ALJDEC decisions subject to certification as final

19A-094-INS · Department of Insurance · 2019-09-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 26, 2019 APPEARANCES: Daniel Chaim Zrihen appeared on his own behalf. The Arizona Department of Insurance was represented by Assistant Attorney General Deian Ousounov. ADMINISTRATIVE LAW JUDGE: Antara Nath Rivera _____________________________________________________________________ FINDINGS OF FACT On or about May 5, 2019, Daniel Chaim Zrihen (Appellant) submitted an application to the Arizona Department of Insurance (Department). Appellant answered “Yes” to Question 2 of the Background section which, as pertinent to this matter, asks in part, “[h]ave you ever been named or involved as a party in an administrative proceeding, including FINRA sanction or arbitration proceeding regarding any professional or occupational license or regulation?” As a result of the background investigation, the Department discovered, that, on or about August 18, 2016, the Arizona Registrar of Contractors (ROC) revoked the dual residential and small commercial contracting license issued to ROI Improvements, LLC (ROI). Appellant was manager, and member, of ROI from May 2013 to August 16, 2016. On or about June 5, 2019, the Department notified Appellant that his license application was denied. On or about June 28, 2019, Appellant filed a timely appeal of the denial of his application. On or about July 16, 2019, the Department issued a Notice of Hearing to Appellant setting this matter for hearing at 1:00 p.m. on August 26, 2019. Aqueelah Currie (Ms. Currie), Licensing Supervisor, testified that when an applicant had administrative actions against him, the Department investigated the nature of the action to determine how much money was involved, the nature of the breach of contract and trust, and the extent an applicant’s actions would hurt the public. Ms. Currie testified that Appellant was truthful and answered “Yes” to Question #2. She stated that the Department learned that Appellant’s ROC license was revoked because he had 37 pending cases and one open case. She stated that, multiple default judgments, totaling $215,000.00, were entered against ROI. Ms. Currie stated that while ROI paid off $200,000.00 there remained a balance of $15,000.00 that was owed to remaining customers. The Department reached out to Appellant to address this issue, however, Appellant never responded. Ms. Currie opined that the fact that Appellant did not respond was a concern because the Department would not be able to regulate Appellant. Additionally, Ms. Currie stated that the default judgments were entered as recently as 2017. She opined that the length of time that expired was not long enough to be considered as mitigation. The fact that there was a large portion of the public that suffered financially, because of Appellant’s actions, the Department appropriately denied Appellant’s license to protect the public from such financial loss. At hearing, Appellant put on one witness, Leeann Cannon (Ms. Cannon), who testified that she was ROI’s Certified Public Accountant (CPA). She did not provide any dates of her employment with ROI. Ms. Cannon testified that she observed unusually large amounts of money were taken out of ROI’s account after she started. She testified that Tim Stapp (Mr. Stapp), co-owner of ROI, took money from ROI, never documented what he took, and left ROI without returning the money. Ms. Cannon did not state how she knew that it was Mr. Stapp who took the money. She stated that she alerted Appellant immediately. She stated that Appellant put $50,000.00 of his own money into ROI’s account to help the customers Mr. Stapp defrauded. Appellant testified on his own behalf and stated that he had no knowledge of Mr. Stapp’s actions until Ms. Cannon informed him of the lack of funds. He stated that he was young when he started the contracting business with Mr. Stapp. Appellant testified that he thought the amounts Mr. Stapp withdrew were normal because he was not familiar with the construction business. Appellant stated that, in the end of 2014, he realized the extent of the damages caused by Mr. Stapp. He testified that his first goal was to help the customers. Appellant stated that initially, there were 1000 customers who were affected by Mr. Stapp’s deception. He testified that he brought that number down to 37 but was forced to file for bankruptcy, as a result of trying to financially help those customers. Appellant opined that he never meant to defraud his customers. While he acknowledged ROI’s wrongdoings, he did not take the responsibility because it was Mr. Stapp’s fault. Appellant also stated that the United States Trustee did not find any wrong doing by Appellant. CONCLUSIONS OF LAW 1. Appellant bears the burden of persuasion. See Ariz. Rev. Stat. § 41-1092.07(G)(1). 2. The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code R2-19-119. 3. A preponderance of the evidence is: The 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.

Black’s Law Dictionary 1373 (10th ed. 2014). 4. The judgment against Appellant showed that he engaged in conduct that included financial irresponsibility in the conduct of business in this state or elsewhere. Consequently, the Department’s Director has discretion to deny Appellant’s application based on Ariz. Rev. Stat. § 20-295(A)(8). 5. It is uncontested that Appellant was forthcoming in his application. However, while Appellant accepted accountability for ROI’s actions that resulted in the judgment against his ROC license, he blamed Mr. Stapp for all wrongdoing. Moreover, Appellant did not respond to the Department’s request to discuss this matter. This caused the Department concern with respect to the regulation of Appellant. 6. Had Appellant brought forth one or more prospective employers, to testify to his character, the outcome may have been different. Appellant provided no testimony from a licensed agent, or broker, who was willing to monitor Appellant over the course of the next several years. Appellant bears the burden to establish such evidence with respect to his character and professionalism. 7. Appellant’s testimony did not overcome the greater weight of the evidence in the record to compel the Department to issue him a real estate salesperson license. More was needed to assure and balance the Department’s need to regulate applicants with an applicant’s desire to better themselves through the pursuit of professional success in the real estate field. 8. Based on the evidence presented, the Administrative Law Judge must find that Appellant did not completely sustained his burden of proof. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Department’s denial be upheld at this time and that Appellant Daniel Chaim Zrihen’s appeal be denied. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five (5) days from the date of that certification. Done this day, September 5, 2019.

/s/ Antara Nath Rivera Administrative Law Judge

Transmitted electronically to:

Keith A. Schraad, Director Arizona Department of Insurance

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

Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826