02-003023BID Canco Construction, Inc. vs. Department Of Transportation Status: Closed Recommended Order on Tuesday, December 31, 2002.

Summary: The Department`s proposed action, awarding the contract to Intervenor, is not contrary to the agency`s statutes, rules, or policies, or the bid specifications. Recommend that contract be awarded to Intervenor.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CANCO CONSTRUCTION, INC., )

)

Petitioner, )

)

vs. )

)

DEPARTMENT OF TRANSPORTATION, )

)

Respondent, ) Case No. 02 - 3023BID

)

and )

)

RICK RICHARDS, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this

case on September 10 and 11, 2002, in Sarasota County, Florida,

before Carolyn S. Holifield, a duly - designated Administrative

Law Judge of t he Division of Administrative Hearings.

APPEARANCES

For Petitioner: John O. Williams, Esquire

Kimberly A. Terrell

Qualified Representative

Williams & Holz, P.A.

The Cambridge Centre

211 East Virginia Street

Tallahassee, Florida 32301

For Respondent: Barbara G. Hines, Esquire

Department of Transportation

605 Suwannee Stre et

Haydon Burns Building, Mail Station 58

Tallahassee, Florida 32399

Michael Lines, Esquire

Department of Transportation

801 North Broadway

Bartow, Flor ida 33831 - 1249

For Intervenor: John S. Jaffer, Esquire

Wilson, Johnson & Jaffer, P.A.

27 South Orange Avenue

Sarasota, Florida 34236

STATEMENT OF THE ISSUE

Whether the proposed decision of the D epartment of

Transportation to award Contract No. E1C74 to Intervenor Rick

Richards, Inc., is contrary to the agency's governing statutes,

rules, or policies or the specifications of the contract.

PRELIMINARY STATEMENT

Canco Construction, Inc. ("Canco ") filed a Notice of Intent

to protest on July 3, 2002, and a Formal Written Protest

("Protest") on July 10, 2002. The Protest was in response to

the Department's decision on April 30, 2002, to award Contract

No. E1C74 to Rick Richards, Inc., and to rejec t Canco's bid as

non - responsive. On July 12, 2002, Rick Richards, Inc., filed

its Motion to Intervene in this matter. On July 31, 2002, the

matter was referred to the Division of Administrative Hearings

("Division") for assignment of an Administrative La w Judge to

conduct a formal hearing. The case was set for hearing on

August 30, 2002. At the request of Intervenor, the hearing was

continued until September 11, 2002.

On September 9, 2002, Intervenor filed a Motion to Dismiss

("Motion"). The Depar tment joined in the Motion. On

September 11, 2002, prior to the evidentiary part of the final

hearing, oral argument was held on the Motion. In the Motion,

Intervenor asserted that Petitioner interfered with the

discovery process and engaged in discovery abuses. In response,

counsel for Petitioner denied these assertions and represented

that he had cooperated in discovery, produced all the requested

documents that were provided to him by his client, and made

available all witnesses within his client's co ntrol. The

undersigned reserved ruling on the Motion at hearing. Upon

consideration of the Motion, the record in this case, and

applicable law, the underlying basis for the Motion is

insufficient upon which to grant the Motion. Instead, the

resolution o f this matter requires and is based on the

determination of the facts in dispute.

At hearing, Canco presented the testimony of Thomas Brown

and Ronald Hummel. The Department presented the testimony of

Alan Stein, Mario Resendiz, Randolph Thomas Lehma n, James

Callihan, James Lovell, Kenneth Akers, and Joseph Medlin.

Intervenor called one witness, Elias Salinas, and offered

excerpts from the depositions of Russell Graves, Thomas Brown,

and Juan Manceras. Canco offered and had Petitioner's

Exhibits 1 t hrough 10 and 17 through 22 admitted into evidence.

The Department offered and had Respondents Exhibits 1 through 4,

6 through 10, 13 through 14, 23 through 31, and 33 through 42

admitted into evidence. Intervenor's Exhibits 1 through 3 were

admitted int o evidence.

Petitioner was represented by counsel throughout these

proceedings, until December 2, 2002, when the above named -

counsel and law office, filed a Notice of Withdrawal as Counsel

of Record for Petitioner.

The two - volume Transcript was filed with the Division on

November 7, 2002. Counsel for Petitioner and the Department

filed proposed recommended orders and Intervenor filed a Post -

Trial Memorandum, all of which were considered in preparation of

this Recommended Order.

FINDINGS OF FACT

1. On April 3, 2002, the Department posted its intent to

award Contract No. E1C74 ("Contract" or "Contract No. E1C74") to

Rick Richards, Inc. ("Rick Richards"). The Contract was for

mowing and litter removal on the interstate system in Charlotte

and Lee Counties, Florida.

2. Canco's bid was lower than Rick Richard's bid.

However, after a thorough review of Canco's proposal and other

relevant documents, the Department rejected Canco's bid as non -

responsive. The Department's decision was based on its

de termination that Canco's bid proposal for Contract No. E1C74

provided false and misleading information and that Ronald Hummel

("Hummel"), the president and principal of Canco, is an illegal

alien.

3. Hummel is a nonresident alien who was deported from the

United States in the fall of 1996, after being convicted of a

felony, manslaughter. Since being deported and at all times

material to this proceeding, Hummel has lived in Canada.

4. Due to his being deported, Hummel is barred from

entering the United St ates without the permission of the United

States Attorney and cannot legally reside or work in this

country.

5. At Hummel's direction, Canco, Inc., was incorporated in

Florida in 1997, a few months after Hummel was deported from the

United States.

6. Af ter Canco was incorporated, the company submitted bid

proposals to the Department and has been awarded at least two

Department contracts. At the time these prior contracts were

awarded to Canco, appropriate Department officials were not

aware that Hummel, the principal of Canco, was a nonresident

alien.

7. The Florida Department of Transportation Standard

Specifications for Road and Bridge Construction 2000 ("Standard

Specifications") are incorporated into the Department's

solicitation for Contract No. E1 C74, together with additional

specifications for the proposal.

8. In its response to the Department's solicitation for

proposals for Contract No. E1C74, Canco submitted a bid

proposal, signed by Hummel as president of Canco. The bid

proposal declared tha t the bidder carefully and to its full

satisfaction examined the Standard Specifications as amended by

the specification package and any additional specifications.

9. By responding to the proposal, Canco became subject to

Standard Specifications and the r evisions thereto.

10. Specification 2 - 5.1 requires that proposals submitted

on behalf of corporations indicate the corporation's bidding

office street address. Consistent with this provision, the

proposal form has a line marked "Bidding Office Physical

A ddress -- City -- State -- Zip." Hand - written on this blank on

Canco's bid proposal is "3204 Lena Road, Bradenton, Florida

34211."

11. Because Hummel was barred from entering the United

States, he prepared Canco's bid proposal for the Contract and

its other bi d proposals for Department projects in Canada.

Hummel mailed the subject bid proposal to his accountant in

Bradenton, Florida, who then sent it to the Department.

Accordingly, the Bradenton, Florida, address listed by Hummel on

the Canco proposal as the "bidding physical address" was false.

12. Standard Specification 2 - 6, Rejection of Irregular

Proposals, states that a "proposal is irregular and the

Department may reject it if shows omissions, . . . or

irregularities of any kind."

13. Canco's bid propos al was non - responsive in that it

listed a false "bidding office physical address" and was, thus,

properly rejected by the Department pursuant to Standard

Specification 2 - 6.

14. The bid proposal submitted by Canco states in

paragraph 11, "The firm certifie s that the bidder is not a

nonresident alien, or a foreign corporation formed under the

laws of a country other than the United States." Hummel signed

the form, as president of Canco. By signing the proposal,

Hummel certified that the proposal was not be ing submitted by a

nonresident alien, when, in fact, he is a nonresident alien.

15. Petitioner's position is that Canco is an active

Florida corporation in good standing and, thus, is permitted to

submit proposals and perform work for the Department.

