Findings Of Fact On March 10, the Charging Party began negotiations on behalf of both units with the Public Employer seeking a contract for the 1976 - 1977 fiscal year. On May 10, after eight (8) negotiating sessions, the negotiators for both sides reached an agreement upon a tentative contract, subject to ratification by the unit's membership and approval by the Public Employer. During the eight (8) negotiating sessions prior to tentative agreement both sides agreed to the withdrawal of numerous contract proposals. On May 19 and 20, the tentative agreement was submitted to the membership of both units for approval, pursuant to Section 447.309(1), F.S. The membership of both units unanimously rejected the proposed agreement at that time. Thereafter, on May 21, the Charging Party notified the Public Employer of the rejection by letter and requested further negotiations pursuant to Section 447.309(4), F.S. Pursuant to this request the Public Employer and Charging Party met for the first post-rejection negotiating session on May 26. The Charging Party presented the Public Employer with three lists designated as List A, List B, and List C. List A enumerated articles contained within the rejected contract which the Charging Party felt could remain unchanged and would not require further bargaining. List B contained those articles which had been withdrawn during negotiations, but which the Charging Party was of the opinion were not necessary to include in the contract in order for successful ratification by unit members. List C contained those articles in which the Charging Party maintained that further negotiations were necessary in order to achieve a ratifiable contract. See General Counsel`s Exhibit number 4 received in evidence. James R. Norris, the Charging Party's president and chief negotiator testified that the items noted on List C were formulated on the basis of the information which the Charging Party solicited from the voting unit members during discussions which preceded the ratification vote. It is undisputed that on May 26, the Public Employer, through its chief negotiator, Robert E. DuVernoy, refused to negotiate on nine (9) articles found on List C which were presented to it by the Charging Party for further negotiations. Those articles were: leave, work rules, P.B.A. business, injury leave, pension, safety, group health insurance and funeral expenses, off-duty work, and special skills. DuVernoy testified that there was no requirement that the Public Employer bargain over items that had been withdrawn prior to rejection of the proposed agreement and he therefore did not negotiate on those items. He testified that his refusal was based on language of Section 447.309(4), F.S., and the "negotiating guidelines" signed by the parties at the start of negotiations. Based on this refusal, the Charging Party filed the subject charges with PERC on May 27. After the May 26 meeting the Public Employer, by letter, requested the Charging Party to put its proposals in writing. At the final negotiating session on June 2, specific written proposals on all the articles set forth on the "C" list were presented to DuVernoy, who accepted them but refused to respond and/or negotiate any of those items. DuVernoy maintained his prior position that there was no duty to bargain on items which had been withdrawn. DuVernoy declared impasse and at no time has the Public Employer negotiated on those items contained in List C. The Respondent takes the position that it had no bargaining obligation as to those items contained on List C for two reasons. First of all, it maintains that under the negotiating guidelines there was no requirement for further negotiation once an item had been withdrawn. Secondly, it maintains that Chapter 447.309(4), Florida Statutes, provides that upon rejection only the "agreement" shall be returned to the bargaining agents for further negotiation. (See Respondent's Exhibit number 1 received into evidence and made part hereof by reference). An examination of the negotiating guidelines reflect that it deals with two subjects. The first two sentences deal with proposals that are tentatively agreed to by both parties and provides for the agreement to be tentative and subject to further negotiation by the parties until the final agreement is signed by them. The last sentence provides that "proposals withdrawn by either party shall be initialed by both parties to signify that the proposal is no longer an issue for discussion". Respondent takes the position that the May 10 agreement reached by the negotiators represented a signed agreement and that each of the articles contained therein had been signed by the negotiators initialing the individual articles. Said agreement did not include certain items which had been withdrawn pursuant to paragraph nine (9) of the negotiating guidelines. Upon rejection by the union's membership, Respondent maintains that, under the guidelines, there existed no obligation on the City's part to negotiate on the withdrawn items. It is undisputed that during the course of the negotiations the parties did not rigidly abide by many of the guidelines and in those instances in which there was noncompliance, neither party complained. Respondent takes the position that since paragraph 14 of the guidelines provides for the changing thereof by mutual consent, it is clear that whenever "there is noncompliance with the guidelines and neither party complains, there has been an implicit mutual consent to change the guidelines for that particular application." Respondent maintains that there was never any mutual consent to change paragraph nine (9) of the guidelines. Therefore, Respondent urges that when it refused to bargain on the withdrawn items, it was simply following the guidelines as agreed to by the parties. In further defense of its position, Respondent refers to Chapter 447.309(4), F.S., which states in pertinent part that "if the agreement . . . is not approved by a majority vote of employees voting in the unit, . . . the agreement shall be returned to the chief executive officer and the employee organization for further negotiation." The City's interpretation of this is that when the union's membership rejected the May 10 agreement which had been agreed to by the negotiators, the parties were obligated to negotiate only on the agreement which was rejected. It therefore maintains that since the Charging Party submitted to Respondent items for negotiation which were not contained in the May 10 agreement, that the City was under no obligation to bargain based on the cited statute. An examination of the proposals submitted by the Charging Party for further negotiations cover items which have been traditionally found to be mandatory subjects of bargaining. As such, any alleged waiver of a statutory right must be clear and unmistakable. See for example, Timken Roller Bearing v. N.L.R.B., 325 F.2d 746, 54 LRRM 2785 (CA 6, 1963), The Item Company, 220 F.2d 956, 35 LRRM 2709 (CA 5, 1955). And in view of the certification which issued to the Charging Party by PERC, Respondent was under an obligation to continue bargaining with the Charging Party until impasse had been reached and the parties could not resolve their disputes via other statutory means. During the course of the hearing, the Respondent's chief negotiator armed with some approximately twelve (12) years experience at the negotiating table, indicated his familiarity with the negotiating process and was of the opinion that the negotiating process called for ratification by the unit members prior to army final agreement having been reached. Since the testimony is clear that the unit members unanimously rejected the tentative agreement reached on May 10, it necessarily follows that the parties were under an obligation to continue to make efforts to reach an agreement acceptable to both sides. It cannot be said with any degree of seriousness that the parties reached an approved agreement within the meaning of Chapter 447.309, F.S., in view of the unanimous rejection of the proposed agreement by unit members. Turning to the contention by Respondent that the Charging Party's negotiators waived its right to negotiate further on items not contained in the agreement, it is clear from the evidence that the Charging Party's negotiators did not waive or concede on those items which are mandatory subjects of bargaining. Furthermore, a fundamental doctrine of labor law recognizes that an employer is under a continuing obligation to bargain over any matter which is not included in the collective bargaining agreement but affects terms and conditions of employment. See for example, Long Lake Lumber Company, 160 NLRB 123, 63 LRRM 1160 (1966). In this case, the evidence evince that neither the union negotiators nor its members ever indicated a willingness to waive its statutory right to bargain over the items submitted in List C. Based on these facts, and the entire record in this case, I therefore conclude that the Respondent, by refusing to negotiate over mandatory subjects of bargaining, violated Section 447.501(1)(a) and (c), Florida Statutes.
Findings Of Fact David G. Tracy is, and at all material times has been, an employee of the Respondent, and a public employee within the meaning of Florida Statutes s. 447.203(3). The Firefighters Union is, and at all material times has been, an employee organization within the meaning of Florida Statutes s. 447.203(10). The Respondent is a public employer within the meaning of Florida Statutes s. 447.203(2). The Respondent and the Firefighters Union have been engaging in the collective bargaining process since prior to October, 1973. The parties first entered into a collective bargaining agreement on October 16, 1973. 1/ A second agreement was adopted on March 4, 1975. 2/ This latter agreement was retroactively effective from the first day of October, 1974 until October 1, 1975. The collective bargaining relationship that existed between the Firefighters Union and the Respondent, and the contracts promulgated by them were undertaken in accordance with the Firefighters Bargaining Act, Florida Statutes (1973) 447.20 et seq. In 1972, the Respondent adopted a merit pay plan as a part of its general pay plan. The merit pay plan was adopted by ordinance of the City Commission, but it was not immediately funded. The merit pay plan was funded by the Respondent for the first time in March, 1975, retroactive to October 1, 1974. The merit pay plan as adopted, and as funded, applied to all employees of the Respondent. The merit pay plan was specifically included as part of the second agreement between the Respondent and the Firefighters Union. 3/ In accordance with the second agreement, which was then in effect, the Firefighters Union advised ,the Respondent that it wished to renegotiate 12 of the 36 articles contained in the agreement by letter dated May 22, 1975. 4/ Negotiations commenced during the month of June, 1975. Mr. John Kooser, the Respondent's Assistant City Manager, represented the Respondent at the initial bargaining sessions. Among the articles which the Firefighters Union was seeking to renegotiation was Article 14, Wages. Article 14 included the reference to the merit pay plan. At the initial sessions the Firefighters Union indicated that it was requesting an across-the-board pay increase, and a grade increase for rescue drivers. The Firefighters Union did not mention the merit pay plan at the sessions. Mr. Kooser did not respond to the specific requests pertaining to wages, and raised nothing respecting the merit pay plan. During July, 1975, Diane Schiffman, the Respondent's Personnel Director, became the Respondent's chief negotiator. During the time that Ms. Schiffman served as chief negotiator, the merit pay plan was not raised as an issue at bargaining sessions. Herbert Mintz, an attorney, became the Respondent's chief negotiator on July 31. The merit pay plan was not raised as a subject for bargaining during any of the negotiating sessions attended by Mr. Mintz prior to October 3, 1975. The merit pay plan was discussed at a negotiating session on September 10, 1975; however, it was not discussed as a subject for bargaining. A City Commission meeting had been conducted on September 9, 1975, and on September 10, 1975 Mr. Mintz asked the Firefighters Union representative what had transpired at that meeting respecting the merit pay plan. On or about August 15, 1975 John Kooser, then acting city manager of the Respondent, presented his budget submission message to the Mayor and City Commission for the fiscal year 1975-76. 5/ Mr. Kooser therein stated: "I recommend that merit increases for FY 75-76 be suspended and to support this action they have not been budgeted in the FY 75-76 budget." A copy of the proposed budget was delivered to the Charging Parties. Mr. Tracy in turn delivered the proposed budget to a private consulting firm. The merit pay plan was not budgeted in the proposal; however, neither Mr. Tracy nor any other representative of the Firefighters Union deciphered that fact from the proposed budget. The consulting firm did not so advise the Charging Parties. Whether the merit pay plan would be implemented for the 75-76 fiscal year was a topic for discussion at a City Commission meeting on September 9, 1975. Mr. Gauthier, as a representative of the Firefighters Union, addressed the City Commission at that meeting, and argued forcefully in favor of maintaining the merit pay plan. It is apparent that Mr. Gauthier was aware that the Respondent was considering suspending the merit pay plan for all employees, including firefighters. Mr. Gauthier and Mr. Tracy testified that they believed the Respondent was considering suspending the merit pay plan only for employees other than firefighters. It is apparent, however, from the comments that he made at the City Commission meeting on September 9, that Mr. Gauthier did know that the Respondent was considering suspending the plan for all employees. From other comments made at the meeting and from the totality of the circumstances, Mr. Gauthier should have known what the Respondent was planning, and his testimony that he did not is not creditable. At a meeting conducted on October 1, 1975 the Respondent's City Commission suspended the merit pay plan for the 1975-76 fiscal year, effective on that date. No impasse had been reached in negotiations respecting the merit pay plan on October 1, and indeed, the merit pay plan had not been actively negotiated. It has not been shown that suspension of the merit pay plan was a matter of fiscal necessity for the Respondent. The Charging Parties did not learn of the action until October 3. A negotiating session had been scheduled for October 3, 1975. The parties met on that date. Mr. Tracy, representing the Firefighters Union expressed outrage at the Respondent's action. He expressed the position of the union that only those matters raised in General Counsel's Exhibit 2 were open for negotiation, and that the merit pay plan was not among those items. Mr. Mintz, as the Respondent's chief negotiator, expressed the Respondent's position that all issues were open for negotiation. No specific discussion was had respecting future reinstatement of the merit pay plan. The meeting did not last long. It terminated when Mr. Tracy walked out. Since October 3, 1975, the parties have engaged in several negotiating sessions. The Respondent has made no specific proposals respecting the merit pay plan other than to note in a proposed contract that the plan had been suspended. 6/ The Respondent has not, since October 3, 1975, either formally or informally refused to bargain respecting the merit pay plan, and has, in fact, been willing to do so. The Charging Parties have not requested that the merit pay plan be negotiated, but have rather rested on their earlier position that the merit pay plan is not properly a matter for negotiation, and should be reinstated retroactively to October 1, 1975. At the time that the complaint was filed by the General Counsel, the merit pay plan had not become an active matter of negotiation. The parties may have reached an impasse as to whether the merit pay plan is properly a subject for negotiation. Contracts negotiated between the Firefighters Union and the Respondent for the 1973-74 and 1974-75 years were not adopted in accordance with the provisions of the Public Employees Relations Act. Florida Statutes s. 447.201 et seq. The Act became effective during December, 1974. On or about September 2, 1975, the Respondent and the Firefighters Union filed a voluntary recognition petition with the Public Employees Relations Commission. On or about January 13, 1976, the Public Employees Relations Commission certified the Firefighters Union as the exclusive bargaining representative of employees in the Respondent's Fire Department. The Firefighters Union had not been certified by PERC at the time that the Respondent suspended the merit pay plan.
The Issue Whether Petitioner is owed $545,124.00 after Respondent required Petitioner to return that amount originally paid under two separate contracts.
Findings Of Fact On April 3, 2000, OAOC contracted with Able Trust, Inc. to conduct procurement activities for privatized vocational rehabilitation services in Florida. (Stipulated Fact No. 1.) OAOC, itself, was a privatized commission created by statute and subsequently repealed. The predecessor in interest of OAOC was the Florida Department of Labor, Division of Vocational Rehabilitation Services. The successor in interest of OAOC is the Florida Department of Education (FDOE), Division of Vocational Rehabilitative Services. (Stipulated Fact No. 2.) At all times material, OAOC was responsible for developing policy governing vocational rehabilitative services, while VRS was responsible for administratively supporting OAOC's efforts. Hereafter, unless the individual entity is indicated, the designation "VRS" will be used to mean OAOC and the Division of Vocational Rehabilitation/Rehabilitative Services, wherever located and however named. (Stipulated Fact No. 2, amplified.) At the time VRS was attempting to privatize vocational rehabilitative services, it was under scrutiny from the Rehabilitation Services Administration of the United States Department of Education (RSA). Following a privatization project in Monroe County, Florida was deemed a "high risk" state by RSA. Able Trust, Inc., prepared and published a request for proposals (RFP). (Stipulated Fact No. 3.) According to the RFP, OAOC sought to enter into contracts with private providers for the delivery of vocational rehabilitation services in each of 24 regions of the state. The RFP stated that any transition period and/or transition expenses would be negotiated separately from the award of the contract and the cost for service delivery. (Stipulated Fact No. 3.) Petitioner Abilities is a private, non-profit corporation, not a state or local government, nor a federally- recognized Indian tribe. Abilities submitted proposals to provide services in Regions Seven and Twenty. Florida Institute for WorkForce Innovation (FIWI) submitted a proposal for Region Nine. (Stipulated Fact No. 4.) Abilities' proposals indicated that Abilities would "partner" or "team" with Lockheed Martin IMS n/k/a ACS State and Local Solutions, Inc., (ACS). (Stipulated Fact No. 5.) ACS is a private sector, for-profit corporation. Abilities, with other proposers, attended a bidders' conference on or about April 24, 2000. (Stipulated Fact No. 6.) At the bidders' conference, VRS stated that the time period needed for transition and any required start-up funds (hereinafter "transition expenses") would be negotiated separately from the award of the contract and the cost for service delivery. (Stipulated Fact No. 7.) Proposers were instructed that transition expenses were not to be included as part of their RFP response. Due to concerns raised by RSA, only three of the twenty-four regions of Florida were awarded contracts from the proposals. (Stipulated Fact No. 8.) The contracts were also re-designed to cover only one year with possible renewals for two years. Two of these contracts were awarded to Abilities for Regions Seven and Twenty. A third contract