ALJDEC decisions subject to certification as final

19F-288-REL · Department of Real Estate · 2019-05-13

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 02, 2019 at 1:00 PM. APPEARANCES: Assistant Attorney General Deian Ousounov, Esq., appeared on behalf of the Arizona Department of Real Estate (“Department”) with Linda Bevins as a witness. Michael Denious, Esq., appeared on behalf of Heather Dziedzic (“Petitioner”) with Petitioner and Alan Baskin as witnesses. Susan Hack, Melanie Martinez, Bret Biesnthal, and Dan Jones observed. ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Commissioner of the Department.

FINDINGS OF FACT Background and Procedure 1. On September 16, 2010, the Department issued Real Estate Broker License No. BR568811000 to Petitioner.[1] The license expired on September 30, 2018.[2] 2. On July 16, 2018, an Information was issued for Petitioner in United States District Court, for the District of Arizona, case number CR-18- 01080-PHX-DGC.[3] Petitioner was charged with two counts: (1) that on or about August 23, 2012, Petitioner aided and abetted her husband[4] and codefendant in the willful sale of a security, via interstate communication(s), which was neither registered nor exempt from registration in violation of 15 U.S.C. §§ 77(e) and 77(x), and 18 U.S.C. § 2; and (2) that between December 2011 and December 2013 Petitioner, acting in the course of interstate commerce, knowingly circumvented the arms-length transaction restrictions applicable to short sales of residential property which enabled her to eliminate competition in violation of 15 U.S.C. § 13(a).[5] 3. On August 06, 2018, Petitioner submitted a guilty plea in case number CR-18-01080-02-PHX-DGC to Count One of the Information, Aiding and Abetting a Willful Communication of Unregistered Securities, pursuant to 15 U.S.C. §§ 77(e) and 77(x), and 18 U.S.C. § 2, a Class D felony offense.[6] Petitioner also pled guilty to Count Three of the Information, Unfair Competition, pursuant to 15 U.S.C. § 13(a), a Class A misdemeanor offense.[7] Petitioner’s plea reads, in pertinent part of the Factual Basis section, as follows:

* * * * b. I assisted in marketing a number of programs under the “Housing Angels” banner, including a heavily-marketed program directed toward helping homeowners stay in their homes following a short sale, through a sale-leaseback program within the “angel investor. Although this program provided opportunities for homeowners with distressed mortgages, and in some cases for investors, for a variety of reasons it wasn’t good for the banks and other lending institutions involved in the transactions. I knew the mortgage-holding banks wanted arm’s length transactions between parties who were unaffiliated by family, marriage or commercial enterprise. Bit I assisted in routinely working around the arms-length agreement by using straw entities and individuals under my control to purchase distressed properties. I was on both sides of the transaction in these cases, and that enabled my company to make short sale offers with greater precision, which can result in lower-than-market short sale pricing. I understand that this disadvantaged my competitors, and I engaged in these actions in an effort to get ahead of my competitors. I was also more easily able to find investors than my competitors because of the promise that the sellers might be available as tenants, and I helped run a separate property management company to make things easy for the investors. I also knew the mortgage-holding banks did not want the homeowner to remain in the property after a short sale. But I routinely to circumvent the arm’s length agreements and encouraged homeowners to remain as tenants and, in some cases, to repurchase the properties.[8]

4. On August 08, 2018, the Court issued an Order in case number CR-18- 01080-02-PHX-DGC accepting Petitioner’s guilty plea(s) pursuant to Rule 11 of the Federal Rules of Evidence.[9] In accepting Petitioner’s waiver of indictment, the following was found by the Court in pertinent part:

a. that [Petitioner] understands the nature of the charge to which [Petitioner] pleads and the elements of the offense(s) to which [Petitioner] is pleading guilty; * * * * e. that [Petitioner] understands that answers given by [Petitioner] may later be used in prosecution for perjury or false statement;

* * * * g. that [Petitioner] understands the terms of any plea agreement provision waiving the right to appeal or to collaterally attack the sentence, and has knowingly, intelligently, and voluntarily made and is not the result of force of threats or of promises apart from the plea agreement between the parties; h. that [Petitioner] is competent to plead guilty; i. that [Petitioner] is satisfied with the representation provided by defense counsel; and j. that there is a factual basis for [Petitioner’s] plea.[10]

