92-003421 Board Of Accountancy vs. Edwin Tunick Status: Closed Recommended Order on Monday, November 14, 1994.

Summary: Financial statements did comport with Generally Accepted Accounting Procedures; no proof of fraud; suspension rather than revoke probation report is agreement factor but not basis for discipline.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, BOARD )

OF ACCOUNTANCY, )

)

Petitioner, )

)

vs. ) CASE NOS. 92-3421

) 92-5696

EDWIN TUNICK, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in the above-styled

cases on May 4, 1994 in Fort Lauderdale, Florida, before J. Stephen Menton, a

duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Charles F. Tunnicliff, Chief Attorney

Department of Business and

Professional Regulation

Northwood Centre, Suite 60

1940 North Monroe Street

Tallahassee, Florida 32399-0792

For Respondent: Walter B. Lebowitz

Qualified Representative

420 Lincoln Road, Suite 238

Miami Beach, Florida 33139

STATEMENT OF THE ISSUE

The issue in these consolidated cases is whether disciplinary action should

be taken against Respondent's license to practice as a certified public

accountant in the state of Florida based upon the alleged violations of Chapter

473, Florida Statutes, set forth in the Amended Administrative Complaints filed

by Petitioner.

PRELIMINARY STATEMENT

On January 23, 1992, the Department of Professional Regulation (the

"Petitioner" or the "Department") 1/ filed an Administrative Complaint (the

"First DOAH Complaint") against Respondent Edwin Tunick charging Respondent with

violating the laws and rules governing the practice of certified public

accounting in Florida. Specifically, the First DOAH Complaint alleges that

Respondent violated Sections 473.323(1)(a), 473.323(1)(g), 473.323(1)(h),

Florida Statutes, and/or Rules 21A-22.001 and 21A-36.001(23), Florida

Administrative Code (these rules have subsequently been renumbered as Rules

61H1-22.001 and 61H1-36.001(23), Florida Administrative Code). Essentially, the

First DOAH Complaint charges Respondent with violating the terms of the

probation imposed by the Department in a prior disciplinary proceeding, DPR Case

Number 63043. Respondent disputed the allegations contained in the First DOAH

Complaint and requested a formal hearing pursuant to Section 120.57, Florida

Statutes. The case was referred to the Division of Administrative Hearings

("DOAH") where it was assigned DOAH Case Number 92-3421.

On July 6, 1992, the Department filed another Administrative Complaint (the

"Second DOAH Complaint") against Respondent. The Second DOAH Complaint alleges

that Respondent violated Sections 473.323(1)(a), 473.323(1)(g), 473.323(1)(h),

Florida Statutes, and/or Rules 21A-22.001, 21A-22.002, and 21A-22.003, Florida

Administrative Code, (these rules have subsequently been renumbered as Rules

61H1-22.001, 61H1-22.002, 61H1-22.003, Florida Administrative Code) in

connection with his preparation of financial statements for American British

Enterprises, Inc. and Federal Restaurants, Inc. Respondent denied the

allegations of the Second DOAH Complaint and requested a formal administrative

hearing pursuant to Section 120.57, Florida Statutes. The case was referred to

DOAH where it was assigned DOAH Case Number 92-5696.

By Order dated October 1, 1992, DOAH Case Numbers 92-3421 and 92-5696 were

consolidated. The Department was subsequently permitted to amend both of the

administrative complaints pursuant to an Order dated November 3, 1993. After

several continuances were granted at the joint request of the parties, the

consolidated cases proceeded to hearing on May 4, 1994.

At the hearing, Petitioner presented the testimony of three (3) witnesses:

Mark S. Einbinder, CPA, who was accepted as an expert in certified public

accounting; Marlyn D. Felsing, CPA, who was accepted as an expert in auditing,

tax and certified public accounting; and Morton Weinberger, CPA, who was

accepted as an expert in auditing and certified public accounting.

At the outset of the hearing, Petitioner submitted a notebook containing

twenty seven (27) premarked exhibits. During the course of the hearing,

Petitioner's Exhibits 1-26 were accepted into evidence without objection.

Petitioner's Exhibit 27 was an affidavit from Martha P. Willis, the deputy

custodian of records for the Florida Board of Accountancy. During the hearing,

Petitioner withdrew that exhibit and offered in its place a deposition of Ms.

Willis taken on April 27, 1994. That exhibit was accepted without objection.

In addition, during the hearing one of Petitioner's witnesses referred to

Statements on Standards for Accounting and Review Services 1, ("SARS-1") Section

.19. Petitioner requested an opportunity to submit a copy of SARS-1 as a late-

filed exhibit. On May 17, 1994, Petitioner submitted a copy of SARS-1 which is

hereby accepted into evidence as Petitioner's Exhibit 28.

Respondent presented the testimony of one witness, Morris I. Hollander,

CPA, who was accepted as an expert in accounting and Securities Exchange

Commission investigations and filings. Respondent offered five (5) exhibits

into evidence, all of which were accepted without objection.

A transcript of the proceedings has been filed. At the conclusion of the

hearing, the parties agreed upon a schedule for submitting proposed recommended

orders. Petitioner timely submitted a proposed recommended order consisting of

proposed findings of fact and conclusions of law. A ruling on each of

Petitioner's proposed findings of fact is included in the Appendix to this

Recommended Order. Respondent filed Respondents [sic] Proposed Final Order on

August 20, 1994. Respondent's proposal consisted of a one page summary of the

proceedings and a proposed conclusion. No proposed findings of fact were

submitted. Accordingly, no rulings are made in connection with Respondent's

submittal.

FINDINGS OF FACT

Based upon the oral and documentary evidence adduced at the final hearing

and the entire record in this proceeding, the following findings of fact are

made:

1. At all times pertinent to these proceedings, Respondent was licensed to

practice as a certified public accountant ("CPA") in the state of Florida,

having been issued license number AC0001638. Respondent's most recent business

address was 224 North Federal Highway, Suite #4, Fort Lauderdale, Florida 33301.

2. Petitioner has presented evidence of a number of Final Orders entered

by the Florida Board of Accountancy (the "Board") against Respondent as a result

of prior disciplinary action initiated by Petitioner. While the records

presented are somewhat confusing and bear several different case numbers, it

appears that, as a result of the various cases, Respondent has been on probation

for approximately the last 12 years.

3. According to the records presented, the first action taken against

Respondent's license is reflected in a Final Order dated December 31, 1981 and

filed on February 8, 1982 in DPR Case Number 0000499. That Final Order

indicates that a stipulation executed by Respondent "as to facts, law and

discipline" was accepted by the Board "with no changes." The stipulation

referenced in that Final Order was not included with the exhibits entered into

evidence in this proceeding. Thus, the "facts, law and discipline" are not of

record in this case.

4. Next, the Board entered a Final Order dated May 11, 1982 and filed on

May 17, 1982 in DPR Case Numbers 16369, 16370 and 15399 imposing a $1,000 fine

against Respondent and suspending his license for eighteen (18) months. An

Amended Final Order dated September 3, 1982 was filed in DPR Case Numbers 16369,

16370 and 15399 on September 15, 1982. That Amended Final Order accepted a

signed stipulation dated July 30, 1982 and modified the Final Order entered on

May 11, 1982. In lieu of the fine and suspension imposed in the May 11 Final

Order, the Amended Final Order placed Respondent on probation for five years

with a requirement for a review of Respondent's practice at the end of each year

by a CPA selected by the Department at Respondent's expense. The independent

certified public accountant was supposed to submit written and oral reports to

the Board and the Department regarding Respondent's compliance with the

applicable statutes and rules governing the accounting profession.

5. The Stipulation which was incorporated into the Amended Final Order

specifically required Respondent to comply "with all provisions of Chapter 455

and 473, Florida Statutes, and the rules promulgated pursuant thereto." The

Stipulation provided in part as follows:

D. The Board shall determine at a public

hearing whether [Respondent] has complied with

Chapters 455 and 473, F.S. and the rules

promulgated thereto.

E. The Board may restrict or prohibit

[Respondent's] practice of public accountancy

during his period of probation as it deems

necessary to protect the public safety and welfare.

F. It is clearly understood and agreed that,

in the event the DEPARTMENT, the BOARD or the

BOARD'S Probable Cause Panel find sufficient

evidence to believe reasonable cause exists

that [Respondent] has violated any of the

conditions of probation as outlined above,

a notice of said violation shall be sent to

[Respondent], by certified mail, setting forth

the nature of the alleged violation and an

emergency hearing will be held by the BOARD

or the BOARD'S Probable Cause Panel, and upon

a find [sic] of probable cause, [Respondent's]

probation may be vacated and his license to

practice accountancy in the State of Florida,

subject to automatic suspension, with further

disciplinary proceedings, pursuant to Chapters

455 and 473, F.S. If Respondent has not complied

with all the terms and conditions of this joint

stipulation and final order of the BOARD, the

BOARD shall enter an Order imposing such further

terms and conditions of probation pursuant to

the statutory powers set forth in 473.323(1)(3),

F.S., and shall further cause said matter to be

referred to the BOARD'S Probable Cause Panel or

such other jurisdictional authority as may be

established for purposes of determining probable

cause and initiating further administrative

and/or judicial action against the Respondent.

* * *

5. [Respondent] expressly waives all further

procedural steps and expressly waives all rights

to seek judicial review of, or to otherwise

challenge or contest the validity of a joint

stipulation of facts, conclusions of law and

imposition of discipline, and the final order

of the BOARD incorporating said stipulation.

6. At a meeting on January 21, 1985, the Florida Board of Accountancy

reviewed a report from the consultant hired to conduct the inspection and review

of Respondent's public accountancy practice in accordance with the terms of the

Amended Final Order entered on September 15, 1982. Based upon its review of the

consultant's report, the Board imposed an additional condition of probation that

all audits, reviews and compilations prepared by Respondent were to be reviewed

prior to their issuance by a CPA selected by Respondent at Respondent's expense.

This additional aspect of Respondent's probation was incorporated in a Final

Order dated February 15, 1985 and entered on February 28, 1985 in DPR Case

Number 0016369.

7. In an Administrative Complaint dated December 4, 1985, Petitioner

charged Respondent with violating the terms of his probation by issuing

compilations without prior review by another CPA. This Administrative Complaint

was assigned DPR Case Number 0063064. As reflected in a Final Order dated

February 23, 1987 and filed on March 10, 1987 in DPR Case Number 0063064,

Respondent's probation was extended until September 1988 based upon a signed

Stipulation dated November 16, 1986 which was accepted by the Board during its

meeting on January 30, 1987.

8. As a result of the March 10, 1987 Final Order extending Respondent's

probation, Respondent was required to continue to obtain review and approval by

an independent CPA prior to issuance of any audited financial statements,

reviewed financial statements and compiled financial statements and related

accountant's reports.

9. In an Administrative Complaint dated December 7, 1989 in DPR Case

Number 0063064, Petitioner charged Respondent with violating Section

473.323(1)(g), Florida Statutes, as a result of his issuance of financial

statements without prior review by a CPA as required by the previous Final

Orders entered against Respondent. The Complaint did not specify any date(s) or

specific financial statements involved.

10. At a meeting on February 22, 1990, the Board accepted a Counter-

Settlement Stipulation signed by Respondent on March 26, 1990 in Case Number

0063064. The Board entered a Final Order dated April 4, 1990 and filed on April

10, 1990 confirming its acceptance of the Counter-Stipulation. 2/ The Counter-

Settlement Stipulation incorporated in the April 1990 Final Order extended

Respondent's probation "until the terms of probation have been met." The terms

of probation were stated to be:

A. That the Respondent shall not violate

the provisions of Chapters 455 or 473, Florida

Statutes or the rules promulgated pursuant

thereto or the terms and conditions of this

joint stipulation.

B. A Department of Professional Regulation

Certified Public Accountant consultant shall

interview the Respondent's clients to determine

the type of work product they are receiving from

the Respondent.

C. A Department of Professional Regulation

Certified Public Accountant Consultant shall

conduct a review of the Respondent's tax practice

along with work papers at the Respondent's expense.

The Counter-Stipulation further provided that:

5. Respondent and the Department fully understand

that this Stipulation, and the subsequent Final Order

incorporating same, will not in any way preclude

additional proceedings by the Board and/or Department

against the Respondent for acts or omissions not

specifically detailed in the investigative findings

of the Department upon which a finding of probable

cause was made.

6. Respondent and the Department expressly waive

all further procedural steps, and expressively waives

[sic] all rights to seek judicial review of or to

otherwise challenge or contest the validity of the

joint stipulation and the Final Order of the Board,

if said stipulation is accepted by the Board and

incorporated in the Final Order....

11. In early 1991, Marlyn Felsing, a CPA retained as a consultant to

conduct a review of Respondent's work pursuant to the terms of his probation,

met with Respondent and reviewed financial statements, work papers and various

tax returns prepared by Respondent for his clients. Felsing reviewed the

financial statements and/or business tax returns for approximately four of

Respondent's business clients and reviewed the personal income tax returns for

approximately three of Respondent's clients who were business owners. He also

reviewed all of the related work papers and discussed his review with

Respondent.

12. Felsing prepared a report dated April 23, 1991 detailing several

problems and deficiencies he found during his review. A copy of Felsing's

report was offered into evidence in this case and he testified at the hearing

regarding many of those findings. This evidence was offered in support of the

charges in the First DOAH Complaint (DOAH Case Number 92-3421) as amended.

Neither Felsing's report nor any of his findings are specifically alleged in the

First DOAH Complaint. That Complaint referenced a probation report which

"revealed deficiencies which were brought before the Probable Cause Panel, and

it was determined that Respondent had violated the terms of the Final Order."

As noted in the Preliminary Statement above, the First DOAH Complaint was filed

on January 23, 1992.

13. As reflected in a Final Order dated June 19, 1991, and filed on July

1, 1991 in DPR Case Number 0063064, the Board reviewed a probation report during

its meeting on May 21, 1991 and approved a settlement stipulation extending the

probation imposed by the April 4, 1990 Final Order for a period of one (1) year.

The settlement stipulation referenced in this July 1, 1991 Order has not been

offered into evidence in this proceeding.

14. As best can be determined from the evidence presented in this case,

the Final Order entered in DPR Case Number 0063064 on July 1, 1991, was entered

after review of the probation report prepared by Marlyn Felsing on April 23,

1991. Thus, it appears that the Board has already taken final action with

respect to the deficiencies found in Felsing's report.

15. During the Board Meeting on May 21, 1991, the Board also considered

whether disciplinary action should be taken against Respondent with respect to

another Administrative Complaint filed against Respondent on January 7, 1991.

That new Administrative Complaint was assigned DPR Case Number 95979 and

contained allegations that Respondent "was associated with personal financial

statements for Michael Raybeck which did not meet the appropriate standards."

16. As reflected in a Final Order dated June 19, 1991 and filed on July 1,

1991 in DPR Case Number 95979, the Board during its May 21, 1991 meeting

accepted a settlement stipulation signed by Respondent on April 15, 1991. In

that settlement stipulation, Respondent admitted the allegations in the

Administrative Complaint in DPR Case Number 95979. The Settlement Stipulation

provided as follows:

* * *

Stipulated Disposition

2. Respondent's license to practice public

accounting is currently on probation in case

number 63064. Probation in this case shall

run concurrently with the probation in case

number 63064. The same CPA consultant who is

assigned to review the Respondent's practice

in Case Number 63064 shall also review the

personal financial statements the Respondent's

office prepares. The consultant shall also

review the Respondent's records to determine

whether he is accepting commissions. These

additional terms shall also be paid for by the

Respondent.

* * *

5. Respondent and the Department fully under-

stand that this Stipulation, and the subsequent

Final Order incorporating same, will not in any

way preclude additional proceedings by the Board

and/or Department against the Respondent for acts

or omissions not specifically detained [sic] in

the investigative findings of the Department upon

which a finding of probable cause was made.

* * *

8. This Settlement Stipulation is [sic] an

admission of any liability on behalf of the

Respondent and is being entered into merely to

resolve a dispute. It shall not be admissible

in any court of law or any subsequent adminis-

trative proceeding for any purpose.

