12-002312F Ahmad Labib Baltagi vs. Department Of Business And Professional Regulation, Board Of Accountancy Status: Closed DOAH Final Order on Wednesday, May 22, 2013.

Summary: Petitioner not entitiled to attorney's fees and costs, or sanctions. Petitioner failed to prove status as a small business party.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AHMAD LABIB BALTAGI , )

)

Petitioner , )

)

vs. ) Case No. 1 2 - 2312F

)

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, BOARD )

OF ACCOUNTANCY , )

)

Respondent . )

)

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case

on October 12 , 2012, and on February 22, 2013 , in Tallahassee,

Flo rida, before Jessica E. Varn , a designated Administrative Law

Judge of the Division of Administrative He arings (DOAH).

APPEARANCES

For Petitioner: Frederick R. Dudley, Esquire

Holland and Knight

315 South Calhoun Street, Suite 600

Tallahassee, Florida 32301

For Respondent: Gautier Kitchen, Esquire

Department of Business and

Professional Regulation

Suite 86

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

Kyle Christopher, Esquire

Department of Business and

Professional Regulation

Suite 86

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

ST ATEMENT OF THE ISSUE

Whether Petitioner, Ahmad Labib Baltagi (Mr. Baltagi) ,

should be awarded attorney's fees and costs pursuant to section

57.111 , Florida Statutes (2011), and section 57.105, Florida

Statutes (2011).

PRELIMINARY STATEMENT

On July 3, 2012 , th e Florida Board of Accountancy en tered

Final Order No. 2010 - 031881 , adopting the Findings of Fact and

Conclusions of Law contained in the Recommended Order entered by

the unde rsigned in DOAH Case No. 11 - 6262 PL (the underlying

disciplinary proceeding). In t hat Recommended Order , the

undersigned found that the Department of Business and

Professional Regulation (Department) had failed to prove by clear

and con vincing evidence that Mr. Baltagi (Petitioner) committed

the violations that had been alleged in t he Administrative

Complaint.

On July 6, 2012, Mr. Baltagi filed a Petition for Attorneys

Fees and Costs, seeking an award of attorneyÓs fees and costs as

a prevailing small business party, pursuant to section 57.111,

Florida Statutes (2011). The inst ant case was assigned DOAH case

No. 12 - 2312F. On September 6, 2012, Mr. Baltagi filed a Motion

for Sanctions pursuant to section 57.105, Florida Statutes

(2011). The Department filed its Response to the Motion for

Sanctions on September 18, 2012.

The par ties stipulated that the discip linary action against

Mr. Baltagi was instituted b y a state agency, that the Department

was not a nominal party, that Mr. Baltagi was the prevailing

party in the disciplinary proceeding , and that the amount of fees

a nd costs ($69,417.50 , and $4,725.15, respectively) being sought

was reasonable.

The final hearing was scheduled for September 25, 2 012.

During a telephonic hearing held on September 19, 2012,

Petitioner requested a continuance, which was granted. The

hearing was rescheduled for October 12, 2012. On October 4,

2012, the Department filed a Motion to Compel Discovery,

requesting that Mr. Baltagi produce all the documents that had

been requested, on September 24, 2012, via a properly served

subpoena duces tecum.

The final hearing commenced on October 12, 2012, as

scheduled. During the hearing, the parties presented argument on

the Motion to Compel. The Motion was granted by the undersigned,

and due to the granting of the Motion, the final hearing was

continued, and rescheduled for November 16, 2012.

On November 13, 2012, Petitioner filed an Emergency Motion

to Continue Final Hearing, indicating that the Department had no

objection to the continuance. The parties were ordered to advise

the undersigned of the statu s of the case by December 14, 2012.

A status report was filed by the parties on December 13, 2012,

and the final hearing was rescheduled for February 22, 2013.

At the final hearing, Mr. Baltagi testified on his own

behalf, and presented Exhibits A - S into evidence. The Department

offered the testimony of Daniel Hevia, Eric Hurst, Kathleen

Brown - Blake, and Alphonse Cheneler; Exhibits 1 - 20, and 22 - 26 were

admitted into evidence.

A Transcript of t he proceedings consisting of three volume s

was filed on March 1 1, 2013 . The parties timely filed Proposed

F inal Orders which have been considered by the undersigned in the

preparation of this Final Order.

