08-003080 David L. Fleming vs. Office Of Financial Regulation Status: Closed Recommended Order on Tuesday, January 6, 2009.

Summary: Recommend denial of Petitioner`s application for licensure as a mortgage broker due to misrepresentation.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DAVID L. FLEMING, )

)

Petitioner, )

)

vs. ) Case No. 08-3080

)

OFFICE OF FINANCIAL REGULATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal administrative hearing was

held in this case before Diane Cleavinger, Administrative Law

Judge of the Division of Administrative Hearings, on September 9

and 10, 2008, in Gainesville, Florida.

APPEARANCES

For Petitioner: David L. Fleming, pro se

1653 Bass Avenue

Seville, Florida 32191

For Respondent: Robert H. Schott, Esquire

Office of Financial Regulation

Post Office Box 8050

Tallahassee, Florida 32314

STATEMENT OF THE ISSUE

The issue in this case is whether the Petitioner’s

application for licensure as a mortgage broker should be

granted.

PRELIMINARY STATEMENT

On April 28, 2008, Respondent, the Office of Financial

Regulation (Respondent or OFR) issued a Denial Letter denying

Petitioner, David L. Fleming’s (Petitioner) application for

licensure as a mortgage broker based on Sections 494.0041(1)(f)

and 494.0041(2)(a),(c), (i) and (q), Florida Statutes.

Specifically, OFR denied Petitioner’s application based on

alleged material misrepresentations on his application when he

answered “No” to questions about his criminal history, past

licensure discipline and past application denials.

Petitioner disputed the OFR’s denial and timely filed a

Petition for Administrative Hearing. Initially, OFR determined

that Petitioner did not raise any disputed issues of material

fact and set the case for an informal hearing. However, based

on some of Petitioner’s discovery responses, OFR determined that

disputed issues of material fact existed and referred the matter

to the Division of Administrative Hearings for purposes of

hearing.

Prior to the hearing, OFR twice moved to amend its reasons

for denial. In the first motion, it sought to amend the Denial

Letter to assert additional grounds under Section

494.0041(2)(c), Florida Statutes (material misstatements on

license applications.) The motion was granted. The Second

Motion to Amend sought to deny Petitioner’s application based on

Emergency Rule 69VER08-1, adopted on August 12, 2008, and

involving application denials based on past criminal

convictions. The motion was granted. At the hearing,

Respondent clarified that OFR raised Rule 69VER08-1 only as

evidence of past OFR policy regarding license denial and not as

an additional “Rule” basis for such denial.

At the formal hearing, Petitioner testified on his own

behalf and called OFR’s attorney as a witness. Additionally,

Petitioner introduced 12 numbered exhibits into evidence and

proffered an additional exhibit. Respondent did not present the

testimony of any witnesses, but offered 19 lettered exhibits

into evidence, including 3 deposition transcripts.

After the hearing, Petitioner filed a Motion to Supplement

Record to introduce four additional exhibits. The motion was

granted. Additionally, Petitioner and Respondent filed Proposed

Recommended Orders on October 10, 2008.

FINDING OF FACTS

1. Petitioner resides in Seville, Florida. He is a single

parent with an 18-year-old daughter.

2. Petitioner graduated from law school in 1978 and holds

an LLM degree in international tax planning. Petitioner

currently is a law clerk and consultant working primarily as an

independent contractor for Wealthcare International Title

Services, LLC.

3. On April 3, 1998, in the United States District Court,

Northern District, Pensacola Division, Petitioner, then a

practicing attorney, was convicted of conspiracy to commit

bankruptcy fraud for failing to disclose to the bankruptcy court

and trustee, $12,000 in legal fees paid to Petitioner and

$50,000 derived from the sale of inflated assets involved in a

bankruptcy estate. The court, commenting on the

conviction, wrote:

The evidence, viewed most favorable to the

government as it must now be, shows that

Fleming was responsible for structuring the

sale of 112 Matamoros, arranged for $50,000

to go to Yost personally, and did not

disclose the $50,000 payment to the

bankruptcy court. While the $50,000 was

supposedly given for personal property

inside the residence, and the amount was

inflated in excess of what even Yost felt

was the true value, Fleming asked Yost to

prepare a list of items inside the residence

to provide support for the price, and later

asked Yost to revise the list to add more

items. The $50,000 was placed in Fleming’s

escrow account, and approximately $12,000 of

the funds were paid to Fleming personally.

Fleming and Yost both believed that the

residence was part of the bankruptcy estate.

On the basis of this evidence, a reasonable

fact-finder could find that the evidence

established beyond a reasonable doubt that

Fleming conspired to knowingly, willfully,

and fraudulently conceal the $50,000 from

creditors of Mariner Realty Associates,

Inc., and conceal all evidence of the

payment of legal fees to Fleming from the

bankruptcy trustee and bankruptcy court.

(emphasis supplied)

After the conviction, the Florida Supreme Court suspended

Petitioner from the practice of law based on the conviction.

Later, on September 13, 2001, based on the same facts as the

conviction, the Florida Supreme Court disbarred and fined

Petitioner for commission of an unlawful act that is contrary to

honesty and justice. The disbarment was effective back to 1998

with the ability to apply for readmission after five years.

4. In disbarring Petitioner, the Florida Supreme Court

adopted the referee’s report. The referee specifically found

dishonest or selfish motive to be a relevant aggravating factor

and recommended disbarment based on the following ethical rules:

5.11 Disbarment is appropriate when:

a. a lawyer is convicted of a felony under

applicable law; or

b. a lawyer engages in serious criminal

conduct, a necessary element of which

includes intentional interference with the

administration of justice, false swearing,

misrepresentation, fraud, extortion,

misappropriation, or theft; or

* * *

e. a lawyer attempts or conspires or

solicits another to commit any of the

offenses listed in sections (a)-(d); or

f. a lawyer engages in any other intentional

conduct involving dishonesty, fraud, deceit,

or misrepresentation that seriously

adversely reflects on the lawyer's fitness

to practice.

5 . On March 14, 2007, prior to the present license

application at issue here, Petitioner sought licensure as a

resident title insurance agent with the Department of Financial

Services.

6. On the March 14th application, Petitioner disclosed

his criminal conviction. However, he answered “No” to the

question that asked :

Have you ever had a professional license

subjected to any of the following actions by

any state agency or public authority or any

other regulation authority in any

jurisdiction:

Revocation in Florida less than two years

ago.

Revocation in another state at any time or

in Florida more than two years ago

Suspension

Placed on probation

Administrative fine or penalty levied

Cease and desist order entered.

The question is clear and capable of being understood by a

reasonable person. As indicated, the Florida Supreme Court had

suspended, disbarred and assessed a fine against Petitioner.

However, Petitioner responded “No”; and therefore, Petitioner

failed to disclose this very material information to the

Department in his application.

7. On May 22, 2007, unaware of the bar’s disciplinary

actions and citing the criminal conviction, the Department

denied the title insurance agent license application.

Petitioner requested an informal hearing on the Department’s

denial. An informal hearing was begun on August 31, 2007, but

the hearing officer determined that material issues of fact

existed and ended the hearing so that the case could be

forwarded to the Division of Administrative Hearings.

8. On September 1, 2007, Petitioner withdrew his request

for a hearing acknowledging that the Department’s denial of his

title insurance agent license application would become final.

9. On December 10, 2007, Petitioner filed an online

application for licensure as a mortgage broker with OFR.

Question 5A of that application asked:

Have you pleaded nolo contendre, been

convicted, or found guilty, regardless of

adjudication, of a crime involving fraud,

dishonest dealing, or any other act of moral

turpitude? YES___ NO___

Petitioner checked “NO.” Additionally, Question 5B of the

application asked:

Have you had a license, or the equivalent,

to practice any profession or occupation

denied, revoked, suspended, or otherwise

acted against which involved fraud,

dishonest dealing, or any other act of moral

turpitude? YES ____ NO ____

Similarly, Petitioner checked “NO” to Question 5B.

10. On July 27, 2008, the Respondent filed an Amended

Denial Letter, denying Petitioner’s application for licensure as

a mortgage broker. As grounds for denial under Section

part:

(a) On or about April 3, 1998, you were

convicted on conspiracy to commit bankruptcy

fraud. This conviction resulted from your

structuring the sale of property located at

112 Matamoros Drive, Pensacola Beach,

Florida, so that $50,000, including your

$12,000 fee, would be concealed from

creditors and the bankruptcy court. This

was a crime involving dishonesty and/or

moral turpitude within the meaning of

section 494.0041(2)(a) and an act of fraud,

misrepresentation, concealment, and

dishonest dealing in a business transaction

within the meaning of section

494.0041(2)(q). Although your civil rights

have been restored, this criminal act was a

felony and directly related to the business

license being sought, within the meaning of

section 112.011(1)(b), Florida Statutes.

( b) On July 23, 1998, The Florida Supreme

Court, on being advised of the conviction

discussed at (a) above, suspended you from

the practice of law.

(c) On September 13, 2001, The Florida

Supreme Court disbarred you for commission

of an act that is unlawful or contrary to

honesty and justice. This constituted

having a professional license, or the

equivalent revoked for dishonest dealing

within the meaning of section

494.0041(2)(i). Further, you were fined

$933.90.

(d) On or about March 17, 2007, you applied

to the Florida Department of Financial

Services Bureau of Licensing (“Bureau”) for

a resident title insurance agent license.

On that application, you answered “No” to

the question that asked, inter alia , if any

regulatory authority had revoked and/or

suspended any professional license or had

fined you. In answering “No,” you made a

material misrepresentation on an initial

application within the meaning of Section

494.0041(2)(c), Florida Statutes.

(e) On or about May 22, 2007, the Bureau

issued a Notice of Denial to you. That May

22 Notice advised you that you were being

denied licensure because of having been

found guilty of a felony. You responded by

Petitioning for a Hearing. On August 31,

2007, at the informal hearing, the Bureau

further asserted, as grounds for denial, the

bar disciplinary actions discussed at (b)

and (c) above. On September 1, 2007, you

withdrew your Petition for Hearing.

(f) You answered "No" to Question #5A,

Florida mortgage broker license application,

that asked if you have pleaded nolo

contendere to or have been convicted or

found guilty of a crime involving fraud,

dishonest dealing, or any act of moral

turpitude.

(g) You answered "No" to Question #5B, on

your Florida mortgage broker license

application, that asked if you have had a

professional license denied, suspended or

revoked in a matter involving fraud,

dishonest dealing, or any act of moral

turpitude. In fact, during the Office’s

processing of the application, you concealed

that you had been denied a resident title

insurance agent license as described at (d)

and (e) above.

(h) In so answering Questions #5A and 5B,

you made material misrepresentations on your

initial mortgage broker license application

within the meaning of Section

494.0041(2)(c), Florida Statutes.

11. Petitioner attributes his “NO” responses to questions

5A and 5B to the Respondent’s requirement that applications be

submitted on-line. He asserts that the on-line procedure

or a qualified answer. Specifically, Petitioner thought he

should be permitted to qualify his answer based on the fact that

he was convicted of conspiracy to commit bankruptcy fraud and

not the related substantive charge of bankruptcy fraud.

However, the facts found by both the federal court and the

Florida Supreme Court clearly established that both courts

considered the conspiracy conviction as one involving fraud,

dishonesty and misrepresentation. Clearly, Petitioner was aware

of both courts’ findings and, based on such findings, should

Petitioner was neither honest with himself or with OFR and

materially misrepresented both his prior conviction and his bar

license discipline to OFR.

12. On December 14, 2007, OFR wrote a letter to Petitioner

asking for additional information and documentation about his

application, including a set of fingerprints.

13. Petitioner responded by letter dated January 28, 2008.

Petitioner’s January 28th letter disclosed his criminal

conviction and subsequent disbarment. In addition to his

fingerprints, Petitioner attached a copy of the 1998 criminal

judgment and the Supreme Court order disbarring Petitioner.

Petitioner contends that his January 28th correspondence cured

his untruthful responses to questions 5A and 5B.

14. However, the letter did not cure Petitioner’s

misrepresentation of either his conviction and subsequent

suspension and disbarment. Nowhere in the letter does it

reference the Department of Financial Services’ denial of

Petitioner’s title insurance agent application. The title

insurance license was, clearly, a license denial within the

meaning of question 5B of Petitioner’s mortgage broker license

application. Petitioner should have disclosed the denial of

that license to OFR when he completed the online mortgage broker

application and should have disclosed the denial when he had a

second opportunity to disclose in his January 28th letter.

15. In fact, Petitioner took measures to conceal the

Department’s title agent license denial. In applying for the

title insurance agent license, Petitioner submitted five letters

of recommendation. Two of these letters, from Christopher

Cathcart and Karen Powell Ward, made a passing reference to

Petitioner’s fitness to act as a title agent. Another, from

Steven Andrews made two prominent references to the pending

title agent application.

