ALJDEC decisions subject to certification as final

18F-DI-174-REL · Department of Real Estate · 2018-05-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Original Application for Real Estate Salesperson’s License of:

JOSHUA ROTHBERG, holder of License Number SA517401000 (Candidate),

Petitioner.

No. 18F-DI-174-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 11, 2018, at 1:00 p.m. and May 7, 2018, at 1:00 p.m.

APPEARANCES: Joshua Rothberg (“Mr. Rothberg”) was represented by Robert N. Bass, Esq., Law Offices Robert N. Bass Ltd.; the Arizona Department of Real Estate (“the Department” or “ADRE”) was represented by Ryan Matthew Krench, Esq., Assistant Attorney General.

ADMINISTRATIVE LAW JUDGE: Diane Mihalsky

_____________________________________________________________________

FINDINGS OF FACT

Mr. Rothberg’s License History and the Application

Mr. Rothberg was previously licensed by the Department as a real estate salesperson, License No. SA517401000, on or about July 2, 1999.

On December 14, 2007, Mr. Rothberg accepted the Department’s Consent Order in Case No. 08F-DI-086, under which he admitted that between May 2007, and August 2007, he had violated statutes governing real estate salespersons, including A.R.S. § 32-2153(B)(8), by conducting property management activities without the approval of or supervision by his designated broker, Robert Kline of R&M Realty LLC dba RE/MAX, and by accepting compensation for such property management activities and commingling the monies received with his own personal funds. As a result of the admitted violations, Mr. Rothberg’s salesperson’s license was placed on a two-year provisional status and he was required to submit sworn quarterly declarations that he was complying with the Consent Order.

On or about December 24, 2009, shortly after Mr. Rothberg’s real estate salesperson’s license was restored to unrestricted status, he was licensed by the Department as a real estate broker, License No. BR517401000. Mr. Rothberg founded the brokerage, Scout Realty, LLC, for which he was the designated broker.

On or about March 11, 2013, the Department issued a Cease and Desist Order in Case No. 13F-DI-2010 against Mr. Rothberg and Scout Realty, LLC, based on the results of an onsite audit that the Department had conducted on February 19, 2013. The Department found that between January 18, 2012, and January 27, 2013, Mr. Rothberg had spent a total of $51,290.28 in tenant deposits held in trust for Scout Realty, LLC’s property management clients for personal expenses, as follows:

01/18/2012 Chicago Cubs Spring Training Tickets $1,808.00

01/19/2012 Costco Gas 74.00

01/23/2012 Midwestern Meats 6.20

01/23/2012 Chompies Restaurant 21.00

01/30/2012 Enterprise Rent-A-Car 250.00

01/31/2012 Embassy Suites, Irvine, CA 98.95

03/26/2012 Expedia Travel 342.45

03/27/2012 Fairmont Hotel 85.80

03/27/2012 Fairmont Hotel 26.36

04/02/2012 Innovative Primary Care 165.00

04/23/2012 Smashburger 23.54

05/24/2012 Don & Charlie’s 101.87

06/18/2012 Rover Techs 1,234.05

06/25/2012 AMC Theatres 15.00

06/25/2012 AMC Theatres 15.00

06/29/2012 Forensic Counseling 1,000.00

09/17/2012 Nordstrom 76.23

10/09/2012 Froggy’s French Café, Chicago, IL 449.70

10/09/2012 Wolfgang Puck, Chicago, IL 41.42

12/21/2012 Rover Techs 102.48

12/21/2012 A & R Smoke Shop 7.73

01/27/2013 Jdate.com 104.94

The Department concluded that Mr. Rothberg had violated applicable statutes, including A.R.S. §§ 32-2153(B)(7), 32-2153(B)(8), and 32-2153(B)(11). Mr. Rothberg did not dispute that he had converted monies held in trust for his clients in violation of statute. On or about August 12, 2013, the Department revoked his broker’s license.

On December 4, 2017, Mr. Rothberg filed an application to again be licensed as a real estate salesperson with the Department. Mr. Rothberg answered “yes” to the following six questions on the application:

5.1 Has the Applicant “[h]ad a professional or occupational license or registration of ANY kind denied, suspended, restricted, or revoked?”

5.2 Has the Applicant “[h]ad an administrative order and/or ANY other disciplinary action taken against ANY license issued to [him] by any local, state, or federal regulatory agency?”

5.3 Has the Applicant “[h]ad an action issued by the ADRE which resulted in an Accelerated Settlement Agreement (ASA)?”

5.4 Has the Applicant “[v]oluntarily surrendered ANY professional or occupational license during the course of an investigation or disciplinary proceeding?”

5.5 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 [him] from engaging in ANY profession or occupation?”

5.6 Has the Applicant “[h]ad any judgment and/or order entered against them by ANY court arising out of the conduct of any business in real estate, cemetery property, timeshare intervals, or membership campgrounds?”

Mr. Rothberg attached to his application for a real estate salesperson’s license a written explanation of his “yes” answers that stated in relevant part as follows:

On May 4, 2007, I was the victim of a drunk driver in a car crash. On May 18, 2007, After coming out of a lifesaving induced coma for 2 weeks, my Broker, Robert Kline, report[ed] to ADRE that his agent, Josh Rothberg, had been conducting property management activities without his approval or supervision.