Apparently, Petitioner believes that Hummel's status as a

nonresident alien is of no import and should not be considered

in evaluating Canco's proposal. However, this position is

rejected, in view of the facts surrounding the formation and

functioning o f Canco.

16. Alan Stein ("Stein"), who prepared Canco's Articles of

Incorporation ("Articles") and filed them with the Florida

Department of State, was listed in the Articles as the sole

incorporator. However, no directors were listed in the

Articles. A ccording to Section 607.0205, Florida Statutes, when

no directors are named, the incorporator is required to hold an

organizational meeting. Here, the incorporator took no steps to

transfer matter over to directors. Furthermore, Canco never

functioned as a corporation. Canco has never had by - laws, has no

corporate books, records, or financial statements, has never

authorized shareholder dividends, and has held no directors'

meetings.

17. At all times since its inception, Hummel was the sole

stockhol der of the corporation and served as its sole director

and sole officer. Also, from the time Canco was formed until

approximately mid - August 2002, Hummel was president of Canco.

18. Canco has no real existence and serves only as a mere

instrumentality fo r Hummel. Hummel used the corporation to

submit proposals that he could not submit in his own name and to

be awarded contracts that could not be legally awarded in his

name because of his immigration status.

19. Hummel engaged in improper conduct in the formation

and use of Canco. The corporation was formed after Hummel was

deported, using a Florida address because Hummel could not

legally live or work in the United States. After the

corporation was formed, Hummel consistently used the Lena Road

address in Bradenton on all official documents, despite the fact

that he was conducting and directing the operations of Canco

from Canada.

20. The only signatories on the Canco corporate bank

account are Ronald Hummel and his father, John Hummel, who lives

in Fl orida. John Hummel keeps Canco's corporate seal and also

submits Canco's time sheets to Stein.

21. In or about 1998, Canco filed a Form 1120S and claimed

to be a Subchapter - S Corporation. The form listed the address

of the sole shareholder, Hummel, as t he Lena Road address in

Bradenton, Florida. However, Canco could not legally claim

Subchapter - S status because such a corporation cannot have a

nonresident alien as a shareholder.

22. Stein, Canco's outside accountant, set up Canco as a

Subchapter - S corp oration, but would not have done so had he

known that Hummel was an illegal alien. Prior to Canco's filing

the Protest, Stein did not know that Hummel was a nonresident

alien.

23. Neither Hummel nor Canco filed income tax returns for

1999, 2000, or 2001. Despite Stein's repeatedly asking Hummel

to provide documents so that Stein could prepare the tax

returns, Hummel did not and, as of the date of the hearing, had

not complied with Stein's request.

24. Hummel submitted two notarized documents to the

Depa rtment as part of Canco's previous bid submittals, a

Contractor's Affidavit of Vehicle Registration (Affidavit) and a

Power of Attorney (Power of Attorney). Both documents were

signed by Ron Hummel and bore the certificate of a Florida

notary that Hummel had personally appeared before them. With

regard to the Affidavit, Hummel did not sign the document in the

notary's presence. Instead, Hummel signed the Affidavit while

he was in Canada and then sent it to Florida where it was

notarized. As a result of this action, the Affidavit was a

false document.

25. As to the Power of Attorney, there was conflicting

testimony regarding whether Hummel signed the document in the

notary's presence. Hummel testified that he signed the Power of

Attorney while he was in Canada. Contrary to Hummel's

testimony, the notary who allegedly witnessed Hummel execute the

document testified that Hummel was in Florida and in the

notary's presence when the document was signed. Given the

conflicting testimony, it is difficult to as certain which

version is true. However, regardless of which version is true,

the effect and conclusion is that Hummel acted improperly. If

Hummel signed the Power of Attorney in the presence of the

notary who was in Florida, Hummel was in Florida illegal ly. On

the other hand, if Hummel signed the document while he was in

Canada and then sent it to Florida to be notarized, Canco,

through Hummel, submitted a false document to the Department.

26. Petitioner's bid was non - responsive in that Hummel

falsely c ertified that the bidder is not a nonresident alien.

This false certification by Hummel is a proper basis for the

Department's rejecting the bid pursuant to Standard

Specification 2 - 6.

27. The Standard Specifications, Section 2 - 11 provides in

pertinent p art the following:

The Department may disqualify any bidder and

reject the bidder's proposal or proposals

for any of the following reasons:

* * *

(e) Uncompleted work on other projects

that, in the judgment of the Department

could hinder or prevent th e prompt

completion of the proposed work.

(f) Failure to pay or satisfactorily settle

all bills due for labor and material on

other contracts in force at the time of

advertisement for bids.

* * *

(h) Employment of unauthorized aliens in

violation of Section 274A(e) of the

Immigration and Nationality Act.

28. The Department rejected Canco's bid proposal because

Canco had failed to complete work on other projects; failed to

settle a bill due for labor on another contract; and employed an

unauthorized alien in violation of the Immigration and

Naturalization Act. These all constitute a proper basis for

rejecting Canco's bid proposal pursuant to Standard

Specification 2 - 11.

29. Hummel submitted false claims to the Department on

behalf of Canco for payme nt for herbicide sprayers and supplied

the licenses of two men, James Callihan ("Callihan") and Randall

Thomas Lehman ("Lehman"). Lehman never worked for Canco, did

not give Canco permission to submit his license to the

Department, and did not give a copy of his license to Hummel or

any other person associated with Canco. The copy of Lehman's

license that Hummel submitted was a copy of the license that the

Department had previously supplied to Hummel in response to a

public records request for documents f rom Rick Richards' file.

30. Callihan worked for Canco for three or four days in

late March or early April 2002, but has not been paid in full

for the work he performed for Canco. The failure of Canco

and/or Hummel to pay Callihan for the services he pro vided on a

Department project that was in force when the subject bid was

advertised is a basis to reject Canco's proposal pursuant to

Standard Specification 2 - 11(f).

31. After Callihan was no longer associated with Canco, he

learned from the Department th at the copy of the license that

had been submitted by Hummel had expired. Immediately

thereafter, on or about June 10, 2002, Callihan contacted Hummel

and demanded that his license not be used by Canco.

32. Hummel billed the Department for $50,473.53 for

herbicide spraying and received payment for such services by

falsely claiming Lehman and Callihan were involved in the work

for which the claim was submitted. The claim was for work that

was allegedly performed after Callihan had demanded that his

licens e not be used and when Callihan was no longer associated

with Canco or Hummel. As noted in paragraph 29, Lehman was

never associated with Hummel or Canco.

33. Canco's payroll records show no payments made to

either Callihan or Lehman, although Hummel sub mitted their

licenses to the Department indicating that they had performed

herbicide services required for the Department project Canco was

working on in the summer of 2002.

34. In the summer of 2002, Hummel directed Mario Resendiz,

who was not a licensed herbicide sprayer, to spray herbicide on

a Department project. Resendiz told Hummel that he did not have

a license, but Hummel still told him to spray herbicide, which

Resendiz did.

35. The herbicides used in roadside spraying, if used or

applied incorr ectly, can be harmful to people, animals and the

environment. Accordingly, these chemicals are to be used only

by licensed professionals. Here, the claim filed by Hummel for

herbicidal spraying allegedly done in the summer of 2002, was

false. Therefore, the Department could not determine and Canco

and/or Hummel did not establish that the herbicidal spraying was

completed.

36. Based on the foregoing, the Department was authorized

to reject Canco's proposal for failure to complete work on

another project, which in the Department's judgment could hinder

or prevent prompt completion of the work on the proposed project

pursuant to Standard Specification 2 - 11(e).

37. Hummel has broad and almost exclusive authority of the

overall and day - to - day operations of C anco. Hummel prepared and

signed bids for Canco, supervised Canco employees, was the

Department's contact person for Canco, told Department

inspectors that he was on Department job sites, and, in

September 2002, visited the Department's Sarasota Maintenan ce

Yard regarding Canco business. No evidence was presented to

indicate that the responsibilities now carried out by Hummel

would be assigned to someone else.

38. Hummel has regularly received checks from Canco for

unspecified amounts twice a month. Hum mel testified that the

money that he received from Canco was in the form of shareholder

dividends. However, this testimony is not credible in light of

the fact that Canco never held shareholders' meetings or

directors' meeting where dividends were declare d.

39. Hummel is an employee of Canco, and the money he

receives from Canco twice a month is compensation. Because

Hummel is an employee of Canco and is also a nonresident,

unauthorized alien, the Department may reject the bid proposal

submitted for Cont ract No. E1C74 pursuant to Standard

Specification 2 - 11(h). Also, Subsection 448.09(1), Florida

Statutes, makes it unlawful to employ an alien who is not duly

authorized to work by the immigration laws or the Attorney

General of the United States.

40. Sta ndard Specification 5 - 8.3 requires that contractors

have a supervisor, who is available at or reasonably near the

jobsite at all times on a 24 - hour basis and who speaks and

understands English. Hummel testified that Elias Salinas

("Salinas") and Juan Manc eras ("Manceras") were supervisors who

worked, and presumably would work, on Department projects being

performed by Canco. However, Salinas and Manceras have never

performed supervisory duties, were not given the title of

supervisor, and were not paid any more than other workers on the

job. Salinas and Manceras were only tractor or truck drivers,

and not supervisors. Moreover, even if Salinas and Manceras

were supervisors, they would not meet the requirement of

Standard Specification 5 - 8.3 because they s peak only limited

English.

41. Standard Specification 5 - 8.3 also requires that a

contractor submit, by certified mail, the phone numbers and

names of personnel designated to be contacted in cases of

emergencies. Hummel and/or Canco have never provided th is

information to the Department for projects it has previously

worked on or for the bid proposal for Contract No. E1C74.

However, based on Hummel's admission, he is the contact person.

In fact, for most, if not all, written communication between the

Dep artment and Canco, Hummel was the contact person.

42. Further indication that Hummel is the contact person

for Canco is the fact that the telephone and fax number used by

Canco and listed on its bid proposal for Contract No. E1C74 is a

toll free telephone number located in Hummel's house in Canada.

43. Petitioner's failure to comply with Standard

Specification 5 - 8.3 is a proper basis for the Department's

rejecting Canco's bid proposal.

44. Standard Specification 5 - 8.2 requires that a

contractor provide a superintendent with "the full authority to

receive instructions from the Engineer and to execute orders or

directions of the Engineer, including promptly supplying any

materials, tools, equipment, labor, or incidentals that may be

required." Hummel testi fied that he is the contact person

within the meaning of this provision and that, depending on the

situation, he would then contact someone else. Standard

Specification 5 - 8.2 clearly contemplates a superintendent who is

available at or reasonably near the job site. In this case,

Hummel is "1200 miles" away and is precluded from being

available or reasonably near the job site. Canco's failure to

comply with this provision is a basis for the Department's

rejecting the bid proposal.

45. A few weeks prior t o this hearing, Hummel took steps

which he viewed as removing himself as president of Canco and

appointing a new president. In mid - August 2002, in a telephone

conversation, Hummel asked his friend, Thomas Brown ("Brown"),

to serve as president of Canco an d Brown agreed to do so. Brown

is listed as the president of Canco on the August 22, 2002,

annual report filed with the Florida Department of State.

However, Brown has no duties, has no knowledge about Canco's

Board of Directors, and does not know who Ca nco employees or

supervisors are. As of the date of the hearing, Brown's salary

and benefits had not yet been determined.

46. Notwithstanding Hummel's designating Brown as the

president of Canco, Hummel has complete power to direct the

activities of Canc o and the actions of Brown. The credible

testimony of Brown was that, with regard to Canco, he will

follow Hummel's orders. In Brown's only action as president,

Brown signed a bid proposal and Disadvantaged Business (DBE)

statement submitted to the Depar tment. However, Brown saw only

the pages that he signed. Hummel prepared that bid, which was

submitted in Canco's name, and he remains the sole director and

sole stockholder of the company.

CONCLUSIONS OF LAW

47. The Division of Administrative Hear ings has

jurisdiction over the parties and the subject matter presented

herein, pursuant to Subsection 120.57(3), Florida Statutes.

48. Canco has challenged the Department's proposed agency

action of determining that Canco's proposal is non - responsive.

49. This proceeding is de novo and for the purpose of

evaluating the action that was taken by the Department in order

to determine whether that action is contrary to the agency's

governing statutes, the agency's rules or policies, or the bid

specifica tions. See Subsection 120.57(3)(f), Florida Statutes,

and State Contracting and Engineering Corp. v. Department of

Transportation , 709 So. 2d 607 (Fla. 1st DCA 1998). From the

time the Department posted the intent to reject Canco's bid

proposal as non - re sponsive and Canco filed its Protest, the

Department had the opportunity to further review the proposal in

light of the claim raised by Canco. Accordingly, the de novo

proceeding encompasses a review of all of the Department's

actions leading up to this p roceeding.

50. In order for Canco to prevail, it must establish the

proposed action by the Department was clearly erroneous,

contrary to competition, arbitrary, or capricious. Subsection

120.57(3)(f), Florida Statutes. Canco must meet that standard

by a preponderance of the evidence. Subsection 120.57(1)(j),

Florida Statutes.

51. An arbitrary decision is one not supported by facts or

logic, or one that is despotic. To act capriciously is to act

without thought or reason or to act irrationally. Agri co

Chemical Co. v. State, et. al. , 365 So. 2d 759 (Fla. 1st DCA

1978).

52. In determining whether the Department's actions were

clearly erroneous, the appearance of error and the fact that

reasonable persons may disagree with the actions do not

constitut e clear error. Capeletti Bros., Inc. v. State,

Department of Transportation , 432 So. 2d 1359 (Fla. 1st DCA

1983). However, under Subsection 120.57(3)(f), Florida

Statutes, the fact - finder is required to find for the Department

unless the Department was c learly erroneous, contrary to

competition, arbitrary, or capricious.

53. The evidence established that Canco is merely an

instrumentality or alter ego of Hummel. Moreover, as reflected

in paragraphs 16 through 25, Hummel engaged in improper conduct

in th e formation and use of the corporation. See Bellairs v.

Mohrmann , 716 So. 2d 320 (Fla. 2d DCA 1998). Therefore, the

corporate veil should be and is disregarded.

54. Petitioner failed to demonstrate that the Department's

actions were clearly erroneous, c ontrary to competition,

arbitrary or capricious. Likewise, Petitioner has failed to

establish that the intended contract award to Rick Richards is

contrary to the Department's governing statutes, applicable

rules or policies, or the specifications of the request for

proposals.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Department of Transportation issue a

final order that rejects the bid proposal submitted by Canco

Construction, Inc., awards C ontract No. E1C74 to Rick Richards,

Inc., and dismisses Canco's Bid Protest.

DONE AND ENTERED this 31st day of December, 2002, 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 31 st day of December, 2002.

COPIES FURNISHED :

Canco Construction, Inc.

c/o Ronald J. Hammel

3204 Lena Road

Bradenton, Florida 34235

Barbara G. Hines, Esquire

Department of Transportation

605 Suwannee Street

Haydon Burns Building, Mail Stop 58

Tallahass ee, Florida 32399 - 0458

Robert M. Johnson, Esquire

Wilson, Johnson & Jaffer, P.A.

27 South Orange Avenue

Sarasota, Florida 34236

John O. Williams, Esquire

Williams & Holz, P.A.

211 East Virginia Street

The Cambridge Centre

Tallahassee, Florida 32301

J ames C. Myers, Clerk of Agency Proceedings

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399 - 0450

Michael Lines, Esquire

Department of Transportation

801 North Broadway

Bartow, Florida 338 31 - 1249

Pamela Leslie, General Counsel

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399 - 0450

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exception s within

10 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.