98-005208 Board Of Accountancy vs. John Calhoon Status: Closed Recommended Order on Friday, September 10, 1999.

Summary: One-year suspension, five-year probation (with first two years carrying restriction against preparation of Medicare cost reports) for Respondent convicted on eight counts of mail fraud and false statements in connection with filing false cost reports.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

BOARD OF ACCOUNTANCY, )

)

Petitioner, )

)

vs. ) Case No. 98-5208

)

JOHN E. CALHOON, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division of

Administrative Hearings, conducted the final hearing in St.

Petersburg, Florida, on April 9, 1999.

APPEARANCES

For Petitioner: Charles F. Tunnicliff

Senior Attorney

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

For Respondent: John E. Calhoon, pro se

Post Office Box 40806

St. Petersburg, Florida 33743-0806

STATEMENT OF THE ISSUE

The issue is whether Respondent has been found guilty of a

crime directly relating to the practice of public accounting, in

violation of Section 473.323(1)(d), Florida Statutes; or

performed a fraudulent act while licensed to practice public

accounting, in violation of Section 473.323(1)(k), Florida

Statutes.

PRELIMINARY STATEMENT

By Administrative Complaint dated October 20, 1998,

Petitioner alleged that, on January 31, 1995, Respondent was

found guilty of eight counts of false statements and three counts

of mail fraud in the United States District Court for the Middle

District of Georgia. The Administrative Complaint alleges that

the false statements involve Respondent's responsibility for the

signing of Medicare cost reports claiming amounts that Respondent

knew were not reimbursable. The Administrative Complaint alleges

that the mail fraud involves Respondent's use of the mail in

connection with false Medicare cost reports.

The Administrative Complaint alleges that Respondent was

found guilty of a crime directly relating to the practice of

public accounting or the ability to practice public accounting,

in violation of Section 473.323(1)(d), Florida Statutes, and

performed a fraudulent act while licensed to practice public

accounting, in violation of Section 473.323(1)(k), Florida

Statutes. (At the hearing, Petitioner dropped an allegation that

Respondent committed an act of fraud, negligence, incompetency,

or misconduct in the practice of public accounting, in violation

of Section 473.323(1)(g), Florida Statutes.)

Respondent timely requested a formal hearing.

At the hearing, Petitioner called two witnesses and offered

into evidence four exhibits. Respondent called one witness and

offered into evidence three exhibits. All exhibits were

admitted.

The court reporter filed the Transcript on April 23, 1999.

At the request of Respondent, and without objection by

Petitioner, the Administrative Law Judge gave the parties until

September 1, 1999, within which to file proposed recommended

orders. The purpose of this extended period of time was to give

Respondent time to obtain a ruling from federal court on a motion

for reconsideration.

FINDINGS OF FACT

1. At all material times, Respondent has been licensed as a

certified public accountant, holding license number 0012093. He

has been licensed in Florida for 16 years. The record reveals no

prior discipline. Respondent received his bachelor of arts

degree in accounting from the University of South Florida.

2. From 1983-84, Respondent was employed by Hospital

Corporation of America. From 1984-90, he was employed by Charter

Medical Corporation (Charter). Since 1990, he has been

self-employed. Respondent's legal problems arose while he was

employed at Charter.

3. Charter is a for-profit corporation that owns about 94

hospitals. Except for 8-10 medical/surgical hospitals, Charter

operates psychiatric hospitals. Charter is a parent corporation.

Each of the 94 hospitals is owned by a different corporation, of

which Charter is the sole shareholder. Charter is the sole

shareholder of another 100 corporations that are also involved in

medical services.

4. Respondent earned several promotions while employed at

Charter. He started as a reimbursement manager. Two years

later, he became a senior manager. In February 1988, Respondent

became a senior director. As a senior director, Respondent

assumed significant responsibilities in, among other areas, the

Medicare cost reimbursement program for Charter's hospitals east

of the Mississippi River. His assignment was to maximize the

cost reimbursements paid to Charter or its subsidiaries.

5. Respondent incurred criminal liability due to his

participation in the preparation of Medicare cost reports, which

Charter submitted to an insurer-intermediary retained by the

Health Care Financing Administration for the purpose of receiving

and examining Medicare cost reports and paying cost

reimbursements.

6. The federal indictment contains 11 counts. The United

States dismissed two counts, and the jury found Respondent not

guilty on one count. The remaining eight counts contain three

counts of mail fraud and five counts of making false statements.

7. The three mail fraud counts allege that Respondent

filed, or caused to be filed, false cost reports for three

Charter hospitals. These counts charge that Respondent used one

general ledger to support these cost reports and used an internal

general ledger that reflected the true nature of certain expenses

contained in the general ledger maintained for cost-reimbursement

purposes.

8. The five false statement counts allege that Respondent

filed, or caused to be filed, false cost reports for five Charter

hospitals. These counts charge that Respondent filed cost

reports containing amounts that he knew were not reimbursable.

9. Two of the sources of falsehoods contained in the cost

reports involve the improper reporting of transactions, such as

the payment of royalties and interest, between related

organizations within the Charter family and the improper

characterization of advertising as "outreach" expenses.

10. On February 5, 1995, following the issuance of a jury

verdict of guilty on eight counts, the federal district court

judge entered a judgment imposing a 15-month prison sentence,

which was the minimum sentence in the sentencing range. The

judge waived any fine due to Respondent's inability to pay. As a

result of the loss of his job and the period of incarceration,

Respondent has declared bankruptcy. The judgment notes a

monetary loss (presumably to the United States) of $20,001 to

$50,000.

11. At the hearing, Respondent testified that he had filed

a motion for reconsideration that was still pending before the

federal district court judge. However, Respondent candidly

revealed after the hearing that, on May 11, 1999, the judge

denied the motion. This post-hearing disclosure was consistent

with Respondent's candid and cooperative behavior at and prior to

the hearing.

12. However, the preparation of cost reports is part of the

practice of accounting. Petitioner has proved by clear and

convincing evidence that Respondent's convictions in connection

with his role in the preparation of several cost reports relate

the practice of accounting.

13. Petitioner has also proved by clear and convincing

evidence that Respondent committed a fraudulent act in the

practice of accounting. Several counts of the indictment charge

that Respondent knew that the cost reports contained false

information, and Respondent was convicted on these counts.

CONCLUSIONS OF LAW

14. The Division of Administrative Hearings has

jurisdiction over the subject matter. Section 120.57(1), Florida

Statutes. (All references to Sections are to Florida Statutes.

All references to Rules are to the Florida Administrative Code.)

15. Section 473.323(1) provides that the Board of

Accountancy may impose discipline for the following acts:

(d) Being convicted or found guilty of, or

entering a plea of nolo contendere to,

regardless of adjudication, a crime in any

jurisdiction which directly relates to the

practice of public accounting or the ability

to practice public accounting.

(k) Performance of any fraudulent act while

holding a license to practice public

accounting.

16. Petitioner must prove the material allegations by clear

and convincing evidence. Department of Banking and Finance v.

Osborne Stern and Company, Inc. , 670 So. 2d 932 (Fla. 1996) and

Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

17. Petitioner has proved by clear and convincing evidence

violations of Sections 473.323(1)(d) and (k).

18. Rule 61H1-36.004(2)(c) sets the penalty guidelines for

a criminal felony conviction related to the practice of

accounting as from a one-year suspension, two-year probation, and

$5000 fine to revocation and a $5000 fine. Rule

61H1 -36.004(2)(g) sets the penalty guidelines for fraud or deceit

from a reprimand, one-year suspension, two-year probation, and a

$5000 fine to revocation and a $5000 fine.

19. Aggravating circumstances include the number--eight--of

cost reports involved in the case. Mitigating factors include

the lack of prior discipline and the financial distress already

suffered by Respondent due to his participation in the

preparation and filing of the false cost reports.

20. In its proposed recommended order, Petitioner states:

"While Petitioner is not necessarily interested in punishing

Respondent to the maximum allowed by Board rule, it is deeply

concerned that Respondent fails to acknowledge any wrongdoing in

the acts for which he was convicted in the U.S. District Court."

Citing Respondent's "lack of remorse or apparent understanding of

the moral implications" as an indication of the likelihood of a

repetition of the same acts that led to his incarceration,

Petitioner asks for an order of revocation.

21. The Administrative Law Judge does not share the concern

that Respondent is likely to repeat the same acts that led to his

15-month incarceration. To the contrary, Respondent appeared

contrite and somewhat frightened at the final hearing; he did not

appear stubborn, combative, or oppositional. His failure to

concede explicitly wrongdoing is attributable in part to the fact

that he was still trying to have the federal conviction set

aside. Respondent appears to be convinced that he is not guilty

of the charges on which he was convicted and that he was

convicted of a crime for which he was not charged. Although

these beliefs lose their credibility over time, they do not

constitute a belief that an accountant may engage in the actions

and omissions of which Respondent was found guilty and escape

criminal liability. Better than any of his peers, Respondent

knows the foolishness of such a belief.

RECOMMENDATION

It is

RECOMMENDED that the Board of Accountancy enter a final

order finding Respondent guilty of violating Sections

473.323(1)(d) and (k), Florida Statutes, and suspending his

license for one year from the date of the final order, placing

his license on probation for a period of five years following the

expiration of the suspension, and restricting his license for the

first two years of the probation so that he may not participate

in the preparation of Medicare cost reports.

DONE AND ENTERED this 10th day of September, 1999, in

Tallahassee, Leon County, Florida.

___________________________________

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 10th day of September, 1999.

COPIES FURNISHED:

Charles F. Tunnicliff

Senior Attorney

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

John E. Calhoon

Post Office Box 40806

St. Petersburg, Florida 33743-0806

William Woodyard, General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Martha Willis, Executive Director

Division of Certified Public Accounting

Department of Business and

Professional Regulation

2610 Northwest 43rd Street, Suite 1A

Gainesville, Florida 32606

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 must be filed with the agency that will

issue the final order in this case.