92-005344 Department Of Agriculture And Consumer Services vs. United Rainbow Foundation, Inc., D/B/A Children's Cancer Society Status: Closed Recommended Order on Monday, April 26, 1993.

Summary: $32,000 is application penalty where organization willfully violated law by soliciting contributions prior to registration with Division of Consumer Services.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF AGRICULTURE AND )

CONSUMER SERVICES, )

)

Petitioner, )

)

vs. ) CASE NO. 92-5344

)

UNITED RAINBOW FOUNDATION, INC., )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly

designated Hearing Officer, Mary Clark, held a formal hearing, in the above-

styled case on March 1, 1993, by telephone conference as stipulated by the

parties.

APPEARANCES

For Petitioner: Robert G. Worley, Esquire

Room 515, Mayo Building

Tallahassee, Florida 32399-0800

For Respondent: John P. Holsonback, Esquire

Melendi, Gibbons & Holsonback, P.A.

408 East Madison

Tampa, Florida 33602

STATEMENT OF THE ISSUES

An administrative complaint and first amended administrative complaint

allege that Respondent violated Section 496.405, F.S. (1991) by soliciting

contributions as a charitable organization on several occasions prior to

approval of its registration statement by the Division of Consumer Services.

The parties have stipulated that the violations occurred and further

stipulated that the remaining issue for resolution is an appropriate penalty.

PRELIMINARY STATEMENT

The initial administrative complaint is dated July 30, 1992, and was issued

at the same time as a separate notice of denial of Respondent's request for

registration approval. Timely petitions for hearing were filed and the

proceeding on registration denial was conducted under the expedited scheduled

provided in Section 496.405(7), F.S.

The outcome of the registration denial proceeding was a recommended order

entered August 17, 1992, recommending that registration be approved, by default.

The agency's final order provided for registration approval retroactive to July

17, 1992.

In this instant action under the administrative complaint the agency is

seeking administrative fines against the Respondent, United Rainbow Foundation,

Inc. (URF).

A stipulation of facts was filed by the parties on February 12, 1993, and

in a prehearing stipulation filed on February 24, 1993, the parties requested

that the hearing officer determine an appropriate fine, if any, on the basis of

the record already established in DOAH case #92-4817 (the registration denial

proceeding) and on the parties' stipulations.

Oral argument was conducted by telephone on March 1, 1993. Petitioner's

motion for leave to file an amended administrative complaint was granted. The

amended complaint conforms the dates of solicitations to the parties'

stipulation and deletes reference to alleged violations after the July 17, 1992

retroactive registration approval.

The transcript of proceeding in DOAH case #92-4817 was filed on March 8,

1993 and the parties' proposed recommended orders were filed on March 8 and

March 15, 1993.

The proposed findings of fact by each party are substantially adopted here

as they are derived from the stipulated facts filed on February 12, 1993, and on

facts found in DOAH case #92-4817.

FINDINGS OF FACT

1. Petitioner, United Rainbow Foundation, Inc. (URF) is a Florida not-

for-profit corporation with its principal office in Tarpon Springs, Pinellas

County, Florida.

2. The following facts, comprising the parties' stipulation filed on

February 12, 1993, are adopted:

1. Prior to being registered on July 17, 1992,

under Chapter 496, Florida Statutes, United

Rainbow solicited contributions in the State

of Florida for a total of thirty-two (32) days;

2. Solicitations for charitable contributions

were made by United Rainbow in the calendar year

1992 on or about the following dates:

April 10, 13

May 12, 13, 15, 22, 26, 28, 29

June 1, 2, 3, 8, 9, 10, 11, 12, 16, 18, 22,

23, 25, 26, 29

July 1, 2, 3, 6, 7, 9, 10, 14

3. These solicitations were made in several

locations in Florida as follows:

Bradenton

New Port Richey

Orlando

Gainesville

Lecanto

Venice

4. As a result of the aforementioned activities,

United Rainbow received charitable contributions

between April 10, 1992 and July 14, 1992 totalling

approximately $15,446.74; and

5. United Rainbow incurred attorney's fees and

costs totalling $12,876.87 (as of December 31, 1992)

in connection with administrative proceedings in

both this action and in a related action wherein

United Rainbow successfully challenged the denial

of its registration under Chapter 496 (DOAH Case No.