was awarded to FIWI for Region Nine. (Stipulated Fact No. 9.) Region Seven includes Columbia, Union, Gilchrist, and Dixie Counties. Region Twenty includes Indian River, St. Lucie, Martin, and Okeechobee Counties. Funding for these contracts was provided through a federal grant from a Vocational Rehabilitation Title I, Section 110, Innovation and Expansion Program grant. (Stipulated Fact No. 10.) There was testimony that the "spread," as it were, was that the federal government put up four dollars (80%) for every dollar (20%) contributed by the State, but the contracts show that no state funds were used. Therefore, it is found that only federal funds were used for the prime contracts with Abilities. OAOC was both the "designated state agency" (DSA) for receipt of federal funds and the "designated state unit" (DSU) for expenditures of federal and state funds under the State Plan for Vocational Rehabilitative Services. FDOE was never so- designated. The contracts were initially intended to fund services for a twelve-month period from October 1, 2000 through September 30, 2001. (Stipulated Fact No. 11.) VRS ultimately awarded fixed rate contracts to Abilities and FIWI only for the six-month period from April 1, 2001 through September 30, 2001. (Stipulated Fact No. 12, amplified.) After notifying Abilities that it had been awarded the contracts for core services for Regions Seven and Twenty, OAOC delayed the contracts implementation date to April 1, 2001. Award of a bid is not a guarantee that a contract will be awarded or executed with the successful proposer/bidder. Many unforecast events can intervene.2/ Section 287.058(2), Florida Statutes, recognizes this concept, and provides, in part, that "the written agreement shall be signed by the agency head and the contractor prior to the rendering of any contractual service. . . ." Moreover, in the prime contracts finally signed between the parties, Attachment G.III.A. (page 31) states ". . . Except as may otherwise be expressly stated in this Agreement, OAOC/VRS shall not be obligated to pay any amount for expenses, services rendered, or goods provided prior to the effective date of this Agreement." Although 12 months of funding had been allocated for the provision, throughout 12 months, of core vocational rehabilitative services, the delay in contract implementation meant that only six months' worth of funding would be consumed for the provision of the core vocational rehabilitative services over a time-span of six months, to begin on April 1, 2001. On February 15 and 16, 2001, the parties held a meeting in Lake City, Florida, to discuss the transitional procedures and expenses in accordance with the terms of the RFP. (Stipulated Fact No. 13.) As of the February 2001, meeting, the contracts had not been signed and Abilities had assumed none of the duties of the contract. At that point, VRS employees were actually "doing the job." VRS's Bureau Chief of Field Services, Linda Parnell, was responsible for the management and supervision of state employee-VRS counselors and the program of service delivery to Florida's disabled citizens. She anticipated from the official discussions and written agreements reached in the main February 2001, meeting that once the contracts were signed, current State employees would be co-workers with the out-sourced providers for a transitional period of time and that the transitional period would start at the beginning of the contract period and continue for a minimum of one month (all of April 2001). The topics at the meeting between Bureau personnel and the successful bidders were aspects of service delivery; how the providers would receive clients from the State; how the providers would be housed in existing Division offices; and what duties the providers would assume. At the same date and location, in a "side-meeting" with William Sandonato of Abilities and Dr. Bruce Waite of FIWI, Carl Miller, then-Director of VRS, offered to use the remaining six months' worth of unencumbered contract funds, which funds otherwise would not have been spent on core services, due to the shortened span of the contract, to pay the successful proposers'/providers' transition expenses. (Stipulated Fact No. 14, with additional clarifying language.) The remaining funds on Abilities' proposed contracts totaled $545,124.00. William Sandonato previously had been a member of OAOC. At that time, he simultaneously had been president of Abilities. Like Mr. Sandonato, more than one-third of OAOC commissioners also were vocational rehabilitation providers. Mr. Sandonato testified that he played no part in the selection of Abilities pursuant to the RFP. The RFP was not drafted by OAOC, but by Able Trust, Inc., as an agent for OAOC. Mr. Sandonato recused himself from the RFP selection process. When Abilities had become the apparent successful bidder on the RFP, Mr. Sandonato resigned from OAOC. He later signed the VRS- Abilities contracts and two contract extensions as president of Abilities. Mr. Sandonato's paid employment with Abilities ended on January 31, 2001, but he continued to represent Abilities, as its unpaid president, for an indeterminate period thereafter. Also, between January 31, 2001 and July 1, 2002, he was a paid employee of ACS, the for-profit subcontractor to Abilities for Abilities' two contracts with VRS. At the February meeting, Mr. Miller was told that Abilities had hired staff, which already had been interacting with existing VRS state employees, regarding case loads during the period from July 1, 2000, to April 1, 2001. Mr. Miller believed that Abilities was "working" before the contracts were even executed. Mr. Miller erroneously concluded that the "transition" period under the VRS contracts with Abilities ran from July 1, 2000, the date the contracts were initially scheduled to be effective, to April 1, 2001, the actual start date of the contracts. In fact, Mr. Miller did not sign the prime contracts for VRS with Mr. Sandonato, signing for Abilities, until March 29, 2001 (see infra.), and Abilities did not sign its subcontracts with ACS until May 2, 2001, with those subcontracts being retroactively effective from April 2, 2001 forward. Mr. Sandonato signed for Abilities on the subcontracts. After the February 2001 meeting, Mr. Miller requested submission of proposed amounts of expected transition expenses. (Stipulated Fact No. 15.) Abilities and FIWI submitted correspondence to VRS outlining the total proposed transition expenses. (Stipulated Fact No. 16.) Mr. Sandonato testified that he had recognized that the sum Mr. Miller had offered, during their February 2001, meeting, for transitional expenses, would not cover the transitional expenses of Abilities/ACS, but would cover a significant portion thereof. He considered the six months' funds amount to be a cap on what Abilities could request from VRS for transition expenses. He further testified that for that reason, Abilities just took the money amount that was available and "indicated [to VRS] that's the number we [Abilities] would like to have." Further documentation of the expected transition expenses was requested by VRS from both Abilities and FIWI. (Stipulated Fact No. 17.) Abilities and FIWI each submitted budgets to justify their respective projected transition expenses. (Stipulated Fact No. 18, amplified for clarity.) In Abilities' case, this amounted to exactly $545,124.00. The proposed transition expenses were incorporated into the contract amounts for the fixed amount contracts for Regions Seven, Nine, and Twenty. (Stipulated Fact No. 19.) Draft contracts for services were prepared by VRS staff and reviewed by various divisions, including legal, financial, and contract management. All VRS reviewers approved the final form and content of the contracts. (Stipulated Fact No. 20.) VRS approved the final versions of these contracts, which were executed by VRS and Abilities. (Stipulated Fact No. 21.) Abilities' contracts with VRS were numbered VH521 and VH531. (Stipulated Fact No. 22.) Mr. Miller, for VRS, executed them on March 29 and 30, 2001. Mr. Miller had both apparent and actual authority from OAOC to enter into the contracts and subsequent extensions. Mr. Sandonato signed for Abilities. Abilities was acknowledged as a "vendor" of vocational rehabilitation services, as opposed to a "sub-recipient," within each of its contracts with VRS. At the end of the initial contract period, VRS, FDOE, and Abilities entered into two 30-day extensions of contracts VH521 and VH531. (Stipulated Fact No. 23.) The extensions for October 2001, and November 2001, expressly incorporated the terms of the original contracts. Mr. Miller signed the contract extensions for VRS, and Mr. Sandonato signed for Abilities. Abilities, and ACS through Abilities, was also paid separately for the two contract extensions at a rate of $30,626.00 per month for Region Seven and $70,485.00 per month for Region Twenty. These additional payments represented one- sixth of each contract amount, less the transition expenses. ACS's subcontracts with Abilities essentially imposed the same duties upon ACS as the VRS contracts imposed upon Abilities. See infra. Every dollar received by Abilities from VRS under the contracts was paid directly to ACS, under the subcontracts. It is noted that, pursuant to Section 216.181 (16) (a) and (b), Florida Statutes, advance payments may only be paid by a state agency to other governmental agencies or to not-for-profit corporations. As a for-profit corporation, ACS could not have received advance payments directly from VRS, but nothing precluded ACS being paid by Abilities as a subcontractor, or precluded ACS from making a profit, provided all other legal requirements were met. Abilities submitted monthly invoices to VRS for payment. (Stipulated Fact No. 24.) The invoices were submitted and paid at the front of the month in which the services were to be incurred, for each of the six months. Each invoice amounted to a calculated one-sixth of the total contract amount. According to Mr. Sandonato, Abilities' process of billing VRS for transitional expenses was "passing everything right through, . . . one-invoice-in [from ACS to Abilities] and one-invoice-out [from Abilities to VRS]," without Abilities going behind any ACS invoice to verify how expenses were incurred or monies disbursed. At hearing, Mr. Sandonato's personal knowledge of what constituted the transition expenses incurred by ACS was largely limited to the payment of his ACS salary, but he also vaguely knew something about office space and equipment either being moved or purchased. VRS employees reviewed each monthly Abilities' invoice to determine if payment was proper and allowable, then forwarded the invoice, with additional supporting documentation, to DFS for processing and payment. (Stipulated Fact No. 25.) Although in hindsight certain VRS and FDOE witnesses disavowed specific VRS and DOE signature and approval stamps as being affixed by themselves personally, the invoices/payment processing documents show on their face that DOE and VRS personnel affirmatively signed-off, for each Abilities' invoice, that the transactions were "in accordance with the Florida Statutes and all applicable laws and rules of the State of Florida," and that these costs "were allowable costs and in compliance with the grant budget." After receiving the documents from VRS, DFS also reviewed each invoice to determine if the payments were allowable and if sufficient funds existed for payment. (Stipulated Fact No. 26.) DFS approved the invoices and paid Abilities each of the invoiced amounts. (Stipulated Fact No. 27.) Each invoice submitted by Abilities and each payment by VRS was in the amount set forth in contracts VH521 and VH531. (Stipulated Fact No. 28.) In turn, Abilities paid the whole of the disputed transition expense funds to ACS, in the amount of $545,124.00. Abilities did not retain any of the transition expense money itself. Abilities acted only as a "pass-through" conduit to its subcontractor. Abilities relied on VRS's and DFS's approval of the invoices Abilities submitted to those agencies as constituting the agencies' determination of "reasonable and necessary expenses" and "allowable" expenses for Abilities, in turn, to pay ACS, pursuant to the subcontracts. After all payments under the contracts and sub- contracts had been made, the Office of Program Policy and Government Accountability (OPPAGA) questioned VRS's methods of doing business on these contracts. In 2002, the Auditor General of the State of Florida, an officer associated with the Legislature, issued a report on the federal award program for the fiscal year ending June 30, 2001. This report questioned in excess of $1,000,000 of the costs charged under the three VRS contracts assigned to Abilities and FIWI. On January 24, 2002, the Inspector General of the FDOE issued Final Report No. 01-130, detailing an investigation of Abilities' contracts VH521 and VH531, as well as the contract awarded to FIWI. (Stipulated Fact No. 29.) The FDOE Inspector General (IG) concluded that VRS had violated federal and state regulations by not conducting an analysis to verify if an additional award of $545,124.00, to Abilities was reasonable or necessary, or more cost effective than services provided by the State. (Stipulated Fact No. 30.) FDOE's IG also concluded that VRS' payment of the additional funds invalidated the bid process. (Stipulated Fact No. 31.) This determination rested on defining differences between "start up costs" and "ramp-up costs"; not allowing negotiation of the proposers' terms and conditions; and not resubmitting proposals for the transition expenses to OAOC. VRS published a response to the DOE IG's report, objecting to the IG's findings. Apparently, the overriding concern of OPAGGA, FDOE, and DFS was that VRS's failure to conduct an analysis to verify if an additional award was reasonable or necessary, or more cost-effective than services provided by state employees was "because it places the state at a substantial risk of the disallowance of all, or a portion, of the [total amount VRS paid to both Abilities and FIWI] which may have to be repaid from non-federal funds to the grantee." (See IG Report, page 5 of 16; bracketed material substituted for clarity.) Regardless of the foregoing pronouncements within Florida's state government, neither the United States Department of Education, RSA, nor any other federal authority has ever disallowed any payments to VRS, to the "prime" (Abilities), or to the "sub" (ACS), or issued any written request to FDOE or VRS for return of federal grant money in connection with any of the funds involved with these contracts. The IG Report contained a series of recommendations, including but not limited to the recommendation that VRS seek an appropriate legal remedy to address the costs awarded to the vendors outside of the RFP process, i.e. the transition expenses. In March 2002, FDOE assigned Joe Knicely, C. P. A., one of its educational finance specialists, to check into the perceived problem. He requested access to Abilities' records so that he could select a sample of disbursements to determine if they were allowable under the program and to determine if they seemed reasonable and necessary to the program. He received from Abilities a general ledger with many entries. This material was insufficient for him to conduct his review, because it did not contain the detailed disbursements for the Program. It only showed a transfer of funds from Abilities to ACS. He then sought out receipt and disbursement information from ACS, which ACS supplied, pursuant to the express terms of its subcontract with Abilities. Ultimately, he only got sketchy material with quite a lot of salary information on employees. Mr. Knicely was able to determine that if all of ACS's records (mostly profit and loss statements) which he saw were correct, then ACS did not expend $459,644.00 on its sub- contracts with Abilities. However, he was unable to complete an audit to determine whether ACS's records were accurate; whether the costs ACS listed on paper had actually been expended for the purposes listed; or whether the $459,644.00 figure could be accounted for as "profit". Before Mr. Knicely could form any other conclusions, the FDOE IG asked him to stop his audit. He believes that this request came in July or August of 2002, but he was not certain of the date. Obtaining the necessary information to commence an audit was a preliminary step to doing an audit. Because he was ordered to stand down, Mr. Knicely did not continue to request backup material from ACS or Abilities so that an audit could be performed. He also did not perform an audit within the parameters of "generally accepted accounting principles and standards," because at the time he was ordered to stop pursuing the information to conduct an audit, he did not have enough information to perform such an audit. Mr. Knicely therefore formed no conclusions concerning the reasonableness, necessity, or allowability of the costs incurred by ACS in performing its subcontracts. The total recorded expenses by ACS for Region Seven (contract VH531) for the period April 1, through September 2001, which were placed in evidence at hearing, were $185,260. For Region Twenty (contract VH521), the total recorded expenses for the period April 1, through September 2001, which were placed in evidence, were $507,086.00. These amounts together total $692,346.00. Abilities had received $1,151,806.00, through its two VRS contracts for that period, which it passed through to ACS. There appears to be $459,460.00 paid by VRS to Abilities, which is unsupported by ACS's expense records in evidence. Abilities now claims this amount was a legally permissible "profit" to ACS. At hearing, Mr. Knicely testified that the recorded $692,346.00 also is not backed up with other records of sufficient detail which would permit him to determine their appropriateness under the program. Mr. Knicely was called off the audit when the DOE IG informed DFS of the IG's findings and the DOE IG coordinated activities with DFS to seek the return of the money from Abilities. DFS also performed no audit on the situation, but assigned investigators. On October 14, 2003, representatives of Abilities met with representatives of DFS, concerning the funds identified by the IG's Report. (Stipulated Fact No. 32.) Peter Dunbar, attorney for Abilities October 2003- January 2004, was serving as General Counsel of DFS at the time of the disputed-fact hearing in November 2004. He did not accept the position with DFS until July 1, 2004. Mr. Dunbar and Abilities' then-president, Janet Samuelson, testified credibly that they understood at the October 14, 2003, meeting with DFS personnel that if Abilities did not return all the money which VRS had paid Abilities for transition expenses, DFS would continue to investigate, not just the transition expenses, but all aspects of the two contracts in dispute; would delay other funds due on these contracts; and, possibly, would withhold funds on other VRS-Abilities contracts, pending the investigations. At the October 14, 2003, meeting, Abilities' president and its legal counsel admitted no wrong-doing and disagreed with DFS's legal position that return of the funds was appropriate, required, or owed. The meeting concluded without a resolution of the dispute. Abilities had received from VRS only the amount of payment authorized in the fixed price contracts, which it had already passed through to ACS. At no time has Abilities or ACS ever refused the FDOE IG, VRS, or DFS access to its books or accounts, but Mr. Sandonato testified that since Abilities never verified any of ACS's charges (one-sixth of the total amount per month for six months), there was nothing from Abilities for any reviewing authority to audit. Apparently, there are no further records to be obtained from ACS, either. A demand for the return of the $545,124.00, which had been paid to Abilities as transition expenses under its two contracts, was made to Abilities in November 2003. (Stipulated Fact No. 33.) Mr. Dunbar, on behalf of Abilities, and Richard E. Speer, DFS Law Enforcement Investigator II, negotiated the language in a demand letter sent by Mr. Speer on December 18, 2003, to Mr. Dunbar. That letter read, in pertinent part, as follows: This is to confirm that our investigation has determined that the Florida Department of Education, Division of Vocational and Rehabilitation Services has made unallowable payments in the amount of $545,124 to your client, Abilities, Inc. Said payments were inconsistent with procurement documents and with state and federal guidelines, and there was no documentation to justify the expenses as reasonable and necessary. We anticipate that the good faith evidenced by Abilities, Inc. at the October 14, 2003 meeting will result in the repayment of this sum by Abilities, Inc. This will resolve all of the remaining issues concerning the demonstration projects for region 7 and region 20. Please confirm your client's intention concerning this matter at your earliest convenience. If the matter cannot be successfully concluded as anticipated above by 1/12/04, it will be necessary for the State of Florida to consider the alternative action we have previously discussed. The parties stipulated that Abilities returned the funds ($545,124.00) in December 2003, and the funds were ultimately delivered to VRS. (Stipulated Fact No. 34, modified.) In fact, Abilities' check for $545,124.00 was sent to Mr. Speer, accompanied by a January 12, 2004, letter from Mr. Dunbar, Abilities' attorney, which stated, only: In accordance with your letter of December 18, 2003, enclosed is check #029022 in the amount of $545,124.00 payable to the State of Florida. I would appreciate you acknowledging receipt of the check in the signature block noted below. . . . The check was dated January 9, 2004, and did not specify on its face the purpose of the payment. Upon receiving the foregoing check from Abilities, DFS closed its case. On January 15, 2004, Mr. Speer forwarded the check to FDOE/VRS. It cannot be ascertained from this record when or how FDOE/VRS handled return to RSA of the federal grant monies. The best the undersigned can glean from the record and Mr. Knicely's depositions is that, despite RSA making no demand or disallowance related to these contracts and subcontracts, FDOE/VRS at some point informally credited the funds back to the United States Department of Education by not "drawing down" as much as the state Agency would otherwise have been entitled to "draw down" from "the feds" from other grants or monies. This credit/debit system could have occurred before or after Abilities paid back the money to VRS via DFS. Mr. Dunbar testified that at the time Abilities' check was tendered, he thought that all state agencies concerned had appreciated that Abilities was returning the money with the option to file the instant action. Mr. Speer testified that he understood that the return of the money was in exchange for the State ceasing its investigation of the transition expenses on Abilities' specific two contracts. The parties stipulated that Abilities filed this administrative action pursuant to the dispute resolution provision of Contract Numbers VH521 and VH531, to contest the final agency action in demanding return of the contract payments. (Stipulated Fact No. 35. modified.) The Division's file reveals that the date of the mailed service of the Petition was February 4, 2004, and that it was filed at FDOE that day. The Petition recited that "All conditions precedent to filing this petition have occurred, been waived, or are now futile." An Amended Petition was served by mail on May 12, 2004. FDOE referred the matter to the Division of Administrative Hearings on May 24, 2004. The dispute resolution language of the contracts relied on by the parties, provides, at Attachment E, SPECIAL PROVISIONS, 3. (pages 15-16), for a series of informal and formal negotiation stages, totaling 81 days, and ends with: c. The action of the OAOC/VRS Director is final and binding unless one party wants to seek remedy through the Administrative hearing system. There also is language at Attachment G.IV.G. (pages 34-35) of the prime contracts that provides: Remedies of OAOC/VRS Cumulative. In addition to all remedies available to OAOC/VRS, hereunder, in the event Provider breaches its obligation under this Agreement, OAOC/VRS shall be entitled to exercise any remedy available or provided under Florida law (all rights and remedies granted in this Agreement to OAOC/VRS available at law or equity shall be cumulative and not mutually exclusive). Both prime contracts VH521 and VH531 are termed "AGREEMENTS," within themselves. Both require, at Attachment (pages 21-22), that the provider (Abilities) will: . . . maintain (in accordance with generally accepted accounting procedures) and retain, during and for three (3) years after termination of this Agreement, books, records and all other documents relating to this Agreement which sufficiently and properly reflect all expenditures of funds provided by OAOC/VRS under this Agreement (collectively, the "Records"). If an audit has been initiated and audit findings have not been resolved at the end of such three (3) year period, provider shall retain the Records until resolution of the audit findings. * * * 6. To submit all invoices for payment for services or expenses in form acceptable to the OAOC/VRS and in detail sufficient for proper pre-audit and post-audit thereof. Attachment G.II.C. 7-12 (pages 22-23) of the prime contracts specifies that some types of audits in compliance with OMB Circular A-133 may be ordered by the provider at the provider's expense and submitted by the provider, or the provider may pay the expenses of some audits if they are done by the Auditor General. Because of the limited nature of this case, and a pre-trial ruling eliminating OMB Circular A-133 as a federal requirement that Abilities may have been bound by for purposes of this case (See Preliminary Statement supra. and Endnote 1.), whatever OMB Circular A-133 required or did not require by way of audits may not be pursued here. However, the language employed at G.II. 7-12 of the prime contract is nonetheless significant, because it requires delivery of such reports and audits to OAOC/VRS by the "provider." Then, at Attachment A.III 1-2 (pages 4-5) the prime contracts provide for audits and reporting packages by or on behalf of the "recipients" to be submitted to, among others, OAOC. It also is specifically stated, at A.III.5 (page 5), that delivery is to be by the "recipients" to OAOC, as follows: 5. Recipients, when submitting audit reports to Occupational Access and Opportunity Commission/Vocational Rehabilitation Services for audits done in accordance with OMB Circular A-133, Florida Statutes, and Chapter 10.600, Rules of the Auditor General, should indicate the date that the audit report was delivered to the recipient in correspondence accompanying the audit report. In this context, because OAOC cannot deliver an audit or report to itself, Abilities must also qualify under these contracts as both a "provider" and a "recipient," although "sub- recipient" might, to a layman, be more descriptive of the relationship. These common words, "provider," "recipient," and "sub-recipient," become "words of art" pursuant to law, and the parties disagree as to the effect of those legal definitions. (See Conclusions of Law)) The prime contracts between VRS and Abilities clearly provide, at Attachment D.1. (page 14), that they are "fixed rate" contracts, and neither party disputes that Abilities is both a "vendor" and a "provider" under express language throughout the contracts. The parties disagree as to what is meant by the term, a "fixed rate contract". Petitioner's concept is that it means that the vendor/provider, Abilities, shall get paid by the State, regardless of whether the work is justified by the vendor's/provider's expense itemization, provided the total amount of money fixed in the contract is never exceeded by the invoicing. VRS contends that Abilities' view is wholly inconsistent with the actions of the parties; the terms and express intent of the federal grant; the prime contracts; and the sub-contracts. In fact, what constitute the instant fixed rate prime contracts in this case is specified within the terms of the contracts themselves. The AUTHORITY is found on page 1, thereof, and states: This contract is entered pursuant to the Rehabilitation Act of 1973 as amended [referred hereinafter as the "Act"] Florida Statutes, Chapter 413 (Part II), Public Law 93-112 as amended by Public Laws 93-516, 98- 221, 99-506, 100-630-102-569,103-073, and 105, 220. Other applicable regulations include the Education Department of General Administrative Regulations (EDGAR),3/ the State Plan and the State OAOC/VRS Program Regulations in 34 CFR Part 361. See, also, Attachment G. (page 20) of the prime contract: II. The Provider Agrees: Contractual Services: To provide all the services it is obligated to provide as specified in the Agreement. Federal and State Laws and Regulations: 1. If this Agreement provides for payment, in whole or in part, with federal funds, to comply with the applicable provisions of 34 CFR, Parts 74 and 80, all applicable OMB Circulars, and other applicable regulations specified in this Agreement. * * * Both contracts VH521 and VH531 provide, at Attachment E.9. (pages 17-18), for the return of overpayments by the provider, Abilities, for unearned funds,: 9. Return of Funds (Overpayments and interest penalty ) (Provider agrees) to return to OAOC/VRS any overpayments due to unearned funds or funds disallowed pursuant to the terms of this contract that were disbursed to the provider by OAOC/VRS. In the event that the provider or its independent auditor discovers that an overpayment has been made, the provider shall repay said overpayment within forty (40) calendar days without prior notification from OAOC/VRS. In the event that OAOC/VRS first discovers an overpayment has been made, OAOC/VRS will notify the provider by letter of such a finding. Should repayment not be made in a timely manner, OAOC/VRS will charge interest of one (1) percent per month compounded on the outstanding balance after forty (40) calendar days after the date of notification. (Emphasis supplied) Moreover, contracts VH521 and VH531 provide, at Attachment G.II.S.(page 28), that "program income" shall be used by OAOC/VRS to either reduce the contract award or fund additional services eligible for Federal funding. . . . Program income shall be used, at the direction of the OAOC/VRS, to either reduce the contract award or fund additional services eligible for State and Federal funding. For purposes of this Agreement, "program income" shall mean gross income received by Provider directly generated by a grant supported activity, or earned as a result of this Agreement during the term of this Agreement. If any payment due under this Agreement results directly from a budget line item submitted by Provider and Provider's actual costs/expenditures during the Agreement term are less than the amount budgeted, the resulting excess payment shall be deemed, for the purposes of this Agreement, "program income." * * * Attachment G.II.J. (pages 24-25) also contains a provider agreement: . . . To return to OAOC/VRS any overpayment of funds disallowed pursuant to the terms of this Agreement that were disbursed to the Provider by OAOC/VRS. . . . 34 CFR § 74.2, defines "award," for purposes of that federal regulation, dealing with what the federal government pays out in grants, as: Award means financial assistance that provides support or stimulation to accomplish a public purpose. Awards include grants and other agreements in the form of money or property, in lieu of money, by the Federal Government to an eligible recipient. The term does not include-- Technical assistance, which provides services instead of money; Other assistance in the form of loans, loan guarantees, interest subsidies, or insurance; Direct payments of any kind to individuals; and Contracts which are required to be entered into and administered under procurement laws and regulations. (Emphasis supplied) 34 CFR § 74.24(b), provides that program income earned during the project period must be retained by the program recipient (VRS) in this situation, (VRS) and, in accordance with United States Department of Education regulations or the terms or conditions of the award, must be used in one or more of the following ways: * * * (3) Deducted from the total project or program allowable cost in determining the net allowable costs on which the Federal share of costs is based. Abilities subcontracted with ACS after appropriate notice to VRS. Both contracts VH521 and VH531, at Attachment E.5.(page 16) permitted Abilities to subcontract with another party as follows: Subcontracts: The Provider may assign or delegate obligations under this Agreement to another party and may subcontract for any work contemplated under this Agreement with an OAOC/VRS approved vendor or, with the written approval of OAOC/VRS. The Provider is solely liable for the performance of all obligations outlined in this Agreement which are not the exclusive responsibility of the OAOC/VRS. . . . In the event the Provider subcontracts all or any portion of its obligations under this Agreement, the subcontractor is bound by the terms of the Agreement and all applicable laws and regulations. After the execution of the contract, if a subcontract is found to be in violation of federal/state rules and regulations, the Provider will be considered to be in breach of contract. Abilities expected that its subcontractor ACS would be bound by the same agreements by which Abilities was bound. On or about May 2, 2001, Abilities and ACS, using some new words of art, entered into subcontracts providing that Abilities would pass through the federal grant funds to ACS for performing the services and obligations under State VRS contracts VH521 and VH531, by the following sub-contract language: PRIME CONTRACT Notwithstanding any other provision of this Agreement, this Agreement is a subcontract under the Prime Contract [VRS and Abilities] and each and every provision of the Prime Contract, as may be tailored herein, and any amendments thereto, as added to this Subcontract, shall extend to and be binding upon SUBCONTRACTOR [ACS]as part of this Agreement. With respect to any references in the Prime Contract to CONTRACTOR and CUSTOMER for purposes and applicability to this Subcontract, CONTRACTOR shall mean and include SUBCONTRACTOR and CUSTOMER shall mean and include CONTRACTOR. (Bracketed material added for clarity.) Every dollar received by Abilities under the contracts was paid directly to its subcontractor ACS. The subcontracts between Abilities and ACS also specifically provided at pages 4 and 5 of the subcontracts that Attachment E and Attachment G of prime contracts VH521 and VH531 apply to the subcontractor. Once again, different words of art were employed for the same entities. See the subcontracts: 7.0 SPECIAL PROVISIONS Attachment E, Special Provisions, of the Prime Contract shall apply to this Subcontract. 12.0 OAOC/VRS STANDARD TERMS AND CONDITIONS Attachment G of the Prime Contract, OAOC/VRS Standard Terms and Conditions Attachment shall apply to this Agreement, except that the following shall apply to SUBCONTRACTOR under the identified sections of the Standard Terms and Conditions: Federal and State Laws and Regulations SUBCONTRACTOR shall be subject to applicable OMB circulars for For-Profit organizations. Audits and Records Access to records for SUBCONTRACTOR shall be accommodated at Subcontractor's facility in Austin, Texas. Such access shall exclude information related to profit or business proprietary information. E. Indemnification Relative to indemnification to CUSTOMER, CONTRACTOR and SUBCONTRACTOR agree to cross indemnify each other relative to any cause of action brought by the CUSTOMER under this Agreement. The expenditures claimed by Abilities and ACS would have to be examined in accordance with 34 CFR § 74.27, which provides, in part: (a) For each kind of recipient, there is a set of cost principles for determining allowable costs. Allowability of costs are determined in accordance with the cost principles applicable to the entity incurring the costs, as specified in the following chart. For the cost of a- Use the principle in- Private nonprofit organization OMB Circular A-122 other than An institution of higher education; a hospital; or (3) an organization named in OMB Circular A-122 as not subject to that circular OMB Circular A-122. Educational Institution OMB Circular A-21 Hospital Appendix E to 45 CFR part 74 Commercial for-profit organization other than a hospital and an educational institution 48 CFR part 31 Contract Costs Principles and Procedures or institution. Uniform and accounting standards that comply with cost principles acceptable to ED. OMB Circular A-122 states that in order for costs to be allowable under an award, they must be "reasonable for the performance of the award and be allocable thereto under these principles." ACS was a commercial for-profit organization, and pursuant to its subcontract with Abilities, ACS had to comply with 48 C.F.R. Part 31. Those provisions state, in part: 31.102 Fixed-price contracts. The applicable subparts of part 31 shall be used in the pricing of fixed-price contracts, subcontracts, and modifications to contracts and subcontracts whenever (a) cost analysis is performed, or (b) a fixed- price contract clause requires the determination or negotiation of costs. However, application of cost principles to fixed-price contracts and subcontracts shall not be construed as a requirement to negotiate agreements on individual elements of cost in arriving at agreement on the total price. The final price accepted by the parties reflects agreement only on the total price. Further, notwithstanding the mandatory use of cost principles, the objective will continue to be to negotiate prices that are fair and reasonable, cost and other factors considered. 48 CFR 31.201-2 provides: 31.201-2 Determining allowability. (a) A cost is allowable only when the cost complies with all of the following requirements: Reasonableness Allocability Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circumstances. Terms of the contract. Any limitations set forth in this subpart . . . * * * (d) A contractor is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are allocable to the contract, and comply with applicable cost principles in this subpart and agency supplements. The contracting officer may disallow all or part of a claimed cost that is inadequately supported. (Emphasis supplied) In the prime contract, at Attachment G.II.B., the provider, Abilities, agreed: 4. To comply with all applicable laws, statutes an regulations of the State of Florida and the United States, and to complete any forms required under such law, statutes, and regulations, whether or not such forms are referenced in this Agreement.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Florida Department of Education, Division of Vocational Rehabilitative Services enter a final order dismissing the Petition and Amended Petition herein. DONE AND ENTERED this 9th day of May, 2005, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 9th day of May, 2005.
The Issue The issues in this matter are whether Respondent violated section 112.313(6), Florida Statutes (2013),1/ by obtaining funds from Orange County in the form of a severance payment while remaining employed as General Counsel for the Orange County Clerk of Courts; and, if so, the appropriate penalty.
Findings Of Fact Respondent, Stephan Carter, served as General Counsel for the Orange County Clerk of Courts (the “Clerk’s Office”) from June 2003 through April 1, 2014. Respondent was a public employee at all times material to this action. Respondent was personally hired by Lydia Gardner, the Orange County Clerk of Courts. In January 2005, Respondent and Ms. Gardner executed an employment contract (the “Employment Agreement”). The Employment Agreement was signed by Respondent and Ms. Gardner, in her capacity as the Clerk of Courts, on January 10, 2005, and January 13, 2005, respectively. The Employment Agreement, paragraph 6, entitled “Termination of Employment,” established that the Clerk would pay Respondent a fee should the Clerk terminate the Employment Agreement prior to its expiration date (the “Severance Payment”). Paragraph 6 specifically provided: The Clerk may declare this agreement terminated at any time. . . . The Clerk shall promptly pay to the General Counsel a sum equal to i) the salary and deferred compensation that is accrued but unpaid as of the date of the termination, plus ii) an amount equal to the pro rata portion of his salary for all accrued but unused leave time, plus, iii) an amount equal to the salary and deferred compensation that the General Counsel would have received during the 180 days immediately following the date such termination takes effect, as if this agreement had not been terminated. At the final hearing, Respondent explained that when he accepted the position of General Counsel (then titled “Legal Counsel”) with the Clerk’s Office in June 2003, he informed Ms. Gardner that he would only agree to work for the Clerk’s Office if he could be protected from losing his position. Therefore, Respondent sought and obtained the Severance Payment provision should he be terminated for any reason other than his voluntary resignation. The Employment Agreement provided that Respondent’s term of employment continued until January 6, 2009. On January 7, 2009, Respondent and Ms. Gardner entered a signed agreement wherein the Employment Agreement was “extended indefinitely.” On February 5, 2013, Respondent and Ms. Gardner signed a second amendment to the Employment Agreement.2/ This “clarification of terms” stated: [A]s to the definition of termination in paragraph 6, for the purposes of the contract, termination by the Clerk includes the ending of the employment relationship for any reason other than General Counsel’s voluntary resignation. The amendment also provided that an $11,000 annual payment into Respondent’s deferred compensation plan contained in the original Employment Agreement be considered compensation under Florida Administrative Code Rule 60S-6.001(15)(relating to pensions) and not a fringe benefit. In February 2013, Ms. Gardner became gravely ill. Ms. Gardner’s illness caused her to be absent from the Clerk’s Office. In Ms. Gardner’s absence, Colleen Reilly, the Chief Administrative Officer for the Clerk’s Office, assumed Ms. Gardner’s responsibilities. Ms. Reilly was hired in 2009. At that time, Respondent prepared an employment contract for Ms. Reilly modelled on his own Employment Agreement. In April 2013, Ms. Reilly approached Respondent to talk about their future employment with the Clerk’s Office. Ms. Gardner’s health was deteriorating. Respondent and Ms. Reilly discussed the impact of Ms. Gardner’s death on their positions. Ms. Reilly was also concerned whether the new Clerk of Courts would honor their Employment Agreements. Respondent and Ms. Reilly’s conversation led to a discussion regarding how they could protect the Severance Payments under their respective Employment Agreements. Respondent and Ms. Reilly considered several possibilities. One position was that their Employment Agreements would remain in effect upon Ms. Gardner's death, and they could ask the new Clerk of Courts to honor the payout terms. Respondent, however, determined that the Employment Agreements were not clear on whether he and Ms. Reilly were entitled to the Severance Payments following a change of administration. Therefore, they became concerned whether the new Clerk of Courts would be legally bound to honor the Severance Payments should he or she decide not to retain their services. Respondent, without seeking legal guidance or consulting with outside counsel for the Clerk’s Office, concluded that the Employment Agreements would terminate upon Ms. Gardner’s death. At the final hearing, Respondent explained that he considered his employment to be tied specifically to Ms. Gardner and not the Clerk's Office. Therefore, Respondent reasoned that because both he and Ms. Reilly were hired by and worked directly for Ms. Gardner, her death would terminate their contracts. This termination, of course, would also entitle Respondent (and Ms. Reilly) to the Severance Payment because his employment would have ended for a reason other than his voluntary resignation. Respondent and Ms. Reilly also discussed their plans once their Employment Agreements were terminated. Respondent informed Ms. Reilly that he believed that after the Employment Agreement was terminated, they could continue to work for the Clerk’s Office as “at-will” employees without employment contracts. Respondent encouraged Ms. Reilly to take her Severance Payment then stay in her position with the Clerk’s Office. He intended to do the same. Late in April 2013, Ms. Reilly informed Respondent that she was planning to visit Ms. Gardner, who was on convalescent leave at her home, to ask her to formally terminate the Employment Agreements and make them at-will employees of the Clerk’s Office. Respondent encouraged Ms. Reilly’s endeavor. Respondent then drafted two versions of a memorandum Ms. Gardner could sign to effectuate the termination of their contracts. Ms. Gardner, however, did not agree to terminate the Employment Agreements or sign the paperwork Respondent had prepared. Consequently, the Employment Agreements remained in effect. When Ms. Reilly was not able to obtain Ms. Gardner’s consent to terminate the Employment Agreements, Respondent began to consider Ms. Reilly’s authority to terminate his Employment Agreement. Respondent determined that Ms. Reilly could terminate his contract under section 28.09, Florida Statutes, and they could still receive the Severance Payments. Section 28.09 describes the appointment of a clerk ad interim in the case of a vacancy occurring in the office of a clerk by death. Section 28.09 states that the clerk ad interim “shall assume all the responsibilities [and] perform all the duties” of the clerk. Therefore, because Ms. Reilly would assume all the powers of Ms. Gardner, she would be authorized the terminate his Employment Agreement. Ms. Gardner passed away on May 8, 2013. On May 9, 2013, Ms. Reilly was officially appointed as Clerk Ad Interim for the Clerk’s Office. Also on May 9, 2013, Respondent and Ms. Reilly immediately took steps to obtain their respective Severance Payments. To effectuate their plan, Ms. Reilly promptly terminated both their Employment Agreements using her newfound authority as the interim Clerk. Respondent hoped that this step would remove any questions of their entitlement to the Severance Payment that might be raised by the new Clerk of Courts. Respondent then went directly to the Clerk’s Payroll office. There, he approached Tracy Gasinski, the payroll administrator for the Clerk’s Office. Respondent informed her that Ms. Reilly had approved him to receive a payout. Respondent declared that his payout was authorized because his Employment Agreement was terminated. Respondent also instructed Ms. Gasinski to pay Ms. Reilly’s payout under her Employment Agreement. Respondent stressed that he wanted both payouts processed immediately. Finally, Respondent advised Ms. Gasinski that nobody needed to know about the payout. Ms. Gasinski felt pressured by Respondent. However, based on his representation that Ms. Reilly had approved the payout, she immediately processed a final paycheck for Respondent (and Ms. Reilly), which included the Severance Payment provided in his Employment Agreement. Ms. Gasinski calculated a payout for Respondent in the gross amount of $110,290.61. This figure included a Severance Payment of $76,844.00. In addition, per his request, Respondent was also paid $27,822.10 for all his unused vacation leave (405.57 hours times a rate of $68.60), as well as $5,624.51 for his unused sick leave (327.96 hours times a rate of $17.15). Ms. Gasinski paid 25 percent of Respondent’s sick leave per Clerk’s Office policy. The next day, on May 10, 2013, Ms. Gasinski issued Respondent a check in the amount of $58,400.00 which was deposited directly into Respondent's personal bank account. Ms. Gasinski also deposited a final paycheck into Ms. Reilly's bank account. On or about May 20, 2013, however, Respondent returned to see Ms. Gasinski. He was not happy with his payout. Respondent told Ms. Gasinski that the amount she deposited was incorrect, and he was due more money. Respondent demanded several adjustments which would maximize his Severance Payment. First, referencing the February 5, 2013, amendment to his Employment Agreement, Respondent wanted the $11,000 he received as deferred compensation to be incorporated into his base salary thereby increasing his rate of pay. Second, Ms. Gasinski, in calculating Respondent’s Severance Payment, computed the final payout based on six month’s salary in accordance with the standard practice of the Clerk's Office. Respondent, however, insisted that his Severance Payment be calculated based on “180 days” as specifically stated in his Employment Agreement at paragraph 6. This mathematical adjustment increased Respondent's payout by including payment for all Saturdays and Sundays.3/ Third, Respondent demanded that he receive 100 percent payout for his remaining sick leave instead of just 25 percent as was the Clerk’s Office policy. Fourth, Respondent requested that 56 hours (7 days) be reserved in his vacation leave account and not paid out.4/ Following their meeting, Ms. Gasinski voided the initial payout check. However, she was not comfortable with Respondent’s request based on her understanding of employment contracts. Respondent's and Ms. Reilly's transactions were out of the ordinary course of business for the Clerk's Office. In her experience, final paychecks to Clerk’s Office employees were always accompanied by paperwork from the Clerk’s Office’s Talent Management division. This paperwork came in the form of an Employee Change Notice (“ECN”). However, Respondent did not produce, nor had Ms. Gasinski received, an ECN supporting Respondent’s payout. In Clerk’s Office accounting practices, Talent Management and the Payroll office act as a check and balance for each other. Typically, Talent Management initiates the paperwork, and then Payroll issues the checks. The normal process for a payout when a Clerk's Office employee leaves employment is for Talent Management to notify Ms. Gasinski who then processes the final payout. Respondent did not have the authority to direct Ms. Gasinski to issue the checks. Similarly, Ms. Gasinski did not have the authority to write checks to either Respondent or Ms. Reilly. Furthermore, a final payout upon termination is always via a paper check. Direct deposit to a personal bank account is never an option. The terminated employee picks up the paper check from Talent Management who verifies that the employee's garage pass and badge have been returned. Because of her discomfort with issuing Respondent’s payout check, Ms. Gasinski sought advice from her supervisor, Mike Murphy, the Chief Financial Officer for the Clerk’s Office. Mr. Murphy suggested that Ms. Gasinski contact Talent Management. On May 21, 2013, Ms. Gasinski spoke to Joann Gammichia, the Director of Talent Management, about Respondent’s request for a payout. When Ms. Gammichia learned of the situation, she had immediate concerns. First, Ms. Gammichia wondered why Payroll was issuing a check without any documentation from Talent Management such as an ECN. Ms. Gammichia testified that each employment activity requires completion of an ECN which acts as a recordkeeping system for the Clerk's Office. Because Respondent approached Ms. Gasinski in the Payroll office directly, no ECN or other written record was generated explaining why the Clerk’s Office was issuing the payout to Respondent. Ms. Gammichia explained that the policy of the Clerk’s Office is that payouts, severance checks, termination, or any kind of position change should only occur with an ECN in order to maintain and track the complete history of an employee's tenure with the Clerk's office. Ms. Gammichia also wondered why Respondent went directly to Ms. Gasinski with his demands. The normal starting point for employee changes begins with Talent Management, and the end of the line is financial services and Payroll. The fact that Respondent was attempting to verbally change his employment status in the Payroll office was “highly irregular.” Ms. Gammichia was also puzzled why the Clerk’s Office was issuing a severance payout on an employment contract when the employment was not ending. Consequently, Ms. Gammichia told Ms. Gasinski not to issue the adjusted payout check. Ms. Gasinski then notified Respondent via e-mail dated May 21, 2013, that she could not process the final payout until she received the proper documentation from Ms. Gammichia in Talent Management. Shortly thereafter, Respondent visited Ms. Gammichia’s office to inquire why she was involved in his payout matter. According to Ms. Gammichia, Respondent became “pretty aggressive.” Respondent told Ms. Gammichia that she had no authority or business being involved. It was a personal matter. Respondent warned Ms. Gammichia that she was directly violating an order from Ms. Reilly to make the Severance Payments. Ms. Gammichia informed Respondent that not only was she involved, but she was not authorizing the payout check to go through. Ms. Gammichia further advised Respondent not to contact Ms. Gasinski regarding the payout. Later that day, Ms. Gammichia contacted her supervisor, Cathi Balboa, the Director of Administrative Services for the Clerk’s Office, to discuss Respondent’s payout request. Ms. Gammichia relayed to Ms. Balboa that Ms. Gasinski was upset because she was being asked to prepare a large payout based only on verbal instructions without any supporting paperwork. At the final hearing, Ms. Balboa recalled that Respondent’s urgent request for a payout was highly irregular. Ms. Balboa relayed that the Clerk’s Office should not issue a final payout unless an employee was truly terminated from his or her position. Based on their concerns, Ms. Gammichia and Ms. Balboa called Ms. Reilly, who was sick at home, to confirm whether Ms. Reilly was aware of the payouts that Respondent said she had authorized. Ms. Gammichia also wanted to report the fact that Ms. Gasinski felt that she was being coerced and harassed by Respondent. Ms. Gammichia described Ms. Reilly’s reaction as hostile and negative. Ms. Reilly did not seem happy that others were involved. Ms. Reilly asked Ms. Balboa, “How did you get involved in this?" The next morning, on May 22, 2013, Ms. Reilly returned to the Clerk’s Office and called a meeting with Mr. Murphy, Ms. Balboa, and Respondent. Ms. Reilly opened the meeting by asking Mr. Murphy and Ms. Balboa "what do you think your role is in this organization," and "where do your loyalties lay?" Ms. Reilly then announced that “it was a private matter, it was their personal business, [and] to stay out of it." Ms. Balboa testified at the final hearing that Ms. Reilly intimidated her in their meeting. Mr. Murphy conveyed that he understood that they were not to get involved in the severance payout matter. After the meeting, Ms. Gasinski was told to proceed with the payouts for Respondent and Ms. Reilly. On May 23, 2013, Ms. Gasinski processed a second severance payout check for Respondent and Ms. Reilly. Ms. Gasinski prepared for Respondent a revised final paycheck in the total amount of $156,443.11. This amount included a Severance Payment of $106,387.20. Respondent was also paid $25,826.23 for his vacation leave (349.57 hours times a rate of $73.88), as well as $24,229.68 for all his unused sick leave (327.96 hours times a rate of $73.88). A check in the net amount of $99,125.45 was deposited in Respondent’s personal bank account. On May 23, 2013, Respondent repaid the initial payout of $58,400.00 to the Clerk’s Office by personal check. After Ms. Reilly terminated his Employment Agreement on May 9, 2013, Respondent never left his position with the Clerk’s Office. Respondent considered himself an at-will employee and continued to report to work as General Counsel. There was never any break in his employment. At no time did Respondent (or the Clerk’s Office) initiate or complete any paperwork to rehire Respondent after either Ms. Gardner’s death or Ms. Reilly terminated his Employment Agreement. No documentation was prepared transitioning Respondent from a contract employee to an at-will employee. Respondent continued to perform the same duties under the same terms, conditions, and compensation contained in the Employment Agreement as if he never left office.5/ At the final hearing, Respondent testified why his interpretation of his Employment Agreement justified his actions and motives. Respondent first remarked that his Employment Agreement was not typical for a Clerk’s Office employee. It contained certain provisions which were not to be “exposed generally,” such as the termination clause and the contact termination fee. Therefore, he desired to keep his employment terms quiet. Respondent further disclosed that he did not initiate an ECN because his Severance Payment was not a human resources issue, it was a matter of contract. Respondent also explained that at the end of 2008, when his Employment Agreement was nearing its initial termination date, Respondent became concerned with his future at the Clerk’s Office. He began to wonder what would happen if Ms. Gardner left her position as Clerk. Therefore, he prepared, then executed, the 2009 amendment to the Employment Agreement extending it “indefinitely.” In 2013, Respondent prepared, then executed, the second amendment clarifying the term “termination.” Regarding collecting his Severance Payment without leaving his position with the Clerk’s Office, Respondent contended that just because his Employment Agreement was terminated (thus, entitling him to the Severance Payment) did not mean he had to leave employment with the Clerk’s Office. Respondent characterized the payment as a “contract termination fee.” Therefore, he asserted that the Clerk could terminate his Employment Agreement without actually terminating him from his position as General Counsel. Consequently, nothing prevented him from becoming an at-will employee. Accordingly, when Ms. Reilly terminated the Employment Agreements on May 9, 2013, by exercising her prerogative as the interim Clerk, she also decided that both Respondent and she would stay on with the Clerk’s Office as at-will employees until the new Clerk of Courts determined what to do with them. In February 2014, the new Clerk of Courts, Eddie Fernandez, determined to initiate an investigation to review the propriety of the 2013 Severance Payments to Respondent and Ms. Reilly. On March 28, 2014, Respondent was placed on administrative leave with pay. On April 1, 2014, after the investigation recommended that Respondent’s employment be terminated, Respondent resigned from his position with the Clerk’s Office. As a condition of his resignation, Respondent was not eligible for rehire by the Clerk’s Office. Respondent reimbursed the full amount of the money that he received as the Severance Payment from the Clerk’s Office. Commenting on the circumstances of his resignation and restitution, at the final hearing, Respondent urged that he did not act dishonestly, but, maybe he exercised bad judgment. Respondent also proclaimed that he received his Severance Payment because the interim Clerk ordered it, not by reason of his actions or conduct. Therefore, he personally never violated any duty of his office. Based on the evidence and testimony presented during the final hearing, the competent substantial evidence in the record establishes, by clear and convincing evidence, that Respondent acted corruptly, with a wrongful intent, in seeking and obtaining the Severance Payment when he never intended to leave his public employment with the Clerk’s Office. Accordingly, the Advocate proved that Respondent violated section 112.313(6).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission enter a final order finding that Respondent, Steven Carter, violated section 112.313(6), Florida Statutes; and that Respondent be subject to public censure and reprimand. DONE AND ENTERED this 3rd day of January, 2017, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER 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 3rd day of January, 2017.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner's Final Determination be approved and that Respondent be required to repay $1,753 in grant funds expended in a manner inconsistent with Department regulations. DONE and ENTERED this 16th day of February, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER 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 16th day of February, 1982. COPIES FURNISHED: Sonja P. Mathews, Esquire Suite 117-Montgomery Building 2562 Executive Center Circle, East Tallahassee, Florida 32301 Robert L. Davis Post Office Box 350 Apalachicola, Florida 32320
The Issue Whether Petitioner committed the offenses alleged in the Administrative Complaint and, if so, what discipline should be imposed against Respondent's Pari-Mutuel Wagering Occupational License?
Findings Of Fact Respondent submitted an application to Petitioner, the Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering (Division) on or about October 6, 2004, for a pari-mutuel wagering occupational license. The Division issued license number 7244830-1021, at Ocala Jai-Alai to Respondent. The nature of the license is an "owner's license" regarding owning racehorses. The Division is the state agency charged with regulation of pari-mutuel wagering pursuant to Chapter 550, Florida Statutes, and is responsible for licensing employees of pari-mutuel facilities. The following question appeared on Respondent's application for licensure: Have you ever been convicted of a crime, found guilty, or entered a plea of guilty or nolo contendere (no contest) to, even if you received a withhold of adjudication? This question applies to any violation of the laws of any municipality, county, state or nation, including felony, misdemeanor and traffic offenses (but not parking, speeding, inspection, or traffic signal violations), without regard to whether you were placed on probation, had adjudication withheld, were paroled, or pardoned. If you intend to answer "NO" because you believe those records have been expunged or sealed by court order pursuant to Section 943.058, Florida Statutes, or applicable law of another state, you are responsible for verifying the expungement or sealing prior to answering "NO." YOUR ANSWER TO THIS QUESTION WILL BE CHECKED AGAINST LOCAL, STATE AND FEDERAL RECORDS. FAILURE TO ANSWER THIS QUESTION ACCURATELY MAY RESULT IN THE DENIAL OR REVOCATION OF YOUR LICENSE. IF YOU DO NOT FULLY UNDERSTAND THIS QUESTION, CONSULT WITH AN ATTORNEY OR CONTACT THE DEPARTMENT. If an applicant answers "yes" to the above question, he or she is then required to complete form 0050-1. Respondent answered "yes" to the question and submitted form 0050-1 which contained the following explanation: Offense: Tax Evasion County: New York State: New York Penalty/ Disposition: Restitution misdemeanor-probation Date of offense: 1985 Have all sanctions been satisfied: yes Description: Sold property failed to pay tax liens-ultimately bank was money damaged so I had to pay restitution + serve 2y probation.[1/] In April 1995, the United State District Court for the Western District of New York issued a Judgment against Respondent finding him guilty of the crime of Bank Larceny and Theft. The Judgment lists the date the offense concluded as "03/03/89." Respondent was ordered to pay a special assessment of $25, restitution in the amount of $59,000 in installments to Empire of America, and was placed on one year probation. Steven Toner is an investigator for the Division. He was assigned Respondent's case and conducted an interview of Respondent. During cross-examination, Mr. Toner described part of the interview: Q: Did Mr. Paradelo in the course of your interview in my office indicate to you that the entire thing on his application for 1985 tax evasion, which he stated to you for the 1995 conviction, was all a single case? A: It was told to me that it was a run-on. Now, I'm not trying to be evasive, but it was a run-on between the criminal and the civil matters that were in the Landlord/Tenant things that were going, that were happening during that period of time. Respondent described the general chain of events leading up to the 1995 Judgment: in 1985, the Internal Revenue Service (IRS) filed a tax lien against Respondent; in 1988 Respondent applied to Empire of America Bank to refinance apartments which he owned; at the closing for the refinancing, the tax lien was revealed to the bank and to Respondent; the closing went forward; Respondent filed for bankruptcy in 1991; the bank failed and was taken over by a trust company; in 1991, the IRS commenced foreclosure proceedings based upon the 1985 tax lien; the matter was ultimately resolved in the criminal case which resulted in the Judgment wherein Respondent was required to pay $59,000 in restitution. Respondent considers the Judgment as a continuation of, and not distinct from, the tax lien matter that initially arose in the 1980's. The undersigned finds Respondent's testimony in this regard to be credible. The details of the events leading up to the 1995 judgment are important to the extent that they lend support to Respondent's position that he did not falsify the license application. Respondent answered "yes" to the question that he had a criminal conviction. He disclosed that he sold property, had to pay tax liens, had to pay restitution, and was placed on probation. While Respondent's description of his criminal conviction was imprecise, it was not false.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That a final order be entered dismissing the Administrative Complaint filed against Respondent. DONE AND ENTERED this 10th day of July, 2006, in Tallahassee, Leon County, Florida. S BARBARA J. STAROS 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 July, 2006.