Unless otherwise noted, all statutory references are to

Florida Statutes (2011).

FINDING S OF FACT

1. At all time s relevant to this proceeding, Mr. Baltagi

had been a licensed public accountant and the owner of a business

kn own as Baltagi Business Services , Inc.

2 . In 2006, the United States, on behalf of the Internal

Revenue Service (IRS), filed a complaint agains t Baltagi,

alleging that he had prepared 32 federal tax returns for Native

Americans that failed to include per - capita distributions from

gaming proceeds in their taxable income.

3 . Mr. Baltagi signed a Stipulated Judgment of Permanent

Injunction, which p rovided as follows:

Pursuant to 26 U.S.C. §§ 7402(a), 7407 and

7408, defendants and their employees are

permanently enjoined from:

a. preparing or assisting in the preparation

of, or counseling of or advising the

preparation of filing of, federal tax ret urns

which assert that per capita distributions of

gaming proceeds paid to Native Americans are

exempt from federal income tax;

b. preparing or assisting in the preparation

of, or counseling or advising of federal tax

returns that assert any position for which

there is not a realistic possibility of being

sustained on its merits that results in the

understatement of tax liability, or that

evinces a willful, intentional, or reckless

disregard for the applicable laws, rules, and

regulations;

c. engaging i n any fraudulent or deceptive

conduct which interferes with the proper

administration of the internal revenue laws.

4 . In summary, the Stipulated Judgment prohibited Mr.

Baltagi from preparing federal income tax returns that asserted

that per capita gam ing proceeds were exempt from federal income

taxes, and from preparing federal income tax returns that

understate tax liability by asserting any other frivolous or

unrealistic position.

5 . Also in 2006, Fast Cash Services , one of Mr. BaltagiÓs

businesses, entered into a contract with iStream Financial

Services, Inc., and its affil iate, Kenny Bank . Fast Cash

Services was tasked with verifying identification via current

driver's licenses or other appropriate form of identification for

clients who sought to cash a check.

6 . In July and August of 2009, Kenny Bank received multiple

Department of Treasury reclamation claims from Fast Cash

Services. Someone other than the named payee cashed the

reclamation checks, and one of Mr. Baltagi's employees failed to

no tice the discrepancy.

7 . As a result of these checks being cashed, the Circuit

Court for Waukesha County, Wisconsin, entered a default judgment

against Mr. Baltagi in the amount of $276,160.42 in response to a

complaint filed by iS tream Financial Services and Kenny Bank .

8 . On May 27, 2010 , the Department received a complaint

from the general counsel of Kenny Bank about the default judgment

entered against Mr. Baltagi in Wisconsin. The complaint also

included a copy of charges brought against Mr. Balta gi by the

United States Departm ent of Justice, and included the Stipulated

Injunction that Mr. Baltagi had entered into with the United

States government.

9 . The Department conducted an investigation, which

resulted in an Investigative Report. During the investigation,

the Department reviewed the IRS investigation of Mr. Baltagi for

filing fraudulent tax returns; an allegation that Mr. Baltagi had

failed to cooperate with the IRS during the IRS investigation;

the charges brought by the Department of Justi ce against Mr.

Baltagi for filing fraudulent tax returns; the Stipulated

Judgment between Mr. Baltagi and the U.S. government; Mr.

BaltagiÓs failure to report the injunction to the Department; a

Secret Service investigation regarding Mr. BaltagiÓs check

ca shing business; the allegations made by Kenny Bank in a civil

suit against Mr. Baltagi relating to his check cashing business;

and the civil judgment entered against Mr. Baltagi in the civil

case filed by Kenny Bank.

10 . A copy of the investigative file , the investigative

report, and a one - count complaint were presented to the probable

cause panel on May 5, 2011. The panel members were all licensed

public accountants.

11 . The standard used by the probable cause panel is

whether there is a reasonable be lief that the allegations, if

proven true, would constitute a violation of applicable law or

rules.

12 . The panel members engaged in a detailed discussion

regarding the allegations, and questioned Mr. Baltagi at length

regarding the circumstances that led to the default judgment and

the permanent injunction issued by the IRS . Mr. Baltagi

testified under oath, and answered questions presented by the

panel members.

13 . The C omplaint at this juncture only contained one

count: failure to maintain good moral character, based on the

circumstances that led to the default judgment in the civil case.

14. Counsel for the Board of Accountancy provided legal

counsel to the panel, and recommended that a second count be

added to the Complaint, based on the allegation that Mr.

BaltagiÓs license had been acted upon by the IRS, by way of the

Stipulated Judgment. The panel found probable cause for the

original count, and add ed the second charge.

15. On June 16, 2011 , the probable cause panel once again

addressed the Com plaint against Mr. Baltagi. The panel received

advice from the Board Attorney, and also heard from Mr. Hurst,

counsel for the Department. The panel believed that the IRS was

a licensing authority, and that in entering a Stipulated Judgment

which included a permanent injunction, the IRS had disciplined

Mr. BaltagiÓs license. Accordingly, probable cause was once

again found for two charges.

16 . The materials attached to the Investigative Report, the

testimony provided by Mr. Baltagi, and the legal advice provided

to the panel would lead a reasonable person to conclude that

there was probable cause to file the charges in the

administrativ e complaint against Mr. Baltagi .

17 . Daniel Hevia, a certified public accountant and one of

the DepartmentÓs expert witn esses, opined that because the

allegations against Mr. Baltagi involved fr aud, for both the

civil suit involving the check cashing business, and the

fraudulent preparation of tax returns, it was reasonable for the

Department to charge Mr. Baltagi with a fa ilure to maintain good

moral character.

1 8 . On July 5, 2011, the Department filed an Administrative

Complaint, charging Mr. Baltagi with the two counts that the

probable cause panel had approved.

1 9 . On November 29, 2011, Mr. Baltagi filed a Petition for

Formal Administrative Hearing, and the file was sent to DOAH.

The final hearing was held before the undersigned on February 1,

2012. The undersigned entered a Reco mmended Order on April 12,

2012, recommending the dismissal of both charges. On July 3,

2 012, the Department entered a Final Order adopting the

undersignedÓs Recommended Order in its entirety.

20 . At the final hearing in the instant attorneyÓs fees

case, Mr. Baltagi testified that his net worth was less than

$2,000,000.00 at all times durin g 2011.

21 . Howeve r, Mr. Baltagi failed to disclose his individual

tax return for 201 1; evidence of jointly owned properties owned

in 2011; personal and business bank accounts held in 2011;

evidence of satisfied mortgages in 2011; or stocks and dividend s

received in 2011 from his multiple businesses. Mr. BaltagiÓ s

testimony during the hearing was evasive, self - serving, and not

credible.

22 . Mr. Cheneler, a certified public accountant and

attorney who reviewed all documents provided by Mr. Baltagi

regar ding his net worth , credibly testified that Mr. BaltagiÓs

net worth was understated, and that it was absolutely possible

that in 2011, Mr. BaltagiÓs net worth was in excess of

$2,000,000.00.

2 3 . Mr. Baltagi failed to meet his burden of proving his

net wor th was less than $2,000,000.00 in 2011, and therefore did

not establish his status as a small business party.

24 . The greater weight of the evidence demonstrates that,

when initiating the disciplinary proceedings against Mr. Baltagi,

the Department was su bstantially justified in doing so, and did

not act in a frivolous manner.

CONCLUSIONS OF LAW

25 . DOAH has personal and subject matter jurisdiction in

this proceeding pu rsuant to sections 57.111 , 120.569, and

120.57(1).

26. Mr. Baltagi has the burden of p roving by a preponderance

of the evidence that he is entitled to an award of attorney fees

and costs. See Balino v. Dep't of HRS , 348 So. 2d 349, 350 (Fla.

1st DCA 1977) and Dep't of Transp. v. J.W.C. Co., Inc. , 396 So.

2d 778 (Fla. 1st DCA 1981).

27 . Th e preponderance of the evidence standard requires

proof by "the greater weight of the evidence," Black's Law

Dictionary 1201 (7th ed. 1999), or evidence that "more likely

than not" tends to prove a certain proposition. See Gross v.

Lyons , 763 So. 2d 276, 289 n.1 (Fla. 2000).

28 . Section 57.111(4)(a), Florida Statutes, provides:

Unless otherwise provided by law, an award of

attorney's fees and costs shall be made to a

prevailing small business party in any

adjudicatory proceeding or administrative

proceedi ng pursuant to chapter 120 initiated

by a state agency, unless the actions of the

agency were substantially justified or

special circumstances exist which would make

the award unjust.

