ALJDEC decisions subject to certification as final

23F-397-REL · Department of Real Estate · 2023-09-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Real Estate License of:

KROTONSKY, GEORGE, holder of license number SA560103000,

Respondent.

No. 23F-397-REL

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: September 27, 2023 at 1:00 PM.

APPEARANCES: Assistant Attorney General James Rolestead, Esq. appeared on behalf of the Arizona Department of Real Estate (“Department”) with Robin King as a witness. No appearance(s) by or on behalf of George Krotonsky (“Respondent”). Susan Hack 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

On March 16, 2005, the Department issued Real Estate Salesperson License No. SA560103000 to Respondent. The license expired on March 31, 2023.

On or about May 03, 2023, the Clerk for Superior Court of the State of Arizona in and for the County of Maricopa (“Court”) notified the Department that Respondent had been convicted of Fraudulent Schemes and Artifices, a class two felony, and two counts of Filing a False Tax Return, class 5 felonies, in violation of Arizona Revised Statutes (“Ariz. Rev. Stat.”) §§ 32-2153(B)(2) and (B)(9), in Case No. CR2021-002282-001.

Immediately thereafter, the Department conducted an investigation into the confirmable information received by the Court.

On July 31, 2023, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on September 27, 2023. Per the August 07, 2023, Notice of Hearing the issue to be determined is whether the Department has cause to discipline License No. SA560103000, up to and including revocation, based on the following charges:

Charge 1: A.R.S. § 32-2153(B)(2)

Charge 2: A.R.S. § 32-2153(B)(9)

Hearing Evidence

The Department called Robin King as a witness and submitted Exhibits 1-5. The Notice of Hearing was admitted as its own exhibit. The substantive evidence reflects that, upon investigation, the Department determined the following:

Respondent was the owner of 2 restaurants; Teakwoods Tavern, located in Gilbert, Arizona and Chandler, Arizona respectively.

On or between January 01, 2013, and April 30, 2016, Respondent charged customers at his first restaurant a Transaction Privilege Tax (“TPT”) without remitting the funds in full to the Arizona Department of Revenue (“ADOR”), which created a tax liability totaling at least $814,237.65.

On or between April 01, 2016, and October 31, 2019, Respondent charged customers at his second restaurant a TPT without remitting the funds in full to ADOR, which created a tax liability totaling at least $1,008,853.31. During that same period, Respondent withheld income from his employees’ paychecks without remitting to ADOR the full amount of withholding tax due.

In August 2016, Respondent circumvented ADOR tax liens by transferring liquor licenses from both of his restaurants to a single-member Arizona limited liability company, controlled by his co-defendant.

In October 2016, Respondent knowingly submitted a false 2015 Individual Income Tax return to ADOR.

In October 2017, Respondent knowingly submitted a false 2016 Individual Income Tax return to ADOR.

On February 22, 2022, Respondent entered a plea agreement in Case No. CR2021-002282-001, before the Court, whereby he plead guilty to the following charges:

Count 1: FRAUDULENT SCHEMES AND ARTIFICES, a class 2 felony, in violation of Ariz. Rev. Stat. § 13-2310, 13-2301, 13-301, 13-302, 13-303, 13-304, 13-305, 13-306, 13-701, 13-702, 13-801, 13-811, and 13-2314.01 for act committed on or between January 01, 2013, and March 31, 2016.

Count 12: FILING A FALSE TAX RETURN, a class 5 felony, in violation of Ariz. Rev. Stat. § 42-1127(B)(2), 42-1101.01, 13-701, 13-702, and 13-801, committed on or about October 12, 2016.

Count 13: FILING A FALSE TAX RETURN, a class 5 felony, in violation of Ariz. Rev. Stat. § 42-1127(B)(2), 42-1101.01, 13-701, 13-702, and 13-801, committed on or about October 09, 2017.

(Emphasis in original.)

On May 05, 2023, Respondent was sentenced as follows:

Imprisonment with the Arizona Department of Corrections (“ADOC“) for 1.5 years;

Ordered to pay $1,974,569.16 in restitution;

Assessed a $100,000.00 fine;

Sentenced to 7 years of supervised probation upon release, and

Required to perform 100 hours of community service.

On May 09, 2023, Respondent was remitted to ADOC’s custody. Respondent is scheduled to be released from ADOC custody on May 29, 2024.

CONCLUSIONS OF LAW

Because at all times relevant to this matter Respondent was subject to the provisions of Title 32, Chapter 20, Ariz. Rev. Stat., the Commissioner of the Department has jurisdiction over Respondent and the subject matter in this case.

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 (“Ariz. Admin. Code”).

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.

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.”

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.

* * *

9. 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. Therefore, Department has discretion to revoke a license under Ariz. Rev. Stat. § 32-2153(B) as a real estate salesperson’s license is a privilege, not a right.

The issue in this case is, in light of Respondent’s felony convictions and current incarceration status, whether Respondent can be trusted at this time to be responsible in his dealings with clients and the public in general if the Department agrees not to revoke his real estate salesperson license.

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.”

The time period required for a license applicant to establish rehabilitation is commensurate with the period of misconduct and the severity of the offenses.

The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result.

The material facts underlying this matter are not in dispute.

It is undisputed that Respondent’s license is currently expired. He is unable to engage in real estate transactions and will not be able to submit a renewal request to the Department until on or after May 29, 2024, as he remains in ADOC’s custody until that time. It is also undisputed that nearly five (5) months have passed since Respondent’s conviction. Respondent still has about eight months left to serve on his incarceration sentence prior to release. The record is devoid of empirical evidence to support a finding that Respondent has learned from his past mistake(s) and/or is unlikely to repeat them in the future.

After closely scrutinizing the underlying conduct that resulted in Respondent’s felony convictions, as well as the convictions themselves, this Tribunal holds that the evidence of record establishes by a preponderance of the evidence that the revocation of Respondent’s real estate salesperson license is warranted because he poses a significant threat to the public. It is also the position of this Tribunal that Respondent’s criminal convictions evince his inability to submit to Department regulation at this time.

Pursuant to Ariz. Rev. Stat. §§ 32-2153(B)(2) and 32-2153(B)(9), the Department has established grounds to take disciplinary action against Respondent’s real estate salesperson 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 Respondent George Krotonsky’s Real Estate Salesperson License No. SA560103000.

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, September 28, 2023.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted electronically to:

Susan Nicolson, Commissioner

Arizona Department of Real Estate

100 N. 15th Ave., Ste. 201

Phoenix, AZ 85007

[email redacted]

James Rolstead, Esq., Assistant Attorney General

Office of the Attorney General

2005 N. Central Ave.

Phoenix, AZ 85004

[email redacted]

George Krotonsky, Respondent

7055 E. Sweetwater Ave.

Scottsdale, AZ 85254

[email redacted]

ASP Kingman, Cerbat Unit, Respondent

ATTN: George E. Krotonsky Inmate #361430

P.O. Box 3009

Kingman, AZ 86402

By: OAH Staff