ALJDEC decisions subject to certification as final

2014A-880-ROC · Registrar of Contractors · 2014-09-29

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 9, 2014 APPEARANCES: The Registrar of Contractors was represented by Assistant Attorney General Michael Raine. Christopher P. Lewallen was present personally and he was represented by his attorney, David Sandoval, Esq. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ FINDINGS OF FACT 1. Pursuant to the Notice of Hearing and Citation and Civil Penalty in Case No. 2014-880 issued by the Registrar (“Registrar”), the above- captioned matter was forwarded to the Office of Administrative Hearings, an independent agency, for a hearing on the charges contained in the Citation issued to Christopher P. Lewallen (“Respondent”) and on the civil penalty assessed against Respondent. 2. The Registrar presented its case through the testimony of Cort Bacon, an investigator for the Registrar, and six (6) exhibits consisting of the following: (i) A G Energy advertisement; (ii) Investigator Bacon’s report; (iii) A supplement to Investigator Bacon’s report; (iv) A Cease and Desist Order and Civil Citation issued by the Registrar to Respondent; (v) Contracts for 71 projects; and (vi) A G Energy advertisement. Respondent presented his case through Respondent’s testimony. 3. On or about March 10, 2014, the Registrar commenced an investigation of Respondent, doing business as G Energy, L.L.C., for unlicensed contracting. The Registrar received an advertisement from G Energy stating “We Recently Installed Solar Electrical Systems at: 1423 W. 17th Street Yuma, AZ 85364.” The advertisement did not disclose a Registrar-issued contractor’s license number. 4. After being assigned the investigation, Investigator Bacon went online to the Arizona Corporation Commission website to look up G Energy, L.L.C. but it did not show up as a corporation authorized to conduct business in Arizona.[1] 5. Investigator Bacon also performed a check of the Registrar’s database for any contractor licenses for G Energy, L.L.C., with negative results. 6. Investigator Bacon then interviewed the McDermotts, the owners of 1423 W. 17th Street, Yuma, Arizona. The McDermotts provided Investigator Bacon with a copy of their contract for a solar photo voltaic system, a construction permit for the solar system listing Top Choice Solar, a subsidiary of Top Choice Electric (“Top Choice”), as the electrical contractor, and cancelled checks for payments for the solar system made out to G Energy not Top Choice. 7. The McDermotts’ contract was signed by a G Energy salesperson and listed Top Choice’s name and contracting license number together with G Energy’s logo and contact information. 8. The McDermotts stated to Investigator Bacon that Torres Electrical was the local electrician subcontracted by Top Choice to install the electrical panels. 9. On March 10, 2014, Investigator Bacon called Top Choice and requested to speak to Lee Marino, the qualifying party for the contractor. Mr. Marino stated that G Energy was a 1099 sales force for Top Choice. Mr. Marino identified Respondent as the owner of G Energy. 10. Mr. Marino also informed Investigator Bacon that Respondent had been the subject of an Arizona Attorney General judgment and he was no longer supposed to be telemarketing in Arizona. 11. Investigator Bacon went online to the Arizona Corporation Commission website to search for any business names listed under Respondent. Investigator Bacon found no business names listed under Respondent. 12. Investigator Bacon also performed a check of the Registrar’s database but found no contractor licenses for Respondent. 13. Investigator Bacon went online and verified an Attorney General Judgment dated December 5, 2012, against Respondent in Case No. CV2011- 019787 in the Superior Court of Maricopa County. 14. Mr. Marino explained to Investigator Bacon that Top Choice produced the contract forms used by Respondent to solicit business. Top Choice would inform Respondent what Top Choice’s cost to do a project would be and then Respondent would retain any additional money negotiated for a contract as a commission. Customers who paid cash or check did so to Respondent, who then paid Top Choice for its work. Funds received from customers who used financing to pay for a project were paid to Top Choice, who then paid Respondent’s commission. 15. The relationship between Top Choice and Respondent ended as the result of a financial disagreement. 16. Inspector Bacon determined that Respondent acted as a general contractor for 71 contracts totaling $1,968,381.00, covering a period from July 3, 2013, to March 12, 2014. All those contracts exceeded $1,000.00 in contract price. The projects also required a permit to install the solar systems. The solar systems were required to be installed by licensed electricians. 17. On or about April 16, 2014, Inspector Bacon, on behalf of Respondent, issued Respondent a Cease and Desist Order and a Civil Citation in Case No. 2014-880.[2] The Cease and Desist Order required Respondent to “immediately cease and desist all unlicensed contracting and advertising in the State of Arizona” pursuant to A.R.S. § 32-1166. (Emphasis in the original). 18. The Civil Citation assessed the maximum civil penalty in the amount of $2,500.00 per day for engaging in contracting without a license in violation of A.R.S. § 32-1151.