97-001854 Division Of Real Estate vs. Harold E. Hicks And Service First Realty, Inc. Status: Closed Recommended Order on Tuesday, November 25, 1997.

Summary: Respondents' failure to keep financial record in form and content as directed by rule constitutes violation regardless of lack of harm to consumer.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION , )

DIVISION OF REAL ESTATE , )

)

Petitioner , )

)

vs. ) Case No. 97-1854

)

HAROLD E. HICKS and )

SERVICE FIRST REALTY, INC. , )

)

Respondents. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held by telephone

conference call in this case on September 12, 1997, with the

parties participating from Miami, Florida, before J. D. Parrish,

a designated Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner : Daniel Villazon, Esquire

Department of Business

and Professional Regulation

Division of Real Estate

Post Office Box 1900

Orlando, Florida 32802

For Respondent : Harold E. Hicks, pro se

9715 Northwest 27th Avenue

Miami, Florida 33147

STATEMENT OF THE ISSUES

Whether the Respondents committed the violations alleged

and, if so, what penalty should be imposed.

PRELIMINARY STATEMENT

This case began on March 12, 1997, when the Department of

Business and Professional Regulation (Department) filed an

Administrative Complaint against the Respondents, Harold E. Hicks

and Services First Realty, Inc. Such complaint set forth six

counts against each Respondent, all of which arose from alleged

failures to keep and maintain appropriate financial records as

required by Chapter 475, Florida Statutes, and the applicable

rules set forth in the Florida Administrative Code. Respondents

disputed the factual allegations and requested an administrative

hearing.

The case was forwarded to the Division of Administrative

Hearings for formal proceedings on April 14, 1997. Thereafter

the case was scheduled for hearing. At the hearing, Petitioner

presented the testimony of Kenneth Rehm and Roberto Castro.

Petitioner's Exhibits 1 through 6 have been admitted into

evidence. Petitioner's Exhibit 7 was marked for identification

only.

The Respondent, Harold Hicks, testified on behalf of himself

and the corporation and presented the testimony of Eugene Parker,

an accountant.

A transcript of the proceedings was filed on September 24,

1997. In accordance with the parties' stipulation, they were

granted thirty days' leave to file their proposed recommended

orders. Petitioner filed a proposed order which has been

considered in the preparation of this order. Respondents have

not filed a proposed order.

FINDINGS OF FACT

1. Petitioner is the state agency charged with the

responsibility of regulating real estate licensees.

2. At all times material to the allegations of this case,

Respondent, Harold E. Hicks, was licensed as a real estate

broker, license number 0136248.

3. At all times material to the allegations of this case,

Mr. Hicks was the qualifying broker for the Respondent

corporation, Service First Realty, Inc. (the corporation), whose

address is 9715 N. W. 27th Avenue, Miami, Florida 33147. The

Respondent corporation holds license number 0223295.

4. Mr. Hicks was responsible for the day-to-day business

operations of the corporation.

5. Mr. Hicks was responsible for the financial records kept

and maintained by the corporation. All financial records at

issue in this proceedings were in the name of the corporation.

6. In 1996, an investigator employed by the Petitioner,

Kenneth G. Rehm, attempted to conduct an audit of the

Respondents' financial records. This audit was in response to a

complaint not at issue in this proceeding.

7. Mr. Rehm went to the Respondents' place of business and

asked for the financial records for all real estate accounts.

8. Mr. Hicks provided the investigator with records which

established a negative escrow bank balance of $761.00. Moreover,

there was no monthly reconciliation for the escrow account.

9. Based upon the bookkeeping method used, the Respondents'

records did not show how much money was being held in trust for

individual clients.

10. Respondents pooled money for different rental

properties into one escrow account without establishing that they

maintained accurate ledger balances per client.

11. When Mr. Rehm was unable to reconcile the accounts, he

elected to offer Respondents additional time to gather the

records and to prepare for a complete audit. Such audit was

assigned to Petitioner's investigator, Roberto Castro.

12. Mr. Castro attempted to complete the follow-up audit of

Respondents' financial records on February 13, 1996.

13. Once again, the audit was hampered due to the lack of

escrow account records. Based upon the records that were

provided by Respondents, Mr. Castro computed that Respondents had

$3,922.45 in outstanding checks from the rental distribution

trust account but only $2,241.58 in the account. This

calculation resulted in a shortage of $1,680.87.

14. Mr. Castro also determined that Respondents were not

completing monthly escrow account reconciliations in accordance

with the rule promulgated by the Florida Real Estate Commission.

15. On May 3, 1996, Respondents were served with a subpoena

to provide Mr. Castro with all escrow records from February 1995

to February 1996. Respondents did not respond to the subpoena.

16. As of the date of hearing, Respondents have not shown

monthly escrow account reconciliations in accordance with the

rule promulgated by the Florida Real Estate Commission.

CONCLUSIONS OF LAW

17. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings.

18. The Petitioner bears the burden of proof to establish

by clear and convincing evidence the allegations of the

Administrative Complaint.

19. Section 475.25(1), Florida Statutes, provides, in

pertinent part:

(1) The commission may deny an application

for licensure, registration, or permit, or

renewal thereof; may place a licensee,

registrant, or permittee on probation; may

suspend a license, registration, or permit

for a period not exceeding 10 years; may

revoke a license, registration, or permit;

may impose an administrative fine not to

exceed $1,000 for each count or separate

offense; and may issue a reprimand, and any

or all of the foregoing, if it finds that the

licensee, registrant, permittee, or

applicant:

* * *

(b) Has been guilty of fraud,

misrepresentation, concealment, false

promises, false pretenses, dishonest dealing

by trick, scheme, or device, culpable

negligence, or breach of trust in any

business transaction in this state or any

other state, nation, or territory; has

violated a duty imposed upon him by law or by

the terms of a listing contract, written,

oral, express, or implied, in a real estate

transaction; has aided, assisted, or

conspired with any other person engaged in

any such misconduct and in furtherance

thereof; or has formed an intent, design, or

scheme to engage in any such misconduct and

committed an overt act in furtherance of such

intent, design, or scheme. It is immaterial

to the guilt of the licensee that the victim

or intended victim of the misconduct has

sustained no damage or loss; that the damage

or loss has been settled and paid after

discovery of the misconduct; or that such

victim or intended victim was a customer or a

person in confidential relation with the

licensee or was an identified member of the

general public.

* * *

(e) Has violated any of the provisions of

this chapter or any lawful order or rule made

or issued under the provisions of this

chapter or chapter 455.

* * *

(k) Has failed, if a broker, to immediately

place, upon receipt, any money, fund,

deposit, check, or draft entrusted to him by

any person dealing with him as a broker in

escrow with a title company, banking

institution, credit union, or savings and

loan association located and doing business

in this state, or to deposit such funds in a

trust or escrow account maintained by him

with some bank, credit union, or savings and

loan association located and doing business

in this state, wherein the funds shall be

kept until disbursement thereof is properly

authorized; or has failed, if a salesperson,

to immediately place with his registered

employer any money, fund, deposit, check, or

draft entrusted to him by any person dealing

with him as agent of his registered employer.

The commission shall establish rules to

provide for records to be maintained by the

broker and the manner in which such deposits

shall be made.

20. Rule 61J2-14.012, Florida Administrative Code,

provides:

(1) A broker who receives a deposit as

previously defined shall preserve and make

available to the BPR, or its authorized

representative, all deposit slips and

statements of account rendered by the

depository in which said deposit is placed,

together with all agreements between the

parties to the transaction. In addition, the

broker shall keep an accurate account of each

deposit transaction and each separate bank

account wherein such funds have been

deposited. All such books and accounts shall

be subject to inspection by the DPR or its

authorized representatives at all reasonable

times during regular business hours.

(2) At least monthly, a broker shall cause

to be made a written statement comparing the

broker's total liability with the reconciled

bank balance(s) of all trust accounts. The

broker's trust liability is defined as the

sum total of all deposits received, pending

and being held by the broker at any point in

time. The minimum information to be included

in the monthly statement-reconciliation shall

be the date the reconciliation was

undertaken, the date used to reconcile the

balances, the name of the bank(s), the

name(s) of the account(s), the account

number(s), the account balance(s) and

date(s), deposits in transit, outstanding

checks identified by date and check number,

and any other items necessary to reconcile

the bank account balance(s) with the balance

per the broker's checkbook(s) and other trust

account books and records disclosing the date

of receipt and the source of the funds. The

broker shall review, sign and date the

monthly statement-reconciliation.

(3) Whenever the trust liability and the

bank balances do not agree, the

reconciliation shall contain a description or

explanation for the difference(s) and any

corrective action taken in reference to

shortages or overages of funds in the

account(s). Whenever a trust bank account

record reflects a service charge or fee for a

non-sufficient check being returned or

whenever an account has a negative balance,

the reconciliation shall disclose the

cause(s) of the returned check or negative

balance and the corrective action taken.

(4 ) The books, accounts and records

pertaining to the broker's real estate

brokerage business shall be preserved for a

period of not less than 5 years after receipt

of any money, funds, deposit, check or drafts

entrusted to the broker or the conclusion of

the broker's involvement in the transaction,

whichever results in a greater period of

retention of records. If any brokerage

record has been the subject of or has served

as evidence in litigation, relevant books,

accounts and records must be retained for at

least 2 years after the conclusion of the

civil action or the conclusion of any

appellate proceeding, whichever is later, but

not less than a total of 5 years as set

above.

21. In this case the Petitioner has established, by clear

and convincing evidence, that the Respondents did not maintain

financial records as required by the rule guidelines for real

estate brokers. While Respondents may have kept records which,

for their purposes, tracked the funds received and disbursed by

the company, such records did not comply with the uniform

guidelines for financial records as specified by the Florida Real

Estate Commission. All real estate licensees are directed to

conform to the standard for financial records set by their

governing board. That a consumer was not financially harmed does

not absolve Respondents of the mandates of their profession.

Pursuant to the applicable statutes and rules, Respondents must

maintain financial records as directed.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Florida Real Estate Commission

enter a Final Order finding the Respondents guilty of violating

Sections 475.25(1)(b), (e), and (k), Florida Statutes, and

imposing an administrative fine in the amount of $1,500.00. It

is further recommended that the Commission suspend Respondents'

licenses until the Respondent Hicks has completed a seven-hour

course in real estate escrow management and that such suspension

be followed by a probationary period with monitoring of the

Respondents' financial records to assure compliance with all

Commission rules.

DONE AND ENTERED this 25th day of November, 1997, in

Tallahassee, Leon County, Florida.

___________________________________

J. D. Parrish

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488- 9675 SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 25th day of November, 1997.

COPIES FURNISHED:

Henry M. Solares

Division Director

Division of Real Estate

Post Office Box 1900

Orlando, Florida 32802-1900

Lynda L. Goodgame

General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Daniel Villazon, Esquire

Department of Business and

Professional Regulation

Division of Real Estate

Post Office Box 1900

Orlando, Florida 32802-1900

Harold E. Hicks, pro se

Service First Realty, Inc.

9715 Northwest 27th Avenue

Miami, Florida 33147

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the Final Order in this case.