The Issue The basic issue in this case is whether the Petitioner's application for registration as an associated person in the state of Florida with Value Equities Corporation should be granted or denied. The Department proposes to deny the application on the basis of Section 517.161(1)(h) and (k), Florida Statutes, contending that the Petitioner has demonstrated his unworthiness to transact the business of an associated person and is of bad business repute. The Petitioner has little, if any dispute with the facts relied upon by the Department, but offered evidence in mitigation and asserts that, on the facts in this case, he is entitled to registration. Subsequent to the hearing in this case, a transcript was filed on March 4, 1987, and, pursuant to ruling at the close of the hearing, the parties were allowed until March 16, 1987, within which to file their proposed recommended orders. Both parties filed timely post-hearing documents, containing proposed findings of fact. A specific ruling on all proposed findings of fact is contained in the Appendix attached to and incorporated into this recommended order.
Findings Of Fact Based on the stipulations of the parties, on the testimony of the witnesses at the hearing, and on the exhibits received in evidence, I make the following findings of fact. Petitioner, Kenneth Joseph Whitehead, ("Whitehead") filed a Form U-4 application to be registered as an associated person in the state of Florida with Value Equities Corporation, located at 216 South Fairway Drive, Belleview, Illinois. Said application was received at the Department of Banking and Finance ("Department") in due course on June 21, 1986. By letter dated September 3, 1986, the Department advised the Petitioner that it intended to deny his application for registration for the reasons set forth at length in the letter. Thereafter, the Petitioner filed a timely request for hearing. The National Association of Securities Dealers ("NASD") District Business Conduct Committee, District #4, on July 11, 1978, accepted a "Letter of Admission, Waiver and Consent" against Weinrich, Zitzman & Whitehead, Inc., Kenneth J. Whitehead and others. In said agreement, Whitehead personally consented to a censure, a fine in the amount of $2000, and a ten day suspension from NASD membership. The sanctions imposed by the NASD resulted from violations of Regulation T imposed against Whitehead individually. The State of Missouri issued an order entitled "ORDER TO CEASE AND DESIST" in the matter of: Weinrich, Zitzman and Whitehead, Inc., Kenneth Whitehead, et al., on February 24, 1982, and found Whitehead to have personally made sales of unregistered securities, to have effected Unauthorized transactions, to have distributed promotional materials while not providing a prospectus and to have omitted to purchasers the fact that said securities were unregistered. Further, all respondents in that proceeding, including Whitehead, were found by the State of Missouri to have omitted the fact that unsuccessful attempts were made to register certain stocks, the fact that certain stocks could not justify their offering price, and the fact that the promoter's equity position could not be justified with respect to certain stock. All of the aforementioned were found to have constituted violations of Missouri law. As a result, Whitehead and others were ordered to cease and desist from violating Missouri law. Petitioner was afforded his due process rights to contest said order which was subsequently upheld. On May 31, 1983, the NASD District Business Conduct Committee #4 ("Committee"), entered a "Decision in Complaint No. KC-261" as to Whitehead and others. The Committee found that Whitehead failed to maintain minimum margin equity on certain accounts and failed to deliver securities as required by Article III, Sections 1 and 30, of the NASD Rules of Fair Practice. As a result of said violations, Whitehead was censured, fined $2500 and suspended by the NASD for three days. On September 19, 1985, the Committee issued a second complaint (KC-339) against Whitehead and others alleging violations of Article III of the NASD Rules of Fair Practice by failing to maintain required net capital, proper books, and records. As a result of an offer of settlement, Whitehead was censured and fined $1500. On December 20, 1985, the Committee issued a third Complaint (KC-343) against Whitehead and others for failure to maintain required net capital in violation of SEC Rule 15C3-1 and Article III, Section 1, of the NASD Rules of Fair Practice. The complaint remains pending. In 1982, eleven suits were filed by individual plaintiffs against WZW Financial Services, Inc., Whitehead, and others in the Circuit Court of the City of St. Louis to effect rescission of the sale of unregistered securities in the state of Missouri. The suits were settled for an aggregate of $240,000. The Petitioner was not directly involved in the sales that led to these suits, but he was vicariously liable as an officer of the corporation. In 1984, a suit was filed in the U.S. District Court for the Southern District of Illinois by certain individual plaintiffs against WZW, Inc., Kenneth Whitehead, and others in the sale of limited partnership interests wherein the allegations included violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C 78j(b), Rule 10b-5, involving securities fraud; violations of Section 1964c of the Racketeer Influence and Corrupt Organizations Act ("RICO") of 18 U.S.C. 1962C, 1964c, involving racketeering activity; and violations of 18 U.S.C. 1341, involving mail fraud. The case is currently pending. On January 30, 1986, O. R. Securities, Inc., filed a Form U-5 termination notice in which Whitehead was terminated for violating the firm's policy concerning margin accounts. The termination was investigated by the NASD. Following the investigation, the NASD determined that no further action was warranted.
Recommendation Based on all of the foregoing, it is recommended that the Department of Banking and Finance issue a final order in this case which denies the Petitioner's application for registration as an associated person with Value Equities Corporation. DONE AND ENTERED this 19th day of March 1987, at Tallahassee, Florida. M. M. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of March, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4055 The following are my specific rulings on each of the proposed findings of fact submitted by both parties. Findings submitted by Petitioner First unnumbered paragraph: Accepted in substance with unnecessary details omitted. Second unnumbered paragraph: First sentence accepted in substance. Second sentence covered in introductory portion of this recommended order. Paragraph 1: All but last sentence is accepted in substance. Last sentence is rejected as irrelevant because there is no persuasive competent substantial evidence that customers were not hurt or jeopardized. Paragraph 2: First sentence accepted. Second sentence rejected as incomplete. Third sentence rejected as irrelevant in light of other evidence. Fourth and fifth sentences rejected as contrary to the greater weight of the evidence. Sixth sentence accepted. Seventh sentence rejected as contrary to the greater weight of the evidence and as not supported by persuasive competent substantial evidence. Paragraph 3: Accepted in substance. Unnumbered paragraph following paragraph 3: First sentence is rejected as irrelevant in light of other evidence. Second and third sentences are rejected as in part contrary to the greater weight of the evidence and in part not supported by persuasive competent substantial evidence. Paragraph 4: Accepted in substance. Paragraph 5: Accepted in substance. Paragraph 6: The first four sentences are rejected as constituting irrelevant and unnecessary details. The fifth sixth, and seventh sentences are rejected as contrary to the greater weight of the evidence and as not supported by credible competent substantial evidence. Paragraph 7: Accepted in substance with unnecessary details omitted. Findings submitted by Respondent Paragraph 1: Accepted. Paragraph 2: Accepted in substance. Paragraph 3: Accepted. Paragraph 4: Accepted. Paragraph 5: Accepted. Paragraph 6: Accepted. Paragraph 7: Accepted. Paragraph 8: Accepted. Paragraph 9: Accepted. Paragraph 10: Accepted with additional facts for clarity and accuracy. Paragraph 11: Rejected as constituting proposed conclusions of law or legal argument regarding what was not proved, and not constituting findings of fact based on evidence. COPIES FURNISHED: James S. McClellan, Esquire 314 North Broadway, Suite 1930 St. Louis, Missouri 63102 Charles E Scarlett, Esquire Assistant General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Between July 25, 1977, and August 10, 1978, petitioner, Douglas A. Charity, was employed with the Division of Security, Department of General Services, first as a Capitol Security Officer I and then as a Surveillance Systems Operator. Thereafter, petitioner was employed for approximately ten months as a legislative intern budget analyst with the Senate Ways and Means Committee. From there, he was employed between June and November of 1979 as a research analyst with the Citizens Council for Budget Research. One of his prime projects in this position was a review and analysis of the Division of Motor Pools in the Department of General Services (DGA). From December of 1979 through August 27, 1980, petitioner was unemployed. He desired to find a position in an administrative, analytical or consulting capacity but was unsuccessful in finding employment. On August 27, 1980, petitioner was offered employment with the Division of Security within DGS. Based upon prior conversations, it was orally agreed between petitioner and administrators within the Division of Security that petitioner would be assigned to and be paid at the salary level for the position classified as a Capitol Security Officer I. The salary for this position was approximately $8,000.00 per year. It was further agreed that petitioner would not wear a uniform nor would he perform the duties normally required of a Capitol Security Officer. Instead, it was agreed that petitioner would perform duties normally required of a Capitol Security Officer. Instead, it was agreed that petitioner would perform duties of an "administrative" nature and assist with the preparation and writing of a four-year plan containing an analysis of the Division of Security. Because the preparation of the four-year plan was not expected to take long and because the salary for a Capitol Security Officer was not as high as petitioner desired, it was anticipated by those within the Division of Security that petitioner would continue to seek other employment. Petitioner did, in fact, continue to seek other employment. One of his reasons for accepting employment with the Division of Security was to enhance his possibilities for employment in an administrative, analytical or consulting capacity through his record at DGS which would show his work on the four-year plan. Some two and a half months prior to petitioner's employment with the Division of Security on August 27, 1980, an outline for the four-year plan had already been prepared and approved. The purpose of the plan was to review the function and performance of the Division of Security and to set a plan for structural and program development and change. A portion of the plan pertained to position descriptions and classifications and the Division of Security's need for additional positions classified as management analyst and administrative assistant. The plan ultimately concluded that such positions were not needed within the Division of Security. The four-year plan was completed in February of 1981. In addition to his work on the four-year plan, both before and after February of 1981, petitioner performed duties in the following areas: reports on security personnel, procedures and problems; administrative correspondence and paperwork; budget issues; legislative bill analysis; and the attendance of meetings with DGS officials and legislative staff persons. His duties varied from day to day, dependent upon instructions he received from the Division Director or Assistant Director. Construing the facts presented at the hearing with respect to the duties actually performed by petitioner from August 27, 1980 through January 10, 1982, in a manner most favorable to petitioner, his actual duties compared with the job description for the classification of Administrative Assistant I. During the entire period in question, petitioner was classified as and received the salary of a Capitol Security Officer I. He never wore a uniform and he never performed the duties of a Capitol Security Officer I which duties included patrolling and maintaining the security of the Capitol Building and Legislative facilities on an assigned shift, locking doors, raising and lowering flags, maintaining logs and related security duties. Petitioner's immediate superiors within the Division of Security, as well as the Executive Director and those within the personnel office of DGS, were aware that petitioner was performing out-of-class duties for the Division of Security. Various efforts were made by DGS officials to help petitioner find employment in a higher position. The possibility of creating a management analyst position in another Division was considered, but that position was never established. Petitioner did not qualify for such a position until approximately October of 1981. The Chief of the Bureau of Personnel Management Services performed an audit of the Division of Security to ascertain if additional administrative positions were needed. While the first draft of the audit report recommended a reorganization of the Division to include an Administrative Assistant I position, it was ultimately concluded that the Division needed only two administrative positions -- the Director and the Assistant Director. Petitioner was informed of a position as an Assistant Facilities Services Coordinator in the Bureau of Property Management, but chose not to apply for that position. Though efforts were made by officials within DGS to either create a higher position for petitioner or place him in a vacant higher position, petitioner was never promised a specific position. Instead, he was informed of possibilities for placement in the future. He was also told that should such positions become established or available, he would have to qualify for the position and compete with other applicants. Petitioner discussed his increasing frustrations with his employment situation with officials within DGS. He also sought advice from a Personnel Program Analyst with the Department of Administration (DOA). She advised him that he could request an audit of his position through his supervisor, his own personnel officer or the DOA Bureau of Program Assistance, whose function is to perform desk audits to ascertain whether the duties performed by an employee are the same as the position description for that employee. She also informed petitioner that he could resolve his difficulties through the career service system or the grievance procedure set forth in the collective bargaining agreement. She indicated to him that he may wish to wait and see if the management analyst position (which had been discussed) would become available, in which case the problem might resolve itself if he were able to fill that position. The Department of Administration was never furnished with a current position description accurately reflecting the duties of petitioner's position. No one ever requested the DOA's Bureau of Program Assistance to perform a desk audit appraisal of petitioner's duties and classification, and petitioner's position was not among those randomly selected for desk audit review. By late November and throughout December of 1981, officials within DGS were becoming increasingly concerned with the fact that petitioner was performing out-of-class duties. Though efforts were maintained to find a position for petitioner which would more accurately reflect his actual job duties, such efforts were not successful. In mid-December 1981, petitioner filed a grievance pursuant to the collective bargaining agreement. After the final draft of the audit of the Division of Security indicated that no additional administrative positions were needed in that Division, petitioner was informed that he would be required to cease out-of-class work and that he must commence to perform the official duties of a Capitol Security Officer I effective January 11, 1982. Petitioner did assume the duties of a Capitol Security Officer on January 11, 1982, and has since functioned in that capacity.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED: That the relief sought by petitioner from the Department of General Services and the Department of Administration be DENIED, and that the petitions filed in Case Nos. 82-2733 and 82-3381 be DISMISSED. Respectfully submitted and entered this 14th day of October, 1983, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of October 1983. COPIES FURNISHED: Robert B. Beitler, Esquire Post Office Box 12921 Tallahassee, Florida 32317 Sylvan Strickland, Esquire Room 452, Larson Building Tallahassee, Florida 32301 Daniel C. Brown, Esquire General Counsel 435 Carlton Building Tallahassee, Florida 32301 Thomas M. Beason, Esquire Suite 858, Barnett Bank Building Tallahassee, Florida 32301 Secretary Nevin Smith Department of Administration 435 Carlton Building Tallahassee, Florida 32301 Thomas Brown, Executive Director Department of General Services 133 Larson Building Tallahassee, Florida 32301
The Issue The issues presented are whether Respondent reviewed the appraisal report of an assistant appraiser in a manner that departed from the standards of care in Subsections 475.624(14), and (15), Florida Statutes (2001); and, if so, what penalty should be imposed against Respondent's professional license.
Findings Of Fact Petitioner is the state agency authorized to regulate certified general real estate appraisers (appraisers) and assistant appraisers pursuant to Chapter 475, Part II, Florida Statutes (2001). Respondent and Ms. Deborah Hall are certified appraisers pursuant to certificate numbers RZ-1589 and RD-4615. On April 5, 2002, Respondent operated an appraisal business located at 1727 Coachman Plaza Drive, Clearwater, Florida. Respondent supervised approximately 14 assistant appraisers, including Ms. Hall.1 Ms. Hall was certified as an assistant appraiser pursuant to certification number RI-5557.2 Ms. Hall developed a written appraisal report for residential real estate located at 7415 Flounder Drive, Hudson, Florida. Respondent reviewed the appraisal report and cosigned it with Ms. Hall before she communicated it to the client. The appraisal report complied with all applicable standards of practice except one. The appraisal report included incorrect values for three comparable properties. The correct closing prices of the three comparables were $73,000, $74,000, and $82,000. The appraisal report included erroneous closing prices of $110,000, $116,000, and $110,000; and inadvertently inflated the appraised value. Omission of the comparable values from the appraisal report was a substantial error. The error significantly affected the appraisal according to statutorily adopted Uniform Standards of Professional Appraisal Practice, Appraisal Standards Board, The Appraisal Foundation, 2002 ed. (USPAP), Standards Rule 1-1(b), at page 15. (The terms USPAP and "appraisal standards" are used synonymously and the abbreviation "SR" refers to a specific Standards Rule, such as SR 1-1(b)).3 The "workfile" developed by Ms. Hall contained the correct closing price for each comparable. The term "workfile" is defined in USPAP, Definitions, at page 5. A workfile consists of the "documentation necessary to support an appraiser's analysis, opinions, and conclusions."4 The omission of the correct comparable values from the appraisal report could not be discovered without reviewing the "workfile" developed by Ms. Hall. It is undisputed that Respondent did not include the workfile in his review of the appraisal report; and that the workfile was located in the appraisal office and was readily accessible. Petitioner alleges the omission of the workfile from Respondent's review of the appraisal report violated statutorily adopted appraisal standards as well as the statutory requirement to exercise reasonable diligence in Subsections 475.624(14) and (15), Florida Statutes (2001) (the relevant statutes). The parties agree no express requirement existed for Respondent to review the workfile. SR 2-3 discusses the standard of care applicable to the supervision of assistant appraisers. In relevant part, the standard states: When a signing appraiser(s) has relied on work done by others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. The signing appraiser(s) is required to have a reasonable basis for believing that those individuals performing the work are competent and that their work is credible. SR 2-3, USPAP at 30-31. Respondent did not rely on work done by an assistant appraiser who did not sign the appraisal report. Ms. Hall signed the appraisal report as the "Appraiser." Respondent signed the appraisal report as the "Supervisory Appraiser." On April 5, 2002, Respondent had a reasonable basis, within the meaning of SR 2-3, to believe that Ms. Hall was competent and that her work was credible. Ms. Hall had sufficient experience and demonstrated proficiency to develop and communicate the appraisal report without the need for Respondent to review her workfile. Ms. Hall began appraising real estate in 1979 and had been a certified appraiser in several states. On April 5, 2002, she was certified in Florida and New York, had worked for Respondent for approximately three years, and had completed over 100 appraisals for Respondent. Ms. Hall was a Senior Resident Appraiser in the Society of Real Estate Appraisers. Other than enforcement action ancillary to this proceeding, Ms. Hall has no disciplinary history against her professional license. Respondent had sufficient experience and demonstrated proficiency to continually evaluate the competence of Ms. Hall. Respondent was first licensed as an appraiser in Kentucky in 1965 and became a licensed appraiser in Indiana in 1967 where he also taught appraisal courses. Respondent moved to Florida in 1977 and continued his career as an appraiser and appraiser instructor. In accordance with statutory requirements enacted in 1990, Respondent became certified in Florida as a General Real Estate Appraiser and is authorized to appraise commercial, industrial, and residential real estate. Respondent has developed and reviewed thousands of real estate appraisals in Florida and has no disciplinary history against his professional license. A footnote to SR 2-3 references Advisory Opinion AO-5 on page 132 of USPAP. Advisory Opinion AO-5 does not establish new appraisal standards or interpret existing standards. Rather, the Opinion illustrates the applicability of appraisal standards in specific situations and offers advice for the resolution of appraisal issues and problems. In the terms of Advisory Opinion A-05, Respondent was a principal on April 5, 2002, and Ms. Hall was an assistant. The extent of assistance that can be provided in the appraisal process is directly related to the competence of the assistant. As experience and demonstrated proficiency increase, it is appropriate for the principal to place greater reliance on the work performed by the assistant. It is appropriate for a principal to allow an experienced assistant with demonstrated proficiency to develop and communicate an appraisal. Such an assistant is competent to inspect the property, take pictures, draft the final appraisal report, and cosign the appraisal report with the principal. Advisory Opinion AO-5, at page 134, lines 112-114, lists only two minimum standards for the supervision of an experienced assistant. The principal should inspect both the exterior of the property and the photographs. Respondent's review of the appraisal report exceeded the express minimum standards for supervision of an assistant. Respondent personally inspected the property and the photographs and examined the appraisal report to verify that the distances of the comparables from the property were appropriate. Respondent ensured that adjustments in the report between comparables and the property were accurate and not excessive and also validated the calculation of adjustments in the appraisal report. Respondent reviewed maps of the area and verified dates and legal descriptions in the appraisal report. The omission of the workfile from Respondent's review of the appraisal report did not violate the standard of practice in the community in which Respondent and Ms. Hall practice. Two certified real estate appraisers with significant experience testified as peers in the community. Their testimony confirms the practice followed by Respondent and Ms. Hall.5 The community standard does not require a principal to review the workfile of an experienced appraiser unless the appraisal report is complex. The appraisal report that Respondent reviewed was not complex. Ms. Hall appraised a manufactured home in an area zoned for condominiums with no existing condominiums. A variation between actual and zoned use does not make an appraisal complex. As one peer explained in her testimony, "That wouldn't have made it complex to me. Zoning is a simple thing to me." The community standard of peers is an acceptable measure of competence in the appraisal standards adopted by statute. SR 1-2(f), USPAP at page 17, states that the scope of work necessary to complete an assignment is acceptable when it is consistent with the actions that peers would take in performing the same assignment or a similar assignment. A requirement for a principal to review the workfile of an experienced appraiser would be problematic in the community. Many experienced appraisers work from home and do not provide their principal with the workfile until after the appraisal report is communicated to the client. Even when a workfile is readily accessible, most principals do not have time to personally review the workfile. A principal must rely on administrative staff to perform that task. Only larger appraisal companies with extra staff have the luxury of reviewing workfiles. One peer who testified at the hearing had previously operated an appraisal company with sufficient staff to review workfiles. The staff routinely reviewed only the workfiles of assistants in training. Staff did not review the workfiles of experienced assistants.6 Respondent's signature on the appraisal report appears under a "Supervisory Appraiser's Certification." In relevant part, Respondent certified that he agreed to be bound by Appraiser Certification numbers 4-7 in the appraisal report. Appraiser Certification numbers 4-6 are neither relevant nor material to the matter at issue. The certifications address racial and other types of bias, an interest in the property, and a predetermined appraised value. Appraiser Certification number 7 certifies that Ms. Hall performed the appraisal in compliance with applicable appraisal standards. Similarly, the Supervisory Appraiser's Certification states that Respondent takes "full responsibility for the appraisal and the appraisal report." Petitioner interprets the quoted terms and similar terms elsewhere in the appraisal standards to mean that Respondent certifies to Petitioner that Ms. Hall performed the appraisal correctly and that Respondent is responsible to Petitioner for her errors. Petitioner interprets the certification of the "appraisal" to include the workfile. The agency's interpretation of statutory terms conflicts with the weight of the evidence. The term "responsibility" is reasonably construed as acknowledging responsibility to the client, rather than Petitioner, for the acts or omissions of an assistant. If Respondent were to evade his responsibility to the client, Respondent arguably may be responsible to Petitioner for the evasion. However, there is no evidence that Respondent attempted to evade his responsibility to the client. The precipitating complaint for this proceeding did not originate from the client, and there is no evidence of harm to the client. Ms. Hall does not know how the correct sales price information was omitted from the appraisal report. There is no evidence of intent or culpable knowledge by Ms. Hall. The closing price of a comparable is not the type of information that an appraiser would knowingly alter in an appraisal report. The correct closing prices at issue were matters of public record at the time and were so basic and fundamental that their omission from the appraisal report is patently inadvertent in the absence of contrary evidence. Ms. Hall followed the normal appraisal procedure she has used consistently over time. She utilized what is identified in the record as a clone appraisal. Ms. Hall modified an appraisal she had previously completed with data pertinent to the property being appraised. Either the computer program did not accept the correct closing prices for the comparables or Ms. Hall inadvertently failed to "input" them. Respondent did not have constructive knowledge of facts unknown to Ms. Hall at the time she drafted the appraisal report. SR 1-1(c), USPAP at page 15, does not define competency as perfection. Perfection is impossible to attain. Rather, competency requires only that Respondent use due diligence and due care in reviewing the appraisal report.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Respondent not guilty of the violations charged in the Administrative Complaint and imposing no penalty against Respondent's professional license. DONE AND ENTERED this 3rd day of February, 2006, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 3rd day of February, 2006.
The Issue Whether Respondents' real estate licenses should be disciplined for the reasons set forth in the Administrative complaint, as more fully detailed infra.
Findings Of Fact Petitioner is the state government licensing and regulatory agency charged with the responsibility and duty to prosecute administrative complaints pursuant to the laws of the State of Florida, in particular Section 20.30 F.S., Chapters 120, 455, and 475 F.S. and the rules promulgated pursuant thereto. Respondent E. Darrell Traylor is now and was at all time material hereto a licensed real estate broker in the State of Florida having been issued license number 0192773 in accordance with Chapter 475 F.S. The last license issued Respondent E. Darrell Traylor was as a broker, t/a Salt Springs Realty, 1200 Deltona Boulevard 20, Deltona, Florida, 32752. Respondent Centrastate Development Corporation is now and was at all times between July 31, 1987 through March 31, 1988 a corporation registered as a real estate broker in the State of Florida having been issued license number 0251203. The last license issued Respondent Centrastate Development Corporation was at the business address of 1200 Deltona Boulevard 20, Deltona, Florida, 32752, the same address as Salt Springs Realty. At all times material hereto, that is, July 31, 1987 through March 31, 1988, Respondent E. Darrell Traylor was also the licensed and qualifying broker for Respondent, Centrastate Development Corporation. On or about August 4, 1988, Petitioner's investigators Robert N. Miller and Crawford Richardson visited the office of Respondent Traylor at 1200 Deltona Boulevard 20, Deltona, Florida 32752. Both Centrastate Development Corporation and Centrastate of Florida, Inc. occupy these offices. When Messrs. Miller and Richardson spoke with Respondent Traylor and his attorney, they were told that an audit was not possible due to confusion arising from employment of a new bookkeeper; that there were two companies: one was a real estate company and one was a construction and development company; and that Mr. Traylor did not view selling homes he built as dealing as a real estate broker but as a builder. The investigators requested that Traylor furnish them with a copy of the escrow account books as soon as possible. Mr. Miller testified he felt sure Traylor and his attorney understood that the investigators wanted the "information pertaining to the real estate brokerage, Centrastate of Florida, Inc." There is nothing in this record clearly to demonstrate the non-party Centrastate of Florida Inc., as opposed to Respondent Centrastate Development Corporation, Inc. is licensed as a real estate brokerage with Respondent Traylor as its qualifying agent. They are separate corporate entities. Respondent Centrastate Development Corporation, the real estate brokerage, was registered and recognized as a corporation by the Florida Secretary of State as of December 9, 1985 as corporation H88712. (R-2). Centrastate of Florida, Inc. which is not a party hereto, was registered and recognized by the Florida Secretary of State as of July 2, 1986 as corporation J22204. (R- 1) Three and a half months after Messrs. Miller and Richardson's visit to Respondent Traylor, Miller received from Traylor, via his attorney, what Miller described at formal hearing as a lot of ledger cards and sheets "that made no sense to me." He could not explain any items he had received, but claimed they were impossible to audit. The ledger cards received in evidence show that "Michael" or "Mike" or "Brooker" received some money, but they do not specify from which corporation; the inference is that they are cards of the non-party corporation. The ledger sheets were not offered as a separate exhibit. Likewise, there are no checks in evidence to verify that the amounts listed on the ledger cards were actually paid out to Brooker by either corporation or by Respondent Traylor. Mr. Miller revealed on cross examination that he did not know the difference, if any, among Centrastate of Florida, Centrastate Homes of Florida, Centrastate of Florida, Inc., or Respondent Centrastate Development Corporation. Although Mr. Miller testified that no one named Michael Brooker was licensed by the Florida Real Estate Commission, there was insufficient predicate laid by which he could know this. No computer search for Brooker was introduced as a business record, and Mr. Miller did not testify that he conducted a personal document search. Mr. Miller's attempts to locate any Michael Brooker, licensed or not, in the appropriate venue were fruitless. Upon the whole of Mr. Miller's testimony, it is found that his and Mr. Richardson's initial visit was prompted by a complaint previously filed with the Petitioner alleging certain improprieties in the corporate affairs of the non- party on the part of Centrastate of Florida, Inc. Prior to the date of their visit, the investigators had copies of certain bank records and cancelled checks drawn on the account of Centrastate of Florida, Inc., and it was the banking records of that entity which Investigator Miller then requested from the Respondents and which he ultimately reviewed. Therefore, it can be inferred that Miller and Richardson never formally asked for the records of Respondent Centrastate Development Corporation and that Respondents provision of Centrastate of Florida, Inc. materials cannot be considered uncooperative or evasive. However, by letter of November 21, 1988, referring to Centrastate of Florida, Inc., Respondent's attorney informed the investigators of numerous deficiencies with regard to the accounts of Centrastate of Florida, Inc., including overdrafting and commingling of clients' escrow accounts and withdrawal of funds by Respondent Traylor. The attorney also advanced the theory, on behalf or his clients, that none of the transactions posted to that account involved purchase or sale of real estate. (P-4). The investigators did not pursue any further investigation of, or accept the Respondents' attorney's offer of, additional bank statements and supporting documentation. Thereafter, Petitioner did not attempt a reconciliation of those or any other banking records. J. Glenn Nold was a bookkeeper in charge of Respondent Traylor's accounting operations for Respondent Centrastate Development Corporation and for the non-party, Centrastate of Florida, Inc. for eight months. According to Mr. Nold, one corporation built houses and one sold the houses and lots, but he could not even recall which company issued his or anyone else's paychecks. Therefore, he knew of no paychecks issued to Michael Brooker. Mr. Nold also represented that Respondent Traylor owned an inventory of empty lots and sometimes would build on such an empty lot a home in a design selected by the buyers and then sell that lot and the finished home together to those buyers. He stated that Traylor sometimes built houses for other people on their own lots, but Nold could not remember if Traylor ever sold other peoples' empty lots for them. Indeed, Nold did not know if Traylor ever engaged in selling the real property (house and/or lots) of third persons. Nold stated that either Centrastate of Florida, Inc. or Centrastate Development Corporation had an escrow account and that they shared offices, but he could not remember which entity had the escrow account. He volunteered that whichever entity had an escrow account, the escrow account was in disarray. If there were another escrow account for the other corporation, Nold did not know of it. He discovered that before he took over the bookkeeping, some unidentified person had twice paid out the same amount from the escrow account into an operating account. Therefore, Nold, as the new bookkeeper, elected to leave $30,000 in that escrow account to cover deficits instead of thereafter regularly transferring money out of the escrow account and into the operating account, as it was earned. He maintained that he told Respondent Traylor what he was doing and Traylor did not object, however, Nold admitted that no periodic reports were given by him to Traylor. Mr. Nold expressed the belief that many things were "wrong" with Traylor's several operations, but he was unable to articulate what he felt was "wrong" with Respondent's operation beyond the $30,000 incident related supra. Mr. Nold had quit Traylor's employ upon the suggestion of a Department of Professional Regulation attorney he spoke with by telephone in an attempt to describe what he thought was wrong. Giving Mr. Nold's testimony that construction most favorable to Petitioner, the most that has been established is that Traylor acquiesced in a short-term bookkeeping correction on paper to cover a money transfer error, but even so, for which corporate entity it was done is unclear. It is most logical, given the documentary exhibits in evidence, that even this short- term bookkeeping correction related to the non-party, Centrastate of Florida, Inc., which clearly had an escrow account. One could also infer that the Respondent real estate brokerage, Centrastate Development Corporation, was not maintaining any escrow account at all, but one could just as easily infer the Respondent brokerage was not conducting any sales at all, in which case there should be an escrow account but no escrow accounting for Mr. Nold to handle during his brief employment. However, upon the less than credible candor and demeanor of the witness Nold, it is found that his testimony is neither clear nor convincing of any of the charges of this Administrative Complaint. There is insufficient credible evidence to show that a $19,000 check issued to Traylor on the Centrastate of Florida, Inc. escrow account for "permitting" was for any improper purpose. There is no evidence in this record to support any finding at all with regard to Traylor t/a Salt Springs Realty.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Florida Real Estate Commission enter an order dismissing all counts of the Administrative Complaint as not proven. DONE and ENTERED this 13th day of November, 1989, at Tallahassee, Florida. ELLA JANE P. DAVIS, HEARING OFFICER Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 1989. APPENDIX TO RECOMMENDED ORDER The following constitute specific rulings pursuant to Section 120.59(2) F.S. upon the parties' respective proposed findings of fact (PFOF): Petitioner's PFOF: 1-6 and 8 are accepted. 7 is accepted only as modified; the record reflects no meaningful attempt to audit Respondent Centrastate Development Corporation. is subordinate and unnecessary. is rejected; the exhibit speaks for itself and is properly characterized within the facts as found. The proposal is mere conclusionary argument by Petitioner. 11, 12, 13 are rejected as not supported by the record as a whole but are either mere unreconciled testimony or conclusionary argument by Petitioner. 14 is irrelevant in light of the other facts as found. Respondents' PFOF: 1, 2, 3, 4, 5, 6, 7, 9, 13, and 14 are accepted. 8, 10, 11, and 12 are accepted as modified to exclude subordinate and cumulative material and to more clearly reflect the record as a whole. COPIES FURNISHED: JAMES H. GILLIS SENIOR ATTORNEY FLORIDA DEPARTMENT OF PROFESSIONAL REGULATION DIVISION OF REAL ESTATE LEGAL SECTION 400 WEST ROBINSON STREET POST OFFICE BOX 1900 ORLANDO, FLORIDA 32802 JOHN V. BAUM, ESQUIRE JOHN V. BAUM, P.A. ATTORNEY AND COUNSELOR AT LAW 111 SOUTH MAITLAND AVENUE MAITLAND, FLORIDA 32751-5607 DARLENE F. KELLER, DIRECTOR DIVISION OF REAL ESTATE 400 WEST ROBINSON STREET POST OFFICE BOX 1900 ORLANDO, FLORIDA 32802 KENNETH E. EASLEY, GENERAL COUNSEL DEPARTMENT OF PROFESSIONAL REGULATION 1940 NORTH MONROE STREET TALLAHASSEE, FLORIDA 32399-0792
The Issue The nature of the controversy is set forth in the Order Finding Probable Cause issued by the Commission on Ethics (the "Commission") on September 16, 2015, which specifically alleged that Respondent, City Attorney, code enforcement special magistrate, or special or backup counsel for the City of North Port, violated sections 112.313(3), 112.313(6), 112.313(7)(a), and 112.313(16), Florida Statutes: [B]y providing counsel and recommendations to the City Commission regarding the adoption of local Ordinance 2014-29 requiring the appointment of a Zoning Hearing Officer and encouraging the City Commission to amend Part II, Chapter 2, Article IX, of the City Code to replace the Code Enforcement Board with a Code Enforcement Special Magistrate and offering himself for consideration for the position of Zoning Hearing Officer as well as Code Enforcement Special Magistrate. The issue is whether Respondent violated these provisions of the Code of Ethics for Public Officers and Employees as alleged in the Order Finding Probable Cause, and, if so, what penalty is appropriate.
Findings Of Fact The City of North Port ("City") is an incorporated municipality, created by the Florida Legislature in 1959, and located in Sarasota County. Its electorate approved a revised charter in 1988. Subsequent amendments to the Charter were approved throughout the years, with the most recent amendment occurring in 2014. Article XIV, concerning the City Attorney, has never been amended. The City's form of government is Commission-Manager. The City Commission consists of five elected City Commissioners. The City Commissioners elect the Mayor, who serves as presiding officer of the City Commission, and who is elected by majority vote of the City Commissioners. The Mayor is "responsible to see that all laws, provisions of [the] Charter and acts of the [City] Commission are faithfully executed; [to] sign on behalf of the City all intergovernmental agreements . . . and any other official documents." The Charter establishes the separation of powers between the executive and legislative branches of the City. The Charter requires the City Commission to appoint the City Manager who serves as the chief administrative officer. The Charter empowers the City Manager to supervise the daily administrative duties and all non-charter employees, make City personnel decisions, represent the City in contract negotiations, sign contracts on behalf of the City, enforce agreements, and perform numerous other duties. The City Commissioners may not interfere with the selection of the personnel of the City Manager's subordinates, nor give orders to City personnel. The Charter establishes the City Manager, City Clerk, and City Attorney. The Charter specifies that the City Clerk and City Attorney are offices that the City Commission cannot abolish. The Charter provides for the office of City Attorney and assigns various duties to the position. As indicated in section 1.03 of the Charter, "reference to any office or officer includes any person authorized by law to perform the duties of such office." The functions of City Attorney include: attending all meetings; advising the City Commission as to its compliance with the Charter and Florida law; being the legal advisor and counselor for all departments; preparing and reviewing contracts, legal and official instruments; and endorsing each legal contract as to form and correctness. The Charter states that "[n]o legal document with [the] Municipality shall take effect until his approval is so endorsed thereon." Respondent provided legal services to the City of North Port from 2001 until August of 2014. From 2001 to 2006, Respondent was a partner in the Bowman, George, Scheb & Robinson law firm which had a contract to provide legal services to the City. The firm was designated the City Attorney for the City. In 2006, simultaneously with the renewal of the Bowman George contract, Respondent moved his practice to the Nelson Hesse law firm, in which he was a partner. From 2006 until August 2012, the Nelson Hesse law firm had a contract to provide legal services to the City. The firm was designated as the City Attorney. In each instance, the City contracted with a law firm, and not a specific individual, to serve as the City Attorney. From 2001 through August 2012, Respondent, as a member of a contracted law firm, performed the duties and responsibilities of the City Attorney as outlined in the City Charter and as provided in the contracts between the City and the Bowman George firm and the Nelson Hesse firm. In 2011, the City Commission began discussing alternatives to the way legal services were provided due to concerns with the City's rising costs for legal fees. In the spring of 2012, the City issued a Request for Proposals (RFP) which sought "proposals from experienced and qualified law firms to provide a full range of municipal legal services serving as the City's legal counsel on a contractual basis." Respondent played no role in developing the RFP or participating in any discussions concerning the RFP because he believed it "would prohibit [his] submission of a proposal to that RFP." Commissioner Linda Yates testified that Respondent said he could not participate in the creation or discussions of the RFP due to ethical issues. Throughout the RFP process, Jonathan R. Lewis served as City Manager. He had been appointed by the City Commission and acts as chief administrative officer. In addition to his various duties, he is responsible for the hiring and firing of City personnel, representing the City in contract negotiations, and signing all contracts, agreements, and applications for the City after approval by the City Commission. Mr. Lewis signed a contract with Suzanne D'Agresta to provide legal advice and counsel to the City Commission during the RFP process since Respondent removed himself from the process as he intended to submit a proposal on behalf of his firm. RFP applicants were advised in writing that "[t]he City Attorney is appointed by the [City] Commission, serves as a Charter officer, and performs duties and responsibilities pursuant to the Charter of the City of North Port section 14.05 and the general law of the State of Florida." Other specialty legal services, such as bond work and pension issues, are outsourced. Minimum qualifications for the position included seven years' experience in Florida municipal law, and licensure by and good standing with The Florida Bar. The Nelson Hesse firm, partnering with the Lewis, Longman & Walker law firm, submitted a response to the RFP. Three other firms submitted responses to the RFP. After an interview process, the Nelson Hesse firm was ranked first by three of five members of the City Commission and the general consensus was that the firm was the most qualified applicant. The City and the Nelson Hesse firm then negotiated the terms of an agreement for legal services that were subsequently presented to the City Commission for approval. On August 15, 2012, the City of North Port approved the Agreement for Legal Services with the Nelson Hesse firm whereby the City employed, engaged, and hired "the Firm to serve as and to perform the duties and responsibilities of City Attorney pursuant to Request for Proposal No. 2012-21." The Agreement stated: The Firm designates and the City accepts Robert K. Robinson as the primary attorney for City legal work. Mr. Robinson may utilize the services of other attorneys and staff in the Firm and [Lewis, Longman and Walker] as he deems appropriate for City legal work. The Agreement, which commenced on September 1, 2012, was for a term of two years and could be renewed for one additional term of one year. The Agreement further provided: The Firm shall serve as the City Attorney who shall act as legal advisor to, and attorney and counselor for, the City and all of its officers in matters relating to their official duties. On September 10, 2012, the City Commission voted four- to-one to approve Nelson Hesse and Respondent to provide legal services to the City Commission. Commissioner Yates was the lone dissenter citing numerous reasons for her "no" vote. Nelson Hesse's compensation was fixed by contract as required by the Charter. A monthly retainer was set at $28,333.33 to cover a maximum of 2,400 hours, and the rate was fixed at $170 for "Hourly Legal Services." Expenses, including travel within the county, were to be billed to the City. The Office of City Attorney was budgeted through "Charter and Executive Services," and in FY 2012 the legal department had a budget of $776,000. Respondent was required to submit his projected budget annually. Respondent had office space for his use at City Hall. Unlike the contract with Ms. D'Agresta, which was signed by City Manager Lewis, Respondent's Agreement was signed by then-City Commission Chair Tom Jones. This indicates that Respondent or his firm was a Charter officer serving under the City Commission, and not a non-charter independent contractor serving under the City Manager on a temporary basis when Respondent and his firm recused themselves from any involvement with the RFP since they intended to submit a proposal. The Agreement reiterated and expanded the duties and powers enumerated in the Charter and provided that Respondent may not assign the Agreement without prior written consent of the City Commission. Respondent, as an individual, believes he was never appointed City Attorney by majority vote of the City Commission nor was he elected to that position. Respondent was also not an employee of the City. His firm, Nelson Hesse, in which he was a partner, served as City Attorney. From the evidence, this appears true even though the Charter refers to the City Attorney as "he or she." Following the November 2012 election of two new commissioners, the City began the process of transitioning from the use of a firm to serve as the City Attorney to the appointment of an individual to serve as the City Attorney. This process, which involved a series of meetings and workshops, included a review of all legal services for the City and eventually led to a decision to retain a consultant to conduct a search for an individual to serve as City Attorney. This process, in turn, led to the appointment of Mark Moriarty as the City Attorney by majority vote of the City Commission. Mr. Moriarty began his employment as the City Attorney on or about September 15, 2014. Well prior to Mr. Moriarty's start as City Attorney, at the June 9, 2014, City Commission meeting, at Vice-Mayor Rhonda DiFranco's request, Respondent, on behalf of his firm, Nelson Hesse, submitted a "Letter of Engagement," that he drafted, to the City Commission for approval. Since the 2012 Agreement with Nelson Hesse was going to expire on August 31, 2014, Respondent sought to provide the City with a "safety net" to ensure it would be covered for legal services until Mr. Moriarty was in place and the City had no need for further services from Nelson Hesse. The Letter of Engagement would allow Respondent, through his firm, to continue to provide advice and representation beginning September 1, 2014, as the backup attorney to the new in-house counsel, Mr. Moriarty. Additionally, the Letter of Engagement specified Respondent would "provide advice and representation to the City on zoning . . . [and as] code enforcement hearing officer." The Letter of Engagement included a higher hourly fee than the previous Agreement with the City ($275 versus $170). The reason given for the higher hourly fee was that Respondent could not ascertain how many hours, if any, his firm would work under the new arrangement and, therefore, could not offer a volume discount for his time. Nothing in the June 9 Engagement Letter required the City to use Nelson Hesse for any future work. The testimony as to Respondent's motive for placing the June 9 letter before the City Commission was disputed by the parties. Respondent was not representing a private individual or entity before the City Commission at the meeting. If he was representing anyone, he believes he was representing the City. He took no action to impede or frustrate the City Commission's move to an appointed City Attorney. If anything, the evidence suggests Respondent assisted the City in its search for an in- house City Attorney by recommending a search firm, and by speaking positively about the transition to the in-house situation. Because Mr. Moriarty was not going to assume his new position until September 15, 2014, the City Manager was authorized to