Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, the following findings of fact are made: Florida Brethren Homes, Inc. is a not for profit corporation doing business as the Palms. The Palms is a nursing home facility certified to participate in the Medicaid program. The Department is the state agency charged with the responsibility of reviewing costs claimed by facilities participating in the Medicaid program. The Palms filed a cost report for Medicaid reimbursement for the fiscal period ending December 31, 1987. The cost report reviews the past payment rate and sets the prospective rate. The Department reviewed Petitioner's report and disallowed interest costs in the amount of $298,500 which were included by the Palms. The Palms timely challenged that disallowance. In 1984, the Palms participated in a revenue bond issuance in order to finance the construction of certain improvements to its health care facilities. That bond issue in the amount of $13,970,000 bore a tax exempt interest rate of approximately 12.89 %. For the period ending December 31, 1987, the interest which was due on that bond debt was $298,500. On April 5, 1988, the Palms filed a Chapter 11 action in the Bankruptcy Court for the Southern District of Florida. The Palms did not pay the accrued interest prior to filing its petition in bankruptcy. In fact, the Palms was in default on the interest at the time of the bankruptcy petition. The Medicaid rate which had been established prior to that time had presumed an allowable interest cost for the period and had included that interest payment in the calculation of the rates then available to the Palms. In filing bankruptcy, the Palms sought to restructure its debt. As a result, the Palms executed an Amended And Restated Indenture of Trust which included the accrued but unpaid interest which had accumulated under the 1984 revenue bond issue. The plan called for a bond issuance and for deferred interest certificates to cover the unpaid interest. The deferred interest certificates had not been issued as of the date of the final hearing. The accrued but unpaid interest provided in the deferred interest certificate has a maturity date of December 1, 2016. The unpaid interest is subject to a mandatory prepayment from available net cash flow after December 1, 1992. The restructure of Petitioner's debt has allowed it to remain in business. The plan of reorganization was entered into as a good faith, arm's length transaction. The plan of reorganization was confirmed by the Bankruptcy Court and the proceedings before that tribunal have concluded. In its audit of the Palms, the Department determined that the deferred interest obligation does not mature and become due and payable until December 1, 2016, and that, therefore, the interest expense is not a reimbursable cost for the period that ended December 31, 1987. The Palms' claims that for cost reimbursement purposes the accrued interest was paid by the refinancing of the debt and that the amount should remain an allowable cost to be included for that period.
Recommendation Based upon the foregoing, it is RECOMMENDED: That the Department audit disallowing interest claimed for the period that ended December 31, 1987, be confirmed. DONE and ENTERED this 14th day of June, 1991, in Tallahassee, Leon County, Florida. Joyous D. Parrish Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of June, 1991. APPENDIX TO CASE NO. 90-1770 Rulings on the proposed findings of fact submitted by the Petitioner: Paragraphs 1 through 3 are accepted. Paragraphs 4 and 5 are not findings of fact but restate the stipulation reached by the parties at the outset of the hearing. Paragraphs 6 through 11 are accepted. Paragraph 12 is rejected as it is not a finding of fact but, if accurate, would be a conclusion of law. Such conclusion has not been reached in this case. Paragraph 13 is rejected as irrelevant. Paragraph 14 is accepted. With regard to paragraph 15, it is accepted that the repayment of the accrued interest is not a short term liability. Otherwise, the paragraph is rejected as irrelevant. Paragraph 16 is rejected as a restatement of the issue or fact not supported by the weight of the evidence. Paragraph 17 is rejected as irrelevant. Paragraph 18 is accepted. Paragraph 19 is rejected as irrelevant. Paragraphs 20 and 21 are rejected as irrelevant or a conclusion of law. Paragraph 22 is accepted. Paragraph 23 is rejected as irrelevant. Paragraph 24 is rejected as a conclusion of law not supported by the record in this case. Paragraph 25 is rejected to the extent that the term "refinancing" is used to suggest a payment of allowable interest; it is accepted that restructuring the Palms' debt was required to allow it to continue in business. Paragraph 26 is rejected as irrelevant. Rulings on the proposed findings of fact submitted by the Department: 1. Paragraphs 1 through 14 are accepted. COPIES FURNISHED: Scott D. LaRue Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Karen L. Goldsmith Goldsmith and Grout, P.A. P.O. Box 2011 Winter Park, Florida 32790-2011 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Linda K. Harris Acting General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue The issue in this case is whether the methodology that Respondent uses to determine the amounts payable to pharmacies for prescription drugs dispensed to Medicaid beneficiaries constitutes an invalid exercise of delegated legislative authority on the ground that the methodology in question, which is incorporated by reference in Florida Administrative Code Rule 59G-4.250, enlarges, modifies, or contravenes the specific provisions of law implemented.
Findings Of Fact The Parties Medicaid is a cooperative federal-state program in which Florida participates in partnership with the national government. Medicaid provides medically necessary health care—— including, relevantly, prescription drugs——to lower income persons. In addition to shouldering administrative and regulatory responsibilities, Florida partially funds the Florida Medicaid Program, contributing about 42 percent of the money budgeted for the program's operation in this state. Federal funds make up the balance. Respondent Agency for Health Care Administration (the "Agency") is the state agency charged with administering the Medicaid Program in Florida. (At the federal level, the Centers for Medicare and Medicaid Services of the U.S. Department of Health and Human Services, known collectively as "CMS," is the agency authorized to administer Medicaid.) Among other things, the Agency is responsible for reimbursing Medicaid providers in accordance with state and federal law, subject to specific appropriations. In this connection, the Agency is authorized and required to prescribe, by rule, reimbursement methodologies. The Agency is permitted to publish such methodologies in policy manuals and handbooks, provided the latter are incorporated by reference in duly promulgated rules. Petitioner, The Florida Retail Federation, Inc. (the "Federation"), is a trade association whose members include all or most of the major drugstore chains doing business in Florida. These drugstore chains, which include Walgreen's, CVS, Eckerd's, Albertson's, Publix, Winn-Dixie, Target, and Wal-Mart, participate in the Federation's Chain Drugstore Council, which is the only organization in this state representing the interests of drugstore chains. Members of the Federation's Chain Drugstore Council operate more than 2,500 separate pharmacies, each of which is an enrolled Medicaid provider of prescription drugs. Given that there are approximately 4,000 pharmacy-providers participating in the Florida Medicaid Program, the Federation represents a significant percentage of the enrolled pharmacies. The Federation advocates on behalf of its members before the Florida Legislature and the state regulatory agencies. Medicaid funding is one of the organization's top priorities. The Federation brought the instant proceeding because it believes that the Medicaid Program has been under- reimbursing its members based on a methodology that contravenes the applicable Florida statutes. The Disputed Rule The Medicaid reimbursement methodology for prescribed drugs is set forth in the Florida Medicaid Prescribed Drugs Services Coverage, Limitations, and Reimbursement Handbook, July 2001 (the "Handbook), which Handbook was incorporated by reference in, and hence adopted via Section 120.54(1)(i)1., Florida Statutes, as, Florida Administrative Code Rule 59G- 4.250. The methodology, which will be referred to hereafter as the "Reimbursement Rule," limits the amount that the Medicaid Program will pay for prescription drugs, as follows: Reimbursement for covered drugs dispensed by a licensed pharmacy that has been approved to be an eligible provider, or a physician filling his own prescriptions if there is no licensed pharmacy within a ten mile radius of his office, shall not exceed the lowest of: Average Wholesale Price (AWP) minus 13.25 per cent of the drug, (also known as the Estimated Acquisition Cost or EAC) plus the dispensing fee; Wholesaler Acquisition Cost (WAC) plus 7 per cent plus the dispensing fee; Federal Upper Limit (FUL) price plus the dispensing fee; The State Maximum Allowable Cost (SMAC) plus a dispensing fee established by the state on certain categories of drugs not reviewed by CMS (formerly HCFA); or Amount billed by the pharmacy, which cannot exceed the pharmacy’s average charge to the public (non-Medicaid) in any calendar quarter, for the same drug, quality, and strength. This average is known as the pharmacy’s usual and customary charge for the prescription. By its plain terms, the Reimbursement Rule (a) requires that five separate methods for determining reimbursement be applied with respect to each prescription and (b) mandates that the maximum allowable payment for each prescription be the lowest dollar amount resulting from the application of these five methods to the claim at hand.1 For ease of reference, the five separate methods enumerated in the Reimbursement Rule will be referred to collectively as the "Limits." Individually, the Limits will be called the "First Limit," "Second Limit," etc., with the numerical adjective corresponding to the order in which the Reimbursement Rule lists the respective Limits. (Thus, for example, the First Limit is the one based on average wholesale price; the Fourth Limit references the state maximum allowable cost.)2 The Reimbursement Rule was promulgated to implement two statutes in particular. One of these was Section 409.908, Florida Statutes, which provided in pertinent part as follows: A provider of prescribed drugs shall be reimbursed the least of the amount billed by the provider, the provider's usual and customary charge, or the Medicaid maximum allowable fee established by the agency, plus a dispensing fee. § 409.908(14), Fla. Stat. (2003). The other was Section 409.912, Florida Statute, which directed, in relevant part, that "[r]eimbursement to pharmacies for Medicaid prescribed drugs shall be set at the average wholesale price less 13.25 percent." § 409.912(40)(a)2., Fla. Stat. (2003). The Challenge The Federation filed its Petition for Invalidity of Rule ("Petition") on May 19, 2004, initiating the instant proceeding. The Petition describes a straightforward objection to the Reimbursement Rule, namely that the prescribed Limits include methods for determining reimbursement in addition to "average wholesale cost less 13.25 percent," which latter, according to the Petition, constitutes the exclusive method for reimbursing pharmacies, pursuant to Section 409.912(40)(a)2., Florida Statutes (2003). Thus, the Federation alleged, only the First Limit is permissible; the rest are unauthorized, and the Reimbursement Rule enlarges, modifies, or contravenes Section 409.912(40)(a)2. for using them, making the Reimbursement Rule an invalid exercise of delegated legislative authority pursuant to Section 120.52(8)(c), Florida Statutes. As this proceeding progressed, the Federation's position became a bit more complicated. Forced to deal with Section 409.908(14), Florida Statutes (2003), which was not mentioned in the Petition, the Federation effectively conceded (assuming it ever disputed) that "amount billed" and "usual and customary charge" are statutorily authorized methods for calculating reimbursement, in addition to discounted average wholesale price. Unable as a result to argue that the Fifth Limit should be rejected in toto, the Federation claimed instead that the Reimbursement Rule's definition of "usual and customary charge" enlarges, modifies, or contravenes the use of that term in Section 409.908(14), Florida Statutes (2003). On this point, the Federation presented expert testimony at hearing that "usual and customary charge" is a term of art used in the industry to mean the amount a pharmacy charges cash paying customers who have no insurance coverage for the prescription in question. The Reimbursement Rule's definition, in contrast, does not restrict the scope of "usual and customary charge" to uninsured customers, but rather requires that charges to all non-Medicaid customers be taken into account in determining the average charge that equals "usual and customary charge." Because private insurers and HMOs typically negotiate discounts not available to uninsured consumers, the inclusion of amounts charged to insured customers in the equation for calculating "usual and customary charge," à la the Reimbursement Rule, is likely to produce, in most instances, a lower "usual and customary charge" than would obtain were charges to insured customers excluded from the calculation. The Federation argues that the legislature intended "usual and customary charge" to have the more generous technical meaning that the industry ascribes to it, and therefore that the Reimbursement Rule enlarges, modifies, or contravenes the specific law implemented by giving the term a different, more parsimonious meaning. Confronting Section 409.908(14) also compelled the Federation to argue that, while the section imposes (and hence enables the Agency to implement) limits on reimbursement in addition to discounted average wholesale price, the reference therein to "the Medicaid maximum allowable fee established by the agency" as an alternative reimbursement limit nevertheless cannot be construed as authority for the adoption of a methodology that would result in reimbursement at less than the least of (a) the amount billed by the provider, (b) the provider's "usual and customary charge" (as the Federation would define that term), or (c) average wholesale cost less 13.25 percent. In this regard, the Federation asserts that Section 409.908(14) and Section 409.912(40)(a)2.——which might at first blush appear to be inconsistent with one another——can easily be harmonized by construing "Medicaid maximum allowable fee established by the agency" to mean "average wholesale price less 13.25 percent." The Agency's Defense of Reimbursement Rule The Agency's arguments in support of the Reimbursement Rule can be reduced to two principal propositions. First, the Agency insists that if it were to reimburse pharmacies for all prescribed drugs at average wholesale price less 13.25 percent, the resulting payments, in the aggregate, would exceed federal limits on reimbursement, for reasons that need not detain us here. Exceeding federal limits, the Agency asserts, could cause CMS to take adverse action against the Florida Medicaid Program, perhaps putting at risk Florida's continued receipt of federal matching funds. Second, the Agency contends that Section 409.912(40)(a)2., Florida Statutes (2003), which requires that reimbursement be set at the average wholesale price less 13.25 percent, does not establish a floor (as the Federation maintains) but rather, when read in conjunction with Section 409.908(14), Florida Statutes (2003), prescribes another potential ceiling in addition to the pharmacy's actual charge, "usual and customary charge," and "the Medicaid maximum allowable fee established by the agency," which are the other potential ceilings pursuant to Section 409.908(14). Under this interpretation of the statutes, application of the Reimbursement Rule always produces the Medicaid maximum allowable fee established by the Agency——a statutorily authorized limit——and if that fee happens in a given situation to be less than the discounted average wholesale price, so be it. The New Statutory Methodology The 2004 Legislature amended Sections 409.908(14) and 409.912(40)(a)2., Florida Statutes (2003), enacting a bill (House Bill No. 1843) that was signed by the governor while this case was pending, on May 28, 2004. See Laws of Florida, Ch. 2004-270, §§ 12 and 17. The relevant statutory amendments took effect on July 1, 2004, id. at § 25, which was shortly after the final hearing in this case——and prior to the date of this Final Order. As amended, Section 409.908(14), Florida Statutes (2004), reads in relevant part as follows, with the recently added language underlined: A provider of prescribed drugs shall be reimbursed the least of the amount billed by the provider, the provider's usual and customary charge, or the Medicaid maximum allowable fee established by the agency, plus a dispensing fee. The Medicaid maximum allowable fee for ingredient cost will be based upon the lower of: average wholesale price (AWP) minus 15.4 percent, wholesaler acquisition cost (WAC) plus 5.75 percent, the federal upper limit (FUL), the state maximum allowable cost (SMAC), or the usual and customary (UAC) charge billed by the provider. As amended, Section 409.912(40)(a)2., Florida Statutes (2004), provides in pertinent part as follows, with the newly added language underlined and recently deleted language stricken through: Reimbursement to pharmacies for Medicaid prescribed drugs shall be set at the lesser of: the average wholesale price (AWP) minus 15.4 percent, the wholesaler acquisition cost (WAC) plus 5.75 percent, the federal upper limit (FUL), the state maximum allowable cost (SMAC), or the usual and customary (UAC) charge billed by the provider the average wholesale price less 13.25 percent. Collectively, Sections 409.908(4) and 409.912(40)(a)2., Florida Statutes (2004), will be referred to hereafter as the "New Statutory Methodology."
Findings Of Fact The petitioners, Leo A. Price and Elizabeth R. Price, are husband and wife. They have been members of the Florida retirement System (FRS) since their transfer on January 1, 1979. Previously, the petitioners were members of the Teachers' Retirement System (TRS) Plan D. In order to transfer to FRS, they moved from TRS Plan D, to TRS Plan E, on December 31, 1978, and then into FRS on January 1, 1979. In transferring from TRS to FRS, a member is entitled to a refund of excess TRS contributions. In early 1979, Mr. Price received refund warrants totalling $16,060.61 which represented TRS contributions of $10,138.73 and accrued interest of $5,921.88. In early 1979, Mrs. Price received refund warrants totalling $17,515.03 which represented TRS contributions of $11,383.91 and accrued interest of $6,131.12. The petitioners failed to cash these refund warrants and to date have not negotiated them. In November, 1979, the petitioners visited the Division of Retirement and discussed the cashing of these warrants based on questions of taxation. This discussion was followed by a letter dated December 30, 1979, to A. J. McMullian III, State Retirement Director, in which the petitioners again discussed the taxation questions and advised the respondent that they had not cashed the warrants. They asked that new warrants be issued and that they be paid interest on the amount of the warrants for the period of time from the issuance to the cashing of the warrants. By letter dated January 25, 1980, Mr. McMullian advised the petitioners to cash the warrants and further told petitioners that interest could not be paid. In their petition for an administrative hearing, the petitioners alleged that they were under-refunded; however, at the hearing the parties stipulated that only two issues are presented for resolution: Whether the petitioners are entitled to interest on their contributions from July 1, 1978, through December 31, 1978, and Whether the petitioners are entitled to interest on the total amount of the uncashed warrants from the date of issuance to the present. Ruth Sansom, Assistant Bureau Chief, Bureau of Benefits, Division of Retirement, testified that she has worked with TRS and FRS in a supervisory capacity since 1963. In these seventeen years, Section 238.10, Florida Statutes, has consistently been construed as providing for the payment of interest on contributions based on a fiscal year. The fiscal year is from July 1 to June 30. On June 30 of each year, interest is calculated on the total accumulated contributions then on deposit. If no contributions are on deposit on June 30, no interest is credited for this fiscal year. Since the petitioners received refunds of excess accumulated contributions on December 31, 1978, no interest was paid for the 1978-79 fiscal year because no contributions were on deposit on June 30, 1979. At the time that refund warrants are issued, the funds backing the warrants are transferred from the retirement system trust fund to the Treasurer's Office and the Division earns no more interest on these funds. The petitioners contend that they were advised by Leon Burnett of the Division of Retirement not to cash the warrants in their possession pending the outcome of this case. Ruth Sansom testified that it is standard practice to advise members not to cash benefit warrants if the amount of the benefit is in question, but that refund warrants may be cashed and adjustments made in the future. In a separate case (Case No. 80-1029), Mr. Price is challenging the amount of his benefit warrants. However, at the hearing in this case the petitioners did not understand the difference between a refund warrant and a benefit warrant, although this subject was discussed at their November, 1979, meeting with Mr. Burnett, and Mr. Price had in his possession both refund warrants and benefit warrants which had not been cashed.
