06-003651CVL Inter-Tel, Inc. And Inter-Tel Technologies, Inc. vs. Department Of Management Services Status: Closed DOAH Final Order on Monday, April 2, 2007.

Summary: Respondent failed to demonstrate that it is in public interest to place Petitioner on the convicted vender list.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

INTE R - TEL, INC. AND INTER - TEL )

TECHNOLOGIES, INC., )

)

Petitioner, )

)

vs. ) Case No. 06 - 3651CVL

)

DEPARTMENT OF MANAGEMENT )

SERVICES, )

)

Respondent. )

___________________________ ________)

FINAL ORDER

Pursuant to notice, a formal hearing was scheduled in this

case for December 11, 2006, in Tallahassee, Florida, before

Errol H. Powell, a designated Administrative Law Judge of the

Division of Administrative Hearings. The parties stipulated to

all material facts at issue. The hearing was canceled. Both

parties filed a motion for summary final order.

APPEARANCES

For Petitioner: Martha Harrell Chumbler, Esquire

Danny Hernandez, Esquire

Carlton Fie lds, P.A.

Post Office Drawer 190

Tallahassee, Florida 32302

For Respondent: Michael J. Barry, Esquire

Department of Management Services

4050 Esplanade Way, Suite 160D

T allahassee, Florida 32399 - 0950

STATEMENT OF THE ISSUE

The issue for determination is whether Petitioner s should

be placed on the State of Florida’s Convicted Vendor List.

PRELIMINARY STATEMENT

By Notice of Intent to Place Person or Affiliate on

Convicte d Vendor List dated August 3, 2006, the Department of

Management Services, hereinafter DMS, notified Inter - Tel

Technologies, Inc. , hereinafter Technologies, of its intent to

pl ace Technologies on the convicted vendor list pursuant to

Section 287.133(3), Fl orida Statutes. Among other things, DMS

indicated that good cause exists for the action taken.

Inter - Tel, Inc . and Technologies , 1 hereinafter I nter - T el ,

disputed DMS’ determination and requested a hearing. On

September 22, 2006, this matter was referre d to the Division of

Administrative Hearings.

A telephone conference was held in this matter on

October 3, 2006. During the telephone conference, the parties

waived the 30 - day hearing requirement and agreed on a date

certain for the hearing. An order was issued on October 4,

2006, waiving the 30 - day hearing requirement. A final hearing

was scheduled for December 11, 2006. On November 28, 2006, the

parties filed a Joint Stipulation, together with exhibits, in

which, among other things, the parties stipul ated to all

material facts in issue. Subsequently, on December 4, 2006,

I nter - T el filed a Motion for Summary Final Order, which included

legal argument. By Order dated December 5, 2006, the final

hearing was canceled. On December 5, 2006, DMS filed a Mo tion

for Summary Final Order, including a memorandum of law. In

response, on December 12, 2006, I nter - T el filed a Memorandum in

Opposition to DMS’ Motion for Summary Final Order. The parties’

Joint S tipulation and exhibits attached thereto are accepted a nd

incorporated herein. Further, the parties’ Joint Stipulation

and exhibits attached thereto , motions and responses were

considered in the preparation of this Final Order.

FINDINGS OF FACT

1. On January 5 , 2005, in the United States District Court

for t he Northern District Court of California, Technologies

entered a plea of guilty to the commission of two crimes: an

antitrust violation, involving the submission of fraudulent and

non - competitive bids, and a mail fraud violation.

2. Technologies’ convicti on arose out of its participation

in the E - Rate Program — a federal program designed to provide

funding to public schools and public libraries for

telecommunication services, including local and long - distance

telephone service, internet access, and interna l connections.

The E - Rate Program is operated under the offices of the Federal

Communications Commission, hereinafter FCC, and is administered

by the Universal Services Administrative Company, hereinafter

USAC.

3. On January 28, 2005, by Notice of Publ ic Entity Crime,

I nter - T el provided notice of this conviction to DMS.

4. On March 9, 2005, I nter - T el provided DMS a supplement

to its (I nter - T el ’s) notice of January 28, 2005.

5. On August 29, 2006, by Notice of Intent to Place Person

or Affiliate on Con victed Vendor List, DMS issued a notice of

intent to place Technologies on the convicted vendor list.

6. Technologies received DMS’ notice of August 29, 2006,

on August 31, 2006.

