ALJDEC decisions subject to certification as final

17F-DI-126-REL · Department of Real Estate · 2017-04-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Real Estate Activities of:

HOLCOMB, MICHELLE, holder of Broker's License Number BR544455000,

and

FORE PEAKS SALES GROUP LLC,

holder of Entity License Numbers LC641582000 and LC641582001,

Respondents.

No. 17F-DI-126-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: March 16, 2017

APPEARANCES: Ryan Krench, Attorney for the Department of Real Estate; Frank Medina, witness

ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang

_____________________________________________________________________

Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Decision to the Commissioner of the Arizona Department of Real Estate.

FINDINGS OF FACT

The Arizona Department of Real Estate (“Department”) issued Real Estate Broker’s License No. BR544455000 to Michelle Holcomb (“Respondent”). That license expires on September 18, 2017, and was active as of the time of the hearing. The Department also issued a Real Estate Entity License Nos. LC641582000 and LC641582001 to Fore Peaks Sales Group, LLC, (“Fore Peaks”) which expire on September 30, 2017 and were active at the time of the hearing. Respondent is the designated broker for Fore Peaks. Therefore, all violations found against Fore Peaks in this matter are the responsibility of Respondent as well.

In September 2016, Department Investigator Frank Medina initiated an audit the transaction records of Respondent and Fore Peaks. He sent Respondent an email informing her of the documentation needed for the audit and noted that the date set for the audit was October 14, 2016. Respondent emailed Investigator Medina back the same day to give him the correct business address.

On October 14, 2016, Investigator Median attended the audit with Respondent and Wayne Jackson, another Department investigator. At that time, Respondent was unable to provide the investigators with complete bank statements for the audit period, check registers, bank signature cards, bank reconciliation reports, tenant and owner ledgers for the audit period, an employee file for an unlicensed individual employed by Respondent, earnest money receipts for 18 of 20 reviewed sales contracts, a purchase contract for one of the contract files, and documentation of cancellation of the contract on 2 of the contract files. Respondent was also unable to provide any files at all on 8 files requested by the investigators, which prompted them to request 8 alternate files for review.

By email dated October 20, 2016 at 4:23 p.m., Investigator Medina requested some of the documentation not provided at the time of the audit to be provided to him by the following day, October 21, 2016.

By email dated October 21, 2016 at 4:37 p.m., Investigator Medina stated that he had left Respondent a voice mail about the documents. He also attached the October 20, 2016 email. He stated in the October 21st email that he must have the documents emailed to him by October 24th and could not keep her case pending any longer.

The Department sent Respondent and Fore Peaks a subpoena duces tecum dated October 25, 2016 by certified mail commanding them to produce a bank trust signature card for a named bank account, a check register for the same bank account for the periods from April through September 2016, “owner statements” for April through September 2016, a copy of all employee files, and bank statements for the same bank account from April through September 2016. An online report from USPS.com indicated that notice was left of the item because an authorized recipient was not available at the address. It is noted that the address is the same as the address given to Investigator Medina by email on October 4, 2016.

On November 9, 2016, Dan Jones from the Department emailed Respondent, the text of which stated, “I have a few questions for you regarding the audit of your brokerage. Our auditor says he has been unable to contact you. Please contact me by close of business tomorrow at the telephone number or email below. I would like to resolve the issues surround (sic) the audit ASAP. Please refer to A.R.S. ss32-2153(B)(11) regarding ongoing audits.” The following day, November 10, 2016, Dan Jones emailed Respondent stating, “The Department is closed tomorrow and I’d like to speak with you. Please call me on Monday.” Fourteen minutes later, Respondent responded to the email, stating, “Sure. I’ll forward the items to you.” On November 18, 2016, Dan Jones emailed Respondent, the text of which stated, “You failed to call me this week as you agreed. I have received nothing from you via email. I left you a voice mail today at both numbers on file with the Department. I need to speak with you today. Please understand the importance of cooperating with the Department during an on-going audit/investigation. Failure to do so may result in disciplinary action.”

After receiving no further contact or documentation from Respondent, the Department issued a Cease and Desist Order and Notice of Right to Request Hearing to Respondent and Fore Peaks on December 6, 2016 by certified mail.

On January 17, 2017, a Department representative, Jim Ledwith, went to the Fore Peaks address to ensure that the Cease and Desist Order was being complied with. He found that Respondent and Fore Peaks were still actively conducting business. When asked why she had not complied with the order, Respondent claimed that she had not received it. When asked why she did not comply with the numerous opportunities afforded to her to provide the requested audit documents, she stated that it was during the holidays and she had had a funeral to go to. No further contact or documentation was received from Respondent or Fore Peaks.

Notices of Hearing were sent to Respondent and Fore Peaks on February 3, 2017. Although the beginning of the hearing was delayed in order to allow them to appear, no one appeared on their behalf. The Department offered evidence and testimony in support of the above findings of fact and requested revocation of Respondent’s and Fore Peaks’ licenses on the grounds that, if the Department cannot conduct audits of its licensees it cannot fulfill its purpose of protecting the public.

CONCLUSIONS OF LAW

The Commissioner has jurisdiction over Respondent, Fore Peaks, and the subject matter in this case.

Pursuant to A.R.S. § 41-1092.07(G)(2) and A.A.C. R2-19-119(B), the Department has the burden of proof in this matter. The standard of proof is by a preponderance of the evidence. See A.A.C. R2-19-119(A).

A.R.S. § 32-2153 provides as follows:

32-2153. Grounds for denial, suspension or revocation of licenses; letters of concern; provisional license; retention of jurisdiction by commissioner; definitions

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:

1. Pursued a course of misrepresentation or made false promises, either directly or through others, whether acting in the role of a licensee or a principal in a transaction.

* * *

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.

* * *

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:

* * *

11. Failed to respond in the course of an investigation or audit by providing documents or written statements.

The evidence of record established that Respondent and Fore Peaks violated A.R.S. § 32-2153(A)(1), (3), (17), and (18), as well as A.R.S. § 32-2153(B)(11). The evidence also established that Respondent violated A.R.S. § 32-2153(A)(21) as well. Respondent and Fore Peaks violated A.R.S. § 32-2153(A)(1) when Respondent promised to provide requested documentation and then failed to do so. They violated A.R.S. § 32-2153(A)(3) by failing to keep and maintain required documents and produce them on demand. They violated A.R.S. § 32-2153(A)(17) when they failed to maintain all documents that all licensees are required to maintain. They violated A.R.S. § 32-2153(A)(18) when they failed to maintain complete records of transaction done within that chapter. By failing to produce all documents requested during the investigation, Respondent and Fore Peaks violated A.R.S. § 32-2153(B)(11). By failing to exercise reasonable supervision over the activities of Fore Peaks and her own brokerage activities, Respondent has egregiously violated A.R.S. § 32-2153(A)(21) as well. Pursuant to A.R.S. § 32-2160.01(A), the Department is authorized to impose a civil penalty up to $1000.00 per violation of the applicable statutes and regulations. The evidence of record has established numerous violations of the applicable statutes and rules. The evidence in this matter would have supported the imposition of a civil penalty except that the Department has opted at this time not to request one.

The evidence clearly established that License Nos. BR544455000, LC641582000, and LC641582001 should be revoked because Respondent’s and Fore Peaks’ professional and business practices placed the public at risk of significant financial loss and possible victimization. Some of the principles violated in this matter were as basic as maintaining records of transactions. The public has a right to expect that someone licensed by the State to practice in a field that relies heavily on documentation to protect them from fraud, negligence, and loss will at the very least maintain a detailed, clear, reliable record of every transaction. Respondent did not set up her business practices in a manner that ensured that the basics of proper documentation took place. Therefore, it is not appropriate for Respondent to represent to the public that she is competent enough to have a license.

RECOMMENDED ORDER

It is ordered that License Nos. BR544455000, LC641582000, and LC641582001 shall be revoked on the effective date of the Order in this matter.

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 shall be five days from the date of the certification.

Done this day, April 3, 2017.

/s/ Dorinda M. Lang

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate