14-003471 Department Of Business And Professional Regulation, Division Of Alcoholic Beverages And Tobacco vs. Thompson And Company Of Tampa, Inc. Status: Closed Recommended Order on Friday, May 29, 2015.

Summary: Permit holder established that all owners were disclosed to DBPR and that records of out-of-state sales need not be maintained or produced.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND

PROFESSIONAL REGULATION,

DIVISION OF ALCOHOLIC BEVERAGES

AND TOBACCO ,

Petitioner,

vs. Case No. 14 - 3471

THOMPSON AND COMPANY OF TAMPA,

INC. , d/b/a THOMPSON CIGAR S,

Respondent.

_______________________________/

RECOMMENDED ORDER

On March 10, 2015, a hearing in this case was held by video

teleconferenc ing at sites in Tampa and Tallahassee, Florida,

before D.R. Alexander, Administrative Law Judge, Divisi on of

Administrative Hearings (DOAH) .

APPEARANCES

For Petitioner : Jason D. Borntreger , Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 323 99 - 2202

For Respondent : Rex D. Ware, Esquire

Buchanan Ingersoll & Rooney, PC

101 North Monroe Street , Suite 1090

Tallahassee, Florida 32301 - 154 7

STATEMENT OF THE ISSUE

The issue is whether Respondent 's permit as a retail

tobacco dealer should be disciplined for the reasons set forth

in an Administrative Complaint issued on May 6, 2014, by the

Department of Business and Professional Regulation, Division of

Alcoholic Beverages and Tobacco (Division) .

PRELIMINARY STATEMENT

The Administrative Complaint alleg es that Respondent :

(a) failed to produce records of tobacco products sold to

persons or business entities in the S tate of Idaho, and

(b) failed to submit a sworn application reflecting that two

individuals , not previously disclosed, had a direct or indirect

financial interest in the business . Respondent timely requested

a formal hearing to contest the charge s , and the matter was

referred by Petitioner to DOAH for a hearing.

At the final hearing, the Division presented the testimony

of two witnesses. Division Exhibits A through I ( also referred

to in the Transcript as Division Exhibits 1 through 9 ) were

accepte d in evidence. Respondent presented one witness.

Respondent's Exhibits 1 through 14 were accepted in evidence.

A one - volume T ranscript of the hearing has been prepared .

The parties submitted p roposed r ecommended o rder s (PROs) on

May 18 , 2015 , which ha ve been considered in the preparation of

this Recommended Order.

FINDINGS OF FACT

A. Background

1. Since 1998, Respondent has operated a business under

the name of Thompson Cigars at 5401 Hangar Court, Tampa,

Florida. It holds retail tobacco permit numb er 39 - 05470 Series

RTPD (Permit), which authoriz es the sale , at a retail level, of

tobacco products , including cigarettes, cigars, and other

tobacco products . See § 569.003(1)(a), Fla. Stat. It has no

disciplinary history with the Division.

2. Although the P ermit authorizes the sale of cigarettes,

Respondent sells only cigars and other tobacco products. The

Division concedes ther e is no statutory or rule requirement that

Respondent mainta in record s for the sale of cigars and other

tobacco products to cu stomers in Florida or out - of - state . Also,

u nlike cigarettes, there are no taxes on the sale of cigars.

Except for periodic audits of purchase records to ensure that

Respondent is purchasing products from a licensed wholesaler and

paying taxes on those pu rchases, the Division conduct s no other

audits of its records.

3 . Cigars make up the bulk of Respondent's sales. Ninety -

nine percent of sales are made through the internet, mail order

catalogs, and telephone to customers in all 50 states. The

remainin g portion of its business consists of retail sales at

two small retail locations in Tampa.

B. Count I

4. In September 2013, the Division was contacted by the

Idaho State Tax Commission requesting that the Division obtain

records of all sales by Respo ndent of tobacco products to Idaho

residents from July 2008 through September 2013. Specifically,

the Idaho State Tax Commission wanted the names, addresses, and

permit numbers of all Idaho entities to wh om Respondent sold or

distributed tobacco products during that five - year time period,

including copies of sales invoices for more than 70 i ndividuals.

According to a Division special agent, this was the first time

the Tampa office had been asked to obtain records on behalf of

another s tate.

5 . Chapter 210 , Florida Statutes (2014), consists of two

parts. Part I relates to taxes on cigarettes while part II

relates to taxes on tobacco products other than cigarettes or

cigars. Section 210.161 , found in part I, a uthorizes the

Division to examine the " books , records, and accounts of any

permittee. "

6. Relying on section 210.161, and solely for the purpose

of assisting the State of Idaho, o n October 23, 2013, an agent

presented Respondent 's Director of Finance and Accounting,

Darren Hurd, with a form entit led " Record of Inspection . " The

form directed Respondent to take the following action:

You are required to provide records of all

sales of tobacco products made to persons or

business entities in Idaho for the period of

July 1, 2008 until the present. Th e records

must be produced to the Division no later

than November 1, 2013. Please produce the

requested records to C/O Special Agent

Robert Jones [at the Tampa District Office].

7. Besides presenting the written form to Mr. Hurd, the

agent explained to him why the request was made and the records

that he should produce.

8 . The Record of Inspection is normally used by the

Division in conjunction with a compliance audit . At hearing,

the agent acknowledged this was not a compliance audit to

determine if R espondent was operating pursuant to the law.

Rather, the request was made to assist the State of Idaho.

9 . Florida Administrative Code Rule 61A - 2.019 , entitled

Approved Forms, lists more than 200 approved forms used by the

Division. The Record of Inspec tion is not on the list.

Respondent contends the form is an agency statement of general

applicability that requires the production of records for

inspection. B ecause the form is not listed as an approved form

in rule 61A - 2.019, Respondent argues that the document is an

unadopted rule that cannot be used in this case to compel

production of the records. See § 120.57(1)(e), Fla. Stat.

10. As suming that the Division had authority to examine

the records, the use of the form was un necessary. Th is is

becau se th ere is no statute or rule that prohibits the Division

from orally requesting that records be produced for inspection.

Therefore , reliance on the form was unnecessary , as is the

resolution of the issue of whether the form is an unadopted

rule.

11 . U pon advice of counsel, Mr. Hurd declined to produce

any records citing privacy concerns for Respondent's out - of -

state customers and the Division's lack of statutory authority

to examine the records. Mr. Hurd noted that t he sales records

for customers cont ain personal information, including their

name, address, birth date, telephone number, and credit card

number .

12. Besides the privacy issue, Mr. Hurd explained that

over the last 17 years, the firm has sold tobacco products to

literally "millions" of c ustomers throughout the United States .

There is no Division requirement that Respondent maintain

records of these sales for state auditing purposes , and records

are kept on an antiquated tape system that is periodically

purged . Mr. Hurd added that even a ssuming the relevant tapes

exist, it would be an "overwhelming " burden and take countless

man hours for the small firm to manually restore backup t apes

and attempt to extract records of retail sales (out of millions

of customers ) for a particular time peri od for one state .

13. Respondent's bottom line is that the records do not

exist , and even if they did, the Division lacks authority to

request the m . On the other hand, t he Division maintains that if

Respondent keeps records of sales for any purpose, e ven non -

regulatory, it must make a search , no matter how extensive , to

determine if the Idaho records exist . If they do, it must

produce them ; if they do not exist , the exercise in collegiality

with Idaho end s . 1 /

1 4 . When the records were not produced, the Division

issued an Administrative Complaint charging Respondent with

violating section 210.161. A Division witness admitted that the

statute "is kind of vague" on whether the Division can legally

demand the records, and to that end, one of th e purpose s of th is

proceeding is "to try to determine if" it has that authority.

Thus, Count I essentially poses the question of exactly how

broad the Division's inspection authority is .

C. Count II

1 5 . While pursuing the records, the agent took steps to

verify whether there is an issue regarding "an undisclosed

interest in the ownership [of Respondent ] , " that is, to

ascertain whether there are owners of the corporation that have

not been disclosed to the Division. This is a routine

verification made during enfo rcement investigations. As

confirmed by the agent at hearing, the focus of this inquiry is

on undisclosed corporate owners rather than corporate officers.

1 6 . To make th is determination, the agent compared the

officers , but not owners , listed in Resp ondent's 2013 Annual

Report filed with the Division of Corporations with those names

shown on its 1998 permit application . The Annual Report list s a

corporation's officers , directors, and registered agent, but not

its owners or shareholders . It named Car lo Franzblau, Alix

Franzblau, R.M. Franzblau, Jo Z. Franzblau, and Colm Conway in

the Officer/Director Detail section of the report. On the other

hand, t he 1998 permit application listed as owners Carlo

Franzblau, Jo Franzblau, Robert Franzblau, and Alix [D] orr .

R.M. Franzblau (listed in the Annual Report) and Robert

Franzblau (listed in the permit application) are the same

individuals. Alix Franzblau, a female, was married when the

1998 application was filed and used her married name "Dorr . "

She is now single and uses her maiden name, Franzblau.

Mr. Conway has no direct or indirect financial interest in the

corporation and is not involved in the decision - making process .

He was listed in the Annual Report only because he currently

serves as Respo ndent's vice president - finance and chief

financial officer. In sum, Respondent is and always has been a

family - owned corporation that disclosed all persons having a

direct or indirect financial interest in the business .

1 7 . Count II alleges Respondent vi olat ed section

569.003 (1) (b) by "fail[ing] to submit to the [Division] a sworn

application" stating that Colm Conway and R.M. Franzblau had a

direct or indirect financial interest in the corporation .

Because it later learned that Robert Franzblau and R.M.

Franzblau are the same individuals , t he Division now contends

that the omission of Mr. Conway's name is the only statutory

violation.

1 8 . Section 569. 0 03 (1)(b) requires that a corporation

applying for a new permit file a sworn application " set [ting]

for th the names and addresses of the principal officers of the

corporation . " B ecause a new application is not at issue here,

and the statute requires disclosure of the principal officers

only, section 569.003 cannot support t he charge . A ssuming

arguendo tha t it does, there has been no change in corporate

owners since the 1998 application was filed . Finally, the

Division admits that there is no rule or statute that

specifically requires a corporate licensee to file the updated

information referred to in Coun t II. 2 /

CONCLUSIONS OF LAW

1 9 . The Administrative Complaint seeks to impose an

administrative penalty on Respondent. In order to prevail,

Petitioner has the burden of proof to show, by clear and

convincing evidence, that Respondent committed the acts all eged

in the Administrative Complaint. See , e.g. , Dep't of Banking &

Fin. , Div. of Sec. & Investor Prot. v. Osborne Stern & Co. , 670

So. 2d 932 , 935 (Fla. 1996 ).

20 . R espondent can only be found guilty of violations

specifically charged in the Administr ative Complaint. See,

e.g. , Trevisiani v. Dep't of Health , 908 So. 2d 1108, 1109 (Fla.

1st DCA 2005) . Although other statutes not cited in the

Administrative Complaint may help interpret the offenses

actually charged, Respondent cannot be found guilty of

violations not specifically included in the charging document.

See Dep't of Bus. & Prof 'l Reg., DABT v. MJT Restaurant Grp. ,

Case No. 07 - 4747 (Fla. DOAH Mar. 4, 200 8 ; Fla. DBPR Mar. 31,

2008).

21. In this case, the Administrative Complaint cites only

sections 210.161 and 569.003 as being contravened. If there is

any doubt concerning the proper interpretation of th ose

statute s , that doubt must be resolved in favor of the licensee.

See, e.g. , Djokic v. Dep't of Bus. and Prof'l Reg. , 875 So. 2d

693, 695 (Fla. 4th DCA 2004). Also, because chapter 210 is a

taxing statute, its provisions are strictly construed against

the taxing authority. See, e.g. , Fla. Hi - Lift v. Dep't of Rev. ,

571 So. 2d 1364, 1368 (Fla. 1st DCA 1990). This is so here even

though the Division is not seeking to impose a tax; rather,

u sing a taxing statute, it seeks t o impose a burden on

Respondent to search its records and produc e certain documents .

2 2 . The Administrative Complaint consists of two charges:

Respondent failed to produc e certain records pursuant to a

demand by the Division in violation of section 210.161; and

Respondent failed to disclose that Colm Conway had a direct or

indirect financial interest in the corporation in violation of

section 569. 0 03 (1)(b) .

2 3 . Section 210.161 provides in relevant part as follows:

The division, or any employee designated by

it, shall have the power and authority to

examine into the business , books, records,

and accounts of any permittee and to issue

subpoenas to said permittee or any oth er

person from whom information is desired and

to take depositions of witnesses within or

without the state.

2 4 . Section 210.161 requires nothing of a retail tobacco

licensee such as Respondent. It only states the power and

authority of the Division, un der certain circumstances, to

examine records of licensees and to issue subpoenas. In short,

there is nothing in section 210.161 which requires anything of

Respondent so that a failure to comply would be a violation of

the statute. The undersigned is not persuaded that t h e statute

alone can form the basis of a violation against Respondent's

permit. See Djokic ; Fla. Hi - Lift .

2 5 . Even if section 210.161 could for m the basis for a

violation, the Division stipulates that Respondent is not

required by law to maintain records of retail sales to end

consumers in the State of Idaho. I f Respondent is not required

to maintain records, there is no obligation to produce th em .

The statute cannot be used to penalize Respondent under the

proven facts of this case.

2 6 . Th e Division 's reliance in its PRO on sections

210.09(3), 210.15(1)(g), and 569.004 as authority for inspecting

Respondent's records is misplaced. Those sections authorize the

Division to inspect the records of a permit holder to determine

compliance with the law. Here, the Division admits that the

inspection is only for the purpose of retrieving records for

another state, and not to ensure Respondent's compliance with

regulatory requirements.

2 7 . Finally, the Division relies on section 20.165(9) as

authority to inspect Respondent's records . Al though not cited

in the Administrative Complaint, the statute deals only with the

organization al structure and general authority of the Department

of Business and Professional Regulation and its various

divisi ons. Among other things, paragraph (9)(a) authorizes the

Division "to examine the books and records of licensees."

Notably, t he last sentence of the paragraph provides that an

"authorized employee [of the Division] shall require strict

compliance with th e laws of this state relating to the

transaction of such business." When r ead in context with the

right to examine records, th e statute's purpose is to require

licensees to produce records that relate only to the "laws of

this state," and not records that Florida does not require nor

records that concern dealings with other states.

2 8 . Count II focuses on Respondent's alleged failure to

update the names of persons having a direct or indirect

financial interest in the corporation. The Division conceded at

hearing that there is no statute or rule that requires this

specific information. Aside from this l ack of authority, the

record shows that the ownership of the corporation has not

changed since 1998. Therefore, no violation has occurred.

2 9 . In its P RO, the Division argues that section 210.15(3)

requires a licensee to updat e its corporate owners in order to

maintain a valid permit. Th e statute states in part that

"Cigarette permits . . . shall be valid only for the persons in

whose names [the permit was] issued." While the undersigned

accepts what the statute clearly says, Respondent is not charged

with violating section 210.15(3), and Mr. Conway is not the

permit holder. The persons having a direct or indirect

financial interest in the corporation have not changed since the

initial permit application was filed.

30 . Lacking clear and convincing evidence to sustain them ,

the charges against Respondent should be dismissed. Given this

resolution of the case, Respondent's Motion to Strike Portion of

Pe titioner's Proposed Recommended Order and Petitioner's Motion

for Leave to File Amended Proposed Recommended Order are

rendered moot.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Division of Alc oholic Beverages and

Tobacco enter a final order dismissing the Administrative

Complaint.

DONE AND ENTERED this 29th day of May , 201 5 , in

Tallahassee, Leon County, Florida.

S

D. R. ALEXANDER

Administrative Law Judge

Div ision 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

t his 29th day of May , 201 5 .

ENDNOTE S

1/ The Idaho State Tax Commission is not without a means to

secure the requested relief. In January 2014, or before the

Administrative Complaint was issued, i t notified the Division

agent that it was referring the matter to the Idah o Attorney

General for possible enforcement action against the Idaho

residents . See Pet'r Ex. B, p. 2.

2/ Permit holders must renew their permits on an annual basis

and pay a $50.00 renewal fee to the Division. Respondent has

renewed its permit each ye ar since 1998 on the appropriate

permit renewal form. There is no requirement on the one - page

form that the licensee update the names of its owners if a

change occurs during the preceding year.

In March 2014, Respondent filed an application with the Divi sion

for a second retail location in Tampa. The application form

requires that the applicant list "all officers, directors, and

stockholders." Pursuant to that requirement, Respondent listed

the same individuals as are listed on the 2013 Annual Report.

When the Administrative Complaint was issued, the Tampa office

was unaware that an application for a new retail location had

been filed listing the current principal officers.

COPIES FURNISHED :

Thomas Philpot, Director

Division of Alcoholic Beverages an d Tobacco

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399 - 2202

(eServed)

William N. Spicola, General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 32399 - 2202

(eServed)

Jason D. Borntreger, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 40

Tallahassee, Florida 323 99 - 2202

(eServed)

Rex D. Ware, Esquire

Buchanan Ingerso ll & Rooney PC

101 North Monroe Street , Suite 1090

Ta llahassee, Florida 32301 - 1547

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

1 5 days of the date of this Recommended Order. Any except ions to

this Recommended Order should be filed with the agency that will

render a final order in this matter.