The Issue Whether Alachua County Environmental Protection Department discriminated against Tilak B. Shrestha based upon his race or national origin, in violation of Title VII of the Federal Civil Rights Act of 1964 and the Florida Civil Rights Act of 1992, by releasing Mr. Shrestha from his temporary assignment through Temp Force with the Alachua County Environmental Protection Department and by not hiring Mr. Shrestha for the position of Senior Environmental Specialist within the Alachua County Environmental Protection Department.
Findings Of Fact The State of Florida funds the Petroleum Cleanup Program (Petroleum Program) which is focused on removing petroleum contaminants from various sites within the State of Florida. The Department of Environmental Protection (DEP) administers the Petroleum Program, also known as the Underground Storage Cleanup Program. In 12 counties, including Alachua, Florida contracts with the county to manage the Petroleum Program. The Alachua County Environmental Protection Department (Alachua DEP) manages the Petroleum Cleanup sites in Alachua County. Mr. Chris Bird has been the director of the Petroleum Program since 1993. He has worked with Alachua County since 1986. In the 1994-1995 fiscal year, the Florida Legislature was facing a deficit; therefore, the Legislature significantly reduced the funding for the Petroleum Program. As a result, DEP froze the Petroleum Program, and dropped several active sites. The lack of funding resulted in downsizing at both the county and state levels at the beginning of 1995. At the beginning of 1995, the Alachua DEP had three funded positions in the Petroleum Program. Mr. Alex Vieira occupied the position of full-time Professional Engineer. The Alachua DEP also had funding for an administrative position and a full-time Environmental Engineer/Geologist. The Environmental Engineer/Geologist position was vacant at the beginning of 1995. The Alachua DEP originally advertised for the position. However, when the State reduced funding for the Petroleum Program, the Alachua DEP decided not to fill the position with a permanent employee and ultimately froze this permanent position. In order for the Petroleum Program to continue at a minimum level of operation, the Alachua DEP hired temporary employees through Temp Force, a temporary employment agency. Temp Force served as an independent contractor for the Alachua DEP. Temp Force provided Mr. Tilak Shrestha and Mr. Mike Shuler to the Alachua DEP Petroleum Cleanup Program. Mr. Shuler began working at the Alachua DEP through Temp Force two months prior to Mr. Shrestha's Temp Force assignment to the Petroleum Program. At the time of the assignment through Temp Force, Shrestha was not credentialed as a Ph.D. Mr. Shrestha and Mr. Shuler were employees of Temp Force, received their paychecks from Temp Force and acquired no benefits from Alachua County. Mr. Shrestha worked as a Temp Force employee for six months at Alachua DEP and was assigned to various projects at the Alachua DEP. As supervisor for the Petroleum Program, Mr. Vieira assigned projects to both Mr. Shrestha and Mr. Shuler. Mr. Shrestha described his working conditions during his assignment through Temp Force with the Alachua DEP as "good, no complaints," and "good on average." In 1995, the Florida legislature ultimately reduced funding for the Petroleum Program from $1.2 million to approximately $250,000. When the Alachua DEP received notice of these funding cuts, Mr. Bird advised Mr. Vieira that he needed to release one of the Temp Force employees from his assignment with the Alachua DEP. Mr. Vieira retained Mr. Shuler and informed Mr. Shrestha that he would no longer be working on the Petroleum Cleanup assignment through Temp Force. Mr. Shrestha's assignment through Temp Force with the Alachua DEP was terminated on August 10, 1995. During Fall 1995, the legislature substantially changed the law and administration pertaining to the Petroleum Program, both at the county and state levels. In October 1995, Ms. Pegeen Hanrahan became the Petroleum Program supervisor following Mr. Vieira's resignation. Ms. Hanrahan earned a Bachelor's degree in Environmental Engineering and Sociology and a Master's degree in Environmental Engineering. She is a registered Professional Engineer and a certified Hazardous Materials Manager. She began working for Alachua County in 1992 as an Environmental Engineer and later served for three years as Hazardous Materials Program Supervisor for Alachua County. When Ms. Hanrahan became supervisor of the Petroleum Program in Fall 1995, the Petroleum Program had essentially entered a "stand-by" mode. The Alachua DEP declined to send any additional work to its sub-contractors. Therefore, the technical duties involved in the Petroleum Program were reduced and the administrative duties became more important. During the Fall of 1995, there were no permanent employees on staff. Mr. Shuler remained as the only temporary employee in the Petroleum Program and according to Ms. Hanrahan was doing a "perfectly adequate job." Based on the new and reduced Petroleum Program budget for the 1995-1996 fiscal year, the Alachua DEP acted in October 1995 to establish the position of Senior Environmental Specialist in lieu of the Environmental Engineer/Geologist position. The position was advertised in December 1995. The main role of the Senior Environmental Specialist was to assist the Professional Engineer in the area of the administration involved in the Petroleum Program. The duties included filing reports, tracking sites, and submitting task orders and invoices to the office in Tallahassee. Due to the increasing changes in the Petroleum Program, the Alachua DEP required a Senior Environmental Specialist who understood the Petroleum Program's administrative tasks, as well as the State policies pertaining to the Petroleum Program. The Senior Environmental Specialist candidate was required to have a technical background in fields including, but not limited to, engineering, biology or geology. The Professional Engineer, not the Specialist, was assigned the technical review of the Petroleum Program. An applicant's understanding of the technical and administrative duties was necessary. In 1995, the Alachua DEP advertised the position of Senior Environmental Specialist, which included printing an advertisement in the local newspaper, per the County regulations. The Alachua DEP described the administrative tasks of Senior Environmental Specialist to include: preparing reports; making recommendations; receiving and investigating complaints; conducting performance evaluations; counseling, hiring and terminating employees. The Alachua DEP described the knowledge, skills, and abilities of the Senior Environmental Specialist to include: thorough knowledge of the technical methods and procedures involved in the administration of environmental regulations, programs, and policies; knowledge of local, state, and federal rules, regulations, and ordinances related to environmental protection; ability to create concise, clear, and succinct technical reports; and ability to research technical problems, formulate recommendations, and compile related reports. The Alachua DEP described the minimum qualifications for the position of Senior Environmental Specialist as: Bachelor's degree in environmental or natural science, civil or environmental engineering, geology, or hydrology, or related field, and two years' professional level environmental-related experience; or any equivalent combination of related training and experience. The County received 14 applications for the position as Senior Environmental Specialist from applicants, which included Mr. Shrestha and Mr. Shuler. Ms. Hanrahan was supervisor of the Petroleum Program in January 1996 and responsible for the hiring of the Senior Environmental Specialist. She received an Application Referral Document from personnel, stating that each of the applicants met the County's minimum requirements for the position of Senior Environmental Specialist. Upon receipt of the re?sume's and applications, Ms. Hanrahan initially screened the applicants for those who had petroleum-related experience. She narrowed the applicants to four individuals, who included Mr. Shrestha, Mr. Shuler, and two others. On January 22, 1996, Ms. Hanrahan conducted a telephone interview of each of the four applicants who passed the initial screening. The telephone interview was customary hiring practice within the Alachua DEP. During the telephone interview, Ms. Hanrahan asked each applicant the same series of ten questions, designed to test the applicant's level of knowledge regarding technical and administrative aspects of the position of Senior Environmental Specialist. Mr. Shrestha answered five out of a possible eleven answers correctly. This was the second highest score out of the four applicants. Shuler achieved the highest score, answering eight-and-one-half out of eleven answers correctly. Three interview questions specifically addressed administrative issues. Question six asked, "What does RBCA stand for?" Question seven stated, "This year the Florida Petroleum Cleanup Program has adopted a new mechanism for review and approval of work on petroleum contaminated sites. Can you tell me what that program is called?" Question nine stated, "Give two examples of policy decisions under RBCA." Mr. Shrestha failed to answer question six, seven or nine correctly. Mr. Shrestha's failure to correctly answer each of the administrative questions indicated to Ms. Hanrahan that he was unaware of the changes within the Petroleum Program. Another purpose of the telephone interview was to assess the applicants under pressure. Ms. Hanrahan also sought to evaluate how the applicants responded to her authority. During the telephone interview, Mr. Shrestha challenged Ms. Hanrahan regarding the relevance of the questions to the position of Senior Environmental Specialist and she noted his argumentative attitude during the interview. He conceded at the hearing that he did ask her about the relevancy of the questions. Based upon his argumentative tone, Ms. Hanrahan questioned Mr. Shrestha about his ability to accept her supervisory decisions. She decided not to hire Mr. Shrestha for the position of Senior Environmental Specialist based on his limited knowledge of the administration of the Petroleum Program, a factor essential to the position of Senior Environmental Specialist, and his inability to accept her authority as supervisor. Ms. Hanrahan was also aware of critical statements that Mr. Shrestha allegedly had made to female co-workers during his assignment through Temp Force at the Alachua DEP. Ms. Robin Hallbourg is currently employed as Senior Environmental Specialist with the Alachua DEP. Ms. Hallbourg has been with the Alachua County DEP for 15 years. Ms. Hallbourg worked with Mr. Shrestha at the Alachua DEP during Mr. Shrestha's assignment through Temp Force. Ms. Hallbourg testified that Mr. Shrestha told her that "she should be home with her child" and that she "should allow a man to have her job." After this conversation, Ms. Hallbourg discussed his statements with others in the Alachua DEP, including Ms. Hanrahan. Ms. Hanrahan recalled the discussion with her. Ms. Hanrahan hired Mr. Shuler for the position of Senior Environmental Specialist because he proved himself to be the most qualified candidate during the interview process. Ms. Hanrahan kept an interview log on which she noted Mr. Shuler's strong qualifications for the position of Senior Environmental Specialist. She noted his "excellent experience in the Petroleum Cleanup Program and his significant applicable training and experience in program administration." Ms. Hanrahan also noted that his "application and interview showed strong computer skills." Mr. Shuler's Bachelor's degree in Microbiology met the education requirements for the position of Senior Environmental Specialist. Moreover, at the time of Shuler's application, there had been a growing emphasis placed on bi-remediation, which is currently a regularly used process. Given Ms. Hanrahan's education, training,and experience as a Professional Engineer, she determined that a Bachelor's degree in Microbiology was an appropriate background for the position. In addition, Mr. Shuler had the technical knowledge of processes, performance of groundwater sampling, and drilling, as well as other relevant technical knowledge pertaining to the position of Senior Environmental Specialist. Additionally, due to his continued assignment in the Alachua DEP, he was aware of the new administrative duties required of a Senior Environmental Specialist. Ms. Hanrahan had personally observed Mr. Shuler from October 1995 until January 1996, and was extremely satisfied with his performance. As part of the usual hiring process, Ms. Hanrahan submitted her interview log, personnel action form, and applications to the personnel department to support her hiring decision. Mr. Bird approved the hiring decision in his capacity as director, and the personnel department, budget department, and Equal Employment Office then approved the decision. Since his hire, Mr. Shuler has been commended by the Alachua DEP and his supervisors. Ms. Hanrahan informed Mr. Shrestha that he had not been hired for the position during a telephone conversation on January 23, 1996. She did not base her decision to hire Mr. Shuler over Mr. Shrestha on the basis of race or national origin. Ms. Hanrahan is fully aware of Alachua County's Equal Employment Opportunity policy through her position as advisor on the Equal Opportunity Advisory Committee. There is no evidence of any discriminatory hiring decision. In fact, on the same day that Ms. Hanrahan hired Mr. Shuler for the position of Senior Environmental Specialist, she also hired Mr. Gus Olmos for the position of Environmental Engineering Supervisor. Mr. Olmos is from Panama and is Hispanic. Moreover, Dr. Prasad Kuchibhotla is a Professional Engineer with a Bachelor's, Master's and Ph.D. in Chemical Engineering. He is from India and is Asian. Alachua County hired Dr. Kuchibhotla in 1997 and is the current Petroleum Cleanup Program Manager for Alachua DEP. Dr. Kuchibhotla currently has a Senior Environmental Specialist working for him within the Petroleum Program. As was the case in December 1995, the current Specialist's primary duty is to assist him with the detailed administrative tasks involved with the Petroleum Program. On January 27, 1997, Mr. Shrestha filed a formal Charge of Discrimination. The charge was date stamped as received by the Florida Commission on Human Relations on January 30, 1997. Mr. Shrestha is currently employed with Bell South in Atlanta, Georgia. He earns $47,000 per year and receives health benefits.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations enter a final order finding that Petitioner, Tilak B. Shrestha is not entitled to any relief relating to his charge of discrimination under Title VII of the Federal Civil Rights Act of 1964 and the Florida Civil Rights Act of 1992. DONE AND ENTERED this 2nd day of August, 2000, in Tallahassee, Leon County, Florida. WILLIAM R. PFEIFFER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of August, 2000. COPIES FURNISHED: Tilak B. Shrestha 3579-C Meadowglen Village Lane Doraville, Georgia 30340 Robert M. Ott, Esquire County Litigation Attorney Post Office Box 2877 Gainesville, Florida 32602 Sharon Moultry, Clerk Florida Commission on Human Relations 325 John Knox Road Building F, Suite 240 Tallahassee, Florida 32303-4149 Dana A. Baird, General Counsel Florida Commission on Human Relations 325 John Knox Road Building F, Suite 240 Tallahassee, Florida 32303-4149
The Issue The issue in this case is whether Petitioner's site located at 13292 N.W. 118th Avenue in Miami, Florida is eligible for reimbursement of the costs of petroleum contamination cleanup pursuant to Section 376.3071(12), Florida Statutes.
Findings Of Fact Petitioner Rinker Material Corporation ("Rinker") owns and operates a site known as the Rinker FEC Quarry located at 13292 N.W. 118th Avenue, Miami, Florida 33127 (the "site"). At the Site, Rinker operated three (3) one thousand (1,000) gallon tanks which stored waste oil, virgin oil and hydraulic fluid. The DER Facility ID Number for the Site is 138628827. On December 2, 1988, Petitioner, as part of a tank replacement program that it was attempting to conduct in compliance with the applicable state and county regulations, began excavating the three underground storage tanks at the Site. During the excavation, a visible sheen was discovered. At the time of the excavation on December 2, 1988, Alan Gillespie of the Dade County Environmental Resource Management (DERM) was present to conduct a closure inspection of the Site. The December 2, 1988 closure inspection was conducted for Dade County DERM in its own capacity and not as an agent for DER. The purpose of the December 2, 1988 visit by Alan Gillespie was to inspect the removal and closure of the three 1,000 gallon tanks containing, respectively, waste oil, new oil and hydraulic fluid. Mr. Gillespie's inspection indicated that, while there appeared to be no holes in the tanks, free product was visible. Mr. Gillespie noted in his inspection report, dated December 2, 1988, that the contamination was not caused by a tank leak, but, instead, by overspills caused by the pouring of waste oil into the tank, spilling locally around the riser and then contaminating the soil around the tank. Rinker took samples at the Site and submitted them to a laboratory for analysis. It is not clear when the laboratory report was returned, but it generally takes two (2) weeks to obtain the laboratory analysis. Upon receipt of the laboratory report, Rinker initiated its efforts to apply for participation in the Inland Protection Trust Fund for reimbursement or site rehabilitation. In order to participate in the Inland Protection Trust Fund, an applicant was required to submit an Early Detection Incentive Program Notice (the "EDI Form") to DER prior to midnight on December 31,. 1988. The back of the EDI Form states that the form must be filed with and received by DER during the 15 month grace period beginning July 1, 1986 and ending October 1, 1987. The EDI program was; originally scheduled to end on September 30, 1987. However, the deadline for filing was extended by the legislature to December 31, 1988. The EDI Notification Form was not amended to change the dates to reflect subsequent amendments to the reporting date made by the legislature. While the back of the EDI Application Form indicates that the notification form must be filed with and received by DER on or prior to the initial deadline, DER considered as timely all applications with a postmark on or before the extended deadline of December 31, 1988. Petitioner's EDI Form for the Site was prepared by William Voshell, environmental manager for Rinker. Mr. Voshell was out of the state during the last few days of December, 1988. Petitioner's EDI Form was reviewed and signed by William Payne as Vice President of Real Estate for Rinker, on Friday, December 30, 1988. William Payne was informed by Mr. Voshell that the EDI Forms needed to be sent out before the end of the year. A cover letter accompanying the EDI Form for the Site was signed for Mr. Voshell by his secretary, Linda Vasquez on December 30, 1988. After signing the EDI Form, William Payne returned the application to Linda Vasquez to "process to mail". He reminded her that it had to be mailed that day. Ms. Vasquez placed the EDI Form and the cover letter in the Petitioner's mail system on December 30, 1988. The Certified Mail Number P 533059801 appears on the envelope containing Petitioner's EDI Form. January 3, 1989 was the first business day of 1989. The envelope containing the EDI Form was postmarked January 3, 1989. A certified mail return receipt attached to the envelope containing the EDI Form and cover letter shows that the return was stamped by the post office on January 3, 1989. The postal receipt for the EDI Form and cover letter was returned to Rinker from the post office on January 3, 1989. DER received Petitioner's EDI Form for the Site on January 9, 1989. Petitioner's normal procedure is to internally meter regular mail and affix a postmark date. However, certified or registered mail is metered and taken to the post office for processing. Registered mail received in the Petitioner's mailroom on December 30, 1988 should have been metered and taken to the post office for processing the same day or at the latest the next business day (December 31st, a Saturday). After the EDI Form was filed but prior to the eligibility determination, Petitioner was required to submit Site characterization information and documentation of the Site conditions before the initiation of cleanup. The evidence did not establish the expense or costs incurred by Rinker in gathering this information. Prior to ruling on Petitioner's EDI application, DER, through DERM, conducted an eligibility inspection at the Site. Alan Gillespie of DERM conducted the EDI eligibility inspection on April 20, 1989. During an EDI inspection, the inspector examines and reports on the existing conditions of a facility including: recordkeeping, the age of the tanks and the conditions of the monitoring wells and whether there is any negligence involved with the contamination that has occurred. During the April 20, 1989 inspection, Alan Gillespie reported that the three 1,000 gallon underground tanks had been removed and replaced with a new aboveground petroleum storage system. On the EDI inspection report, Mr. Gillespie reported evidence of soil contamination and/or recent product loss and noted that such contamination was discovered at the time of tank removal. After completion of the April 20, 1989 inspection report, Mr. Gillespie's supervisor at DERM sent the report to DER in Tallahassee. In 1989, final Early Detection Incentive Program or Reimbursement Program eligibility determinations were made in Tallahassee by DER. At the time of the EDI eligibility inspection of the Site on April 20, 1989, the role of Dade County DERM was only to conduct an EDI inspection at the site and to forward the information to Tallahassee. Prior to making an eligibility determination on the Site, Patricia Dugan, Environmental Administrator of the DER Petroleum Cleanup Reimbursement Section, reviewed the EDI application, the inspections from DERM, documentation of the site conditions prior to initiation of cleanup and the envelope that the application came in. On November 23, 1989, DER issued an order finding the Site to be ineligible for participation in the Reimbursement Program. Initially, Petitioner's reimbursement application was deemed ineligible because of mixed contamination (i.e., the Site contained used oil) and because the application was deemed untimely. Subsequent to the date of the denial, certain legal decisions made it clear that, contrary to DER's position, sites containing used oil were eligible for participation in the Reimbursement Program. Thus, the only remaining predicate for DER's denial of Rinker's application is that the application was not timely filed. Because Petitioner's EDI application was postmarked on January 3, 1989, after the December 31, 1988 statutory deadline, the Petitioner's application was deemed untimely by DER. DER's policy of relying on the postmark date for purposes of determining timeliness was informally arrived at in 1987. DER has never promulgated a rule on this matter nor conveyed its interpretation to affected parties. Petitioner could have and would have internally placed a postmark date of December 30, 1988 on the envelope containing the EDI Form had it been aware of DER's policy.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Environmental Regulation enter a Final Order approving Petitioner's application for eligibility under the state's reimbursement program. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 23rd day of July, 1990. J. STEPHEN MENTON 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 23rd day of July, 1990. APPENDIX Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties. The Petitioner's Proposed Findings of Fact: Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Adopted in substance in Findings of Fact 1. Adopted in substance in Findings of Fact 3, 9 and 10. Adopted in substance in Findings of Fact 17 and 20. Adopted in substance in Findings of Fact 20. Adopted in substance in Findings of Fact 26. Adopted in substance in Findings of Fact 22, 36, 37 and 38. Adopted in substance in Findings of Fact 37 and 38. Adopted in substance in Findings of Fact 40. Adopted in substance in Findings of Fact 41. Rejected as constituting argument rather than a finding of fact. Rejected as argument rather than a finding of fact. The Respondent's Proposed Findings of Fact: Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Adopted in substance in Findings of Fact Adopted in substance in Findings of Fact 2. Adopted in substance in Findings of Fact 25. Adopted in substance in Findings of Fact 22. Adopted in substance in Findings of Fact 21. Adopted in substance in Findings of Fact 17. Adopted in substance in Findings of Fact 16. Adopted in substance in Findings of Fact 18. Adopted in substance in Findings of Fact 19. Adopted in substance in Findings of Fact 20. Adopted in substance in Findings of Fact 23. Adopted in substance in Findings of Fact 24. Rejected as constituting argument rather than a finding of fact. Adopted in substance in Findings of Fact 22. Rejected as unnecessary and irrelevant. Adopted in substance in Findings of Fact 15. 17. Adopted in substance in Findings of Fact 15. 18. Adopted in substance in Findings of Fact 37, 38 and 39. 19. Adopted in substance in Findings of Fact 4. 20. Adopted in substance in Findings of Fact 5. 21. Adopted in substance in Findings of Fact 6. 22. Adopted in substance in Findings of Fact 7. 23. Adopted in substance in Findings of Fact 8. 24. Adopted in substance in Findings of Fact 28. 25. Adopted in substance in Findings of Fact 29. 26. Adopted in substance in Findings of Fact 30. 27. Adopted in substance in Findings of Fact 31. 28. Adopted in substance in Findings of Fact 32. 29. Adopted in substance in Findings of Fact 33. 30. Adopted in substance in Findings of Fact 34. 31. Adopted in substance in Findings of Fact 36. 32. Adopted in substance in Findings of Fact 35. 33. Adopted in substance in Findings of Fact 37. 34. Adopted in substance in Findings of Fact 39. 35. Adopted in substance in Findings of Fact 15. 36. Adopted in substance in Findings of Fact 12. 37. Adopted in substance in Findings of Fact 14. 38. Adopted in substance in Findings of Fact 15. 39. Adopted in substance in Findings of Fact 36, 37 and 38. COPIES FURNISHED: Richard A. Pettigrew, Esquire Morgan, Lewis & Bockius 200 South Biscayne Boulevard Miami, Florida 33181 Janet E. Bowman Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Dale W. Twachtmann, Secretary Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Daniel H. Thompson General Counsel Department of Environmental Regulation Twin Towers Office Building 2600 Blair Stone Road Tallahassee, Florida 32399-2400 =================================================================
The Issue The issues in this case are whether Respondent, L.B. King, Jr., violated certain rules relating to petroleum contamination site cleanup criteria promulgated by Petitioner, Department of Environmental Protection (Department), whether he should be required to pay an administrative fine and investigative costs and expenses incurred by the Department, and whether he should take corrective action, as described in the Department's Notice of Violation, Orders for Corrective Action, and Administrative Penalty Assessment (Notice of Violation) issued on June 15, 2007.
