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.
The Issue Whether Respondent is entitled to contest the forfeiture of his retirement benefits.
Findings Of Fact On December 28, 2006, Respondent sent a Notice of Forfeiture to Petitioner at 2848 Carriage Court, Kissimmee, Florida 34772, via certified mail. Petitioner’s actual residence was not in Kissimmee, but rather located at 2848 Carriage Court, Saint Cloud, Florida 34772. The certified mail receipt for the Notice of Forfeiture was returned unsigned. A printout of the United States Postal Service’s website scanned in as part of Petitioner's file with the Division indicates that the Notice of Forfeiture was delivered on January 6, 2007, in Saint Cloud, Florida 34772. A handwritten notation on the copy of the printout indicates that: “must file petition on or before Jan 29, 2007.” On January 22, 2007, Robert Augustus Harper, who represented himself as counsel for Petitioner, sent a letter to Respondent requesting “all records and documents on Mr. Day.” This letter was stamped as received on January 25, 2007, in Respondent’s records. Respondent’s records do not indicate whether a response was ever sent to Mr. Harper or Petitioner. On April 8, 2009, Petitioner sent a letter to Respondent regarding the appeal of his criminal case, which was stamped as received on April 10, 2009, by Respondent. The letter advised that it was “to update your office of my retirement account with the State.” The letter further stated: At this time I have gone through one appeal process of criminal offences [sic] filed against me, out of the original 15 charges filed 13 has [sic] been reversed or found not guilty by either the Circuit Court or Appeals Court [sic] We are in the process of further appealing the remaining two counts. Enclosed is a letter from my attorney which was sent to you prior to our first appeal. After over 30 years of retirement payments made and a few years paid by myself in the 1970’s I hope this results in a favorable ending to myself. No response was sent to this letter by Respondent. On July 26, 2017, Petitioner met with employees of Respondent and received a copy of the Notice of Forfeiture. At that meeting, an employee of the Division, identified as Mr. Dame, submitted the following electronic inquiry: “Member never received reply to his letter dated April 8, 2009. He would like a reply ASAP. He also would like to know the disposition of his contributions.” On August 9, 2017, Kathy Gould, bureau chief of Benefit Calculations for Respondent, sent Petitioner a letter in response to his inquiry of July 26, 2017. The August 9, 2017, letter from Ms. Gould to Petitioner stated in pertinent part: The Division has reviewed the legal circumstances surrounding the forfeiture of your Florida Retirement System Benefits. On December 28, 2006, a Notice of Forfeiture of Retirement Benefits was sent by certified mail to you. This notice also included a statement of your rights to appeal the forfeiture decision by administrative hearing within 21 days, if you believed your rights under Chapter 121, F.S. were improperly or wrongfully determined. We have no evidence that you filed an appeal with the Division within 21 days. You have $315.89 in employee contributions on deposit. I am enclosing a Request For Refund of Employee Contributions (form FRS- M81) for your completion. Please contact our office if you have any questions or need additional information. On September 18, 2017, Petitioner sent Respondent a letter addressed to Ms. Gould stating in pertinent part: Thank you for your letter dated August 9, 2017. Although your letter indicates that a Notice of Retirement Benefits was sent by certified mail on December 28, 2006, I did not receive the notice. In fact, when I visited with staff of the Division of Retirement on July 26, 2017, I was advised of the existence of the forfeiture notice and provided a copy of the Certified Mail Receipt from my file. Importantly, the receipt is unsigned and the mailing address was incorrect. The file also includes a request from my attorney for a copy of all records and documents related to myself. The letter is dated January 22, 2007. No documents, records, or other response, however, was provided. The timing of the forfeiture letter is very curious to me. At the time the letter was mailed, my convictions were under appeal. A decision was not issued until February 22, 2008. Day v. State, 977 So. 2d 664 (Fla. 5th DCA 2008). That decision reversed all of the convictions for the misdemeanor offenses. The two felony convictions were upheld but, as of the date of the forfeiture letter, they were on appeal and not yet final. My file also includes a letter dated April 8, 2009, from myself to the Division of Retirement advising that the process of further appealing the remaining two felony counts was continuing. The letter attached the previous letter from my attorney requesting a copy of my file. Again, no response from the Division was received. I believe that I have a meritorious argument regarding whether the retirement benefits for my 30-years of service were lawfully