FINACT19A-2019.100-ACY.pdf

19A-2019.100-ACY · State Board of Accountancy · 2019-07-01

BEFORE THE ARIZONA STATE BOARD OF ACCOUNTANCY In the Matter of OAH Docket No. 19A-2019.100-ACY

Certified Public Accountant ASBA File Nos. 2018.187, 2018.188, 2018.189, 2018.190, 2019.100 Certificate No. 14765-E Issued to: CHARLES KILPATRICK, DECISION AND ORDER Respondent; and

Certified Public Accountant Firm Registration No. 3332-L Issued to: CHARLES A. KILPATRICK, 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”) Velva Moses-Thompson’s proposed Findings of Fact, Conclusions of Law and Recommended Order (“ALJ’s Decision”). 1 Neither Charles Kilpatrick (“Respondent”), a representative of Charles A. Kilpatrick, CPA, PLLC (“Respondent Firm”) nor an attorney on their behalf appeared. Assistant Attorney General Seth Hargraves 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”). /// /// A true and correct copy of the ALJ’s Decision is attached and certain parts of it are incorporated here as set forth below. FINDINGS OF FACT The Findings of Fact as set forth in the ALJ’s Decision are adopted in their entirety and incorporated herein. CONCLUSIONS OF LAW The Conclusions of Law as set forth in the ALJ’s Decision are adopted in their entirety and incorporated herein. ORDER Based on the foregoing, the Board ORDERS that Respondent Certified Public Accountant Certificate No. 14765-E 2 and Respondent Firm Certified Public Accountant Firm Registration No. 3332-L 3 be REVOKED. IT IS FURTHER ORDERED that Respondent Firm shall be required to reimburse the Board $374.12 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. 4 NOTICE OF APPEAL RIGHTS Respondent and Respondent Firm is hereby notified that they have 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 and Respondent Firm. Respondent and 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. 2 Certificate No. 14765-E expired due to non-registration after the ALJ rendered her recommendation to the Board. The Board modified the ALJ’s decision to correct Respondent Firm’s Certified Public Accountant Firm

Registration No. from “14765-E” to “3332-L”. The Board voted to modify the ALJ’s Decision to include reimbursement of fees and costs to recuperate costs for enforcement. DATED this 28th day of June, 2019. ARIZONA STATE BOARD OF ACCOUNTANCY By: ___________________________________ Julie S. Klewer, CPA, Board President Original of the foregoing Decision and Order (and attachment) filed this 28 day of June, 2019 with: th

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 (and attachment) e-filed this 28 day of June, 2019 with: th

Greg Hanchett, Director Arizona Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, AZ 85007 Copy of the foregoing Decision and Order (and attachment) mailed via U.S. First Class Mail and Certified Mail #[account number redacted] 7882 this 28th day of June, 2019, to: Charles Kilpatrick Charles A. Kilpatrick CPA, PLLC 2158 N. Gilbert Rd., Ste 107 Mesa, AZ 85203 Copy of the foregoing Decision and Order (and attachment) emailed this 28th day of June, 2019 to: Scott Donald Assistant Attorney General [email redacted] Seth Hargraves Assistant Attorney General [email redacted] John Tellier Assistant Attorney General Independent Advisor [email redacted] By: ___________________________________ IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of No. 19A-2019.100-ACY

Certified Public Accountant ADMINISTRATIVE LAW JUDGE Certificate No. 14765-E DECISION Issued to: CHARLES KILPATRICK,

Respondent;

And Certified Public Accounting Firm Registration No. 3332-L Issued to: CHARLES A. KILPATRICK, CPA, PLLC

Respondent Firm.

HEARING: April 5, 2019 APPEARANCES: Respondent Charles A. Kilpatrick kid not appear. No one appeared on behalf of Respondent Charles A. Kilpatrick, CPA, PLLC. Assistant Attorney General Scott Donald appeared on behalf of the Arizona State Board of Accountancy. ADMINISTRATIVE LAW JUDGE: Velva Moses-Thompson _____________________________________________________________________ FINDINGS OF FACT 1. On or about February 1, 2017, Charles A. Kilpatrick, CPA, PLLC (“Kilpatrick PLLC”) filed a biennial firm registration renewal form for Firm Registration No. 3332-L. See Exhibit 6. Kilpatrick PLLC listed certified public accountants Charles A. Kilpatrick and Kenneth A. Kilpatrick as its current partners. See id. The renewal form shows that Charles A. Kilpatrick is Kilpatrick LLC’s Partner In Charge under ARIZ. REV. STAT. section 32-731(C). The main office address provided on the form was 2158 N. Gilbert Road, Suite 107, Mesa, AZ 85203 (“Mesa address”). See id.

Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826 2. On May 1, 2018, Charles A. Kilpatrick’s license was suspended for non- registration. See Exhibit 8. The last renewal registration form received by the Arizona State Board of Accountancy (“Board) was for the renewal of month of April and the

renewal period of 2016 to 2018. See Exhibit 5.

3. On June 18, 2018, the Board received a complaint from a consumer

against Charles A. Kilpatrick and Charles A. Kilpatrick, CPA, PLLC (“Kilpatrick PLLC”).

See Exhibit 1. The consumer complained that Charles A. Kilpatrick and Kilpatrick LLC

(“Respondents”) failed to stay in communication with the consumer and that

Respondents failed to prepare the consumer’s tax returns. See id.

4. On June 19, 2019, the Board notified Mr. Kilpatrick that it received a

consumer complaint against Mr. Kilpatrick and Kilpatrick PLLC. See Exhibit 2.

The June 19, 2018 notice provides, in relevant part, as follows:1

…………………………………………….

Please review the enclosed complaint packet. 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), (15), and 32-742(B).

5. The Domestic Return Receipt for the mailing reflects that the June 19, 2018 letter was returned to the Board as undeliverable. 6. Mr. Kilpatrick did not respond to the Board’s June 19, 2018 letter. 7. On or about June 21, 2019, the Board received a letter from Mr. Kilpatrick which provided, “Kenneth A. Kilpatrick, CPA#1681-E has not been associated with Charles A. Kilpatrick, CPA, PLLC (dba Kilpatrick & Co., CPAs) since October 17, 2017.” Mr. Kilpatrick requested that Kenneth A. Kilpatrick’s name be removed from the firm as of October 17, 2017. The address provided on the letter for Kilpatrick LLC was the same address that was listed on Kilpatrick LLC’s biannual renewal form. 8. On June 29, 2018, the Board notified Mr. Kilpatrick that he may have violated A.R.S. §§ 32-741.01(B) and 32-747(A). See Exhibit 8. Mr. Kilpatrick’s license

was suspended on May 1, 2018. The June 29, 2018 notice provides, in relevant part,

as follows:2

The Arizona State Board of Accountancy (Board) has opened the above-referenced file because it has come to our attention that you may have used the “CPA” designation while on suspended status. …………………………………………….

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 (15).

9. The Domestic Return Receipt for the mailing reflects that the June 29,

2018 letter was returned to the Board as undeliverable.

10. On June 25, 2018, the Board issued a “Notification of Failure to Meet Firm Qualifications” to Mr. Kilpatrick, Partner-In-Charge. See Exhibit 11. The June 25, 2018 notice provides, in relevant part, as follows:3 Pursuant to A.R.S. § 32-73 l(A)(l ), CPA firm qualifications include the requirement that a firm have at least one partner who is a resident and a full-time practicing certified public accountant in good standing in Arizona. According to our records, KILPATRICK, CHARLES A., CPA, PLLC (Firm 333- L) does not presently meet this statutory requirement to be registered and recognized as a CPA firm in Arizona. Pursuant to A.RS. § 32-742(A), "[a]fter notice and an opportunity for a hearing, the board shall revoke a firm's registration to practice public accounting if at any time it

See id. See id. 3 See Exhibit 3. does not have all the qualifications prescribed by this chapter." Therefore, if CHARLES KILPATRICK does not renew the individual CPA Certificate No. 14765-E by 7/25/2018, the Board may take action to REVOKE the firm's registration.

11. Mr. Kilpatrick did not renew Certificate No. 14765-E by July 25, 2018.

12. The Domestic Return Receipt for the mailing reflects that the June 25,

2018 letter was returned to the Board as undeliverable. See Exhibit 14.

13. On February 20, 2019, the Board issued a Complaint and Notice of

Hearing which contained an allegation that Respondent violated Board rules and

advised the parties of the time, date, and location of an evidentiary hearing in the

matter before the Office of Administrative Hearings, an independent agency. The Complaint and Notice of Hearing was sent to Respondent at his addresses of record with the Board. 14. The Board attempted to serve Respondents by a process server at Mr. Kilpatrick’s residential address of record and at the Mesa address. See Exhibit 15. However, the leasing manager of the residential property where the Board attempted to serve Mr. Kilpatrick reported that Mr. Kilpatrick moved in July of 2016 and no longer lived at that address. A person by the name of Cathy Howard of Legacy CPAs reported that Mr. Kilpatrick leased the space at the Mesa address and was evicted in late 2017. 15. A hearing was held on April 5, 2019. 16. The commencement of the scheduled hearing was delayed approximately 20 minutes to allow for the late arrival of Mr. Kilpatrick or an attorney authorized to represent Mr. Kilpatrick or Kilpatrick PLLC. After the delay, the Administrative Law Judge conducted the hearing. 17. At hearing, the Board presented the testimony of Christopher Rasmussen, Assistant Director of Compliance Issues for the Board, and submitted exhibits 1 and 16. CONCLUSIONS OF LAW 1. The Board has personal and subject matter jurisdiction over Respondent pursuant to ARIZ. REV. STAT section 32-701 et seq. and A.A.C. R4-1-101 et seq. 2. The Board has the authority to discipline Respondent pursuant to ARIZ. REV. STAT. section 32-742. 3. Pursuant to ARIZ. REV. STAT. section 41-1092.07(G)(2), the Board has the

burden of proof in this matter. The standard of proof is by a preponderance of the

evidence. A.A.C. R2-19-119(A).

4. ARIZ. REV. STAT. section 32-742(B) provides:

After notice and an opportunity for a hearing, the board may revoke or suspend a firm's registration to practice public accounting or may take disciplinary action concerning the registrant for any of the causes enumerated in section 32- 741, subsection A or for any of the following additional causes: * * * *

2. The cancellation, revocation, suspension or refusal to renew the authority of the firm or any Arizona partner, shareholder, member, manager, officer, director, agent or employee to practice public accounting in any jurisdiction for any cause other than failure to pay a registration fee in the jurisdiction.

5. Under ARIZ. REV. STAT. section 32-741(A)(9), the board may revoke or

suspend any certificate granted under this chapter and may take disciplinary action

concerning the holder of any certificate for violating a rule issued or adopted by the

Board, after notice and an opportunity for a hearing.

6. A.A.C. R4-1-455.03(D) provides: Communications: When requested, a registrant shall file a written response to a communication from the Board within days of the date of the mailing of such communication by certified mail. A written response is deemed filed on the date and time received in the Board office. The Board shall record the date and time either by electronic date stamp in Arizona time or on physical receipt in the Board’s office. The Board shall not accept a postmark as evidence of timely filing. 7. ARIZ. REV. STAT. section 32-742(A) provides: After notice and an opportunity for a hearing, the board shall revoke a firm's registration to practice public accounting if at any time it does not have all the qualifications prescribed by this chapter.

* * * * 8. ARIZ. REV. STAT. section 32-731(A) provides:

Except as provided in section 32-725, subsection G, once every two years a partnership engaged in this state in the practice of accounting by certified public accountants or public accountants shall pay the registration fee pursuant to section 32-729 and register with the board as a partnership of certified public accountants and shall meet the following requirements:

1. At least one partner shall be a resident and a full-time practicing certified public accountant in good standing in this state.

* * * *

9. The Board established by a preponderance of the evidence that Mr. Kilpatrick failed to timely respond to the Board’s letters issued on June 25, 2018 and June 29, 2018, which is a violation of ARIZ. REV. STAT. section 32-741(A)(9), as it relates to A.A.C. R4-1-455.03(D). 10. The Board established by a preponderance of the evidence that Kilpatrick PLLC does not have an Arizona CPA certificate holder in good standing in Arizona, which is a violation of ARIZ. REV. STAT. section 32-731(A). 11. Because Kilpatrick PLLC Accounting violated ARIZ. REV. STAT. section 32- 731(A), the Board has authority to revoke its registration to practice public accounting under ARIZ. REV. STAT. section 32-742(A). 12. Because Mr. Kilpatrick violated ARIZ. REV. STAT. section 32-741(A)(9), the Board has authority to revoke his registration to practice public accounting. 13. Considering the facts and circumstances of this matter, it is recommended that the board revoke Mr. Kilpatrick’s Accounting’s certificate No. 14765-E and the firm registration of Kirkpatrick PLLC Firm No. 3332-L.

RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Board’s final order, the Board revoke Certified Public Accounting Certificate No. 14765- E issued to Charles A. Kilpatrick, and Certified Public Accounting Firm Registration No. 14765-E issued to Charles A. Kilpatrick, CPA, PLLC. 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, April 5, 2019.

/s/ Velva Moses-Thompson Administrative Law Judge

Transmitted electronically to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy