ALJDEC decisions subject to certification as final

11F-2011.063-ACY · State Board of Accountancy · 2011-03-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: February 15, 2011 at 8:00 a.m. APPEARANCES: Respondent Douglas J. Kingston appeared on his own behalf; the Arizona State Board of Accountancy appeared through Seth T. Hargraves, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT 1. The Arizona State Board of Accountancy (“the Board”) issued Certified Public Accountant Certificate No. 9207-E to Douglas J. Kingston (“Respondent”). This certificate enables Respondent to practice as a certified public accountant (“CPA” or “registrant”) in the State of Arizona. 2. The Board issued Certified Public Accounting Firm Registration No. 4767-S to Respondent’s firm, International Tax & Accounting. 3. A.R.S. § 32-730(D) requires all registrants to register biennially with the Board and to submit satisfactory proof that they have completed the continuing professional education (“CPE”) that the Board requires. 4. The Board has promulgated A.A.C. R4-1-453(F) to require registrants to maintain documentation of their CPE, including course outlines, proof of attendance or participation, and written proof of completion, for three years and to provide copies to the Board upon request. 5. On or about June 30, 2010, Respondent submitted to the Board his biennial registration renewal application (“the 2010 registration renewal”) for the period from June 30, 2010, through June 30, 2012. On the 2010 registration renewal, Respondent indicated that he had completed 81.5 hours of CPE. Respondent signed the application, certifying that the CPE information that he reported was true, that he understood that the CPE was subject to the Board’s approval, and that he would retain all documentation of the claimed CPE for three years following the registration renewal. 6. On September 21, 2010, the Board sent a letter via certified mail to Respondent, notifying him that he had been randomly selected for a CPE audit, and requesting that he submit to the Board, within thirty days, the documentation for the CPE that he claimed on his 2010 registration renewal. The Board’s September 21, 2010 letter requested that Respondent respond in writing to the letter within thirty days pursuant to A.A.C. R4-1-455.03(F). 7. The Board’s September 21, 2010 letter informed Respondent that A.A.C. R4-1-453(F) required him to submit two documents to support the courses that comprised his claimed CLE hours, as follows: (1) A course outline, syllabus, or agenda issued by the sponsor of the course that identified the topics covered in the course; and (2) A certificate of completion or letter of verification issued by the sponsor that verified his attendance at and completion of the course. 8. On or about September 27, 2010, Respondent signed the certified mail receipt to indicate that he had received the Board’s September 21, 2010 certified letter. 9. On October 4, 2010, Respondent’s mother died in the hospital. On October 8, 2010, Respondent’s mother’s funeral was held. 10. Respondent did not respond to the Board’s September 21, 2010 letter within thirty days. 11. On or about October 26, 2010, the Board’s deputy director, Jim Dubé, on its behalf, sent an e-mail to Respondent, informing him that “[p]er your letter, you were required to submit 2 documents for each course listed on the CPE reporting form,” specifically, “a certificate of completion (that included all the pertinent parts laid out in the letter)” and “[a] course outline.” 12. On October 26, 2010, Respondent answered Mr. Dubé’s e-mail, apologizing for his failure to respond to the Board’s September 21, 2010 letter because “tax season almost got the better of me this year.” 13. On October 26, 2010, Respondent provided certain documents that were responsive to the Board’s September 21, 2010 letter and Mr. Dubé’s October 26, 2010 e-mail. 14. On October 27, 2010, Mr. Dubé informed Respondent by e-mail that “[a]fter organizing and reviewing your most current submission, it appears you are short 1 hour of CPE” because three of Respondent’s claimed courses were missing either certificates verifying completion or course outlines, or both. Mr. Dubé identified the three courses and informed Respondent that “[i]f this shortage is not resolved prior to the [CPE Advisory Committee (‘the Committee’)] meeting on 11/16/2010, your file will be referred to the next scheduled Board meeting for possible disciplinary action pursuant to ARS 32-730(D) and 32-741(D).” 15. Mr. Dubé testified that Board staff only reviews CPE submissions to determine whether the registrant has complied with the Board’s formal requirements. Board staff does not attempt to determine whether documentation that registrants submit to support their claimed hours meets the Board’s substantive requirements. 16. Mr. Dubé testified that he missed Respondent’s failure to document the content of both days of a 16-hour 2-day ASCPA- sponsored course on Respondent’s CPE reporting form that Respondent claimed to have taken on November 6-7, 2008. 17. Respondent testified that he understood Mr. Dubé’s October 27, 2010 e-mail to mean that he had until November 16, 2010, to submit supporting documentation for the one hour that Mr. Dubé thought that he was short, that he would have an opportunity to address the Board about the shortage at its next scheduled meeting, and that he understood that the next time the Board was scheduled to meet was on January 18, 2011. 18. On November 15, 2010, Respondent was rear-ended by an uninsured driver and hospitalized for three days for a brain hemorrhage, among other serious injuries. 19. On November 16, 2010, the Committee reviewed Respondent’s CPE report and determined that he had not provided documentation to establish either his completion or the content of the following claimed courses: |Course Title |Date |Sponsor |Deficiency | | | | |(total hours) | |Getting Ready for Tax Season|1/13/09|Tax Talk TV|Completion, Content| |2009 | | |(2) | |Foreign Bank Account |8/20/09|ABA-AICPA |Completion (1)[1] | |Reporting | | | | |Getting Ready for Tax Season|1/20/10|IRS |Completion (1) | |Federal Tax Institute |11/6/08|ASCPA |Content (16) |

The Committee determined that Respondent had submitted documentation to support only 63 hours of his claimed CPE, 17 hours short of the required 80 hours. 20. The ASCPA course that Respondent claimed was a two-day, 16-hour course for which the Committee determined that Respondent had only furnished an agenda for the second day, Friday, November 7, 2008. Because Respondent had not submitted a complete agenda, the Committee determined that Respondent should not be given any credit for the course until he provided the complete agenda. 21. At the Board’s December 6, 2010 meeting, it accepted the Committee’s report and voted to offer Respondent a Decision and Order (by Consent) for suspension of his CPA certificate for up to one year to allow Respondent to complete CPE requirements, and if Respondent did not accept the Board’s offer, to proceed to hearing. 22. On December 8, 2010, Board staff sent a certified letter to Respondent, notifying him of the Board’s offer of a Decision and Order (by Consent). 23. On December 15, 2010, Respondent left for a trip to Reunion Island, via Paris, France. Respondent had purchased the non- refundable ticket for the trip on September 29, 2010. 24. On December 15, 2010, the Board received a copy of its December 8, 2010 letter, on which Respondent had written, “Please schedule me for an appeal hearing, whatever it is called. I am out of the country until 8 Jan 2011.” 25. Mr. Dubé testified that the Board accepted Respondent’s communication at face value, and referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 26. Respondent testified that he was trying to avoid a hearing, and that he only wanted to meet with the Board to discuss any remaining deficiencies in his CPE documentation. 27. On December 17, 2010, the Board issued a Complaint and Notice of Public Hearing, setting a hearing on February 15, 2011, at 8:00 a.m. 28. On January 8, 2011, Respondent returned to Arizona from Reunion Island. 29. On January 24, 2011, Respondent hand-delivered to the Board additional documentation to support his claimed CPE hours, as follows: 29.1 For the Tax Talk TV course, a certificate of completion signed by the CEO of L&M Production Design Group, the producer of the program, and a transcript of the show; 29.2 For the ABA-AICPA course, a signed statement that the “ABA never issued a ‘CLE’ certificate for this course, but I hereby sign (below) and certify under penalties of perjury that indeed attended [sic] this course believing it was qualified for CPE,” and an outline for the course; 29.3 For the IRS course, a signed statement that the “IRS never issued a ‘CPE’ certificate for this course, but I hereby sign (below) and certify under penalties of perjury that indeed attended [sic] this course believing it was qualified for CPE”; 30. Respondent’s additional documentation was submitted to the Board at its meeting on February 7, 2011. The Board voted to deny Respondent’s request for reconsideration and to proceed to hearing. 31. Mr. Dubé testified that the additional documentation that Respondent submitted on January 24, 2011, furnished the Board’s completion and content requirements for the January 13, 2009 Tax Talk TV course. Because the course only furnished 2 hours of CPE, Respondent was still short 15 hours of the required 80 hours for the 2010 registration renewal period. 32. On February 10, 2011, Respondent hand-delivered an undated two- day agenda, purportedly of the November 6 and 7, 2008 course sponsored by the ASCPA. The afternoon courses on the second day of the undated agenda convened from 1:00 – 2:00 p.m., 2:00 – 3:00 p.m., and 3:15 – 4:30 p.m. 33. The afternoon courses listed on the dated partial agenda that Respondent submitted for the November 6-7, 2008 course to Mr. Dubé on October 26, 2010, convened from 1:00 – 2:00 p.m.; at 2:00 – 3:15 p.m.; and at 3:30 – 4:30 p.m. 34. The agendas for the November 7, 2008 ASCPA two-day course that Respondent submitted to the Board on October 26, 2010, and February 10, 2011, had the same course names and presenters for the courses on the second day, and listed the course from 10:45 a.m. to 12:00 p.m. as “Federal Tax Policy in the Wake of the 2008 Elections.” 35. Mr. Dubé testified that the differences between the times for the second-day courses on the agendas that Respondent submitted to the Board on February 10, 2011, and on October 26, 2010, suggested that the agendas might have been for the same course offered in two different years. He testified that it would be up to the Committee to determine whether the additional documentation that Respondent submitted was sufficient to establish the content of the course. CONCLUSIONS OF LAW The Board has been created and authorized to regulate and control the profession of Certified Public Accountancy in Arizona.[2] This matter lies within its jurisdiction. The Board bears the burden of proof and must establish Respondent’s statutory and regulatory violations by a preponderance of the evidence.[3] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard[4] and to establish factors in mitigation of any penalty that the Board may impose as a result of proven violations. A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[5] Respondent was required to submit to the Board as part of his 2010 registration renewal “satisfactory proof, in a manner prescribed by the [B]oard, that [he] has completed the [CPE] requirements established by the [B]oard.”[6] Pursuant to its statutory authority, the Board has promulgated A.A.C. R4-1- 453 to set forth CPE requirements. A.A.C. R4-1-453(F) specifically requires Respondent to “maintain for three years and provide the Board upon request the following documents: course outlines, proof of attendance or participation, and written proof of completion.” Under A.A.C. R4-1-453(F), the issue at the hearing was not whether Respondent took the courses that he reported on the CPE form that accompanied his 2010 registration renewal, but whether he had complied with the Board’s requirements for maintaining and submitting the documentation that the Board requires to support the content and his completion of the claimed CPE. The Board established that Respondent violated A.R.S. § 32- 741(A)(9),[7] specifically, his failure to comply with the professional standards set forth at A.A.C. R4-1-453(F). Respondent is deemed to have knowledge of the rules,[8] and reasonably should have known that he did not have the documentation he needed when he submitted the 2010 registration renewal. Therefore, the Board established that Respondent failed to maintain documentation of the CPE that he reported on his 2010 registration renewal and failed to provide the documentation to the Board within thirty days after request, in violation A.R.S. §§ 32-730(D),[9] 32-741(A)(3), 32-741(A)(6), 32-741(A)(14), and 32- 741(A)(15).[10] Respondent’s failure to timely respond to the Board’s September 21, 2010 letter violated A.R.S. §§ 32-741(A)(15) and 32-741(A)(9), specifically A.A.C. R4-1-455.03(F).[11] Respondent’s failures to maintain documentation to support the CPE that he claimed on his 2010 registration renewal or to respond to the Board’s written communications within the time allowed constitute discreditable acts, as defined by A.A.C. R4-1-455.03(A)(1) and (3).[12] Respondent’s violations of the applicable statutes and regulations that are set forth above provide grounds for the Board to take disciplinary action against his CPA certificate under A.R.S. §§ 32-741(A) and 32- 741(D)[13] and against his firm registration under A.R.S. § 32- 742(B)(1).[14] Respondent established factors in mitigation of any penalty to be imposed as a result of the statutory violations that the Board established, to wit, his mother’s October 4, 2010 death and the November 15, 2010 automobile accident. As of the date of the hearing, Respondent established that he had provided the documentation that A.A.C. R4-1-453(F) requires to establish course content and completion for 65 hours of CPE, 15 hours short of the 80 hours that A.A.C. R4-1-453(D)(1) requires. The two-day course outline for the ASCPA course on November 6-7, 2008, that Respondent provided to the Board on February 10, 2011, may establish the content of the course under A.A.C. R4-1-453(F), thereby furnishing the remaining CLE hours that Respondent needs for the 2010 registration renewal period. Because the Board has not had an opportunity to consider or determine the sufficiency of this additional document, however, any appeal regarding it is premature. If the Board determines that the document is insufficient, Respondent may appeal the determination at that time. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Board’s final order, the Board suspend Respondent Douglas J. Kingston’s Certified Public Accountant Certificate No. 9207-R and International Tax & Accounting’s Certified Public Accounting Firm Registration No. 4767-S for a period of twelve months or until Respondent submits proof that is satisfactory to the Board to support 80 hours of CPE for the 2010 registration renewal period, whichever occurs earlier. It is further recommended that if Respondent fails to submit proof that is satisfactory to the Board that he has completed 80 hours of CPE for his 2010 registration renewal period within twelve months, the Board deem his CPA certificate to be expired pursuant to A.R.S. § 32-741(D). It is further recommended that pursuant to A.R.S. § 32-701(6)(f), the Board require Respondent to reimburse its costs of investigation and of proceeding to hearing in this matter within thirty days of the effective date of the final order. It is further recommended that if Respondent fails to so reimburse the Board’s costs, the Board suspend Respondent’s CPA Certificate No. 9207- R and CPA Firm Registration No. 4767-S until Respondent has reimbursed to the Board its costs under A.R.S. § 32-701(6)(f). In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification. Done this day, March 3, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy ----------------------- [1] Respondent originally claimed 1.5 hours for this course. However, because the reporting form instructed registrants to “report whole hours only,” Board staff crossed out .5 hours that Respondent claimed. Respondent did not challenge this deduction at the hearing. [2] See A.R.S. § 32-701 et seq. [3] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [4] See A.A.C. R2-19-119(B)(2). [5] Black’s Law Dictionary at page 1220 (8th ed. 1999). [6] A.R.S. § 32-730(D). [7] A.R.S. § 32-741(A)(9) sets forth as grounds for the Board to revoke a previously issued CPA certificate, “[k]nowing violation of any . . . rule . . . adopted by the board.” [8] See A.A.C. R4-1-102(A). [9] A.R.S. § 32-730(D) provides that “[a]t the time of registration, every certified public accountant and public accountant shall as a prerequisite to biennial registration submit to the board satisfactory proof, in a manner prescribed by the board, that the registrant has completed the continuing education requirements established by the board.” [10] A.R.S. § 32-741(A) provides that after notice and an opportunity for hearing, the board may revoke any certificate previously issued for any of the following causes:

3. Fraud or deceit in obtaining a certificate as a certified public accountant or in obtaining a certificate as a public accountant under this chapter. . . . .

6. Violation of any of the provisions of this chapter . . . .

. . . .

14. Knowingly making a false or misleading statement:

a) To the board or its designated agent.

b) On a form required by the board. . . . .

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.

[11] A.A.C. R4-1-455.03(F) provides that “[w]hen requested, certified public accountants or public accountants shall respond to communications from the Board within 30 days of the mailing of such communications by registered or certified mail.” [12] A.A.C. R4-1-455.03(A) defines a “discreditable act” as follows:

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; . . . .

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

[13] A.R.S. § 32-741(D) provides that “[t]he board shall, after notice and a hearing, suspend the certificate of any certified public accountant or public accountant who fails to show proof, in accordance with section 32- 730, subsection D, of compliance with the continuing professional education requirements established by the board.” [14] A.R.S. § 32-742(B) provides that the Board may take disciplinary action against a firm’s registration following “[t]he revocation or suspension of any certificate issued by the board of any partner, shareholder, member, manager, officer, director, agent or employee of the firm.”

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