Findings Of Fact Based upon the record presented by the parties, and those allegations in the Notice of Violation which are undisputed, the following findings of fact are determined: Respondent is the owner and operator of non-residential property (doing business as King Oil and Tire) located at 16776 Southeast U.S. Highway 19 (at Main Street and Ward Street) in Cross City, Florida. He has owned the property since June 30, 1982. Since July 1978, eight regulated petroleum storage tanks were situated on the property. See Fla. Admin. Code R. 62- 761.200(20), (45), (53), and (65). The Department has assigned facility identification number 15/8839661 to the site. During the intervening time period since Respondent assumed ownership, six of the tanks and their associated piping have been closed or removed, including tank 4 in August 1997 and tanks 5 and 6 in March 2004. Tank 4 was a 1,000 gallon diesel underground storage tank system (UST) originally installed in July 1982, tank 5 was a kerosene UST installed in July 1978, while tank 6 was a waste oil UST installed in July 1978. Only tanks 7 and 8 still remain in service. After tank 4 and the associated piping were closed in August 1997, Respondent conducted a closure assessment in the area of tank 4 and performed soil and groundwater analytical sampling in the area of its former piping run. He then filed a Tank Closure Assessment Report (TCAR) with the Department on August 19, 2003. The TCAR revealed groundwater contaminants above the Department's Cleanup Target Levels (CTLs) for Methylnapthalene in two respects and for Naphthalene. See Fla. Admin. Code R. 62-777.170(1)(a), Table I. Because of the presence of contamination on the site, on September 3, 2003, the Department sent Respondent a letter requesting that he submit a Discharge Report Form (DRF) and initiate a site assessment, as required by Florida Administrative Code Rule 62-770.600, and that he file a completed site assessment report by July 10, 2004.3 Subsection (1) of that rule requires that "[w]ithin 30 days of discovery of contamination, the responsible party shall initiate a site assessment." On September 29, 2003, the Department received the requested DRF. During a tank closure inspection of tanks 5 and 6 performed on March 4, 2004, the Levy County Health Department, acting on behalf of the Department, discovered stained soils in the fill area of tank 6. On May 18, 2004, the Department received a TCAR dated May 7, 2004, for the closure of tanks 5 and 6. The TCAR documented the results of laboratory analytical tests on groundwater samples, which revealed groundwater contaminants above the Department's CTLs for Methylnapthalene in two respects. On May 24, 2004, the Department received from Respondent a copy of a DRF (dated March 9, 2004, as amended on April 9, 2004) for the contamination related to tanks 5 and 6. The DRF was the last report filed by Respondent concerning tanks 5 and 6. On the same date, the Department sent Respondent a letter requesting that he initiate site assessment activities for the discharge related to tanks 5 and 6, as required by Florida Administrative Code Rule 62-770.600(1). On July 14, 2004, the Department sent Respondent another letter requesting (a) completion of a site assessment and (b) the submission of a Site Assessment Report (SAR) for the discharge from tank 4 (SAR-97), which complied with the requirements of Florida Administrative Code Rule 62-770.600(8). (The SAR-97 was originally due on July 10, 2004, but had not yet been filed.) In order to be deemed complete, a SAR must contain all of the information detailed in subsection (8). Also, the letter requested that a SAR for the 2004 discharge (SAR-04) be completed no later than August 1, 2004, as required by Florida Administrative Code Rule 62-770.600(7). That subsection requires in relevant part that "[w]ithin 270 days of discovery of contamination, the responsible party shall submit to the Department or to the FDEP local program for review two copies of a [SAR] " On July 15, 2004, or the day after the above letter was mailed, the Department received a copy of the SAR-97 from Respondent. The report was then referred to the Department's Petroleum Cleanup Section for its review. By letter dated August 27, 2004, the Department advised Respondent that SAR-97 was under review. The letter also changed the due date for the SAR-04 from August 1, 2004, to November 9, 2004. On September 15, 2004, the Department received correspondence from Respondent requesting an extension of time in which to submit his SAR-04. On December 10, 2004, the Department approved the request and authorized Respondent to file a SAR-04 no later than March 1, 2005. On April 12, 2005, Respondent filed with the Department a Site Assessment Report Addendum (SARA) for the 1997 discharge (SARA-97). The report was dated March 1, 2005. On May 25, 2005, the Department sent Respondent a letter requesting that he file two copies of a supplement to the SARA-97 no later than July 5, 2005, to address certain deficiencies noted in that report, as required by Florida Administrative Code Rule 62-770-600(11). That subsection provides that "[i]f the [SAR] is incomplete in any respect, or is insufficient to satisfy the objectives of subsection 62- 770.600(3), F.A.C., the Department or the FDEP local program shall inform the responsible party pursuant to paragraph 62- 770.600(9)(b), F.A.C., and the responsible party shall submit to the Department or to the FDEP local program for review two copies of a [SARA] that addresses the deficiencies within 60 days after receipt of the notice." The same letter also requested that a disposal manifest be provided for the tank and piping closures. On July 11, 2005, the Department received a second SARA-97 from Respondent's consultant. On July 14, 2005, it also received the disposal manifest documentation for the closure of tank 4 and its piping. These were the last reports filed by Respondent. On October 4, 2005, the Department sent Respondent a letter requesting that he provide two copies of a third SARA for the 1997 discharge to address deficiencies noted by the Department in the second SARA. The letter indicated that the third SARA was to be filed no later than November 23, 2005. The Department also requested that he provide a completed financial affidavit to justify Respondent's claim that he was financially unable to complete the remaining required cleanup corrective actions at his property. On November 29, 2005, Respondent requested an extension of time to complete the third SARA-97. (The reason for the requested extension was that Respondent's insurance carrier would not give authorization for the work.) On January 12, 2006, the Department advised Respondent by letter that his request had been denied and that he must submit either the third SARA or a financial affidavit, as previously requested, no later than February 15, 2006. In its response, the Department indicated that it did not "consider generic delays by contractors or insurance carriers as good cause for an extension." To date, neither filing has been made. By failing to file the requested third SARA for the 1997 discharge, Respondent has contravened the requirements of Florida Administrative Code Rules 62-770.600(11) and 62- 770.800(3), which require that within 60 days after notice, a responsible party submit a SARA to address deficiencies noted in a SAR. Respondent's conduct also implicates Florida Administrative Code Rule 62-770.800(5), which makes it a violation of two Florida Statutes for a responsible party to not submit requested information within the time frame specified. Since March 1, 2005, which was the due date on which a report was to be filed, Respondent has failed to submit an approved SAR for the 2004 discharge, as required by Florida Administrative Code Rule 62-770.600(7), which in turn contravenes Florida Administrative Code Rule 62-770.800(3) and (5). To date, Respondent has failed to complete site assessment activities for both the 1997 and 2004 discharges, as required by Florida Administrative Code Rule 62-770.600(10). That provision states that "[s]ite assessment activities shall not be deemed complete until such time as a [SAR] is approved." To date, Respondent has failed to timely and completely assess and remediate the contamination at his property, as required by Florida Administrative Code Rule Chapter 62-770. That chapter contains the criteria which apply to the cleanup of a site contaminated with petroleum products. During the course of its investigation of this matter, the Department has incurred expenses "in the amount of not less than $500.00." As mitigating evidence, Respondent offered into evidence Respondent's Exhibits 2-15, the majority of which pertain to his insurance policy and the pending litigation with his carrier, Mid-Continent Casualty Company (MCC), or the priority score funding process, which is the process by which contaminated properties are scored or rated for purposes of determining eligibility to receive state cleanup funds when the responsible party is financially unable to do so. Although evidence regarding the insurance policy and pending litigation was deemed to be immaterial to the issues of establishing Respondent's liability for the violations and responsibility for undertaking the corrective actions necessary to satisfy the violations, the undersigned ruled that it could be used by Respondent as mitigating evidence, if relevant, for the purpose of seeking to reduce the administrative penalty. Respondent's Exhibits 8, 9, and 11 indicate that after he reported the 2003 discharge to MCC, in 2003 the carrier denied coverage for that discharge (on the ground "any 'confirmed release' must commence after the retroactive date of the policy (4/3/98)"). However, MCC initially accepted coverage for the 2004 discharge and authorized Respondent's environmental consultants to conduct a site assessment. The documents further show that in December 2005, or before the 2004 site assessment had been completed and a SAR prepared, MCC reversed its position and denied coverage for the 2004 discharge on the ground there was no "Confirmed Release," as defined by the policy. Respondent then filed his lawsuit seeking a determination that the carrier was responsible for cleanup costs. Respondent asserts that he has expended more than $50,000.00 in pursuing the lawsuit, which is much more than the administrative penalty being assessed by the Department. Respondent points out that prior to the time MCC reversed its position as to coverage for the 2004 discharge in December 2005, he had filed a DFR, TCAR, disposal manifest, SAR- 97, and two SARAs for the 1997 discharge, and a TCAR and DFR for the 2004 discharge, all of which indicate a good faith effort on his part to comply with the assessment requirements. As noted above, the final reports prepared by Respondent's consultant were a second SARA-97 and a disposal manifest for the 1997 discharge, which were filed with the Department in July 2005, and a TCAR and DRF for the 2004 discharge filed in May 2004. Respondent's Exhibit 10A recites language in Coverage B of the insurance policy, which provides in part that MCC "will pay Clean-up Costs by an Insured for environmental damage that an Insured is legally obligated to pay . . . ." Respondent argues that if he acknowledges by affidavit or other proof that he does not have the ability to pay for cleanup costs, he fears that under the above language, MCC would not be "legally obligated to pay." This is because Section 376.3071(7)(c), Florida Statutes, provides that when a responsible party does not have the ability to pay for all of the cleanup costs, the Department "may" enter into an agreement with the responsible party to undertake all or part of the site rehabilitation after "taking into consideration the party's net worth and the economic impact on the party." Respondent contends that if he files an affidavit under this statute, MCC would then be relieved of any responsibility under the policy, and his rights in the lawsuit would be jeopardized. Respondent further points out that several other provisions in the insurance policy prohibit him from completing the assessment until the litigation is concluded. For example, one provision (Section II.B) provides that "No Clean-up Costs, charges, and expenses shall be incurred without the Company's consent," while another (Section II.C) provides that "An Insured shall not admit or assume any liabilities or settle any Claim(s) without the Company's consent." Respondent asserts that these provisions prevent his consultant from conducting any further work on the site without MCC's consent, and if he does so, he will lose the right to reimbursement under the policy. Finally, Exhibits 3 through 6 show that Respondent's property has been assigned a site ranking score of ten points, and that the Department is currently funding sites that are eligible for state restoration funding only if they have scores of 37 points and higher. Thus, Respondent argues that a delay in remediation of the site is not unreasonable. Except for the two discharges at issue in this case, there is no evidence that Respondent has a history of non- compliance or that he gained any direct economic benefit by virtue of the discharges. Although no reports have been filed since July 2005, through counsel, Respondent has kept the Department abreast of his efforts to establish liability on the part of MCC so that the site assessments can resume.
Findings Of Fact Reimbursement Program The Florida Legislature created the Petroleum Contamination Site Cleanup Program to encourage responsible persons with adequate financial ability to conduct site rehabilitation and seek reimbursement in lieu of the state conducting cleanup. Section 376.3071(12), Florida Statutes (1993). Site owners and operators or their designees become entitled to reimbursement from the Inland Protection Trust Fund (IPTF) of their allowable costs at reasonable rates after completing a program task. Section 376.3071(12)(b), Florida Statutes. The costs of site rehabilitation must be actual and reasonable. Section 376.3071(12)(d), Florida Statutes. "Allowable" costs are those which are associated with work that is appropriate for cleanup tasks, i.e. whether the cost represents work that is technically necessary for the program task and otherwise not in violation of reimbursement limitations prescribed by statute or rule. In order for costs to be reimbursable, an applicant must convert charges in an application into applicable units and rates. Rule 17-773.100(5), Florida Administrative Code. DEP has a predominate rate schedule to determine whether a specific allowable cost is reasonable. DEP bases its predominate rates on a study of average rates that contractors charge for a particular task. In addition, DEP reviews each application to determine whether the overall cost and the methods used to perform the work are reasonable. DEP must also evaluate each application to determine whether a charge is an actual cost of a project. Contractors or subcontractors do not actually incur a fully reimbursable cost when they promise the site owner or its designee that they will perform work for an amount less than other professionals would charge, then allow the site owner or its designee to file a claim for reimbursement at or near the predominate rate. Such an agreement creates a back flow of funds to the site owner or its designee. This is true even though the charges are within the range of DEP's predominate rates. DEP never intended the rate schedule to create an entitlement to reimbursement regardless of the cost that contractors and subcontractors actually incur. Requests for reimbursement must apply to costs which are "integral" to site rehabilitation. Rule 17-773.100(2), Florida Administrative Code. "Integral" costs are those which are essential to completion of site rehabilitation. Rule 17-773.200(2)(11), Florida Administrative Code. After integral costs have been identified and incorporated on a units and rates basis in an invoice, the invoice may be marked up at two levels. These markups are subject to certain limitations: There can be no more than two levels of markups or handling fees applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(9), F.A.C.); There can be no markups or handling fees in excess of 15 percent for each level of allowable markup applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(10), F.A.C.); and There can be no markups or handling fees applied to invoices between any two entities which have a financial, familial, or beneficial relationship with each other (Rule 17-773.350(11), F.A.C.). In order to be reimbursable, costs must have been actually "incurred." Rule 17-773.700, Florida Administrative Code. "Incurred" means that allowable costs have been paid. Rule 17-773.200(9), Florida Administrative Code. A contractor must pay all invoices generated by a subcontractor at 100 percent of their face value prior to submission of an application in order to qualify those invoices for reimbursement. When a contractor pays a subcontractor's invoices, the contractor paying those invoices may apply the first-tier markup. Prior to submitting a reimbursement application, a funder or "the person responsible for contamination site rehabilitation" (PRFCSR) must pay the contractor for its invoices and markup. Then, the funder may apply the second- tier markup and submit the reimbursement application to DEP. DEP does not contest the second level of markup in these applications. DEP rules restrict reimbursement when parties within the usual "chain" of reimbursement (PRFCSR or funder, contractor and subcontractor) have financial, beneficial or familial relationships with each other or the site owner. These terms are defined in Rules 17-773.200(1), 17-773.200(6), 17- 773.200(7), Florida Administrative Code. The application form requires disclosure of such relationships through the Program Task and Site Identification Form. DEP's rules and written guidelines do not address or apply to activities, including financing arrangements, occurring outside of the chain of reimbursement if an applicant does not include charges for such activities in an application. Heretofore, DEP has not deducted finance costs that an applicant does not include as a line item in a reimbursement application. DEP must perform financial audits to ensure compliance with Chapter 376, Florida Statutes, and to certify site rehabilitation costs. Rule 17- 773.300(1), Florida Administrative Code. DEP performs this audit function: (a) to establish that the PRFCSR incurred the cost; (b) to determine that adequate documentation supports the claimed costs as incurred; and (c) and to review the reasonableness and allowance of the costs. The audit staff interprets the term "incurred" to mean that the applicant paid the costs included in the reimbursement application. DEP's audit staff usually does not inquire as to the level of a PRFCSR's financing where the application contains no line-item financing charges. However, the audit staff makes appropriate inquiries depending on the facts and events surrounding an individual application. Pursuant to Rule 17-773.350(4)(e), Florida Administrative Code, "[i]nterest or carrying charges of any kind with the exception of those outlined in Rule 17-773.650(1), F.A.C." are not reimbursable. The exceptions to the payment of interest set forth in Rule 17-773.650(1), Florida Administrative Code, are not at issue here. An interest rate charge on short-term borrowed capital from an unrelated third-party source is a "cost of doing business." DEP's predominate rates are fully loaded. They include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. DEP includes the cost of short-term borrowed capital in the direct and indirect overhead components of the fully-loaded personnel rates. Rule 17-773.700(5)(a), Florida Administrative Code. Petitioners PRFCSRs are entitled to make application for reimbursement of allowable markups and costs of site rehabilitation that they incur. In these consolidated cases, the site owners or operators designated either Petitioner ET or Petitioner SEI as PRFCSR. The PRFCSR is typically referred to as the "funder" in the reimbursement chain. Petitioner ET is a trust formed in 1993 and domiciled in Bermuda. It acts as American Factors Group, Inc.'s (AFG discussed below) conduit for funds that finance activities associated with Florida's petroleum contamination site cleanup program. The named beneficiaries of the trust are those contractors and subcontractors entitled to payment of costs for activities integral to site rehabilitation and for allowable markups of such costs. The sole trustee of ET is Western Investors Fiduciary, Ltd. (WIFL). WIFL is also the owner and a beneficiary of ET. Any profit that ET derives from funding petroleum contamination site cleanup flows through WIFL to investors who provide funds to finance site rehabilitation. American Environmental Enterprises, Inc. (AEE, discussed below) provided the investment funds for the reimbursement applications at issue here. WIFL is a limited liability corporation created and domiciled in Bermuda. The officers of WIFL are: William R. Robins, President; John G. Engler, Vice-President; and Peter Bougner, Secretary. The directors and shareholders of WIFL are: William R. Robins, John G. Engler, Paul H. DeCoster, Alec R. Anderson and Nicholas Johnson. Petitioner SEI is a corporation incorporated and operating under Florida law. Organized in 1994, SEI acts as AFG's conduit for funds to finance activities associated with Florida's petroleum contamination cleanup program. The officers and directors of SEI are: William R. Robins, President; John G. Engler, Executive Vice President; and Paul H. DeCoster, Secretary. William R. Robins is the sole shareholder of SEI. ET filed the petition for administrative hearing on behalf of SEI in at least four cases: Case Numbers 96-405, 96-425, 96-433, 96-437. Respondent DEP is the agency charged with the duty to administer the IPTF and Chapter 376, Florida Statutes. Financing Entities American Factors Group, Inc. (AFG) is a privately held corporation incorporated and operating under New Jersey law. AFG is not a party to this proceeding. AFG, acts as the servicing agent for contracts associated with factoring activities and other types of financing operations. AFG, through one of its divisions, Environmental Factors (EF), entered into factoring contracts with: (a) Gator Environmental, Inc. (Gator), general contractor; and (b) Tower Environmental, Inc. (Tower), prime subcontractor. Through these agreements, EF or its assignee bought the rights of Gator and Tower to future reimbursement payments at a percentage of the face value of the relevant invoices. The officers of AFG are: William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Bleak House, Inc. (Texas) owns the stock of AFG. American Environmental Enterprises, Inc. (AEE) is incorporated and operating under Nevada law. AEE is not a party to this proceeding. AEE, as the assignee under the EF contracts, is a third-party provider of capital to various entities in the reimbursement process. The officers of AEE are: William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Bleak House, Inc., (Nevada) owns the stock of AEE. Bleak House, Inc., (Nevada) is incorporated and operating under Nevada law. Bleak House, Inc. (Texas) is incorporated and operating under Texas law. Officers of both corporations are William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Magazine Funding, Inc. owns the stock of both Bleak House corporations. Magazine Funding, Inc. is incorporated and operating under Nevada law. Officers of Magazine Funding, Inc. are William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Family Food Garden, Inc. owns the stock of Magazine Funding, Inc. Family Food Garden, Inc. is incorporated and operating under Massachusetts law. Officers of Family Food Garden, Inc., are William R. Robins, President; and Paul H. DeCoster, Secretary. Six shareholders own the stock of Family Food Garden, Inc. None of these shareholders are related by familial ties to the officers or directors of the aforementioned companies or any relative thereof. Each of these companies -- ET, SEI, WIFL, AEE and AFG (including EF) share common officers and directors. Each of the companies maintain their own books and business records, file their own tax returns, and maintain records in accordance with the laws of the jurisdiction in which they were established. They operate pursuant to their respective bylaws or trust documents. ET, WIFL, and SEI do not have common assets with AEE or AFG (including EF). ET, WIFL and SEI do not have a beneficial, financial, or familial relationship with AEE or AFG (including EF) as Rule 17-773.200, Florida Administrative Code, defines those terms. Despite the facial organizational and structural integrity of ET, WIFL, SEI, AEE and AFG, the officers and directors of AFG and/or AEE created ET, WIFL, and SEI, in large part, for the benefit of AFG and/or AEE as a means to invest funds in petroleum contamination site cleanup programs. The officers and directors of AFG specifically created SEI to meet the needs of AFG's Florida investors. The purpose of each funder is to maximize the profits of AFG and its investors. AFG has other investment vehicles (funders) which it uses at times depending on the needs of its investors. AFG waits until the last instance before deciding which entity it will designate as funder in any particular factoring scenario. AFG usually does not make that decision until the day AFG's designated funder issues a funder's authorization to the general contractor. At the hearing, Mr. Stephen Parrish, a vice president of AFG, testified as the party representative for ET and SEI. ET, WIFL and SEI have no employees. EF or AFG responded to DEP's request for Petitioners to provide additional information about the financing scheme utilized here using stationary bearing EF's or AFG's letterhead. At least five of these letters written on SEI's behalf, refer to ET, an affiliate of AEE, as the funder. Nineteen of the letters written on ET's behalf refer to ET, an affiliate of AEE, as the funder. The greater weight of the evidence indicates that AFG and/or AEE negotiated less than arms-length contractual agreements with ET, WIFL, and SEI. Petitioners admit that they are "affiliates" of AEE and AFG through contractual agreements. However, there are no written factoring contracts between Petitioners and AFG such as the ones that exist between AFG, Gator and Tower. The only documented evidence of agreements between Petitioners and AFG are transactional based bills of sale representing the sale to AEE of Petitioners' right to receive reimbursement from IPTF. AFG created these bills of sale for bookkeeping purposes. AFG did not even go to the trouble of tailoring the form for the bills of sale for their stated purpose. For all practical purposes, Petitioners are under the management and control of AEE and AFG. Petitioners and AFG disclosed their affiliation in meetings with DEP staff and through correspondence and other documentation, including but not limited to: (a) letter to DEP dated July 13, 1994 from AFG's counsel; (b) Addendum to Certification Affidavit signed by a certified public accountant in each application; (c) funder's authorization form; (d) letters sent to DEP between August 14, 1995 and November 19, 1996. Factoring and the Factoring Transactions Factoring is the purchase and sale of an asset, such as an account receivable, at a discount. An account receivable reflects the costs that a business charges after rendering a service but before the entity responsible for payment pays for that service. When a contractor completes a rehabilitation task, the contractor's invoice is an account receivable until it receives payment. In these consolidated cases, AEE provided short-term capital to Gator and Tower at an interest rate equal to the discount percentage of the relevant invoice (account receivable). Gator and Tower did not sell their account receivables to AEE. Instead, AEE, as the assignee of EF, purchased a contractual right to receive Gator's and Tower's reimbursement payments. In exchange, AEE advanced them a discounted amount of their invoices. The discounted amount of each invoice represents a loan from AEE to Gator and Tower. The difference between the face amount of the invoices and the discounted amount of the invoices represents interest. A discount percentage and an interest rate are equivalent. The amount of the discount represents interest on the loans or advances provided by AEE. It is an interest expense to the contractor or subcontractor. The amount that Gator and Tower actually incurred is the discounted amount of their invoices. The Factoring Agreements On or about April 25, 1994, EF and Tower entered into a Prime Subcontractor Factoring Agreement which set forth the terms under which EF or its assignee would finance Tower's site remediation work. At that time, the parties to the contract anticipated that EF would retain a general contractor to perform on-site remediation services with Tower acting as prime subcontractor. In the contract, Tower agreed to sell to EF its right to receive payments from the general contractor at a percentage of the underlying invoices. Subsequent to the execution of April 1994 Prime Subcontractor Factoring Agreement, Tower experienced financial difficulties resulting in its inability to pay subcontractors for work that they performed under non-EF contracts. These financial difficulties made it impossible for Tower to meet its payroll that was due in two weeks. Tower and its subcontractors under the non-EF contracts approached AFG and EF requesting financial assistance to resolve Tower's financial difficulties and to ensure that the subcontractors would be paid for their work. At that time, the program tasks under these non-EF contracts were complete or substantially complete. Given the preexisting contractual relationship between EF and Tower on other projects, AFG determined that it could use a similar financing arrangement to resolve Tower's financial problems. Such an arrangement also would protect AFG's investment in projects being conducted under the EF-Tower contracts. On or about July 8, 1994, EF and Tower executed an addendum to the April 1994 Prime Subcontractor Factoring Agreement. This addendum applied to projects that were not covered by the original Prime Subcontractor Factoring Agreement. The addendum required Tower to sell to EF Tower's right to receive payments from the general contractor. In return, EF agreed to advance Tower a discounted amount equal to 97 percent of the face amount of Tower's invoices. Tower agreed to pay EF 100 percent of the face amount of the invoices upon receipt of payments from the general contractor. The discounted amount of each invoice represents a loan from AEE to Tower. Late in 1993 or early in 1994, Gator began negotiating a contract with EF to provide general contracting services for on-site remediation work on unspecified Florida projects being financed by EF. Gator began serving as general contractor on some of these unspecified projects prior to the execution of a contract. On or about July 8, 1994, EF and Gator entered into a General Contractor Factoring Agreement. In this contract, EF agreed to provide financing for projects on which Gator served as general contractor. Gator agreed to sell to EF its right to receive payments from the funder (ET or SEI) at a percentage of Gator's underlying invoices. On or about July 13, 1994, EF and Gator entered into an Addendum to the July 8, 1994 General Contractor Factoring Agreement. This addendum applied to projects which were not covered under the original General Contractor Factoring Agreement. The addendum required Gator to sell to EF Gator's right to receive payments from the funder (ET or SEI). In return, EF agreed to advance Gator a discounted amount equal to 88 percent of the face amount of Gator's invoices. Gator agreed to pay EF 100 percent of the face amount of the invoices upon receipt of payments from the funder. The discounted amount on each invoice represents a loan from AEE to Gator. Gator and Tower negotiated the respective factoring contracts and addenda thereto at arms-length. Pursuant to the terms of these contracts, EF assigned to AEE the rights to payments due to Tower from Gator and to Gator from ET or SEI. ET and SEI were not named parties to these contracts. The factoring contracts and the corresponding addenda apply to the reimbursement applications at issue here. Pursuant to those agreements, the following interrelated transactions took place though not necessarily in this order. First, Tower provided EF with a Site Certification Affidavit for a certain project. Tower also sent Gator a complete reimbursement application for the project and an invoice for Tower's services and the services of its subcontractors and vendors. Next, EF designated either ET or SEI as the funder. The funder then sent Gator a funder's authorization form. This form acknowledged that EF was an affiliate of the funder. It is the only documented evidence of a contract between the funder and Gator. Gator's receipt of the form constituted authorization for Gator to perform work on the project subject to reimbursement for all reimbursable costs and paid subcontractor invoices. Within two days of receiving the funder's authorization for a project, Gator issued Tower a subcontract/purchase order. Gator notified EF and the funder of such issuance. Upon receipt of the subcontract/purchase order, Tower sold to AEE (at a discount) Tower's right to receive full payment from Gator. A bill of sale evidenced this transaction. Tower agreed to repay AEE the face amount of Tower's invoice upon receipt of payment from Gator. Tower executed an agreement indemnifying the funder and guaranteeing the performance of all services and the delivery of all goods. Tower agreed to a reserve trust fund deposit as security for the ultimate reimbursement payment from the IPTF. Within four days of receiving the complete reimbursement application from Tower and within two days of receiving the funder's authorization, Gator and a certified public accountant (retained by EF) were supposed to review all supporting documentation on the project. The stated purpose of this review was to determine whether the invoices of Tower and its subcontractors were reimbursable under DEP guidelines. As to 30 of the instant applications, Tower completed the on-site work before Gator became involved. In those cases, Gator performed a minimal due diligence review, if any, of Tower's on-site work. This included comparing Tower's technical and administrative files with the applications prepared by Tower. Without Gator's minimal review and risk assessment on these 30 applications, EF would not have included them as projects covered by the addenda to the factoring contracts. As to 15 of the instant applications, Petitioners claim that Gator not only reviewed Tower's work product but also, issued subcontractor/purchase orders selected and scheduled subcontractors, and made on-site visits. However, there is no persuasive record evidence as to the specific activities or the level of Gator's involvement in on-site work on any one of these 15 applications. When Gator and EF's certified public accountant completed their assessment, Gator prepared a deficiency letter and sent it to all parties. The report advised EF, the funder and Tower whether any of Tower's charges were in excess of the reimbursable amount. Tower could accept or reject any disallowance set forth in the deficiency letter. If there was no problem with a disallowance or within five days of Tower's acceptance of a disallowance, AEE advanced Tower an amount equal to 97 percent of Tower's invoice. Tower used these funds to pay subcontractors and vendors. The discounted amount of Tower's invoice represents the actual cost that Tower incurred. Tower signed a repayment agreement in which it promised to repay AEE the face amount of Tower's invoice upon receipt of payment from Gator. When Tower received the discounted cash advance from AEE, it had to contribute the reserve deposit (to cover any reimbursement shortfalls) to a reserve trust, domiciled in Bermuda, which was affiliated with EF. Tower was a beneficiary of the reserve trust to the extent of its contribution less any monies it owed AEE after the IPTF reimbursed the funder. Meanwhile, Gator sold to AEE (at a discount) Gator's right to receive full payment from the funder. A bill of sale evidenced this transaction. Gator agreed to repay AEE the face amount of Gator's invoice upon receipt of payment from the funder. AEE advanced Gator an amount equal to 88 percent of the face amount of Gator's invoice. The discounted amount of Gator's invoice represent the amount that Gator actually incurred. Gator used these funds to pay Tower the face amount of its invoice. Tower in turn repaid AEE in full. Gator signed a repayment agreement in which it promised to repay AEE the face amount of its invoice upon receipt of payment from the funder. For the 45 applications at issue here, the addendum to the General Contractor Factoring Agreement did not require Gator to deposit any amount in the reserve trust which was domiciled in Bermuda and affiliated with EF. Next, Gator prepared an invoice for its services and the services of Tower and its subcontractors including a 15 percent markup and an application preparation fee. Gator's invoice could not include a charge for "management time." Then, Gator forwarded its invoice and Tower's invoice to the funder together with the complete reimbursement application. In the meantime, ET and SEI sold AEE their right to receive reimbursement from the IPTF at a discount equal to 87 percent of their total invoice amount. A bill of sale for each transaction is the only documented evidence of an agreement between the funders and AEE. ET and SEI agreed to repay AEE for the face amount of their invoices upon receipt of payment from IPTF. The funder prepared an invoice for the face amount of Gator's and Tower's invoices plus a 15 percent markup. Upon receipt of ET's or SEI's invoice, AEE advanced them the discounted amount as agreed. ET or SEI used the funds advanced by AEE to pay Gator the face amount of its invoice. Gator in turn repaid AEE in full. When ET or SEI receive a reimbursement payment from the IPTF, they will remit the total payment to AEE. The total cost for each project increased as the discount percentage and the face amount of each invoice passing up through the chain grew larger. In regards to some applications, the relevant dates on the subcontract/purchase order, Gator invoice, and Tower invoice are the same. It is clear that the turn around time on all of the above referenced transactions, including the time between the payment of the advances by AEE to Gator and Tower and their subsequent repayment of 100 percent of the face amount of an invoice to AEE, was very short--a matter of days or weeks. In Summary, the financing of the pending reimbursement applications involved the following interrelated transactions but not necessarily in this order: AEE as the assignee of EF purchased the right of ET, SEI, Gator and Tower to receive reimbursement for their services at a discount. ET, SEI, Gator and Tower agreed to repay AEE in full. Tower prepared and submitted to Gator an invoice for services provided by Tower and its subcontractors. Tower also prepared and submitted to Gator a reimbursement application for the program task. AEE advanced Tower the agreed upon discount amount. Tower used these funds to pay its subcontractors and vendors. AEE advanced Gator the agreed upon discount amount. Gator used these funds to pay Tower. Tower repaid AEE in full. Gator prepared an invoice for services provided by Gator, Tower and Tower's subcontractors including a 15 percent markup and submitted it with the reimbursement application either to ET or SEI. AEE advanced ET or SEI the discounted amounts as agreed. ET or SEI paid Gator in the full amount of Gator's invoice plus markup. Gator repaid AEE in full. ET or SEI prepared an invoice for its services plus the services of Gator, Tower, and Tower's subcontractors and a 15 percent markup. ET or SEI submitted the reimbursement application to DEP. When ET or SEI receives reimbursement from the IPTF, they will remit the total payment to AEE. The Applications Petitioners filed the 45 applications that are the subject of this proceeding between July 18, 1994 and February 17, 1995. The financing scheme that Petitioners utilized in these applications was unique. Prior to receiving these applications, DEP never had reviewed reimbursement applications using the type of financing scheme at issue here. In fact, the instant cases present a scenario never contemplated by DEP when promulgating rules and developing written policies. DEP has established a list by which it determines whether an applicant is charging a "reasonable rate." DEP developed that list in accordance with Petroleum Cleanup Reimbursement (PCR) Guideline Number 1. PCR 1 establishes a "predominant rate" for costs involved in the site rehabilitation process. The predominant rate may be exceeded by up to 30 percent for personnel charges, and by up to 50 percent for non-personnel charges. Within these ranges, DEP evaluates each application and determines whether the PRFCSR is entitled to reimbursement for "allowable cost" at "reasonable rates." The work performed by Tower was at or near DEP's "predominant" rate. In no instance were Tower's rates near the upper limits of the reasonable rate ceiling. Tower's invoices appear to represent work that was integral to site rehabilitation which was broken down into appropriate units and rates. There is no evidence of "price fixing" between any entities engaged in site rehabilitation. There is no evidence that Tower intentionally inflated the costs of cleanup or of the scope of cleanup services to cover the cost of financing. There are no familial, beneficial or financial relationships, or any other form of affiliation between Tower and its subcontractors. A certified public accountant (CPA) attestation accompanied the applications indicating that Petitioners incurred (paid) all relevant costs. The applications did not include charges associated with the financing arrangements as line items. The CPA attestations referenced an addendum to the Certification Affidavit. The addendum indicated that "American Environmental Enterprises, Inc., an affiliate of the Environmental Trust, has provided financing to certain contractors and subcontractors by factoring invoices which are included within this application." The CPA provided the reference to the addendum in the CPA attestation as an "emphasis of the matter" statement rather then an "exception," or a modification of the CPA's attestation that Petitioners had incurred all costs in the application. The CPA firm performing the attestation services previously informed DEP of its intent with regard to "emphasis of the matter" reports. Nevertheless, the difference between the face amount of an invoice and the discounted amount of that invoice clearly represents interest. This interest was not allowable as an actual and reasonable cost of site remediation because Gator and Tower agreed to accept a lesser amount for their services prior to submittal of the applications. Therefore, they did not actually incur the amount reflected in the face amount of their invoices. DEP's predominate rates and units are fully loaded. Interest rate charges on borrowed capital from unrelated third-party sources are a "cost of doing business." DEP's fully-loaded rates include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. The direct and indirect overhead components of DEP's fully-loaded rates include the cost of short-term "working" capital. However, DEP never intended the predominate rate schedule to entitle an applicant to reimbursement for costs that it did not actually incur. In the instant cases, funds that passed down through the chain from ET or SEI to Gator or from Gator to Tower flowed directly and immediately back to AEE who was affiliated with the funder. Any profit derived by the funder, ET or SEI, will flow directly to AEE and its investors. The amount that Petitioner's actually incurred before they submitted the applications was the amount that AEE advanced to Tower and/or its subcontractors for integral site work plus the actual cost of Gator's allowable services, if any, which were separate and distinct from Tower's work, plus any allowable markup(s). Factoring Policy At the time that Petitioners submitted the subject applications for reimbursement, there was no rule or written guideline governing financing transactions, including factoring, occurring outside of the usual chain of reimbursement. DEP normally did not inquire about such financing so long as an applicant did not pass the costs of such financial transactions to DEP in the application as a line-item cost. There was no policy disallowing reimbursement for the face amount of the invoices when an applicant sold the right to payment, i.e. the receivable, at a discount to a disinterested third-party in an arms- length transaction. Commencing on August 31, 1994, DEP began to develop a policy regarding the use of factoring as a financing mechanism in the reimbursement program. DEP staff exchanged numerous documents regarding the subject of factoring. In one of those documents, Charles Williams, DEP's Reimbursement Administrator indicated that "we absolutely need to have a Big Meeting to decide what to do once and for all." In a November 1994 telephone conversation, DEP provided AFG's counsel with an informal opinion of how DEP would handle a factored application as described by Will Robins of AFG in an earlier meeting with DEP staff. The statement was: that the difference between the amount that a contractor accepted in payment for his services, which was a discounted amount after factoring, . . . and the face value of the invoice which was claimed and marked up in the application was determined to be a carrying charge or interest, which is specifically disallowed for reimbursement in the reimbursement rule. American Factors Group. Inc. and the Environmental Trust v. Department of Environmental Protection, DOAH Case No. 95-0343RU, Final Order issued July 24, 1995. DEP advised AFG's counsel that it would deal with factored applications involving other entities on a case by case basis. On December 20, 1994, John Ruddell, Director of DEP's Division of Waste Management, sought permission from DEP's Policy Coordinating Committee to promulgate a rule amendment to Chapter 62-773, Florida Administrative Code (formerly Chapter 17-773, Florida Administrative Code.) A draft rule accompanied the request. The draft rule was developed in compliance with Chapter 94-311, Section 6, Laws of Florida, which required DEP to revise its reimbursement rule. The draft rule provided that: nothing in this Chapter shall be construed to authorize reimbursement for the face amount of any bill or invoice representing incurred costs when the receivable has been sold at a discount. In all such cases, reimbursement shall be limited to the actual discounted amount accepted by the provider of the goods or services . . . . The draft rule had the effect of prohibiting factoring as a mechanism for financing site rehabilitation work. It did not single out any other type of financing mechanism. DEP did not promulgate the draft rule because the problems with the program were too numerous to correct in a timely fashion by rulemaking. Instead, DEP focused on drafting proposed legislation. In the meantime, DEP requested that Petitioners furnish additional information regarding the instant applications. Between March 1, 1995 and November 17, 1995, ET and SEI responded to DEP's requests with letters bearing AFG's or EF's letterhead. The letters state that prior to filing the applications, ET or SEI paid Gator for the face amount of Gator's invoices plus Gator's markup. Gator then paid the subcontractors for the face amount of their invoices. Prior to these payments, AEE an affiliate of ET, or SEI purchased the right to receive the amount due to Gator from ET and the right to receive the amount due to subcontractors from Gator. In each case, AEE bought the right to receive at a discount. According to the financing scheme, ET or SEI received sufficient funds from AEE to make the payments to Gator. ET or SEI, in turn, were obligated to pay AEE following their receipt of the funds claimed in the reimbursement application. On April 21, 1995, DEP issued a memorandum to DEP application reviewers to guide them in the processing of reimbursement applications. The memorandum indicated that: invoices from subcontractors, vendors, suppliers and/or the general contractor which were paid a factored (e.g., discounted) amount by a third party capital participant (e.g., funder) represents the actual amount incurred by that entity and subsequently by the general contractor. The memorandum directed reviewers to deduct costs in an amount equal to the difference in the face value of an invoice or application and the amount paid for the right to receive payment under that invoice or application. DEP did not direct the policy set forth in the April 21, 1995 memorandum towards any individual company. DEP intended the policy to apply to "any combination of a general contractor, management company, funder and responsible party" in any situation in which a third-party capital provider paid any program participants a factored (discounted) amount of their invoices." The April 21, 1995, policy did not condition DEP's position on factoring on any affiliation between any parties. Between August 14, 1995 and January 19, 1996, DEP took action on the 45 applications that are the subject of this proceeding. As reflected in those notices, DEP denied reimbursement of costs claimed in those applications "as a result of factoring of the supporting invoices" and because "the difference between the face amount of the supporting invoices and the amount factored represents interests or carrying charges which are specifically excluded from reimbursement pursuant to Rule 62-773.350, F.A.C." The notices properly reflect a basis of denial of costs that is consistent with DEP's policy as reflected in the December 20, 1994 draft rule and the April 21, 1995 memorandum. DEP has proven that its policy on factoring is consistent with its legislative mandate to deny reimbursement of costs which are not actual and reasonable. Affiliation Policy Not all out-of-chain affiliations between entities constitute a problem with regard to reimbursement. However, the instant cases presented DEP with unique facts as to the relationship between AEE, AFG, ET, WIFL and SEI which DEP's rules and written policies do cover. The mere existence of common corporate officers does not, in and of itself, cause AFG/AEE, ET, WIFL, and SEI