FINANCIAL CRIMES SYMPOSIUM. Department of Business & Professional Regulation Division of Real Estate REAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOU.

FINANCIAL FINANCIAL CRIMES CRIMES

SYMPOSIUMSYMPOSIUM

Department of Business & Professional Regulation Department of Business & Professional Regulation Division of Real EstateDivision of Real Estate

REAL ESTATE ENFORCEMENT: REAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOUWHAT WE DO TO PROTECT YOU

Real Estate Enforcement: Real Estate Enforcement: What We Do to Protect YouWhat We Do to Protect You

Overview

How DRE Operates

How DRE Combats License Law Violations

Bullet Proof Your Practice

Case Studies

Real Estate Enforcement: Real Estate Enforcement: What We Do To Protect You What We Do To Protect You

How DRE Operates1. DBPR / DRE / OGC

2. Our Boards:• Commission: brokers / sales associates (FREC)• Appraisal Board: appraisal licenses (FREAB)


How DRE Operates3. What is a license law violation?

• Governed by Florida Statutes Chapters 120, 455 and 475 plus Florida Administrative Rules

• Administrative Law


How DRE Operates4. Complaint Process

• Complaint filed• Reviewed determining if colorable• Complaint sent to investigation• File sent to prosecutors• File sent to probable cause panel• Dismissed / Letter of Guidance; or• Administrative Complaint

Real Estate Enforcement: Real Estate Enforcement: What We Do To Protect YouWhat We Do To Protect You

How DRE Combats License Law Violations 1. Notification to the State Attorney

• Criminal charges• Example: theft, unlicensed activity

2. Emergency Suspension Orders• Florida Statute Sections 120.60(6) and 455.225(8)

3. Escrow Disbursement Orders 4. Administrative Complaints

.Top 5 Statutes FREC and FREAB

Top 5 FREC Charging StatutesVIOLATION FLORIDA STATUTE

Emergency Suspension Order If the agency finds that immediate serious danger to the public health,

safety or welfare…

Sections 455.225(8) and 120.60(6)

Making misleading, deceptive or fraudulent representations in or related to the practice of licensee’s profession or employing a trick or scheme related to the practice of a profession

Sections 455.227(1)(a) and (m)

Guilty of Fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealings by trick scheme or device, culpable negligence, or breach of trust in any business transaction in this State

Section 475.25(1)(b)

Failed to keep and make available to the department such books, accounts, and records…

Section 475.5015

Obstruction or HinderingA person may not obstruct or hinder in any manner the enforcement of

this chapter or the performance of any lawful duty by any person acting under the authority of this chapter

Section 475.42(1)(h)

Top 5 FREAB Charging StatutesVIOLATION FLORIDA STATUTE

Emergency Suspension Order If the agency finds that immediate serious danger to the public health,

safety or welfare…

Sections 455.225(8) and 120.60(6)

Making misleading, deceptive or fraudulent representations in or related to the practice of licensee’s profession or employing a trick or scheme related to the practice of a profession

Sections 455.227(1)(a) and (m)

Guilty of Fraud, Misrepresentation, Concealment, False, False Pretenses, Dishonest Conduct, Culpable Negligence, or Breach of Trust in Any Business Transaction in this State

Section 475.624(2)

Retention of Records. An Appraiser Registered, Licensed, or Certified Under this Part Shall Retain, for at least 5 years, Original or True Copies of any Contracts Engaging the Appraiser’s Services, Appraisal Reports, and Supporting Data Assembled and Formulated by the Appraiser in Preparing Appraisal Reports.

Section 475.629

Obstruction or hindering A person may not obstruct or hinder in any manner the enforcement of this section or the performance of any lawful duty by any person acting under the authority of this section…

Section 475.626(1)(e)


Bullet Proof Your Practice – FREAB Look up Licensee

• http://www.myfloridalicense.com/dbpr/ Attend a Meeting

• Next FREC Meeting: November 13, 14, 2012• Next FREAB Meeting: December 3, 4, 2012

Document and Disclose


Bullet Proof Your Practice – FREC Disclose, Disclose, Disclose Keep Your Records Don’t entrust others with your records Maintain control of the escrow accountMaintain control of the escrow account Prepare/review monthly account Prepare/review monthly account

reconciliationsreconciliations


Case Study #1 Facts: Facts:

Respondent was the listing agent for a Respondent was the listing agent for a property listed at 1827 SW 18property listed at 1827 SW 18 thth Avenue in Avenue in MiamiMiami

The property was initially listed for $285,000The property was initially listed for $285,000 The property sold for $350,000The property sold for $350,000



Respondent represented the buyer in a Respondent represented the buyer in a property located at 447 Aragon Avenueproperty located at 447 Aragon Avenue

The property was listed for $545,000The property was listed for $545,000 Respondent submitted an offer to purchase Respondent submitted an offer to purchase

the property for $595,000the property for $595,000



Respondent represented the buyer in the Respondent represented the buyer in the purchase of property located at 1852 SW purchase of property located at 1852 SW 1010thth Street Street

The property was listed for $450,000The property was listed for $450,000 Respondent’s buyer placed an offer to Respondent’s buyer placed an offer to

purchase the property for $499,000purchase the property for $499,000 Respondent’s buyer purchased the property Respondent’s buyer purchased the property

for $515,000for $515,000



Respondent represented a buyer in the Respondent represented a buyer in the purchase of property located at 903 Red purchase of property located at 903 Red RoadRoad

The property was listed for $499,000The property was listed for $499,000 Respondent’s client purchased the property Respondent’s client purchased the property

for $549,000for $549,000

Real Estate Enforcement: What Real Estate Enforcement: What We Do To Protect YouWe Do To Protect You


Respondent represented the buyer in the Respondent represented the buyer in the purchase of property at 3707 Le Jeune purchase of property at 3707 Le Jeune RoadRoad

The property was listed $525,000The property was listed $525,000 The property was purchased for $575,000The property was purchased for $575,000



Respondent represented the buyer in the Respondent represented the buyer in the purchase of property located at 1631 SW purchase of property located at 1631 SW 1313thth Avenue Avenue

The property was listed at $390,000The property was listed at $390,000 The property was purchased for $500,000The property was purchased for $500,000


Case Study #1 Administrative Complaint Charge: Administrative Complaint Charge:

Brokerage business records.—Each broker shall keep and Brokerage business records.—Each broker shall keep and make available to the department such make available to the department such books, accounts, and books, accounts, and records as will enable the department to determine records as will enable the department to determine whether such broker is in compliance with the provisions whether such broker is in compliance with the provisions of this chapterof this chapter. Each broker shall preserve at least one . Each broker shall preserve at least one legible copy of all books, accounts, and records pertaining to legible copy of all books, accounts, and records pertaining to her or his real estate brokerage business for at least 5 years her or his real estate brokerage business for at least 5 years from the date of receipt of any money, fund, deposit, check, or from the date of receipt of any money, fund, deposit, check, or draft entrusted to the broker or, in the event no funds are draft entrusted to the broker or, in the event no funds are entrusted to the broker, for at least 5 years from the date of entrusted to the broker, for at least 5 years from the date of execution by any party of any listing agreement, offer to execution by any party of any listing agreement, offer to purchase, rental property management agreement, rental or purchase, rental property management agreement, rental or lease agreement, or any other written or verbal agreement lease agreement, or any other written or verbal agreement which engages the services of the broker.which engages the services of the broker.


Case Study #1 Administrative Complaint Charge: Administrative Complaint Charge:

The Respondent did not keepThe Respondent did not keep• Listing agreementsListing agreements• Offers to purchaseOffers to purchase• Counter offersCounter offers• ContractsContracts• ChecksChecks• ANYTHING! ANYTHING!


Case Study #1 Outcome: Outcome:

Administrative Judge found for the Administrative Judge found for the Department (a win!)Department (a win!)

License revokedLicense revoked

Real Estate Enforcement:Real Estate Enforcement:What We Do To Protect YouWhat We Do To Protect You

Case Study #2Case Study #2 Facts in Administrative Complaint:Facts in Administrative Complaint:

Husband and wife (sellers) had two properties. In Husband and wife (sellers) had two properties. In 2006, Respondent entered into listing agreements 2006, Respondent entered into listing agreements with the sellers to list one of the properties at with the sellers to list one of the properties at $359,000, and the other at $350,000$359,000, and the other at $350,000

In June 2006, Sellers entered into purchase contracts In June 2006, Sellers entered into purchase contracts for the two properties, one for the amount of $329,000 for the two properties, one for the amount of $329,000 and one for the amount of $325,000and one for the amount of $325,000

Without telling the Sellers, Respondent raised the Without telling the Sellers, Respondent raised the listing price for each property to $450,000listing price for each property to $450,000


Case Study #2Case Study #2 Administrative Complaint Charge:Administrative Complaint Charge:

475.25(1)(b) - Has been guilty of fraud, 475.25(1)(b) - Has been guilty of fraud, misrepresentation, concealment, false misrepresentation, concealment, false promises, false pretenses, dishonest dealing promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable by trick, scheme, or device, culpable negligence or breach of trust.negligence or breach of trust.


Case Study #2Case Study #2 Elements of Fraud:Elements of Fraud:

Misrepresentation of material factMisrepresentation of material fact Maker of statement knew it was falseMaker of statement knew it was false Maker intended another to act or rely on itMaker intended another to act or rely on it Injury or damagesInjury or damages


Case Study #2Case Study #2 What Happened at Closing of Properties:What Happened at Closing of Properties:

Sellers all along thought each property was being sold Sellers all along thought each property was being sold for about $350,000for about $350,000

At some point, the transactions were assigned to a At some point, the transactions were assigned to a new buyer.new buyer.

At the closing, sellers first learned of the increased At the closing, sellers first learned of the increased listing price to $450,000 for each propertylisting price to $450,000 for each property

Also at the closing, the assigned ‘buyer’ showed up, Also at the closing, the assigned ‘buyer’ showed up, looked like someone dragged off the streetlooked like someone dragged off the street


Case Study #2Case Study #2 What Happened at Closing (Continued):What Happened at Closing (Continued):

Also at the closing, it came to light that the Also at the closing, it came to light that the bank did not know about the original contract bank did not know about the original contract on each property for $350-something, they on each property for $350-something, they only saw the contracts at $450. only saw the contracts at $450.

Sellers refused to complete the sale of these Sellers refused to complete the sale of these two properties.two properties.


Case Study #2Case Study #2 What Was the Extra Hundred Thousand For:What Was the Extra Hundred Thousand For:

In early stages Respondent told Sellers they’d use In early stages Respondent told Sellers they’d use ‘creative financing’ – buyer wanted to make ‘creative financing’ – buyer wanted to make improvements and they’d have to give back twenty or improvements and they’d have to give back twenty or thirty thousand above selling price.thirty thousand above selling price.

Addendum - any difference in purchase price and Addendum - any difference in purchase price and appraisal value would be used to repair house.appraisal value would be used to repair house.

Big difference between twenty thousand and one Big difference between twenty thousand and one hundred thousand. Houses also didn’t require one hundred thousand. Houses also didn’t require one hundred thousand worth of repairs hundred thousand worth of repairs


Case Study #2Case Study #2 HUD:HUD:

HUD said sellers would receive roughly $412,000 per HUD said sellers would receive roughly $412,000 per property, which was simply not true. They were only property, which was simply not true. They were only getting 350-something. Title company said an getting 350-something. Title company said an addendum to the HUD would state what sellers would addendum to the HUD would state what sellers would really be getting. When sellers’ attorney asked why really be getting. When sellers’ attorney asked why that couldn’t go in the HUD, she was told cause the that couldn’t go in the HUD, she was told cause the lender couldn’t see the addendumlender couldn’t see the addendum


Case Study #2Case Study #2 Missing Players in Action:Missing Players in Action:

The appraiser in this case is now somewhere The appraiser in this case is now somewhere in Panamain Panama

Mortgage broker closed his office and Mortgage broker closed his office and disappeareddisappeared


Case Study #2Case Study #2 Listing Price:Listing Price:

Generally, someone’s trying to get a loan at a Generally, someone’s trying to get a loan at a higher amount, so when the lender is making higher amount, so when the lender is making the loan they check the listing. If they don’t the loan they check the listing. If they don’t correlate, loan won’t go through. So if the correlate, loan won’t go through. So if the listing price is above what it’s selling for, listing price is above what it’s selling for, someone’s pocketing extra moneysomeone’s pocketing extra money


Case Study #2Case Study #2 Witnesses at Trial:Witnesses at Trial:

Sellers Sellers Sellers’ attorneySellers’ attorney Respondent’s brokerRespondent’s broker Expert WitnessExpert Witness

• Why we use expertWhy we use expert RespondentRespondent


Case Study #2Case Study #2 Administrative Law Judge’s Ruling:Administrative Law Judge’s Ruling:

In my proposed recommended order, I limited In my proposed recommended order, I limited suggested charges to misrepresentation, suggested charges to misrepresentation, concealment and breach of trustconcealment and breach of trust

Judge found him guilty of concealment, but Judge found him guilty of concealment, but not the other two. He relied on a couple of not the other two. He relied on a couple of cases, has to do with cases, has to do with intentintent


Case #2Case #2 Cases Judge Relied Upon:Cases Judge Relied Upon:

Munch v. DBPR, 592 So. 2d 1136 (1Munch v. DBPR, 592 So. 2d 1136 (1stst DCA 1992) DCA 1992)• Real estate salesman was receiving commissions on behalf Real estate salesman was receiving commissions on behalf

of condo association, which broker didn’t know about. of condo association, which broker didn’t know about. Realtor thought he was acting as community association Realtor thought he was acting as community association manager, not real estate salesman.manager, not real estate salesman.

• For there to be “misrepresentation, concealment and breach For there to be “misrepresentation, concealment and breach of trust” in violation of 475.25(1)(b) there must be wrongful of trust” in violation of 475.25(1)(b) there must be wrongful intent or scienter.intent or scienter.

• No intent to deceive here.No intent to deceive here.


Case #2Case #2 Cases Judge Relied Upon:Cases Judge Relied Upon:

Morris v. DBPR, 474 So. 2d 841 (5Morris v. DBPR, 474 So. 2d 841 (5thth DCA 1985) DCA 1985) • Broker accused of fraud for passing a worthless check for Broker accused of fraud for passing a worthless check for

property he wanted to personally buyproperty he wanted to personally buy• Court found no evidence of fraudulent intent, because Court found no evidence of fraudulent intent, because

deposit was made on a Saturday, and even though deposit was made on a Saturday, and even though insufficient funds on that day broker could have deposited insufficient funds on that day broker could have deposited sufficient funds on that Monday had he wanted to go through sufficient funds on that Monday had he wanted to go through with the deal (he didn’t)with the deal (he didn’t)


Case #2Case #2 Administrative Law Judge’s Ruling:Administrative Law Judge’s Ruling:

Judge didn’t find Respondent guilty of fraud Judge didn’t find Respondent guilty of fraud for the following reasons:for the following reasons:• Complaint didn’t charge him that way, no noticeComplaint didn’t charge him that way, no notice• Insufficient evidence to prove Respondent was Insufficient evidence to prove Respondent was awareaware of fraudulent activity of fraudulent activity


Case #2Case #2 Penalty:Penalty:

Judge in his Recommended Order issued: Judge in his Recommended Order issued: One year suspension, $1000 fine, costs of One year suspension, $1000 fine, costs of investigationinvestigation

Commission upped penalty to revocationCommission upped penalty to revocation

Department of Business & Professional Regulation Department of Business & Professional Regulation Division of Real EstateDivision of Real Estate

REAL ESTATE ENFORCEMENT: REAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOUWHAT WE DO TO PROTECT YOU

FINANCIAL CRIMES SYMPOSIUM. Department of Business & Professional Regulation Division of Real Estate REAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOU.

Documents

section section

e slide

h slide

administrative complaint

appraisal licenses freab

practice freab

practice frec

records section