The Issue The issue in this proceeding is whether the Respondent's intended award of Invitation to Negotiate (ITN) 13/14-01 was contrary to the Department's governing statutes, rules or policies; contrary to the solicitation specifications; and was clearly erroneous, contrary to competition, arbitrary or capricious.
Findings Of Fact The Department is designated by section 409.2257, Florida Statutes (2014), as the Title IV-D agency for the State of Florida. As such, it is responsible for the administration of the Child Support Enforcement program that is required in all states by the Federal Social Security Act. See § 409.2577, Fla. Stat. As part of its duties under chapter 409, the Department is authorized to solicit proposals from, and to contract with, private contractors to develop, operate, and maintain a state disbursement unit (SDU). The SDU is responsible for processing, collecting and disbursing payments for most child support cases in Florida. The current contractor for the SDU is Xerox whose contract will expire on February 28, 2015. In general, Florida procurement law provides a continuum of competitive procurement processes running from invitations to bid, through requests for proposals, to invitations to negotiate. Invitations to bid are used where specifications can be stated with certainty with the primary issue being price. Invitations to negotiate, on the other end of the procurement spectrum, are used to purchase services when state agencies need to "determine the best method for achieving a specific goal or solving a particular problem." § 287.057(1)(c), Fla. Stat. (2014). In essence, an ITN contains the process a state agency follows in awarding a contract and the criteria to which a vendor should reply in order to be considered responsive to the ITN. Under an invitation to negotiate and even though a reply must be responsive to the invitation, specifications generally are more fluid and less mandatory. Price, while important, is negotiable. Indeed, an agency may "reply shop" the terms, including price, of one vendor's reply against a competitor's reply in seeking revisions to that vendor's reply. As such, contract price is a more fluid concept under an ITN and is not the primary consideration in an ITN. In this case, the Department was seeking a solution for processing, collecting and paying child support payments based on a negotiated per transaction rate resulting from such SDU services plus negotiated service costs associated with the operation of the SDU. In fact, contracting for a transaction- rate-based price was one of the prime considerations under this ITN because the Department felt it could gain significant contract savings by utilizing a transaction-rate-based pricing scheme in its negotiations. Towards that end, the Department issued Invitation to Negotiate 13/14-01 on August 27, 2013, soliciting service solutions for the operation of the SDU. Prior to receiving replies to the ITN, the Department issued seven addenda to the ITN, provided several replacement pages to the ITN and answered numerous vendor questions regarding the ITN. After the release of the ITN and the seven addenda, there was no protest filed pursuant to section 120.57, Florida Statutes, regarding the ITN's specifications. As such, any objection to those specifications was waived by Petitioner and Intervenor. In this case, the ITN required a vendor's reply to be in a particular format. Specifically, the ITN required that a vendor's reply consist of two components presented in two multiple-tabbed binders: the Administrative/Technical Reply (Technical Reply) and the Cost Data Reply (Cost Reply). Technical Replies were to contain non-cost information such as corporate capability, proposed solution technical components, quality assurance and monitoring, and a variety of attachments. Cost Replies were to contain a vendor's Transaction Rate, Baseline Compensation, Reimbursable Costs, and other cost-related information as specified by the ITN. Vendors were not permitted to disclose any cost information in the Technical Reply. Additionally, the ITN required that a 15-page "Requirements Response Location Form" be completed and provided by the vendor in its ITN reply. The form listed the section numbers of the essential criteria of the ITN and the pages of the ITN on which each criterion could be found. The form also contained blank spaces adjacent to each referenced criteria where the vendor was to list the sections and pages of the vendor's reply that responded to each of the referenced criteria in the requirements response form. Relevant to this case, Section 1 of ITN 13/14-01 contained general definitions of terms used in the ITN. Under Section 1, a "Responsive Reply" was defined as "[a] Reply submitted by a responsible Vendor that conforms in all material respects to the solicitation." A "Minor Irregularity" was defined as "[v]ariations of terms and conditions from the Invitation to Negotiate which do not affect the price of the Reply or give the Vendor an advantage or benefit not enjoyed by the other Vendors or do not adversely impact the interests of the State." Additionally, the Department reserved the right to waive minor irregularities in a vendor's reply. ITN Section 2.4 provided: "The FDOR intends to negotiate with one or more Vendors who are compliant with the mandatory compliance items identified throughout this document." ITN Section 2.5 addressed Desired vs. Mandatory Requirements and Actions: Within the ITN the use of "shall" or "must" indicates a mandatory requirement or mandatory action. The FDOR may consider failure to meet a mandatory requirement to be a material deficiency, in which case the FDOR may reject the Reply and not consider it further, or FDOR may have the option to score that requirement with a zero (0). (emphasis added). The use of "should" or "may" indicates a desired requirement. The FDOR will not reject a Reply just because it fails to meet a desired requirement and may result in a lower score for that requirement. Clearly under the ITN, the mandatory nature of a requirement did not result in the criteria also being material since the Department could consider failure to meet a mandatory requirement to be a material deficiency or allow the vendor to move to the evaluation phase with the materiality of such criteria to be addressed by the evaluators during scoring. ITN Section 3.1.9, titled "Material Requirements Compliance Review," addressed the ITN's pro-forma review for responsiveness and provided: Each Vendor shall submit a Reply that conforms in all material respects to this solicitation. Material requirements of the ITN are those set forth as mandatory or those that affect the competitiveness of Replies. All Replies will be reviewed to determine if they are responsive. The FDOR will conduct a Material Requirements Compliance Review of all Replies submitted in response to this ITN. This review does not assign scores, but is simply a pass/fail review. Replies that do not meet all material requirements of this ITN; fail any of the mandatory requirements in this ITN; fail to timely respond to Reply Qualification Requests (see Section 3.1.10); fail to provide the required/requested information, documents, or materials in the Reply and/or during the Reply Qualification Process; or include language that is conditional, or takes exception to terms, conditions and requirements, shall be rejected as non-responsive and not considered further. The FDOR reserves the right to determine whether a Reply meets the material requirements of the ITN. Additionally, Section 3.1.10 of the ITN provided that the Department was to initially review each reply "to determine a Vendor's compliance with the requirements of the ITN not directly related to the Technical Specifications and Cost Data of the ITN." (emphasis added). A checklist titled "Material Requirements Compliance Review" was used to determine the responsiveness of a reply. The checklist items are not at issue here. Importantly, per the ITN criteria, the material responsiveness review was a review of the form of a reply and not a review of the substance of the same. Indeed, deficient replies could be cured as part of the "Reply Qualification Process." After the responsiveness review, an Evaluation Committee chosen by the Department would score the Administrative/Technical Volume for each vendor in accordance with the evaluation criteria in the ITN. Towards that review, the vendor was required to complete and submit the "Requirements Response Location Form" as part of its reply. As indicated earlier, the response location form listed the section numbers of the essential criteria of the ITN and the pages of the ITN on which each criterion could be found. The form's criteria references matched the criteria references in the score sheets to be used by the individual evaluators to score a vendor's reply. Further, the evaluation committee used the location form to locate information within a vendor's reply. In evaluating replies, the committee members were not expected to hunt down information in a vendor's reply outside what was provided by a vendor on its response location form. Thus, the form is a very good indication of the materiality or importance of a particular ITN criteria since those criteria were the ones on which a vendor's reply was to be evaluated. Relevant to this case, Section 7.13.1.1 of the ITN required that a letter of commitment for a surety bond be submitted with a vendor's cost reply. There was no prescribed format or wording for this letter. Additionally, Section 12 of the ITN contained a table titled "Attachments and Submittals." According to Section 12, the table listed a variety of documents "to be completed and included in Volume One: Administrative/Technical as indicated[.]" However, the table clearly listed documents that the ITN, in other sections, required to be in Volume Two, the Cost Data Reply. In fact, the table itself only indicated who should complete a document. It did not indicate whether a document was required, for responsiveness purposes, to be submitted with a reply. The "as indicated" language, referenced above, referred to other sections within the ITN to determine if such documents should be submitted and in what volume they should be submitted. Other than referral to other sections of the ITN, Section 12 did not require that any document listed in its table be attached to the ITN. Two of the documents listed in Section 12 of the ITN were "Incident Control Policy and Procedures" and "Change Management Policy and Procedures." In the column of the table titled "Attachment" these two documents were listed as "Vendor's Documents." However, unlike the other documents listed in the Section 12 table, these two documents had no attendant requirement in other sections of the ITN stating that the two documents should be provided or where in a vendor's reply the two documents should be placed. The Department's responses to October 24, 2014, vendor questions 18 and 19 regarding these documents were that the two documents referred to the vendor's corporate documents and that a copy of such documents were required to be submitted with a vendor's "proposal." Except for the Department's responses, there were no written addenda amendments to the ITN document making such submission mandatory or indicating in what section of the vendor's multi-tabbed response the documents should be included. Further, no addenda amendments were made to the response location form to cover these documents. Similarly, no addenda amendments were made to the evaluator's score sheets to cover or evaluate these documents. Thus, despite the use of the word "required" in the Department's response to questions 18 and 19 and in view of the lack of any amendments to the ITN in relation to these responses, the evidence demonstrated that submission of these two documents with a vendor's reply was only desired by the Department and was not mandatorily required under the ITN for purposes of responsiveness. Section 12 of the ITN also listed Attachment G, "Individual Contractor Security and Agreement Form." The form was to be "completed" by the vendor and subcontractors. As discussed above, inclusion in the Section 12 table did not indicate whether a document was required for responsiveness purposes to be submitted with a reply. Those criteria were found elsewhere in the ITN. Notably, the provision of the standard contract which would emerge from this ITN required the security form be executed by subcontractors within five days of signing the contract. More importantly, Section 6.6 of the ITN stated that Attachment G "should" be executed and submitted with a vendor's reply. As such, the document's attachment was not mandatorily required for responsiveness purposes, but was only desired by the Department at this point in the ITN process since the winning vendor and its subcontractor's must provide the document within five days of signing the contract. The ITN further provided in Section 10.3.2 that upon completion of the Administrative/Technical evaluation, the Cost Data Volume would be publicly opened and scored. Relevant to this case, the ITN addressed renewal cost and renewal of any future contract in Section 7.4 of the ITN. Section 7.4 stated, in pertinent part: RENEWALS The FDOR reserves the right to renew any Contract resulting from this ITN. Renewals shall be subject to the terms and conditions set forth in the original Contract and subsequent amendments, . . . Vendors shall include the cost of any contemplated renewals in their Reply, . . . In substance the section tracked the language of section 287.057(13), Florida Statutes, making any renewal subject to the same terms and conditions, including price, as the original contract. The statute also requires that the "price" of any "services to be renewed" be provided in a vendor's reply. However, if a separate renewal price was not provided in a vendor's reply, any renewals would be at the price of the original contract since under the ITN the original price would be the renewal price for section 287.057(13) purposes. On the other hand, Section 7.4 of the ITN deviated from the statute's language and required that the "cost" of any "contemplated renewals" be included in the vendor's reply. Such cost information was not part of the criteria requirements listed for the ITN on the "Requirements Response Location Form" and was not part of the requirements to be evaluated by the evaluation committee. Question 39 posited by SMI on September 18, 2013, asked about the handling of renewal cost information in the vendor replies to the ITN. The Department's response to question 39 was that "renewal rate information" "should" "please" be provided in summary form in the cost volume of the vendor's reply to the ITN. Additionally, the Department's response stated that renewal cost information was not to be "scored" as part of the transaction rate. Clearly, the Department in its response viewed this "rate information" as related to the transaction rate, which was one of several costs used to calculate total compensation under the ITN. The Department's explanation or interpretation of Section 7.4 has a reasonable basis since renewal of the contract was statutorily restricted to the same terms and conditions of the original contract, making such renewal cost information immaterial. Additionally, the renewal information was not part of the scoring criteria that permitted a vendor to move through the negotiation process under the ITN and was not required in order for a vendor to be responsive to the ITN. In essence, the Department's response made the provision of renewal cost information a non- essential criteria of the ITN. Non-compliance with such criteria can be waived by the Department as a minor irregularity.2/ ITN Section 10.3.2.1.4 provided: Only cost submitted in the prescribed format will be considered. Alternate cost models will not be considered for scoring purposes. Vendors selected for negotiations will be provided the opportunity to present alternate costing structures. "Alternate cost models" referred to models that did not use a transaction-based rate such as a fixed price model or did not use the format for calculating compensation required by the ITN. Part of the format for vendor cost replies included Attachments K (Transaction Rate Cost Form), L (Baseline Compensation Form), M (Reimbursable Cost Form), N (Unknown, Unanticipated, and Unspecified Tasks Cost Form), and O (Total Compensation Form). Additionally, after questions posed by the vendors, the Department supplied an estimate of the number of transactions it predicted might be processed by the SDU under the contract. The estimate provided by the Department was 69,425,110 transactions and was based in part on an assumed percentage increase in actual transactions that occurred under the current contract in 2012. Attachment K was the form used by a vendor to explain and report the per-transaction rate that the vendor would charge the Department for each transaction it processed through the SDU. The form required disclosure of the costs the vendor included in determining its transaction rate. The form was required to be signed by a representative who could bind the vendor. Relative to Attachment K under the ITN, neither the method used nor the costs included by a vendor to calculate its transaction rate was prescribed by the ITN criteria. There was no requirement that the Department's estimated number of transactions of 69,425,110 be used in calculating the vendor's transaction rate. The Department only supplied such estimates as information to the vendor. In fact, a vendor was free to use its own assumptions regarding the estimated number of transactions that might be processed through the SDU in its calculation of its transaction rate. The method of rate calculation did have to be explained. However, once calculated, the vendor's transaction rate was carried over to line "B" on Attachment L which, as discussed below, ultimately filtered through to a contract price and commensurate price of services that might be renewed in Attachment O. Attachment L was the form used to calculate the baseline compensation cost for the vendor. The initial form did not require that the Department's estimate of 69,425,110 transactions be used in the calculation of the baseline compensation cost. After questions from the vendors and internal discussions within the Department, Attachment L was revised to require that the Department's estimated number of transactions be used on that form. Notably, the Department did not revise Attachment K to require the use of the estimate when it revised Attachment L. The formula used to calculate Projected Baseline Compensation on Attachment L required the vendor to multiply its transaction rate from Attachment K by the Department's estimated transactions of 69,425,110. The requirement to use the Department's estimated number of transactions on Attachment L normalized the vendors' baseline compensation calculation so that an apples-to-apples comparison of baseline compensation could be made between vendors. Once calculated, the projected baseline compensation cost calculation was carried over to a line item in Attachment O, which form calculated the total projected SDU compensation, the cost factor used in awarding points to evaluate a vendor's reply. Attachment M was the form on which a vendor was to submit estimates of actual costs the vendor anticipated it would expend for performing the contract. Although not specified, presumably the costs listed by the vendor on Attachment M would be those not used in the vendor's Attachment K transaction rate calculation. Additionally, ITN specifications Sections 7.10.4.3 and 10.3.2.3 provided that all vendors "shall execute and submit Attachment M: Reimbursable Costs." The term "execute" simply means to complete. Within Attachment M, a list of several anticipated cost categories (facilities rent/lease, postage, e-disbursement, post office box fees, etc.) were provided by the Department. There were also several blank fields for additional cost categories contained on the form. The specifically-listed cost categories were those categories the Department, in its experience, anticipated a vendor might incur and for which it would reimburse a vendor. The use of the phrase "will reimburse" in relation to these anticipated cost categories did not make the reporting of such costs mandatory given the format of Attachment M and the instructions later provided on the form discussed below. Such anticipation only indicated interest by the Department in those expense categories but did not create a requirement that those specific expenses were required to be estimated by a vendor for purposes of responsiveness to the ITN in order to move forward in the evaluation and negotiation process.3/ Indeed, such costs or expenses were intentionally negotiable under the ITN. Following this list, a box to provide the amount of each reimbursable cost and ultimate total was provided at the end of Attachment M. Notably, except for two of the anticipated cost categories, the box did not include any of the anticipated costs listed earlier in Attachment M. The two cost categories that were listed in the reimbursable cost box were "Facilities Rent/Lease" and "CSR Salary Expenses." Both these cost categories had blank fields where the vendor was required to fill in an amount in the reimbursable cost box at the end of Attachment M. Additionally, the instructions for executing the box clearly stated that amounts for these two categories must be provided. As indicated, the other anticipated costs contained on Attachment M were not specifically listed in the reimbursable cost box. Only blanks, labeled as "(other)," where amounts for vendor "proposed" costs could be reported were contained within the box. Given the format of this form and the instructions at the top of the reimbursable cost box, amounts for anticipated cost categories listed in Attachment M, other than the two required cost categories in the box, were not required to be proposed by the vendor in completing Attachment M and, as indicated earlier, such amounts were not required in order for a reply to be responsive to the ITN. As with the other forms, the total from the reimbursable cost box was carried over to a line item in Attachment O. Attachment O was the form used to calculate the total projected SDU compensation that constituted the vendor's proposed contract price. The proposed price was also the price for services which may be renewed since, unless the vendor proposed a different renewal price, this was the original price proposed as a term of the initial contract. Section 10.3.2 sets forth the formula for scoring the Cost Data Volume of a vendor. The formula was: Total Available Cost Points x Amount of Lowest Response Cost/Vendor's Reply Cost (emphasis in original). The ITN further stated: "Each Vendor's Cost Data points will be added to their Administrative/Technical score to obtain the Vendor's Total Reply Score. The Vendor's Total Reply Score will be used to determine which Vendors the FDOR will Negotiate with." Thus, the vendor with the lowest cost would receive the maximum points available for its Cost Data Volume with all other vendors receiving a portion of the total available Cost Data points proportionate to the difference between their proposed cost and that of the vendor with the lowest cost. Notably, lower cost points did not disqualify a vendor from selection for negotiation. Similarly, a lower Total Reply Score did not disqualify a vendor from selection for negotiation because the goal in an ITN procurement is to develop a range of vendor replies for negotiation. The ITN, in Section 11.3, provided broad discretion to the Department regarding the manner in which negotiations would be conducted, including obtaining revised offers from vendors. The section reserved to the Department the right to: negotiate with one or more, all, or none of the vendors; eliminate any vendor from consideration during negotiations as deemed to be in the best interest of the State; and conduct negotiations sequentially, concurrently, or not at all. Sections 3.1.19.1 and 11.5 of the ITN provided that at the "conclusion" of negotiations, the Department would post a Notice of Intended Agency Decision, as determined to be in the best interest of the State. However, this language must be read in conjunction with Section 11.4 of the ITN that authorized the Department's negotiation team to request a Best and Final Offer (BAFO) from one or more vendors with which the Department concluded negotiations. The section reserved to the Department the right to "request additional BAFO; reject submitted BAFO; and/or move to the next vendor" after a BAFO had been submitted and negotiations concluded. Additionally, Section 2.6.9 contemplates that discussions, i.e. negotiations, regarding the form and language of the final contract would continue after the Notice of Intent to Award was posted. Section 2.6.9 states: The FDOR anticipates initially addressing any contract terms and conditions or concerns during the Negotiation process and then continue discussions post award. Given this language, the Department, in its judgment and acting in the best interest of the state, may post an intended award prior to the complete conclusion of negotiations and finalization of the contract with a vendor. In this case, SMI and Xerox both timely submitted a reply to the ITN. Each reply contained a Volume I: Administrative/Technical; and a Volume II: Cost Data. Both vendors submitted a completed Requirements Location Response Form and had information contained in their reply relative to the references contained in that form. As indicated earlier, under the ITN's pro forma responsiveness review, the substance of each vendor's reply was not a determining factor in whether a vendor's reply was responsive to the ITN for purposes of being accepted and moving forward in the ITN process. John Kinneer was a purchasing analyst with the Department. He served as the procurement officer and as a negotiator with respect to the ITN. Mr. Kinneer reviewed the technical replies submitted by Xerox and SMI for pro-forma responsiveness to the ITN sufficient to move forward in the ITN process. In compliance with the ITN, he checked the Material Requirements form for both vendors and checked that each vendor had some information in its technical reply relative to the response form. Per the ITN, he did not check the substance of that information. In this case, the evidence demonstrated that both replies met the preliminary responsiveness requirements of the ITN and properly moved forward in the ITN process to the evaluation phase. The Department appointed an evaluation team of seven persons to evaluate and score the Technical Replies. The Committee consisted of Shannon Herold, Barbara Johnson, Connie Beach, Stan Eatman, Beth Doredant, Mark Huff, and Craig Curry. Under the ITN, the evaluation team was tasked with analyzing the substance of each reply and scoring them accordingly with any issues regarding the quality or responsiveness of a vendor's reply to be addressed in that evaluator's scoring. Each evaluator reviewed and independently scored each vendor's reply according to the criteria listed in the "Requirements Response Location Form." In this case, both replies contained a surety letter of commitment as required by Section 7.13.1.1 of the ITN. SMI's letter was from OneBeacon, the apparent bonding agent in the letter. Indeed, there was no evidence that OneBeacon was not a bonding company. The letter indicated that OneBeacon intended to provide a bond to SMI and that SMI qualified for such a bond in an amount sufficient to meet the requirements of the ITN. Xerox's letter of commitment was also from an apparent bonding company and stated only that the bonding company was "prepared to write the required performance bond" in an unspecified amount and "subject to standard underwriting conditions." While one may quibble about the language used in both Xerox's and SMI's letters, the evidence showed that both letters were not simply letters of reference from a bonding company but were letters of commitment from such companies and were intended as such by those bonding agents. Moreover, the language of both letters was acceptable to the Department as meeting the requirements of the ITN. As such, both Xerox and SMI were responsive to the surety commitment requirements of the ITN. Xerox's reply also attached a copy of its Corporate Change Control Policy and Procedures and a copy of its Corporate Incident Control Policy. These documents were developed by Xerox over several years of being in the business of providing SDU services. They were not developed in relation to this ITN and the evidence did not show that Xerox was disadvantaged either monetarily or otherwise by producing these documents for the ITN. On the other hand, SMI did not attach such documents. Instead, SMI summarized the substance of its policy and procedures in Tabs 3, 10 and 13 of its Technical Reply and included a copy of SMI's corporate Security Plan encompassing the incident and control policies of SMI. The quality of SMI's reply was evaluated by the evaluation committee members and scored according to the criteria relevant to the ITN. Further, the evidence demonstrated that failure to attach these two documents would not adversely affect any vendor or impair the procurement process since a vendor ultimately was required to agree to adopt the Department's incident control and change management policies and procedures. Moreover, as indicated earlier, the documents were not part of the responsiveness requirements under the ITN. Therefore, SMI's reply was responsive without the attachment of these two documents. However, assuming such documents were required, the evidence demonstrated that the lack of copies of specific documents titled in a certain way was a minor irregularity which the Department reasonably waived since SMI summarized the information relevant to these documents in its reply. Such waiver was not clearly erroneous, contrary to competition, arbitrary, or capricious. Additionally, Xerox submitted with its reply an executed Attachment G, Individual Contractor Security Agreement Form, for both itself and its proposed subcontractors. SMI submitted an executed Attachment G for itself but did not submit the attachment for its proposed subcontractors. The form was not submitted for SMI's proposed subcontractors because its subcontractors could not access the Department's online procurement library to determine what they would be agreeing to by signing the form. The inaccessibility of the procurement library was not the fault of SMI or its subcontractors but was due to the Department's failure to provide the policies referenced. Additionally, the Department's Standard Contract required Attachment G to be provided within five business days of contract execution. The evidence did not demonstrate that SMI's failure to include an executed Attachment G for its subcontractors constituted a material deviation from the ITN. Further, as indicated above, Attachment G was not a mandatory provision of the ITN for responsiveness purposes. As such, SMI's reply was responsive on this criterion. However, even assuming Attachment G was required under the ITN, the quality of SMI's reply was evaluated by the evaluation committee members under the relevant criteria. The evidence did not demonstrate that SMI obtained an unfair competitive advantage by not including this form in its reply since any subcontractor would have to submit the executed form after contract execution as required by the Department's Standard Contract. Additionally, the evidence did not demonstrate that the procurement process was undermined by the lack of a subcontractor Attachment G in SMI's reply. Therefore, the lack of such a document in SMI's reply was reasonably waived by the Department as a minor irregularity and such waiver was not clearly erroneous, contrary to competition, arbitrary, or capricious. The evaluation team completed scoring of the vendor's technical replies around January 17, 2014. Xerox scored 969 points and SMI scored 943 points. The difference of 26 points was not shown by the evidence to be significant since both vendors were experienced and well qualified to perform the services required to operate the child support State Disbursement Unit. After the technical replies were evaluated and scored, the initial Cost Data replies of each vendor were opened and the total costs read aloud at a public meeting. The initial cost replies were reviewed by Mr. Kinneer to ensure the replies were mathematically accurate and that the cost forms were used. He did not review or consider the substance of the cost numbers included on those forms or the narratives in the cost replies. The substance of the cost replies was left for consideration by the negotiation team. Xerox's proposed total compensation for years 1 through 5 of the contract was $84,920,072.00. SMI's proposed total compensation for the same period was $47,996,387.00, approximately $36 million less than Xerox's proposed compensation. Neither vendor submitted a separate price for renewal of the SDU services contract. Therefore, for purposes of section 287.057(13), Florida Statutes, the "price" for the "services to be renewed" was the amount stated above for that vendor. Both Xerox and SMI were responsive for purposes of the statutory requirement of section 287.057(13). Xerox also submitted a brief summary of renewal cost in its introductory letter to its cost reply. In essence, Xerox did not anticipate any renewal cost associated with future renewal of the contract. SMI, also, did not anticipate any renewal cost associated with future renewal of the contract, but did not submit a statement to that effect. However, as discussed above, such cost information was not part of the criteria requirements listed for the ITN on the "Requirements Response Location Form" and was not part of the requirements to be scored by the Department for purposes of the cost reply. The evidence demonstrated that the information was immaterial to the Department in evaluating these replies. Further, the evidence did not demonstrate that failure to summarize such renewal cost information would adversely affect any vendor or impair the procurement process. Under this ITN and the facts of this case, the failure to provide such non-essential cost information constituted a minor irregularity and was appropriately waived by the Department. The Department's action in that regard was not unreasonable and was not clearly erroneous, contrary to competition, arbitrary, or capricious. The evidence showed that both vendors filled out Attachments K, L, M, N, and O. Relative to Attachment K, Transaction Rate, both vendors completed the form based on their unique assumptions regarding the appropriate transaction rate. Neither vendor used the Department's estimated transaction amount of 69,425,110 transactions. Xerox claimed that its assumptions took into consideration the Department's estimate and that such consideration was buried in its ultimate calculation. However, Xerox's mathematical explanation of its transaction rate calculation on its Attachment K does not reflect that it used the Department's estimate in its calculation. In general, the explanation of its transaction rate contained in its reply reflects that Xerox based its transaction rate on the current contract price minus the annualized costs contained in its Attachment M, divided by the actual number of transactions Xerox processed in 2012 and discounted by 12% to produce a transaction rate of 1.150 for the ITN. Clearly, Xerox did not use the Department's estimate in its calculation and, instead, based its transaction rate on the current contract price, a method the Department warned vendors against using. Similarly, SMI did not use the Department's estimated transaction number in its calculation of its transaction rate on Attachment K. SMI based its proposed rate of .497 on its own historical transaction volumes from other states. The estimated number of transactions used by SMI was 45,066,694 transactions. For unknown reasons, the detailed explanation of the amount of transactions used by SMI was placed on Attachment L. However, the explanation was not used on Attachment L and did not impact the calculation contained on Attachment L. Such misplacement was immaterial to the ITN and had no impact on the ultimate result in Attachment O. As such, the misplaced explanation did not render SMI's Attachment K non-responsive to the ITN and both Xerox and SMI were responsive to the ITN regarding Attachment K. Likewise, the misplaced explanation of SMI's transaction volume did not render SMI's Attachment L non- responsive to the ITN since it was immaterial to that Attachment. Further, the evidence demonstrated that both Xerox and SMI used the Department's estimated transaction volume on Attachment L as required by the ITN. Therefore, both Xerox and SMI were responsive to the ITN regarding Attachment L. Relative to Attachment M, Reimbursable Costs, both vendors supplied cost amounts for rent and CSR salaries as required by Attachment M. However, neither vendor supplied all of the cost amounts listed in Attachment M's list of anticipated costs. SMI did not supply amounts for postage associated with certain services, post office box fees, foreign bank fees, and hand-signed paper check stock costs. Xerox did not supply amounts associated with SDU mass mailings as listed in cost category two for postage-related items on Attachment M and did not submit an amount for telecommunications cost. As discussed earlier, except for two of the anticipated cost categories of rent and CSR salaries, the ITN did not require that amounts be supplied for those categories in order for a reply to be responsive to the ITN. Therefore, both Xerox and SMI were responsive to the ITN regarding Attachment M. Both Xerox and SMI submitted a responsive Attachment O which included line items from Attachments K through N. Attachment O formed the basis for awarding points based on the lowest cost. As indicated earlier, Xerox's proposed total compensation for years 1 through 5 of the contract was $84,920,072.00. SMI's proposed total compensation for the same period was $47,996,387.00. Under the ITN, the cost replies were scored according to the ITN specifications in Section 10.3.2 and the formula contained therein. SMI received a total of 660 points as the low cost reply. As the second lowest cost reply, Xerox received 376 points as a proportion of the total 660 points received by SMI. Both vendors' scores were added to their technical scores. SMI received a combined Total Reply score of 1603 points for its reply. Xerox received a combined Total Reply Score of 1346 points for its reply. As responsible and responsive vendors, both Xerox and SMI were selected to participate in the negotiation phase of the ITN, where, under the ITN, the criteria and terms of the ITN became negotiable. Further, the evidence did not demonstrate that either the evaluation scores or the Total Reply Scores impacted the ITN process beyond qualifying the vendors to participate in the negotiation process. The Department formed a Negotiation Team consisting of Thomas Mato, Clark Rogers, Nancy Luja, Max Smart, Steve Updike, John Kinneer, and Bo Scearce. Several meetings of the Negotiation Team were held during which the team evaluated Xerox's and SMI's replies, posed written questions to the vendors and discussed technical issues with technical experts. Face to face negotiating sessions between the team and the vendors were also held, as well as meetings to discuss technical issues with the parties. Additionally, two rounds of separate demonstrations of a vendor's proposed system and solution were given to the Negotiation Team by Xerox and SMI. The Negotiation Team only observed the demonstration of each vendor in the first such meeting. During the second demonstration by each vendor, the Negotiation Team observed the demonstration and asked questions of the vendor. Based on these demonstrations and meetings, the team elected to request revised replies from both vendors. At some point prior to submission of the revised offers and per the ITN, the team communicated to Xerox that, if it wished to stay competitive in the ITN process, it should bring its price closer to that of SMI. The team also communicated its desire to SMI that costs from the anticipated cost list on Attachment M that SMI had not included in its initial reply should be included on that form. With that information from the Negotiation Team, Xerox and SMI submitted revised cost replies. Xerox's Total Projected SDU Compensation dropped from $84,920,072.00 to $48,200,000.00. Its transaction rate was reduced from $1.150 to $.525. Its Attachment M cost estimate increased from $5,081,195.50 to $9,926,119.00. SMI's Total Projected SDU Compensation increased from $47,996,387.00 to $49,500,000.00. Importantly, its transaction rate remained the same at $.497. Its Attachment M cost decreased from $13,492,107.00 to $12,433,125.00. After reviewing the revised replies, the Negotiation Team elected to continue to conduct negotiations with SMI first. Such vendor selection was appropriate under the ITN since its transaction rate remained lower than Xerox's transaction rate and the team preferred SMI's solution for a variety of legitimate reasons to Xerox's solution. Additional negotiations were conducted with SMI, resulting in additional terms and conditions. After several such negotiation meetings, the evidence showed that the substantive part of the negotiations, including price and scope of work, had concluded with only final contractual language remaining. As such, the Negotiation Team requested a Best and Final Offer (BAFO) from SMI. On May 14, 2014, SMI submitted its BAFO. SMI's Total Projected SDU Compensation increased from $49,500,000.00 to $50,700,000.00. Its transaction rate dropped slightly to $.495 and its Attachment M cost increased from $12,433,125.00 to $13,740,152.09. The BAFO was acceptable to the negotiation team and would, along with SMI's technical reply, become part of the Department's standard contract under the ITN. The team reasonably concluded SMI's management team was superior, and its solution was more customer friendly, intuitive, efficient, and innovative. The Negotiation Team documented its reasons for selecting SMI in a memorandum to the procurement file. On May 19, 2014, the Department posted its Notice of Intended Award to SMI. The evidence did not demonstrate that the award violated section 287.057, Florida Statutes, since that section only requires that negotiations be "conducted" prior to an intended award of a contract. Notably, the award is only intended and is not final since the Department under Sections 3.1.19.2 and 7.3 is not required to enter into a contract if such a document cannot be finalized. Indeed, the statutory language of section 287.057(4) and the ITN in Section 2.6.9 permit continued negotiation and finalization of a contract after the Notice of Intended Award. In this case, the evidence demonstrated that the negotiations between the negotiation team and SMI resulted in a meeting of the minds regarding the services that SMI would be performing and the price for those services. Further, the evidence showed that the negotiations had concluded in all substantial respects prior to posting of the Notice of Intent to Award the contract to SMI. What remained for the Department and SMI to accomplish was the finalization of the contract assembly by inserting the BAFO, Technical Reply, and price into the contract language; insertion of a start date; and work on implementation issues such as invoices and background screening of employees. Given these facts, the evidence demonstrated that the point at which the Department elected to post its Notice of Intended Award was reasonable since the substantive parts of the negotiations were complete. Ultimately, the evidence in this case did not demonstrate that the ITN process followed by the Department was fundamentally flawed or gave an advantage to one vendor over another. Further, the actions of the Department in this procurement were not contrary to the Department's statutes; contrary to the Department's rules or policies; or contrary to a reasoned interpretation of the ITN specifications. Finally, the evidence did not demonstrate that the Department's actions were clearly erroneous, contrary to competition, arbitrary, or capricious. Given these facts, the protest filed by Petitioner should be dismissed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that the Respondent, Florida Department of Revenue, enter a final order dismissing the protest of Petitioner, Xerox State and Local Solutions, Inc., and approving the award of the contract to Intervenor, Systems and Methods, Inc. DONE AND ENTERED this 18th day of February, 2015, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of February, 2015.
The Issue The issue in this case is whether Rule 25-4.113(1)(f), Florida Administrative Code, is a valid exercise of delegated legislative authority.
Findings Of Fact History of the Rule The Commission first adopted a rule setting out its policy on disconnection and refusal of service in August of 1955. In re: Adoption of rules and regulations governing telephone companies, Order No. 2195 (June 24, 1955) (O.R. E). (Prehearing stipulation p. 10) Rule 20 provided that: “Service may be denied to any subscriber or applicant for failure to comply with these rules, the telephone company’s tariff, municipal ordinances or state laws.” Id. Effective December 1, 1968, the Commission revised its disconnect rule to specifically provide that a company could disconnect telephone service for nonpayment. In re: Proposed revision of rules and regulations governing telephone companies, Order No. 4439 (October 17, 1968) (O.R. F). (Prehearing stipulation p. 10) Since adoption of Rule 310-4.66(1) in 1968, the Commission’s disconnect rule has been revised seven times: In re: Proposed revision of Chapter 2-4 relating to telephone companies and radio common carriers, Order No. 7132 (March 1, 1976) (O.R. G); In re: Amendment of Rules 25-4.113 and 25-10.74 - Relating to Refusal or Discontinuance of Service, Order No. 13787, 84 F.P.S.C. 10:208 (1984) (O.R. J); In re: Amendment of Rules 25-4.109 - Customer Deposits, 25-4.110 - Customer Billing, and 25-4.113 - Refusal or Discontinuance of Service, Order No. 16727, 86 F.P.S.C. 10:157 (1986) (O.R. K); In re: Amendment of Rule 25-4.113 - F.A.C., pertaining to Refusal or Discontinuance of Service by Company, Order No. 23721, 90 F.P.S.C. 11:75 (1990) (O.R. M); In re: Adoption of Rule 25-4.160, F.A.C., Operation of Telecommunications Relay Service and Amendment of Rules 25-4.113, F.A.C., Refusal or Discontinuance of Service by Company; 25- 4.150, F.A.C., The Administrator; 25-24.475, F.A.C., Company Operations; Rules Incorporated, Order No. PSC-92-0950-FOF-TP, 92 F.P.S.C. 9:208 (1992) (O.R. N); In re: Proposed Amendment of Rule 25-4.113, F.A.C., Prohibiting Refusal or Discontinuance of Service for Nonpayment of a Dishonored Check Service Charge Imposed by the Utility, Order No. PSC-92-1483-FOF-PU, 92 F.P.S.C. 12:543 (1992) (O.R. P); In re: Proposed Amendment to Rule 25- 4.113 F.A.C., Refusal or Discontinuance of Service by Company, Order No. PSC-95-0028-FOF-TL, 95 F.P.S.C. 1:50 (1995) (O.R. T). (Prehearing stipulation p.11) By Order No. 12765, issued December 9, 1983, the Commission expanded its disconnect policy to allow local exchange companies (LECs) that bill for interexchange carriers (IXCs) to disconnect local service for nonpayment of the long distance portion of the bill. In re: Intrastate telephone access charges for toll use of local exchange services, Order No. 12765, 83 F.P.S.C. 12:100, 125 (1983) (O.R. H). (Tr 118-119) The Commission believed that “by granting LECs disconnect authority bad debts for toll charges will be less than without this authority.” Order No. 12765 at 12:125. (Tr 120) In addition, the Commission found that if the IXCs encounter excessive bad debt expense, the IXCs may increase their toll charges to recoup expenses, which would cause Florida subscribers to pay higher toll rates. Order No. 12765 at 12:125. (Tr 120) The disconnect authority for nonpayment for IXC toll charges was limited only to LECs who performed billing and collection services for IXCs. Order No. 12765 at 12:125. (Tr 120) By Order No. 13429, issued June 18, 1984, the Commission ordered Florida’s LECs to file a uniform tariff that specified their billing and collection procedures and rates when billing for IXCs. In re: Intrastate telephone access charges for Toll Use of Local Exchange Services, Order No. 13429, 84 F.P.S.C. 6:221 (1984) (O.R. I). The LECs complied with this requirement. (Tr 126-127; Ex 30) Since the Commission first adopted its disconnect policy, the Legislature has never enacted legislation to invalidate the Commission’s policy. (Tr 155) Nor has the Joint Administrative Procedures Committee ever objected to any version of the Commission’s disconnect rule. (Tr 155-156) The Current Version of Rule 25-4.113(1)(f) Today, Rule 25-4.113(1) provides: the company may refuse or discontinue telephone service under the following conditions provided that, unless otherwise stated, the customer shall be given notice and allowed a reasonable time to comply with any rule or remedy any deficiency: * * * (f) For nonpayment of bills for telephone service, including the telecommunications access system surcharge referred to in Rule 25-4.160(3), provided that suspension or termination of service shall not be made without 5 working days’ written notice to the customer, except in extreme cases. The written notice shall be separate and apart from the regular monthly bill for service. A company shall not, however, refuse or discontinue service for nonpayment of a dishonored check service charge imposed by the company. No company shall discontinue service to any customer for the initial nonpayment of the current bill on a day the company’s business office is closed or on a day preceding a day the business office is closed. * * * (O.R. CC) LECs that bill for IXCs can still disconnect for nonpayment of toll calls. (Tr 122, 158) No company, however, can disconnect for nonpayment of unregulated services, such as customer premises services like inside wire maintenance and information services like voice mail. Rule 25-4.113(4)(e), Florida Administrative Code. (Tr 124-125, 130) In addition, the billing and collection tariffs are not uniform today because LECs have individually lowered many of the rates they charge for billing and collection services. (Tr 128-129; Ex 31). Two Separate, Pertinent Service Contracts It is important for understanding the Commission’s rationale for its disconnect rule to recognize that two separate, pertinent service contracts are involved. (Tr 151-152) One is the billing and collection services contract between the LEC and the IXC. (Tr 126, 152) The other is the contract for service between the company providing telephone service and the subscriber. (Tr 152) As discussed above, LECs who perform billing and collection services for IXCs have a tariff on file with the Commission that sets out the terms, conditions, and rates upon which the LECs offer this service. (Tr 126 -129; Ex 31) Pertaining to the contract for telephone service, the Commission has specified by rule the terms and conditions upon which a company may refuse or disconnect service. (Tr 137) Each company has a tariff on file with the Commission that sets out the terms and conditions upon which it will refuse or disconnect service. (Tr 137; Ex 32) The Commission’s Dispute Policy If service is going to be disconnected for any authorized reason, separate notice must first be provided to the customer. Rule 25-4.113, Florida Administrative Code; In re: Complaint of Aristides Day Against BellSouth Telecommunications, Inc. d/b/a Southern Bell Telephone and Telegraph Company regarding interruption of service, Order No. PSC-94-0716-FOF-TL, 94 F.P.S.C. 6:157 (1994) (O.R. R). If a customer has a pending complaint concerning disputed charges, Rule 25-22.032(10), Florida Administrative Code, prohibits disconnection for nonpayment of the disputed charges. (Tr 129) (O.R. FF) The customer, however, is expected to pay the charges not in dispute. In re: Complaint of Ron White against AT&T Communications and GTE Florida Incorporated regarding responsibility for disputed calling card charges, Order No. PSC-92-1321-FOF-TP, 92 F.P.S.C. 11:274 (1992) (O.R. O); In re: Complaint of Leon Plaskett against BellSouth Telecommunications, Inc. d/b/a Southern Bell Telephone and Telegraph Company regarding unpaid long distance bills, Order No. PSC-94-0722-FOF-TL, 94 F.P.S.C. 6:177 (1994) (O.R. S). When a LEC contracts with an IXC to perform an IXC’s billing and collection functions, the Commission acts to resolve disputes over both intra and interstate toll calls. In re: Complaint against AT&T Communications of the Southern States, Inc. and United Telephone Company of Florida by Health Management Systems, Inc., regarding interLATA PIC slamming, Order No. PSC- 97-0203-FOF-TP, 97- F.P.S.C. 2:477, 482 (1997) (O.R. AA). (Tr 55) Rationale for Rule 25-4.113(1)(f) The reasons the Commission gave in 1983 to allow companies to disconnect for nonpayment of toll are still viable today. (Tr 122, 158). If LECs could not disconnect for unpaid IXC bills, the IXCs uncollectible expenses would probably increase. (Tr 122-123, 138, 158) Moreover, if local service was not disconnected, a consumer could run up bad debts with different IXCs without ever paying for a toll call. (Tr 124, 135) This bad debt would have to be passed on to Florida consumers through increased rates to cover the uncollectible expenses. (Tr 122-123, 135, 158) Good paying customers should not have to pay for the fraud created by those who switch from carrier to carrier leaving behind unpaid toll charges. (Tr 124, 135) Additional reasons for the policy also exist because of the 1995 changes to Chapter 364, Florida Statutes (1995). If the Commission prohibited LECs from disconnecting local service for nonpayment of toll, LECs would be economically disadvantaged and alternative local exchange companies (ALECs) would be advantaged. (Tr 123, 147-148) This is because LECs could not disconnect local service for nonpayment of toll, but the ALECs could continue to disconnect due to the Commission’s limited jurisdiction and regulation over ALECs. (Tr 123, 147-148) Moreover, deposit requirements are affected by the disconnect policy. If LECs could not disconnect for nonpayment, deposit requirements would probably increase. (Tr 123-124, 195) Large deposits are a barrier to access to telecommunications services and would have an adverse effect on subscribership. (Tr 124) Finally, the Rule puts costs on the cost causer. (Tr 158) The Rule’s Impact on Universal Service The obligation to provide universal service is the obligation to offer access to basic telephone service at reasonable and affordable rates. Section 364.025(1), Florida Statutes (1995). (Tr 139, 167; Ex 29) As long as a customer pays the nondisputed portion of his bill, service will not be disconnected. (Tr 143) Therefore, Rule 25-4.113(1)(f) does not preclude a subscriber from obtaining basic local service, as long as he pays the undisputed portion of his telephone bill. (Tr 142-143) Basic service includes access to all locally available IXCs. Section 364.02(2), Florida Statutes (1995). (Tr 133-134) Any consumer who pays his bill can have access to any available carrier in the market where he resides. (Tr 133-134, 149) The Rule’s Impact on Competition Today the toll market is reasonably competitive. (Tr 144) In 1995, the Legislature authorized competition in the local market. However, very few providers are actually providing basic local service; therefore, market conditions have not substantially changed since Rule 25-4.113 was last amended. (Tr 144-145) The basic local market is still largely a monopoly despite the legislative changes at the state and federal level. (Tr 145; Ex 28) The Commission is charged with regulating telecommunications companies during the transition from monopoly to competitive services. Section 364.01(3), Florida Statutes (1995). (Tr 156, 197-198) To a certain extent, all rules and regulations restrict competition. (Tr 147) In this case, the benefits of the rule outweigh any negative impact the rule may have on competition, because the rule keeps uncollectible expenses lower than they would otherwise be and it also puts costs on the cost causer.
The Issue Whether Respondent committed the offenses set forth in the two-count Administrative Complaint, dated April 17, 2007, and, if so, what penalty should be imposed.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Department of Business and Professional Regulation, Division of Real Estate (the "Department"), is the state agency charged with enforcing the statutory provisions pertaining to persons holding real estate broker and sales associate's licenses in Florida, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes. At all times relevant to this proceeding, except where specifically noted, Respondent Mathew Johnson was a licensed Florida real estate sales associate, having been issued license number SL3149081. Respondent first obtained his real estate associate's license in 2003 and worked under the license of broker Jacqueline Sanderson in Orlando. When he married and his wife became pregnant, Respondent believed that he needed a more steady income than his commission-based employment with Ms. Sanderson provided. Respondent left Ms. Sanderson's employ on good terms and commenced work as the marketing manager for the downtown YMCA in Orlando. While working at the downtown YMCA, Respondent met a member of the YMCA named Tab L. Bish ("Mr. Bish"), a broker who owns First Source, Inc., an Orlando real estate sales company (sometimes referred to as "FSI Realty"). Respondent became friendly with Mr. Bish, and expressed an interest in getting back into the real estate business. Mr. Bish offered Respondent a job at First Source. Respondent had allowed his sales associate's license to lapse while he was working at the YMCA. Respondent informed Mr. Bish of that fact, and told Mr. Bish that he required a salaried position in order to support his young family. Respondent testified that Mr. Bish was happy to hire him as an office manager, because Mr. Bish wanted Respondent to perform a marketing role for First Source similar to that he had performed for the YMCA. Respondent started working at First Source in May 2005, as a salaried office manager. Mr. Bish agreed that he initially hired Respondent as an office manager, but only on the understanding that Respondent would take the necessary steps to reactivate his sales associate's license and commence selling property as soon as possible. Respondent took the licensing course again. Mr. Bish believed that Respondent was taking too long to obtain his license, and cast about for something Respondent could do during the interim. In order to make profitable use of Respondent's time, Mr. Bish began to deal in referral fees from apartment complexes. Certain complexes in the Orlando area would pay a fee to brokers who referred potential renters to the apartments, provided these potential renters actually signed leases. Among the apartment complexes offering referral fees was the Jefferson at Maitland, which in 2005 offered a referral fee of half the first month's rent. Mr. Bish placed Respondent in charge of connecting potential renters with apartment complexes, showing the apartments, following up to determine whether the potential renters signed leases, and submitting invoices for the referral fees. Mr. Bish did not authorize Respondent to collect the payments. Respondent initiated contact with the Jefferson at Maitland and began sending potential renters there. Respondent would submit invoices to the Jefferson at Maitland, payable to First Source, for each referral that resulted in a lease agreement. Respondent estimated that he submitted between 12 and 15 invoices for referral fees to the Jefferson at Maitland during his employment with First Source. Respondent obtained his license and became an active sales associate under Mr. Bish's broker's license on November 16, 2005. Mr. Bish began a process of weaning Respondent away from his salaried position and into working on a full commission basis. Respondent stopped showing apartments under the referral arrangement and began showing properties for sale. The last lease for which First Source was due a referral fee from the Jefferson at Maitland was dated December 5, 2005. In early February 2006, it occurred to Respondent that he had failed to follow up with the Jefferson at Maitland regarding the last group of potential renters to whom he had shown apartments during October and November 2005. Respondent claimed that he "hadn't had the opportunity" to follow up because of the press of his new duties as a sales associate and the intervening holiday season. However, nothing cited by Respondent explained his failure to make a simple phone call to the Jefferson at Maitland to learn whether First Source was owed any referral fees. Respondent finally made the call to the Jefferson at Maitland on February 9, 2006. He spoke to a woman he identified as Jenny Marrero, an employee whom he knew from prior dealings. Ms. Marrero reviewed Respondent's list and found three persons who had signed leases after Respondent showed them apartments: Mike Tebbutt, who signed a one-year lease on October 26, 2005, for which First Source was owed a referral fee of $532.50; Terry Ford, who signed an eight-month lease on November 14, 2005, for which First Source was owed a referral fee of $492.50; and Juan Sepulveda, who signed an eight-month lease on December 2, 2005, for which First Source was owed a referral fee of $415.00. However, there was a problem caused by Respondent's failure to submit invoices for these referral fees in a timely manner. Respondent testified that Ms. Marrero told him that the Jefferson at Maitland had reduced its referral fee from 50 percent to 20 percent of the first month's rent, effective January 2006.2 Ms. Marrero could not promise that these late invoices would be paid according to the 2005 fee structure. According to Respondent, Ms. Marrero suggested that the Jefferson at Maitland's corporate office would be more likely to pay the full amount owed if Respondent did something to "break up" the invoices, making it appear that they were being submitted by different entities. She also suggested that no invoice for a single payee exceed $1,000, because the corporate office would know that amount exceeded any possible fee under the 2006 fee structure. Ms. Marrero made no assurances that her suggestions would yield the entire amount owed for the 2005 invoices, but Respondent figured the worst that could happen would be a reduction in the billings from 50 percent to 20 percent of the first month's rent. On February 9, 2006, Respondent sent a package to the Jefferson at Maitland, via facsimile transmission. Included in the package were three separate invoices for the referral fees owed on behalf of Messrs. Tebbutt, Ford, and Sepulveda. The invoices for Messrs. Tebbutt and Sepulveda stated that they were from "Matt Johnson, FSI Realty," to the Jefferson at Maitland, and set forth the name of the lessee, the lease term, the amount of the "referral placement fee," and stated that the checks should be made payable to "FSI Realty, 1600 North Orange Avenue, Suite 6, Orlando, Florida 32804." The invoice for Mr. Ford stated that it was from "Matt Johnson" to the Jefferson at Maitland. It, too, set forth the name of the lessee, the lease term, and the amount of the referral fee. However, this invoice stated that the check should be made payable to "Matt Johnson, 5421 Halifax Drive, Orlando, Florida 32812." The Halifax Drive location is Respondent's home address. The package sent by Respondent also included an Internal Revenue Service Form W-9, Request for Taxpayer Identification Number and Certification, for Mr. Bish and for Respondent, a copy of Respondent's real estate sales associate license, a copy of Mr. Bish's real estate broker's license, and a copy of First Source, Inc.'s real estate corporation registration. Approximately one month later, in early March 2006, Mr. Bish answered the phone at his office. The caller identifying herself as "Amber" from the Jefferson at Maitland and asked for Respondent, who was on vacation. Mr. Bish asked if he could help. Amber told Mr. Bish that the W-9 form submitted for Respondent had been incorrectly filled out, and that she could not send Respondent a check without the proper information. Mr. Bish told Amber that under no circumstances should she send a check payable to Respondent. He instructed her to make the payment to First Source. Amber said nothing to Mr. Bish about a need to break up the payments or to make sure that a single remittance did not exceed $1,000. Mr. Bish asked Amber to send him copies of the documents that Respondent had submitted to the Jefferson at Maitland. Before those documents arrived, Mr. Bish received a phone call from Respondent, who explained that he submitted the invoice in his own name to ensure that Mr. Bish received the full amount owed by the Jefferson at Maitland. On March 10, 2006, after reviewing the documents he received from the Jefferson at Maitland, Mr. Bish fired Respondent. On March 29, 2006, Mr. Bish filed the complaint that commenced the Department's investigation of this matter.3 At the hearing, Mr. Bish explained that, even if Respondent's story about the need to "break up" the invoices and keep the total below $1,000 were true, the problem could have been easily resolved. Had Mr. Bish known of the situation, he would have instructed the Jefferson at Maitland to make one check payable to him personally as the broker, and a second check payable to First Source, Inc. In any event, there was in fact no problem. By a single check, dated March 15, 2008, First Source received payment from the Jefferson at Maitland in the amount of $1,440, the full sum of the three outstanding invoices from 2005. Respondent testified that he never intended to keep the money from the invoice, and that he would never have submitted it in his own name if not for the conversation with Ms. Marrero. Respondent asserted that if he had received a check, he would have signed it over to Mr. Bish. Respondent and his wife each testified that the family had no great need of $492.50 at the time the invoices were submitted. Respondent's wife is an attorney and was working full time in February 2006, and Respondent was still receiving a salary from First Source. In his capacity as office manager, Respondent had access to the company credit card to purchase supplies. Mr. Bish conducted an internal audit that revealed no suspicious charges. Respondent failed to explain why he did not immediately tell Mr. Bish about the potential fee collection problem as soon as he learned about it from Ms. Marrero, why he instructed the Jefferson at Maitland to send the check to his home address rather than his work address, or why he allowed a month to pass before telling Mr. Bish about the invoices. He denied knowing that Mr. Bish had already learned about the situation from the Jefferson at Maitland's employee. The Department failed to demonstrate that Respondent intended to keep the $492.50 from the invoice made payable to Respondent personally. The facts of the case could lead to the ultimate finding that Respondent was engaged in a scheme to defraud First Source of its referral fee. However, the same facts also may be explained by Respondent's fear that Mr. Bish would learn of his neglect in sending the invoices, and that this neglect could result in a severe reduction of First Source's referral fees. Respondent may have decided to keep quiet about the matter in the hope that the Jefferson at Maitland would ultimately pay the invoices in full, at which time Respondent would explain himself to Mr. Bish with an "all's well that ends well" sigh of relief. Given the testimony at the hearing concerning Respondent's character and reputation for honesty, given that Respondent contemporaneously told the same story to his wife and to Ms. Sanderson that he told to this tribunal, and given that this incident appears anomalous in Respondent's professional dealings, the latter explanation is at least as plausible as the former. Respondent conceded that, as a sales associate, he was not authorized by law to direct the Jefferson at Maitland to make the referral fee check payable to him without the express written authorization of his broker, Mr. Bish. Respondent also conceded that Mr. Bish did not give him written authorization to accept the referral fee payment in his own name. Respondent has not been subject to prior discipline.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order: Dismissing Count I of the Administrative Complaint against Respondent; and Suspending Respondent's sales associate's license for a period of one year for the violation established in Count II of the Administrative Complaint. DONE AND ENTERED this 21st day of September, 2007, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of September, 2007.
The Issue Whether the Department of General Services should disqualify as unresponsive Kodak's bid for Classes 11 and 12, Types I, III, IV of Bid No. 402- 600-38-B, Walk-Up Convenience Copiers, Plain Bond Paper.
Findings Of Fact The Department is the state agency empowered to contract for the purchase, lease, or acquisition of all commodities required by any state agency under competition bidding or by contractual negotiation. On April 26, 1984, the Department issued Invitation to Bid No. 402-600- 38-8 entitled Walk-up Convenience Copiers, Plain Bond Paper. The bid invitation categorized walk-up convenience copiers by type, class, and acquisition plan. The specifications provided for four types and twelve classes of copiers with four acquisition plans--one-year lease, two-year lease, three-year lease, and outright purchase. Kodak responded to the bid invitation on June 26, 1984, by submitting bids on all acquisition plans for the following categories: Type I, Classes 8- 12; Type II, Class 12, Type III, Classes 8-12; and Type IV, Classes 8-12. The Department posted its decision on the Copier Bid on August 9, 1984, at which time the Department indicated its intent to reject all bids submittsd by Kodak on the ground that Kodak's bid contained additional terms and conditions. Addendum A to Kodak's bids contains the language which the Department found to be additional terms and conditions and consists of an explanation of a quantity discount offered by Kodak to all state agencies. Kodak's bids were the lowest bids received by the Department of the two-and three-year lease plans for the following categories: Type I, Classes 11 and 12 Type III, Classes 11 and 12 Type IV, Classes 11 and 12 In addition, Kodak's bids were the lowest bids for the one-year lease plans on Class 12 of Type I, III, and IV. The quantity discount reflected in Addendum A does not affect the bid prices (price per copy made) submitted by Kodak for any of the machine categories or acquisition plans on which Kodak bid and was not considered by the Department in finding Kodak to be the low bidder in those categories specified above. The invitation to bid (ITB) contains general and special conditions. The "general conditions" are conditions that apply to all contracts bid by the state; the "special conditions" are the terms and conditions that apply specifically to the invitation to bid under consideration. The general conditions provide that "[a]ny and all special conditions and specifications attached hereto which vary from these general conditions shall have precedence." Section 4(b) of the general conditions provides: "Under Florida law use of State contracts shall be available to political subdivisions (county, county board of public instruction, municipal, or other local public agency or authority) and State Universities, which may desire to purchase under the terms and conditions of the contract. Such purchases shall be exempt from the competitive bid requirements otherwise applying to their purchases." The special conditions set forth the purpose of the bid as the establishment of "....a 12 month contract for the purchase of Walk-up Convenience Copiers: Plain Bond Paper by all State of Florida agencies and institutions." The purpose provision does not mention political subdivisions. However, several special conditions of the ITB refer to political subdivisions. Under "Estimated Quantities" it states: "It is anticipated that the State of Florida agencies and other eligible users will expend approximately $1,000,000 under any term contract resulting from this bid." Other eligible users include political subdivisions. The condition entitled "Distribution of Literature" provides: "Successful bidder will be required to furnish State agencies and political subdivisions...with descriptive literature..." The condition entitled "Summary of Total Sales" provides that "Total Dollar sales to political subdivisions may be submitted in lieu of the detailed information required for State and university placements." Although political subdivisions may purchase under the terms and conditions of the state copier contract, certain of the special conditions distinquish between state agencies and political subdivisions. As mentioned above, the ITB provides that total dollar sales to political subdivisions may be submitted in lieu of the information required for state and university placement. Further, the ITB requires each bidder to identify its equity accrual plan and sets forth minimum requirements that the plan must meet. One of the minimum requirements refers to State agencies only, directing that "[t]he State shall have the right to transfer the equipment from one State agency to another State agency without the loss of equity accrued." The special condition at issue in this proceeding is entitled" Quantity Discounts". It provides: "Bidder is urged to offer additional discounts for one time delivery of large single orders of any assortment of items." In response to this provision, Kodak included as part of its bid "Addendum A", which reflects the quantity discount offered by Kodak to major customers. The discounts offered by Kodak are based upon the total number of machines installed in state agencies at the time invoices are sent out. If the state has fewer than seventy-five machines installed, it enjoys no discount and pays the full amount indicated on the price sheets submitted in Kodak's bid. If a seventy-fifth machine is installed, the state receives a two percent discount off the bottom line of each monthly invoice on all Kodak machines installed. When the number of Kodak machines exceeds 149 the state receives a three percent discount, and when the number of machines exceeds 199, a four percent discount is applied. When the discount level changes either up or down due to a change in the machine base, Kodak provides 60 days advance written notice prior to applying the new discount level. Kodak's billing system utilizes a computer which tracks the number of machines and applies the quantity discounts. Each individual account or customer has a "custom master" in the computer, which is a computer record consisting of the name of the company, the address, the customer number, and information concerning invoices. The "custom master" is used in billing the customer. When quantity discounts are involved, a master agreement number and/or a common owner number is assigned and that number is placed on each individual custom master in the system that comes under the master agreement. Thus, each individual account has both an individual customer number and a master agreement number. When the computer prepares the bill, it automatically counts the number of machines installed with all customers who share the same master agreement number. Because of the billing system, any machine that is included in the billing is also included in determining the quantity discount. If the machine is not counted in the machine base, the customer is not being charged for the machine. Paragraph II of Addendum A provides: 11. Eligible Users Eligibility under the Quantity Discount Schedule listed below will be exclusively for installations of KODAK EKTAPRINT Copier-Duplicator and Duplicator models within the State of Florida's Government departments, agencies, and State universities. The Quantity Discount Schedule does not apply to installations of KODAK EKTAPRINT Copier-Duplicator and Duplicator models within political subdivisions in the State of Florida (county, county board of public instruction, municipal, or other local public agency or authority). This provision prevents the state from receiving discounts based upon machines purchased by political subdivisions, and also prevents political subdivisions from receiving quantity discount credit for machines placed with state agencies and universities. In other words, the machine base for state agencies and universities would be determined solely by the number of machines installed with state agencies and universities; machines installed within political subdivisions would not be counted in that machine base because political subdivisions would not have the master agreement number assigned to state agencies and universities. Although Kodak contends that each political subdivision would be eligible for quantity discounts based upon the number of machines installed within that particular political subdivision, that provision was not included in Addendum A. Kodak did not address political subdivisions in the quantity discount provision because the purpose of the ITB, as stated in the special conditions, was to establish a contract for state agencies and because the quantity discount provision did not specify that any quantity discounts offered must include political subdivisions. After the copier contract is awarded, each eligible user places its orders for copiers from the contract. The orders do not go through the Department, and the Department does not have a system that indicates how many machines are installed in state agencies and universities. Although the Department does not have a system for independently monitoring the number of machines installed, under Kodak's billing system the state may elect to receive a monthly or quarterly printout which lists each machine installed by its purchaser and provides information relating to the machine's location, type, and acquisition plan. In addition, the state may designate a central location to receive copies of all invoices sent out on each machine installed within the state system. The Department determined that Kodak's bids should be disqualified as containing additional terms and conditions. Specifically, the provision of Addendum A excluding political subdivisions from participation in the quantity discount offered and the Department's inability to independently monitor the quantity discount were identified as the additional terms and conditions. If not for Addendum A, Kodak would have been awarded the contract on the categories for which it was the low bidder. Had Kodak failed to provide any quantity discounts it would have been awarded the contract. Had Kodak omitted Addendum A from its bids, but automatically accorded to the state its quantity discount through its billing system, the state would have paid the discounted prices. The inclusion of Addendum A in its bids does not give Kodak an advantage or benefit not enjoyed by other bidders. All bidders were "urged to offer additional discounts...; however, the quantity discounts offered were not considered in determining the low bidder. Therefore, the inclusion of the quantity discount offered by Kodak could not have given it a competitive advantage not enjoyed by other bidders. The inclusion of Addendum A does not adversely impact the interests of eligible users of state contracts. Had Addendum A not been included in Kodak's bids, Kodak would have been awarded the contract in the categories previously specified, and all eligible users would pay the full contract price. Political subdivisions are not adversely affected by the inclusion of Addendum A because they will pay no more than they would have paid had Kodak failed to provide any quantity discounts. State agencies and universities are not adversely affected by the quantity discount offered because they will pay the same or less than they would have paid had Kodak not included Addendum A.
Recommendation Based on the foregoing, it is RECOMMENDED that the State of Florida, Department of General Services, award to Eastman Kodak Company the following portions of Bid Number 402-600-38- B: Class 11, Types I, III, IV - two and three year lease. Class 12, Types I, III, IV - one, two and three year lease. DONE and ENTERED this 26th day of February, 1985, in Tallahassee, Florida. DIANE A. GRUBBS Hearing Officer Division of Administrative Hearings 2009 Apalachee Parkway The Oakland Building Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of February, 1985.
The Issue The issue in this case is whether J&K Enterprises of Lee County owes Petitioner money for sod.
Findings Of Fact On January 29, 1994, Petitioner invoiced Respondent J&K Enterprises for five loads of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $3139. On February 10, 1994, Petitioner invoiced Respondent J&K Enterprises for four loads of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $2776. On February 24, 1994, Petitioner invoiced Respondent J&K Enterprises for five loads of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $3946. On March 3, 1994, Petitioner invoiced Respondent J&K Enterprises for one load of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $736. On March 10, 1994, Petitioner invoiced Respondent J&K Enterprises for one load of Bermuda sod that Petitioner had sold and delivered to Respondent. Pursuant to the agreed-upon price, the amount of the invoice was $656. The total of the five invoices is $11,253. Respondent J&K Enterprises made the following payments on account: April 10, 1994--$1000; April 29, 1994--$1000; May 17, 1994--$1000; May 25, 1994--$1000; June 24, 1994-- $1000; September 23, 1994--$2000; October 21, 1994--$500; and December 15, 1994--$250. The total of the eight payments is $7750. Respondent J&K Enterprises still owes Petitioner the difference of $3,503. Despite repeated demands, Respondent refuses to pay the remaining balance. The parties agreed on the delivery tickets that Respondent J&K Enterprises would pay 18 percent on all unpaid balances after 30 days. Respondent has paid in full the first two invoices. Respondent paid all but $2111 of the third invoice, which balance began to earn interest on March 24, 1994. The fourth invoice of $736 began to earn interest on April 3, 1994, and the last invoice of $656 began to earn interest on April 10, 1994. Interest through March 1, 1995, on the February 24 invoice is $355.02 plus $1.04 per day thereafter. Interest through March 1, 1995, on the March 3 invoice is $120.38 plus $0.36 per day thereafter. Interest through March 1 on the March 10 invoice is $104.64 plus $0.32 per day thereafter.
Recommendation It is hereby RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order ordering J&K Enterprises of Lee County to pay the amount set forth above and, if said amount is not paid, ordering Preferred Mutual Insurance Company to pay said amount, up to its maximum liability on the bond. ENTERED on February 16, 1995, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on February 16, 1995. COPIES FURNISHED: Hon. Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, FL 32399-0810 Richard Tritschler, General Counsel Department of Agriculture The Capitol, PL-10 Tallahassee, FL 32399-0810 Brenda Hyatt, Chief Bureau of Licensing and Bond Department of Agriculture 508 Mayo Building Tallahassee, FL 32399-0800 Larry Perkins Florida Sod of Hendry County, Inc. P.O. Box 159 LaBelle, FL 33935 J&K Enterprises of Lee County 2290 Bruner Lane Ft. Myers, FL 33912 Preferred Mutual Insurance Co. Legal Department P.O. Box 40-7003 Ft. Lauderdale, FL 33340-7003
The Issue Whether there is probable cause for Petitioner to bring an action against Respondents for violation of the Florida Deceptive and Unfair Trade Practices Act?
Findings Of Fact Respondents sell used cars in Pensacola, about 500 a year. On or about June 19, 1981, when Fannie Mae Tunstall bought a '76 Buick LeSabre from Fairfield Motors, Inc. (Fairfield), she dealt with Elaine Owens Atkins, who is Fairfield's general manager, secretary-treasurer and a six-year employee. The installment sales contract specified an annual percentage rate of 29.64 percent, and was stamped with the legend, "MINIMUM $25 REPO OR COLLECTION FEE." Respondent's Exhibit No. 1. Ms. Tunstall told Ms. Atkins the payments were too much but signed the papers anyway, and did so without reading them, although Ms. Atkins had told her to read them. The payments did indeed prove too much and Ms. Tunstall fell behind. She was 13 days late with a payment in November of 1981, but Ms. Tunstall and Ms. Atkins had discussed the matter and Fairfield agreed to accept the payment late. Fairfield accepted other payments late, but arranged to have Willie Easley (formerly a singer and now a minister as well as a repossessor of cars) take possession of the Quick early in the morning of January 10, 1983, and drive it away. Ms. Tunstall had failed to make the monthly payment due December 30, 1982. Ms. Atkins had telephoned her once and gotten no answer. Later on January 10, 1983, Fairfield agreed to return the car in exchange for December's payment, another payment in advance, a six dollar late fee and a $100 repossession fee. Ms. Tunstall paid the entire balance Fairfield claimed to be owed and retrieved the car. Linda Louise LaCoste and her husband Ronnie have bought several cars from Fairfield, including a 1976 Chevrolet Suburban Mr. LaCoste bought on February 7, 1983, under an installment agreement calling for interest at an annual percentage rate in excess of 30 percent. The "cash price" was $3,459.75, and the "total sale price" was $4,613.15. Respondent's Exhibit No. 3. The LaCostes understood from prior dealings that their agreement required Mr. LaCoste to maintain insurance on the vehicle, and Mr. LaCoste contracted with Allstate Insurance Company (Allstate) for appropriate coverage. Allstate sent Fairfield a notice of cancellation for nonpayment of premium effective 12:01 A.M. April 4, 1983. Petitioner's Exhibit No. 4. At 11:25 A.M. on April 4, 1983, Allstate accepted the premium Ronnie LaCoste offered in order to reinstate the policy, No. 441361747, and Allstate's Chirstine Smith also wrote a new policy to be sure there would be coverage. Ms. Smith told Fairfield that insurance was in force on April 4, 1983. On April 20, 1983, Allstate issued another notice of cancellation for nonpayment of premium on policy No. 441361747, effective 12:01 A.M. May 4, 1983. At ten minutes past three o'clock on the afternoon of May 4, 1983, Mr. LaCoste's Chevrolet Suburban was repossessed at Fairfield's instance on account of the apparent lapse of insurance. Mrs. LaCoste and here sister appeared promptly at Fairfield's place of business and tendered payment due that day. All prior payments to Fairfield were current. When Mrs. Atkins refused payment, Mrs. LaCoste and here sister protested with such vehemence that a Fairfield employee called the sheriff's office. According to Fairfield's contemporaneous records, Fairfield employees ("we") tried to give Mrs. LaCoste a letter "advising vehichle [sic] would be held for 10 days" (i.e., that it would be sold thereafter) but "she refused to accept a copy." Respondent's Exhibit No. 3. At hearing, Ms. Atkins conceded that she had not mailed a copy of the letter to Mr. LaCoste but testified that Mrs. LaCoste accepted a copy after refusing to take it initially. Mrs. LaCoste denied that she ever received the letter, and her version has been credited. On May 7, 1983, Fairfield received another communication from Allstate. Whether insurance coverage in fact lapsed on May 4, 1983 was not clear from the record. On May 17, 1983, Fairfield sold the Chevrolet Suburban for $2,050.00. Carolyn V. Kosmas purchased a 1978 Ford LTD II from Fairfield and made a downpayment of $550.00 on June 2, 1983. Under the terms of the installment sale contract, which called for an annual percentage rate in excess of 29 percent, she was to begin seventy dollar ($70.00) biweekly payments on June 22, 1983. At the time of the sales of the Ford to Ms. Kosmas on June 2, 1983, Fairfield asked for credit information about her fiance as well as about herself. On June 24, 1983, she appeared at Fairfield's place of business and tendered not only the payment due June 22 but also the payment due July 6, a total of $140.00 in cash. Ms. Atkins refused to accept the money, telling her that her references had not panned out, and asked her to surrender the keys to the car and gather up her personal effects. Ms. Kosmas made no secret of her opinion that she was not being treated fairly, but, crying and afraid, eventually agreed to treat the transaction as a rental and accepted a refund of $104.39 on that basis. Ms. Atkins "advised if she gave me another background sheet, that I could verify, I would renegotiate with her," Respondent's Exhibit No. 5, but Ms. Kosmas told Ms. Atkins that she had lost her job at West Florida Hospital and the renegotiation eventuated in the retroactive lease. Respondent Pearl Allen was present on June 24, 1983, and took the car keys from her. It was also he who wrote her on June 27, 1983 that the 1978 Ford LTD II would be privately sold on July 6, 1983. She did not appear when and where she was told the sale would occur. The Ford was in fact sold at auction in Montgomery, Alabama, on July 19, 1983. Respondent's Exhibit No. 5. Mary Lee Hobbs' husband Forace paid Fairfield $800.00 down on a 1977 Oldsmobile 98 on February 27, 1982, agreeing to maintain insurance on the car until paid for, and to pay the unpaid principal balance of $4134.25 over a two and a half year period together with interest at an annual percentage rate of 29.79. Stamped on the contract was the legend, "MINIMUM $25 REPO OR COLLECTION FEE." In part, the installment sale contract read: * NOTE: DISCLOSURES REQUIRED BY FEDERAL LAW, Respondent's Exhibit No. 6 (reduced in size), has been omitted from this ACCESS Document. For review, contact the Division's Clerk's Office. All payments were current when, at about half past five o'clock on the morning of November 1, 1983, Fairfield's agents used a wrecker to remove the Oldsmobile, damaging the Hobbses' porch in the process. Fairfield acted because it received notice of cancellation or nonrenewal of the insurance policy that Hobbs maintained on the car. Typed on the form notice as the effective date of cancellation was November 29, 1983. Someone has written in ink "should be 10-29." In fact the insurance policy never lapsed. According to Fairfield's records, they received conflicting information, on October 29, 1983, about whether an insurance premium had been paid. The Hobbses' 27-year old "daughter said they p[ai]d--Conway Spence said they did not pay." Respondent's Exhibit No. 6. This was the same day Mr. Spence, an insurance agent, erroneously informed Fairfield that the effective date of expiration "should be 10-29." Respondent's Exhibit No. 6. Even after Mr. Spence's error was known to it, Fairfield refused to return the car without payment of a $75.00 "repossession fee," and also refused to let the Hobbs children return with the laundry they were sent to fetch from the trunk of the car. It was the refusal to give up the dirty laundry that sent Mrs. Hobbs to the authorities. Karel Jerome Bell bought a 1977 Delta 88 Oldsmobile from Fair field on July 22, 1982, under an installment sale contract calling for two "pick up notes" to be paid in August of 1982 and biweekly payments of $125.00 thereafter until payments reached a total of $4161.212. Respondent's Exhibit No. 7. The "pick up notes," each for $220.00 were due August 7 and 21, 1982, and were not treated as down payments on the installment sale form. After reducing his indebtedness to $1221.21, Mr. Bell fell two payments behind, and Fairfield repossessed the Oldsmobile on July 7, 1983. The same day Fairfield wrote Mr. Bell that it intended to sell his car, but not time or date was specified. On July 8, 1983, Mr. Bell called and asked whether he could continue making payments while the car on the lot. Respondent's Exhibit No. 7. Fairfield's Ms. Gilstrap accepted $100.00 from Mr. Bell on July 12, 1983, which she applied to satisfy a reposession fee of $100.00. On the Bell contract, too, had been stamped, "MINIMUM $25 REPO OR COLLECTION FEE." Ms. Gilstrap "told him as long as he paid something something regularly on the account, I felt sure we would hold it for him." Mr. Bell indicated he would pay an additional $125.00 the following Friday and Ms. Gilstrap made a notation to this effect in his file, where she also wrote, "Pls. don't sell he intends to pay for." Respondent's Exhibit No. 7. Mr. Bell had not made any further payment when, on July 30, 1983, without notice to Mr. Bell, Fairfield sold the car for $1,000.00 to a wholesaler. Respondents use form installment sale contracts. A blank form like the one in use at the time of the hearing was received as Respondent's Exhibit No. This was the form used in the Kosmas and LaCoste transactions. The predecessor form used in the Bell, Hobbs and Tunstall transactions was similar in many respects. The earlier form provided, "LATE CHARGES: Buyer(s) hereby agrees to pay a late charge on each installment in default for 10 days or more in an amount of 5 percent of each installment or $5.00 whichever is less." On the reverse, the form provided: ACCELERATION AND REPOSSESSION. In the event any Buyer(s) or Guarantor of this Contract fails to pay any of said installments, including any delinquency charges when due or defaults in the performance of any of the other provisions of this Contract or (c) in case Buyer(s) or Guarantor becomes insolvent or (d) institutes any type of insolvency proceedings or (e) has any thereof instituted against him, or (f) has entered against him any judgment or filed against him any notice of lien in case of any Federal tax or has issued against him any distraint warrant for taxes, or writ of garnishment, or other legal process, or (g) in case of death, adjudged incompetency, or incarceration of the Buyer(s) or Guarantor or (h) in case the seller or the holder of this Contract, upon reasonable cause, determines that the prospect of payment of said sums or the performance by the Buyer(s) or his assigns of this Contract is impaired, then, or in such event, the unpaid portion of the balance hereunder shall, without notice, become forthwith due and payable and the holder, in person or by agent, may immediately take possession of said property, together with all accessions thereto, or may, at first, repossess a part and later, if necessary, the whole thereof with such accessions, and for neither or both of these purposes may enter upon any premises where said property, may be and remove the same with or without process of law. Buyer(s) agrees in any such case to pay said amount to the holder, upon demand, or, at the election of the holder, to deliver said property to the holder. If, in repossessing said property, the holder inadvertently takes possession of any other goods therein, consent is hereby given to such taking of possession, and holder may hold such goods temporarily for Buyer(s), without responsibility of liability therefor, providing holder returns the same upon demand. There shall be no liability upon any such demand unless the same be made in writing within 48 hours after such inadvertent taking of possession. Should this contract mature by its term or by acceleration, as hereinabove provided, then, and in either such event, the total principal amount due hereunder at that time shall bear interest at the rate of 10 percent per annum, which principal and interest, together with all costs and expenses incurred in the collection hereof, including attorneys fees (to be not less than 15 percent of the amount involved), plus appellate fees, if any, and all advances made by Seller to protect the security hereof, including advances made for or on account of levies, insurance, repairs, taxes, and for maintenance or recovery of property shall be due the Holder hereof and which sums Buyer(s) hereby agrees to pay. * * * LIABILITIES AFTER POSSESSION. Seller, upon obtaining possession of the property upon default, may sell the same or any part thereof at public or private sale either with or without having the property at the place of sale, and so far as may be lawful. Seller may be a purchaser at such sale. Seller shall have the remedies of a secured party under the Uniform Commercial Code (Florida) and any and all rights and remedies available to secured party under any applicable law, and upon request or demand of Seller, Buyer(s) shall, at his expense, assemble the property and make it available to the Seller at the Seller's address which is designated as being reasonably convenient to Buyer(s). Unless the property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Seller will give Buyer(s) reasonable notice of the time and place of any public or private sale thereof. (The requirement of reasonable notice shall be met if such notice is mailed, postage prepaid, to Buyer(s) at address shown on records of Seller at least five (5) days before the time of the sale or disposition) Expenses of retaking, holding, preparing for the sale, selling, attorneys' fees, supra, incurred or paid by Seller shall be paid out of the proceeds of the sale and the balance applied on the Buyer(s) obligation hereunder. Upon disposition of the property after default, Buyer(s) shall be and remain liable for any deficiency and Seller shall account to Buyer(s) for any surplus, but Seller shall have the right to apply all or any part of such surplus against (or to hold the same as a reverse against) any and all other liabilities of Buyer(s) to Seller. Similarly, the more recent form provides, on the obverse, Late Charge: If a payment is received more than ten (10) days after the due date, you will be charged $5.00 or five (5 percent) of the payment, whichever is less. and on the reverse, has identical provisions on "Acceleration and Repossession" and "Liabilities After Repossession."
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That Petitioner find probable cause to initiate judicial proceedings against Respondents pursuant to Section 501.207(1), Florida Statutes (1981). DONE and ENTERED this 26th day of April, 1985, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative Hearings this 26th day of April, 1985. COPIES FURNISHED: William P. White, Jr., Esquire Assistant State Attorney Post Office Box 12726 Pensacola, Florida 32501 Paul A. Rasmussen, Esquire Eggen, Bowden, Rasmussen & Arnold 4300 Bayou Boulevard, Suite 13 Pensacola, Florida 32503 Curtis A. Golden, State Attorney First Judicial Circuit of Florida Post Office Box 12726 190 Governmental Center Pensacola, Florida 32501
The Issue The issues are whether Respondent has made unauthorized payments to Superior Insurance Group, its corporate parent, and whether Respondent has properly disclosed these payments on its financial reports filed with Petitioner.
Findings Of Fact Respondent is a domestic stock insurance company operating under a certificate of authority to transact in Florida the business of property and casualty insurance. As a nonstandard automobile insurer, Respondent primarily deals with policyholders whose driving records and accident histories preclude their coverage by standard automobile insurers. Superior Insurance Group, Inc. (formerly GGS Management, Inc. (GGS)) owns Respondent; Symons International Group, Inc. (Symons) owns Superior Insurance Group, Inc. (Superior Group); and Goran Capital, Inc. (Goran) owns 73 percent of Symons. Although publicly traded, Goran was founded, and probably is still controlled, by the Symons family. Superior Group serves as Respondent’s managing general agent. GGS changed its name to Superior Group in early 2000; where appropriate, this Recommended Order refers to this entity as GGS/Superior Group. Respondent owns Superior American Insurance Company (Superior American) and Superior Guaranty Insurance Company (Superior Guaranty), which are both domestic stock insurance companies authorized to conduct in Florida the business of property and casualty insurance. Also engaged in the nonstandard automobile insurance business, Superior American and Superior Guaranty transfer all of their premiums and losses to Respondent under a reinsurance agreement. All financial information concerning Superior American and Superior Guaranty, which, for the purpose of this case, are mere conduits to Respondent, are included in the financial information of Respondent. On or about April 30, 1996, GGS acquired the stock of Respondent, as well as other assets, from an unrelated corporation, Fortis, Inc. or one of its subsidiaries. From the regulatory perspective, the acquisition started when, as required by law, on or about February 5, 1996, GGS filed with Petitioner a Form A application for Petitioner’s approval of the acquisition of Respondent. This was an extensive document, consisting of more than 1000 pages. One of the purposes of the application process, as described in Section 628.461, Florida Statutes, is to assure the adequacy of the funds used by the entity acquiring the insurer. The proposed acquisition is described by the Statement Regarding the Acquisition of More Than Five Percent of the Outstanding Voting Securities of Superior Insurance Company . . . by GGS Management, Inc., dated February 5, 1996 (Acquisition Statement). The Acquisition Statement states that GGS Management Holdings, Inc. owned GGS. (The distinction between GGS and GGS Management Holdings, Inc. is irrelevant to this case, so “GGS,” as used in this Recommended Order, shall also refer to GGS Management Holdings, Inc.) According to the Acquisition Statement, Symons owned 52 percent of GGS; GS Capital Partners II, L.P., owned 30 percent of GGS; GS Capital Partners II Offshore, L.P., owned 12 percent of GGS; and three mutual funds (probably all affiliates of Goldman Sachs) owned the remaining 6 percent of GGS. GS Capital Partners II, L.P., was owned by 100 investors, including The Goldman Sachs Group, L.P. (16.54 percent), “wealthy individuals and trusts, corporate pension funds, foundations and endowments, family trusts/corporations and one state pension fund.” The ownership of GS Capital Partners II Offshore, L.P., resembled the ownership of GS Capital Partners II, L.P. The Acquisition Statement states that GGS “will be the manager of all insurance operations for [Respondent] and will act as the holding company for [Respondent] and [an Indiana nonstandard automobile insurer known as Pafco whose stock Symons was contributing to GGS].” The Acquisition Statement projects the stock-purchase price, which was expressed as a formula, to be about $60 million. Citing the $2 billion in capital of the two Goldman Sachs limited partnerships and the $50 million in capital of Goran, the Acquisition Statement assures that “GGS has tremendous wherewithal to fund the growth needs of [Respondent] . . ..” Alluding to Goran’s 20 years’ experience in managing nonstandard automobile insurance companies, the Acquisition Statement represents that the Goldman Sachs limited partnerships and Goran “possess the capital and leadership resources to support the proposed activities of [Respondent].” According to the Acquisition Statement, the Goldman Sachs limited partnerships and Goran “anticipate that the acquisition of [Respondent] is but the first step in an effort to build a significant non-standard auto insurance company.” The Acquisition Statement describes the respective contributions of the two owners of GGS: Symons will contribute Pafco, which then had a current GAAP book value of $14 million, and the Goldman Sachs limited partnerships will contribute $20 million in cash. With the backing of Symons and the Goldman Sachs limited partnerships and secured by all of the stock of Respondent and GGS, GGS will execute a six-year promissory note with The Chase Manhattan Bank (Chase) for $44 million. Drawing $40 million from this credit extension and using the $20 million cash contribution of the Goldman Sachs limited partnerships, GGS will fund the anticipated cash purchase price of $60 million. The Acquisition Statement represents that GGS will be able to service the debt. Due to the cash contribution of the Goldman Sachs limited partnerships, the Chase debt represents only two-thirds of the purchase price. Due to the cash contribution of the Goldman Sachs limited partnerships and the stock contribution by Symons, the Chase debt represents only about one-half of the initial capital of GGS. The Acquisition Statement states that GGS will service the Chase debt in part by “the combination of the management activities of both Pafco and [Respondent] within GGS, billing fees, other non-insurance company activities and anticipated insurance company operating economies which will result from the combination of these two operations [Pafco and Respondent].” The equity contributions of cash and stock “contribute significantly to the financial stability of GGS, allowing GGS to service the debt using operating cash flows only, including, if necessary, normal dividends from earned surplus as a secondary source of debt service funds. GGS does not anticipate using dividends from either Pafco or [Respondent] as a primary source of debt service funds.” The Chase Credit Agreement, which is dated April 30, 1996, requires GGS to use its best efforts to cause Respondent to pay "cash dividends or other distributions or payments in cash including . . . the payment of Billing Fees and Management Fees" in sufficient amounts to pay all principal and interest due under the financing instrument. The Chase Credit Agreement defines "Billing Fees" as: "fees with respect to the payment of premiums on an installment basis that are received by an Insurance Subsidiary from policyholders and in turn paid to [GGS] or received directly by [GGS] . . .." The Chase Credit Agreement defines "Management Fees" as: "all fees paid by an Insurance Subsidiary to [GGS] that are calculated on the basis of gross written premiums." With respect to the "Management Fees" described in the Chase Credit Agreement, the Acquisition Statement describes a five-year management agreement to be entered into by GGS with Pafco and Respondent (Management Agreement). The Management Agreement, which GGS and Respondent executed on April 30, 1996, provides that GGS “will provide management services to both Pafco and [Respondent] and will receive from [Respondent] as compensation 17% of [Respondent’s] gross written premium” and a slightly lower percentage of premiums from Pafco (Management Fee). Under the Management Agreement, Respondent “will continue to pay premium taxes, boards and bureaus costs, legal and audit fees and certain computer costs.” The Acquisition Statement states that Respondent’s “operating costs" were about 21%, so the 17% cap “will allow [Respondent] to see a significant and immediate improvement in its overall financial performance”-- over $1 million in 1994, which was the last year for which financial information was then available. The Management Agreement gives GGS the exclusive right and nondelegable and nonassignable obligation to perform a broad range of business actions on Respondent’s behalf. These actions include accepting contracts, issuing policies, appointing adjustors, and adjusting claims. The Management Agreement requires GGS to "pay [Respondent’s] office rent and occupancy operating expenses from the amounts that it receives pursuant to this Agreement.” In return, the Management Agreement requires Respondent to pay GGS “fees for the business placed with [Respondent as follows:] Agents commission plus 17% not to exceed 32% in total.” The scope of the services undertaken by GGS in the Management Agreement is similarly described in the Plan of Operation, which GGS filed with Petitioner as part of the application. The Plan of Operation provides that, in exchange for the 17 percent “management commission,” GGS assumes the responsibility for all aspects of the operating expenses of the book including underwriting, claims handling and administration. The only expenses which remain the responsibility of [Respondent] directly are those expenses directly related to the insurance book, such as premium taxes, boards and bureaus, license fees, guaranty fund assessments and miscellaneous expenses such as legal and audit expenses and certain computer costs associated directly with [Respondent]. In response to a request for additional information, Goran’s general counsel, by letter dated March 13, 1996, to Petitioner’s application coordinator, added another document, Document 26. The new document was a pro forma financial projection for 1996-2002 (Proforma) showing the sources of funds for GGS to service the Chase debt. The seven-year Proforma contains only two significant sources of income for GGS: “management fee income” and “finance & service fee income" (Finance and Service Fees). By year, starting with 1996, these respective figures are $28.6 million and $7.0 million, $34.2 million and $8.6 million, $38.1 million and $9.9 million, $42.6 million and $11.0 million, $47.5 million and $12.3 million, $53.0 million and $13.7 million, and $59.3 million and $15.3 million. Accounting for the principal and interest payments over the six-year repayment term of the Chase Credit Agreement, the Proforma shows ending cash balances, during each of the covered years, culminating in a final cash balance, in 2002, of $43.9 million. By letter dated March 29, 1996, Goran’s general counsel informed Petitioner that an increase in Respondent’s book value had triggered an increase in the purchase price from $60 million to $66 million. Also, the book value of Pafco had increased from $14 million to $15.3 million, and the cash required of the Goldman Sachs limited partnerships had increased from $20 million to $21.2 million. Additionally, the letter states that Chase had increased its commitment from $44 million to $48 million. A revised Document 26 accompanied the March 29 letter and showed the same income projections. Reflecting increased debt-service projections, the revised Proforma projected lower cash balances, culminating with $39.8 million in 2002. During a meeting in March 1996, Mr. Alan Symons, president and chief executive officer of Goran and a director of Superior Group and Respondent, met with three of Petitioner's representatives, including Mary Mostoller, Petitioner's employee primarily responsible for the substantive examination of the GGS application. During that meeting, Mr. Symons informed Petitioner that GGS would receive Finance and Service Fees from Respondent's policyholders who paid their premiums by installments. Ms. Mostoller did not testify, and the sole representative of Petitioner who attended the meeting and testified candidly admitted that he could not recall whether they discussed this matter. In response to another request for additional information, Respondent’s present counsel, by letter dated April 12, 1996, informed Petitioner that the “finance and service fee income” line of the Proforma “is composed primarily of billing fees assessed to policyholders that choose to make payments on a monthly basis,” using the same rate that Respondent had long used. The letter explains that the projected increase in these fees is attributable solely to a projected increase in business and not to a projected increase in the rate historically charged policyholders for this service. In an internal memorandum dated April 18, 1996, Ms. Mostoller noted that GGS would pay the Chase Credit Agreement through a “combination of the management fees and other billing fees of both Pafco and [Respondent].” Later in the April 18 memorandum, though, Ms. Mostoller suggested, among other things, that Petitioner condition its approval of the acquisition on the right of Petitioner to reevaluate annually the reasonableness of the “management fee and agent’s commission”--omitting any mention of the "other billing fees." On April 30, 1996, Petitioner entered a Consent Order Approving Acquisition of Stock Pursuant to Section 628.461, Florida Statutes (Consent Order). Incorporating all of Ms. Mostoller's recommendations, the Consent Order is signed by Respondent and GGS, which "agree to and consent to all of the above cited terms and conditions . . .." The Consent Order does not incorporate by reference the application and related documents, nor does the Consent Order contain an integration clause, which, if present, would merge all prior written and unwritten agreements into the Consent Order so as to preclude the implementation of such agreements in conjunction with the Consent Order. Among other things, the Consent Order mandates the following: [Respondent] shall give advance notice to [Petitioner] of any proposed changes in the [Management Agreement] and shall receive written approval from [Petitioner] prior to implementing those changes. In addition, for a period of three (3) years, [Petitioner] shall reevaluate at the end of each calendar year the reasonableness of the fees as reflected on Addendum A of the [Management] Agreement[.] Furthermore, [Petitioner] may at its sole discretion, and after consideration of the performance and operating percentages of [Respondent] and any other pertinent data, require [Respondent] to make adjustments in the [M]anagement [F]ee and agent's commission. GGS . . . shall file each year an audited financial statement with [Petitioner] . . .. In addition to the above, for a period of 4 years from the date of execution of this Consent Order . . .: [Respondent] shall not pay or authorize any stockholder dividends to shareholders without prior written approval of [Petitioner]. Any direct or indirect contracts, agreements or transactions of any type or nature including but not limited to the sale or exchange of assets among or between [Respondent] and any member of the Goran . . . holding company system shall receive prior written approval of [Petitioner]. That failure to adhere to one or more of the above terms and conditions shall result WITHOUT FURTHER PROCEEDINGS in the Treasurer and Insurance Commissioner DENYING the above acquisition, or the REVOCATION of the insurers' certification of authority if such failure to adhere occurs after the issuance of the Consent Order approving the above acquisition. The Consent Order addresses the Management Fees and the commissions payable to the independent agents who sell Respondent's insurance policies. However, the Consent Order omits any explicit mention of the Finance and Service Fees, even though GGS and Respondent had clearly and unambiguously disclosed these fees to Petitioner on several occasions prior to the issuance of the Consent Order. On its face, the Consent Order requires prior approval for the payment of Finance and Service Fees, which arise due to a contract or agreement between Respondent and GGS/Superior Group. The Consent Order prohibits "direct or indirect contracts, agreements or transactions of any type or nature including . . . the sale or exchange of assets among or between [Respondent] and any member of the Goran . . . holding company system," without Petitioner's prior written approval. The exact nature of these Finance and Service Fees facilitates the determination of their proper treatment under the Consent Order and the facts of this case. Ostensibly, the Finance and Service Fees pertain to items not covered by the Management Fees, which cover a wide range of items. In fact, the Finance and Service Fees arise only when a policyholder elects to pay his premium in installments; if no policyholder were to pay his premium by installments, no Finance and Service Fees would be due. The testimony in the record suggests that the Finance and Service Fees pertain to services that necessarily must be performed when policyholders pay their premiums by installments. This suggestion is true, as far as it goes. Installment payments require an insurer to incur administrative and information-management costs in billing and collecting installment payments. Other costs arise if late installment payments necessitate the cancellations and if reinstatements follow cancellations. Installment-payment transactions are undeniably more expensive to the insurer than single-payment transactions. The record as to these installment-payment costs, which are more in the nature of a service charge, is well- developed. However, the Finance and Service Fees also pertain to the cost of the loss of the use of money when policyholders pay their premiums by installments. Installment-payment transactions cause the insurer to lose the use of the deferred portion of the premium for the period of the deferral. The record as to these costs, which are more in the nature of a finance charge or interest, is relatively undeveloped. At the hearing, Mr. Symons testified that an insurer does not lose the use of the deferred portion of the premium for an established book of business. Mr. Symons illustrated his point by analyzing over a twelve-month period the development of a hypothetical book of business consisting of twelve insureds. If an insurer added its first insured in the first month, added a second in the third, and so forth, until it added its twelfth insured in the twelfth month, and each insured chose to pay a hypothetical $120 annual premium in twelve installments of $10 each, the cash flow in the twelfth and each succeeding month (assuming no changes in the number of insureds) would be $120-- the same that it would have been if each of the insureds chose to pay his premium in full, rather than by installment. Thus, Mr. Symons' point was that, after the first eleven months, installment payments do not result in the loss of the use of money by the insurer. Mr. Symons' illustration assumes a constant book of business after the twelfth month. However, while the insurer is adding installment-paying insureds, the insurer loses the use of the portion of the first-year premium that is deferred, as is evident in the first eleven months of Mr. Symons' illustration. Also, if the constant book of business is due to a constant replacement of nonrenewing insureds with new insureds--a distinct possibility in the nonstandard automobile market--then the insurer will again suffer the loss of the use of money over the first eleven months. Either way, Mr. Symons' illustration does not eliminate the insurer's loss of the use of money when its insureds pay by installments; the illustration only demonstrates that the extent of the loss of the use of the money may not be as great as one would casually assume. The Finance and Service Fee is sufficiently broad to encompass all of the terms used in this record to describe it: "installment fee," "billing fee," "service charge," "premium fee," and even "premium finance fee." However, only "installment fee" is sufficiently broad as to capture both types of costs covered by the Finance and Service Fee. The dual components of the Finance and Service Fee are suggested by the statute authorizing its imposition. Section 627.902, Florida Statutes, authorizes an insurer or affiliate of the insurer to "finance" premiums at the "service charge or rate of interest" specified in Section 627.901, Florida Statutes, without qualifying as a premium finance company under Chapter 627, Part XV, Florida Statutes. If the insurer or affiliate exceeds these maximum impositions, then it must qualify as a premium finance company. The "service charge or rate of interest" authorized in Section 627.901, Florida Statutes, is either $1 per installment (subject to limitations irrelevant to this case) or 18 percent simple interest on the unpaid balance. The charge per installment, which is imposed without regard to the amount deferred, suggests a service charge, and the interest charge, which is imposed without regard to the number of installments, suggests a finance charge. The determination of the proper treatment of the Finance and Service Fees under the Consent Order is also facilitated by consideration of the process by which these fees were transferred to GGS/Superior Group. As anticipated by the parties, after the acquisition of Respondent by GGS, Respondent retained no employees, and GGS/Superior Group employees performed all of the services required by Respondent. The process by which Respondent transferred the Finance and Service Fees to GGS/Superior Group began with Respondent issuing a single invoice to the policyholder showing the premium and the Finance and Service Fee, if the policyholder elected to pay by installments. As Mr. Symons testified, Respondent calculated the Finance and Service Fee on the basis of the 1.5 percent per month on the unpaid balance, rather than the specified fee per installment. The installment-paying policyholder then wrote a check for the invoiced amount, payable to Respondent, and mailed it to Respondent at the address shown on the invoice. Employees of GGS/Superior Group collected the checks and deposited them in Respondent's bank account. From these funds, the employees of GGS/Superior Group then paid the commissions to the independent agents, the Management Fee (calculated without regard to the Finance and Service Fee) to GGS/Superior Group, and the Finance and Service Fee to GGS/Superior Group. Respondent retained the remainder. Finance and Service Fees can be considerable in the nonstandard automobile insurance business. Many policyholders in this market lack the financial ability to pay premiums in total when due, so they commonly pay their premiums in installments. At the time of the 1996 acquisition, for instance, about 90 percent of Respondent's policyholders paid their premiums by installments. For 1996, on gross premiums of $156.4 million, Respondent earned net income (after taxes) of $1.978 million, as compared to gross premiums of $97.6 million and net income of $5.177 million in 1995. At the end of 1996, Respondent's surplus was $57.1 million, as compared to $49.3 million at the end of the prior year. "Surplus" or "policyholder surplus" for insurance companies is like net worth for other corporations. In 1996, Respondent received $2.154 million in Finance and Service Fees, as compared to $1.987 million in the prior year. However, Respondent did not pay any Finance and Service Fees to GGS in 1996. For related-party transactions in 1996, Respondent's financial statements disclose the payment of $155,500 to GGS and Fortis for "management fees," assumed reinsurance premiums and losses, and a capital contribution of $5.558 million from GGS, of which $4.8 million was in the form of a note. These related-party disclosures for 1996 were adequate. In August 1997, Symons bought out Goldman Sachs' interest in GGS for $61 million. Following the 1996 acquisition, Goldman Sachs had invested another $3-4 million, but, with a total investment of about $25 million, Goldman Sachs enjoyed a handsome return in a little over one year. Mr. Symons attributed the relatively high price to then-current valuations, which were 100 percent of annual gross premiums. More colorfully, Mr. Symons' brother, also a principal in the Goran family of corporations, attributed the purchase price to Goldman Sachs' "greed. " At the same time that Symons bought out Goldman Sachs, Symons enabled GGS to retire the Chase acquisition debt. The elimination of Goldman Sachs and Chase may be related by more than the need for $61 million to buy out Goldman Sachs. The 1996 Annual Statement that Respondent filed with Petitioner reports "total adjusted capital" of $57.1 million and "authorized control level risk-based capital" of $20.7 million, for a ratio of less than 3:1. Section 8.10 of the Chase Credit Agreement states that GGS "will not, on any date, permit the Risk Based Capital Ratio . . . of [Respondent] to be less than 3 to 1." Section 1 of the Chase Credit Agreement defines the ”Risk-Based Capital Ratio" as the ratio of Respondent's "Total Adjusted Capital" to its "Authorized Control Level Risk-Based Capital." In August 1997, Symons raised $135 million in a public offering of securities that probably more closely resemble debt than equity. After paying $61 million to Goldman Sachs and the $45-48 million then due Chase under the Credit Agreement (due to additional advances), Symons applied the remaining loan proceeds to various affiliates, as additional capital contributions, and possibly itself, for cash-flow purposes. The $135 million debt instrument, which remains in place, requires payments over a 30- year term, provides for no repayment of principal until the end of the term, and allows for the deferral of the semi-annual dividend/interest payments for up to five years. Symons exercised its right to defer dividend/interest payments for an undetermined period of time in 2000. The payments that are the subject of this case took place from 1997 through 1999. During this period, on a gross basis, Respondent paid GGS $35.2 million in Finance and Service Fees. In fact, $1.395 million paid in 1999 were not Finance and Service Fees, but were SR-22 policy fees, which presumably are charges attributable to the preparation and issuance by GGS of certificates of financial responsibility. Because Respondent's financial statements did not separate any SR-22 fees from Finance and Service Fees for 1997 or 1998, it is impossible to identify what, if any, portion of the Finance and Service Fees in those years were actually SR-22 fees. Even though SR-22 fees represent a service charge without an interest component, they are included in Finance and Service Fees for purposes of this Recommended Order. For 1997, on gross premiums of $188.3 million, Respondent earned net income of $379,000. For 1998, on gross premiums of $179.8 million, Respondent suffered a net loss of $8.122 million. For 1999, on gross premiums of $170.5 million, Respondent suffered a net loss of $19.232 million. Respondent's surplus decreased from $65.1 million at the end of 1997, to $57.6 million at the end of 1998, to $34.2 million at the end of 1999. In its Quarterly Statement filed as of September 30, 2000, Respondent disclosed, for the first nine months of 2000, a net loss of $5.89 million and a decline in surplus to $24.0 million. By the end of 2000, Respondent's surplus decreased to $21.6 million. However, at all times, Respondent's surplus exceeded the statutory minimum. For 1999, for example, Respondent's surplus of $34.2 million doubled the statutory minimum. Respondent also satisfied the statutory premium-to-surplus ratio, although possibly not the statutory risk-based capital ratio. As of the final hearing, Petitioner had required Respondent to file a risk-based capital plan, Respondent had done so, Petitioner had required amendments to the plan, Respondent had declined to adopt the amendments, and Petitioner had not yet taken further action. From 1997-1999, Respondent's annual statements, quarterly statements, and financial statements inadequately disclosed the payments that Respondent made to GGS. The annual statements disclose "Service Fee on Ceded Business," which is a write-in item described in language chosen by Respondent. Petitioner's contention that this item appears to be a reinsurance transaction in which Respondent is ceding risk and premiums to a third-party is rebutted by the fact that the Schedule F, Part 5, on each annual statement discloses relatively minor reinsurance transactions whose ceded premiums would not approach those reported as "Service Fee on Ceded Business." Notwithstanding the unconvincing nature of Petitioner's contention as to the precise confusion caused by Respondent's reporting of the payment of Finance and Service Fees, Respondent's reporting was clearly inadequate and even misleading. The real problem in the annual statements, quarterly statements, and financial statements is their failure to disclose Respondent's payments to a related party, GGS. Respondent unconvincingly attempts to explain this omission by an imaginative recharacterization of the Finance and Service Fee transactions as pass-through transactions. These were not pass-through transactions in 1996 when Respondent retained the Finance and Service Fees. These were not pass- through transactions in 1997-1999 when Respondent properly accounted for these payments from policyholders as income and payments to GGS as expenses. The proper characterization of these transactions involving the Finance and Service Fees does not depend on the form that Respondent and GGS/Superior Group selected for them-- in which policyholders pay Respondent and Respondent pays GGS/Superior Group--although this form does not serve particularly well Respondent's present contention. Even if Respondent had changed the form so that the policyholders paid the Finance and Service Fees directly to GGS/Superior Group, the economic reality of the transactions would remain the same. Even if policyholders paid their installments to Respondent, GGS/Superior Group, or any other party, the Finance and Service Fees would initially vest in Respondent, which, under an agreement, would then owe them to GGS/Superior Group. The inadequacy of the disclosure of the Finance and Service Fees is a relatively minor issue, in itself, in this case. In its proposed recommended order, Respondent invites direction as to how Petitioner would like Respondent to report these payments in the future. The major impact of Respondent's nondisclosure of these payments is that none of the statements filed after the 1996 acquisition notified Petitioner of the existence of these payments. It is thus impossible to infer an agreement or even acquiescence on the part of Petitioner regarding Respondent's payment of Finance and Service Fees to GGS/Superior Group. The major issue in this case is whether the Consent Order authorizes Respondent to pay $35 million in Finance and Service Fees after the 1996 acquisition or, if not, whether Petitioner has approved of such payments by any other means. As already noted, the Consent Order authorizes the payment of agents' commissions and Management Fees, but not Finance and Service Fees. To the contrary, the Consent Order prohibits the payment of Finance and Service Fees for four years, at least without Petitioner's approval, because of the provision otherwise prohibiting agreements, contracts, and the transfer of assets involving Respondent and its affiliates. As noted in the Conclusions of Law, the absence of an integration clause invites consideration of oral agreements that may have preceded the execution of the Consent Order. The Consent Order is somewhat of a hybrid: Petitioner orders and Respondent consents. However, the Consent Order is sufficiently an agreement to be subject to interpretation under normal principles governing the interpretation of contracts. Respondent contends that such agreements encompassed the payment of Finance and Service Fees because Respondent disclosed such payments several times to Petitioner prior to the issuance of the Consent Order. (Any testimonial assertion of an explicit agreement by Petitioner to the payment of the Finance and Service Fees is discredited.) Respondent repeated disclosures to Petitioner of the Finance and Service Fees began with the Acquisition Statement at the start of the application process. The parties discussed these fees in March 1996. The Proformas disclose two main revenue sources from which GGS/Superior Group could service its acquisition debt: Management Fees and Finance and Service Fees. And the Proformas project almost exactly the amount that Respondent paid GGS in Finance and Service Fees from 1997-99. Although the ratio of Management Fees to Finance and Service Fees was 4:1 in the Proformas, this ratio does not minimize the role of the Finance and Service Fees. Based on gross revenues, this ratio is no indication of the relative profitability of these two sources of revenue. In fact, in 1999, the expenses covered by the Management Agreement exceeded the Management Fees by $3 million. The Finance and Service Fees are thus an important component of the revenue on which GGS intended to rely in servicing the acquisition debt. However, neither the clear disclosure of the Finance and Service Fees nor Petitioner's recognition of the importance of these fees in servicing the acquisition debt necessarily means that Petitioner agreed to their payment. By a preponderance of, although less than clear and convincing, evidence, the record precludes the possibility that Petitioner agreed in preclosing discussions or the Consent Order to preapprove the Finance and Service Fees. In this respect, Petitioner treated the Finance and Service Fees differently from the Management Fees, which Petitioner agreed to preapprove, subject to annual reevaluation for the first three years. At the level of a preponderance of the evidence, it is possible to harmonize this construction of the Consent Order with Respondent's repeated disclosures of the Finance and Service Fees. The Acquisition Statement mentions dividends as a revenue source--although a "secondary" source--and the Consent Order clearly did not impliedly preapprove the payment of dividends. Aware of the reliance of GGS upon the Finance and Service Fees to service the Chase acquisition debt, Petitioner may have chosen, for the first four years, to consider Respondent's requests