ALJDEC decisions subject to certification as final

2015A-2001-ROC · Registrar of Contractors · 2015-10-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: September 29, 2015 APPEARANCES: Travis Stephenson appeared on behalf of Respondent West- Core Drilling LLC. The Arizona Registrar of Contractors was represented by Assistant Attorney General John Tellier. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ Respondent appealed a Civil Citation issued by the Registrar of Contractors (Registrar) for contracting without a license. The Civil Citation imposed aggregate civil penalties in the amount of $35,000.00. Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law, and Recommend Order are made, finding a violation and recommending assessment of a $14,000.00 civil penalty. FINDINGS OF FACT Background Respondent is not a licensed contractor in the State of Arizona. On or about April 28, 2015, an anonymous caller told Investigator Martha Watson that they had received reliable information that Respondent was operating at the Copperstone Mine in Quartzsite, Arizona just off Highway 95. On or about May 4, 2015, Investigator Watson contacted Michael Ball with the Arizona Department of Water Resources about Respondent. Mr. Ball stated that Respondent did not have an active drilling license or a pending application for a drilling license. Mr. Ball also did not have any active notice of intent to drill in the area of the Copperstone Mine, also known as the Bonanza Exploration Mine. On or about May 4, 2015, Investigator Watson contacted Tim Evans, Assistant State Mine Inspector, who indicated that the mine was not in operation and had not been for some time. On or about May 5, 2015, Investigator Watson and Investigator Barry Maeker drove to the Copperstone Mine and made contact with Amanda Roady, Controller, and Josh Ayers, Mine Superintendent. Mr. Ayers acknowledged that Respondent was on site in the mine pit area and that they normally worked during the night. Ms. Roady showed Investigator Watson a copy of the contract executed by Copperstone Mine and Respondent. Investigator Watson saw that the contract was executed on or about April 22, 2015, and that payments were to be wire transferred to a Wells Fargo Bank account for Respondent in Colorado. Neither Mr. Ayers nor Ms. Roady had the ROC license number Respondent was operating under. Investigator Watson contacted the Quartzsite Police Department to determine if they had had any interaction with Respondent or employees of Respondent around this time. Quartzsite Police indicated that a vehicle with “West- Core” decals had been observed at the Super 8 Motel. Investigator Watson drove to the Super 8 Motel and located a Dodge Ram 2500 pick-up with Nevada license plate number 763-XTD with West-Core Drilling, Elko, NV on both the passenger and driver side door. The vehicle did not have a Registrar license number or the phrase “not a licensed contractor.”

On the afternoon of May 5, 2015, Investigator Watson received an email from Ms. Roady in which Nathan Tribble, with Kerr Mines, stated that Respondent had given him the Registrar license number 267629 with the Qualifying Party of Ronald Thomas Patterson. Investigator Watson determined that Registrar license number 267629 was an A-4 Drilling license for Salisbury and Associates, Inc., in Chewelah, Washington (Salisbury). On or about May 7, 2015, Investigator Watson contacted Salisbury regarding their drilling activity in Arizona. Noah Patterson, an officer of Salisbury, stated that Kris Brown with Respondent had contacted him on or about May 5, 2015, asking if Respondent could work under Salisbury’s number. Mr. Patterson stated he did not authorize Respondent to use his Registrar license number. On or about May 7, 2015, Investigator Watson spoke to Mr. Brown who confirmed that Respondent had a crew working at the Copperstone Mine, that Respondent had been working at the mine for approximately two weeks, that Respondent did not have an ROC license or a Arizona Driller’s license from Arizona Department of Water Resources, and that Respondent was licensed in Nevada. On or about May 7, 2015, Investigator Watson sent Mr. Brown a Cease and Desist Order via email and requested copies of the completed contract between Respondent and Copperstone Mine, daily drilling logs, and invoices submitted to Copperstone Mine. On or about May 22, 2015, the Registrar issued a subpoena duces tecum to Respondent for the production of records related to activity at Copperstone Mine. On or about June 23, 2015, Investigator Watson spoke to Travis Stephenson, President of Respondent, regarding the investigation. Mr. Stephenson acknowledged that Respondent did not have an Arizona ROC license. Respondent had previously begun the process to be licensed, but had not completed the process. Investigator Watson also subpoenaed Respondent’s bank records to identify deposits related to the Copperstone Mine. The Registrar identified a deposit of $40,610.67 on May 15, 2015, with a notation referencing “Bonanza Exploration” as being in connection to the Copperstone Mine. The Registrar also identified two different $50,000.00 deposits on May 8, 2015, and May 29, 2015, with the notations “Gold Acquisition Westcore Exploration Deposit” and “Gold Acquisition Deposit Exploration Deposit” respectively that it attributed to the contract with Copperstone Mine. At hearing, the Registrar also identified three additional deposits with the notation “Gold Acquisition” referencing invoice numbers 1855, 1856, and 1857 on May 28, 2015, totaling $85,259.88, that the Registrar attributed to the contract with Copperstone Mine. Investigator Watson determined that Respondent had violated the provisions of A.R.S. § 32-1151 (Engaging in contracting without a license). A Cease & Desist Order was issued to Respondent on or about July 15, 2015, for violating the provisions of A.R.S. § 32-1151. A total of $35,000.00 in civil penalties was assessed for contracting without a license on 14 distinct days between April 22, 2015, and May 6, 2015. Investigator Watson testified she had observed Respondent’s equipment still in the Quartzsite area in July 2015. As to the bank records in question, the Administrative Law Judge concludes the Gold Acquisition deposits identified by the Registrar were not in connection to Respondent’s drilling activities at the Copperstone Mine. Notably, the only invoices from Respondent to Copperstone Mine were invoice numbers 1849 and 1854. As evidenced by the invoices and the bank records, it appears the only payment received by Respondent related to the Copperstone Mine was the May 15, 2015, deposit of $40,610.67. Mr. Stephenson testified that Respondent had only operated in Arizona on this one occasion. Mr. Stephenson stated that Respondent purchased a company and the equipment from someone else who represented he was licensed in Arizona and was under the impression that Respondent was able to operate under the license, but acknowledged that it did not confirm with the Registrar that the license was in place or that Respondent could use the license. Mr. Stephenson stated that after receiving the Cease and Desist Order, Respondent leased its equipment located at the Copperstone Mine to another drilling contractor licensed to operate in Arizona so as to avoid leaving the mine in a bind. Mr. Stephenson testified that Respondent was not paid in full by Copperstone Mine and asked that the civil penalty be reduced. Mr. Stephenson also testified that Respondent is currently in the process of obtaining an ROC license. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction. See A.R.S. § 32-1101 et seq. The Registrar bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. See A.R.S. § 41- 1092.07(G)(2); A.A.C. R2-19-119(A); and A.A.C. R2-19-119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). Arizona contracting law prohibits a person from acting as a contractor without a license.[1] The Registrar can order a person who performs contracting without a license and who is not exempt from licensure to cease and desist such activity and may impose a civil penalty of between $200.00 and $2,500.00 for each violation, but not more than $2,500.00 per day.[2] A.R.S. § 32-1151 provides as follows: It is unlawful for any person, firm, partnership, corporation, association or other organization, or a combination of any of them, to engage in the business of, submit a bid or respond to a request for qualification or a request for proposals for construction services as, act or offer to act in the capacity of or purport to have the capacity of a contractor without having a contractor's license in good standing in the name of the person, firm, partnership, corporation, association or other organization as provided in this chapter, unless the person, firm, partnership, corporation, association or other organization is exempt as provided in this chapter. Evidence of securing a permit from a governmental agency or the employment of a person on a construction project shall be accepted in any court as prima facie evidence of existence of a contract.

A.R.S. § 32-1166(A) authorizes the Registrar to assess “a civil penalty in an amount of at least two hundred dollars for each violation but not more than two thousand five hundred dollars for the multiple violations committed on the same day.” With respect to the appropriate amount of civil penalties for violations of A.R.S. § 32-1151, A.R.S. § 32-1166(A) required the Registrar to “adopt rules covering the assessment of a civil penalty that give due consideration to the gravity of the violation and any history of previous violations.” Pursuant to this directive, the Registrar adopted A.A.C. R4-9-131.[3] The evidence established a violation of Arizona contracting laws. As to the aggravating factors identified in A.A.C. R4-9-131, it is unclear if Respondent represented to Copperstone Mine that it was a licensed contractor, but it is clear Respondent did not have any prior violations and did not fail to perform any work for which it was paid. In fact, it appears Respondent performed work for which it was not paid. Also, Respondent is currently in the process of obtaining an ROC license. Thus, the maximum civil penalty of $2,500.00 per day is not warranted. Based on the specific and unique circumstances in this matter, the Tribunal concludes that a civil penalty of $1,000.00 per day, or $14,000.00 total is warranted in this case. RECOMMENDED ORDER Based upon the foregoing, it is recommended that the Registrar affirm the finding that Respondent violated A.R.S. § 32-1151, reverse the decision to assess a civil penalty in the amount of $35,000.00, and assess a civil penalty of $14,000.00 to be paid in certified funds to the Registrar on or before the effective date of the Registrar’s final Order in this matter. 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 forty (40) days from the date of certification. Done this day, October 20, 2015.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] A.R.S. § 32-1164(A)(2). [2] A.R.S. § 32-1166(A). [3] A.A.C. R4-9-131 sets forth permissible aggravating factors to be considered, in relevant part as follows:

In assessing a civil penalty as provided for under A.R.S. § 32- 1166(A), the Registrar shall give due consideration to whether the person cited or any individual acting on that person’s behalf has committed one or more of the following acts in determining the gravity of the cited violation: 1. Falsely represented to be a licensed contractor. 2. Failed to perform any work for which money was received. 3. Executed or used any false or misleading documents for the purpose of inducing a person to enter into a contract or to pay money for work to be performed. 4. Made false or misleading statements for the purpose of inducing a person to enter into a contract or to pay money for work to be performed. 5. Failed or neglected to apply funds which were received for the purpose of obtaining or paying for services, labor, materials, or equipment. 6. Performed work that was or had the potential to become hazardous to the health, safety, or general welfare of the public. 7. Performed work that deliberately was in violation of building codes, safety laws, labor laws, workers’ compensation laws, or unemployment insurance laws. 8. Performed work that failed to meet minimum acceptable trade or industry standards or practices or was not performed in a good and workmanlike manner. 9. Has committed any other act which would otherwise be cause for disciplinary action if the person cited had been properly licensed pursuant to A.R.S. Title 32, Chapter 10. 10. Has committed two or more prior violations. 11. Performed work that has caused loss or damage to the structure, its appurtenances, or property being worked upon or has caused loss or injury to any person.

-----------------------

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