07-004120 Department Of Agriculture And Consumer Services vs. American Cash Machine, Llc Status: Closed Recommended Order on Friday, February 8, 2008.

Summary: Registered business opportunity seller failed to provide proper disclosures or to comply with contract requirements.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF AGRICULTURE AND )

CONSUMER SERVICES , )

)

Petitioner , )

)

vs. ) Case No. 07 - 4120

)

AMERICAN CASH MACHINE, LLC , )

)

Respondent . )

)

RE COMMENDED ORDER

On December 3, 2007, a formal administrative hearing in

this case was held in Tallahassee, Florida, before William F.

Quattlebaum, Administrative Law Judge, Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Eric H. Mil ler, Esquire

Department of Agriculture and

Consumer Services

2005 Apalachee Parkway

Tallahassee, Florida 32301

For Respondent: Gilbert B. Swarts, pro se

American Cash Machine, LLC

535 Twenty - Second Street South

St. Petersburg, Florida 33712

STATEMENT OF THE ISSUES

The issues in the case are whether the allegations of the

Administrative Complain t are correct, and, if so, what penalty,

if any, should be imposed.

PRELIMINARY STATEMENT

By letter dated July 16, 2007, the Department of

Agriculture and Consumer Services (Petitioner) filed an

Administrative Complaint against American Cash Machine, LLC

( Respondent), alleging that Respondent failed to comply with

requirements set forth in Subsections 559.803(11)(a) and (b) and

559.809(11), Florida Statutes (2005), related to the sale of

"business opportunities." The Respondent disputed the

allegations and filed a request for formal hearing. The

Petitioner forwarded the request to the Division of

Administrative Hearings, which scheduled and conducted the

proceeding.

At the hearing, the Petitioner presented the testimony of

one witness and had Exhibits 1 through 1 4 admitted into

evidence. Gilbert B. Swarts, president/owner of the Respondent

testified on behalf of the Respondent.

The Transcript of the hearing was filed on December 13,

2007. The Petitioner filed a Proposed Recommended Order on

January 10, 2008. On January 14, 2008, the Petitioner forwarded

to the Division of Administrative Hearings, a letter received by

the Petitioner from Mr. Swarts on January 11. The letter has

been treated as a Proposed Recommended Order.

FINDINGS OF FACT

1. At all t imes material to this case, the Respondent was

a seller of business opportunities registered with the

Petitioner, holding registration number 2000 - 054, and located at

3101 Twenty - Second Avenue South, St. Petersburg, Florida 33712.

2. The Respondent was th e successor in interest to

American Cash Machine, Inc., and is responsible for fulfilling

the obligations of the previous company.

3. At all times material to this case, Gilbert B. Swarts

was the president and chairman of the board of the Respondent.

4. On July 8, 2005, the Respondent entered into a contract

with Bonnie Campbell as trustee of the Campbell Family Trust

(purchaser) under which the purchaser agreed to purchase

36 "CardPayment" machines from the Respondent, and the

Respondent agreed to p lace the machines in appropriate business

locations on behalf of the purchaser. As required by the

contract, the purchaser paid a total of $135,000 by check to the

Respondent.

5. At the time of the sale, the Respondent provided a

disclosure form to the p urchaser which stated that

200 "CardPayment Business Opportunities" had been sold by the

Respondent to other purchasers by the end of 2005 and that

25 "Internet Kiosk Business Opportunity [ sic ] " had been sold by

the Respondent to other purchasers by the end of 2002.

6. The disclosure form also stated that the Respondent

would provide to the purchaser, the names, addresses, and

telephone numbers of the ten purchasers located closest to the

purchaser; however, the disclosure form did not include the

inform ation, and the Respondent did not otherwise provide the

information to the purchaser.

7. The Respondent stocked the 36 CardPayment machines, but

failed to acquire business locations for all of the machines.

8. The Respondent has asserted that after dis cussions with

the purchaser, the parties agreed to "upgrade" the 36

CardPayment machines identified in the contract to 18 Internet

Kiosk machines. The Respondent was subsequently unable to

acquire business locations for all of the Internet Kiosk

machines.

9. The Respondent has asserted that after discussions with

the purchaser, the parties agreed to "upgrade" the 18 Internet

Kiosk machines to 18 "Smart Terminal" machines.

10. The CardPayment machines, Internet Kiosk machines, and

Smart Terminal machines are different types of machines, and

each type has a usage different from the others.

11. The terms of the contract executed between the parties

did not provide for the substitution of various machines upon

failure by the Respondent to place the machine s into operation.

The contract required the Respondent to rebate a portion of the

sales price for each month during which each CardPayment machine

was not placed for operation.

12. No contract for the purchase of either the Internet

Kiosk or the Smart Terminal machines was executed by the

parties.

13. The disclosure information provided by the Respondent

to the purchaser related to the Internet Kiosk machines was

insufficient to comply with the statutory requirements addressed

herein.

14. No discl osure information related to the Smart

Terminal machines was provided by the Respondent to the

purchaser.

CONCLUSIONS OF LAW

15. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. §§ 120. 569 and 120.57(1), Fla. Stat. (2007).

16. The Petitioner has the burden of establishing the

allegations of the Administrative Complaint by clear and

convincing evidence. Coke v. Department of Children & Family

Services , 704 So. 2d 726 (Fla. 5th DCA 1998) ; Department of

Banking and Finance v. Osborne Stern and Company , 670 So. 2d 932

(Fla. 1996); Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

In this case, the burden has been met.

17. Subsection 559.801(1)(a), Florida Statutes (2005),

provides the fol lowing relevant definition:

"Business opportunity" means the sale or

lease of any products, equipment, supplies,

or services which are sold or leased to a

purchaser to enable the purchaser to start a

business for which the purchaser is required

to pay an i nitial fee or sum of money which

exceeds $500 to the seller, and in which the

seller represents:

1. That the seller or person or entity

affiliated with or referred by the seller

will provide locations or assist the

purchaser in finding locations for the use

or operation of vending machines, racks,

display cases, currency or card operated

equipment, or other similar devices or

currency - operated amusement machines or

devices on premises neither owned nor leased

by the purchaser or seller;

2. That the se ller will purchase any or all

products made, produced, fabricated, grown,

bred, or modified by the purchaser using in

whole or in part the supplies, services, or

chattels sold to the purchaser;

3. That the seller guarantees that the

purchaser will deriv e income from the

business opportunity which exceeds the price

paid or rent charged for the business

opportunity or that the seller will refund

all or part of the price paid or rent

charged for the business opportunity, or

will repurchase any of the produc ts,

equipment, supplies, or chattels supplied by

the seller, if the purchaser is unsatisfied

with the business opportunity; or

4. That the seller will provide a sales

program or marketing program that will

enable the purchaser to derive income from

the business opportunity, except that this

paragraph does not apply to the sale of a

sales program or marketing program made in

conjunction with the licensing of a

trademark or service mark that is registered

under the laws of any state or of the United

States if the seller requires use of the

trademark or service mark in the sales

agreement.

For the purpose of subparagraph 1., the term

"assist the purchaser in finding locations"

means, but is not limited to, supplying the

purchaser with names of locator com panies,

contracting with the purchaser to provide

assistance or supply names, or collecting a

fee on behalf of or for a locator company.

18. Section 559.803, Florida Statutes (2005), sets forth

the requirement that a business opportunity seller provide a

written disclosure form to the purchaser at least three days

prior to execution of a contract or the seller's receipt of

consideration by the purchaser, whichever occurs first, and

identifies the information that must be included within the

disclosure sta tement. S ubs ection 559.803(11), Florida Statutes

(2005), requires that such information include the following:

(11)(a) The total number of persons who

purchased the business opportunity being

offered by the seller within the past

3 years.

(b) The name s, addresses, and telephone

numbers of the 10 persons who previously

purchased the business opportunity from the

seller and who are geographically closest to

the potent ial purchaser.

