97-001854 Division Of Real Estate vs. Harold E. Hicks And Service First Realty, Inc.
 Status: Closed
Recommended Order on Tuesday, November 25, 1997.


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Summary: Respondents' failure to keep financial record in form and content as directed by rule constitutes violation regardless of lack of harm to consumer.

1STATE OF FLORIDA

4DIVISION OF ADMINISTRATIVE HEARINGS

8DEPARTMENT OF BUSINESS AND )

13PROFESSIONAL REGULATION , )

16DIVISION OF REAL ESTATE , )

21)

22Petitioner , )

24)

25vs. ) Case No. 97-1854

30)

31HAROLD E. HICKS and )

36SERVICE FIRST REALTY, INC. , )

41)

42Respondents. )

44__________________________________)

45RECOMMENDED ORDER

47Pursuant to notice, a formal hearing was held by telephone

57conference call in this case on September 12, 1997, with the

68parties participating from Miami, Florida, before J. D. Parrish,

77a designated Administrative Law Judge of the Division of

86Administrative Hearings.

88APPEARANCES

89For Petitioner : Daniel Villazon, Esquire

95Department of Business

98and Professional Regulation

101Division of Real Estate

105Post Office Box 1900

109Orlando, Florida 32802

112For Respondent : Harold E. Hicks, pro se

1209715 Northwest 27th Avenue

124Miami, Florida 33147

127STATEMENT OF THE ISSUES

131Whether the Respondents committed the violations alleged

138and, if so, what penalty should be imposed.

146PRELIMINARY STATEMENT

148This case began on March 12, 1997, when the Department of

159Business and Professional Regulation (Department) filed an

166Administrative Complaint against the Respondents, Harold E. Hicks

174and Services First Realty, Inc. Such complaint set forth six

184counts against each Respondent, all of which arose from alleged

194failures to keep and maintain appropriate financial records as

203required by Chapter 475, Florida Statutes, and the applicable

212rules set forth in the Florida Administrative Code. Respondents

221disputed the factual allegations and requested an administrative

229hearing.

230The case was forwarded to the Division of Administrative

239Hearings for formal proceedings on April 14, 1997. Thereafter

248the case was scheduled for hearing. At the hearing, Petitioner

258presented the testimony of Kenneth Rehm and Roberto Castro.

267Petitioner's Exhibits 1 through 6 have been admitted into

276evidence. Petitioner's Exhibit 7 was marked for identification

284only.

285The Respondent, Harold Hicks, testified on behalf of himself

294and the corporation and presented the testimony of Eugene Parker,

304an accountant.

306A transcript of the proceedings was filed on September 24,

3161997. In accordance with the parties' stipulation, they were

325granted thirty days' leave to file their proposed recommended

334orders. Petitioner filed a proposed order which has been

343considered in the preparation of this order. Respondents have

352not filed a proposed order.

357FINDINGS OF FACT

3601. Petitioner is the state agency charged with the

369responsibility of regulating real estate licensees.

3752. At all times material to the allegations of this case,

386Respondent, Harold E. Hicks, was licensed as a real estate

396broker, license number 0136248.

4003. At all times material to the allegations of this case,

411Mr. Hicks was the qualifying broker for the Respondent

420corporation, Service First Realty, Inc. (the corporation), whose

428address is 9715 N. W. 27th Avenue, Miami, Florida 33147. The

439Respondent corporation holds license number 0223295.

4454. Mr. Hicks was responsible for the day-to-day business

454operations of the corporation.

4585. Mr. Hicks was responsible for the financial records kept

468and maintained by the corporation. All financial records at

477issue in this proceedings were in the name of the corporation.

4886. In 1996, an investigator employed by the Petitioner,

497Kenneth G. Rehm, attempted to conduct an audit of the

507Respondents' financial records. This audit was in response to a

517complaint not at issue in this proceeding.

5247. Mr. Rehm went to the Respondents' place of business and

535asked for the financial records for all real estate accounts.

5458. Mr. Hicks provided the investigator with records which

554established a negative escrow bank balance of $761.00. Moreover,

563there was no monthly reconciliation for the escrow account.

5729. Based upon the bookkeeping method used, the Respondents'

581records did not show how much money was being held in trust for

594individual clients.

59610. Respondents pooled money for different rental

603properties into one escrow account without establishing that they

612maintained accurate ledger balances per client.

61811. When Mr. Rehm was unable to reconcile the accounts, he

629elected to offer Respondents additional time to gather the

638records and to prepare for a complete audit. Such audit was

649assigned to Petitioner's investigator, Roberto Castro.

65512. Mr. Castro attempted to complete the follow-up audit of

665Respondents' financial records on February 13, 1996.

67213. Once again, the audit was hampered due to the lack of

684escrow account records. Based upon the records that were

693provided by Respondents, Mr. Castro computed that Respondents had

702$3,922.45 in outstanding checks from the rental distribution

711trust account but only $2,241.58 in the account. This

721calculation resulted in a shortage of $1,680.87.

72914. Mr. Castro also determined that Respondents were not

738completing monthly escrow account reconciliations in accordance

745with the rule promulgated by the Florida Real Estate Commission.

75515. On May 3, 1996, Respondents were served with a subpoena

766to provide Mr. Castro with all escrow records from February 1995

777to February 1996. Respondents did not respond to the subpoena.

78716. As of the date of hearing, Respondents have not shown

798monthly escrow account reconciliations in accordance with the

806rule promulgated by the Florida Real Estate Commission.

814CONCLUSIONS OF LAW

81717. The Division of Administrative Hearings has

824jurisdiction over the parties to, and the subject matter of,

834these proceedings.

83618. The Petitioner bears the burden of proof to establish

846by clear and convincing evidence the allegations of the

855Administrative Complaint.

85719. Section 475.25(1), Florida Statutes, provides, in

864pertinent part:

866(1) The commission may deny an application

873for licensure, registration, or permit, or

879renewal thereof; may place a licensee,

885registrant, or permittee on probation; may

891suspend a license, registration, or permit

897for a period not exceeding 10 years; may

905revoke a license, registration, or permit;

911may impose an administrative fine not to

918exceed $1,000 for each count or separate

926offense; and may issue a reprimand, and any

934or all of the foregoing, if it finds that the

944licensee, registrant, permittee, or

948applicant:

949* * *

952(b) Has been guilty of fraud,

958misrepresentation, concealment, false

961promises, false pretenses, dishonest dealing

966by trick, scheme, or device, culpable

972negligence, or breach of trust in any

979business transaction in this state or any

986other state, nation, or territory; has

992violated a duty imposed upon him by law or by

1002the terms of a listing contract, written,

1009oral, express, or implied, in a real estate

1017transaction; has aided, assisted, or

1022conspired with any other person engaged in

1029any such misconduct and in furtherance

1035thereof; or has formed an intent, design, or

1043scheme to engage in any such misconduct and

1051committed an overt act in furtherance of such

1059intent, design, or scheme. It is immaterial

1066to the guilt of the licensee that the victim

1075or intended victim of the misconduct has

1082sustained no damage or loss; that the damage

1090or loss has been settled and paid after

1098discovery of the misconduct; or that such

1105victim or intended victim was a customer or a

1114person in confidential relation with the

1120licensee or was an identified member of the

1128general public.

1130* * *

1133(e) Has violated any of the provisions of

1141this chapter or any lawful order or rule made

1150or issued under the provisions of this

1157chapter or chapter 455.

1161* * *

1164(k) Has failed, if a broker, to immediately

1172place, upon receipt, any money, fund,

1178deposit, check, or draft entrusted to him by

1186any person dealing with him as a broker in

1195escrow with a title company, banking

1201institution, credit union, or savings and

1207loan association located and doing business

1213in this state, or to deposit such funds in a

1223trust or escrow account maintained by him

1230with some bank, credit union, or savings and

1238loan association located and doing business

1244in this state, wherein the funds shall be

1252kept until disbursement thereof is properly

1258authorized; or has failed, if a salesperson,

1265to immediately place with his registered

1271employer any money, fund, deposit, check, or

1278draft entrusted to him by any person dealing

1286with him as agent of his registered employer.