Recommendation BASED UPON the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the petition of Leo A. Price and Elizabeth R. Price, seeking interest on their contributions for the period of time from July 1, 1978, through December 31, 1978, be denied. It is further RECOMMENDED that the claim of the petitioners, Leo A. Price and Elizabeth R. Price, for interest on the total amount of their uncashed warrants from the date of issuance, be denied. THIS RECOMMENDED ORDER entered on this 19 day of September, 1980. WILLIAM B. THOMAS Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-1779 Filed with the Clerk of the Division of Administrative Hearings this 19th day of September, 1980. COPIES FURNISHED: Leo A. Price and Elizabeth R. Price 1000 N.E. 96th Street Miami, Shores, Florida 33138 Diane R. Keisling, Esquire Cedars Executive Center Suite 207C, Box 81 2639 North Monroe Street Tallahassee, Florida 32303
The Issue Whether Respondent committed the offenses set forth in the two-count Administrative Complaint, dated April 17, 2007, and, if so, what penalty should be imposed.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Department of Business and Professional Regulation, Division of Real Estate (the "Department"), is the state agency charged with enforcing the statutory provisions pertaining to persons holding real estate broker and sales associate's licenses in Florida, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes. At all times relevant to this proceeding, except where specifically noted, Respondent Mathew Johnson was a licensed Florida real estate sales associate, having been issued license number SL3149081. Respondent first obtained his real estate associate's license in 2003 and worked under the license of broker Jacqueline Sanderson in Orlando. When he married and his wife became pregnant, Respondent believed that he needed a more steady income than his commission-based employment with Ms. Sanderson provided. Respondent left Ms. Sanderson's employ on good terms and commenced work as the marketing manager for the downtown YMCA in Orlando. While working at the downtown YMCA, Respondent met a member of the YMCA named Tab L. Bish ("Mr. Bish"), a broker who owns First Source, Inc., an Orlando real estate sales company (sometimes referred to as "FSI Realty"). Respondent became friendly with Mr. Bish, and expressed an interest in getting back into the real estate business. Mr. Bish offered Respondent a job at First Source. Respondent had allowed his sales associate's license to lapse while he was working at the YMCA. Respondent informed Mr. Bish of that fact, and told Mr. Bish that he required a salaried position in order to support his young family. Respondent testified that Mr. Bish was happy to hire him as an office manager, because Mr. Bish wanted Respondent to perform a marketing role for First Source similar to that he had performed for the YMCA. Respondent started working at First Source in May 2005, as a salaried office manager. Mr. Bish agreed that he initially hired Respondent as an office manager, but only on the understanding that Respondent would take the necessary steps to reactivate his sales associate's license and commence selling property as soon as possible. Respondent took the licensing course again. Mr. Bish believed that Respondent was taking too long to obtain his license, and cast about for something Respondent could do during the interim. In order to make profitable use of Respondent's time, Mr. Bish began to deal in referral fees from apartment complexes. Certain complexes in the Orlando area would pay a fee to brokers who referred potential renters to the apartments, provided these potential renters actually signed leases. Among the apartment complexes offering referral fees was the Jefferson at Maitland, which in 2005 offered a referral fee of half the first month's rent. Mr. Bish placed Respondent in charge of connecting potential renters with apartment complexes, showing the apartments, following up to determine whether the potential renters signed leases, and submitting invoices for the referral fees. Mr. Bish did not authorize Respondent to collect the payments. Respondent initiated contact with the Jefferson at Maitland and began sending potential renters there. Respondent would submit invoices to the Jefferson at Maitland, payable to First Source, for each referral that resulted in a lease agreement. Respondent estimated that he submitted between 12 and 15 invoices for referral fees to the Jefferson at Maitland during his employment with First Source. Respondent obtained his license and became an active sales associate under Mr. Bish's broker's license on November 16, 2005. Mr. Bish began a process of weaning Respondent away from his salaried position and into working on a full commission basis. Respondent stopped showing apartments under the referral arrangement and began showing properties for sale. The last lease for which First Source was due a referral fee from the Jefferson at Maitland was dated December 5, 2005. In early February 2006, it occurred to Respondent that he had failed to follow up with the Jefferson at Maitland regarding the last group of potential renters to whom he had shown apartments during October and November 2005. Respondent claimed that he "hadn't had the opportunity" to follow up because of the press of his new duties as a sales associate and the intervening holiday season. However, nothing cited by Respondent explained his failure to make a simple phone call to the Jefferson at Maitland to learn whether First Source was owed any referral fees. Respondent finally made the call to the Jefferson at Maitland on February 9, 2006. He spoke to a woman he identified as Jenny Marrero, an employee whom he knew from prior dealings. Ms. Marrero reviewed Respondent's list and found three persons who had signed leases after Respondent showed them apartments: Mike Tebbutt, who signed a one-year lease on October 26, 2005, for which First Source was owed a referral fee of $532.50; Terry Ford, who signed an eight-month lease on November 14, 2005, for which First Source was owed a referral fee of $492.50; and Juan Sepulveda, who signed an eight-month lease on December 2, 2005, for which First Source was owed a referral fee of $415.00. However, there was a problem caused by Respondent's failure to submit invoices for these referral fees in a timely manner. Respondent testified that Ms. Marrero told him that the Jefferson at Maitland had reduced its referral fee from 50 percent to 20 percent of the first month's rent, effective January 2006.2 Ms. Marrero could not promise that these late invoices would be paid according to the 2005 fee structure. According to Respondent, Ms. Marrero suggested that the Jefferson at Maitland's corporate office would be more likely to pay the full amount owed if Respondent did something to "break up" the invoices, making it appear that they were being submitted by different entities. She also suggested that no invoice for a single payee exceed $1,000, because the corporate office would know that amount exceeded any possible fee under the 2006 fee structure. Ms. Marrero made no assurances that her suggestions would yield the entire amount owed for the 2005 invoices, but Respondent figured the worst that could happen would be a reduction in the billings from 50 percent to 20 percent of the first month's rent. On February 9, 2006, Respondent sent a package to the Jefferson at Maitland, via facsimile transmission. Included in the package were three separate invoices for the referral fees owed on behalf of Messrs. Tebbutt, Ford, and Sepulveda. The invoices for Messrs. Tebbutt and Sepulveda stated that they were from "Matt Johnson, FSI Realty," to the Jefferson at Maitland, and set forth the name of the lessee, the lease term, the amount of the "referral placement fee," and stated that the checks should be made payable to "FSI Realty, 1600 North Orange Avenue, Suite 6, Orlando, Florida 32804." The invoice for Mr. Ford stated that it was from "Matt Johnson" to the Jefferson at Maitland. It, too, set forth the name of the lessee, the lease term, and the amount of the referral fee. However, this invoice stated that the check should be made payable to "Matt Johnson, 5421 Halifax Drive, Orlando, Florida 32812." The Halifax Drive location is Respondent's home address. The package sent by Respondent also included an Internal Revenue Service Form W-9, Request for Taxpayer Identification Number and Certification, for Mr. Bish and for Respondent, a copy of Respondent's real estate sales associate license, a copy of Mr. Bish's real estate broker's license, and a copy of First Source, Inc.'s real estate corporation registration. Approximately one month later, in early March 2006, Mr. Bish answered the phone at his office. The caller identifying herself as "Amber" from the Jefferson at Maitland and asked for Respondent, who was on vacation. Mr. Bish asked if he could help. Amber told Mr. Bish that the W-9 form submitted for Respondent had been incorrectly filled out, and that she could not send Respondent a check without the proper information. Mr. Bish told Amber that under no circumstances should she send a check payable to Respondent. He instructed her to make the payment to First Source. Amber said nothing to Mr. Bish about a need to break up the payments or to make sure that a single remittance did not exceed $1,000. Mr. Bish asked Amber to send him copies of the documents that Respondent had submitted to the Jefferson at Maitland. Before those documents arrived, Mr. Bish received a phone call from Respondent, who explained that he submitted the invoice in his own name to ensure that Mr. Bish received the full amount owed by the Jefferson at Maitland. On March 10, 2006, after reviewing the documents he received from the Jefferson at Maitland, Mr. Bish fired Respondent. On March 29, 2006, Mr. Bish filed the complaint that commenced the Department's investigation of this matter.3 At the hearing, Mr. Bish explained that, even if Respondent's story about the need to "break up" the invoices and keep the total below $1,000 were true, the problem could have been easily resolved. Had Mr. Bish known of the situation, he would have instructed the Jefferson at Maitland to make one check payable to him personally as the broker, and a second check payable to First Source, Inc. In any event, there was in fact no problem. By a single check, dated March 15, 2008, First Source received payment from the Jefferson at Maitland in the amount of $1,440, the full sum of the three outstanding invoices from 2005. Respondent testified that he never intended to keep the money from the invoice, and that he would never have submitted it in his own name if not for the conversation with Ms. Marrero. Respondent asserted that if he had received a check, he would have signed it over to Mr. Bish. Respondent and his wife each testified that the family had no great need of $492.50 at the time the invoices were submitted. Respondent's wife is an attorney and was working full time in February 2006, and Respondent was still receiving a salary from First Source. In his capacity as office manager, Respondent had access to the company credit card to purchase supplies. Mr. Bish conducted an internal audit that revealed no suspicious charges. Respondent failed to explain why he did not immediately tell Mr. Bish about the potential fee collection problem as soon as he learned about it from Ms. Marrero, why he instructed the Jefferson at Maitland to send the check to his home address rather than his work address, or why he allowed a month to pass before telling Mr. Bish about the invoices. He denied knowing that Mr. Bish had already learned about the situation from the Jefferson at Maitland's employee. The Department failed to demonstrate that Respondent intended to keep the $492.50 from the invoice made payable to Respondent personally. The facts of the case could lead to the ultimate finding that Respondent was engaged in a scheme to defraud First