OAH 16-1005-21193-2

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE DEPARTMENT OF COMMERCE

In the Matter of the Real Estate Salesperson License Application of Ronald Nelson

FINDINGS OF FACT,

CONCLUSIONS, AND

RECOMMENDATION

This matter came before Administrative Law Judge Manuel J. Cervantes (ALJ) on April 29, 2010, at 9:30 a.m., at the Office of Administrative Hearings (OAH) pursuant to a Notice and Order for Hearing and Order to Show Cause, filed March 22, 2010.

Christopher M. Kaisershot, Assistant Attorney General, appeared on behalf of the Department of Commerce (Department). Ronald Nelson appeared on his own behalf without counsel. The record closed at the conclusion of the contested hearing.

STATEMENT OF ISSUE

Did Mr. Nelson show cause as to why his application for a real estate salesperson license should not be denied?[1]

Based on the hearing record, the Administrative Law Judge makes the following:

FINDINGS OF FACT

1. Mr. Nelson is licensed in the State of California as a real estate salesperson; with a term from July 2, 2003 to July 1, 2011.[2] On February 4, 2007, Mr. Nelson was indicted in Los Angeles County, California, on four felony counts of forgery and tendering a check from a bank account with insufficient funds. Mr. Nelson was already on probation for a felony level 2006 Terroristic Threats conviction.[3]

2. Mr. Nelson submitted two Minnesota applications for a real estate salesperson license. The first was on November 12, 2007 (2007 application) which was approved on the following day and expired on June 30, 2008.[4] The second application followed the expiration of the first license; it was submitted on December 12, 2009 (2009 application).

3. The first question on page 2 of the application reads, “Have you ever been convicted of a crime, had a judgment withheld or deferred, or have you been charged with committing a crime?” Mr. Nelson answered, “No” on his 2007 application and answered “Yes” to the same question on his 2009 application.

4. On December 7, 2009, Mr. Nelson supplemented his 2009 application. In his “Statement of Circumstances,” Mr. Nelson acknowledged that on April 11, 2008, he was convicted of three felony counts of forgery and one felony count of insufficient funds/check in Los Angeles County, CA.[5] The supplement reflects that Mr. Nelson was taken into custody for these charges in November 2006, and he posted $40,000 bail on November 7, 2006. Mr. Nelson was indicted on February 5, 2007.[6] Mr. Nelson made no reference to the Terroristic Threats conviction in 2006 in his 2009 application.[7]

5. On May 23, 2008, Mr. Nelson was sentenced to 90 days in jail for the Count I forgery conviction to be served consecutively in the county jail with 275 days for the Count II insufficient funds conviction. Mr. Nelson was ordered to pay restitution in the amount of $11,370.00[8] to one victim, $330,646.69[9] to a second victim, and placed on three years of probation.[10] Neither the application nor supplement provides the underlying facts or circumstances for the convictions or restitution.

6. Mr. Nelson accepts responsibility for the felony charge Count II involving the insufficient funds charge but in the supplement and at the hearing, he maintained his innocence on the three remaining convictions.[11] Mr. Nelson indicated that the disputed convictions were currently on appeal in California.

7. On December 22, 2009, a senior investigator with the Market Assurance Division, Department of Commerce, wrote Mr. Nelson requesting specific information. The investigator requested: 1) a copy of the original criminal complaint; 2) a copy of the sentencing order; and 3) a letter from his probation officer evidencing compliance with the terms of probation. The letter further indicated that the Department could not proceed with the license application without this required documentation.[12]

8. On January 20, 2010, Mr. Nelson provided the Market Assurance Division with a letter, dated January 6, 2010, from his Minnesota probation officer who indicated that Mr. Nelson was compliant with the terms of his probation, except with regards to his restitution obligations to the court and to his victims.[13] Since his sentencing two years ago, Mr. Nelson has made one $20 payment for restitution.[14]

9. Mr. Nelson also provided a copy of the Los Angeles County criminal complaint, dated February 20, 2007, referencing criminal conduct that occurred on May 31, 2006 and July 2, 2006. The criminal complaint further alleged that Mr. Nelson took advantage of his position of trust as a real estate agent to commit the offenses alleged in the four counts,[15] an allegation which was unrefuted.

10. Lastly, Mr. Nelson provided a partial sentencing transcript commencing at page 60, dated May 23, 2008.[16] The transcript excerpt does not include the underlying facts or circumstances for the convictions or the basis for the restitution awards.

11. The partial sentencing transcript contains a reference to a prior felony conviction.[17] The transcript notes that the sentencing judge revoked Mr. Nelson’s probation for a prior conviction in light of the new forgery and insufficient funds convictions of April 11, 2008, conduct which violated the prior probationary terms.

12. On February 10, 2010, a senior investigator with the Market Assurance Division wrote Mr. Nelson advising him that his license application was denied under Minn. Stat. § 45.027 because the serious nature of his criminal convictions demonstrated that he was unqualified to act under authority of a Minnesota real estate license. The letter also advised Mr. Nelson of his right to a contested case hearing.[18]

13. On February 16, 2010, Mr. Nelson timely requested a contested case.[19] Pursuant to Minn. Stat. § 45.027, subd. 7 (2008), Mr. Nelson was ordered to appear and to show cause at the hearing why his application for a real estate salesperson license should not be denied.[20]

14. At the hearing, Mr. Nelson maintained that he had a pending appeal before a California appellate court for the multiple forgery counts. At the hearing, the Assistant Attorney General presented Mr. Nelson with a copy of a California Court of Appeals decision dated April 23, 2009.[21] The California Court of Appeals affirmed the decision of the trial court in full, including the fraudulent and deceptive conduct on the part of Mr. Nelson to purchase a former real estate customer’s house.[22]

15. Mr. Nelson denied being aware of the Court of Appeals decision.[23] Mr. Nelson was in the Los Angeles County jail when the Court of Appeals decision was rendered.[24]

16. It was not until cross examination by the Assistant Attorney General at the contested hearing that Mr. Nelson acknowledged a prior conviction for a felony Terroristic Threats conviction, an offense committed against Comcast Cable Company over a disputed cable bill. In addition to the sentence imposed for the forgery and insufficient funds convictions, Mr. Nelson was sentenced to serve 270 days in the county jail for the Terroristic Threats probation violation,[25] a conviction and probation violation that were not disclosed in either of his license applications of 2007 or 2009.

17. These Findings are based on all of the evidence in the record. Citations to portions of the record are not intended to be exclusive references.

18. The ALJ adopts as Findings any Conclusions that are more appropriately described as Findings.

19. The Memorandum that follows explains the reasons for these Findings of Fact. To the extent that the Memorandum contains additional facts, including findings on credibility, the ALJ incorporates them herein.

Based on these Findings of Fact, the ALJ makes the following:

CONCLUSIONS OF LAW

1. The ALJ and the Commissioner of Commerce (Commissioner) have jurisdiction to consider this matter pursuant to Minn. Stat. §§ 14.50, 45.011, 45.027, and 82.35 (2008).

2. Mr. Nelson received the Notice and Order for Hearing, Order to Show Cause, and Statement of Charges. This constitutes due notice. The Department has complied with all substantive and procedural requirements.

3. Pursuant to Minn. R. 1400.7300, subp. 5, Mr. Nelson has the burden of proof to establish by a preponderance of evidence that the requested license should not be denied.

4. Under Minn. Stat. § 82.35, subd. 1, the Commissioner may by order deny any license, if the Commissioner finds that the order is in the public interest, and the applicant:

(a) has filed an application for a license which is incomplete in any material respect or contains any statement which, in light of the circumstances under which it is made, is false or misleading with respect to any material fact;

(b) has engaged in a fraudulent, deceptive, or dishonest practice;

* * *

(e) has violated or failed to comply with any provision of this chapter or any rule or order under this chapter; [or]

(f) has, in the conduct of the licensee's affairs under the license, been shown to be incompetent, untrustworthy, or financially irresponsible.

5. Contrary to Minn. Stat. § 82.35, subd. 1 (a), Mr. Nelson failed to make complete and material disclosures in his 2007 license application relative to the Terroristic Threats conviction which occurred prior to his 2007 application. This omission was false and misleading. Furthermore Mr. Nelson failed to make complete and material disclosures in his 2009 application relative to the Terroristic Threats conviction, probation violation, and the sentence imposed.

6. Contrary to Minn. Stat. § 82.35, subd. 1 (b), Mr. Nelson was convicted of three counts of forgery and one count of insufficient funds in April 2008 involving fraudulent, deceptive, and dishonest conduct. Mr. Nelson has demonstrated little remorse for his actions, has demonstrated no empathy for the victims, and maintains his innocence on the forgery counts, even after two California courts determined otherwise.

7. Contrary to Minn. Stat. § 82.35, subd. 1 (f), Mr. Nelson took advantage of his position of trust as a real estate agent to commit the offenses in Counts I-IV which conduct demonstrates Mr. Nelson to be incompetent, untrustworthy, and financially irresponsible.[26]

8. Contrary to Minn. Stat. § 82.35, subd. 1 (e), Mr. Nelson has violated provisions of this chapter as described above.

9. Under Minn. Stat. § 364.03, subd. 1, no person shall be disqualified from pursuing, practicing, or engaging in any occupation for which a license is required because of a prior conviction of a crime or crimes, unless the crime or crimes for which convicted directly relate to the position of employment sought or the occupation for which the license is sought.

10. In the present case, Minn. Stat. § 364.03, subd. 1, does not protect Mr. Nelson from disqualification from a real estate license because, as it was found by the California courts, he used his office and his position of trust as a real estate agent to engage in fraudulent and deceptive conduct.

11. Under Minn. Stat. § 82.39, subd. 5, a licensee must notify the Commissioner in writing within ten days if the licensee is charged with, adjudged guilty of, or enters a plea of guilty or nolo contendere to a charge of any felony, or of any gross misdemeanor alleging fraud, misrepresentation, conversion of funds, or a similar violation of any real estate licensing law.

12. Contrary to Minn. Stat. § 82.39, subd. 5, Mr. Nelson failed to disclose to the Commissioner that he was convicted of four felonies in May 2008, while licensed as a real estate salesperson in Minnesota.

13. Mr. Nelson has failed to demonstrate by a preponderance of the evidence that he is trustworthy and financially responsible such that granting Mr. Nelson’s license application would serve the public interest.

14. The ALJ adopts as Conclusions any Findings that are more appropriately described as Conclusions.

15. These Conclusions are reached for the reasons discussed in the Memorandum below. The Memorandum is hereby incorporated into these Conclusions.

16. These Conclusions are reached for the reasons indicated in the Memorandum below. The Memorandum is hereby incorporated into these Conclusions.

Based upon these Conclusions and for the reasons explained in the accompanying Memorandum, the ALJ makes the following:

RECOMMENDATION

The Administrative Law Judge recommends that the Commissioner AFFIRM the Department’s denial of Mr. Nelson’s 2009 real estate salesperson license application.

Dated: May 17, 2010

s/Manuel J. Cervantes

MANUEL J. CERVANTES

Administrative Law Judge

Reported: Digitally recorded. No transcript prepared.

NOTICE

This report is a recommendation, not a final decision. The Commissioner will make the final decision after a review of the record and may adopt, reject or modify these Findings of Fact, Conclusions, and Recommendation. Under Minn. Stat. § 14.61, the Commissioner shall not make a final decision until this Report has been made available to the parties for at least ten days. The parties may file exceptions to this Report and the Commissioner must consider the exceptions in making a final decision. Parties should contact Glenn Wilson, Commissioner of Commerce, 85^th Seventh Place East, Suite 500, St. Paul, MN 55101-2198, to learn the procedure for filing exceptions or presenting argument.

If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a. The record closes upon the filing of exceptions to the Report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes.

Pursuant to Minn. Stat. § 14.62, subd. 1, the Commissioner is required to serve his final decision upon each party and the Administrative Law Judge by first class mail.

MEMORANDUM

Mr. Nelson was licensed and employed as a California real estate salesperson when he became involved in a felonious real estate transaction, resulting in four criminal charges in 2008. Mr. Nelson was first licensed in Minnesota as a real estate salesperson in November 2007. In this application, Mr. Nelson did not disclose a felony Terroristic Threats conviction from 2006. When that license expired on June 30, 2008, Mr. Nelson reapplied again for a similar license in December 2009. The Department denied the 2009 application because of the disclosure of the forgery, and insufficient funds convictions involving the California real estate transaction. Again, Mr. Nelson failed to disclose the Terroristic Threats conviction in his 2009 application. Mr. Nelson appealed the Department’s license denial. He stated at the hearing, “I’m going to throw myself at the mercy of the court.”[27] The ALJ notes that the OAH is not a court of equity that can dispense “mercy,” rather, it is a statutory tribunal that interprets and enforces those laws within its jurisdiction.

Procedurally, this matter came on for hearing pursuant to the Department’s Notice and Order for Hearing and Order to Show Cause why Mr. Nelson’s application should not be denied. In this context, the Department established reasonable cause in its statement of charges that Mr. Nelson violated multiple laws and was unsuitable for licensure. Under such circumstances, Mr. Nelson must show that his application is complete in every material respect, does not contain any false or misleading information, that he has not engaged in any fraudulent, deceptive, or dishonest practice, and that he has conducted his practice in a competent, trustworthy, and financially responsible manner.[28] In short, Mr. Nelson must show that he has not violated any Minnesota law, rule, or order under the jurisdiction of the Commissioner.

The Department contends that Mr. Nelson has not been honest in disclosing his past criminal record involving terroristic threats in his 2007 or 2009 real estate license applications. The Department further contends that his 2009 application, aside from the omission of the terroristic threats conviction, was incomplete. Until the hearing, the underlying facts relative to the forgery and insufficient funds convictions and the basis for restitution were not clear. Mr. Nelson has not been forthcoming relative to all the underlying facts involving the felonious real estate transaction.

Mr. Nelson’s explanation for not including the Terroristic Threats conviction on his 2007 application was because he pled nolo contendere to the charge and did not know that he had to disclose it. This explanation is incredible. The first question on page 2 of the 2007 and 2009 applications is clear: it required Mr. Nelson to disclose whether he has been charged with a crime, regardless of the outcome of the charge. However, in the paragraph immediately following the question are the definitions of “crime” and “convicted.” The plea of “nolo contendere” is contained within the definition of convicted and requires reporting. Real estate salespersons require specialized training to read, comprehend, and draft legally binding contracts. Mr. Nelson’s claim that he did not know that he had to disclose the facts that he was charged and convicted of Terroristic Threats is simply not credible.

This lack of credibility carried over to Mr. Nelson’s 2009 license application. While Mr. Nelson disclosed the forgery and insufficient funds convictions, he did not make a full disclosure by providing the complete May 2008 sentencing transcript. It is during sentencing, subsequent to a court trial, that the trial judge summarizes the charges and the facts that refute or support the convictions. Mr. Nelson was convicted of all four counts, but that portion of the sentencing record was not provided by Mr. Nelson to the Department. Mr. Nelson’s claim at the hearing that the Department did not want the full transcript is likewise not credible. Mr. Nelson had ample opportunity at the contested hearing to provide a full explanation of the underlying facts, but chose not to do so.

As to the available facts surrounding the three forgery and insufficient funds convictions,[29] the record establishes that in 2005, Mr. Nelson worked for a real estate office in Sherman Oaks, California. Victim Will Pryor listed his house with his office from May 2005 until he terminated the arrangement in April 2006. One month after the termination of the formal listing arrangement, Mr. Nelson agreed to buy Pryor’s house. On May 31, 2006, Mr. Nelson gave Pryor a check for $1,000 drawn on a closed Bank of America account. Approximately one month later, on July 2, 2006, Mr. Nelson gave Pryor two more checks that were purportedly drawn on a Charles Schwab account; one check was in the amount of $18,000 and the other was in the amount of $50,000. The Schwab account was fictitious.

At the hearing, Mr. Nelson continued to dispute the facts surrounding whether the real estate transaction between he and the victim was a sale or a rental agreement. The California Court of Appeals characterized it as a sale. Mr. Nelson did not produce any of the underlying documents to support his position.

At the hearing, Mr. Nelson admitted to tendering the $1,000 check but denied tendering the $18,000 and $50,000 checks. The only explanation at hearing was that he did not do it. He did not offer an alternative explanation. One can reasonably assume that the trial judge heard the entire explanation and did not believe Mr. Nelson. The California Court of Appeals affirmed the trial court in full, including the sentence imposed by the trial judge on all four counts. The ALJ does not believe Mr. Nelson either.

As to whether Mr. Nelson knew of the California Court of Appeals decision, in this ALJ’s view, it is more likely than not that Mr. Nelson was served with the opinion in light of the fact that the Court of Appeals knew he was in custody in the Los Angeles County jail.

The Department contends that Mr. Nelson was convicted of serious criminal charges that have a direct bearing on Mr. Nelson’s qualifications to act as a real estate salesperson. The Investigator’s testimony best describes the situation when she said that the Mr. Nelson is not trustworthy enough to be a real estate salesperson that has unfettered access to unoccupied homes and individuals’ personal belongings, including their financial records, banking, and checking accounts. The ALJ agrees.

The licensing process exists to ensure that licenses are granted to qualified individuals who are likely to comply with their professional fiduciary obligations and to ensure that the public’s interest is being served. Mr. Nelson has failed to establish that he qualifies for a Minnesota real estate salesperson license or that he has otherwise complied with Minnesota licensing law. The Department’s denial of the license should be AFFIRMED.

M. J. C.

[1] Minn. Stat. §§ 45.027, subd. 7, and 82.35, subd. 1 (2008). Minn. Stat. ch. 45 grants the Commissioner of Commerce general regulating authority; Minn. Stat. ch. 82 specifically regulates real estate brokers and salespersons.

[4] Ex. 7, Testimony (Test.) of Investigator Costello (Costello).

[8] According to the testimony of Mr. Nelson, this restitution amount is payable to the Fair Plan Insurance Co. for physical damage to a victim’s house. This amount was paid by Fair Plan Insurance Co. to the victim for home repairs.

[9] According to the testimony of Mr. Nelson, this restitution amount is payable to victim Will Pryor for vandalism and theft of home fixtures and appliances, including a bath tub and refrigerator among other things.

[14] Test. of Costello and California Deputy Probation Officer Jimenez, Jr.

[20] See the Notice and Order for Hearing, Order to Show Cause, and Statement of Charges, filed March 22, 2010.

[28] Minn. Stat. §§ 45.027, subd. 7 and 82.35, subds.1 and .5.