ALJDEC decisions subject to certification as final

19F-162-REL · Department of Real Estate · 2019-08-01

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 16, 2019 APPEARANCES: Gary Swanson failed to appear. Assistant Attorney General Deain Ousounov represented the Arizona Department of Real Estate.

ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn _____________________________________________________________________ FINDINGS OF FACT 1. On October 8, 2015, the Arizona Department of Real Estate (Department) issued real estate broker’s license BR646521000 to Respondent Gary Swanson (Swanson). This license is set to expire on October 31, 2019.

2. On October 9, 2015, the Department issued the real estate entity license LC660852000 to River Life Realty LLC dba Cooperative Real Estate River Life (River). This license is set to expire on October 31, 2019. Swanson is the designated broker for River. 3. On September 14, 2018, Mr. Shah filed a complaint with the Department about a property manager keeping rent deposit and trust account monies. 4. On November 21, 2017, Mr. Shah had contracted with River and Swanson for property management services on fourteen properties. River was to receive ten percent of collected rents as management fees and leasing commissions. 5. On August 15, 2018, Swanson had written a $9570.93 check to Agami LLC for “AUG Rent proceeds.” The check was returned to Mr. Shah’s account for insufficient funds.[1] 6. On September 5, 2018, Mr. Shah terminated the contract with River and Swanson. The stated reasons were “lack of proper accounting, misused funds and poor working relationship.”[2] Mr. Shah notified River and Swanson that Long River Realty was the new management company and that certain specific items needed to be provided to Long River Realty. 7. In September 2018, the Department’s investigator contacted Lake Havasu City law enforcement to ensure that any departmental investigation would not interfere with any law enforcement investigation. 8. Law enforcement advised the Department’s investigator that he had reports of Swanson not turning over documents, theft of rent monies by Swanson, and demanding tenants pay rent in cash. 9. By letter dated September 19, 2018, the Department notified Swanson and River of the complaint filed against them and requested that Swanson provide “a written, ‘signed’ statement” and a “complete copy of any and all documents related to the subject transactions.”[3] 10. Mr. Shah emailed Swanson about missing monies (rent and security deposits) on September 20, 2018. 11. The Department followed up on September 20th and September 25th with no success; Swanson failed to respond to the Department. In fact, the letters sent to Swanson and River were returned by the postal service to the Department as undeliverable and not able to be forwarded from the 344 London Bridge Road and Suite address. 12. On September 27, 2018, the property manager engaged by Mr. Shah prior to River and Swanson filed a statement with the Department and with law enforcement regarding his concerns due to issues that various tenants and property owners had been funneling to him.[4] Additionally, the prior property manager noted that Swanson had “cleaned out his professional office” and moved to a temporary location. 13. On October 3, 2018, the owners of Long River Realty provided a timeline of contact they had with Swanson regarding the transfer of property and information.[5] They informed that Swanson had stated that he was in California “for a friend’s passing” and that they had heard from multiple tenants about Swanson’s questionable actions. 14. As of October 29, 2018, Swanson had not responded to the Department. 15. On November 6, 2018, the Department summarily suspended Swanson’s broker’s license BR646521000 based on the alleged violations of A.R.S. §§ 32-2153 and 32-2157.[6] 16. On November 6, 2018, the Department issued a Cease and Desist Order to Swanson and River, specifying the alleged violations of statute and rule applicable to the two real estate licensees.[7] While the notification indicated that Swanson and River had the right to appeal, the Department had not received any appeal or request for hearing from either Swanson or River. 17. On June 7, 2019, the Department issued a Notice of Hearing regarding this matter.[8] The Department alleges violations of the following: A.R.S. § 32-2153(A)(3), (A)(9), and (A)(21); A.R.S. § 32- 2153(B)(11); and A.A.C. R4-28-1101(A). 18. At hearing, the Department presented the basis for its decisions thus far. The Department’s reasons include disregard of and/or violations of the statutes and rules applicable to real estate licensees. The Department expressed concern that Swanson would not follow applicable law and regulatory requirements regarding real estate transactions. The Department requested that its summary suspensions of Swanson and River be upheld and that its proposed revocation of Swanson’s broker’s license and River’s entity license licensure be upheld. 19. The evidence presented to the hearing record established the multiple violations or statue and rule as were alleged by the Department. CONCLUSIONS OF LAW 1. This hearing was conducted in accordance with Arizona Revised Statutes (A.R.S.) § 41-1092.01 et seq. Respondent has the burden of proof and the standard of proof on all issues is by a preponderance of the evidence. See Arizona Administrative Code (A.A.C.) R2-19-119. 2. A.R.S. § 32-2153(A) provides as follows: The commissioner may suspend or revoke a license, deny the issuance of a license, issue a letter of concern to a licensee, issue a provisional license or deny the renewal or the right of renewal of a license issued under this chapter if it appears that the holder or applicant, within five years immediately preceding, in the performance of or attempt to perform any acts authorized by the license or by this chapter has:

3. Disregarded or violated any of provisions of this chapter or any rules adopted by the commissioner. …….

9. Failed, within a reasonable time, to account for or to remit any monies, to surrender to the rightful owner any documents or other valuable property coming into the licensee’s possession and that belongs to others … …….

21. As a licensed broker, vailed to exercise reasonable supervision over the activities of salespersons, associate brokers or others under the broker’s employ or failed to exercise reasonable supervision and control over the activities for which a license is required of a corporation, limited liability company or partnership on behalf of which the broker acts as designated broker under section 32-2125.

3. A.R.S. § 32-2153(B) provides in relevant part as follows: The commissioner may suspend or revoke a license, deny the issuance of a license, issue a letter of concern to a licensee, issue a provisional license or deny the renewal or the right of renewal of a license issued under this chapter when it appears that the holder or applicant has: ..… 11. Failed to respond in the course of an investigation or audit by providing documents or written statements.

The Commissioner is authorized under A.R.S. § 32-2153(A) and (B) to suspend or revoke licenses for the reasons set forth above. The Department’s concerns in these areas are legitimate. First, a person who fails to respond to the Department demonstrates the probability that the person is not able to be regulated in the real estate practice. Related specifically, a person who is alleged to have failed to take requisite actions involving financial dealings and the supervision or management thereof demonstrates the possibility that there are false or fraudulent actions taking place. The Department relies on a person, once licensed, to follow any and all applicable real estate laws, rules and commissioner orders. 4. Respondent has the burden of proving by the preponderance of the evidence that he has resolved the issues alleged and that the public would be protected from any false or fraudulent actions, and that he has sufficient good character and reputation to satisfy the statutory requirements for continued licensure as a real estate salesperson. 5. The Department alleged that Swanson and River violated A.R.S. § 32-2153(A)(3), (9), (21) and (B)(11). The Administrative Law Judge concludes that the hearing record evidences the violations. Because Swanson and Rover have violated A.R.S. § 32-2153(A)(3), (9), (21) and (B)(11), the Department has authority to suspend or revoke the Swanson and River licenses. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Department’s summary suspension actions be upheld and that the Swanson and River licenses, respectively, be revoked immediately. 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 shall be five days from the date of the certification. Done this day, August 1, 2019.

/s/ Kay A. Abramsohn Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate ----------------------- [1] Exhibit 15. [2] Exhibit 5. [3] Exhibit 7 listed the various documents to be provided. [4] Exhibit 11. [5] Exhibit 12. [6] This was certified mailed to the last known business address on London Bridge Road. [7] This was certified mailed to the last known business address on London Bridge Road. [8] This was certified mailed to the last known business address on London Bridge Road and to one other address in Lake Havasu City, which appears to be a residence address.

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