The Issue The issue in this proceeding is whether the Petitioner is entitled to recover attorney's fees and costs incurred in this proceeding pursuant to the provisions of Section 112.317(8), Florida Statutes, and if so, the amount of such attorney's fees and costs.
Findings Of Fact Petitioner, Gordon Sands (Petitioner or Mayor Sands), is and at all times material to this proceeding was mayor of the Town of Welaka, Florida (Town or Town of Welaka), having served in that position for four years. Initially, Petitioner was appointed mayor in May 1996, after the then-mayor resigned. In 1997, Petitioner ran unopposed for mayor and, in March 1999, he was re-elected. Respondent, Caron Speas (Respondent), is and has been a resident of the Town of Welaka for two years. Respondent, who has practiced law since 1981, considers herself a "watchdog" of the actions of the Town's local government. She is chair of and has been active in a local "political committee" currently known as Concerned Citizens for Public Integrity, Inc. Respondent's brother, Rand Speas, is also a resident of the Town of Welaka. During January to March 1999, Mr. Speas was running for a position on the Town Council at the request of his sister, Respondent. Mr. Speas lost his election campaign on March 3, 1999. During Mr. Speas' unsuccessful 1999 election campaign, Mayor Sands was running for re-election. Respondent was opposed to Petitioner's re-election bid and had actively opposed many of the official actions taken by Mayor Sands. Moreover, Respondent had openly expressed her dislike and dissatisfaction with the manner in which the Town of Welaka was governed and her opposition to the administration of Mayor Sands. On April 9, 1999, Respondent filed an amended ethics complaint (Amended Complaint) against Mayor Sands alleging that the mayor violated Section 112.313(6), Florida Statutes, by orchestrating a willful and deliberate violation of the public records laws in order to aid his re-election campaign. After an investigation and consideration of the Complaint and the Amended Complaint, the Ethics Commission issued an order finding that there was no probable cause to believe that the mayor had violated the Code of Ethics as alleged by Respondent and dismissing both the Complaint and the Amended Complaint. In this case, Petitioner asserts a right to attorney's fees and costs by reason of Respondent's filing the Amended Complaint. In the Amended Complaint made against Mayor Sands, Respondent submitted an Amended Statement of Facts, which stated: AMENDED STATEMENT OF FACTS During the months from January 1999 to March 1999, said party [Mayor Sands] did violate Florida Statute [sic] 112.313(6) by orchestrating a willful and deliberate violation of the public records laws for the purpose of aiding his re-election campaign. Said party did use his position as Mayor of the Town of Welaka (population approximately 600) to instruct the town clerk not to provide his political opponents with public records that contained information relating to campaign issues. On January 13, 1999, The Concerned Citizen's Group, a political committee opposing Mayor Sands [sic] bid for re-election, requested copies of very specific public records. The town clerk produced records which were wholly incomplete--rather than producing the audited financial statements that were requested, she produced only the balance sheets taken from the audited financial statements. When the deficiency was pointed out to her, she wrote a letter on February 16, 1999, improperly requesting a $100.00 deposit for the "extensive labor" involved in locating the records. When it was pointed out that she had already located the records because she copied the balance sheets from them, she finally had to accede to copying the audited financial statements that day. Over one month after they were requested. [sic] On January 22, 1999, The Concerned Citizen's Group, served a second written request for copies of very specific public records, to wit: grant applications. On February 16, 1999, the town clerk wrote the above- referenced letter improperly requesting a $100.00 deposit but did not object to the public nature of the records requested. When the $100.00 deposit was paid under protest, the records were nevertheless not forthcoming. One day before the election, The Concerned Citizen's Group was contacted and told it could pick up the records that afternoon. The records consisted of 11 pages for which the Concerned Citizen's Group was charged $66.50, or $6.60 per page. On January 22, 1999 Philip J. Cobb, campaign manager for Rand Speas, requested a copy of the Absentee Ballot Voter's List for the last two Welaka elections and did not receive the requested document until one day before the election. It was three pages long and he was charged 45 cents. On January 28, 1999, Edna Moore, a political opponent of the mayor, made a request for public records, (specifically: two ordinances, a permit, a receipt for equipment purchase, Minutes of a town council meeting, and employee work sheets for 4 months). Ms. Moore also received a letter requesting a $100.00 deposit, which she was unable to pay. The day after the election, Ms. Moore was told that her public records were ready for pick up. She was charged $39.75 for 115 copies, or 35 cents per page. On February 15, 1999, May Nigh, a member of the Concerned Citizen's Group, made a request for specific public records. Ms. Nigh also received a letter requesting a $100.00 deposit, which she was unable to pay. Ms. Nigh received the requested records a week after the election. The records consisted of 19 pages for which she was charged $31.25, or $1.64 per page. The excuses and explanations given for the delays in producing the above records were totally lacking in plausibility. Each of the persons who requested public records were [sic] told that the requests were either voluminous or could not be located and that the town clerk would have to work on the weekends to provide the records. The records that were ultimately produced were not "voluminous" and a former town employee, Irene Perrins, (who has a lifetime of experience in office work) has indicated verbally to the complainant that there is not enough work at town hall to keep the town clerk busy for more than 3 hours a day, let alone on the weekends. The statute cited by Respondent and the facts alleged in support of her charges comprise a specific accusation by Respondent that Mayor Sands, a public officer of the Town of Welaka, corruptly used his official position by orchestrating a willful and deliberate violation of public records laws in order to secure a special privilege or benefit for himself by directing the Town Clerk not to provide his political opponents with requested records. At the time Respondent completed and filed the Amended Complaint, she had no personal knowledge that Mayor Sands had, in fact, "orchestrated a willful and deliberate violation of the public records laws for the purpose of aiding his re-election campaign." Respondent relied on statements of three individuals in making the charge against Mayor Sands contained in the Amended Complaint. First, according to Respondent, Grace Evans, a former member of the Town Council of the Town of Welaka, told Respondent that Mayor Sands totally controls and directs the activities of the Town Clerk, Renee Peterson. Next, Virgil Posetti, a political ally of Rand Speas and the political opponent of Mayor Sands in the 1999 election, allowed Respondent to tape a statement in which Posetti stated that Mayor Sands controls what goes on in Town Hall and supervises the Town Clerk. Finally, in a telephone conversation initiated by Respondent, Eileen Perrins, a former town employee who was fired, told Respondent that the Town Clerk had only three or four hours of work to do during the work day. Respondent put credence in Ms. Evans' statements because Respondent believed that Ms. Evans knew Mayor Sands well. Respondent testified that Ms. Evans had formerly served on the Town Council under Mayor Sands but resigned from the Council "saying that Mayor Sands violates the Sunshine Laws regularly." Respondent apparently believed the statements made by Posetti because he had been a former member of the Town Council. However, it is significant that at the time the public records requests were made to the Town Clerk, Posetti was not a member of the Town Council, was not active in Town Hall, and did not work in Town Hall. Moreover, prior to and at the time Respondent filed the Amended Complaint, she was aware that Posetti was running against Mayor Sands for mayor of the Town of Welaka. Lastly, Respondent apparently believed the statements of Ms. Perrins because Perrins had previously worked in Town Hall as an employee of the Town. Respondent relied on Ms. Perrins' statements although she knew or believed that Perrins had been fired from her job with the Town. Respondent's reliance on any statements made by Evans, Posetti, or Perrins was not well-founded. By her own testimony, Respondent was aware that the statements by these individuals should be weighed carefully in light of their likely biases against Mayor Sands. Moreover, there was no evidence that Evans, Posetti, or Perrins worked at Town Hall or were aware of or had any knowledge of what was going on in Town Hall at the time the subject public records request were made. Finally, Respondent acknowledged that none of the aforementioned individuals ever told her that Mayor Sands had orchestrated a willful and deliberate violation of the public records laws. Respondent also based the charges in the Complaint on the chronology--the dates the public requests were made; the information that was requested; the length of time she believed it reasonably should have taken to produce the documents; the time it actually took to produce the documents; and the dates that the records were actually produced. In summary, Respondent testified that the basis for the charges she made in the Amended Complaint was as follows: [W]hat I was hearing around town, what I was hearing from former council people, what I heard from Irene Perrins in the telephone conversation I had with her and the timing of the requests, the demands for $100 deposits, and the actual production of documents and what was produced. The totality of the circumstances is the reason this complaint was filed. (Transcript, pages 71-71). Respondent was "upset" and "outraged" when some of the public records requests were not responded to in the time frame and manner that she thought was reasonable. As a result, after the March 1999 election, she filed the Complaint against Mayor Sands. Respondent chose to file the Complaint against Mayor Sands although she knew that all the subject public records requests had been directed to the Town Clerk and/or the Town Custodian of Records. The only Town official with whom Respondent communicated regarding the subject public records requests was Renee Peterson. However, Respondent believed Mayor Sands was a "dictator" in that he "controls" and "runs everything" at Town Hall. In light thereof, Respondent believed that Ms. Peterson was delaying and withholding production of documents at the direction of Mayor Sands. Despite Respondent's belief that Mayor Sands controlled everything at Town Hall, including responses to public records requests, she never communicated with him about the delay in the Town Clerk's responding to the subject public records requests. In fact, Respondent has never had a conversation with Mayor Sands. At all times material to this proceeding, Renee Peterson was the Town Clerk and Custodian of Records for the Town of Welaka, having been employed in that position since September 1998. Among her various duties, Ms. Peterson was responsible for keeping and providing public records for review and copying such records upon request. In that connection, the Town of Welaka has a duly-adopted ordinance establishing a procedure for Ms. Peterson to follow. At all times relevant to this proceeding, Mayor Sands was charged with supervising the Town Clerk, Ms. Peterson. When Ms. Peterson was first employed, Mayor Sands instructed Ms. Peterson to refer any questions about public records to the Town's attorney or to use the "Sunshine Manual." However, the mayor was not involved in and did not direct the day-to-day work activities of Ms. Peterson. Ms. Peterson used her discretion in establishing and accomplishing her job priorities. Between approximately January 13 and March 9, 1999, Ms. Peterson received at least 13 public records requests from the Concerned Citizens Group and several individuals. Ten of the thirteen public records requests were made in January 1999 and some required research back to 1990. In January 1999, when ten of the public records requests were made, Ms. Peterson had been employed as Town Clerk for only three or four months. Given her varied responsibilities as Town Clerk, the number and the volume of the public records request, and the extensive research required to comply with some of the public records requests, Ms. Peterson took several weeks to respond to several of the public records requests. In instances when Ms Peterson determined that there would be some delay in fully responding to the requests, she wrote letters to the appropriate individuals and informed them of the status of their public records requests. Subsequently, with the help of two other people, Ms. Peterson worked seven hours one Saturday to satisfactorily respond to the public records requests. Respondent testified that the public records requests were relevant to campaign issues in the March 1999 election. However, none of the persons who had made the subject public records requests ever complained to Ms. Peterson about the time frame within which she responded to their public records requests. Furthermore, when the requests were made and after they received letters advising them of the status of their requests, none of the individuals advised Ms. Peterson that the requested records were needed by a date certain. Ms. Peterson did not think in terms of the subject public requests as related to the election. She simply thought of them as public records requests. Under all the circumstances, there was no unreasonable delay in her response to those public records requests. Ms. Peterson testified credibly that she never told Mayor Sands that the subject public records requests had been made; that Mayor Sands never orchestrated any willful or deliberate violation of the public records law; and that the mayor never instructed her not to provide his political opponents with public records that contained information relating to campaign issues or to delay providing such records to his political opponents. Mayor Sands' credible testimony was that Ms. Peterson never advised him that she had received the subject public records requests and that he never instructed her not to provide his political opponents with public records or to delay providing such records to his political opponents. Mayor Sands' credible testimony was that he first heard about problems concerning an individual's obtaining public records at a political rally two weeks before the March 1999 election. While at that rally, he heard Posetti, his opponent in the election, and Edna Moore, make statements that Ms. Moore could not get public records that she desired. Neither Posetti nor Ms. Moore accused Mayor Sands of interfering with Ms. Moore's getting the records. However, after hearing these complaints, Mayor Sands asked the former Town Clerk and a former Town Council member who had served as assistant records keeper to assist Ms. Peterson in responding to the public records requests. Soon thereafter, all records were produced. Respondent acknowledged that no one told her that Mayor Sands orchestrated a willful and deliberate violation of the public records law to assist his re-election campaign. Rather, in filing the Amended Complaint, Respondent relied on statements made to her by individuals who were obviously biased against Mayor Sands and whose statements, even if true, do not support the charge that the mayor orchestrated a willful and deliberate violation of the public records law for the purpose of aiding his re-election efforts. Respondent had no first-hand knowledge of any facts that would reasonably support the charge she made against Mayor Sands in the Amended Complaint. In absence of such knowledge, Respondent relied on the statements of Ms. Evans, Ms. Perrins, and Mr. Posetti and on Respondent's conclusion that the chronology of events related to the public records was evidence that Mayor Sands: (1) orchestrated a willful and deliberate violation of the public records law for the purpose of aiding his re-election campaign; and (2) instructed the Town Clerk not to provide his political opponents with public records that contained information relating to campaign issues. Contrary to Respondent's beliefs, the aforementioned statements and the chronology of events relative to the public records requests do not support or provide a reasonable basis for charges against Mayor Sands in the Amended Complaint. The allegations and statements of fact in the Amended Complaint are mere conjecture and surmise. Based on the foregoing, Respondent filed the Amended Complaint with a malicious intent to injure the reputation of Mayor Sands and with reckless disregard for whether said Amended Complaint contained false allegations material to a violation of the Code of Ethics. In defending himself against the allegations in the Complaint and in this proceeding, Petitioner has been represented by Allen C. D. Scott, II, Esquire. Mr. Scott's hourly rate is $125.00. Prior to the final hearing, Mr. Scott expended 43 hours on this matter and a related case, McGuire v. Speas, DOAH Case No. 00-0267FE, Recommended Order issued August 24, 2000. One- half of that time is attributable to the instant case. The hourly rate of $125.00 billed by Mr. Scott is reasonable. Likewise, the pretrial time of 21.80 hours expended in this matter is reasonable. Accordingly, the attorney's fee of $2,725.00 incurred is reasonable. Judith Ginn, Esquire, an attorney who has practiced law in the state of Florida since 1974, testified as an expert witness in this case. Ms. Ginn's hourly rate of $150.00 is reasonable. The reasonable cost of Ms. Ginn's expert witness services in this case and in the companion case is $650.00.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that: The Ethics Commission enter a final order finding that Respondent, Caron Speas, is liable for attorney's fees of $2,725.00 and costs of $325.00; and The Ethics Commission award fees and costs which were incurred on the day of and after the administrative hearing. DONE AND ENTERED this 5th day of September, 2000, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 5th day of September, 2000. COPIES FURNISHED: Allen C. D. Scott, II, Esquire Scott & Scott 101 Orange Street St. Augustine, Florida 32084 Peter Ticktin, Esquire Scholl, Ticktin, Rosenberg, Glatter & Litz, P.A. Net First Plaza 5295 Town Center Road, Third Floor Boca Raton, Florida 33486-1080 Sheri L. Gerety, Complaint Coordinator and Clerk Commission on Ethics 2822 Remington Green Circle, Suite 101 Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Bonnie J. Williams, Executive Director Commission on Ethics 2822 Remington Green Circle, Suite 101 Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Philip C. Claypool, General Counsel Commission on Ethics 2822 Remington Green Circle, Suite 101 Post Office Drawer 15709 Tallahassee, Florida 32317-5709
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 Respondents violated the statutes and rules alleged in the Second Amended Administrative Complaint; and, if so, what is the appropriate penalty to be imposed against Respondents.
Findings Of Fact OFR is the state agency charged with administering and enforcing chapter 560, Florida Statutes, including part II related to money services businesses. At all times material hereto, Payservices has been a foreign corporation and part II licensee pursuant to chapter 560, specifically a "money services business," as defined in section 560.102(22), and "money transmitter," as defined in section 560.102(23).4/ At all times material hereto, Mr. Danenberg has been the chief executive officer, compliance officer, and an owner of Payservices. As such, Mr. Danenberg is an "affiliated party" and a "responsible person" as defined in sections 560.103(1) and 560.103(33). Count I Licensees, such as Payservices, are required to annually file a financial audit report within 120 days after the end of the licensee's fiscal year. The financial audit report is prepared by a certified public accountant and is used to demonstrate to OFR that the licensee has the financial health to conduct its business and transmit funds within the State of Florida. Payservices' fiscal year ends December 31st. Respondents were required to provide Payservices' 2016 financial audit report to OFR by no later than May 1, 2017. On December 20, 2017, William C. Morin, Jr., OFR's Chief of the Bureau of Registration, contacted Payservices by email with regard to Payservices' failure to timely file a financial audit report within 120 days after the 2016 fiscal year ended. Mr. Danenberg responded by email that same day, telling Mr. Morin that Payservices' accountant had prepared a financial audit report "many months ago," and that it was his "impression" that it had been uploaded to the REAL system "at some point when we filed the quarterly reports." Mr. Danenberg attached to his December 20, 2017, email what OFR accepted as the financial audit report that same day. Notably, the document indicated it was prepared by a certified public accountant on June 15, 2017, after the May 1, 2017, deadline. In any event, Mr. Morin reviewed the REAL system regarding Payservices and determined there were no problems with the REAL system's ability to accept uploaded documents. Mr. Morin testified that he could see on the REAL system that Payservices successfully uploaded a quarterly report and Security Device Calculation Form on January 26, 2017, which created a transaction number. Mr. Morin also observed that Payservices started to upload its financial audit report, which would create a transaction number, but no financial audit report was actually attached and uploaded to the REAL system on January 26, 2017, under that transaction number. According to Mr. Morin, Payservices may have attempted to start to file a financial audit report on January 26, 2017, but it did not complete the transaction because no financial audit report was attached. At hearing, Mr. Morin acknowledged that: "When I looked at the Financial Audit Report transaction, nothing was attached. And I also know that the functionality of the REAL system will kind of allow for the transaction to be completed and nothing attached." Tr. p. 100. Mr. Morin testified that Mr. Danenberg was cooperative when he was contacted on Decemeber 20, 2017, and submitted the financial audit report. The persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not submit their financial audit report to OFR until December 20, 2017, almost eight months after the May 1, 2017, deadline. Count II Licensees, such as Payservices, are required to annually file Form OFR-560-07, Security Device Calculation Form, by January 31st of each calendar year for the preceding calendar year. The Security Device Calculation Form requires licensees to report to OFR the dollar amount of transactions with Florida consumers. The dollar amount of transactions identified in the form is then utilized by OFR to determine if additional collateral is necessary to protect Florida consumers in the event a claim is made against the collateral for monies that were not properly transmitted by the licensee. Andrew Grosmaire, OFR's Chief of Enforcement in the Division of Consumer Finance, acknowledged at hearing that a licensee has 60 days to amend the face value of its surety bond, should an increase be required, and that at all times material hereto, the value of Payservices' surety bond has been correct for the minimum amount required. Nevertheless, Mr. Morin testified that Respondents did not file Form OFR-560-07, Security Device Calculation Form, until February 10, 2018, ten days late. The persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not file Form OFR-560-07, Security Device Calculation Form, until February 10, 2018, ten days late. Count III Licensees, such as Payservices, are required to update information contained in an initial application form, or any amendment to such application, within 30 days after the change is effective. In Payservices' initial application dated September 25, 2015, Respondents identified Corporate Access, Inc., as its registered agent with an address for service of process at 236 East 6th Avenue, Tallahassee, Florida 32303. According to the Department of State, Division of Corporation's records, on January 10, 2017, Mr. Danenberg was appointed as Payservices' registered agent with a new address for service of process at 300 West Palmetto Park Road, A210, Boca Raton, Florida 33432. Respondents filed an amended license application with OFR on August 28, 2017, which still listed Corporate Access, Inc., as the registered agent for service of process. On February 26, 2018, Respondents amended their registered agent information with the Department of State listing a new address for Mr. Danenberg at 14061 Pacific Pointe Place, No. 204, Delray Beach, Florida 33484. Mr. Morin testified that at no time have Respondents updated their initial application with OFR to reflect Mr. Danenberg as the registered agent for Payservices and his address as the registered agent.5/ Mr. Morin and Mr. Grosmaire testified that the reason a licensee needs to update a change in the registered agent's name and address is so that OFR may effectuate service of process against the licensee. Yet, Mr. Grosmaire acknowledged that OFR has access to the Division of Corporation's records. Nevertheless, the persuasive and credible evidence adduced at hearing clearly and convincingly establishes that Respondents did not update their initial application with OFR to reflect Mr. Danenberg as the registered agent for Payservices and his address as the registered agent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that OFR impose an administrative fine against Respondents in the amount of $6,000. DONE AND ENTERED this 16th day of December, 2019, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ 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 16th day of December, 2019.