This was false. I have evidence of his approval & supervision, but he was only allowing the activity because of the extra money he was making off my activities. As a young agent in a booming market, I did not understand that Robert Kline was allowing me to do activities not allowed for agents. As soon as he found out that I was going to survive, he reported me to ADRE to cover his own rear. I know now, that what I was doing was wrong, but Robert Kline enabled me to continue until the car crash for his own profit.

Almost one (1) year after the car crash mentioned above, I was able to get back to work at US Preferred Realty under the supervision of Broker, Nancy Smith. In 2010, I opened Scout Realty llc. after acquiring my broker’s license. That same year, my ex-wife pulled me into a nearly 2-year long child custody battle that required more money in court fee[s] and attorney fees than I could afford.

I knowingly made a bad decision to use Scout Realty, llc. money from the security deposit trust account to subsidize a battle in court for my only child, Scout Rothberg. I knew I could lose my brokerage, but could [not] imagine losing my daughter. I was victorious in court, but when ADRE came in for an audit on February 19, 2013[,] I knew that my brokerage was over. On that day of the audit, I fully cooperated with ADRE staff and explained everything. I fully cooperated throughout the entire investigation and was totally transparent for ADRE.

No owner of any rental property managed by Scout Realty ever complained to ADRE. All monthly rents were always paid. No tenant of any rental property ever complained to ADRE.

I have worked many different jobs over the last 5 years to pay back all security deposits. Maggie Smith, Broker of Valley Executives Property Mgmt., llc., can verify this information. She took over managing all the properties that Scout Realty, llc. Had been managing before the ADRE cease and desist letter.

I am currently a property manager for self-managed HOA of 201 units and 13 buildings in a gated community in Scottsdale. I meet with the Board of Directors multiple times a week. They will verify that I have matured to a trust-worthy agent on their behalf with excellent integrity.

With a new real estate license for an agent, [I] will not have access to any trust accounts and will be closely supervised by Maggie Smith, broker of Valley Executives Prop. Mgmt., llc. I understand my errors, and as a more mature adult, I will not make the same mistake. . . .

On December 14, 2017, the Department informed Mr. Rothberg via certified mail that based on the consent order in Case No. 08F-DI-086 and the revocation of his broker’s license in Case No. 13-DI-201, it had concluded that he did not meet the qualifications for licensure pursuant to applicable statute. Therefore, the Department notified Mr. Rothberg that it intended to deny his license application.

Mr. Rothberg requested a hearing on the Department’s intended denial of his application for a real estate salesperson’s license. The Department referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. On January 30, 2018, the Department issued a Notice of Hearing that charged cause to deny Mr. Rothberg’s real estate salesperson’s license under A.R.S. §§ 32-2153(A)(3), 32-2153(A)(16), 32-2153(A)(22), 32-2153(B)(5), 32-2153(B)(7), 32-2153(B)(8), and 32-2153(B)(10), and A.A.C. R4-28-1101(A).

On April 11, 2018, and May 7, 2018, an evidentiary hearing was held. Mr. Rothberg submitted three exhibits and presented the testimony of eleven witnesses: (1) Himself; (2) John J. Hughmanick, a real estate investor for whom Mr. Rothberg has worked as a property manager and real estate salesperson; (3) Timothy F. Bartlett, a former New York City police officer who presently is the president of the HOA board for whom Mr. Rothberg works as property manager; (4) Margaret (“Maggie”) E. Smith, the designated broker for Valley Executives Property Management, LLC, which took over Mr. Rothberg’s property management clients after his broker’s license was revoked; (5) Rabbi Jason Bender, the assistant rabbi at Temple Emanuel synagogue in Tempe, where Mr. Rothberg is a member of the congregation and volunteer; (6) Robert (“Bob”) Dominici, a real estate investor who lives in California, for whom Mr. Rothberg has worked as a property manager and real estate salesperson; (7) Yohan Yun, the owner of Big Eye Sushi restaurant in Tempe, for whom Mr. Rothberg works part-time cutting sushi; (8) Mitchell Zimmerman, Mr. Rothberg’s friend in Texas for whom Mr. Rothberg has worked as a property manager and real estate salesperson; (9) David Schapiro, whose children attend the synagogue school at Temple Emanuel with Mr. Rothberg’s daughter; (10) Richard Vu, a real estate investor for whom Mr. Rothberg has worked as a property manager and real estate salesperson; and (11) Tracy McGlynn, a real estate broker who employed Mr. Rothberg when he had the provisional real estate salesperson’s license and who presently is Ms. Smith’s partner in Valley Executives Property Management, LLC. The Department submitted nine exhibits to establish the facts set forth above and presented the testimony of its investigator, Linda Bevins.

Additional Hearing Evidence

Mr. Rothberg

Mr. Rothberg testified consistently with the written explanation attached to his application for a real estate salesperson’s license. Mr. Rothberg testified that he suffered traumatic brain injury in the May 4, 2007 traffic accident and was put into a medically induced coma for three weeks. He underwent physical therapy for a year and a half after the accident. Mr. Rothberg testified that his former broker Mr. Kline “threw him under the bus” after the accident to avoid taking responsibility for his role in Mr. Rothberg’s improper property management activities.

