The Issue Whether Gary Savage committed the statutory violations alleged in the Amended Administrative Complaint and, if so, what penalty is authorized for such violations.
Findings Of Fact The Parties and Principle Allegations The Department is the state agency charged with the licensing of insurance agents in Florida, pursuant to authority granted in chapter 626, parts I and IX, Florida Statutes, and Florida Administrative Code Chapter 69B-231. Mr. Savage is a 75-year-old registered investment advisor and financial planner who also is licensed to sell life insurance in Florida. The Department’s Complaint seeks to revoke Mr. Savage’s license as an insurance agent. Counts I through III and V through VIII concern eight clients, whereby Mr. Savage earned commissions for selling them annuities and, based on agreements they signed, charged them annual one-percent financial planning service fees tied to the value of their portfolios, including the annuities. Each of these counts alleged the following statutory violations: Engaging in unfair insurance trade practices for knowingly collecting an excessive premium or charge. § 626.9541(1)(o)2., Fla. Stat.; Demonstrating a lack of fitness or trustworthiness to conduct insurance business. § 626.611(1)(g), Fla. Stat.; Demonstrating a lack of reasonably adequate knowledge and technical competence to engage in insurance transactions. § 626.611(1)(h), Fla. Stat.; Engaging in fraudulent or dishonest insurance practices. § 626.611(1)(i), Fla. Stat.; and Misappropriating, converting, or unlawfully withholding moneys belonging to others in conducting insurance transactions. § 626.611(1)(j), Fla. Stat. Count IX charged Mr. Savage with two violations concerning adverse administrative action taken by the Financial Industry Regulatory Authority (“FINRA”) against his securities license: Failing to timely report final administrative action taken by FINRA against his securities license. § 626.536, Fla. Stat.; and Being suspended and fined for violating FINRA’s rules. § 626.621(12), Fla. Stat. At the time of the hearing, Mr. Savage was not working in the financial services industry because FINRA suspended him for several months. During his suspension, Mr. Savage continued to meet with his insurance clients, though he currently has no appointments with life insurers to sell their products. Wearing Two Hats - An Investment Advisor and Insurance Agent Mr. Savage has worked in the investment industry for over 50 years, initially focusing on securities but evolving into financial advising and estate planning work. He has taken numerous courses and examinations relevant to securities law, financial planning, and tax law. Mr. Savage owns two investment advisor businesses: Wall Street Strategies, Inc. (“Wall Street”), is a stock brokerage firm that handles securities transactions; and Advanced Strategies, Inc. (“Advanced Strategies”), is a registered investment advisor firm, offering clients financial planning, tax management, and estate planning advice. In order to provide a wide variety of products to his financial planning clients, Mr. Savage also is licensed as a nonresident agent in Florida to sell life insurance, including annuities.2/ Annuities provide a guaranteed income stream over a term of years, but also come with substantial penalties if they are surrendered or cancelled before the term expires. Fixed index annuities, like those Mr. Savage sold to the clients at issue here, offer portfolios of funds tracking stock market indexes. Owners choose from around six portfolios and can then reallocate by choosing different portfolios each year. Mr. Savage considers himself an investment advisor who is licensed to sell insurance, which is what he tells new clients. Indeed, his businesses are securities and investment advisor firms, not insurance agencies. Mr. Savage’s client base is diverse. Many have portfolios with annuities and other investment products. Some have portfolios with no annuities. Others have portfolios with only annuities, like most of the clients at issue. In order to procure new clients, Mr. Savage held financial planning seminars where diverse speakers discussed financial and estate planning, and tax management. Mr. Savage discussed the types of insurance products he preferred, including fixed index annuities. Other speakers discussed real estate, oil, and investment trusts, which were beneficial from a tax perspective. Most of the clients at issue attended such a seminar and later met with Mr. Savage to discuss their financial plans. When Mr. Savage first met with the clients at issue, he asked them to bring tax returns, investment statements, wills and/or trusts, and other documents relevant for a financial planning discussion. They completed a new client form with information about their assets, investments, and objectives. He often met several times with new clients to develop a plan for them to reach their financial, estate, and tax management goals. To provide financial planning services, Mr. Savage—— like most investment advisors——charged an annual one-percent fee based on the total value of the portfolio. He has reduced or waived his fee if the clients’ situation warranted it or if they continued to purchase products for which he received commissions to compensate him for providing financial planning services. Before that are charged an annual fee, Mr. Savage’s clients signed a “Service Fee Agreement” (“Fee Agreement”), which was on “Advanced Strategies, Inc., Registered Investment Advisor” letterhead and provided as follows: Advanced Strategies charges a 1% (one percent) financial planning retention fee annually. This fee is based upon the total combined value of accounts including annuities, indexed life, mutual funds, income products and brokerage accounts that we manage or provide service for. This amount is tax deductible as a professional fee. The Fee Agreement offered to provide several financial planning services3/: Address, ownership, and beneficiary changes; Duplicate statements and tax returns; Required minimum distribution and withdrawal requests, and deposits; General account questions; One printed analysis per year; Annual review; Asset rebalancing when applicable; Informing client of new tax laws, changes in estate planning, and new exciting products and concepts. The Fee Agreement noted that the non-refundable fee was due on the service anniversary date and that non-payment would result in discontinuation of the planning services until paid in full. Mr. Savage confirmed that the Fee Agreement was voluntary. If clients wanted to purchase a product, but did not want him to manage their portfolio or provide the outlined services, they did not have to sign the agreement. In that event, Mr. Savage would procure the product and not provide financial planning services. All of the clients at issue here purchased annuities from Mr. Savage. He helped them complete the applications with the insurance companies and, if necessary, assisted them with transferring or closing out other investments used to pay the premiums. He ensured that the insurers received the paperwork and the premiums. Once the annuities were procured, he received commissions from the insurers. The Complaint did not allege that he acted unlawfully in recommending annuities to the clients or receiving commissions from the insurers. All of the clients at issue also signed the Fee Agreement and Mr. Savage provided them with services every year.4/ Some of the services were things an insurance agent technically could handle, such as answering client calls, making address and beneficiary changes, providing duplicate statements, assisting with the paperwork for required minimum distributions, withdrawals, and deposits, and asset reallocation. Other services were things that an agent could not provide, such as tax management/credits, duplicate tax forms, assistance with estates, trusts, and wills, and financial planning advice. But, even as to the services an agent technically could provide, Mr. Savage used his financial planning expertise to advise these clients as to a number of decisions relating to their annuities. For instance, although agents can assist with reallocation, required minimum distributions, and withdrawals, Mr. Savage’s securities and financial planning expertise allowed him to make recommendations that took into account an analysis of the stock market, the economy, and the clients’ financial circumstances and overall goals. An agent is not required to have that expertise, which is one reason he charged the clients an annual service fee. Many of these clients did not recall Mr. Savage providing most of the services listed in the Fee Agreement, but the weight of the credible evidence reflects otherwise. He analyzed asset reallocations for these clients every year and, when he believed reallocation was appropriate, he undisputedly made it happen. He provided annual account analyses consolidating the clients’ investment statements. He met with some of them every year to conduct an annual review and, for those he did not meet, he offered to do so in their annual invoice letter. Whenever the clients asked for assistance with questions, address, beneficiary, or ownership changes, withdrawals or required minimum distributions, or deposits, among others, he performed the task. And, as he confirmed and some of the clients acknowledged, the Fee Agreement made it clear that the services were available, even if they did not need all of them in a particular year or did not think to ask. Although some of the clients testified that Mr. Savage failed to tell them that his fee was optional, all of them had a chance to review the Fee Agreement before voluntarily signing it. The agreement noted that the fee was a “financial planning retention fee” based on the value of the accounts “that we manage or provide