17. As reflected in an Order dated September 29, 1992 and filed on

September 30, 1992 in DPR Case Number 90-95979, the Board reviewed a probation

report during its September 24, 1992 meeting and determined "that the probation

imposed upon Respondent by the Final Order dated July 1, 1991, shall be extended

and/or modified as follows: extend probation and defer action until Case Number

90-13254 is resolved." Case Number 90-13254 is the Second DOAH Complaint, which

was filed on July 6, 1992 (DOAH Case Number 92-5696). The Second DOAH Complaint

includes specific allegations against Respondent based upon his purported

preparation of misleading financial statements for American British Enterprises,

Inc. and Federal Restaurants, Inc.

The Second DOAH Complaint

18. The evidence presented in this case established that Respondent

provided a number of accounting services to American British Enterprises, Inc.

and Federal Restaurants, Inc. The exact nature and scope of the services

provided by Respondent are not entirely clear.

19. Respondent's records of his engagement include a balance sheet of

Federal Restaurants as of August 17, 1987; Consolidated Financial Statements of

American British Enterprises, Inc. as of August 25, 1987; Interim Compiled

Financial Statements, American British Enterprises, March 31, 1988; Financial

Statements of American British Enterprises, Inc. November 30, 1988; and

Financial Statements of American British Enterprises, Inc., December 31, 1988.

20. The Second DOAH Complaint, as amended, alleges that the financial

statements referenced in paragraph 19 above were included in due diligence

packages for American British Enterprises and were distributed to broker-

dealers. No persuasive evidence was presented regarding any such distribution.

21. The Second DOAH Complaint also alleges that "Respondent distributed

misleading financial statements to brokers with the purpose of driving up the

price of the stock so they could sell shares they controlled at a profit." No

evidence was presented to support this allegation.

22. Respondent's counsel suggested that all of the financial statements in

question were simply drafts and were not intended to be issued. The evidence

established that Respondent executed a letter in connection with the August 17,

1987 Balance Sheet of Federal Restaurants which provided as follows:

I have examined the accompanying Balance Sheet

of Federal Restaurants, Inc., as of August 17,

1987 whose sole Assets are Cash and [sic]

Purchase Deposit. My examination was made in

accordance with standards established by the

American Institute of Certified Public Accountants

and accordingly, included such procedures as I

considered necessary in the circumstances.

In my opinion the enclosed Balance Sheet represents

the financial position of Federal Restaurants, Inc.,

as of August 17, 1987 in accordance with generally

accepted accounting principals.

Similarly, Respondent's records include a signed letter to the Board of

Directors of American British Enterprises in connection with the August 28, 1987

Consolidated Balance Sheet. That letter provides that Respondent conducted an

examination "in accordance with generally accepted auditing standards and

accordingly, included such tests of the accounting records and such other

auditing procedures as I considered necessary in the circumstances." The letter

further opines that the financial statements "present fairly the Consolidated

Financial Position...[of the companies] in conformity with generally accepted

accounting principals."

Respondent's records also include a signed letter regarding both the November,

1988 and December, 1988 Financial Statements for American British Enterprises

indicating that Respondent had conducted an audit in accordance with generally

accepted auditing standards and that, in his opinion, the financial statements

"present fairly, in all material respects, the financial position" of the

company as of the stated date. There is no indication on any of these financial

statements that they were drafts that were not to be issued.

23. Aside from the letters noted in paragraph 22, the only evidence

presented that any of the financial statements listed in paragraph 19 above were

issued was the testimony of one of Petitioner's experts who suggested that the

statements had to have been issued since they were found in the SEC's files.

However, no direct evidence was presented to establish that any investors or

potential investors received the financial statements. Moreover, no evidence

was presented that any such investors suffered a loss as a result of their

reliance upon the financial statements.

24. Certified public accountants are required to utilize specific

guidelines in the performance of accounting services. Those guidelines are

codified in the Statements on Standards for Accounting and Review Services

("SSARS"). The failure to abide by the SSARS guidelines constitutes performance

below acceptable accounting standards.

25. Petitioner has presented testimony from two experts regarding the

deficiencies in the various financial statements referenced in paragraph 19

above. Many of the problems cited by Petitioner's experts relate to alleged

deficiencies in Respondent's work papers. Respondent's expert has challenged

some of those alleged deficiencies. Because the work papers have not been

offered into evidence, it is impossible to resolve some of the conflicts in the

experts' opinions. Nonetheless, the evidence was sufficient to clearly and

convincingly demonstrate that Respondent's work was not in accordance with

generally accepted accounting principals in several respects and the financial

reports identified in paragraph 19 failed to comply with the SSARS in several

ways.

26. The August 17, 1987 balance sheet of Federal Restaurants indicates

that the only assets of the company were cash and a purchase deposit on a

contract to acquire a restaurant.

27. The balance sheet of Federal Restaurants as of August 17, 1987 has no

notes to it. Accounting Principals Board ("APB") Opinion 22 provides that a

description of all significant accounting policies of the reporting entities

should be included as an integral part of the financial statements. In this

particular instance, the omission of accounting policies is of minor importance

since the balance sheet only reflects two assets: cash being held in escrow and

a deposit on a contract to purchase a restaurant (the "Purchase Contract"). As

discussed below, none of the financial statements prepared by Respondent

disclosed the terms of the Purchase Contract. Furthermore, it appears from

other documents in Respondent's records that the corporation is wholly owned by

American British Enterprises and/or is jointly controlled, but there is no

disclosure of that relationship in the financial statements. These omissions

are significant deficiencies which have not been explained.

28. Statement of Auditing Standards ("SAS") 41 requires work papers to

support the conclusions of an audit. According to SAS 41, the work papers

constitute the principal record of the work that the auditor has done and the

conclusions that he has reached concerning significant matters. Respondent's

records do not include work papers for the August 17, 1987 audit.

29. SAS 22 provides guidance to an independent auditor making an

examination in accordance with generally accepted auditing standards on the

considerations and procedures applicable to planning and supervision, including

preparing an audit program, obtaining knowledge of the entity's business, and

dealing with differences of opinion among firm personnel. While there is

conflicting evidence as to what was included in Respondent's work papers, the

evidence was clear that Respondent's records for the August 17, 1987 audit do

not comply with the requirements of SAS 22, because there was no clearly

identified planning memos or audit programs. In fact, there is not even an

engagement letter.

30. SAS 19 requires an independent auditor to obtain certain written

representations from management as part of an examination made in accordance

with generally accepted auditing standards and provides guidance concerning the

representations to be obtained. Petitioner's experts contend that Respondent's

work papers do not include an appropriate representation letter from management

for any of the Financial Statements. Respondent's expert contends there was

such a letter with respect to the August 27, 1987 Consolidated Financial

Statements. While it is not clear what is contained in the records, it is clear

that the records do not clarify conflicting documentation in Respondent's work

papers regarding the relationship between Federal Restaurants and American

British Enterprises. Furthermore, Respondent's records do not include a clear

statement from management regarding the terms of the Purchase Contract and the

apparent contingencies involved with that Contract. Consequently, Respondent

has failed to comply with SAS 19 and SAS 45 (which addresses related-party

disclosures).

31. The August 27, 1987 Consolidated Financial Statements are not properly

consolidated in accordance with Accounting Research Bulletin ("ARB") 51. In

addition, the consolidated Financial Statements do not include the disclosures

required by Accounting Principals Board Opinion 22. Respondent's expert

contends that the statements were mistakenly entitled and they should have been

captioned as "combined" rather than consolidated financial statements. Even if

this after the fact justification is accepted, the statements do not adequately

disclose the relationship between the companies.

32. Respondent's expert suggests that the August 25 Consolidated Financial

Statement for American British Enterprises and Federal Restaurants reflects a

voidable acquisition of Federal Restaurants by American British Enterprises. If

this interpretation is accepted, the August 17, 1987 Balance Sheet for Federal

Restaurants was not necessarily misleading for failure to disclose its

relationship with American British Enterprises. However, the August 25, 1987

Consolidated Financial Statements are incomplete since the transaction is not

fully explained. Moreover, there is no disclosure that the companies were

apparently under common control or ownership.

33. With respect to the November, 1988 balance sheet of American British

Enterprises, the evidence established that there was a discrepancy between the

amount reflected in the financial statement for a note receivable which was the

major asset of the corporation and the confirmation in the work papers regarding

that asset. While this discrepancy may have been due to a discount and/or

accrued interest, no explanation is provided. The discrepancy constitutes a

violation of SAS 1, Section 331, which addresses the appropriate background

information for receivables, and SAS 1, Section 530 which addresses the dating

of the auditor's report. If the discrepancy is due to a discount, Respondent

failed to comply with APB Opinion 6, paragraph 14 which requires unearned

discounts to be shown as a deduction from the related receivable and/or APB

Opinion 21, paragraph 16 which provides for the discount or premium to be

reported on the balance sheet as a direct deduction from or addition to the face

amount of the note. The work papers for the November audit do not include a

reconciliation between the 1982 financial statements of the predecessor

corporation and the 1987 statements. There is no documentation of efforts to

communicate with the prior auditor nor is there any discussion of the

consistency of application of accounting principals between the two statements.

As a consequence, the statements do not conform with SAS 7 which addresses

communications with a prior auditor. The work papers fail to reflect any audit

work being performed on the appraisal for the equipment collateralizing the

note. In addition, the work papers include a confirmation from the stock

transfer agent that doesn't agree with the number of shares reflected on the

financial statement. There is no explanation for this discrepancy nor is there

any clear indication of the audit work performed. The financial statements also

include a footnote referencing a joint venture agreement. Respondent's records

do not include any evidence of audit work performed with respect to this venture

agreement.

34. The deficiencies noted in paragraph 33 also appear in the December 31,

1988 financial statements for American British Enterprises. Furthermore,

Respondent's records do not contain an audit file for this December statement.

35. The November 30, 1988 and the December 31, 1988 audits of American

British Enterprises do not contain a segregation between current and noncurrent

assets. This deficiency is relatively insignificant since the company was

essentially just a holding company. However, it does constitute a violation of

ARB 43. Similarly, the cash flows in the financial statements were not

presented in the appropriate format or style required by Statement of Financial

Accounting Standards 95. However, it appears that all of the necessary

information was present.

36. The deficiencies found in the financial statements prepared for

Federal Restaurants and American British Enterprises constitute negligence on

the Respondent's part and establish a failure to exercise professional

competence and due professional care in the performance of accounting services.

