ALJDEC decisions subject to certification as final

12F-2012.096-ACY · State Board of Accountancy · 2012-05-31

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 9, 2012, at 8:00 a.m. APPEARANCES: Applicant Gary E. Lotzer appeared on his own behalf; the Arizona State Board of Accountancy was represented by Seth T. Hargrave, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure A.R.S. § 32-702(A) authorizes the Arizona State Board of Accountancy (“the Board”) to administer and to enforce statutes relating to Certified Public Accountants (“CPAs”). A.R.S. § 32-703(B)(6) authorizes the Board to “[i]ssue to qualified applicants [CPA] certificates . . . .” On or about January 10, 2012, the Board received from Gary E. Lotzer an application for certification as a CPA by reciprocity based on substantial equivalency. Mr. Lotzer answered “yes” to the question on the application, “Have you knowingly violated any decision, order or rule issued or adopted by the Board?” Mr. Lotzer explained that his violation consisted of “[u]se of CPA designation prior to completing Application process.” On February 16, 2012, the Board issued an order denying Mr. Lotzer’s application under A.R.S. §§ 32-721 and 32-726 because Mr. Lotzer had committed acts that would constitute grounds for revocation or suspension of a certificate under A.R.S. § 32-741(A)(6), specifically A.R.S. § 32-747, and A.R.S. §§ 32-741(A)(9), 32-741(A)(14), and 32-741(A)(15). Mr. Lotzer appealed the Board’s denial. Pursuant to A.R.S. §§ 41-1092(7)(a) and 41-1092.01(E), the Board referred Mr. Lotzer’s appeal to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. A hearing was held on May 9, 2012. Mr. Lotzer testified on his own behalf and submitted 53 exhibits. The Board presented the testimony of its Deputy Director, Jim Dubé, and submitted 12 exhibits. Hearing Evidence Arizona is one of three “title states” where persons cannot legally use the designation, “CPA,” unless the responsible state agency has issued a certificate to them that allows them to practice as a CPA in the state. See A.R.S. § 32-747.[1] In 1978, Mr. Lotzer passed the CPA examination and was certified as a CPA in the State of Wisconsin. In 1986, Mr. Lotzer sold his accounting firm in Waukesha, Wisconsin, and has not practiced as a CPA since. Mr. Lotzer has maintained his CPA certification in Wisconsin and is a member of the American Institute of CPAs. Mr. Lotzer has lived in Arizona for eight years. Mr. Lotzer is licensed by the State of Arizona Department of Real Estate as a real estate agent and specializes in the sale of businesses and commercial properties. Mr. Lotzer started using the CPA designation in January 2011 when he became employed by Hallmark Business Consultants, Inc. (“Hallmark”) as an agent for the sale of businesses, and by Hunter Wise Financial Group, L.L.C. (“Hunter Wise”), an investment banking firm, as a managing director. Mr. Lotzer explained that although he is not practicing as a CPA, use of the designation distinguishes him from other real estate agents and business consultants. Mr. Lotzer testified that if he is not allowed to use the designation, his employers would be disappointed. Mr. Lotzer testified that he did not realize that he could not use the CPA designation in Arizona unless he was certified by the Board. On April 28, 2011, the Board’s staff sent a Notice of Violation and Opportunity to Comply (“the April 28, 2011 Notice”) to Mr. Lotzer in File No. 2011.119, informing him that the Board had received documents that indicated that he was violating A.R.S. § 32-747 by using the designation, “CPA,” even though he had not been certified in Arizona. The Board attached to the April 28, 2011 Notice copies of Mr. Lotzer’s Summary Career Biography and biography from the website of Az Biz Seller, a business brokerage, that showed his name followed by the CPA designation. The Board also attached a copy of A.R.S. § 32-747. The April 28, 2011 Notice notified Mr. Lotzer that if he was using the CPA designation, he should discontinue the usage and requested that he respond to the Board within 30 days to describe the remedial actions that he had taken. On June 3, 2011, the Board received Mr. Lotzer’s response to the April 28, 2011 Notice that stated that he had removed the CPA designation from the Az Biz Seller website and from his career biography and curriculum vitae, that he would commence the application process to obtain certification from the Board, and that he would refrain, “as presently practicable, from using the CPA designation on professionally printed materials.” The Board accepted the response, even though it was received more than 30 days after April 28, 2011. At the Board’s meeting on June 6, 2011, it reviewed Mr. Lotzer’s June 3, 2011 response and voted to close File No. 2011.119. On December 22, 2011, Board’s staff sent a second Notice of Violation and Opportunity to Comply (“the December 22, 2011 Notice”) to Mr. Lotzer in File No. 2012.054, informing him that the Board had received documents that indicated that he was still violating A.R.S. § 32-747 by using the designation, “CPA,” even though he had not been certified in Arizona. The Board attached to the December 22, 2011 Notice copies of the following documents: 1. A consumer complaint from Donald H. and Anita A. Poyas that alleged that Mr. Lotzer had fraudulently held himself out as a CPA and was charging them for performing public accounting services, even though he was not certified in Arizona; 2. A printout of Hallmark’s website dated December 20, 2011, that showed Mr. Lotzer’s name followed by the CPA designation; 3. A printout of a listing on a website for a dry cleaning drop-off store in Tucson, Arizona that showed Mr. Lotzer as the listing agent, with the CPA designation after his name; 4. A printout of the Az Biz Seller website dated December 19, 2011, that showed Mr. Lotzer’s name followed by the CPA designation; 5. A copy of Mr. Lotzer’s business card with Hallmark that showed the CPA designation; 6. A listing for Mr. and Mrs. Poyas’s resort lodge and full-service restaurant in the White Mountains of Arizona that showed as the listing agent, “Gary E. Lotzer, CPA”; 7. A flier from the Tucson Metro Chamber of Commerce for a seminar scheduled on November 29, 2011, showing “Gary E. Lotzer, CPA” as the presenting expert; 8. A printout of a listing for Mr. and Mrs. Poyas’s resort and restaurant on the website BusinessBroker.net dated December 10, 2011, showing “Gary E. Lotzer, CPA” as the listing agent; 9. A printout of a listing for Mr. and Mrs. Poyas’s resort and restaurant on BizBuySell.com dated December 12, 2011, showing “Gary E. Lotzer, CPA” as the listing agent; 10. A contract between Mr. and Mrs. Poyas and “Gary E. Lotzer, CPA” for the listing of the resort and restaurant dated July 6, 2011, that also showed “Gary E. Lotzer, CPA” in the heading of the contract; and 11. E-mails from Mr. Lotzer dated September 13, 2011, November 29, 2011, December 1, 2011, December 2, 2011, December 5, 2011, and December 12, 2011, that showed the CPA designation after Mr. Lotzer’s name in the “from” line and in the signature block. The December 22, 2011 Notice requested that Mr. Lotzer respond to the Board within 30 days and informed Mr. Lotzer that the Board would consider the matter at its February 13, 2012 meeting. On February 9, 2012, the Board received Mr. Lotzer’s response to the December 22, 2011 Notice. Mr. Lotzer stated that due to the viral nature of the internet, he could not control the appearance of the CPA designation on the results of internet searches. Mr. Lotzer acknowledged that he inadvertently continued to use the CPA designation. Mr. Lotzer stated in his February 9, 2012 response to the Board’s December 22, 2011 Notice that his late response was due to delays occasioned by finalizing his application for licensure and his out-of-state vacation over the holidays. Mr. Lotzer acknowledged at the hearing that he received the Board’s December 22, 2011 Notice when he returned to Arizona on January 3 or 4, 2012. Mr. Lotzer testified that he confused the 30-day response time with the February 13, 2012 date of the Board’s meeting. Mr. Lotzer acknowledged at the hearing that he continued to use the CPA designation after June 6, 2011. Mr. Lotzer argued at the hearing that the Board should have provided clearer “do’s and don’ts” about the prohibition on the use of the CPA designation. Mr. Lotzer testified that although the Board was clear that he could not hold himself out to the public as a CPA, it was less clear about the use of the CPA designation on business documents. At the Board’s meeting on February 13, 2012, it voted to authorize the filing of an injunction against Mr. Lotzer in superior court and to deny Mr. Lotzer’s application for certification by reciprocity due to his responses on the application and his history of unlawful use of the CPA designation in Arizona. On April 4, 2012, the Pima County Superior Court issued a Final Judgment and Order Granting Permanent Injunction (“Injunction”) against Mr. Lotzer, permanently enjoining him from using the CPA designation in Arizona and requiring him to make his best effort to remove the designation from any internet directories or advertisements. The Injunction provided that if Mr. Lotzer was found to be qualified to be certified as a CPA in Arizona, he could seek amendment to or relief from the Injunction from the Board or from the Court. Mr. Lotzer testified that he agreed to the Injunction as a gesture of good faith to the Board, even though he felt that a lifetime prohibition on his right to use the CPA designation in Arizona was unduly harsh. The Board submitted e-mails that Mr. Lotzer sent to the Board dated December 22, 2011, requesting acknowledgment of receipt of his application. The e-mails showed the CPA designation after Mr. Lotzer’s name in the “from” line and in the signature block. Mr. Lotzer testified that he manually removed the CPA designation from e- mail messages before he sent them. Mr. Lotzer testified that until Hallmark’s attorney informed him that e-mail recipients still saw the designation, he did not realize that he needed to make more substantial changes to remove the embedded designation. Mr. Lotzer testified that he cannot control information that is available on the internet that is based on information that he submitted before he became aware of A.R.S. § 32-747’s prohibition on the use of the CPA designation in Arizona by persons who are not certified by the Board. Mr. Lotzer submitted business cards that showed he had removed the CPA designation. Mr. Lotzer also submitted recent listing agreements from which he had removed the CPA designation from the heading and from the signature block. Mr. Lotzer testified that he submitted a syllabus and biography for the Tucson Metro Chamber of Commerce seminar before he received the Board’s April 28, 2011 Notice. Mr. Lotzer testified that he assumed that he would be given an opportunity to approve the flier before it was printed. Mr. Lotzer testified that Mr. and Mrs. Poyas made the consumer complaint to the Board on the advice of their attorney after he refused to release them from their listing agreement with Hallmark. Mr. Lotzer testified that despite Mr. and Mrs. Poyas’s threat that they would make a complaint to the Board if he did not cancel the contract, he refused to barter his use of the CPA designation to avoid a complaint to the Board, at great risk and cost to himself. Mr. Lotzer acknowledged that he continued to use the CPA designation after June 6, 2011, such as on his July 6, 2011 listing contract with Mr. and Mrs. Poyas and on some business cards that he gave to members of the public. Mr. Lotzer testified that after the December 22, 2011 Notice, he removed the CPA designation from all electronic forms in which it was embedded. CONCLUSIONS OF LAW This matter lies within the Board’s jurisdiction to resolve.[2] Mr. Lotzer bears the burden of proof to establish that he meets statutory requirements for certification as a CPA by a preponderance of the evidence.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] Pursuant to A.R.S. §§ 32-721 and 32-726, to be issued a CPA certificate, an applicant must demonstrate that he meets character and fitness requirements, including presenting satisfactory evidence that he is of good moral character and has not engaged in any conduct that would constitute grounds for disciplinary action pursuant to A.R.S. § 32-741.[5] Mr. Lotzer’s use of the CPA designation without having been certified by the Board violated A.R.S. § 32-747 and would have provided grounds for discipline under A.R.S. § 32-741(A)(6).[6] The Board closed File No. 2011.119 on June 6, 2011, based on Mr. Lotzer’s assurances that he would refrain from using the designation. Mr. Lotzer’s continued use of the CPA designation without having been certified by the Board would have provided grounds for discipline under A.R.S. § 32- 741(A)(9) and (14).[7] Mr. Lotzer’s late responses to the Board’s April 28, 2011 Notice and December 22, 2011 Notice would have provided grounds for discipline under A.R.S. § 32-741(A)(15).[8] It appears that Mr. Lotzer continued to use the CPA designation after June 6, 2011, to avoid disrupting his business practices, with the hope that he could obtain certification before the Board gave the matter closer scrutiny. Mr. Lotzer’s cavalier attitude toward regulation and repeated failures to conform his business practices to the requirements of A.R.S. § 32-741(A)(6), specifically A.R.S. § 32-747, and A.R.S. § 32-741(A)(9), (14), and (15) demonstrate that at this time, he does not meet the character and fitness requirements defined in A.R.S. § 32-721 and 32-726 for certification as a CPA. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Board affirm its denial of Mr. Lotzer’s application for certification as a CPA and dismiss this appeal. 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, May 31, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy ----------------------- [1] A.R.S. § 32-747 involves unlawful use of designation or abbreviation and provides in relevant part as follows: A. An individual who has received from the board a certificate to practice as a certified public accountant or as a public accountant issued under the laws of the state or who is a limited reciprocity privilege holder under section 32-725 shall be known as a "certified public accountant" or "public accountant", in accordance with the certificate or the privilege and may also use the abbreviation "C.P.A.", "CPA", "P.A." or "PA", in accordance with the certificate or the privilege. No other individual or firm shall assume or use any title, designation or abbreviation or any other title, designation, sign, card or device in this state tending to indicate that the individual or firm using it is authorized to practice public accounting or is a certified public accountant or a public accountant. B. No individual or firm shall when referring to accounting or accounting practices assume or use the title or designation "chartered accountant", "certified accountant", "enrolled accountant", "registered accountant", "licensed accountant", "certified tax accountant", "certified tax consultant" or any other title or designation likely or intended to be confused with "certified public accountant" or "public accountant" unless the individual or firm has received from the board a certificate to practice as a certified public accountant or as a public accountant issued under the laws of this state, the individual is a limited reciprocity privilege holder under section 32-725 or the partnership, corporation or other entity is permitted to practice accounting in this state pursuant to section 32-725, subsection G. . . . [2] See A.R.S. §§ 32-702(A); 32-703(B)(6). [3] See A.R.S. § 41-1092.07(G)(1); A.A.C. R4-1-344(4); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] A.R.S. §§ 32-721(A)(3) and 32-726(D)(5)(c) require an applicant for a CPA certificate to meet certain character and fitness requirements, including that he “[h]as not engaged in any conduct that would constitute grounds for revocation or suspension of a certificate or other disciplinary action pursuant to section 32-741.” [6] A.R.S. § 32-741(A)(6) provides as grounds for revocation, suspension, or other disciplinary action against a CPA certificate, “[v]iolation of any of the provisions of this chapter, of title 44, chapter 12, article 13 or of any fraud provisions of the federal securities laws.” [7] A.R.S. § 32-741(A)(9) and (14) provide as grounds for revocation, suspension, or other disciplinary action against a CPA certificate, the following: 9. Knowing violation of any decision, order or rule issued or adopted by the board. 14. Knowingly making a false or misleading statement: (a) To the board or its designated agent. (b) On a form required by the board. (c) In written correspondence to the board. [8] A.R.S. § 32-741(A)(15) provides as grounds for revocation, suspension, or other disciplinary action against a CPA certificate, “[f]ailing 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.”

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