ALJDEC decisions subject to certification as final

19A-2017.115-ACY · State Board of Accountancy · 2019-05-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 24, 2019 at 9:00 AM. APPEARANCES: Charles Buttke (“Respondent”) appeared on his own behalf and Charles Buttke, CPA, PLLC (“Firm”). Assistant Attorney General Scott Donald Esq., appeared on behalf of the Arizona State Board of Accountancy (“Board”) with Christopher Rasmussen as a witness. ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ 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 Order to the Executive Director of the Board. 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 and Firm. Additionally, pursuant to Ariz. Rev. Stat. §§ 32-741 and 32-742 the Board had the authority to discipline Respondent and Firm. 2. Respondent is 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.[1] During Respondent’s certificate period the certificate was disciplined on four prior occasions.[2] Such prior record reflects that Firm’s registration was issued on September 11, 2006, and was suspended on July 13, 2018.[3] During Firm’s registration period the registration was disciplined on three prior occasions.[4] 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 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.[5] 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 13, 2018, 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[6] 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 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 was appropriate as evidence established that neither Respondent nor Firm could be regulated by the Board. 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 bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.[7] The standard of proof is a preponderance of the evidence.[8] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[9] 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.”[10] 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.” 5. Ariz. Rev. Stat. §§ 32-741(A)(9) and 32-741(A)(15) provide that after notice and an opportunity to be heard, the Board could impose discipline against a certificate holder for a “[k]nowing violation of any decision, order or rule issued or adopted by the board” or “[f]ailing to respond or furnish information in a timely manner to the board or its designated agent, if the information is legally requested by the board and is in the registrant’s possession or control.” 6. 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. 7. 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. 8. 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.” 9. It is established law that wherever statutory authority conflicts with agency rule-making, the rule must yield to the statute.[11] 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. 10. Respondent is deemed to have knowledge of the Board’s rules.[12] 11. The Board established by a preponderance of the evidence that it mailed a disciplinary action notice to Respondent and Firm’s correct address of record on December 18, 2018, and Respondent and Firm failed to respond within thirty days of mailing, which is a violation of Ariz. Admin. Code R4-1-455.03(D). 12. Because Respondent violated Ariz. Admin. Code R4-1-455.03(D), the Board has authority to revoke his Certified Public Accountant Certificate under Ariz. Rev. Stat. § 32-741(A)(9). 13. Because 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). 14. Because Respondent and Firm 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).[13] RECOMMENDED ORDER Based on the foregoing facts and conclusions of law, it is recommended that on the effective date of the Board’s Final Order, the Board revoke CPA Certificate No. 7198-E for the failure to submit a timely response to the Board. IT IS FURTHER RECOMMENDED that on the effective date of the Board’s Final Order, the Board revoke CPA Firm Registration No. 2776-L for the failure to submit a timely response to the Board. IT IS FURTHER RECOMMENDED that on the effective date of the Final Order, Respondent and/or Respondent Firm shall be required to pay the Board’s costs and attorney’s fees incurred in prosecuting the two violations in this matter pursuant to Ariz. Rev. Stat. § 32-701(10)(g). 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 02, 2019.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy ----------------------- [1] See https://www.azaccountancy.gov/CPADirectory/LicenseeDirectory.aspx?category=q Uz0M0e8k11HsCztZAjs5BWErop235XXq6ZE76MVLNU%3d&search=oeuJBSCs7UA4zB55bgyb1w% 3d%3d. [2] Id. Notably, the disciplinary actions at issue took place on July 11, 2011, March 16, 2016, November 16, 2017, and July 13, 2018. [3] See https://www.azaccountancy.gov/CPADirectory/FirmDirectory.aspx?category=pAR8U D%2b90GiwwjVkt7wG0q8mCkWwyZGx0TbkQV9p7%2bo%3d&search=ydl193kZh2EwIEPgGMwpdA% 3d%3d. [4] Id. Notably, the disciplinary action at issue took place on July 11, 2011, November 16, 2017, and July 13, 2018. [5] See Board Exhibit 1. [6] See Board Exhibit 2. [7] See ARIZ. ADMIN. CODE R2-19-119(B)(2). [8] See Ariz. Admin. Code R2-19-119(A). [9] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [10] Black’s Law Dictionary at page 1064 (6th ed. 1990). [11] 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). [12] See Ariz. Admin. Code R4-1-102(A). [13] 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.”

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