[3] The Civil Citation also assessed Respondent a civil penalty of $2,500.00 for engaging in advertising without a license in violation of A.R.S. § 32-1165. The total amount of the civil penalties assessed against Respondent is $135,000.00 19. Respondent appealed the imposition of the civil penalties. The Registrar forwarded Respondent’s appeal to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. 20. At the hearing, Investigator Bacon testified as to the Registrar’s exhibits and investigation of Respondent. 21. Investigator Bacon stated that Respondent acted as a general contractor. Respondent marketed contracting services, submitted bids, and obtained contracts which Respondent or his employees signed but not the licensed electrical contractor. Respondent did not supervise any of the labor on projects. Respondent was the contact point for customers rather than the electrical contractors. 22. Investigator Bacon acknowledged that there have been no workmanship issues at this point for the solar systems contracted for between Respondent and the customers. Inspector Bacon also stated that there were no fraud issues in this matter. 23. Respondent testified that he did not install or purchase the solar systems for the said contracts. 24. Respondent acknowledged the violations charged by the Registrar but stated that he cannot afford to pay the $135,000.00 civil penalty assessed by the Registrar. Respondent stated that he had no intent to commit the violations. Respondent contends that a civil penalty in the amount of $10,000.00 would be more appropriate. 25. As to the Purchase Agreement dated July 3, 2013, between Global Wide Green, a licensed contractor, Leon Anderson, and Roberta Chatfield, Respondent testified that he was not involved with that contract or project. The authorized representative who executed the contract was Dave Chandler. Mr. Chandler had given the homeowners a G Energy business card with his name on it. Respondent testified that Mr. Chandler no longer worked for him at the time of the contract. 26. Respondent’s advertisements entered into evidence advertised solar electric systems that Respondent could provide and install. The advertisement did not disclose that Respondent was not a licensed contractor. CONCLUSIONS OF LAW 1. The evidence of record established that Respondent violated the provisions of A.R.S. § 32-1151 by contracting without a required contractor’s license. 2. The evidence of record established that Respondent violated the provisions of A.R.S. § 32-1165 by advertising that his company, G Energy, was able to provide solar power equipment and installation for compensation when neither Respondent nor G Energy possessed an appropriate contracting license. 3. A.R.S. § 32-1166 authorizes the Registrar to issue a cease and desist order to an unlicensed person or business to cease and desist unlicensed contracting activity. The statute also provides that the Registrar may also issue a citation and the assessment of a civil penalty in the amount of at least $250.00 per violation per day but not more than $2,500.00 per day for multiple violations committed on the same day. 4. There is credible evidence that Respondent was not responsible for the July 3, 2013 contract with Leon Anderson and Roberta Chatfield. Therefore, the $2,500.00 civil penalty assessed by the Registrar against Respondent should be set aside. 5. The evidence of record supports the Registrar’s maximum assessment of $2,500.00 per day of violation for the remaining 70 contracts that Respondent has been found to have engaged in contracting without being licensed and the maximum assessment of $2,500.00 for engaging in advertising without a license. After subtracting the civil penalty assessed for the July 3, 2013 contract with Leon Anderson and Roberta Chatfield, the total civil penalty of $132,500.00 is supported by the record. The total value of the 70 contracts is significant.[4] Respondent engaged in unlicensed contracting for an extended period of time and profited from that unlicensed activity. Respondent’s unlicensed contracting activity could potentially impact the ability of those 70 consumers to access the Residential Contractors’ Recovery Fund. Therefore, the civil penalty is warranted and appropriate. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar’s Cease and Desist Order be affirmed and that the Registrar’s Citation be amended to assess a total civil penalty in the amount of $132,500.00 against Respondent for unlicensed contracting and advertising without a license on the effective date of the Order entered in Case No. 2014-880.

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 40 days from the date of the certification Done this day, September 29, 2014.

/s/ Brian Brendan Tully Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] During the Registrar’s investigation, Respondent disclosed that G Energy, L.L.C., was a Nevada limited liability company. [2] See Exhibit 11. [3] Several of the contracts constituting unlicensed contracting by Respondent occurred on the same date. In such cases, the Registrar assessed the maximum civil penalty of $2,500.00 for the violation day rather than per violation on the date. [4] After deducting the amount of $35,000.00 paid pursuant to the July 3, 2013 contract with Leon Anderson and Roberta Chatfield, the total contract price for the remaining 70 contracts that involved Respondent’s unlicensed contracting is $1,933,381.00.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826