Mr. Rothberg testified that after he became a real estate broker, he used tenants’ deposits from his clients’ trust accounts for his personal expenses because his custody dispute with his ex-wife had depleted his personal financial resources. Mr. Rothberg testified that the divorce proceedings began in 2012, but when his attention was drawn to his written explanation, testified it may have begun in 2010.

Mr. Rothberg testified that the $1,000.00 payment to Forensic Counseling on June 29, 2012, was for a court-ordered evaluation in the custody dispute.

Mr. Rothberg acknowledged that, with the exception of the payment to Forensic Counseling, none of the payments were for attorneys’ fees, court costs, or other expenses directly related to his court battle with his ex-wife, but testified that expenditures of his personal resources for direct costs of the litigation left him no money for other personal expenses.

Mr. Rothberg testified that he gave the $1,808.00 Cubs Spring Training Tickets to clients to impress them and that many of the other entertainment expenses were for client development. The Rover Tech costs were for repairing and maintaining his 15-year-old Land Rover. The $250.00 paid to Enterprise Rent-A-Car was for a replacement vehicle while his Land Rover was broken down. The $76.23 paid to Nordstrom was for dress clothes to wear while conducting his business.

Mr. Rothberg acknowledged that the $104.94 to Jdate.com paid for a dating service for Jewish singles. When asked whether most of the expenses were not necessary for his survival, Mr. Rothberg responded, “It depends how you define survival.” Mr. Rothberg testified that at the time, he thought the expenses were necessary.

Mr. Rothberg acknowledged that he used some of his clients’ trust monies to maintain his lifestyle. Mr. Rothberg testified that he spent over $50,000 in attorney’s fees in the custody battle, which left him very little money to live on. Mr. Rothberg testified that he was raised by a single mother to follow the rules. Mr. Rothberg testified that it took him more than two years to recover from the 2007 traumatic brain injury and after he recovered, his wife sued for divorce. Mr. Rothberg testified that it was a perfect storm.

Mr. Rothberg testified that he had hoped to pay back the clients’ trust funds before his conversion was discovered, but that he came clean during the Department’s audit. Mr. Rothberg testified that for the past five years, he has been landscaping back yards, fixing toilets, hauling off furniture, and cutting sushi, which he had not done since college. He has delivered pizzas and documents.

Mr. Rothberg testified that as soon as the Department discovered his conversion of clients’ funds, he started making telephone calls to his clients. The calls were hard to make, but he wanted his clients to know that even though he had used their money improperly, he would make it right and take care of them.

Mr. Rothberg testified that looking back, he thinks what an idiot he was because he knew that the Department would audit his trust account. He explained that at that time, he was a younger man and was too proud to ask for help. Mr. Rothberg testified that he is now 45 years old and that he no longer is the person who converted monies held in trust to pay for personal expenses.

Mr. Rothberg testified that he feels that he is a smart, educated person who should have known better than to use the money in his clients’ trust accounts. He is embarrassed by having to repeatedly explain his actions. At some point, he will have to explain his misconduct to his daughter, Scout.

Mr. Rothberg testified that the custody battle ended on April 9, 2014, when he was granted full custody of his daughter. Mr. Rothberg testified that his daughter is the center of his world and that he could not imagine his life without her. Mr. Rothberg testified that his daughter has changed his life and humbled him. Since he lost his broker’s license, he has lived under the poverty line and has struggled to pay his former clients back and to support himself and his daughter. He has been in AHCCCS, but recently got a job with insurance benefits.

Mr. Rothberg testified that he has a debit card for the HOA and that he has the keys to Big Eye Sushi, where he has the keys to the restaurant and access to cash. He does bookkeeping for the HOA and is on the operational reserve accounts. He is trying to be a good role model. He volunteers at the synagogue and at his daughter’s school and has coached Little League. Although he knew he could reapply for a real estate license two years after the revocation of his broker’s license, he waited five years to have a longer time for personal growth. Mr. Rothberg testified that he has learned from his errors.

Timothy Bartlett

Mr. Bartlett is a retired New York City police officer who currently owns two video stores and a security firm. Mr. Bartlett has a criminal justice degree. Mr. Bartlett is also on the board of the homeowners’ association (“HOA”) of the condominium development where he owns a condominium. Mr. Bartlett testified that Mr. Rothberg applied to the HOA to be its property manager. Mr. Bartlett testified that he interviewed and performed a criminal background check on Mr. Rothberg.

Mr. Bartlett testified that during the interview, Mr. Rothberg disclosed that he had had problems and had lost his real estate license due to fraud, but that he had paid back all the clients whom he had defrauded. Mr. Bartlett explained that because Mr. Rothberg was upfront and the criminal background check would not have disclosed Mr. Rothberg’s license history, Mr. Bartlett gave Mr. Rothberg a shot and hired him as the HOA’s property manager.

Mr. Bartlett testified that Mr. Rothberg said he took his former real estate clients’ money because he was going through a nasty divorce and needed money for attorney’s fees. Mr. Bartlett was surprised to hear that Mr. Rothberg had used his clients’ money for hotel stays and a dating service. But Mr. Bartlett testified that the information did not change his opinion of Mr. Rothberg.