service for,” and that non-payment “will result in the discontinuation of my/our planning services.” These clients believed they hired Mr. Savage as an investment advisor and many understood that such advisors do charge fees for providing services. More importantly, no client testified that Mr. Savage said his annual fee was required to procure the annuities or was a charge for insurance. Nothing in the Fee Agreement gave that indication either. Mr. Savage credibly confirmed that he did not charge a fee for insurance; rather, the client paid the fees for financial planning services. And, if they decided they no longer wanted Mr. Savage’s services and stopped paying his fee, they took over management of their annuities without losing access to them or the money in them. The Department concedes that Mr. Savage may wear two hats, as both the agent selling an annuity and the financial advisor managing his client’s portfolio. It contends, however, that Mr. Savage violated the insurance code by selling annuities to these clients and thereafter charging them annual fees——tied to the value of the annuities——to provide services that he should have provided for free after earning commissions on the sale of those annuities. The Department’s investigator, Ms. Midgett, testified about annuities, commissions, and insurance agent services based on her experience in the industry as both a former agent and certified chartered life underwriter.5/ Ms. Midgett confirmed that the Department approves both the premiums and commissions applicable to annuities. Once the premium or deposit is paid, the commission is earned; if an additional deposit is made into the annuity, the agent would earn another commission. Ms. Midgett testified that it is improper for an agent to receive a commission and knowingly charge a client any fees with respect to that annuity under section 626.9541(1)(o). However, she admitted that a financial advisor may charge service fees on annuities if they did not receive a commission on the sale. And, if the annuity is ever rolled into a non- insurance product, that agent could charge service fees on that asset because they are no longer tied to the annuity. Ms. Midgett also testified about the services agents are expected to provide. Once an agent sells a product, he or she becomes the agent of record and does “things such as answer questions, beneficiary changes, address changes, yearly reviews, anything to keep that client and to help them in any way they can.” According to her, “it’s basic 101 insurance that an agent services their clients,” which is “extremely important if you want to build your book of business and to keep a client happy.” Importantly, however, Ms. Midgett conceded that no statute or rule specified what services agents were required to provide once they sold an annuity. “It’s just understood when you’re an insurance agent that you’re going to service your clients. It’s part of the sale of the product.” She believed agents learned this in the course study to obtain a license. Although Ms. Midgett testified that Mr. Savage should have provided most of the services listed in the Fee Agreement for free once he earned commissions on the sale of the annuities, she conceded that at least two of them——duplicate tax forms and informing the client of new tax laws——were not services agents would do. She also agreed that agents could not advise clients as to taking money from an annuity and investing in stocks, mutual funds, real estate trusts, or other investment-related options as “those are all investment advisor functions.” Ms. Midgett initially admitted having no knowledge of whether insurance agents were trained in asset reallocation, though she “would assume so” because “[i]f you have a license to sell the product, then obviously you have to have the knowledge of how to be able to service that product and make the allocations.” When she testified several months later in the Department’s rebuttal case, she stated that the manual used to obtain a license in Florida had a chapter on annuities that “touched on” reallocation. But, she admitted she was not an expert on reallocation or analyzing market conditions, and she had only previously worked with one agent who sold annuities, though he did advise his annuity clients on reallocation. In sum, the Department conceded that no statute or rule articulated the services an agent is required to provide upon receiving a commission. The appointment contracts between the agents and the insurance companies, two of which are in the record, apparently do not specify the services agents are expected to provide. At best, the evidence established what a good agent should do to build a book of business; the evidence did not establish what services an agent, like Mr. Savage, was legally required to provide for receiving a commission. Count I – Kathy Butler Ms. Butler met Mr. Savage while working at a yacht club. In February 2011, they met at his office and she filled out a new client form with financial information. In March 2011, Mr. Savage assisted Ms. Butler with the application for a fixed index annuity for $50,000. On that same day, she signed the Fee Agreement, which she understood to be paying for his services as an investment advisor to manage the annuity and ensure it was being invested correctly; she believed he received income from the insurance company. In January 2012, she purchased another fixed index annuity for $8,000. Mr. Savage procured both annuities. Between 2012 and 2015, Ms. Butler received annual invoices from Mr. Savage and paid about $3,265 in service fees. At this point, Ms. Butler deals directly with the insurance companies, though Mr. Savage is still listed as her agent. The weight of the credible evidence shows that Mr. Savage answered general account questions, made a beneficiary change, conducted annual reviews when requested, sent annual account statements, analyzed reallocation each year and, when he recommended reallocation in 2014 and 2015, he handled the paperwork. Ms. Butler knew she could avail herself of the services in the Fee Agreement, even though she chose not to request many of them. Count II – Beverly Wilcox Ms. Wilcox met Mr. Savage at a seminar in early 2009. In February 2009, they met at his office, she completed a new client form, and she signed the Fee Agreement. She believed he was a financial advisor and that she would owe him money, but she did not read the Fee Agreement before signing it. In March 2009, Mr. Savage assisted Ms. Wilcox with the application to purchase a fixed index annuity for $120,000. He procured the annuity, as requested. Between 2010 and 2016, Ms. Wilcox received yearly invoices from Mr. Savage and paid about $6,500 in fees, after which she decided to deal with the annuity company directly. The weight of the credible evidence shows that Mr. Savage answered questions when asked, offered to conduct annual reviews each year, sent annual account statements, analyzed reallocation each year and, when he recommended reallocation in 2010 and 2012, he handled the paperwork. Count III – Joseph Cerny Mr. Cerny met Mr. Savage while working at a yacht club and knew he was a financial advisor. Mr. Cerny purchased several fixed index annuities and other investments from Mr. Savage, who helped him complete the paperwork and procured the policies. Between 2003 and 2004, he bought two annuities for $100,000 each and two mutual funds for about $30,000 each. In 2008, he bought an annuity for $10,000. In 2010, he bought another annuity for $119,400. Mr. Savage did not charge fees for the first few years. Mr. Cerny believed he received compensation from the companies. However, in March 2010, Mr. Cerny signed the Fee Agreement. Between 2011 and 2012, he received two invoices, paying the first for $1,266.84 but refusing to pay the second. Mr. Cerny and Mr. Savage ended their relationship at that point. The weight of the credible evidence shows that Mr. Savage answered questions, provided annual statements, assisted with making withdrawals when requested, met with Mr. Cerny yearly, analyzed reallocation each year and, when he recommended reallocation in 2010 and 2011, he handled the paperwork. Count V – Marion Albano Ms. Albano met Mr. Savage at a retirement seminar in early 2007. In February 2007, they met at his office to go over her investments, including several annuities. Based on his recommendation, she surrendered her old annuities and purchased a fixed index annuity for about $1.6 million. He assisted her with the application and procured the annuity. In February 2007, Ms. Albano also signed the Fee Agreement. Mr. Savage told her there was a service charge to manage the annuity and she agreed because her brother pays the same rate on his managed brokerage account. She was never worried about losing the annuity if she failed to pay the fee. Ms. Albano received invoices from Mr. Savage every year from 2008 through 2015 and testified that she had paid between $110,000 and $120,000 in fees during that time. She had to pay some of the fees out of her distributions. The weight of the credible evidence shows that Mr. Savage answered account questions, corresponded with her daughter about his recommendations, provided her with an account analysis each year, met with her annually to review her account, and assisted her with required minimum distributions and withdrawals. He analyzed reallocation each year and, when he recommended reallocation in 2010 and 2011, he handled the paperwork. Count VI – Jane D’Angelo Ms. D’Angelo and her late husband, whose son-in-law was an insurance agent, met Mr. Savage at an estate planning seminar in early 2003; they believed he was an investment advisor. In March 2003, he came to their home and they completed a new client form, indicating they had several types of investments, including annuities. Between 