to lose their integrity as separate legal entities, or make them "one and the same." Common officers of corporations are not an element of the term "financial relationship," nor does the concept of common corporate officers appear in the definitions of beneficial relationship, familial relationship, indirect interests, material interests, or sources of income. DEP's position at hearing that "affiliation" is a major key to it's position with regard to factoring does not appear in any of the documents in which DEP has either discussed or disseminated information regarding factoring. There are no requirements in DEP's application forms to disclose the nature of the relationships between an applicant and an applicant's source of financing. DEP makes no standard inquiry of funders to disclose the nature of any affiliation between the funder and the provider of capital. Nevertheless, the record supports DEP's position that it can deny reimbursement for costs when a PRFCSR has an "affiliation" with a factoring company outside of the chain of reimbursement under the facts of these cases. It is not contested that ET, WIFL, SEI and AFG and its sister company AEE are affiliated. The greater weight of the evidence indicates that this affiliation goes beyond a mere contractual agreement. AFG, AEE, WIFL (which owns ET and is a trust beneficiary), and SEI have common officers and directors. These officers and directors created ET and SEI primarily for the benefit of AFG and AEE as conduits for investment of funds in Florida's petroleum contamination site rehabilitation program. AFG has other investment vehicles, in addition to ET and SEI, which it can designate as a funder depending on the needs of its investors. AFG usually waits until the last instance to select the funder that it will use in any particular case. AFG often selects the funder on the same day that the funder issues its authorization to the general contractor. The greater weight of the evidence indicates that AFG and/or AEE and the Petitioners did not negotiate the contractual agreements between them at arms-length. A bill of sale evidencing the sale of Petitioners' right to receive reimbursement on each application is the only documented evidence of agreements between Petitioners and AFG or AEE. Any profit derived by ET flows back to AEE through WIFL. ET and SEI are under the management and control of AEE and AFG's officers and directors. For all practical purposes ET and SEI are "one and the same" as AEE and AFG. The affiliation between AEE, AFG, WIFL, ET and SEI is especially troublesome here where AEE advanced the discounted amount of invoices to: (a) Tower so that it could pay its subcontractors in full; (b) Gator so that it could pay Tower in full; and (c) its affiliates, ET and SEI, so that they could pay Gator in full. Gator's and Tower's immediate repayment in the face amount of the invoices to AEE is a back flow of funds (interest) to an entity affiliated with Petitioners. All of these transactions took place before Petitioners filed the instant applications or within a few days thereafter. They create a paper trail indicating that the parties within the "chain" at each level incurred the face amount of the next lowest level. However, the only amount actually incurred at the time Petitioners submitted the applications was the discounted amount of the invoices. Interest or Carrying Charges "Incurred" means that "allowable costs have been paid." (Rule 17- 773.200(9), Florida Administrative Code) Under DEP's rules, the facial meaning of the term is that persons must receive due return for their invoiced goods and services, billed on a units and reasonable rates basis, for allowable costs of site rehabilitation. A finance charge usually does not effect DEP's determination of charges that were "incurred" unless that charge appears as a line-item cost which is not the case here. However, these consolidated cases presented DEP with a new scenario in which Gator and Tower immediately repaid the face amount of their invoices to AEE retaining only the discount amount of their invoices to pay the actual costs of the level below them before submitting the applications. Moreover, they included the carrying charges in the applications as having been "incurred." Case Number 95-403RU, Pick Kwick No. 143, DEP Facility No. 528515448 is a typical example showing how the entities in the chain paid interest charges and included them in the application. In that case, Gator provided Tower with a subcontract/purchase order on July 8, 1994. Tower provided Gator with an invoice in the amount of $17,556.43 on July 8, 1994. Tower's invoice represented services performed in connection with the initial remedial action task at the Pick Kwick No. 143 facility including $269.90 for application preparation. On or about July 8, 1994, Gator provided ET with an invoice in the amount of $20,149.41. This invoice included Gator's 15 percent markup in the amount of $2,592.98 and $269.90 for application preparation. On August 4, 1994, AEE purchased Gator's right to receive payment from ET. AEE advanced Gator $17,696.44 or 88 percent of Gator's invoice. The interest charge on the advance was $2,452.97. On August 4, 1994, AEE purchased Tower's right to receive payment from Gator. AEE advanced Tower $17,029.74 or 97 percent of Tower's invoice. The interest charge on the advance was $526.69. On August 10, 1994, AEE purchased ET's right to receive payment from IPTF. AEE advanced ET $20,831.41 or 87 percent of ET's invoice. The interest charge on the advance was $2,981.93. On August 15, 1994, ET filed the reimbursement application in the amount of $23,813.34. This amount included ET's 15 percent markup on the face amount of Gator's invoice. Prior to filing the application, ET paid Gator, $20,149.41. Gator then paid Tower $17,556.43. Following receipt of payment from ET, Gator repaid AEE $20,149.41. Following receipt of payment from Gator, Tower repaid AEE $17,556.43. Gator and Tower made these repayments within a matter of weeks of the time that AEE advanced funds to them. Calculating simple interest, the annualized interest rate on the loan from AEE to Gator was approximately 144 percent. The annualized interest rate on the loan from AEE to Tower was approximately 36 percent. These were the interest rates, as predetermined by the discount percentage in the addenda to the factoring contracts (Gator at 88 percent and Tower at 97 percent), in approximately 30 of the 45 applications. In the other 15 applications, the Gator sold its right to receive payment at a discount percentage between 87 to 89 percent of the face amount of the invoice. In those cases, Tower sold its right to receive payment at a discount percentage between 95 and 72 percent of the face amount of the invoice. There is no evidence that Petitioners made adjustments to the costs in the applications where Gator and Tower sold their right to payments for a discount percentage at an amount other than as stated in the addenda to the factoring contracts. Analysis of the transactions involved in each of the subject applications clearly shows that the financing scheme utilized here was not equivalent to a "plain vanilla" loan from a disinterested third-party capital provider such as a bank. DEP properly deducted costs from Petitioners' applications that represented interest which Gator and Tower agreed to repay to Petitioners' affiliate, AEE, before Petitioners submitted the applications. The only costs that Gator and Tower actually incurred was the net amount that they received after factoring their invoices. That amount includes the difference between the face amount Gator's and Tower's invoices and the amount that AEE advanced to them. Gator and Tower did not actually incur allowable costs in the amount of the interest paid to AEE when they : (a) agreed to accept reimbursement for their services at a discount; (b) accepted the full amount of their invoices from the next highest level; and (c) passed the full amount of their respective invoices back to AEE. DEP did not envision this type of elaborate factoring plan when it created its simple definition of "incurred" as meaning allowable costs have been paid. It is important for participants in the program to know the "rules of the game." Applicants have to make technical and financial decisions regarding site cleanup. They have to pay all contractors and subcontractors prior to submitting an application. In this case Petitioners' attempts to win DEP's pre-approval of their various factoring proposals were unsuccessful because DEP did not have enough information about the transactions and the relationships of the entities involved. After DEP received additional information from Petitioners, it became abundantly clear that the rules were insufficient to cover the financing scheme presented here. As early as November 4, 1993, Petitioners acknowledged that "the provisions of Rule 170773, F.A.C. do not specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." Petitioners revealed their final plan in July of 1994 just before they began filing the applications. At that time, Petitioners knew DEP's concerns. They also knew DEP could not make a decision on an application until they filed the application with DEP. Inconsistent Application of Statutes, Rules and Written Guidelines DEP has authorized financial transactions by which other applicants, after incurring (paying) all costs and filing their applications, sold or pledged their right to future payment to an entity outside the usual reimbursement chain. In those cases, DEP did not deduct interest associated with such transactions. DEP's approval of such transactions came before Petitioners filed their applications in this matter. There is no evidence that those transactions involved the factoring of invoices and an agreement to repay interest before the PRFCSR submitted the applications. Likewise, there is no evidence of an affiliation and less than arms-length negotiation between the funder and the financing company in those cases. The record contains no evidence of an inconsistent application of DEP's statutes, rules or written policies before or after Petitioners filed the instant applications. Reservoir Capital On March 14, 1994, DEP met with Reservoir Capital Corporation (Reservoir) to discuss a change of address notice directing reimbursement orders and checks for Clean America Financial, Inc. (Clean America) applications to a Baltimore, Maryland address. During that meeting Reservoir's counsel informed DEP that Reservoir "paid a percentage, not the full cost, for each application." DEP representative, Paul DiGuisseppe, informed Charles Williams of that conversation by memorandum dated March 15, 1994. Mr. DiGuisseppe later spoke with a representative of Clean America (the funder) and advised him to provide a list of facilities pledged to Reservoir for which notices and payments were to be sent to the Baltimore, Maryland address. On March 30, 1994, Clean America wrote to Charles Williams and Doug Jones, providing a list of sites pledged to Reservoir and directing DEP to send payments to the Baltimore, Maryland address. Among the sites pledged to Reservoir were Curry Station, DEP Facility No. 309103537 and Scardo Automotive, DEP Facility No. 428511319. On June 17, 1994, DEP issued a reimbursement order to Scardo Automotive at the Baltimore, Maryland address. On July 1, 1994, DEP issued a reimbursement order to Curry Station at the Baltimore, Maryland address. These orders did not contain a denial of costs or deductions of interest based upon the disclosed fact that Reservoir had purchased the applications for an amount less than their face value. However, there is no evidence that either of the applicants sold the right to receive reimbursement before submitting the application. Additionally, there is no evidence that Reservoir was affiliated with Clean America. On April 11, 1996, DEP revisited the Reservoir Capital factoring mechanism. In that instance, DEP reviewed a situation in which Reservoir Capital directly paid a subcontractor's invoice in an application that All American Funding (All American) filed. Reservoir had purchased the receivable of All American, and applied part of the purchase price to directly pay a subcontractor. There is no evidence of any "affiliation" between Reservoir and any other entity in the reimbursement chain. Prior to the meeting with Reservoir, DEP intended to deny those costs since it appeared that Reservoir actually paid them rather than the applicant, All American. As a result of that meeting, DEP requested additional information from Reservoir. At the time of hearing in these cases, DEP had not made a decision in that case pending receipt of the requested information. Governor's Bank On March 9, 1994, Governors Bank wrote to Charles Williams requesting that DEP directly remit to Governors Bank any reimbursement due on an application filed by Clean America due to the fact that Clean America "secured its borrowings from the bank with any rights to payment which CAFC has in connection with certain reimbursement applications." On March 30, 1994, Clean America sent a letter to Charles Williams and Doug Jones requesting that the DEP honor the March 9, 1994 letter directing payment to Governor's Bank. On November 4, 1994, Clean America advised DEP that DEP was to remit additional final reimbursements to Governors Bank. The letter advised DEP that "based upon a loan relationship Governor's Bank established with Clean America . . ." reimbursement payments had been assigned to Governors Bank and therefore "all payments and proceeds must be remitted to Governor's Bank." There is no record evidence that Clean America entered into a loan agreement with Governors Bank prior to submittal of the application or that the applications included claims for interest paid to the bank. There is no evidence of any affiliation between Clean America and the bank. The financing mechanism that Petitioners used for these 45 applications is not similar to a "plain vanilla" bank loan where a lender advances funds after an applicant files an application and directs DEP to forward reimbursement payments to a bank lock box. Barriston Environmental Investors L.P. On March 11, 1993, Barriston Environmental Investors, L.P. (Barriston) wrote to John Ruddell, Director of the DEP's Division of Waste Management and described a mechanism of financing by which Barriston (the funder) would obtain funds, at least partially through bank debt, for the payment of subcontractors' site rehabilitation invoices. In the Barriston proposal, the subcontractor would remit an "investment banking fee" of 5 percent of the value of the invoices back to the funder upon payment of 100 percent of the invoices. Barriston's letter acknowledged that this fee would not be reimbursable under the program. In addition, the Barriston funder would receive a commitment fee from the site owner which the Barriston funder would not include in the reimbursement claim. A reference in the letter to the payment of interest on funds advanced on the site owner's behalf does not specify the time frame in which interest would be paid, i.e. before or after the filing of an application. The letter sought DEP's approval and assurance that the payment of 100 percent of the invoices would entitle Barriston to full reimbursement including both markups. Barriston's letter requested an informal response because it realized that DEP had no authority to take official agency action without the submission of an application. On April 9, 1993, DEP responded to the Barriston letter. In its response, DEP stated that the arrangements appeared to be consistent with current statutes and rules and would be eligible for the full reimbursement allowed by DEP's rules. However, there is no record evidence of any official agency action on an application submitted in accordance with Barriston's proposal. Interest Indemnification Interest indemnification encompasses a situation in which a contractor pays interest directly back to a funder during the period of time after submittal of an application but before reimbursement by the IPTF. In June 1995, a DEP employee contacted Petitioners' certified public accountant (CPA) inquiring about the practice and seeking copies of his other clients' interest indemnification contracts. After that conversation, the CPA discussed the matter with another DEP employee to confirm his understanding that financing issues were outside of the scope of DEP's review so long as an applicant did not include such charges in the application. Since the June 1995 discussions, DEP has reimbursed applications which were financed through interest indemnification without adjustments for the payment of interest. However, the interest indemnification payments applied to applications after the applicants filed them with DEP to replace long-term interest that IPTF is no longer paying. The applicants were not seeking reimbursement of those payments as incurred costs. Petitioners have not established their entitlement to reimbursement for the factored amounts of their invoices. DEP presented competent evidence to support its "factoring" and "affiliation" policies as applied here. In addition, the evidence indicates that DEP has not inconsistently applied such policies to other similarly situated reimbursement applicants. Petitioners have failed to prove that DEP's denial of costs based upon factoring is not reasonably related to the purpose of reimbursement review and otherwise unsupported by competent evidence. The April 21, 1995 policy statement is a rule as defined in Section 120.52(16), Florida Statutes. DEP was not aware of the need for such a rule when it made the last substantive amendments to Rule 17-773, Florida Administrative Code, in 1993. Nevertheless, DEP demonstrated that the non-rule policy is a reasonable interpretation of Sections 376.3071(12)(b) and 376.3071(12)(d), Florida Statutes. DEP provided an evidentiary basis to support its factoring policy in these consolidated cases. The difference between the face amount of the invoices and their factored amount did not represent allowable costs which were actual and reasonable. DEP deducted the amount of the relevant discount percentage (on a prorated basis) from each invoice submitted by Tower and its subcontractors. There is a discrepancy between the amount that DEP deducted from each invoice (itemized) and the total deduction based on a lump sum in 33 of the 45 cases which DEP did not explain during the hearing. Therefore, before DEP enters a Final Order, it should review the supporting documents to determine the correct deduction in each application. "Value Added" Policy Funders and contractors are entitled to take a markup of paid contractor and subcontractor invoices for allowable costs at reasonable rates. The invoices must represent actual and reasonable costs which are integral to site remediation. Contractors are entitled to a first-tier 15 percent markup for supervising and/or coordinating on-site remediation, for investing capital while awaiting reimbursement by paying subcontractors invoices, and for assuming liability for the performance of the subcontractors. Funders generally are entitled to a second-tier 15 percent markup as an incentive to provide funds to finance the work. Markups are expressly subject to limitations set forth in Section 17- 773.350(9), (10) and (11), Florida Administrative Code. There are no other specific or implied limitations on markups in the rules or written guidelines. Requiring each entity that receives a markup in the reimbursement chain to pay contractor, subcontractor, and vendor invoices helps ensure that each level in the reimbursement chain pays the participant at the next lowest level. In these cases, each level in the reimbursement application chain "technically" paid the next lowest level. DEP policy in effect at the time Petitioners submitted the instant applications for reimbursement was to allow markups of paid invoices at two levels. However, prior to the submission of the instant applications, DEP was not aware of a case where a general contractor claimed a markup for work that was complete before the general contractor became involved in the project. With regard to all of the pending reimbursement applications, Gator applied a 15 percent markup to all of Tower's invoices including the invoices of Tower's subcontractors. With regard to a minimum of 30 of the 45 sites, Gator clearly did not supervise, manage or direct site remediation activities performed by Tower or its subcontractors. In fact, Gator did not become involved until after Tower completed these tasks. In at least 30 of the instant cases, Tower was acting as the general contractor when all of the on-site remediation took place. However, Tower could not apply a 15 percent markup to the invoices for its own services. Gator made it possible for Petitioners to claim the markup on Tower's invoices. As to the 15 sites at which Gator allegedly had some type of involvement with on-site remediation activities, there is no persuasive evidence regarding the specific activities or the level of Gator's involvement on any particular project. On September 1, 1994, Restoration Assistance, an entity under contract with DEP to review reimbursement applications, issued a memorandum to its reviewers directing them to complete their review and do a "total denial" on "Gator Environmental packages." The memorandum advised the reviewers that "Bruce" was drafting canned language to use in DEP's denial statement. On or about April 21, 1995, DEP presented its reviewers with a memorandum setting forth an initial overview of a "value added" policy for markups taken by a "management company" involved in site remediation activities. According to the memorandum, DEP would allow reimbursement of claims for actual project management work and value-added services. The memorandum further provided that DEP would allow markups to a management company which only provided cash-flow services for a majority of the program task period even if the management company performed no other service. However, DEP would deny a markup if the management company provided such services during a "one month time period." DEP intended for the April 21, 1995 memorandum to acquaint DEP reviewers with the emerging DEP policy on markups. DEP's rules and written guidelines do not address the distinction made in the April 21, 1995 memorandum regarding the timing during which a management company could provide cash flow services and still be entitled to a markup. On October 20, 1995, Charles Williams issued a DEP policy memorandum for reviewers to use in reviewing reimbursement applications. Through that memorandum, DEP finalized and implemented the "value added" policy. The memorandum states that: if the 'GC' [general contractor] was involved with the management of the project during the course of the actual work by subcontractors, [DEP] rules do not preclude them from applying a markup. However, if the 'GC' came along after the work was completed by other contractors and their involvement was more of a due diligence exercise to faciltiate (sic) a funding arrangement by a third party, then the 'GC' markup would not be justified, though a markup by the actual funder listed as the PRFCSR could be allowed. Prior to the establishment of the "value added" policy on October 20, 1995, DEP made no inquiry as to whether a contractor provided value added services in order for the contractor to be entitled to a markup. DEP applied the "value added" policy to all pending applications (including the ones at issue here) resulting in a deduction of Gator's markup in all of the subject cases. The Department of Banking and Finance reviewed and issued a report (Comptroller's Report) on the Petroleum Contamination Site Cleanup Reimbursement Program on November 29, 1994. This report addressed the issue of markups in the reimbursement program. The Comptroller's Report recognized that DEP found the multiple markup structure to be beneficial in that it "attracts the involvement of companies whose role in cleanup projects is limited to providing funds to finance the work [and] attracts investors who provide funds which might not otherwise be available--thus facilitating cleanup of contaminated sites." The Comptroller's Report describes a two-tier arrangement involving a "prime contractor engaged to manage the cleanup project" and a "funding entity." The report acknowledges that the prime contractor "might have only limited direct involvement in the cleanup, having engaged subcontractors for most or all of the actual work." The example in the Comptroller's report did not state what DEP's policy would be if a subcontractor had completed all of the actual work before the contractor became involved. Even without this consideration, the report was critical of DEP's allowance of markups on either level. The Petroleum Efficiency Task Force (PETF) issued its final report on financing contractors on August 17, 1994. This report discussed DEP's policy of allowing two markups. In this discussion, the PETF recognized that "funders must be able to rely on the skills and knowledge of contractors to minimize reimbursement shortfalls." The PETF recommended for future consideration that "the Department should provide in rulemaking that contractors who take the first-tier 15 percent markup on subcontracted work must adequately supervise the work." When the PETF issued its report, there was no existing rule that established any level of on site supervision