least $1 million; and Because Petitioner has failed to meet the requirements to continue self-insuring, the final order should require Petitioner to post an additional security deposit in the amount of $7,746,762.50. DONE AND ENTERED this 1st day of June, 2005, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 1st day of June, 2005.