Source of its referral fee. However, the same facts also may be explained by Respondent's fear that Mr. Bish would learn of his neglect in sending the invoices, and that this neglect could result in a severe reduction of First Source's referral fees. Respondent may have decided to keep quiet about the matter in the hope that the Jefferson at Maitland would ultimately pay the invoices in full, at which time Respondent would explain himself to Mr. Bish with an "all's well that ends well" sigh of relief. Given the testimony at the hearing concerning Respondent's character and reputation for honesty, given that Respondent contemporaneously told the same story to his wife and to Ms. Sanderson that he told to this tribunal, and given that this incident appears anomalous in Respondent's professional dealings, the latter explanation is at least as plausible as the former. Respondent conceded that, as a sales associate, he was not authorized by law to direct the Jefferson at Maitland to make the referral fee check payable to him without the express written authorization of his broker, Mr. Bish. Respondent also conceded that Mr. Bish did not give him written authorization to accept the referral fee payment in his own name. Respondent has not been subject to prior discipline.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order: Dismissing Count I of the Administrative Complaint against Respondent; and Suspending Respondent's sales associate's license for a period of one year for the violation established in Count II of the Administrative Complaint. DONE AND ENTERED this 21st day of September, 2007, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of September, 2007.
The Issue The issue is whether Respondent is liable for a penalty of $265,604.81 based on payroll records for the period from October 28, 2008, through October 27, 2008, pursuant to Subsection 440.107(7), Florida Statutes (2008).1
Findings Of Fact Petitioner is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers’ compensation insurance for the benefit of their employees in accordance with Section 440.107. Respondent is a Florida corporation engaged in the construction business. On October 27, 2008, a compensation compliance investigator and other investigators for Petitioner conducted a targeted investigation of Respondent’s business based on reports from a confidential informant that Respondent was not in compliance with Chapter 440 and the Insurance Code. The compliance investigator met two relatives of the sole shareholder of the company, who identified themselves as employees. The compliance investigator also identified construction work being conducted by two workers, who, it is undisputed, were not in compliance with Chapter 440. The disputed issues of fact are comprised of two issues. The first issue is whether payments to relatives of the sole shareholder are compensation or loans. The second issue is whether cash payments to the sole shareholder are compensation or business expenses. None of the loans to family members were repaid to the employer at the time of the hearing. Loans that have not been repaid to the employer are defined as payroll by Florida Administrative Code Rule 69L-6.035, and Respondent owes that portion of the penalty assessment allocable to the first issue. Respondent provided ample evidence to demonstrate that the disputed transactions were loans rather than compensation for employment. One relative is disabled and unable to work at the level for which he is allegedly compensated. He will repay the loans out of the sale proceeds of his home upon his death. Other family members have less tragic but similarly sad stories. However, deviation from Florida Administrative Code Rule 69L- 6.035 would merely invite remand pursuant to Section 120.69. The remaining issue is whether cash payments by Respondent to its sole shareholder are properly characterized as compensation or business expenses. Florida Administrative Code Rule 69L-6.035(1)(f) defines payroll to include expense reimbursements to the extent the business records do not confirm the expense was incurred as a valid business expense. For the reasons stated hereinafter, it is less than clear and convincing that the disputed cash payments are payroll within the meaning of Florida Administrative Code Rule 69L-6.035(1)(f). The sole shareholder explained under oath at the hearing that the cash payments at issue were for business expenses, including the payment of construction materials. He does not give workers charge cards to buy construction materials. He gives them cash. They do not always bring him receipts. The witness submitted detailed tabulations of approximately $77,002.46 in such expenses during the audit period, and the trier of fact found the testimony and supporting documentation to be credible and persuasive. The sole shareholder also testified that he incurred cash office expenses during the audit period of approximately $22,500.00 and submitted documentation to support that testimony. He also purchased three trucks for the business and made cash down payments on each truck with documentation to support the cash payments. The trier of fact finds that testimony and supporting documentation to be credible and persuasive. Based on the evidence through the date of the hearing, it is less than clear and convincing that the disputed cash payments to the sole shareholder were not incurred as valid business expenses within the meaning of Florida Administrative Code Rule 69L-6.035(f). The testimony of the sole shareholder and the supporting documentary evidence also shows that the disputed amounts were not cash payments to the sole shareholder in his capacity as an employee within the meaning of Florida Administrative Code Rule 69L-6.035(1)(b).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order imposing a fine consistent with the amount attributable to unpaid loans. DONE AND ENTERED this 24th day of November, 2009, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of November, 2009.
The Issue The issue in the case is whether supplemental payments made to the Petitioner by Brevard Community College constitute creditable compensation for purposes of determining retirement benefits under the Florida Retirement System.
Findings Of Fact From 1970 until his retirement in June 1998, Brevard Community College employed Stephen J. Megregian at an executive level. The State of Florida, Division of Retirement, manages and oversees operation of the Florida Retirement System (FRS) in which Brevard Community College (BCC) participates. In June 1990, the college adopted an Employee Benefit Plan for BCC Executive Employees. The provisions of the plan covered Mr. Megregian, an executive employee. In fact, Mr. Megregian drafted the plan, which was adopted by the college's Board of Trustees. The executive benefit plan included a severance pay benefit for plan participants. The severance benefit was calculated according to a formula using the employee's daily base pay as multiplied by the sum of "benefit days." Benefit days were earned according to employment longevity. A "severance day" calculation determined the amount of severance pay a departing employee would receive. Apparently, at some point in 1994, participants in the FRS learned that the Division of Retirement would exclude some types of compensation, including severance pay, from the "creditable compensation" used to determine retirement benefits. In June 1995, the college amended the plan to provide a severance pay "opt-out" provision to plan participants. The provision entitled plan participants who were within five years of eligibility for FRS retirement benefits to "opt-out" of the severance package and instead immediately begin to receive supplemental payments. Mr. Megregian drafted the "opt-out" provision, which was adopted by the college board. The decision to "opt-out" was irrevocable. A plan participant could not change his or her mind and take the severance package once the "opt-out" decision was made. The supplemental payments were calculated based upon the "severance days" that the employee would have otherwise earned during the year. The payments were made along with the employee's salary payment. The "opt-out" plan did not require a participant to retire after the fifth year of receiving the supplemental payment. The Petitioner asserts that the creation of the "opt- out" provision was in accordance with information provided by the Division of Retirement. There is no evidence that the Division of Retirement provided any information suggesting that the "opt-out" provision would result in an increase in creditable compensation for purposes of determining FRS benefits, or that the "opt-out" provision was an acceptable method of avoiding the severance pay exclusion. There is no evidence that, prior to March of 1998, the college specifically sought any direction or advice from the Division of Retirement as to the supplemental payments made to employees under the "opt-out" provision. The evidence as to why the college did not simply increase base salaries for employees to whom supplemental payments were being made is unclear. There was testimony that the plan was designed to avoid unidentified tax consequences. There was also testimony that the supplemental plan was designed to avoid increasing some employees base salaries beyond the percentage increases awarded to other employees. There was apparently some concern as to the impact the supplemental payments would have on other college employees who were not receiving the additional funds. There is no evidence that the Petitioner performed any additional duties on the college's behalf in exchange for the supplemental payments. The Petitioner was eligible to participate in the "opt- out" plan beginning in the college's 1995-1996 fiscal year, and he elected to do so. As a result of his election, supplemental payments were made in amounts as follows: Fiscal Year 1995-1996, $7,938.46. Fiscal Year 1996-1997, $8,147.13. Fiscal Year 1997-1998, $8,395.40. On March 21, 1998, Brevard Community College requested clarification from the Division of Retirement as to how the supplemental payments would affect a plan participant's benefit. On April 30, 1998, the Division of Retirement notified the college that the supplemental payments would not be included within the calculation of creditable compensation. The Petitioner retired from his employment at Brevard Community College on June 30, 1998. The Petitioner is presently entitled to retirement benefits under the FRS. The Division calculates FRS retirement benefits based on "creditable compensation" paid to an employee during the five years in which an employee's compensation is highest. Some or all of the three years during which the Petitioner received supplemental payments are included in the calculation of his creditable compensation. The evidence fails to establish that the supplemental payments made to the Petitioner should be included within the creditable compensation upon which FRS benefits are calculated. Under the statutes and rules governing FRS benefit determinations, the supplemental payments made to the Petitioner are "bonuses" and are excluded from the "creditable compensation" calculation.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the State of Florida, Division of Retirement, enter a final order finding that supplemental payments made to Stephen J. Megregian are bonus payments and are excluded from calculation of creditable compensation for FRS benefit purposes. DONE AND ENTERED this 2nd day of December, 1999, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM 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 2nd day of December, 1999. COPIES FURNISHED: David A. Pearson, Esquire Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, P.A. Post Office Box 2346 Orlando, Florida 32802-2346 Robert B. Button, Esquire Division of Retirement Cedars Executive Center Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 A. J. McMullian, III, Director Division of Retirement Cedars Executive Center Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560 Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