for approval of the Finance and Service Fees, based on the circumstances in existence at the time of the requests. This interpretation is consistent with the testimony of Petitioner's employee that he believed that Petitioner would be able to restrict Respondent's payment of Finance and Service Fees to GGS/Superior Group because Petitioner's approval was required for the payment of dividends. The payments are pursuant to a contract or agreement for services and, as such, are not dividends, but the Consent Order requires Petitioner's approval for all contracts and agreements during the first four years. The common point is that Petitioner understood that its approval would be required for Finance and Service Fees, which had not been preapproved like Management Fees. During the application process, GGS may not have been concerned by Petitioner's failure to preapprove the Finance and Service Fees. At the time of the 1996 acquisition, as contrasted to the period after the 1997 refinancing, GGS enjoyed a relatively light debt load due to Goldman Sachs' equity investment and the "tremendous wherewithal" of its 48 percent co-owner. Another practical distinction between the Finance and Service Fees and the Management Fees militates against finding that the Consent Order impliedly approves the Finance and Service Fees and militates in favor of a finding that GGS viewed these fees as more contingent and less likely to be needed than the Management Fees. At the start of the application process, GGS submitted to Petitioner a form Management Agreement. At no time did GGS ever submit to Petitioner a form Finance and Service Agreement. The contingent nature of the Finance and Service Fees, relative to the Management Fees, is reinforced by the fact that, in 1996, Respondent retained the Finance and Service Fees. Respondent's contention that the Finance and Service Fees were a component of the agreement between it and Petitioner is not without its appeal. The contention is sufficient to preclude a finding by clear and convincing evidence that the agreement between the parties did not include a preapproval of Finance and Service Fees. Unlike the Management Fees, the maximum amount of the Finance and Service Fees is set by statute. Two consequences follow. First, Petitioner might not have found it necessary to incorporate these fees in a written agreement, as long as the maximum amount were acceptable to Petitioner, because the law establishes a ceiling on the fees and identifies the services for which they are compensation. Second, Petitioner might not have found it necessary provide for annual reevaluation of the fees, again due to the applicable statutory maximum. In one respect, the relatively contingent quality of the Finance and Service Fees inures to Respondent's benefit, at least in theory. If no policyholder paid by installments, there would be no Finance and Service Fees; however, as a practical matter, the Finance and Service Fees are almost as pervasive as the Management Fees. More importantly, though, the Finance and Service Fees, especially when imposed as a percentage of the unpaid balance, contain a significant interest component. Paying these fees to GGS/Superior Group, Respondent denies itself the investment income attributable to this forbearance. Alternatively, to the extent that the Finance and Service Fees defray services, as they do to some unknown extent, the greater weight of the evidence, although not clear and convincing evidence, establishes that these services are among the services that GGS/Superior Group undertook in the Management Agreement. These factors militate strongly against treating the Finance and Service Fees as an implied exception to the provision of the Consent Order requiring approval of all contracts or agreements with affiliates during the first four years. For these reasons, Petitioner has proved by a preponderance of the evidence, although not clear and convincing evidence, that GGS/Superior Group and Respondent needed Petitioner's approval for all payments of Finance and Service Fees prior to April 30, 2000. To the extent that, as discussed in the Conclusions of Law, Petitioner withholds such approval, the next issue is to determine the amount of Finance and Service Fees that GGS/Superior Group must return to Respondent. The determination of the amount of the repayment is substantially affected by two facts. First, Petitioner's approval is not required for any Finance and Service Fees that Respondent paid GGS/Superior Group after April 30, 2000. The Consent Order did not require Petitioner's approval for such payments, which were not dividends, for which approval would always be required, if inadequate surplus existed. Second, GGS/Superior Group is entitled to a dollar-for-dollar credit, against any liability for improperly received Finance and Service Fees, for about $20 million that it directly or indirectly transferred to Respondent since the 1996 acquisition. Half of the $20 million credit arises from Management Fees that GGS did not collect from Respondent in 1996 and 1998. As Petitioner notes, there is little, if any, documentation concerning these uncollected fees. Mr. Symons persuasively testified that the proper characterization of these amounts is dependent upon the outcome of Petitioner's effort to disallow the Finance and Service Fees already paid by Respondent. Petitioner must credit to GGS/Superior Group these $10 million in fees as an offset to the $35.2 million (or such lesser amount remaining after any retroactive approvals from Petitioner) that Respondent improperly paid GGS/Superior Group in Finance and Service Fees. Also, in 1997, GGS contributed about $10 million to Respondent's capital. As was the case with the uncollected Management Fees in 1996 and 1998, the record contains little, if any, documentation concerning the transfer, including any conditions that may have attached to it. Petitioner should credit GGS/Superior Group with this sum as an offset against the $35.2 million (or such lesser amount remaining after any retroactive approvals from Petitioner) that Respondent improperly paid GGS/Superior Group in Finance and Service Fees. As for the remaining $15 million in Finance and Service Fees that Respondent improperly paid to GGS through 1999 and any additional amounts through April 30, 2000, the impropriety arises because Respondent failed first to obtain Petitioner's approval--not because any transaction was otherwise necessarily improper. Concerning the remaining $15 million, then, Petitioner should give Respondent and GGS/Superior Group an opportunity to request retroactive approval for the payment of all or part of this sum, without regard to the lateness of the request. Applying any and all factors that Petitioner would ordinarily apply in considering such requests, Petitioner can then reach an informed determination as to the propriety of this $15 million in Finance and Service Fees. If Petitioner determines that Respondent must obtain from GGS/Superior Group repayment of any Finance and Service Fees, then Petitioner may consider the issue of the timing of the repayment. As Petitioner mentions in its proposed recommended order, an evidentiary hearing might be useful for this purpose. Obvious sources would be setoffs against Management Fees and Finance and Service Fees that Respondent is presently paying Superior Group.
Recommendation It is RECOMMENDED that the Department of Insurance enter a final cease and desist order: Determining that, without the prior written consent of the Department, Superior Insurance Company paid Finance and Service Fees to GGS/Superior Group in the net amount of approximately $15 million, plus all such amounts paid after the period covered by this case through April 30, 2000. Requiring that Superior Insurance Company immediately file all necessary documentation with the Department to seek the retroactive approval of all or part of the sum set forth in the preceding paragraph. If any sum remains improperly paid after implementing the procedure set forth in the preceding paragraph, establishing a reasonable repayment schedule for Respondent to impose upon Superior Group--if necessary, in the form of setoffs of Management Fees and Finance and Service Fees due at the time of, and after, the Final Order. Determining that Superior Insurance Company inadequately disclosed related-party transactions and ordering that Superior Insurance Company comply with specific guidelines for the reporting of these transactions in the future. DONE AND ENTERED this 1st day of June, 2001, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 2001. COPIES FURNISHED: Honorable Tom Gallagher State Treasurer/Insurance Commissioner Department of Insurance The Capitol, Plaza Level 02 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Insurance The Capitol, Lower Level 26 Tallahassee, Florida 32399-0307 S. Marc Herskovitz Luke S. Brown Division of Legal Services Department of Insurance 200 East Gaines Street, Sixth Floor Tallahassee, Florida 32399-0333 Clyde W. Galloway, Jr. Austin B. Neal Foley & Lardner 106 East College Avenue, Suite 900 Tallahassee, Florida 32301
The Issue The issue for determination is whether Petitioner should be assessed sales and use tax by Respondent, and if so, how much and what penalty, if any, should be assessed.
Findings Of Fact Aircraft Trading Center, Inc. (Petitioner), is a corporation organized and existing under the laws of the State of Florida, having its principal office at 17885 S.E. Federal Highway, Tequesta, Florida. Petitioner is engaged in the business of purchasing aircraft for resale. During all times material hereto, Petitioner was registered as an aircraft dealer with the United States Department of Transportation, Federal Aviation Administration (FAA) and registered as a retail dealer with the State of Florida, Department of Revenue (Respondent). The selling price of Petitioner's aircraft range from one million to twenty-five million dollars and helicopters from two hundred thousand to three million dollars. Normally, Petitioner purchases an aircraft, without having a confirmed buyer. Petitioner purchases an aircraft based upon in-house research which shows a likelihood that the aircraft can be resold at a profit. Petitioner's aircraft is demonstrated to potential buyers/customers. The customers require a demonstration to determine if the aircraft meets the particular needs of the customer. The demonstration could take one day or as long as two weeks. During the demonstration, the customer pays the expenses associated with flying the aircraft. Petitioner uses two methods to determine the costs of demonstration. In one method, the cost is determined from a reference source utilized in the industry to show the cost of operating a particular type of aircraft. In the other method, the customer pays Petitioner's actual out-of- pocket cost. No matter which method is used, the charges to the customers are listed as income on Petitioner's bookkeeping books and records, per the advice of Petitioner's certified public accounting (CPA) firm. Petitioner remains the owner of the aircraft during the demonstration and until the sale. Also, during demonstration, Petitioner maintains insurance coverage on the aircraft and is the loss payee. In an attempt to make sure "legitimate" customers are engaged in the demonstrations, Petitioner screens potential buyers to make sure that they have the resources to purchase one of Petitioner's aircraft. For sales to buyers/customers residing out-of-state, Petitioner utilizes a specific, but standard procedure. Such customers are provided a copy of the Florida Statute dealing with exempting the sale from Florida's sales tax if the aircraft is removed from the State of Florida within ten (10) days from the date of purchase. Florida sales tax is not collected from the buyer if the buyer executes an affidavit which states that the buyer has read the Florida Statute and that the buyer will remove the plane from Florida within ten (10) days after the sale or the completion of repairs and if the bill of sale shows an out-of-state address for the buyer. When an aircraft is sold, Petitioner's standard procedure is to prepare a purchase agreement and after receiving payment, Petitioner prepares a bill of sale. Petitioner sends the bill of sale to a title company in Oklahoma which handles all of Petitioner's title transfers. The title company records the bill of sale, registers the change of title with the FAA and sends Petitioner a copy of the title. For all sale transactions, Petitioner maintains a file which includes the affidavit, the bill of sale, and a copy of the title. Respondent conducted an audit of Petitioner for the period 2/1/87- 1/31/92 to determine if sales and use tax should be assessed against Petitioner. All records were provided by Petitioner. The audit resulted in an assessment of sales and use tax, penalty, and interest against Petitioner. Respondent assessed tax on the sale of a helicopter and on certain charges made by Petitioner to its customers as a result of demonstrations. Regarding the helicopter, Respondent assessed tax in the amount of $18,000.00 for the helicopter transaction. By invoice dated 7/10/89, Petitioner sold the helicopter to Outerscope, Inc., for $300,000.00. Outerscope was an out-of-state company. Petitioner used its standard procedure for the sale of aircraft and sales to nonresidents. Petitioner did not obtain proof that the helicopter was removed from the State of Florida, and Petitioner has no knowledge as to whether it was removed. As to the charges by Petitioner for demonstrations, Respondent assessed tax in the amount of $72,488.55. Respondent determined the tax by taking an amount equal to 1 percent of the listed value of the aircraft demonstrated and multiplying that number by 6 percent, the use tax rate. Respondent relied upon the records and representations provided by Petitioner's bookkeeper as to determining which aircraft were demonstrated, the value of the aircraft and the months in which the aircraft were demonstrated. Several transactions originally designated as demonstrations have been now determined by Petitioner's bookkeeper not to be demonstrations: The February 4, 1987 transaction with Ray Floyd. The July 10, 1988 transaction involving Trans Aircraft. The May 2 and 12, 1989 items for Stalupi/Bandit. The July 12, 1989 item involving Bond Corp. The July 18, 1989 item involving Seardel. The November 28, 1990 item involving J. P. Foods Service. Petitioner's CPA firm advises it regarding Florida's sales and use tax laws. At no time did the CPA firm advise Petitioner that its (Petitioner's) demonstrations were subject to sales and use tax and that it (Petitioner) was required to obtain proof that an aircraft had been removed from the State of Florida.
Recommendation Based upon the foregoing, Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order assessing sales and use tax for the period 2/1/87 - 1/31/92 against Aircraft Trading Center, Inc., consistent herewith. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 10th day of July 1995. ERROL H. POWELL 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 10th day of July 1995. APPENDIX The following rulings are made on the parties' proposed findings of fact: Petitioner Partially accepted in findings of fact 1 and 2. Partially accepted in findings of fact 2 and 3. Partially accepted in finding of fact 3. Partially accepted in finding of fact 4. Partially accepted in finding of fact 5. Rejected as subordinate. Partially accepted in finding of fact 14. Partially accepted in finding of fact 15. Partially accepted in findings of fact 5 and 14. Rejected as subordinate. Partially accepted in findings of fact 8 and 9. 12 and 13. Partially accepted in finding of fact 13. 14. Partially accepted in findings of fact 5 and 16. Respondent Partially accepted in findings of fact 11 and 12. Partially accepted in finding of fact 12. Partially accepted in finding of fact 13. Partially accepted in finding of fact 13. Also, see Conclusion of Law 20. Partially accepted in finding of fact 4. Partially accepted in finding of fact 5. 7 and 8. Partially accepted in finding of fact 6. 9. Partially accepted in finding of fact 7. 10 and 11. Partially accepted in finding of fact 14. 12. Partially accepted in finding of fact 5. 13-15. Partially accepted in finding of fact 9. NOTE: Where a proposed finding has been partially accepted, the remainder has been rejected as being irrelevant, unnecessary, subordinate, not supported by the more credible evidence, argument, or conclusion of law. COPIES FURNISHED: Robert O. Rogers, Esquire Rogers, Bowers, Dempsey & Paladeno 505 South Flagler Drive, Suite 1330 West Palm Beach, Florida 33401 Lealand L. McCharen Assistant Attorney General Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera General Counsel Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Recommendation Based upon the finding of facts and conclusions of law recited above, it is recommended that the agency's action in denying the Petitioner's application for registration as an electronic service dealer be sustained. DONE and ENTERED this 18th day of February, 1977, in Tallahassee, Florida. JAMES E. BRADWELL, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Lawrence D. Winson, Esquire Department of Business Regulation Division of Beverage The Johns Building Tallahassee, Florida 32304 William C. Kimberl, Director Division of General Regulation Department of Business Regulation The Johns Building Tallahassee, Florida 32304 Mr. Arthur Resnick Pompano Beach Club Towers 111 Briny Avenue, Apt. 1105 Pompano Beach, Florida 33062
