ALJDEC decisions subject to certification as final

21F-026-REL · Department of Real Estate · 2020-10-21

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Original Application for Real Estate Salesperson's License of:

Steven Reger, f/k/a Steven Reiger,

holder of License No. SA690846000 (Candidate),

Petitioner

No. 21F-026-REL

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: October 6, 2020

APPEARANCES: Bretton Barber, Esq. represented Petitioner Steven Reger, who was present. Assistant Attorney General Holly Wan represented the Arizona Department of Real Estate. Witnesses Bret Biesenthal and Rabbi Yosef Gluckowsky testified.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

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 Arizona Department of Real Estate (“Department”).

FINDINGS OF FACT

Petitioner’s Application

On or about July 7, 2020, Petitioner Steven Reger (“Petitioner”) submitted to the Department an application to be licensed as a real estate salesperson.

Petitioner answered “yes” to the following questions on the application:

. . . .

(6) “Has the Applicant . . . [h]ad any judgment and/or order against them by ANY court involving fraud, dishonesty, misrepresentation, unfair trade practice, or moral turpitude?

. . . .

(12) “Has the Applicant . . . [b]een convicted and/or entered into a plea agreement and/or a plea of NOLO CONTENDERE (no contest) to ANY felony in Arizona and/or any other state, whether or not the plea or verdict was set aside, judgment or sentencing was deferred, conviction was dismissed or expunged, or has been pardoned, or the conviction is being appealed?”

(13) “Has the Applicant . . . [b]een convicted and/or entered into a plea agreement and/or a plea of NOLO CONTENDERE (no contest) to ANY misdemeanor in Arizona or any other state, whether or not the plea or verdict was set aside, judgment or sentencing was deferred, the conviction was dismissed or expunged, or has been pardoned, or the conviction is being appealed?” CONVICTIONS – DUI AND/OR RECKLESS DRIVING, EITHER MISDEMEANOR OR FELONY, MUST BE DISCLOSED. Minor traffic citations do not constitute a misdemeanor or felony offense.

. . . .

Petitioner attached a written explanation of his “yes” answers to his application where he detailed the circumstances giving rise to the convictions.

Petitioner disclosed to the Department the following:

On January 12, 2010, Petitioner pleaded guilty to and was convicted of Scheme to Defraud 1st Degree, a Class E Felony, and Grand Larceny 2nd Degree, a Class C Felony, in the Supreme Court of the State of New York, New York County, in Case Number 01851-2009.

On February 18, 2010, the Court sentenced Petitioner to sixteen months to four years for the Scheme to Defraud 1st Degree offense, and eighteen months to fifty-four months for the Grand Larceny 2nd Degree offense.

On August 5, 2020, the Department issued an Intent to Deny Application letter to Petitioner.

On August 9, 2020, the Department received a timely appeal letter from Petitioner’s counsel.

Thereafter, the Department referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. On August 28, 2020, a Notice of Hearing was issued citing the issue for hearing as whether grounds existed to affirm the Department’s intent to deny Petitioner’s application for a real estate salesperson’s license pursuant to A.R.S. §§ 32-2153(B)(2), 32-2153(B)(5) and 32-2153(B)(10).

Hearing Evidence

Petitioner testified on his own behalf, and called Rabbi Yosef Gluckowsky as a witness, and submitted seven exhibits. The Department called Bret Biesenthal (“Investigator Biesenthal”) as a witness and submitted five exhibits.

Bret Biesenthal’s testimony

At the hearing, the Department contended that Petitioner’s 2010 felony convictions constituted violations of A.R.S. § 32-2153(B)(2). The Department further contended that Petitioner’s conduct, for which he had been convicted, also amounted to violations of A.R.S. §§ 32-2153(B)(5) and 32-2153(B)(10). As such, the Department argued that multiple grounds existed to deny Petitioner’s application for a real estate salesperson license.

Investigator Biesenthal testified that he is a Senior Investigator with the Department. One of Investigator Biesenthal’s job duties is to determine licensure applicant eligibility. Per Investigator Biesenthal, in order for an applicant for a real estate salesperson’s license to be approved for licensure, the applicant must be professionally and morally qualified. Investigator Biesenthal testified that because of Petitioner’s two felony convictions and the conduct involved with those convictions, the Department has concerns about granting a license to Petitioner. The Department is charged with protecting the public and the Department has placed more weight on the crimes for which Petitioner was convicted because real estate involves large transactions.

Investigator Biesenthal testified that he did not conduct an independent investigation, but rather, reviewed the application and supporting documentation, including, criminal records, Petitioner’s statement, and Petitioner’s fingerprint clearance card. Investigator Biesenthal also reviewed a May 4, 2009 news article that was considered by the Department. The article states that Petitioner and his business partner stole approximately $1.7 million from the payroll company they owned, affecting 300 small businesses and nonprofits. The article states that prosecutors alleged that Petitioner and his business partner embezzled that money from 2004 through 2006. The article further states that Petitioner and his business partner allegedly concealed the theft by entering false information into the company’s computer system and by lying to the IRS, state officials, and their clients. Investigator Biesenthal did not corroborate the information contained in the article and acknowledged that he had no basis to know whether the information contained in the article was true or false.

