ALJDEC decisions subject to certification as final

13F-DI-273-REL · Department of Real Estate · 2014-02-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 30, 2014, at 8:00 a.m. APPEARANCES: Petitioners June B. Jochum and JB Jochum & Associates, L.L.C. failed to appear. The Arizona Department of Real Estate (hereinafter “the Department”) was represented by Assistant Attorney General, Liane C. Kido, Esq. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________

1. On the date of the scheduled hearing, the Administrative Law Judge convened the hearing at 8:15 a.m., which provided additional time for Petitioners, June B. Jochum (hereinafter “Ms. Jochum”) and JB Jochum & Associates, L.L.C. (hereinafter “JBJ”) (hereinafter collectively “Petitioners”), to appear. After expiration of the additional time, Petitioners failed to appear and the hearing proceeded. 2. On or about April 14, 2000, the Department issued Broker License No. BR046975000 to Jochum. 3. On or about April 14, 2000, the Department issued Entity License No. LC521846000 to JBJ. 4. JBJ is a domestic entity, organized in the State of Arizona on December 15, 1999, with Ms. Jochum as its manager/statutory agent. 5. The Notice of Hearing contained allegations regarding the conduct of Petitioners that the Department contended violated Arizona real estate laws. Through the administrative hearing process, the Department sought to revoke Broker License No. BR046975000 issued Ms. Jochum and to revoke Entity License No. LC521846000 issued to JBJ. 6. On June 6, 2013, the Commissioner of the Department (“Commissioner”) issued a Cease and Desist Order and Notice of Right to Request Hearing directing Ms. Jochum and JBJ to cease and desist from engaging in acts, practices and transactions without first complying with all applicable laws and rules, pursuant to A.R.S. §§ 32- 2154(A) and 32-2122(B). Testimony of Daniel Jones 7. Daniel Jones (hereinafter “Mr. Jones”) testified that he is an auditor for the Department. Mr. Jones stated that the Department conducted an Initial Electronic Broker Audit of Ms. Jochum and JBJ in November, 2013. Mr. Jones testified that the audit covered a time period from March 1, 2012, through August 31, 2013. Mr. Jones stated that as of August 31, 2012, the Department’s audit found serious deficiencies in the three trust accounts maintained by Ms. Jochum and JBJ. Account No. #####5578 (Main Trust Account) 8. Mr. Jones testified that the bank signature card submitted by Ms. Jochum and JBJ for Account No. #####5578 did not show the account as a trust account. Mr. Jones stated that Account No. #####5578 is the main trust account that is used as the property management trust account and contains owner funds. Mr. Jones testified that the November 2012 bank statement for the account showed a balance of $14,839.16. Mr. Jones stated that the available balance for the account as of November 30, 2012, was $6,547.77. Mr. Jones testified that the owner ledgers for the account showed a total liability of $42,503.32, for a deficiency of approximately $35,856.52. Account No. #####9110 9. Mr. Jones testified that Petitioners used this account as a property management trust account. Mr. Jones stated that the October 2012 bank statement for this account showed a balance of $1,291.74. Mr. Jones testified that the available balance for the account as of October 31, 2012, was $5,393.24. Mr. Jones stated that the tenant ledgers showed a total liability of $112,598.29, for a deficiency of approximately $107,205.05. Account No. #####5931 10. Mr. Jones testified that the November 2012 bank statement for this account showed a balance of $171.87. Mr. Jones stated that no account reconciliations were provided by Petitioners for this account. Mr. Jones testified that that account records showed two (2) outstanding checks for this account totaling $24,310.00, leading to an account deficiency of $24,156.12. 11. Mr. Jones testified that that the Department conducted an interview with Ms. Jochum on May 15, 2013. Mr. Jones stated that Ms. Jochum disclosed that she did not know why Account No. #####5931 had been established. Mr. Jones testified that Ms. Jochum did not know what the purpose of the account was and did not know what the balance of the account was. 12. Mr. Jones testified that Ms. Jochum stated that that she did not reconcile or review the trust accounts on a monthly basis and that she did not know how many accounts she had for JBJ. Mr. Jones stated that Ms. Jochum acknowledged that the trust accounts were all significantly deficient and that the trust accounts had been deficient for approximately ten years. Mr. Jones testified that Ms. Jochum confirmed the approximate shortages in the trust accounts as determined by the Department. 13. Mr. Jones testified that Ms. Jochum asserted that the shortages in the trust accounts were caused by unnamed persons who sabotaged her business. Mr. Jones stated that Ms. Jochum indicated that she wanted to make up the deficits in the accounts but was not financially able to do so. Mr. Jones testified that Ms. Jochum confirmed that it was the EBAR program that brought the deficiencies in the accounts to the attention of the Department.[1] 14. Mr. Jones testified that Ms. Jochum acknowledged that she personally knew that the trust accounts were short and not in balance when she completed the Broker Audit Declarations on April 30, 2008, and April 30, 2012, for Petitioners’ license renewal applications. Mr. Jones stated that Ms. Jochum knowingly misrepresented in Petitioners’ Broker Audit Declarations for the April 30, 2008 and the April 30, 2012 license renewal applications that the trust accounts were in balance and that the trust accounts were reconciled monthly with bank statements. Mr. Jones testified that Petitioners provided false and misleading information when applying for renewal licenses. 15. Mr. Jones testified that Petitioners failed or refused to comply with the Department’s demand to produce records that Petitioners were required by law to maintain. Mr. Jones stated that Petitioners failed to maintain a complete record of each transaction involving Petitioners’ licenses. Mr. Jones testified that Petitioners failed to make property management records, including trust account records, available as requested by the Commissioner or the Commissioner’s representatives as required by statute. 