29 . Subsection s 57.111(3)(b) and (c), provide:

(b) The term "initiate d by a state agency"

means that the state agency:

1. Filed the first pleading in any state or

federal court in this state;

2. Filed a request for an administrative

hearing pursuant to chapter 120; or

3. Was required by law or rule to advise a

smal l business party of a clear point of

entry after some recognizable event in the

investigatory or other free - form proceeding

of the agency.

30 . Section 57.111(3)(d) defines the term "small business

party" as follows:

(d) The term "small business party" means:

1.a. A sole proprietor of an unincorporated

business, including a professional practice,

whose principal office is in this state, who

is domiciled in this state, and whose

business or professional practice has, at the

time the action is initiate d by a state

agency, not more than 25 full - time employees

or a net worth of not more than $2 million,

including both personal and business

investments;

b. A partnership or corporation, including a

professional practice, which has its

principal office in this state and has at the

time the action is initiated by a state

agency not more than 25 full - time employees

or a net worth of not more than $2 million;

or

c. An individual whose net worth did not

exceed $2 million at the time the action is

initiated by a state agency when the action

is brought against that individual's license

to engage in the practice or operation of a

business, profession, or trade . . .

31 . To prevail in this proceeding for an awa rd of costs and

fees, Mr. Baltagi must first estab lish that he was a small

business party at the time the Department initiated the

disciplinary proceedings against him. Mr. Bal tagi failed to meet

his burden of proof in this proceeding. He provided no credible

evidence that his net worth was less than $2 ,000,000.00 in 2011.

32 . Substantial justification is defined in section

57.111(3)(e), as "a reasonable basis in law and fact at the time

it was initiated by a state agency." Substantial justification

requires that the probable cause panel had a "solid t hough not

necessarily correct basis in fact and law for the position it

took." Fish v. Dep't of Health , 825 So. 2d 421, 423 (Fla. 4th

DCA 2002) (citing McDonald v. Schweiker , 726 F.2d 311, 316 (7th

Cir. 1983)).

26 . Although it is unnecessary to reach thi s level of

inquiry given the fact that Petitioner failed to meet his burden

of proof, the Department did establish that it was substantially

justified i n filing the Administrative Complaint in the

disciplinary proceeding.

27. In relevant part, s ubsection 57.105(1) authorizes fees

and costs when the losing party knew or should have known its

claim was not supported by material facts at the time the claim

is initially presented or at any time before trial.

28. In Murphy v. WISU Properties , 895 So. 2d 1088 , 1094 (3d

DCA 2004), the court explained that the standard for awarding

fees under this section requires the undersigned to find the

action Ðto be frivolous or so devoid of merit on both facts and

the law as to be completely untenable.Ñ

29 . Mr. Baltagi fai led to show that the Department knew or

should have known that the charges were not supported by material

facts, or by the application of then - existing law to those facts.

The greater weight of the evidence did not demonstrate that the

DepartmentÓs action s were frivolous or devoid of merit.

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is ORDERED that Mr. Baltagi's Motion for Attorney's Fees

and Costs is denie d, and his Motion for Sanctions is also denied.

DONE AND ORDERED this 22nd day of May , 2013 , in Tallahassee,

Leon County, Florida.

S

JESSICA E. VARN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of May, 2013 .

COPIES FURNISHED:

Frederick R. Dudley, Esquire

Holland and Knight

315 South Calhoun Street, Suite 600

T allahassee, Florida 32301

Gautier Kitchen , Esquire

Department of Business and

Professional Regulation

Suite 86

1940 North Monroe Street

Tallahassee, Florida 32 399 - 2202

Kyle Christopher, Esquire

Department of Business and

Professional Regulation

Suite 86

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

Veloria Kelly, Director

240 NW 76th Drive, Ste. A

Gainesville, Florida 32607

Ken Lawson, Secretary

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

J. Layne Smith, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is a dversely 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 o f administrative appeal with the agency

clerk of the Division of Administrative Hearings within 30 days

of rendition of the order to be reviewed, and a copy of the

notice, accompanied by any filing fees prescribed by law, with

the clerk of the District Cou rt of Appeal in the appellate

district where the agency maintains its headquarters or where a

party resides or as otherwise provided by law.