Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing the following facts are found: On or about November 24, 1976, the Petitioner, Department of Banking and Finance, Division of Securities, filed and served a Notice of Intent to Suspend or Revoke License and accompanying Administrative Charges and Complaint on Respondent. The Notice of Intent and Administrative Charges and Complaint were received by Respondent on November 26, 1976. Thereafter, Respondent, by and through his counsel, timely requested a Section 120.57 hearing. The Petitioner referred the Respondent's request for hearing to the Division of Administrative Hearings and the undersigned Hearing Officer was assigned to conduct the hearing. On or about March 17, 1978, Petitioner filed a Motion to Amend Administrative Charges and Complaint seeking to withdraw the prior allegations contained in the complaint and substituting paragraphs eight (8) and nine (9) which respectfully alleged that Respondent was adjudicated guilty on or about March 6, 1978, to the felony charges of two (2) counts of sale of unregistered securities, and that such adjudication of guilt is prima facie evidence of unworthiness to transact a business of a securities salesman in the State of Florida. Petitioner's Motion to Amend was granted without objection by Respondent. Counsel for Petitioner introduced into evidence certain "admissions" of Respondent to certain questions propounded to Respondent by the Petitioner's Request for Admissions filed on or about March 21, 1977. The two "admissions" admitted into evidence were number 1 and number 2, which admitted that Respondent was registered as a security salesman on or about July 30, 1971 and that he held license no. 64590 as a salesman at the time the Administrative Charges and Complaint was filed. The supervisor for the licensing and registration of securities dealers and agents testified that Respondent was registered as a securities salesman on or about July 30, 1971 and that Respondent did hold license no. 64590 as a securities salesman at the time the Administrative Complaint was filed. Counsel for Petitioner introduced into evidence a certified copy of Judgment of Guilt/Order of Probation of Respondent, which had been filed with the Hearing Officer on or about March 27, 1978, pursuant to a proper Notice of Filing. The certified copy of the Judgment of Guilt of the Respondent concerned the case of State of Florida v. Jay Aten, Jr., in the Circuit Court of Lee County Florida, Case No. 76-239 CF. According to that document on or about March 6, 1978, Respondent tendered to the court a plea of nolo contendere to the offense of sale of unregistered securities. Respondent was adjudicated guilty, and the imposition of a five (5) year prison sentence was withheld and the Respondent placed on a five (5) year period of probation. Respondent was required to pay the sum of $5,000 fine within six (6) months. Counsel for Petitioner requested the Hearing Officer to take official recognition of Section 517.16(1)(h), Florida Statutes, and Rule 3E-30.10(1), Florida Administrative Code, pursuant to Rule 221-2.25 of the Model Rules. The Hearing Officer officially recognized the statute and rule cited above.
Recommendation Revoke the license no. 64590 held by the Respondent as a securities salesman. DONE AND ENTERED this 22nd day of June, 1978, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Franklyn J. Wollett, Esquire Jay Aten, Jr. Office of the Comptroller 4178 Erindale Drive The Capitol North Ft. Myers, Florida Tallahassee, Florida 32304 M. W. Schryver, Esquire 600 Fifth Avenue South, Suite 306 Naples, Florida 33940
Findings Of Fact At all times relevant hereto Frank LaRocca, Respondent, was the holder of Real Estate Broker License Nos. 0050488, 0236407 and 0170796 issued by the Florida Real Estate Commission. On or about July 12, 1989, the Respondent, in the United States District Court, Middle District of Florida, upon a verdict of guilty rendered by a jury, was found guilty of five counts of conspiracy to commit bank fraud, a felony. On or about July 12, 1989, Respondent was sentenced to imprisonment for four years. On or about August 1, 1989, the United States District Court Judge ordered a stay of the judgment against Respondent pending completion of Respondent's appeal. Frank LaRocca was a vice-president of the Central Bank in Tampa, Florida, when he retired in May 1984 after working at this bank for 31 years. During this period, he enjoyed a good reputation in the community. Upon his retirement from the bank, he became an active real estate broker principally investing in real estate. The transactions which formed the bases for his conviction in federal court involved bank loans on condominiums he and three other partners purchased. These bank loans had all been repaid at the time of Respondent's trial but one, which had been refinanced by the bank.
Recommendation Taking all these factors into consideration, it is recommended that the licenses of Frank LaRocca as a real estate broker be revoked, but the revocation be stayed pending completion of his appeal to the court of appeals or two years whichever first occurs. At that time, depending upon the action of the court of appeals, his license be revoked or these proceedings dismissed. ENTERED this 7th day of February, 1990, in Tallahassee, Florida. K. N. AYERS 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 7th day of February, 1990. COPIES FURNISHED: Steven W. Johnson, Esquire Kenneth E. Easley Division of Real Estate General Counsel 400 W. Robinson Street Department of Professional Orlando, FL 32801-1772 Regulation 1940 N. Monroe Street Frank LaRocca Suite 60 Tallahassee, Florida 32399-0792 4814 River Boulevard Tampa, FL 33603 Darlene F. Keller Division Director Division of Real Estate 400 W. Robinson Street Post Office Box 1900 Orlando, FL 32801
The Issue The issue presented is whether Respondents are guilty of the allegations contained in the Amended Administrative Complaint, and, if so, what action should be taken against them, if any.
Findings Of Fact At all times material hereto, Respondent Boca Insurance Lenders, Inc. (hereinafter "Boca"), has been a Florida corporation involved in the business of purchasing life insurance assignments. Some beneficiaries of insurance policies are unable to pay for the funeral of the friend or relative insured by that policy, and most funeral homes require payment in full for the funeral expenses at the time the funeral is scheduled. Under the arrangement that Boca has with certain funeral homes, the beneficiary of the life insurance policy of a decedent can assign the policy to the selected funeral home. The funeral home then assigns the policy to Respondent Boca, and Boca pays the funeral home the cost of the funeral. Respondent Boca's profit results from a 6 percent discount on the monies paid. Shares of preferred stock of Respondent Boca were sold for $1,000 a share. Respondent Boca ceased selling its preferred stock in March 1994, converted and/or re-acquired the outstanding shares, and began selling bonds issued by the company instead. Purchasers of preferred shares of the stock of Respondent Boca earned a return of 12 percent, 14 percent if their investment was held longer than one year. Purchasers of the bonds issued instead of the preferred shares of stock received the same return on their investment as was paid on the preferred shares. At all times material hereto, Respondent Equity Investment Club, Inc. (hereinafter "Equity"), has been a Florida corporation. The business purpose of Respondent Equity is to allow persons to deposit small amounts of money in a personal account akin to a Christmas Club, except that such persons can withdraw their money on 24-hours notice. Account owners earn a return of 6 percent on their deposits. The monies deposited in such accounts were "pooled" by Respondent Equity and used by Respondent Equity to purchase Respondent Boca's shares of preferred stock. At all times material hereto, Respondent Alec Shatz was the president and the director of both Respondent Boca and Respondent Equity. He was also the sole stockholder of Respondent Equity. Respondents admit that Respondent Shatz directed, controlled, supervised, managed, and participated in the acts, practices, and policies of Respondents Boca and Equity. In conjunction with commencing sales of its preferred shares, Respondent Boca filed with the United States Securities and Exchange Commission a Form D which is a Notice of Sale of Securities pursuant to Regulation D, Section 4(6), a Uniform Limited Offering Exemption. When Respondent Equity was formed, it also filed a Form D with the Securities and Exchange Commission under Rule 504. Filing a Form D notice that stock will be sold pursuant to an exemption from registration is not the same as registering a stock with the Securites and Exchange Commission. Respondents Boca and Shatz did not register the preferred shares of stock with the Department, and neither Respondent Boca nor Shatz is or has been registered with the Department to sell or offer for sale securities as a dealer, as an associated person, or as an issuer. One of the ways in which Respondent Boca marketed its preferred shares of stock was by advertising seminars which could be attended by members of the public. Advertisements appeared in newspapers and were aired on the radio. It was not necessary that a potential investor attend one of Respondent Boca's seminars in order to purchase Boca's preferred shares. Employees of Respondent Boca attended the seminars and gave presentations. They also answered questions from members of the public attending the seminars. Information about Respondent Boca, Respondent Equity, and Respondent Shatz' other companies was given out at the seminars. A prospectus for Respondent Boca was also given out. The seminar advertisement which appeared in The Palm Beach Post on February 22, 1993, on behalf of Respondent Boca represented that one could earn 12 percent interest on a "No Risk Return", that there was no penalty for withdrawal, that the investment was "liquid," and that interest was paid every 60 days. The advertisement also read: "Registered with S.E.C". (Part of the advertisement, which was admitted as Joint Exhibit numbered l, is illegible.) By September 27, 1993, the advertisement which appeared in The Palm Beach Post remained substantially the same except that the interest rate was 14 percent, the phrase "Your Money Guaranteed through Insurance Payments" had been added, and the ad read "Register [sic] under S.E.C. exemptions". An October 25, 1993, advertisement was the same except that the word "interest" now read "dividend". However, a February 14, 1994, advertisement used the word "interest" rather than "dividend". Respondent Boca's September 18, 1995, advertisement also used the word "interest", represented that "This is a Minimum Risk Return!", and stated that "Our Investment Involve [sic] Insurance Company". The advertisement contained no language as to any registration with either the S.E.C. or the Department. Although some persons purchasing Respondent Boca's preferred shares were "accredited investors", no purchasers were questioned by Respondents Boca or Shatz as to their financial ability or experience to determine if they were accredited investors prior to their purchase of Boca's preferred shares. At some of the seminars conducted by Respondents Boca and Shatz, attendees were also given information regarding the membership accounts offered by Respondent Equity. Between May 7, 1992, and March 14, 1994, Respondent Boca made 137 sales of its preferred shares of stock. In April 1993 Respondent Shatz announced the establishment of Respondent Equity as an investment club for the purpose of raising money for Respondent Boca by having the investment club purchase Respondent Boca's stock. In May 1993 five membership accounts in Respondent Equity were opened, and those members subsequently made additional deposits in their accounts. Once the accounts were opened, Respondent Equity became the sole manager of those funds. On July 2, 1993, Respondent Equity purchased five shares of Respondent Boca's stock with the combined monies from the membership accounts. Respondent Equity has not registered its securities with the Department, and neither Respondent Equity nor Respondent Shatz is registered with the Department to sell or offer to sell its membership accounts as an issuer, as a broker/dealer, or as an associated person. A pamphlet regarding Respondent Boca's offering, labeled "prospectus" but generally known as a private placement memorandum, was given to attendees who wanted one at each seminar. No prospectus was available regarding Respondent Equity's offering. As the advertisements placed by Respondents Boca and Shatz changed, so did the prospectus for Respondent Boca. Boca's February 1, 1993, prospectus carried a caveat on the cover page that the securities of Boca and its prospectus were neither approved or disapproved by the Securities and Exchange Commission. The September 1, 1993, prospectus carried the same caveat. However, the November 1, 1993, and the April l, 1994, prospectuses added to that caveat an additional statement that the securities of Respondent Boca were not registered with the Department but the firm was registered as an issuer/dealer to sell its own securities. Between June 15, 1993, and January 14, 1994, neither Respondent Boca nor Respondent Shatz had access to all of the corporate books and records for the time period prior to June 15, 1993, since those records were in the possession of Respondent Boca's accountant/escrow agent. Respondent Boca's September 1, 1993, prospectus, its September 1, 1993, revised prospectus, and its November 1, 1993, prospectus represented that any purchaser of Boca's preferred shares had the right of access upon reasonable notice to Boca's books and records. Further, the November 1, 1993, prospectus offered that right of access to potential purchasers. Respondent Boca's September 1, 1993, prospectus represents that Larry Rosenman was Boca's escrow agent possessing copies of all assignments of insurance policies. That information was also provided orally to those attending Respondent Boca's September 30, 1993, seminar. On October 7, 1993, Rosenman wrote a letter to Respondents Boca and Shatz denying that he had agreed to be Boca's escrow agent, demanding that Boca and Shatz cease any representations to the contrary, and demanding that Boca and Shatz notify anyone who had received the September 1, 1993, prospectus that the representation in the prospectus that Rosenman was the escrow agent was not accurate. By letter dated October 8, Respondent Shatz wrote Rosenman apologizing for the error, agreeing to remove Rosenman's name from Boca's prospectus, and agreeing to notify all persons who had received the prospectus that Rosenman's name should not have been listed. Respondents Shatz and Boca issued a revised September 1, 1993, prospectus deleting any reference to an escrow agent and, specifically, deleting Rosenman's name. They did not notify all persons who may have received the original September 1 prospectus. Thereafter, none of Respondent Boca's prospectuses represented that Boca had an escrow agent. Attorney Tina Talarchyk was Respondent Boca's "in-house counsel" from October 1, 1993, through December 1993. She denied at hearing that she was also Boca's escrow agent during that time period and that she had ever executed the temporary escrow agent agreement written on her letterhead and admitted in evidence in this cause. She offered no explanation for the other items of correspondence admitted in evidence which reflect she was the person handling the redemption of stock certificates when investors wished to withdraw their monies invested in Respondent Boca. As she appeared to be carrying out the duties of an escrow agent on her professional letterhead and as she represented herself to an investor to be Boca's escrow agent, she acted as an escrow agent on behalf of Respondent Boca during that time period. On October 7, 1994, Respondents Boca and Shatz directed a letter to all investors that incorrect statements had been made in the past. The letter specifically advised that Respondent Boca did not have an escrow agent at that time, that Respondent Boca had never been registered as an issuer/dealer to sell its own securities, and that, although any investor could examine the company's books and records, no audit had been performed at that time. The letter also offered to return any investor's money. No investor requested the return of any monies based upon the contents of that letter. No investor relied upon any misrepresentation or "incorrect statement" in investing in Respondent Boca. The investors who testified at the final hearing conducted their own "due diligence" inquiry before investing in Respondent Boca and discovered, as the Department's own investigators discovered, that there were no complaints regarding Respondents made to any local or state agency. On occasion, a former employee of Respondent Boca found that an entry in Boca's accounts receivable journal had not yet been deleted when he thought it should have been. From August 18 to August 25, 1993, one of Respondent Boca's bookkeepers gave Respondent Shatz a report that she prepared indicating that Respondent Boca had a negative bank balance. Respondent Boca never missed making timely any interest or dividend payment to any investor who purchased Boca's preferred shares and, later, Boca's bonds. Similarly, Respondent Equity never missed making timely any interest payment to any investor having a membership account. Every person who purchased preferred shares in Respondent Boca was able to redeem those certificates and receive back the money invested in Boca upon electing to do so. Similarly, every member of Respondent Equity was able to withdraw their monies upon electing to do so. The Department has never received a complaint from any investor in Respondent Boca regarding Boca's or Respondent Shatz' business practices. Similarly, the Department has never received a complaint from any member of Respondent Equity regarding Equity's or Respondent Shatz' business practices. Although the Department has examined and copied Respondents' business records at the corporate office on several occasions, and although the Department has interrogated investors in Respondent Boca and members of Respondent Equity, some of them on repeated occasions, the Department has not discovered any investor or member who has been injured by Respondents' business practices, by Respondents' failure to register with the Securities and Exchange Commission and the Department, or by any representations made by Respondent Shatz at Boca's seminars or by Respondents Shatz or Boca in any of Boca's prospectuses. Further, the Department has not discovered any investor or member who relied on any erroneous or inaccurate statement made by any Respondent in deciding to invest in Respondent Boca or open a membership account in Respondent Equity. A Department investigator attended the September 30, 1993, seminar after seeing the newspaper advertisement and ascertaining that Respondents Boca and Shatz and Boca's securities were not registered with the Department. He also attended the February 17, 1994, seminar. Fifty-five of the 137 sales made by Respondents Boca and Shatz occurred after the first seminar which he attended.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered: Finding Respondents Boca and Shatz not guilty of the allegations contained in counts 1-4 of the Amended Administrative Complaint filed against them; Finding Respondents Equity and Shatz guilty of the allegations against them contained in counts 5-19; Finding Respondents Boca and Shatz guilty of the allegations against them contained in counts 20-430; Ordering Respondents to cease and desist from the sale of unregistered securities by unregistered persons and entities; Imposing an administrative fine in the amount of $100 for each of the 137 transactions against Respondents Boca and Shatz, jointly and severally, for a total of $13,700; Imposing an administrative fine in the amount of $100 for each of the 5 membership accounts against Respondents Equity and Shatz, jointly and severally, for a total of $500. DONE and ENTERED this 30th day of July, 1996, at Tallahassee, Leon County, Florida. LINDA M. RIGOT, 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 30th day of July, 1996. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 94-6671 Petitioner's proposed findings of fact numbered 2-6, 8, 11, 13, 14, 16- 18, 22, 24, 25, 28, 29, and 33 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 1, 7, 9, 15, 19, and 20 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Petitioner's proposed findings of fact numbered 10, 21, 23, 27, and 31 have been rejected as not being supported by the weight of the evidence. Petitioner's proposed findings of fact numbered 12, 26, 30, 32, and 37- 40 have been rejected as being subordinate to the issues involved herein. Petitioner's proposed findings of fact numbered 34 and 36 have been rejected since they are illegible. Petitioner's proposed finding of fact numbered 35 has been rejected as being irrelevant. Respondents' proposed findings of fact numbered 1-3, 11, 13, 18, 23, 40, and 41 have been adopted either verbatim or in substance in this Recommended Order. Respondents' proposed findings of fact numbered 4, 6-10, 12, 19-21, 24, 29, 30, 32-34, 36-39, 42, and 43 have been rejected as not constituting findings of fact but rather as constituting conclusions of law, argument of counsel, or recitation of the testimony. Respondents' proposed findings of fact numbered 5, 14-17, and 35 have been rejected as being irrelevant to the issues herein. Respondents' proposed findings of fact numbered 22, 25, 28, and 31 have been rejected as being subordinate to the issues involved herein. Respondents' proposed findings of fact numbered 26 and 27 have been rejected as not being supported by the weight of the evidence. COPIES FURNISHED: John D. O'Neill, Esquire Department of Banking and Finance Division of Securities and Investor Protection The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 Alec Shatz 5850 West Atlantic Avenue Suite 103 Delray Beach, Florida 33484 Hon. Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350
The Issue The central issue in this case is whether Petitioner is entitled to be registered as an associated person.
Findings Of Fact Petitioner filed an uniform application for securities registration with the Department. This application sought registration as a general securities representative (5-7) and named Sheffield Securities, Inc. as the firm for whom she intended to work. The application sought information regarding Petitioner's past work experience and specifically inquired as to whether the U.S. Securities and Exchange Commission (SEC) had ever found her to have been involved in a violation of investment-related regulations or statutes. The application also asked Petitioner to disclose whether the SEC had entered an order denying, suspending or revoking her registration or disciplined here by restricting her activities. To both of these questions Petitioner answered "yes." Petitioner's association with the securities industry began in 1972 when she was employed as a secretary for a securities firm. Her work prior to that had been as a bookkeeper. Petitioner obtained her registration and purchased a securities business, Adams & Whitney Securities Corp., in late 1973 or early 1974. Adams & Whitney was registered with the SEC and operated as a broker/dealer buying and selling interests for itself and others. Petitioner was the president and sole principal for Adams & Whitney. On February 9, 1976, the SEC issued a released which claimed Adams & Whitney and Petitioner had wilfully violated and wilfully aided and abetted violations of the anti-fraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities EXCHANGE ACT of 1934, and Rule lOb-5 in connection with an offer to purchase, and sale of ITS securities and manipulation of the price of the security. The release also alleged Petitioner had violated Section 15(c)(2) of the securities EXCHANGE ACT of 1934 and Rule 15c 2-7 by submitting quotations for ITS securities to a interdealer quotation system without notification to the system of arrangements with other brokers and guarantees of profits. Without admitting or denying the allegations against her, Petitioner submitted an offer of settlement regarding the ITS charges which the SEC determined to accept. As a result, the registration as a broker-dealer of Adams & Whitney was suspended for a period of four months. Also, Petitioner was suspended from association with any broker-dealer for a period of four months. On June 27, 2977, the SEC issued a release which charged that Petitioner had wilfully violated and wilfully aided and abetted violations of the registration provisions of the Securities Act of 1933, and had willfully violated an wilfully aided and abetted violations of the anti-fraud provisions of the Securities Act of 1933 and the Securities EXCHANGE Act of 1934 in connection with the offer and sale of the common stock of Tucker Drilling Company, Inc. Without admitting or denying the allegations against her, Petitioner submitted an offer of settlement regarding the Tucker Drilling charges which the SEC decided to accept. As a result, the SEC found that Petitioner wilfully violated and wilfully aided and abetted violations of Sections 5(a) and 5(c) of the Securities Act of 1933. Further, it was found Petitioner willfully violated and willfully aided and abetted violations of Section 10(b) of the EXCHANGE act and Rule 10b-6. Based on its findings the SEC suspended Petitioner from association with any brokers, dealer or investment company for a period of twelve months and barred her from association with any broker, dealer or investment company in a supervisory or proprietary capacity. Prior to the entry of the administrative penalties imposed against Petitioner in connection with the Tucker Drilling charges, the SEC had obtained a civil injunction against Petitioner which permanently enjoined her from violating the federal securities laws in connection with the offer and sale of Tucker securities or any other securities. Petitioner maintained at hearing that the submitted of settlement were offered as an expedient means of resolving the charges since she did not have the financial resources needed to oppose the allegations. In connection with the ITS charges, Petitioner stated she did not improperly scheme to manipulate the stock prices, that she neither bought nor sold shares of ITS, and that she was charged with other broker-dealers who had "made a market" for ITS simply because of her association with them. Further, Petitioner denied she had ever received compensation for deals made with the ITS sales In connection with the Tucker Drilling charges, Petitioner admitted she actively participated in the purchase and sale of the Tucker stock but that she had not known of the improprieties of others involved in the trading. Petitioner denied she had knowingly violated the laws and alleged that by the time she determined something was improper, the investigations had begun. Petitioner found the Tucker incident a "stupid mistake. In 1976, Adams & Whitney went out of business. Petitioner subsequently devoted her energy to her own and family health problems and became a housewife. In 1985, Petitioner's family moved to Florida and she worked as a secretary for a brokerage firm called Brown & Hawk, Inc. From September, 1986 until the time of her application, Petitioner worked as a secretary for Sheffield Securities, Inc. During her employment with Sheffield, Petitioner studied for an successfully passed the examination for S-7 registration. According to Dennis Dixon, who was a financial principal and general securities associated person at Sheffield Securities, Petitioner is a very trustworthy person who is also very capable. According to Don Saxon, the determination that Petitioner had violated the anti-fraud provisions was a great concern to the Department since those violations are the most serious types perpetrated by an individual in the industry.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: Department of Banking and Finance, Office of the Comptroller, Division of Securities and Investor Protection enter a Final Order approving Petitioner's application for registration with restrictions as may be deemed appropriate by the Department. DONE and RECOMMENDED this 25th day of July, 1988, in Tallahassee, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of July, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-0531 Rulings on Petitioner's proposed Findings of Fact: Paragraph 1 is accepted. Paragraph 2 is accepted. Paragraph 3 is rejected as argument. Paragraph 4 is rejected as argument or unsupported by the evidence. To the extent relevant see findings made in paragraphs 11 & 12. Paragraph 5 is rejected as argument. Paragraph 6 is accepted to the extent addressed in findings made in paragraphs 10, 11, 12 otherwise rejected as argument unsupported by the record, or irrelevant. The first sentence in paragraph 7 is accepted. The balance of paragraph 7 is rejected as argument. Paragraph 8 is accepted. Paragraph 9 is rejected as argument. The first 4 sentences of paragraph 10 are accepted. The balance of paragraph 10 is rejected as argument. Paragraph 11 is rejected as argument. COPIES FURNISHED: Charles E. Scarlett Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399 Michael J. Cohen, Esquire 517 S. W. First Avenue Fort Lauderdale, Florida 33301 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350
Findings Of Fact On November 20, 1985, petitioners, Richard Schulze and Constable Atlantic, Inc., made application with respondent, Department of Banking and Finance, Division of Securities (Divi- sion), for licensure as a principal and broker-dealer, respec- tively. In response to a Division request, petitioners submitted amended applications containing additional information on January 31, 1986. After conducting an investigation of petitioners' backgrounds, the agency issued a proposed final order on February 18, 1986, denying the application on the grounds (a) Schulze had violated the federal Commodity Exchange Act and had been the subject of a final administrative order in the State of Minnesota involving a violation of that state's security laws, and (b) an officer or director of Constable Atlantic, Inc. (Schulze) had been guilty of an act which would be cause for denying or revoking the registration of an individual dealer. The agency action prompted the instant proceeding. Schulze is president of Wyndwood Merchantile Corporation (Wyndwood) and various affiliated organizations. Wyndwood is involved in the sale of precious metals and is currently doing business in the State of Florida and other states. Constable Atlantic, Inc. is a Delaware corporation authorized to do business in the State of Florida. Schulze is Constable's president, his wife Theodora treasurer, and his son Otto secretary. The three are also the directors and shareholders of the corporation. Constable is now registered as a broker and dealer with the federal Securities and Exchange Commission. Just recently, Schulze was licensed as an associated person and a commodity pool operator by the National Futures Association, which is the licensing arm of the Commodities Futures Trading Commission (CFTC), a federal agency in Washington, D.C. Schulze has been involved in selling securities for the last six or seven years. At one time he was also a principal with Atlantic Futures, Inc. (AFI), which was then licensed as a commodity pool operator and trading advisor with the CFTC. AFI and Schulze were both under the regulatory jurisdiction of that agency. On October 2, 1984 the CFTC issued a complaint and notice of hearing alleging that AFI and Schulze had violated various provisions of the federal Commodity Exchange Act and CFTC regulations. More specifically, it alleged that: ...AFI and Schulze, aided and abetted by each other,...cheated and defrauded or attempted to cheat and defraud AFI's pool participants in violation of Section 46(A) of the Commodity Exchange Act, as amended...; that AFI, aided and abetted by Schulze, violated Section 40(1) of the Act and Sections 4.41(a) and 166.3 of the Commission's regulations; and that AFI violated Sections 4.21(a) and 4.21(a)(3) of the Commission's regulations. Thereafter, Schulze and AFI submitted an offer of settlement to the CFTC which was accepted and formalized in a consent decree entered by the CFTC on April 23, 1985. The consent decree made no adjudication of law or fact, or an adjudication on the merits of the case. Rather, it was entered solely for the purposes of accepting the offer of settlement and terminating the proceeding. Under the terms of that decree, which has been received in evidence as respondent's exhibit 2, Schulze and Atlantic paid a $100,000 fine and agreed to cease and desist from any violations. In addition, AFI agreed to a suspension of its registrations for six months and to never apply for any other registrations with the CFTC. Finally, for purposes of the settlement only, the CFTC found Schulze had violated certain portions of the Act and regulations and noted that "these findings may be used only in any other proceedings brought by the Commission." Schulze later made application with the CFTC for licensure as a dealer, and this application was approved on September 11, 1986. On or about July 26, 1984 the State of Minnesota issued an ex parte cease and desist order against Wyndwood, Schulze and others requiring them to stop selling securities in that state without being registered. The order, which has been received in evidence as respondent's exhibit 1, required Schulze to request a hearing within a prescribed time, or the order would become final. Schulze did not timely request a hearing. However, after the prescribed time to request a hearing had expired, he filed a request with the State Commissioner and the order of July 26 was subsequently vacated on September 18, 1986. The outcome of the proceeding is not known. Constable Atlantic, Inc. is a member firm of the National Association of Security Dealers (NASD) and is registered as a broker and dealer with the Securities and Exchange Commission (SEC). In obtaining their registrations, Constable and Schulze furnished the SEC and NASD the same information that was submitted to respondent.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the applications of Constable Atlantic, Inc. and Richard Schulze for registration as a broker- dealer and principal, respectively, be APPROVED. DONE and ORDERED this 26th day of November, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of November, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1065 Petitioners: 1. Covered in finding of fact 4. 2. Covered in finding of fact 4. 3. Covered in finding of fact 4. 4. Covered in finding of fact 3. 5. Covered in finding of fact 3. 6. Covered in finding of fact 3. 7. Covered in finding of fact 3. 8. Covered in finding of fact 3. 9. Covered in finding of fact 3. Covered in finding of fact 3. Covered in finding of fact 2. Covered in finding of fact 2. Rejected as being irrelevant. Covered in finding of fact 5. Respondent: Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 1. Covered in finding of fact 4. Covered in finding of fact 4. Covered in finding of fact 3. Rejected as being irrelevant. Rejected as being irrelevant. COPIES FURNISHED: Edward Brodsky, Esquire Sarah S. Gold, Esquire SPENGLER, CARSON, OUBAR, BRODSKY and FRISCHLING 280 Park Avenue New York, New York 10017 Calianne P. Lantz, Esquire Office of the Comptroller 401 Northwest 2nd Avenue Suite 870 Miami, Florida 33128 Honorable Gerald Lewis, Comptroller The Capitol Tallahassee, Florida 32301-8054 Charles E. Scarlett, Esquire Room 1302, The Capitol Tallahassee, Florida 32301-8054
The Issue Whether the Certificate of Authority held by Respondent should be subject to discipline for Respondent's failure to timely return build-up funds to a licensed bail bond agent, Willie David, pursuant to the terms of Section 648.29(3), Florida Statutes (2003).
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: Roche Surety holds a Certificate of Authority as a Florida domestic property and casualty insurer authorized to transact insurance business in the State of Florida, subject to the jurisdiction and regulation of the Department pursuant to the Florida Insurance Code. Roche Surety, Inc. ("Roche-MGA") is a managing general agent licensed by the Department. Armando Roche is an officer and director of Roche Surety and an officer and director of Roche-MGA. He is licensed by the Department as a limited surety (bail bond) agent. Willie David is licensed by the Department as a limited surety (bail bond) agent. On or about April 18, 1995, Mr. David entered into an Agency Agreement with Roche-MGA. "Build-up fund," or "BUF," accounts are held by the insurer in trust for the agent in order to protect the insurer against any liability that the agent does not directly satisfy. The insurer places a portion of the premium due to the agent on each bond into the BUF account. Should there be a forfeiture on the bond, the insurer is allowed to take that amount out of the BUF account. In this case, Roche Surety was the insurer holding Mr. David's BUF account, pursuant to his Agency Agreement with Roche-MGA. Section 648.29(3), Florida Statutes (2003), provides: Build-up funds are maintained as a trust fund created on behalf of a bail bond agent or agency, held by the insurer in a fiduciary capacity to be used to indemnify the insurer for losses and any other agreed- upon costs related to a bail bond executed by the agent. The build-up funds are the sole property of the agent or agency. Upon termination of the bail bond agency or agent's contract and discharge of open bond liabilities on the bonds written, build-up funds are due and payable to the bail bond agent or agency not later than 6 months after final discharge of the open bond liabilities. (Emphasis added) On or about June 23, 2000, the Agency Agreement between Willie David and Roche-MGA was terminated. In July 2001, Mr. David made a complaint to the Department that Roche Surety had not returned funds that it held in his BUF account, as required, pursuant to Section 648.29, Florida Statutes (2003). Mr. David did not provide the Department with documentation sufficient to demonstrate that all of his open bond liabilities had been discharged. The Department provided Mr. David with a list of what was needed to prove discharge of the liabilities. Over a period of months, Mr. David continued to submit letters to the Department. Matters between Mr. David and Roche Surety became increasingly acrimonious. Roche Surety made repeated attempts to schedule an audit of Mr. David's records. Mr. David made allegations against Roche Surety that the company's principal, Armando Roche, considered defamatory. On or about January 7, 2002, Roche Surety filed a civil complaint in the Thirteenth Judicial Circuit in and for Hillsborough County against Willie David for defamation and civil extortion. The case was styled Roche Surety, Inc. v. Willie David, Case No. 02000151. Mr. David ultimately submitted information sufficient to satisfy the Department that all of his outstanding bond liabilities had been discharged as of August 23, 2002. Thus, the Department's position was that Roche Surety should have returned the BUF account funds to Mr. David on or before February 23, 2003. The Department sent Roche Surety a letter, dated March 3, 2003, advising Roche Surety that all of Mr. David's outstanding liabilities had been discharged as of August 23, 2002, and placing Roche Surety on notice that it was required to return the funds held in the BUF account, pursuant to Section 648.29(3), Florida Statutes (2003). On March 7, 2003, Roche Surety filed a motion in the circuit court case requesting "an order allowing [Roche Surety] to hold funds as security or, in the alternative, for a pre- judgment writ of attachment." The motion asserted Roche Surety's belief that Mr. David was judgment proof and that the BUF account represented the only asset available to satisfy any potential judgment in Roche Surety's favor. Roche Surety requested a court order permitting it to transfer the BUF account funds into the registry of the court or some other secure account or, in the alternative, for a pre-judgment writ of attachment of the BUF account. Paragraph 4 of Roche Surety's motion states, in full: Defendant [Willie David] has satisfied his open bond liabilities and said bonds have been discharged. As such, pursuant to Section 648.29, Florida Statutes, defendant is entitled to a return of the BUF account and defendant has made demand for its return. Also on March 7, 2003, counsel for Roche Surety wrote a letter in response to the Department's letter of March 3, 2003, attaching a copy of Roche Surety's circuit court motion. In the letter, counsel asserted, "By transferring the BUF account pursuant to Court Order, Roche Surety would fully comply with Florida law, including Section 648.29, Florida Statutes." The Department made no effort to intervene in the circuit court case. On August 15, 2003, Circuit Judge James D. Arnold entered an order granting Roche Surety's motion, allowing Roche Surety "to hold the proceeds of defendant's BUF Account in the same account as it now exists until this matter is resolved or until further Order of Court." The judge's order noted that Mr. David did not object to entry of an order "based on the facts stated in plaintiff's Motion and the facts stated in defendant's response to the Motion." Among the facts recited in Roche Surety's motion and repeated in the judge's order, was the statement that Mr. David had satisfied his open bond liabilities and was entitled to return of the BUF account. At the hearing in the instant case, Roche Surety offered testimony and some documentation to demonstrate that Mr. David has, in fact, not satisfied all of his open bond liabilities. This evidence directly contradicted Roche Surety's representation to the circuit court that Mr. David had satisfied all open bond liabilities. In particular, Roche Surety offered testimony that Mr. David had taken cash collateral upon the issuance of several bonds and had failed to document or account for that collateral in such a way as to assure Roche Surety that it had been returned. At most, the evidence established that Roche Surety had suspicions regarding Mr. David's handling of collateral, but no actual proof that he had not returned collateral to any of his clients. Roche Surety also offered testimony that Mr. David has not returned, provided proof of discharge, resolved, or otherwise accounted for two outstanding powers of attorney. Evidence presented by the Department demonstrated that Mr. David had reported the two powers of attorney as lost and, pursuant to the Agency Agreement, had paid the premiums on them. No evidence was presented that the powers of attorney were ever used to write bail bonds. Roche Surety's initial representation to the circuit court that Mr. David had satisfied all open bond liabilities is supported by the facts, as well as by the equitable consideration that Roche Surety should not benefit by taking diametrically opposed positions before different tribunals. The evidence established that the amount of money held in the BUF account is $30,792.08, plus any interest that has accrued since December 2002, the date of the last statement presented at hearing.
Recommendation Based on all the evidence of record, it is RECOMMENDED that the Department of Financial Services enter a final order holding that the evidence is not clear and convincing that Roche Surety has willfully violated Section 648.29, Florida Statutes (2003), and that the First Amended Notice and Order to Show Cause be dismissed. DONE AND ENTERED this 28th day of January, 2004, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of January, 2004. COPIES FURNISHED: Douglas S. Gregory, Esquire Preston & Cowan, LLP 100 North Tampa Street, Suite 1975 Tampa, Florida 33602 Richard J. Santurri, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact By Prehearing Stipulation entered into by the parties on August 30, 1990, the parties agreed, and it is so found, that: Petitioner, Edward T. Strehlau, is President and control person of Deerfield Securities, Inc. On or about February 3, 1989, Petitioners filed an application, (Form BD), for registration as a broker/dealer, which was signed by Mr. Strehlau. On or about March 15, 1989, Petitioners filed with the Division an amendment to that Form BD. On or about April 19, June 22, and July 20, 1989, Petitioners filed additional amendments to the Form BD initially signed and submitted on behalf of the Petitioners by Mr. Strehlau. All of the Forms BD and amendments filed by Petitioner, Strehlau, with the Division were represented by him as true and complete. On February 3, 1989, Petitioner, Strehlau, also filed the Articles of Incorporation of Deerfield Securities, Inc., with the Florida Secretary of State. These Articles listed Edward T. Strehlau, Patericia O'Dell, William Manger, and Patricia Strehlau as Directors. The Division of Securities requires the filing of the Articles of Incorporation along with the dorm BD. This requirement is outlined in Section 517.12, Florida Statutes. Neither William Manger nor Patricia Strehlau were listed as Directors of Deerfield Securities, Inc., on the Form BD or on any amendments thereto which were filed with the Division. Mr. Manger is the subject of a complaint relating to securities violations committed by Eiffel Securities, Inc., Mr. Manger, a Mr. Riddle, and a Mr. Ashbee, in the State of Tennessee. On or about February 23, 1989, Mr. Strehlau, as President of Deerfield, withdrew the application for registration of Deerfield Securities, Inc., as a broker dealer with the State of Tennessee, and further agreed not to reapply for registration as a broker/dealer in that State, and not to sell Deerfield Investments, Inc.'s investment units in Tennessee. Deerfield Securities, Inc. is a wholly owned subsidiary of Deerfield Investments, Inc. Edward T. Strehlau is a control person and President of Deerfield Investments, Inc. The principal place of business of Deerfield Securities, Inc. is Sarasota, Florida. William Manger, at all times pertinent hereto, was President and a control person of the aforementioned Eiffel Securities, Inc., a Tennessee corporation. Petitioner, Edward T. Strehlau, was a control person of Eiffel Securities, Inc., during the period June 1, 1988 through September 21, 1988. Eiffel Securities, Inc. was a wholly owned subsidiary of Tennessee Investments Marketing Enterprises, (TIME), and Edward T. Strehlau was vice-president of TIME between June, 1988 and September, 1988. On February 3, 1989, Petitioner Strehlau paid $200.00 in filing fees for Deerfield Securities, Inc. with the Florida Division of Securities. On February 10, 1989, The Division of Securities notified Deerfield of several deficiencies in its application for registration as a securities dealer. These deficiencies included a requirement for: the officer or partner names of the parent firm; registration as a foreign corporation or a legal opinion indicating no need therefor;+ a clearing agreement from a dealer in Florida signed by both firms; Articles of Incorporation or partnership agreement; proof of securities effectiveness and compliance with SIPC (Securities Investors Protection Corporation). Thereafter, on February 27, March 16, April 20, June 22, and July 18, 1989, Mr. Strehlau sent letters to the Division of Securities in which he attempted to convince the Division of his compliance with the requirements set forth in the February 10, 1989 deficiencies letter. The Petitioner's efforts, however, were not supported by facts in some particulars. For example, the clearing agreement with OTRA, to be signed by both parties, was signed only by Petitioner Strehlau as President of Deerfield Securities, Inc., and attested by Patericia O'Dell of the firm. No signature from any responsible party of OTRA appears on the document. By letter dated December 2, 1988, Mr. Strehlau submitted this unilaterally executed clearing agreement. By letter dated February 22, 1989, the vice- president for finance of the SIPC attested that Deerfield Securities, Inc. was, as of that date, registered with the Securities and Exchange Commission, (SEC), as a securities broker under Section 15(b), of the 1934 Securities Investor Protection Act, and by operation of that Act, the corporation would be a member of SIPC unless its business consisted exclusively of various activities which are not pertinent to this hearing. It would appear, therefore, that Deerfield Securities, Inc. was, at the time of application at least, a member of SIPC. It is also found, however, that the application for registration submitted by Mr. Strehlau on behalf of himself and Deerfield Securities, Inc. contained what appears to be a material misrepresentation of fact in that it did not list Mr. Manger and Mrs. Strehlau as Directors. Mr. Manger had a disciplinary history in the industry in Tennessee and his omission was material. Article VI of Deerfield Securities' Articles of Incorporation filed with the Florida's Secretary of State's office listed Mr. Manger as one of the original Directors of Deerfield Securities, Inc. as of February 3, 1989. However, when Mr. Strehlau submitted the application for registration for Deerfield, (Form BD), neither that form nor any of the subsequent amendments listed Manger as a Director or affiliated person even though the form required that all Directors be listed. Mr. Strehlau contends that Manger and Mrs. Strehlau were omitted because neither were to take an active part in the management of Deerfield's operations. The Division, however, considered the omission to be a false material statement since the Directors of an applicant are considered to be pertinent to its operation. In this, the Division is correct. The Division also took the position that the pending Tennessee disciplinary action against Mr. Manger was significant. It surmised that Manger, seeing he could not be licensed in Florida on his own, was attempting to achieve this end through Mr. Strehlau, and the Department was concerned there was still a relationship between Manger and Deerfield. There is no evidence, direct or otherwise, to support that suspicion. When an application form is sent to an applicant, upon the applicant's request, an instruction sheet is sent with it which outlines the basic requirements for filing. These instructions are not, however, all inclusive or controlling. The statutes and Rules of the Department, pertinent to criteria for application and registration, constitute the ultimate guidelines over who is approved for registration. When Division analysts review an application, they check it against a requirements check list to insure that all requirements are met. If required information is not included with the application, the Division must notify the applicant of the omitted information within 30 days. If the requested information is received within 60 days, the Division then has an additional 90 days in which to rule on the application. If the omitted information is not timely received, however, the Division can deny the application for incompleteness or approve it if appropriate. On the other hand, when all required information is received timely, if the Division does not act on the application within 90 days, the application is automatically approved and if a discrepancy is thereafter noted, corrective action must be through disciplinary action rather than denial. The Division's denial action here was based on two grounds. The first was the failure to list Mr. Manger as a Director on the original Form BD or any of the amendments thereto. The second was Mr. Manger's prior and pending disciplinary record. Even if the pending action were not considered, the Division would still have denied the Petitioner, Deerfield's, application based on the prior, completed disciplinary actions against Mr. Manger in Tennessee. Petitioner claims that the Division did not request a second time those items listed on the initial deficiency letter and which were not thereafter provided by him. It is the Division's policy that once the initial deficiency letter is sent, calling for additional information, if the applicant submits only a part of those items identified, it will not send out another notification reminding the applicant of the still- missing items. It is not required that such follow-up notification be sent. If, however, the applicant calls and inquires if its application is complete, the Division will advise the applicant which of the previously noted deficiencies have not yet been corrected. Here, no such inquiry by the Petitioner was made. In this case, the Division took the position that Petitioner's application was never complete since there was no clearing agreement signed by the required parties prior to approval. Further, Mr. Strehlau's application as a principal failed to include a proper copy of his personal disciplinary history regarding a dismissed charge of felonious pointing a fire arm in Oklahoma in 1981. Under Florida law, every securities dealership must have a registered principal and Mr. Strehlau was to fill that capacity for Deerfield. Since his application could not be deemed complete because of the failure to provide all the required information, neither could Deerfield's be deemed complete. The State of Florida will not approve the application of a broker/securities dealer without approval of the National Association of Securities Dealers, (NASD). It is normal practice for NASD and Florida approval to be at the same time. There is an attempt at coordination, but Florida cannot approve a dealer for registration without the approval of the SEC and NASD. As of March 8, 1989, the state had been advised that NASD was prepared to approve Deerfield Securities, Inc., though it had some reservations about the firm which were insufficient to support denial. Even had NASD granted approval, however, NASD registration and membership does not guarantee Florida registration. The standards for registration are different. No doubt Mr. Strehlau made many phone calls to the Division in an effort to get approval of these applications. Without question he submitted numerous amendments to the Form BD in an effort to provide that information that the Division asked for in a timely and proper manner. His claims that neither Mr. Manger nor Mrs. Strehlau were listed as Directors on any of the forms because they were not involved in the operation of the business, and that had it been intended for them to work in an operational capacity, they would have been listed are not persuasive, however. Notwithstanding his argument that if the Division had any questions about that, it should have inquired, clearly, that is not the Division's responsibility to do.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore recommended that the application of Deerfield Securities, Inc. to be registered as a broker/dealer, and the application of Edward T. Strehlau to be registered as an associated person/principal of Deerfield Securities, Inc., in Florida be denied. RECOMMENDED this 5th day of October, 1990, in Tallahassee, Florida. ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of October, 1990. COPIES FURNISHED: Edward T. Strehlau, pro se 13122 Woodington Drive Houston, Texas 77038 R. Beth Atchison, Esquire Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32399-0350 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 William G. Reeves General Counsel The Capitol Plaza Level, Room 1302 Tallahassee, Florida 32399-0350
The Issue The issues to be resolved in this proceeding concern whether the proposed award of a contract to Ben Withers, Inc., is contrary to the Agency's governing statutes, rules, or policies or contrary to the bid solicitation specification concerning bid bond requirements, within the meaning of Subsection 120.57(3)(f), Florida Statutes (2008). It must also be determined whether those bidders who submitted a less than "A+" bid bond rating are compliant with the specification, or should be disqualified for non-responsiveness.
Findings Of Fact The Petitioner is a closely held Florida corporation. It holds a State of Florida license as a General Contractor. Its licensure authorizes it to perform work of the nature and scope involved in this project. Mr. Milton Fulmer is the principal owner and president of the Petitioner. He testified in this proceeding on behalf of the Petitioner. The Respondent is an Agency of the State of Florida charged with managing and administering state-owned lands in the state park system, including the planning and arranging for the construction of facilities, installations and improvements on those lands. The Respondent engages in procurement through competitive bidding on a regular basis, in order to build and maintain its improvements on those lands. The Respondent issued an Invitation to Bid (ITB) for certain road and additional work to be performed at the Bald Point State Park, in Franklin County. The ITB is designated as “Bid No. 49-08/09” on the Department of Management Services’ Vendor Bid System (VBS). It is undisputed that the ITB was properly advertised and noticed. The ITB project involves the construction of a new entrance roadway, the removal of an existing timber bridge and the installation of a new “free-span" bridge. The project also includes related drainage and utility work. Three addenda to the ITB were issued, which significantly increased the scope of the work, and the estimated budget for the project, from $1,000,000 to $3,000,000. The bids were timely opened on January 12, 2009. Withers was the low bidder. The Petitioner was the sixth low bidder. The bid tabulation, announcing the Respondent’s intent to award to Withers was posted on January 23, 2009. The Petitioner filed a timely protest, pursuant to Section 120.57(3), Florida Statutes (2008). The protest notice was filed on January 28, 2009, and the Petition was timely filed on February 6, 2009. Eight vendors submitted timely bid responses. None of the bids were disqualified by the Respondent. The specifications in the ITB required bidders to submit a good faith deposit or bid guaranty, amounting to five percent of the bid. This could be provided in the form of a bid bond. All the bidders submitted bid bonds with their bids. The instructions to bidders in the specifications of the ITB require that, for bids exceeding $2,000,000, “the surety that will provide the Performance Bond and Labor and Materials Payment Bond shall have at least an 'A+' rating in A.M. Best Company’s online rating guide.” The ITB also provides that the rating of a reinsurance company is not applicable and does not meet this requirement. The Petitioner’s expert witness, Paul Ciambriello, acknowledged in his testimony that a Bid Bond, a Labor and Materials Payment Bond (payment bond) and a Performance Bond (payment bond) guarantee different aspects of a procurement or project. A bid bond guarantees that a vendor or contractor will execute the contract and undertake it for the bid price. A payment bond guarantees payment for all equipment, labor, materials and services, in the event the contractor fails to pay for them, as contractually required. The performance bond guarantees full performance of the contract by the surety company, if the contractor defaults on performance of the contract. The surety company would, in that event, be completing the job, or obtaining bids from other contractors for completion, while remaining liable for the difference between the contract price and the actual price of project completion. The Petitioner has taken the position that the specification requiring an "A+" rating for the payment and performance bonds should be applied by the Respondent to the bid bond requirement, as well, because there is no significant or practical difference between the issuance and underwriting efforts involved in the obtaining of the two types of bond for a given project. The Petitioner’s point is that, if an "A+" rated surety is required for the payment bond and the performance bond, then, as a practical matter, that is the same thing as requiring a bid bond of that same rating, because in the vast majority of cases, the surety which underwrites the bid bond and the one issuing the payment and performance bonds is the same surety, and that inclusive would allow for only one underwriting effort. Because of this purported custom or course of dealing in the industry, as also purportedly reflected in past Department practice regarding bond requirements, the Petitioner maintains that its bid was the only responsive bid, and all the other bidders should have been disqualified. The Petitioner provided its insurance and bond broker, Paul Ciambriello, of the Guignard Company with information about the project and its surety requirements. The broker then obtained a bid bond with International Fidelity Insurance Company and Everest Reinsurance Company, as co-sureties. International Fidelity Insurance Company has an “A-“ rating, according to the Best’s rating guide. Everest Reinsurance Company has a rating of “A+”, according to that rating guide. The other seven bidders submitted bids accompanied by bid bonds issued by surety companies with “A” ratings. The bid specification provided no rating requirement for the bid bond. The Petitioner has argued that it is the custom or practice in the surety industry for the surety company which underwrites a bid bond to also underwrite the payment and performance bonds. In addition to the reasons referenced above, this is generally done because the surety will offer a very low premium price for a bid bond and "make its money" on the premium price for the payment and performance bonds, which it would also issue in the normal course of dealing. There is also a very short time period between issuance of the bid bond and the requirement to underwrite the payment and performance bonds, which is another reason why it is the customary practice in the surety industry for the same company to write both types of bond. The Petitioner contends that the bid bond and the payment and performance bonds really have no practical distinction because it is so common that a surety company issuing a bid bond will be the same as the surety company (with its bond rating) which issues the payment and performance bonds. Although the Petitioner's expert witness, Mr. Ciambriello, testified that a bid bond, in essence, guarantees the payment and performance bond, that guarantee is not actually true as a matter of law. Rather, the bid bond does not guarantee that the surety company issuing the bid bond will issue the payment and performance bonds, but rather that the principal, i.e. the contractor, shall provide the payment and performance bonds from a good and sufficient surety, according to the obligee's, the Respondent Agency's, requirements (bid specifications). Mr. Ciambriello acknowledged in his testimony, however, that, while it is rare, in his experience representing surety companies, for a contractor to change the surety company it uses between the issuance of the bid bond and the issuance of the payment and performance bonds, a contractor certainly can do so. It can also simply initially select a different surety company, from the bid bond surety, to issue the payment and performance bonds. There are several reasons a contractor might elect to change surety companies between the issuance of the bid bond and the issuance of the payment and performance bonds. The surety company might become insolvent, lose its ratings, or another surety company might offer a better rate on its premium, which might induce a contractor to change surety companies between the issuance of the two types of bonds. In order for a vendor or contractor to establish a surety, a pre-qualification process is necessary. In pre- qualification, contractors must supply information including project history, credit references, reviewed financial statements, personal financial information and details regarding assets. The surety companies assess risk based upon the characteristics of the project, including its size, nature, location, and complexity. A surety may elect not to underwrite the payment and performance bonds for a project for which it has issued the bid bond, which would also require a contractor to seek a different surety for issuance of the later payment and performance bonds. Moreover, contractors must qualify for surety bonds and not all contractors succeed in qualifying; further, not all contractors can succeed in qualifying and procuring surety bonds from an "A+" rated company. The Petitioner, as found above, submitted its bid response with co-sureties proposed to underwrite the bonds. The Respondent accepts the premise that use of the rating of a co- surety is compliant with the ITB solicitation specification. The use of two surety companies listed as co-sureties on a bond is very unusual, in the Respondent's experience. The Respondent had a good faith belief, at the time it posted the notice of intent to award the bid, that it could not disqualify any bidder for submitting a bid bond from a surety rated less than A+, based upon its ITB specification. Indeed it should not, because the bid bond specification contained no rating requirement for the bid bond. Moreover, the Respondent had a good faith belief that the contractors could change surety companies between the issuance of the bid bond and the payment and performance bonds. The Respondent's belief or interpretation as to this last point is correct. In another procurement involving the Respondent, on a project located at Jonathan Dickenson State Park, a bidder, H and J Contracting, Inc. (H and J), changed surety companies between the issuance of the bid bond and the issuance of the payment and performance bonds. That bidder was determined to have successfully provided compliant bonds, which met the specifications in that solicitation. The Respondent had advertised the ITB for the campground renovation project at Jonathan Dickenson State Park, using the same solicitation specification for surety bonds as was used for the Bald Point project at issue in this case. The low bidder in that case, H and J Contracting, Inc., submitted a bid for $2,033,636.32. It was therefore required to comply with the specification for bonds regarding bids which exceeded two million dollars. H and J, therefore submitted a bid bond from Liberty Mutual Insurance Company, a company which carried an "A" rating according to Best's On-line Ratings Guide. H and J subsequently submitted payment and performance bonds from U.S. Specialty Insurance Company, a company rated "A+" according to that same ratings guide. H and J was deemed to have complied with the specifications concerning bonding, because, by changing surety companies for the payment and performance bonds, it provided such bonds with the required "A+" rating, even though the bid bond submitted in that case only carried an "A" rating. The solicitation specification in that case did not require any particular rating for the bid bond. In the instant situation, the Respondent did not violate its specification by accepting bid bonds of all bidders because the solicitation specification stated that the rating should apply to the surety company issuing the payment and performance bonds, not the bid bond. The Petitioner contends that its interpretation of the solicitation specification, that the rating requirement should be applied to the bid bond also, is the only practical interpretation because of the pre-qualification process and the lack of adequate time between submittal of the bid bond and the requirement for submittal of the payment and performance bonds. Moreover, the Petitioner contends that any other interpretation would be contrary to competition because other bidders may have bid on the project had they known that the Respondent was not applying the rating requirement to the bid bond, as the Respondent had done in past procurements. This argument is somewhat specious, however, because, in fact, the Petitioner's interpretation would negate the fact that the bid bond specification does not require a rating. The Petitioner is the only one of the six top bidders who submitted an "A+" bond rating response concerning, according to its argument, the bid bond requirement. Thus, if its interpretation were followed as to the bid bond rating requirement, then such would be anti-competitive, in relation to the other bidders, because none of them supplied an ”A+" rating surety in response to the bid bond specification. In the face of the fact that the bid bond specification required no rating, to interpret the rating requirement of the payment and performance bonds as being applicable to the bid bond stage of the procurement, would effectively eliminate the other bidders, which were lower in price than the Petitioner, from the competition. The Petitioner also argues that other unknown vendors might have bid on the project had they known that the Respondent was not applying a rating requirement to the bid bond, as the Respondent had done in the past. In fact, however, all bidders or vendors with access to the ITB solicitation knew, or should have known, of the specification of this particular ITB, which differed in its terms from some past solicitations of the Respondent by not requiring a rating for the bid bond. Moreover, there is no evidence that, in the pre- submittal stage of the process, potential bidders could not have asked for clarification of the specification from the Agency had they chosen to do so. There is no showing by persuasive evidence that there is an anti-competitive effect on potential bidders caused by the Respondent's specification concerning the bid bond. In fact, logic would dictate that by removing any rating requirement for the bid bond, the potential universe of bidders might be enlarged and therefore this might have a positive competitive effect. Additionally, the Petitioner's argument that the specification should be interpreted to apply a rating requirement to the bid bond, when the actual specification, in its language, does not contain such a requirement, is rejected also for the additional reason that such an interpretation is contrary to the plain meaning of the bid specification language. This amounts to, at least, an implicit collateral challenge to the specification, which is untimely and impermissible.1/ There are 19 vendors listed on the "plan holders list" for the Bald Point project. That relatively large number of potential bidders is because the project began as a paving contract, and was later amended to include vertical construction. This changed the licensure requirement as to potential vendors from a situation of no license being required, to a situation where a general contractor or building contractor license would be required. Some of the bidders appearing on the plan holders list are just paving contractors, and therefore, under the amended project, they would no longer qualify to bid on the entire job, although they might be sub-contractors. Not all bidders who bid on the Bald Point Project are listed on the plan holders list. The Petitioner's argument that the Respondent may have had more of the 19 potential bidders actually submit bids, if the other vendors had known that the Respondent would accept bid bonds from a surety rated less than "A+" is not persuasive. It is impossible to determine how many contactors actually reviewed the Bald Point Project plans and for what reasons they decided not to submit a bid. Seven of the eight bidders submitted bid bonds from surety's rated "A" rather than "A+." It certainly seems obvious that those bidders did not interpret the bid bond specification as requiring a bid bond from an "A+" rated surety company or better. Moreover, all potential vendors, whether they bid or not, who reviewed the specifications should have known when they read the specification that there was no rating requirement attendant to the bid bond (as evidenced by the fact that seven of the eight bidders competing in this situation obviously seemed to be so aware and did not submit an "A+" surety for the bid bond). Thus, in this context, the Respondent's interpretation of this specification is not anti- competitive. The Petitioner also contends that the Respondent acted contrary to its policy by accepting bid bonds from all eight bidders and not disqualifying all but the Petitioner's bid, since it alone submitted one carrying an "A+" rating. The Petitioner refers to past practices of the Respondent as being its "policy." In this particular, the Petitioner and Respondent were involved in a prior bid procurement and protest involving the Apalachicola National Estuarine Research Reserve Headquarters project (ANERR). The Petitioner in that situation was the lowest bidder, but had its bid disqualified. The Petitioner uses the prior project specification as evidence of what the Respondent's policy is with regard to situations such as that in the instant case. The solicitation specification regarding bonds for the ANERR project, however, was different from the solicitation specification for the Bald Point Project. The solicitation specification for the ANERR project required that all bonds have at least a minimum rating of "A" in the latest issue of the Best Rating Guide. The Petitioner submitted a bid bond from a surety company rated "A-" with its bid for the ANERR Project. The bid was therefore deemed non-responsive by the Respondent Agency and the bid was disqualified for failing to meet the solicitation specification. The Petitioner's president testified that he read the specification for the Bald Point Project and he conceded that it was different from the specification for the ANERR Project. The Petitioner's argument that, apparently, the Respondent's policy or practice in the ANERR Project situation should be applied to interpretation of the bonding requirement for the Bald Point Project is not persuasive. Clearly the specification concerning the bid bond and bond rating was different between the two projects. The attempted application of the purported past policy or practice of the Department to interpret the Bald Point specification concerning the bid bond, to require an "A+" rating for the bid bond, when the specification term clearly does not provide it (merely because that was the policy or practice in the ANERR project case, involving a different specification) amounts to an untimely collateral attempt to alter the specification of the Bald Point Project. Such would amount to a material deviation from the specifications because it would disqualify seven of the eight bidders (and would likely have resulted in fewer bids had potential bidders been on notice of that policy or interpretation). In like manner, the Petitioner relies on the case of Gum Creek Farms, Inc., v. Department of Environmental Protection, Case No. OGC 07-2623 (FO: June 20, 2008) as evidence of the Respondent's policy with regard to bond rating requirements. In that case, as in the ANERR situation, the solicitation specification was different from the Bald Point specification at issue. Because the two situations referenced above are different from the Bald Point Project as to the specification requirements, they cannot be said to be evidence of a policy or regular practice by the Agency which would be applicable to this case, since the specific requirements of the bid specifications in this solicitation are what drive the necessary bid responses. Over a period of approximately 10 years the Department has engaged in bid procurement with regard to approximately 600 projects. The Respondent has, during that time, consistently required compliance with its surety ratings specifications in its bid solicitations. This is because an adequate surety bonding for payment and performance is an important means for the Respondent to manage its risk as the owner of a project. Thus, whatever the specifications concerning bond ratings are for a particular project, the Respondent has consistently required compliance with them. In the instant situation, the Respondent re-wrote its rating specification for the Bald Point Project so that it was different from the other two projects referenced and discussed above. It has re-written its specifications on other occasions as well, which is within its prerogatives. Timeliness of Payment and Performance Bond Notification The general conditions of the contract require that the contractor submit evidence of its ability to provide acceptable payment and performance bonds within two working days of being notified of a successful bid. The contractor has 10 days to actually furnish the bonds. The testimony of Michael Renard, of the Department, shows, however, that as a practical matter, it is not a material deviation if a contractor does not supply evidence of ability to provide compliant bonds precisely within that time period. The actual payment and performance bonds are usually submitted to the Respondent at the time the contract is actually signed or shortly thereafter. Sometimes it may be a longer period of time before the contractor submits payment and performance bonds. This might occur because authorization to sign a contract is suspended due to budgetary concerns or due to lack of funding availability. The Respondent does not require and contractors do not generally wish to expend their capital for payment of a surety premium until a contract is actually signed and in effect, and the Agency's funding is approved and released, as persuasively shown by the testimony of Michael Renard and Ben Withers. The winning bidder herein, Withers, did not provide evidence of ability to provide compliant payment and performance bonds within two days of being notified of being the lowest bidder. This was because the protest was filed during the intervening time and Withers and the Respondent were of the good faith belief that all responsive efforts to the solicitation were tolled upon notice being provided that a protest had been filed. In fact, because a protest was filed, triggering a formal proceeding to determine which entity might ultimately be the contractor, it could not be determined that there was, as yet, a winning bidder or contract, as a necessary pre-requisite to issuance of payment and performance bonds. In fact, the Respondent has received evidence of Withers' ability to provide compliant payment and performance bonds. This evidence was provided after Withers was informed that a co-surety rating would be acceptable to the Respondent and in compliance with the bid specification. This treatment, of allowing a co-surety rating as being acceptable was also accorded the Petitioner, who submitted a co-surety proposal. There is no persuasive evidence that the fact that Withers may have supplied evidence of a compliant payment and performance bond beyond the above-referenced time limits had anything to do with selection of Withers over the Petitioner or other bidders and thus provided a competitive advantage for Withers. The Petitioner filed its written evidence of ability to provide the payment and performance bonds on February 20, 2009, almost a month after the posting of the Intent to Award. It did not even become incumbent upon Withers to submit such evidence regarding payment and performance bond compliance until after it was notified that it was a successful bidder. As pertinent to the issues in this proceeding, Withers was selected, in essence, because its bid submittal was compliant with the bid bonding requirement, other specifications, and was the lowest bid. The fact that Withers went beyond the time limits for furnishing evidence of compliant payment and performance bonds, occurred after the initial choice by the Agency as to the awarded bidder, here under review. Thus, Withers' excession of the time limit regarding the payment and performance bond evidence submittal, etc., is not a material deviation from specifications, as to the manner in which the award decision was made. It is of no consequence because, with the initiation of a formal proceeding, there was not even a final award and contract as yet. Finally, although argument was made concerning whether the Respondent had waived the requirement of payment and performance bonds from an "A+" down to an "A" rating, the persuasive evidence shows that the Respondent never did waive the rating requirement in order to post the award to Withers. The Respondent has established that there was no need for it to waive the "A+" rating requirement, and it had no intent to do so.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be issued by the Florida Department of Environmental Protection dismissing the protest. DONE AND ENTERED this 1st day of May, 2009, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of May, 2009.
