ALJDEC decisions subject to certification as final

17F-DI-202-REL · Department of Real Estate · 2017-05-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Real Estate Activities of:

EUGENE ASHLEY, holder of license number BR533116000,

and

EUGENE B. ASHLEY d/b/a EUGENE B. ASHLEY, REALTORS, holder of license number SE5333116000

Respondents.

No. 17F-DI-202-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 2, 2017, at 1:00 p.m.

APPEARANCES: The Arizona Department of Real Estate (“the Department”) was represented by Ryan Krench, Esq., Assistant Attorney General; Eugene Ashley appeared on behalf of himself and Eugene B. Ashley d/b/a Eugene B. Ashley, Realtors (“Mr. Ashley,” “Ashley Realtors,” or, collectively, “Respondents”).

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

On April 22, 2002, the Department issued real estate broker license number BR533116000 to Mr. Ashley. That license will expire on April 30, 2018.

On April 22, 2002, the Department issued real estate self-employed broker license number SE533116000 to Ashley Realtors. The license will expire on April 30, 2018.

On March 20, 2017, the Department issued a Notice of Hearing and Complaint to revoke Respondents’ licenses and setting the matter for hearing on May 2, 2017, before the Office of Administrative Hearings, an independent state agency.

The Notice of Hearing alleged certain facts and based on those facts, charges grounds to revoke or otherwise discipline Respondents’ licenses under A.R.S. §§ 32-2153(A)(3), 32-2153(A)(17), 32-2153(A)(24), and 32-2153(B)(11).

An evidentiary hearing was held before the Office of Administrative Hearings, an independent agency. The Department cross-examined Mr. Ashley, presented the testimony of its auditor, Frank Medina, and submitted eight exhibits. Mr. Ashley testified on Respondents’ behalf and submitted two exhibits.

Hearing Evidence

Ashley Realtors’ office is located in Mr. Ashley’s home at 30382 N. Palo Brea Dr., Scottsdale, Arizona 85262.

Mr. Ashley testified that Ashley Realtors is a small agency and only has five part-time real estate agents, who are Mr. Ashley’s family or friends. All of Ashley Realtors’ real estate agents have other full-time jobs. Mr. Ashley testified that in the past five years, Ashley Realtors’ agents only made 24 sales transactions.

On November 2, 2016, Mr. Medina called Mr. Ashley to schedule an audit at Respondents’ office of Respondent’s records on November 3, 2016. Mr. Medina testified that he discussed a list of documents that Respondents should make available for the audit, as well as the date, time, and location of the audit and that he sent an email to confirm the scheduled audit.

Mr. Medina testified that a one-day turn-around for an audit is not an unreasonable timeframe because applicable statute requires brokers to keep certain records on a 24/7 basis and to make such records available for the Department’s audit on demand.

On November 2, 2016, Mr. Ashley called Mr. Medina to reschedule the November 3, 2016 audit.

Mr. Ashley testified that he already had an itinerary for November 3, 2016. Mr. Medina testified that Mr. Ashley mentioned that his wife had cancer when he asked to reschedule the November 3, 2016 audit. Mr. Ashley acknowledged that his wife has cancer, which has contributed to his stress level, but denied that he ever rescheduled an audit due to his wife’s illness.

On November 2, 2016, Mr. Medina rescheduled the November 3, 2016 audit to November 16, 2016.

Mr. Medina testified that on November 16, 2016, shortly before the scheduled audit, Mr. Ashley called and asked to reschedule the audit due to his wife’s illness. Mr. Medina was certain that Mr. Ashley did not mention an investors’ meeting.

Mr. Ashley testified that he was working on a start-up business and that he called to reschedule the November 16, 2016 audit because he had a meeting with potential investors in the start-up company on November 16, 2016.

Mr. Medina rescheduled the November 16, 2016 audit to November 28, 2016, between 10:00 a.m. and 10:30 a.m. On November 17, 2016, Mr. Medina sent an email to Mr. Ashley, confirming that he had scheduled an audit on November 28, 2016. Mr. Medina attached to the email form letters that defined audit and investigation terms and detailed files to be reviewed.

Mr. Ashley testified that at approximately 8:30 a.m. on November 28, 2016, he was working on the garage door opener at his home and slipped on a greasy rag and fell, injuring his back. Mr. Ashley testified that after the accident, he called Mr. Medina to reschedule the audit and left a voicemail, then went to the chiropractor.

