The Issue Whether or not the Petitioner, Conduces Club, Inc., is entitled to the issuance of a Series 11-C alcoholic beverage license.
Findings Of Fact The Petitioner, Conduces Club, Inc., a nonprofit corporation incorporated in the State of Florida, has applied to the Respondent, State of Florida, Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, for the issuance of a series 11-C alcoholic beverage license. This license is described in Rule 7A-1.13, Florida Administrative Code, as a club license to sell to members and nonresident guests only. The terms and conditions for the issuance of such a license are as set forth in Subsection 561.20(7)(a), Florida Statutes, and Subsection 565.02(4), Florida Statutes. The Director of the Division of Alcoholic Beverages and Tobacco has denied the application of the Petitioner premised upon the assertion that the Petitioner has failed to meet the requirements set out in the aforementioned sections of the Florida Statutes. The Petitioner has disagreed with that interpretation and a Section 120.57, Florida Statutes, hearing was scheduled and held on April 10, 1979. The crucial language to be considered in determining whether or not the Petitioner should be extended the privilege of operating under a Series 11-C alcoholic beverage license is found in the Subsection 561.20(7)(a), Florida Statutes, which reads as follows: "(7)(a) There shall be no limitation as to the number of licenses issued pursuant to 565.02(4). However, any licenses issued under this section shall be limited to: Subordinate lodges or clubs of national fraternal or benevolent associations; Golf clubs and tennis clubs municipally or privately owned or leased; Nonprofit corporations or clubs devoted to promoting community, municipal, or county development or any phase of community, muni- cipal, or county development; Clubs fostering and promoting the general welfare and prosperity of members of showmen and amusement enterprises; Clubs assisting, promoting, and de- veloping subordinate lodges or clubs of national fraternal or benevolent associa- tions; and Clubs promoting, developing, and main- taining cultural relations of people of the same nationality." (Although the introductory phrase in the above-quoted Subsection makes reference to Subsection 565.02(4), Florida Statutes, as being involved in the process of issuing a license, Subsection 565.02(4), Florida Statutes, true function is the establishment of the requirement that chartered or unincorporated clubs pay an annual state license tax of $400.00, and it is this Subsection 561.20(7)(a), -- Florida Statutes, which establishes those categories of candidates who may receive a Series 11-C alcoholic beverage license.) Of the possible categories for licensure, the one which appears to be the focal point of the controversy is that provision found in Subsection 561.20(7)(a)3., Florida Statutes. In support of its request, the Petitioner presented certain witnesses and items of evidence. Among those items was the testimony of Mrs. E. R. Atwater, Social worker Supervisor with the United States Department of Housing and Urban Development, Housing Management Division, assigned to the Blodgett Community in Jacksonville, Florida. The Blodgett Community is a housing development of some 53 acres which contains 628 housing units with a breakdown of that population containing 301 senior citizens and 1,069 juveniles, with cost of the heads of the households being female. Those persons living in the Blodgett development are described as having a poor economic circumstance. Mrs. Atwater indicated that the Conduces Club, Inc., had on occasion sponsored girls softball teams and boys basketball teams for those young persons living in the Blodgett Community and she had expressed her appreciation in the form of correspondence of January 17, 1979, which is the Petitioner's Exhibit No. 1 admitted into evidence. In addition, Mrs. Atwater indicated that the Conduces Club, Inc., had provided transportation for a trip for the residents of the Blodgett Community to Six Gun Territory located near Ocala, Florida. Arrangements were made for three busses; two of the busses which transported residents on July 16, 1977, and the third bus transported them on August 11, 1977. The trips involved both young people and adults as participants. The letters requesting the assistance of the Conduces Club, Inc., and the confirmation of that request may be found as Petitioner's Exhibits Nos. 2 and 3, admitted into evidence consecutively. The president of the Conduces Club, Inc., Mr. Cornell Tarver, testified in support of the petition. He indicated that the club had been originally formed as the Pacesetter Club but its name was changed in September, 1976, because of a conflict concerning the utilization of the name, which had been preempted by another club. The club was chartered as a nonprofit corporation by the State of Florida on September 22, 1976, under the name, "Conduces Club, Inc." A copy of the Articles of Incorporation may be found as Respondent's Exhibit No. 1 admitted into evidence. Mr. Tarver indicated that the purpose of the club was to help the youth and senior citizens and principally the kids of the Blodgett Community, to include organizing softball and baseball and providing uniforms. He also testified that a certain banquet was hold for these young persons and the parents of those children were invited to attend, and enough food was prepared to food cost of the individuals who reside in the Blodgett Community. He produced certain plaques and trophies awarded to the club. The plague was given by the mothers of the children in the sports programs and the trophy was presented by an unaffiliated club that the Conduces Club had helped to organize. The witness, Tarver, indicated that the club was financed by functions such as dances, fish fries, food sales in their club house, dues of the members and fines. The club itself has twenty-seven members. Other projects the club has participated in, were the contribution of money to local churches and the donation of an organ to one of those churches. On December 16, 1977, the club contributed $500.00 to the National Association for the Advancement of Colored People. The club house is open every day and there are certain activities through the week, to include club meetings and entertainment for the benefit of club members. The members run the club without compensation and the club does not maintain any regular employees. The official statement of the club's purposes may be found in the Respondent's Exhibit No. 2 admitted into evidence. This is a composite exhibit which contains part of the application for the license and a copy of the Bylaws. The objectives of the corporation may be found in Article II of the Bylaws and the activities of the corporation may be found in Article VIII of the Bylaws. Article II states: "The objectives of this organization shall be as follows: To unite fraternally all persons who the membership may from time to time take into the club. To promote brotherhood, sportsmanship, friendship and charity for the membership and their families. To strive at all times to promote and protect the welfare of every member. To promote a spirit of cooperation between its members and the public. To honor outstanding individuals in the City of Jacksonville for their achievement. To do anything necessary, including, but not limited to, the ownership of property, real and personal, for the accomplishment of the foregoing objectives, or those which may be recognized as proper and legal objectives of this club, all of which shall be consistent with the laws, the public interest and the interest of its mergers. To sue or to be sued as a natural person. To bear a seal to be placed on all of the club's official correspondence." Article VIII states: "COMMITTEES Section 1. The following standing committees and such other committees as the directors may, from time to time deem necessary, shall be appointed by the president of the association. Social Committee Athletic Committee Scholarship Committee The duties of the standing committee shall include the following, which shall not, however, prelude other activities by such committees. Section 2. The social committee shall be composed of six members. It shall be the duty of this canted to supervise the use of club room and to plan such club meetings of a purely social nature as it may deem necessary. These may include parties, picnics, and other such social or athletic events sponsored by the organization. Section 3. The athletic committee shall be composed of three members. It shall be the duty of this committee to supervise and manage all athletic activities for the association, including but not limited to management of various athletic teams sponsored by the club. Section 4. The scholarships committee shall be composed of six members. It shall be the duty of this committee to screen applicants for scholarships and deserving students in Duval County, Florida, and to make recommendations to the general membership of its findings of worthwhile recipients of scholarships, or awards." It can be seen that the Petitioner's members have a commendable concern for the community in which the club has its principal base of operation and this concern has been expressed through the activities of the club members which have been described in the course of this Recommended Order; however, it appears from an examination of the testimony in this hearing and the official statement, that is, the Bylaws of this corporation, that the principal purpose of the club is as stated by the Article II B. of the Bylaws, which language states, "To promote brotherhood, sportsmanship, friendship and charity for the membership and their families," and this attitude carries over to foster good relations between those members and the members of the general public. Therefore, the Petitioner is not perceived as being a club which meets the criterion, "devoted to promoting community, municipal or county development or any phase of community, municipal or county development." See Subsection 561.20(7)(a)3., Florida Statutes. This conclusion is reached in examining the definition of the word "devoted," as found in Webster's New World Dictionary of the American Language, College Edition. That definition states that to be devoted one must be, "1. vowed; dedicated; consecrated. 2. very loyal; faithful." and although the community concern of the Petitioner is very high, it does not reach the level of devotion. Consequently, the Director of the Division of Alcoholic Beverages and Tobacco was correct in denying the application for a Series 11-C alcoholic beverage license.
Recommendation It is recommended that the Director of the Division of Alcoholic Beverages and Tobacco deny the Petitioner, Conduces Club, Inc.'s request for a Series 11-C alcoholic beverage license. DONE AND ENTERED this 30th day of April, 1979, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings Room 101, Collins Building MAILING ADDRESS 530 Carlton Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Jennings H. Best, Esquire 3410 North Myrtle Avenue Jacksonville, Florida 32209 Francis Bayley, Esquire Staff Attorney Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301 J. M. Ogonowski Richard P. Daniel Building, Room 514 111 East Coast Line Drive Jacksonville, Florida 32202
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
Findings Of Fact For the purposes of the motion, the parties stipulated to the following facts: The Department's action giving rise to Petitioners' petition for attorney's fees under Section 57.111, Florida Statutes, was to propose confirm a report of abuse/neglect against each of the five Petitioners in their individual capacity. Each Petitioner requested a formal hearing under Section 120.57(1), Florida Statutes, which resulted in five separate cases, none of which named Palmetto Guest Home, Inc. as a party. The five cases were consolidated but were subsequently dismissed as a result of the Department downgrading each case to "closed without classification". All five of the Petitioners worked at the Palmetto Guest Home, Inc. and are related to each other. The Palmetto Guest Home, Inc., is a Florida corporation in good standing and registered with the State of Florida as an adult congregate living facility. James E. Biggins is the president and a director of Palmetto Guest Home, Inc., and is the corporation's sole shareholder. Palmetto Guest Home, Inc., was not named as a party in the underlying administrative action and is not one of the Petitioners in this case. James E. Biggins was not named as an alleged perpetrator in the underlying administrative action and is not one of the Petitioners in this case. James E. Biggins is the father of Petitioners, K.B., J.J.B. and M.B., who are vice presidents of the corporation. James E. Biggins is the husband of Petitioner S.B., who is a director and the secretary/treasurer of the corporation. James E. Biggins is the father-in-law of Petitioner T.B., who is the administrator of Palmetto Guest Home, Inc. Palmetto Guest Home, Inc. has net a worth of less than two million dollars.
The Issue The issue in the case is whether the allegations of the Administrative Complaint are correct and, if so, what penalty should be imposed.
Findings Of Fact At all times material to this case, Frederick L. Roberts (Respondent) was a licensed Florida mortgage broker, holding license number MB 316324569. In November 1993, a friend of the Respondent, Alan Petzold, introduced Tami Aaronson to him. Ms. Aaronson owned property in Maryland and was interested in securing a mortgage on the Maryland property to provide funding for a Florida home for herself and her son, Jarrett. According to Ms. Aaronson, Mr. Petzold is the father of a minor son, Jarrett Aaronson. The Respondent believed that such was the case at the time he met the family. The Respondent met several times with Ms. Aaronson. The Respondent gave a “Flagship Mortgage Company” business car to Ms. Aaronson. The business card had the Respondent’s name printed on it. The Respondent had been briefly employed by Flagship Mortgage Company, but apparently was not so employed at the time he met Ms. Aaronson. Frederick L. Roberts (Respondent) received check number 0170, dated November 22, 1993, from Tami Aaronson as “Custodian for Jarrett Aaronson” in the amount of three thousand dollars. The notation on the check states that it is for “refinancing.” Ms. Aaronson believed the check was payment for services the Respondent would render in obtaining refinancing of the Maryland property. There was no written agreement between the Respondent and Ms. Aaronson, or between the Respondent and Mr. Petzold. The Respondent completed no written documentation related to the Aaronson transaction. The Respondent did not place the Aaronson deposit into a segregated escrow account. The Respondent did not record the Aaronson deposit into an escrow transaction journal. During the period he held the Aaronson funds, the Respondent worked on unrelated business, and traveled to China for about thirty days. The Respondent performed no work on behalf of Ms. Aaronson, Mr. Petzold, or Jarrett Aaronson. There is no evidence that the Respondent intended to perform any work on behalf of Aaronson/Petzold. The Respondent asserted that he asked for a three thousand dollar “deposit” as a means of discouraging the couple from asking for his assistance. The assertion is not credible. The Respondent asserts that the three thousand dollars he received from Ms. Aaronson was a deposit against travel expenses he would incur during his examination of the property in Maryland. The assertion is not supported by credible evidence. In the spring of 1994, the Respondent received a telephone call from Ms. Aaronson. The Respondent asserts that he believed Ms. Aaronson to have called him from a mental hospital. For whatever reason, at that time he determined that he no longer wanted to be involved in the Aaronson/Petzold situation. Shortly after receiving the Aaronson phone call in spring 1994, the Respondent also received a call from a Department of Banking and Finance investigator, apparently looking into a complaint received from Ms. Aaronson. The Respondent thereafter contacted Mr. Petzold and made arrangements to return the funds to him. According to a notarized statement dated May 9, 1994, the Respondent returned the three thousand dollars to Jarrett R. Aaronson and Alan C. Petzold. The Respondent testified that the money had been returned on May 8, 1994 to Mr. Petzold. The Respondent offered into evidence a document dated May 8, 1994, purporting to be a receipt received from Mr. Petzold for return of the funds. The signature is not notarized. The Respondent did not return the Aaronson deposit to Tami Aaronson. There is no evidence that Ms. Aaronson authorized the return of the three thousand dollars to Mr. Petzold. There is no evidence that Ms. Aaronson authorized the return of funds to Jarrett. Ms. Aaronson has not received any part of the three thousand dollars allegedly refunded. There is no evidence that the funds have been redeposited into the minor child’s custodial account. The Respondent asserts that he was not acting as a mortgage broker and was merely investigating the property to determine whether the Aaronson property could be used as a source of funds for the purchase of Florida property. The Respondent asserts that had a refinancing situation arisen, he would have referred Ms. Aaronson to another licensed person who would assist in the actual refinancing. The assertion is not supported by credible evidence. The Respondent asserts that in the spring of 1994 he had reason to believe that Ms. Aaronson had been hospitalized in a mental facility, and therefore he returned the funds to Mr. Petzold. The rationale for the failure to return the funds to the appropriate party is not persuasive.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Insurance enter a Final Order suspending the mortgage broker license held by Frederick L. Roberts until the following conditions are met: Payment to Tami Aaronson of $3,000 plus appropriate interest calculated from November 22, 1993. Payment of an administrative fine in the amount of $5,000. After compliance with the above conditions, the license suspension shall be lifted, and a two-year probationary period shall begin RECOMMENDED this 22nd day of October, 1997, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of October, 1997. COPIES FURNISHED: Clyde C. Caillouet, Esquire Department of Banking and Finance 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 Michael W. Carlson, Esquire Carlton Fields Ward Emmanuel Smith & Cutler, P.A. 215 South Monroe Street, Suite 500 Tallahassee, Florida 32301 Harry Hooper, General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350 Hon. Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350
The Issue The issue is whether respondents sold securities in violation of Sections 517.07, 517.12, and 517.301, Florida Statutes, as alleged in the administrative complaint.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background Respondent, Sea Pride Industries, Inc. (Sea Pride), is a corporation incorporated in Delaware and registered to do business in the State of Florida. It conducts business at 1198 Gulf Breeze Parkway, Gulf Breeze, Florida. Sea Pride is developing and implementing new methods for the open water mariculture of both shellfish and finfish. Respondent, John D. Ericsson, is one of the founders and the chief operating officer of Sea Pride. Petitioner, Department of Banking and Finance (Department), is a state agency authorized to carry out the provisions of Chapter 517, Florida Statutes, also known as the Securities and Investor Protection Act. As part of its development, Sea Pride made the decision to raise initial development capital by selling shares of stock in Sea Pride Industries, Inc. In doing so, Sea Pride developed a Private Placement Memorandum (Memorandum) which was designed to qualify for an exemption from the requirements of registration with the Securities and Exchange Commission (SEC) and with the Department. Under Florida law, this exemption is contained in Section 517.061(11), Florida Statutes. The exemption has several provisions that Sea Pride included in its Memorandum. In designing its Memorandum, respondents relied upon the advice of counsel to ensure that the language met all requirements for exemption. The Memorandum was issued in November 1993, and among other things, stated several times that this was an offering of a company that should be considered to be a high-risk investment and was available only to accredited investors. It also disclosed the nature of the company, the names of the principals involved, and the rights of the investor to rescission under Florida law. Although not required by law, copies of Sea Pride's financial statements were provided with the Memorandum. All investors signed a statement saying that they were familiar with the investment and had the opportunity to review the Memorandum. The sales were made in person, and each investor had the opportunity to ask for additional information. In 1994, the Department began an investigation of Sea Pride. The basis for the investigation is not of record. In any event, the investigation continued until the spring of 1996, when a staff recommendation was made that a disciplinary action be initiated. On October 29, 1996, the Department issued an administrative complaint charging that respondents violated Sections 517.07, 517.12, and 517.301(1)(a)1.,2.,3. and (c), Florida Statutes, by selling unregistered securities, selling securities without being registered to do so, and employing a scheme to defraud, obtaining money by untrue statements of material fact and omissions of material fact, engaging in transactions which operated as a fraud on persons, and knowingly and willfully making false and fraudulent statements in connection with the sale of stock to Florida residents. While acknowledging that they are not registered dealers in Florida, respondents contend that under the terms of Section 517.061(11), Florida Statutes, they are exempt from registration. They deny all allegations of fraudulent activities. Do Respondents Qualify for an Exemption? Respondents claim that they qualify for an exemption from registration under Section 517.061(11), Florida Statutes. To qualify, the number of purchasers (non-accredited investors) within the state must be "no more than 35" during any twelve- month period, and sales cannot be by "general solicitation or general advertising." Also, prior to each sale, each purchaser must be provided with a "full and fair disclosure of all material information," and no person defined as a dealer may be paid a commission or compensation unless registered as a dealer. Finally, after sales are made to five persons in this state, any sale must be voidable by the purchaser within a specified period of time. Number of investors Sea Pride had a total of 31 Florida investors who have purchased stock, all of whom are accredited investors. Two contractors also received stock in lieu of payment for services and could be considered purchasers. In addition, there are five or six employees and former employees, some of whom are Florida residents, who have received stock. Because they did not pay for their stock with either money or specific services, the employees are not purchasers. Therefore, Sea Pride demonstrated that it did not exceed the limit of 35 non-accredited investors during any twelve-month period. Solicitations and advertising The majority of Sea Pride investors reside in Alabama and Mississippi. As to Florida residents, no general solicitations or general advertising were made by Sea Pride to secure investors. Rather, limited mailings were made to specific areas in Pensacola and Gulf Breeze in an attempt to target affluent residents who were accredited investors and owned waterfront property. Therefore, the second part of the exemption test was satisfied. Disclosure of material information To satisfy the third part of the exemption test, prior to the sale, the issuer must make "full and fair disclosure of all material information." As to this requirement, the Department contends that respondents failed to disclose to investors the fact that Ericsson had been convicted of a misdemeanor in Nevada in 1988; Sea Pride's secretary-treasurer, Yvonne R. Higgins, had been convicted of passing worthless bank checks and fraud; and another employee, Lawrence B. Ackland, had been convicted of a felony. Based on the following circumstances, however, it is found that respondents made a full and fair disclosure of all material information. On December 15, 1987, Ericsson pled guilty to one count of conspiracy to obtain money by false pretenses, a gross misdemeanor, in Washoe County, Nevada. The conviction arose out of acts while Ericsson served as president of Nevada Energy Corporation in 1984. The misdemeanor conviction was not disclosed in the Memorandum, nor did respondents disclose this fact to potential investors. In not doing so, respondents properly relied upon SEC regulations relating to standard instructions for filing registration statements and advice of counsel. Those regulations provide that only "legal proceedings" occurring during the five years immediately preceding the sale of stock be disclosed. Here, Ericsson's misdemeanor conviction occurred more than five years before November 1993. Only two existing investors, Segasser and Cherry, and one former investor, Eisiger, presented testimony regarding their lack of knowledge about Ericsson's background. Cherry stated it would have made a difference had she known about the conviction, while Segasser stated it would not. In June 1995, Eisiger read about the conviction in a local newspaper and promptly requested a refund of her $10,000.00 investment. Sea Pride complied with her request. Yvonne R. Higgins was hired by Sea Pride in June 1994 at a salary of around $12,000 per year. At the time of her hiring, Higgins had previously been convicted of grand theft and worthless checks and was on probation. Higgins was interviewed and hired to fill a "secretarial position" by Patrick Meadows, a former vice- president. Meadows could not recall Higgins disclosing her background to him, and Higgins did not indicate her criminal background on her application form. One of Higgins' recent employers was the Executive Club in Pensacola. At the time she was hired, Ericsson telephoned the Executive Club and was not told of her background. Without knowledge of her criminal history, Higgins was installed as secretary-treasurer of Sea Pride. Her duties, however, were primarily secretarial, and the corporate title was given solely for the purpose of facilitating company correspondence and the signing of certain documents. Higgins was never an executive officer of the company, made no corporate decisions, did not participate in policy discussions of the Board, and had limited check-writing authority. In June 1995, Higgins' background was revealed to respondents by a shareholder. Higgins was immediately removed from the office of secretary-treasurer although she continued to work for Sea Pride as a secretary for a short time thereafter. Because respondents were unaware of Higgins' background until June 1995, and she performed primarily secretarial duties, they had no duty to disclose her background in the Memorandum or to investors. The Department also contends that respondents failed to disclose the fact that Lawrence B. Ackland, a former employee, had a criminal background. When Ackland was hired by Sea Pride on April 28, 1995, he was on parole for a felony conviction "involving something to do with telephones or some sort of telephone device." Ericsson was aware of Ackland's criminal background when he was hired in April 1995. However, Ackland served solely in the capacity of an independent contractor, and his duties were limited to providing public relations services. Contrary to petitioner's assertion, he did not sell stocks. Although the record is not altogether clear as to how long Ackland remained at Sea Pride, it appears he worked there for some two months. Because Ackland was an independent contractor, and not an employee, there was no requirement that respondents disclose his criminal background in the Memorandum and to investors. Payment of compensation or commission for sale of stock Respondents assert that no person defined as a dealer was paid a commission or compensation for the sale of Sea Pride's stock. In response, petitioner contends that two unregistered employees, John Hawk and Peter Baker, were paid a commission for the sale of stock. Hawk and Baker both held the title of vice-president of marketing. They were paid a regular salary, which did not vary based on sales of stock, and they had minor duties in addition to stock sales. For example, they attended meetings with permitting agencies, prepared a newsletter, placed articles in magazines, and arranged for meetings with potential investors. In addition, Baker was involved with the development of a piece of equipment known as the aqua-fence. When Hawk and Baker were initially employed by Sea Pride, stock sales were a substantial part of their responsibilities. They understood, however, that if they remained with Sea Pride after the sale of the initial offering, they would have additional substantial duties with the continuing company. There was no evidence regarding the payment of a bonus or other incentive to Baker in conjunction with stock sales. As to Hawk, who left Sea Pride under adverse circumstances, he "felt" he had worked in a "commission based system." Although he could not remember the amount of the "bonus" or the date he received the money, Hawk claimed that he was paid a single bonus by check for a non-Florida sale early in the program. However, no documentary evidence was offered to support this claim, and respondents denied that it occurred. Given these considerations, Hawk's testimony is not accepted as being credible on this issue. Right of recission On page 6 of the Memorandum is found a lengthy "Notice to Florida Residents" which explains their right to rescission. Among other things, it states that: The availability of the privilege to void sales pursuant to Section 517.061(12) is hereby communicated to each Florida offeree. In view of this, it is found that this portion of the statute has been satisfied. Allegations of Fraud and Misrepresentations Besides the allegations that respondents failed to disclose material information in conjunction with the sale of stock, which have been discussed above, the complaint alleges that respondents falsely represented to investors that they had obtained a $20 million federal loan guarantee from the United States Department of Agriculture. In support of this allegation, petitioner established that even though respondents prepared an application, it was never filed with the lender. Respondents did not represent to investors, or place a representation in the Memorandum, that they had actually obtained a loan guarantee from the federal government. Rather, the Memorandum represented that Sea Pride was eligible for the loan guarantee. This is confirmed by language found on page 10 of the Memorandum which states that Sea Pride was seeking to "establish project eligibility for . . . Federal loan guarantees." In addition, correspondence from the Rural Development Administration to Sea Pride on August 17, 1994, states that Sea Pride "is eligible for a Business and Industry (B&I) loan guarantee under current program guidelines." Therefore, respondents did not falsely represent that they had obtained a federal loan guarantee, as charged in the complaint.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Banking and Finance enter a final order dismissing the administrative complaint with prejudice. DONE AND ENTERED this 21st day of July, 1997, in Tallahassee, Leon County, Florida. COPIES FURNISHED: DONALD R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1997. Honorable Robert F. Milligan Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 Harry L. Hooper, III, Esquire Department of Banking and Finance Room 1302, The Capitol Tallahassee, Florida 32399-0350 Clyde C. Caillouet, Jr., Esquire 4900 Bayou Boulevard, Suite 103 Pensacola, Florida 32503 Donald A. Rett, Esquire Carol A. Forthman, Esquire 131 North Gadsden Street Tallahassee, Florida 32301-1507
The Issue The issue in the case is whether the Petitioner qualifies as a “charitable institution” as defined at Section 212.08(7) (o)2.b., Florida Statutes, and is therefore entitled to a consumer certificate of taxation exemption.
Findings Of Fact The Junior League of Tampa, Inc., (League) is a non- profit corporation exempt from federal income tax under Section 501(c)3 of the Internal Revenue Code. The Articles of Incorporation for the League provide that the League is intended to foster member’s interests in local social, economic, educational, cultural, and civic conditions, and to make efficient use of members as volunteers. According to testimony offered at hearing, the purposes of the Junior League of Tampa are to offer social assistance to persons in the community, provide volunteers to various local organizations, and to offer volunteer training to League members. The League provides member education regarding issues of local concern by offering bus tours through area communities, attendance at government meetings (school board, county commission, etc.) and training sessions focusing on the operation and activities of the League. Members of the League pay dues which are used to support the administrative costs of the organization. Members of the League are expected to provide volunteer services to community organizations through the League. No services are provided directly to individuals. In addition to dues the League raises funds through local fund raising activities, including production of a cookbook and a thrift sale. Fund raising revenue is used to support community projects. According to the financial statements for the fiscal year ending May 31, 1995, the League’s total operational expenses (excluding depreciation) were about $400,000. Expenses were allocated between “program services” and “support services.” Total support services costs were approximately $269,000, including $94,576 for fund raising costs. Other costs allocated to support services included $103,827 in “administrative costs,” $11,089 in “association dues,” $20,493 in “membership expense” and almost $39,000 for the League’s membership publication, “The Sandspur.” None of the support services expenditures were directly related to the community or volunteer efforts of the League. Total program services costs were $131,655, including $21,642 for “program research and evaluation,” $25,876 for “association dues,” and $84,137 for “community projects.” “Program research and evaluation” costs include the expenses of the community advisory board which assists the League in determining local needs and evaluating projects. Additional program research costs include expenses related to development and evaluation of League projects, expenses related to sending Tampa League members to meetings of the national League, other membership expenses, expenses of a public relations campaign, expenses related to preparation of a member brochure describing volunteer opportunities, and “ad hoc training.” None of the expenses allocated to “program research and evaluation” are directly provided to recipient organizations through monetary donation or by provision of volunteers. Expenses identified as “program services/association dues” include $25,876 paid to the American Association of Junior Leagues. The national organization offers information related to the anticipated success of specific league projects. None of the expenses allocated to “association dues” are directly provided to recipient organizations through monetary donation or provision of volunteers. The “community projects” total expenditure of $84,137 represents actual funds donated by the League to recipient organizations. In addition to actual donations, members of the League provide hours of free volunteer service to local IRC 501(c)(3) organizations. During fiscal year 1985, League members provided 11,823 hours of volunteer service to local organizations and to the League’s own community projects. The League asserts that many League members providing volunteer services are professionals and that such services should be valued at approximately $10.00 per hour. The evidence fails to establish that the volunteer services provided require professional education or certification or that the volunteer services should be valued at any more than the minimum wage, $5.00 during the time period relevant to this proceeding. The League lists 22 local activities and organizations for which volunteer services were provided. The parties have stipulated that 12 of the 22 (Bereavement Camp, Kids Rights Fund, Child Life Program, Immunization, Ronald McDonald House, Parenting Power, Emergency Shelter, Georgia Flood Relief, Judeo Christian Health, Bay Area Legal Services, WestCoast Golden Services, and McDonald Training) are accepted as “charitable activities.” The Department asserts that the ten remaining activities and organizations do not meet the relevant definition of acceptable charitable services and can not be included in the League’s total charitable effort for purposes of tax exemption. The ten activities include Puppet Troupe, Children’s Museum, McKay Bay Learning Lab, Funbook, Tampa Tickets, Tampa Area Playground, Tampa Museum of Art, Tampa Bay Youth Orchestra, Musicale and Federated Club and H. B. Plant Museum. The “Puppet Troupe” consists of the preparation and performance of a puppet show for residents of nursing homes and for hospitalized children. The evidence fails to establish that the League's participation in Puppet Troupe is an acceptable charitable service for purposes of the tax determination. The Tampa Children’s Museum is an admission-charging, public museum, open to all, designed to provide learning opportunities for children and parents. The evidence fails to establish that the League's participation in Tampa Children's Museum is an acceptable charitable service for purposes of the tax determination. The McKay Bay Learning Lab offers educational programs to children of elementary school ages. The programs are targeted to special needs children, but are open to all. The evidence fails to establish that the League's participation in the McKay Bay Learning Lab is an acceptable charitable service for purposes of the tax determination. “Funbook” is a coloring book focused on Tampa history and distributed to hospitalized children. The evidence fails to establish that the League's participation in Funbook is an acceptable charitable service for purposes of the tax determination. “Tampa Tickets” is a grant of funds to the Tampa Performing Arts Center and is intended to subsidize the cost of admission to cultural events at the Center. The evidence fails to establish that the League's participation in Tampa Tickets is an acceptable charitable service for purposes of the tax determination. The Tampa Area Playground is a public playground which was constructed with funds and volunteer labor contributed by many local organizations including the League. The evidence fails to establish that the League's participation in the Tampa Area Playground is an acceptable charitable service for purposes of the tax determination. The Tampa Museum of Art is a public admission-charging museum for which the League funded a curriculum guide for use in local schools. The evidence fails to establish that the League's participation in the Tampa Museum of Art is an acceptable charitable service for purposes of the tax determination. The Tampa Bay Youth Orchestra received funds from the League directed towards purchasing musical instruments for children who could not afford them. The evidence fails to establish that the League's participation in the Tampa Bay Youth Orchestra is an acceptable charitable service for purposes of the tax determination. The Musicale and Federated Clubs is a performing arts organization. The League provided a grant of funds to cover the costs of termite treatment for the Club facility. The evidence fails to establish that the League's participation in the Musicale and Federated Clubs is an acceptable charitable service for purposes of the tax determination. The H. B. Plant Museum is a public admission-charging museum. The League contributed funds to purchase two computers used in the museum’s membership solicitation program. The evidence fails to establish that the League's participation in the H. B. Plant Museum is an acceptable charitable service for purposes of the tax determination. The evidence establishes that the McKay Bay Learning Lab, the Children’s Museum, the Tampa Museum of Art, and the H. B. Plant Museum are educational institutions, rather than charitable institutions. Expenditures of funds or volunteer time contributed to educational organizations which do not otherwise meet the requirements for qualification as charitable institutions are properly disallowed from the calculation of the League’s charitable effort. The evidence is insufficient to establish that expenditures related to the Puppet Troupe and Funbook projects, the Tampa Tickets program, the Tampa Area Playground, the Tampa bay Youth Orchestra, or the Musicale and Federated Clubs meet applicable requirements for qualification as a charitable expenditures by the League. Such expenditures are properly disallowed from the calculation of the League’s charitable effort. Based on examination of the total acceptable charitable effort of the League, both donations of volunteer time and actual funds, the evidence fails to establish that the sole or primary purpose of the League is to provide such services.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Revenue enter a Final Order denying the Petitioner’s application for renewal of a Consumer Certificate of Exemption. RECOMMENDED this 8th day of January, 1997, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of January, 1997. COPIES FURNISHED: Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Jeremy P. Ross, Esquire Bush, Ross, Gardner, Warren and Rudy, P.A. 220 South Franklin Street Tampa, Florida 33602 Ruth Ann Smith, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact Brooks and Wilt is a fictitious name for a general partnership established by Mr. Wilt and his wife in either late 1989 or early 1990. Brooks and Wilt evolved as a part-time enterprise as a result of Mr. Wilt's relationship with various individuals who requested that Mr. Wilt assist them in preparing tax returns or maintaining bookkeeping records for their businesses. The activities of Mr. Wilt's wife were not at issue in this proceeding. At no time has Brooks and Wilt or Wayne E. Wilt been registered with the Petitioner as an investment adviser. For the three years preceding the formal hearing, Mr. Wilt was a full time employee of James Hartley, an architect with offices in Hollywood, Florida. Mr. Wilt's duties for Mr. Hartley include bookkeeping and accounting. When Brooks and Wilt was formed, Mr. Wilt was providing strictly bookkeeping, accounting, and tax work for his clients. In August 1991, Mr. Wilt completed a two-year correspondence course from the College of Financial Planning and was awarded a certificate of completion. On March 30, 1992, Mr. Wilt applied for registration as a financial adviser with the United States Securities and Exchange Commission (SEC). Mr. Wilt received notification dated April 22, 1992, from the SEC that he had been approved for registration. An applicant for registration as an investment adviser in the State of Florida must first be registered with the SEC. At the time Mr. Wilt applied for registration with the SEC, he called the SEC to inquire about registration with the State of Florida. Mr. Wilt was told in response to his inquiry that the SEC would notify the State of Florida upon his becoming registered with the SEC. The Petitioner receives quarterly reports from the SEC which list each person who resides in Florida and is registered with the SEC as an investor adviser. Petitioner received notification of Mr. Wilt's registration with the SEC and sent to Mr. Wilt a letter dated June 22, 1992, which informed him of the information it had received from the SEC, specifically advised him that Florida law required registration, and inquired as to his intentions to register with the State of Florida as an investment adviser. This letter also elicited certain information from Respondents. Mr. Wilt considered the letter from Petitioner to be part of the registration process and responded to the questions accordingly. Mr. Wilt did not realize that the letter was part of an investigation into suspected violation of the Florida Securities and Investor Protection Act, which generally requires registration with Petitioner of all persons who engage in the business of investment adviser in the State of Florida. In his response to the Petitioner's letter dated June 22, 1993, Mr. Wilt sent a letter that was received by the Petitioner on July 13, 1992. This July letter responded to the questions raised by Petitioner's June letter. The last paragraph of Mr. Wilt's July letter provided as follows: "I will wait to hear from the appropriate office as to how to complete the registration process." Petitioner's June letter asked for the following information: Provide a list of 'all' services offered or rendered to the general public by the firm. Mr. Wilt's July letter responded with the following list of services: Bookkeeping/Accounting Tax Return Preparation Financial Planning Money Management Petitioner's June letter asked for the following information: Has the firm or its associated persons provided investment advisory services for compensation from offices in this state or with persons of this state? Mr. Wilt's July letter responded with the following: "Services for compensation? YES". Petitioner's June letter asked for the following information: Has the firm or its associated persons held themselves out to the general public as an investment adviser? Mr. Wilt's July letter responded with the following: "Hold out to public? YES". Petitioner's June letter asked for the following information: "If the firm has provided investment adviser business from offices in this state or with persons of this state, provide all methods in which the firm holds itself out to the general public and provide documentation representing all methods and forms utilized. Methods used to hold oneself out include, but are not limited to document letterhead, business cards, advertising, transcripts, telephone and business directory listings, building directories, etc." Mr. Wilt's July letter responded with the following: "Methods (copies enclosed): Business Cards Brochures" Mr. Wilt enclosed a copy of his brochure and a copy of his business card. Petitioner's June letter asked for the following information: "If the firm has conducted investment adviser business from offices in this state or with persons of this state, provide the total number of clients (accounts) in this state in which those services have been rendered within the last twelve (12) months." Mr. Wilt's July letter responded with the following: "This state accounts: Six (6)". Petitioner's June letter asked for the following information: "If the firm claims it is exempt from registration as an investment adviser with the Department, indicate which exemption(s) to registration the firm is claiming and provide proof to the Department that the firm met or is meeting the requirements of the exemption(s) claimed." Mr. Wilt's July letter responded with the following: "No Exemption Claimed". Petitioner's June letter asked for the names, addresses, and fees charged to each client to whom Brooks and Wilt had provided investment adviser services. Mr. Wilt's July letter responded with the following names: Elsa Johnson, Joanne Boren, Frank Kostek, Abe Oquendo, Karen Hartley, and James Hartley. The response also reflected that Mr. Oquendo had been paid a fee of $100.00 and that Mr. Hartley had paid a fee of $1,026.50. The business card that was enclosed with Mr. Wilt's July letter was printed in March 1992. This card identified Mr. Wilt as being a registered investment adviser. Mr. Wilt testified that he had ordered these cards in anticipation of being registered and that the only one of these cards he had given to anyone was the one he enclosed with his July letter to Petitioner. It is found that Mr. Wilt did not distribute any of these business cards to the public at any time pertinent to this proceeding. In addition to the business cards, Brooks and Wilt had a brochure prepared in August or September of 1991. This brochure represented that Brooks and Wilt offered "customized financial planning" and contained the following statement: "We specialize in asset allocation among a broad spectrum of investment vehicles, including all types of mutual funds. Millions of dollars under current management." Mr. Wilt testified at the formal hearing he did not hire anyone to distribute his brochure and that he undertook to distribute the brochure as follows: "Only to people that I knew, my friends, my coworkers, family, . . . an occasional tax client. If they had a bookkeeping need . . . it would come up in discussion and I would hand them this (the brochure) . . . in the privacy of my house, my home office." Based on Mr. Wilt's testimony, it is found that Respondents' distribution of the brochures was limited and was not made to the general public. Since 1988, Mr. Wilt has discussed mutual funds and retirement planning with six individuals. Each of these individuals was either a coworker, a relative of a coworker, or a friend. Elsa Johnson was a coworker of Mr. Wilt's, who in 1988, asked Mr. Wilt some questions about how mutual funds worked and whether investing in mutual funds was a good idea. Mr. Wilt calculated the amount of income Ms. Johnson would require to maintain the retirement life-style she wanted. He also calculated the amount of the investment she would have to make to attain that retirement income. Mr. Wilt recommended several different mutual funds to Ms. Johnson as possible investments. Mr. Wilt answered Ms. Johnson's questions, but he did not charge her a fee for that information. Joanne Boren is a coworker of Mr. Wilt's wife, and a family friend, who in mid 1991 was dissatisfied with the mutual fund in which she had invested. Mr. Wilt recommended to her several mutual funds as possible investments. Mr. Wilt answered Ms. Boren's questions, but he did not charge her a fee for that information. Frank Kostek is a longtime friend of Mr. Wilt's who asked how mutual funds worked and whether investing in mutual funds was a good idea. Mr. Wilt answered Mr. Kostek's questions and recommended several mutual funds as possible investments, but he did not charge him a fee for that information. Abe Oquendo is a coworker and a friend of Mr. Wilt's who asked Mr. Wilt about mutual funds and whether they would be an appropriate investment. On November 1, 1991, Mr. Wilt answered the questions Mr. Oquendo had posed and helped Mr. Oquendo complete an application to purchase mutual funds that Mr. Oquendo had selected. It was not established that Mr. Wilt advised Mr. Oquendo as to the mutual funds to purchase or the amounts that he should purchase. For explaining mutual funds to him and helping complete the application, Mr. Oquendo paid Mr. Wilt the sum of $100. Karen Hartley is the daughter of Mr. Wilt's employer, James Hartley. On one occasion, Ms. Hartley asked Mr. Wilt general questions by telephone about mutual funds. Mr. Wilt answered Ms. Hartley's questions, but he did not charge her a fee for that information. In 1989, Mr. Wilt explained how mutual funds worked to his employer, James Hartley, and he recommended several mutual funds as possible investments. Following his discussions with Mr. Wilt, Mr. Hartley invested a large sum of money in mutual funds. That money had previously been invested by Hartley in certificates of deposit. Mr. Hartley also hired Brooks and Wilt to monitor his mutual fund portfolio. That monitoring consisted of tracking the value of the various mutual fund investments Mr. Hartley had made. For work performed in monitoring Mr. Hartley's mutual fund portfolio in 1992, Brooks and Wilt was paid the sum of 1,026.50. For work performed in monitoring Mr. Hartley's mutual fund portfolio in 1993, Brooks and Wilt was paid the sum of 1,095.00. Mr. Wilt testified that he would give general financial advice to these six individuals if he were asked to do so.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order which dismisses this proceeding. DONE AND ENTERED this 3rd day of November, 1993, in Tallahassee, Florida. CLAUDE B. ARRINGTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of November, 1993.
The Issue The central issue in this case is whether the Petitioner is a prevailing small business party as defined by law.
Findings Of Fact The administrative complaint in Department of Professional Regulation, Board of Medicine v. Beltran J. Pages, DOAH Case No. 87-4157, DPR Case No. 30291, was filed on September 23, 1987. This case was consolidated with another case then pending against Dr. Pages, DOAH Case No. 87-1882. On October 15, 1987, an order was entered which denied Dr. Pages' request to dismiss Case No. 87-4157. The hearing for both cases was conducted on January 26-27, 1988. Pertinent to this cause is the following finding of fact reached in the Pages' order: Respondent is a board certified psychiatrist who has practiced in the Palm Beach County area since July, 1981. Respondent left private practice in September, 1985, and is currently employed at the South Florida Evaluation and Treatment Center, an HRS facility for the criminally insane. An exception was not filed to the finding of fact described in paragraph 4.
The Issue The issues presented here concern the entitlement of the petitioner to be certified as a Minority Business Enterprise (female) in keeping with Rule 14- 78.05, Florida Administrative Code. In particular, it is to be decided whether the request for certification should be denied premised upon Respondent's assertion that: (1) Princess Construction Company is lacking in independent business status; and (2) that the female owners do not have bona fide control of the operations of Princess Construction Company.
Findings Of Fact Princess Construction Company, Petitioner, was incorporated on February 3, 1981, upon the filing of its articles of incorporation as a Florida corporation. The directors of the corporation were, and remain, Lucy B. Jensen, Mary Anna Jensen and Stephen F. Jensen, and they are individually the holders of 1,000 shares of stock and serve as officers in the capacity of president, secretary and treasurer, respectively. Minutes of the corporation organizational meeting held in Jacksonville, Florida, on February 3, 1981, show the election of the officers. See Respondent's Exhibit 2. As shown in Respondent's Exhibit 2, which is the application for Minority Business Enterprise certification, hereinafter referred to as MBE certification, Petitioner is engaged in the business of constructing concrete sidewalks, curb and gutter and ditch paving. The corporation also is involved in priming and sanding and equipment leasing. The minority ownership of the corporation consists of two (2) Caucasian females who own 66.6 percent of the corporation. Lucy B. Jensen, President, is one of the female employees and has additional employment as Secretary of Jensen of Jacksonville, Inc. That latter corporation pays her a salary of $300.00 per week and petitioner pays her $5.00 per week, with her time of employment being equally divided between the employers. The second female owner of the Princess Construction Company is Mary Anna Jensen who is an Assistant Secretary of Jensen of Jacksonville, Inc., and is paid $260.00 by Jensen and $5.00 by Petitioner. Her time is divided 75 percent with Princess Construction and 25 percent with Jensen. The third member of the ownership group in Princess is Stephen F. Jensen who is an Assistant Treasurer of Jensen of Jacksonville, Inc. Lucy B. Jensen is the mother of Mary Anna Jensen and Stephen F. Jensen, and her husband is the principal authority in Jensen of Jacksonville. Schedule A of the application for MBE certification, which schedule is part of Respondent's Exhibit 2, indicates that policy-making in Princess Construction is done by all owners; that financial decisions are made by Stephen Jensen; that dismissal of management personnel is a function of Lucy Jensen; that decisions to bid jobs are made by Stephen Jensen, as well as job estimating; that purchase of equipment and supervision of field operations are handled by Stephen Jensen and Mary Jensen; that payrolls are signed by any of the three (3) owners and that surety and insurance bonds are signed by Lucy Jensen. At the time of the initial application, Schedule A indicated that the firm owned and/or leased no equipment and had not completed any projects. By the date of hearing, there had been some changes in the overall responsibility of the principal officers within Princess Construction. Lucy Jensen was then the individual involved with the day-to-day operation of Princess Construction, including review of the work with the job foreman or field supervisor, one Caesar Moultrie. She also was primarily responsible for estimating for priming and sanding and had had occasion to fire an employee of the corporation. At the point of hearing, Mary Anna Jensen was involved in liaison with the field operations of the corporation and office functions. She had on occasion operated the concrete curb machine on a contract completed by the Petitioner corporation, handled payroll matters and had done estimating work on concrete projects. In addition, she was responsible for handling problems that might arise concerning the delivery of the concrete material to the job sites, by contacting the materials supplier. Stephen Jensen was taking a less active role in the corporation on December 13, 1982, in view of his enrollment in a university program. At present he only participates in major policy decisions, in the routine affairs of the corporation. At the point of hearing, Princess Construction owned a crew-cab truck and two (2) heavier trucks that were being prepared to assist in the work activities of the corporation. These vehicles are variously depicted in Petitioner's Exhibits 8 through 12, which are photographs of the equipment. The application for certification at Schedule A, Respondent's Exhibit 2, shows that Lucy B. Jensen has been a corporate secretary of Jensen of Jacksonville, Inc., and in charge of office management and some field scheduling in the years 1967 through 1981. It is also shown that she had held various secretarial and clerical jobs in construction and manufacturing industries in the years 1949 through 1967. Mary Anna Jensen is shown to have been employed with Jensen of Jacksonville, Inc., as payroll supervisor and safety director or as assistant secretary, responsible for payroll and safety programs and a certified multi- media Red Cross instructor in the years 1978 through 1981. It is indicated that Mary Anna Jensen has held various summer employment positions with Jensen of Jacksonville, as a job clerk, and other clerical positions and as a laborer. This was in the years 1974 through 1978. Within that same time frame, she achieved a Bachelor of Science degree from the University of Florida with an emphasis on health, business management and recreation. Stephen F. Jensen, in the key profile portion of Schedule A is identified as having various summer employment with Jensen of Jacksonville, Inc., as laborer, operator and supervisor and as having worked on various co-op endeavors with companies in Georgia and Europe, in the years 1975 through 1980. At the time of the preparation of the schedule, Stephen Jensen was shown to have graduated from Georgia Institute of Technology with a BS degree in Civil Engineering, emphasis on construction and management. The time spent in achieving this degree was between the years 1976 and 1981. When the hearing was convened, the profile related to the corporate owners, who are the Key personnel in the corporation, had changed to the extent of increased or decreased job responsibilities within the corporation which have been previously discussed and which will be subsequently mentioned in these fact's. Following receipt of the application for certification as Minority Business Enterprise, a copy of which is found as Respondent's Exhibit 2, a desk audit was performed on that application. The desk audit was done by Sunil B. Nath, presently Supervisor of Budget and Planning for the Department of Transportation, who was an MBE liaison officer with that Department at the time of the application. Following the audit, Nath determined that the application should be denied for lack of independent business status, in that the Petitioner was linked to another business, namely Jensen of Jacksonville, Inc., and was sharing facilities, equipment, etc.; for lack of equipment on the part of Princess Construction; for lack of capability; for lack of minority owned control in the "day-to-day" sense of that term; and for lack of experience and technical know how to enable the corporation to control and train its employees. On January 13, 1982, the formal statement of denial was mailed to the corporation, setting forth those items indicated in the Issues statement of this Recommended Order as the basis for the denial of the application. A copy of that letter of notification may be found as Respondent's Exhibit 1, admitted into evidence. Petitioner did not accept the proposed agency disposition of the application and the formal hearing was conducted following the Department's request that the Division of Administrative Hearings conduct a formal Subsection 120.57(1), Florida Statutes, hearing. In addition to the general observations which have been made about the business posture of the corporation at the point of application and at the time of hearing, a number of more specific facts concerning the corporation's status were established through witnesses who appeared at the final hearing. One (1) of these persons who gave testimony on the question of entitlement to certification was Charles P. Caddell, President of Caddell Construction Company of Jacksonville, Florida. Caddell has known Mr. Jensen, the husband of Lucy Jensen and father of the other two (2) Principals to Princess Construction, for a period of approximately fifteen (15) Years. During that time, Jensen of Jacksonville and Caddell Construction have pursued joint ventures related to Department of Transportation projects. Caddell is knowledgeable of the fact of Lucy B. Jensen and Mary Anna Jensen's work experience in the construction industry related to office operations. He is also aware of the field experience of Mary Anna Jensen related to the teaching of a first aid course. In particular, Caddell has had involvement with the female contingent of Princess Construction while they were working with Jensen of Jacksonville and Princess, in the area of bookkeeping, cost data, rental of equipment and crews and movement of equipment. Charles H. Barco who is the President of C. H. Barco Contracting Company, testified on the subject of two (2) contracts which he had ventured with Princess Construction Company. One (1) of these contracts in 1981, has been completed and the second one is still underway. The completed project was fully performed by Princess Construction. Barco has known Lucy Jensen for twenty to twenty-five (20-25) years and has worked with her husband in an unrelated company. One of the two projects mentioned, which is referred to as the southside connector project, was one in which Barco's knowledge of Lucy B. Jensen's participation related to her involvement with general administrative matters on the project. He had no knowledge of the exact participation of Mary Anna Jensen. Eugene F. Fulgham, Sales Manager and Vice President of M. D. Moody and Sons, indicated that Lucy B. Jensen recently purchased sand spreading equipment for the Petitioner corporation. This refers to items installed or to be installed on the heavy trucks depicted in the photographs that have been previously identified. Fulgham has been involved with Jensen of Jacksonville since 1968, in establishing purchasing and payment schedules for equipment related to that corporation. Lucy B. Jensen has contacted Fulgham in the past on the topic of acquisition of equipment from Moody for the benefit of Jensen of Jacksonville. He knows of Mary Anna Jensen through her work with Jensen of Jacksonville while in high school. That work pertained to transportation of parts. At princess she has been involved in the solicitation of quotations of rental equipment related to the activities of the corporation, and the delivery of equipment. At the time of hearing, Princess had no lease arrangements with Moody and Sons; however, Fulgham stated that he would lease or rent equipment to Petitioner in the future. Minna Strickland, Assistant Vice President with Florida National Bank of Jacksonville, testified on the topic of loans which were made to Princess Construction for the purchase of two (2) Mack Trucks, the two (2) heavier work trucks which are shown in the aforementioned photographs. The loan was secured by the trucks following a down payment of 10 to 20 percent and personally endorsed by Lucy Jensen. Princess, to the knowledge of Strickland, has no other loans with that bank. Strickland had also dealt with Lucy B. Jensen in connection with Jensen of Jacksonville, which has an account with the Florida National Bank; however, this arrangement by Jensen of Jacksonville was not a determining factor in deciding to loan the money for the purchase of Petitioner's trucks. A. B. Lynch, Jr., Vice President of Surety Associates, which is a banking company, indicated that his company had issued a bid bond in the amount of $10,000.00 to $15,000.00, for the benefit of Princess Construction. His involvement with Lucy B. Jensen has been in the administrative and financial realm related to bonding. He has known Mrs. Jensen for fifteen (15) years or more and has dealt with her on the projects of Jensen of Jacksonville concerning bonds. Petitioner's bonding capacity is in the range of $100,000.00 to $150,000.00. Stanley L. Storey, an insurance agent with C. W. Powell and Company, gave testimony on the subject of the insurance coverage provided for Princess Construction Company. Storey also has regular business dealings with Jensen of Jacksonville through Lucy B. Jensen. He has no knowledge of Mrs. Jensen's abilities in the construction industry other than as they relate to the administrative function, such as provision of insurance coverage. In each instance of affiliation as related by the various witnesses, identified before, it was the opinion of those individuals that Princess Construction Company is a viable business entity. Caesar Moultrie, the foreman of Princess Construction Company, testified. Moultrie is a minority male but he does not have ownership interest in Princess Construction Company. He has served as foreman for a period of four or five (5) months and has worked for the company for seven (7) months. He supervises a crew of five (5) men normally and the work activities of Moultrie and his crew include the installation of curbs, working gutter, sidewalks, ditch paving, other paving, flag work and driveways. He supervises the men in the field in the sense of instructing them about jobs to be performed. He also orders concrete and other necessary material. He is visited on the job sites by the three (3) principals in the corporation, the Jensens, and inquiry is made of him to establish if the job is going smoothly. According to Moultrie, Lucy B. Jensen visits the job site on a routine basis. Lucy B. Jensen is his immediate supervisor and on one (1) occasion when it was necessary to dismiss a crew member, that dismissal was made by Lucy B. Jensen, upon recommendation of Moultrie. (This is the personnel action spoken of before.) As established by Moultrie, Lucy B. Jensen does not involve herself in the technical aspects of the job, i.e., the ongoing operations of the corporation in its field operations. Mary Anna Jensen's testimony at the hearing established that she is the payroll clerk for Princess Construction. Furthermore, her principal training for her position with Princess Construction came through her involvement with Jensen of Jacksonville. In the way of field operations, she has operated the concrete machine for three (3) or four (4) days on one project and has run concrete for curb and gutter on other projects for two (2) days. She relies on Moultrie when questions arise on the technical aspects of the job in the field, to the extent of indicating that she depends "very heavily" on his expertise related to field operations. Mary Anna Jensen's testimony pointed out that Princess Construction Company is located at 5334 Whitney Street, Jacksonville, Florida, and shares office space with Jensen of Jacksonville, for which fifteen dollars ($15.00) per month is paid and the primary equipment is constituted of a kitchen table and file cabinet. Her testimony established that, while at Jensen of Jacksonville she has done accounts payable, been involved with the payroll, typed letters and answered the phone; however, her involvement has not included supervision of field operations or job estimating. With Princess, she has estimated concrete work and prepared the estimates related to contracts in evidence as Petitioner's Exhibit 1 and 2. She visits the job site two (2) or three (3) times a week to check the progress of work on the ongoing Princess job and to inquire on the topic of the employees' satisfaction with their positions. She coordinates and deals with problems that might arise with the delivery of concrete by dealing with the material supplier. Finally, Mary Anna Jensen is familiar with the overall capabilities of the equipment owned by Princess Construction. Lucy B. Jensen's testimony described the office location of the construction company as being the residence of her family. In addition to the items which have been spoken to concerning her duties with Princess Construction, she mentioned writing crew letters, answering complaints and filling out forms. She clarified her status as Secretary with Jensen of Jacksonville by establishing that she was the office manager and a board member of that corporation, but without any stock ownership. She indicated that Princess had owed money to Jensen of Jacksonville in the past, however, no debt is outstanding at present. Her management duties are performed by conferring with Moultrie on the night before the work day, and sometimes on the day of job assignments. She has specific understanding of priming and sanding through the use of a distributor truck and this is an activity which Princess would like to be engaged in but has yet to undertake. Princess Construction has been certified pursuant to Section 337.14, Florida Statutes, in the work class ratings minor bridges, grading and flexible paving. See Petitioner's Exhibit 7, admitted into evidence.