7. On September 18, 2006, I nter - T el timely filed a

petition for formal admi nistrative hearing to determine whether

it is in the public interest for Technologies to be placed on

the State of Florida Convicted Vendor List.

8. The nature and details of the public entity crime for

which Technologies was convicted are fully set forth in the

criminal information filed in the U.S. District Court for the

Northern District Court of California. As specified in the

criminal information, Technologies’ public entity crime

implicated specific employees working on specific transactions

in Mich igan and California only. In addition, the conduct was

isolated to one of fifty - nine branch offices of Technologies and

one related operating unit.

9. As part of its plea agreement, Technologies agreed to

pay $1,721,000.00 in criminal fines. In addition to these

fines, Technologies agreed to pay to the United States

$7,000,000.00 as part of a civil settlement between it an the

United States. The $7,000,000.00 was comprised of a cash

payment in the amount of $6,740,458.12 and the release of the

United St ates from invoices in the amount of $259,541.88 for

work Technologies and other affiliated subsidiaries had

performed under the E - Rate Program but had not yet been

compensated for.

10. On January 6, 2005, one day after the plea agreement

and civil settlem ent agreement were accepted by the Court,

Technologies made cash payments to the United States in the

amounts of $1,721,000.00 and $6,740,458.12. In doing so,

Technologies paid all fines, penalties, and damages owed in

connection with its conviction. Con firmation of the wire

transfers to the United States was provided.

11. As confirmed by the Department of Justice, hereinafter

DOJ, I nter - T el cooperated with the federal investigation by

voluntarily supplying a wide array of information and documents

to DO J and by encouraging current and former employees to

cooperate with DOJ’s investigators. DOJ characterized this

cooperation by I nter - T el as enabling it “to expand [its]

knowledge base to criminal behavior at school districts not

previously covered in othe r pleas” and noted that “the nature,

speed, and extent of Inter - Tel’s cooperation has been very

helpful in developing [its] investigation to date.”

12. I nter - T el has fully cooperated with DMS in connection

with its investigation under Section 287.133, Flo rida Statutes.

I nter - T el promptly provided information as requested by DMS and

made its attorneys available to DMS to facilitate collection of

records and information vital to DMS’ investigation.

13. The employees who were identified as being responsible

for the conduct leading to the public entity crime to which

Technologies pled guilty were Jason King, Bill Boehm, Jim

O’Hare, Earl Nelson, and Tim Scarafiotti.

14. Jason King resigned from Technologies on August 14,

2003.

15. Bill Boehm resigned from Te chnologies on September 24,

2004.

16. Jim O’Hare was terminated from Technologies on

August 14, 2002.

17. Earl Nelson retired from Technologies on April 30,

2002.

18. Tim Scarafiotti resigned from Technologies on

October 30, 2002.

19. No business or e mployment relationships currently

exist between Technologies and Jason King, Bill Boehm, Jim

O’Hare, Earl Nelson, or Tim Scarafiotti.

20. I nter - T el has implemented an intensive, multi - year

program of monitoring, training, and auditing with respect to

gove rnment procurement contracts, including a comprehensive

anti - fraud and antitrust compliance plan.

21. On February 15, 2005, Inter - Tel formally adopted a

compliance program that includes: (1) an Antitrust and Anti -

Fraud policy; (2) a government sales polic y; (3) and E - Rate code

of conduct; and (4) detailed description of the procedures for

administering these policies, including employee training,

reporting of suspected violations, disciplinary action, internal

monitoring, external reporting, and the respon sibilities of

I nter - T el ’s compliance officer.

22. In January 2005, Inter - Tel hired a full - time

compliance officer, whose job it is to ensure that I nter - T el

conducts its activities involving public entities in accordance

with applicable laws and the compli ance program. The compliance

officer’s responsibilities include at least monthly meetings

with key executives in I nter - T el ’s accounting, finance,

installations, legal, marketing, and sales departments to ensure

compliance. The current compliance officer has over ten years

of legal experience specializing in public procurement.

23. While the settlement agreement with the United States

only requires training for employees who deal in public

procurement, Inter - Tel ’s management has mandated that all

employee s of Inter - Tel, and its subsidiaries, including

Technologies, receive extensive training on the E - Rate program,

antitrust, fraud, government procurement ,and ethics. To

accomplish this, Inter - Tel developed internal training programs

and, in addition, reta ined a private company that specializes in

developing compliance training. To date, all employees of

Inter - Tel and its subsidiaries, including Technologies, have

received the above - mentioned trainings, and new hires receive

the training shortly after begi nning employment with Inter - Tel,

or any of the affiliated subsidiaries, including Technologies.

In 2004, Inter - Tel established an ethics hotline to permit

employees and other third parties to report suspected violations

of I nter - T el ’s Code of Business Con duct anonymously by telephone

and the internet.

24. In response to the fraudulent conduct, on June 30,

2006, the FCC issued its Notice of Debarment debarring

Technologies from the E - Rate Program for one year, effective

June 30, 2006 to June 30, 2007. The standard FCC debarment

period is three years.

25. The FCC debarment is limited in scope and does not

affect I nter - T el ’s ability to continue contracting with other

federal agencies.

26. During the period of 2002 to 2004, Technologies

transacted business with over twenty public entities within the

State of Florida.

27. Technologies is one of three companies that have been

approved by DMS’ Division of State Purchasing to provide Key

System telecommunication equipment to public entities in

Florida.

28. Si nce 2000, I nter - T el has organized yearly company -

wide United Way fundraisers, through which I nter - T el has raised

in excess of $100,000.00. After Hurricane Katrina, Inter - Tel

conducted a one - month internal company - wide fundraising campaign

and raised over $43,000.00 in donations from employees.

I nter - T el matched funds donated by employees for a total of over

$85,000.00 raised for Hurricane Katrina victims. Following the

terrorism events of September 11, 2001, employees raised over

$117,000.00 for the Ame rican Red Cross. I nter - T el matched the

employee - donated funds for a total of over $241,000.00 donated

by I nter - T el to the 9/11 relief effort. A table reflecting all

the charitable and civic campaigns participate in, or organized

by, I nter - T el since 2000 was provided.

CONCLUSIONS OF LAW

29 . The Division of Administrative Hearings has

jurisdiction of these proceedings and the parties thereto

pursuant to Section s 120.569 and 120.57 (1) , Florida Statutes

(2006).

30 . This proceeding is governed by Section 2 87.133,

Florida Statutes (2005) and (2006). Section 287.133 (3)(e) ,

Florida Statutes (2005) and (2006) , provides in pertinent part:

3. In determining whether it is in the

public interest to place a person or

affiliate on the convicted vendor list, the

adm inistrative law judge shall consider the

following factors:

a. Whether the person or affiliate

committed a public entity crime.

b. The nature and details of the public

entity crime.

c. The degree of culpability of the person

or affiliate proposed to be placed on the

convicted vendor list.

d. Prompt or voluntary payment of any

damages or penalty as a result of the

conviction.

e. Cooperation with state or federal

investigation or prosecution of any public

entity crime, provided that a good faith

exe rcise of any constitutional, statutory,

or other right during any portion of the

investigation or prosecution of any public

entity crime shall not be considered a lack

of cooperation.

f. Disassociation from any other persons or

affiliates convicted of the public entity

crime.

g. Prior or future self - policing by the

person or affiliate to prevent public entity

crimes.

h. Reinstatement or clemency in any

jurisdiction in relation to the public

entity crime at issue in the proceeding.

i. Compliance by the person or affiliate

with the notification provisions of

paragraph (b).

j. The needs of public entities for

additional competition in the procurement of

goods and services in their respective

markets.

k. Mitigation based upon any demonstration

of g ood citizenship by the person or

affiliate.

4. In any proceeding under this section,

the department shall be required to prove

that it is in the public interest for the

person to whom it has given notice under

this section to be placed on the convicted

v endor list. Proof of a conviction of the

person or that one is an affiliate of such

person shall constitute a prima facie case

that it is in the public interest for the

person or affiliate to whom the department

has given notice to be put on the convicted

vendor list. Prompt payment of damages or

posting of a bond, cooperation with

investigation, and termination of the

employment or other relationship with the

employee or other natural person responsible

for the public entity crime shall create a

rebuttab le presumption that it is not in the

public interest to place a person or

affiliate on the convicted vendor list.

Status as an affiliate must be proven by

clear and convincing evidence. If the

administrative law judge determines that the

person was not co nvicted or is not an

affiliate of such person, that person or

affiliate shall not be placed on the

convicted vendor list.

31. DMS has the ultimate burden of persua s ion that it is

in the public interest to place Technologies on the convicted

vendor list . § 287.133(3)(e)4., Fl a . Stat . While the burden of

going forward may shift as it relates to the prima facie case

and rebuttable presumption, the ultimate burden of persuasion

does not and remains with DMS. § 287.133(3)(e)4., Florida

Statutes. See Florid a Department of Transportation v. J.W.C.