Mr. Bartlett testified that the property manager pays the HOA’s bills, makes deposits, supervises four other employees, gets bids, and oversees contractors. Mr. Rothberg is entrusted with money and other valuables, including the keys to all the units. Mr. Rothberg has worked for the HOA for sixteen months and that he was under Mr. Bartlett’s supervision until January 1, 2018. Mr. Bartlett testified that if Mr. Rothberg were dishonest, Mr. Bartlett would have known because the HOA has checks and double-checks in place to monitor its employees. Mr. Bartlett testified that Mr. Rothberg is honest and helpful. In Mr. Barlett’s opinion, Mr. Rothberg has good moral character.

Margaret (“Maggie”) Smith

Ms. Smith has worked in real estate since 2005. After she obtained her broker’s license in 2010, she started Valley Executives Property Management, LLC with a partner. Ms. Smith first met Mr. Rothberg when both worked at U.S. Preferred Realty in 2008. Ms. Smith testified that she and Mr. Rothberg both branched out from U.S. Preferred Realty to start their own companies.

Ms. Smith testified that Mr. Rothberg came to her after he lost his broker’s license to request help so that he could repay his former property management clients whose money he had used for his own purposes. Ms. Smith testified that Mr. Rothberg’s former clients were switched to her property management brokerage.

Ms. Smith testified that Mr. Rothberg is a skilled photographer and is able to perform property maintenance. Ms. Smith testified that she kept track of the monies that Mr. Rothberg owed to his former clients and that she hired him to perform photography and maintenance services to infuse her trust account to repay his former clients.

Ms. Smith testified that, eventually, Mr. Rothberg repaid all the client deposits that he had taken. Ms. Smith testified that one tenant has not moved out, but that the money is available to repay the security deposit when he does.

Ms. Smith testified that she has talked to Mr. Rothberg and that her relationship to Mr. Rothberg is “cohesive.” Ms. Smith testified that they have discussed the basics, ethics, and Mr. Rothberg’s love of the real estate profession and plans for the future. Ms. Smith testified that her relationship with Mr. Rothberg is professional, not personal.

Ms. Smith testified that Mr. Rothberg has always taken personal responsibility for his client’s losses, which is why she took the leap of faith to assume responsibility for his former clients. Mr. Rothberg has never made excuses. Ms. Smith testified that she believes that Mr. Rothberg is rehabilitated and that he is a person of honest and good character.

Ms. Smith testified that if the Department issues a real estate salesperson’s license to Mr. Rothberg, she would hire him and act as his practice monitor. Ms. Smith testified that although she knew that if Mr. Rothberg stepped out of line, it could affect her license, she has no concerns. If the Department issued a provisional license that prohibited Mr. Rothberg from accessing and handling client trust account monies, she would accept that condition.

Ms. Smith acknowledged that Mr. Rothberg did not tell her what he used the former clients’ deposits for. However, she has read the revocation order. Ms. Smith acknowledged that she had issues with the Department 1-1/2 or 2 years ago based on the results of its audits. Ms. Smith testified that she has put procedures in place to address the shortcomings that the Department identified in its audits.

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Rabbi Jason Bonder

Rabbi Bonder is an Assistant Rabbi and Education Director at Temple Emanuel. In 2015 he graduated from rabbinical school.

Rabbi Bonder testified that Mr. Rothberg is the parent of a child in the religious school and a congregant. Mr. Rothberg has been a presence who volunteers at the school on Sunday mornings and helps teach fifth graders at the school on Tuesday and Wednesday evenings.

Rabbi Bonder testified that Mr. Rothberg shared that he had taken real estate clients’ money for personal purposes. Rabbi Bonder testified that Mr. Rothberg seemed remorseful. Rabbi Bonder was surprised by Mr. Rothberg’s disclosure because such behavior is out of character.

Rabbi Bonder testified that, based on everything that he has observed, Mr. Rothberg is a person of integrity, is responsible, has good character, and is a kind, involved member of the community. Rabbi Bonder testified that Mr. Rothberg was one of the more involved parents of the 430 families who belong to the Temple Emanuel community.

Robert (“Bob”) Domenici

Mr. Domenici works at San Mateo Community College District in California as a purchasing agent. Mr. Domenici is also a real estate investor. He met Mr. Rothberg in 2004, when Mr. Rothberg worked for REMAX and Mr. Domenici was looking for investment property in Arizona.

Mr. Domenici testified that Mr. Rothberg was the real estate agent on a triplex that Mr. Domenici purchased in Mesa. Mr. Domenici testified that Mr. Rothberg did a good job of communicating and interacting with Mr. Domenici and the seller.

After Mr. Domenici purchased the property, Mr. Rothberg managed the property. Mr. Domenici testified that Mr. Rothberg respects the law and treated both Mr. Domenici and his tenants in an honest manner. Mr. Rothberg made payments on time and coordinated repairs to the property. Mr. Domenici testified that he recommended Mr. Rothberg to his brother when he was looking for investment property in Arizona.

Mr. Domenici testified that in January or February 2013, he received some disturbing news when Mr. Rothberg called and said that he could no longer participate in real estate activities in Arizona. Mr. Domenici testified that Mr. Rothberg stated there were issues, but did not go into detail.

Mr. Domenici testified that he would be concerned if Mr. Rothberg’s real estate license was revoked because he took his clients’ money from the trust account. Mr. Domenici testified that although he would be concerned if Mr. Rothberg used clients’ money for hotels, rental cars, and a dating services, he would still use Mr. Rothberg for his real estate needs. Mr. Domenici testified that if Mr. Rothberg had taken more than $50,000 from his clients, he would want to know the details.

Yohan Yun

Mr. Yun is in the restaurant industry and has owned Big Eye Sushi in Scottsdale for nine years. He has been a small business owner for 20 years. Mr. Rothberg is Mr. Yun’s friend and has been working at Big Eye Sushi. Mr. Yun testified that Mr. Rothberg cuts sushi and sometimes opens the restaurant and closes out waiters and waitresses when they finish their shifts. Mr. Yun trusts Mr. Rothberg with money.

Mr. Yun testified that Mr. Rothberg told him that he got into trouble and that his real estate license had been revoked due to financial irregularities. Mr. Rothberg’s disclosure did not cause Mr. Yun to have any misgivings about hiring Mr. Rothberg and allowing him to help run the business. Mr. Yun testified that Mr. Rothberg is honest and trustworthy and has a good character. Mr. Yun would use Mr. Rothberg as his real estate agent and has no concerns about recommending Mr. Rothberg to family and friends.

Mitchell Zimmerman

When Mr. Zimmerman is in Arizona, he is in charge of Home Warranty of Arizona. He gives presentations and meets real estate agents. He has known Mr. Rothberg since 1999 or 2000, when he helped Mr. Zimmerman purchase a house. Mr. Zimmerman ended up moving to Dallas and Mr. Rothberg became his property manager in renting the house. Mr. Rothberg has helped with plumbing and other issues. Mr. Zimmerman testified that on one project, after the general contractor that he had hired abandoned the job, Mr. Rothberg completed the project.

Mr. Zimmerman testified that Mr. Rothberg informed him that he had used a tenant’s deposit for personal expenses due to trouble from hard times, medical expenses, and poor decisions. Mr. Zimmerman testified that Mr. Rothberg quickly rectified his mistake by repaying the money.

Mr. Zimmerman testified that he believes the mistake humbled Mr. Rothberg. Mr. Zimmerman testified that Mr. Rothberg lives and breathes real estate, especially when he is helping clients buy and sell homes or manage investment property. Mr. Rothberg is a great dad who is active in his temple. Mr. Zimmerman would recommend Mr. Rothberg to anyone because he is trustworthy and has learned from his mistake.

Mr. Zimmerman acknowledged that Mr. Rothberg did not go into detail about what he spent Mr. Zimmerman’s tenant’s deposit on. Mr. Zimmerman was surprised to hear that Mr. Rothberg had taken more money that Mr. Zimmerman’s tenant’s deposit. He was surprised to learn that Mr. Rothberg had spent more than $50,000 of his clients’ money and that he had used $1,800 to purchase Cubs spring training tickets.

Mr. Zimmerman testified that everyone makes mistakes and that Mr. has paid his dues. Mr. Rothberg must have faced desperate times that required desperate measures. Even if Mr. Rothberg took more than $50,000 of clients’ money and purchased spring training tickets, Mr. Zimmerman trusts Mr. Rothberg to manage his rental property.

David Schapiro

Mr. Schapiro is an account manager for a roofing company who has known Mr. Rothberg since they met at the synagogue when they were young children. Mr. Schapiro has never been Mr. Rothberg’s client. Mr. Schapiro’s and Mr. Rothberg’s children currently attend the same synagogue school.

Mr. Schapiro testified that he knew that Mr. Rothberg had been a real estate broker and that he had lost his license. Mr. Schapiro testified that Mr. Rothberg is a responsible person who was forthcoming about the loss of his broker’s license. Mr. Schapiro testified he has never heard anyone say anything bad about Mr. Rothberg.

Mr. Schapiro acknowledged that Mr. Rothberg had not shared the specifics about the reasons for the loss of his license. Mr. Schapiro testified that he thought it had something to do with improperly using client funds. Mr. Schapiro testified that after a bad decision, most people learn from their experiences. Mr. Schapiro testified that nothing would change his opinion of Mr. Rothberg.

Richard Vu

Mr. Vu is semi-retired. Before his retirement, he worked full-time as a programmer for 20 years for various government agencies. Mr. Vu testified that he met Mr. Rothberg in 2008, when a friend invested in real estate in the Mesa area and Mr. Vu visited the friend. The friend suggested that Mr. Vu invest in real estate in the Mesa area and Mr. Vu contacted Mr. Rothberg. Mr. Rothberg showed Mr. Vu some properties, which Mr. Vu purchased. Between 2008 and 2011, Mr. Vu purchased multiple properties in Arizona through Mr. Rothberg. Because Mr. Vu lives on the east coast, Mr. Rothberg managed Mr. Vu’s Arizona real estate.

Mr. Vu praised Mr. Rothberg’s advice on which properties to purchase, the cost of fixup, and how much rent could be charged. Mr. Vu testified that during the time he was purchasing property through Mr. Rothberg through the end of 2012, quite a few foreclosures were on the market.