The Issue Whether the Respondent, a licensed Limited Surety Agent, failed to transmit the statistical reporting requirements information to the Petitioner within thirty days after the end of 1988.
Findings Of Fact Beverly Elaine Bryson's licensure as a Limited Surety Agent (bail bondsman) was placed with Bankers Insurance Company on December 1, 1988. The Department required all limited surety agents to complete a Statistical Reporting Requirements form for the period from July 1 through December 31, 1988. The report was to be transmitted to the Department within 30 days after the end of the period. Respondent Bryson opened her business on December 7, 1988, and executed twenty bonds within the reporting period. Respondent Bryson completed the form within the first part of January 1989. She mailed one copy of the form to the Department and another copy to her general agent, Amando Roche, at Roche's Surety, Inc. Linda Roche, who is employed at Roche's Surety, Inc., recalls receiving a copy of the report from Respondent Bryson. To assure that the Department received the report form, Linda Roche sent a copy of the report, along with the reports of other agents to the Department by Federal Express Mail. The purpose of the transmittal by express mail was to obtain a signed receipt from the Department. The one-page report form that was transmitted to the Department incorrectly listed the bondman's name as "Brysons, Beverly" as opposed to "Beverly Elaine Bryson." In addition, the form was completed in such an ambiguous fashion that an ordinary reading of the form reveals that the report was completed for the reporting period from January 1 through June 30, 1988, as well as the period from July 1 through December 1988. The address on the form, 1960 Velasco Street, was different than the address on file with the Department. The address at the Department was 1900 Velasco Street. Based upon the high percentage of errors, misinformation, ambiguities, and general differences in the report from information already on file, it is unknown what happened to the two copies of the report transmitted to the Department. The problems with the contents of the report were created by the Respondent. In an attempt to acquire the report after the reporting deadline, the Department sent the Respondent a letter stating that the Department had not received the report. An additional time period in which to file the report was given to the Respondent. The letter was sent by certified mail, and reached the 1960 Velasco Street address by March 15, 1989. When the certified letter was received at Respondent's business, Beverly Elaine Bryson was out of the state on vacation. Carol Graham, an insurance agent within the business, signed for the letter. The Respondent was never notified by Carol Graham or any other employee within the business that the Department had not received the first report and was requesting that the information be provided. In March 1989, Linda Roche received a telephone call from Carol Graham regarding the Statistical Reporting Requirements form for the Respondent. Mrs. Roche incorrectly recalls that the call was made by the Respondent. Mrs. Roche reported to the caller that she had sent a copy of the report by Federal Express Mail to the Department. Mrs. Roche's recollection of the telephone call reconciles the question of why Carol Graham did not inform the Respondent of the Department's request. A reasonable inference exists that Ms. Graham believed that Mrs. Roche's mailing was a recent one, and that the matter did not require any more attention. As of the date of hearing on October 17, 1989, the Department records did not reveal that a Statistical Reporting Requirements form for July through December 31, 1988, had been filed on behalf of Beverly Elaine Bryson. The inaccuracy of the report completed and mailed by the Respondent was unintentional.
Recommendation Based upon the foregoing, it is RECOMMENDED: That the violations charged against the Respondent Bryson as set forth in the Administrative Complaint, Case No. 89- 4411, be DISMISSED. DONE and ENTERED this 30th day of November, 1989, in Tallahassee, Leon County, Florida. VERONICA D. DONNELLY 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 30th day of November, 1989. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 89-4411 Rulings on the proposed findings of fact submitted by the Petitioner are addressed as follows: Accepted. See HO #1. Accepted. See HO #1. Rejected. See HO #4. Rulings on the proposed findings of fact submitted by the Respondent are addressed as follows: Accepted. See HO #1. Accepted. See HO #3. Accepted. See HO #2. Rejected. See HO #4. Accepted. Rejected. See HO #5. Accept the first sentence. See HO #5. The rest is rejected. Improper conclusion. See HO #7 and #14. Rejected. See HO #10 through #13. Rejected. See HO #14. Accepted. Rejected. See Preliminary Statement Accepted. See HO #2 and #4. COPIES FURNISHED: C. Christopher Anderson III, Esquire Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 Dennis J. Rehak, Esquire Post Office Drawer 660 Fort Myers, Florida 33902 Honorable Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, Esquire General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
The Issue Whether Commercial Carrier Corporation (Petitioner), has the financial strength necessary to ensure the timely payment of all current and future workers' compensation claims in the State of Florida; Whether Petitioner has maintained a net worth of at least $1 million during the period 1999 to 2004; and Whether Petitioner shall post an additional qualifying security deposit to remain qualified to self-insure and the amount of the additional security deposit to be posted.
Findings Of Fact Upon careful consideration, it is found and determined as follows: Petitioner, Commercial Carrier Corporation, is a privately-owned trucking company headquartered in Auburndale, Florida, which has been in business for over 50 years. Petitioner is one of five operating subsidiaries of Comcar Industries, Inc. (Comcar), whose primary business is truckload transportation of general and specialized commodities in the continental United States. Comcar routinely prepares consolidated financial statements reflecting the operations of all five subsidiary companies. Although Petitioner is the nominal Petitioner, Comcar is the de facto Petitioner in this proceeding. All of Comcar’s subsidiaries operate as self- insured in Florida. Petitioner has been self-insured for workers’ compensation in Florida since January 1, 1973. Pursuant to Florida law, Respondent has jurisdiction over Petitioner as a self-insured employer for purposes of workers’ compensation. Under Florida law, the general requirement is that employers must obtain and maintain workers’ compensation insurance coverage. The exception of this general requirement is found in Subsection 440.38(1)(b), Florida Statutes (2004), whereby an employer can seek to qualify to self-insure by "furnishing satisfactory proof to the Florida Self-Insurers Guaranty Association, Inc., . . . that it has the financial strength necessary to ensure the timely payment of all current and future claims[.]" FSIGA is a not-for-profit corporation established by Section 440.385, Florida Statutes (2004), to guarantee payment of the covered workers’ compensation claims by employees of self-insurers that become insolvent. Other than governmental entities and public utilities, all self-insurers, including Petitioner, must be members of FSIGA. FSIGA pays the covered claims of current and former insolvent self-insurer members to the extent an insolvent self-insurer’s security deposit is insufficient. An insolvency fund is established and managed by FSIGA for the purpose of meeting the obligations of insolvent members after exhaustion of any security deposit. The insolvency fund is funded by assessments from members of FSIGA. Accordingly, FSIGA and all of its members share an interest in ensuring adherence to the legislative standard that only financially strong employers are granted the privilege to self- insure. To maintain self-insurer status, an employer must submit annual financial statements no later than four months following the end of the self-insured’s fiscal year and furnish satisfactory proof to FSIGA that it has the financial strength necessary to ensure timely payment of all current and future claims. The financial statements that must be submitted to FSIGA for financial analysis must be prepared in accordance with the United States Generally Accepted Accounting Principles (GAAP). GAAP-prepared financial statements must show, at all times, a net worth of $1 million. The requirements of furnishing proof of the requisite financial strength and maintaining a net worth of at least $1 million, as shown on the employer’s financial statements, are continuing annual requirements to become and remain qualified to self-insure, and those requirements are applied equally to applicants and current members. FSIGA is required to review the financial strength of its current members. It makes recommendations to Respondent regarding the members’ continuing qualification to self-insure and the amount of security deposit that should be required of each member. If FSIGA determines that a current member does not have the financial strength necessary to ensure the timely payment of all current and estimated future claims, it may recommend that Respondent require an increase in the member’s security deposit. FSIGA operates under a statutorily-approved plan of operations. FSIGA’s plan of operation provides that its executive director has the responsibility to make FSIGA’s recommendations to Respondent. FSIGA’s recommendations are based upon a review of the financial information collected from member employers. It may include recommendations regarding the appropriate security deposit amount necessary for a self-insured employer to demonstrate that it has the financial strength to ensure timely payment of all current and future claims. Respondent is required to accept FSIGA’s recommendations unless it finds, by clear and convincing evidence, that the recommendations are erroneous. 2002 Financial Review of Petitioner Petitioner is currently a member of FSIGA and has posted a qualifying security deposit of $2,500,000.00. On October 2, 2002, Brian D. Gee, C.P.A., who is now FSIGA’s executive director, completed a review of Petitioner’s audited financial statements for 1999, 2000, and 2001. Gee was FSIGA's financial analyst, responsible for conducting financial reviews and developing information for FSIGA's executive director, to determine the financial strength of self-insured members and make recommendations to Respondent. Gee’s review of Petitioner’s financial statement consisted of an assessment of Petitioner’s liquidity, profitability, degree of leverage, liabilities compared to net worth, and cash flow generated by operations. He also reviewed the financial statements to determine if Petitioner was maintaining a net worth of at least $1 million. Gee concluded that Petitioner did not have the financial strength necessary to ensure the timely payment of current and estimated future workers’ compensation claims. On October 8, 2002, FSIGA's executive director forwarded a letter to the Division of Workers’ Compensation, Department of Insurance (now Respondent). He recommended to Respondent that Petitioner be ordered to increase its security deposit to 150 percent of actuarially determined loss reserves. FSIGA’s recommendations were reviewed by Cynthia Shaw, assistant general counsel for the Division of Workers’ Compensation. Shaw drafted a letter for signature by Mark Casteel, General Counsel for Respondent, which adopted FSIGA's recommendations. Casteel signed that letter dated October 28, 2002, without revision or discussion. Shaw, an attorney, has no financial background or expertise. Shaw did not perform any additional financial analysis. Additionally, since Respondent did not have a CPA firm under contract, FSIGA’s recommendation was not reviewed by anyone with financial background before being transmitted to Petitioner. Petitioner responded to the October 28, 2002, directive from Respondent by filing a petition requesting a formal administrative hearing. Petitioner failed to file financial statements with FSIGA within four months following the end of its 2000 and 2001 fiscal years. Petitioner’s failure to timely file financial reports for 2000 and 2001 was due to the fact that it was in default on certain loan covenants and was engaged in negotiations with its lenders. In 1999 and 2000, Petitioner incurred additional long-term debt to finance the purchase of a new fleet of trucks. Petitioner’s creditors had exercised their right for accelerated payment of the outstanding loan balances, which by the end of 2001, was approximately $205 million. In 2001 and 2002, Petitioner entered into negotiations with its creditors to amend and restate its loan agreements. In 2002, Petitioner implemented a business plan calling for the sale of non-core assets, reduction of long-term debt, and transition from purchasing to leasing truck tractors. In July 2002, Petitioner entered into amended and restated loan agreements with its creditors. In order to secure the amended and restated loan agreements, Petitioner was required to pay increased interest, pledge substantially all of its property to secure the loans, pay the lenders $3.3 million, provide certain lenders with warrants to acquire an equity interest in Petitioner under certain conditions and agree to restrictions on how it could use cash generated by its operations and asset sales. Petitioner timely made all principal and interest payments due pursuant to the restated credit agreement and maintained compliance with all required financial ratios and standards. Furthermore, Petitioner continued to timely pay all claims for current and estimated future claims under its workers’ compensation system. Following execution of the amended and restated loan agreements, Petitioner’s auditors prepared the financial statements of 2001, which Petitioner then filed with FSIGA. Separate audited financial statements for 2000 were never filed with FSIGA, although prior-year financial results were shown (without footnotes) on the audited 2001 financial statements. With respect to liquidity, Petitioner’s financial statements showed a current ratio (current assets divided by current liabilities) of 1.41 at December 28, 2001. It did not disclose that Petitioner had any available funds under its revolving credit line as of December 28, 2001. Although Petitioner’s current ratio was acceptable, further analysis raised serious concern regarding Petitioner’s financial strength. With respect to Petitioner’s capital structure, the financial statement review showed that Petitioner’s total liabilities-to-book-equity ratio deteriorated from 4.91 at December 1999 to 30.46 at December 28, 2001. This deterioration reasonably raised concern because Petitioner became much more heavily leveraged from 1999 to 2001, relying much more heavily on debt to fund its operations. FSIGA concluded, Petitioner’s financial statement showed a "very weak capital structure." The impact of the increasing reliance on debt was marked by the end of 2001, when the financial statements showed that Petitioner was in default of its debt covenants at December 28, 2001. To address its defaults, Petitioner entered into an agreement to restructure its debt by which the creditors waived the defaults in return for imposing additional restrictions on Petitioner as described in paragraph 20 above. Although Petitioner maintained a net worth of $11.1 million at the end of 2001, Petitioner’s net worth at the end of 2001 was significantly lower than its net worth of $74.8 million at the end of 2000. In addition, the financial statement review showed that Petitioner had incurred net losses of $24.2 million, $39.5 million, and $5.7 million for the years 2001, 2000, and 1999, respectively. These losses were substantial and raised significant concerns about Petitioner’s financial strength. The 2002 financial review of Petitioner also showed a substantial decline in Petitioner’s cash flow from operations, from positive $32.6 million for 1999 to negative $2.1 million for 2001. This meant that in 2001, Petitioner was spending more cash in its operating activities than it was collecting. At the time FSIGA made its recommendation to Respondent, neither FSIGA nor Respondent had current information from Petitioner regarding the amount of Petitioner’s net outstanding liability for workers’ compensation claims in Florida. This is because Petitioner failed to file the Form SI-20 report that had been due on August 31, 2002. From October 2002 until December 14, 2004, FSIGA and Respondent did not have accurate information in regard to the amount of Petitioner’s outstanding liability for workers’ compensation claims in Florida, because Petitioner did not file its required Forms SI-17 and SI-20 reports or provide an actuarial study. At the final hearing, Petitioner did not present evidence disputing the reasonableness of FSIGA’s 2002 assessment of Petitioner’s financial statements or of FSIGA’s conclusions based thereon regarding Petitioner’s lack of financial strength in 2002. Based on FSIGA’s analysis of Petitioner’s 2001 financial statements and the financial statements for the two preceding years, FSIGA reasonably concluded that Petitioner had not demonstrated that it had the financial strength to ensure payment of current and future workers’ compensation claims. Based on the information then available to it, FSIGA made the correct recommendation to Respondent. There was no clear and convincing evidence available to Respondent that demonstrates FSIGA's recommendation was erroneous, instead, the available evidence supports FSIGA’s recommendation. Accordingly, Respondent’s direction to Petitioner to provide an actuarial report and post additional security was reasonable and appropriate. Continuing Financial Review of Petitioner After 2002. In November 2002, Petitioner challenged Respondent’s determination and requested a formal administrative hearing. Petitioner requested that Respondent hold the petition in abeyance. The request was granted, and the petition was not filed with DOAH until July 9, 2004. During this period, Respondent re-examined Petitioner’s financial strength. Following its business plan, on January 16, 2004, Petitioner refinanced its debt. While there was conflicting testimony regarding whether the actual interest on the refinanced debt was lower than on the debt it replaced, it was undisputed that $30 million of the refinanced debt was carrying an interest rate of 19 percent. This is a higher rate than the nine-percent and 11-percent interest applicable to the earlier debt. It is undisputed that substantially all of Petitioner’s property is pledged to secure the 2004 refinanced indebtedness, and there continues to be restrictions on Petitioner’s use of cash generated by its operations. However, the 19-percent interest on a portion of the January 2004 refinancing has now caused Petitioner to go into the lending market to attempt to refinance its debt once again. Nevertheless, the refinancing of its long-term debt has reduced its financing costs. Since Respondent’s 2002 request that Petitioner provide an actuarial report and post an additional security deposit, FSIGA has reviewed Petitioner’s audited financial statements for the years ended December 27, 2002, and December 26, 2003, as well as Petitioner’s unaudited financial statements for the year ended December 31, 2004. The financial information received from Petitioner since the 2002 review has not resulted in FSIGA changing its 2002 recommendations. Petitioner’s 2002, 2003, and 2004 financial statements revealed that Petitioner’s net worth had fallen below the required $1 million in each of those three years. The 2002 and 2003 financial statements also show that Petitioner continued to experience net losses. Petitioner sustained a net loss of $12.1 million for the year ended December 27, 2002, and a net loss of $9.9 million for the year ended December 26, 2003. Petitioner’s cash flow statement shows a $4.8 million decrease in cash in 2002 and a $2 million decrease in cash in 2003. Petitioner’s 2004 unaudited financial statements indicate net income of $4.1 million for 2004. However, because the 2004 financial statements are unaudited, whether adjustments may be necessary following the audit are unknown at this time. Financial statements prepared without footnotes are not prepared in accordance with GAAP. Even if the unaudited results are confirmed in audited financial statements, 2004 would be the first year that Petitioner has recognized net income since 1998, following a five-year string of annual losses totaling $90 million. Petitioner’s Financial Status Evidenced at Final Hearing At the final hearing, to demonstrate that it had the financial strength necessary to ensure the timely payment of current and future workers’ compensation claims, Petitioner presented testimony of its expert witness, Lawrence Hirsh, C.P.A. He posited that Petitioner's financial strength should be measured by determining its ability to generate cash flow through a calculation of its earnings before interest, taxes, depreciation and amortization (EBITDA). EBITDA is a measure commonly used by financial institutions to evaluate the ability of a company to generate cash flows and in determining whether to extend credit or to make investments. Petitioner’s lenders evaluated its EBITDA before deciding to refinance its credit facility in 2002 and to refinance its long-term debt in 2004. However, EBITDA is not a calculation provided for under GAAP. GAAP provides a method for determining cash flows and that method is used in preparing the portion of a GAAP- compliant financial statement called the "Statement of Cash Flows." Evidence presented by Respondent demonstrated that EBITDA has many limitations and is not a good proxy for cash flow. Application of EBITDA to Petitioner’s known financial performance in the past consistently overstates Petitioner’s ability to generate cash flow from operations. In every year from 1999 through 2003, Petitioner’s cash flow from operations, as shown on Petitioner’s cash flow statement that was prepared in accordance with GAAP, was significantly lower than the amount calculated for EBITDA by Hirsh: Year Petitioner's Cash Flow From Operations as Shown on GAAP-Compliant Cash Flow Statement EBITDA 1999 $32.6 million $61.1 million 2000 $344,000 $21.2 million 2001 ($2.1 million) $40.3 million 2002 $11.9 million $54.8 million 2003 $12.3 million $42.3 million Petitioner's unaudited 2004 cash flow statement showed $18.1 million in cash flow from operations. This is significantly lower than the $52.9 million in EBITDA calculated for 2004. Similarly, each year from 1999 to 2003, Hirsh's EBITDA's calculation grossly exceeds Petitioner's net loss as shown on its financial statements that were prepared in accordance with GAAP: Petitioner's Cash Flow From Operations as Year Shown on GAAP-Compliant Cash Flow Statement EBITDA 1999 (5.7 million) $61.1 million 2000 ($39.5 million) $21.2 million 2001 ($24.2 million) $40.3 million 2002 ($12.1 million) $54.8 million 2003 ($9.9 million) $42.3 million EBITDA is also misleading because it includes gain from the sale of assets. To the extent that Petitioner is selling its operating assets, such as trucks, Petitioner will have to expend cash to replace the assets, either by lease or purchase. To the extent that Petitioner is selling non-core assets, such as its unused real property, Petitioner cannot continue this practice indefinitely. Petitioner will soon run out of assets to sell. Therefore, cash generated from the sale of operating assets and non-core assets should not be considered in determining Petitioner's ability to generate cash from operating activities. Petitioner sought to bolster its evidence of its financial strength through testimony that it had received a credit rating in November 2003 from Standard & Poor's of B-plus. However, a B-rating is not an investment grade rating. It means that while a company currently has the capacity to meet its debt obligations, adverse business, financial, or economic conditions likely will impair the obligor's capacity or willingness to meet its financial commitment on the obligations in the future. In addition, Petitioner received a lower credit rating of B-3 from Moody's Investment Services. A B-3 rating from Moody's Investment Services is equivalent to a B minus rating from Standard & Poor's. The Standard & Poor's and Moody's credit ratings do not effectively demonstrate that Petitioner has the financial strength necessary to ensure the payment of current and future workers' compensation claims. Respondent's expert witness, Dr. Sondhi, disputed Petitioner's calculation of its EBITDA interest coverage ratio because Petitioner's calculation was based on interest paid as opposed to interest expense, and it failed to adjust for non-recurring items. Petitioner's interest expense is greater than the interest paid partly because Petitioner's loan agreement provides that a portion of the interest payments will accrue monthly with payments deferred until the final prepayment date or other principal payment milestone dates. Petitioner's calculation of the EBITDA interest coverage ratio was not performed in accordance with Standard & Poor's formula for determining the EBITDA interest coverage ratio. Even if the calculation of EBITDA interest coverage ratio was an appropriate measure of Petitioner's financial strength, the formula used by Petitioner to calculate the ratio overstates the results and shows greater financial strength than would be shown if the Standard & Poor's formula had been used. For the reasons noted above, Petitioner's EBITDA calculations are rejected as an inappropriate, overstated method to assess whether a company has the financial strength necessary to ensure the payment of current and future workers' compensation claims. Petitioner also argued that it had the required financial strength because it has paid all workers' compensation claims to-date and because, at the end of 2004, it had a cash balance of $26.6 million in the bank. The ability to currently pay workers' compensation claims does not demonstrate the financial strength to ensure the payment of workers' compensation claims in the future. Current capacity to pay is only part of the statutory standard, which is a risk-based standard requiring a company to ensure payment into the future because of the long period of time that workers' compensation claim payments continue. Likewise, having cash in the bank in the amount of $26.6 million at the end of 2004, does not demonstrate the required financial strength. Current cash balance is not an indicator, by itself, of financial strength to ensure payment in the future. Given Petitioner's extensive operating expenses, $26.6 million represents a very small amount of operating expenses. Petitioner’s consolidated balance sheets list its assets at historical or book cost, the cost at which those assets were purchased, and not at their current fair market value. Petitioner argues that adjusting the book values of assets to current market value would provide the most accurate assessment of Petitioner's net worth. To demonstrate that it has maintained a net worth of $1 million, Petitioner presented testimony that when determining net worth, the fair market value of its assets should be considered in place of the book value of its assets that is reflected on its balance sheet. However, GAAP does not permit the value of assets to be shown at fair market value and instead, requires that assets be shown at book value. Even if GAAP permitted the use of fair market value of assets to be used on a balance sheet, Petitioner did not offer any admissible evidence to prove the current fair market value of its assets for 2002, 2003, and 2004. Consequently, it cannot be determined whether the use of the current fair market value of assets would result in Petitioner's financial statements showing a net worth at all times of at least $1 million. Respondent has interpreted the term "net worth," as it is used in Florida Administrative Code Rule 69L-5.106, to mean the total assets of a company as reflected on the balance sheet, minus the total liabilities of the company as reflected on the balance sheet. Respondent's interpretation of the term "net worth" is a reasonable interpretation, consistent with the interpretation given to the term by accountants and financial analysts. The more credible expert testimony is that net worth appears on the balance sheet as stockholders' or shareholders' equity. Based on the above interpretation of Florida Administrative Code Rule 69L-5.106, for each year from 2002 through 2004, Petitioner has failed to maintain a net worth of at least $1 million. The preponderance of evidence demonstrates Petitioner's net worth was negative $976,000, and negative $10.8 million for the years ended December 27, 2002, and December 26, 2003, respectively. In addition, Petitioner's unaudited financial statements for 2004 show that Petitioner maintained a negative net worth of $6.7 million as of December 31, 2004. Although Petitioner's financial condition has strengthened significantly from year end 2001 to year end 2004, based on the evidence, Petitioner does not now have the financial strength necessary to ensure payment of current and future workers' compensation claims, nor has Petitioner maintained a net worth of at least $1 million. Therefore, an additional security deposit is required for Petitioner to remain qualified as a self-insurer. In May 2002, Thomas Lowe was employed by Petitioner as its vice-president in charge of Risk Management. Lowe instituted a number of risk management practices which have significantly reduced the number and costs of Petitioner's workers' compensation claims. In 2001, Petitioner's workers' compensation claims were adjusted by three separate third-party administrators (TPAs), resulting in three overlapping data bases of claims information. Petitioner was unable to reconcile this overlapping claims information and, consequently, was unable to accurately determine the amount of its workers' compensation reserves for 2001. As a result of its inability to determine its workers' compensation reserves in 2001, Petitioner did not submit the required SI-17 and SI-20 forms to FSIGA in 2002 and 2003. Petitioner informed FSIGA of the difficulty it was having in reconciling its claims data for 2001 and paid the required penalties for its inability to timely submit Forms SI-17 and SI-20 in 2002 and 2003. Failure to submit these forms did not affect Petitioner's ability to make timely payments of all current and estimated future workers' compensation claims. In 2004, Petitioner submitted Forms SI-17 to FSIGA reflecting incurred workers' compensation losses for calendar years 2002 and 2003. On December 14, 2004, Petitioner submitted Form SI-20 to FSIGA, reflecting that the present value of its estimated loss reserves was $6,894,776.00. Anthony Gripps, Sr., an independent actuary who is a member of the American Academy of Actuaries, reviewed Petitioner's workers' compensation claims data pursuant to Respondent's October 28, 2002, directive. Grippa issued two reports, one dated December 1, 2004, and the other dated December 15, 2004. Grippa concluded that the present value of Petitioner's workers' compensation loss reserves as of September 30, 2004, was $6,831,175.00. The parties stipulated to Grippa's finding that the amount of Petitioner's workers' compensation loss reserves as of September 20, 2004, was $6,831,175.00. Petitioner's financial statements for 2004 had not been audited as of the final hearing, but were received into evidence in unaudited form. There was no evidence presented that Petitioner's 2004 financial statements do not accurately represent its financial performance in 2004 and its financial condition as of December 31, 2004. Florida Administrative Code Rule 69L-5.101(4) does not require Petitioner to submit audited financial statements as it has been self-insured since prior to January 1, 1997. Petitioner timely supplied Respondent with unaudited financial statements at least annually as required by Florida Administrative Code Rule 69L-5.101(4). Petitioner currently has a qualified security deposit of $2,500,000.00 deposited with FSIGA. In 2002, FSIGA recommended that in light of Petitioner's "significant net losses and very weak capital structure," Petitioner's security deposit should be increased to 150 percent of the actuarially determined loss reserves. Upon consideration of all of Petitioner's financial statements from 1999 through 2004, FSIGA's recommendation should be followed. Petitioner's actuarially determined loss reserves for all current and estimated future workers' compensation claims are $6,831,175.00. One hundred and fifty percent of the actuarially determined loss reserves of $6,831,175 equals $10,246,762.50. Petitioner presented no evidence of a different amount of security deposit increase that would be sufficient assuming one were to find that Petitioner lacks the financial strength to ensure payment of future workers' compensation claims or that Petitioner has failed to maintain a net worth of at least $1 million.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that The chief financial officer issue a final order determining that: (i) Petitioner does not have the financial strength to ensure the timely payment of all current and future workers' compensation claims; and (ii) Petitioner has failed to maintain a net worth of at least $1 million; and Because Petitioner has failed to meet the requirements to continue self-insuring, the final order should require Petitioner to post an additional security deposit in the amount of $7,746,762.50. DONE AND ENTERED this 1st day of June, 2005, in Tallahassee, Leon County, Florida. S 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 2005.
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 Whether the Florida Department of Financial Services (the Department) has grounds to deny the application for an "All- Lines Public Adjuster's" license filed by Jeffrey Carl Pellet (Mr. Pellet) as alleged in the Department's Notice of Amended Denial and Notice of Permanent Bar dated January 19, 2012. Specifically, two grounds for denial were at issue. First, whether Mr. Pellet's action in litigating a subpoena served on him in 2008 by the Department constitutes grounds to deny his application. Second, whether Mr. Pellet's criminal history disqualifies him from licensure.
Findings Of Fact The Department is the state agency that regulates the practice of insurance in the State of Florida. On April 20, 2011, Mr. Pellet filed with the Department an application for an "All-Lines Independent Adjuster's" license. CRIMINAL HISTORY On October 13, 1987, Mr. Pellet entered a plea of nolo contendere to three counts of insurance fraud and three counts of grand theft. Adjudication of guilt was withheld. He was ordered to serve six months of community control to be followed by 2.5 years of probation. Mr. Pellet's term of probation was terminated May 24, 1989.3/ CHANGE IN THE LAW Before it was invalidated in April 2010, Florida Administrative Code Rule 69B-211.042(8)(a) contained a 15-year waiting period before a person with Mr. Pellet's criminal history would become eligible for the type license at issue in this proceeding.4/ Section 6 of chapter 2011-174, Laws of Florida, created subsection 626.207(3), Florida Statutes. That provision became effective on July 1, 2011, and provides as follows: (3) An applicant who commits a felony of the first degree; a capital felony; a felony involving money laundering, fraud, or embezzlement; or a felony directly related to the financial services business is permanently barred from applying for a license under this part. This bar applies to convictions, guilty pleas, or nolo contendere pleas, regardless of adjudication, by any applicant, officer, director, majority owner, partner, manager, or other person who manages or controls any applicant. Section 626.207(1) defines the term "financial services business" to include any financial activity regulated by the Department of Financial Services, Office of Insurance Regulation, or Office of Financial Regulation. The foregoing provision is applicable to the type of application submitted by Mr. Pellet. The foregoing provision is applicable to Mr. Pellet's application because his application was pending when the provision became law. Section 18 of chapter 2011-174, Laws of Florida, provides as follows: The amendments to s. 626.207, Florida Statutes, made by this act do not apply retroactively and apply only to applicants whose applications are pending or submitted on or after the date that the amendments to s. 626.207, Florida Statutes, made by this act become law. This section shall take effect upon this act becoming a law. PRIOR LICENSE In compliance with the then existing 15-year waiting period, Mr. Pellet waited until December 18, 2003, to file with the Department an application for licensure as an "Independent Adjuster." That application disclosed Mr. Pellet's criminal history. On July 9, 2004, the Department granted Mr. Pellet's application and issued an "Independent Adjuster" license to him.5/ He held that license until he converted it to a "Public Adjuster Apprentice" license in August 2009. Mr. Pellet's "Public Adjuster Apprentice" license expired February 11, 2011.6/ Mr. Pellet held no license from the Department as of the date of the formal hearing. SUBPOENA Prior to February 12, 2008, the Department received complaints that Mr. Pellet was performing services beyond the scope of his licensure. At that time, Mr. Pellet was an owner and operator of a business known as Professional Insurance Estimating & Appraisals. On February 12, 2008, the Department served an investigative subpoena on Mr. Pellet by leaving the subpoena with an employee of Mr. Pellet at Mr. Pellet's office. The subpoena was directed to Mr. Pellet and to an associate of Mr. Pellet who is not involved in this proceeding. The subpoena cited the following authority for the subpoena: sections 624.307, 624.310, 624.317, 624.318, 624.321, 626.561, 626.601, 626.748, and 626.9561. The subpoena demanded that Mr. Pellet produce to the Department: the complete claim files for seven named consumers "including the contracts entered with each of these consumers, communications with these consumers and or their insurers, the request for appraisal for each of these consumers, the companies settlement checks, the consumer check made payable to Pellet or Professional Insurance Estimating & Appraisals, and the bank account name and number for Professional Estimating & Appraisals' bank account." Mr. Pellet did not comply with the subpoena. Instead, Mr. Pellet filed "Motion for a Protective Order and to Quash Subpoena" (Motion to Quash) in Broward circuit court. The Motion to Quash was heard by a magistrate who denied the Motion to Quash as it related "to non-testimonial production of files, records, documents, etc." The magistrate's report ordered Mr. Pellet and his associate to comply with the subpoena within 30 days unless they filed an objection and requested a hearing before the circuit judge within the 30-day period. On February 18, 2009, the circuit judge denied the Motion to Quash and also denied the exceptions to the magistrate's report that had been filed on behalf of Mr. Pellet. The circuit judge ratified and "approved in all respects" of the magistrate's report. On March 10, 2009, Mr. Pellet, through counsel, offered to produce two of the seven consumer files demanded by the subpoena and asserted that the other five consumer files had been shredded before the subpoena was issued. No offer was made as to the banking information demanded by the subpoena. The Department rejected that offer. Mr. Pellet appealed the order denying the Motion to Quash to the Fourth District Court of Appeal. On May 19, 2010, the court affirmed the order denying the Motion to Quash. Mr. Pellet filed a motion for re-hearing, which was denied by the court on June 16, 2010. During the course of the formal hearing before the undersigned Mr. Pellet repeated the offer to produce two of the seven consumer files demanded by the subpoena and asserted that the other five consumer files had been shredded before the subpoena was issued. No offer was made as to the banking information demanded by the subpoena. The Department rejected that offer. Mr. Pellet's action in litigating the subpoena impeded the Department's investigation into his alleged wrongdoing. Mr. Pellet has paid the fee and passed a pre-licensure examination, which are pre-requisites for the license he seeks.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Financial Services enter a final order denying Mr. Pellet's application for license as an "All-Lines Public Lines Adjuster." DONE AND ENTERED this 11th day of July, 2012, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON 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 11th day of July, 2012.