19. The disclosure statement provided by the Respondent to

the purchase r failed to disclose the total number of persons who

purchased within the preceding three years and stated only that

200 CardPayment "Business Opportunities" had been sold by the

end of 2005 and that 25 "Inter net Kiosk Business Opportunity

[ sic ] " had been sold by the end of 2002. There was no

disclosure statement provided in relation to the Smart Terminal

substitution.

20. The disclosure statement provided by the Respondent to

the purchaser failed to disclose information related to the ten

previous purc hasers geographically located closest to the

potential purchaser, for any of the machines sold to the

purchaser by the Respondent, and the information was not

otherwise provide d to the purchaser .

21. S ubs ection 559.809(11), Florida Statutes (2005),

prohib its a seller of business opportunities from failing to

provide a written contract to a purchaser. The Respondent

failed to provide a written contract related to the "upgrade"

from the CardPayment to the Internet Kiosk machines. The

Respondent failed to p rovide a written contract related to the

"upgrade" from the Internet Kiosk t o the Smart Terminal

machines.

22. The Respondent appears to have treated the sale of the

CardPayment machines as one under which the equipment being sold

was interchangeable with other "Business Opportunities" offered

by the Respondent. Nothing in the Act provides for the

substitution of equipment sold as part of a Business

Opportunity, and nothing in the sales contract provided for such

an exchange.

23. S ubs ection 559.813(2)( a), Florida Statutes (2005),

sets forth the remedies for violations of the Act and provides

in relevant part as follows:

(2)(a) The department may enter an order

imposing one or more of the penalties set

forth in paragraph (b) if the department

finds that a seller or any of the seller' s

principal officers or agents:

1. Violated or is operating in violation of

any of the provisions of this part or of the

rules adopted or orders issued thereunder ;

2. Made a material false statement in any

application, do cument, or record required to

be submitted or retained under this part;

3. Refused or failed, after notice, to

produce any document or record or disclose

any information required to be produced or

disclosed under this part or the rules of

the department;

4. Made a material false statement in

response to any request or investigation by

the department, the Department of Legal

Aff airs, or the state attorney; or

5. Has intentionally defrauded the public

through dishonest or deceptive means.

(b) Upon a f inding as set forth in

paragraph (a), the department may enter an

order doin g one or more of the following:

1. Issuing a notice of noncom pliance

pursuant to s. 120.695.

2. Imposing an administrative fine not to

exceed $5,000 per violation for each act

which constitutes a violation o f this part

or a rule or order.

3. Directing that the seller or its

principal officers or agents cease a nd

desist specified activities.

4. Refusing to issue or revoking or

suspending an adver tisement identification

number .

5. Placing the registrant on probation for

a period of time, subject to such conditions

as the department may specify.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Agriculture and

Consumer Services enter a f inal o rder finding that the

Respondent has violated S ubs ections 559.803(11)(a) and (b) and

559.809(11), Florida Statutes (2005) ; imposing an administrative

fine of $10,000 ; and placing the Respondent on probation for a

period of three years subject to such conditions as the

Department deems appropriate.

DONE AND ENTERED this 8th day of February, 2008 , in

Tallahassee, Leon County, Florida.

S

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Div ision 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

th is 8th day of February, 2008 .

COPIES FURNISHED :

Eric H. Miller, Esquire

Department of Agriculture and

Consumer Services

2005 Apalachee Parkway

Tallahassee, Florida 32301

Gilbert B. Swarts

American Cash Machine, LLC

535 Twenty - Second Street South

St. Petersburg, Florida 33712

Richard Ditschler, General Counsel

Department of Agriculture and

Consumer Services

407 South Calhoun Street, Suite 520

Tallahassee, Florida 32399 - 0800

Honorable Charles H. Bronson

Commissioner of Agriculture

Department of Agriculture and

Consumer Services

The Capitol, Plaza Level 10

Tallahassee, Florida 32399 - 0810

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 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.