ALJDEC decisions subject to certification as final

16F-DI-196-REL · Department of Real Estate · 2016-06-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: June 3, 2016, at 1:00 p.m. APPEARANCES: Curtis Geoffrey Baumgarth (“Petitioner”) was represented by Charity Elyse Clark, Charity Clark Law PLLC; the Arizona Department of Real Estate (“the Department”) was represented by Ryan Matthew Krench, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT The Application On February 8, 2016, Petitioner filed an application to be licensed as a real estate salesperson with the Department of Real Estate (“the Department”). Petitioner answered “yes” to the following three questions on the application: 1.1 “Has the Applicant . . . [b]een convicted and/or entered into a plea agreement and/or plea of NOLO CONTENDERE (no contest) to ANY felony in Arizona and/or any other state, whether or not the plea or verdict was set aside, judgment or sentencing was deferred, conviction was dismissed or expunged, or has been pardoned?” 1.2 “Has the Applicant . . . [v]oluntarily surrendered ANY professional or occupational license during the course of an investigation or disciplinary proceeding?” 1.3 “Has the Applicant . . . [e]ntered into ANY consent decree, and/or had an injunction (either temporary or permanent), a suspension, an order and/or a judgment issued which prohibited or restricted them from engaging in ANY profession or occupation?”[1] On March 14, 2016, the Department informed Petitioner via certified mail that based in part on his 2014 felony conviction for Criminal Copyright Infringement and his 2009 class six undesignated conviction for Attempted Computer Tampering, it had concluded that he did not meet the qualifications for licensure pursuant to A.R.S. §§ 32-2123, 32-2124, and 32- 2153. Therefore, the Department notified Petitioner that it intended to deny his license application. Petitioner requested a hearing on the Department’s intended denial of his license application. The Department referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. On April 26, 2016, the Department issued a Notice of Hearing, charging that grounds existed under A.R.S. §§ 32-2153(A)(24), 32-2153(B)(2), 32- 2153(B)(5), 32-2153(B)(7), 32-2153(B)(9), and 32-2153(B)(10) to deny his license application. A hearing was held on June 3, 2016. Petitioner testified on his own behalf and submitted seven exhibits. The Department submitted thirteen exhibits. Hearing Evidence Petitioner’s Criminal and Licensing History Petitioner did not dispute the facts set forth on the Department’s Notice of Hearing. Petitioner provided additional details about the circumstances of his history at the hearing. For fourteen years, Petitioner was employed as a certificated police officer in Arizona. During the approximately last year and a half of his law enforcement career, Petitioner was involved in a volatile romantic/sexual relationship with a woman, which Petitioner characterized as “toxic.” Petitioner testified that in February 2008, he threatened to post naked pictures on the internet of his former girlfriend and actually posted one picture on eBay. Petitioner testified that he also sent threatening emails to his former girlfriend. Petitioner testified that the emails did not threaten physical harm. As a result of the posts, criminal charges were filed against Petitioner and he lost his job in law enforcement. On or about July 28, 2008, the Department issued original real estate salesperson’s License No. SA627358000 to Petitioner. He became employed at Century 21 All Star, Realtors in Glendale, Arizona as a real estate salesperson.[2] On January 14, 2009, Petitioner pled guilty to and was convicted of Attempted Computer Tampering, a Class 6 Undesignated Felony, in Maricopa County Superior Court Case No. CR2008-108072-001.[3] Pursuant to the plea agreement, Petitioner was sentenced to three years’ probation, community service, counseling, fines and fees. Among the terms of Petitioner’s probation in Case No. CR2008-108072-001, was that he was required to “[o]bey all laws.”[4] Petitioner reported his January 2009 conviction in Case No. CR2008-108072- 001 to the Department. On March 19, 2009, in light of Petitioner’s criminal conviction in Case No. CR2008-108072-001, the Department issued a two-year provisional license to Petitioner subject to his compliance with certain conditions, including that he “remain law abiding.”[5] Petitioner testified that in the time after he lost his career in law enforcement and before he started receiving steady commission checks from his real estate sales, he was broke. His parents were required to pay his child support. He could not contribute to his new girlfriend’s mortgage payments or his dates with his girlfriend. His new girlfriend lost her home to foreclosure and had her car repossessed. Petitioner testified that a friend asked him to burn a copy the P90X Extreme Fitness Kit DVDs. After he burned a copy of the multiple DVD set, friends at church asked for more copies. A friend suggested that Petitioner start selling the bootleg disks on line. Petitioner testified that in early 2009, he started posting advertisements for the bootleg P90X Fitness Kit DVDs on Craigslist for $30.00. Petitioner testified that he also posted advertisements on Craigslist for handyman services and hauling trash and that $30.00 was the cost of hanging a ceiling fan. Petitioner testified that, initially, the proceeds from the sale of the bootleg P90X Fitness Kit DVDs that he sold on Craigslist went to buy gas and other necessities. Petitioner acknowledged that he knew that his sales of the bootleg P90X Fitness Kit DVDs were wrong and that the sales violated the terms of his probation Case No. CR2008-108072-001 and the conditions of his provisional real estate license. On or about November 11, 2009, Petitioner received a Cease & Desist letter from the P90X Fitness Kit copyright holder. Nonetheless, Petitioner continued selling the bootleg P90X Fitness Kit DVDs on Craigslist. Petitioner explained that after he received the Cease & Desist letter, 20 or 30 people continued to advertise bootleg P90X Fitness Kit DVDs on Craigslist. He testified that it did not seem to him that the Cease & Desist letter had anything behind it since “everyone” continued selling the bootleg fitness kits online. Petitioner acknowledged that he should have stopped selling the bootleg P90X Fitness Kit DVDs when he received the Cease & Desist order, especially after his income from selling real estate started increasing. He denied that he made significant income from the sale of the bootleg DVDs. While the money was helpful to his household, it was never a substitute for building a career or hard work. On September 22, 2011, an undercover agent from the Federal Bureau of Investigation (“FBI”) bought a bootleg P90X Fitness Kit DVD set from Petitioner in a parking lot. Petitioner testified that after the FBI agent confronted him, he stopped selling the bootleg P90X Fitness Kit DVDs. On October 14, 2011, the FBI seized more than 14,000 DVDs from Petitioner’s home and vehicle pursuant to a valid search warrant. Petitioner testified that the P90X Fitness Kit set included 14 DVDs and that he did not know how many of the DVDs that the FBI seized were blank. Petitioner testified that although he did not hear again from the FBI for years, he did not sell any more P90X Fitness Kit DVDs after September 22, 2011. On December 10, 2013, Petitioner pled guilty to one count of Criminal Copyright Infringement, a Class E felony offense, in violation of 17 U.S.C. § 2319(c)(1) in Federal District Court Case No. CR-13-1673-001.[6] On or about March 6, 2014, U.S. District Court Judge James G. Carr sentenced Petitioner to a one-year probation term, 1,500 hours of intermittent confinement, and a fine of $5,000.00.[7] Judge Carr did not require Petitioner to pay any restitution to the holder of the P90X Fitness Kit copyright. Respondent reported the conviction in Case No. CR-13-1673-001 to the Department. After the Department learned of Petitioner’s second felony conviction, on or about April 14, 2014, it issued an order summarily suspending Petitioner’s real estate salesperson’s license.[8] Although Petitioner initially appealed the summary suspension,[9] he withdrew his appeal before the scheduled administrative hearing.[10] Petitioner explained that he withdrew his appeal of the summary suspension because after the informal settlement conference, he learned that he would not be allowed to keep his license during the term of his criminal probation in Case No. CR-13-1673-001. Petitioner testified that after his real estate license was suspended, he stopped practicing as a real estate salesperson. On or about July 31, 2014, Petitioner’s real estate salesperson’s License No. SA627358000 expired. Evidence of Petitioner’s Qualifications and Rehabilitation Petitioner testified that between 2008 and 2014, he worked as a real estate agent. He thinks that he got only perfect scores on his clients’ reviews. Petitioner was the only salesperson in his Century 21 Office to have received the Quality Service Award for three years in a row. Petitioner submitted a letter to the Department dated March 19, 2014, from the Honorable James G. Carr, the federal district court judge who had presided over Petitioner’s sentencing in Case No. CR-13-1673-001, that summarized the documents that he had reviewed before imposing the sentence and concluded in relevant part as follows: Upon reviewing the information, I came to the conclusion that [Petitioner] did not represent any risk to society and was unlikely to reoffend. I also concluded there was nothing about [Petitioner’s] offense, his past, or his current situation that led me to believe he was at all a risk to those whom he represented in his work as a realtor. By all accounts, [Petitioner] has ethically represented his clients and has abided by all legal and ethical constraints required of him as a realtor. I see no indication that [Petitioner] will not continue to do so and continue to be a productive and positive member of the realty community. In fact after reviewing all information presented me regarding [Petitioner], it is my hope that [Petitioner] should not lose his real estate license as a result of this instant conviction.

The sentence I imposed against [Petitioner] carefully took into consideration all factors in determining what sentence would be appropriate for his situation. I also took into consideration his work needs as a realtor in the hope that he would be able to maintain his license. While [Petitioner] did break the law, I sincerely believe those actions have been sufficiently dealt with by the sentence I have imposed against him. It is my hope [Petitioner] will not be further punished by the Real Estate Board for his offense by losing his license. I do not believe such is necessary and implore the Board to consider my evaluation of [Petitioner] when determining what sanctions, if any, are necessary.[11]

Petitioner submitted a letter from Shauna Hensley, the accountant at Century 21 All Stars, dated July 6, 2015, stating that the entire office missed Petitioner’s “energy and advice at the weekly sales meetings and on a daily basis.” Ms. Hensley characterized Petitioner as “an honest and caring agent that should be given an opportunity to once again engage in Real Estate . . . .”[12] Petitioner submitted a letter from Rosita Lopez, the broker at Century 21 Arizona All Stars, dated June 24, 2015, that provided in relevant part as follows: [Petitioner] was employed by Century 21 All Star, Realtors from July 28, 2008 to April 14, 2014. During this time period, we found him to be friendly, fair and honest in his dealings and association with us. More importantly his clients gave him exceptional reviews. [Petitioner] is one of the few agents who was an Award Recipient for “Quality Service”, year after year. This is based on a Century 21 survey that is completed after every transaction in which you have to score a 93% or higher to be recognized. The consumers respond to a series of questions in regards to their satisfaction of the service provided by [Petitioner]. In each instance, his clients reported him to be rated “A”, for OUTSTANDING service, over and above the average agent. In addition, he was awarded for “Top Producer” amongst the office for the years, 2011, 2012 and 2013.

In conclusion, Century 21 All Star, Realtors had a positive experience with [Petitioner]. He proved to be of good character, with regards to his ethics and has great reputation as a Professional Real Estate Agent.[13]

Respondent submitted a letter from Kumiko Tanaka-Rosier, the former office manager at Century 21 All Star, Realtors, dated July 6, 2015, that provided in relevant part: In a short time period, [Petitioner] had developed the strong business based on the relationship with the clients, customers and sphere of influence. With his excellent customer service skill along with a soft and friendly demeanor, he won the trust and repeated business from them, which resulted in receiving CENTURY 21 “Quality Services Award” in consecutive years.

As an office manager at that time, I witnessed that [Petitioner] was always willing to help new agents to kick start their career by allowing them to market his listings and offered his knowledge and experience to assist them . . . .

Over the years, I have enjoyed his cheerful, positive attitude and sense of humor. He had been a very pleasant person to be around and a responsible professional to work with. . . .[14]

Petitioner submitted a letter from Rosita Lopez dated April 19, 2016, stating that she “would personally re-hire” Petitioner because “[h]e had a stellar record during his previous employment and remained in good standing with Century 21.”[15] Petitioner submitted an undated letter from Amy Golba, the broker and owner of Century 21 Platinum Real Estate, located in Chandler, Arizona, in relevant part as follows: I would welcome [Petitioner] into my office and be his responsible broker in the event he is granted a provisional license by [the Department]. . . . In talking with Bob Krause, an associate broker in my office, he informed me of the caliber of person [Petitioner] is and that he would also help in whatever needs to be done to make this happen. Bob worked with [Petitioner] from July 2008 while at Century 21 All Star Realty and know[s] his professionalism to his office, career and his clients is second to none. As a former broker and owner of Century 21 Desert Palm, Bob said [without] a doubt he would bring [Petitioner] into his office [without] hesitation as he knows [Petitioner] very well and feels that not having [Petitioner] as a member of DRE would be a huge loss of a great talent.[16]

Petitioner testified that since 2014, his employment opportunities have been limited by his two felony convictions. He is currently working part- time with a former colleague from the police department teaching self- defense tactics. Petitioner also owns nine rental houses that generate approximately $40,000 in annual income. Petitioner testified that he earned $50,000 or $60,000 annually during his best years selling real estate. Petitioner testified that he always planned to retire from police work and begin a second career as a real estate agent. Petitioner is now 47 years old and has no career prospects, other than selling real estate. Petitioner’s two daughters are in college and he would like to be able to support them and make them proud of him again. Petitioner testified that he lost two careers after the felonies. Petitioner testified that he was never out to swindle people out of their life savings. He embarrassed his daughters and suffered public humiliation. Petitioner acknowledged that he made two stupid mistakes that resulted in criminal convictions and that he should have considered the risk to himself and his family. Petitioner testified that although things have not been easy for him since 2014, he has scraped by. Petitioner testified that because he cannot afford to lose any more, he will not commit another crime. Petitioner testified that after the first felony conviction, he benefitted from undergoing the court-ordered counselling. Petitioner testified that after the FBI contacted him in September 2011, he returned to the same counsellor to determine why he had done something so stupid for a second time. Petitioner testified that he continued to see the counsellor until he was told he could stop. CONCLUSIONS OF LAW This matter lies within the Department’s jurisdiction. Petitioner bears the burden of proof to establish that he meets statutory qualifications for a real estate salesperson’s license by a preponderance of the evidence.[17] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[18] 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.”[19] Petitioner does not dispute his felony convictions, including copyright infringement that involved repeated sales of bootleg copyrighted material, which is the theft of another’s ideas. Petitioner does not dispute that he violated the terms of his probation in Case No. CR2008-108072-001 and the conditions of the Department’s provisional license when he committed the crime of copyright infringement. Cause therefore exists under A.R.S. §§ 32- 2153(A)(24), 32-2153(B)(2), 32-2153(B)(5), 32-2153(B)(9), and 32- 2153(B)(10) for the Department to deny his license application.[20] The legislature established the Department to protect “the public health, safety and welfare by regulating the sale of real estate . . . .”[21] A person who has successfully completed his sentences may not be disqualified from employment by the state or any of its agencies.[22] Such a person may be denied a certificate to engage in an occupation “by reason of the prior conviction of a felony or misdemeanor if the offense has a reasonable relationship to the functions of the employment or occupation for which the . . . certificate is sought.”[23] Denial of a license based on past criminal history does not constitute additional punishment, even if the denial or revocation is based on the same misconduct that caused the license applicant or licensee to be punished by the criminal justice system. The licensing proceeding “‘is not a second criminal proceeding placing [the licensee] in double jeopardy . . . . Rather, the purpose is to maintain sound professional standards of conduct for the purpose of protecting the public and the standing of the . . . profession in the eyes of the public.’”[24] “‘[T]he primary purpose of a disciplinary proceeding is the ascertainment of moral fitness and professional competency . . ., and a determination of whether it is necessary for the protection of the public interest that the [licensee] be disciplined . . . . These are public interests not addressed by the underlying criminal proceeding.’”[25] A real estate salesperson’s license is a privilege, not a right. The issue in this case is whether, on the date Petitioner submitted his application for licensure, he was “a person of honesty, truthfulness and good character” under A.R.S. § 32-2153(B)(7). The Department has discretion[26] to grant a license to an applicant who has reestablished that he is a person of good character.[27] The issue of what constitutes good character or a lack thereof is nebulous at best. Former United States Supreme Court Justice Frankfurter noted: No doubt satisfaction of the requirement of moral character involves an exercise of delicate judgment on the part of those who reach a conclusion, having heard and seen the applicant . . . , a judgment of which it may be said as it was of "many honest and sensible judgments" in a different context that it expresses "an intuition of experience which outruns analysis and sums up many unnamed and tangled impressions; impressions which may lie beneath consciousness without losing their worth." . . . [28]

Once good character is shown to be absent, it is not automatically regained by the mere passage of time and positive and affirmative activities are required for a person to regain what was lost. The time period for which a license applicant must establish rehabilitation is commensurate with the period of misconduct and the severity of the offenses. Petitioner committed two serious criminal offenses in 2008, and between early 2009 and September 2011. He committed the second offense while he was required to be law-abiding by the terms of his probation for the first offense and the terms of the Department’s provisional license. He credibly testified that he has been law-abiding since September 2011. Although both offenses show serious repeated lapses in judgment that are astounding in a former police officer, the record does not show that the offenses resulted in substantial financial gain to Petitioner or in substantial loss to any member of the public, including the P90X Fitness Kit copyright holder. Petitioner’s distress over the harm that his poor judgment caused to himself, his family, and his career was sincere. He credibly testified that he has undergone counselling to understand why he made such poor decisions and that he will avoid such poor decisions in the future. Petitioner’s evidence shows that he was an ethical, honorable, and honest real estate salesperson between 2008 and 2014, and that at least two licensed brokers are willing to monitor and support him. Petitioner established that he does not pose a threat to the public if he is licensed as a real estate salesperson. RECOMMENDED ORDER Based on the foregoing, it is recommended that Petitioner shall be granted a 2-year provisional license, subject to the same terms and conditions as the March 19, 2009 provisional License No. SA-[number redacted]. 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, June 10, 2016.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate ----------------------- [1] The Department’s Exhibit 10 at 2. [2] See the Department’s Exhibit 1. [3] See the Department’s Exhibit 2. [4] The Department’s Exhibit 3. [5] The Department’s Exhibit 4. [6] See the Department’s Exhibit 5. [7] See the Department’s Exhibit 6. [8] See the Department’s Exhibit 9. [9] See the Department’s Exhibit 12. [10] See the Department’s Exhibit 13. [11] Petitioner’s Exhibit 1. [12] Petitioner’s Exhibit 2. [13] Petitioner’s Exhibit 4. [14] Petitioner’s Exhibit 5. [15] Petitioner’s Exhibit 6. [16] Petitioner’s Exhibit 7. [17] See A.R.S. § 41-1092.07(G)(1); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [18] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [19] Black’s Law Dictionary at page 1220 (8th ed. 1999). [20] A.R.S. § 32-2153 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: . . . . 24. Violated any condition or term of a commissioner's order. . . . . 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: . . . . 2. Been convicted in a court of competent jurisdiction in this or any other state of a felony or of any crime of forgery, theft, extortion, conspiracy to defraud, a crime of moral turpitude or any other like offense. . . . . 5. Been guilty of any conduct, whether of the same or a different character than specified in this section, which constitutes fraud or dishonest dealings. . . . . 9. Violated the terms of any criminal or administrative order, decree or sentence. 10. Violated any federal or state law, regulation or rule that relates to real estate or securities or that involves forgery, theft, extortion, fraud, substantial misrepresentation, dishonest dealings or violence against another person or failure to deal fairly with any party to a transaction that materially and adversely affected the transaction. This paragraph applies equally to violations of which the licensee was convicted in any lawful federal or state tribunal and to any admissions made in any settlement agreement by the licensee to violations. [21] See Laws 1992, Ch. 14, § 3. [22] See A.R.S. § 13-904(E). [23] Id.

[24] Schillerstrom v. State Board of Chiropractic Examiners, 180 Ariz. 468, 470, 885 P.2d 156, 158 (App. 1994), review denied, December 20, 1994 (quoting Kaplan v. Department of Registration and Educ., 46 Ill. App. 3d 968, 5 Ill. Dec. 303, 308, 361 N.E.2d 626, 631 (1977) (citations omitted)). [25] Id. at 470-71, 885 P.2d at 158-59 (quoting Matter of Rabideau, 102 Wis. 2d 16, 26-27, 306 N.W.2d 1, 7, appeal dismissed, 454 U.S. 1025, 102 S. Ct. 559, 70 L. Ed. 2d 469 (1981) (citations omitted)). [26] See A.R.S. § 32-2153(B) (“The commissioner may . . . deny the issuance of a license” under certain circumstances (emphasis added)). [27] See, e.g., Matter of Rivkind, 164 Ariz. 154, 160-61, 791 P.2d 1037, 1043-44 (1990) (“[C]ourts are uniformly impressed by an attorney’s sincere efforts at rehabilitation and contrition, especially if such efforts demonstrate that the public and the legal system are unlikely to suffer a risk of future misconduct.”); Application of Spriggs, 90 Ariz. 387, 388-90, 368 P.2d 456 (1962) (where 4 years had passed since conviction for income tax evasion and evidence showed rehabilitation, applicant readmitted to bar without being required to pass bar exam again); Ulrich v. Board of Funeral Service, 289 Mont. 407, 961 P.2d 126 (1998) (“[A]n applicant whose license has been denied or revoked due to a criminal conviction . . . is entitled to apply for reinstatement and he is entitled to a full hearing . . . .”); cf. Matter of Wines, 135 Ariz. 203, 205-06, 660 P.2d 454, 456-57 (1983) (after considering circumstances of conviction as well as respondent’s poor prior record, Arizona Supreme Court did not disbar attorney but instead suspended him for a period of 5 years, with credit for 16 months interim suspension during pendency of proceedings). [28] Schware v. Board of Bar Examiners of the State of New Mexico, 353 U.S. 232, 248, 77 S. Ct. 752, 761 (1957) (citation omitted; concurring opinion).

-----------------------

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