5. On December 06, 2018, the prosecution in case number CR-18-01080-02- PHX-DGC submitted a Sentencing Memorandum to the Court.[11] 6. On December 10, 2018, Petitioner submitted a Sentencing Memorandum for case number CR-18-01080-PHX-DGC to the Court, which included several letters of recommendation.[12] 7. On or about December 18, 2018, in United States District Court, for the District of Arizona, case number CR-18-01080-02-PHX-DGC, Petitioner was convicted of Aiding and Abetting a Willful Communication of Unregistered Securities, a Class D felony offense, pursuant to 15 U.S.C. §§ 77(e) and 77(x), and 18 U.S.C. § 2, as charged in Count One of the Information; and Unfair Competition, a Class A misdemeanor offense, pursuant to 15 U.S.C. § 13(a), as charged in Count One of the Information.[13] Petitioner was sentenced to two years of probation on Count Three.[14] Petitioner’s sentence on Count One is deferred until January 18, 2021, at 4:00 p.m.[15] 8. On February 12, 2019, the Department issued an Order of Summary Suspension and Notice of Opportunity for Hearing (“Summary Suspension Order”) to Petitioner.[16] 9. On March 05, 2019, the Department received a letter from Petitioner’s attorney appealing the summary suspension of her license.[17] 10. On April 09, 2019, the Department issued an Order to Vacate Order of Summary Suspension (“Vacate Order”) to Petitioner.[18] 11. On March 21, 2019, the Department issued a Notice of Hearing setting the above-captioned matter for hearing at 1:00 p.m. on May 02, 2019, at the Office of Administrative Hearings (“OAH”), an independent state agency.[19] The Notice of Hearing shows that the hearing is to be conducted to determine whether grounds exist to revoke Petitioner’s real estate broker’s license.[20] Hearing Evidence 12. The Department called Linda Bevins as a witness and submitted exhibits 1-10. Petitioner testified on her own behalf, called Alan Baskin as a witness, and submitted exhibits A-D. Petitioner’s testimony 13. Petitioner testified that she passively let her broker’s license lapse during her plea negotiations with prosecutors in case number CR-18- 01080-PHX-DGC, as she did not understand that she had to physically surrender her license to the Department pursuant to the Court’s Order. 14. Petitioner testified that she used her knowledge as a broker to unfairly harm competitors, but denied using fraud, misrepresentation, or dishonesty in the underlying conduct that resulted in her guilty plea. 15. Per Petitioner, when the 2008-2009 recession began short sales had no regulation, as they had never before existed. The short sale process was “lengthy, chaotic, and uncertain.” Petitioner testified that the governance of short sales “evolved rapidly,” and eventually led to arm’s length restrictions in short sales. During such transactions, banks had varying requirements and were not always explicit. As a result, Petitioner testified that she unfairly competed within the market based on her knowledge. Petitioner denied “working around” arm’s length transaction requirements in every transaction completed during the relevant time period. 16. Petitioner testified that banks are now much clearer about what they want, and now that the market has corrected itself there are fewer short sales. 17. Petitioner testified that she and her husband anticipated that he would go to prison, so they saved a significant amount of money for her to live on while he is serving his sentence. Petitioner opined that money will not last indefinitely, so at some point she will have to start “earning a living.” 18. To that end, Petitioner wishes to renew her license once she completes her probation. Petitioner testified that she is amenable to provisional licensure and the assignment of a practice monitor should the Department see fit to grant her renewal request. Alan Baskin’s testimony 19. Mr. Baskin testified that he was Petitioner’s attorney for CR-18-01080- PHX-DGC. Per Mr. Baskin, it took just over three years to secure the terms outlined in Petitioner’s plea agreement on her behalf. The plea was the best Mr. Baskin could secure for Petitioner under the circumstances. Mr. Baskin agreed that prosecutors in Petitioner’s case could have sustained their burden at trial of proving the facts identified in the Factual Basis of the plea agreement beyond a reasonable doubt. Linda Bevins testimony 20. Ms. Bevins testified that she is employed by the Department as an investigator. 21. Per Investigator Bevins, the Department received a complaint that Petitioner had been convicted of a crime. Specifically, the Department was informed that Petitioner violated the arm’s length restriction[21] of a number of short sale[22] transactions. 22. An investigation was opened and all related documentation was obtained and reviewed by the Department.[23] 23. The Department determined that between 2009 and 2012 Petitioner, acting in concert with her husband, allowed sellers of property to either purchase the property back or lease the sold properties, whereby Petitioner acting directly or through her company, represented both parties in the transactions. According the language in Petitioner’s plea agreement, Petitioner knew that her conduct was impermissible and gave her an unfair advantage over her competitors. CONCLUSIONS OF LAW 1. Because at all times relevant to this matter Respondent was subject to the provisions of Title 32, Chapter 20, Arizona Revised Statutes, the Commissioner of the Department has jurisdiction over Respondent and the subject matter in this case. 2. The case was properly brought before the Office of Administrative Hearings for adjudication pursuant to Title 2, Chapter 19, Article 1, of the Arizona Administrative Code. 3. Pursuant to Ariz. Rev. Stat. § 41-1092.07(G)(2) and Ariz. Admin. Code R2-19-119(B), the Department has the burden of proof in this matter. The standard of proof is by a preponderance of the evidence.[24] 4. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.”[25] It is “[e]vidence which is of greater weight or more convincing than the 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.”[26] 5. Ariz. Rev. Stat. § 32-2153(B) provides, in pertinent parts, 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 has:

* * * 2. Been convicted in a court of competent jurisdiction in this or any other state of a felony or of any crime of forgery, theft, extortion, conspiracy to defraud, a crime of moral turpitude or any other like offense. 3. Made any substantial misrepresentation. * * * 5. Been guilty of any conduct, whether of the same or a different character than specified in this section, which constitutes fraud or dishonest dealings. 7. Not shown that the holder or applicant is a person of honesty, truthfulness and good character. * * * 10. Violated any federal or state law, regulation or rule that relates to real estate or securities or that involves forgery, theft, extortion, fraud, substantial misrepresentation, dishonest dealings or violence against another person or failure to deal fairly with any party to a transaction that materially and adversely affected the transaction. This paragraph applies equally to violations of which the licensee was convicted in any lawful federal or state tribunal and to any admissions made in any settlement agreement by the licensee to violations.

6. The legislature has charged the Department with protecting the public and consumers who deal with licensed salespersons when it issues licenses.[27] Therefore, Department has discretion[28] to revoke a license under Ariz. Rev. Stat. § 32-2153(B)[29] as a real estate salesperson’s license is a privilege, not a right. 7. The issue in this case is, in light of Petitioner’s real estate related misdemeanor conviction, whether Petitioner can be trusted at this time to be responsible in her dealings with competitors and the public overall if the Department agrees not to revoke her real estate broker’s license. 8. The definition of what constitutes good character, or a lack thereof, is not codified by the legislature. Former United States Supreme Court Justice Frankfurter noted, “No doubt satisfaction of the requirement of moral character involves an exercise of delicate judgment on the part of those who reach a conclusion.”[30] 9. The time period required for a license applicant to establish rehabilitation is commensurate with the period of misconduct and the severity of the offenses. 10. The material facts underlying this matter are not in dispute. 11. Petitioner’s license is currently expired. She is unable to engage in real estate transactions and will not be able to submit a renewal request to the Department until on or about January 18, 2021. 12. In December of 2018 Petitioner was convicted in a court of competent jurisdiction of Unfair Competition, a Class A misdemeanor offense, pursuant to 15 U.S.C. § 13(a). The crime, as it related to real estate, requires a knowing level of unscrupulous practices which are rooted in intentionally deceptive conduct that make business dealings inherently inequitable. 13. Approximately six months have passed since Petitioner’s conviction. Petitioner still has eighteen months of probation left to serve in her sentence. The record is devoid of empirical evidence to support a finding that Petitioner has learned from her past mistake(s) and is unlikely to repeat them in the future. 14. After closely scrutinizing the underlying conduct which resulted in Petitioner’s criminal conviction, as well as the conviction itself, this Tribunal holds that the evidence of record establishes by a preponderance of the evidence that the revocation of Petitioner’s real estate broker’s license is warranted because she poses a significant threat to the public. It is also the position of this Tribunal that Petitioner’s criminal conviction evinces her inability to be regulated by the Department at this time. 15. Pursuant to Ariz. Rev. Stat. §§ 32-2153(B)(2), 32-2153(B)(5), 32- 2153(B)(7), and 32-2153(B)(10) the Department has established grounds to take disciplinary action against Petitioner’s real estate broker’s license, including revocation. RECOMMENDED ORDER Based upon the foregoing, IT IS RECOMMENDED that upon the effective date of the Final Order entered in this matter the Commissioner of the Department revoke Petitioner Heather Dziedzic’s Real Estate Broker’s License No. BR568811000. 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, May 13, 2019.

/s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner Arizona Department of Real Estate ----------------------- [1] See Registrar Exhibit 1. [2] Id. [3] See Department Exhibit 2. [4] Petitioner’s husband is David John Dziedzic. Mr. Dziedzic is the first codefendant named in Information CR-18-01080-PHX-DGC issued in United States District Court, for the District of Arizona. Mr. Dziedzic was charged and plead guilty to Willful Communication of Unregistered Securities, pursuant to 15 U.S.C. §§ 77(e) and 77(x), and 18 U.S.C. § 2, a Class D felony offense; and Failure to File form 8300, 31 U.S.C. §§ 5324(a)(1) and 5324(d)(1), Class E and D felony offenses respectively. [5] Id. [6] See Department Exhibit 3; see also Petitioner Exhibit A. [7] Id. [8] Id. [9] See Department Exhibit 4. [10] Id. [11] See Petitioner Exhibit C. [12] See Petitioner Exhibit B. [13] See Department Exhibit 5. [14] Id. [15] Id. [16] See Department Exhibit 6. [17] See Department Exhibit 7. [18] See Department Exhibit 8. A Notice of Errata for Order to Vacate Order of Summary Suspension was issued by the Department on April 11, 2019, to correct a typographical error. See Department Exhibit 9. [19] See Notice of Hearing. [20] Id. On April 11, 2019, the Department issued a notice to OAH to advise that the Department vacated the Order of Summary Suspension and would therefore not pursue the issue at the May 02, 2019, hearing. See Department Exhibit 10. [21] An arm's length transaction refers to a transaction between unrelated parties and meets the requirements of Market Value. An affidavit created by the short sale bank must be signed by the parties to attest that neither party has a prior relationship with the other. The purpose of the document is to avoid mortgage fraud. [22] A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. Also, the homeowner must be so far behind on mortgage payments that the homeowner is unable to catch up. Thus, if the lien holder(s) agrees to accept less than the amount owed on the debt, a sale of the property may be accomplished. [23] See Department Exhibits 1-5. [24] See Ariz. Admin. Code R2-19-119(A). [25] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [26] Black’s Law Dictionary 1182 (6th ed. 1990). [27] See Laws 1992, Ch. 14, § 3. [28] See Ariz. Rev. Stat. § 32-2153(B) (“The commissioner may . . . deny the issuance of a license” under certain circumstances (emphasis added)). [29] See, e.g., Matter of Rivkind, 164 Ariz. 154, 160-61, 791 P.2d 1037, 1043-44 (1990) (“[C]ourts are uniformly impressed by an attorney’s sincere efforts at rehabilitation and contrition, especially if such efforts demonstrate that the public and the legal system are unlikely to suffer a risk of future misconduct.”); Application of Spriggs, 90 Ariz. 387, 388-90, 368 P.2d 456 (1962) (where 4 years had passed since conviction for income tax evasion and evidence showed rehabilitation, applicant readmitted to bar without being required to pass bar exam again); Ulrich v. Board of Funeral Service, 289 Mont. 407, 961 P.2d 126 (1998) (“[A]n applicant whose license has been denied or revoked due to a criminal conviction . . . is entitled to apply for reinstatement and he is entitled to a full hearing . . . .”); cf. Matter of Wines, 135 Ariz. 203, 205-06, 660 P.2d 454, 456-57 (1983) (after considering circumstances of conviction as well as respondent’s poor prior record, Arizona Supreme Court did not disbar attorney but instead suspended him for a period of 5 years, with credit for 16 months interim suspension during pendency of proceedings). [30] Schware v. Board of Bar Examiners of the State of New Mexico, 353 U.S. 232, 248, 77 S. Ct. 752, 761 (1957) (citation omitted; concurring opinion).

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