Company, Inc. , 396 So. 2d 778 , 787, 788 (Fla. 1st DCA 1981).

32 . No dispute exists that Technologies’ convictions

establish a prima facie case that it is in the public interest

to place Technologies on the convicte d vendor list.

§ 287.133(3)(e)4., Fla. Stat.

33 . No dispute exists that the evidence demonstrates that

two of the three requirements for establishing a rebuttal

presumption that it is not in the public interest to place

Technologies on the convicted ven dor list have been satisfied,

i.e., “[p]rompt payment of damages or posting of bond” and

“cooperation with [the] investigation.” § 287.133(3)(e)4., Fla.

Stat.

34 . The parties agree that only two issues remain for

determination. The two issues are the fo llowing: (1) Whether

the third requirement for a rebuttable presumption has been met

and, if so, whether DMS h as rebutted the presumption; and (2)

whether I nter - T el has established that it is not in the public

interest that Technologies be placed on the co nvicted vendor

list.

35. The wording for the rebuttable presumption has not

changed from the time the Florida Legislature created Section

287.133, Florida Statutes, in 1989; only the location of the

wording has changed. In 1989, the wording was located a t

Section 287.133(3)(e)3.k. and 4., Florida Statutes (1989). In

1990, the wording was removed from Section 287.133 (3)(e)3.k.,

Florida Statutes.

36 . Regarding the third requirement for a rebuttable

presumption, Section 287.133(3)(e)4., Florida Statutes, requires

a showing of the “termination of the employment or other

relationship with the employee or other natural person

responsible for the public entity crime.” I nter - T el argues that

the resignation, termination and retirement of the employees

responsib le for the public entity crime satisfies the

requirement of “termination.” To the contrary, DMS argues that

“termination” requires an affirmative action on the part of

I nter - T el , that resignation and retirement are not affirmative

action on the part of I n ter - T el , and that, therefore, I nter - T el

has not satisfied the third requirement.

37 . The term “termination” is not, and has not been,

defined by Section 287.133, Florida Statutes. It is well

settled that legislative intent is the polestar that guides the

statutory construction analysis. See Knowles v. Beverly

Enterprises - Florida, Inc. , 898 So. 2d 1, 5 (Fla. 2004). “Look

first to the statute’s plain meaning.” (citation omitted) Id.

Usually, “when the language of the statute is clear and

unambiguous and conveys a clear and definite meaning, there is

no occasion for resorting to the rules of statutory

interpretation and construction; the statute must be given its

plain and obvious meaning.” (citation omitted. ) Id.

38 . The stated legislative intent of S ection 287.133,

Florida Statutes, is “the preservation of the public contracting

and purchasing process as well as the provision for public

entities of open competition among persons of good citizenship.”

See Florida House of Representatives, Committee on Governmental

Operations, Final Staff Analysis & Economic Impact Statement o

CS/HB 647 (CS/SB 458 passed) (June 28, 1989). Further,

regarding definitions, the Legislative Analysis states that

“[t]his bill provides the definitions of terms essential to the

administration of the convicted vendor list and program. This

bill defines affiliate, conviction, convicted vendor list,

Department, person, public entity, and public entity crime.”

Id.

39 . Termination is defined as “the act of terminating or

the condi tion of being terminated.” The American Heritage

Dictionary of the English Language (4th ed. 2000). Terminate is

defined as “to bring to an end or halt”; “to discontinue the

employment of.” Id. Terminate is also defined as “to put an

end to; to make to cease; to end.” Black’s Law Dictionary

(revised 4th ed. 1968).

40. Giving the plain meaning to termination is not

contrary to the legislative intent of the statutory provision;

the legislative intent of the statutory provision is preserved.

41 . Technol ogies’ employees who were responsible for the

public entity crime either resigned or were terminated (as

worded by the parties’ stipulation) or retired. Their

employment with Technologies was brought to an end,

discontinued, put to an end, halted, ceased and was ended. No

affirmative action was required on the part of Technologies,

except for one employee, Technologies did take affirmative

action.

42 . Further, prior decisions by the Division of

Administrative Hearings provide guidance. In National Healt h

Laboratories v. Department of Management Services , DOAH Case No.