The Issue Whether Respondents committed the offenses described in the administrative complaint? If so, what disciplinary action should be taken against them?
Findings Of Fact Based upon the record evidence and the stipulations entered into by the parties, the following Findings of Fact are made: Murray Wieder (Respondent Wieder) is now, and was at all times material hereto, a real estate broker licensed in the State of Florida pursuant to license number 0303130. His last license was issued c/o Wieder Realty, Inc., 900 S. Pompano Parkway, Pompano Beach, Florida 33069. Wieder Realty, Inc. is now, and was at all times material hereto, a corporation licensed in the State of Florida as a real estate broker pursuant to license number 0254413. Its last license reflects its address as 900 S. Pompano Parkway, Pompano Beach, Florida 33069. Respondent Wieder is now, and was at all times material hereto, the President of Wieder Realty, Inc., and its qualifying broker. Margaret Hoskins has been an investigator with the Department of Professional Regulation for the past year and a half. As part of her responsibilities, she conducts audits of escrow accounts maintained by real estate brokers licensed in the State of Florida. On April 27, 1989, Hoskins conducted a routine audit of Respondents' escrow accounts. Her investigation revealed that, on that date, Respondents maintained at Bank Atlantic in Fort Lauderdale, Florida, a noninterest-bearing escrow account (number 005-50199 0-3) with a balance of $14,577.39 and an interest- bearing account (number 005-175922-1) with a balance of $32,955.50. Respondents' "trust liability" with respect to these two accounts was $41,856.50. The $5,676.39 difference between the total balance of these two escrow accounts and Respondents' "trust liability" represented accrued interest on the monies deposited in the interest-bearing account. Respondents used the accrued interest to cover their incidental operating expenses. Hoskins further discovered as a result of her investigation that on March 13, 1989, Respondents had deposited $50,000.00 into the noninterest- bearing account, which prior to the transaction had had a balance of $950.58, and that on March 30, 1989, Respondents had withdrawn $25,000.00 from the interest-bearing account and had deposited $25,000.00 in the noninterest-bearing account. During the course of her investigation, Hoskins spoke with Respondent Wieder, who indicated to her that it was his practice to transfer funds from one of the Bank Atlantic escrow accounts to the other. Of the fully executed sales contracts and lease agreements Respondents' had on file, only one, the Kutner-Fox contract, contained a provision authorizing Respondents to place escrow monies in the interest-bearing account and to use the accrued interest for incidental operating expenses. The remaining contracts and leases were silent regarding the matter. Hoskins, in her conversation with Respondent, therefore attempted to find out from him if the escrow monies in the interest-bearing account, other than those attributable to the Kutner-Fox contract, had been deposited in the account with the permission of all interested parties. Wieder, who was otherwise very cooperative, failed to provide Hoskins with a direct answer to her question. Hoskins did not thereafter make any effort to contact these parties and ask them if they had given Respondents permission to place monies held in escrow in an interest- bearing account and to use the accrued interest to cover incidental operating expenses. Later on April 27, 1989, after Hoskins had completed her visit to their office, Respondents withdrew all of the funds from the interest-bearing account and deposited them in the noninterest-bearing account. They then closed the interest- bearing account. Respondents then transferred from the noninterest- bearing account to their operating account $5,676.39, the amount of interest that had accrued on the monies that had been in the interest-bearing account.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Florida Real Estate Commission issue a final order in this matter finding the proof insufficient to establish Respondents' guilt of the offenses charged and dismissing the instant administrative complaint. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 22nd day of August, 1990. STUART M. LERNER 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 22nd day of August, 1990.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, I make the following: Defendants, Robert I. Krinzman, Edward Golodetz, and Sanford B. Heims, are registered real estate brokers with the Florida Real Estate Commission and Defendant Keyes National Investors, Inc., is a registered corporate broker with the Commission. On November 17, 1970, Gordon R. Higginbotham, a registered real estate salesman was in the employ of the Defendant Keyes, and was to be compensated by a share of the commission received by Keyes from all real estate transactions for which he was the listing or selling salesman. Under the term of Higginbotham's employment agreement with Keyes, forty percent (40 percent) of the commissions collected by Keyes would go to Higginbotham as selling salesman. Evidence reveals that on or about November 17, 1970, Higginbotham sold under contract to Kimco, Inc. an apartment complex known as Westover Village for the purchase price of $3,500,000.00. Based on this transaction, Keyes, as broker, earned a real estate commission of $91,700.00. Of the earned commission, Keyes received $60,000.00 at closing from which Higginbotham received forty per cent (40 percent). The balance of the commission $31,700.00, was pursuant to an agreement, deferred for five years and was to be paid on or about November, 1975. During the course of the hearing, evidence was introduced that at a board meeting of Keyes on September 11, 1972, Keyes hired the Faril Corporation to handle the fiscal management of Defendant Keyes corporation. Irving R. Rill, the sole stockholder and president of the Faril Corporation, who was also a director of Keyes and was subsequently elected to the position of chairman of its executive committee and acting president, handled all fiscal matters relative to Keyes Corporation. Evidence revealed further that at a director's meeting of Keyes held on or about September 24, 1973, the board of directors approved a proposal to arrange for the discounting of the balance of the commission due from the sale of Westover Village. Shortly thereafter, the $31,700.00 commission balance was discounted and the Defendant, Keyes, received $20,000.00 as full payment. Irving Rill testified that, with the $20,000.00 in the bank, he offered to pay Higginbotham $8,000.00 as his portion of the deferred but discounted commission. This offer was relayed to Royal Jonas, Higginbotham's attorney, who rejected it and demanded payment of $12,680.00, which was forty percent (40 percent) of $31,700.00, or the full commission Rill testified further that, by the terms of the agreement, the commission was not due until November 17, 1975, so as a compromise he gave Higginbotham a corporate note for the full commission payable in 1975, when due. Be further testified that he drafted a note and directed Edward Golodetz, as executive vice president, to sign it on behalf of the corporation. Evidence revealed that all negotiations for payment of the discounted commission to Higginbotham were conducted by Rill for Defendant Keyes with Jonas, Higginbotham's attorney. There was no testimony introduced during the course of the hearing that Defendant Goldetz, Heims or Krinzman had any involvement in or control of business negotiations. Respecting Defendant Krinzman's conduct as president of Keyes, evidence reveals that on March 7, 1973, a Mr. Zeeman became president of Keyes and Defendant Krinzman resigned. Of course, this was some seven months prior to the actions here complained of. Rill testified that Higginbotham, through Attorney Jonas, rejected both the $8,000.00 discounted commission and the corporate note for $12,680.00 and demanded, in lieu thereof, the immediate payment of $12,680.00, which testimony remains uncontradicted on the record. Defendants Golodetz and Heims testified that they acted at all times under the direction of financial consultant Irving Rill relative to all fiscal matters pertaining to Keyes. There was no evidence introduced to indicate that either Defendants Krinzman, Golodetz, or Rill had any control over the fiscal policy of the corporation or control of its finances. The Defendants further testified that there was never any intent on their part to deny Higginbotham his share of commissions due from the sale of the Westover Village apartment complex. Nor was there any evidence which would indicate that the expenditure of the $20,000.00 which was received from the Westover Village commissions were used for any purposes other than for corporate purposes. Chapter 475, Florida Statutes (the real estate licensing law), requires a real estate dealer to be open, honest and establish a fair relationship with his client such as is normally expected of a businessman of sound integrity. Where there is no concealment or no misleading statements there is no conduct on the part of a personal charge sufficient to substantiate a violation of the statute. (See, for example, Rivard v. FREC, 212 So.2nd, 672, 674 and in Brod v. Jernigan, 188 So.2nd 275, a case involving a charge of fraud and dishonest dealings. The court there said that "scienter is made a necessary element of the violation". In this case there is no proof of any participation by the named Defendants of fraud, conversion or misdeed. Based on the evidence, I conclude that Irving R. Rill controlled the Defendant Keyes Corporation in his capacity as the acting president, the chairman of the executive committee and as its management and fiscal consultant; that Defendant Keyes offered Higginbotham $8,000.00 as the then due commission or, in the alternative, a corporate note for $12,680.00 payable when the full commission would have been due; that Higginbotham rejected both the payment and the corporate note; that the $20,000.00 commission received by Defendant Keyes was used for corporate purposes; that there was no evidence to show or otherwise infer an intent to defraud Higginbotham; that neither Defendant Krinzman, Golodetz or Heims, were the corporate treasurers nor did they control corporate funds or had any control either directly or indirectly with the negotiations with Higginbotham. It is therefore concluded that neither Defendants Robert I. Krinzman, Edward Golodetz, Sanford B. Heims or Keyes National Investors, Inc., are guilty of the charges as alleged.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is hereby recommended: 1. That the information filed herein be dismissed in its entirety. DONE and ENTERED this 4th day of March, 1977, in Tallahassee, Florida. JAMES E. BRADWELL, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Edward C. Teitig, Esquire Richard H. Olsen, Esquire Manuel E. Oliver, Esquire