Mr. Medina testified that between November 17, 2016, and November 28, 2016, he had no contact with Mr. Ashley. Mr. Medina testified that Mr. Ashley lives in a gated community. On November 28, 2016, Mr. Medina went to the callbox, but Mr. Ashley did not respond. Mr. Medina testified that he went to a coffee shop for a half hour, then returned to the callbox, but there was still no response. Mr. Medina testified that during this time, he left two voicemails for Mr. Ashley.

Mr. Medina testified that when he returned to his office on November 28, 2016, there was a voicemail from Mr. Ashley, stating that he had had a family emergency that had prevented him from being available for the audit.

Mr. Medina called Mr. Ashley on December 1, 2016, and left a message to reschedule the audit. Mr. Medina testified that he is scheduled to perform two audits on most days and that a Department investigator usually accompanies him to audits. Mr. Medina explained that he must consider both his own calendar and the availability of an investigator when he schedules audits.

On December 1, 2016, Mr. Medina sent Mr. Ashley an email to reschedule the audit to December 6, 2016 at 9:00 a.m.

Mr. Medina testified that on December 5, 2016, Mr. Ashley called back to confirm the December 6, 2016 rescheduled audit.

Mr. Medina testified that the audit did not occur on December 6, 2016. He and the investigator went to the gated community where Mr. Ashley lives. There was no response at the callbox and no response to Mr. Medina’s calls to Mr. Ashley’s telephone. Mr. Medina testified that at 10:30 a.m., he left.

Mr. Ashley testified that on December 6, 2016, his wife was having car trouble. Because she needed to be at work at 9:00 a.m., he took her to work in his car. Mr. Ashley testified that he informed Mr. Medina and the audit time was changed to 10:00 a.m. on December 6, 2016.

Mr. Ashley testified that when he was driving back to his house after dropping his wife off at work, the alternator failed in his car. Mr. Ashley testified that he called AAA and Mr. Medina. The car had to be loaded onto a flatbed truck to be taken to a mechanic.

Mr. Medina testified that it was very unusual for a broker to schedule and call off an audit three times. Mr. Medina testified that he informed Mr. Ashley that he would have to consult his supervisor before scheduling another audit. Mr. Medina testified that he was very professional when he made these communications.

Mr. Ashley testified that he asked Mr. Medina to reschedule the audit, but that Mr. Medina did not believe that Mr. Ashley had car trouble and adopted an accusatory tone. Mr. Ashley testified that Mr. Medina said he washed his hands of the matter and that the Department would issue a subpoena for Respondents’ records.

Mr. Medina testified that he discussed the matter with his supervisor, Robi King, and that she decided to issue a subpoena for Respondents’ records.

On December 8, 2016, the Department issued a subpoena duces tecum that order Mr. Ashley to appear before the Department’s Commissioner on December 19, 2016, at 9:00 a.m. with the documents described in an attachment. The subpoena also provided in relevant part as follows:

AS AN ALTERNATIVE TO APPEARING IN PERSON AT THE ABOVE DATE AND TIME, you may comply with this subpoena by delivering, prior to that time, all documents requested herein, together with a list on your company’s letterhead that itemizes the documents provided, and that contains a statement certifying that you are the duly authorized Custodian of Records to whom this subpoena is directed, and that you have provided true and correct copies of all records requested that are kept by you in the normal every day course of business.

If you have any questions contact Investigator Frank Medina at (602) 771-7730.

The Department attached to the subpoena duces tecum an exhibit that described the documents to be produced.

The Department’s subpoena duces tecum was sent to Respondents via certified mail. Mr. Ashley signed the certified mail receipt to accept service of the subpoena duces tecum on December 16, 2016.

Mr. Medina testified that Respondents did not contact him after the Department issued the subpoena duces tecum.

Respondents did not provide the Department with any documents described in the attachment to the subpoena duces tecum on or before December 19, 2016.

Mr. Ashley testified that he was under a lot of stress in December 2016, and that he does not remember what prevented him from meeting with the Department and providing documents in response to the subpoena duces tecum.

Mr. Ashley also testified that documents that were responsive to the subpoena duces tecum and to the Department’s audit were stored on his computer in three places. Mr. Ashley testified that the Departments auditor could have viewed all the documents on Respondents’ computer, although the process would have been laborious.

Mr. Ashley testified that by March 2017, he had printed out all the documents in a format that could be delivered to the Department. Mr. Ashley testified that he did not provide the documents to the Department at that time because he was waiting for another letter from the Department requesting the documents.

Respondents submitted a Chronological Sales Log that showed the transactions that Respondents’ employees had closed during the last five years.

Respondents also submitted a Commission Transaction Log that showed the commissions its employees had earned on the sales transactions that closed during the last five years.

Mr. Ashley appeared at the hearing with a banker’s box of files that he stated contained all Respondents’ documents that were responsive to the audit and the Department’s subpoena duces tecum.

CONCLUSIONS OF LAW

This matter lies within the Department’s jurisdiction.

The Department bears the burden of proof to establish cause to discipline Respondents’ licenses by a preponderance of the evidence. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

The Arizona legislature created the Department “to protect the public health, safety and welfare by regulating the sale of real estate . . . .” None of the statutes that the Department charged in the Notice of Hearing and Complaint require intent.

A.R.S. § 32-2151.01(A) provides the following record-keeping requirements for brokers:

Each licensed employing broker shall keep records of all real estate, cemetery, time-share or membership camping transactions handled by or through the broker and shall keep employment records, including copies of employment status, for all current and former employees. The records required by this section shall include copies of earnest money receipts, confirming that the earnest money has been handled in accordance with the transaction, closing statements showing all receipts, disbursements and adjustments, sales contracts and, if applicable, copies of employment agreements. The records shall be open at all reasonable times for inspection by the commissioner or the commissioner's representatives. The records of each transaction and employment records shall be kept by the broker for a period of at least five years from the date of the termination of the transaction or employment. The records shall be kept in the employing broker's principal office or licensed branch office in this state or at an off-site storage location in this state if the broker provides prior written notification of the street address of the off-site storage location to the department.

(Emphasis added.) A.R.S. § 32-2151.01(A) required Respondents to keep certain records and to make them available to the Department upon demand. Although the Department accommodated Respondent’s various scheduling issues at least three times, ultimately it was Respondents’ legal responsibility to produce the records upon demand, not the Department’s responsibility to continue making repeated demands for the documents after Respondents failed to make the records available. The Department established that Respondents failed to make their records available as required by A.R.S. § 32-2151.01(A), thereby providing cause to discipline their licenses under A.R.S. § 32-2153(A)(3).

The Department established that Respondents failed or refused to produce documents or information that they were required to maintain, thereby providing cause to discipline their licenses under A.R.S. § 32-2153(A)(17).

The Department established that Respondents did not respond to the Department’s subpoena duces tecum in the time allowed or at any time before the hearing in this matter, when Mr. Ashley presented the banker’s box of documents to the Administrative Law Judge, not to the Department. Because the subpoena duces tecum was an order issued by the Commissioner, the Department established cause to discipline Respondents’ licenses under A.R.S. § 32-2153(A)(24).

The Department established that Respondents failed to respond to Mr. Medina’s attempts to perform an audit and to the Commissioner’s order during the course of this investigation, thereby providing cause to discipline their licenses under A.R.S. § 32-2153(B)(11).

Based on the established statutory violations, the Department is authorized to suspend or revoke Mr. Ashley’s and Ashley Realty’s licenses and to assess a civil penalty of up to $1,000.00 for each violation of statute. See A.R.S. §§ 32-2153 and 32-2160.01.

The bases of the charged violations are that Respondents failed to submit to an audit and that they failed to comply with the Commissioner’s subpoena duces tecum. Based on these two acts, a civil penalty in the amount of $2,000.00, which is $1,000.00 for each act that gave rise to the four charged and proven violations, is appropriate.

Because licensees are expected know and to comply with the law that governs their profession, Mr. Ashley’s expectation that the Department would again request the records after March 2017, is not a factor in mitigation of the penalty.

In mitigation of the penalty, Mr. Ashley credibly testified that he was under stress during the time that the Department was attempting to audit his records. In addition, it does not appear that any consumers were harmed by Respondents’ statutory violations.

ORDER

IT IS ORDERED that Eugene Ashley’s Broker License Number BR533116000 is revoked.

IT IS FURTHER ORDERED that Eugene B. Ashley, d/b/a Eugene B. Ashley, Realtors’ Self-Employed Broker License Number SE533116000 is revoked.

IT IS FURTHER ORDERED that within twenty days of the effective date of the final Order in this matter, Eugene Ashley shall pay to the Department a civil penalty in the amount of $2,000.00.

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 is five days after the date of that certification.

Done this day, May 10, 2017.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate