ALJDEC decisions subject to certification as final

19A-2019.100-ACY · State Board of Accountancy · 2019-04-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

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. 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 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:

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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 30 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.

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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.

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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

----------------------- [1] See id. [2] See id. [3] See Exhibit 3.

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