92-4817). However, the Department objects to the

relevancy of attorney's fees incurred by United

Rainbow and does not waive its objection by

execution of this Stipulation.

3. The findings of fact reflected in the recommended order dated August

17, 1992 in DOAH case #92-4817, as adopted in the agency's final order entered

August 19, 1992 are adopted herein. The recommended and final orders are

appended hereto.

CONCLUSIONS OF LAW

4. The Division of Administrative Hearings has jurisdiction in this

proceeding pursuant to Section 120.57(1), F.S. and Section 496.419(6), F.S.

5. Section 496.405(1), F.S. provides, in pertinent part:

496.405 Registration statements by charitable

organizations and sponsors.-

(1)(a) A charitable organization or sponsor,

unless exempted pursuant to s. 496.406, which

intends to solicit contributions in this state

by any means or have funds solicited on its

behalf by any other person, charitable organization,

sponsor, commercial co-venturer, or professional

solicitor, or that participates in a charitable

sales promotion or sponsor sales promotion, must,

prior to engaging in any of these activities, and

annually thereafter, file a registration statement

with the division.

. . .

(c) No charitable organization or sponsor

that is required to file a registration statement

shall, prior to approval of its registration

statement by the division in accordance with

subsection (7) solicit contributions or have

contributions solicited on its behalf by any

other person, charitable organization, sponsor,

commercial co-venturer, or professional solicitor,

or participate in a charitable sales promotion or

sponsor sales promotion.

. . .

6. It is uncontroverted that URF is a "charitable organization" as defined

in Section 496.404(1), F.S. and is required to file a registration statement

with the Division of Consumer Services of the Florida Department of Agriculture

and Consumer Services.

7. It is uncontroverted that URF violated subsection 496.405(1)(c), F.S.

on thirty-two separate occasions.

8. As stipulated, the only issue is the amount of administrative fine to

be imposed, if any.

Section 496.419, F.S., provides, in pertinent part:

. . .

(4) The division may enter an order

imposing one or more of the penalties set

forth in subsection (5) if the division

finds that a charitable organization, sponsor,

professional fundraising consultant, or

professional solicitor, or an agent, servant,

or employee thereof has:

(a) Violated or is operating in violation

of any of the provisions of ss. 496.401-496.424

or of the rules adopted or orders issued

thereunder:

. . .

(5) Upon a finding as set forth in subsection

(4), the division may enter an order doing

one or more of the following:

(a) Imposing an administrative fine not

to exceed $1,000 for each act or omission

which constitutes a violation of ss. 496.401-

496.424 or a rule or order.

(b) Issuing a cease and desist order

that directs that the person cease and desist

specified fundraising activities;

(c) Refusing to register on probation for

a period of time, subject to such conditions

as the division may specify;

(d) Placing the registrant on probation

for a period of time, subject to such conditions

as the division may specify;

(e) Issuing of a letter of concern, and

(f) Cancelling an exemption granted under

s. 496.406.

9. This is the first case arising under Sections 496.401-496.424, F.S.,

the "Solicitation of Contributions Act", which act was created in 1991 by

Chapter 91-208, Laws of Florida.

There are no adopted guidelines for imposing a penalty, and no policy

created by prior agency action.

10. Counsel for the agency argues that a fine of $1,000.00 a day for each

of the thirty-two days is reasonable, since each day of solicitation could

effectively be broken down into multiple separate violations when the number of

solicitors working each day is considered. See findings of fact #7, recommended

order, DOAH #92-4817: "At various times, and in various cities in Florida

typical crews of four to twenty people worked traffic intersections with plastic

jugs."

11. Counsel for URF argues that the $32,000.00 fine is excessive, and

would be a "death penalty"; that the organization did everything necessary

within its knowledge to meet regulatory requirements before commencing

operation; that it lost money during the four to six weeks that it could not

operate while awaiting a decision on the registration denial; and that it

incurred costs and attorney's fees in contesting the denial decision in a

proceeding in which it ultimately prevailed.