1294The commission shall establish rules to

1300provide for records to be maintained by the

1308broker and the manner in which such deposits

1316shall be made.

131920. Rule 61J2-14.012, Florida Administrative Code,

1325provides:

1326(1) A broker who receives a deposit as

1334previously defined shall preserve and make

1340available to the BPR, or its authorized

1347representative, all deposit slips and

1352statements of account rendered by the

1358depository in which said deposit is placed,

1365together with all agreements between the

1371parties to the transaction. In addition, the

1378broker shall keep an accurate account of each

1386deposit transaction and each separate bank

1392account wherein such funds have been

1398deposited. All such books and accounts shall

1405be subject to inspection by the DPR or its

1414authorized representatives at all reasonable

1419times during regular business hours.

1424(2) At least monthly, a broker shall cause

1432to be made a written statement comparing the

1440broker's total liability with the reconciled

1446bank balance(s) of all trust accounts. The

1453broker's trust liability is defined as the

1460sum total of all deposits received, pending

1467and being held by the broker at any point in

1477time. The minimum information to be included

1484in the monthly statement-reconciliation shall

1489be the date the reconciliation was

1495undertaken, the date used to reconcile the

1502balances, the name of the bank(s), the

1509name(s) of the account(s), the account

1515number(s), the account balance(s) and

1520date(s), deposits in transit, outstanding

1525checks identified by date and check number,

1532and any other items necessary to reconcile

1539the bank account balance(s) with the balance

1546per the broker's checkbook(s) and other trust

1553account books and records disclosing the date

1560of receipt and the source of the funds. The

1569broker shall review, sign and date the

1576monthly statement-reconciliation.

1578(3) Whenever the trust liability and the

1585bank balances do not agree, the

1591reconciliation shall contain a description or

1597explanation for the difference(s) and any

1603corrective action taken in reference to

1609shortages or overages of funds in the

1616account(s). Whenever a trust bank account

1622record reflects a service charge or fee for a

1631non-sufficient check being returned or

1636whenever an account has a negative balance,

1643the reconciliation shall disclose the

1648cause(s) of the returned check or negative

1655balance and the corrective action taken.

1661(4 ) The books, accounts and records

1668pertaining to the broker's real estate

1674brokerage business shall be preserved for a

1681period of not less than 5 years after receipt

1690of any money, funds, deposit, check or drafts

1698entrusted to the broker or the conclusion of

1706the broker's involvement in the transaction,

1712whichever results in a greater period of

1719retention of records. If any brokerage

1725record has been the subject of or has served

1734as evidence in litigation, relevant books,

1740accounts and records must be retained for at

1748least 2 years after the conclusion of the

1756civil action or the conclusion of any

1763appellate proceeding, whichever is later, but

1769not less than a total of 5 years as set

1779above.

178021. In this case the Petitioner has established, by clear

1790and convincing evidence, that the Respondents did not maintain

1799financial records as required by the rule guidelines for real

1809estate brokers. While Respondents may have kept records which,

1818for their purposes, tracked the funds received and disbursed by

1828the company, such records did not comply with the uniform

1838guidelines for financial records as specified by the Florida Real

1848Estate Commission. All real estate licensees are directed to

1857conform to the standard for financial records set by their

1867governing board. That a consumer was not financially harmed does

1877not absolve Respondents of the mandates of their profession.

1886Pursuant to the applicable statutes and rules, Respondents must

1895maintain financial records as directed.