enter into an interim agreement for legal services with Respondent's firm to cover the two-week period between the expiration of the prior Legal Agreement with Nelson Hesse and Mr. Moriarty's start date. Consistent with that new agreement, Respondent attended and provided legal services to the City Commission at its September 8, 2014, meeting. At this meeting, his firm was no longer the City Attorney, but was a contract attorney providing services during the interim period between City Attorneys. The Advocate's take on the post-City Attorney plans of Respondent was quite different. The argument was made that Respondent's June 9 letter was designed to hire Respondent's firm at an increased rate of $275 per hour, plus to make Respondent the Zoning Hearing Officer and Code Enforcement Special Magistrate. The Charter requires reading of a proposed ordinance at two separate public City Commission meetings at least one week apart. On the second and final reading, the proposed ordinance is offered for adoption. If adopted, it becomes local law on its effective date. Respondent, as City Attorney, supervised the drafting of Ordinance 2014-29 to create the position of Zoning Hearing Officer for zoning appeals and variance matters, effective September 1, 2014. The Zoning Hearing Officer was to be hired and could be terminated by the City Commission, which also would supervise the position. Ordinance 2014-29 was presented to the City Commission for first reading at the July 14, 2014, City Commission meeting. Respondent explained the ordinance to the commissioners and legally advised them on the document. The second reading took place at the City Commission's July 28, 2014, meeting. Again, Respondent offered legal advice to the commissioners about the ordinance's effects. Respondent suggested that an appointment needed to be made that night, effective September 1, 2014, the day after his Legal Agreement expired. He offered his services and responded "yes" to a question from City Commissioner Yates regarding whether a decision should be made that night. Respondent provided no other options other than to appoint him immediately. Other options may have been available since it was "the norm" (Respondent's words) for City Manager Lewis to contract with attorneys from a variety of law firms for services without undertaking the competitive solicitation process when specialty legal services were needed. Respondent himself could have called an experienced attorney to handle the pending petition. Instead, Respondent informed the City Commission it was not his responsibility to provide other options to the City Commission. When asked how he would be ready to go with this on September 1, 2014, Respondent said he would "take off [his] city attorney hat" and on September 1 "put on the zoning officer appeals hat." He made clear to the City Commissioners that he was "uniquely qualified" for the position, therefore no others need be considered in his opinion. With no other options before them and having been advised of the urgency of making the appointment, the City Commission appointed Respondent to serve a four-year term by a four-to-one vote (Commissioner Yates being the lone dissenter). Respondent served in the position of Zoning Hearing Officer from September 1 through September 19, 2014. He earned $1,453.50 for 5.5 hours worked ($264.27 per hour). Respondent's 2012 Agreement did not provide he could serve as Zoning Hearing Officer. Respondent drafted the June 9, 2014, Letter of Engagement allowing him to serve as Zoning Hearing Officer. As Zoning Hearing Officer, Respondent served at the pleasure of the City Commission and could be removed with or without cause by a majority of the City Commissioners. Respondent had the power to take testimony under oath and compel attendance of witnesses. He could not engage in any "ex-parte" communications with City Commissioners while serving as Zoning Hearing Officer because he was serving as a neutral arbitrator in a quasi-judicial position adjudicating controversies between two parties: the City and property owners. Respondent could not serve as backup legal advisor to the City from September 1 through 14, 2014, if at the same time he was serving as Zoning Hearing Officer since he was supposed to be in a neutral and, therefore, independent position. Ordinance 2014-30 amended the City Code to abolish the seven-member Code Enforcement Board and create one Code Enforcement Special Magistrate ("Special Magistrate") position, effective October 1, 2014. The Special Magistrate was to be hired by and could be terminated by the City Commission upon a majority vote. That ordinance was presented to the City Commission for first reading on July 28, 2014. Respondent advised the City Commissioners that the ordinance created a special magistrate position, and informed the City Commissioners he would work on the details for the position in September and October 2014, a period of time covered by the June 9 Letter of Engagement, but not the 2012 Legal Services Agreement. Respondent admitted he drafted the June 9 Letter of Engagement so that he could assume the special magistrate position himself. After advising the City Commission on the effects of the ordinance as their attorney, Respondent offered himself for consideration for the not-yet-existent position and was appointed on a four-to-one vote of the City Commissioners to a two-year term beginning October 1, 2014. Like the Zoning Hearing Officer, the Special Magistrate serves as a neutral arbitrator in a quasi-judicial position that adjudicates controversies between two parties: the City and the property owner or alleged violator. Respondent attended ethics classes taught by Chris Anderson, attorney for the Commission on Ethics. Respondent denied he had a conflict of interest because in his view a violation would occur by "the attorney getting up out of his chair and going down in front of the commission and representing John Q. Public or John Q. Developer with regard to matters that are appearing before the city commission. That was not the case with me." Respondent's term as City Attorney ended on August 31, 2014. On August 28, 2014, City Manager Lewis requested authorization from the City Commission to hire Respondent to provide legal services from September 1 through 15, because the new in-house City Attorney would not begin until September 15, 2014. At the next regularly scheduled meeting of the City Commission on September 8, 2014, Ordinance 2014-30 was read a second time and voted for adoption. Respondent attended the meeting as the City Commission's legal advisor. Mayor Blucher introduced him as the "City Attorney" and quickly realized his error and corrected himself to announce Respondent's new title as "attorney for the City." Respondent replied, "Careful." This was apparently the only time Respondent reacted when he was identified as the appointed City Attorney. Although he claims his firm is the entity that contracted with the City to provide legal services, his silence is an admission he considered himself at least to be the de facto City Attorney or appointed public officer. City Commissioner Yates strongly objected every time Respondent's name was presented for the position of interim attorney for the City (for the September 1 through 14 period), Zoning Hearing Officer, or Special Magistrate. In each instance, she asked the City Commission to delay the vote until the new in- house City Attorney came on board so that he could have some input into the decision. She was outvoted four-to-one each time. Municipal governments utilize three typical arrangements for procuring legal services: 1) an in-house attorney who is directly on the government payroll; 2) an attorney in private practice whose firm (or the individual attorney) is retained through a contractual relationship under which the attorney remains employed by his/her firm; and 3) an attorney who practices in a specialized area who is retained on an as-needed basis through contract. Respondent's work for the City fits into the second category of lawyers retained to perform City business. In this matter, Respondent was considered by the City as a Charter Officer holding a public office. According to the RFP, the City sought a City Attorney as contemplated by its Charter when it appointed Respondent for the office. Respondent held himself out as the City Attorney to the Florida Attorney General when requesting legal opinions, to the public on his website, and to the Commission when filing his Form 1, "Statement of Financial Interests" (which also identifies him as an employee of his firm, Nelson Hesse). Respondent has never corrected the suggestion that he is City Attorney. His name appears as the appointed City Attorney on the City's official letterhead, and his picture hangs in City Hall with the other City officers. In City Hall, the name plate below his picture identifies him as the City Attorney and Charter Officer. The official minutes of each City Commission meeting held during his tenure indicate Respondent is the appointed City Attorney. Respondent admitted, when asked at hearing, that the Charter contemplates that a person, not an entity, will be the City Attorney. Respondent denies that he was "appointed" to the position of City Attorney, yet he did not correct Commissioner Blucher when he said during a meeting, "we elected him as a city attorney." City Commissioner Yates, also testifying at the hearing, believes the City Commission approved Respondent as the City Attorney. The City Charter does not require the City Attorney to take an oath of office and, although City Commissioner Yates does not recall whether Respondent did, she testified she expected he would have taken an oath as a matter of course. Respondent's current denial of any violations of chapter 112, Florida Statutes, and insistence that Nelson Hesse is the City Attorney conflicts with previous statements he made. At one point he declared, "Either I am or I am not the City Attorney." Further, when declining to negotiate an assignability clause in his June 9, 2014, Letter of Engagement because, as he explained to the City Commission, "But, the thing you have to understand is, Number 1, is that – is I'm sort of the center of the universe, so wherever I go, that's where it [this contract] goes." Respondent accurately, and appropriately, portrayed himself as the primary attorney for the City, regardless of his firm being named in his 2012 Agreement for Legal Services to the City. Respondent regularly signed official documents as "Robert K. Robinson, City Attorney," not as "Nelson Hesse as City Attorney, by Robert K. Robinson," or some other form of signature where he states his firm is the City Attorney. It is significant that the 2012 Agreement for Legal Services was signed by Tom Jones, then-Chair of the City Commission. The City Manager did not sign the document as he would have if this contract and the legal services rendered thereunder fell into the category of non-charter personnel performing legal (or other) services for the City. Only the City Commission can appropriately sign an agreement or contract designating a Charter Officer such as the City Attorney. Respondent was accountable to the City Commission for work performed under the Agreement. He acknowledged that the Agreement was on a City Commission agenda "at a public hearing where they [the Commissioners] adopted – or they executed the contract."