2003 and 2016, the D’Angelos invested with Mr. Savage. In 2003, they purchased a tax credit investment for $10,000. In 2005, they purchased a similar investment for $19,000, which resulted in tax credits totaling $17,174. Between 2005 and 2011, they purchased eight fixed index annuities from Mr. Savage. He assisted them with the applications, informing them that the companies paid him directly. He procured the following annuities, some of which were purchased by transferring money from their existing annuities: In April 2005, they bought an annuity for $250,000; in May 2007, they bought an annuity for $32,789.78; in May 2008, they bought an annuity for $29,510; in March 2009, they bought three annuities for $337,554, $550,000, and $6,000; in May 2011, they bought two annuities, one for $40,715 and another for $150,889; and, in June 2011, they bought an annuity for $24,667. Prior to 2010, they paid no service fees. However, in April 2010, they signed the Fee Agreement. Although they were surprised and felt like they had to sign, Ms. D’Angelo agreed they were not coerced or told the annuities would lapse if they failed to do so. Indeed, she never lost access to the annuities even after she stopped paying Mr. Savage’s fees in 2015. Mr. Savage sent them annual invoices from 2010 through 2015, totaling $54,000 in fees. Mr. Savage agreed to waive the 2010 fee and, ultimately, they only paid about $14,511 total. In 2016, Ms. D’Angelo informed Mr. Savage that she no longer needed his services. She had been dealing directly with the insurance companies herself, though they have provided her with names of individuals if she wanted someone to advise her. The weight of the credible evidence shows that Mr. Savage provided numerous services to the D’Angelos on the investments he managed for them.6/ He had discussions with them, sent them annual statements, and assisted them with deposits and transfers between annuities, required minimum distributions and withdrawals, income riders, and beneficiary and ownership changes. He analyzed reallocation every year and handled the paperwork when he felt it was appropriate. He also offered to meet annually and held those meetings in years in which they were requested. Count VII – Ernest Blougouras Rev. Ernest Blougouras, a Greek Orthodox priest, attended several financial planning seminars with Mr. Savage. They met privately in February 2005, at which he completed a new client form listing his investments, which included fixed annuities, CDs, mutual funds, bonds, and stocks. Rev. Blougouras purchased fixed index annuities and other investments from Mr. Savage. He told Rev. Blougouras that he received commissions for selling the annuities. Mr. Savage assisted with the applications and procured the policies. Over the last 14 years, Rev. Blougouras purchased nine fixed index annuities. In March 2005, he bought an annuity for $347,003; in April 2005, he bought an annuity for $229,458; in August 2005, he bought an annuity for $102,227; in June 2006, he bought an annuity for $8,300; in May 2007, he bought an annuity for $41,143; in June 2009, he bought an annuity for $50,000; in July 2009, he bought an annuity for $14,308; and, though the record is unclear as to the date, he bought another annuity that was worth $40,572 in 2010. Since 2011, he bought an additional annuity and several non-insurance investments, such as real estate trusts and energy funds. Prior to 2010, Mr. Savage did not charge Rev. Blougouras service fees because he continued to purchase annuities. However, in 2010, Mr. Savage decided to start charging an annual service fee and sent Rev. Blougouras the Fee Agreement. Rev. Blougouras believed that Mr. Savage’s services would be cancelled if he failed to pay the fee and he would have to hire another advisor. He signed the Fee Agreement and continues to use Mr. Savage’s services. Mr. Savage has sent annual invoices to Rev. Blougouras every year since 2010. The record only contains the 2010 invoice for $9,883 and Rev. Blougouras could not recall how much he paid overall. However, he confirmed that he has paid every invoice he has received either himself or with distribution checks he received from the annuities. The weight of the credible evidence shows that Mr. Savage provided numerous services to Rev. Blougouras. He prepared paperwork and documents for required minimum distributions and withdrawals, held meetings to review and organize his tax paperwork, copied documents requested, and made address changes when requested. He analyzed asset reallocation every year and, when he recommended reallocation in 2010 and 2011, he completed the necessary paperwork. Count VIII – George Flate Mr. Flate and his wife met Mr. Savage at a financial planning seminar in 2010. In February 2010, they met Mr. Savage and completed their new client form listing their investments, including fixed annuities, CDs, mutual funds, and stocks. They also signed the Fee Agreement, which Mr. Flate believed was a standard service agreement. They thought they hired Mr. Savage as an investment advisor and never believed they would lose access to the annuities if they stopped paying his fees. Based on Mr. Savage’s recommendation, the Flates purchased two fixed index annuities: one annuity was issued in April 2010 for approximately $22,000, and the other annuity was issued in May 2010 for approximately $22,500. Mr. Savage assisted them with filling out the applications and handled the paperwork to ensure the annuities were issued. Between 2012 and 2015, Mr. Savage sent the Flates invoices for his annual service fees every year. In total, they paid approximately $1,506 in service fees. In 2015, the Flates terminated their relationship with Mr. Savage. They have worked with two financial advisors since then, neither of whom charged them service fees relating to the annuities. The weight of the credible evidence shows that Mr. Savage provided numerous services to the Flates. Each year, he met with them to go over their account, provided them with account analyses, analyzed reallocation and, the two to three times they agreed with his recommendations, he handled the paperwork. He handled withdrawals and address changes for them when requested, and he provided them with information as to changes in tax law and estate planning, though they did not believe that was necessary since they had tax and estate lawyers. The Flates understood that Mr. Savage was available to answer their questions and provide the services if they asked. Count IX – FINRA Disciplinary Proceeding On July 14, 2016, two former clients of Mr. Savage’s filed a Statement of Claim with FINRA alleging that he had recommended investments that were not suitable for them. Over Mr. Savage’s objections to proceeding with the hearing as scheduled, the arbitration panel awarded the clients over $725,000 in damages, fees, and costs. The clients filed a petition in Florida circuit court to approve the arbitration award. Mr. Savage responded in opposition and moved to vacate the arbitration award on grounds that it violated his due process rights. On November 9, 2017, the circuit court issued a final judgment awarding over $769,000. On December 4, 2017, Mr. Savage appealed the circuit court’s order to the Second District Court of Appeal. On June 12, 2018, while the appeal was pending, Mr. Savage signed a Letter of Acceptance, Waiver and Consent (“AWC”) with FINRA. The AWC stated that Mr. Savage accepted and consented, without admitting or denying, the following findings: Wall Street failed to apply for a material change in its business operations, i.e., to sell oil and gas interests, private placements, and non-traded real estate investment trusts, before engaging in more than 50 such transactions, many of which were consummated by Mr. Savage; Mr. Savage failed to timely update his FINRA Form U4 within 30 days of the Statement of Claim being filed against him in July 2016; Mr. Savage failed to timely respond to FINRA’s requests for information relating to an upcoming examination of Wall Street; and Wall Street failed to maintain the minimum net capital requirements of $5,000 while engaging in securities transactions. Mr. Savage agreed to three sanctions: (1) a five- month suspension from associating with any FINRA registered firm; (2) a three-month suspension from association with any FINRA registered firm in a principal capacity, to be served following the five-month suspension; and (3) a $30,000 fine. The AWC confirmed that Mr. Savage waived his procedural rights relating to these alleged violations and made clear that it would become part of his permanent disciplinary record that could be considered in future actions brought by FINRA or other regulators. He was precluded from taking positions inconsistent with the AWC in proceedings in which FINRA was a party, but was not precluded from taking inconsistent positions in litigation if FINRA was not a party. The five-month suspension began on June 13, 2018, and ended on November 17, 2018. The three-month suspension began on November 18, 2018, and ended on February 17, 2019. In the interim, on August 16, 2018, FINRA notified Mr. Savage by letter that it was suspending his securities license indefinitely for his “failure to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.” This letter is not in the record and, as such, it is unclear whether Mr. Savage had an avenue to challenge that suspension directly. Mr. Savage had challenged the underlying arbitration award, which remained pending on appeal in the Second District Court of Appeal. On November 7, 2018, the Second District affirmed the circuit court’s arbitration order. On November 20, 2018, Mr. Savage put the Department on notice of the FINRA disciplinary actions, including the AWC from June 2018 and the decision of the Second District affirming the arbitration award.
Conclusions For Petitioner: David J. Busch, Esquire Department of Financial Services Room 612, Larson Building 200 East Gaines Street Tallahassee, Florida 32399-0333 For Respondent: Michael Buchholtz, Esquire The Law Office of Michael Buchholtz Post Office Box 13015 St. Petersburg, Florida 33777
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services issue a final order suspending Mr. Savage’s license as an insurance agent for twelve months. DONE AND ENTERED this 30th day of September, 2019, in Tallahassee, Leon County, Florida. S ANDREW D. MANKO 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 30th day of September, 2019.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating Chapter 473 and rules promulgated thereunder as set forth in the Conclusions of Law portion of this Order. His license should be suspended for one year with probation thereafter for a period of two years. He should also be required to take such additional continuing education courses as the Board deems appropriate. DONE and ORDERED this 15th day of April, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 1986.
The Issue Whether the Respondent, the Health Care Cost Containment Board, should waive the requirement that Golden Glades Regional Medical Center file its audited actual experience or was the Respondent correct in declining to review the Petitioner's fiscal year 1990 proposed budget?
Findings Of Fact On or about September 26, 1989, the Petitioner filed its proposed budget for its fiscal year beginning January 1, 1990, and ending December 31, 1990, with the Respondent. The Petitioner's proposed 1990 budget was submitted pursuant to Section 407.50(3), Florida Statutes. The Respondent determined that the Petitioner's proposed 1990 budget should not be approved. The Respondent proposed in its preliminary findings and recommendations to hold the Petitioner to its 1988 budget levels of gross revenue per adjusted admission of $8,532.00 and net revenue per adjusted admission of $5,835.00. About the same time that the Petitioner filed its proposed 1990 budget, the Petitioner filed unaudited financial statements for its fiscal year ending December 31, 1988, with the Respondent. The financial statements were not accompanied by an audit opinion letter from the Petitioner's certified public accountants. Therefore, the statements did not constitute "audited actual experience" or "audited actual data". The Respondent rejected the Petitioner's proposed 1990 budget because of the Petitioner's failure to file audited actual experience. Hospitals subject to Chapter 407, Florida Statutes, are required to file audited actual experience which is used by the Respondent in reviewing hospital budgets. In February or March, 1989, the Petitioner retained an independent, Florida licensed certified public accountant (hereinafter referred to as the "Auditors"), to prepare audited financial statements for its 1988 fiscal year. The Auditors completed all the field work they could complete in April or May, 1989. An audit opinion letter must be included with an audit report pursuant to generally accepted auditing standards. The Auditors have delayed issuing an audit opinion letter for the Petitioner's 1988 fiscal year, which is required in order to issue audited financial statements. Audit opinion letters typically contain a description of the scope of the work performed by the auditors, a description of the audit process and an opinion concerning whether the financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles. The Auditors have been requested by the Petitioner to withhold issuance of their final audit report for the Petitioner's 1988 fiscal year. As of the date of the formal hearing of this case, the Auditors had not issued an audit opinion letter, and thus an audit report, because they needed to be provided by the Petitioner with information concerning the restructuring of the Petitioner's debt, updated legal letters from the Petitioner's attorneys and a management representation letter from the Petitioner. The Petitioner's source of working capital for its daily operations has been a line of credit with First American Bank. The line of credit expired during 1989. A new source of working capital has not been arranged by the Petitioner. Therefore, the Auditors could not issue an audit opinion letter concluding that the Petitioner is viable as a "going concern." Unless the Petitioner can restructure its debt or find another source of debt-financing, increase its equity capital or achieve profitable operations, the Auditors will not be able to opine that the Petitioner is a going concern. This problem has been in existence almost since the inception of the Petitioner's ownership of the hospital. The Petitioner has requested three extensions of time to file its proposed 1990 budget. It did not inform the Respondent of the debt restructuring problem in any of the extension requests. Without resolving the debt restructuring problem of the Petitioner, the Auditors cannot determine what effect a renegotiation of the Petitioner's debt may have on the Petitioner's financial statements for its 1988 fiscal year. There will be uncertainty concerning the 1988 fiscal year financial statements of the Petitioner until the Auditors issue their final audit report. If the Auditors issued an opinion letter as of the date of the formal hearing, they would have to issue a "disclaimer" letter. In issuing a disclaimer, an auditor declines to render an opinion concerning the financial statements. To avoid a disclaimer opinion letter, the Petitioner requested that the Auditors not issue their final audit report. Whether the Petitioner is a going concern does not impact on the calculation of its operational revenues and expenses as represented in the Petitioner's unaudited 1988 fiscal year financial statements. If the Petitioner is not considered a going concern the Petitioner would be considered on a liquidation basis for purposes of its financial statements. Therefore, the question of whether the Petitioner is a going concern does impact the manner in which its assets would be valued and the determination of the Petitioner's liabilities. A management representation letter, which the Auditors also need to complete their audit of the Petitioner, is a letter from the management of a business, such as a hospital, representing that management has made available all of the books and records of the hospital, that management understands generally accepted accounting principles and the financial statements of the hospital have been prepared in accordance with such principles, that all liabilities have been accrued and that proper disclosures have been made in the financial statements. A management representation letter is required by the American Institute of Certified Public Accountants before an audit opinion letter may be issued. A management representation letter should provide assurances to the auditors that management has made available all financial records and related data, and minutes of the meetings of the stockholders and directors, if a corporation, and that there are no irregularities involving management employees that could have a significant effect on the financial statements. Without a management representation letter there are no assurances that a hospital such as the Petitioner's has engaged in related-party transactions or, if so, the nature and impact on expenses of such transactions. In addition to submitting unaudited financial statements to the Respondent, the Petitioner provided the Respondent with a "comfort letter" from the Petitioner's Auditors. The Respondent needs audited actual experience in order for it to perform a full budget review of a hospital's proposed budget submitted pursuant to Section 407.50(3), Florida Statutes. The financial data contained in the audited actual reports of a hospital is used in the methodologies and formulas utilized by the Respondent in its budget review. The purpose of conducting a budget review is to determine the recommended levels of charges that a hospital may impose upon its patients in the budget year. Audited actual experience provides the starting point for determining whether a hospital's proposed budget is reasonable. A comfort letter merely indicating that the information on the financial statements should not change is not sufficient to provide the reliability the Respondent should demand of a hospital's financial statements. The Respondent's budget review includes an analysis of a hospital's ability to earn a reasonable rate of return. This analysis requires reliance upon the financial data contained in the hospital's balance sheet and income statement. The data must be reliable. Accuracy of the data can only be assured if it is part of an auditor's final report. As part of the audited actual experience of a hospital such as the Petitioner's hospital, it is reasonable for the Respondent to require that an audit opinion letter be provided. Without an audit opinion letter the Respondent cannot determine whether there are any disclaimers, qualifying statements or notes about subsequent events of the hospital. The Respondent does not have the resources necessary to perform its own audit of hospitals. Therefore, it is reasonable for it to require that hospital's provide audited actual experience to the Respondent. The rules of the Respondent allow it to waive the requirement that a hospital file audited financial statements. Rule 10N-1.006, Florida Administrative Code. The Respondent grants waivers pursuant to Rule 10N-1.006, Florida Administrative Code, if it is "impossible" for a hospital to file audited financial statements. The Petitioner did not file a request for such a waiver. The evidence failed to prove that the Respondent was prejudiced by the Petitioner's failure to file a request for a waiver. The Petitioner has failed to prove that the information necessary for it to file audited financial statements for its 1988 fiscal year was "not available at the time nor can be reasonably developed by the hospital " Unaudited financial statements may be relied upon for some purposes. The Respondent relies upon unaudited data for some purposes. But not for full budget review purposes. The weight of the evidence failed to prove that it is unreasonable for the Respondent to refuse to rely upon the Petitioner's 1988 fiscal year unaudited financial statements to complete the budget review the Respondent is required to conduct for 1990.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent issue a Final Order dismissing the Petitioner's Petition for Administrative Hearing. DONE and ENTERED this 31st day of May, 1990, in Tallahassee, Florida. LARRY J. SARTIN 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 31st day of May, 1990. APPENDIX TO RECOMMENDED ORDER The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1-7 and hereby accepted. The last two sentences of proposed finding of fact 6 is not supported by the weight of the evidence. 8 2. 9 1-2. 10 3 and 10. See 29. Not relevant. Hereby accepted. The proposed finding of fact that the data on the financial statements "will not change" and the last sentence are not supported by the weight of the evidence. 11-14. The last sentence is not relevant. See 26. 16 See 27-28. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 2. 3 4. Hereby accepted. 2 and 4. 6 6. 7 6-7 and 9. 8 8. 9 9-11. 10 12. 11-12 15. 13 12. 14 21. 15 3, 22 and 29. 16 21-22. 17 22-23. 18 16-19. 19 25. 20 Not relevant. The Intervenor's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 3. 3 2. 4-8 Hereby accepted. 9-11 10. 12 16. 13 18. 14 16-19. 15 11-12. 16 11 and 13. 17 10, 14-15 and hereby accepted. 18 15. 19 Hereby accepted. 20 11. 21 14. 22 Hereby accepted. 23-26 8 27 20 and 22. 28 Hereby accepted. 29 9 and 14. 30 Hereby accepted. 31 8. 32 Not supported by the weight of the evidence. 33 21 and 24. 34 13. 35 12. 36 9. 37 12. 38 13. 39 29. 40 Hereby accepted. 41 26-27. 42 Hereby accepted. 43 9. 44 8 and hereby accepted. 45 21. 46 23. 47 24. 48 25. 49 22. 50 23 and hereby accepted. COPIES FURNISHED: James M. Barclay, Esquire Suite 500 315 South Calhoun Street Tallahassee, Florida 32301 Robert D. Newell, Jr., Esquire 817 North Gadsden Street Tallahassee, Florida 32303-6313 Jack Shreve Public Counsel David R. Terry Associate Public Counsel Peter Schwarz Associate Public Counsel c/o The Florida Legislature 812 Claude Pepper Building 111 West Madison Street Tallahassee, Florida 32399-1400 Stephen Presnell, General Counsel Health Care Cost Containment Board Woodcrest Office Park 325 John Knox Road Building L, Suite 101 Tallahassee, Florida 32303
The Issue Whether the Respondents' Florida real estate licenses should be disciplined based upon the following charges, as alleged in the administrative complaint: COUNTS I and II: Whether Respondent Richard Michael Regazzi ("Regazzi") is guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust in any business transaction in violation of Section 475.25(1)(b), Florida Statutes. COUNT III: Whether Respondent Regazzi is guilty of failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. COUNT IV: Whether Respondent Atlantic Rentals Realty, Inc. is guilty of failure to maintain trust funds in the real estate brokerage escrow bank account or some other proper depository until disbursement thereof was properly authorized in violation of Section 475.25(1)(k), Florida Statutes. COUNT V: Whether Respondent Regazzi is guilty of failure to prepare the required written monthly escrow statement- reconciliations in violation of Rule 61J2-14.012(2) and (3), Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. COUNT VI: Whether Respondent Atlantic Rentals, Inc. is guilty of failure to prepare the required written monthly escrow statement-reconciliations in violation of Rule 61J2-14.012(2) and (3), Florida Administrative Code, and therefore in violation of Section 475.25(1)(e), Florida Statutes. COUNT VII: Whether Respondent Regazzi is guilty of having been found guilty for a third time of misconduct that warrants his suspension or has been found guilty of a course of conduct or practices which shows that he is so incompetent, negligent, dishonest, or untruthful that the money, property, transactions, and rights of investors, or those with whom he may sustain a confidential relation, may not safely be entrusted to him in violation of Section 475.25(1)(o), Florida Statutes.
Findings Of Fact Petitioner is a state government licensing and regulatory agency charged with the responsibility and duty to prosecute Administrative Complaint pursuant to the laws of the State of Florida, in particular Section 20.165, Florida Statutes, and Chapters 120, 455 and 475, Florida Statutes, and the rules promulgated pursuant thereto. Respondent Regazzi is, and was at all times material hereto, a licensed Florida real estate broker. License number 0273453 was issued in accordance with Chapter 475, Florida Statutes. The last license issued was as a broker in care of Atlantic Rentals, Inc., 6811 North Atlantic Avenue, No. B, Cape Canaveral, Florida. Respondent Atlantic Rentals, Inc. is, and was at all times material hereto, a corporation registered as a Florida real estate broker having been issued license number 0273444 in accordance with Chapter 475, Florida Statutes. The last license issued was at the address of 6811 North Atlantic Avenue, No. B, Cape Canaveral, Florida. At all times material hereto, Respondent Regazzi was licensed and operating as the qualifying broker and officer of Respondent Atlantic Rentals, Inc. On January 28, 1997, Petitioner's Investigator Maria Ventura ("Investigator Ventura") conducted an audit of Respondents' escrow account #3601612291, maintained at NationsBank and titled Atlantic Rentals, Inc., Multi Unit escrow Account (escrow account). On January 28, 1997, Respondents had a reconciled bank balance of $46,166.93. As of January 28, 1997, Investigator Ventura determined that Respondents had a total trust liability of $84,586.77. By comparing Respondents' reconciled bank balance with Respondents' trust liability, it was determined that Respondents had a shortage of $38,419.84 in their escrow account. In addition, Respondents were not performing monthly reconciliations of their escrow account. On January 28, 1997, Respondent Regazzi prepared a monthly reconciliation statement (reconciliation statement) for December 1996, and provided it to Petitioner on the same day. Respondent Regazzi's reconciliation statement indicated that there was shortage of $28,885.36 in the escrow account. Respondent Regazzi's reconciliation statement is not signed, and does not indicate what month was being reconciled. The statement indicates that the reconciled bank balance and trust liability agree when, in fact, the reconciliation statement indicates a shortage of $28,885.36. Respondent Regazzi's explanation of how the funds were removed from the escrow account by a third party is not credible. Even if this account were credible, it does not lessen Respondent Regazzi's culpability. On April 21, 1992, the Florida Real Estate Commission ("FREC") issued a final order whereby Respondent Regazzi was found guilty of misconduct and was fined $200, and placed on probation for one year with a requirement to complete and provide satisfactory evidence to the Department of having completed an approved 30-hour broker management course. Respondent successfully completed the terms of probation. On November 12, 1996, the FREC issued a final order whereby Respondent Regazzi was fined $250 for misconduct and Respondent Atlantic Rentals, Inc. was reprimanded.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent Regazzi be found guilty of violating Sections 475.25(1)(b), (e), (k), and (o), Florida Statutes (1995), as charged in the Administrative Complaint. Respondent Atlantic Rentals, Inc. be found guilty of having violated Sections 475.25(1)(b), (k), and (e), Florida Statutes, as charged in the Administrative Complaint. That Respondents Regazzi's real estate license be revoked and that he be ordered to pay restitution in the amount of $38,419.84, plus interest. That Respondent Atlantic Rentals, Inc.'s corporate brokerage registration be revoked. RECOMMENDED this 23rd day of December, 1997, at Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of December, 1997. COPIES FURNISHED: Daniel Villazon, Esquire Department of Business and Professional Regulation 400 West Robinson Street, Suite N-308 Orlando, Florida 32801 Richard Michael Regazzi, pro se Atlantic Rentals, Inc. 6811-B North Atlantic Avenue Cape Canaveral, Florida 32920 Henry M. Solares, Division Director Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Lynda L. Goodgame General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Basic is a general contractor specializing in asphalt resurfacing and related construction activities. Its principal offices are in Orlando, Florida. Basic is not currently qualified to bid on construction projects to be let by DOT. Its certificate of qualification expired on June 30, 1984. Until the expiration, Basic had been continuously qualified by DOT to bid on such jobs since 1975. During the time it was qualified, Basic successfully performed approximately fifty state jobs. In early September, 1984, Basic received its annual audited financial statement from its accountants, Fox and Company (Fox), which reflected Basic's financial condition for the year ending on March 31, 1984. On or about September 14, 1984, Basic filed its application for renewal of its certificate of qualification. With the application, Basic filed the audited financial statement prepared by Fox and Company and an additional financial statement prepared by Basic's new accountants, Colley, Trumbower and Howell (Colley). This Colley financial statement was merely a compilation and covered the period April 1, 1984 through June 30, 1984. The audited statement of Fox contained the opinion of a certified public accountant; the compilation of Colley contained no opinion. The audited statement preceded the date of filing by approximately 170 days. DOT reviewed the application and denied it on the ground that the financial statements submitted were of a date more than 120 days prior to the application DOT did not perform a fiscal analysis or further review of the application after it determined that the application did not contain what it believed to be the necessary financial statements. In response to the denial, Basic had Colley prepare an additional financial statement which reflected its financial condition through September 30, 1984. This financial statement was a review and did not contain an opinion of a certified public accountant (See transcript p 47, lines 22 and 23). DOT declined to accept this review. An "audited" financial statement is a financial statement that has been subjected to full audit scrutiny and verification. A compiled financial statement is merely a compilation of financial information as supplied by the client. A reviewed financial statement consists of inquiries and compilation of financial data with application of analytical procedures and is less in scope than an audited financial statement. An "opinion" is a term of art in the field of accounting and refers to an opinion that the basic financial information taken as a whole is fairly stated in all material respects and is in accordance with generally accepted accounting principals. A qualified opinion is subject to the same definition and level of scrutiny, but is qualified as it relates to one or more items in the financial statement. DOT only accepts audited financial statements which express an opinion. The financial information in the reviewed financial statement, when read in conjunction with the audited financial statement reflects that Basic is in an adequate financial situation with positive current rates and a substantial adjusted net worth. Basic is making a profit.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying the application of Basic for a certificate of qualification. DONE and ORDERED this 8th day of February, 1985, in Tallahassee, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 8th day of February, 1985.
The Issue Whether respondent's proposed amendment to Rule 59C-1.008(5)(g), Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority?
Findings Of Fact 1. The proposed amendment under challenge would repeal or delete the fourth numbered paragraph of a provision in one of the respondent's rules, entitled "Certificate of Need Application Contents," Rule 59C-1.008(5)(g), Florida Administrative Code. Respondent has succeeded the Department of Health and Rehabilitative Services as administrator of the certificate of need program. The provision now reads: (g) With respect to paragraph 408.037(3), F.S., which requires an audited financial statement of the applicant the following provisions apply: The audited financial statement of the applicant must be for the most current fiscal year. If the most recent fiscal year ended within 120 days prior to the application filing deadline and the audited financial statements are not yet available, then the prior fiscal year will be considered the most recent. Existing health care facilities must provide audited financial statements for the two most recent consecutive fiscal years in accordance with subparagraph 1. above. Only audited financial statements of the applicant will be accepted. Audited financial statements of any part of the applicant, including but not limited to subsidiaries, divisions, specific facilities or cost centers, will not qualify as an audit of the applicant. Nor shall the audited financial statements of the applicant's parent corporation qualify as an audit of the applicant. Audited financial statements that are a combination of legal entities shall not qualify as an audit of the applicant. As construed by respondent, the sentence proposed for deletion prohibits combining information from separate legal entities in financial statements used to support certificate of need applications (in any circumstances other than those in which generally accepted accounting principles dictate the use of an applicant's consolidated financial statements.) The repeal proposed by the amendment would permit the use, in appropriate circumstances, of combined, as well as of consolidated, financial statements. Testimony at hearing identified situations in which a flat prohibition against combined financial statements may inhibit fair and meaningful statements concerning an applicant's financial position, and meaningful comparison with competing applicants. In the case of a partnership subject to financial control by a corporation, generally accepted accounting principles do not permit consolidated statement of the corporation's revenues, costs, income, expenses, assets, liabilities or cash flows with the partnership's. Generally accepted accounting principles do require that a corporation exercising financial control over (an)other corporation(s) present financial information on a consolidated basis, however. The consolidation requirement prevents shifting assets or other items among parent and subsidiary corporations in a way that might mislead. Of course, separate financial statements for a corporation and a partnership over which it exercises financial control create similar possibilities for misleading shifts of assets and other items. To preclude this, generally accepted accounting principles require combined statements, in certain circumstances. Forbidding combined statements, as respondent's rules now do, creates the possibility that corporations in economically identical postures will appear otherwise depending solely on technicalities concerning the legal form in which entities they control are organized. If two corporations are competing for certificates of need, one may receive an unfair advantage, unless combined statements are permitted to put the parent of a corporate joint venturer on the same footing as the parent of a corporate subsidiary with minority stock ownership equivalent to the unaffiliated partners' share in the joint venture. A joint venture might itself be an applicant for a certificate of need. In that event, according to petitioners' expert, combined financial statements would be appropriate, in support of the application. Deleting the language proposed for repeal by the amendment under challenge would have no bearing on "combined financial statements" in the sense of a combination of governmental funds required by law to be maintained in separate accounts, although belonging to a single governmental entity, since the provision at issue concerns only "a combination of legal entities." For the same reason, a combination of one legal entity's assets, liabilities, revenues, costs or the like with only selected assets, liabilities, revenues, costs or the like of another entity would not be condoned by the proposed amendment. As the notice published in the Florida Administrative Weekly and Rule 59C-1.002(5), Florida Administrative Code, make clear, the proposed amendment is not a retreat from respondent's insistence on audited financial statements, prepared in accordance with generally accepted accounting principles. Respondent does not propose to repeal the fundamental requirement that "[o]nly audited financial statements of the applicant will be accepted." Rule 59C-1.008(5)(g) 3., Florida Administrative Code. (Emphasis supplied.) The proposed amendment cannot be construed to countenance combining an applicant's assets or revenues with the assets or revenues of an unrelated entity, not legally responsible for complying with conditions that may be placed on a certificate of need.
The Issue Whether Petitioner's "change of status" application should be denied for the reasons set forth in the 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 has an undergraduate and master's degree in civil engineering from the Georgia Institute of Technology (received in 1962 and 1964, respectively) and a law degree from Emory University (received in 1980). In 1968, Petitioner went into the consulting business, and he has had his own business ever since. Since 1968, Petitioner has been licensed as a professional engineer, at one time or another, in approximately 20 different states, including Florida. He has held his Florida license since 1970. The other states in which he is currently licensed are Georgia, Alabama, New York, and Maryland. Petitioner is licensed to practice law in Georgia, but is on inactive status. Petitioner has been licensed as a real estate broker in Florida since 2001 or 2002. Petitioner has been certified as a general contractor in Florida since 1980. He was the qualifier for McKinney Drilling Company from 1980 until 1994. Since 1994, he has been the qualifier for Pressure Concrete, Inc. (Pressure), which approximately a year ago was purchased by Proshot Concrete, Inc. (Proshot). Petitioner has never received any discipline in connection with any of the professional licenses he has held over the years, including the certification allowing him to engage in general contracting in Florida; nor does he have any criminal record. Petitioner has not undertaken any construction or consulting project that has resulted in a lawsuit, judgment, or lien being filed. Petitioner has not been involved in any project where there has been a default triggering a claim against a payment or performance bond. All of the vendors and suppliers he has used on construction projects have been paid. Petitioner has never filed for bankruptcy. There are no lawsuits now pending against Petitioner. In or around September 2006, Petitioner completed and submitted an application to the Board seeking a "change of status" in his certification to enable him (as a general contractor) to qualify Proshot instead of Pressure. Petitioner used a Board-generated form, DBPR CILB 4363-Change of Status Application From One Business Entity to Another (Form), to apply for such a "change of status." The "Financial Responsibility" section of the Form contained the following questions and accompanying instructions: NOTE: If you answer "Yes" to any of the questions below, you must provide an explanation on DBPR 0060-General Explanatory Description form and attach legal documentation, i.e., satisfaction of lien, judgment, payment schedule, etc. If you have been convicted of a felony, you must submit proof of reinstatement of civil rights. The following persons must answer the financial responsibility questionnaire: Qualifying Agent All Owners/Partners Have you, or a partnership in which you were a partner, or an authorized representative, or a corporation in which you were an officer or an authorized representative ever: Undertaken construction contracts or work that a third party, such as a bonding or surety company, completed or made financial settlements? Had claims or lawsuits filed for unpaid past-due bills by your creditors as a result of construction operations? Undertaken construction contracts or work which resulted in liens, suits, or judgments being filed? (If yes, you must attach a copy of Notice of Lien and any payment agreement, satisfaction, Release of Lien or other proof of payment.) Had a lien filed against you by the U.S. Internal Revenue Service or Florida Corporate Tax Division? Made an assignment of assets in settlement of construction obligations for less than the debts outstanding? Been charged with or convicted of acting as a contractor without a license, or, if licensed as a contractor in this or any other state, been subject to any disciplinary action by a state, county, or municipality? (If yes, you must attach a copy of any state, county, municipal or out- of-state disciplinary order or judgment.) Filed for or been discharged in bankruptcy within the past five years? (If "yes," you must attach a copy of the Discharge Order, Order Confirming Plan, or if a Corporate Chapter 7 case, a copy of the Notice of Commencement.) Been convicted or found guilty of or entered a plea of nolo contendere to, regardless of adjudication, a crime in any jurisdiction? Note: If you, the applicant/licensee, have had a felony conviction, proof that your civil rights have been restored will be required prior to Licensure. Petitioner answered "No" to all of these questions, believing, in good faith, that such information was accurate. The final page of the Form contained the following "Attest Statement," which Respondent signed: I have read the questions in this application and have answered them completely and truthfully to the best of my knowledge. I have successfully completed the education, if any, required for the level of licensure, registration, or certification sought. I have the amount of experience required, if any, for the level of licensure, registration, or certification sought. I pledge to comply with the applicable standards of practice upon licensure, registration, or certification. I understand the types of misconduct for which disciplinary proceedings may be initiated. As part of the application process, Petitioner made the necessary arrangements with Advantage Information Services, LLC (Advantage) to directly provide the Board with a credit report. On or about October 26, 2006, Advantage sent the Board a two-page Transunion credit report (Transunion Report) containing Petitioner's "credit profile," along with a one-page report of the results of a "check[]" of public records at the "local, statewide, and national level" (Records Check Report). The Transunion Report revealed a federal tax lien in the amount of $35,100.00 that had been filed against Petitioner in 1997 for unpaid personal income taxes. Petitioner was aware of this lien at the time he filled out the Form, but did not report it in response to Question 4 of the "Financial Responsibility" section because he did not understand the question to ask about liens such as this one which were unrelated to his business activities. The Internal Revenue Service is withholding 15% of Petitioner's monthly Social Security benefit and applying it to reduce the amount Petitioner owes for his unpaid personal federal income taxes. The Records Check Report read as follows: Public records have been checked on a local, statewide, and national level and are incorporated within the report. Additional records are as follows: Cheatham Register of Deeds, TN - Federal Tax Lien Release, 01/11/2005, Case #74147 - Book/Page 131/552 - $30,908.00 - Not Paid. Plaintiff: IRS Walton County Superior Court GA - County Tax Lien, 03/12/1998, $387.00 - Not Paid. Case Number - B3P253C, Book/Page - 3/253 Plaintiff: County Tax Assessor Dekalb County State Court, GA - Civil Judgment, 05/01/1991, $49,283.00 - Not Paid. Case Number - 814497 Plaintiff: Bank South The 1998 Walton County Tax lien noted in the Records Check Report concerned an assessment made on tangible personal property in the form of an airplane owned, not by Petitioner, but by a corporation of which he was the president. The lien did not arise out of any activities in which Petitioner was engaged as a general contractor. The 1991 Dekalb County civil judgment noted in the Records Check Report required Petitioner to repay a bank loan Petitioner had co-signed for a friend. It too had nothing to do with his activities as a general contractor. It was only after the Board had provided Petitioner with a copy of the Records Check Report that Petitioner first became aware of the existence of the 1998 Walton County Tax lien and the 1991 Dekalb County civil judgment.2 As noted above, on April 18, 2007, the Board issued its Notice of Intent to Deny Petitioner's "change of status" application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Board find Petitioner qualified for the "change of status" for which he has applied. DONE AND ENTERED this 1st day of November, 2007, 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 1st day of November, 2007.
The Issue The issue in this case is whether Petitioner's application for a certificate of need was complete.
Findings Of Fact Petitioner and Intervenor each filed applications in the same batching cycle for certificates of need to establish Medicaid-certified home health agencies in Collier County, District 8. By letter dated October 6, 1994, Respondent advised Petitioner that its application omitted certain elements. The letter requests, among other things, an "audited financial statement," including a balance sheet and profit-and-loss statement for the previous two years' operation. Petitioner's application contained an unaudited financial statement for the part of the year that it had been operation. Incorporated in 1994, Petitioner had been receiving patients only since September or October 1994. Petitioner's agent contacted a representative of Respondent and discussed the omissions letter. A misunderstanding ensued in which Petitioner's agent thought that Respondent's representative said that Petitioner would not be required to submit an audited financial statement because Petitioner had not been in operation for a full fiscal year. In fact, Respondent's representative did not say that. Respondent's policy is to permit applicants to file audited financial statements for a partial year, if that is how long they have been in business. For example, Intervenor included with its application an audited financial statement covering the six-week period that it had been in existence. In this case, it would have been possible for Petitioner to obtain an audited financial statement for a period of time including at least its first month of operation.
Recommendation It is hereby RECOMMENDED that the Agency for Health Care Administration enter a final order dismissing Petitioner's challenge to the administrative withdrawal of the subject application for a certificate of need. ENTERED on April 24, 1995, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on April 24, 1995. APPENDIX Rulings on Petitioner's Proposed Findings 1-6: rejected as subordinate. 7-8: rejected as unsupported by the appropriate weight of the evidence. 9: adopted or adopted in substance. 10-11: rejected as not finding of fact. 12-14: rejected as recitation of evidence. 15: rejected as unsupported by the appropriate weight of the evidence. Rulings on Proposed Findings of Respondent and Intervenor All are adopted or adopted in substance. COPIES FURNISHED: Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, FL 32303 Attorney Robert E. Senton P.O. Box 963 Tallahassee, FL 32302 Richard A. Patterson Assistant General Counsel Agency for Health Care Administration 325 John Knox Road Suite 301--The Atrium Tallahassee, FL 32303 Attorney Alfred W. Clark 117 South Gadsden Street Suite 201 Tallahassee, FL 32301
The Issue The issue in this case is whether Respondent, Fazal Ali, committed the offenses alleged in an Administrative Complaint issued against him on December 16, 1998.
Findings Of Fact Petitioner, the Department of Business and Professional Regulation, Division of Real Estate (hereinafter referred to as the "Division"), is an agency of the State of Florida. The Division is charged with the responsibility for, among other things, regulating the practice of persons holding real estate brokers' and real estate salespersons' licenses in Florida. Section 20.165, and Chapters 455 and 475, Florida Statutes (1997). Respondent, Fazal Ali, is now, and at all times relevant to this matter has been, licensed as a real estate salesperson in Florida. Mr. Ali holds license number 0604229. Prior to and during September and October 1997 Mr. Ali was employed as a salesperson by S & J Enterprise of Jacksonville, Inc., t/a/ Re/Max Alpha Realty (hereinafter referred to as "Re/max"). During September 1997 Re/Max had listed a parcel of real property located at 3444 Deer Street, Jacksonville, Florida (hereinafter referred to as the "Deer Street Property"). In or about September 1997 Herbert and Angela Lively contacted Re/Max about the Deer Street Property. Mr. Ali was designated as the salesperson to assist the Livelys. At the time that Livelys inquired about the Deer Street Property, a contract for sale was already pending on the property. In the event that the pending contract fell through, Mr. Ali prepared a back-up contract on the Deer Street Property for the Livelys. The Livelys gave Mr. Ali a check made payable to Re/Max in the amount of $500.00 to be used as a deposit on the contract. The contract on the Deer Street Property ultimately was carried out. Thereafter Mr. Ali continued to show the Livelys other property, including a parcel at 1602 East 10th Street, Jacksonville, Florida (hereinafter referred to as the "10th Street Property"). On or about September 26, 1997, Mr. Ali completed an offer to purchase the 10th Street Property on behalf of the Livelys. The contract specified that the Livelys had deposited a $500.00 binder deposit on the property. Mr. Ali agreed to use the check for $500.00 check previously given to him by the Livelys on the Deer Street Property as the binder deposit on the 10th Street Property. Mr. Ali failed to provide the Livelys with required agency disclosures at the time the offer on the 10th Street Property was completed. Mr. Ali also failed to remit the $500.00 binder deposit to Re/Max. Instead, Mr. Ali kept the check in his possession. The Livelys' offer was accepted and a contract for the sale of the 10th Street Property to the Livelys was executed on September 30, 1997. The $500.00 deposit check was still not deposited by Mr. Ali. When J. Earline Lamb, Re/Max's registered real estate broker, learned that there was a contract on the 10th Street Property and that the $500.00 binder deposit had not been remitted by Mr. Ali, she contacted the Livelys and Mr. Ali. Mr. Ali admitted to Ms. Lamb that he had the $500.00 binder deposit check and some financial documents that belonged to the Livelys. Mr. Ali agreed to retrieve and return the check and documents to Ms. Lamb. On or about October 20, 1997, Mr. Ali returned the $500.00 check which the Livelys had given him in September to Ms. Lamb. The original check was destroyed. On or about October 17, 1997, the Livelys wrote a new $500.00 check for the binder deposit. That check was deposited by Re/Max. The contract for sale of the 10th Street Property eventually closed. The Livelys purchased the property for the purchase price agreed to after the offer prepared by Mr. Ali on their behalf had been submitted. The Livelys were satisfied with Mr. Ali's assistance. The evidence failed to prove that the Livelys suffered any harm as a result of the failure of Mr. Ali to deposit their binder deposit check or his failure to provide them with agency disclosures. The evidence failed to prove why Mr. Ali failed to deposit the Livelys' $500 check with Re/Max. The evidence also failed to prove that Mr. Ali attempted to gain any advantage from his failure to deposit the check. Prior to October 1997 Mr. Ali decided to leave the employ of Re/Max. On October 2, 1997, Mr. Ali filed a form 400.5 with the Division reporting a change in employment. Mr. Ali reported that he was employed by Results Real Estate Investments Corp. Mr. Ali certified on the form that "I have notified my former broker of this change " Mr. Ali did not inform anyone at Re/Max that he was resigning or that he was employed by Results Real Estate Investments Corp. Mr. Ali also retained the $500.00 binder deposit check which he had received while employed by Re/Max. On October 16, 1997, Ms. Lamb informed Mr. Ali that he was terminated from Re/Max because of his failure to deposit the $500.00 binder deposit from the Livelys. Mr. Ali did not inform Ms. Lamb that he had already filed a form 400.5 with the Division reporting his association with Results Real Estate Investments Corp. Ms. Lamb learned of Mr. Ali's association with Results Real Estate Investments Corp. after filing a form 400.5 with the Division reporting Mr. Ali's termination by Re/Max. The evidence failed to prove why Mr. Ali failed to timely report to Re/Max his new association with Results Real Estate Investments Corp. The evidence also failed to prove that Mr. Ali gained or attempted to gain anything from his failure to disclose. The evidence also failed to prove that Re/Max or Results Real Estate Investments Corp. suffered any harm from Mr. Ali's failure to disclose. The evidence failed to prove that Mr. Ali has had any other disciplinary actions brought against him by the Division.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner finding that Respondent has violated Sections 475.25(1)(b), (d)1, and (q), Florida Statutes, as alleged in the Administrative Complaint issued against Respondent. It is further RECOMMENDED that Respondent be placed on probation for a period of one year from the entry of the final order; that he be required to successfully complete a 45-hour post-licensure course; and that he be required to pay an administrative fine of $500.00. DONE AND ENTERED this 10th day of August, 1999, in Tallahassee, Leon County, Florida. LARRY J. SARTIN 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 10th day of August, 1999. COPIES FURNISHED: Ghunise Coaxum, Senior Attorney Division of Real Estate Department of Business and Professional Regulation Hurston North Tower, Suite N308 400 West Robinson Street Orlando, Florida 32801-1772 Rodney G. Gregory, Esquire Rodney G. Gregory, P.A. 3900 Atlantic Boulevard Jacksonville, Florida 32207 Herbert S. Fecker, Division Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802-1900 William Woodyard, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Northwood Centre Tallahassee, Florida 32933-1920
