The Issue The issue in this case is whether the Respondent, the Department of Transportation (DOT), arbitrarily refused to accept the low bid submitted by the Petitioner, Quinn Construction, Inc. (Quinn), and Bay Machine, Inc., for State Project No. 15200-3902.
Findings Of Fact On or about December 7, 1994, the Petitioner, Quinn Construction, Inc. (Quinn), submitted a $1,695,534.84 bid on behalf of Quinn and Bay Machine, Inc., in response to a November, 1994, Department of Transportation (DOT) solicitation for bids on State Project No. 15200-3902. State Project No. 15200-3902 was essentially the same project for which the DOT previously solicited bids on or about July 1, 1994. The earlier solicitation for bids was cancelled when all bids were rejected, and the bid solicitation process was reinitiated. All bidders were required to furnish a bid guaranty, and the parties stipulate that any bid not accompanied by a bid guaranty would be declared nonresponsive. Attached to the Quinn/Bay Machine bid was a Bid or Proposal Bond on DOT Form 375-020-09. There was only one bridge rehabilitation project for Pinellas County among the projects for which the DOT was opening bids on December 7, 1994, and the bid bond was attached to the bid proposal of Quinn and Bay Machine for State Project No. 15200-3902. Utilizing the DOT form, the Quinn bid bond described the proposal being bonded as being "for constructing or otherwise improving a road(s) and/or bridge(s) or building(s) in Pinellas County; particularly known as Bayway 7918 Bridge Rehab." The part of the form calling for identification of the "Project No." was left blank. The bid bond was executed by James M. Moore as attorney- in-fact for North American Specialty Insurance Company. In addition to calling for the "Project No." in DOT Bid or Proposal Bond Form 375-020-09, the DOT routinely furnishes all bidders a Bidder's Checklist which reminds bidders to use the form and to identify the project on the form by county, by the federal aid number(s), if applicable, and by the State Project Job Number. Although the Bidder's Checklist was not in the bid package received by Quinn in connection with the November, 1994, solicitation for bids, Quinn received a Bidder's Checklist for the July, 1994, solicitation for bids on the same project and for many other previous bid solicitations. In prior bid proposal submissions, including the bid proposal submitted for the same project in August, 1994, Quinn had its surety use the "Project No." to identify the project on the bid bond. The attorney-in-fact for the bond company testified that the number 7918 on the bond was a typographical error. He testified that he thought 798 was the number that was supposed to be on the bond to identify the project. The WPI No. for the project was 7116982. The applicable State Road number was 679. The applicable bridge number was 150049. Although DOT Bid or Proposal Bond on DOT Form 375-020-09 called for identification of the "Project No.," DOT would have accepted a bid bond that identified the project by any of these numbers or by the official name of the bridge, if any. The bridge in question has no official name. It was not even proven that the bridge is commonly known as the Bayway 7918 Bridge, or even as the Bayway Bridge. The bridge in question is part of the Pinellas Bayway, which is a system of roads, causeways and bridges connecting St. Petersburg and St. Petersburg Beach and several small keys in Boca Ciega Bay. There are two state roads on the Pinellas Bayway: State Road 682, which connects State Road 699 to the west on St. Petersburg Beach to Interstate 275 to the east in St. Petersburg; and State Road 679, which intersects State Road 682 and runs south through Tierra Verde into Fort DeSoto Park on Mullet Key. Both 682 and 679 have combination fixed-span and bascule (draw) bridges. The bridge in question is on 679. When the DOT opened the bid of Quinn and Bay Machine, the incorrect identification of the project on the bid bond was noticed, and the question was referred to the Technical Review Committee. During its meeting on December 21, 1994, the Technical Review Committee sought the advice of its legal counsel and was advised that the bond probably would not be enforceable due to the inaccurate identification of the project to which it pertained. Based in part on the advice of counsel, the Technical Review Committee voted unanimously to recommend to the DOT Contract Awards Committee that the bid proposal be rejected as being non-responsive because of the bid bond. On December 23, 1994, the Contract Awards Committee met and voted unanimously to reject the bid proposal as being non-responsive because of the bid bond. Instead, the Committee accepted the bid proposal of M & J Construction Company of Pinellas County, Inc. (M & J). It was not arbitrary for the DOT to conclude that the Quinn bid bond was, or might well have been, unenforceable due to the inaccurate identification of the project to which it pertained. The DOT did not even consider whether the Quinn bid bond also may have been invalid and unenforceable because it named just Quinn as the principal, instead of both Quinn and Bay Machine, the actual entity that was prequalified to bid on the project and the actual entity bidding on the project. It also was not arbitrary for the DOT to conclude that submitting an unenforceable bid bond is not a minor irregularity. If a successful bidder does not enter into a contract, the project would be delayed while it is being rebid. The delay itself would result in a monetary loss. In addition, rebidding the project would result in additional costs to the DOT. Submitting an unenforceable bid bond could give a bidder the competitive advantage of feeling able to escape from having to contract and perform in accordance with a low bid, if advantageous to the bidder, without being liable under the bid bond.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Transportation enter a final order dismissing the Petitioner's bid protest and awarding State Project No. 15200-3902 to M & J Construction Company of Pinellas County, Inc. RECOMMENDED this 26th day of April, 1995, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-0564BID To comply with the requirements of Section 120.59(2), Fla. Stat. (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. (It appears that the Petitioner's proposed findings of fact are found at pages 2-5 of its Proposed Findings of Fact and Conclusions of Law. For purposes of these rulings, the unnumbered paragraphs on those pages are assigned consecutive numbers.) Rejected in part. (Joint Exhibit 2 refers to State Road 679, not the project, as having the "Local Name: Pinellas Bayway." Joint Exhibit 5 also only refers to State Road 679, not the project, by the name "Pinellas Bayway." Only the front covers of the technical specs refer to the "Pinellas Bayway Bridge." The other pages refer to the "Pinellas Bayway," and all of the pages also include the State Project Number.) Otherwise, accepted and incorporated to the extent not subordinate or unnecessary. First sentence, accepted and incorporated to the extent not subordinate or unnecessary. Second and last sentences, rejected as not proven. Rejected in part as argument and in part as not proven. Last sentence accepted, but ambiguous and not legally significant, subordinate and unnecessary, whether DOT could "tie" the bid bond to the bid. Penultimate sentence, rejected in part as not proven (that Exhibit 4 "identified the project as the Pinellas Bayway"); otherwise, accepted and incorporated to the extent not subordinate or unnecessary. The rest is accepted and incorporated to the extent not subordinate or unnecessary. First sentence, rejected as not proven. (The evidence was clear that the DOT form requires a state project number and that the Bidder's Checklist provided to bidders by the DOT reminds bidders to use the form and identify the project by county, federal aid number(s), if applicable, and State Project Job Number.) Second sentence, subordinate and cumulative. Rejected as conclusion of law. Last sentence rejected as not proven that North American identified the project or that it used the local name of the bridge. The rest is rejected as not proven because the evidence was clear that the DOT form requires a state project number and that the Bidder's Checklist provided to bidders by the DOT reminds bidders to use the form and identify the project by county, federal aid number(s), if applicable, and State Project Job Number.) Accepted but subordinate and unnecessary. Rejected as not proven that DOT was arbitrary. The rest is subordinate, in part cumulative and in part argument. Subordinate, cumulative and argument. Rejected in part as conclusion of law, in part as argument and in part as not proven. Respondent's and Intervenor's Proposed Findings of Fact. All of the DOT's and the Intervenor's proposed findings of fact are accepted and are incorporated to the extent not subordinate or unnecessary or argument. COPIES FURNISHED: Suzanne Quinn, Esquire 1321 77th Street East Palmetto, Florida 34221 Thomas H. Duffy, Esquire Department of Transportation 605 Suwannee Street Tallahassee, Florida 32399-0450 Joseph G. Thresher, Esquire One Mack Center 501 E. Kennedy Bouelvard, Suite 725 Tampa, Florida 33602 Ben G. Watts Secretary Department of Transportation Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0450 Thornton J. Williams, Esquire General Counsel Department of Transportation 562 Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0450
The Issue Whether the Respondent's insurance licenses should be disciplined on the basis of the alleged multiple violations of Chapter 626, Florida Statutes, as set forth in the Administrative Complaint.
Findings Of Fact Petitioner is the state agency charged with licensing insurance agents of all types, regulating licensure status, and enforcing the practice standards of licensed agents within the powers granted by the Legislature in Chapter 626, Florida Statutes. At all times material to these proceedings, Respondent Wolfe was licensed as an insurance agent in the following areas: Ordinary Life, Ordinary Life including Disability Insurance, General Lines, and Disability. Respondent was also registered with the Department as an Automobile Inspection and Warranty Salesperson. Respondent Wolfe conducted his insurance business through Edison Insurance Agency, Inc. (hereinafter Edison), which is located in Fort Myers, Florida. The Respondent is the President, the Director, and sole shareholder of the insurance agency. All of Edison's personnel who collected funds in a fiduciary capacity, on behalf of the insured named in the Administrative Complaint, acted through the supervision and control of Respondent Wolfe, the licensed general lines agent of record at Edison. One of the services provided to customers who sought insurance through Edison was the agency's processing of premium financing applications. If an insurance customer decided to finance premium payments, the Respondent or agency personnel, would arrange premium financing for the customer through Regency Premium Finance Company (hereinafter Regency). Once the insurance customer's application to Regency was processed, Regency would issue a check for the financed portion of the premium. The check would name Edison as the payee, and would be sent to the agency's offices. The Respondent or agency personnel acting through his licenses, were then required to remit the money to the insurance company to obtain the insurance coverage selected by the proposed insured. Count I On October 7, 1986, Regency issued a check in the amount of eleven thousand eighty four dollars and twenty five cents to Edison. Upon receipt of the check, Edison paid the outstanding balance of the premiums owed to Canal Insurance Company by Shirley Turlington, who became insured with the company through Edison on July 16, 1986, under policies numbered P02 31 71, and 14 43 39. On November 7, 1986, a Notice of Cancellation was sent by Regency to the insurer as the insured did not pay an installment payment, as agreed, by October 16, 1986. The insurance policies were cancelled by the insurer, and an unearned premium of ten thousand one hundred and twenty four dollars was credited to Edison's account with Dana Roehrig & Associates, an authorized representative of Canal Insurance Company. Pursuant to the Premium Finance Agreement signed by the insured Shirley Turlington, Regency was assigned all unearned premiums returned by the insurance company on these specific policies. Shirley Turlington was not entitled to the unearned premiums credited to Edison's account by Canal Insurance Company through Dana Roehrig & Associates. A determination of Regency's entitlement to the unearned premium refund is currently pending in a civil action. Count II On March 16, 1987, Regency issued a check in the amount of nine thousand four hundred and forty one dollars to Edison. The purpose of the check was to have Edison pay the outstanding balance of the premium owed to Canal Insurance Company by Guillermo Rodriguez for a commercial automobile liability policy numbered 152 656. In reality, the amount of money necessary for payment to Canal Insurance Company had already been earmarked in the account maintained by Dana Roehrig & Associates which shows the credits and debits placed on Edison's business transactions with Dana Roehrig & Associates. The premium was paid, and the policy was issued by Canal Insurance Company with an effective date of February 2, 1987. In the premium finance agreement completed on behalf of Mr. Rodriguez in Edison's Offices, the inception date of the policy was projected for March 29, 1987. Respondent Wolfe and Edison personnel were unable to bind Canal Insurance Company so that an actual policy number and policy inception date were unknown by Edison at the time the finance agreement with Regency was completed at the agency. As the commercial automobile liability market was very active at Dana Roehrig & Associates during this time period, it is unknown what basis was used for the projected inception date of the policy. On May 27, 1987, a Notice of Cancellation was sent by Regency to the insurer as the insured did not pay an installment payment, as agreed, on April 29, 1987. The policy was cancelled September 25, 1987. No evidence was presented at hearing to demonstrate what happened to the unearned premium refund. Count III On March 24, 1987, Regency issued a check in the amount of twenty one thousand four hundred thirty five dollars to Edison. The purpose of the check was to pay the outstanding balance of the premium on a commercial automobile liability policy from Lumbermans Mutual Insurance Company which had been applied for by Thomas Gleason through Edison. Edison did not purchase an insurance policy for Mr. Gleason with the funds sent to Edison by Regency for that purpose. The check from Regency was cashed, and the funds were commingled with other funds in the agency's account number 632717. Count IV On April 21, 1987, Regency issued a check in the amount of twenty five thousand one hundred and fifty eight dollar and seventy five cents to Edison. The agency was to apply these funds against the outstanding balances on premiums for Clayton Olding, Inc., a trucking firm. The proposed insured had applied for insurance coverage from Canal Insurance Company and Cadillac Insurance Company. Edison paid for policy number 155941 with Canal Insurance Company with check number 7120. The premium amount and the inception date listed on the Regency premium finance agreement were correct. A notice of cancellation was sent to Canal Insurance Company on July 1, 1987, as Clayton Olding had failed to pay the installment due Regency on June 13, 1987. However, the policy had already been cancelled by the insured on June 1, 1987. A credit of nineteen thousand one hundred seventeen dollars and eighty cents was placed against Edison's account with Dana Roehrig & Associates, the authorized representative for Canal Insurance Company. Paperwork given to Clayton Olding, Inc. represented that the company was insured by Cadillac Insurance Company through Edison. Edison was the authorized agent of Cadillac Insurance Company and was able to temporarily bind the company. However, the money which was to be given to Cadillac Insurance Company as the down payment on the insurance premium was never sent to the insurer. Instead, Rose Delaney, an employee of Edison, created interagency documents which reflected that the money had been sent, and took the money for her own personal use. When Clayton Olding, Inc. notified Ms. Delaney to cancel the policy on June 1, 1987, this customer believed that Edison had acquired the insurance policy requested with Cadillac Insurance Company. Clayton Olding, Inc. received a refund from Edison after the cancellation of the two policies in the amount of approximately one thousand dollars. It was not revealed at hearing whether the refund related to the Canal Insurance Company policy or the Cadillac Insurance Company policy, or both transactions. Count V On April 28, 1987, Regency issued a check in the amount of four thousand five hundred and sixteen dollars to Edison for payment of the outstanding balance of the premium purportedly owed by Arthur Farquharson to Canal Insurance Company through Edison. Edison did not purchase an insurance policy for Mr. Farquharson with the funds sent to Edison by Regency for that purpose. The check from Regency was cashed, and the funds were commingled with the funds in the agency's checking account numbered 632717. The policy requested by Mr. Farquharson was never obtained by Edison on his behalf. Counts VI through VIII Count VI through Count VIII of the Administrative Complaint involve requests from proposed insured to purchase insurance through Edison. The proposed insured were Clinton Roole, Bertel Alexander Prince, and A & E Young Trucking, Inc, respectively. In each application for insurance, the proposed insured requested premium financing through Regency. Regency issued checks on behalf of these proposed insured to Edison. The agency was to pay the outstanding balances on insurance premiums in the policies purportedly obtained by Edison on behalf of these customers. Edison did not properly apply the funds sent to the agency by Regency because the requested policies were never purchased by Edison on behalf of these customers. The checks from Regency were cashed by the agency, and commingled with other funds in the agency's checking account numbered 632717. The customers did not receive the benefits requested from Edison, their insurance agency. Count IX On May 7, 1987, Regency issued a check in the amount of thirty two thousand one hundred and nine dollars to Edison. The agency was to apply the funds against the outstanding balances on three policies which were purportedly applied for from the following companies through Edison: Canal Insurance Company, Cadillac Insurance Company, and South Atlantic Council. The proposed insured was Charles Bernardo d/b/a ABX, Inc. A binder of insurance was issued by Canal Insurance Company to Mr. Bernardo for a fifteen day period which expired on April 28, 1987. A full policy was never purchased by Edison on behalf of Mr. Bernardo with the funds sent to Edison by Regency for that purpose. No information was provided at hearing regarding the purported application for insurance from South Atlantic Council on behalf of Mr. Bernardo through Edison. The check from Regency to Edison was cashed, and the funds were commingled with other funds in the agency's checking account numbered 632717. Mitigation All of the insurance transactions involved in the Administrative Complaint were conducted by Rose Delaney, an employee of Edison. During the months of March 1987 through May 1987, this employee was involved in a complex embezzlement and document falsification scheme in which she embezzled funds from the insurance agency and created phoney insurance policies and premium financing agreements, as well as false agency control documents, to cover her misdeeds. Respondent Wolfe was unable to discover this embezzlement scheme until May 23, 1987. His inability to detect the scheme was based upon a number of extraordinary factors, in spite of his reasonable attempts to supervise his insurance business and the employees with the high degree of care commensurate with his responsibilities as an insurance agent. These extraordinary factors were: the rapid and intense growth of Respondent's business during this time period; the redesign of the computerized accounting program by the agency's accountant, who failed to recognize that he had disabled an account reconciliation function within the program; the sophistication of Ms. Delaney's embezzlement scheme, and her ability to generate false documents within the agency setting which hid her crimes from the supervisory reviews conducted by Respondent Wolfe over a two and one half month period. Rose Delaney, the perpetrator of the embezzlement and documentation falsification scheme, is currently being treated in a mental health institution for mental illness. She has been diagnosed as having major depression with psychotic features as well as suffering from latent schizophrenia, paranoid type. Based upon the professional opinions of the two psychiatrists who examined Ms. Delaney, she was insane during the time she handled the insurance transactions set forth in the Administrative Complaint. The McNaughton standard was applied by both of the experts, and no evidence to the contrary was presented during the administrative hearing.
Recommendation Based upon the foregoing, it is RECOMMENDED: That the Respondent, Gary Stephen Wolfe, be found not guilty of all nine counts set forth in the Administrative Complaint. DONE and ENTERED this 5th day of September, 1989, at Tallahassee, Florida. VERONICA E. DONNELLY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of September, 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 88-4927 Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO# 2. Accepted. See HO# 2. Accepted. See HO# 3. Accepted. See HO# 3. Petitioner's findings do not contain a number 5. Accepted. See HO# 3. Accepted. Accepted. See HO# 4. Accepted. Accepted. See HO# 5. Rejected. See HO# 27. Accepted. See HO# 5. Accepted, but for further exposition of the facts, see HO# 7. Accepted. See HO# 5. Accepted. See HO# 6 and # 7. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 8. Rejected. Irrelevant. See HO# 8. Rejected. See HO# 10. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 11. Accepted. See HO# 12. Accepted. See HO# 12. Accepted. Accepted. Rejected. See HOC 27. Accepted. See HO# 13. Rejected. Irrelevant. See HO# 13. Rejected. Irrelevant to pleadings. See HO# 13. Rejected. Irrelevant to pleadings. See HO# 13. Accepted. See HO# 14. Accepted. See HO# 14. Accepted. See HO# 14. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 17. Accepted. See HO# 18. Accepted. See 1O# 18. 43.-48. Not provided to the Hearing Officer. Accepted. See HO# 18. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 19. Accepted. See HO# 20. Accepted. See HO# 20. Accepted. Accepted. Accepted. See HO# 19. Accepted. See HO# 20. Accepted. See HO# 20. Accepted. Accepted. Rejected. See HO# 27. Accepted. See HO# 19. Accepted. See HO# 20. Rejected. Cumulative. Rejected. Improper summary. Rejected. Cumulative. Rejected. See HO# 25 and #27. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant and immaterial. Rejected. Irrelevant. Accepted. See HO# 25. Rejected. See HO# 27. Rejected. Irrelevant. Improper shifting of burdens of proof. Not an ultimate issue in these proceedings. Rejected. Immaterial. Outside the scope of the pleadings. Rejected. Contrary to fact. A co-signer was required on any checks signed by Ms. Delaney. Rejected. Outside the scope of the pleadings. Accepted that Respondent Wolfe was not personally involved in the wrongdoings committed by Ms. Delaney. See HO# 25. The rest of paragraph 84 is rejected as argumentative. Rejected. Irrelevant - Argumentative. Rejected. Improper summary. Rejected. Argument as opposed to proposed finding of fact. Improper summary. Respondent's proposed findings of fact are addressed as follows: Accepted. See HO# 2. Accepted. See HO# 3. Rejected. Irrelevant. Accepted the first statement in paragraph 4. See HO# 9. The rest is rejected a- irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Accepted. Rejected. Irrelevant. Rejected. Irrelevant. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. See HO# 26. Accepted. Rejected. Irrelevant. Rejected. Not established by competent evidence. Accepted. Rejected. Improper summary with many factual conclusions that are immaterial to the allegationS in the Administrative Complaint. Rejected. Irrelevant to these proceedings. Rejected. Irrelevant. Accepted. Accepted. Accepted. Rejected. Not established by competent evidence. Rejected. Irrelevant to these proceedings. Accepted. Accepted. See HO# 27. Accepted. Accepted. See HO# 25. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Irrelevant. Rejected. Improper summary. For rulings on each transaction, refer to Findings of Fact in the Recommended Order. Accepted. See HO# 25. COPIES FURNISHED: S. Marc Herskovitz, Esquire Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Joseph D. Stewart, Esquire Hardt & Stewart 801 Laurel Oak Drive Suite 705, Sun Bank Building Naples, Florida 33963 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol Tallahassee, Florida 32399-0300 Don Dowdell, Esquire General Counsel Department of Insurance The Capitol Tallahassee, Florida 32399-0300 =================================================================
The Issue The issue for determination is whether Respondent, Construction Industries Recovery Fund ("Respondent"), should reimburse Petitioners for damages caused by a contractor.
Findings Of Fact 1. Respondent is the governmental agency responsible for processing claims against it pursuant to Sections 489.140 through 489.143. Petitioners are natural persons within the meaning of Section 489.140(1). Except for the matters to be determined in this proceeding, Petitioners are otherwise eligible to seek recovery from Respondent within the meaning of Section 489.141. Initial Agreement On June 10, 1993, Petitioners entered into a written contract of sale with Klingshirn & Associates, Inc. ("Klingshirn") to construct a home at 6617 Southfork, Titusville, Florida (the "initial agreement"). The total purchase price was $134,000. The home was to be completed by November 24, 1993. The initial agreement required Petitioners to pay $24,000 of the total purchase price from their own funds3 and to make a good faith effort to obtain financing for the remaining $110,000. If Petitioners were unable to obtain financing, Klingshirn reserved the option to provide financing. The terms of financing were prescribed in paragraph 3 of the initial agreement. Paragraph 3 stated: . . . MORTGAGE PROVISION . . . within five (5) days [Petitioners] will make a good faith application with . . . a lender approved by [Klingshirn] for a mortgage loan in the amount set forth above at the prevailing interest rate not to exceed 8 1/2% 30 year and terms of the lender as of closing. If [Petitioners are] not approved for the mortgage within 30 days or any extension [Klingshirn gives them], or if [Petitioners] application is rejected, [Klingshirn] can either provide [Petitioners] with the mortgage on the same terms and conditions as the lender [Petitioners] applied with, or (ii) refund [Petitioners] deposits . . . and terminate this contract. . . . Petitioners and Klingshirn changed the printed text in the initial agreement. They struck through the phrase, "at the prevailing interest rate," and inserted the phrase, "not to exceed 8 1/2% 30 year." Condition Precedent A condition precedent is one which calls for the performance of some act, or the happening of some event, after a contract is entered into upon the performance or happening of which an obligation to perform depends.4 The initial agreement was subject to a condition precedent by its express terms and by oral agreement. The express terms of the initial agreement made the agreement subject to a condition precedent. Petitioners' obligation to perform was expressly dependent on the procurement of financing for $110,000, over a 30 year term, at an interest rate not to exceed 8 1/2 percent per annum. Even if the initial agreement were not expressly subject to a condition precedent, it was subject to such a condition by oral agreement. Prior to and at the time that Klingshirn and Petitioners signed the initial agreement, Petitioners and Klingshirn agreed that the initial agreement would become operative only upon the occurrence of financing. Even if the initial agreement were not subject to a condition precedent, the requisite financing was part of a contemporaneous oral agreement that induced Petitioners to enter into the initial agreement. There was no mutual intent for Petitioners to be obligated unless they procured the prescribed financing from either a commercial lender or Klingshirn. Construction Contract The condition precedent to the initial agreement was never satisfied. The initial agreement never became operative. On July 7, 1993, Petitioners obtained a financing commitment from Harbor Federal Savings & Loan Association in Fort Pierce, Florida ("Harbor"). Harbor agreed to provide financing for $105,000 rather than the $110,000 prescribed in the initial agreement. Petitioners agreed to increase their cash investment. On August 4, 1993, Petitioners and Klingshirn executed a Construction Loan Agreement for $105,000 (the "construction loan agreement"). The construction loan agreement stated: [Klingshirn] hereby . . . agrees to the terms and conditions of the [construction loan], and further agrees that where the [construction loan] conflicts with the terms and provisions of any construction contract existing with Borrower, that the [construction loan] shall control. Petitioners executed the construction loan agreement as borrowers. Klingshirn executed the builder's assent to the construction loan agreement. On August 4, 1993, Petitioners and Klingshirn executed a construction contract within the meaning of Section 489.141(1)(a) (the "construction contract"). The construction contract included the construction loan agreement and those terms in the initial agreement which did not conflict with the construction loan agreement and which Petitioners and Klingshirn adopted when they executed the construction contract.5 The construction contract was executed after July 1, 1993. It controlled the construction of Petitioners' home until it was modified on December 9, 1993. On December 9, 1993, Petitioners agreed to extend the completion date to March, 1994. Klingshirn agreed to repair specified defects and to increase the landscaping allowance. Mismanagement And Misconduct Petitioners did not know that Klingshirn was a corporation engaged in contracting without a qualifying agent in violation of Section 489.119. Mr. Michael R. Harvey, a financially responsible officer of Klingshirn and one of its employees, was licensed as a certified building contractor (the "contractor" or "licensee"). However, the contractor neglected to qualify Klingshirn. The contractor illegally used his license to obtain the necessary building permit on behalf of Klingshirn. He procured the building permit in his own name on August 27, 1993. The contractor knowingly violated Section 489.129. He committed mismanagement and misconduct in the practice of contracting that caused financial harm to Petitioners in the amount of $58,534.46. The contractor failed to ensure that the home was constructed according to either the plans and specifications of the project or the Southern Building Code. He also failed to remedy the violations. The contractor failed to satisfy subcontractor liens after Petitioners gave him the funds to do so. He obtained at least three draws of unspecified amounts from Harbor. The contractor abandoned the job. He failed to perform work without just cause for over 90 consecutive days when the percentage of completion was less than the total contract price paid to him at the time of abandonment. The project was not completed on November 24, 1993. On December 9, 1993, Petitioners and Klingshirn entered into an Addendum to the initial agreement. The Addendum extended the completion date to March, 1994. The contractor failed to meet the extended deadline. On April 4, 1994, construction ceased. On April 14, 1994, the contractor removed himself and his license from the project. Final Order On August 11, 1995, the Department of Business and Professional Regulation filed an Administrative Complaint against the contractor alleging violations of Sections 489.129(d), (h), and (k). The Construction Industry Licensing Board (the "Board") entered a Final Order on January 16, 1996. The Final Order found the contractor guilty of the allegations in the Administrative Complaint. The Board directed the licensee to pay restitution to Petitioners in an unspecified amount based on violations of Sections 489.129(d), (h), and (k) that occurred on or after July 1, 1993. Civil Action On October 23, 1995, Petitioners filed a civil action against the contractor. Petitioners filed the civil action in the Circuit Court of the Eighteenth Judicial Circuit in and for Brevard County, Florida. Daniel J. Johnson and Doris S. Johnson v. Michael R. Harvey, Case Number 95-16601-CA-F. On December 1, 1995, the contractor filed a Suggestion of the Pendency of Bankruptcy in the civil case. On November 25, 1994, the contractor had filed for bankruptcy in the United States Bankruptcy Court, Middle District of Florida. In Re: Michael R. Harvey, Debtor, Case Number 94-11514-8B7. On March 8, 1995, the Bankruptcy Court entered a Discharge of Debtor Order. On December 1, 1995, the bankruptcy trustee notified Petitioners that no assets were available for distribution from the bankruptcy estate except exempt assets. Claim Against Respondent On March 29, 1996, Petitioners filed a claim against Respondent. On June 13, 1996, the Construction Industries Recovery Fund Committee (the "Committee") denied the claim. The Committee determined that Petitioners are required by law to execute a construction contract on or after July 1, 1993, to recover from Respondent. The Committee found that Petitioners executed the required contract on June 10, 1993. On June 14, 1996, the Board ratified the Committee's action. The Board entered a Final Order on August 20, 1996. Payment To Respondent Petitioners paid money to Respondent in statutorily prescribed amounts through a surcharge of one-half cent per square foot of the project. The surcharge is imposed pursuant to Sections 489.140(2) and 468.631. Petitioners received no reimbursement from Respondent. Nor did Petitioners receive restitution from the licensee.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and thereinGRANT Petitioners' claim for recovery against Respondent. RECOMMENDED this 20th day of March, 1997, in Tallahassee, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 20th day of March, 1997.
The Issue The issue for determination at formal hearing was whether proposed amendments to Rule 4J-2.002, Florida Administrative Code, are an invalid exercise of delegated legislative authority.
Findings Of Fact An admitted or authorized insurance company is a foreign insurance company which is licensed to do business in its home state and another state which is Florida in the case at hand, or is a domestic insurance company licensed to do business in its home state, here Florida. Examples of such insurance companies are Hartford, Travelers and USF&G. A non-admitted or surplus lines insurance company writes coverage for risks which are not normally written by admitted companies. An example of such a company is Lloyd's of London. A risk is eligible to be placed with a surplus lines insurer if, after diligent effort, the full amount of insurance required to cover the risk cannot be placed with admitted insurers, if the rate offered is not less than or broader than that offered by the admitted insurers, and if the policy offered is not more favorable to the insurer than those offered by admitted insurers which actually write similar coverages on similar risks. The surplus lines' premium is usually higher than the admitted insurer's premium. If an insurance agent is unable to place a risk with either an admitted insurer or a surplus lines insurer, the agent can certify the inability to the Market Assistance Plan (MAP) and request assistance from MAP in placing the risk, which has access to all admitted and surplus lines brokers doing business in Florida. MAP was legislatively created to assist those who are unable to obtain property or casualty insurance and is comprised of all insurers licensed to do business in Florida. The Florida Legislature also created the Florida Property and Casualty Joint Underwriting Association (FPCJUA) to provide coverage for certain risks when the risk cannot be placed in the admitted market, the surplus lines market and MAP, i.e., the voluntary market. The FPCJUA is a residual market or market of last resort. It is comprised of all insurers licensed by the State of Florida to write property and casualty insurance coverage in Florida. After the devastation to Florida from Hurricane Andrew in 1992, the premiums for commercial residential coverage greatly increased and became virtually unaffordable. However, coverage was possible if an applicant could afford the premiums being charged. Commercial residential coverage became a hard market which meant that it was hard to obtain insurance for such coverage. Attempting to address the dilemma involving insurance coverage of commercial residential property, in the November 1993 Special Session, the Florida Legislature specifically activated temporary coverage under the Joint Underwriters Association (JUA) for commercial residential properties, i.e., condominium associations, apartment buildings, common elements of homeowners associations and other commercial coverages of residences. As of May 1994, the JUA had not written any coverages for commercial residential properties. Out of approximately 300 to 400 admitted insurance companies in Florida qualified to write commercial residential coverage, only two to five were writing such coverage after Hurricane Andrew. In May 1994, the Department of Insurance by emergency order directed the JUA to write coverages for commercial residential properties under specified guidelines. Without the emergency order, the JUA would not have written coverages for such properties because coverage was being written even though it was being done by only two to five admitted insurance companies and even though the premiums were virtually unaffordable. Finally, the Department of Insurance resorted to a more enduring remedy by seeking to amend Rule 4J-2.002, Florida Administrative Code, to address the dilemma of coverage for commercial residential properties. Foremost, the proposed amendments would modify the FPCJUA's Plan of Operation by temporarily making the coverage for commercial residential property automatically eligible for the FPCJUA without first seeking coverage from the voluntary market. This change would, therefore, transform the FPCJUA, as far as coverage for commercial residential property is concerned, into a market of first resort instead of last resort. Secondly, the proposed amendments would provide for specific deductibles for such coverage. And thirdly, the proposed amendments would provide for the FPCJUA to conduct periodic surveys regarding premiums for such coverage to determine if rates should be adjusted. Standing is not an issue in this proceeding.
The Issue Whether the Florida Fish and Wildlife Conservation Commission’s (“Respondent” or “FWC”) determination that Tallahassee Corporate Center, LLC (“Petitioner” or “TCC”), submitted a nonresponsive reply to FWC’s Invitation to Negotiate (“ITN”) No. 770-0235 is contrary to the Commission’s governing statutes, the agency’s rules or policies, or the solicitation specifications; and, if so, whether it was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact The following Findings of Fact are based on exhibits admitted into evidence, testimony offered by witnesses, and admitted facts set forth in the pre-hearing stipulation. ITN No. 770-0235 and Background FWC is a state agency that seeks office space to be occupied by personnel from six of FWC’s divisions. FWC currently leases office space from TCC, which expires in October 2019. On July 19, 2017, FWC issued ITN No. 770-0235, seeking vendors that could provide 53,000 square feet of office space for lease. FWC anticipates occupying the space by November 1, 2019. Between August 15, 2017, and November 2, 2017, FWC issued four addenda to the ITN, which contained amendments, modifications, and explanations to the ITN. There were no bidders that challenged the terms, conditions, or specifications contained in the ITN or its amendments. TCC and NLH were two of the potential lessors that submitted replies in response to the ITN. FWC seeks to lease either a building that already exists or a non-existing building to be constructed in the future. The ITN describes the proposals requested as follows: Competitive proposals may be submitted for consideration under this Invitation to Negotiate (ITN) for the lease of office space in either an existing building or a non- existing (build-to-suit/turnkey) building. NOTE: All buildings must comply with the Americans with Disabilities Act (ADA) as stated in Attachment A, Agency Specifications, Section 6.D., page 32. OPTION 1 - an ‘existing’ building: To be considered an ‘existing’ building, the facility offered must be enclosed with a roof system and exterior walls must be in place at the time of the submittal of the Reply. OPTION 2 - a ‘non-existing’ building: Offeror agrees to construct a building as a ‘build-to-suit’ (turnkey) for lease to FWC. Each applicant that submitted a proposal in response to the ITN was required to meet the specification in Attachment A of the ITN. The ITN provides as follows: FWC is seeking detailed and competitive proposals to provide built-out office facilities and related infrastructure for the occupancy by FWC. As relates to any space that is required to be built-out pursuant to this Invitation to Negotiate in accordance with this Invitation to Negotiate, see Attachment ‘A’ which includes the FWC Specifications detailing the build-out requirements. The specifications in Attachment A provided the basic requirements for the potential leased space such that proposals offering existing or non-existing building may be compared and evaluated together. The ITN included certain provisions to clarify the rights contemplated by the ITN, and included the following disclaimer: This ITN is an invitation to negotiate and is for discussion purposes only. It is not an offer, contract or agreement of any kind. Neither FWC nor the Offeror/Lessor shall have any legal rights or obligations whatsoever between them and neither shall take any action or fail to take any action in reliance upon any part of these discussions until the proposed transaction and a definitive written lease agreement is approved in writing by FWC. This ITN shall not be considered an offer to lease. The terms of any transaction, if consummated, shall not be final nor binding on either party until a Lease Agreement is executed by all parties. This ITN may be modified or withdrawn by FWC at any time. The ITN also included a provision expressly reserving FWC’s “right to negotiate with all responsive and responsible Offerors, serially or concurrently, to determine the best-suited solution.” The term “Offeror” was defined by the ITN to mean “the individual submitting a Reply to this Invitation to Negotiate, such person being the owner of the proposed facility or an individual duly authorized to bind the owner of the facility.” This reservation of rights placed interested lessors on notice that only responsive lessors could be invited to negotiations. While TCC and NLH were two of the potential lessors that submitted replies in response to the ITN, the bidders submitted different proposals. TCC submitted a proposal for an existing building, and NLH submitted a proposal for a non- existing building. During an initial review of all replies, FWC determined TCC’s reply to be nonresponsive based on TCC’s response to ITN section IV.G (Tenant Improvements) and a statement titled “Additional Response” that TCC submitted with its reply. As a result, FWC did not evaluate or score TCC’s reply. After TCC’s reply was declared nonresponsive, there were no further negotiations with TCC regarding the ITN. NLH’s reply passed the initial responsiveness review and was then evaluated and scored by FWC. FWC ultimately issued an intended award of the contract to NLH after conducting negotiations. Tenant-Improvement Cap The ITN prohibited vendors from proposing conditional or contingent lease rates that included a tenant-improvement cap, or allowance. A tenant-improvement cap reflects the maximum amount the landlord is willing to spend to make improvements to leased space. Mr. Hakimi asserted that the tenant-improvement cap would be an incentive to FWC to enter a lease. However, the tenant-improvement cap would also place a limit on improvements. According to ITN section IV.E, any reply offering a lease rate with a tenant-improvement cap would be deemed nonresponsive: FULL SERVICE (GROSS) RENTAL RATE The Offeror shall provide FWC with a Full Service (gross) lease structure. Therefore, the lease rate must include base rent, taxes, all operating expenses (including, but not limited to, janitorial services and supplies, utilities, water, insurance, interior and exterior maintenance, recycling services, garbage disposal, pest control, security system installation and maintenance, and any amortization of required tenant improvements to the proposed space). There shall be no pass through of additional expenses . . . . Offerors must provide their best, firm lease rates. Lease rates that are contingent, involve a basic rate plus “cap” or “range” for such things as tenant improvements will be deemed nonresponsive. The ITN also provided, in section IV.G, that any current lessor must meet all ITN requirements, including those set forth in ITN Attachment A: TENANT IMPROVEMENTS The State requires a “turn-key” build-out by the Landlord. Therefore, Offeror shall assume all cost risks associated with delivery in accordance with the required specifications detailed in this ITN, including Attachment A (see pages 28-45). Additionally, replies for space which is currently under lease with, or occupancy by, the Florida Fish and Wildlife Conservation Commission does not exclude the Offeror from meeting the requirements specified in this ITN document. Offeror agrees to provide “turn-key” build-out/improvements in accordance with the specifications detailed in this ITN. (use an X to mark one of the following): YES or NO TCC responded “NO” to the statement “Offeror agrees to provide ‘turn-key’ build-out/improvements in accordance with the specifications detailed in this ITN.” Additional Response Not only did TCC include a barred tenant-improvement cap, but TCC also attached an addendum to its proposal, which provided the following: The reality is that as the current Landlord, it would be impossible to ask FFWCC to move out of its existing office space in order to meet the requested Agency Specifications in Attachment A. If this condition makes our response to the Invitation to Negotiate (ITN) “non-responsive”, we stand willing to continue further negotiations with FFWCC. There was no provision in the ITN for additional responses outside what was requested in the ITN. More importantly, the addendum indicated TCC could not comply with the ITN, unless certain conditions were met. Mr. Hakimi confirmed the effect of what was written in the addendum when he testified that TCC is unable to meet Attachment A’s specifications because it presently has a tenant in place (i.e., FWC) that prevents it from constructing the building improvements necessary to comply with ITN Attachment A. Proof of Ownership of Property The ITN also provided that to be responsive, each lessor was required to submit certain documentation demonstrating the lessor’s control of the property proposed for the leased space: Replies must completely and accurately respond to all requested information, including the following: (A) Control of Property (Applicable for Replies for Existing and/or Non- Existing Buildings). For a Reply to be responsive, it must be submitted by one of the entities listed below, and the proposal must include supporting documentation proving control of the property proposed. This requirement applies to: The real property (land); The proposed building(s) (or structure(s); The proposed parking area(s). Control of parking includes the area(s) of ingress and egress to both the real property and the building(s). The owner of record of the facility(s) and parking area(s) – Submit a copy of the deed(s) evidencing clear title to the property proposed. The authorized agent, broker or legal representative of the owner(s) – Submit a copy of the Special Power of Attorney authorizing submission of the proposal. The Special Power of Attorney form was attached to the ITN as Attachment K. TCC’s certification was executed by TCC president, Lyda Hakimi. However, TCC did not execute Attachment K or include an executed power of attorney to demonstrate that TCC has control of the property. The evidence offered at hearing of the property’s ownership contained in TCC’s reply was a deed showing DRA CRT Tallahassee Center, LLC to be the property owner. Respondent argued that although TCC owns DRA CRT Tallahassee Center, LLC, the two are different legal entities. Because these were two different legal entities, TCC was required to provide a copy of Attachment K to its response to be deemed responsive. Broker Commission The ITN required lessors to agree to execute a broker- commission agreement, which was attached to the ITN as Attachment J: Offeror understands FWC is utilizing the services of a Tenant Broker representative for this lease space requirement and the successful Offeror shall execute a Commission Agreement, in coordination with FWC’s Tenant Broker representative, within fifteen (15) business days of notification of Award. Offeror agrees and acknowledges that a Tenant Broker Commission Agreement is a requirement and the successful Offeror shall be required to execute a Commission Agreement as described above. (use an X to mark one of the following): YES or NO The ITN included a schedule for the commission rate based on the total aggregate gross base rent that could be paid ranging from 2.50 percent to 3.50 percent. TCC conditioned its reply by agreeing to pay a two-percent broker commission, which is inconsistent with the commission schedule. By offering a lower commission rate, TCC could save money. TCC would then have a competitive advantage over other bidders. TCC’S Bid was Nonresponsive Based upon the foregoing, TCC’s bid submission added a tenant-improvement cap, failed to comply with the broker commission rate, failed to provide supporting documents to demonstrate proof of property ownership, and added additional conditions regarding compliance with the ITN requirements. The information requested and terms of the ITN were required for TCC’s bid to be responsive. TCC did not file a challenge to the specifications or any of the requirements of the ITN. It is now too late for such a challenge. TCC’s inclusion of a tenant-improvement allowance limits the amount that would pay for improvements. The lower broker commission increases the profit advantage for TCC more than for other bidders, which would be an unfair advantage over other bidders. TCC’s failure to comply with the terms of the ITN and failure to provide the required attachment to show proof of ownership were not minor irregularities, which FWC could waive. Therefore, FWC properly determined that TCC’s bid submission was nonresponsive. Standing TCC submitted a bid proposal that did not conform to the requirements of the ITN and it seeks relief that includes setting aside FWC’s rejection of its proposal. Therefore, TCC has standing to bring this protest. If it is determined that TCC was nonresponsive, NLH has standing to the extent the procurement process could be deemed contrary to competition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Fish and Wildlife Conservation Commission enter a final order dismissing Tallahassee Corporate Center, LLC’s Petition. DONE AND ENTERED this 27th day of March, 2018, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN 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 27th day of March, 2018.
The Issue Pursuant to chapter 287, Florida Statutes, and section 255.25, Florida Statutes,1/ the Department of Management Services (DMS) released an Invitation to Negotiate for a contract to provide tenant broker and real estate consulting services to the State of Florida under Invitation to Negotiate No. DMS-12/13-007 (ITN). After evaluating the replies, negotiating with five vendors, and holding public meetings, DMS posted a notice of intent to award a contract to CBRE, Inc. (CBRE) and Vertical Integration, Inc. (Vertical). At issue in this proceeding is whether DMS’s intended decision to award a contract for tenant broker and real estate consulting services to CBRE and Vertical is contrary to DMS’s governing statutes, its rules or policies, or the ITN’s specifications, or was otherwise clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact Based on the demeanor and credibility of the witnesses and other evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Background5/ DMS released Invitation to Negotiate No. DMS-12/13-007 on March 18, 2013, and released a revised version of the ITN on May 14, 2013, for the selection of a company to provide tenant broker and real estate consulting services to the State of Florida. Thirteen vendors responded to the ITN. The replies were evaluated by five people: Bryan Bradner, Deputy Director of REDM of DMS; Beth Sparkman, Bureau Chief of Leasing of DMS; Rosalyn (“Roz”) Ingram, Chief of Procurement, Land and Leasing of the Department of Corrections; Clark Rogers, Purchasing and Facilities Manager of the Department of Revenue; and Janice Ellison, Section Lead in the Land Asset Management Section of the Department of Environmental Protection. Five vendors advanced to the negotiation stage: Cushman (score of 87), JLL (score of 87), CBRE (score of 87), Vertical (score of 89), and DTZ (score of 86). DTZ is not a party to this proceeding. The negotiation team consisted of Beth Sparkman, Bryan Bradner, and Roz Ingram. Janice Ellison participated as a subject matter expert. DMS held a first round of negotiations and then held a public meeting on July 16, 2013. DMS held a second round of negotiations and then held a second public meeting on August 1, 2013. A recording of this meeting is not available, but minutes were taken. Also on August 1, 2013, DMS posted Addendum 8, the Request for Best and Final Offers. This Addendum contained the notice that “Failure to file a protest within the time prescribed in section 120.57(3) . . . shall constitute a waiver of proceedings under chapter 120 of the Florida Statutes.” The vendors each submitted a BAFO. DMS held a final public meeting on August 14, 2013, at which the negotiation team discussed the recommendation of award. All three members of the negotiation team recommended Vertical as one of the two vendors to receive the award. For the second company, two of the three negotiation team members recommended CBRE and one negotiation team member recommended JLL. DMS prepared a memorandum, dated August 14, 2013, describing the negotiation team’s recommendation of award. The memorandum comprises the following sections: Introduction; The Services; Procurement Process (subsections for Evaluations and Negotiations); Best value (subsections for Selection Criteria, Technical Analysis, Price Analysis, and Negotiation Team’s Recommendation); and Conclusion. Attached to the memorandum as Attachment A was a memorandum dated April 30, 2013, appointing the evaluation and negotiation committees, and attached as Attachment B was a spreadsheet comparing the vendors’ BAFOs. DMS posted the Notice of Intent to Award to CBRE and Vertical on August 16, 2013. Cushman and JLL timely filed notices of intent to protest the Intent to Award. On August 29, 2013, JLL timely filed a formal protest to the Intent to Award. On August 30, 2013, Cushman timely filed a formal protest to the Intent to Award. An opportunity to resolve the protests was held on September 9, 2013, and an impasse was eventually reached. On October 10, 2013, DMS forwarded the formal protest petitions to DOAH. An Order consolidating JLL’s protest and Cushman’s protest was entered on October 15, 2013. Scope of Real Estate Services in the ITN Prior to the statutory authority of DMS to procure real estate brokerage services, agencies used their own staff to negotiate private property leases. Section 255.25(h), Florida Statutes, arose out of the legislature’s desire for trained real estate professionals to assist the State of Florida with its private leasing needs. The statutorily mandated use of tenant brokers by agencies has saved the state an estimated $46 million dollars. The primary purpose of the ITN was to re-procure the expiring tenant broker contracts to assist state agencies in private sector leasing transactions. Once under contract, the selected vendors compete with each other for the opportunity to act on behalf of individual agencies as their tenant broker, but there is no guarantee particular vendors will get any business. The core of the services sought in the ITN was lease transactions. The ITN also sought to provide a contract vehicle to allow vendors to provide real estate consulting services, including strategies for long and short-term leases, space planning, and space management as part of the negotiation for private leases. As part of providing real estate consulting services, vendors would also perform independent market analyses (IMAs) and broker opinions of value (BOVs) or broker price opinions (BPOs). In almost all instances, this would be provided at no charge as part of the other work performed for a commissionable transaction under the resulting contract. However, the resulting contract was designed to allow agencies to ask for an IMA or BOV to be performed independently from a commissionable transaction. In addition to the primary leasing transactions, the contract would also allow state agencies to use the vendors for other services such as the acquisition and disposition of land and/or buildings. These services would be performed according to a Scope of Work prepared by the individual agency, with compensation at either the hourly rates (set as ceiling rates in the ITN), set fees for the service/project, or at the percentage commission rate negotiated between the vendor and the individual agency. However, these services were ancillary to the main purpose of the contract, which was private leasing. In Florida, most state agencies are not authorized to hold title to land. However, the Department of Environmental Protection (DEP) serves as staff for the Board of Trustees of the Internal Improvement Trust Fund (“Board”), which holds title to land owned by the State of Florida. In that capacity, DEP buys and sells land and other properties on behalf of the Board. DEP recently began using the current DMS tenant broker contract for acquisitions and dispositions. The process was cumbersome under the current contract, so DEP asked to participate in the ITN in order to make the contract more suitable for their purposes. The ITN was revised to include DEP’s proposed changes, and DMS had Ms. Ellison serve first as an evaluator and later as a subject matter expert. At hearing, Ms. Ellison testified that she was able to participate fully, that her input was taken seriously, and that the proposed contract adequately addressed DEP’s concerns. While DEP anticipated that under the proposed contract it would use more BOVs than it had previously, there was no guarantee that DEP would use the proposed contract. DEP is not obligated to use the contract and maintains the ability to procure its own tenant brokers. Additionally, administration and leadership changes may cause a switch of using in-house agency employees instead of tenant brokers to perform real estate acquisition and disposition services. Specifics of the ITN The ITN directed vendors to submit a reply with the following sections: a cover letter; completed attachments; pass/fail requirements; Reply Evaluation Criteria; and a price sheet. The Reply Evaluation Criteria included Part A (Qualifications) and Part B (Business Plan). Qualifications were worth 40 points, the Business Plan was worth 50 points, and the proposed pricing was worth 10 points. For the Business Plan, the ITN requested a detailed narrative description of how the vendors planned to meet DMS’s needs as set forth in section 3.01, Scope of Work. The ITN requested that vendors describe and identify the current and planned resources and employees to be assigned to the project and how the resources would be deployed. Section 3.01, Scope of Work, states that the primary objective of the ITN is to “identify brokers to assist and represent the Department and other state agencies in private sector leasing transactions.” The ITN states that the contractor will provide state agencies and other eligible users with real estate transaction and management services, which include “document creation and management, lease negotiation and renegotiation, facility planning, construction oversight, and lease closeout, agency real estate business strategies, pricing models related to relocation services, project management services, acquisition services, and strategic consulting.” Id. The ITN also specifies: Other real estate consulting services such as property acquisitions, dispositions, general property consulting, property analysis and promotions, property marketing, property negotiation, competitive bidding or property, property auctions and direct sales or those identified in the reply or negotiation process and made part of the Contract (e.g., financial services, facilities management services, lease v. buy analyses). The ITN lists the following duties the contractor will perform: Act as the state’s tenant broker, to competitively solicit, negotiate and develop private sector lease agreements; Monitor landlord build-out on behalf of state agencies; Provide space management services, using required space utilization standards; Provide tenant representation services for state agencies and other eligible users during the term of a lease; Identify and evaluate as directed strategic opportunities for reducing occupancy costs through consolidation, relocation, reconfiguration, capital investment, selling and/or the building or acquisition of space; Assist with property acquisitions, dispositions, general property consulting, property analysis and promotions, property marketing, property negotiation, competitive bidding property, property auctions and direct sales; and Provide requested related real estate consulting services. The ITN set the commission percentage for new leases at 4 percent for years 1-10 and 2 percent for each year over 10 years; 2 percent for lease renewals, extensions, or modifications; and 2 percent for warehouse or storage space leases. Id. For “other services,” the ITN states: With respect to all other services (e.g., space management services, general real estate consulting services, property acquisitions, dispositions, general property consulting, property analysis and promotions, property marketing, property negotiation, competitive bidding or property, property auctions and direct sales), compensation will be as outlined in an agency prepared Scope of Work and will be quoted based on hourly rates (set as ceiling rates in this ITN), set fees for the service/project or by percentage commission rate as offered and negotiated by the broker and the using agency. The ITN also required that vendors specify the number of credit hours to be given annually to DMS. Each vendor gives a certain number of credit hours at the start of each year under the contract. The state earns additional credit hours as the vendors perform transactions. DMS manages the pool of accumulated credit hours and gives them to individual agencies to use on a case-by-case basis as payment for individual projects. These credit hours are commonly allocated to pay for IMAs and BOVs that are not part of commissionable transactions. With the exception of one legislatively mandated project, DMS has never exhausted its pool of credit hours. The ITN further specified that IMAs and BOVs must be offered at no cost when performed as part of a commissionable transaction. Historically, most IMAs and BOVs are performed as part of a commissionable transaction. They have only been performed separately from a commissionable transaction a handful of times under the current contract, and many of these were still provided at no cost through the allocation of free credit hours available to the agencies. Therefore, most IMAs and BOVs to be performed under the proposed contract will likely be at no cost. The ITN states that points to be awarded under the price criterion will be awarded based on the number of annual credit hours offered and the commission rate paid per transaction per hour of commission received. The ITN further provides that DMS will evaluate and rank replies in order to establish a competitive range of replies reasonably susceptible to award, and then the team will proceed to negotiations. Regarding negotiations, the ITN states: The focus of the negotiations will be on achieving the solution that provides the best value to the state based upon the selection criteria and the requirements of this solicitation. The selection criteria include, but are not limited to, the Respondent’s demonstrated ability to effectively provide the services, technical proposal and price. The Department reserves the right to utilize subject matter experts, subject matter advisors and multi-agency or legislative advisors to assist the negotiation team with finalizing the section criteria. The negotiation process will also include negotiation of the terms and conditions of the Contract. The ITN also states: At the conclusion of negotiations, the Department will issue a written request for best and final offer(s) (BAFOs) to one or more of the Respondents with which the negotiation team has conducted negotiations. At a minimum, based upon the negotiation process, the BAFOs must contain: A revised Statement of Work; All negotiated terms and conditions to be included in Contract; and A final cost offer. The Respondent’s BAFO will be delivered to the negotiation team for review. Thereafter, the negotiation team will meet in a public meeting to determine which offer constitutes the best value to the state based upon the selection criteria. The Department does not anticipate reopening negotiations after receiving BAFOs, but reserves the right to do so if it believes doing so will be in the best interests of the State. The ITN and draft contract permit subcontractors to perform under the contract and provide an avenue for a contractor to add subcontractors by submitting a written request to DMS’s contract manager with particular information. Best and Final Offers After the conclusion of negotiations, the negotiation team requested each vendor to submit a BAFO, to be filled out in accordance with the RBAFO format. The RBAFO noted that each vendor would get a set percentage commission for leasing transactions, but asked vendors to submit their prices for IMAs, BOVs, and BPOs performed outside a commissionable transaction and to submit the number of annual credit hours vendors would give DMS at the start of the new contract. In an effort to increase potential savings to the state, DMS lowered the percentage rates of the commissions for lease transactions in the RBAFO below the rates initially set in the ITN. By selecting only two vendors instead of three, the additional potential volume for each vendor on the contract could support the lower commission rates being requested of tenant brokers. The state would ultimately save money due to the impact of the reduced commissions on the overall economic structure of each lease. Beth Sparkman, Bureau Chief of Leasing of DMS, expounded on the rationale for reducing the number of vendors under the new contract to two: The Court: To me, it’s counterintuitive that having fewer vendors would result in more favorable pricing for the state of Florida; and yet you said that was the anticipated result of reducing the number of vendors from three to two – The Witness: Correct. The Court: -- for the new contract. I’m unclear. Tell me the basis for the team’s anticipation that having fewer vendors would result in better pricing. The Witness: When the original ITN was released, it had the same percentages in there that are under the current contract. And I’ll talk, for context, new leases, which right now is at 4 percent. So the discussion was – and 4 percent is typical of the industry. That’s typical for what the industry pays across the board. So the desire was to reduce the commission, to reduce those commission amounts to drive that percentage down. So we went out with the first BAFO that had a range that said for leases that cost between zero – and I can’t remember – zero and a half million, what would your percentage be? Thinking that when we had a tiered arrangement, those percentages would come down. They really didn’t. So when we sat down as a team and discussed: Well, why didn’t they – and you know, because typical is 4 percent. So we came back and said: Well, if we reduce the percentage on new leases to 3.25 but restrict the reward to two vendors, each vendor has the potential to make as much money as they would have made at 4 percent, but the savings would be rolled back into the state. Each of the five vendors invited to negotiate submitted a BAFO, agreeing as part of their submissions to comply with the terms and conditions of the draft of the proposed contract and agreeing to the lowered set percentage commission rates in the RBAFO. The RBAFO listed selection criteria by which the vendors would be chosen, to further refine the broad criteria listed in the ITN. The RBAFO listed the following nine items as selection criteria: performance measures (if necessary), sliding scale/cap, IMA set fee, broker’s opinion of value, balance of line (can be quoted per hour or lump sum), contract concerns, credit hours (both annual and per deal hour), hourly rates, and vendor experience and capability. CBRE’s BAFO submission followed the format indicated in the RBAFO, but CBRE included an additional section giving its proposed commission rates for acquisitions and dispositions of land. These rates were also submitted by other vendors at other parts of the procurement process, but CBRE was the only vendor to include such rates as part of its BAFO submission. DMS considered this addition a minor irregularity that it waived. In its BAFO submission, Cushman offered a three-tiered approach to its pricing for IMAs and BOVs. For the first tier, Cushman offered to perform IMAs and BOVs for free as part of a commissionable transaction. This is redundant, as the ITN required all vendors to perform IMAs and BOVs at no cost when part of a commissionable transaction. For the second tier, Cushman offered to perform IMAs and BOVs at no cost when the user agency has previously hired Cushman on tenant representative work. Ms. Sparkman testified that this provision was unclear, as Cushman did not define the scope of this provision or what amount of work qualified the agency for free services. For the third tier, Cushman offered to perform IMAs and BOVs for $240 when not part of a commissionable transaction for an agency with which it had never done business. Best Value Determination The five BAFOs were sent to the negotiation team for review on August 8, 2013, and on August 14, 2013, the team met in a public meeting to discuss the BAFOs, consider the selection criteria, discuss the team’s award recommendation, and draft a written award recommendation memorandum. During the August 14, 2013, meeting the team determined that CBRE and Vertical represented the best value to the state, by a majority vote for CBRE and by a unanimous vote for Vertical. Ms. Sparkman stated at the meeting that, from her perspective, CBRE and Vertical represented a better value than the other vendors because they were more forward thinking in their long term business strategies for managing Florida’s portfolio. Also at this meeting, Ms. Sparkman noted that CBRE’s prices for IMAs and BOVs were somewhat high but that she would attempt to convince CBRE to lower its prices during the contract execution phase. This was part of an attempt to equalize costs to ensure user agencies selected vendors based on individual needs rather than cost. However, CBRE represented the best value to the state regardless of whether its pricing changed. At hearing, Ms. Sparkman testified that if CBRE had refused to lower its pricing, DMS would still have signed a contract with them based on the pricing submitted in its BAFO. Ms. Sparkman also stated at the public meeting that if she were unable to come to contract with both CBRE and Vertical, she would arrange for another public meeting to select a third vendor with whom to proceed to the contract execution phase. This statement did not refer to DMS selecting a third vendor to replace CBRE should CBRE refuse to lower its price, but rather reflected the possibility that during the contract execution phase, DMS and either one of the vendors could potentially be unable to sign a contract because the vendor was unwilling to execute the written terms and conditions. The “contract negotiations” referenced during the public meeting are the remaining processes to be worked out during the contract execution phase and are distinct and separate from the negotiation phase. At hearing, Ms. Sparkman testified that in the past, vendors have refused to sign a contract because their legal counsel was unwilling to sign off on what the business representatives agreed to. Thus, if either CBRE or Vertical refused to sign the contract altogether, DMS would potentially have selected a third-place vendor in order to have a second vendor on the contract, according to Ms. Sparkman. International experience weighed in favor of CBRE and Vertical, according to team member comments made at the public meeting. Although the phrase “international experience” was not specifically listed in the selection criteria of the ITN or RBAFO, many vendors highlighted their international experience as part of the general category of vendor experience. Vendor experience and capability is specified in both the ITN and RBAFO as part of the selection criteria. Ms. Sparkman testified that international experience is indicative of high quality general vendor experience because international real estate market trends change more rapidly than domestic market trends. None of the negotiation team members recommended Cushman for a contract award, and in fact, Cushman's name was not even discussed at the award meeting. The Award Memorandum Also during the August 14, 2013, public meeting the negotiation team prepared a memorandum setting forth the negotiation team’s best value recommendation of CBRE and Vertical, and many of its reasons for the recommendation. There was no requirement that the memorandum list every single reason that went into the decision. For example, the memorandum did not state that the team found CBRE and Vertical’s focus on long term strategies more impressive than Cushman’s focus on past performance under the current contract. The award memorandum included a “Selection Criteria” section which simply repeated the nine selection criteria that had been previously identified in the RBAFO. The memorandum then went on to include a section labeled “B. Technical Analysis” that stated: Analysis of pricing is provided in section C below. As to the remaining selection criteria items, the Team identified the following key elements for the service to be provided: Long term strategies Key performance indicators Management of the portfolio Top ranked vendors had comprehensive business plans Pricing on the BOV and IMAs. The selection criteria provided above were used by the Team to make its best value recommendation. Ms. Sparkman testified that while the choice of wording may have been imprecise, the items listed in the Technical Analysis section were simply elaborations of the selection criteria in the ITN and RBAFO, and not new criteria. The first four are subsumed within vendor experience and capability, and the fifth was specifically listed in the RBAFO. Indeed, Cushman’s Senior Managing Director testified at hearing that Cushman had addressed the first four items in their presentation to DMS during the negotiation phase to demonstrate why Cushman should be chosen for the contract. The memorandum failed to note that CBRE had included non-solicited information in its BAFO regarding proposed rates for the acquisition and disposition of land. However, the negotiation team considered CBRE’s inclusion of these proposed rates a minor irregularity that could be waived in accordance with the ITN and addressed in the contract execution phase, since those rates were for ancillary services, and there was no guaranteed work to be done for DEP under that fee structure. The memorandum included a chart, identified as Attachment B, that compared the proposed number of credit hours and some of the pricing for IMAs and BOVs submitted by the vendors in their BAFOs. The chart listed Cushman’s price for IMAs and BOVs as $240 and failed to include all the information regarding the three-tiered approach to IMAs and BOVs Cushman listed in its BAFO. However, Ms. Sparkman testified that the chart was meant to be a side-by-side basic summary that compared similar information, not an exhaustive listing. The Cushman Protest Negotiations After Award of the Contract Cushman alleges that DMS’s selection of CBRE violates the ITN specifications because DMS selected CBRE with the intent of conducting further negotiations regarding price, which provided CBRE with an unfair advantage. Cushman further argues that the procedure of awarding to one vendor and then possibly adding another vendor if contract negotiations fail violates Florida’s statutes and the ITN. Amended Pet. ¶¶ 23, 28 & 31. Section 2.14 of the ITN specifically reserved DMS's right to reopen negotiations after receipt of BAFOs if it believed such was in the best interests of the state. Specifically, section 2.14 A. provides: The highest ranked Respondent(s) will be invited to negotiate a Contract. Respondents are cautioned to propose their best possible offers in their initial Reply as failing to do so may result in not being selected to proceed to negotiations. If necessary, the Department will request revisions to the approach submitted by the top-rated Respondent(s) until it is satisfied that the contract model will serve the state’s needs and is determined to provide the best value to the state. The statements made by Ms. Sparkman at the August 14, 2013, public meeting and in the award memorandum, that DMS would attempt to reduce CBRE's prices for ancillary services during the contract execution process were not contrary to the ITN or unfair to the other vendors. Both Ms. Sparkman and Mr. Bradner, the two negotiation team members who voted to award to CBRE, testified that they recommended CBRE as providing the best value even considering its arguably higher prices for ancillary services. Ms. Sparkman further confirmed that even if CBRE refused to lower its prices during the contract execution phase, DMS would still sign the contract, as CBRE's proposal would still represent the best value to the state. The anticipated efforts to obtain lower prices from CBRE were simply an attempt to obtain an even better best value for the state. Ms. Sparkman also testified that section 2.14 F. allowed continued negotiations, even though it was silent as to timeframe. Paragraph F states: In submitting a Reply a Respondent agrees to be bound to the terms of Section 5 – General Contract Conditions (PUR 1000) and Section 4 – Special Contract Conditions. Respondents should assume those terms will apply to the final contract, but the Department reserves the right to negotiate different terms and related price adjustments if the Department determines that it provides the best value to the state. Ms. Sparkman also cited section 2.14 I. as authority for reopening negotiations following receipt of the BAFO’s. That section provides: The Department does not anticipate reopening negotiations after receiving the BAFOs, but reserves the right to do so if it believes doing so will be in the best interests of the state. Ms. Sparkman’s statement that if DMS failed, for any reason, to successfully contract with either of the two vendors selected, it would consider pulling in another vendor, is not inconsistent with the clear language of the ITN. Selection Criteria Cushman alleges that DMS used criteria to determine the awards that were not listed in the ITN or the RBAFO. Amended Pet. ¶ 25. Section 2.14 E of the ITN established broad selection criteria, stating: The focus of the negotiations will be on achieving the solution that provides the best value to the state based upon the selection criteria and the requirements of this solicitation. The selection criteria include, but are not limited to, the Respondent's demonstrated ability to effectively provide the services, technical proposal and price. The Department reserves the right to utilize subject matter experts, subject matter advisors and multi-agency or legislative advisors to assist the negotiation team with finalizing the selection criteria. The negotiation process will also include negotiation of the terms and conditions of the Contract. (emphasis added). Following the negotiations, and with the assistance of its subject matter expert, the negotiation team provided in the RBAFO additional clarity as to the selection criteria, and identified the "Basis of Award/Selection Criteria" as follows: Performance Measures (if necessary) Sliding scale/cap IMA set fee Broker's opinion of value Balance of line (can be quoted per hour or lump sum) Contract concerns Credit hours (both annual and per deal hour) Hourly rates Vendor experience and capability The foregoing selection criteria, as well as the selection criteria stated initially in the ITN, make clear that pricing was only one of the criteria upon which the award was to be made. Indeed, Cushman's representative, Larry Richey, acknowledged during his testimony that criteria such as "Performance Measures," "Contract Concerns," and "Vendor Experience and Capability" did not refer to pricing, but rather to the expected quality of the vendor's performance if awarded the contract. As the principal draftsman of the ITN and DMS's lead negotiator, Ms. Sparkman explained that the RBAFO's statement of the selection criteria was intended to provide greater detail to the broad selection criteria identified in the ITN, and was used by the negotiation team in making its best value determination. Ms. Sparkman further testified that the best value determination resulted from the negotiation team's lengthy and extensive evaluation of the vendors' initial written replies to the ITN, review of the vendors' qualifications and comprehensive business plans, participation in approximately two and a half hours of oral presentations by each vendor (including a question and answer session with regard to the proposed implementation and management of the contracts), and a review of the vendors' BAFOs. Applying the selection criteria contained in the ITN and the RBAFO, the negotiation team selected Vertical for several reasons, including its performance indicators, employees with ADA certification, computer programs and employee training not offered by other vendors, its presence in Florida, and the strength of its business plan and presentation. Similarly, the negotiation team selected CBRE for an award based on the strength of its ITN Reply, its broad look at long-term strategies, its key performance indicators, the experience and knowledge of its staff, the comprehensiveness of its proposal and business plan, size of its firm, and creative ideas such as use of a scorecard in transactions. Ms. Sparkman observed that both Vertical and CBRE specifically identified the CBRE staff who would manage the state's business and daily transactions, while it was not clear from Cushman's ITN reply and related submissions who would actually be working on the account. Cushman likewise did not discuss out-of-state leases and how such leases were going to be handled, which was a significant concern because DMS considered out-of-state leases to be particularly complex. Ms. Sparkman also noted that with respect to the vendors' business plans, both Vertical and CBRE focused primarily on strategic realignment and plans for the future, whereas Cushman discussed their current transactions at length, but did not demonstrate forward thinking to the negotiation team. Cushman's reply to the ITN also included various discrepancies noted at the final hearing. While Cushman's ITN reply identifies a Tallahassee office, Cushman does not in fact have a Tallahassee office, but instead listed its subcontractor’s office.6/ Additionally, two of the business references presented in Cushman's ITN Reply appear not in fact to be for Cushman, but instead for its subcontractor, Daniel Wagnon, as Cushman's name was clearly typed in above Mr. Wagnon's name after the references were written. Finally, Cushman failed to provide in its ITN Reply the required subcontractor disclosure information for at least one of its "Project Management Partners," Ajax Construction. Based on all of the above, DMS's decision to award contracts to Vertical and CBRE as providing the best value to the state was not arbitrary, capricious, clearly erroneous, or contrary to competition. Simply stated, and as the negotiation team determined, the submissions by Vertical and CBRE were more comprehensive and reasonably found to offer better value to the state than Cushman's submission. Indeed the negotiation team did not even mention Cushman as a potential contract awardee, but instead identified only Vertical, CBRE and JLL in their deliberations as to best value. Cushman's argument that DMS award memorandum improperly relies on the following as "key elements" related to services does not alter this analysis: Long term strategies Key performance indicators Management of the portfolio Top ranked vendors had comprehensive business plans Pricing on the BOV and IMAs. While Ms. Sparkman acknowledged that the choice of language in the memorandum could have been better, it is clear that the foregoing are indeed "elements" of the selection criteria stated in the ITN and RBAFO, as the first four elements plainly relate to the vendors' ability to effectively provide the services, their technical proposal, performance measures, and vendor experience and capability, while the last element relates to the pricing portion of the criteria. Cushman also argues that the award memorandum failed to inform the final decision-maker that Cushman offered IMAs and BOVs at no charge when Cushman was engaged in a commissionable transaction or was performing other work for an agency under the contract. As a result, Cushman asserts, the Deputy Secretary was provided with inaccurate information relating to price. Cushman's argument that the award process was flawed because the pricing chart attached to the award memorandum did not accurately reflect Cushman's proposed pricing is without merit. As Ms. Sparkman testified, the chart was prepared by the negotiation team to provide for the decision-maker an apples-to- apples broad summary comparison of the vendor's proposed pricing for the proposed ancillary services. The chart was not intended to identify all variations or conditions for potential different pricing as proposed by Cushman.7/ Best Value Determination Cushman contends that the negotiation team’s decision to award a contract to CBRE did not result in the best value to the state. Amended Pet. ¶¶ 26, 28 & 29. Cushman further argues that DMS did not meaningfully consider differences in proposed pricing. The failure to consider price for potential ancillary services, Cushman argues, was contrary to competition as it gave an unfair advantage to CBRE whose prices were higher than Cushman’s prices in all but one category. Although pricing for the potential ancillary services was relevant, the ITN's initial scoring criteria made clear that DMS was primarily focused on evaluating the experience and capability of the vendors to provide the proposed services. For this reason, the ITN's initial scoring criteria awarded 90 percent of the points based upon the qualifications and business plan of the vendors, and only 10 percent of the points based on the pricing for potential ancillary services. The negotiation team members testified that this same focus on qualifications and the vendors' business plan continued during the negotiation phase and award decision, although without reliance on the mathematical scoring process utilized during the initial evaluation phase. Nothing in the ITN specifications altered this focus, and the negotiations were directed to gaining a greater understanding of the vendors' proposed services, the qualifications and bios of individuals who would actually do the work, vendors' approach to the work and parameters the vendors would use to evaluate their performance. Pricing remained of relatively minor significance primarily because the RBAFO established a uniform lease commission rate for all vendors, effectively removing pricing as a means to differentiate between the vendors. As a result, vendors were required to quote pricing only for certain potential ancillary services, including IMAs and BOVs, and the number of free credit hours to be provided to the state. Pricing for these potential ancillary services was not considered particularly important, since historically these services were seldom used, and the ITN required all vendors to provide IMAs and BOVs free of charge when related to a commissionable transaction (thereby greatly reducing the impact of any "free" IMA or BOV services). For these reasons, the negotiation team considered the potential ancillary services and pricing for these services not to be significant in the award decision and only incidental to the core purpose and mission of the intended contract, to wit, leasing and leasing commissions. As a result, the negotiation team referred to these potential ancillary services as "balance of line" items which were nominal and added little value to the contract. Notwithstanding Cushman's argument that it should have been awarded the contract because it offered the lowest pricing for these ancillary services, its prices were not in fact the lowest offered by the vendors. Indeed JLL offered to provide all IMA and BOV services (with no preconditions) at no cost. Cushman's pricing for the ancillary services also was not materially different than CBRE's pricing. CBRE's consulting services rates are comparable, if not lower, than Cushman's rates, and the difference between Cushman's and CBRE's proposed charges for IMAs and BOVs is only a few hundred dollars. When considered in terms of the anticipated number of times the ancillary services will be requested (rarely, based on the prior contract), the total "extra" amount to be spent for CBRE's services would be at most a few thousand dollars. The negotiation team reasonably considered this to be insignificant in comparison to the multimillion dollar leasing work which was the core purpose of the intended contract.8/ Because pricing for the potential ancillary services was of lesser significance to DMS's award decision, Cushman's position that DMS should have awarded Cushman a contract based upon its pricing for ancillary services is not consistent with the ITN and does not render DMS's intended awards to Vertical and CBRE arbitrary, capricious, clearly erroneous or contrary to competition. To the contrary, DMS articulated a rational, reasonable and logical explanation for the award. CBRE’s Proposal Non-Responsive to ITN and RBAFO? Cushman alleges that CBRE’s BAFO was not responsive to the ITN and the RBAFO because CBRE included a set rate for acquisitions and dispositions in its proposal. Amended Pet. 30. Since CBRE's BAFO materially deviated from the ITN's specifications, CBRE’s proposal should have been deemed non- responsive and therefore rejected, Cushman argues. The ITN originally requested pricing related only to credit hours as the ITN set the rates for leases. The ITN stated that “other services” would be determined on a case-by- case basis as negotiated by the agencies. However, as part of the ITN process, DMS discussed with the vendors the potential for them to assist the state in the sale and acquisition of property, and what commission rates might be charged for this work. For this reason, CBRE included proposed commission rates for acquisition and disposition services in its BAFO. DMS considered the inclusion of potential rates for acquisitions and dispositions to be a minor irregularity which did not render CBRE's BAFO non-responsive. This determination is consistent with the terms of the ITN, which at section 2.14(g) states "[t]he Department reserves the right to waive minor irregularities in replies." The form PUR 1001 incorporated by reference into the ITN likewise reserves to DMS the right to waive minor irregularities and states: 16. Minor Irregularities/Right to Reject. The Buyer reserves the right to accept or reject any and all bids, or separable portions thereof, and to waive any minor irregularity, technicality, or omission if the Buyer determines that doing so will serve the state's best interests. The Buyer may reject any response not submitted in the manner specified by the solicitation documents. Consistent with the above-cited provisions, the negotiation team noted at its August 14, 2013, meeting that CBRE's inclusion of the proposed rates was not material, and that during the contract execution process, DMS would either exclude the proposed rates from the contract, or possibly include such as a cap for these services. Both of these alternatives were available to DMS given CBRE's commitment to follow the terms of the draft contract, which specifically stated that fees for acquisitions and dispositions would be negotiated on a case-by-case basis. Finally, CBRE's inclusion of proposed commission rates for acquisitions and dispositions did not give CBRE an advantage over the other vendors, or impair the competition, because Cushman and JLL also submitted, as part of their ITN responses, proposed commission rates for the acquisition and disposition of property. Do the ITN Specifications Violate Section 255.25? Cushman's final argument is that the ITN specifications, and the proposed contract, violate section 255.25(3)(h)5., Florida Statutes, which states that "[a]ll terms relating to the compensation of the real estate consultant or tenant broker shall be specified in the term contract and may not be supplemented or modified by the state agency using the contract." Cushman's argument has two components. First, Cushman argues that the specifications included at Tab 5, page 13 of the ITN violate the statute by providing: "With respect to all other [ancillary] services, . . . , compensation shall be as outlined in an agency prepared Scope of Work and will be quoted based on an hourly rate (set as ceiling rates in this ITN), set fees for the service/project or by a percentage commission rate as offered and negotiated by the using agency.” Cushman also argues that the language in the award memorandum stating that the BOV rates are "caps" and "may be negotiated down by agencies prior to individual transactions," violates the statute. This latter reference to "caps" correlates to the "ceiling rates" stated in the above quoted ITN specification. Section 120.57(3)(b), Florida Statutes, requires vendors to file a protest to an ITN’s terms, conditions, or specifications within 72 hours of the release of the ITN or amendment; failure to protest constitutes a waiver of such arguments. DMS included this language with the release of the ITN and each amendment, so Cushman was on notice of its protest rights. Cushman's challenge to the ITN specifications as violating section 255.25 is untimely and has been waived. Having been fully informed of this specification since May 14, 2013, when the revised ITN was published, Cushman could not wait until the ITN process was completed some four months later, and then argue that the ITN specifications do not comply with section 255.25 and must be changed. Such argument plainly constitutes a specifications challenge, and such a challenge is now time-barred. Even were Cushman’s challenge not time-barred, it would still fail. Section 255.25 requires only that "[a]ll terms relating to the compensation of the real estate consultant or tenant broker shall be specified in the term contract," and not that all terms identifying the compensation be specified. The challenged ITN specification, actually added via Addendum 2 at the request of DEP and its subject matter expert, does specify the approved methods by which the state could compensate the vendor, which DMS determined would best be determined on a case-by-case basis. By stating the approved methods which can be used by the state agencies, the ITN specifications and term contract did specify the terms "relating to" the compensation of the vendor, i.e., an hourly rate (set as ceiling rates in the ITN), set fees for the service/project, or a percentage commission rate. DMS established these terms because the exact compensation would best be determined by the state agency on a case-by-case basis in a Statement of Work utilizing one of the specified compensation methods.9/
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That a final order be entered denying the petition of Cushman & Wakefield of Florida, Inc., and affirming the Notice of Intent to Award to CBRE, Inc., and Vertical Integration, Inc. DONE AND ENTERED this 24th day of January, 2014, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS 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 January, 2014.