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Respondent, Robert K. Robinson, violated sections 112.313(6) and 112.313(16)(c), Florida Statutes, and ordering him to pay a penalty of $5,000 per violation ($10,000 total). DONE AND ENTERED this 31st day of January, 2017, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN 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 31st day of January, 2017. COPIES FURNISHED: Elizabeth A. Miller, Esquire Office of the Attorney General Plaza Level 01, The Capitol Tallahassee, Florida 32399 (eServed) Mark Herron, Esquire Messer Caparello, P.A. Post Office Box 15579 2618 Centennial Place Tallahassee, Florida 32317 (eServed) Brennan Donnelly, Esquire Messer Caparello, P.A. 2618 Centennial Place Tallahassee, Florida 32308 (eServed) Millie Wells Fulford, Agency Clerk Florida Commission on Ethics Post Office Drawer 15709 Tallahassee, Florida 32317-5709 (eServed) C. Christopher Anderson, III, General Counsel Florida Commission on Ethics Post Office Drawer 15709 Tallahassee, Florida 32317-5709 (eServed) Virlindia Doss, Executive Director Florida Commission on Ethics Post Office Drawer 15709 Tallahassee, Florida 32317-5709 (eServed)
The Issue Whether Petitioner's application for registration as a trainee real estate appraiser should be denied on the ground set forth in the Florida Real Estate Appraisal Board's Notice of Intent to Deny.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Petitioner is a 35-year-old divorced man (born in October 1972) who resides in Miami-Dade County, Florida, with his parents. He is the father of a six-year-old son whom he shares custody of with his former wife. In early 2003 (when he was 30 years of age), fueled by a desire to increase his wealth, Petitioner engaged in the trafficking of counterfeit Procrit to drug wholesalers. (Procrit is a prescription drug manufactured by Amgen, Inc.) In so doing, Petitioner recklessly exposed the intended consumers of these counterfeit drugs to the risk of serious bodily harm. Prior to engaging in this criminal enterprise, Petitioner had lived a law-abiding life. Petitioner was arrested on or about February 28, 2003, and subsequently charged in the United States District Court for the Southern District of Florida with the federal crime of trafficking in counterfeit goods in violation of 18 U.S.C. § 2320. The information against Petitioner alleged, in pertinent part, that, "[f]rom on or about January 20, 2003 to on or about February 27, 2003, at Miami, Miami-Dade County, in the Southern District of Florida, and elsewhere, the defendant, Eddy Gorrin, did intentionally traffic and attempt to traffic in goods, that is, Procrit prescription drugs, and knowingly used a counterfeit mark on and in connection with such goods without authorization from Amgen, Inc., such mark being identical with and substantially indistinguishable from the genuine mark in use and registered for those goods by Amgen, Inc. on the principal register in the United States Patent and Trademark Office, and the use of which counterfeit mark was likely to cause confusion, to cause mistake, and to deceive." With Petitioner's post-arrest assistance, the authorities recovered all of the counterfeit Procrit that Petitioner and his co-perpetrators had distributed. On or about May 22, 2003, Petitioner entered into a plea agreement with the federal prosecutor's office. The agreement provided, in pertinent part, as follows: The defendant agrees to waive prosecution by indictment and plead guilty to Count One of an Information, which charges the defendant with intentionally trafficking and attempting to traffic in goods and knowingly using a counterfeit mark on those goods in violation of Title 18, United States Code, Sections 2320 and 2. The defendant is aware that the sentence will be imposed in conformity with the Federal Sentencing Guidelines and Policy Statement (hereinafter "Sentencing Guidelines"), and that the applicable guidelines will be determined by the Court. The defendant is also aware that a sentence imposed under the guidelines does not provide for parole. Knowing these facts, the defendant agrees that this Court has jurisdiction and authority to impose any sentence within the statutory maximum set for his offense. This Office and the defendant agree that, although not binding on the Probation Office or the Court, they will jointly recommend that the Court make the following findings and conclusions regarding the applicable Sentencing Guidelines: Applicable Offense Guideline: That pursuant to Section 1B1.2(a) of the Sentencing Guidelines, the offense guideline applicable to the defendant's offense is Section 2B5.3 of the Sentencing Guidelines, which provides for a base offense level of eight; Amount of Loss: That under Sections 2B1.1(b)(1) and 1B1.3 of the Sentencing Guidelines, the amount of loss resulting from the defendant's offense conduct is between $200,001 and $400,000, increasing the defendant's offense level by twelve levels. Manufacture of Counterfeit Drug: That under Section 2B5.3(b)(2) of the Sentencing Guidelines, the defendant's offense involved the manufacture of the counterfeit prescription drug Procrit and that his offense level should therefore be increased by two levels. Conscious or Reckless Risk of Serious Bodily Injury: That under Section 2B5.3(b)(4) of the Sentencing Guidelines, the defendant's offense involved the conscious or reckless risk of serious bodily harm, and that as a result, his offense level should be increased by two levels. Acceptance of Responsibility: That under 3E1.1 of the Sentencing Guidelines, the Sentencing Guideline level applicable to the defendant's offense should be reduced by three levels based upon his recognition and affirmative and timely acceptance of personal responsibility for the offense, provided further that the defendant makes a full, accurate and complete disclosure to the United States Probation Office of the circumstances surrounding defendant's relevant conduct and does not engage in any misconduct after entering into this agreement . . . . Other Adjustments: That no other additional downward adjustments from Chapters 2 or 3 of the Sentencing Guidelines are applicable in this case. Restitution and Fine: That pursuant to Section 5E1.1(a) of the Sentencing Guidelines, the defendant agrees that he shall pay restitution in the amount of $8,000 to the U.S. Food and Drug Administration, which takes into account the $25,000 voluntarily restituted in March 2003, prior to the filing of the information in this case. It is also agreed that this payment will be a condition of the defendant's probation and/or supervised release. After a through review by the parties of both the offense conduct and the application of the Sentencing Guidelines to this offense conduct as outlined in paragraph 3 of this Agreement, this Office and the defendant agree, pursuant to Rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure, that the applicable total resulting offense level in this case is an offense level 21. This Office does not object to the defendant's request to be sentenced at the low end of the guideline range, that is, 37 months. The defendant understands and agrees that the Court may impose any sentence authorized by law and that the defendant may not withdraw his plea solely as a result of the sentence imposed. The defendant also understand and agrees that the Court may impose a statutory maximum term of imprisonment of up to ten years, followed by a maximum supervised release term of three years. In addition to a term of imprisonment and supervised release, the Court may impose a fine up to $2,000,000. The defendant understands and agrees that, in addition to any sentence imposed under paragraph 5 of this agreement, a special assessment in the amount of $100 will be imposed on the defendant. The defendant agrees that any special assessment imposed shall be paid at the time of sentencing. The defendant is aware that the sentence has not yet been determined by the Court. The defendant is also aware that any estimate of the probable sentencing range that he may receive from his counsel, the government or the Probation Office, is a prediction, not a promise, and is not binding on the government, the Probation Office or the Court. * * * After entering his plea of guilty, Petitioner was sentenced to 37 months in federal prison. He was also fined and ordered to pay restitution. Petitioner began serving his prison sentence on October 16, 2003. While in prison, Petitioner took a correspondence course in real estate appraising. He also participated in and completed a nine-month alcohol rehabilitation program (for which he was eligible because he had a history of alcohol abuse). As a result of his completion of the program, his prison sentence was shortened. In March 2005, Petitioner was released from prison and placed on supervised probation for a period of three years. For the first six months of his probation, Petitioner was under house arrest and had to wear a monitoring device on his ankle. Petitioner's probation officer recommended that he be discharged early from probation inasmuch as he had "complied with the rules and regulations of probation/supervised release and [was] no longer in need of supervision." On November 22, 2006, the sentencing judge issued an order adopting this recommendation and discharging Petitioner from probation. Since his release from prison in March 2005, Petitioner has led a crime-free life and become a productive member of society. He has abstained from the use of alcohol, with the exception of having an occasional glass of wine. He has gone back to school and completed the necessary coursework to obtain his Associate of Arts degree from Miami- Dade Community College. He has been gainfully employed throughout the post- incarceration period. From March 2005, to April 2006, Petitioner worked for two companies owned by Patsy Stecco: Mortgage Processors of South Florida, Inc., where he helped process mortgages, work that required him to handle money (which he did without incident); and Buyers Home Connection, Inc., where he was a credit analyst with managerial responsibilities. During this time period, he took a "real estate mortgage broker course . . . to get more of an understanding of what the work entail[ed]." Ms. Stecco has known Petitioner for the past ten years,1 having first met him "through a niece of [hers who] was friend[ly] with his ex-wife."2 Ms. Stecco was aware of Petitioner's criminal past when she hired him. In April 2006, Petitioner went to work for a Florida- certified residential appraiser, Gaston Gosselin, Jr. Mr. Gosselin owns his own appraisal business, Precision Appraisers and Company, Inc. He hired Petitioner based upon Ms. Stecco's recommendation. Before hiring Petitioner, Mr. Gosselin did not inquire as to whether Petitioner had a criminal record, and Petitioner did not volunteer that he did. It was not until two or three months after Petitioner began working for him that Mr. Gosselin found out (from Ms. Stecco) about Petitioner's criminal past. When Mr. Gosselin confronted Petitioner about the matter, Petitioner was candid and forthright, and he apologized to Mr. Gosselin for not making the disclosure sooner. While Mr. Gosselin was concerned about Petitioner's "initial[]" lack of openness regarding the matter, Petitioner had so impressed him during the "short time" they had known each other that, despite this concern, Mr. Gosselin retained Petitioner as an employee. Petitioner did research and marketing work for Mr. Gosselin. He also assisted with office personnel matters. In February 2008, Mr. Gosselin had to let Petitioner go because, due to deteriorating business conditions, he could no longer afford to keep Petitioner on the payroll. He has "stayed in touch" with Petitioner, however, and now "consider[s] him a friend." Ms. Stecco and Mr. Gosselin (both of whom testified, credibly, at the final hearing on Petitioner's behalf3) found Petitioner to be a hardworking, quick-learning, reliable, dedicated, competent, honest, and trustworthy employee. Mr. Gosselin would not hesitate to serve as Petitioner's supervising appraiser were Petitioner's application for registration as a trainee real estate appraiser to be granted.4 He believes that Petitioner would be a "great asset to [him] and [his] business." Since February 2008, Petitioner has been a staffing manager with Robert Half International (RHI). RHI does not "know about [Petitioner's] criminal history." It has not "inquire[d] [of Petitioner] about [his] criminal past," and Petitioner has not come forward and made any unsolicited disclosures regarding the matter. In addition to working full-time for RHI, Petitioner works evenings and weekends for his father's company, EDGO General Consulting Services, Inc. (EDGO), which "owns rental properties." Petitioner collects rents and makes deposits, as well as does needed repair work, for the company. Petitioner had worked for EDGO prior to his incarceration. In 2001, he was "involved in overseeing" a residential construction project undertaken by the company. In applying for the staffing manager position he now holds with RHI, Petitioner submitted a copy of a resume, wherein he had listed, "oversee construction development of single family spec homes," as one of his duties at EDGO. In so doing, he meant to convey that "oversee[ing] construction development of single family spec homes" was one of things that he had done during his employment with EDGO, not that it was among his current job duties. The resume also contained the following entry regarding his employment with Precision Appraisers and Company, Inc. (under the heading of "Professional Experience"): Precision Appraisers & Company, Inc., Office Manager/Appraiser 04/2006-02/2008 Establish productive marketing strategies and incentives for existing and potential clients. In charge of interviewing new prospective personnel for clerical and administrative positions. Research all records of properties being appraised and provide all information to the appraiser performing the appraisal. Organize bi-weekly payroll for staff and independent contractors. It was Petitioner's intent, in describing his position as "Office Manager/Appraiser," to indicate that he was an "office manager for an appraiser firm," not that he himself was an appraiser. Under the heading of "Education/Qualifications" on the resume appeared the following: Real Estate Appraiser Real Estate Mortgage Broke[r] Associates in Arts, Business Administration Petitioner listed "Real Estate Appraiser" and "Real Estate Mortgage Broke[r]" under this heading to indicate that he had taken "Real Estate Appraiser" and "Real Estate Mortgage Broke[r]" coursework. He did not mean to represent that he was authorized to act as a "Real Estate Appraiser" and a "Real Estate Mortgage Broke[r]." While the resume entries discussed above were not models of precision, neither were they intentionally deceptive. Petitioner has become a more mature and responsible person than he was at the time he engaged in the criminal conduct that led to his incarceration. He is repentant and remorseful about his crime and recognizes the importance of his being a positive role model for his son. He understands all too well what his ill-advised decision five years ago has cost him and his family, particularly his son, who did not have a father around during the time Petitioner was in prison. More importantly, he feels "terribly" about the potential harm to which he exposed the public and is "thankful that no one was [actually] harmed." Petitioner is embarrassed and ashamed of what he did and is committed to not making the same mistake again in the future and jeopardizing his freedom and ability to be with his son and the rest of his family. He has "learned [a] lesson" from the price he and his family has paid for his one criminal indiscretion. He has no intention of ever "put[ing] [him]self in a position like that again." In short, in the five years that have passed since his crime, Petitioner has been rehabilitated, and it appears that the interest of the public will not likely be endangered if he is granted the registration he seeks and is able to work as a trainee real estate appraiser under the supervision of a licensed or certified appraiser.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Board issue a Final Order granting Petitioner's application for registration as a trainee real estate appraiser. DONE AND ENTERED this 11th day of July, 2008, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 11th day of July, 2008.
Findings Of Fact At all times pertinent to the allegations contained herein, the Respondents were licensed real estate brokers in the State of Florida. Respondent Ronald Blecker was licensed and operating as the qualifying broker and officer for Blecker Realty and Appraisals, Inc., and at all times alleged in the Administrative Complaint, the Respondents were engaged in the appraisal of real property in Florida for a fee. On or about June 23, 1983, Respondent Blecker, or behalf of Blecker Realty and Appraisal, Inc., (Blecker Realty), appraised a piece of real property known as the Deerfield Yacht Basin , (DYB), a commercial marina located at 580 North Federal Highway, Deerfield Beach, Florida. The appraisal, which reflected that the then fair market value of the property was $3,000,000.00, was requested by a representative of State Capital Corporation, (SCC), for which Blecker had done numerous appraisals over the years for a fee. In fact, Blecker did probably several hundred appraisals for SCC for which he was paid generally $150.00 for a single family appraisal, and $700.00 or $800.00 to several thousand dollars for a commercial appraisal. For the first appraisal of the DYB, Mr. Blecker was paid $1,000.00. Around the same date as the appraisal, June 22, 1983, a contract for sale and purchase of the property in question was executed between Eastern Sea Investment, N.V. as seller and Berkley Multi-Units, Inc., as buyer, for transfer of the property in question for $2,200,000.00. According to the terms of the contract, the seller was to receive a purchase money first mortgage in the amount of $750,000.00 at 6 percent annual interest for five years and a purchase money third mortgage in the amount of $800,000.00 at 6 percent for five years. No second mortgage was called for. In January, 1984, Blecker was asked by SCC to again appraise the property in question, this time including in the appraisal provision for a future 50 boat storage rack to be constructed on the property. With this factor added in, when the second appraisal was completed, it bore an appraisal value of $3,991,525.00 rounded off to $4,000,000.00. This second appraisal took an appraised value cost approach of $3,126,000.00 with a new annual income of $471,000.00 and applied the Elwood Capitalization rate at a .118 rate to it which resulted in an income appraisal of approximately $4,000,000.00. Again, on August 22, 1984, SCC requested Blecker to reappraise the property a third time, this time including 146 proposed boat storage racks. When this was done, a net annual income of $634,000.00 was utilized to which the Elwood capitalization rate was applied and which resulted in an ultimate income approach valuation of $5,113,000.00. In the profession of real estate appraisal, there are basically three methods used to establish the value of a piece of property. These are the cost approach in which the land value and the cost of improvements are factored into an appraised value; the market comparable method whereby recent sales of comparable properties are evaluated to give a general figure of the going price of property of this nature in the area; and the third, the income approach, wherein the property is evaluated on the basis of its income and expenses projected out over a period of years. Mr. John Danner, a registered real estate broker and appraiser and in individual involved in various professional organizations and societies dealing with the practice of real estate appraisal, was called in to evaluate the property in question by representative of the State's Attorney's office which was, at the time, involved in the investigation and prosecution of various individuals affiliated with SCC for possible racketeering. Mr. Danner was called into the case in 1985 and on May 23 of that year, rendered his appraisal report assessing a value of $1,435,000.00. His appraisal has some major differences which are: (1) the description of the property as of the date of valuation, and (2) his use of the sales comparison approach using 31 comparative sales of property with the same potential use. At the time Mr. Danner looked at the property in question, none of the 50 or 146 projected storage racks called for in the latter two Blecker appraisals were in place. There was a concrete slab which could serve as the base for these racks, but no racks had been built and the county building office records reflected that the concrete slab had been poured for a structure permitted in the autumn of 1984. In his appraisal, Mr. Danner considered all existing buildings and construction but did not provide for income of proposed buildings not in existence. Mr. Danner was concerned that his appraisal was so much lower than those rendered by Mr. Blecker. He admits at this point that perhaps he should have considered the proposed storage racks as consideration of the highest and best use of the property, but he did not do so. The property was zoned for commercial use, non residential, and consequently, it could not be used for condominium construction as was reflected as a potential use on Mr. Blecker's appraisal. Having reviewed Mr. Blecker's appraisals, Mr. Danner concluded that all three are improperly done in that appropriate research was not done, documentation to support the figures contained therein is not attached, and the values assigned are beyond the market value of the property. It appeared to Mr. Danner that the June 23, 1983 appraisal for $3,000,000.00 did not appear to consider the 6 percent mortgages. He does not know whether Mr. Blecker considered these mortgages or not, but he did and felt that these mortgages at 6 percent interest, which were much lower than the going mortgage rate at the time, would tend to inflate the valuation of the property. It appeared to Mr. Danner also that in the first two reports accomplished by Mr. Blecker, some comparable sales (one from Jupiter and one from the Keys) were included but neither is in the immediate area. In the third report done by Mr. Blecker, he appeared to have found a third comparable in the Deerfield Beach area but Mr. Danner was not able to do so. Instead, he found his own 31 comparables in both Broward and Palm Beach Counties. Of these, he feels, a great many were available at the time Mr. Blecker made his appraisals. As will be seen, however, many of these 31 comparables were considered to be not comparable and invalid comparisons by experts called to testify on behalf of the Respondents. In fact, in the opinion of Mr. Haddad, an individual who has performed 4 or 5 marina appraisals recently, only 1 or 2 of the 31 listed "comparables" of Mr. Danner can be considered comparable equivalents. Mr. Haddad, who visited the DYB and all but 2 or 3 of the "comparables" listed by Mr. Danner, concludes that the sales comparison approach is not the best for the appraisal of a marina because there are too many variables. In his opinion, it is difficult and improper to try to unitize them, so, unless several units could be found that had comparable equivalents, he would not feel comfortable with the use of that basis for evaluation of a marina. All in all, and considering the relative testimony of the two experts, it is found that the sales comparable method as relied upon by Mr. Danner is not as effective as some other method to be discussed later herein. Mr. Danner was also concerned with the taxes listed in the expense portion of each appraisal form which showed real estate taxes and etc. figure of $30,000.00 for 1983. In reality, the 1983 tax bill was $10,902.00. In January, 1984, the real estate taxes were again listed as $30,000.00, when in reality the taxes were $11,890.00. The August, 1984 appraisal reflected taxes at $35,000.00 and it can be expected that the actual real estate tax figure is proportionately less. However, as the tax figure goes up, while real estate taxes are some indication of property value, the increase in tax paid constituted an increase in expense which results in a lessening of the net income which would cause an overall reduction in the valuation by income approach assessment. Appraisal reports are used generally to establish market value of property for many reasons. Inflated reports can be intentional, or caused by negligence, or because of incompetence of the appraiser. Here, the three reports were done for SCC ostensibly to obtain additional financing on this property. The leaving out of a second mortgage was often a part of SCC's procedure to allow the financing to be increased up to 75 percent of value and inflated appraisal reports would allow SCC to sell second mortgages up to 75 percent of the value. Here, even though the purchase price of the property the same day as the first $3,000,000.00 appraisal was $2,200,000.00, the fact that there was only $1,550,000.00 of mortgage accumulated on the property would, on a $3,000,000.00 appraisal, allow a second mortgage to be sold in a significant amount and if this were to be done, the likelihood is that there would be little if any equity in the property to support that mortgage. Notwithstanding Mr. Danner's recounting of the scheme to be utilized by SCC, while this may have been the purpose of the inflated appraisals, there was no direct evidence to establish this, and Mr. Danner's recitation, even if based on reports to him from the State's Attorney's office, would constitute no more than hearsay evidence which will not, by itself, form the basis for a Finding of Fact. Consequently, absent any additional independent evidence of the purpose behind the increased value of the mortgages, it can only be found that there was no showing of any impropriety by either Respondent. It is not at all unusual for appraisers to differ in their valuations of property. Quite often the purpose behind the appraisal will dictate the approach toward appraisal valuation. It must be remembered that an appraisal is a "probable" value, and in establishing the probable value, all three of the bases for appraisal stated previously, (cost, market comparison, and income) should be considered. A marina is an income producing property and income is an important factor in valuation, but, according to Mr. Danner, not the most important factor. Consequently, the income approach may not be the most accurate or correct basis for valuation as he sees it. Mr. Danner did not use the income approach at all in his valuation. He considered it and had the income information available but did not use it because he could not determine who prepared the information and its accuracy. He questioned its rapid escalation and considered that that information on income which was available was insufficient. As a result, he felt that the market comparison value was more appropriate and in trying to get the necessary data for this comparison, he evaluated comparable sales. Mr. Danner at no time contacted Blecker to see what information he had even though Mr. Blecker's first appraisal reflected that he had owner supplied information. His reason for this was his belief that because he was working for the State's Attorney's office, he was not supposed to contact Mr. Blecker. He did not request permission to do so, however, and as a result, his conclusion is felt to be somewhat incomplete, even by his own admission. Nonetheless, he contends that it is not much off because the income information he would have received from Mr. Blecker would have come from a party a biased sources whose information may have been slanted. As to comparable sales, the subject property is water frontage which is generally more costly than inland property. In considering the proposed improvements, as was done by Mr. Blecker in the second and third appraisals, Mr. Danner considers this to be inappropriate because the appraiser has no way of knowing if the owner of the property will actually construct the proposed improvements. He is, however, to assume that they will in his appraisal and this is what Mr. Blecker did. The size of the proposed construction is about the same regardless of the number of racks, while income would increase threefold. The DYB is currently being operated by a court-appointed receiver, Mr. Roger H. Wagner. As receiver, it is his responsibility to work for the betterment of the operation. He has not appraised this facility but is aware of its history back to the original owners in 1979 and 1980. There have been three transfers of the property from the time of the original owner until the $2.2 million sale to Berkley Multi-Units, Inc. in 1983. In that regard, it should be noted that Berkley Multi-Units, Inc. is a stand-in party for SCC. Mr. Wagner was aware that Mr. Blecker had done two appraisals on the property but did not know why. The existing improvements include a metal building used for carpentry and fiberglass repairs; a building for mechanical repairs; and a building used for offices, sales, and inventory storage and sales. There is also an incomplete slab, docks, underground tanks, and fuel pumps. The slab was built originally to support boat racks and a large forklift. As receiver, Mr. Wagner looked into the completion of the racks and found that because of ordinances it could not be built as originally envisioned. The reasons given were, (1) the land was not platted and (2) no metal structures are allowed within the city and a variance seemed unlikely. After 18 months of receivership, during which time he tried to sell the property, he finally was successful at a sale at which there were in excess of 20 bidders. This was not a distress sale. There was plenty of time allowed for financing by the buyer. The second highest bid was $2.4 million: the highest was $2,405,000.00 plus trustees fee. While Mr. Wagner operated the marina, it generated a significant cash flow. There was some shoddy operation when he took it over, but he was able to put the operation on a paying basis. The owners of the property and Mr. Blecker justify the increase in valuation from $3 million to $5 million by the inclusion of the boat storage racks ultimately expected to be 146 in number. Mr. Wagner initially indicated that his inquiry into the availability of racks indicated that they could not be built. However, in retrospect, he concedes that while the ordinance prohibits "uncovered" racks and metal buildings, as well as the platting requirement, from a strictly legal standpoint, if the property were to be platted and if a cinderblock or wooden building were to be constructed for covered racks, no doubt they could be constructed and generate increased income. Mr. Gary Allen, is a former Vice-President of SCC through which Berkeley Multi-Units, Inc. borrowed substantial money. SCC was a mortgage broker/banker. There were regular business relationships between Berkley Multi- Units, Inc. and SCC and in the course of these dealing over several years, Mr. Allen became familiar with the DYB and Mr. Walt Lehman, its manager with whom he discussed the expansion by the addition of rack storage. Mr. Allen was also familiar with Mr. Blecker long before SCC was formed. He chose Mr. Blecker over other appraisers on the basis of what he knew of him and recommended him to perform the appraisals for SCC and the DYB in particular. Mr. Blecker did three separate appraisals and was paid per appraisal after each one. He received his agreed upon fee and no more. When Blecker did the appraisal, he was normally given any sales contracts on hand with the sales price on them. Allen admits he may have told Blecker what he felt the property was worth and he probably gave Blecker a copy of the contract between Eastern Sales and Berkley. Some 6 or 7 months after the initial appraisal, he called Mr. Blecker and requested a second appraisal with the inclusion of 50 boat racks. At that time, Berkley intended to expand the DYB operation to take advantage of the potential it perceived to be there. Berkley always intended to do this and Allen did not believe it would be impossible to get the required permits. Mr. Lehman was supposed to do this as manager and Lehman never gave him any indication that there would be a problem in securing the required permits. SCC did solicit potential investors for the DYB mortgage but they were not given copies of the appraisal report unless they requested it. No doubt some prospective investors for this project did request appraisal reports but Mr. Allen is not aware of which report they were given or whether any of them ultimately invested in the project. At no time did he have any reason to doubt Mr. Blecker's appraisals. As far as he was concerned, he had no reason to believe they were not conducted in accordance with standard procedures or that they misrepresented the value, and he did not question Mr. Blecker as to the appraisal value estimate. The appraisal value for the DYB did not surprise Allen when it came in. The property is considered to be valuable water-front property in the Boca line. Even though a $3 million appraisal came in on property recently sold for $2.2 million, it did not necessarily please him. He remained neutral about the situation. SCC has used Mr. Blecker primarily to do its appraisals since shortly after starting business. Both Respondents, Orbaker and Blecker were, except at the beginning, the only appraisers SCC used and he used Blecker primarily because (1) his turn-around time was quick, and (2) his fee was reasonable. Mr. Blecker would more often than not come in and ask for income information and expense figures on a property to be appraised but Allen cannot say whether this was done in the DYB case. Mr. Allen feels the jump of $2.1 million in valuation in 13 months was justified by the additional income to be earned as a result of the 146 additional racks. Income will result not only from the rental on the racks but also on the increased operations derived from the storage of 146 additional boats. Rack storage for a 30 foot boat is estimated to cost $100.00 per month per rack. Mr. Allen pled guilty to racketeering and after adjudication of guilt was withheld, was sentenced to 10 years of probation as a result of his involvement with the operation of SCC. The DYB was seen as a gold mine potential investment by Frank J. Kenney, a contractor in practice in Deerfield Beach, Florida, who put together a group of investors to purchase the operation. At the time he looked into the feasibility of putting in a rack system as one of 9 or 10 income sources he saw for the marina. In his investigation of the property toward that end, in early 1986, he discussed the issue of rack construction with the city zoning and planning people and determined that the city requirements would not have precluded construction of the racks. He discussed this proposal with Mr. Wagner, the receiver, who felt that the proposal was good. With proper management he considered an estimate would be that $52 thousand per month gross profit could be achieved within two months of operation and $71.9 thousand-per month gross profit within six months, based on an investment of $2.75 million. His group intended to offer $2.5 million for the entire package but their offer was never made because he heard that someone else was going to bid on the property and he felt that if he could not get it at a steal, he was not interested. Even though he was prepared to offer only $2.5 million for the property, Mr. Kenney though it was worth approximately $5.5 million with the land being worth $2.4 million alone. In considering these figures bandied about by Mr. Kenney, it should be noted that Mr. Kenney was intending to put no money of his own in the investment and it can be concluded quickly that talk is cheap. When one considers a definition of the term, "value, in property, one must recognize that the term means many things. Market value is what a willing buyer is willing to pay and a willing seller is willing to take. In a forced liquidation sale, value is almost always depressed. Buyers expect to pay less than what even they feel it is worth. In the opinion of Dr. William Weaver, a professor of real estate at the University of Central Florida, who espoused the above definition, appraisers may differ in their appraisals. It would be unusual if three different independent appraisers were to come up with the same or similar price for the same property. Special purpose property is that without a ready market. Example of this are schools, churches, and, according to the American Institute of Appraisers, (AIA), marinas, as well as airports and other similar properties. Since these special properties have special purposes, there are special approaches to appraisal of them. The market comparable approach, utilized by Mr. Danner, is difficult to use in special purpose property and if it is used, it should be used only as a check on calculations made utilizing another appraisal approach. In Dr. Weaver's opinion, the preferred approach to marina appraisal would be the cost/income approaches utilized equally for brand new marinas. Older marinas would use the income approach over the cost approach. Market comparables would be the least valid. The AIA suggests the income approach as the best way with the market approach as a check. The cash equivalent calculation utilized by Mr. Danner is, in Dr. Weaver's opinion, theoretically correct, but practically, probably not. Even if financing is way below market as in the instant case, the saving is shared between the buyer and the seller and does not necessarily flow to the property. What is more, as investor sophistication goes up, the effect of this factor on any appraisal or sale is diminished. Capitalization, according to Weaver means the conversion of the income stream into valuation to come up with the present value of the property. This is a part of the income approach and its use is to forecast income into a figure of what someone will pay for the property. It is a time/value calculation. As a result, in a marina situation, one would consider all sources of revenue, lump them together, and do income figuring based on that. Once the income figure is reached, additional calculation is required using the Elwood approach which is an attempt to make the present value calculation simple. Factors do a time/value adjusted computation. It is an appropriate method for use on any income property, including marinas. If the cash flow information is available, it would, in Dr. Weaver's opinion, be a serious error not to use the income approach unless there were a good reason shown not to. Here it should be noted that in each of the three appraisals, the Elwood capitalization calculations were used as is considered appropriate by Dr. Weaver, an expert in the field. Mr. Blecker has served an appraiser in both Florida and Wisconsin for more than 20 years. At no time has he had any financial interest in SCC but merely did appraisal work for them with SCC accounting for approximately 30 percent of his work in 1983 and 1984. As was stated by Mr. Allen, periodically, officials at SCC would suggest to him a figure for appraisal but, according to Blecker, he always came up with his own independent calculations. In doing so he used, primarily, the income approach because he felt it was most applicable to income producing property. He also used the Elwood method in his appraisals because he felt, as did Dr. Weaver and others, that the Elwood approach is appropriate to income property. In the first appraisal, the highest and best use shown for the property was as a marina. He did not use condominium use as a value. When he did the second and third appraisals, he utilized the present value of the property plus income figures derived from racks anticipated for 50 and 146 boats, the information which he got from Mr. Allen. His appraisal was on an "if converted" basis. He had no way of knowing if the work would be done but saw the slab there. Unfortunately, on none of the appraisals did Mr. Blecker clearly indicate that the appraisal was based on an "if converted" basis and his recitation of the proposed construction in the middle of a multi-line paragraph without any highlighting was inadequate. As to appraisal three, again the value given is the actual value plus increased income based on 146 racks. By this time, he had seen plans for the construction of the racks in Mr. Allen's office and had been advised that they were going to put them in. According to Mr. Blecker, he made no mention of the plans because the appraisal was for SCC and as far as he knew, they knew what they were doing. Mr. Blecker did not use comparable sales because he could find none in the area. Those he listed, he got from Ready's research laboratory in Miami. Blecker feels that Mr. Danner's comparables are not really comparable since many are not even marinas and the location of many is vastly different from DYB. This agrees with the testimony of Mr. Haddad and it is found that comparable sales basis is not the appropriate method to use in the case of marinas and in this case in particular. Mr. Orbaker, who was the review appraiser on the second and third appraisals had no part in the first. He was out of town during the time the third appraisal was accomplished but based on the previous work done on the project by Mr. Blecker, which he had seen; based on his previous review of the second appraisal of the same property; and based on rough drafts and agreements on values which were made available to him, he affixed his signature to the blank appraisal form. This is not his usual practice and it was not his intention to have the appraisal go out without him seeing it before it was released notwithstanding the fact that he had seen the property with Blecker several days prior to that time. Mr. Orbaker has done approximately 40 review appraisals for Mr. Blecker for each of which he received $200.00 then doing this, he goes over the appraiser's figures in the office and if he disagrees with the conclusion drawn by the basic appraiser, he goes out and personally views the property. Mr. Orbaker did not compare the third appraisal here with the second. When it went from $4 million to $5 million in valuation, Mr. Blecker explained to him that the racks had been increased with resultant substantial increase in projected income with little increase in expense and it made sense to him. As a result, he accepted Mr. Blecker's assurances as to the ability to put those extra units in. Mr. Orbaker is an associate in Mr. Blecker's real estate office but is on appraisals, however, an independent contractor. He does his own appraisals of residential property, RV parks, and the like from Maine to Florida. He has never, however, appraised a marina in this area. It would appear then, based on the above information, that Mr. Blecker's method of appraisal, utilizing the income method primarily, as modified by the Elwood factor, was the appropriate method of appraisal in this case. It well may be that the property is too highly valued. There is no evidence, however, to show that these appraisals were the result of gross negligence or any unlawful scheme, trick, misrepresentation, or fraud. The relationship with SCC, whose operation was the subject of criminal prosecution, is unfortunate but guilt by association does not apply. There is no showing that Mr. Blecker or Mr. Orbaker knew of any illegal operation or were a part thereof.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Administrative Complaint filed herein against Respondents Clifford L. Orbaker, Ronald Blecker, and Blecker Realty and Appraisal, Inc., be dismissed. RECOMMENDED this day of June, 1987, at Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of June, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1714 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the Respondent herein. 1. Accepted, 2-4. Accepted and incorporated herein. 5-8. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. 11-13. Accepted and incorporated herein. Accepted and incorporated herein. Accepted as to first sentence. Second sentence is irrelevant. Accepted. Accepted. Accepted. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. COPIES FURNISHED: Harold Huff, Executive Director Division of Real Estate Post Office Box 1900 Orlando, Florida 32802 James H. Gillis, Esquire Division of Real Estate Post Office Box 1900 Orlando, Florida 32802 Leslie King O'Neal, Esquire Markel, McDonough and O Neal Post Office Drawer 1991 Orlando, Florida 32802 John W. Wilcox, Esquire Morris, McMichael, Wilcox & Mora 1870 Barnett Plaza 101 East Kennedy Tampa, Florida 33602 Joseph A. Sole, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Van Poole, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750