1900RECOMMENDATION

1901Based on the foregoing Findings of Fact and Conclusions of

1911Law, it is RECOMMENDED that the Florida Real Estate Commission

1921enter a Final Order finding the Respondents guilty of violating

1931Sections 475.25(1)(b), (e), and (k), Florida Statutes, and

1939imposing an administrative fine in the amount of $1,500.00. It

1950is further recommended that the Commission suspend Respondents'

1958licenses until the Respondent Hicks has completed a seven-hour

1967course in real estate escrow management and that such suspension

1977be followed by a probationary period with monitoring of the

1987Respondents' financial records to assure compliance with all

1995Commission rules.

1997DONE AND ENTERED this 25th day of November, 1997, in

2007Tallahassee, Leon County, Florida.

2011___________________________________

2012J. D. Parrish

2015Administrative Law Judge

2018Division of Administrative Hearings

2022The DeSoto Building

20251230 Apalachee Parkway

2028Tallahassee, Florida 32399-3060

2031(904) 488- 9675 SUNCOM 278-9675

2036Fax Filing (904) 921-6847

2040Filed with the Clerk of the

2046Division of Administrative Hearings

2050this 25th day of November, 1997.

2056COPIES FURNISHED:

2058Henry M. Solares

2061Division Director

2063Division of Real Estate

2067Post Office Box 1900

2071Orlando, Florida 32802-1900

2074Lynda L. Goodgame

2077General Counsel

2079Department of Business and

2083Professional Regulation

20851940 North Monroe Street

2089Tallahassee, Florida 32399-0792

2092Daniel Villazon, Esquire

2095Department of Business and

2099Professional Regulation

2101Division of Real Estate

2105Post Office Box 1900

2109Orlando, Florida 32802-1900

2112Harold E. Hicks, pro se

2117Service First Realty, Inc.

21219715 Northwest 27th Avenue

2125Miami, Florida 33147

2128NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

2134All parties have the right to submit written exceptions within 15

2145days from the date of this Recommended Order. Any exceptions to

2156this Recommended Order should be filed with the agency that will

2167issue the Final Order in this case.

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Date
Proceedings
Date: 02/12/1998
Proceedings: Final Order filed.
PDF:
Date: 02/11/1998
Proceedings: Agency Final Order
PDF:
Date: 02/11/1998
Proceedings: Recommended Order
PDF:
Date: 11/25/1997
Proceedings: Recommended Order sent out. CASE CLOSED. Hearing held 09/12/97.
Date: 10/27/1997
Proceedings: Petitioner`s Proposed Recommended Order (filed via facsimile).
Date: 09/24/1997
Proceedings: (I Volume) Transcript filed.
Date: 09/12/1997
Proceedings: CASE STATUS: Hearing Held.
Date: 09/10/1997
Proceedings: Amended Notice of Hearing sent out. (hearing set for 9/12/97; 9:00am; Miami)
Date: 08/05/1997
Proceedings: Notice of Hearing sent out. (hearing set for 9/12/97; 9:00am; Miami)
Date: 07/08/1997
Proceedings: Letter to Judge J. D. Parrish from D. Villazon Re: Hearing dates filed.
Date: 06/25/1997
Proceedings: Order Granting Continuance sent out. (hearing cancelled; parties to file available hearing dates by 7/7/97)
Date: 06/23/1997
Proceedings: Letter to Judge J. D. Parrish from H. Hicks Re: Motion for Continuance (filed via facsimile).
Date: 05/16/1997
Proceedings: Notice of Hearing sent out. (hearing set for 6/25/97; 9:00am; Miami)
Date: 04/28/1997
Proceedings: (Petitioner) Unilateral Response to Initial Order (filed via facsimile).
Date: 04/17/1997
Proceedings: Initial Order issued.
Date: 04/14/1997
Proceedings: Answer; Agency Referral letter; Administrative Complaint filed.

Case Information

Judge:
J. D. PARRISH
Date Filed:
04/14/1997
Date Assignment:
04/17/1997
Last Docket Entry:
02/12/1998
Location:
Miami, Florida
District:
Southern
Agency:
ADOPTED IN TOTO
 

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