12. The assessment of a penalty, so long as it is within the range

permitted by law, is a policy matter essentially within the agency's perogative.

Criminal Justice Standards and Training Commission v. Bradley, 596 So. 2d 661,

663 (Fla. 1992).

The following observations, based on the facts and circumstances in this

case, are therefore offered as guidance.

13. Section 496.422, F.S. requires the Department of State to include

notice of registration requirements with its packets sent to persons or

organizations seeking to incorporate as nonprofit corporations. This was not

done in this case. (Finding of Fact #3, Recommended Order in DOAH #92-4817.)

Nonetheless, URF was given notice of the requirements on several other

occasions as it continued its solicitation activities:

An April 6, 1992 letter from the Pinellas

County Department of Consumer Affairs included

explicit instructions to contact the Division

of Consumer Services. (Findings of Fact #6,

Recommended Order in DOAH 92-4817);

The organization's own accountant informed it

on June 11, 1992 that requirements of the

Solicitation of Contributions Act had not been

satisfied. (Finding of Fact #18, Recommended

Order, DOAH #92-4817); and

On or about June 26, 1992, a URF representative

was informed by telephone by Division Staffperson

Mary Helen Shelton, of the registration requirements.

(Finding of Fact #8, Recommended Order, DOAH #92-4817.)

The organization's protestations of ignorance are simply unpersuasive.

14. The organization has spent considerable funds in this and the prior

registration proceeding. It prevailed in the prior proceeding largely because

the agency was inexperienced in administering a function that it had been

assigned for barely six months (see Chapter 91-208, Laws of Florida, effective

1/1/92). It is impossible to distinguish the costs and fees expended in that

case from those in this case in which the organization has not prevailed, and

it would be improper to offset the penalty by deducting the fees and costs.

15. From the evidence and argument it is impossible to determine that a

$32,000.00 penalty would be a "death penalty". The budget submitted with its

registration application by URF in July 1992 reflected gifts, grants and

contributions totalling $1,125,000.00 and expenses totalling $828,896.00.

(Finding of Fact 17, Recommended Order, DOAH #92-4817.)

The parties have stipulated that the contributions collected during the

relevant periods prior to registration amounted to $15,446.74.

The budgeted amounts may have been overly optimistic, but at the time that

the budget was submitted, surely the organization had some notion of the amount

it had collected (the $15,446.74), and some anticipation that collections would

substantially pick up over the 1992 calendar year. Compared to the

organization's budget, the $32,000.00 penalty would be "a drop in the bucket".

16. That the organization lost money during the time that it was awaiting

a decision on the registration is effectively countered with the fact that for

at least the same amount of time the organization illegally gained money prior

to its approval.

17. It is possible that the illegally gained money is the most appropriate

and concrete measure of a penalty. That is, the organization should at least

relinquish the $15,446.74 in contributions solicited prior to registration.

However, as discussed above, there are more aggravating than mitigating

factors found in the record and the reasonableness of the agency counsel's

recommendation has not been refuted.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED:

That the agency enter its final order finding that the Respondent, United

Rainbow Foundation, Inc. violated Section 496.405(1)(c), F.S. and assessing a

penalty of $32,000.00.

DONE AND ENTERED this 26th day of April, 1993, in Tallahassee, Florida.

___________________________________

MARY CLARK

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

day of April, 1993.

COPIES FURNISHED:

John P. Holsonback, Esquire

Melendi, Gibbons & Holsonback, P.A.

408 East Madison

Tampa, Florida 33602

Robert G. Worley, Esquire

Room 515, Mayo Building

Tallahassee, Florida 32399-0800

Honorable Bob Crawford

Department of Agriculture and

Consumer Services

The Capitol, PL-10

Tallahassee, Florida 32399-0810

Richard Tritschler, General Counsel

Department of Agriculture and

Consumer Services

The Capitol, PL-10

Tallahassee, Florida 32399-0810

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.