The Issue Whether the Respondent, Michael E. Langton, violated Sections 112.313(6) and 112.3141(1)(c), Florida Statutes, and Section 8(e), Article II, Constitution of the State of Florida, by his activities and contacts with staff of the Department of Community Affairs on matters dealing with the Community Development Block Grant Program?
Findings Of Fact The Respondent. The Respondent, Michael E. Langton, took office as a member of the Florida House of Representatives, on October 22, 1985. The Respondent has continuously served as a Florida state representative since October 22, 1985. At all times relevant to this proceeding, the Respondent served as a public officer subject to Sections 112.313(6) and 112.3141(1)(c), Florida Statutes, and Section 8(e), Article II, of the Constitution of the State of Florida. Since October, 1981, the Respondent has been a grants consultant. The Respondent formed, owned and was employed by Langton Associates, Incorporated. Upon taking office as a Florida state representative in 1985, the Respondent requested an opinion of the Commission concerning his continued work for Langton Associates, Incorporated. The opinion of the Commission indicated that the Respondent could continue to work as a grants consultant but that he should not personally appear before state agencies. Langton Associates, Incorporated. The Respondent has been the sole stockholder of Langton Associates, Incorporated (hereinafter referred to as "Langton Associates"), since it was formed in October, 1981. The corporation is a for-profit-corporation. Among its functions, Langton Associates provides consulting services to governments eligible to apply for grants under the Community Development Block Grant Program and assists governments in preparing and submitting applications for grants under the program. During the period of time at issue in this proceeding, the Respondent was paid a salary from Langton Associates for his services to, and on behalf of, the corporation. The salary paid to the Respondent has been determined by the Respondent. Although the salary varies from year-to-year, it averages approximately $50,000.00 a year, including 1988, 1989 and 1990. The City of Macclenny, Florida, was among the clients of Langton Associates. Macclenny paid Langton Associates $12,000.00 a year for five to six years, including 1988. Income paid to Langton Associates by its clients was deposited in a business account from which the Respondent's salary was paid. During the five to six years prior to July, 1990, Langton Associates made approximately $350,000.00 for services to its clients. During the period of time at issue in this proceeding, the Respondent, through Langton Associates, provided services to a number of local governments. Several of these local governments paid Langton Associates an annual fee. The average fee was approximately $30,000.00 a year. Other clients of Langton Associates paid on a per grant application basis approximately $3,000.00 per grant application. The Community Development Block Grant Program. The Community Development Block Grant Program (hereinafter referred to as the "CDBGP"), is a Federal government program whereby funds are provided to States to use to improve small local communities. Funds received for the CDBGP in Florida are administered by the Florida Department of Community Affairs (hereinafter referred to as the "Department"), through the Department's Division of Housing and Community Development. Funds for the CDBGP are received and are distributed for four categories of grant projects: (1) housing; (2) neighborhood revitalization; (3) economic development; and (4) commercial revitalization. CDBGP funds are intended to be used in part to assist small local governments to revitalize homes and neighborhoods. Each year the Department adopts administrative rules governing the CDBGP and the manner in which annual funds are to be distributed in Florida. The Department's revised administrative rules provide the steps to be followed in each annual funding cycle. The procedures for determining which small governments receive CDBGP funds generally include the following steps: An applicant workshop is held at the beginning or the middle of the funding cycle; An opening date is established for when Applications are to be submitted; A closing date is established for when Applications are scored and awards of funds are made; Applications are initially ranked according to their scores; Site visits are conducted by the Department; Applications are ranked again. These rankings can be challenged; and Funds are awarded. The Secretary of the Department makes the final decision as to how CDBGP funds are awarded. All applications for CDBGP funds are "self-scored" prior to filing. Each applicant determines, based upon objective standards, the score of its application and informs the Department of the score on the application. When applications are filed they are initially ranked by the Department based upon the self-score determined by the applicant. Applications may be filed on behalf of small cities of less than 50,000 population or small counties of less than 200,000 population. Applications for CDBGP funds are technically filed by eligible applicants--a county or city. Private individuals and businesses are not eligible to apply for grants from the Department under the CDBGP. Applications are prepared 90 to 95% of the time by consultants, including Langton and Associates. The following question is included on applications from which it may be determined if an application was prepared by a consultant: "Who was the agency or firm responsible for preparing the application?" The eligible county or city for which an application is submitted is considered the "applicant." If a consultant prepared and filed an application on behalf of an applicant, however, it was common for Department staff associated with the CDBGP to refer to the consultant and/or the government entity as the "applicant." Although the number of consultants in Florida who prepared applications for CDBGP awards varied from year to year, there have been approximately six to ten consultants in Florida preparing applications for CDBGP awards. During 1988, there were a total of approximately 276 local governments which were eligible for awards under the CDBGP. Only a small number of these entities, however, actually filed applications for awards. The Department does not consider the identity of any consultant involved in filing a CDBGP application in determining which applicants should be awarded CDBGP grants. Following the filing of applications for CDBGP grants, additional information is not to be provided to the Department unless requested. Nor are arguments to be presented to the Department in support of any application. Target Area Maps and Gerrymandering. Applications filed during the 1988 (as well as prior years) annual funding cycle for CDBGP funds for the housing category were required to include a "target area map". A "target area map" was an area map of the local community of the applicant depicting the specific area that the proposed grant activities were to be conducted in. Therefore, a target area map for a housing grant would identify on the area map the specific houses for which the funds were being requested. Prior to the 1988 annual funding cycle many target area maps had been submitted which included oddly shaped target areas. These oddly shaped target areas were not square or rectangular; instead, the target area was drawn in such a way that houses that qualified for CDBGP funds were included and those that did not qualify, even if located right next door to a qualified house on the same block, were excluded. "[A]pplicants would draw their target area boundaries in such a way to exclude housing units that would adversely affect their score." Lines 24-25, page 73, and line 1, page 74, Transcript of September 30, 1991-October 1, 1991, Formal Hearing (hereinafter referred to as the "Transcript"). This practice was referred to as "gerrymandering." There had been concern and debate in and outside the Department concerning whether gerrymandering should be allowed. There were some who were not concerned about, or bothered by, gerrymandering because the use of gerrymandering to identify a target area did not cause persons who were not in need to be directly benefited from CDBGP funds. For example, in the housing grant area, only the houses of persons with low enough income levels could directly benefit from the CDBGP. Those that did not qualify for assistance could not be directly benefited even if an impacted area was gerrymandered. There were others, however, who were concerned about and bothered by gerrymandering because the use of gerrymandering allowed applicants to achieve higher scores for their applications by drawing the targeted area in such a way to insure that it included mainly or totally houses that were qualified for funding while excluding unqualified houses in the same neighborhood which would reduce their scores. Persons concerned with, and bothered by, gerrymandering, including the Respondent, believed that the CDBGP intended that only relatively box-shaped geographic neighborhoods should be allowed as the target area. At various times, the Department tried to devise a method of preventing gerrymandering, but could find no reasonable solution. The difficulty with preventing gerrymandering was explained by Lewis O. Burnside, the Director (beginning in January, 1989) of the Department's Division of Housing and Community Development: Every time I talked about target areas when we looked at it -- we tried to deal with target areas to see what shape should they be. Should they be square or circular and should they -- we couldn't find any rhyme or reason for that. Also, our program applies to urban and rural areas. And in rural areas it is quite normal to have a large property value farm across from what used to be tenant lands, where you have very low income people directly across the street from a multi-million-dollar piece of farmland. And so, we could not write anything, one that would give you a non-gerrymandered target area unless it was just arbitrary. We would just have to say it has got to be square, or it has got to be rectangular, and it can be no larger than a certain size. . . . Lines 8-20, page 141, Transcript. Most people associated with the CDBGP, other than the Respondent, did not consider the issue of gerrymandering to be a burning issue or a particularly improper practice. This lack of concern was caused by the fact that the general purpose of the CDBGP was to benefit low and moderate income people and gerrymandering did not circumvent this general purpose. Ultimately, individuals in the houses included in a target area, even in a gerrymandered target area, benefited only if they were in need of assistance as established under the CDBGP. There were members of the Florida Legislature, including the Respondent, who believed that gerrymandering in the CDBGP was inconsistent with the goals of the CDBGP. Through at least the 1988 annual funding cycle, gerrymandering of target area maps was not prohibited by federal or Florida law. The 1988 Funding Cycle. The general procedures for determining how CDBGP funds were to be awarded each funding cycle which are described in finding of fact 18, supra, were followed for the 1988 funding cycle. Legislation concerning the CDBGP was adopted during the 1988 legislative session and was codified as Chapter 88-201, Laws of Florida. As a result of the adoption of Chapter 88-201, Laws of Florida, and as was the practice of the Department prior to each funding cycle, the Department undertook to amend its administrative rules governing the CDBGP, Chapter 9B-43, Florida Administrative Code. Rule 9B-43.003(33), Florida Administrative Code, was renumbered as subparagraph (35) and was amended by the Department by adding the following underlined language: "Target area" means a distinct, locally designated slum or blighted area under Section 163.340, F.S.; or a designated Enterprise Zone under Section 290.065, F.S.; or a distinct locally designated area, totally contained and contiguous in nature, that is characterized by concentrations of low and moderate income persons, wherein low and moderate income persons comprise at least 51 percent or more of the target area population. It was believed in the Department when the Department amended the definition of "target area" in its Rules that gerrymandering had been eliminated or substantially reduced. Although no formal opinion was given, an attorney on the Department's legal staff indicated during a CDBGP application workshop conducted by the Department for the 1988 funding cycle that gerrymandering would no longer be allowed. A representative of the Department instructed potential CDBGP grant applicants during a CDBGP application workshop held sometime after October 11, 1988, the effective date of Rule 9B-43.003(35), Florida Administrative Code, that gerrymandered target area maps would not be permitted. The Respondent and Langton Associates were aware of this representation. At some time subsequent to the workshop at which it was announced that gerrymandering would not be allowed, applications for CDBGP housing grants for the 1988 funding cycle were submitted to the Department. There were a total of thirty-four applications received for CDBGP housing grants for the 1988 funding cycle. Langton Associates submitted applications for housing grants for the 1988 funding cycle for three applicants: (1) Macclenny; (2) Fellsmere, Florida; and (3) St. Johns County, Florida. The target areas proposed with the applications prepared and submitted by Langton Associates for Macclenny, Fellsmere and St. Johns County were not gerrymandered. Langton Associates did not submit gerrymandered target areas because the Respondent did not believe that gerrymandering was proper and because the Department had announced that it would not accept gerrymandered maps. Despite the Department employee's statement during the workshop that gerrymandered maps would not be allowed for the 1988 funding cycle, most of the target area maps submitted with applications for the 1988 funding cycle were gerrymandered. Only five applications received by the Department did not include gerrymandered target areas: (1) the three applications submitted by Langton Associates; (2) the application of Apalachicola, Florida; and (3) the application of Century, Florida. On December 1, 1988, a memorandum was sent from Earl H. Parmer, Jr., then Director of the Department's Division of Housing and Community Development, to the Department's General Counsel. Mr. Parmer informed the General Counsel of the target area maps which had been filed for the 1988 funding cycle and stated, in part, the following: As you know, the department has been attempting to reduce the grantsmanship in the CDBG program by substantially reducing the gerrymandering of CDBG target areas; however, we question whether our current rule language supports our position. Advocate's Exhibit 7. On December 2, 1988, the following response was given by the Department's legal staff to Mr. Parmer: "Maps appear to be in compliance with Rule." Advocate's Exhibit 7. The Department, therefore, determined that it could not, despite the previous instructions from a Department representative that gerrymandered target areas would not be accepted, prevent the use of gerrymandered target area maps for the 1988 funding cycle. On December 14, 1988, the applications for CDBGP housing grants were initially ranked by the Department based upon the scores determined by the applicants through self-scoring and reported to the Department. Applications were listed by highest score to lowest score. The total 1988 funding cycle housing grant funds available were sufficient to meet the requests for funds of only the top fifteen-ranked applications. There were not sufficient funds to fund those applicants who ranked below fifteenth. The applications filed by Langton Associates ranked as follows, based upon their self determined scores, on the initial ranking: (1) Macclenny was seventeenth; (2) St. Johns was thirtieth; and (3) Fellsmere was thirty-second. The scores for these applicants determined through self-scoring were not high enough to entitle any of the applicants to an award of a housing grant for the 1988 funding cycle. The Respondent's Contacts with Linda Frohock. During December, 1988, the Respondent was informed that most applications for CDBGP housing grants for the 1988 funding cycle included gerrymandered target area maps and that the Department intended to accept those maps. After learning of the Department's acceptance of gerrymandered target area maps, the Respondent telephoned Thomas Yeatman, an employee of the Department. The Respondent left a message requesting that his telephone call be returned. Between December 20 and 31, 1988, Linda Frohock, then Chief of the Bureau of Housing and Community Assistance, in the Department's Division of Housing and Community Development, returned the telephone call the Respondent had made to Mr. Yeatman. This telephone call probably took place on or about December 20, 1988. The Respondent's initial telephone call to Mr. Yeatman and his conversation with Ms. Frohock were the result of his frustration over the fact that the Department was going to allow gerrymandering of target areas. The Respondent had expressed concern over the Department's administration of the CDBGP prior to 1988. The Respondent described his frustration: I called Mr. [Yeatman] and Linda, and I wanted to speak to the secretary as Representative Langton. I made it very clear, I said, I don't care what this is going to cost me politically or financially; you guys have got to stop this craziness. You are disadvantaging tons of cities, cities that are doing this right, they are doing this fair. They have no shot at ever competing for these grants, if you are going to continue this abuse of a program. . . . . Lines 16-24, Page 35, September 12, 1991, Deposition of the Respondent. The Respondent admitted that when he called the Department he intended to put pressure on the Department through his position as a legislator and that he attempted to use his power as a public official to force the Department to take action. The Respondent let it be known to Ms. Frohock that he was calling in his capacity as a legislator. Ms. Frohock informed the Respondent that she was returning his telephone call at the direction of the Assistant Secretary of the Department and that she would report their conversation back to the Secretary and the Assistant Secretary of the Department. During Ms. Frohock's telephone conversation with the Respondent, she took notes of the nature of the conversation. During the telephone conversation with Ms. Frohock, the Respondent was very upset and angry. The Respondent was excited, and he talked loudly and rapidly. The Respondent was angry that his competitors were benefiting by being allowed to submit gerrymandered target area maps while the applications prepared for, and submitted on behalf of, Langton Associates' clients had not included gerrymandered target area maps. The Respondent believed that Langton Associates had lost money in the past because it had not gerrymandered target areas while the Respondent's competitor's had. During the Respondent's conversation with Ms. Frohock, the Respondent indicated the following: He had met with Mr. Parmer in the summer of 1988 and discussed gerrymandering. Mr. Parmer had promised him that gerrymandering would not be allowed. A Department employee had stated at a workshop that gerrymandering would not be allowed for the 1988 funding cycle. He wanted to be allowed to gerrymander the target area maps Langton Associates had submitted on behalf of its clients or he wanted the Department to require that those applicants that had gerrymandered their target area maps be punished. He indicated that he did not care what it cost him politically or financially to fight the Department's actions. He intended to shut down the CDBGP and see that all of the employees involved in the CDBGP were fired if the matter was not resolved to his satisfaction; "Heads would roll." He indicated that Florida Senator Carrie Meek and Florida Representative C. Fred Jones had asked him to play a major role in the Legislature in revising the CDBGP. He stated that the matter would end up in a court of law. He would get Fred Baggett and Jack Skelding, both of whom are attorneys, to assist him to fight the Department. He indicated that he would stop the 1988 funding cycle by suing the Department. He stated that he would probably only get two grants funded during the 1988 funding cycle. He stated that he would return to his office on January 2, 1989, and would have a legislative committee meeting on January 9, 1989; if he had not heard back from the Department about the problem, he wanted to talk to the Secretary of the Department after his return. If he was not satisfied after talking to the Secretary of the Department, he indicated he intended to speak to the then Lieutenant Governor and the Speaker of the House Designate. The Respondent asked Ms. Frohock to pass his concerns on to the Department's Secretary. The Respondent requested that Ms. Frohock provide him with copies of all target area maps submitted in the housing category and the neighborhood revitalization category for the 1988 funding cycle. These documents were public records. The Respondent's conversation with Ms. Frohock made her nervous, in part because he was a legislator. During the Respondent's conversation with Ms. Frohock, he did not specifically say that he was calling on behalf of himself, Langton Associates or any local government for which the Respondent or Langton Associates was working. Nor did the Respondent specifically mention being compensated for the call. Despite the foregoing finding of fact, it is obvious that the Department's actions which the Respondent complained of during his conversation with Ms. Frohock had directly affected applicants which had paid Langton Associates to prepare and file applications on their behalf during the 1988 funding cycle. It is also obvious that the alternative resolutions of the problem suggested by the Respondent had the potential to benefit those same applicants. In light of the fact that the Langton Associates' three applications were among only five applications out of thirty-four applications filed that were not gerrymandered, it was in the interest of Langton Associates and the Respondent that the Department take the actions the Respondent suggested or some other action to correct the Department's decision to accept gerrymandered target areas. It is also true that the Respondent did not specifically request any change in the scores of the applicants represented by Langton Associates; and that the specific actions recommended by the Respondent were suggested for the "entire set of eligible applicants." But the Respondent's suggestions included the applicants represented by Langton Associates and those applicants stood to gain more from the Respondent's suggestions than those applicants that had filed gerrymandered target area maps; especially if the applicants that had filed gerrymandered target area maps were penalized as suggested by the Respondent. While it is true that the concerns which the Respondent expressed to Ms. Frohock were to some degree concerns which the Respondent or any other legislator could have raised in their capacity as a legislator, the Respondent's actions also could have beneficially impacted clients of Langton Associates that had paid Langton Associates to prepare and file applications on their behalf in the funding cycle at issue. The fact that issues may have been raised by the Respondent in his capacity as a legislator does not negate the fact that the raising of those issues before the Department could also have benefitted the clients of his company, Langton Associates. The Respondent's actions in telephoning Mr. Parmer and talking to Ms. Frohock were also considered necessary by the Respondent because of the possible harm to the reputation of Langton Associates caused by the Department's actions. Langton Associates was one of the only consultants that heeded the Department's instructions concerning the use of gerrymandered target areas for the CDBGP 1988 funding cycle. When the Department reversed its position and accepted the gerrymandered target areas proposed by most of the applicants in the 1988 funding cycle for housing, the Respondent had to be concerned about those who would question why Langton Associates had not filed gerrymandered maps. In light of these concerns, the Respondent had to have felt compelled to take some action to force the Department to admit that it had been in error and not Langton Associates, even if the clients of Langton Associates were not directly benefited. Finally, some of the comments and requests made by the Respondent to Ms. Frohock may have been reasonable in light of the events which precipitated the conversation. If the Respondent had not been a member of the legislature who was prohibited from representing others for compensation before a state agency, some of his actions were actions which might be expected of, and considered reasonable if taken by, any consultant in light of some of the Department's actions. Some of the Respondent's actions were taken and some of his comments were made because he believed that the Department's actions had improperly misled Langton Associates. Some of his actions were taken and some of his comments were made, however, solely because of his position and power as a legislator. Following her telephone conversation with the Respondent, Ms. Frohock gave a copy of her notes to, and briefed, the Department's Assistant Secretary. She also gave a copy of her notes to Mr. Burnside. Ms. Frohock also subsequently wrote a memorandum memorializing her telephone conversation with the Respondent. The January 10, 1989, Meeting. Subsequent to the Respondent's telephone conversation with Ms. Frohock, the Respondent requested that a meeting be held with the Secretary of the Department in Representative C. Fred Jones' office. In January, 1989, Representative Jones was the Chairman of the House Committee on Community Affairs, the committee of the House of Representatives with jurisdiction over the Department's programs. The Respondent asked Mario Taylor, Staff Director of the House Committee on Community Affairs, to arrange the meeting with the Secretary of the Department. Mr. Taylor obtained approval for the meeting requested by the Respondent from Representative Jones, and Mr. Taylor informed Michael Richardson, the Department's legislative liaison, of the meeting. The meeting requested by the Respondent was scheduled for January 10, 1989 (hereinafter referred to as the "Meeting"). Mr. Richardson informed the then Secretary of the Department, Thomas Pelham, of the Meeting. Mr. Richardson told Mr. Pelham that the meeting was being held to discuss target area maps and gerrymandering. Mr. Pelham met with Mr. Burnside prior to the meeting to be briefed on the issue and requested that Mr. Burnside attend the Meeting with him. Prior to the Meeting, Ms. Frohock and Mr. Burnside met with Department staff to discuss the gerrymandering issues raised by the Respondent during his telephone conversation with Ms. Frohock. A "discussion paper" was drafted by Ms. Frohock as a result of this Department staff meeting and was dated January 10, 1989. It was agreed by Department staff that the Department had presented faulty instructions concerning gerrymandering during the workshop which took place before applications for the 1988 funding cycle were filed. There were some in the Department that wanted to take this incident into account in any recommended solution to the problem. There were others, including the Department's legal staff, who believed that the Department had done nothing illegal and, therefore, wanted to take no action. The following possible solutions to the gerrymandering issue were discussed and agreed upon by the Department's staff and were discussed in the discussion paper: Allow all applicants to resubmit target area maps (this would benefit the five applicants, including the three Langton Associates' applicants, that had submitted maps that had not been gerrymandered); Give the maximum score for the target area for all the proposals (this would also benefit the five applicants, including the three Langton Associates' applicants, that had submitted maps that were not gerrymandered); and Do nothing and allow any disappointed applicant to follow the Chapter 120, Florida Statutes, process to challenge the Department's actions. This is the option that was ultimately recommended in the discussion paper. The Meeting was attended by Representative Jones, the Respondent, Mr. Pelham, Mr. Burnside, Mr. Taylor and Mr. Richardson. The Meeting was held in Representative Jones' office. Representative Jones agreed to the meeting because he had a number of concerns about the manner in which the Department was administering the CDBGP. Representative Jones was not aware that the Respondent's company, Langton Associates, had filed applications on behalf of its clients which had been affected adversely by the Department's actions in accepting gerrymandered maps. Therefore, Representative Jones was not aware that the Respondent had not requested the Meeting solely in his legislative capacity. During the Meeting the Respondent was hostile, agitated, upset and "seemed about to explode". His manner was threatening. Mr. Pelham described the Respondent's actions as a "tirade". The Respondent did most of the talking during the Meeting: He expressed his displeasure with the Department's administration of the CDBGP and, in particular, the Department's actions in accepting the gerrymandered target area maps. Representative Jones also expressed concern about the Department's administration of the CDBGP. He indicated that he and others, in preparing applications on behalf of local governments for the 1988 funding cycle, had been misled by information presented at a workshop to the effect that gerrymandering would not be allowed for the 1988 funding cycle. The Respondent stated that "he and others had relied upon that misinformation, and now he feared that they were going to be penalized in the way those applications were scored." Lines 4-6, page 194, Transcript. He stated that he did not believe the Department was administering or interpreting the law correctly, especially with regard to gerrymandering. He stated that the law did not allow gerrymandering. He indicated his displeasure with staff of the Department and indicated that they should all, with one exception, be fired. He demanded that all applications be thrown out; that they should not be scored or acted upon. He suggested that the Department should do nothing until the Legislature could take a look at the problem. He threatened to take legal action to stop the Department if it did not stop the funding cycle. Later during the Meeting, he suggested that the Department accept redrawn target area maps that were not gerrymandered or at least require all the applicants to "play by the same set of rules." The Respondent wanted the Department to halt the 1988 funding cycle process so that legislation prohibiting gerrymandering could be adopted. As of the date of the Meeting, if the Department had halted the 1988 funding cycle process it would not have harmed the applicants represented by Langton Associates. All three applicants had scores at that time which were below the funding ranking cut off score. Without some action by the Department, those applicants did not appear destined to receive a grant for the 1988 funding cycle. While it is true that the suggestions made by the Respondent during the Meeting would apply in general to all applicants, it is also true that if all applicants were required to submit maps that were not gerrymandered, the applicants that had submitted gerrymandered maps would in all probability end up with reduced scores, depending on how their target areas were drawn. The applicants for which applications had been prepared by Langton Associates and two other applicants, on the other hand, would not suffer such a reduction in scores because they had already submitted target areas which were not gerrymandered. Those applicants which had the top fourteen scores for the 1988 funding cycle for housing at the time of the Meeting would have suffered disproportionately if the funding cycle were suspended: their status would have changed from prospective award winner to non-award winner. During the Meeting, although the Respondent did not specifically indicate that the Meeting had been called, or that he was voicing his displeasure, on behalf of himself, Langton Associates or its clients, the Respondent made reference to the fact that he was a consultant and that Langton Associates had prepared applications for local governments that had been filed in the 1988 funding cycle being discussed. This was apparent to the Department employees present at the Meeting. The Respondent, although expressing his concerns in terms of all applicants generally, was nonetheless also concerned about the impact on the Langton Associates' applicants and Langton Associates. The Department employees present at the Meeting were aware of this fact also. The Respondent indicated that unless the Department took the actions he had suggested, Langton Associates and the two other applicants that had not gerrymandered their target areas would be prejudiced. The Respondent, through Langton Associates, could have benefited if any of its 1988 funding cycle grants were approved for funding. For example, applicants which are approved will more often than not hire the consultant that prepared a successful application to administer the awarded funds. Fees for such services can be more profitable than the fees for preparing an application. Therefore, if the Respondent's actions during the Meeting could ultimately result in the awarding of a grant to one of the Langton Associates' clients, the Respondent would have benefited. The Respondent's actions in calling and participating in the Meeting were also considered necessary by the Respondent for the same reasons described in finding of fact 71, supra. As was true of the Respondent's conversation with Ms. Frohock, it is true that the concerns which the Respondent expressed during the Meeting were to some degree concerns which the Respondent or any other legislator could have raised in their capacity as a legislator. It is also true that the Respondent's actions also could have beneficially impacted clients of Langton Associates that had paid Langton Associates to prepare and file applications on their behalf in the funding cycle at issue. The fact that issues may have been raised by the Respondent in his capacity as a legislator does not negate the fact that the raising of those issues before Department employees could also have benefited the clients of his company, Langton Associates. It is also true that some of the comments and requests made by the Respondent during the Meeting may have been reasonable in light of the events which precipitated the conversation. If the Respondent had not been a member of the legislature who was prohibited from representing others for compensation before a state agency, some of his actions during the Meeting were actions which might be expected of, and considered reasonable if taken by, any consultant in light of some of the Department's actions. Some of the Respondent's actions were taken and some of his comments were made because he believed that the Department's actions had improperly misled Langton Associates. Some of his actions were taken and some of his comments were made, however, solely because of his position and power as a legislator. The 1988 Funding Cycle Awards in the Housing Category. Following the Meeting, Mr. Burnside met with Ms. Frohock and discussed the meeting. Following this discussion, Ms. Frohock, at Mr. Burnside's direction, prepared a revised discussion paper in the form of a memorandum from Mr. Burnside to Mr. Pelham. In the memorandum from Mr. Burnside to Mr. Pelham a fourth option was added: to cancel the funding cycle and start over. Mr. Burnside ultimately decided, after discussion with Ms. Frohock, to recommend that the Department adopt the option included in the original discussion paper described in finding of fact 83b: give the maximum score for the target area for all the proposals. This option was recommended, in part, because Mr. Burnside and Ms. Frohock had determined that awarding all applicants maximum scores for their target areas would not have any real impact on which applicants were ultimately awarded funds for the 1988 funding cycle for the housing category and the option recognized that the Department had made a mistake at the workshop. The option recommended was also chosen, in part, because the Department had taken a similar action in the past and because the Respondent was a legislator. Mr. Pelham ultimately approved Mr. Burnside's recommendation. The decision of the Department as to how to resolve the issues raised by the Respondent concerning the gerrymandered maps received during the 1988 funding cycle for housing was the direct result of the actions of the Respondent described, supra. After approval by Mr. Pelham of the recommended action, Mr. Burnside telephoned the Respondent to inform him of the Department's decision. This conversation took place sometime in February, 1989. After Mr. Burnside explained the decision to the Respondent, the Respondent went over the scores of the applicants and asked how the decision would affect those scores. Mr. Burnside, in response to the Respondent's question, indicated how the decision would impact the score for the application of Macclenny, one of Langton Associates' clients. This conversation took place after site visits had taken place and after an applicant previously ranked above Macclenny had been moved down in the rankings as a result of the site visits. Therefore, Mr. Burnside was able to inform the Respondent that Macclenny was within the fundable range of applicants. The Department's solution to the dispute was based in part on the fact that Macclenny was going to receive an award. The Respondent told Mr. Burnside that the result of the Department's solution, as explained by Mr. Burnside, might be acceptable to him. The Respondent was satisfied even though the solution did not resolve the ultimate problem of gerrymandering. , which the Respondent has suggested was the reason he was so upset about the Department's actions. The Respondent also asked Mr. Burnside whether the Department's decision could withstand a legal challenge. Mr. Burnside informed the Respondent that the Department's legal staff had opined that the decision was defendable. If the problem raised by the Respondent had been raised by any person who was not a member of the Florida Legislature, Mr. Burnside would have recommended to Mr. Pelham that the Department take no action and allow the complaining individual to take legal action. The Respondent, therefore, clearly affected the manner in which the Department administered the CDBGP. The Respondent's Contact with Department Staff Concerning the Monitoring of CDBGP Grants. During October, 1989, Terri Ganson was employed as a Community Assistant Consultant for the Department. Ms. Ganson's duties included, among other things, monitoring CDBGP grants. During late 1989, Ms. Ganson was responsible for monitoring three CDBGP grants that had been awarded to Marion County (hereinafter referred to as the "Marion Grants"). Ms. Ganson was required to write periodic monitoring reports concerning the Marion Grants. The Marion Grants were being administered on behalf of Marion County by a grant consultant and competitor of the Respondent, Fred Fox Enterprises. Prior to October 30, 1989, Marion County was awarded a fourth grant (hereinafter referred to as the "Fourth Marion Grant"), in the CDBGP. Marion County was seeking bids for the administration of the Fourth Marion Grant. Langton Associates and Fred Fox Enterprises had submitted proposals to administer the Fourth Marion Grant. As of October 30, 1989, Marion County had not yet decided who would administer the Fourth Marion Grant. On October 30, 1989, the Respondent telephoned Ms. Ganson. During this telephone call, the Respondent yelled at her and was very angry and upset. The Respondent believed that Ms. Ganson was cooperating with Fred Fox, his competitor, and he wanted her to stop. The Respondent feared that Ms. Ganson's monitoring reports for the Marion Grants would cause the administration of the Fourth Marion Grant to be awarded to Fred Fox Enterprises. The Respondent did not believe the monitoring reports were critical enough of Fred Fox Enterprises. The evidence failed to prove that Ms. Ganson in fact had favored Fred Fox Enterprises. During his telephone conversation with Ms. Ganson on October 30, 1989, the Respondent indicated the following to Ms. Ganson: He was concerned that Marion County would select Fred Fox Enterprises to administer the Fourth Marion Grant because of the monitoring reports Ms. Ganson had written concerning the Marion Grants. He accused Ms. Ganson of siding with Fred Fox. He told Ms. Ganson that she had "probably cost him a $96,000 administration grant because of the way [her] reports were written" Lines 2-4, page 181, Transcript. He demanded that a mistake in Ms. Ganson's monitoring reports for one of the Marion Grants be corrected. He requested that Ms. Ganson send him a copy of the current contracts and milestones, all of the monitoring reports and all requests for modifications pertaining to the Marion Grants. Ms. Ganson told the Respondent that she would check her reports to determine if she had made a mistake and, if so, would correct it. She ultimately determined that she had made a mistake and corrected it. She did not, however, totally modify her reports in the manner that the Respondent had demanded. Ms. Ganson reported the October 30, 1989, telephone conversation with the Respondent in a memorandum to her immediate supervisor. The Respondent's actions in telephoning Ms. Ganson on October 30, 1989, and his comments to Ms. Ganson were intended to avoid the loss by Langton Associates of the administration fees for the Fourth Marion Grant, which the Respondent believed could be $96,000.00. Although the decision as to who administered the Fourth Marion Grant was a local decision, the Respondent attempted to influence that decision by demanding that Ms. Ganson, an employee of the Department, modify her monitoring reports. The Respondent's conversation with Ms. Ganson was intended to benefit Langton Associates and, thus, benefit himself. The evidence failed to prove that the Respondent's conversation with Ms. Ganson was on behalf of any person or entity (other than Langton Associates) that he had received compensation from. Although the evidence proved that the Respondent was paid a salary by Langton Associates during the year in which his conversation with Ms. Ganson took place, the evidence failed to prove that Langton Associates had any clients at that time that were paying for Langton Associates' services. Although general testimony was elicited concerning Langton Associates' business and clients, testimony concerning clients that paid Langton Associates during any specific period of time was limited to the period of time preceding approximately July, 1989. The Respondent's Contact with Department Staff Concerning Awards of Multiple Service Grant Contracts. A copy of a letter dated September 22, 1989, was received by the Department. The letter was from Patricia Teems, the business manager of Langton Associates, to the Mayor of the City of Bunnell, Florida. The letter was on the letterhead of Langton Associates. In the September 22, 1989, letter Ms. Teems claimed that the City of Bunnell had awarded an administrative contract in violation of Florida law. In the last paragraph of the contract, Ms. Teems stated the following: Also, by this letter I am requesting DCA make a formal investigation into the procurement practices of the City of Bunnell. The complaint made by Ms. Teems in the September 22, 1989, letter, concerned the award of multi-service contracts. A "multi-service" contract includes the awarding of a contract to administer a grant to the same consultant that prepared the application for which the CDBGP grant was awarded. Under Florida law in effect during 1989, multi-service contracts were prohibited unless the local government awarding such a contract indicted in writing that the multi-service contract was in the best interest of the local government. Mr. Burnside was aware of the September 22, 1989, letter and the request of Langton Associates that the Department investigate its complaint against the City of Bunnell. The Department was investigating the complaint in October, 1989. During October, 1989, Mr. Pelham was walking through a hall in the House of Representatives' office building. The Respondent approached Secretary Pelham and indicated that he wanted to speak to him. During the Respondent's October, 1989, conversation with Mr. Pelham, the Respondent indicated the following: He indicated that the Department was not enforcing one of the laws governing the CDBGP. The Respondent indicated that the problem involved the services that could be performed by someone who contracted with a local government to administer a CDBGP grant. He indicated that he "was being hurt by . . . " the Department's failure to properly enforce the law. He threatened to sue the Department unless the Department enforced the law properly. The Respondent, who spoke in a low-key voice, was firm in expressing his position to Mr. Pelham that the law concerning multi-service contracts should be enforced as the Respondent interpreted the law. Shortly after the conversation with the Respondent concerning multi- service contracts, Mr. Pelham spoke to Mr. Burnside about the conversation. Mr. Burnside explained to Mr. Pelham that Langton Associates had filed a copy of the September 22, 1989, letter to the Mayor of the City of Bunnell and that the Department had been requested to investigate the matter. After Mr. Pelham and Mr. Burnside discussed the Secretary's encounter with the Respondent, they realized that the Respondent had been talking about the City of Bunnell incident when he spoke to Mr. Pelham. Mr. Pelham realized that the Respondent had been suggesting that the City of Bunnell had not followed the correct procedures in awarding the administration contract and the consultant that was awarded the administration contract should not have been the same consultant that had obtained the grant. Mr. Burnside responded on behalf of the Department to the request that the Department investigate the City of Bunnell incident by a letter to Ms. Teems dated January 22, 1990. Based upon information reviewed by the Department, including review by the Department's legal staff, the Department informed the Mayor of Bunnell and Ms. Teems that it had been concluded that the City had not violated the law. Although the Respondent admitted that he was aware that he should not directly request that the Department investigate the City of Bunnell, he approached Mr. Pelham to discuss the matter with him. The Respondent's conversation with Mr. Pelham was intended to benefit Langton Associates because Langton Associates was interested in obtaining the grant administration contract the City of Bunnell had awarded to another consultant and, thus, benefit himself. If the Department had agreed with Ms. Teems' and the Respondent's argument that the City of Bunnell had acted illegally, the City of Bunnell could have been forced to select a different administrator for its grant. The Respondent hoped Langton Associates would be the newly selected administrator. The evidence failed to prove that the Respondent's conversation with Mr. Pelham was on behalf of any person or entity (other than Langton Associates) that he had received compensation from. Although the evidence proved that the Respondent was paid a salary by Langton Associates during the year in which his conversation with Mr. Pelham took place, the evidence failed to prove that Langton Associates had any clients at that time that were paying for Langton Associates' services. Although general testimony was elicited concerning Langton Associates' business and clients, testimony concerning clients that paid Langton Associates during any specific period of time was limited to the period of time preceding approximately July, 1989. The Respondent's Contact with Department Staff Concerning Certain Department Policies. In January, 1990, Wanda A. Jones, worked in the Department's Bureau of Housing, Division of Housing and Community Development. On January 23, 1990, Ms. Jones attended a CDBGP workshop in Jacksonville, Florida, sponsored by the United States Department of Housing and Urban Development. The Respondent was introduced to Ms. Jones during the January 23, 1990, workshop by an employee of Langton Associates. The Respondent began questioning Ms. Jones about the Department's policy that allowed Noma, Florida, to continue to be awarded funds under the CDBGP year after year. Noma is a very small community that had received a number of grants and the Respondent was challenging the Department policy that allowed such a small community such as Noma to continue to receive grants. Ms. Jones attempted to explain the Department's policy to the Respondent. At the time of the Respondent's conversation with Ms. Jones, the Department was in the middle of a funding cycle. The weight of the evidence, however, failed to prove that any application had been filed by Langton Associates on behalf of any client during that funding cycle. The Respondent became upset with Ms. Jones' responses and raised his voice. The Respondent was aggressive, confrontational and he badgered Ms. Jones. Ms. Jones felt very uncomfortable. Her discomfort was caused in part by the fact that the Respondent was a legislator and he was holding her accountable for Department actions. The Respondent told Ms. Jones that the Department's policy was impacting on his business. By eliminating the situation that allowed governments like Noma to continue to obtain grants, other governments would become eligible to receive CDBGP funds. Some of those governments might include Langton Associates' clients or prospective clients. After Ms. Jones left the Respondent, he again approached her, apologized and then started to berate her again. During this conversation, the Respondent asked if Ms. Jones would speak to him "off the record" and express her personal opinions about Department actions. The Respondent's conversation with Ms. Jones was intended to benefit Langton Associates and, thus, benefit himself. The evidence failed to prove that the Respondent's conversation with Ms. Jones was on behalf of any person or entity (other than Langton Associates) that he had received compensation from. Although the evidence proved that the Respondent was paid a salary by Langton Associates during the year in which his conversation with Ms. Jones took place, the evidence failed to prove that Langton Associates had any clients at that time that were paying for Langton Associates' services. Although general testimony was elicited concerning Langton Associates' business and clients, testimony concerning clients that paid Langton Associates during any specific period of time was limited to the period of time preceding approximately July, 1989.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission on Ethics enter a Final Order and Public Report finding that the Respondent, Michael E. Langton, violated Sections 112.313(6) and 112.3141(1)(c), Florida Statutes, and Section 8(e), Article II, of the Constitution of the State of Florida, as alleged in Complaint No. 90-86. It is further RECOMMENDED that the Respondent be subjected to public censure and reprimand and be required to pay a civil penalty of $5,000.00 ($2,500.00 for each statutory violation). DONE and ENTERED this 27th day of November, 1991, in Tallahassee, Florida. LARRY J. SARTIN 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 27th day of November, 1991. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Advocate's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection A. 1 1-3. 2 6-7. 3 8. 4 See 10. The weight of the evidence failed to prove what years the percentages apply. 5 11. 6 Hereby accepted. 7 5. B. 1 13-14 and 21-23. 2 See 25. 3 24. "Gerrymandering" 1 29-30, 38 and 41. 2 32-34. 3 31-33. 4 32-33 and 35. 5 35. 6 See 35. 7 37. The 1988-1989 Funding Cycle 1 18 and 38. 2 18. 3 44 and 51. 4 82 and hereby accepted. 5 46-47. 6 48-49. 7 19, 38 and 52. 8 52-53. 9 The first sentence is not relevant. 54-55. 10 55-56. 11 59. 12 56. 13 57 and 61-63. 14 58 and 61. 15 63. 16 58. 17 62-63. 18 59, 66 and 73. Hereby accepted. See 75 and 80. 21 76-77 and 80. 22 34. 23 81-83. 24 81. 83 and hereby accepted. Hereby accepted. 27 80. 28 84. 29 87. 30 86-87. 31 87. The testimony supporting these proposed findings was too speculative. 52 and hereby accepted. 34 89-90. 35 87 and 89-90. 36 90. 37 Not relevant. 38 92. 39 95, 97 and 101. 40 97. 41 101. 42 104. 43 100-101. 44-45 102. 46-47 Although these findings of fact are true, there could have been a number of reasonable explanations for why the Respondent did not proposed legislation concerning gerrymandering. 48 There proposed findings of fact are generally true. The fact that there are inconsistencies in testimony alone is not why some of the Respondent's testimony was not credible, however. The Respondent's explanation has been rejected based upon the weight of all of the evidence in this proceeding. C. 1 105. 2 Hereby accepted. 3 Not relevant. 4 106. 5 112-113. 6 114. 7 113. 8 114. 9 109-111. 10 113-114. 11 See 113. The evidence did not prove whether Ms. Ganson did or did not intend to favor Mr. Fox. 12 116. 13 118. D. 1-2 112. 3 120-121. 4 Hereby accepted. 5 124-125. 6 126. 7 127. 8 Not supported by the weight of the evidence or not relevant. 9 128. 10 129 and see 130. E. 1 131. 2 132. The meeting took place on January 23, 1990. 3 133 and 135. 4 133-134. 5 134 and 139. 6 See 136. 7 134. 8 138. 9-10 Not supported by the weight of the evidence. No weight has been given to the sworn statement of Ms. Jones. 11 Hereby accepted. 12 141. 13 Hereby accepted. 14 139. 15 Hereby accepted. 16 140. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1-2. 2 4, 6 and 8. 3 7. 4 13-14 and 16. 5 21-22. 6 22. Not supported by the weight of the evidence. The interrogatories were not offered into evidence. See 26. 9 5. 10 Not supported by the weight of the evidence. The interrogatories were not offered into evidence. 11 27. 12 28. 13 52. 14 57. 15-16 Hereby accepted. 31-32. The last sentence is not supported by the weight of the evidence. Respondent's exhibit 14 was offered and accepted into evidence only for impeachment purposes. Not relevant. 19 14. Hereby accepted. See 32 and 35. Hereby accepted. 23 39-42. 24 Although generally true, the intent of one legislator does not support a finding concerning the intent of the entire Legislature in enacting any law. 25 41. 26 40-42. 27 See 43. 28 44. 29 51. 30 56. 31 See 58. The Respondent's conversation with Ms. Frohock was not to raise "numerous complaints regarding the DCA's administration of the CDBG program." 32-36 See 67-72. 37 See 75 and 77-78. The evidence failed to prove that the Meeting was requested by the Respondent to discuss the general administration of the CDBGP. 38 76. 39 85. 40 78. 41 81. 42 79 and 84. 43 87. See 87. Not relevant. See 91. 47 See 87 and 89-90. See 91. Not relevant. Not supported by the weight of the evidence except as found in 101. See 100-104. 50-51 Not supported by the weight of the evidence. Ms. Frohock's sworn statement was hearsay. 52-54 Not relevant. 55 84. 56 Not relevant. 57 See 67-72 and 90-94. 58 124. 59 125. 60 See 120-121. The third sentence is not supported by the weight of the evidence. 61 See 130-131. 62 112-114. 63 114-115. 64 115. Not supported by the weight of the evidence. See 118. Not relevant. 67 See 118-119. 68 132. 69 133-134. 70 134. 71 137. 72 137 and 143. 73 See 142. 74 Not supported by the weight of the evidence. 51 COPIES FURNISHED: Virlindia Doss Bonnie J. Williams Craig B. Willis Executive Director Assistant Attorneys General Commission on Ethics Department of Legal Affairs The Capitol, Room 2105 The Capitol, Suite 1601 Post Office Box 6 Tallahassee, FL 32399-1050 Tallahassee, FL 32302-0006 Mark Herron, Esquire Jeffrey H. Barker, Esquire Akerman, Senterfitt, Eidson & Moffit 216 South Monroe Street Suite 300 Post Office Box 10555 Tallahassee, FL 32302-2555
Findings Of Fact At all times pertinent to the allegations contained herein, the Respondent, Division of Real Estate, was the state agency responsible for the licensing and regulation of real estate professionals in Florida. Petitioner was a licensed real estate salesperson in Florida whose license was listed with Horizon Appraisal Service, Inc. in Ft. Myers. In October, 1989, Clyde H. Ward applied to Goldome Realty Credit Corporation for a $40,000.00 fixed rate mortgage on his property located in Ft. Myers. On October 5, 1989, Goldome sent Mr. Ward a commitment letter for a mortgage initially described as a 30 year fixed rate mortgage, but which was, five days later, amended to a 15 year fixed rate mortgage at 10%, conditioned upon, among other things, a satisfactory appraisal. Consistent therewith, Goldome thereafter contacted its regular appraiser in the area, Horizon Appraisal Service, Inc., and requested that an appraisal of the property be accomplished. Horizon assigned the Petitioner, Ms. Wilcox, to conduct the appraisal. The original first page of her report indicated the property was a manufactured house with a crawl space, not situated on a slab. In reality, however, as was noted on the amended first page of the report, as of October 9, 1989, the property was not a manufactured house and was situated on a concrete slab without a crawl space. Goldome denied a fixed rate mortgage to Mr. and Mrs. Ward but offered them a one year adjustable rate mortgage. The Wards accepted this change under protest. A formal denial of the fixed rate mortgage was sent to the Wards on December 18, 1989 by a form which indicated that their application for the fixed rate mortgage had been denied for (1) inadequate collateral, and (2) "we do not grant credit to any applicant on the terms and conditions you request." The "inadequate collateral" basis for denial noted, however, that a mortgage had been offered, accepted and closed with the Wards under an adjustable rate bank loan. On February 16, 1990, Mr. Ward wrote to Goldome expressing his concern over the denial of the fixed rate loan and the basis for denial. In response to Mr. Ward's letter, on March 7, 1990, Mr. Krohe, Goldome's vice president for residential lending, wrote to Mr. Ward and clearly stated that Goldome's denial of the fixed rate mortgage was based on several areas in the appraisal that caused concern. Mr. Krohe specifically pointed out that the fact that the property was described in the appraisal as being a "mobile home" was not the only reason for denial. In his testimony, Mr. Krohe cited several other reasons for denial. One was that the appraiser indicated that the predominant value of homes in the neighborhood was $35,000.00 and Mr. Ward's application was for a mortgage in excess of that. It is Goldome's policy typically to not make a loan in excess of the predominant value since there would be no way to sell the loan in the secondary market. In addition, comments on the appraisal indicated that homes in the area were a mixture of mobile homes and small CBS or frame houses located on paved and graveled roads, and the homes in the neighborhood reflected average maintenance. The zoning classification for the property was MH-3, which permits mobile home use on the property. Further, the room sizes and layout was indicated as "fair to average" and the appraiser pointed out an incurable functional problem with the room layout. This problem related to the fact that the only full bathroom in the house was located between the master bathroom and the second bedroom and could be reached only through one of those rooms. Further, the appraiser indicated there were no recent sales similar to the subject property in the neighborhood and those sales which were comparable were noted to have superior construction and functional utility. Mr. Krohe pointed out that not one of those concerns by itself necessarily would have caused the fixed rate mortgage applied for to be declined. He notes, however, that underwriting is not a science, and all of those reasons combined caused the underwriter to decline the loan. Notwithstanding his receipt of this letter, Mr. Ward filed a complaint with the Division of Real Estate which was referred to Investigator John Harris for inquiry in March, 1990. During the course of his investigation, Mr. Harris spoke only with the Petitioner, Ms. Wilcox, and with Mr. Ward. On or about March 22, 1990, he met with Petitioner at her place of business, Horizon Appraisal Service. During the course of that interview, Ms. Wilcox admitted she had made a mistake on the first page of the appraisal report whereon the property w as described as a manufactured home situated on a crawl space without a slab. She indicated she had corrected the form as soon as she found out about the mistake, occasioned not by a written description but by check marks to pre- printed descriptions which were to be marked if appropriate. The work was done by typewriter, not by pen. Mr. Harris also interviewed Mr. Ward, but did not interview anyone else during his entire investigation even though Ms. Wilcox pointed out that information she had from Ms. Selph and Mr. Krohe indicated that the declination of the loan was not primarily based on this erroneous information. In fact, Ms. Wilcox requested that Mr. Harris contact both Selph and Krohe to verify this but he chose not to do so, relying instead on the information provided to him by Mr. Ward and the March 7, 1990 letter from Krohe to Ward which he interpreted as indicating the denial was based on the description of the property as a "mobile home." That letter does not so indicate, however, and clearly shows that any such classification was not the sole basis for denial of the loan. Notwithstanding this, Mr. Harris considered the fact that Ms. Wilcox admitted to making the mistake as tantamount to an admission of culpable negligence and he recommended that action be taken against her. Thereafter, the matter was referred to a probable cause panel of the Real Estate Commission which, on May 15, 1990, considered the allegations against Ms. Wilcox and, after a review of the file and a presentation by a counsel to the Board, found probable cause. Review of the transcript of the probable cause panel as it relates to Ms. Wilcox reveals that even there, the case was inaccurately described to the panel by its counsel who claims that, "the loan was rejected on the basis of the appraisal which incorrectly described the structure as a manufactured house with a crawl space and no slab." Counsel completely omitted any mention of any of the other bases for denial which were described by Mr. Krohe in his deposition of which the Department was notified but declined to attend, and which could have been determined by an appropriate investigation into the matter. The discussion by the panel members, as documented in the transcript of its meeting, in no way related to the particulars of the alleged misconduct but instead concerned itself primarily with the status of the appraiser. In short, it is clear that the probable cause panel's finding of probable cause was based only on its review of the completely inadequate investigation by Mr. Harris and the slanted comments of the panel's counsel. Nonetheless, an Administrative Complaint was filed against the Petitioner which alleged culpable negligence, breach of trust and misrepresentation and concealment. Prior to the hearing, the Board dismissed the allegation of misrepresentation and concealment. A hearing was conducted on the remaining counts on October 11, 1990 in Ft. Myers before H.O. Parrish. In her Recommended Order dated December 12, 1990, Ms. Parrish concluded that the Department had failed to establish the Respondent committed any misconduct; that Ms. Wilcox had accurately described and evaluated the home within customary ranges; and that the lender verified the reasons for denial of the requested mortgage were not related to the typographical errors pertaining to the type of home, the crawl space, and the slab. Ms. Parrish thereafter recommended a Final Order be entered by the Commission dismissing the Administrative Complaint and such an Order was entered. By Motion dated March 4, 1991, Petitioner's counsel sought reimbursement for the Petitioner of attorney's fees and costs relating to her defense against the allegations made against her in the Administrative Complaint. Respondent has stipulated that the amount claimed for the original representation is reasonable as to both hours claimed and fee per hour. It claims, however, that fees and costs are not reimbursable here because, (1), Petitioner is not a small business entity, and (2), the Division had probable cause to initiate the Administrative Complaint. Petitioner has also submitted an additional affidavit, subsequent to the hearing, in which she claims 7.1 additional hours, at $110.00 per hour, for services rendered subsequent to the final hearing in the original action. Petitioner claims to be an independent contractor to Horizon Appraisal Service, Inc.. She works strictly on commission. She has a desk at the Horizon office and keeps almost all her business information there. She has no other office. She cannot do appraisals for other brokers because she can work for only one broker at a time. She claims to be licensed as an appraiser in Florida but the licensure information on file with the Department of Professional Regulation as of September 4, 1990, reflects she is licensed only as a real estate salesman. By affidavit dated December 6, 1985, and attached to the Independent Contractor Agreement of equal date, Petitioner outlines her working conditions with Horizon. She pays all her own license fees and dues; she is responsible for her own auto and transportation expenses; she pays all her client development costs without reimbursement; she is not required to maintain any set working hours; she takes vacations when she pleases; she is not required to meet any quotas; she receives no minimum salary, sick pay or other fringe benefits; she pays her own income and FICA taxes; and the association with the broker may be terminated by either party at any time. Under the terms of the Agreement referenced above, Petitioner is to get 45% of the fee charged by Horizon for the appraisal done by her. Any lawsuits for the collection of appraisal fees must be maintained only in the name of the Broker, however, since the appraiser is considered to be a subagent. Though the appraiser may conduct the actual appraisal, the Agreement requires that these completed appraisals be submitted to the broker for review, and Mr. Krohe, of Goldome, indicated that his institution would accept only appraisals signed by the broker, not the appraiser. The agreement also stipulates that all clients brought in by the appraiser will result in an additional 10% fee split, and will remain clients of the broker upon termination of the agreement. Notwithstanding the appraiser can take vacations when desired and work when she pleases, she must, however, notify the broker a minimum of two weeks in advance of vacation time and call in on days when she will not be available. The appraiser agrees to a five day turnaround on appraisals, may not solicit listings for the transfer of property other than owned by her, and, significantly, may perform her services only for this broker, Horizon Appraisal Services, Inc.,
Findings Of Fact At all times relevant hereto, respondent, Richard Kondian, was a licensed real estate salesman having been issued license number 0302230 by petitioner, Department of Professional Regulation, Division of Real Estate. The license is currently in an inactive status. His present address is 300 South Pine Island Road, Plantation, Florida. In July, 1984, James E. and Janis Shand, who lived at 4940 S. W. 16th Street, Fort Lauderdale, Florida, suffered extensive fire damage to their residence. Respondent approached the Shands, introduced himself as Dick Como, and offered to repair their home to its original condition. He also represented himself to be a contractor and that he was a principal in Apex Roofing, a local contracting firm. The Shands agreed to permit Kondian (Como) to perform the work, and they executed a contract prepared by Kondian on an "Apepco Corp." letterhead which authorized the work. A copy of the contract has been received in evidence as petitioner's exhibit 2. The document is a photostatic copy of the original, and is only partially legible. It does reflect July 24, 1984 as being the date of execution, and describes the repairs to be made as follows: To be effected to return Property to Pre- Fire Condition as per policy. (No extra charge to Home.) It also authorizes Allstate Insurance Company to pay for the repairs in accordance with the terms of the Shands' insurance policy. The contract was accepted by "D. Como." Como and Kondian were identified by the Shands as being one and the same. The owner of Apex Roofing and Insurance Repair Corporation was Michael Derhagopian, a licensed roofing contractor in Dania, Florida. Respondent told Derhagopian that he had procured a repair job on the Shands' residence and that he desired Apex to do the roofing portion of the work, and that a general contractor would perform the remainder of the project. He also advised Derhagopian that he needed to use Apex Roofing as the licensee on the project. Derhagopian agreed to do the work and pulled a permit for the roofing work. He also opened a checking account in which the insurance proceeds from Allstate were to be deposited. Both he and respondent had authorization to sign checks drawn on that account. On September 24, 1984, Allstate Enterprises Mortgage Corporation issued a check payable to Apex Roofing and Insurance and J. E. Shand in the amount of $18,150.66. The check was issued for the purpose of enclosing the house, cleaning it, and installing a new roof, trusses and windows. The check was endorsed by both the Shands and Richard Kondian who 'indicated on the endorsement that he was president of Apex. The check was then deposited into the Derhagopian Kondian joint account. Work began on the Shands' residence in September, 1984. Derhagopian completed a small flat deck in the rear of the house, and the general contractor began stripping the inside of the house and cleaning the premises. When neither was paid by Kondian they ceased work on the project. At that time Derhagopian learned that Kondian had spent the entire $18,150.66 within a week. According to Derhagopian, Kondian spent around $5,000.00 on a "nursing home" transaction, $500.00 for legal expenses, and an undisclosed amount for mortgage payments on his home. It is not known how the remainder of the funds were spent except that they were not used for their intended purpose of repairing the Shands' home. Despite demands for repayment of their monies, Kondian has never repaid the Shands. The Shands eventually had their home repaired, but still have liens on it to this date. They have pending a civil action against Kondian to recover the insurance proceeds.
