ALJDEC

01A-99221-ACY · State Board of Accountancy · 2001-05-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 1, 2001. APPEARANCES: Respondent Muhammad Asif Malik failed to appear. Assistant Attorney General Victoria Mangiapane appeared, representing the Arizona State Board of Accountancy (Board). ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn _____________________________________________________________________ After review of the hearing record in this matter, the following Findings, Conclusions and Recommendation are made: FINDINGS 1. On February 17, 1987, certified public accountant Certificate No. 5490-E was issued to Muhammad Asif Malik by the Board. 2. In June 1999, the Board received a letter of complaint against Muhammad Asif Malik from Dr. M. Imtiaz Ahmad, M.D. One document in Hearing Exhibit 2-E. 3. In December 1999, the Board’s Tax Practice Committee assigned the complaint file to Karl D. Guelich, C.P.A. to perform an on-site review and make findings by January 13, 2000. The Committee’s intent was to have the information in time for a January 24, 2000 Meeting of the Committee. First document in Hearing Exhibit 2-E. 4. On January 24, 2000, the Board’s Tax Practice Committee met with Muhammad Asif Malik in a voluntary informal interview. The meeting was held for investigatory purposes to assist the Committee in determining if there was reasonable cause to believe that the allegations made in Dr. Ahmad’s complaint were true and of sufficient seriousness to warrant disciplinary action by the Board. The Committee asked questions of Muhammad Asif Malik and, near the end of the interview, essentially advised him that he should meet with CPA Guelich regarding the investigation and the information which was being reviewed. See Transcript, Hearing Exhibit 2-D. 5. In March 2000, CPA Guelich detailed his attempts to reach and meet with Muhammad Asif Malik, and to compile the applicable documentation regarding the matter. CPA Guelich notified the Board of his efforts in letter dated March 3, 2000. See Hearing Exhibit 9. 6. In June 2000, the Board reviewed a complaint against Muhammad Asif Malik from Dr. Attiya Salim, M.D. One document in Hearing Exhibit 2- J. 7. In July 2000, the Board’s Tax Practice Committee assigned this second complaint file to Karl D. Guelich, C.P.A. to perform an on-site review and make findings by August 11, 2000. The Committee’s intent was to have the information in time for an August 21, 2000 Meeting of the Committee. First document in Hearing Exhibit 2-J. 8. CPA Guelich met with Respondent Malik in August 2000, in the presence of Respondent Malik’s attorney, and discussed the complaint from Dr. Ahmad. CPA Guelich also met solely with Respondent Malik in August 2000 and discussed the complaint from Dr. Salim. Respondent Malik failed to provide information requested by CPA Guelich. See Hearing Exhibits 2-F and 2-G. 9. Based on information discovered as a result of the Board’s Tax Practice Committee’s informal interview, CPA Guelich obtained additional information from E.A. Edberg Associates, Inc. regarding a lawsuit filed by Dr. Seneo M. Arbaje-Ramirez. M.D. against Respondent Malik and the ensuing judgment against Respondent Malik. See Hearing Exhibit 5 and Hearing Exhibit 7. 10. According to the findings in CPA Guelich’s December 1, 2000 report to the Board, Respondent Malik was involved in issuing five NSF checks to Dr. Ahmad, and had been aware at the time the checks were issued that there were insufficient funds to cover the amounts. 11. According to the findings in CPA Guelich’s December 1, 2000 report to the Board, Respondent Malik was to have prepared the 1996 federal income tax returns for Dr. and Mrs. Salim. Dr. Salim had provided $14,000 to Respondent Malik for purposes of reimbursing Respondent Malik for the filing of an extension. Respondent Malik had written a $10,000 NSF check to the IRS for that extension from one of his business ventures’ checking account. Respondent Malik deposited the check from Dr. Salim in his CPA business’ checking account. 12. According to the findings in CPA Guelich’s December 1, 2000 report to the Board, Respondent Malik had obtained $20,000 from the pension fund of Dr. Arbaje-Ramirez which was to have been invested in AEP, a company of Respondent Malik, but which was not so invested and which monies were converted to Respondent Malik’s own use. During the course of CPA Guelich’s investigation, it was discovered that a civil lawsuit had been filed, and judgment[1] entered for, Dr. Arbaje-Ramirez regarding conversion and NSF checks to Dr. Arbaje-Ramirez. 13. In reviewing the applicable standards and rules, CPA Guelich’s December 1, 2000 report to the Board concludes that Respondent Malik violated Arizona Administrative Code (A.A.C.) R4-1-455.01.D and AR Section 100.01 of Statements on Standards for Accounting and Review Series (SSARS). The report further concludes that Respondent Malik’s conduct showed a lack of competency in violation of A.A.C. R4-1-455.01. The report further concludes that Respondent Malik’s conduct was discreditable in violation of A.A.C. R4-1-455.03. The report finally concludes that Respondent Malik’s conduct violated the reporting rules in A.A.C. R4-1-456. 14. On January 8, 2001, the Board issued an Order of Summary Suspension against Muhammad Asif Malik’s CPA certificate, pending the final outcome of formal proceedings pursuant to A.R.S. §32-741.B, and ordering Muhammad Asif Malik to immediately surrender his CPA Certificate No. 5490-E to the Board. See Hearing Exhibit 8. 15. On March 12, 2001, the Board issued a Complaint and Notice of Public Hearing regarding possible discipline on the Certificate of Muhammad Asif Malik. This Notice of Hearing was mailed on March 14, 2001, to the address of record for Respondent Malik. The Complainant and Notice of Hearing in this matter was filed with this Tribunal on March 15, 2001. 16. At the time set for the administrative hearing in this matter, and for fifteen minutes thereafter, neither Respondent Muhammad Asif Malik nor any representative on his behalf appeared. According to the Board’s representative, the Green Card receipt was received back at the Board’s offices, and there had been no change of address for Respondent Malik of which the Board is aware. According to the Board’s representative, the attorney representing Respondent Malik had withdrawn his representation. 17. In its Complaint, the Board alleges that the Dr. M. Imtiaz Ahmad, M.D. was a tax client of Respondent Malik from approximately 1986 to 1997. Board Complaint, Allegation No. 7. The Board further alleges that Dr. Ahmad agreed to invest $82,500 of his retirement plan assets in a company [Arizona Electrical Products] owned by Respondent Malik, on Respondent Mailk’s recommendation. The Board alleges, in connection with that investment, Dr. Ahmad became concerned when Respondent Malik would not provide requested information about AEP, and requested his investment be returned. Board Complaint, Allegation No. 8. The Board alleges, in connection with that request, Respondent Malik issued, or caused to be issued, a series of five checks, all of which were returned NSF. Board Complaint, Allegation No. 9. The Board alleges that Respondent Malik admitted to CPA Guelich during the investigation that he was aware that there were insufficient funds to cover those checks and that he was still indebted to Dr. Ahmad in the amount of approximately $10,000 as a result. Board Complaint, Allegation No. 10. 18. In its Complaint, the Board alleges that the Dr. and Mrs. Attiya Salim were tax clients of Respondent Malik for several years. Board Complaint, Allegation No. 11. The Board further alleges that Dr. Salim sent $14,000 to Respondent Malik to cover the expenses of an extension to file their 1996 income tax returns and Respondent Malik’s tax services. Board Complaint, Allegation No. 12. The Board further alleges that Respondent Malik deposited this money into his account but, on filing the 1996 return to the IRS, wrote a $10,000 check which was returned NSF. Board Complaint, Allegations No. 13 and 14. The Board alleges, in connection with this, that Dr. Salim incurred penalties and interest imposed by the IRS as well as additional fees in having the returns prepared and filed by another CPA. Board Complaint, Allegation No. 15.

19. In its Complaint, the Board alleges that Dr. Seneo M. Arbaje- Ramirez gave $20,000 from his pension plan to Respondent Malik to invest in a company [Phoenix Aero Products] owned by Respondent Malik. The Board alleges that Respondent Malik converted the money to his own use and did not make the investment. Board Complaint, Allegation No. 16. The Board further alleges that Respondent Malik also prepared unaudited financial statements for Dr. Arbaje-Ramirez’s pension plan and submitted these statements to a third party without requisite compilation reports or disclosures. Board Complaint, Allegation No. 17. The Board alleges that Respondent Malik borrowed $50,000 from Dr. Arbaje-Ramirez, and issued three NSF checks, totaling $80,000 in repayment. Board Complaint, Allegation No. 18. The Board alleges that Respondent Malik failed to report a judgment[2] finding him guilty of fraud and conversion within thirty days of the entry of the judgment, as required under A.A.C. R4-1-456. Board Complaint, Allegations No. 19 and 20. 20. Credible and reliable testimony was presented by the Board’s investigator CPA Guelich. The uncontroverted and unopposed testimony and documentary evidence at hearing showed each of the Board’s allegations to be true. 21. The Board argues that, by virtue of the documented facts shown at hearing regarding the allegations recited in its Complaint and Notice of Hearing, the actions of Muhammad Asif Malik constitute unprofessional conduct, improper conduct and discreditable acts in violation of Arizona Revised Statutes (A.R.S.) §§32-741.A.4, 32- 741.A.7 and 32-741.A.9 and in violation of administrative rules promulgated by the Board, as was set forth in paragraphs 23 through 29, and additional [intended to be paragraph 30]. The Board argues that these circumstances call for revocation of the CPA Certificate No. 5490-E of Muhammad Asif Malik. CONCLUSIONS OF LAW 1. A.R.S. §§32-701 et seq. authorizes the Board to regulate and control the profession of Certified Public Accountancy in Arizona. 2. A.A.C. R4-1-455 through R4-1-455.04 incorporate standards and principles of professional conduct with which all accountant registrants must comply. 3. A.R.S. §32-741.A.4 provides that the Board may suspend or revoke any certificate for dishonesty, fraud or gross or continuing negligence in the practice of accounting. Respondent Malik’s conduct, per the recited and evidenced allegations in Findings 18 and 19 herein, constitutes such unprofessional conduct. 4. A.R.S. §32-741.A.7 provides that the Board may suspend or revoke any certificate for a final judgment in a civil action if the court makes findings of accounting violations, dishonesty, fraud, misrepresentation or breach of fiduciary duty. The judgment entry in Dr. Arbaje-Ramirez’s lawsuit, set forth in Finding 12 herein, against Respondent Malik constitutes such a final judgment. 5. A.R.S. §32-741.A.9 provides that the Board may suspend or revoke any certificate for a knowing violation of any decision, order or rule issued or adopted by the Board. In addition to this other conduct, Respondent Malik’s conduct in failing to cooperate with the Board’s investigation and failing to respond to requests for information, per the recited and evidenced allegations in Findings 5 and 8 herein, constitutes such violations. 6. A.A.C. R4-1-455.03, Professional Conduct: Other Responsibilities and Practices, in Subsection A, Discreditable Acts, provides that certified public accountants shall not commit any act that reflects adversely on their fitness to engage in the practice of public accounting. Subsection A specifically sets forth: violations of any of the provisions of R4-1-455 [the Rules of Professional Conduct], and violations of a fiduciary duty or trust relationship with respect to any person. Respondent Malik’s conduct, per the recited and evidenced allegations in Findings 17, 18 and 19 herein, constitutes such discreditable acts and unprofessional conduct. 7. A.A.C. R4-1-455.01, Professional Conduct: Competence and Technical Standards, in Subsection A, Competence, provides that accountant registrants shall not undertake any engagement for professional services which they cannot reasonable expect to complete with due professional competence, and compliance with standards and principles. In addition to his other conduct, Respondent Malik’s conduct in recommending investments in his own companies, per the recited and evidenced allegations in Findings and 19 herein, constitutes a violation of this rule and a violation of Respondent Malik’s fiduciary duties. 8. A.A.C. R4-1-455.01, Professional Conduct: Competence and Technical Standards, in Subsection D, Accounting and Review Standards, provides that certified public accountants shall not permit their names to be associated with unaudited financial statements of a non public entity in a manner which may imply that they are acting as independent accountants unless they have complied with all applicable standards for accounting and review services. Additionally, AR Section 100.01 of Statements on Standards for Accounting and Review Services [issued by the American Institute of Certified Public Accountants] provides guidance to accountants regarding compilation of financial statements and review of financial statements. Pursuant to Footnote 1 of that Statement Section, an accountant is required to issue a report, in compliance with the Statement’s provisions, whenever he completes a compilation or review of the financial statements of a nonpublic entity. duty or trust relationship with respect to any person. In addition to his other conduct, Respondent Malik’s failure to issue such a report and disclosure with the pension plan’s unaudited financial statement, per the recited and evidenced allegations in Finding 19 herein, is a violation of this Standard. 9. A.A.C. R4-1-456.A.3 requires that accountant registrants shall report to the Board any final judgment in a civil action where the court makes findings of accounting violations, dishonesty, fraud, misrepresentation or breach of fiduciary duty by the accountant registrant. In addition to his other conduct, Respondent Malik’s failure to report the civil judgment awarded to Dr. Arbaje-Ramirez is a violation of this rule of professional conduct. 10. The evidence and record in this matter clearly shows that Muhammad Asif Malik has acted in unprofessional, improper and discreditable manners. The evidence and record in this matter shows that Muhammad Asif Malik is in violation of A.R.S. §§32-741.A.4, 32-741.A.7 and 32-741.A.9, and the associated and related administrative rules. RECOMMENDATION Pursuant to the record in this matter, IT IS RECOMMENDED that the CPA Certificate No. 5490-E issued to Muhammad Asif Malik be revoked; and IT IS FURTHER RECOMMENDED that Muhammad Asif Malik be ordered to pay investigative and administrative costs of $2,425.00; and IT IS FURTHER RECOMMENDED that Muhammad Asif Malik be ordered to pay restitution to each Complainant, including $10,000 to Dr. M Imtiaz Ahmad and $17,514.51 to Dr. Attiya Salim; and IT IS FURTHER RECOMMENDED that no future Arizona CPA certification be issued by the Board to Muhammad Asif Malik unless there has been full satisfaction of the Yuma County Superior Court civil judgment No. SC-97-V- 000514 obtained by Dr. Seneo M. Arbaje-Ramirez against Muhammad Asif Malik. . RECOMMENDED and DATED this day, May 22, 2001.

______________________________________ Kay A. Abramsohn Administrative Law Judge

Original mailed this ____ day of May, 2001, to:

Lee Prins, Executive Director State Board of Accountancy ATTN: Kathy Stone, Deputy Director 3877 North 7th Street, Suite 106 Phoenix, AZ 85014

By ___________________________ ----------------------- [1] On or about June 29, 2000, a judgment was entered in the Superior Court of Yuma County, No. SC-97-V-000514, in a lawsuit filed by Dr. Arbaje- Ramirez against Respondent Malik. [2] Arbaje-Ramirez v. Malik, No. SC-97-V-000514, [Superior Court of Yuma County,] June 29, 2000.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 PH(602) 542-9826/ FAX 542-9827