37. On or about June 14, 1990, the Securities and Exchange Commission

("SEC") filed a civil lawsuit against Respondent and three other defendants

alleging the preparation of false and misleading financial statements for

American British Enterprises, Inc. On August 5, 1991, Respondent executed a

Consent of Edwin Tunick to the Entry of a Final Judgement of Permanent

Injunction in the civil action initiated by the SEC. On September 2, 1991, a

Final Judgement of Permanent Injunction as to Edwin Tunick was entered by the

United States District Court for the Southern District of Florida (Fort

Lauderdale Division) in Case Number 90-6483CIV-ZLOCH. That Final Judgment

"permanently restrained and enjoined" Respondent from violating Section 17(a) of

the Securities Act, 15 U.S.C. 77q(a) and Section 10(b) of the Exchange Act, 15

U.S.C 78 (j)b and Rule 10b-5 promulgated thereunder. The Final Judgment did not

include any specific findings of any violations of the federal securities laws.

CONCLUSIONS OF LAW

38. The Division of Administrative Hearings has jurisdiction over the

parties to and the subject matter of this proceeding pursuant to Sections

120.57(1) and 473.323(3), Florida Statutes.

39. Pursuant to Section 473.323, Florida Statutes, Petitioner is

authorized to suspend, revoke, and/or impose an administrative fine not to

exceed a $1,000 if it finds that a licensed certified public accountant has

violated any of the provisions of that Statute.

40. Section 473.323, Florida Statutes, provides, in pertinent part:

(1) The following acts constitute grounds

for which the disciplinary actions in subsection

(3) may be taken:

(a) Violation of any provision of S. 473.317,

s. 455.227(1), or any other provision of this act;

* * *

(e) Making or filing a report or record which

the licensee knows to be false, willfully failing

to file a report or record required by state law...

Such reports or records shall include only those

which are signed in the capacity of a certified

public accountant;

* * *

(g) Upon proof that the licensee is guilty of

fraud or deceit, or of negligence, incompetency,

or misconduct, in the practice of public accounting;

(h) Violation of any rule adopted pursuant to this

act or Chapter 455;

* * *

(k) Performance of any fraudulent act while holding

a license to practice public accounting;

* * *

(3) When the board finds any licensee guilty of any

of the grounds set forth in subsection (1), it may

enter an order imposing one or more of the following

penalties:

* * *

(b) Revocation or suspension of a license.

(c) Imposition of an administrative fine not to

exceed $1,000 for each count or separate offense.

(d) Issuance of a reprimand.

(e) Placement of the licensee on probation for a

period of time and subject to such conditions as

the board may specify, including requiring the

licensee to attend continuing education courses

or to work under the supervision of another licensee.

(f) Restriction of the authorized scope of practice

by the certified public accountant.

41. Petitioner has the burden of proof in this license disciplinary

proceeding and, since Petitioner has requested revocation or suspension of

Respondent's license, the allegations against Respondent must be proven by clear

and convincing evidence. See, Ferris v. Turlington, 510 So.2d 292 (Fla. 1987);

Pic N' Save v. Department of Business Regulation, 601 So.2d 245 (Fla. 1st DCA

1992); Munch v. Department of Professional Regulation, 595 So.2d 1136 (Fla. 1st

DCA 1992); Newberry v. Florida Department of Law Enforcement, 585 So.2d 500

(Fla. 3d DCA 1991). "The evidence must be of such weight that it produces in

the mind of the trier of fact a firm belief or conviction, without hesitancy, as

to the truth of the allegations sought to be established." Slomowitz v. Walker,

429 So.2d 797, 800 (Fla. 4th DCA 1983).

42. As noted in Smith v. Department of Health and Rehabilitative Services,

522 So.2d 956 (Fla. 1st DCA 1988):

"clear and convincing evidence" is an intermediate

standard of proof, more than the "preponderance of

the evidence" standard used in most civil cases,

and less than the "beyond a reasonable doubt"

standard used in criminal cases. [citations omitted]

43. Disciplinary action may be based only upon the violations specifically

alleged in the Administrative Complaint. See, Kinney v. Department of State,

501 So.2d 129, 133 (Fla. 5th DCA 1987); Hunter v. Department of Professional

Regulation, 458 So.2d 842, 844 (Fla. 2d DCA 1984).

44. In the First DOAH Complaint, as amended, Petitioner charges Respondent

with violating several sections of Section 473.323(1), Florida Statutes, as well

as Rules 21A-22.0001 and 21A-36.0001(23), Florida Administrative Code. All of

those alleged violations are based upon the assertion that Respondent violated

his probation. The First DOAH Complaint does not include any specific

incidences which purportedly constitute a violation of probation. Moreover, it

appears that the Board has already taken final action with respect to the

deficiencies contained in Marlyn Felsing's April 23, 1991 report. Specifically,

the July 1, 1991 Final Order in DPR Case Number 0063064 extended Respondent's

probation for an additional year. That Final Order was entered after the Board

reviewed a probation report during its May 1991 meeting. While the probation

report is not identified, indications are, and Petitioner has not disputed, that

the Board was referring to Felsing's April 23 Report. Petitioner has provided

no explanation or justification for rescinding that Final Order and imposing

some additional penalty based upon the same violations considered by the Board

when it extended Respondent's probation. The July 1991 Final Order references a

Settlement Stipulation which has not been offered into evidence in this

proceeding. Petitioner has not alleged a breach of that Settlement Stipulation.

In sum, because the First DOAH Complaint fails to delineate any specific

violations and because it appears that all of the deficiencies cited in Marlyn

Felsing's report and testimony were already considered by the Board when it

entered the Final Order on July 1, 1991 in DPR Case Number 0063064, it is

concluded that the First DOAH Complaint should be dismissed.

45. The Second DOAH Complaint, as amended, charges Respondent with

violating Sections 473.323(1)(a), (e), (g), (h), and (k) Florida Statutes.

These statutory provisions are set forth above.

46. No evidence was presented that Respondent knowingly or willfully filed

any misleading reports or engaged in fraudulent conduct. Thus, the evidence was

insufficient to establish that Respondent violated subsections (e) and (k).

47. Rule 21A-22, Florida Administrative Code, sets forth the competence

and technical standards for licensees practicing public accounting during the

time period in question. 3/ Subsections 22.001-.004 generally require a

certified public accountant to exercise professional competence and due

professional care in the performance of any accounting engagement and to comply

with the pronouncements and standards published by the American Institute of

Certified Public Accountants. Any deviation from these standards should be

specifically justified. Petitioner has established that Respondent violated

Rule 21A-22.001, Florida Administrative Code, which provides in pertinent part

that a licensee shall comply with the following general standards and must

justify any departure therefrom: undertake only those engagements which he or

his firm can reasonably expect to complete with professional confidence;

exercise due professional care in the performance of an engagement; adequately

plan and supervise the engagement; and obtain sufficient relevant data to afford

a reasonable basis for conclusions or recommendations in relation to an

engagement. Petitioner has also established that Respondent violated Rule 21A-

22.002, Florida Administrative Code, which provides in pertinent part that a

licensee shall not permit his name to be associated with financial statements in

such a manner as to imply that he is acting as an independent certified public

accountant unless he has complied with the applicable generally accepted

auditing standards. Finally, Petitioner has established that Respondent

violated Rule 21A-22.003, Florida Administrative Code, which states that a

"licensee shall not express an opinion that financial statements are presented

in conformity with generally accepted accounting principals if such statements

contain any departure from any such principal which has a material effect on the

statements taken as a whole, unless he can demonstrate that due to unusual

circumstances the financial statements would otherwise have been misleading. In

such cases his report must describe the departure, the approximate affects

thereof, if practical, and the reasons why compliance with the principal would

result in a misleading statement."

48. As a consequence of the violations noted above, it is concluded that

Petitioner has established by clear and convincing evidence that Respondent

violated Section 473.323(1)(g), Florida Statutes, as a result of negligence in

the practice of public accounting and Section 473.323(1)(h), Florida Statutes,

by violating a rule adopted pursuant to Chapter 473.

49. Based upon the violations alleged in the First and Second DOAH

complaints, Petitioner has requested revocation of Respondent's license. Rule

61H1-36.004, Florida Administrative Code, sets forth the disciplinary guidelines

and the range of penalties for violations of Chapter 473, Florida Statutes. The

penalties for a violation of Section 473.323(1)(g), Florida Statutes, include

revocation, but apparently only if fraud or deceit is involved. As noted above,

the evidence was insufficient to establish that Respondent engaged in fraudulent

conduct.

50. For negligence or misconduct involving technical standards, Rule 61H1-

36.004(2)(h) provides a minimum penalty of a letter of guidance and a maximum

penalty of a reprimand and one (1) year probation.

51. The aggravating circumstances that can be considered in imposing a

penalty in excess of the guidelines are set forth in Rule 61H1-36.004(3)(a).

Those circumstances include the licensee's prior disciplinary history and the

magnitude and scope of the engagement and the damage inflicted upon the general

public by the licensee's misfeasance.

52. In this case, there is an extensive history of prior disciplinary

action against Respondent. In addition, while the evidence presented regarding

the First DOAH Complaint can not properly serve as an independent basis for the

imposition of penalties in this proceeding, that evidence does raise serious

concerns regarding Respondent's ability to practice public accounting with a

minimum degree of professional proficiency.

53. On the other hand, permanent revocation of a professional license is a

harsh punishment reserved for egregious cases where rehabilitation is

improbable. See, The Florida Bar v. Davis, 361 So.2d 159 (Fla. 1978).

Petitioner has not properly presented in this proceeding a sufficient basis for

the extreme penalty which it is seeking. No evidence has been presented that

any member of the public has ever suffered a loss as a result of Respondent's

professional activities nor has any evidence been presented of any fraudulent or

deliberately misleading actions taken by Respondent. As noted above, Respondent

can only be disciplined in this proceeding for the allegations set forth in the

Second DOAH Complaint. Respondent's prior disciplinary record justifies a

substantial increase in the penalty, but revocation is not warranted based upon

the facts properly presented in this case.

RECOMMENDATION

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

RECOMMENDED that the Board of Accountancy enter a Final Order dismissing

the Administrative Complaint filed in DOAH Case Number 92-3421 (DPR Case Number

91-09729); finding Respondent guilty of violating Sections 473.323(1)(a), (g)

and (h), Florida Statutes, and Rules 21A-22.0001, 21A-22.0002, and 21A-22.003,

Florida Administrative Code, as alleged in the Administrative Complaint filed in

DOAH Case Number 92-5696 (DPR Case Number 90-13254) and dismissing the other

charges in that Complaint. As penalty for the violations, Respondent should be

fined $1,000, and his license should be suspended for three years. Before

resuming practice, Respondent should be required to complete such mandatory

continuing education courses as may be mandated by the Board and he should be

placed on probation for three (3) years.

DONE and ENTERED this 14th day of November, 1994, at Tallahassee, Florida.

___________________________________

J. STEPHEN MENTON

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 14th day of November, 1994.

ENDNOTES

1/ Subsequent to the filing of the Administrative Complaint, the Department of

Professional Regulation was merged with the Department of Business Regulation

and is currently known as the Department of Business and Professional

Regulation.