Mr. Vu testified that he became aware of Mr. Rothberg’s financial issues when foreclosures were becoming scarcer and Mr. Rothberg asked him if he wanted to buy more. Mr. Vu testified that he resisted buying more property in the area. Mr. Rothberg told him that he was in trouble with his license and that he was working with Maggie Smith. Mr. Vu agreed that his properties could be brought into Ms. Smith’s property management business. Mr. Vu testified that Ms. Smith has given him the same good service that Mr. Rothberg previously provided.

Mr. Vu testified that at some time Mr. Rothberg asked him for an advance. Mr. Rothberg later paid back the advance. Mr. Vu testified that Mr. Rothberg paid him every month for commissions on rentals. Mr. Vu knows that trust issues were involved in the revocation of Mr. Rothberg’s license, but Mr. Vu testified that Mr. Rothberg has learned his lessons and that he is back to where he was.

Mr. Vu acknowledged that he did not know that Mr. Rothberg’s trust account was short $50,000. Mr. Vu testified that it did not affect his high opinion of Mr. Rothberg and that Mr. Rothberg has paid for his mistake. Mr. Vu praised Mr. Rothberg’s transparency, which is important to remote owners. Mr. Rothberg provided documentation for everything, including bills, rents, deposits, and receipts from contractors. Mr. Vu considers Mr. Rothberg to be trustworthy.

Tracy McGlynn

Ms. McGlynn was the Director of Operations at U.S. Preferred Real Estate. She testified that in 2007, after extensive interviews, she hired Mr. Rothberg when his real estate salesperson’s license was on provisional status. Ms. McGlynn testified that Mr. Rothberg had a practice monitor and followed the rules and that she did not regret hiring him. Ms. McGlynn testified that after Mr. Rothberg became an independent broker, she did not see him for a while.

Ms. McGlynn testified that she has seen the Department’s Cease and Desist order revoking Mr. Rothberg’s real estate broker’s license and that she knew that he had converted to his own use a large amount of client trust funds. She was shocked when she learned what Mr. Rothberg had done. Ms. McGlynn testified that Mr. Rothberg had a steep hill to climb to get back into her good graces.

Ms. McGlynn testified that she had dealings with Ms. Smith and that in 2015, she became Ms. Smith’s partner. Ms. McGlynn testified that if she had not worked with Mr. Rothberg in the past, she would not have agreed that Valley Executives Property Management, LLC could hire him if he obtained a real estate salesperson’s license. Ms. McGlynn testified that she has seen Mr. Rothberg come into her office, filthy head-to-toe, from doing janitorial and maintenance work that did not require a license to repay his former clients and to support himself and his daughter. Ms. McGlynn testified that Mr. Rothberg has changed and that he is more humble and is very remorseful. Ms. McGlynn has not heard anything negative about Mr. Rothberg.

Ms. McGlynn testified that Mr. Rothberg shows a high level of professionalism. Ms. McGlynn testified that that she refuses to do business with many real estate agents because they are unethical. Ms. McGlynn testified that that she would list her own house with Mr. Rothberg. Ms. McGlynn testified that if the Department licenses Mr. Rothberg, she will have skin in the game because if he makes a mistake, it will impact her business. Nonetheless, Ms. McGlynn supported Mr. Rothberg’s license application.

Ms. McGlynn testified that Mr. Rothberg said that he converted client funds to live because he was engaged in a strenuous court battle. Ms. McGlynn testified that she had no opinion about whether his use of client funds to purchase Cubs spring training tickets and trips outside Arizona was justified, but stated that if she saw that someone was remorseful and was making efforts to change after make a mistake in her brokerage, she would support the employee’s efforts to change. Ms. McGlynn testified that Mr. Rothberg did not make any excuses; he was just working hard to make his past mistakes right.

Letters of Reference

Robin King is the Director of the American Heart Association’s Go Red for Women campaign. She grew up with Mr. Rothberg and continues to see him several times a year. Ms. King described Mr. Rothberg as genuine, kind, and an amazing father. Ms. King stated that she is aware of the incidents that led to the revocation of Mr. Rothberg’s broker’s license. Ms. King stated that Mr. Rothberg took responsibility for his actions, was upset by his mistake, and, in her opinion, is ready to enter the real estate profession that has been his passion.

Edward Goldstein, M.Ed. is the assistant principal at Laird school in Tempe. He chairs the religious school committee that Mr. Rothberg recently joined to help develop the curriculum for the religious school. Mr. Rothberg also has volunteered at the Laird school. Mr. Goldstein has known Mr. Rothberg for more than two decades and thinks highly of him.

William C. Weeman, III is a Senior Project Manager and Certified Interior Designer in California. He deals with real estate brokers on a regular basis. Mr. Weeman met Mr. Rothberg about seven years ago after Mr. Weeman had purchased a condominium in Arizona and wanted to rent out his townhome. Mr. Rothberg represented Mr. Weeman on the later sale of the townhome and the rental of the condominium. Mr. Weeman praised Mr. Rothberg’s behavior as a property manager, in relevant part as follows:

When [Mr. Rothberg] had to give his clients over to another broker he never once waivered in his personal and professional responsibility to service me as he had always in the past. He was a good employer and a good employee to the new broker. He continued to care about me as a client as he did when he was my broker. His character is exemplary and he is very active in his community and his temple. He sets a great example for his daughter.

I am aware of the incident(s) that led to the previous revocation of his broker’s license – I watched how he reacted to the events, how he took responsibility for his errors; how the experience affected him and how it has changed him for the better.

I understand how important it is for real estate agents to be honest and trustworthy and of good character. In my opinion [Mr. Rothberg’s] character will continue to lead him in a good professional path and his reputation will assure him good business prospects if he is granted a real estate salesperson’s [license]. I would continue to trust him with selling my own house. I would recommend him for a license and career in real estate and would not hesitate to recommend him to friends and family.

Linda Bevins

Ms. Bevins testified that a real estate broker owes a higher fiduciary duty to his clients than a real estate salesperson. In light of Mr. Rothberg’s repeated issues involving complying with the Departments regulations as to property management clients, Ms. Bevins testified that she still believes that the Department correctly denied Mr. Rothberg’s application for a real estate salesperson’s license. Ms. Bevins testified that in her opinion, licensing Mr. Rothberg would put the public at risk.

Ms. Bevins acknowledged that she had no reason to doubt Ms. Smith’s testimony that he had repaid all the deposits and that all of Mr. Rothberg’s property management clients had been made whole.

/ / / /

CONCLUSIONS OF LAW

At the beginning of the hearing, the Department’s attorney withdrew the charged violations of A.R.S. § 32-2153(A) because more than five years had passed since Mr. Rothberg committed the acts providing the basis for the charged violations. The Department’s attorney acknowledged that it no longer had jurisdiction over these charged violations.

The Department has jurisdiction to deny Mr. Rothberg’s application for a real estate salesperson’s license based on his past violations of A.R.S. § 32-2153(B).

Mr. Rothberg bears the burden of proof to establish that he is rehabilitated and that he now meets statutory qualifications for a real estate salesperson’s license 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.”

Although Mr. Rothberg blamed his broker, Mr. Kline, for abetting his violation of real estate statutes in Case No. 08F-DI-086, Mr. Rothberg admitted in the Consent Order that cause existed to discipline his real estate salesperson’s license under A.R.S. § 32-2153(B)(8). Cause therefore also exists in this matter under A.R.S. § 32-2153(B)(8) to deny Mr. Rothberg’s application for a second real estate salesperson’s license. Mr. Rothberg’s successful completion of the conditions under which his provisional license had been placed is considered a factor in mitigation of any action that the Department may take against his second real estate salesperson’s license application.

Mr. Rothberg does not dispute that after his provisional real estate salesperson’s license was restored to unrestricted status and the Department issued a broker’s license to him, he converted to his own use tenants’ deposits that he was holding in trust for his property management clients. The Cease and Desist Order and Order of Revocation in Case No. 13F-DI-210 therefore establish cause under A.R.S. §§ 32-2153(B)(7), 32-2153(B)(8), and 32-2153(B)(11) for the Department to deny his second license application for a salesperson’s license.

The legislature established the Department to protect “the public health, safety and welfare by regulating the sale of real estate . . . .” A real estate salesperson’s license is a privilege, not a right. The issue in this case is whether, on the date Mr. Rothberg 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 to grant a license to an applicant who has established that he is a person of good character. 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." . . .

Once good character is shown to be absent, it is not automatically regained by the mere passage of time. Positive and affirmative activities are required for a person to regain what was lost.

The time period required for a license applicant to establish rehabilitation is commensurate with the period of misconduct and the severity of the offenses. Mr. Rothberg managed to consistently comply with statutes regulating real estate licensees for only the first half of the approximately fourteen years that he has been licensed. As soon as he complied with the terms that the Department had placed on his provisional real estate salesperson’s license, he obtained a broker’s license and, then, breached his clients’ trust by converting their tenants’ deposits to maintain his lifestyle. Mr. Rothberg readily admitted his misconduct, however, and has repaid all the funds that he converted. Five years has past and no client or member of the public ultimately was harmed by his conversion and breach of his fiduciary duty.

Mr. Rothberg credibly testified that he has learned from his mistakes and has been not only law-abiding, but has contributed to the community in positive ways in the five years since March 2013, when the Department issued the Cease and Desist Order in Case No. 13F-DI-210. Mr. Rothberg’s testimony was corroborated by the thirteen people who testified or wrote letters on his behalf. Mr. Rothberg enjoys substantial support in the community. Given the credentials and qualifications of the persons who are willing to risk their licenses by monitoring Mr. Rothberg and the absence of harm to clients or the public caused by his previous violations, licensing Mr. Rothberg at this point would not cause an undue risk of harm to the public whose mission it is the Department’s duty to protect..

RECOMMENDED ORDER

Based on the foregoing, Petitioner Joshua Rothberg shall be granted a real estate salesperson’s license, subject to a two-year probationary term. The conditions of probation include the following:

Only periods of active licensure shall accrue to the probationary license period.

Mr. Rothberg shall submit sworn quarterly declarations, under penalty of perjury, to the Department’s Compliance Officer stating that he has been in compliance with all terms of the probation.

During the probationary license period, Mr. Rothberg shall not act as a supervisor, branch manager, partner, owner, co-owner, or officer of any entity licensed under Title 32, Chapter 20, Arizona Revised Statutes, and shall not handle or access property management clients’ trust funds.

During the probationary license period, Mr. Rothberg shall be licensed under the supervision of a real estate practice monitor (“practice monitor”), subject to the following terms and conditions:

Prior to or concurrent with hiring and submitting any license change form and fee to the Department, or if Mr. Rothberg is actively licensed within ten (10) days of the entry of the final order in this matter, whichever applies, any designated broker representing the Employing Broker employing Mr. Rothberg shall submit a signed statement to the Department Compliance Officer, together with the forms and fees for Mr. Rothberg to be employed by such broker, if required. The signed statement shall certify that the designated broker has received and read a copy of the final order in this matter, agrees to act as Mr. Rothberg’s practice monitor or appoints an associate broker who qualifies under the terms hereof, and agrees to comply with the following requirements:

The proposed practice monitor shall not have been a party to any prior disciplinary action by the Department.

The proposed practice monitor shall not be a partner of or a co-owner with Mr. Rothberg in any business enterprise, and shall not be a relative of or have any other relationship with Mr. Rothberg that may create, or create the appearance of, a conflict of interest or bias.

An associate broker may act as a practice monitor only if the associate broker is employed at the same location as Mr. Rothberg and has been appointed by the designated broker with full written authority pursuant to A.R.S. §§ 32-2151.01(G) and 32-2127. An associate broker appointed to act as practice monitor shall also submit to the Department a signed statement certifying that the associate broker has received and read a copy of the final order in this matter, agrees to act as Mr. Rothberg’s practice monitor, and agrees to comply with the requirements set forth herein.

The proposed designated broker or associate broker who will act as Mr. Rothberg’s practice monitor is subject to review and written approval by the Department Compliance Officer. This written approval may be withdrawn in the sole discretion of the Department Compliance Officer at any time upon written notice from the Department Compliance Officer to Mr. Rothberg and the practice monitor.

The practice monitor shall immediately submit a written report to the Department Compliance Officer if the practice monitor becomes aware of any behavior or conduct in which Mr. Rothberg has engaged that violates real estate statutes or rules in which Mr. Rothberg has violated any terms of the final order in this matter.

If the practice monitor is an associate broker, the designated broker shall sign and date all reports required pursuant to the final order in this matter, noting that the designated broker has accepted and approved the associate broker’s report.

No practice monitor is required if Mr. Rothberg’s license changes to inactive status or expires.

In the event Mr. Rothberg changes employment or reactivates, Mr. Rothberg shall immediately notify the Department Compliance Officer and obtain a new practice monitor who qualifies under the terms and conditions hereof. The new practice monitor must be approved by the Department Compliance Officer before Mr. Rothberg’s hire by the new employing broker.

In the event Mr. Rothberg’s practice monitor is no longer eligible to act as such or ceases to perform the duties required under the terms of the final order in this matter, or there is a new designated broker for Mr. Rothberg’s existing employing broker, Mr. Rothberg, Mr. Rothberg’s practice monitor and/or Mr. Rothberg’s designated broker shall immediately notify the Department Compliance Officer. Unless Mr. Rothberg obtains a new practice monitor who qualifies and is approved under the terms and conditions hereof, termination of Mr. Rothberg’s employment shall be required within seventy-two (72) hours of the time Mr. Rothberg loses the practice monitor.

In the event Mr. Rothberg’s license becomes inactive or Mr. Rothberg fails to obtain a new practice monitor, Mr. Rothberg shall immediately cease and desist from engaging in any activity authorized by Title 32, Chapter 20, Arizona Revised Statutes, and shall notify the Department Compliance Officer that the license is inactive. Mr. Rothberg shall obtain a new practice monitor before reactivating Mr. Rothberg’s license.

In the event Mr. Rothberg discontinues active employment as a real estate licensee in the State of Arizona, Mr. Rothberg shall immediately notify the Department Compliance officer and practice monitor. The practice monitor shall submit the proper form to the Department to place Mr. Rothberg’s license on inactive status.

Mr. Rothberg shall attend eighteen (18) hours of approved continuing education classes in the category of the Commissioner’s Standards. Within thirty (30) days after entry of the final order in this matter, Mr. Rothberg shall submit in writing to the Compliance Officer the course sponsor, title and number of the classes Mr. Rothberg proposes to take, and obtain the approval of the Compliance Officer. Mr. Rothberg shall submit certificates evidencing course completion to the Compliance Officer within one hundred twenty (120) days after entry of the final order in this matter. These continuing education classes shall be in addition to continuing education courses Mr. Rothberg has taken or will take for license renewal pursuant to A.R.S. § 32-2130.

If the Department receives information that it deems credible that Mr. Rothberg has violated any subsection of A.R.S § 32-2153(A) or (B) or the conditions of his probation, the Department shall summarily suspend Mr. Rothberg’s real estate salesperson’s license and refer the matter to the Office of Administrative Hearings for an expedited evidentiary hearing pursuant to A.R.S. § 41-1064(C) for revocation of the license.

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 23, 2018.

/s/ Diane Mihalsky

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate