ALJDEC

97A-221-INS · Department of Insurance · 1998-02-24

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

On February 24, 1998, the above-entitled matter came on for hearing before Administrative Law Judge, Robert I. Worth. The Petitioner, James E. Allred (herein called "Mr. Allred") was represented by his attorney, David B. Cassidy, Esq. and the Arizona Department of Insurance (herein called the “Department”) was represented by Assistant Attorney General, Michael J. De La Cruz, Esq. Evidence and testimony were presented, and based upon the entire case record, including all filed pleadings and post hearing memoranda filed by counsel, the following Findings of Fact, Conclusions of Law and Recommended Order have been prepared and are hereby submitted by the Administrative Law Judge for review, consideration, approval and adoption by the Director of the Department (herein called the “Director”).

FINDINGS OF FACT

1. After the passage of a substantial time period following a previously filed application by Petitioner, James E. Allred, for a bail bond agent license which was denied by the Department, such action being upheld after an administrative hearing on the merits, Petitioner filed another application seeking the same type licensure.

2. The Department once again denied Petitioner's license application, and the instant hearing was requested and scheduled. Unlike the original application, the present application fully disclosed that Petitioner had previously been convicted of a felony. Apart from the non- disclosure issue, which was admittedly not the basis for the

Department's denial action hereunder, the same other underlying legal and factual issues, as well as the same historical events, are involved in this appeal by Petitioner from the agency's most recent denial action. Administrative notice is taken of the prior proceedings involving this same Petitioner under Case Number 96A-126-INS.

3. It was uncontroverted that Mr. Allred, now over 40 years of age, had been convicted of a felony in the State of Arizona, a judgment of guilt having been entered on April 17, 1986, on charges of conspiracy to sell a narcotic drug. The offense was committed over 14 years ago between late 1983 and early 1984 when Mr. Allred was approximately 27 years of age. It appeared that this prior criminal behavior and the ensuing felony conviction constituted the sole basis for the Department's denial action on Petitioner's present application.

4. It is found that the drug-related offense for which Mr. Allred had been convicted was not merely possessory but rather involved the sale or trafficking in prohibited substances, thereby constituting a crime of moral turpitude.

5. The sentence imposed upon Mr. Allred was for five (5) years of probation plus payment of certain probation-related fees. The entire period of probation was fully and successfully served by Mr. Allred.

6. Petitioner retained counsel in November, 1994 for the purpose of initiating proceedings to set aside, expunge or vacate his prior felony conviction, effectively restoring his civil rights. This relief was granted by Court Order dated January 6, 1995.

7. In addition to the previously established unblemished and exemplary record on the part of Petitioner as an excellent employee, a productive member of the community and a devoted family man, it was shown that such fine record continued after the last hearing up to and including the present time. It is further noted that these mitigating factors encompassed Mr. Allred’s marriage and raising of young children as well as his prior cooperation with other law enforcement officials not only between the time of the offense and his conviction, leading to a probationary sentence, but also continuing to the present time. Moreover, as indicated at the prior hearing, there were expressions of a genuine belief by the Department’s Investigator that Mr. Allred should and would become a valued licensee.

8. The testimony of record at the hearing tended to demonstrate that the usual and anticipated occupational functions of a bail bond agent primarily involve the evaluation of a prospective client seeking to obtain a bail bond in order to stay out of jail pending the completion of criminal action. In turn, these customary functions also encompass the approving and arranging for collateral to secure any posted bail bond, as well as the ongoing monitoring of the individual's whereabouts to verify the local home or work addresses, and also to take all prudent and necessary steps to insure the person's promised appearance on future dates as fixed by the Court.

9. The mere fact that any bail bond agent is frequently, if not always, dealing with either persons charged with felonies, or their representatives, does not automatically serve to generate a reasonable relationship between any or all prior offenses that may have been committed in the past by a prospective agent and his or her handling of bail bond matters in the course of performing daily business functions.

10. The applicant in this case was convicted of a felony based on conduct that facilitated the sale of prohibited drugs. No element of fraud or other business and financial misbehavior was involved that can be construed to adversely impact upon the occupational functions expected of a bail bondsman. While some criminal offenses of a type involving a lack of business integrity or fraudulent conduct in dealing with pecuniary matters may well be deemed to directly relate to functioning as a bail bond agent, Petitioner's prior criminal conduct would have a far more remote impact, if any at all, upon the business functions of an individual performing normal duties as a bail bond agent.

11. It is determined under all the facts and circumstances as shown by the evidence presented at the hearing and also after consideration and evaluation of the comments of counsel in post-hearing memoranda, that the criminal offense for which Petitioner was convicted, including the nature and extent of his actual involvement, is at

best only marginally related to the functions of the business or profession for which licensure is sought, and primarily does not, of itself, have such direct or even substantial relationship so as to mandate or even to justify a denial of the license to Mr. Allred.

CONCLUSIONS OF LAW

1. The Director has jurisdiction over this matter pursuant to the provisions of A.R.S. §§ 20-161 and 20-290.

2. A.R.S.§20-282.01 defines a "bail bond agent" as "an individual appointed by an insurer by a power of attorney to execute or countersign bail bonds in connection with judicial proceedings and who receives or is promised monies or other things of value for such a service."

3. The provisions of A.R.S.§20-290(B)(6) expressly set forth that the Director may refuse to issue a license based upon the applicant's record of conviction of a felony involving moral turpitude. This permissive language empowers the Director with discretion to issue or to deny insurance licenses to applicants who have previously been convicted of a felony after full review and evaluation of the entire record in the matter as presented at an administrative hearing

4. The Director's above-described discretion to grant or deny a license exists irrespective of the subsequent setting aside or vacating of the prior felony conviction by a Court of competent jurisdiction. By way of a limitation or at least a consideration which is applicable to the exercise of the Director's discretion, if the felony conviction is subsequently set aside and all civil rights restored, the provisions of A.R.S.§13-904(E), a subsequently enacted statute, expressly provide that a person is not disqualified from engaging in an occupation requiring a license solely because of a prior criminal conviction but may be denied a license if the prior offense bears a reasonable relationship to the functions of the occupation in which the applicant seeks licensure.

5. Other statutory provisions necessarily impacting upon the facts and circumstances of this case are set forth in A.R.S.§§ 20-321(A)(9) and 20-321(B) which purport to preclude the employment (including the owning or operating of a bail bond business) by a bail bond agent of any individual having a felony conviction. This most recently enacted statute could well have excluded but did not exclude the operation of A.R.S. §13-904(E) which provides for a reasonable relationship test. It must logically and legally follow that both statutes were meant to co-exist. Even if an absolute disqualification from bail bond agent licensure may be inferred with respect to those individuals with felony convictions that were never subsequently set aside, a person seeking such license is not faced with an automatic and irrevocable ban for life due to a prior felony conviction of any type in situations, as in this case, where the prior conviction judgment has been vacated or set aside by subsequent Court Order.

6. The elements of any test to determine whether or not a reasonable relationship exists do not appear to require broad sweeping interpretations so as to encompass virtually any type of criminal misconduct. Instead, the language of court decisions that have addressed this issue seems to favor the disregarding of any remote relationship and to suggest the applicability of tests requiring a realistic and a far more direct connection between the nature of the felony and the functions of prospective employment. See Brandt v. Fox, 30 Cal. App. 3d 737, 153 Cal. Rptr. 683 (1979).

7. While the nature of the offense for which Applicant was convicted was one which may properly be said to have involved moral turpitude, the testimonial and documentary evidence in this case generates a highly questionable relationship between such offense and the occupational or employment functions of a bail bond agent. Even if, through a degree of concept stretching, a reasonable relationship were somehow to be found, the statutory language is once again framed in permissive terms, and no denial action is mandated. Stated alternatively, the Director may issue a license despite the prior commission of an offense reasonably or even directly related to the occupational functions of the business for which the license is sought.

8. The facts of this case, as presented at an administrative hearing have adequately established (a) that the underlying criminal conduct was a single instance

of misbehavior committed over 14 years ago, (b) that applicant has demonstrated significantly successful accomplishments in leading an exemplary family and business life ever since, (c) that he has consistently been willing to and did, in fact, assist law enforcement authorities, and (d) that an individual member of the State’s Insurance Department has expressed a personal belief that Mr. Allred would satisfactorily perform all expected functions of a bail bond agent if given the opportunity. When all these factors are considered in combination, the favorable exercise of the Director's discretion in granting the Petitioner's license application is warranted. In essence, the totality of the evidence of record supports a determination that Petitioner has sustained his burden of proving that he is presently entitled to the issuance of the bail bond agent license applied for herein.

RECOMMENDED ORDER

In view of the forgoing, it is recommended that the Director reverse and vacate the prior denial action by the Department, and that the Director enter his Order that the Bail Bond Agent license applied for by Petitioner be issued to James E. Allred in due course upon his satisfying all other requirements and payment of all applicable fees.

Dated: March 27, 1998. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert. I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Mr. John A. Greene, Director Department of Insurance 2910 North 44th Street, #210 Phoenix, AZ 85018-7256

ATTN: Curvey Burton

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Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826