Recommendation Based on the foregoing, it is RECOMMENDED that respondent be found guilty of violating Subsection 475.25(1)(b), Florida Statutes, and that his license number 0302230 be REVOKED. DONE and ORDERED this 16th day of December, 1985, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer ~ Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, FL 32301 (904 ) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16 day of December, 1985. COPIES FURNISHED: Mr. Richard Kondian 300 South Pine Island Road Plantation, FL 33324 Arthur R. Shell, Jr., Esq. P. O. Box 1900 Orlando, FL 32802
The Issue Whether Florida Housing Finance Corporation’s (Florida Housing, Corporation, or Respondent) rejection of the funding for the application submitted by Capital Grove Limited Partnership (Capital Grove) was contrary to Florida Housing’s governing statutes, rules, policies, or the specifications of Request for Applications 2014-114 (the RFA). If so, whether Florida Housing’s decision to fund the application submitted by HTG Wellington Family, LLC (HTG Wellington), is contrary to governing statutes, rules, policies, or the RFA specifications.
Findings Of Fact Florida Housing is a public corporation created pursuant to section 420.504, Florida Statutes. Its purpose is to promote the public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, Florida Housing is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low-income housing tax credits. The low-income housing tax credit program was enacted by Congress in 1986 to incentivize the private market to invest in affordable rental housing. Tax credits are competitively awarded to applicants in Florida for qualified rental housing projects. Applicants then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the owner would otherwise have to borrow. Because the debt is lower, a tax-credit property can offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of ten years. The amount of the annual credit is based on the amount invested in the affordable housing. Tax credits are made available by the U.S. Treasury to the states annually. Florida Housing is authorized to allocate tax credits and other funding by means of request for proposal or other competitive solicitation in section 420.507(48), and adopted Florida Administrative Code chapter 67-60 to govern the competitive solicitation process for several different programs, including the one for tax credits. Rule 67-60.002(1) defines “Applicant” as “any person or legally-formed entity that is seeking a loan or funding from the Corporation by submitting an application or responding to a competitive solicitation pursuant to this rule chapter for one or more of the Corporation’s programs.” Applicants request in their applications a specific dollar amount of housing credits to be given to the applicant each year for a period of 10 years. Applicants typically sell the rights to that future stream of income tax credits (through the sale of almost all of the ownership interest in the Applicant entity) to an investor to generate the majority of the capital necessary to construct the Development. The amount of housing credits an Applicant may request is based on several factors, including but not limited to a certain percentage of the projected Total Development Cost; a maximum funding amount per development based on the county in which the development will be located; and whether the development is located within certain designated areas of some counties. Florida Housing’s competitive application process for the allocation of tax credits is commenced by the issuance of a Request for Applications. In this case, that document is Request for Applications 2014-114 (the RFA). The RFA was issued November 20, 2014, and responses were due January 22, 2015. Capital Grove submitted Application No. 2015-045C in RFA 2014-114 seeking $1,509,500 in annual allocation of housing credits to finance the construction of a 94-unit residential rental development in Pasco County (a Medium County), to be known as Highland Grove Senior Apartments. HTG Wellington submitted Application No. 2015-101C seeking $1,510,000 in annual allocation of housing credits to finance the construction of a 110-unit multifamily residential development in Pasco County, Florida, to be known as Park at Wellington Apartments. Florida Housing has announced its intention to award funding to nine Medium County Developments, including Park at Wellington in Pasco County (Application No. 2015-101C), but not Highland Grove Senior Apartments. Florida Housing received 82 applications seeking funding in RFA 2014-114, including 76 for Medium County Developments. The process employed by Florida Housing for this RFA makes it virtually impossible for more than one application to be selected for funding in any given medium county. Because of the amount of funding available for medium counties, the typical amount of an applicant’s housing credit request (generally $1.0 to $1.5 million), and the number of medium counties for which developments are proposed, many medium counties will not receive an award of housing credit funding in this RFA. Florida Housing intends to award funding to nine developments in nine different medium counties. The applications were received, processed, deemed eligible or ineligible, scored, and ranked, pursuant to the terms of RFA 2014-114; Florida Administrative Code chapters 67- 48 and 67-60; and applicable federal regulations. Florida Housing’s executive director appointed a Review Committee of Florida Housing staff to evaluate the applications for eligibility and scoring. Applications are considered for funding only if they are deemed “eligible,” based on whether the application complies with Florida Housing’s various content requirements. Of the 82 applications submitted to Florida Housing in RFA 2014-114, 69 were found “eligible,” and 13 were found ineligible, including Capital Grove. Florida Housing determined that Capital Grove was ineligible on the ground that its Letter of Credit was deficient under the terms of the RFA. A five-page spreadsheet created by Florida Housing, entitled “RFA 2014-114 – All Applications,” identifying all eligible and ineligible applications was provided to all Applicants. In addition to scoring, Applicants received a lottery number to be applied in tie situations, with the lower number given preference. Capital Grove received lottery number 12. HTG Wellington received lottery number 9. On March 11, 2015, the Review Committee met and considered the applications submitted in response to the RFA, and made recommendations regarding the scoring and ranking of the applications to Florida Housing’s Board of Directors (the Board). Capital Grove’s Letter of Credit The RFA provides for a Withdrawal Disincentive in which an applicant could either provide a $25,000 check or a $25,000 Letter of Credit that would be forfeited if the application was withdrawn by the applicant before a certain period of time. Applicants so withdrawing would also suffer a deduction from the full developer-experience point total in certain future Requests for Applications issued by Florida Housing. According to specifications in the RFA, any Letter of Credit submitted must be in compliance with all the requirements of subsection 4.a. of Section Three, Procedures and Provisions of the RFA, which provides in pertinent part: 4. $25,000 Letter of Credit. Each Applicant not submitting a $25,000 Application Withdrawal Cash Deposit (as outlined in 3 above) must submit to the Corporation a letter of Credit that meets the following requirements with its Application: a. The Letter of Credit must: Be issued by a bank, the deposits of which are insured by the FDIC, and which has a banking office located in the state of Florida available for presentation of the Letter of Credit. Be on the issuing bank’s letterhead, and identify the bank’s Florida office as the office for presentation of the Letter of Credit. Be, in form, content and amount, the same as the Sample Letter of Credit set out in Item 14 of Exhibit C of the RFA, and completed with the following: Issue Date of the Letter of Credit (LOC) which must be no later than January 22, 2015. LOC number. Expiration Date of the LOC which must be no earlier than January 22, 2016. Issuing Bank’s legal name. Issuing Bank’s Florida Presentation Office for Presentation of the LOC. Florida Housing’s RFA number RFA 2014- 114. Applicant’s name as it appears on the Application for which the LOC is issued. Development name as it appears on the Application for which the LOC is issued. Signature of the Issuing Bank’s authorized signatory. Printed Name and Title of the Authorized Signatory. The Sample Letter of Credit included in Exhibit C, Item 14 of the RFA reads: (Issuing Bank’s Letterhead) Irrevocable Unconditional Letter of Credit To/Beneficiary: Florida Housing Finance Corporation Issue Date: [a date that is no later than January 22, 2015] Attention: Director of Multifamily Programs 227 N. Bronough Street, Suite 5000 Tallahassee, Florida 32301 Letter of Credit No.: Expiration Date: [a date that is no earlier than January 22, 2016] Issuing Bank: Florida Presentation Office: FHFC RFA # 2014-114 Applicant: Development: Gentlemen: For the account of the Applicant, we, the Issuing Bank, hereby authorize Florida Housing Finance Corporation to draw on us at sight up to an aggregate amount of Twenty- Five Thousand and No/100 Dollars ($25,000.00). This letter of credit is irrevocable, unconditional, and nontransferable. Drafts drawn under this letter of credit must specify the letter of credit number and be presented at our Florida Presentation Office identified above not later than the Expiration Date. Any sight draft may be presented to us by electronic, reprographic, computerized or automated system, or by carbon copy, but in any event must visibly bear the word “original.” If the document is signed, the signature may consist of (or may appear to us as) an original handwritten signature, a facsimile signature or any other mechanical or electronic method of authentication. Payment against this letter of credit may be made by wire transfer of immediately available funds to the account specified by you, or by deposit of same day funds in a designated account you maintain with us. Unless we notify you in writing at least thirty (30) days prior to the Expiration Date, the Expiration Date of this letter of credit must be extended automatically for successive one-month periods. This letter of credit sets forth in full the terms of our obligations to you, and such undertaking shall not in any way be modified or amplified by any agreement in which this letter is referred to or to which this letter of credit relates, and any such reference shall not be deemed to incorporate herein by reference any agreement. We engage with you that sight drafts drawn under, and in compliance with, the terms of this letter of credit will be duly honored at the Presentation Office. We are an FDIC insured bank, and our Florida Presentation Office is located in Florida as identified above. Yours very truly, [Issuing Bank] By Print Name Print Title Despite these requirements, Capital Grove submitted an “Irrevocable Standby Letter of Credit” issued by PNC Bank National Association (PNC). Capital Grove’s Letter of Credit provides, in pertinent part: Beneficiary: Applicant: Florida Housing Finance Westbrook Housing Corp. Corp. Development, LLC 4110 Southpoint Blvd., 227 North Bronough Street Ste 206 Suite 5000 Jacksonville, Fl 32216 Tallahassee, Fl 32301 ATTENTION: DIR. OF MULTI- FBO CAPITAL GROVE FAMILY PROGRAMS LIMITED PARTNERSHIP IRREVOCABLE STANDBY LETTER OF CREDIT OUR REFERENCE: 18123166-00-00 AMOUNT: USD $25,000.00 ISSUE DATE: JANUARY 20, 2015 EXPIRY DATE: JANUARY 22, 2016 EPIRY PLACE: OUR COUNTER RE: FHFC RFA #2014-114 DEVELOPMENT: HIGHLAND GROVE SENIOR APARTMENTS GENTLEMEN: WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. 18123166-00-000 IN FAVOR OF FLORIDA HOUSING FINANCE CORPORATION FOR THE ACCOUNT OF WESTBROOK HOUSING DEVELOPMENT LLC AVAILABLE FOR PAYMENT AT OUR COUNTERS IN AN AMOUNT OF USD $25,000.00 (TWENTY FIVE THOUSAND AND 00/100 UNITED STATES DOLLARS) AGAINST BENEFICIARY'S PURPORTEDLY SIGNED STATEMENT AS FOLLOWS: "I (INSERT NAME AND TITLE) CERTIFY THAT I AM AN AUTHORIZED REPRESENTATIVE OF FLORIDA HOUSING FINANCE CORPORATION AND HEREBY DEMAND PAYMENT OF USD (INSERT AMOUNT) UNDER PNC BANK, NATIONAL ASSOCIATION LETTER OF CREDIT NO. 18123166-00-000. I FURTHER CERTIFY THAT WESTBROOK HOUSING DEVELOPMENT, LLC HAS FAILED TO COMPLY UNDER THE PROJECT NAME: HIGHLAND GROVE SENIOR APARTMENTS BETWEEN FLORIDA HOUSING FINANCE CORPORATION AND WESTBROOK HOUSING DEVELOPMENT, LLC." Ken Reecy, Director of Multifamily Programs for Florida Housing, personally reviewed all Letters of Credit submitted by RFA applicants, and reported his findings to the Review Committee. The Review Committee recommended finding Capital Grove’s application nonresponsive and ineligible for funding because Capital Grove failed to include a responsive Letter of Credit. The Review Committee also found four other applications ineligible for failing to meet the Letter of Credit requirements, all of which used PNC Bank and involved entities related to Capital Grove, including Westbrook Housing Development, LLC, appearing as Co-Developer. All such PNC Letters of Credit failed for the same reasons. Mr. Reecy and the Review Committee found that the Letters of Credit from PNC Bank (including that submitted by Capital Grove) did not meet the facial requirements of the RFA, in that the Letters of Credit were not in the name of the applicant. The General Partner of the applicant, Capital Grove Limited Partnership, is Capital Grove GP, LLC. The Co-Developer entities are JPM Development, LLC, and Westbrook Housing Development, LLC. Co-Developer Westbrook Housing Development, LLC, a Michigan Company authorized to conduct business within the State of Florida, is a different legal entity from Co-Developer JPM Development, LLC. Mr. Reecy and the Review Committee also found the PNC Letters of Credit (including that submitted by Capital Grove) nonresponsive to the specification of the RFA because the Letters included a condition requiring Florida Housing, in order to draw on the Letter of Credit, to certify that the Co- Developer (and not the applicant) had “failed to comply under the project name: Highland Grove Senior Apartments.” However, under the RFA specifications, the action that is the basis for the presentment of the Letter of Credit is a withdrawal of the application by the applicant, not the developer. Only an applicant may withdraw an application. If the Letter of Credit cannot be drawn upon, the RFA provides that the applicant, “shall be responsible for the payment of the $25,000 to the Corporation; payment shall be due from the applicant to the Corporation within 10 calendar days following written notice from the Corporation.” Applicant Capital Grove is a single-purpose entity that has no assets. In order to collect on the Letter of Credit submitted by Capital Grove, Florida Housing would have to submit a different certification than that called for under the RFA sample letter of credit. According to Kathleen Spiers, Vice President of PNC Bank, to draw down the Letter of Credit, Florida Housing would have to copy the statement outlined in paragraph 2 of the Capital Grove Letter of Credit, sign it, and submit it to PNC to draw upon the letter of credit. At the final hearing, Mr. Reecy testified, “I am not prepared to certify to something that isn’t true. I am not going to certify that the developer didn’t comply by the Applicant withdrawing.” All other Letters of Credit submitted by applicants under this RFA were accepted as responsive. HTG Wellington’s Unit Count HTG Wellington indicated in its application to Florida Housing that its proposed Park at Wellington Development would be 110 multifamily units. In its application for Local Government Support, HTG Wellington described the Development as a 120-unit, multifamily development in five three-story buildings. The RFA requires a minimum $50,000 Local Government Contribution in Pasco County for an applicant to receive the maximum of five points. In order to obtain a Local Government Contribution, tax credit developers must submit an application to Pasco County at least six weeks before the matter is presented to the Board of County Commissioners for approval. Pasco County, in turn, has their underwriter, Neighborhood Lending Partners ("NLP"), organize the applications and create an underwriting package. NLP does not make a recommendation to the Board of County Commissioners for funding. Rather, NLP alerts Pasco County if there is a red flag concerning the Development and scores the applications based upon financial stability of the organization, financing of the project, and the development pro forma. HTG Wellington submitted an application for Local Government Contribution to Pasco County in November 2014. The application contemplated a 120-unit development. Impact fees schedules are adopted by the Pasco County Board of Commissioners. Pasco County has established an impact fee rate for affordable and non-affordable development and the difference between the two is multiplied by the number of units to determine the impact fee amount. The impact fee waiver amount approved for Park at Wellington Apartments was $219,600. This amount was calculated based upon 120 units contemplated in November 2014, multiplied by $1830.00, which is the difference between the normal impact fee rate, minus the rate for affordable housing development. The $219,600 figure was used in HTG Wellington’s application. At 110 units (as opposed to 120 units), the total Local Government Contribution available to HTG Wellington is $201,300. Either amount ($219,600 or $201,300) meets the minimum for HTG Wellington to receive five points for its Local Government Contribution. The change in the contribution amount would have no effect on the scoring of the HTG Wellington application. Pasco County’s Manager of Community Development and Officer of Community Development, George Romagnoli, testified that for approximately 15 years, Pasco County has employed a strategy to approve all applications for Local Government Contribution and then let Florida Housing choose which Development will receive tax credits. Pasco County is not concerned about the ultimate accuracy of the number of units submitted for a Contribution –- as stated by Mr. Romagnoli: "We funded 84, 120, whatever. It's really not material to the approval one way or the other." Although Florida Housing approved HTG Wellington’s application before discovering the discrepancy, had Florida Housing discovered the discrepancy in the number of units during the scoring process, the discrepancy would have been deemed a minor irregularity unless the discrepancy resulted in a change in scoring or otherwise rendered the application nonresponsive as to some material requirement and the discrepancy would generally be handled with a simple adjustment to the amount presented on the application Pro Forma, if necessary. Additionally, changes to the number of units in a development may be increased (but not decreased) under certain circumstances during the credit underwriting process which follows the competitive solicitation process. The discrepancy in the number of units does not provide any competitive advantage to HTG Wellington. The discrepancy in the number of units does not provide a benefit to HTG Wellington not enjoyed by others. Florida Housing’s waiver of the discrepancy in the number of units does not adversely impact the interests of the public. HTG Wellington’s Bus Stop The RFA allows an applicant to obtain 18 proximity points, including six points for a Public Bus Transfer Stop. Florida Housing awarded HTG Wellington 4.5 proximity points for its purported Public Bus Transfer Stop. The RFA defines a Public Bus Transfer Stop as: This service may be selected by all Applicants, regardless of the Demographic Commitment selected at question 2 of Exhibit For purposes of proximity points, a Public Bus Transfer Stop means fixed location at which passengers may access at least three routes of public transportation via buses. Each qualifying route must have a scheduled stop at the Public Bus Transfer Stop at least hourly during the times of 7 am to 9 am and also during the times of 4 pm to 6 pm Monday through Friday, excluding holidays on a year-round basis. This would include both bus stations (i.e. hub) and bus stop with multiple routes. Bus routes must be established or approved by a Local Government department that manages public transportation. Buses that travel between states will not be considered. In response to this requirement HTG Wellington submitted a Surveyor Certification Form which lists coordinates submitted to qualify for a Public Bus Transfer Stop. The site identified by HTG Wellington as a Public Bus Transfer Stop, however, is not a fixed location where passengers may access at least three routes of public transportation. While another bus stop which serves an additional two routes is within 700 feet, stops cannot be combined for purposes of the RFA. Therefore, the site designated as a Public Bus Transfer Stop by HTG Wellington is not a “fixed location” for purposes of the RFA and HTG Wellington is not entitled to obtain proximity points for a Public Bus Transfer Stop. Not including the 4.5 proximity points for a Public Bus Transfer Stop, HTG was awarded 11.5 total proximity points for selected Community Services. The required minimum total of proximity points for developments located in a medium county that must be achieved in order to be eligible to receive the maximum amount of 18 points as set forth in the RFA is 9. HTG had more than the required minimum total of proximity points to receive the maximum award of 18 proximity points based on its Community Services score alone. The disqualification of HTG’s submitted Public Bus Transfer Stop would have no effect on the scoring or ranking of the HTG Wellington application, nor affect its ranking relative to any other application, nor affect the ultimate funding selection. The RFA requires each applicant to read and sign at Attachment A, an Applicant Certification and Acknowledgement Form (the Form). The signing of the Form is mandatory. Page 5, Paragraph 8 of the Form provides: In eliciting information from third parties required by and/or included in this Application, the Applicant has provided such parties information that accurately describes the Development as proposed in this Application. The Applicant has reviewed the third party information included in this Application and/or provided during the credit underwriting process and the information provided by any such party is based upon, and accurate with respect to, the Development as proposed in this Application. Even though there was a discrepancy in the unit numbers submitted to Pasco County for a Local Government Contribution and its application submitted in response to the RFA, HTG signed the Form. No evidence was submitted indicating that HTG signed the Form with knowledge of the discrepancy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Housing Finance Corporation enter a final order: Rejecting Capital Grove’s application as nonresponsive and denying the relief requested in its Petition; Concluding that Capital Grove lacks standing to bring allegations against HTG Wellington; and, Upholding Florida Housing’s scoring and ranking of the HTG Wellington application. DONE AND ENTERED this 3rd day of August, 2015, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, Florida32399-3060 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 2015.
