ALJDEC decisions subject to certification as final

07F-2007.080-ACY · State Board of Accountancy · 2007-09-12

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 7, 2007. The record closed on August 27, 2007. APPEARANCES: James P. Armstrong, Esq. represented Respondent Kurt Mars. Assistant Attorney General Seth Hargraves represented the State of Arizona. ADMINISTRATIVE LAW JUDGE: Daniel G. Martin _____________________________________________________________________

The question presented by this case is whether Respondent Kurt Mars has committed acts or omissions in violation of Arizona Revised Statutes (“A.R.S.”) § 32-741, and, if so, whether he is subject to disciplinary action. Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Order: FINDINGS OF FACT 1. The Arizona State Board of Accountancy (the “Board”) is the duly constituted authority for certifying and regulating the practice of public accounting by certified public accountants in Arizona. 2. Respondent Kurt Mars is the holder of Certified Public Accountant Certificate No. 11127-E. Mr. Mars received his Arizona certification in 1999. 3. Mr. Mars currently works as a senior manager at the accounting firm of PricewaterhouseCoopers (“PWC”) in San Diego, California. Mr. Mars has held that position since 1999. In addition to his Arizona certification, Mr. Mars is certified as a public accountant in the State of California. 4. In accordance with A.R.S. § 32-730, certified public accountants in Arizona must renew their certification biennially. Mr. Mars filed renewal applications in 2000, 2002, 2004, and 2006.

5. On his 2004 renewal form, Mr. Mars answered “yes” to the question: “Since your last renewal/registration, have you been charged with, convicted of or pled nolo contendere to any criminal offense (felony, misdemeanor or undesignated), other than a minor traffic violation, in any state or federal court?” See Exhibit 6. 6. The Board did not pursue Mr. Mars’ disclosure, which was based on his arrest on January 21, 2003 by the Coronado, California police department for battery against a police officer and resisting arrest. Mr. Mars subsequently pleaded guilty to one count of misdemeanor battery against a police officer in San Diego County Superior Court. In consequence of his conviction, the Court placed Mr. Mars on probation, one of the terms of which was that he complete a 20 hour anger management program. 7. Mr. Mars failed to timely complete the anger management program, and on December 12, 2005, he was found in San Diego County Superior Court to have violated the terms of his probation. See Exhibit 9. 8. On his 2006 renewal form, which he filed with the Board on August 30, 2006, Mr. Mars again answered “yes” to the criminal offense question based on his 2005 probation violation. 9. The renewal form states: “Please read and answer each of the following questions carefully. For each yes answer, attach a separate sheet with a thorough explanation and include appropriate documentation such as related complaints, pleadings, judgments, orders, and settlement agreements.” See Exhibit 8. Mr. Mars did not provide either a thorough explanation or any documentation; instead, Mr. Mars wrote “probation violation” next to his yes answer, and noted in the margin that it was not related to accounting. See id. 10. By letter dated September 14, 2006, Board staff responded to Mr. Mars’ “yes” answer to the criminal offense question, and requested that Mr. Mars “send a letter with a thorough explanation of the violation and include all appropriate documentation (judgments, orders, etc.)”. See Exhibit B.[1]

11. In late September 2006, Mr. Mars submitted to the Board a California Superior Court sentencing form that documented his probation violation. See Exhibit 9. The Board received that sentencing form on October 2, 2006. Mr. Mars did not submit any other documentation, nor did he submit the written explanation that the Board had requested in its September 14, 2006 letter. 12. By letter dated October 6, 2006, Board staff advised Mr. Mars that he had not submitted the written explanation that the Board had requested in its September 14, 2006 letter. See Exhibit D. The Board did not request that Mr. Mars submit any additional documentation, and it appears, based on this fact, that the Board was satisfied, as of this point in time, with the prior submission by Mr. Mars of the California Superior Court sentencing form. 13. By letter dated October 25, 2006 (received by the Board on October 30, 2006), Mr. Mars advised the Board: “Regarding the probation violation, this did not occur in Arizona, nor does it concern in any way the practice of public accounting.” See Exhibit 12. 14. Upon receipt of Mr. Mars’ October 25, 2006 letter, Board staff referred the matter of Mr. Mars’ 2006 renewal to Jim Dubé, the Board’s Deputy Director. 15. By letter dated October 31, 2006, Mr. Dubé submitted a final request to Mr. Mars for information regarding his criminal offense. Specifically, Mr. Dubé stated: You were requested on the renewal form and in subsequent mailings to provide a thorough explanation of the criminal offense. To date you have not done so. This is required, regardless of the nature of the offense or whether it occurred in Arizona or California. The Board also requests, along with that explanation, a copy of all court documents, including complaints, pleadings, judgments, orders and settlement agreements.

See Exhibit F (emphasis in original). 16. The Board mailed Mr. Dubé’s October 31, 2006 letter to Mr. Mars at his address of record at PWC in San Diego by certified mail, return receipt requested. The

return receipt indicates that PWC received Mr. Dubé’s October 31, 2006 letter on November 2, 2006. See Exhibit F. 17. In accordance with A.A.C. R4-1-455.03(F), certified public accountants are required, when requested, to respond to board communications sent by certified or registered mail within 30 days of the mailing of such communications. 18. By letter dated December 6, 2006 (received by the Board on December 11, 2006), Mr. Mars responded to Mr. Dubé’s October 31, 2006 letter. Notwithstanding Mr. Dubé’s admonition that Mr. Mars was required to respond regardless of the nature of the offense or the location in which it occurred, Mr. Mars wrote: “Regarding the probation violation, this did not occur in Arizona, nor does it concern in any way the practice of public accounting. It was alleged that I did not complete a court-ordered program in the time frame required. I have now completely satisfied this requirement.” See Exhibit 15. Mr. Mars did not provide any documentation with his response, which, in the Administrative Law Judge’s judgment, was wholly inadequate.[2] 19. Mr. Mars’ December 6, 2006 letter was not timely, as it was not transmitted within 30 days from the mailing of Mr. Dubé’s October 31, 2006 letter, as required by A.A.C. R4-1-455.03(F). 20. By letter dated December 6, 2006, Mr. Dubé advised Mr. Mars that in consequence of his failure to have submitted a timely response to the Board’s October 31, 2006 letter, the matter of his non-compliance would be considered by the Board at its January 8, 2007 meeting. See Exhibit G. 21. At hearing, Mr. Mars stated that he did not recall having received the Board’s October 31, 2006 letter, and suggested that his December 6, 2006 letter was in fact a response to Mr. Dubé’s December 6, 2006 letter. The evidence does not support this assertion. First, Mr. Mars did not receive the Board’s December 6, 2006 letter until December 8, 2006; thus, he could not have responded to that letter on December 6,

2006. Second, the content of Mr. Mars’ December 6, 2006 letter tracks the content of the Board’s October 31, 2006 letter much more closely than it does the content of the Board’s December 6, 2006 letter, which did not, in any event, request or require a response from Mr. Mars. Third, Mr. Mars makes reference in his December 6, 2006 letter to his fourth submission of continuing education forms, which fits the sequence of events preceding that letter in that Mr. Mars had submitted such forms on three prior occasions (on August 30, 2006 with his renewal form, on October 2, 2006 in response to the Board’s September 14, 2006 letter, and on October 25, 2006 in response to the Board’s October 6, 2006 letter). 22. The Board considered Mr. Mars’ case, to which it had assigned number 2007.080, at its January 8, 2007 meeting. As reflected in the minutes of that meeting, the Board directed its staff “to send a letter to [Mr. Mars] requiring him to submit the disclosure of his probation violation to the Board within 30 days, and if not submitted, to file a Compliant [sic] and Notice of Hearing for suspension of his certificate.” See Exhibit I. 23. By letter dated January 10, 2007, Valerie Elliott, the Board’s Executive Director, advised Mr. Mars that “[a]fter discussion and consideration of the matter, the Board voted to provide you one last opportunity to provide the required information regarding your criminal matter. The vote was to give you 30 days to provide the required documentation, and if you fail to do so, to proceed to an administrative hearing for discipline against your certificate.” See Exhibit J. 24. By letter dated February 1, 2007 (received by the Board on February 5, 2007), Mr. Mars responded to Ms. Elliott’s letter as follows: Val,

I provided the Board with an explanation and court document of the 2003 misdemeanor with my renewal in September 2004. It related to an argument over an alleged traffic violation (U- turn).

As requested more recently, I provided your office with the only document I have relating to the alleged 2005 probation violation. It was alleged that I did not complete a court- ordered program in the

time frame required. I did not have a court appearance, legal representation, nor did I ever enter a plea, so I have no other documentation other than what I have already provided you.

At this time, you have copies of all of the documentation that I have.

See Exhibit 17.[3]

25. Notably lacking from Mr. Mars’ February 1, 2007 correspondence is any indication that he had attempted to gather any additional documentation. 26. At its February 12, 2007 meeting, the Board again considered Mr. Mars’ case. As reflected in the minutes of that meeting, the Board voted “to offer a Decision and Order (by Consent) to include suspension until the requested documents are provided to the Board.” See Exhibit L. Ms. Elliott transmitted the proposed Decision and Order to Mr. Mars under cover of letter dated March 1, 2007, and instructed Mr. Mars to respond not later than 30 days from the date of the letter. See Exhibit M. 27. The events that followed the transmission of Ms. Elliott’s March 1, 2007 letter were disputed at hearing. According to Mr. Mars, on March 23, 2007 he faxed a two page letter of explanation to the Board (dated March 21, 2007) in which he explained the circumstances surrounding his probation violation, apologized for his previous unresponsiveness, and pledged a change of attitude and a spirit of cooperation with the Board. See Exhibit 19. The Board asserted at hearing that it had not received Mr. Mars’ March 21, 2007 letter at the time he claimed to have sent it; according to the Board, it first received the letter in May 2007 as an attachment to a letter from Mr. Mars’ attorney. 28. The evidence does not support Mr. Mars’ claim to have transmitted the March 21, 2007 letter. First, Mr. Mars failed to produce a transmission verification. Given the significance of the letter, and the fact that his Arizona certification was then the subject of possible disciplinary action, one would think that Mr. Mars would have retained evidence not only of the transmission of the letter, but its receipt by the Board.

Second, the letter that Mr. Mars produced at hearing is unsigned. The absence of a signature is conspicuous in view of the fact that all of Mr. Mars’ prior correspondence bore his signature.[4] Third, there is no evidence that Mr. Mars contacted the Board to ensure that his letter had been received. Again, such would have been the prudent course of conduct given the fact that his certification was then subject to possible disciplinary action. In fact, Mr. Mars’ next communication with the Board was not to inquire as to the Board’s response to his March 21, 2007 letter, but to request that his license be canceled. See Exhibit 20 (March 29, 2007 letter). At hearing, Mr. Mars explained: “I didn’t receive a response to the letter I faxed on the 19th [sic]. Instead I received ( I think ( a [no further answer provided]. I was worried about being in violation. At that point, I just really wanted to put this whole issue behind me and I was just wanting to resign my license and move on.” But this recounting of events simply does not square with the sentiment expressed in Mr. Mars’ March 21, 2007 letter ( just eight days prior to his March 29, 2007 request for cancellation ( that he wished to cooperate with the Board.[5] 29. At its May 7, 2007 meeting, the Board again considered Mr. Mars’ case. As reflected in the minutes of that meeting, the Board voted “to file a Complaint and Notice of Hearing for revocation.” See Exhibit P. 30. Following the Board’s May 7, 2007 meeting, Mr. Mars retained counsel. In correspondence with counsel for the State, Mr. Mars’ attorney expressed Mr. Mars’ desire to collect and provide to the Board all of the documentation that he could bring to bear on his criminal conviction and probation violation. The parties were not, however, able to reach agreement on terms for an informal disposition of the matter. 31. On June 21, 2007, the Board issued a Complaint and Notice of Hearing in which it alleged that Mr. Mars had violated A.R.S. § 32- 741(A)(9) (knowing violation of

any decision, order or rule issued or adopted by the board) and (A)(15) (failing to respond or furnish information in a timely manner to the board or its designated agent, if the information is legally requested by the board and is in the registrant's possession or control). 32. Pursuant to the Board’s Complaint and Notice of Hearing, the hearing in this matter convened on July 30, 2007. James P. Armstrong represented Mr. Mars; Assistant Attorney General Seth Hargraves represented the State of Arizona. 33. At hearing, Mr. Mars urged that he is an upstanding citizen and that his failure to have cooperated with the Board was due solely to embarrassment and a desire to put the matter behind him. The Administrative Law Judge accepts Mr. Mars’ explanation; however, as Mr. Mars must recognize, such explanation does not excuse his failure to have cooperated with the Board nor his demonstration of an attitude that can at best be described as contemptuous of the Board’s regulatory authority. 34. It is true, as Mr. Mars’ attorney contended at hearing, that Mr. Mars ultimately cooperated with the Board and provided documentation from the San Diego Superior Court and the Coronado Police Department. However, such cooperation came only after repeated warnings that discipline could be taken against Mr. Mars’ certificate, a situation that any reasonable person would recognize as intolerable for a professional regulatory authority such as the Board. 35. At the conclusion of the hearing, the State requested that Mr. Mars be placed on probation for a period of one year, and that Mr. Mars be required, as terms of such probation, to (i) pay a $1,000.00 administrative penalty for each of the five instances that he did not timely provide the information that was required to be submitted with his 2006 renewal form, and (ii) reimburse the Board for its costs incurred in these proceedings. CONCLUSIONS OF LAW In this proceeding, the Board bears the burden to prove, by a preponderance of the evidence, that Mr. Mars violated A.R.S. § 32-741(A), and that his certificate is therefore subject to discipline. See A.A.C. R2- 19-119.

A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). A.R.S. § 32-741(A) provides, in pertinent part: A. After notice and an opportunity for a hearing, the board may revoke or suspend any certificate granted under this chapter and may take disciplinary action concerning the holder of any certificate for any of the following causes:

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9. Knowing violation of any decision, order or rule issued or adopted by the board.

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15. Failing to respond or furnish information in a timely manner to the board or its designated agent, if the information is legally requested by the board and is in the registrant's possession or control.

In support of its allegation that Mr. Mars violated A.R.S. § 32- 741(A)(9), the Board alleged that Mr. Mars had violated A.A.C. R4-1- 455.03(F) by failing to timely respond to the Board’s October 31, 2006 letter. The Board further alleged that Mr. Mars had engaged in discreditable acts as defined in A.A.C. R4-1-455.03(A)(1) and (A)(3). These rules provide: Certified public accountants, public accountants, or firms shall not commit any act that reflects adversely on their fitness to engage in the practice of public accounting, including:

1. Violation of any of the provisions of R4-1-455 through R4- 1-455.04;

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3. Violation of any of the provisions of A.R.S. Title 32, Chapter 6, Article 3, or any rule promulgated under these statutes.

The evidence demonstrated that Mr. Mars: a. Failed to timely provide a thorough explanation of his probation violation in connection with the submission of his 2006 renewal application, in violation of A.R.S. § 32-741(A)(15); b. Failed to timely provide a thorough explanation of his probation violation in response to the Board’s September 14, 2006 request for such explanation, in violation of A.R.S. § 32-741(A)(15); c. Failed to timely provide a thorough explanation of his probation violation in response to the Board’s October 6, 2006 request for such explanation, in violation of A.R.S. § 32-741(A)(15); d. Failed to timely provide a thorough explanation of his probation violation in response to the Board’s October 31, 2006 request for such explanation, in violation of A.R.S. § 32-741(A)(9) (by violation of A.A.C. R4-1-455.03(F)) and (A)(15); and e. Failed to timely provide a thorough explanation of his probation violation in response to the Board’s January 10, 2007 request for such explanation, in violation of A.R.S. § 32-741(A)(15);[6] By virtue of the foregoing statutory violations, Mr. Mars is found to have committed discreditable acts in violation of A.A.C. R4-1-455.03(A)(1) and (A)(3). Based on Mr. Mars’ violations of statute and rule as found herein, grounds exist for the Board to impose discipline against Mr. Mars. In accordance with A.R.S. § 32-741(A) and 32-701(6)(a), the Board is authorized to impose an administrative penalty against a certified public accountant “in an amount not to exceed two thousand dollars for each violation of this chapter or rules adopted pursuant to this chapter.” In accordance with A.R.S. § 32-741(A) and 32-701(6)(f), the Board is authorized to seek reimbursement of its costs of investigations and proceedings.

Having considered all of the facts and circumstances presented by this matter, the Administrative Law Judge concludes that the relief requested by the State is reasonable, except that the administrative penalty should be increased to $1,500.00 per violation in consideration of the unreasonableness of Mr. Mars’ repeated failures to provide information to the Board. ORDER On the effective date of the Order entered in this matter, Mr. Mars shall be placed on probation for a period of one year. As terms of such probation, Mr. Mars shall (i) pay an administrative penalty to the Board in the amount of $7,500.00 not later than ninety (90) days after the commencement of his probation, and (ii) reimburse the Board its costs of investigations and proceedings in this matter not later than ninety (90) days after the submission by the Board to Mr. Mars of an invoice for such costs. Any failure by Mr. Mars to comply with this Order shall constitute further grounds for discipline, up to and including the revocation of his Certified Public Accountant Certificate No. 11127-E.

Done this day, September 12, 2007.

______________________________________ Daniel G. Martin Administrative Law Judge

Original transmitted by mail this ____ day of September, 2007, to:

Valerie Elliott, Executive Director State Board of Accountancy 100 N. 15th Avenue, Suite 165 Phoenix, AZ 85007

By ___________________________ ----------------------- [1] The Board’s September 14, 2006 letter also makes reference to inadequacies in the manner in which Mr. Mars had reported his continuing education hours. Those inadequacies were not alleged as a violation of the Accountancy Practice Act in the Board’s June 21, 2007 Complaint and Notice of Hearing, and are not considered further herein except to the extent that they are relevant to establishing the chronology of events. [2] At hearing, Mr. Mars offered into evidence as Exhibit 22 a certificate of completion from Center of Solutions in Burbank, California, which documented that Mr. Mars had completed the required anger management course as of March 8, 2006. There is no explanation in the record as to why Mr. Mars did not produce this certificate to the Board in December 2006, when it was manifestly within the category of documents being requested by the Board. [3] Mr. Mars’ continuous references to an “alleged” probation violation reflect poorly on the degree of candor with which Mr. Mars addressed the Board. His probation violation could not, under any circumstance, be considered merely “alleged”. [4] For reasons not explained at hearing, the copy of the letter that Mr. Mars’ attorney provided to the Board on May 31, 2007 is signed. See Exhibit 28. [5] The Board denied Mr. Mars’ request to cancel his certificate by letter dated April 11, 2007. See Exhibit O. In rendering this decision, the Board relied on A.R.S. § 32-730(I), which precludes a certificate holder from canceling his certificate while disciplinary proceedings are pending. [6] With regard to this violation, the Administrative Law Judge notes that Mr. Mars’ February 1, 2007 response contained slightly more detail than his previous responses, but not anything that could be considered “thorough”.

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