2/ Apparently through inadvertence, the Final Order was mistakenly filed a

second time on June 21, 1990.

3/ This Rule has subsequently been renumbered as Rule 61H1-22.

APPENDIX TO RECOMMENDED ORDER

DOAH CASE NO. 92-3421 and 92-5696

Only Petitioner submitted proposed findings of fact. The following rulings

are made with respect to the proposed findings of fact submitted by Petitioner.

Petitioner's proposed findings of fact

1. Adopted in substance in Findings of Fact 1.

2. Adopted in substance in Findings of Fact 1.

3-5. Adopted in substance in Findings of Fact 36.

6-7. Rejected as unnecessary.

8. Subordinate to Findings of Fact 18 and 19.

9. Rejected as unnecessary.

10. Rejected as a summary of testimony rather than a finding of fact. The

subject matter is addressed in Findings of Fact 27.

11. Adopted in substance in Findings of Fact 27.

12-21. Rejected as summaries of testimony rather than findings of fact.

The subject matter of these proposals is addressed in Findings of Fact 26-35.

22. Adopted in substance in Findings of Fact 30.

23-24. Rejected as summaries of testimony rather than findings of fact.

The subject matter of these proposals is addressed in Findings of Fact 28 and

29.

25. Adopted in substance in Findings of Fact 28.

26-29. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 28 and

29.

30. Adopted in substance in Findings of Fact 29.

31-35. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 28

through 30 and 36.

36. Subordinate to Findings of Fact 18 and 19.

37-38. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 25, 31

and 32.

39. Adopted in substance in Findings of Fact 31.

40-41. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 31 and

32.

42. Adopted in substance in Findings of Fact 29.

43-67. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 22-23,

25, 27, 30, 32 and 36.

68. Subordinate to Findings of Fact 18 and 19.

69-70. Subordinate to Findings of Fact 22 and 23.

71. Subordinate to Findings of Fact 18 and 19.

72. Rejected as unnecessary.

73. Rejected as vague and unnecessary.

74-76. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 33 and

35.

77. Rejected as vague and ambiguous. The subject matter is addressed in

Findings of Fact 33.

78. Rejected as a summary of testimony rather than Finding of Fact. The

subject matter of this proposal is addressed in Findings of Fact 33.

79. Adopted in substance in Findings of Fact 33.

80-83. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 33.

83-84. Adopted in substance in Findings of Fact 33.

85. Adopted in substance in Findings of Fact 33.

86. Rejected as a summary of testimony rather than Finding of Fact. The

subject matter of this proposal is addressed in Findings of Fact 33.

87. Rejected as unnecessary.

88-90. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is subordinate to Findings of Fact 22 and

23.

91. Adopted in substance in Findings of Fact 22.

92. Rejected as a summary of testimony rather than Finding of Fact. The

subject matter of this proposal is addressed in Findings of Fact 22.

93. Subordinate to Findings of Fact 18 and 19.

94-97. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 34.

98. Rejected as unnecessary.

99. Rejected as unnecessary.

100. Rejected as a summary of testimony rather than Finding of Fact. The

subject matter of this proposal is addressed in Findings of Fact 33.

101. Adopted in substance in Findings of Fact 33.

102-103. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 33.

104. Adopted in substance in Findings of Fact 33.

105. Rejected as a summary of testimony rather than Finding of Fact. The

subject matter of this proposal is addressed in Findings of Fact 33.

106-108. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 33.

109-114. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is addressed in Findings of Fact 36.

115. Adopted in substance in Findings of Fact 4.

116. Adopted in substance in Findings of Fact 4.

117. Adopted in substance in Findings of Fact 6.

118. Adopted in substance in Findings of Fact 7 and 8.

119. Adopted in substance in Findings of Fact 10.

120. Adopted in substance in Findings of Fact 13.

121. Adopted in substance in Findings of Fact 11.

122. Adopted in substance in Findings of Fact 12.

123-129. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is unnecessary in view of Findings of Fact

13 and 14.

130. Rejected as unnecessary.

131-133. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is unnecessary in view of Findings of Fact

13 and 14.

134. Rejected as unnecessary.

135-140. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is unnecessary in view of Findings of Fact

13 and 14.

141. Rejected as unnecessary.

142. Rejected as unnecessary.

143. Rejected as unnecessary.

144-148. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is unnecessary in view of Findings of Fact

13 and 14.

149. Rejected as unnecessary.

150. Rejected as unnecessary.

151-155. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is unnecessary in view of Findings of Fact

13 and 14.

156. Rejected as unnecessary.

157-164. Rejected as summaries of testimony rather than Findings of Fact.

The subject matter of these proposals is unnecessary in view of Findings of Fact

13 and 14.

COPIES FURNISHED:

Jack McRay, General Counsel

Department of Business and Professional

Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Martha Willis, Executive Director

Board of Accountancy

4001 Northwest 43rd Street Suite 16

Gainesville, Florida 32606

Charles F. Tunnicliff, Chief Attorney

Department of Business and Professional

Regulation

Northwood Centre, Suite 60

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Walter B. Lebowitz

420 Lincoln Road, Suite 238

Miami Beach, Florida 33139

Edwin Tunick

224 North Federal Highway #4

Fort Lauderdale, Florida 33301

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended

Order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should contact the agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this Recommended Order. Any exceptions to this Recommended Order should be

filed with the agency that will issue the final order in this case.