93 - 6843CVL (Final Order 1994), in which facts were stipulated to

but not agreement as to outcome, the employees , who were

convicted of the public entity crime , resigned their positions ;

and the Administrative Law Judge, then Hearing Officer,

concluded that the parties had stipulated to facts that

indicated termination of employment. In Paradies Shops, Inc. ,

and Paradies Midfield Corporation v. Department of Management

Services , DOAH Case No . 97 - 2090CVL (Final Order 1997), in which

facts were stipulated to but no agreement as to outcome, the

individual, who was convicted of public entity crime, resigned

and had no control or involvement with companies; and the

Administrative Law Judge conclud ed that the stipulated facts met

the requirements for a rebuttable presumption.

43 . T he undersigned is persuaded and concludes that the

stipulated facts demonstrate that I nter - T el has met the

requirements for a rebuttable presumption that it is not in the

public interest to place it (I nter - T el ) on the convicted vendor

list.

44 . The question now is whether the stipulated facts

demonstrate that DMS has overcome the rebuttable presumption

that it is not in the public interest to place I nter - T el on the

convic ted vendor list. Considering the factors in Section

287.133(3)(e)3., Florida Statutes , the stipulated facts

demonstrate that all are favorable for I nter - T el . However, two

factors are not as obvious as the others and require further

explanation; they are factors “h.” and “j.” As to factor “h.”

(“[r]einstatement or clemency in any jurisdiction in relation to

the public entity crime at issue in the proceeding”),

Technologies was debarred form the E - Rate program by the FCC for

one year, whereas, the standard debarment period by the FCC is

three years, which shows leniency by the FCC toward

Technologies; and the debarment does not affect I nter - T el ’s

ability to continue contracting with other federal agencies. As

to factor “j.” (“[t]he needs of public entities for additional

competition in the procurement of goods and services in their

respective markets”), Technologies is one of only three

companies that have been approved by DMS’ Division of State

Purchasing to provide Key System telecommunications equipment to

public entities in the entire State of Florida; and, during the

period of 2002 to 2004, Technologies transacted business with

over twenty public entities within the State of Florida.

Therefore, the need for additional competition in the market

area in which Technologies engages has been demonstrated.

45 . Hence , the stipulated facts demonstrate that DMS has

not overcome the rebuttable presumption that it is not in the

public interest to place I nter - T el on the convicted vendor list.

46 . Further, even as suming that I nter - T el failed to

satisfy the third requirement for a rebuttable presumption that

it is not in the public interest to place I nter - T el on the

convicted vendor list, the stipulated facts demonstrate that it

is not in the public interest to plac e I nter - T el on the

convicted vendor list. If I nter - T el fails to satisfy the

requirements for a rebuttable presumption, it “may prove by a

preponderance of the evidence that it would not be in the public

interest to put [it] on the convicted vendor list, b ased upon

evidence addressing the factors in [Section 287.133(3)(e)3.].”

§ 287.133(3)(e)3., Fla. Stat. Considering the factors in

Section 287.133(3)(e)3., Florida Statutes, except subparagraphs

3.h. and j., which are not applicable, the stipulated facts

demonstrate that all are favorable for I nter - T el . Therefore,

the stipulated facts demonstrate that it is not in the public

interest to place I nter - T el on the convicted vendor list.

CONCLUSION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

ORDERED that it is not in the public interest to place

Inter - Tel Technologies, Inc. on the convicted vendor list.

DONE AND ORDERED this 2nd day of April , 2007 , in

Tallahassee, Leon County, Florida.

S

__________________________ _________

ERROL H. POWELL

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 t he Clerk of the

Division of Administrative Hearings

this 2nd day of April , 2007 .

ENDNOTE

1/ Technologies is the wholly owned subsidiary of Inter - Tel,

Inc.

COPIES FURNISHED :

Martha Harrell Chumbler, Esquire

Danny Hernandez, Esquire

Carlton Fields, P. A.

Post Office Drawer 190

Tallahassee, Florida 32302

Michael J. Barry, Esquire

Department of Management Services

4050 Esplanade Way, Suite 160D

Tallahassee, Florida 32399 - 0950

Linda South , Secretary

Department of Management Services

4050 Esplanade Wa y

Tallahassee, Florida 32399 - 0950

John Brenneis, General Counsel

Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399 - 0950

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing the original Notice of Appeal with the agency clerk of

the Division of Administrative Hearings and a copy, accompanied

by filing fees prescribed by law, with the District Court of

Appeal, First District, or with the District Court of Appeal in

the Appellate District where the party resides. The notice of

appeal must be file d within 30 days of rendition of the order to

be reviewed.