or any other specific criteria for applying one of the two allowable levels of markup, other than paying invoices for integral site rehabilitation work. DEP's rules and written guidelines did not substantively change with regard to the "value added" policy from the April 22, 1993 revision of Chapter 17-773, Florida Administrative Code, to the October 20, 1995 memorandum which established a non-rule limitation on the ability of an entity to apply a markup to paid invoices. Because the rules and written guidelines do not reflect the "value added" policy, a participant in the program would not be aware of it even if the participant requested program information. Gator technically paid 100 percent of the face value of Tower's invoices. Without Gator's involvement, AFG and AEE would not have financed these applications. However, DEP presented persuasive evidence at the hearing to support its position that Gator was not entitled to a markup because Gator's services added no value to site remediation projects. In the instant cases, Gator performed some type of a minimal due diligence review of Tower's site work. Gator allegedly reviewed Tower's technical and administrative files, cross-referenced technical and administrative files with the applications which Tower prepared, made visits to some job sites, and prepared a deficiency letter to determine the appropriateness of the scope of Tower's work. However, all of these functions were repetitious of the work that was performed by Tower and the certified public accountant attesting to the Certification Affidavit. Gator limited the deficiency letters to the question of whether the scope of Tower's services were reimbursable. However, there is no evidence that Tower's deficiency letters resulted in adjustments to costs in the applications as filed by Petitioners. The deficiency letters served only to adjust the discount percentage set forth in the addenda to the factoring contracts. Tower was a qualified engineering consulting firm that employed its own engineers and geologists. Gator's employee that reviewed the technical information in Tower's files was not a Florida professional engineer. He was not qualified as a certified public accountant to determine whether a charge was within DEP's reasonable rates. The Gator employee was a Florida professional geologist but he did not sign and seal the deficiency letter as such. There is no reference in DEP's rules or written policies to a deficiency letter. AFG required Gator to prepare the deficiency letter within two days of the date on which EF provided Gator with the opportunity to review a completed task. This two-day turn around time allegedly afforded efficiency of payment. Gator did not begin its review of an reimbursement application until after Gator received an invoice from Tower. The relevant subcontract/purchase order issued by Gator to Tower, the Tower invoice and the Gator invoice were often prepared on the same day. Gator technically paid Tower's invoices with funds that AEE advanced. Tower used these funds to repay AEE. When Gator received payment from ET or SEI, it passed the funds back to AEE before ET or SEI submitted the applications to DEP or immediately thereafter. Pursuant to the addenda to the factoring contracts, Tower, not Gator, contributed to a reserve trust account which AEE will use to cover any reimbursement shortfalls. Gator indemnified AEE and guaranteed its own work but did not assume a risk of loss on Tower's work. On most if not all of the applications, Gator performed no meaningful management or supervisory functions. The greater weight of the evidence indicates that Gator's primary purpose in these consolidated cases was not to afford AFG a level of comfort as to the appropriate scope of the individual program tasks but to ensure that third-party investors maximized their profits. The "value added" agency statement has the effect of a rule which DEP did not contemplate when it promulgated its rules and written policies. Nevertheless, DEP's decision concerning the value added policy is within the scope of its delegated legislative authority. DEP has proven that reimbursement for Gator's services was not allowable as actual and reasonable costs of site remediation. Therefore, it is not entitled to a first-tier markup. Computer Costs Prior to January 1, 1995, DEP determined the reimbursability of computer costs based upon a "units and rates basis" as provided by Rules 17- 773.100(5), and 17-733.700(2)(d), Florida Administrative Code. DEP evaluated computer costs "as a certain number of hours [at] a reasonable rate." Pursuant to the units and rates rule provisions, there was no rational basis for DEP to deny the computer costs contained in applications filed prior to January 1, 1995. On January 1, 1995, DEP established a policy by which it would disallow in full any computer costs greater than $750. Under that policy, DEP would reimburse in full an applicant's computer costs with supporting invoices of $749 dollars, but disallow in full computer costs with supporting invoices of $751. DEP's reimbursement orders involving more than $750 in computer costs after January 1, 1995 routinely stated that "there was insufficient justification to demonstrate that this computer time was integral to the task or necessary." DEP applied the computer policy to all applications filed and pending review at the time it developed the policy, regardless of when an applicant performed the work or generated the records. DEP applied the January 1, 1995 computer policy to the application in Case No. 95-4606 which ET filed on July 18, 1994. In that case DEP denied $1,456.25 in computer costs allowing no reimbursement for computer time. On April 27, 1995, DEP implemented a new policy by which it evaluated computer costs based upon a calculation of allowable personnel hours per task as opposed to a units and rates basis. Under that policy DEP would evaluate the total allowable personnel hours in a task and limit computer costs to 10 percent of those hours up to a maximum of $750. Under the April 27, 1995 policy, DEP reduced the reimbursement for computer costs to $500 if the reimbursable amount exceeded $750 after DEP made the 10 percent calculation. DEP implemented the April 27, 1995 policy through the use of a calculation work sheet which it provided to its application reviewers. DEP applied the April 27, 1995 computer policy and work sheet to all applications pending review at the time DEP developed the policy, regardless of when the applicant performed the work or generated the records. DEP applied the April 27, 1995, policy in all of the subject cases subsequent to Case No. 95-4606, with the following exceptions: Case Nos. 96- 0432RU, 96-1006 and 96-1009, which had no denial of computer costs; and Case No. 96-1352, in which DEP applied the 10 percent limitation, but reimbursed 896.75 dollars of the computer costs. After implementation of the April 27, 1995 policy, DEP made no effort to adjust the denial of all computer costs in Case No. 95-4606 under the January 1, 1995 policy. The only other category in which DEP evaluates reimbursement on a percentage of hours basis, rather than a units and rates basis, is total management costs. DEP's written guidelines and Rule 17-773.350(16), Florida Administrative Code, limit management costs to a percentage of total allowable personnel hours. There are no rules or written guidelines that would limit computer costs based upon criteria other than a units and rates evaluation, or that would support DEP's policies as reflected in the January 1, 1995 and April 27, 1995 policy memoranda. DEP's rules and written guidelines did not substantively change with regard to this issue from the time Petitioners filed the subject applications, to the time DEP established the January 1, 1995 and the April 27, 1995 computer policies. DEP did not issue any PCRs or other written guidelines to place applicants on fair notice of DEP's new policies with regard to computer costs. DEP presented no persuasive evidence at the hearing to support its January 1, 1995 and April 27, 1995 policies. The only basis for the policy was DEP's representation that it developed the policies as a "reasonableness issue" in order to reduce the amount of computer costs that were appearing in reimbursement applications. DEP did not demonstrate that it based the new policies on any calculation of the amount of computer time necessary to perform a remediation task. Once the total computer costs reached $750 dollars, DEP gave no consideration to the scope or complexity of the task. Given the difference in the amounts involved in performing site remediation services (e.g. an application totaling 7,249.75 dollars in Case No. 96-0411RU versus an application totaling 149,080.02 dollars in Case No. 96-0425RU) and the differences in program tasks (see Rule 17-773.500, Florida Administrative Code), a policy establishing a flat numerical limit on computer costs that an applicant may claim in an application is not reasonable. DEP presented no evidence at the hearing to prove the basis for its retroactive application of the policies to work performed and applications submitted prior to the development of the policies. DEP did not attempt to explain the basis for its failure to apply the rules and written guidelines in effect at the time the work was performed or the records generated. Based upon the foregoing, DEP's denial of computer costs in each of these applications is not supported by the statutes, rules and written guidelines in effect at the time the work was performed or the applications were filed. Each application contains information supporting the computer costs. The application Certification Affidavits and CPA attestations demonstrate that Petitioners incurred the computer costs which DEP should reimburse. The reimbursement for computer costs should be in full except to the extent that DEP allocates to a supporting document a prorated share of the amount of a discount on a factored invoice. As a final note, of the computer costs denied in 16 of the 45 reimbursement notices, the sum of the allowances and deductions does not equal the overall claim. The differences ranged from a few dollars to over four hundred dollars. DEP provided no evidence to explain the discrepancy in the amount calculated by DEP in its notices. Miscellaneous Costs Prior to September 27, 1995, DEP reimbursed miscellaneous line-item costs when the applicant furnished support for them in the application. The miscellaneous costs policy as of May 17, 1995 even dispensed with the requirement of supporting invoices when these costs totaled less than 300 dollars. DEP's reviewers are employees of a firm that provides DEP with application review services as an independent contractor. On September 27, 1995, after a meeting with DEP staff, the application reviewers implemented a policy to deny costs for "overhead." Under the new policy, certain items were overhead, including but not limited to: gloves, mason jars, sampling disposables, phone calls, excessive faxes, excessive copying, small hand tools, shipping documents, etc. The application reviewers had to exercise their own discretion as to which items were "overhead" until they received a guideline from DEP. The reviewers decided to approve overhead expenses of less than $50 and deny items for more than $50. The policy continued in existence at least through November 9, 1995. DEP applied the miscellaneous/overhead policy to all of the subject applications, regardless of the date of cleanup work or application submittal. The application reviewers applied the miscellaneous/overhead "policy" without the knowledge of DEP's Reimbursement Administrator, Charles Williams. When Mr. Williams found out about the policy, he "counselled them that they need to reverse that position." The correct policy would allow reimbursement of "miscellaneous/overhead" costs that the reviewers denied in 33 of the 45 applications. DEP made no effort to correct the denial of these costs based upon its erroneously applied policy. DEP presented no persuasive evidence at the hearing to support its application of the miscellaneous/overhead policy in applications submitted prior to the development of the policy. DEP did not explain the basis for its failure to apply the rules and written guidelines in effect at the time the subcontractors performed the work or generated the records. Based upon the foregoing, DEP's denial of miscellaneous/overhead costs in 33 applications in which DEP denied such costs is not supported by the applicable states, rules and written guidelines. Each application contains information supporting the miscellaneous costs. The applications' Certification Affidavits and CPA Attestations demonstrate that Petitioner's incurred the miscellaneous costs. Therefore, DEP should reimburse those miscellaneous costs. The reimbursement should be in full except to the extent that DEP allocates to a supporting document a prorated share of the amount of a discount on a factored invoice. Airfare From June 17, 1993, to sometime prior to January 31, 1996, DEP's policy with regard to the reimbursement of airfare was to pay airfare integral to site rehabilitation when such costs were relatively inexpensive. By no later than January 31, 1996, DEP developed and applied a policy to deny all airfare costs regardless of whether the applicant provided justification. On March 13, 1996, DEP decided that once again it would reimburse airfare with sufficient justification such as a comparison with car travel. DEP considers the changes in reimbursability of airfare as "just procedures to follow," and applicable without regard to the timing of work performed. DEP denied airfare charges in Case No. 96-1353 as overhead charges. DEP's rules and written guidelines did not substantively change with regard to airfare from June 17, 1993, when airfare was reimbursable, to the policy implemented on January 31, 1996, in which airfare was not reimbursable, to March 13, 1996, when airfare was reimbursable once again. DEP issued no PCRs or other written guidelines to place applicants on fair notice of the changes in policy with regard to airfare. DEP has not provided any evidence to support the basis for the fluctuations in its airfare policy. DEP presented no evidence at the hearing to provide the basis for its application of the airfare policy to work performed and applications submitted prior to the development of the changes in policy. DEP did not explain the basis for its failure to apply the rules and written guidelines in effect at the time the subcontractors performed the work or generated the records. Based upon the foregoing, DEP's denial of airfare costs in the application for Case No. 96-1353 is not supported by the applicable rules and written guidelines. The application contains information supporting the miscellaneous costs. The application's Certification Affidavit and CPA Attestation demonstrate that Petitioner ET incurred the airfare costs. Therefore, DEP should reimburse airfare costs in full except to the extent that DEP allocates to a supporting invoice the prorated amount of a discount on a factored invoice. Inconsistent Agency Practice The application of DEP's factoring policy did not treat Petitioners in a manner different from other funders. Heretofore, DEP was not aware of a case where program participants factored their invoices before filing an application and claimed the face amount of those invoices for reimbursement. The affiliation between Petitioners and AFG and/or AEE was also unique. DEP issued a memorandum requiring funders to provide "clarification regarding essential cost documentation" on July 26, 1995. The purpose of this memorandum was to remind application reviewers of the need for a funder to submit an invoice documenting and supporting its line-item claim for the second- tier 15 percent markup. DEP did not intend for this memorandum to limit DEP's ability to inquire about relationships and transactions taking place outside the usual chain of reimbursement when an application on its face refers to a factoring scheme involving an "affiliation" between the factoring company and the funder. DEP does not deduct finance charges when an applicant incurs (pays) all invoices, submits the application, then sells the receivable or agrees to pay long-term interest pending receipt of payment from the IPTF. In the instant cases, Petitioners agreed to accept reimbursement for their services at a discount before they submitted the applications then included the cost of borrowing capital in the application. DEP does not routinely ask questions of other applicants regarding their financing. Nevertheless, under the facts of these cases, DEP would have been remiss in its duty if it had not made such inquiries. DEP's actions in the instant cases are not inconsistent with its actions taken in other cases with other similarly situated entities because there is no evidence that other such cases exist. Bias On August 31, 1994, Bruce French provided Charles Williams with a memorandum in which Mr. French discussed factoring. In his memorandum, Mr. French concluded that DEP could only reimburse the "discount" amount that the factoring company actually incurred/paid the funders. On September 1, 1994, Mr. French had a discussion with someone named "Toni" at McGuinnes Laboratories regarding the laboratories' use of AFG services for financing invoices to Tower. On September 2, 1994, Mr. French related in a memorandum to Charles Williams, his understanding that the laboratory had different price lists for different customers, generally depending on volume of analysis performed and individual payment agreements. Mr. French surmised that the laboratory's price for services "is inflated to deal with AFG's discount price to be paid by AFG." Mr. French concluded that, under those circumstances, AFG's financing arrangements may "represent collusion on behalf of all parties to the application to defraud DEP for the benefit of AFG. That is, prices are 'fixed' prior to performing of services." On September 2, 1994, Mr. Williams responded to Mr. French's memo by indicating that the scenario presented by Mr. French "sounds interesting" and that DEP would "absolutely need to have a Big Meeting to decide what to do once and for all." On September 12, 1994, Mr. French provided information on factoring to Bill Sittig of DEP's Office of the Inspector General and to Mr. Williams. Mr. French included a drawing entitled "The Tangled Web They Weave or the Hidden Discount Line Items and other Fluff, August 31, 1994 Interpretation of Bruce French's Discussion." At the hearing, neither Mr. Sittig nor Mr. Williams remembered seeing the drawing. There is no competent evidence as to the identity of the person creating the drawing. There is no persuasive competent evidence that Mr. French was biased against Petitioners or any other entity utilizing factoring as a mechanism of financing. Moreover, DEP had no direct and demonstrable bias against Petitioners. Timeliness of Agency Action Prior to filing the instant applications, representatives of the funders and AFG presented various financing schemes to DEP for pre-approval. In each proposal, the person speaking for AFG also spoke on behalf of the funders. At all times relevant here, Paul DeCoster was secretary and counsel for AFG. He was also secretary of SEI and a corporate director and shareholder of WIFL. In September of 1993, Mr. DeCoster wrote a letter to DEP describing a proposed financing scheme in which AFG would purchase the account receivables of contractors engaged in site rehabilitation. AFG's plans were in a formative stage at this time. Mr. DeCoster wrote DEP a follow-up letter dated October 4, 1993. This letter states that: the amount of financing required to meet [certain contractor clients'] working capital needs is so large that FEC [a funder] must find large institutional investors to accommodate them. For service of finding such investors, FEC proposes to charge a fee to the contractor client, which would be in addition to the 15 [percent] 'markup' taken by the investor providing the financing. The October 4, 1993 letter disclosed that contractor clients would deposit funds in a trust account as security for the performance of their work. The trust would invest its funds "in accounts receivable purchased from AFG, the parent of FEC, and any income earned by the trust on those investments would inure to the benefit of AFG." The plan that Mr. DeCoster proposed was markedly different from the scheme utilized here. The most noticeable differences are that the subject applications did not involve a finder's fee, FEC as a funder, or the purchase of AFG's accounts receivable by a reserve trust. In October of 1993, Will Robins met with DEP staff to discuss the manner in which the reimbursement program would apply to a proposed financing scheme. In this proposal, AFG would charge contractors an application/initiation fee and/or a commitment fee. The transactions between the entities in the instant applications did not involve an application/initiation fee and/or a commitment fee. When Mr. Robins made his presentation, DEP did not know the specific relationships between the entities involved or Mr. Robins' position as an officer, director, and or shareholder of these entities. After that meeting, counsel for AFG sent DEP a letter dated November 4, 1993. The letter acknowledges that the existing rules did not "specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." The letter identifies ET as the proposed funder through which AFG would finance cleanups. According to the letter, ET would incur the costs but AFG would hold the right to receive the ultimate reimbursement payment from the IPTF. The letter clearly reveals DEP's concern that the proposed application/initiation fee was a "kickback" which should be deducted from the funder's markup. In January of 1994, counsel for AFG wrote a letter to DEP describing a financing scheme which differs in some respects from the financing scheme at issue here. This letter states that AFG intended to purchase receivables of the funder and the general contractor at a discount. Under this plan, the general contractor and the funder would claim the two allowable markups. The subcontractors would pay AFG a finder's fee. The letter reveals that AFG, its affiliates, and investors would recover the cash equivalent of both levels of markups plus a fee from subcontractors for funding the high costs of risky projects. The letter states that: since the Department's reimbursement rules do not specifically address the issue of site cleanups that are funded through private sources of capital . . . it is important that we know if there are any obvious or glaring problems with this plan that would cause reimbursement to be withheld otherwise restricted. On July 13, 1994, counsel for AFG wrote DEP to explain some modifications in the details to the proposed plan for the purchase and sale of receivables at a discount. This letter informed DEP that AFG would have a financial affiliation with the funder (ET) which would exist outside the chain of reimbursement and which would have no effect on either the markups or the overall reimbursement amount reflected in any application. All contracts within the chain of reimbursement (between ET, SEI, Gator, Tower, and its subcontractors) would be negotiated in arms-length transactions. The letter states: In this plan the subcontractors will perform their work on the site and will prepare their invoices in a manner consistent with any publicly or privately financed cleanup. Those invoices will be complied and forwarded to the general contractor for its review and the general contractor will add on the markup allowed by rule to the subcontractor's bills. The reimbursement application will then be forwarded to the funder who will ensure that all bills have been paid and who will be identified as the "person responsible for conducting site rehabilitation" on the reimbursement application. The funder will take the second markup allowed by rule, and will submit the reimbursement application to the Department of Environmental Protection for processing. Reimbursement will ultimately be paid by the Department to the funder in accordance with the reimbursement application. At no step in this process will the Department relinquish any authority to review and approve either the scope and nature of the cleanup or the rates charged by the contractors and subcontractors. Petitioners filed the first of their applications with DEP on July 18, 1994, five days after the date of the July 13, 1994 letter. In late November, 1994, after all but 4 of the 45 applications were filed, DEP placed a telephone call to Petitioners' counsel advising him of the position DEP intended to take with regard to his client's financing arrangements. DEP did not provide any written confirmation of that call, or issue any document describing its policy, until April 21, 1995. In each of the above described letters and/or meetings, AFG's attempt to ascertain DEP's position regarding the various proposed financing mechanisms was unsuccessful. However, AFG was aware that DEP could not take a position that represented official agency action until an applicant actually filed an application. At no time did DEP make any affirmative statement which misled Petitioners regarding the acceptability of AFG's proposals. There is no persuasive evidence to support a finding that the agency did not timely respond to the claims for reimbursement.