Investigator Biesenthal testified that when reviewing Petitioner’s application, the Department took into consideration how much time has elapsed since the convictions, and whether Petitioner has been rehabilitated. Investigator Biesenthal asserted that the Department has concerns about granting a license to Petitioner given the seriousness of the crimes and the underlying conduct involved in the crimes.

Petitioner’s testimony

At the hearing, Petitioner explained the circumstances and underlying facts surrounding his convictions. In 2004, Petitioner formed a payroll company with a business partner. Petitioner invested half of a million dollars in the business. The business partner had expertise in back office operations and performed the payroll duties. Petitioner had expertise in sales and his duties included bringing in new clients.

Petitioner testified that approximately a year after opening the business, employees began to complain to him that his business partner had not been coming to work and would not return calls. Petitioner confronted his business partner who denied the allegations. Thereafter, Petitioner’s partner admitted that she was having adjustment issues having just relocated to New York City. Petitioner’s business partner associated with the “wrong crowd,” and began to abuse drugs. Initially, Petitioner attempted to secure help for his business partner. Ultimately, Petitioner terminated his business relationship with his business partner and was forced to manage the entire business, including the operations and payroll.

Within approximately two months, Petitioner discovered discrepancies in the financial records of the business. Petitioner noticed that the “bank accounts were growing but they were having trouble meeting payroll” obligations. Petitioner hired an accountant who informed him that there was a “serious problem.” It was at that point that Petitioner discovered that his business partner had been embezzling funds from the business.

Petitioner recognized that this was criminal activity and hired an attorney who advised Petitioner to disclose the activity and “turn himself in.” The attorney contacted the IRS regarding the tax issues.

Petitioner was not indicted or prosecuted by the federal government. However, the State of New York filed charges against Petitioner and his business partner. Petitioner’s business partner fled the state. Petitioner aided the prosecution in locating his business partner and she was prosecuted.

Petitioner plead guilty to Scheme to Defraud in the 1st Degree and Grand Larceny in the 2nd Degree. Petitioner explained that he plead guilty because he ran the company after he terminated his business partner and continued fraudulent acts to keep the company afloat. Petitioner used newly acquired funds for payroll that was coming due for the two months prior to contacting an attorney. This represented the conviction for Scheme to Defraud in the 1st Degree. Because Petitioner utilized clients’ income/revenue to pay older debts, and the amount exceeded $50,000.00, Petitioner plead guilty to Grand Larceny in the 2nd Degree. Petitioner did not embezzle funds and did not utilize any client funds for personal use.

The Certificate of Disposition Indictment (“Certificate”) issued by the Supreme Court of the State of New York on March 8, 2017, indicates that Petitioner was convicted on January 12, 2010 of Scheme to Defraud 1st Degree and Grand Larceny 2nd Degree. The Certificate also indicates that on February 18, 2010, Petitioner was sentenced to sixteen months to four years for Scheme to Defraud 1st Degree and eighteen months to fifty-four months for Grand Larceny 2nd Degree. The Certificate does not contain an order of restitution. Because Petitioner’s business continued to generate revenue, Petitioner successfully sold the business for $1.7 million, with permission from the State of New York. Petitioner’s used the proceeds from the sale of his business to pay restitution in full to the victims. Petitioner served eighteen months in prison for his crimes.

Petitioner has never had any other interactions with the criminal justice system. While in prison, Petitioner completed classes in an effort to “improve himself.”

On April 13, 2011, Petitioner was granted by the State of New York, a Certificate of Relief from Disabilities. That document states the following: “[t]his certificate is issued to the holder to grant relief from all or certain enumerated disabilities, forfeitures or bars to his employment automatically imposed by law by reason of his conviction of the crime or of the offense specified herein.”

On August 21, 2012, Petitioner was issued a Final Discharge from parole.

Thereafter, Petitioner applied for and was granted a real estate license in New York. Petitioner disclosed his felony convictions during the application process. However, Petitioner did not practice real estate in New York. Instead, he took a salaried position.

Petitioner then moved to New Jersey and applied for a real estate license. During the application process, Petitioner disclosed his felony convictions. On May 10, 2019, Petitioner was granted a real estate salesperson license in New Jersey.

On June 29, 2020, Petitioner obtained his Level One Fingerprint Clearance Card from the State of Arizona.

Petitioner testified that he moved to Arizona with his family for the climate. Petitioner purchased a home and his intention is to practice real estate. Petitioner acknowledged making mistakes, and paying a “dear price.” Petitioner expressed that he is not proud of his mistakes, but wants to move forward and avowed “it will never happen again.”

Rabbi Yosef Gluckowsky

Rabbi Yosef Gluckowsky testified that he met Petitioner’s wife two years ago and became friends with the family. Rabbi Gluckowsky utilized Petitioner’s services as a real estate salesperson on two occasions and was very pleased with those outcomes. Rabbi Gluckowsky has interacted with and observed Petitioner at community events. Rabbi Gluckowsky opined that Petitioner is honest, helpful, has a good heart, and is trustworthy. Rabbi Gluckowsky was sad to see Petitioner move from New Jersey to Arizona but believes that his community’s loss is Arizona’s gain.

Counsel for Petitioner argued that the offenses and convictions occurred over ten years ago and that Petitioner is rehabilitated. Both New York and New Jersey granted Petitioner real estate salesperson licenses subsequent to Petitioner’s disclosure of his convictions. Petitioner obtained a Level One Fingerprint Clearance Card. Petitioner has satisfied all other requirements for licensure.

CONCLUSIONS OF LAW

Because at all times relevant to this matter Petitioner was subject to the provisions of Title 32, Chapter 20, Arizona Revised Statutes, the Commissioner of the Department has jurisdiction over Petitioner and the subject matter in this case.

This 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 (“A.A.C.”).

Pursuant to A.R.S. § 41-1092.07(G)(2) and A.A.C. R2-19-119(B), Petitioner bears the burden of proof in this matter to establish that he is rehabilitated and meets statutory qualifications for a real estate salesperson’s license. The standard of proof is by a preponderance of the evidence.

A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

A.R.S. § 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 when 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.

. . . .

Been guilty of any conduct, whether of the same or a different character than specified in this section, which constitutes fraud or dishonest dealings.

. . . .

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.

The legislature has charged the Department with protecting the public and consumers who deal with licensed salespersons when it issues licenses.

An applicant with a criminal record must be given close scrutiny and careful consideration. However, the conviction of a crime is not a permanent bar to being licensed. A real estate salesperson’s license is a privilege, not a right.

The Department has discretion to grant or deny a license to an applicant under A.R.S. § 32-2153(B). The issue in this case, is whether in light of Petitioner’s past mistakes and the efforts that he has made to rectify those past mistakes, Petitioner at this time is rehabilitated and can be trusted to be responsible and forthright in his dealings with his clients and members of the public if the Department grants his application for a real estate salesperson’s license.

The issue of what constitutes good character or a lack thereof is nebulous at best. The definition of what constitutes good character, or a lack thereof, is not codified by the legislature. 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.” Once good character is shown to be absent, it is not automatically regained by the mere passage of time. Positive and affirmative activities are required for a person to regain what was lost.

The issue in this case is, in light of Petitioner’s convictions for Scheme to Defraud 1st Degree and Grand Larceny 2nd Degree nearly eleven years ago, whether Petitioner can be trusted at this time to be responsible in his dealings with his clients and members of the public if the Department grants him a real estate salesperson’s license.

The time period required for a license applicant to establish rehabilitation is commensurate with the period of misconduct and the severity of the offense(s). Almost eleven years have passed since Petitioner’s convictions, and approximately fifteen years have elapsed since the actions giving rise to the convictions. Petitioner fully cooperated with IRS and state investigators and aided them in locating his business partner, leading to her conviction. Since that time Petitioner has secured gainful employment, has been granted real estate salesperson licenses in the states of New York and New Jersey, has been granted a fingerprint clearance card, has made all of the victims whole, and has otherwise lived an irreproachable life. Though said convictions give pause for concern, Petitioner’s conduct since that time raises confidence in his ability to maintain appropriate and lawful conduct. Petitioner credibly testified, as was corroborated by undisputed evidence, that he has learned from his past mistakes and is unlikely to repeat them in the future.

Petitioner’s criminal history rightly gave the Department cause for concern, but said concern should not prevent the Department from issuing a real estate salesperson’s license upon finer review. The underlying conduct appears to be isolated and not an indication that Petitioner is prone to insidious behavior. After closely scrutinizing the underlying conduct which resulted in Petitioner’s two criminal convictions, as well as the convictions themselves, and after careful consideration of Petitioner’s past and behaviors over the course of the subsequent years, this tribunal holds that Petitioner has established by a preponderance of the evidence that he is fully rehabilitated and that the public does not need any protection from him. The record reflects that Petitioner is an honest and truthful person of good character. Given the circumstances presented in this case, Petitioner shall be granted a real estate salesperson’s license.

RECOMMENDED ORDER

Based upon the foregoing facts and conclusions of law,

IT IS RECOMMENDED that the Commissioner reverse the Department’s August 5, 2020, Intent to Deny Application for Original Salesperson’s License No. SA690846000.

It is FURTHEr recommended that Petitioner Steven Reger be issued a three-year provisional salesperson’s license upon the effective date of the Final Order entered 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 five days from the date of the certification.

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-137160-45720000Done this day, October 21, 2020.

/s/ Sondra J. Vanella

Administrative Law Judge

Transmitted electronically to:

Judy Lowe, Commissioner

Arizona Department of Real Estate

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-137160-45720000