FINACT19A-2017.115-ACY.pdf

19A-2017.115-ACY · State Board of Accountancy · 2019-07-01

BEFORE THE ARIZONA STATE BOARD OF ACCOUNTANCY

In the Matter of OAH Docket No. 19A-2017.115-ACY Certified Public Accountant ASBA File Nos. 2017.115, 2017.116, 2019.101, and 2019.102 Certificate No. 7198-E Issued to: CHARLES E. BUTTKE, DECISION AND ORDER Respondent; And Certified Public Accounting Firm Registration No. 2776-L Issued to: CHARLES BUTTKE, CPA, PLLC, Respondent Firm.

On June 25, 2019, this matter came before the Arizona State Board of Accountancy (“Board”) for consideration of Administrative Law Judge (“ALJ”) Jenna Clark’s proposed Findings of Fact, Conclusions of Law and Recommended Order (“ALJ’s Decision”). Neither Charles E. Buttke (“Respondent”), a representative of Charles Buttke, CPA, PLLC (“Respondent Firm”), nor an attorney on their behalf appeared. Assistant Attorney General Sabrina Khan appeared on behalf of the State. The Board received independent legal advice from Assistant Attorney General John Tellier. The Board, having considered the ALJ’s Decision and the entire record in this matter, hereby issues the following Findings of Fact, Conclusions of Law and Order (“Decision and Order”). FINDINGS OF FACT

BACKGROUND AND PROCEDURE

1. Pursuant to ARIZ. REV. STAT. §§ 32-701 et seq., the Board is the authority for

regulating the practice of Certified Public Accountants in the State of Arizona. Pursuant

to ARIZ. REV. STAT. §§ 32-701 et seq., and ARIZ. ADMIN. CODE R401-101 et seq., the Board has personal and subject matter jurisdiction over Respondent Firm 1. Additionally, pursuant to ARIZ. REV. STAT. §§ 32-741 and 32-742 the Board had the authority to discipline Respondent and Firm. 2. Respondent was 2 the holder of Certified Public Accountant (“CPA”) Certificate No. 7198-E, issued by the Board. Firm is the holder of CPA Firm Registration No. 2776- L, issued by the Board. 3. Administrative Notice is taken of Respondent’s certificate record and Firm’s prior registration record as reflected on the Board’s public website on April 24, 2019. Such prior record reflects that Respondent’s certificate was issued on October 15, 1990, and expired on April 01, 2019. 3 During Respondent’s certificate period the certificate was disciplined on four prior occasions. 4 Such prior record reflects that Firm’s registration was issued on September 11, 2006, and was suspended on July 13, 2018. 5 During Firm’s registration period the registration was disciplined on three prior occasions. 6 STIPULATED HEARING EVIDENCE 4. Firm is a single member professional limited liability company of which Respondent is the sole member and responsible for Firm’s audit practice. 5. On July 13, 2018, Respondent and Firm entered into a Decision and Order (By

Consent) (“CONSENT ORDER”) as a result of violations of integrity, objectivity, and The Board modified paragraph 1 of the ALJ’s decision to replace “Respondent and Firm” with “Respondent Firm”, as Respondent’s certificate expired. The Board modified paragraph 2 of the ALJ’s decision to indicate that Respondent was the holder of CPA Certificate No. 7198-E. See https://www.azaccountancy.gov/CPADirectory/LicenseeDirectory.aspx?category=qUz0M0e8k11HsCztZAj s5BWErop235XXq6ZE76MVLNU%3d&search=oeuJBSCs7UA4zB55bgyb1w%3d%3d. 4 Id. Notably, the disciplinary actions at issue took place on July 11, 2011, March 16, 2016, November 16, 2017, and July 13, 2018. 5 See https://www.azaccountancy.gov/CPADirectory/FirmDirectory.aspx?category=pAR8UD%2b90GiwwjVkt7w G0q8mCkWwyZGx0TbkQV9p7%2bo%3d&search=ydl193kZh2EwIEPgGMwpdA%3d%3d. Id. Notably, the disciplinary action at issue took place on July 11, 2011, November 16, 2017, and July 13, 2018.

tax practice standards that were discovered during the investigation of File Nos. 2017.115 and 2017.116, whereby Respondent was found to have misinformed a client about taxes he failed to file over the course of several years and further failed to resolve although having the authority and power to do so, which caused Respondent’s client to suffer financial hardship as a direct result of Respondent’s inaction and dishonesty. 7 6. Among other requirements, the CONSENT ORDER contained the following provisions: a. Respondent and Respondent Firm shall obey all federal, state and local laws, and all laws/rules governing the practice of public accounting in the State of Arizona. b. The failure of Respondent or Respondent Firm to complete or comply with any of the requirements or provisions of this Consent Order, including the General Provisions, shall be deemed a violation of this Consent Order. 7. On December 17, 2018 8, Board staff received a complaint against Respondent and Firm alleging improper tax filings and unethical behaviors. 8. On December 18, 2018, Board staff processed the complaint, creating File Nos. 2019.101 and 2019.102, and assigning the complaint to the Board’s Tax Advisory Committee (“Committee”). That same day, Board staff sent a certified letter with the

complaint enclosed to Respondent and Firm’s address of record for a response within thirty (30) days of the letter, which states in part: a. You are hereby required to respond, by submitting your written response to

the allegations of the complaint, within thirty (30) days from the date of this letter. Please be advised that your failure to timely respond and/or submit a written response may be considered a violation of A.A.C. R4-1-455.03(D), and/or 7 See Board Exhibit 1. The Board modified paragraph 7 to correct the date that the complaint was received. 9 See Board Exhibit 2.

grounds for disciplinary action against your certificate and registration pursuant to A.R.S. § 32-741(A)(9) and 32-742(B). (Emphasis in original.) 9. Although the letter was signed for by Respondent on December 20, 2018, the Board did not receive a response from Respondent or Firm. 10. On January 28, 2019, the Committee considered Respondent and Firm’s non- response and voted to recommend that the Board proceed to an administrative hearing. 11. On February 11, 2019, the Board voted, pursuant to ARIZ. REV. CODE R4-1- 455.03(D), to proceed to an administrative hearing for revocation of Respondent’s certificate and Firm’s registration for failure to respond to their letter dated December 18, 2018, and for non-compliance with their July 13, 2018, CONSENT ORDER. 12. Per the COMPLAINT AND NOTICE OF HEARING, the Board referred this matter to the Office of Administrative Hearings, an independent state agency, on March 22, 2019, for an evidentiary hearing on April 24, 2019, to determine whether the Board has good cause to take disciplinary action against Certificate No. 7198-E issued to Respondent, and Registration No. 2776-L issued to Firm. ADDITIONAL EVIDENCE 13. At the hearing, the Board submitted two exhibits and presented the testimony of

Mr. Rasmussen, Assistant Director of Regulation and Compliance. Respondent testified on his own behalf and on behalf of Firm. 14. The Board conceded that Respondent’s certification expired on April 01, 2019,

nullifying the second and third allegations from its COMPLAINT AND NOTICE OF HEARING, but argued that revocation of the Firm’s registration was appropriate as evidence established that Respondent Firm could not be regulated by the Board 10. 10 The Board modified paragraph 14 so as to read that the Board argued that revocation was appropriate for Respondent Firm.

15. Respondent admitted that neither he nor Firm had responded to the Board’s December 18, 2018, letter. Specifically, Respondent testified that due to the current presidential administration’s changes to the tax law, as well as familial and professional stresses, he let his work and business obligations “get away” from him as he was overwhelmed. CONCLUSIONS OF LAW 1. This matter was properly brought before the Office of Administrative Hearings pursuant to ARIZ. REV. STAT. §§ 41-1092 et seq. 2. Pursuant to ARIZ. REV. STAT. § 41-1092.07(G)(2), the Board has the burden of proof in this matter. Respondent Firm 11 bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard. 12 The standard of proof is a preponderance of the evidence. 13 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 14 A preponderance of the evidence is also, “evidence which is of greater weight or more convincing than evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.”

4. ARIZ. REV. STAT. § 32-741(A)(5) provide that after notice and an opportunity

for a hearing, the board may revoke or suspend any certificate granted under this chapter and may take disciplinary action concerning the holder of any certificate for “[a]ny cause other than failure to pay license or registration fees.”

11 The Board modified paragraph 2 to change “Respondent” to “Respondent Firm”. See ARIZ. ADMIN. CODE R2-19-119(B)(2). 13 See ARIZ. ADMIN. CODE R2-19-119(A). MORRIS K. UDALL, ARIZONA LAW OF EVIDENCE § 5 (1960). 15 BLACK’S LAW DICTIONARY at page 1064 (6th ed. 1990). The Board omitted paragraph 5 of the Conclusions of Law of the ALJ’s decision as it was not necessary because Respondent’s certificate had expired.

5. ARIZ. REV. STAT. § 32-742(B)(1) holds that after notice and an opportunity for a hearing, the board may revoke or suspend a firm's registration, or may take disciplinary action for any of the causes enumerated in section 32-741(A), if the board revokes or suspends the certificate of any owner of the firm if issued by the board. 6. ARIZ. REV. STAT. § 32-701(12)(g) holds that "disciplinary action" means any other regulatory sanctions imposed by the board in combination with, or as an alternative to, relinquishment, revocation or suspension of a certificate or registration, including the imposition of reimbursement of the board's costs of investigations and proceedings initiated under this chapter, including attorney fees. 7. ARIZ. ADMIN. CODE R4-1-455.03(D) provides, in pertinent part regarding communications, that “[w]hen requested, a certified public accountant or public accountant shall respond to communications from the Board within 30 days after the communication is mailed by registered or certified mail.” 8. It is established law that wherever statutory authority conflicts with agency rule- making, the rule must yield to the statute. 17 However, a regulation setting forth 30 days as the time frame necessary to constitute a “timely” response under the statute does not conflict with the statute. 9. Respondent is deemed to have knowledge of the Board’s rules. 18

10. The Board established by a preponderance of the evidence that it mailed a

disciplinary action notice to Respondent Firm’s correct address of record on December 18, 2018, and Respondent Firm failed to respond within thirty days of mailing, which is a violation of ARIZ. ADMIN. CODE R4-1-455.03(D) 19. 20 See Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177 Ariz. 526, 869 P.2d 500 (1994); Fullen v. Indus. Comm’n, 122 Ariz. 425, 595 P.2d 657 (1979); R.L. Augustine Constr. Co., Inc. v. Peoria Unified Sch. Dist. No. 11, 188 Ariz. 368, 370, 936 P.2d 554, 556 (1997); Ariz. Health Care Cost Containment Sys. Admin. v. Carondelet Health Sys., 188 Ariz. 266, 271-72, 935 P.2d 844, 849-50 (App. 1996). See ARIZ. ADMIN. CODE R4-1-102(A). 19 The Board modified this paragraph to replace instances of “Respondent and Firm” with “Respondent Firm”. The Board omitted paragraph 12 of the Conclusions of Law of the ALJ’s decision as it was not necessary because Respondent’s certificate had expired.

11. Because Respondent Firm violated ARIZ. ADMIN. CODE R4-1-455.03(D), the Board has authority to revoke its Certified Public Accounting Firm Registration under ARIZ. REV. STAT. § 32-742(B)(1). 12. Because Respondent Firm 21 violated ARIZ. ADMIN. CODE R4-1-455.03(D), the Board has authority to require reimbursement of the Board's costs of investigations and proceedings, including attorney fees, under ARIZ. REV. STAT. § 32-701(10)(g). 22 ORDER Based on the foregoing, the Board ORDERS that Respondent Firm CPA Firm Registration No. 2776-L be REVOKED. 23 IT IS FURTHER ORDERED that Respondent Firm shall be required to reimburse the Board $113.66 within thirty (30) days of the effective date of this Decision and Order. This amount reflects the costs and attorney’s fees the Board incurred in prosecuting this matter. 24 NOTICE OF APPEAL RIGHTS Respondent Firm is hereby notified that it has the right to move for a rehearing or review by filing a motion with the Board’s Executive Director within thirty (30) days after service of this Decision and Order. A.R.S. § 41-1092.09. The motion must set forth legally sufficient reasons for granting a rehearing. A.A.C. R4-1-114(C). Service of this Decision and Order is effective on the date of personal service or five (5) days after the date of mailing. If a motion for rehearing is not filed, the Board’s Decision and Order becomes effective thirty (30) days after it is mailed to Respondent Firm. The Board modified this paragraph to replace an instance of “Respondent and Firm” with “Respondent Firm”. 22 ARIZ. REV. STAT. § 32-701(10)(g) defines “disciplinary action” to include “[r]eimbursement of the board's costs of investigations and proceedings initiated under this chapter, including attorney fees.” 23 The Board modified the Order to omit the revocation of Respondent’s certificate as Respondent’s certificate had already expired. 24 The reimbursement of Board fees and costs paragraph of the Order was modified to include the exact amount owed and time period of which it is to be paid. Requiring reimbursement of Board fees and costs is consistent with the Board’s practices.

Respondent Firm is further notified that the filing of a motion for rehearing is required to preserve any rights of appeal to the Superior Court. DATED this 28th day of June, 2019. ARIZONA STATE BOARD OF ACCOUNTANCY By: ___________________________________ Julie S. Klewer, CPA, Board President

Original of ththe foregoing Decision and Order filed this 28 day of June, 2019 with: Monica L. Petersen Executive Director Arizona State Board of Accountancy 100 N. 15 Avenue, Suite 165 th

Phoenix, AZ 85007 Copy of the foregoing Decision and Order e-filed this 28th day of June, 2019 with: Greg Hanchett, Director Arizona Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, AZ 85007 Copy of the foregoing Decision and Order mailed via U.S. First Class Mail and Certified Mail #[account number redacted] 7875 this 28th day of June, 2019, to: Charles E. Buttke Charles Buttke CPA PLLC 2240 McCulloch Blvd N Ste B Lake Havasu City, AZ 86403 Copy of the foregoing Decision and Order emailed this 28th day of June, 2019 to: Scott Donald Assistant Attorney General [email redacted] Sabrina Khan Assistant Attorney General [email redacted] John Tellier Assistant Attorney General Independent Advisor [email redacted] By: _____________________