Recommendation Based upon the foregoing, it is recommended that DEP enter a Final Order in each of these consolidated cases: (a) disallowing reimbursement of the first- tier markup; (b) disallowing reimbursement of any factored invoice in an amount equal to the amount of the discount on that invoice; and (c) allowing reimbursement of costs associated with airfare, computers, and miscellaneous/overhead expenses. DONE AND ENTERED this 8th day of October, 1996, in Tallahassee, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1996. COPIES FURNISHED: E. Gary Early, Esquire Christopher R. Haughee, Esquire Akerman, Senterfitt and Eidson, P.A. 216 South Monroe Street, Suite 200 Tallahassee, Florida 32302-2555 W. Douglas Beason, Esquire Betsy F. Hewitt, Esquire Department of Environmental Protection 2600 Blair Stone Road Tallahassee, Florida 32399-2400 Virginia B. Wetherell, Secretary Department of Environmental Protection Douglas Building 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Perry Odom, Esquire Department of Environmental Protection 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000
Findings Of Fact Reimbursement Program The Florida Legislature created the reimbursement program to provide for rehabilitation of as many petroleum contamination sites as possible, as soon as possible. Section 376.3071(12)(a), Florida Statutes. The Legislature intended that those responsible persons who possessed adequate financial ability should conduct site rehabilitation and seek reimbursement in lieu of the state conducting the cleanup. Section 376.3071(12)(c), Florida Statutes (1993). When owners and operators of the site or their designees perform site remediation program tasks under any of the programs created by Chapter 376, Florida Statutes, those entities become entitled to reimbursement from the Inland Protection Trust Fund (IPTF) of their allowable costs at reasonable rates. Section 376.3071(12)(b), Florida Statutes. "Allowable" costs are those which are associated with work that is appropriate for cleanup tasks. Section 376.3071(12)(d), Florida Statutes, requires DEP to: Reimburse actual and reasonable costs for site rehabilitation; and Reimburse interest on the amount of reimbursable costs for applications filed after August 14, 1992, at a rate of 1 percent per month or the prime rate, which- ever is less. Interest shall be paid from the 61st day after an application is filed with the department until the application is paid, provided the department determines the application is sufficient; otherwise, interest shall be paid commencing on the date the application is made sufficient until the application is paid. . . . A site owner or operator may engage the services of firms to perform remediation activities on a site and may designate an entity to receive reimbursement for such work. Section 376.301(14), Florida Statutes. Chapter 17-773, Florida Administrative Code (as revised in April of 1993), contains DEP's rules which were in effect at the time Petitioners submitted the instant applications. This chapter is currently located in Chapter 62-773, Florida Administrative Code. Chapter 17-773, Florida Administrative Code establishes procedures and documentation required to receive reimbursement from the IPTF. Rule 17-773.100(4), Florida Administrative Code. Rule 17-773.100(5), Florida Administrative Code, provides in pertinent part: "review and approval of reimbursement applications shall be based upon the statutes, rules and written guidelines governing petroleum contamination site cleanup and reimbursement which were in effect at the time the work was performed or the records of activities and expenses were generated, as applicable. . . . In order to be reimbursable, an applicant must break charges in an application into applicable units and rates. Rule 17-773.100(5), Florida Administrative Code. DEP has a predominate rate schedule to determine whether an allowable cost is reasonable. DEP bases its predominate rates on a study of average rates that contractors charge for a particular task. Requests for reimbursement must apply to costs which are "integral" to site rehabilitation. Rule 17-773.100(2), Florida Administrative Code. "Integral" costs are those which are essential to completion of site rehabilitation. Rule 17-773.200(2)(11), Florida Administrative Code. After integral costs have been identified and incorporated on a units and rates basis in an invoice, the invoice may be marked up at two levels. These markups are subject to certain limitations established by DEP rule: There can be no more than two levels of markups or handling fees applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(9), F.A.C.); There can be no markups or handling fees in excess of 15 percent for each level of allowable markup applied to contractor, subcontractor or vendor invoices (Rule 17-773.350(10), F.A.C.); and There can be no markups or handling fees applied to invoices between any two entities which have a financial, familial, or beneficial relationship with each other (Rule 17-773.350(11), F.A.C.). In order to be reimbursable, costs must have been actually "incurred." Rule 17-773.700, Florida Administrative Code. "Incurred" means that allowable costs have been paid. Rule 17-773.200(9), Florida Administrative Code. When the "person responsible for conducting site rehabilitation" (PRFCSR) has no financial interest in the site, DEP considers the following costs as incurred when the program task is complete: Reasonable rates, including profits associated with the work performed, claimed for the use of their own personnel or equip- ment with documentation pursuant to Rule 17-773.700(7), F.A.C.; and Allowable markups or handling fees applied to their paid contractor, subcontractor, or vendor invoices pursuant to Rule 17-773.350(9), (10), and (11), F.A.C. Rule 17-773.200(9), Florida Administrative Code. Other rules reference limitations on the ability of an entity to take a markup. Rule 17-773.600(2)(d), Florida Administrative Code, provides in pertinent part: . . . If the person responsible for conducting site rehabilitation manufactured the [capital expense item], or a markup is otherwise prohibited under Rule 17-773.350(9), (10) or (11), Florida Administrative Code, no markup of the equipment shall be allowed. Rule 17- 773.700(5), Florida Administrative Code, provides in pertinent part: Costs claimed in a reimbursement application for the employees, equipment or materials of the site owner, site operator or any entity which has a financial interest in the site or a familial or other beneficial relation- ship with the site owner or operator shall be considered to be in house and reimburse- ment shall be limited to actual costs only. No fee, markup, commission, percentage or other consideration shall be allowed. . . . Rule 17-773.700(7), Florida Administrative Code, provides in pertinent part as follows: Pursuant to Rule 17-773.200(9), Florida Administrative Code, reasonable rates, including profits, may be claimed for the personnel and equipment or other allowable expenses of the person responsible for conducting site rehabilitation as well as allowable markups on paid contractor subcon- tractor and vendor invoices and shall be considered incurred for the purpose of reimbursement provided: The person responsible for conducting site rehabilitation does not have a financial interest in the site pursuant to Rule 17-773.200(7), Florida Administrative Code, or a familial or other beneficial relationship with the site owner or operator; The activities performed were integral to the program task claimed pursuant to Rule 17-773.500, Florida Administrative Code; and Detailed invoices are provided by the person responsible for conducting site rehabilitation that include all subcon- tractor and vendor invoices . . . [which] must identify the person responsible for conducting site rehabilitation and clearly distinguish their costs from those for paid subcontractors or vendors. There are no other provisions in the applicable rules which pertain to markups. A contractor must pay all invoices generated by a subcontractor at 100 percent of their face value prior to submission of an application in order to qualify those invoices for reimbursement. When a contractor pays a subcontractor's invoices, the contractor paying those invoices normally may take one of the allowable levels of markup. Prior to submitting a reimbursement application, a funder or PRFCSR involved in the reimbursement chain must pay the contractor for its invoices and markup. Then, the funder may apply the second allowable markup and submit the reimbursement application for review by DEP and payment from the IPTF. DEP does not contest the second level of markup in these applications. DEP rules restrict reimbursement when parties within the usual "chain" of reimbursement (PRFCSR or funder, contractor and subcontractor) have financial, beneficial or familial relationships with each other or the site owner. The application form requires disclosure of such relationships through the Program Task and Site Identification Form. Rule 17-773.200(1), Florida Administrative Code, provides as follows: "Beneficial relationship (interest)" means a connection or association, excluding an arm's length contractual relationship, which benefits a person or company by yielding a profit, advantage or benefit, or entitlement thereto, exceeding five percent of the person's or company's annual gross income. Rule 17-773.200(6), Florida Administrative Code, provides in pertinent part: "Familial relationship (interest)" means a connection or association by family or relatives, in which a family member or a relative has a material interest. . . . Rule 17-773.200(7), Florida Administrative Code, provides as follows: "Financial relationship (interest)" means a connection or association through a material interest or sources of income which exceed five percent of annual gross income from a business entity. Banks, lending institutions, and other lenders that provide loans for site rehabilitation activities are not considered to have a financial interest in the site on that basis alone. However, as of the effective date of this rule, guarantors of loans to or co-makers of loans with persons signing as responsible party are considered to have a financial interest if the amount of the loan exceeds five percent of the net worth of either company. As used in this definition, sources of income shall not include any income derived through arm's- length contractual transactions. Rule 17-773.200(13), Florida Administrative Code, states as follows: "Material interest" means a direct or indirect interest or ownership of more than five percent of the total assets or capital stock of any business entity. The rules and written guidelines of DEP do not address activities, including financing arrangements, occurring outside of the usual chain of reimbursement, so long as an applicant does not include charges for such activities in an application. Heretofore, DEP has not deducted finance costs that an applicant does not include as a line item in a reimbursement application. Pursuant to Section 376.3071(l2)(m), Florida Statutes, DEP must perform financial audits "as necessary to ensure compliance with this rule and to certify site rehabilitation costs." Rule 17-773.300(1), Florida Administrative Code. DEP performs this audit function: (a) to establish that the PRFCSR incurred the cost; (b) to determine that adequate documentation supports the claimed costs as incurred; and (c) and to review the reasonableness and allowance of the costs. The audit staff interprets the term "incurred" to mean that the applicant paid the costs included in the reimbursement application. Pursuant to Rule 17-773.350(4)(e), Florida Administrative Code, "[i]nterest or carrying charges of any kind with the exception of those outlined in Rule 17-773.650(1), F.A.C." are not reimbursable. The exceptions to the payment of interest set forth in Rule 17-773.650(1), Florida Administrative Code, are not at issue here. An interest rate charge on short-term borrowed capital from an unrelated third-party source is a "cost of doing business." DEP's predominate rates are fully loaded. They include a variable for all direct and indirect business overhead costs such as rent, utilities and personnel costs. DEP includes the cost of short-term borrowed capital in the direct and indirect overhead components of DEP's fully-loaded personnel rates. Rule 17- 773.700(5)(a), Florida Administrative Code. However, DEP never intended for its predominate rate schedule to create an entitlement to reimbursement of claims which are not otherwise actual and reasonable costs of site rehabilitation. Petitioners PRFCSRs are entitled to make application for reimbursement of allowable markups and costs of site rehabilitation that they incur. In these consolidated cases, the site owners or operators designated either Petitioner ET or Petitioner SEI as PRFCSR. The PRFCSR is typically referred to as the "funder" in the reimbursement chain. Petitioner ET is a trust formed in 1993 and domiciled in Bermuda. It acts as a conduit for funds that finance activities associated with Florida's petroleum contamination site cleanup program. The named beneficiaries of the trust are those contractors and subcontractors entitled to payment of costs for activities integral to site rehabilitation and for allowable markups of such costs. The sole trustee of ET is Western Investors Fiduciary, Ltd. (WIFL). WIFL is also the owner and a beneficiary of ET. Any profit that ET derives from funding cleanup projects flows through WIFL to investors who provide funds to finance site rehabilitation. American Environmental Enterprises, Inc. (AEE discussed below) provided the investment funds for the reimbursement applications at issue here. WIFL is a limited liability corporation created and domiciled in Bermuda. The officers of WIFL are: William R. Robins, President; John G. Engler, Vice-President; and Peter Bougner, Secretary. The directors of WIFL are: William R. Robins, John G. Engler, Paul H. DeCoster, Alec R. Anderson and Nicholas Johnson. WIFL's directors are also its shareholders. Petitioner SEI is a corporation incorporated and operating under Florida law. Organized in 1994, SEI acts as a conduit for funds to finance activities associated with Florida's petroleum contamination site cleanup program. The officers and directors of SEI are: William R. Robins, President; John G. Engler, Executive Vice President; and Paul H. DeCoster, Secretary. William R. Robins is the sole shareholder of SEI. SEI was specifically created to meet the needs of American Factors Group, Inc.'s (AFG discussed below) Florida investors. Respondent DEP is the agency charged with the duty to administer the IPTF and Chapter 376, Florida Statutes. Financing Entities American Factors Group, Inc. (AFG) is a privately held corporation incorporated and operating under New Jersey law. AFG is not a party to this proceeding. AFG, acts as the servicing agent for contracts associated with factoring activities and other types of financing operations. AFG, through one of its divisions, Environmental Factors (EF), entered into financing contracts with entities in the reimbursement process: (a) Petitioners ET and SEI, funders; (b) Gator Environmental, Inc. (Gator), general contractor; and (c) Tower Environmental, Inc. (Tower), prime subcontractor. Through these agreements, EF or its assignee bought the rights of ET, SEI, Gator, and Tower to future reimbursement payments at a percentage of the face value of the relevant invoices. The officers of AFG are: William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Bleak House, Inc. (Texas) owns the stock of AFG. American Environmental Enterprises, Inc. (AEE) is incorporated and operating under Nevada law. AEE is not a party to this proceeding. AEE, as the assignee under the EF contracts, is a third-party provider of capital to various entities in the reimbursement process, including Petitioners. The officers of AEE are: William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Bleak House, Inc., (Nevada) owns the stock of AEE. Bleak House, Inc., (Nevada) is incorporated and operating under Nevada law. Bleak House, Inc. (Texas) is incorporated and operating under Texas law. Officers of both corporations are William R. Robins, President; John G. Engler, Vice President; and Paul H. DeCoster, Secretary. Magazine Funding, Inc. owns the stock of both Bleak House corporations. Magazine Funding, Inc. is incorporated and operating under Nevada law. Officers of Magazine Funding, Inc. are William R. Robins, President; John G. Engler, Vice-President; and Paul H. DeCoster, Secretary. Family Food Garden, Inc. owns the stock of Magazine Funding, Inc. Family Food Garden, Inc. is incorporated and operating under Massachusetts law. Officers of Family Food Garden, Inc., are William R. Robins, President; and Paul H. DeCoster, Secretary. Six shareholders own the stock of Family Food Garden, Inc. None of these shareholders are related by familial ties to the officers or directors of the aforementioned companies or any relative thereof. Each of these companies -- ET, SEI, WIFL, AEE and AFG (including EF) share common officers and directors. Each of the companies maintain their own books and business records, file their own tax returns, and maintain records in accordance with the laws of the jurisdiction in which they were established. They operate pursuant to their respective bylaws or trust agreement. ET, WIFL, and SEI do not have common assets with AEE or AFG (including EF). ET, WIFL and SEI do not have a beneficial, financial, or familial relationship with AEE or AFG (including EF) as Rule 17-773.200, Florida Administrative Code, defines those terms. Despite the facial organizational and structural integrity of ET, WIFL, SEI, AEE and AFG, the officers and directors of AFG and/or AEE created Petitioners, in large part, for the benefit of AFG and/or AEE as a means to invest funds in Florida's petroleum contamination site cleanup program. The primary purpose of each funder is to maximize the profits of AFG and its investors. AFG has other investment vehicles (funders) which it uses at times depending on the needs of its investors. AFG waits until the last instance before deciding which entity it will designate as funder in any particular factoring scenario. AFG usually does not make that decision until the day AFG's designated funder issues a funder's authorization to the general contractor. At the hearing, Mr. Stephen Parrish, a vice president of AFG, testified as the party representative for ET and SEI. WIFL and SEI have no employees. EF or AFG responded to DEP's request for Petitioners to provide additional information about the financing scheme utilized here using stationary bearing EF's or AFG's letterhead. Nineteen of the letters written on ET's behalf refer to ET as an affiliate of AEE. At least five of the letters written on SEI's behalf refer to ET as the funder and AEE as ET's affiliate. The greater weight of the evidence indicates that AFG and/or AEE negotiated less than arms-length contractual agreements with ET, WIFL, and SEI. Petitioners admit that they are "affiliates" of AEE and AFG through contractual agreements. However, there are no written factoring contracts between Petitioners and AFG such as the ones that exist between AFG, Gator and Tower. The only documented evidence of agreements between Petitioners and AFG are transactional based bills of sale representing the sale to AEE of Petitioners' right to receive reimbursement from the IPTF. AFG created these bills of sale for bookkeeping purposes. AFG did not even go to the trouble of tailoring the form for the bills of sale for their stated purpose. For all practical purposes, Petitioners are under the management and control of AEE and AFG. Petitioners and AFG disclosed their affiliation in meetings with DEP staff and through correspondence and other documentation, including but not limited to: (a) letter to DEP dated July 13, 1994 from AFG's counsel; (b) Addendum to Certification Affidavit signed by a Certified Public Accountant in each application; (c) Funder's Authorization; (d) letters sent to DEP between August 14, 1995 and November 19, 1996. Factoring and the Factoring Transactions Factoring is the purchase and sale of an asset, such as an account receivable, at a discount. An account receivable reflects the costs that a business charges after rendering a service but before the entity responsible for payment pays for that service. When a contractor completes a rehabilitation task, the contractor's invoice is an account receivable until it receives payment. In these consolidated cases, AEE provided short-term operating capital to Gator and Tower at an interest rate equal to the discount percentage of the relevant invoice (account receivable). Gator and Tower did not sell their account receivables to AEE. Instead, AEE, as the assignee of EF, purchased a contractual right to receive Gator's and Tower's reimbursement payments. In exchange, AEE advanced Gator and Tower a discounted amount of their invoices. The discounted amount of an invoice represents a loan from AEE to Gator and Tower. The difference between the face amount of the invoice and the discounted amount of the invoice represents interest. A discount percentage and an interest rate are equivalent. The amount of the discount represents interest on the loan or advance provided by AEE. It is an interest expense to the contractor or subcontractor. The Factoring Agreements On or about April 25, 1994, EF and Tower entered into a Prime Subcontractor Factoring Agreement. On or about July 8, 1994, EF and Tower executed an addendum to the Prime Subcontractor Factoring Agreement. The addendum required Tower to sell to EF Tower's right to receive payments from Gator. In return, EF agreed to advance Tower a discounted amount equal to 97 percent of the face amount of Tower's invoices. Tower agreed to repay EF 100 percent of the face amount of the invoices upon receipt of payments from Gator. The discounted amount of each invoice represents a loan from AEE to Tower. A bill of sale evidenced the sale of Tower's right to receive payment on each application. On or about July 8, 1994, EF and Gator entered into a General Contractor Factoring Contract. On or about July 13, 1994, EF and Gator entered into an Addendum to General Contractor Factoring Agreement. This addendum required Gator to sell EF Gator's right to receive payments from ET or SEI. In return, EF agreed to advance Gator a discounted amount equal to 88 percent of the face amount of Gator's invoices. Gator agreed to repay EF 100 percent of the face amount of the invoices upon receipt of payments from the funder. The discounted amount of each invoice represents a loan from AEE to Gator. A bill of sale evidenced the sale of Gator's right to receive payment on each application. The financing of the pending reimbursement applications involved the following interrelated transactions though not necessarily in this order: AEE as the assignee of EF purchased the right of ET, SEI, Gator and Tower to receive reimbursement for their services at a discount. ET, SEI, Gator and Tower agreed to repay AEE in full. Tower prepared and submitted to Gator an invoice for services provided by Tower and its subcontractors. Tower also prepared and submitted to Gator a reimbursement application for the program task. AEE advanced Tower the agreed upon discount amount. Tower used these funds to pay its subcontractors and vendors. AEE advanced Gator the agreed upon discount amount. Gator used these funds to pay Tower. Tower repaid AEE in full. Gator prepared an invoice for services provided by Gator, Tower and Tower's subcon- tractors including a 15 percent markup and submitted it with the reimbursement application either to ET or SEI. AEE advanced ET or SEI the discounted amounts as agreed. ET or SEI paid Gator in the full amount of Gator's invoice plus markup. Gator repaid AEE in full. ET or SEI prepared an invoice for its services plus the services of Gator, Tower, and Tower's subcontractors and a 15 percent markup. ET or SEI submitted the reimbursement application to DEP. When ET or SEI receives reimbursement from the IPTF, they will remit the total payment to AEE. The on-site work on each project was complete or substantially complete prior to Gator's involvement. In regards to some applications, the relevant dates on the subcontract/purchase order, Gator invoice, and Tower invoice are the same. The amount of time between AEE's payment of the advances and Gator's and Tower's subsequent remittance of 100 percent of the face amount of their invoices to AEE varied from a few days to a few weeks. The Agency Statement--Factoring Petitioners submitted the subject applications to DEP between July 18, 1994 and February 17, 1995. The financing scheme utilized in these applications was unique. Prior to the receipt of these applications, DEP never had reviewed reimbursement applications using the type of factoring scheme at issue here. In fact, the instant cases present a scenario never contemplated by DEP when it promulgated its rules and written policies. In the instant applications, the "chain of reimbursement" included: ET and SEI as funders or PRFCSRs, Gator as the named general contractor, Tower as prime subcontractor, and numerous subcontractors and vendors. As stated above, DEP was also aware that AFG and AEE (including EF) were "affiliated" with ET and SEI and would ultimately receive all reimbursement payments from the IPTF. 56 When Petitioners submitted the subject applications, no rule or written policy disallowed reimbursement for the face amount of contractors' and subcontractors' invoices when they sold their right to payments, i.e. the receivables, at a discount. When Petitioners submitted the subject applications, DEP had rules that restricted the ability of an entity to apply markups on invoices when a familial, financial or beneficial affiliation existed between a contractor, subcontractor, PRFCSR and the site or site owner, or when such relationships existed amongst those entities in the chain of reimbursement. However, there were no rules or written guidelines restricting reimbursement, based upon financial transactions occurring outside of the chain of reimbursement, if the applicant did not pass the costs of such transactions to DEP in an reimbursement application. In that regard, DEP usually dealt only with what was apparent in an application. If an application had a line-item claim for interest, DEP would not pay that claim under the rule limiting the payment of interest. Otherwise, DEP generally did not deal with costs, including interest, for which the applicant did not seek reimbursement. The applications in the subject cases did not contain line-item claims for interest. However, the difference between the face value of the invoices and the amount for which Gator and Tower sold their right to receive reimbursement for those invoices clearly represents interest. Tower's invoices appear to represent work that was integral to site remediation which was broken down into appropriate Eunits and rates. There is no evidence that the prime subcontractor, subcontractors and vendors intentionally inflated their invoices to cover the cost of financing. However, they did agree to accept a lesser amount then the face amount of their invoices for their services prior to the filing of the applications. In September and October of 1993, Paul DeCoster wrote letters to DEP describing a proposed financing scheme in which AFG would purchase the account receivables of contractors engaged in site rehabilitation. Mr. DeCoster wrote a follow-up letter dated October 4, 1993. In this letter, Mr. DeCoster proposed that AFG would charge the contractor a finder's fee which would be in addition to the 15 percent financing "markup" taken by the investor providing the financing. This proposal referenced a funder, FEC, whose parent was AFG. The transactions between the entities in the instant applications did not involve a finder's fee or a funder identified as FEC. In October of 1993, Will Robins met with DEP staff to discuss the manner in which the reimbursement program would apply to a proposed financing scheme. In this proposal, AFG would charge contractors an application/initiation fee and/or a commitment fee. The transactions between the entities in the instant applications did not involve an application/initiation fee and/or a commitment fee. After that meeting, counsel for AFG sent DEP a letter dated November 4, 1993. The letter acknowledges that the existing rules did not "specifically address the types of situations that arise when providing capital for cleanup activities through funding groups such as AFG." The letter identifies ET as the proposed funder through which AFG would finance cleanups. AFG would receive the ultimate reimbursement payment from the IPTF. At that time DEP was concerned that the proposed application/initiation fee was a "kickback" which DEP should deducted from the funder's markup. In January of 1994, counsel for AFG wrote a letter to DEP describing a financing scheme which differs in some respects from the financing scheme at issue here. This letter states that AFG intended to purchase receivables of the funder and the general contractor at a discount. Under this plan, the general contractor and the funder would claim the two markups. The subcontractors would pay AFG a finder's fee. The letter reveals that AFG, its affiliates, and investors would recover the cash equivalent of both levels of markups plus a fee from subcontractors for funding the high costs or risky projects. The transactions between the entities in the instant applications did not involve a finder's fee. On July 13, 1994, counsel for AFG wrote DEP to explain some modifications in the details to the proposed plan for the purchase and sale of receivables at a discount. This letter informed DEP that AFG would have a financial affiliation with the funder (ET) which would exist outside the chain of reimbursement and which would have no effect on either the markups or the overall reimbursement amount reflected in any application. All contracts within the chain of reimbursement (between ET, SEI, Gator, Tower, and its subcontractors) would be negotiated in arms-length transactions. The letter states: In this plan the subcontractors will perform their work on the site and will prepare their invoices in a manner consistent with any publicly or privately financed cleanup. Those invoices will be complied and forwarded to the general contractor for its review and the general contractor will add on the markup allowed by rule to the subcontractor's bills. The reimbursement application will then be forwarded to the funder who will ensure that all bills have been paid and who will be identified as the "person responsible for conducting site rehabilitation" on the reimbursement application. The funder will take the second markup allowed by rule, and will submit the reimbursement application to the Department of Environmental Protection for processing. Reimbursement will ultimately be paid by the Department to the funder in accordance with the reimbursement application. At no step in this process will the Department relinquish any authority to review and approve either the scope and nature of the clean-up or the rates charged by the contractors and subcontractors. Commencing on August 31, 1994, DEP began to develop a policy regarding the use of factoring as a financing mechanism in the reimbursement program. DEP personnel exchanged numerous documents regarding the subject of factoring. In one of those memoranda dated September 2, 1994, Charles Williams, DEP's Reimbursement Administrator, indicated that "we absolutely need to have a Big Meeting to decide what to do once and for all." In November 1994, DEP provided AFG's counsel with an informal opinion of how DEP would handle a factored application as described by Will Robins of AFG in an earlier meeting with DEP staff. The statement was that the difference between the amount that a contractor accepted in payment for his services, which was a discounted amount after factoring, . . . and the face value of the invoice which was claimed and marked up in the application was determined to be a carrying charge or interest, which is specifically disallowed for reimbursement in the reimbursement rule. American Factors Group. Inc. and the Environmental Trust v. Department of Environmental Protection, DOAH Case No. 95-0343RU, Final Order issued July 24, 1995. DEP advised AFG's counsel that it would deal with factored applications involving other entities on a case by case basis. On December 20, 1994, John Ruddell, DEP's Director of the Division of Waste Management, sought permission from DEP's Policy Coordinating Committee to promulgate a rule amendment to Chapter 62-773, Florida Administrative Code (formally Chapter 17-773). A draft rule accompanied the request. Mr. Ruddell developed the draft rule in compliance with Chapter 94-311, Section 6, Laws of Florida, which required DEP to revise its reimbursement rule. The draft rule provided that nothing in this Chapter shall be construed to authorize reimbursement for the face amount of any bill or invoice representing incurred costs when the receivable has been sold at a discount. In all such cases, reimbursement shall be limited to the actual discounted amount accepted by the provider of the goods or services. . . . The draft rule had the effect of prohibiting factoring as a mechanism for financing site rehabilitation work. The draft rule did not single out any other financing mechanism. DEP did not promulgate that draft rule. DEP requested that Petitioners furnish additional information regarding the instant applications. Between March 1, 1995 and November 17, 1995, Petitioners responded to DEP's requests with letters bearing AFG's or EF's letterhead. The letters state that prior to filling the applications, ET (and in some cases SEI) paid Gator for the face amount of the invoices plus Gator's markup. Gator then paid the subcontractors for the face amount of their invoices. Prior to these payments, AEE, an affiliate of ET, purchased the right to receive the amount due to Gator from ET or SEI and the right to receive the amount due to subcontractors from Gator. In each case, AEE bought the right to receive at a discount. According to the financing scheme, ET or SEI received sufficient funds from AEE to make the payments to Gator. ET, in turn, was obligated to pay AEE following its receipt of the funds claimed in the reimbursement application. On or about April 21, 1995, Bruce French, Environmental Manager in DEP's Bureau of Waste Cleanup, developed a memorandum discussing the proper handling of factored and/or discounted reimbursement applications. Mr. French initially sent the memorandum to Charles Williams, DEP's Reimbursement Administrator in DEP's Bureau of Waste Cleanup. The memorandum states that: invoices from subcontractors, vendors, suppliers and/or the general contractor which were paid a factored (e.g., discounted) amount by a third party capital participant (e.g., funder) represents the actual amount incurred by that entity and subsequently by the general contractor. DEP subsequently disseminated the memorandum to all application reviewers to acquaint them with DEP's policy on invoices or applications involving factoring as the financing mechanism. DEP did not direct the policy on factoring towards any individual company. DEP intended it to apply to "any combination of a general contractor, management company, funder and responsible party" in any situation in which a third party capital provider paid those program participants or suppliers a factored (discounted) amount of their invoices. The policy memorandum directed DEP reviewers to deduct costs from an application in an amount equal to the difference in the face value of an invoice and the amount paid for the right to receive payment under that invoice. The language of the policy set forth in the April 21, 1995 memorandum was broad and did not condition DEP's position on factoring on any affiliation between any parties. Between August 14, 1995 and February 2, 1996, DEP took action on the 45 applications at issue here. As reflected in those notices, DEP denied reimbursement of costs claimed in those applications because of the factoring of the supporting invoices and because "the difference between the face amount of the supporting invoices and the amount factored represents interests or carrying charges which are specifically excluded from reimbursement pursuant to Rule 62- 773.350(4), F.A.C." DEP deducted from the cost of each application an amount equal to the amount of the discount on each relevant invoice. When DEP issued the denial letters, it had not adopted the policy against factoring by the rulemaking procedure required in Section 120.54, Florida Statutes. The notices reflected a basis of denial of costs that was consistent with DEP's policy as reflected in the December 20, 1994 Draft Rule and the April 21, 1995 memorandum. This non-rule policy, which generally applied to all factoring schemes was not apparent from the rules in effect at that time. The Agency Statement--Markup/Value Added Policy Funders and contractors are entitled to take a markup of paid contractor and subcontractor invoices for allowable costs at reasonable rates. The invoices must represent actual and reasonable costs which are integral to site remediation. Contractors usually are entitled to a first-tier 15 percent markup for supervising and/or coordinating on-site remediation, for investing capital while awaiting reimbursement by paying subcontractors' invoices, and for assuming liability for the performance of the subcontractors. Funders normally are entitled to a second-tier 15 percent markup as an incentive to provide funds to finance the work. Markups are expressly subject to limitations set forth in Section 17- 773.350(9), (10) and (11), Florida Administrative Code. There are no other specific or implied limitations on markups in the rules or written guidelines. Requiring each entity that receives a markup in the reimbursement chain to pay contractor, subcontractor, and vendor invoices helps ensure that each level in the reimbursement chain pays the entity at the next lowest level in full. In these cases, each level in the reimbursement application chain "technically" paid the entity at the next lowest level. DEP policy in effect at the time Petitioners submitted the instant applications for reimbursement was to allow markups of paid invoices at two levels. However, DEP was not aware of situations where general contractors claimed markups for work that was complete before they ever became involved in the projects. With regard to all of the pending reimbursement applications, Gator applied a 15 percent markup to all of Tower's invoices including the invoices of Tower's subcontractors and vendors. With regard to a minimum of 30 of the 45 sites, Gator clearly did not supervise, manage or direct any of the on-site remediation activities. In fact, Gator did not become involved until after Tower had undertaken and completed these tasks. In at least 30 of the instant cases, Tower was acting as the general contractor when all of the on-site remediation took place. However, Tower could not apply a 15 percent markup to the invoices for its own services. Gator made it possible for Petitioners to claim the markup on Tower's invoices. As to the 15 sites at which Gator allegedly had some type of involvement with on-site remediation activities, the record contains no evidence regarding the specific activities or the level of Gator's involvement on any particular project. Gator performed some type of minimal due diligence review of Tower's site work. Gator allegedly reviewed Tower's technical and administrative files, cross-referenced technical and administrative files with the applications which Tower prepared, made visits to some job sites, and prepared a deficiency letter to determine the appropriateness of the scope of Tower's work. However, all of these functions were repetitious of the work performed by Tower and the certified public accountant attesting to the Certification Affidavit. Tower was a qualified engineering consulting firm that employed its own engineers and geologists. Gator's employee that reviewed the technical information in Tower's files was not a Florida professional engineer. He was not qualified as a certified public accountant to determine whether a charge was within DEP's reasonable rates. The Gator employee was a Florida professional geologist but he did not sign and seal the deficiency letter as such. There is no reference in DEP's rules or written policies to a deficiency letter. AFG required Gator to prepare the deficiency letter within two days of the date on which EF provided Gator with the opportunity to review a completed task. This two-day turn around time allegedly afforded efficiency of payment. The deficiency letters were limited to the question of whether the scope of Tower's services were reimbursable. Gator did not begin its review of an reimbursement application until after Gator received an invoice from Tower. The relevant subcontract/purchase order issued by Gator to Tower, the Tower invoice and the Gator invoice often were prepared on the same day. Gator "technically" paid the invoices at the next lowest level with money that AEE advanced. When Gator received payments from ET or SEI, it immediately repaid AEE before ET or SEI submitted the applications to DEP or soon thereafter. Pursuant to the addenda to the factoring contracts, Tower, not Gator, contributed to a reserve trust account which AEE will use to cover any reimbursement shortfalls. Gator allegedly indemnified the funder and guaranteed its own work but did not assume a risk of loss on Tower's work. On most if not all of the applications, Gator performed no meaningful management or supervisory functions. Gator's primary purpose in these consolidated cases was not to afford AFG a level of comfort as to the appropriate scope of the individual program tasks but to ensure that third-party investors maximized their profits. On September 1, 1994, Restoration Assistance, Inc., an entity under contract with DEP to review reimbursement applications, issued a memorandum to its reviewers directing them to complete their review and do a "total denial" on "Gator Environmental packages." The memorandum advised the reviewers that "Bruce" was drafting canned language to use in DEP's denial statement. On or about April 21, 1995, DEP presented its reviewers with a memorandum setting forth an initial overview of a "value added" policy for markups taken by a "management company" involved in site remediation activities. The memorandum indicated that DEP would allow reimbursement of claims for actual project management work and value-added services. The memorandum further provided that DEP would allow markups to a management company which only provided cash-flow services for a majority of the program task period even if the management company performed no other service. However, DEP would deny a markup if the management company provided such services during a "one month time period." DEP intended for the April 21, 1995 memorandum to acquaint DEP reviewers with the emerging DEP policy on markups. DEP's rules and written guidelines do not address the distinction made in the April 21, 1995 memorandum regarding the timing during which a management company could provide cash flow services and still be entitled to a markup. On October 20, 1995, Charles Williams issued a DEP policy memorandum for reviewers to use in reviewing reimbursement applications. Through that memorandum, DEP finalized and implemented the "value added" policy. The memorandum states that if the "GC" [general contractor] was involved with the management of the project during the course of the actual work by subcontractors, [DEP] rules do not preclude them from applying a markup. However, if the "GC" came along after the work was completed by other contractors and their involvement was more of a due diligence exercise to faciltiate (sic) a funding arrangement by a third party, then the "GC" markup would not be justified, though a markup by the actual funder listed as the PRFCSR could be allowed." Prior to the establishment of the "value added" policy on October 20, 1995, DEP made no inquiry as to whether a contractor provided value added services which were not reflected in an application in order to be entitled to a markup. DEP applied the "value added" policy to all pending applications (including the ones at issue here) resulting in a deduction of Gator's markup in all of the subject cases. The Department of Banking and Finance reviewed and issued a report (Comptroller's Report) on the Petroleum Contamination Site Cleanup Reimbursement Program on November 29, 1994. This report addressed the issue of markups in the reimbursement program. The Comptroller's Report recognized that DEP found the multiple markup structure to be beneficial in that it "attracts the involvement of companies whose role in cleanup projects is limited to providing funds to finance the work [and] attracts investors who provide funds which might not otherwise be available--thus facilitating cleanup of contaminated sites." The report acknowledges that a prime contractor "might have only limited direct involvement in the cleanup, having engaged subcontractors for most or all of the actual work." The Comptroller's Report did not address whether a contractor would be entitled to a markup if it became involved after all site work was complete. The Petroleum Efficiency Task Force's (PETF) final report concerning financing for reimbursement contractors issued on August 17, 1994. This report discussed DEP's policy of allowing two markups on paid invoices. The report recognized that "funders must be able to rely on the skills and knowledge of contractors to minimize reimbursement shortfalls." The PETF recommended for future consideration that "the Department should provide in rulemaking that contractors who take the first-tier 15 percent markup on subcontracted work must adequately supervise the work." When the PETF issued this final report, there was no existing rule that established any level of on site supervision or any other specific criteria for applying one of the two allowable levels of markup, other than paying invoices for integral site rehabilitation work. DEP's rules and written guidelines did not substantively change with regard to the "value added" policy from the April 22, 1993 revision of Chapter 17-773, Florida Administrative Code, to the October 20, 1995 memorandum which established a non-rule limitation on the ability of an entity to apply a markup to paid invoices. The "value added" policy is not reflected in any rule or written guideline, and would not be made available to a participant in the reimbursement program who requested program information. The "value added" agency statement is a non-rule policy which has the effect of a rule. DEP intends to apply the policy in all cases where a contractor's service adds no value to a project. DEP did not anticipate the need for such a rule when it promulgated the current rules. The Agency Statement Standard During the 1994 Legislative Session, the Florida Legislature directed that "no later than January 1, 1995, DEP shall review and revise rules related to the pollutant storage tanks programs . . . ." Chapter 94-311, Section 6, Laws of Florida. DEP understood that legislative instruction to include rule revisions related to the reimbursement program. On April 7, 1994, the Office of Statewide Prosecution issued a Statewide Grand Jury Report. The final report concerning financing of reimbursement contractors was prepared for the Florida Petroleum Efficiency Task Force on August 17, 1994. The Office of Controller issued its report on the Petroleum Contamination Site Cleanup Reimbursement Program on November 29, 1994. All of these reports offered suggestions for changes to the reimbursement rule. DEP first learned about factoring from presentations by Paul DeCoster and Will Robins in 1993. After these meetings, Petitioner proposed several factoring plans as proposed schemes to finance petroleum contamination site cleanup projects. Petitioners did not finalize the exact financing scheme they intended to use until July of 1994. Petitioners filed the first applications on July 18, 1994. By that time, DEP was aware that the factoring company was affiliated with the funders. DEP was also aware that the factoring company would receive the difference between the face amount of an invoice and the discount amount of that invoice. However, DEP was not aware of the exact nature of the relationships between AFG, AEE, EF, ET, WIFL, SEI, Gator and Tower. DEP was unable to evaluate all aspects of Petitioners' factoring plan without supplemental information about the details of the purchase and sale of receivables as they related to each application. DEP requested additional information from the applicants to determine if the costs were actually incurred. As a result of the information that DEP received, it reviewed all transactions to determine whether the costs claimed in the applications were actual and reasonable. On December 20, 1994, John Ruddell, Director of DEP's Division of Waste Management, sought permission from DEP's Policy Coordinating Committee to promulgate a rule amendment to Chapter 62-773, Florida Administrative Code (formerly Chapter 17-773, Florida Administrative Code). A draft rule accompanied the request. DEP intended the draft rule to comply with the legislative mandate contained in Chapter 94-311, Section 6, Laws of Florida. By that time, Petitioners had filed 41 of the subject applications. The 1994 draft rule provided that if a program participant sold a receivable at a discount, reimbursement would be limited to the actual discounted amount accepted by the provider of the goods or services rendered. The draft rule eliminated markups of contractor and subcontractor invoices. The December 20, 1994 memorandum to DEP's Policy Coordinating Committee did not indicate any deficiency in the existing delegated legislative authority that would prevent DEP from implementing the changes to the draft rule. DEP policy coordinating committee declined to approve the initiation of rulemaking procedures. Instead, it directed DEP staff to draft a bill for the 1995 legislative session. DEP based this decision on a determination that it would take too long to correct the numerous problems through the rulemaking process. The 1995 Legislative Session made several changes to the reimbursement program, particularly as it related to the direction of future site remediation activities. Chapter 95-2, Laws of Florida, passed the 1995 Legislative Session and changed the program from reimbursement of completed work to requiring pre-approval of work before it commenced. The 1995 Legislative Session did not make any relevant amendment to the reimbursement payment procedures in Section 376.3071(12), Florida Statutes. During the period between adjournment of the 1995 Legislative Session and February 2, 1996, DEP took action on each of the 45 applications that are the subject of this proceeding. Meanwhile, DEP focused its attention on making the necessary changes to switch from a reimbursement program to the new pre- approval program. It is not unreasonable to believe that such a significant change in a large program would take an agency some time to educate itself and the program's participants, prepare documentation and forms, and take steps to begin implementation. On March 22, 1996, approximately six and one-half months (198 days) after the petition for administrative hearing in Case No. 95-4606, and almost 21 months after the effective date of Chapter 94-311, Laws of Florida, DEP published its notice of rule development in the Florida Administrative Weekly. DEP filed the notice of rule development specifically "in response to litigation pending before the Division of Administrative Hearings" in the 45 cases that are the subject of this proceeding. In these consolidated cases, DEP did not have sufficient time prior to March 22, 1996 to acquire the knowledge and experience reasonably necessary to address, through the rulemaking process, the policy statements relative to factoring and markups based on value added services. Certainly, related matters were not sufficiently resolved to enable DEP to initiate rulemaking to address the policies set forth in the March 21, 1995 and October 20, 1995 memoranda until the spring of 1996. DEP is currently using the rulemaking procedure expeditiously and in good faith to adopt rules which address these non-rule policies. Additionally, the record indicates that it was not possible for the agency to initiate rulemaking in time to give Petitioners advance notice of the new policies. Petitioners filed the last applications in February of 1995 before DEP had time to fully evaluate the factoring plan. The time it took DEP to develop the detail or precision in the establishment of the policies set forth in the March 21, 1995 and October 20, 1995 memoranda was reasonable under the circumstances.
The Issue The issues are: (a) whether the accident on December 12, 1995, involving a shrimp trawler, the Atlantic Sun, resulted in a discharge of pollutants into the Atlantic Ocean and caused natural resource damages; and, if so, (b) what amount does Petitioner William A. Harden owe the Department of Environmental Protection for investigation costs incurred in investigating the break up of the Atlantic Sun and for natural resource damages resulting from the accident.
Findings Of Fact On December 12, 1995, the commercial fishing vessel, the Atlantic Sun, went aground on the south jetties in the Atlantic Ocean at the entrance to the channel of St. Mary's River. The shrimp trawler broke apart on the jetties near Fernandina Beach, Florida. Debris from the wrecked ship washed onto the beaches near the jetties. The United States Coast Guard (USCG) arrived at the scene of the accident and removed Roger Cummings, Captain of the Atlantic Sun, and Daniel Boone, an owner of the vessel, from the scene of the wreck. The USCG informed the Florida Marine Patrol (FMP) about the accident on December 12, 1995. Michael Lehman, FMP officer, met the USCG officers investigating the accident when they brought Captain Cummings and Mr. Boone to shore. Captain Cummings stated that the ship had 1200 to 1300 gallons of diesel fuel in its tanks when it hit the jetties. The water was too rough for Officer Lehman to investigate the accident scene that night. Officer Lehman and another FMP officer went to the site of the wreck on the morning of December 13, 1997. On his way to the accident scene, Officer Lehman's boat ran through a sheen of diesel fuel from Eagan's Creek to the end of the jetties. Officer Lehman found the Atlantic Sun upside down at the end of the rock jetties. There was a strong smell of diesel fuel at the site of the wreck. Diesel fuel ran down both sides of the jetties. The fuel was bubbling up on both sides of the wrecked ship. On December 14, 1995, the flow of fuel from the capsized vessel was still not contained. Officer Lehman estimated that approximately 500 gallons of fuel had been discharged into the ocean. He based this estimate on his personal observation at the accident scene, personal experience as an investigator of pollutant discharges, and witness statements. USCG officers estimated that the Atlantic Sun discharged 1,000 gallons of diesel fuel. The diesel fuel sheen on the water surface eventually affected a large area. It covered the entrance to St. Mary's River Channel from bank to bank. The fuel flowed west and inland from the ship wreck. It covered much of Cumberland Sound. It affected coastal waters from the accident site to Ft. Clinch State Park Beach and south approximately two miles. Special management areas which were affected are: Ft. Clinch State Park, Cumberland National Seashore, and Ft. Clinch Aquatic Preserve. By December 16, 1995, Officer Lehman could no longer see fuel coming from the area of the wreckage. By that time, the spilled fuel had dissipated. The accident occurred within one statute mile seaward of the coastline of the state of Florida. The two FMP officers worked a total of 18 hours during the course of their investigation. The cost to Respondent for the two officers' time was $244.80. The FMP officers used a single engine boat in their investigation for five hours. The single engine boat cost Respondent $100.00. They used a twin engine boat for six hours to conduct the investigation. The twin engine boat cost Respondent $240.00. The FMP officers drove a total of 76 miles in patrol vehicles. At $0.20 per mile, the total cost for mileage was $15.20. The FMP officer spent $5.00 developing pictures which were taken during their investigation. Respondent incurred clerical expenses during the investigation in the amount of $33.60. Respondent's total cost for the investigation was $638.60. Respondent assessed Petitioner with damages to natural resources. The damages were based on the total amount of pollutants discharged into Florida's coastal waters as a result of the Atlantic Sun going aground on the jetties. The amount of pollutants was 500 gallons of diesel fuel. Impact to special management areas was also taken into consideration in determining the natural resource damages. Respondent utilized a statutory formula to assess Petitioner with natural resource damages in the amount of $8,008.47. Respondent sent Petitioner a final agency action letter advising him of the total assessment in the amount of $8,647.07.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that Respondent enter a Final Order assessing Petitioner $638.60 in investigative costs and $8,008.47 in natural resource damages. DONE AND ENTERED this 5th day of February, 1998, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 5th day of February, 1998. COPIES FURNISHED: Kisha R. Pruitt, Esquire Kathelyn M. Jacques, Esquire Department of Environmental Protection Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Daniel Boone Boone and Harden Atlantic Sun Post Office Box 438 Darien, Georgia 31305 William A. Harden Boone and Harden Atlantic Sun Route 3, Box 3158 Townsend, Georgia 31337 Kathy Carter, Agency Clerk Department of Environmental Protection Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 F. Perry Odom, Esquire Department of Environmental Protection Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000 Virginia B. Wetherell, Secretary Department of Environmental Protection Mail Station 35 3900 Commonwealth Boulevard Tallahassee, Florida 32399-3000
The Issue The issue for determination is whether Petitioner is liable for the costs and expenses incurred by Respondent in responding to a pollutant discharge, occurring on November 6, 1992, at the waters off John Lloyd State Park, Dania, Florida, and for damages to natural resources resulting from the pollutant discharge.
Findings Of Fact On November 6, 1992, a DC-7 airplane crashed off the Atlantic Coast of Florida, more particularly, 100 yards from John Lloyd State Park, and one quarter of a mile north of Dania Pier in Dania, Florida. The DC-7 was a chartered cargo airplane and had departed from Miami International Airport. The DC-7 was chartered from Claudio Castillo by Miguel Delpino, United States General Manager of Aerochago Airlines, to carry cargo for Aerochago Airlines. Even though Aerochago Airlines owned aircraft, its aircraft was unavailable due to maintenance work being performed. During the flight from Miami International Airport, the DC-7 developed engine trouble, i.e., two of its engines failed. The aircraft began to lose altitude. In an attempt to regain altitude, the captain of the aircraft dumped 3,000 gallons of aviation fuel. However, the DC-7 failed to regain altitude and crashed. Remaining on the crashed aircraft were 3,000 gallons of aviation fuel and 150 gallons of motor oil. When the DC-7 crashed, only the crew and two passengers were on board. One of the passengers was Mr. Castillo. On the same day of the crash, the Florida Marine Patrol (FMP) of the Department of Natural Resources, now the Department of Environmental Protection (DEP), arrived at the crash scene at 3:20 a.m. and investigated the crash. The DEP had four employees investigating the crash: three FMP officers and one employee from the Office of Coastal Protection. The remaining aviation fuel and motor oil in the crashed DC-7 was discharging into the coastal waters. The DEP employees attempted to abate the discharge. The equipment necessary for the employees' investigation of the crash and abatement of the discharge and the cost for the equipment were the following: (a) a DEP vehicle at a cost of $7.00; (b) a twin engine vessel at a cost of $120.00; (c) an underwater sealant kit at a cost of $16.66; (d) scuba tanks at a cost of $9.00; and (e) photographs at a cost of $24.00. The total hours expended by DEP's four employees were 36 hours, at a cost of $685.84. Due to the DC-7 leaking aviation fuel and motor oil into Florida's coastal waters, removal of the aircraft from the Atlantic Ocean was necessary. DEP contracted with Resolve Towing and Salvage (RTS) to remove the DC-7. RTS is a discharge cleanup organization approved by DEP. RTS' contractual responsibilities included removal of the entire DC-7 aircraft and all debris within 100 yards of the center of the aircraft; disposal of the aircraft; plugging the engines to help stop the leakage; and removal and delivery of the engines which failed to the National Transportation Safety Board (NTSB) and the Federal Aviation Authority (FAA). Because the submerged DC-7 was located in an environmentally sensitive coral and sea-plant area, RTS was required to use extreme care in removing the aircraft. The contractual cost was fixed at $34,000.00 A DEP employee, Kent Reetz, was at the scene of the crash during RTS' cleanup. His responsibility was to monitor the removal of the DC-7 by RTS and to ensure that the aircraft's removal was in compliance with DEP's standards. During the removal of the DC-7 from the water, the fuselage ruptured, scattering debris which was dangerous to the public and to the coral and sea-plants. DEP determined that RTS was not responsible for the fuselage rupturing, but that the rupture was caused by several storms, prior to the aircraft's removal, and by the aircraft being submerged for an extended period in salt water. DEP contracted with RTS to remove the dangerous debris emitted when the fuselage ruptured. The contractual cost was fixed at $9,050.00 The total contractual cost between DEP and RTS was $43,050.00. DEP paid RTS from the Coastal Protection Trust Fund. In responding to the pollutant discharge, DEP incurred a total cost of $43,912.50. DEP assessed damages to the natural resources based upon the amount of pollutants discharged which were 3,000 gallons of aviation fuel and 150 gallons of motor oil. Using the statutory formula, DEP assessed damages to the natural resources in the amount of $57,898.72. Based upon the costs incurred by DEP in responding to the pollutant discharge in the amount of $43,912.50 and the damages to the natural resources in the amount of $57,898.72, DEP sought reimbursement and compensation from Mr. Castillo in the total amount of $101,811.22. DEP invoiced Mr. Castillo for reimbursement of the costs and for compensation for the damages. DEP provided Mr. Castillo with detailed and itemized expense documents for the costs that it had incurred in responding to the pollutant discharge. The documents showed the expenses incurred, what each expense represented, and the formula for computing each expense. Further, DEP provided Mr. Castillo with a document showing the amount of the damages to the natural resources, the formula for computing the damages, and how the damages were computed. The charter of November 6, 1992, was not the first time that Mr. Delpino had chartered the same DC-7 from Mr. Castillo. Prior to and, again, at the previous charter, Mr. Castillo represented to Mr. Delpino that he, Mr. Castillo, was the owner of the DC-7. The owner of a chartered aircraft is responsible for obtaining the aircraft's crew and insurance and for maintaining the aircraft. For the previous charter, Mr. Castillo was responsible for obtaining the DC-7's crew and the insurance and for maintaining the aircraft. Mr. Delpino had no reason to expect the charter for November 6, 1992, to be any different. Furthermore, Mr. Castillo did not inform Mr. Delpino that the responsibilities would be different. For the present charter, as before, Mr. Castillo handled all matters relating to the crew, insurance, and maintenance. Regarding the insurance, Mr. Castillo presented to Mr. Delpino an insurance certificate which, after the crash, was discovered to be false. Also, regarding maintenance, prior to the crash, the two engines which failed were to be removed and repaired, but, although they were removed, they were returned without being repaired. Mr. Castillo was the owner of the DC-7. Also, the crash of the DC-7 was investigated by several federal governmental agencies, including the FAA, the U.S. Coast Guard, and the NTSB. Both the Coast Guard and the NTSB issued reports on the crash, which identified Mr. Castillo as the owner of the DC-7. Mr. Castillo was responsible for the discharge of the 3,000 gallons of aviation fuel and 150 gallons of motor oil from the DC-7 into Florida's coastal waters.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection (DEP) enter a final order assessing Claudio Castillo $43,912.50 for costs related to DEP responding to the pollutant discharge on November 6, 1992, at Florida's coastal waters off John Lloyd State Park, Dania, Florida, and $57,898.72 for damages to natural resources resulting from the pollutant discharge--all totaling $101,811.22. DONE AND ENTERED this 26th day of August, 1997, in Tallahassee, Leon County, Florida. ERROL H. POWELL 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 26th day of August, 1997.
The Issue The issue is whether Respondents should have an administrative penalty assessed, take corrective action on their property to remove fill, and pay investigative expenses for the reasons stated in the Notice of Violation, Orders for Corrective Action, and Administrative Penalty Assessment (Notice) issued by the Department of Environmental Protection (Department) on July 5, 2017.
Findings Of Fact Respondents’ residence is located at 3100 Victoria Drive, St. Augustine. The property, purchased in 2009, faces Victoria Drive to the west. The high point of the lot is where it abuts the street. It then slopes downward to a small creek which lies at the rear of the parcel. The largest elevation drop is at the front of the property. The Department has the authority to institute a civil or administrative action to abate conditions that may create harm to the environment. In this case, it filed a Notice directed against Respondents for allegedly placing fill on 0.11 acres of jurisdictional wetlands (around 5,000 square feet) located on their property. Mr. Ravan admits that he placed fill on his property without a permit, but he disputes the Department’s assertion that the filled area covers 0.11 acres of wetlands. Wetlands are areas that are inundated and saturated with water for a long enough period of time to support vegetation that can adapt to that environment. Fla. Admin. Code R. 62- 340.200(1). If the landward extent of a wetland cannot be determined by direct application of the rule definition, i.e., without significant on-site work, field verification using the wetland delineation methodology in Florida Administrative Code Rule 62-340.300 is required. Field verification involves a visual inspection of the site to evaluate vegetation, soil conditions, and other hydrologic indicators on the property. If two of these characteristics are found, the Department identifies the area as a wetland. In this case, field verification was necessary. In 2016, Mr. Ravan was involved in a dispute with a neighbor whose dog was repeatedly “messing” in his backyard. After words were spoken by the two, Mr. Ravan believes the neighbor informed the County that Mr. Ravan was placing fill in his back yard. This assumption probably is true, as emails from the County to the Department state that the case arose a few days later as a result of a “citizen complaint.” Pet’r Ex. 18. After receiving the citizen complaint, a County employee visited Respondents’ property. The employee informed Mr. Ravan that fill material (dirt) had been placed on jurisdictional wetlands without a permit. A few days later, the County reported the alleged violation to the Department. In response to the County’s referral, in September 2016, Ms. Sellers, a Department Environmental Specialist III, inspected the property with a County representative. In preparation for her visit, she reviewed aerials of the property to determine the elevation of the area, reviewed soil mapping layers, and drove around the site to verify the drainage patterns on the property and whether it had any connections to a water body. During her inspection, Ms. Sellers performed “a good analysis of the property” and took photographs of the filled area. The results of her inspection are found in a Chapter 62- 340 Data Form accepted in evidence as Exhibit 17. It supports a finding that the filled area consists of wetlands and covers around 0.11 acres. Respondents submitted no contrary evidence. After her inspection, Ms. Sellers informed Mr. Ravan that he must remove the fill. The Notice was issued on July 5, 2017. On a follow-up visit a year after her initial inspection, Ms. Sellers observed that some of the fill piles had been removed, the remaining fill had been spread throughout the area, and some of the vegetation observed in September 2016 was now covered. In a visit a few weeks before the final hearing in April 2018, Ms. Sellers observed that some fill still remained. To comply with the law, Mr. Ravan must remove the fill, obtain a permit, or enter into a consent order. If a permit is obtained, besides the cost of the permit ($420.00), Mr. Ravan would have to offset the environmental impacts by purchasing a mitigation bank credit, an expensive undertaking. If the fill is removed, it must be extracted with a small device, such as a wheelbarrow or other small piece of equipment, as a vehicle cannot be driven into the backyard. This will be a tedious and time-consuming process. The Department’s preferred option is to remove the fill. Because of the slope of the lot, mainly at the front of the parcel, Mr. Ravan has experienced drainage problems since he purchased the home in 2009. The drainage problem is caused by a County-owned culvert that runs along Victoria Drive, stops at the corner of his lot, and then dumps the runoff into his yard. Despite Mr. Ravan’s repeated efforts to obtain relief, the County has refused to correct the problem. During heavy rain events, the blocked culvert overflows into his yard and runs down the side of his property to the rear of the lot. Photographs support Mr. Ravan’s claim that the drainage problem has caused severe erosion on his property. Mr. Ravan testified that some of the fill was in place when he purchased the property from the prior owner in 2009. Because of its age, he contends the fill should be “grandfathered.” However, Ms. Sellers established that “historic fill” must be at least 20 years old in order to be immune from enforcement action. In this case, there is no proof that the fill qualifies for this exception. Mr. Ravan has cooperated fully with the Department throughout this proceeding. The evidence shows that Mr. Ravan acted in good faith and is only attempting to prevent runoff from the culvert, which has resulted in deep channels in the side and rear of his yard and washed away much of the top soil. There is no evidence regarding the derivation of the Department’s “investigative expenses” of at least $500.00. At hearing, Ms. Sellers summarized the proposed corrective action. This is a reasonable corrective action.1/ Mr. Ravan disputes her assertion that in some areas of the backyard, up to two feet of fill must be removed. He contends that if two feet of soil is removed, the water table would be reached. However, this issue must be resolved during the corrective action process.
The Issue The issue is whether Florida Petroleum Markers and Convenience Store Association (Florida Petroleum) is entitled to reasonable attorney’s fees and costs pursuant to Section 120.595(2), Florida Statutes, and if so, in what amount.1
Findings Of Fact Introduction Florida Petroleum is the prevailing party in the underlying rule challenge and requests an award of reasonable attorney's fees pursuant to Section 120.595(2), Florida Statutes.2 Florida Petroleum prevailed in DOAH Case No. 05-0529RP on one of two challenged proposed rule revisions to Florida Administrative Code Chapter 62-770, which governs cleanup of petroleum contamination. Proposed rule 62-770.220(3)(b) was held to be an "invalid exercise of delegated legislative authority." Proposed rule 62-770.220(4), was "not an invalid exercise of delegated legislative authority, except insofar as notice must be given every five years to persons other than 'local governments and owners of any property into which the point of compliance is allowed to extend,' as provided in Section 376.3071(5)(b)2., Florida Statutes."3 The Department argues that its actions were "substantially justified" because there was a reasonable basis in law and fact at the time its actions were taken. The proposed rules were approved by the Environmental Regulation Commission (ERC) on February 2, 2005, which is the time when the Department's "actions were taken." The Department does not argue that special circumstances exist that would make the award of fees unjust. Department Contamination Programs The Department's Division of Waste Management is comprised of the Bureau of Petroleum Storage Systems, the Bureau of Waste Cleanup, and the Bureau of Solid and Hazardous Waste. The Bureau of Petroleum Storage Systems administers the state's petroleum contamination cleanup program. This cleanup program encompasses the technical oversight, management, and administrative activities necessary to prioritize, assess, and cleanup sites contaminated by discharges of petroleum and petroleum products from petroleum storage systems. There are approximately 23,000 petroleum-contaminated sites statewide. Florida Administrative Code Chapter 62-770 establishes petroleum contamination site cleanup criteria. These criteria are established for the purposes of protecting the public health and the environment and for determining, on a site-specific basis, the rehabilitation program tasks that comprise a site rehabilitation program and the levels at which a rehabilitation program task and site rehabilitation program may be deemed complete. Fla. Admin. Code R. 62-770.160(8). The petroleum contamination cleanup program incorporates risk-based corrective action (RBCA) principles to achieve protection of human health, public safety, and the environment in a cost-effective manner. The phased RBCA process is iterative and tailors site rehabilitation tasks to site-specific conditions and risks. Fla. Admin. Code R. 62-770.160(8). The Bureau of Waste Cleanup administers the state's drycleaning solvent cleanup program. This program is for the cleanup of property that is contaminated with drycleaning solvents as a result of the operations of a drycleaning facility or wholesale supply facility. Florida Administrative Code Chapter 62-782 establishes drycleaning solvent cleanup criteria, established for the purposes of protecting the human health, public safety and the environment under actual circumstances of exposure and for determining, on a site-specific basis, the rehabilitation program tasks that comprise a site rehabilitation program and the levels at which a rehabilitation program task and site rehabilitation program may be deemed complete. Fla. Admin. Code R. 62-782.150(1). The drycleaning solvent cleanup program, like the petroleum contamination cleanup program, the brownfield site rehabilitation program, and the global RBCA contamination cleanup program mentioned below, incorporates RBCA principles to achieve protection of human health and the environment in a cost-effective manner. Fla. Admin. Code R. 62-782.150(1) and 62-785.150(1). In 2003, the Legislature adopted Section 376.30701, Florida Statutes, which authorizes the Department to adopt rule criteria for the implementation of what is referred to as "global RBCA," which extends the RBCA process to contaminated sites where legal responsibility for site rehabilitation exists pursuant to Chapter 376 or Chapter 403, Florida Statutes. Global RBCA is a cleanup program for contaminated sites that do not fall within one of the Department's other contamination cleanup programs. Department Rulemaking Efforts After the passage of Section 376.30701(2), Florida Statutes, the Department initiated rulemaking to develop Florida Administrative Code Chapter 62-780 (global RBCA). Section 376.30701(2) established July 1, 2004, as the date the Department was to adopt rule criteria to implement the global RBCA contamination cleanup program. At the same time, the Department initiated rulemaking with respect to revisions to Florida Administrative Code Chapters 62-770 (petroleum), Chapter 62-782 (drycleaning solvents), and Chapter 62-785 (brownfields). This decision was predicated on the similarities among the four waste cleanup programs and the Department's desire to ensure a consistent approach across the four programs and pursuant to one large rulemaking effort. As such, the Department sought to include the same notification provisions in each rule for consistency purposes. (T 33-34, 55). However, the Department also recognized at the time that the notice provision for RBCA for petroleum contamination cleanups, i.e., Section 376.3071(5)(b)2., was different from the notice provisions for RBCA cleanups for the drycleaning solvent (Section 376.3078(4)(b)), brownfields (Section 376.81(1)(b)), and global RBCA (Section 376.30701(2)(b)) programs. (T 69, 115, 126-129). In each of these three statutes, the Legislature expressly expanded the class of persons to whom notice is required to be given and expressly referred to a specific type of notice to be given (actual or constructive) depending on the class of persons designated to receive notice. Each of the latter statutes was enacted after, and presumably with knowledge of Section 376.3071(5)(b)2., which was materially amended in material part in 1996 to add, in part, the notice provision. See Ch. 96-277, § 5, at 1131, 1135-1136, Laws of Fla. In May 2004, the Department became aware of concerns with regard to on-going efforts to assess the groundwater contamination at the former American Beryllium plant in Tallevast, Manatee County, Florida. (The party's refer to the city as Tallavast, whereas the Transcript (T 36) and DEP Exhibit 1 refer to the city as Tallevast.) For approximately two years, the owner of the plant, Lockheed Martin, had been conducting an on-going assessment of the extent of the solvent (trichloroethylene) contamination. The Department was concerned that there were residential areas located adjacent to and in the immediate vicinity of the former industrial plant. In May 2004, it became apparent that there were problems with certain assumptions concerning the assessment of the groundwater contamination. First, there had been an erroneous assumption that the contamination plume was small and located predominantly on-site. Second, based on well surveys, there was an assumption that there were no human health exposure points in the form of contaminated off-site potable water wells. Significant concerns arose when it became apparent the contamination plume was more extensive than anticipated and had migrated off-site. These concerns were exacerbated when it became apparent that groundwater contamination was impacting off-site potable water wells. Tallevast residents raised concerns that they were being exposed to contamination and that they were never properly notified by the Department, upon the initial discovery of the groundwater contamination. Tallevast residents were also concerned about whether the Department had failed to properly notify then once it was discovered the groundwater contamination had migrated off-site. The problems experienced at Tallevast emphasized to the Department the need to explore available avenues to enhance public notification procedures as a whole.4, 5 The Department asserted as to a reasonable basis in fact for the proposed rules, that contamination affecting Tallevast residents provided an impetus for the Department in May 2004 to address notification of contamination to affected off-site property owners. The situation in Tallevast arose because well surveys failed to indicate the extent of the contamination plume and that residents were using private wells for potable water. The Department's objective was to make sure that if there was exposure potential, the potentially affected parties should be notified. The Department seems to agree that the failure to discover the contamination of the potable wells in Tallevast occurred during the assessment phase of the cleanup and that it had not yet gotten to the stage of determining the remediation strategy. (T 45-46). The Department's stated concerns regarding Tallevast are not specifically addressed by proposed rule 62-770.220(3)(b) and (4). (T 74-75, 95-96). The Department’s procedure for granting a temporary extension of the point of compliance is that the responsible party will propose such an extension in its remedial action plan. (The four cleanup programs provide for the establishment of a TPOC.) The Department will then issue its notice of intended agency action, notice of the agency action will be provided to the enumerated persons, and the persons receiving notice will have a 30-day comment period. (T 149-155). (Pursuant to proposed rule 62-770.220(3)(a), the person responsible for site rehabilitation (PRSR) "shall provide" actual notice "to the appropriate County Health Department and all record owners of any real property into which the point of compliance is allowed to extend . . . ." In this regard, as Mr. Chisolm testified, the process is "similar to a permit.") Mr. Sole testified that, in the course of rulemaking, Florida Petroleum argued to the Department that the "petroleum statute under 376.3071 is different as it addresses the temporary point of compliance. It's not as prescriptive as the other statutory provisions for Risk-Based Corrective Action and the dry-cleaning, the Brownfields, and now the Global RBCA [statutes]. And their concern was that because it's not as prescriptive, [the Department] should not be establishing these additional notice provisions, such as constructive notice . . . But their fear was or concerns . . . were that you're going to engender a lot of litigation that's unnecessary because, as soon as you say the word 'contamination,' somebody is going to want to sue me . . . . And I understood that position. But at the same time, the lessons that we learned were that failure to provide that notice, unfortunately, can cause exposure and can cause a public health concern; and [the Department] needed to balance the two." (T 63-64, 122). Mr. Chisolm testified, in part, about the development of the constructive notice provision in proposed rule 62- 770.220(3)(b) and explained that the global RBCA, brownfields, and drycleaning solvent statutes required constructive notice to residents and business tenants of impacted properties.6 Mr. Chisolm further explained: So, if you're going to give notice to the legal owners of a piece of property, many cases there are tenants there. And they may not get the word, and they may be the ones that are drinking the water. The same with business tenants. So the idea was let's give notice to the people who are going to be or potentially going to be affected by this contamination, which is, after all, under the property which they may be inhabiting and using. So that was the purpose for the rule change in this case. Let's give notice to everybody who could potentially be affected by the rule, by the contamination beyond the property boundaries . . . . The whole idea behind RBCA, Risk- Based Corrective Actions, is that, if there's no exposure, there's no risk. There's no danger to the individual, to any individual. (T 116-117).
The Issue Whether Petitioner, Miami Yacht Divers, Inc., is entitled to reimbursement for cleanup costs.
Findings Of Fact The Respondent is the state agency charged with the responsibility of administering claims against the Florida Coastal Protection Trust Fund. Petitioner is a company located in Dade County, Florida, which performs commercial diving operations. Such operations include oil pollution containment and clean-up. At all times material to the allegations of this case, Dan Delmonico was the principal officer or owner for the Petitioner who supervised the operations of the company. In April of 1993, Mr. Delmonico discovered a fuel discharge next door to the premises of Defender Yacht, Inc., a company located on the Miami River in Dade County, Florida. The source of the discharge was an abandoned sunken vessel. This derelict vessel had no markings from which its ownership could be determined. Upon discovering the vessel, Mr. Delmonico did not contact local, state, or federal authorities to advise them of the discharge. Instead, Mr. Delmonico contacted several colleagues whose help he enlisted to assist him to clean up the discharge. In this regard, Mr. Delmonico procured the services of a diver and a crane company to remove the vessel from the water. Additionally, Mr. Delmonico utilized a boom and oil absorbent clean-up pads to remove the discharged fuel from the water. In total, Mr. Delmonico maintains it took four work days to complete the removal of the discharge and the salvage of the derelict vessel. At no time during this period did Mr. Delmonico contact local, state, or federal authorities to advise them of the foregoing activities. No official from any governmental entity supervised or approved the clean-up operation or salvage activity which is in dispute. After the fact Petitioner filed a reimbursement claim with the United States Coast Guard. Such claim was denied. Upon receipt of such denial, Petitioner filed the claim which is at issue in the instant case. In connection with this claim with Respondent, Petitioner submitted all forms previously tendered to the Coast Guard including the standard claim form, labor receipts, rental receipts, supply receipts, trailer and storage receipts, cash expenses, a job summary, and photographs. On or about September 20, 1996, Respondent issued a letter denying Petitioner's claim for reimbursement for expenses associated with the above-described salvage and clean-up activities. The grounds for the denial were the Petitioner's failure to obtain prior approval for the activities and the absence of "good cause" for the waiver of prior approval. Additionally, the Respondent maintained that Petitioner had failed to provide evidence that a pollutant discharge existed and that the removal of the vessel was necessary to abate and remove the discharge. It is undisputed by Petitioner that prior approval for the clean-up activities was not obtained. Petitioner timely disputed the denial and was afforded a point of entry to challenge such decision.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Environmental Protection enter a Final Order denying Petitioner's claim for reimbursement. DONE AND ENTERED this 31st day of December, 1997, in Tallahassee, Leon County, Florida. J. D. Parrish Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 31st day of December, 1997. COPIES FURNISHED: Kathy Carter, Agency Clerk Department of Environmental Protection 3900 Commonwealth Boulevard Mail Station 35 Tallahassee, Florida 32399-3000 F. Perry Odom, General Counsel Department of Environmental Protection 3900 Commonwealth Boulevard Mail Station 35 Tallahassee, Florida 32399-3000 Kathelyn M. Jacques Assistant General Counsel Department of Environmental Protection 3900 Commonwealth Boulevard Mail Station 35 Tallahassee, Florida 32399-3000 N. Paul San Filippo, Esquire Seidensticker & San Filippo Parkway Financial Center 2150 Goodlette Road, Suite 305 Naples, Florida 34102