forfeited. Under the circumstances, it would be greatly appreciated if you would review my file and advise whether the Division will re-issue the forfeiture letter so as to allow me appropriate notice and an opportunity to contest the determination. The letter was stamped as received by Respondent on September 21, 2017. On October 12, 2017, Respondent, through its Assistant General Counsel Mitchell Herring sent a letter to Petitioner denying his request to reissue the forfeiture letter. The pertinent part of the letter states: I am responding to your letter dated September 18, 2017 addressed to Kathy Gould. Based on a review of the original legal file related to the forfeiture of your retirement benefits, a Notice of Forfeiture of Retirement Benefits was mailed to 2848 Carriage Court, Kissimmee, FL on December 28, 2006 and delivered to that address on January 6, 2007. This was the address that you provided to the Florida Retirement System as your home address, and therefore constituted your address of record. Accordingly, this Notice was effective pursuant to section 120.569, Florida Statutes (2006), and your opportunity to file a petition expired on January 27, 2007. There is no record indicating that a petition was filed. More importantly, our records indicate that the Department was not provided with any notice that an appeal of your criminal conviction was occurring until more than two years after the Notice had originally been sent. Regardless of this, had the appeal overturned all convictions which could have served as the basis for the forfeiture of your retirement benefits, the forfeiture would have been reversed. However, this did not occur, as either of the two convictions for grand theft which still stand are independently sufficient bases for the forfeiture of retirement benefits pursuant to section 112.3173, Florida Statutes (2001-2017), and were included as justification for the forfeiture in the Notice of Forfeiture of Retirement Benefits. Because it has been more than ten years since the Department notified you of its forfeiture of your rights and benefits under the Florida Retirement System, a sufficient basis for the forfeiture still exists, and the Department provided effective notice of its intended action pursuant to law, the Notice of Forfeiture of Retirement Benefits will not be re-issued. At the hearing, Petitioner persuasively testified and offered evidence that he neither received the Notice of Forfeiture in January 2007, nor was aware that such a notice had been issued until his meeting with an employee of the Division near the end of July 2017. When Petitioner obtained a copy of the Notice of Forfeiture during his July 2017 meeting, he noticed that it had an incorrect address, i.e., it was mailed to Kissimmee instead of St. Cloud. Kissimmee and St. Cloud are distinct cities and the only two incorporated cities in Osceola County. Petitioner further explained that his home in St. Cloud was located about a quarter-mile down a private dirt road from a county-maintained road. His home was situated on five acres, with a fence surrounding the property and a locked gate at the driveway. He purchased the property in 2001 and resided there until 2011. Petitioner testified that all of the mailboxes for homes on the private dirt road were clustered together and located at the end of the road where it intersected with the county-maintained road. Anyone from the post office would have been unable to access Petitioner's home because of the fence and locked gate. Petitioner also had a “cur dog” that would not let anybody on the property. The other individuals residing in Petitioner's home in January 2007 were his wife and daughter. Petitioner's wife worked during the week and his daughter went to school and worked part-time. Petitioner testified that there would have been no one around during the week to receive any certified mail delivered at his home from the post office. There were occasions where the post office would leave certified mail slips in Petitioner’s mailbox at the end of the road. On such occasions, Petitioner would go into town to the post office to pick them up. Petitioner did not recall, however, the delivery of, or anyone showing up at his home with, a certified mail letter from the Division. The fact that Petitioner was aware that his criminal convictions could impact his ability to obtain retirement benefits does not demonstrate that he received the Notice of Forfeiture in January 2007. Petitioner acknowledged that he never asked for his deferred retirement option program (DROP) proceeds to be distributed. However, when asked why he sent his letter in April 2009, advising the Division of the status of his appeals and post-conviction efforts, if he was unaware of the forfeiture letter, Petitioner explained that he was still able to work, he was not 62 at the time, and that he wanted to let the Division know that he was still out there. Petitioner further explained that he informed the Division about the status of his appeals because he thought that he could receive his retirement benefits if he won in the appeal process. Petitioner's testimony that he did not receive the Notice of Forfeiture until his meeting with a Division employee in July 2017 was credible. The location and physical description of Petitioner’s home was uncontested and it appears unlikely that the postal service would have been able to deliver the certified mail to Petitioner. Other than the printout of the United States Postal Service website indicating that the Notice of Forfeiture was delivered on January 6, 2007, in St. Cloud, Florida, the Division produced no evidence that Petitioner, in fact, received it. The absence of a signed receipt, when considered with the postal service’s Track and Confirm printout indicating delivery, could, at best, suggest that Petitioner deliberately failed to pick up the certified mail letter. If delivered to St. Cloud, it is plausible that the certified mail slip was placed in the wrong mailbox. The evidence is insufficient, however, to show that Petitioner refused to accept the certified mail letter. The Division’s records do not include any notation that the certified mail was undeliverable or refused. Considering the evidence in light of all of the surrounding facts and circumstances, it is found, as a matter of fact, that the evidence is insufficient to show that Petitioner received the Notice of Forfeiture in January 2007. The Department presented no testimony regarding the practices and policies of the Division when the Notice of Forfeiture was issued. Division employees who were historically involved with Petitioner’s retirement forfeiture issues have either retired or obtained employment elsewhere. The deposition testimony of Mary Katherine Gould, the present bureau chief of the Division’s Benefit Calculations, discussed the Division’s current practice regarding unsigned certified mail receipts for notices of forfeiture. Ms. Gould testified that, currently, additional efforts are undertaken to locate the member and additional certified mailings are attempted to obtain the member’s signature on the return receipt. She also indicated that current practice would include further review of a member’s file to discover any other addresses. Petitioner’s retirement file with the Division shows that the general counsel for the Department at the time was aware that the certified mail return receipt was neither signed nor dated. And, there is nothing in the file indicating that Petitioner was avoiding delivery of the certified mail. Based on her review of Petitioner’s file, Ms. Gould could not determine whether any additional efforts had been made to search for a different address to attempt another certified mail delivery. Had the Division reviewed its own files, it could have easily discovered Petitioner’s correct mailing address. There are letters, applications, and other retirement form submittals within Petitioner’s file reflecting that his correct mailing address at the time was 2848 Carriage Court, St. Cloud, Florida 34772. For example, there are several documents from Petitioner related to his DROP application and submittals that contain his correct mailing address. His file also contains several letters and documents mailed from the Division to Petitioner at his correct address. The Division’s file for Petitioner further reveals that it received the public records request by Petitioner’s attorney, Robert Harper, on January 25, 2007. At the hearing, Petitioner explained that he had retained Mr. Harper to represent him in the appeals of his convictions, which were ongoing at the time of the public records request. Petitioner also asked Mr. Harper to help him “keep track of . . . the retirement part.” There is no evidence that the Department ever responded to Mr. Harper’s request. According to practice, the Division calendars the 21-day time period for the challenge of a forfeiture as commencing on the date the notice is received by the member. Although there is no certified mail return receipt, the purported delivery date of the Notice of Forfeiture indicated by the postal service was January 6, 2007. Therefore, had Petitioner actually received the Notice of Forfeiture, there was still time for Petitioner to contest the forfeiture, when the Division received the public records request by Mr. Harper on January 25, 2007. On January 30, 2007, five days after Mr. Harper’s public records request, the Division sent a memorandum to the General Counsel’s office. The subject of the memorandum is “Request for OGC Assistance with Public Records Request." The memo specifically advised that the public records request was for a copy of Petitioner’s retirement file and that there was a “legal block of Mr. Day’s retirement account because of possible forfeiture. There should be a file in the Legal Office.” An interoffice memorandum regarding the matter from Sarabeth Snuggs, director of the Division, to Geoffrey Christian, Office of General Counsel, dated February 1, 2007, states, in part: The return receipt was neither signed nor dated. However, according to the postal service’s track and confirm website, the letter was delivered on January 6, 2007. The member has failed to protest the forfeiture action within the 21-day time limit. The benefits are now forfeited and the legal file is closed. In other words, even though the certified mail receipt was returned unsigned, and despite the fact that the Division and its general counsel were aware of the pending unanswered public record’s request from Petitioner’s counsel, the Division closed Petitioner’s file on the grounds that Petitioner failed to timely challenge the forfeiture. Regarding Petitioner’s meeting with Division employee, Mr. Dame, on July 26, 2017, Petitioner provided undisputed and persuasive testimony that Mr. Dame provided him with a copy of the Notice of Forfeiture, the certified mail return receipt, and the Postal Service Track and Confirm printout. During the meeting, Mr. Dame pointed out the fact that the return receipt was unsigned. At the time, Mr. Dame also advised Petitioner that he was going to send an inquiry regarding the issue and that Petitioner should “sit tight, we’ll see what happens.” Mr. Dame never advised Petitioner that his 21-day time period to challenge the forfeiture letter would re-commence based upon the fact that Petitioner received a copy of the Notice of Forfeiture during that July 2017 meeting. Petitioner filed the Petition in this case in response to the letter from the Department’s Assistant General Counsel Mitchell Herring, dated October 12, 2017, because it had a case number on it. The letter referenced Petitioner’s September 18, 2017, letter and “OGC Case No. 17-36457.” Prior to that time, Petitioner's understanding was that the Division was investigating the circumstances surrounding his forfeiture letter. Based upon these facts, it is found that the Department never provided Petitioner with a clear point of entry within which to contest the forfeiture of his retirement benefits.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Management Services, either reissue the Notice of Forfeiture of Retirement Benefits to Petitioner or otherwise allow him a point of entry with a 21-day time period within which to contest the forfeiture of retirement benefits. DONE AND ENTERED this 14th day of May, 2018, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of May, 2015.
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 The issue in this case is whether Petitioner's application for a certificate of need was complete.
Findings Of Fact Petitioner and Intervenor each filed applications in the same batching cycle for certificates of need to establish Medicaid-certified home health agencies in Collier County, District 8. By letter dated October 6, 1994, Respondent advised Petitioner that its application omitted certain elements. The letter requests, among other things, an "audited financial statement," including a balance sheet and profit-and-loss statement for the previous two years' operation. Petitioner's application contained an unaudited financial statement for the part of the year that it had been operation. Incorporated in 1994, Petitioner had been receiving patients only since September or October 1994. Petitioner's agent contacted a representative of Respondent and discussed the omissions letter. A misunderstanding ensued in which Petitioner's agent thought that Respondent's representative said that Petitioner would not be required to submit an audited financial statement because Petitioner had not been in operation for a full fiscal year. In fact, Respondent's representative did not say that. Respondent's policy is to permit applicants to file audited financial statements for a partial year, if that is how long they have been in business. For example, Intervenor included with its application an audited financial statement covering the six-week period that it had been in existence. In this case, it would have been possible for Petitioner to obtain an audited financial statement for a period of time including at least its first month of operation.
Recommendation It is hereby RECOMMENDED that the Agency for Health Care Administration enter a final order dismissing Petitioner's challenge to the administrative withdrawal of the subject application for a certificate of need. ENTERED on April 24, 1995, in Tallahassee, Florida. ROBERT E. MEALE 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 on April 24, 1995. APPENDIX Rulings on Petitioner's Proposed Findings 1-6: rejected as subordinate. 7-8: rejected as unsupported by the appropriate weight of the evidence. 9: adopted or adopted in substance. 10-11: rejected as not finding of fact. 12-14: rejected as recitation of evidence. 15: rejected as unsupported by the appropriate weight of the evidence. Rulings on Proposed Findings of Respondent and Intervenor All are adopted or adopted in substance. COPIES FURNISHED: Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Attorney Robert E. Senton P.O. Box 963 Tallahassee, FL 32302 Richard A. Patterson Assistant General Counsel Agency for Health Care Administration 325 John Knox Road Suite 301--The Atrium Tallahassee, FL 32303 Attorney Alfred W. Clark 117 South Gadsden Street Suite 201 Tallahassee, FL 32301
