The Issue The issue in this case is whether Petitioner and its controlling person are entitled to licenses as, respectively, an employee leasing company and a controlling person of an employee leasing company.
Findings Of Fact Petitioner has operated as an employee leasing company since November, 1989. Susan J. Haggerty is the president and controlling person of Petitioner. An employee leasing company assumes from the employer many of the administrative responsibilities normally associated with employment. The employee leasing company replaces the original employer by employing the employees and leasing them back to their original employer. For each leased employee, the employee leasing company assumes responsibility for workers compensation, employee benefit plans, unemployment compensation, withholding, and social security payments. The former employer enters into an agreement with the employee leasing company under which it pays a set amount to lease its former employees. The amount includes the leasing company's markup and all of the costs projected to be associated with the employee, including compensation and the items described in the preceding paragraph. In the case of Petitioner, the fee is not subject to readjustment, even if one of the items, such as workers compensation, later proves to be higher than projected. Due to the enactment of new legislation regulating employee leasing companies, on July 13, 1992, Petitioner and Ms. Haggerty filed with Respondent a joint application for licensure. Petitioner and Ms. Haggerty had been operating in their respective roles for at least six months prior to January 1, 1992, which qualifies them for licensure under the "grandfathering-in" provisions cited in the Conclusions of Law. Following receipt of the joint application on July 13, 199, Respondent informed Petitioner, by letter dated July 20, 1992, that the application was missing various items. The letter requested, among other things, financial statements for the two preceding years, including a corrected statement for 1991 and a certification that there had been no material adverse changes in financial statements since the date of the last statement. The portion of the application of the controlling person also required various items, such as fingerprints. The letter advised that the missing material must be supplied by August 5, 1992, if Respondent were to be able to issue the licenses by the statutory deadline of October 1, 1992. By letter dated July 30, 1992, Petitioner supplied additional information in response to the July 20 letter. By letter dated August 7, 1992, Respondent informed Petitioner that various deficiencies continued to exist. Among other things, the letter states that the 1991 financial statement must conform to generally accepted accounting principles, include a statement of cash flows, and describe loan receivables by footnote. Also, the letter asserts that the 1991 financial statement shows a tangible accounting net worth deficiency of about $109,000 when adjusted for loan receivables to controlling persons. By letter dated September 25, 1992, Petitioner submitted a financial statement dated August, 1992, containing footnotes describing loan receivables. By letter dated October 19, 1992, Petitioner references a letter dated October 8, 1992, from Respondent and encloses documentation concerning Ms. Haggerty's personal finances. In the October 19 letter, Ms. Haggerty promises that she will attend Respondent's November 2 meeting to answer questions regarding her previous employment. The letters dated July 20 and August 7 from Respondent are the only formal notification of deficiencies, errors, or omissions given Petitioner within the time permitted by statute. Consistent with its practice, Respondent considered the joint application to be separate applications of the employee leasing company and the controlling person. Consistent with Respondent's practice, it would, if appropriate, grant a license to a controlling person without granting a license to the employee leasing company with which she is associated. Respondent's first meeting at which it considered Petitioner's application was October 5, 1992. Ms. Haggerty and an attorney were in attendance. Although Board members wanted information as to where Ms. Haggerty had previously worked, they would not let her speak. At Respondent's November 2 meeting, Board members developed a long list of information that they wanted in order to consider the application. Petitioner's attorney, who was in attendance, asked that they memorialize their demands in a letter. When Respondent took up Petitioner's application at the December 8 meeting, Ms. Haggerty was not in attendance. Warned by its counsel that the statutory time limit had expired on the application so that the applicants were deemed licensed, Respondent elected to take no action as to Ms. Haggerty's controlling person application and to deny Petitioner's application. Respondent's order concerning Petitioner, which was entered December 18, 1992, states that the application is denied due to the failure to submit a completed application for licensure, reflect all liabilities in the financial statements, disclose a disputed workers compensation premium in the financial statements, comply with the statute requiring the payment of workers compensation premiums, comply with Section 468.525(3)(c) and (d) regarding tangible accounting net worth and positive working capital, and comply with Section 468.531(1)(d) regarding providing Respondent with false or forged evidence of the purpose of obtaining a license. The final order also predicates the denial of the application on a misrepresentation of fact regarding the issue of disputed premiums. By stipulation, the parties have identified the specific issues for denial of the corporate application as the failure to identify and account for workers compensation premiums owed Hartford Insurance Company and the treatment of "related party items" in the financial statements. The application form contains an affidavit regarding workers compensation. A portion of the affidavit attests: "I further certify that . . . all premiums due as of this date have been fully paid to all Worker's Compensation insurance carriers except for disputed premiums listed below:". The form contains blanks for the name of any carriers and the disputed amounts. Signing the affidavit as president of Petitioner, Ms. Haggerty left blank the above-described portion of the application form, thereby attesting that there were no disputed workers compensation premiums. As of July 13, 1992, this representation was accurate and complete. As is typical with workers compensation, the carrier performs annual audits to determine if any premium arrearages exist. Petitioner's fiscal year- end with Hartford was November. The audit for fiscal year-end 1991 was not yet completed by July, 1992. It was only at the end of August, 1992, that Ms. Haggerty or anyone else at Petitioner learned that Hartford would be asserting a premium arrearage. After Hartford completed the audit and claimed an arrearage, Petitioner's auditor asserted that at least a portion of the arrearage, which was in the form of a surcharge, was unlawful. Ms. Haggerty fully discussed the matter with Petitioner's independent professional consultants. Petitioner's outside accountant ascertained the appropriate amount to be reserved for the contingent liability. In accordance with generally accepted accounting principles, the accountant prepared the August, 1992, financial statement, in which the appropriate amount for the liability is recorded among other current liabilities totalling $265,450 and the contingent liability is discussed in a footnote. Tangible accounting net worth is calculated by taking the total assets, exclusive of intangible assets such as goodwill, and reducing the total adjusted assets by the total liabilities. The August, 1992, financial statement reveals total assets of $439,462 without any intangible assets. Reduced by the total liabilities of $388,426, the financial statement discloses a tangible accounting net worth of $51,036. Positive working capital, or net working capital, is calculated by taking current assets and reducing them by current liabilities. Current assets include cash, inventories, receivables to be paid within one year, work in progress, and related-party receivables to be paid within one year. The August, 1992, financial statement reveals current assets of $417,566 and current liabilities of $384,990, for a positive working capital of $32,566. The August, 1992, financial statement discloses a related-party item of a promissory note from Ms. Haggerty to the corporation in the amount of $68,867. The note was a demand note, which, under generally accepted accounting principles, is treated as a current asset and is properly includible in determining positive working capital. Likewise, the note is properly includible in determining tangible accounting net worth. In fact, Ms. Haggerty repaid $40,000 in October, 1992, and, by year end, the corporation cancelled the remaining balance of the note in compensation for sums due to Ms. Haggerty. Ms. Haggerty is of good moral character and meets all other requirements for licensure as a controlling person.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Board of Employee Leasing Companies certify for licensure to the Department of Business and Professional Regulation Suncoast Resource Management, Inc. as an employee leasing company and Susan J. Haggerty as a controlling person of an employee leasing company. ENTERED on December 9, 1993, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on December 9, 1993. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-871 Treatment Accorded Proposed Findings of Petitioner 1-2: adopted or adopted in substance. 3-4: rejected as irrelevant. 5-7: adopted or adopted in substance. 8-13: rejected as legal argument. 14-16: adopted or adopted in substance. 17-19: rejected as legal argument. 20-41: adopted or adopted in substance. 42: rejected as subordinate. 43: rejected as unnecessary. 44-47: rejected as not finding of fact. 48-50: rejected as unnecessary. 51-63, 70-79, and 82-92: rejected as irrelevant, repetitious, subordinate, and unnecessary. 64-69: adopted. 80-81: adopted. COPIES FURNISHED: Jack McRay, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Anna Polk, Executive Director Board of Employee Leasing Companies 1940 North Monroe Street Tallahassee, Florida 32399-0767 H. Richard Benchimol Benchimol, Hoft, and Strouse P.A. One Urban Centre 4830 West Kennedy Boulevard, Stuie 985 Tampa, Florida 33609 Michael A. Mone Office of the Attorney General Administrative Law Section Pl-10 The Capitol Tallahassee, Florida 32399
The Issue This case was to consider whether the application of Samuel Tinney for a private employment agency/agent's license should be granted or denied.
Findings Of Fact Samuel Tinney made application for licensure as a private employment agency and as a private employment agent in February, 1978. The Department of State gave Tinney notice of its tentative denial of his application on the basis that he failed to meet the minimum qualifications for experience as stated in Chapter 449, Florida Statutes. Samuel Tinney is a 76 year old male who retired from active employment in 1972, after 50 years of work. His last employment was as a salesman. In 1973, Tinney began to work with senior citizens, attempting to get them jobs in the local community. At first this was a slow process but late in 1973 he began to do more of this work. In attempting to place senior citizens in gainful employment, Tinney contacted employers to determine their needs and spoke with many senior citizens in an attempt to find them employment. He has been working as a volunteer in this project for the last five years and guessed that he had placed between 120 to 150 people. Tinney indicated that he sought a license so that he could charge a nominal fee for his services to offset his personal expenses incurred up until this point in finding senior citizens employment. The Division of Licensing, Department of State, presented no evidence rebutting Tinney's testimony.
Recommendation Based upon the foregoing findings of fact and conclusions of law, the Hearing Officer would recommend that the Division of Licensing, Department of State, approve the application of Samuel Tinney as an employment agent and agency. DONE AND ORDERED this 20th day of July, 1978, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings 530 Carlton Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of July, 1978. COPIES FURNISHED: Samuel Tinney 375 South West 56th Avenue Margate, Florida Marvin Sirotowitz Bureau Chief Division of Licensing The Capitol Tallahassee, Florida 32304 Gerald Curington, Esquire General Counsel Department of State Plaza Level, New Capitol Tallahassee, Florida 32304
The Issue Whether or not Petitioner's application for registration as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer & Associates, Inc. should be approved.
Findings Of Fact Respondent, Department of Banking and Finance, is the state agency charged with the administration and enforcement of Chapter 517, Florida Statutes, The Florida Securities and Investor Protection Act and the administrative rules promulgated thereunder. On or about October 30, 1990, Petitioner submitted a Form U-4, Uniform Application for Securities Industry Registration or Transfer, seeking transfer as an associated person of Brauer & Associates, Inc., and as an investment adviser of G.G. Brauer, Inc. On or about January 25, 1991, Respondent denied Petitioner's application for registration based upon its determination that Petitioner had filed a form U-4, which contained material misstatements and had demonstrated prima facie evidence of unworthiness by engaging in prohibited business practices. Petitioner was previously registered as an associated person with the St. Petersburg, Florida branch office of Smith Barney from March 1987 until July 25, 1990, when he was permitted to resign from the firm for ordering securities from the "over the counter" desk without prior client orders. Petitioner was also registered with the NASD and is charged with knowledge of their Rules of Fair Practice. On or about May 9 1990, Ronald Padgett filed a written complaint with Respondent alleging that Petitioner was engaging in unauthorized trading in his account and that the account was trading on margin without a signed margin agreement. Mr. Padgett also alleged that the signed margin agreement on file with Smith Barney was a forgery. After receiving Mr. Padgett's complaint, Respondent commenced its investigation in Petitioner's activities and requested that Smith Barney provide it with information regarding Padgett's complaint. Respondent also requested and was provided with copies of all other customer complaints that had been filed against Petitioner with Smith Barney. Smith Barney provided Respondent with copies of customer complaints that had been filed against Petitioner by Dorothy Juranko, Wayne Schmidt, Mark Madison, Michael Russo, Gloria Fallon, Patricia Schoenberg and William & Verna Bankhead. All of these individuals were investor clients of Petitioner. Prior to his employment with Smith Barney, Petitioner had not been the subject of a customer complaint or industry disciplinary proceeding or licensure revocation, suspension, or denial. Wayne Schmidt Sr. the owner of Suncoast Chrysler-Plymouth (Suncoast) opened his account at Smith Barney in 1985. Initially, the account executive assigned to Schmidt's account at Smith Barney was Steve Ellis. Schmidt maintained two accounts with Smith Barney and Steve Ellis, namely, a profit- sharing account for Suncoast Chrysler-Plymouth and a joint account with his wife. Schmidt exercised no control of the Suncoast account, but rather allowed his associate, Gloria Fallon to initially monitor the transactions in that account. Afterwards, Schmidt started overseeing the trading activities in the Suncoast account. Schmidt had no knowledge of any unauthorized transactions in the Suncoast account after he began monitoring it. Gloria Fallon did not testify at the proceeding. In connection with the maintenance of his joint account at Smith Barney, Schmidt executed a "Securities Account Agreement." During the time Schmidt maintained his account at Smith Barney, the Securities Account Agreement was utilized by Smith Barney as a margin contract. The Securities Account Agreement qualifies as a margin account agreement/margin contract as to form, and is consistent with industry standards, custom and usage. Although Florida Statutes proscribes certain procedures relative to margin agreements, neither the Florida Securities Act nor the rules promulgated thereunder require a broker/dealer to characterize a margin contract as a "margin agreement." The gravamen of Schmidt's complaint against Petitioner was that certain shares of stock were not liquidated from the joint account maintained by him in contravention of his directions to Petitioner. There was no proof submitted to support any conclusion that Petitioner failed to place an order for the liquidation of such securities for Schmidt's account. Likewise, there was no evidence of any unauthorized trading in the Schmidt's joint account. While Petitioner was assigned as account executive to the Schmidts joint account, a profit of approximately $10,000.00 was generated for that account in 1988 and in 1989, a net gain of approximately $15,000.00 was generated. Schmidt conceded at hearing that Petitioner probably did a better job handling his account than his prior broker, Steve Ellis. During the year 1988, Smith Barney generated and sent to Schmidt, monthly statements and confirmation statements regarding every transaction in his joint account. The monthly statements sent to Schmidt for the joint account contained entries regarding margin interest being charged to the account. For the year 1989, Smith Barney also generated and sent to Schmidt, monthly statements and confirms regarding every transaction in his joint account. The 1989 monthly statements sent to Schmidt also showed margin interest. For the years 1988 and 1989, Schmidt deducted from his individual tax returns, the margin interest charged to his account. Also, during 1988 and 1989, Schmidt did not complain to Petitioner or Smith Barney that the use of margin account was unauthorized. During his tenure at Smith Barney, Petitioner was the account executive assigned to the account of Michael Russo (Russo). Petitioner was assigned to the Russo account in approximately May of 1990, an account which was formerly serviced by an account executive whose last name is Dudenhaver. Michael Russo matriculated at City College of New York where he received a Bachelor of Business Administration degree and was a certified public accountant for approximately 30 years. Russo has been in the accounting business for approximately 40 years and during this time period, he operated his own accounting practice. Russo maintained three (3) accounts at Smith Barney which included an account with his wife, an individual account and an IRA account. Russo opened his first brokerage account in the early 1980s with Merrill Lynch, Pierce, Fenner & Smith. Russo has a history is investing in real estate and by mid 1990, he had accumulated a net worth of approximately $750,000.00. On or about July 13, 1990, Russo presented Petitioner a check in the amount of $26,000.00 which was to be deposited into Russo's accounts. The $26,000.00 check was deposited by Petitioner into Russo's accounts but were returned for non-sufficient funds (NSF). Russo then replaced the NSF check with a $22,000.00 check. The funds derived from the $26,000.00 of Russo originated from an interest-bearing money market account from the Fidelity- Spartan Mutual Funds Family. During the period July 13-20, 1990, Russo was on vacation and was away from his home visiting relatives in the Melbourne, Florida area. During that week, Russo spoke by telephone with Petitioner regarding his account on more than one occasion. Russo specifically recalls speaking with Petitioner on July 15, 1990, regarding his account. During that week, Russo spoke with Respondent about selling certain shares of stock in his account and his specific recall is that one of those conversations occurred on July 15, 1990. The shares were to be sold "at market." Russo again spoke with Petitioner on July 21, 1990, regarding transactions in his account. On July 24, 1990, Russo told Larry Youhn, the branch manager at Smith Barney, that he was very happy with Petitioner as his broker. The July 1990 month-end statement for the Russo account indicate that funds were deposited into the Russo accounts in an amount sufficient to satisfy security purchases made in his account during July 1990. Although these transactions appear at month-end in a type-2 margin account, a review of such statements indicate that the transactions initially occurred in a cash account and were mistakenly journaled to the margin account by Smith Barney as a result of an NSF check presented by Russo as payment for the purchase transactions. The individual account of Russo reflects the purchase of 500 shares of Wiley Laboratories on July 16, 1990, for $7,702.00. On that same day, $10,500.00 from the $26,000.00 NSF check was received into the account. The July 1990 monthly statement for Russo's individual account reflected that there would have been a $2,800.00 net credit in the account if Russo had not presented the NSF check. During his tenure at Smith Barney, Petitioner also served as the registered representative for an account maintained by Nicholas and Dorothy Juranko (Juranko). The Jurankos have a substantial history of business experience, having currently owned a service station in the Ohio area and Mrs. Juranko currently owns her own drapery shop and manages eight (8) apartment/rental units that they jointly own. The Jurankos opened their first securities brokerage account in approximately 1962. They have held accounts at several brokerage firms including Merrill Lynch, Blinder-Robinson and First Jersey Securities prior to opening their account at Smith Barney. At Blinder-Robinson, the Jurankos engaged in the purchase of several "Penny" stocks and fully realized that they were speculating. The Blinder- Robinson account was opened by the Jurankos so that Mr. Juranko would "have something to do." The Jurankos maintained a securities brokerage account at First Jersey Securities prior to Petitioner's employment with First Jersey. Petitioner was assigned as account executive for the Juranko account at First Jersey in approximately 1985. When the Jurankos opened their account at Smith Barney, their net worth was approximately $220,250.00. Although Mrs. Juranko maintains that unauthorized trades occurred in her account during the month of December 1987, when asked to identify which trade which unauthorized, she could not do so. This was so, despite an effort to refresh her recollection by presenting her the December 1987 monthly account statement which depicted all securities holdings and transactions generated in their account. Mrs. Juranko also alleged that she was losing money and did not want to deposit any additional funds into her account. However, Mrs. Juranko wanted to have profits generated from the funds that were then existing into her account as of year-end December, 1987. Respecting the December 1987 trades, the Jurankos received confirms for every transaction that occurred during the month. Through December 1987, while Petitioner was assigned to manage the Juranko account, the account generated a net profit. Also, continuing through January 1988, Petitioner had effected trades which produced a net profit for the Juranko account. As testified by Mrs. Juranko, "All I could see...greed, all I could see was $14,200.00 some dollars and $9,900.00 some dollars, and I thought, wow... I thought "wow", he's making me money." Although Mrs. Juranko complained that she was losing money, an analysis of the account revealed that during the two years that Petitioner was assigned her account, it made a net profit. Notwithstanding the documentary evidence to the contrary, Mrs. Juranko admitted that she was upset and complained to Smith Barney's compliance officer, a Mr. Singer, because of her unfounded belief that she had lost money. Mrs. Juranko identified anger as the basis for her inability to understand a letter which was sent by Larry Youhn, Smith Barney's branch manager, which show the activity that had been generated into her account. Notwithstanding the clear language of that letter, Mrs. Juranko maintained that she did not understand it. This is so, despite the fact that Mrs. Juranko did not telephone Smith Barney to complain because she "didn't want to get [Petitioner] in trouble." 1/ The use of margin in the Jurankos account was discussed because Mrs. Juranko believed the account was losing money; she wanted to do whatever was necessary over a period of time to make up for the losses and she refused to deposit additional funds into the account to generate profits in trading the account. In connection with the maintenance of the Juranko account at Smith Barney, Petitioner instructed his sales assistant to send a margin agreement to Mr. and Mrs. Juranko for execution. The use of margin was discussed with the Jurankos in approximately November 1987. Petitioner relied upon the Smith Barney infrastructure to maintain the necessary paperwork for margin accounts, including the Jurankos. This is a customary practice in the securities industry and is utilized by most large brokerage houses. Juranko first complained to Petitioner about the use of margin in January 1988, when she received her monthly account statement which contained an entry for margin interest. Mrs. Juranko explained that she thought the margin charges were too much and that she wanted to reduce the margin charges by liquidating securities from the account. Mrs. Juranko thereafter became uncooperative and it became difficult for Petitioner to transact business in the account consistent with Mrs. Juranko's desired objectives. As a result, in March 1988, Petitioner determined that the only thing he could do for the account was to liquidate positions at or near break-even points. Thereafter, Petitioner never made any other purchase recommendations to the Jurankos. Petitioner also serviced the account of Mark D. Madison while employed at Smith Barney. Madison is a marketing, advertising and management consultant who owns his own business. Madison maintained two (2) accounts at Smith Barney's St. Petersburg branch office, including an individual account and an account in the name of his mother, Mary Jean Madison. Mark Madison was a fiduciary for and conducted all transactions in his mother's account. Prior to Petitioner's assignment as broker to Madison's fiduciary account, it was assigned to broker Steve Ellis. The fiduciary account was maintained as a margin account since its opening in 1984. Commencing on February 13, 1986, broker Ellis and Madison executed several margin transactions in the fiduciary account. Through the period ending October 31, 1987, roughly 95% of the transactions in the fiduciary account were executed on margin. As of year-end 1987, the Madison fiduciary account and Mark Madison's personal account historically traded over-the-counter securities. During this period while Ellis was the broker, margin transactions were executed in both Madison accounts. During this period, broker Ellis actively traded both accounts and generated both profits and losses in the accounts. Mark Madison was familiar with the active trading in both accounts as well as the profit/loss picture. Madison estimated losses in the fiduciary account to be over $20,000.00 while the account was handled by Ellis. These losses all occurred while he was the fiduciary on the account and was in charge of approving trading in the account. When the fiduciary account was transferred from Ellis to Petitioner, Madison expressed his concern about the losses that his mother's fiduciary account had sustained as well as his responsibility for such losses. During his initial conversations with Petitioner, Madison explained his mother's displeasure at the approximately $30,000.00 in losses that had been generated while Ellis was assigned as broker. Madison also explained to Petitioner that his brother had made references to conversations with his mother about suing him as the fiduciary because of the losses generated. During the time that the fiduciary account was handled by Ellis, there were differences in the execution prices of transactions in the same securities which occurred in both the fiduciary account and his (Mark Madison's) personal account. When Petitioner was assigned the account, it became apparent to him that Madison consistently obtained higher prices on liquidating transactions than his mother was obtaining in the fiduciary account for the same securities. Petitioner was concerned with the type of trading in which Madison wanted to engage in for the fiduciary account and brought this trading strategy to the attention of branch manager, Youhn, who explained to Petitioner that it was the fiduciary who had ultimate responsibility for trading the account. In addition to discussing the trading strategy with Youhn, a review of the account history was conducted by Petitioner. Petitioner's review revealed that the account had lost approximately 40% in equity during the time it was handled by account executive Ellis and Mark Madison as fiduciary. As a result of the losses generated, Madison expressed his desire to Petitioner to recoup losses in the account by taking advantage of 2-3 point swings in certain over-the-counter securities. During the months of January through March 1988, Madison, despite his allegations to the contrary, authorized the purchase of a specified number of shares of certain securities and later maintained that certain additional shares of those securities were purchased without his authorization. Throughout this period, Madison maintained continuous telephone conversations with Petitioner regarding such securities. Throughout the period, Madison did not instruct Petitioner to cancel the trades, but rather instructed him that he wanted out of those positions as near as possible to "break even." The Department conducted an investigation of the allegations made by Petitioner's former clients in connection with the denial of his registrations as an associated person an investment advisor. In connection with the investigation, the Department, through its investigative employee, Carol Irizarry (Irizarry), spoke with individuals who had submitted written complaints against Petitioner. In furtherance of her investigation, Irizarry visited the office of William Lyman, Esquire, who represented several of the former customer/complainants, and reviewed the information that Lyman had relative to such complaints. Ms. Irizarry did not testify during the formal hearing herein. Dennis Farrar (Farrar), area financial manager, Division of Securities, Department of Banking and Finance, supervised the writing of the report completed by Irizarry. Farrar's first direct contact with the investors/complainants in this case occurred approximately one (1) week prior to the commencement of the hearing herein. Following Ellis' separation from employment with Smith Barney, several Smith Barney brokers and clients of Petitioner advised him that broker Ellis was out to get him and urged them to file complaints against Petitioner. Specifically, Petitioner received a telephone call from Gloria Fallon, an associate of Wayne Schmidt, who warned Petitioner that Ellis was "trying to stir up trouble for him." In connection with the initial customer complaint received by the Department, a request for information responsive to the complaint was sent to Smith Barney. Among the documents received by the Department was a securities account agreement which contained language normally contained in a margin contract. The securities account agreement is the document utilized by Smith Barney as its margin contract at all time material hereto. A Form U-4, Uniform Application for Securities Industry Registration for Transfer, is a document generated by the National Association of Securities Dealers (NASD) and the North American Securities Administrators Association (NASAA). The Form U-5, Uniform Termination Notice, also is generated by the above entities. The disclosure section of a Form U-4 requires an applicant to respond to the best of his ability. An intentional falsification of information on a Form U-4 will give rise to a violation of Section 517.161, Florida Statutes. It is customary in the securities industry for a registered representative to rely upon his current broker/dealer employer to determine which complaints, if any, are disclosable on the Form U-4. It is customary in the industry for a representative to rely on the Form U-5, termination notice for completion of his U-4 and usually the information on both forms track each other. Also, the prospective applicant filling out his U-4 usually consults with the firm that he separated from to ensure that both Forms U-4 and U-5 are consistent. Petitioner's completion of the Form U-4 on August 30, 1990 in connection with his employment at Brauer & Associates contained a disclosure of customer complaints consistent with the disclosures made by Smith Barney on its amended Form U-5 Termination Notice dated August 17, 1990. Petitioner's reliance on the information contained in his files and that provided by his employers was reasonable and there was no evidence that Petitioner intentionally falsified his Form U-4 application.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that Respondent enter a Final Order granting Petitioner's application for registrations as an associated person or broker/dealer of Brauer & Associates, Inc. and investment adviser to G.G. Brauer, Inc. RECOMMENDED this 13TH day of August, 1991, in Tallahassee, Leon County, Florida. JAMES E. BRADWELL 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 13th day of August, 1991.
Findings Of Fact Terry G. Jewell is the sole proprietor of an unincorporated business, wherein Jewell engages in business as a real estate broker-salesman. His net worth is less than $2,000,000. In DOAH Case No. 87-2192, the Division filed an Administrative Complaint dated April 20, 1987, wherein the Division essentially alleged that Jewell was co-owner and agent for Sun Country Homes of North Florida, Inc., a corporation engaged in the business of constructing homes; that Jewell, as vice- president and agent for Sun Country Homes, entered into a contract with the Koblinskis to build their house; that Sun Country Homes received approximately $74,900.00 to build the home; that Sun Country Homes did not pay certain materialmen and contractors; and that Jewell did not pay the outstanding liens. The Division sought revocation and other penalties against Jewell's license as a real estate broker-salesman, alleging that Jewell was guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence and breach of trust in a business transaction. After hearing, a Recommended Order was entered by the undersigned on September 25, 1987, recommending dismissal of the Administrative Complaint. The recommendation was based on findings that Jewell's contacts with the Koblinskis were solely as an officer, co-owner and agent for Sun Country Homes of North Florida, Inc.; that all sums paid by the Koblinskis were to Sun Country Homes and were deposited to its corporate account; that the president of Sun Country Homes mismanaged the corporate funds and did not pay some of the subcontractors on Koblinskis' home, that Jewell quit the corporation then he found out about this; that Jewell did all he could to assist the Koblinskis once he had resigned from the corporation; that the president of the corporation disappeared with the Koblinskis' money; and that Jewell did not benefit from the funds paid by the Koblinskis to Sun Country Homes of North Florida, Inc. The recommendation was based on conclusions of law that the contract was between the Koblinskis and Sun Country Homes of North Florida, Inc.; that Jewell had no intent to deceive the Koblinskis; that it is well settled law that disciplinary action cannot be taken against a real estate broker's license for conduct not connected with the licensee's business as a broker; and that Jewell did not violate Section 475.25(1)(b), Florida Statutes, as alleged. The Final Order of the Division, through the Florida Real Estate Commission, adopted the Findings of Fact, Conclusions of Law and Recommendation in the Recommended Order and dismissed the Administrative Complaint. The affidavit which initiated this action was filed on February 5, 1988, and was later supplemented by the Petition for Small Business Party's Attorney's Fees and Costs. The affidavit, which was an application for an award of fees and costs, was timely, having been filed within 60 days after the date on which Jewell became a prevailing small business party. In this case, the 60 days is calculated from the date on the Certificate of Service showing mailing of the Final Order to the parties. See Section 57.111(4)(b)2, Florida Statutes. According to the affidavit of William C. Andrews, and the statements of account attached thereto, Jewell incurred legal fees of $3,252.50 and costs of $957.21. These fees and costs are found to be reasonable since the Division has not filed a counter affidavit or response questioning their reasonableness. According to the Petition, the disciplinary action in DOAH Case No. 87- 2192 was substantially unjustified at the time it was initiated: because the Administrative Complaint was an attempted disciplinary action taken against Petitioner's real estate broker-salesman's license for conduct not connected with the licensee's business as a broker-salesman, and there was a complete absence of evidence to show any wrong doing on the part of the Petitioner.
Findings Of Fact Based upon the testimony of the witnesses, the documentary evidence received at the hearing, and the record in DOAH case no. 88-6257, the following findings of fact are made: On October 24, 1988, the Department notified Sophie DeRuiter and Ann & Jan Retirement Villa that the license to operate an adult congregate living facility expired on October 23, 1988, and that the application for renewal was denied. The specific reasons listed as the grounds for such denial were a determination of confirmed medical neglect of residents and the inappropriate retention of residents. Thereafter, Petitioner timely sought an administrative review of the denial by filing a petition for administrative hearing with the Department which was subsequently forwarded to the Division of Administrative Hearings for formal proceedings on December 16, 1988. That matter was assigned DOAH case no. 88- 6257. Hearing of case no. 88-6257 was originally scheduled for March 17, 1989, by notice of hearing dated January 18, 1989. Thereafter, Petitioner scheduled a number of depositions and requested a continuance in the case to accommodate Sophie DeRuiter. That motion was unopposed by the Department and was granted by order entered February 27, 1989. That order also rescheduled the hearing for April 14, 1989, and required the parties to file a prehearing statement no later than March 24, 1989. Neither party timely filed a prehearing statement. In fact, the parties were unable to agree on a statement due to their disagreement as to the issues of the case. The unilateral statements filed by the parties established that Petitioner sought review of all grounds for the denial of the license renewal. On the other hand, the Department took the position that since Sophie DeRuiter was listed on the Florida Abuse Registry for confirmed medical neglect of residents, that such listing precluded renewal of the license. The Department alleged that Petitioner had not timely challenged the abuse report, and that such record could not be challenged in the instant case. The Department's letter denying amendment or expungement of the medical neglect had been issued December 7, 1988. Given the confusion of the parties and their failure to file prehearing statements as required, the hearing scheduled for April 14, 1989, was cancelled. Subsequently, the Department moved to limit the issue to whether there was a confirmed record of an abuse report (and thereby presume the underlying report correct). Such motion was denied on June 1, 1989. On June 9, 1989, the hearing of this matter was convened. At that time, the Department moved to continue the case due to illness of counsel and her inability to review an amended witness list filed by Petitioner. The motion was granted after it was apparent counsel for the Department was unprepared to go forward on all issues of the case (she represented she had just received the order requiring her to go forward on all issues on June 8, 1989). The case was rescheduled for August 10, 1989. Subsequently, the matter was continued again at Petitioner's request. The case was finally scheduled for hearing for September 8, 1989. The Petitioner filed a motion for summary judgment on August 14, 1989. On September 7, 1989, the Department filed a notice of dismissal which was construed as an assent, in whole or in part, to the relief requested by the Petitioner. Consequently, the hearing was cancelled and jurisdiction was relinquished to the Department for such further action as would be appropriate. It was presumed that the abuse record would be expunged which would result in the reinstatement of the license. The Petitioner in the instant case has not, however, established the final resolution of DOAH case no. 88-6257. Petitioner did not comply with Rule 22I-6.035, Florida Administrative Code by attaching the documents on which the claim that the small business party prevailed was predicated nor was proof of such document offered at the hearing of this matter. Sophie DeRuiter is the administrator and owner of Ann & Jan Retirement Villa which is located at 3486 Rostan Lane, Lake Worth, Florida. According to the style of the initial pleading filed by Petitioner in the instant case, Ann & Jan Retirement Villa has been incorporated. The proof offered at hearing suggested that Sophie DeRuiter is the sole proprietor of a business known as "Ann & Jan Retirement Villa." In August, 1988, Ms. DeRuiter employed approximately four full-time employees. In the three years she has owned and operated the facility, Ms. DeRuiter has never employed more than twenty-five full-time employees. The net worth of Ann & Jan Retirement Villa is less than two million dollars. Ms. DeRuiter's personal net worth is less than two million dollars. The combined worth of Ann & Jan Retirement Villa and Ms. DeRuiter is less than two million dollars. Ms. DeRuiter employed the law firm of Weissman and Chernay, P.A. to represent her in connection with the allegations in DOAH case no. 88-6257. In connection with that case, Ms. DeRuiter incurred legal fees in the amount of $8587.50 together with costs in the amount of $897.59. The reasonableness of those amounts was not disputed.
Findings Of Fact Bernard M. Tully, M.D. served by mail his Motion to Tax Attorney's Fees and Costs pursuant to Chapter 57, Florida Statutes, on May 19, 1987; same was filed with the Division of Administrative Hearings on May 21, 1987 and was assigned DOAH Case No. 87-2265F. This instant cause is a fee and costs case pursuant to Chapter 57, Florida Statutes, arising out of Department of Professional Regulation, Board of Medical Examiners v. Bernard M. Tully, M.D.; DOAH Case No. 85-3175. The Department of Professional Regulation has moved to dismiss Tully's Motion to Tax Attorney's and Costs, (hereafter, "Fees and Costs Petition") upon allegations that the claim was not filed in a timely manner pursuant to Section 57.111(4)(b)2, Florida Statutes, and upon allegations that the Fees and Costs Petition did not comply with the requirements of Section 57.111(4)(b), Florida Statutes, in that the claimant had not submitted an itemized affidavit of the nature and extent of the services rendered as well as the costs incurred. A Voluntary Dismissal was served by mail by Petitioner Department of Professional Regulation in DOAH Case No. 85-3175 on March 6, 1987, and filed with the Division of Administrative Hearings on March 10, 1987. The Order closing the Division file in that case was entered March 18, 1987, but is largely superfluous since a Voluntary Dismissal by the party bearing the burden of proof dismisses a cause by operation of law as of the date of filing of the Voluntary Dismissal. Tully's Fees and Costs Petition was served (May 19, 1987) and filed (May 21, 1987) well beyond the 60 day timeframe (May 11, 1987) provided in Section 57.111(4)(b)2, Florida Statutes, for the filing of such claims. Tully's Fees and Costs Petition attached schedules itemizing costs incurred and pleadings filed in DOAH Case No. 85-3175. The Petition was not verified and no affidavits are attached. In these respects, the Fees and Costs Petition failed to comply with Section 57.111(4)(b)1, Florida Statutes, and Rule 22I-6.35, Florida Administrative Code. Neither does the Fees and Costs Petition or any accompanying affidavit allege whether or not Tully requests an evidentiary hearing; that he is a small business party; where his domicile and principal office are located; how many employees he has; whether or not he is a sole proprietor of an unincorporated business, and, if so, whether or not his net worth exceeds $2,000,000; whether or not he operates as a partnership or corporation i.e. professional practice, and, if so, whether or not the net worth exceeds $2,000,000; whether the agency's actions were substantially unjustified; and whether or not circumstances exist that would make the award unjust; or whether or not the agency was a nominal party only. There were also no documents upon which the claim was predicated attached to the Fees and Costs Petition. in these respects, the Petition failed to comply with virtually all of Section 57.111(4)(b), Florida Statutes, and Rule 22I-6.035(1)(2), and (3), Florida Administrative Code. Tully timely filed a Response to Order to Show Cause wherein he acknowledged as true and accurate the dates as found in Finding of Fact 4, supra. Moreover, his Response concedes that pursuant to Section 57.111(4)(b)2, Florida Statutes, the application for an award of attorney's fees must be made within 60 days after the date that a small business party becomes a prevailing small business party, but his Response asserts that nothing in the applicable statute provides that an application for costs must be made within 60 days, and therefore at least his application for costs must be deemed timely. The Response further sets out an itemization of costs incurred and is sworn to by Tully's attorney of record. No leave to amend the Petition was granted by the Order to Show Cause.
The Issue The issues to be resolved in this proceeding concern whether the Petitioner is entitled to recover attorney's fees and costs incurred as a result of prevailing in the underlying case of Florida Elections Commission vs. Catherine King, Case No. 98-1256, Final Order entered December 11, 1998, based on the authority of Section 57.111, Florida Statutes.
Findings Of Fact This proceeding commenced when the Respondent entered an Order of Probable Cause on November 7, 1997. The Petitioner herein requested a formal hearing on the allegations upon which the agency had found probable cause. The formal hearing was held in the above-referenced underlying case (98-1256) on July 10, 1998. A Recommended Order was thereafter entered finding that the Petitioner had not committed any of the election law violations that Respondent herein had alleged in its order of probable cause. Thereafter, on December 11, 1998, the Respondent entered a Final Order by which it adopted the Recommended Order in Case No. 98-1256, in its entirety. In that Final Order, the Respondent "accepted the Findings of Fact, Conclusions of Law and Recommendation" of the Administrative Law Judge. The Petitioner, Catherine King, was the prevailing party (Respondent) in the underlying action which had been initiated by the Florida Elections Commission, the Respondent in this proceeding. Neither party has appealed the Respondent's Final Order in Ms. King's favor and indeed it is undisputed that she is a "prevailing party." The Respondent was not merely a nominal party in that underlying case. There are no existing circumstances which would make an award of attorney's fees and costs unjust in this action and indeed the Respondent herein has agreed that that is the case. The attorney's fees and costs which the Petitioner incurred in the underlying proceeding total $8,109.20. There is no dispute that they are reasonable. The Petitioner actually expended that amount for fees and costs. The attorney's fees incurred by the Petitioner in this proceeding through April 9, 1999, are in the amount of $1,440.00. Those fees are shown to be reasonable. The Petitioner has paid some of the fees but has not yet been billed for all of the fees incurred during the month of April, 1999. The Petitioner was the sole proprietor of an unincorporated business located in Walton County, Florida, and she herself was domiciled in Walton County, Florida, at the time the underlying action was initiated by the Respondent agency. Her business is known as "Quick Retrieval." It is unincorporated and had less than twenty-five employees and a net worth of less than two million dollars including both the Petitioner's business and personal investments at the time the action was initiated by the Respondent. Indeed its only employee is the Petitioner. It has not been established that the Petitioner is a "small business party" for purposes of Section 57.111(3)(d)1.a. and b., Florida Statutes, however. Although proof offered by the Petitioner at hearing established that she has a "small business" and, as found above, it meets the employee compliment and net worth threshold requirements in order to recover attorney's fees under the Florida Equal Access to Justice Act (Section 57.111, Florida Statutes), it has not been demonstrated that the Petitioner is a prevailing small business party. Although the Petitioner demonstrated that she had an unincorporated business of which she is the sole proprietor, the Petitioner's proof does not establish that the action initiated by the agency, from which she seeks to recover fees and costs, was initiated against her as the proprietor of a small business. Rather, that action, the probable cause order issued by the Respondent, Florida Elections Commission, was against her in her personal capacity as an office holder or one seeking to hold office as Clerk of the Court in Walton County. The action was the agency's attempt to re-dress what it had alleged was an election law violation by the Petitioner personally. The action initiated by the agency in the underlying case had nothing to do with the Petitioner's capacity as the proprietor of a small business. For instance, no license of that business was in jeopardy by the Respondent agency's action and none of the facets of the operation of the Petitioner's business was in any way jeopardized or subjected to any potential fine, penalty or sanction by the action initiated by the agency in the underlying case. The Petitioner's business was not a party to nor in anyway related to the subject matter of the underlying proceeding pertaining hereto. The Petitioner offered no evidence to indicate that her participation in the underlying proceeding was as the sole proprietor of an unincorporated business party to the subject action. That is, it was not the activities of the business which were in question. Thus, that element necessary to recovery of an attorney's fee, pursuant to Section 57.111, Florida Statutes, has not been proven. 1/
The Issue The issue in this case is whether Petitioner is liable for intangible taxes, interest, and penalties, and, if so, how much.
Findings Of Fact Petitioner was incorporated in October, 1985. An S corporation, the original shareholders of Petitioner were Thomas Riden, who has practiced law in the Tampa Bay area for 25 years; Hal Lyons, who is experienced in the recreational business; Gus Stavros and Walter Loebenberg, who are established businessmen in the Tampa Bay area. The original business of Petitioner was boat-repairing. The first business location was the Pasadena property located in St. Petersburg. Petitioner derived its name from this property. The boat-repair business did not prosper. By December, 1985, Mr. Lyons wanted to sever his relationship with the company and did so at that time or shortly thereafter. This left the three other shareholders to run the business. Mr. Riden is a practicing attorney, who heads a 17-person law firm in Tampa. The other shareholders are prominent businessmen and investors, who were unavailable to handle the day-to-day responsibilities of the new company. In early 1986, the three remaining shareholders decided that they needed to hire someone with considerable experience in the boatyard business. They found a good general manager at another boatyard in the area. In negotiating with this individual, the shareholders decided that Petitioner needed to expand into boat sales in order to make the company prosper. Thus, on April 1, 1986, the shareholders caused Petitioner to acquire the assets of the other boatyard business, including the general manager with whom they had been negotiating. The results of the acquisition were that Petitioner now operated boatyards in Naples and Sarasota, as well as St. Petersburg, and sold boats from several prominent and predominantly expensive lines, such as Hatteras and Bertran. Some of these boats, such as the 77-foot Hatteras, retail for $4 million. Petitioner owned all of the boatyards except for the Sarasota location, which had been leased by the company which had sold its assets to Petitioner. Later in 1986, the land underlying the Sarasota boatyard was foreclosed, and Petitioner bought the assets of a nearby boatyard business in order to maintain a Sarasota presence. As hindsight later disclosed, Petitioner's dramatic business expansion was ill-timed, as 1986 was the last good year in the luxury boat market. The 1986 Tax Reform Act removed many tax advantages to owning or leasing luxury craft or boatyard businesses. Shortly thereafter, the crisis in the lending community associated with the savings and loan bail-out chilled lending, both as to prospective purchasers of luxury boats and of the boatyard business itself. Later, a special federal tax was imposed upon luxury boats of the type that Petitioner was marketing. And all of these events took place against a backdrop of declining real estate values, largely as a result of the some of the same reasons. For the reasons set forth in the preceding paragraph, Petitioner performed poorly. On gross receipts of $20.5 million in taxable year 1986, Petitioner showed a tax loss of $451,255. On gross receipts of $23.9 million in taxable year 1987, Petitioner showed a tax loss of $963,974. On gross receipts of $25.4 million in taxable year 1988, Petitioner showed a tax loss of $1.2 million. On gross receipts of $22.5 million in taxable year 1989, Petitioner showed a tax loss of $2.9 million. On gross receipts of $19.8 million in taxable year 1990, Petitioner showed a tax loss of $1.4 million. On gross receipts of $7.8 million in taxable year 1991, Petitioner showed a tax loss of $2.3 million. The financial statements similarly depict a financially stressed corporation. The balance sheet for the year ending December 31, 1986, shows a total shareholders' equity of ($103,344). For the year ending December 31, 1987, the balance sheet shows a total shareholder's equity of ($994,918). For the year ending December 31, 1988, the balance sheet shows a total shareholders' equity of ($1.7 million). For the year ending December 31, 1989, the balance sheet shows a total shareholders' equity of ($4.6 million). For the year ending December 31, 1990, the balance sheet shows a total shareholders' equity of ($7.1 million). None of the financial statements is audited because the corporation has not qualified as a going concern since its inception. The corporation has survived solely on the basis of the ongoing shareholder loans that it has received. The corporation ceases to exist as soon as the shareholders refuse to make more loans. Likewise, the shareholder debt, which is the intangible property that is the subject of the present proceeding, remains viable only as long as the shareholders are willing to continue to fund the corporation; in other words, the debt to the shareholders presently cannot be repaid from any source other than the shareholders. In starting Petitioner, as well as in acquiring the assets described above, the shareholders committed substantial sums of money to the company, either in the form of cash or, more frequently, personal guarantees so as to enable the new corporation to obtain bank loans for which it would not otherwise have been eligible. The practice of Petitioner and its shareholder was to treat the shareholder advances to the company as shareholder advances. These loans were undocumented and carried no interest. These loans are subordinated to all other debt of the corporation. As time passed, instead of obtaining repayment of their loans, the shareholders had to meet the constant demands of the business for more money. Although, in retrospect, it might have been prudent to cut losses early and sell the business assets for whatever they could get, the shareholders continued to fund the business. Their motivation in doing so varied. At first, they poured more money into the business in the hope that business would recover. Later, they continued to bail out the business in order to meet such basic obligations as inventory acquisition, payroll, and mortgage debt in the hope that, if they maintained the business until business and economic conditions improved sufficiently, they could at least cover outstanding debt with the sale proceeds. For varying reasons related to their backgrounds and standing in their respective communities, the bankruptcy of individuals is a particularly unappealing prospect. Given the extent of shareholder guarantees, the bankruptcy of the corporation would not assist the shareholders in addressing their financial situations. After an audit, Respondent proposed an assessment of intangible tax based on the value of the shareholder loans for taxable years 1986 through 1989. Valuing these loans at their face value, the assessed intangible taxes totaled for each of the four years, respectively, $301.01, $2869.75, $998.51, and $1175.98. The assessed penalties for each of the four years are, respectively, $120.40, $1247.90, $499.41, and $570.40. The assessed interest for each of the four years is, respectively, $137.56, $967.07, $216.33, and $113.67. The grand total is $9217.99. Petitioner has proved that the fair value of the shareholder debt was considerably less than the face value of the debt. The debts were subordinated to all other debt of Petitioner. The financial condition of Petitioner, as well as prevailing business and economic conditions, decreased the value of these debts well below their face value. Additional shareholder loans, which were made for business and personal reasons, were worth less than their face amount immediately after being made due to the above-described factors. On top of the rest of these factors, there is no market for shareholder loans to a closely held corporation, especially when the loans are undocumented and the corporation can most generously be described as ailing. However, the fair value of the shareholder loans bear some speculative value, which, given the decline in fortunes during the years in question, itself declines over the four years. The fair value of the shareholder loans pertaining to taxable year 1986 are 25 percent of the face value. The fair value of the shareholder loans pertaining to taxable years 1987-1989 are 10 percent of the face value. Therefore, the intangible tax and related interest should be correspondingly reduced by 75 percent for 1986 and 90 percent for the remaining three years. The failure to pay the portion of intangible taxes finally determined to be due was due to reasonable cause and not wilful negligence, wilful neglect, or fraud.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner owes intangible taxes and interest on the shareholder loans whose value has been reduced by 75 percent for 1986 and 10 percent for 1987-1989 and that Petitioner owes no penalties. ENTERED on April 13, 1993, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on April 13, 1993. COPIES FURNISHED: Dr. James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Clifford Hunt Julie Kirk Riden, Earl & Kiefner, P.A. 100 2d Avenue South, Ste 400N St. Petersburg, FL 33701 Leonard F. Binder Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, FL 32399-1050
Findings Of Fact The Petitioner is a "small business party" sole proprietorship domiciled in Tampa, Florida, with less than 25 employees, and a net worth of less than $2 million. The Respondent previously initiated action against Petitioner as a result of a Medicaid audit of Petitioner's pharmacy and identified an overpayment which it then sought to recover from Petitioner. A timely request for hearing was filed by Petitioner, and the matter was transmitted by the Respondent to the Division of Administrative Hearings where it was assigned Case Number 88-1668. The final hearing was held in Tampa, Florida, on June 22, 1988, before Donald D. Conn, Hearing Officer, and thereafter a Recommended Order was filed on August 17, 1988, which recommended that Respondent enter a Final Order dismissing its action against Petitioner, refunding any funds which it had withheld, plus interest, and removing all other sanctions. The Respondent approved and adopted this recommendation in its Final Order entered on September 15, 1988, by the terms of which Petitioner prevailed in the prior action initiated by the Respondent. The Respondent was not a nominal party to the prior proceedings, and there is nothing in the record to show that the Respondent was substantially justified in bringing the prior action, or that any special circumstances exist which would make an award of fees and costs unjust. On November 2, 1988, a Petition for Costs and Attorney's Fees was filed with the Division of Administrative Hearings by the Petitioner. The Petition is accompanied by an affidavit and supporting documents which are uncontroverted, and which establish that Petitioner incurred legal fees in the amount of $14,587.50 and costs of $1,437.77, as a result of the prior proceedings in Case Number 88-1668. In the Petition for Costs and Fees, the Petitioner specifically indicated that an evidentiary hearing was not requested. No responsive pleading of any kind has been filed on behalf of the Respondent to this Petition for Costs and Fees.
The Issue At issue is whether Petitioner is entitled to an award of attorney's fees and costs pursuant to Section 57.111, Florida Statutes, the "Florida Equal Access to Justice Act."
Findings Of Fact Findings relating to the underlying disciplinary action The Department of Health, Division of Medical Quality Assurance, Board of Dentistry (Department), is a state agency charged with the duty and responsibility for regulating the practice of dentistry pursuant to Section 20.43 and Chapters 455 and 466, Florida Statutes. At all times material hereto, Petitioner, Mounir Albert, D.D.S. (Dr. Albert), was licensed to practice dentistry in the State of Florida, having been issued license number DN 0010217. On September 2, 1997, the Department issued an Administrative Complaint against Dr. Albert (Agency Case Number 95-12645). The complaint charged that Dr. Albert was subject to disciplinary action under the provision of Subsection 466.028(1)(aa), Florida Statutes (1995), for having violated Subsection 455.241(1), Florida Statutes, by having failed, upon request, to furnish a patient in a timely manner, without delays for legal review, copies of all reports and records relating to the patient's examination or treatment, including x-rays and insurance information. For such violation, the Department proposed that one or more of the following penalties be imposed: . . . revocation or suspension of . . . [Dr. Albert's] license, restriction of . . . [Dr. Albert's] practice, imposition of an administrative fine, issuance of a reprimand, placement of . . . [Dr. Albert] on probation, and/or any other relief that the Board deems appropriate. Dr. Albert disputed the allegations of fact contained in the Administrative Complaint, and the matter was referred to the Division of Administrative Hearings (DOAH) for the assignment of an administrative law judge to conduct a formal hearing. The matter was assigned DOAH Case No. 97-5001, and a hearing was duly held on February 5, 1998. On March 9, 1998, a Recommended Order was rendered, which concluded that, while Dr. Albert failed to furnish the patient records on request, the Administrative Complaint should be dismissed. Central to such conclusion was the finding that: . . . while subsection 455.241(1) obligates the health care provider to provide, upon request, copies of a patient's medical records, subsection 455.241(4) also authorizes the health care provider to charge, for such service, the cost of duplication. Reading the provisions in pari materi, it is reasonable to conclude that, absent payment of the cost of duplication, a health care provider is under no obligation to provide a patient with copies of his records. Since the patient failed to pay Dr. Albert for the cost of duplication, as requested, it was resolved that Dr. Albert had not violated Subsection 455.241(1) as alleged in the Administrative Complaint. On June 9, 1998, the Board of Dentistry entered a Final Order in the underlying case. The Final Order approved and adopted the Findings of Fact and Conclusions of Law set forth in the Recommended Order, and dismissed the Administrative Complaint. Judicial review of the Final Order was not sought, and Petitioner timely filed the subject petition for attorney's fees and costs pursuant to Section 57.111, Florida Statutes. Findings relating to the claim for attorney's fees and costs Pertinent to Dr. Albert's claim for attorney's fees and costs, the Department has conceded that the underlying action was initiated by the Department, that Dr. Albert prevailed in the underlying case, and that the claim for attorney's fees and costs was timely filed.1 The Department has, however, denied that Dr. Albert was a "small business party" and, therefore, a "prevailing small business party," as those terms are defined by Section 57.111, Florida Statutes, and has affirmatively averred that its actions were "substantially justified." Given the circumstances, an award of reasonable attorney's fees and costs would be appropriate provided Dr. Albert can establish, by a preponderance of the evidence, that he was a "prevailing small business party" in the underlying proceeding and, if so, the Department fails to establish that its actions were "substantially justified." Addressing first Dr. Albert's status, it must be concluded that the proof fails to support the conclusion that at the time the underlying proceeding was initiated, or at any other time material hereto, Dr. Albert (the party to the underlying proceeding) was a "small business party," as that term is defined by Section 57.111(3)(d), Florida Statutes, and, consequently, the proof fails to support the conclusion that he was a "prevailing small business party," as required for compensation under the Florida Equal Access to Justice Act. See Section 57.111(4)(a), Florida Statutes. In so concluding, it is observed that the proof demonstrates that, at all times material, Dr. Albert practiced dentistry as an employee of a professional service corporation, Mounir Albert, D.D.S., P.A. (the corporation or business), as authorized by Chapter 621, Florida Statutes, and was not shown to be the sole proprietor of, or operate his dental practice or any other enterprise, as an unincorporated business. Having resolved that Dr. Albert was not shown to be a "prevailing small business party," and was, therefore, not eligible for an award of attorney's fees and costs under the Florida Equal Access to Justice Act, it is not necessary to address whether the Department's actions were "substantially justified," when the underlying proceeding was initiated.