16. Petitioner submitted the same Cathcart and Ward

letters to the OFR in support of the mortgage broker license

application. However, the references to Petitioner acting as a

title agent were redacted in both letters. Petitioner did not

submit the Andrews letter with the prominent references to title

agency in support of his mortgage broker license application.

17. Petitioner testified that he did not believe that

question 5B applied to the title insurance agent license denial.

However, the question asks specifically whether the applicant

has had a license denied within the past two years. The

evidence demonstrated that Petitioner was denied a title agent’s

license within the relevant timeframe and that that information

should have been disclosed by Petitioner.

18. In fact, Petitioner admitted that he intentionally

chose not to disclose the title agent’s license denial.

Petitioner stated that:

I chose not to voluntarily disclose anything

having to do with that license application

because I wanted my mortgage broker license

application to be considered on its own

merits and not fall into the trap of monkey-

see/monkey-do type of approach from the

Office of Financial Regulation when they saw

that the Department of Financial Services

had taken that action on the application.

Petitioner’s deliberate concealment of the Department’s license

denial reveals an attitude that he doesn’t need to disclose

material information when he doesn’t want to. At best,

Petitioner’s appreciation of honesty, truthfulness and integrity

is suspect. It is Petitioner’s consistent and continued failure

to recognize when he should reveal facts about his past that

leads to the conclusion that Petitioner has failed to establish

that he has the character and honesty necessary to be trusted to

hold a mortgage broker’s license. Lacking such evidence,

Petitioner’s application should be denied.

19. Finally, Petitioner introduced five licensure files

where the applicant’s were granted licensure or probationary

licensure after conviction for serious felony offenses. In four

of the five licensing files relied on by Petitioner, the

applicant answered “YES” to question 5A disclosing his or her

criminal history. In the fifth case, the applicant answered

“NO” to question 5A. However, OFR did not act on the

applicant’s file within the 90-day deadline imposed by Section

120.60(1), Florida Statutes, for such action. Based on the

deemer provision in Chapter 120, Florida Statutes, the applicant

received his license. All of these files are distinguishable

from the facts in Petitioner’s case. At least four of the files

were, from the outset, honest in their answers to the questions

on the application regarding the applicant’s criminal history.

Given these differences, none of these files form a precedential

basis for a grant of licensure in this case.

CONCLUSIONS OF LAW

20. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2008).

21. OFR is the agency in the State of Florida responsible

for administration and enforcement of Chapter 494, Florida

Statutes. Dep't of Banking and Fin. v. Osborne Stern & Co. ,

670 So. 2d 934 (Fla.1996) .

22. Section 494.0041(1)(f), Florida Statutes, authorizes

the OFR to deny an application for a mortgage broker license

when an applicant has violated any provision of Section

494.0041(2), Florida Statutes.

23. Section 494.0041(2), Florida Statutes, states, in

relevant part:

Each of the following acts constitutes a

ground for which the disciplinary actions

specified in subsection(1) may be taken:

(a) Pleading nolo contendere to, or having

been convicted or found guilty of,

regardless of whether adjudication was

withheld, a crime involving fraud, dishonest

dealing, or any act of moral turpitude.

* * *

(c) A material misstatement of fact on an

initial or renewal application.

* * *

(i) Having a license, or the equivalent, to

practice any profession or occupation

revoked, suspended, or otherwise acted

against, including the denial of licensure

by a licensing authority of this state or

another state, territory, or country for

fraud, dishonest dealing, or any other act

of moral turpitude.

* * *

(q) Commission of fraud, misrepresentation,

concealment, dishonest dealing by trick,

scheme, or device, culpable negligence, or

breach of trust in any business transaction

in any state, nation, or territory; or

aiding, assisting, or conspiring with any

other person engaged in any such misconduct

and in furtherance thereof.

24. Petitioner is an applicant for a mortgage broker's

license. Accordingly, as the party asserting the affirmative of

an issue, Petitioner carries the burden of proof to establish by

a preponderance of the evidence that his application for

licensure should be granted. Department of Transportation v.

J.W.C. Company Inc. , 396 So. 2d, (Fla.1st DCA 1981); Osborne

Stern Co. , supra ; and Pershing Industries, Inc. v. Department of

Banking and Finance , 591 So. 2d (Fla.1st DCA 1991).

25. The facts surrounding Petitioner’s conviction for

conspiracy to commit bankruptcy fraud and the findings of the

federal court and the Florida Supreme Court clearly demonstrate

that Petitioner’s conviction for the same constitutes a crime

involving fraud, dishonest dealing, or moral turpitude within

Unquestionably, the bar disciplinary actions and the Department

of Financial Services’ denial of Petitioner’s title insurance

agent license application were actions against a license.

Failure to disclose those denials violate Section 494.0041(2)

(a), (i) and (q), Florida Statutes. Watts v. Dep’t of Banking

and Fin. , DOAH Case No. 97-2270, 1997 WL 1053357 at ¶ 30 (Fla.

DOAH 1997) (Recommended Order) (concluding that the denial of

Petitioner's application for admission to the Florida Bar was

grounds for denial of the mortgage broker license under the

provisions of § 494.0041(2)(i)).

26. "Honesty, truthfulness and integrity are attributes

required for individuals who deal with the public as mortgage

brokers." Dep't of Banking and Fin. v. Hughes , DOAH Case No.94-

5114, 1995 WL 1052790 at ¶ 36 (Fla. DOAH 1995)(Final Order). See

also State v. Beeler , 530 So. 2d 932, 934 (Fla. 1988)

(commenting on the legislative goal of protecting the public in

enacting Chapter 494, Florida Statutes) and Hester v. Office of

Fin. Regulation , DOAH Case No. 05-2107, 2005 WL 3733863 at ¶ 55

(Fla. DOAH 2005.) In that regard, Petitioner's failure to

disclose the bar disciplinary actions on his March 2007 title

insurance agent license application and his answers to questions

5A and 5B on his December 2007 mortgage broker application were

material misstatements of fact. The consistent and continued

misrepresentations of such information by Petitioner is very

troubling, especially since the basis for not revealing the

required information was more for the convenience of Petitioner

and were based on rationalizations that have no factual basis.

Such misrepresentations do not demonstrate honesty and violate

Section 494.0041(2)(c), Florida Statutes.

27. Petitioner’s untruthful answers to disclosure

questions reveal a lack of honesty, integrity and

trustworthiness. Starr v. Department of Business and

Professional Regulation , 729 So. 2d 1006, 1007 (Fla. 4th

DCA 1999)(noting that applicant should have answered questions

regarding criminal history affirmatively and noting that the ALJ

rejected the applicant's explanation that she thought the

question only applied to felonies); Walker v. Department of

Business and Professional Regulation , 705 So. 2d 652, 654

(Fla. 5th DCA 1998) (concluding that circumstantial evidence

supported the conclusion that the license applicant acted

intentionally in obtaining license by means of fraud,

misrepresentation, or concealment). The repeated unwillingness

of Petitioner to be forthcoming in applications demonstrates

Petitioner's lack of appreciation for truthfulness, honesty and

integrity. The continuation of such behavior also undermines

any argument that he has been rehabilitated from the events

providing grounds for denial in this case. Fonseca v.

Department of Juvenile Justice , DOAH Case No. 99-3931, 2000 WL

564808 at ¶ 23 (Fla. DOAH 2000) (Recommended Order)(concluding

that the applicant's dishonesty in the application process

showed that he was not rehabilitated); Goings v. State , DOAH

Case No.80-2062S, 1981 WL 180305(Fla. DOAH 1981) (observing

that, "Petitioner has failed to demonstrate rehabilitation when

he continues to rely upon dishonesty when he deems it

appropriate"); Florida Board of Bar Examiners ex rel. John Doe ,

770 So. 2d 670 (Fla. 2000). Therefore, Petitioner's application

for licensure as a mortgage broker should be denied.

RECOMMENDATION

Based upon the Findings of Fact and Conclusions of Law, it

is RECOMMENDED:

A Final Order be entered denying Petitioner's application

for licensure as a mortgage broker.

DONE AND ENTERED this 6th day of January, 2009, in

Tallahassee, Leon County, Florida.

S

DIANE CLEAVINGER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 6th day of January, 2009.

COPIES FURNISHED :

David L. Fleming

1653 Bass Avenue

Seville, Florida 32191

Robert H. Schott, Esquire

Office of Financial Regulation

Post Office Box 8050

Tallahassee, Florida 32314-8050

Alex Hager, Acting Commissioner

Office of Financial Regulation

200 East Gaines Street

Tallahassee, Florida 32399-0350

Robert Beitler, General Counsel

Department of Financial Services

200 East Gaines Street, Suite 526

Tallahassee, Florida 32399-0350

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.