16. Mr. Jones testified that Petitioners failed maintain trust account bank reconciliations and client ledger balances on a monthly basis as required by statute. Mr. Jones stated that Petitioners failed to maintain all monies held on behalf of clients and tenants in broker trust accounts, resulting in a shortage of approximately $143,000.00. 17. Mr. Jone’s testimony is found to be credible. 18. At the hearing, the Department’s counsel argued that Petitioners’ violations of the State’s real estate laws warrant the imposition of a joint and several civil penalty against Petitioners for Petitioners’ violations of the charged real estate laws for a total civil penalty in the amount of $8,000.00, in addition to the revocation of Petitioners’ licenses. Petitioners did not present any evidence or legal argument to refute or rebut the evidence or legal arguments presented by the Department to support the imposition of civil penalties in this matter. CONCLUSIONS OF LAW 1. This matter lies within the jurisdiction of the Department. See A.R.S. Title 32, Chapter 20. 2. Because this matter is disciplinary in nature, the Department bears the burden of proof. The standard of proof on all issues is by a preponderance of the evidence. See A.A.C. R2-19-119. 3. 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). It is “[e]vidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary 1182 (6th ed. 1990). 4. Pursuant to A.R.S. § 32-2153(A)(16), the Commissioner may suspend or revoke a license if the licensee “commingled the money or other property of the licensee’s principal or client with the licensee’s own or converted that money or property to the licensee or another.” The evidence of record established that Ms. Jochum and JBJ converted clients’ funds for Petitioners’ or another’s use, in violation of A.R.S. § 32- 2153(A)(16). Pursuant to A.R.S. § 32-2153(A)(21), the Commissioner may suspend or revoke a license if the licensee fails to exercise reasonable supervision “over the activities of salespersons, associate brokers or others under the broker’s employ or failed to exercise reasonable supervision and control over the activities for which a license is required of a corporation [or] limited liability company . . . .” Ms. Jochum, as a licensed broker, failed to exercise reasonable supervision over the activities of salespersons, associate brokers, or others under her employ, as evidenced by the above Findings of Fact, in violation of A.R.S. § 32-2153(A)(21). The above delineated facts, specifically those enumerated in Findings of Fact Numbers 7 through 16, establish that Ms. Jochum and JBJ disregarded and violated rules of the Commissioner in violation of A.R.S. § 32- 2153(A)(3). Ms. Jochum and JBJ failed or refused to produce documents and records for the Commissioner that the Petitioners were required by law to maintain in violation of A.R.S. § 32-2153(A)(17). Ms. Jochum and JBJ failed to maintain complete record of each transaction performed under Petitioners’ licenses in violation of A.R.S. § 32- 2153(A)(18). Ms. Jochum and JBJ failed to exercise reasonable supervision over the activities of salespersons, associate brokers, and others employed by Petitioners in violation of A.R.S. § 32-2153(A)(21). Ms. Jochum and JBJ demonstrated negligence and incompetence in performing any act for which a license is required in violation of A.R.S. § 32- 2153(A)(22) and A.R.S. § 32-2153(B)(8). Ms. Jochum violated A.R.S. § 32-2153(B)(1) when she filed false and misleading Declarations during her renewal application process in 2008 and 2012. Ms. Jochum and JBJ violated A.R.S. § 32-2153(B)(3) by making substantial misrepresentations as described in the above delineated Findings of Fact. The evidence of record established that Ms. Jochum is not a person of honesty, truthfulness, and good character, and therefore, Ms. Jochum is in violation of A.R.S. § 32-2153(B)(7). The Department proved by a preponderance of the evidence that Petitioners violated the charged provisions of A.R.S. §§ 32-2153(A)(3), 32-2153(A)(17), 32-2153(A)(18), 32-2153(A)(21), 32-2153(A)(22), 32-2153(B)(1), 32- 2153(B)(3), 32-2153(B)(7), and 32-2153(B)(8).[2] Pursuant to A.R.S. § 32-2154, the Department may issue a Cease and Desist Order if it appears that a licensee is in violation of Title 32, Chapter 20. The Commissioner of the Department has the authority to deny, suspend, or revoke Ms. Jochum’s real estate broker license no. BR046975000 and JBJ’s entity license no. LC521846000 pursuant to A.R.S. § 32-2153(A)(3), based on the above-found violations of the provisions of Title 32, Chapter 20 of the Arizona Revised Statutes. Pursuant to A.R.S. § 32-2160.01, the Department may impose a civil penalty not to exceed $1,000.00 for each violation of Title 32, Chapter 20. This Tribunal concludes that the Department met its burden of proving by preponderance of the evidence that the issuance of the Cease and Desist Order was reasonable, appropriate, and in accordance with the law. This Tribunal concludes that the Department proved by a preponderance of the evidence that grounds exist for the revocation of Ms. Jochum’s real estate broker license no. BR046975000 and JBJ’s entity license no. LC521846000. This Tribunal concludes that a total civil penalty in the amount of $8,000.00 against Petitioners, jointly and severally, for the violations found above, pursuant to A.R.S. § 32-2160.01, is reasonable and appropriate under the circumstances. RECOMMENDED ORDER The June 6, 2013 Cease and Desist Order is affirmed. On the effective date of the Order entered in this matter, Ms. Jochum’s real estate broker and JBJ’s real estate entity licenses shall be revoked. It is further recommended that within sixty (60) days of the effective date of the Order entered in this matter, Ms. Jochum and JBJ shall pay to the Department a total civil penalty in the amount of $8,000.00, and such payment shall be made by cashier’s check or money order made payable to the Department. 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 (5) days from the date of that certification.

Done this day, February 13, 2014.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate

----------------------- [1] EBAR (Electronic Broker Audit Review). [2] A.R.S. § 2153 provides, in relevant part, as follows: A. The commissioner may suspend or revoke a license, deny the issuance of a license, issue a letter of concern to a licensee, issue a provisional license or deny the renewal or the right of renewal of a license issued under this chapter if it appears that the holder or applicant, within five years immediately preceding, in the performance of or attempt to perform any acts authorized by the license or by this chapter, has: . . . . 3. Disregarded or violated any of the provisions of this chapter or any rules adopted by the commissioner. . . . . 17. Failed or refused upon demand to produce any document, contract, book, record, information, compilation or report that is in the licensee's possession or that the licensee is required by law to maintain concerning any real estate, cemetery or membership camping business, services, activities or transactions involving or conducted by the licensee for inspection by the commissioner or the commissioner's representative. 18. Failed to maintain a complete record of each transaction which comes within this chapter. . . . . 21. As a licensed broker, failed to exercise reasonable supervision over the activities of salespersons, associate brokers or others under the broker's employ or failed to exercise reasonable supervision and control over the activities for which a license is required of a corporation, limited liability company or partnership on behalf of which the broker acts as designated broker under section 32-2125. 22. Demonstrated negligence in performing any act for which a license is required. B. The commissioner may suspend or revoke a license, deny the issuance of a license, issue a letter of concern to a licensee, issue a provisional license or deny the renewal or the right of renewal of a license issued under this chapter when it appears that the holder or applicant has: 1. Procured or attempted to procure a license under this chapter for the holder or applicant or another by fraud, misrepresentation or deceit, or by filing an original or renewal application which is false or misleading. . . . . 3. Made any substantial misrepresentation. . . . . 7. Not shown that the holder or applicant is a person of honesty, truthfulness and good character. 8. Demonstrated incompetence to perform any duty or requirement of a licensee under or arising from this chapter. For the purposes of this paragraph, "incompetence" means a lack of basic knowledge or skill appropriate to the type of license the person holds or a failure to appreciate the probable consequences of the licensee's action or inaction.

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