Florida Board of Employee Leasing Companies Meeting Report: August 17, 2011

 

The Florida Board of Employee Leasing Companies (“Board”) met via teleconference on August 17, 2011.  To view the meeting agenda, click here.   Following is a report of the meeting proceedings:

 

Employee Leasing Company and Controlling Person Applications

After approving minutes from its July 20, 2011 meeting, the Board considered the following employee leasing and controlling person applications:

• Four Point HR, LLC (Employee Leasing Applicant)
• Noelle Wojciehowski, Controlling Person Applicant

A Board member asked representatives of Four Point HR (“Four Point”) about the company’s financial statements, saying that the balance sheet listed current corporate assets as including a $122,000 workers’ compensation injury fund reimbursement and another “substantial” amount for Providence Insurance Company (“Providence”), which is currently in receivership in Oklahoma. 

“As most of us know,” he said, “it is hard to collect from a state workers’ compensation injury fund.  Most of them are broke.  And Providence is in receivership and you have that listed as a current asset.”

In response, Phil Herron of Four Point said that the $122,000 reimbursement is a workers’ compensation second injury fund recovery that is due to the company.  He explained that the Providence item is collateral that is separate from claims-related issues, and that Four Point left Providence before the receivership occurred.  He said that the Four Point attorney is working on obtaining that money.  A Board member stated that it is unlikely that this could be considered a “short-term asset.”

Board Chair John Jones asked the representatives of Four Point, “Do you have anything to make the Board feel comfortable that those are real assets?”  As an example, Mr. Jones cited an acknowledgement from the State of Oklahoma of the unreturned collateral amount and a commitment that the money would be returned within a period that would be considered short-term, such as sometime in 2011.

Board Vice Chair Keith Reeves questioned what materials were shown to Four Point’s accountants in order for these to be listed as current assets, to which a Four Point representative stated that a letter from the company’s attorney was provided to supplement conversations held during the complete review of Four Point’s books.

Mr. Reeves said that, contained in a footnote to the financial statements, was a comment that Four Point’s legal counsel expects these two items to be received in the current year.  He also said that, at the last Board meeting, consensus was that if an accountant “puts it on paper,” Board members should not question it.  “You know I do [want to question it], but they did disclose it, they have legal counsel, they told them they expect to receive these funds, so I guess we have to live with that at this point in time,” he said.

Florida Department of Business and Professional Regulation (“DBPR”) Executive Director Rick Morrison said that Four Point has an unlicensed activity citation that is currently open.

A representative of the Florida Department of Financial Services (“DFS”) recounted that an anonymous caller reported that Four Point was affiliated with a man named Joshua Poole, who, according to Fraud Digest, received a federal indictment in relation to a company named Horizons HR.  Ultimately, the DFS representative said, Mr. Poole accepted a plea deal. 

The DFS representative said that he did not find any connection between Mr. Poole and Four Point.   However, he said that Four Point has Florida workers’ compensation policies that were noted as employee leasing policies going back to March 1, 2009.

Noelle Wojciehowski, Controlling Personal Applicant for Four Point, said that Mr. Poole had no relation to Four Point in terms of ownership, but that he is her husband. 

In regard to a question about the 2009 employee leasing policies, she referred a question from a Board member to a Four Point attorney in attendance who explained “The best I recollect is that, originally, we were going to do this [application] several years ago, and we didn’t.  There is a separate company called Process Source that is licensed.  If it all related to Florida, it should have been under that entity.”

Mr. Herron, who stated that he currently owns nine percent of Four Point’s stock, added that Horizons is related to Four Point. 

The attorney for Four Point added that Horizons was a company in Georgia and a separate entity from Process Source, which is now “doing business as” Horizons, but-subject to the investigation related to Joshua Poole-is not the same legal entity.  Process Source was a separate company that was purchased in Florida, but with a different controlling person.  The attorney stated that he did not know whether Mr. Poole was related to any employee involved in Process Source.

Mary Ellen Clark, Assistant Attorney General with the Florida Office of the Attorney General, said that if Board members believe that any information in the application materials would later render an applicant an unlicensed entity subject to discipline, action must be taken before a license is granted.  A disciplinary complaint cannot be opened later on issues that were known to the Board at the time of application, she explained.

Ms. Clark then asked the attorney speaking on behalf of Four Point whether he is licensed in Florida, to which he replied that he is not.  She said that it is “unlicensed activity” for him to be acting in the capacity of an attorney on the call.  He replied that was not his understanding.

Board members expressed discomfort with the financial statements and the pending unlicensed activity citation against Four Point.  It was further discussed that, if the unlicensed activity in question is apparent in the application materials, existing case law provides that the Board knew or should have known about the problem at the time of licensing. 

A Board member questioned whether the unlicensed activity complaint was grounds for denial of the application and noted that Four Point has the opportunity to appeal the citation.  Another Board member offered, “We want to bring them into compliance.  Not deny the license because they have an unlicensed activity citation.”

Mr. Herron explained that a controller had left the company unexpectedly, leading to the hire of an outside accounting firm, from which two controllers with no professional employer organization experience were assigned.  The first client acquired under Four Point was on December 31, 2010. 

“As far as endorsements on the workers’ compensation policy, all of our operating companies are endorsed on the policy and all Florida operations are run through a Florida license.  We have explained  . . .  that it was an honest mistake.  When our accountants set up pseudo accounts and tax accounts, they put them under the Four Point name instead of Process Source,” Mr. Herron said.

Mr. Herron said that the company is willing to re-file two quarters’ worth of taxes under Process Source, the correct operating company. 

A Board member made a motion to table the Four Point and Wojciehowski applications until the Board’s next meeting on September 21 in Tampa, Florida.  It was discussed that, because that meeting is to be in-person, representatives of Four Point can appear and answer questions under oath.

Board members requested that, for the September 21 meeting, Four Point’s attorney provide an updated financial statement explaining why the $122,000 reimbursement and the Providence collateral should be listed as current assets.  The update is to include payroll documentation pertaining to the pending unlicensed activity citation.

The motion to table the applications passed, followed by further discussion of the issues.

A participant on the call asked if Four Point could stipulate that a client was illegally in the state and placed in the wrong entity, pay the $2,500 fine, and proceed with the application from there.  A Board member said he would be fine with that scenario.

With regard to the financial statements, Mr. Reeves again expressed his concern about Four Point’s  aforementioned two items being listed as current assets if they might not be realized in the next three months.

 

De Minimis Exemption and Registration Application

The Board then considered a de minimis exemption and registration application for the following company:

• OP Six, Inc. (Amy Wentrack and Ronald Hock, Owners)

The de minimis license was approved without discussion.

 

Public Record Requests

The Board then discussed pending public record requests from Thomas A. Range and Mary Morris relating to certain employee leasing companies’ financial information.

Ms. Clark said that, on August 16, she had spoken with Amy Toman, an DBPR attorney who has been handling these requests.  She reported that there is no pending action on Mr. Range’s request, because, after discussion between the DBPR and the attorney representing Mr. Range, the request was withdrawn.  The DBPR also believes the other request is “not active,” she said, adding that an opinion was provided to Ms. Morris as to what can and cannot be produced.  No further request was apparently made.

Mr. Morris suggested that the Board should discuss the future handling of these types of requests.  “The arguments presented here were pretty strong,” he said.  [The requestors] were arguing that financial information of employee leasing companies is public record.  I don’t think [the DBPR believes] that is public record, but [the requestors] put together a good case and the question is, what do we do in the future, either legislatively, or by rule, to make sure financial information is confidential?”

Board member Abram Finkelstein said that, after reading the legal brief pertaining to the public record request, he agreed that the argument was strong, but that he did not believe it was possible for the Board to take action.  “This is a legislative matter,” he said. “Even a rule would not withstand scrutiny.  We do not have [the power] to make a rule outside of our legislative authority.”

A Florida Association of Professional Employer Organizations (“FAPEO”) representative asked whether the Board could take the position that financial information required by the Board in applications is exempt from Florida’s public records act.  He also said that, in his opinion, rulemaking on this topic might not be outside of the Board’s power.

Mr. Jones, analogizing the situation to a “slippery slope,” said “Who knows what other things people can do if we’re going to start releasing financial statements [publicly]?”

Discussion ensued regarding 455.229, F.S., which refers to the confidentiality of applicants’ financial statements, but makes no mention of similar protection for companies once they become licensees.  A Board member, noting that the statute mentions applicants for both licensure and renewal, said that at all times, a particular company could perhaps be considered an applicant, because companies apply for renewal once they have gained initial licensure.

Mr. Finkelstein offered a motion that the Board issue a position statement that it will continue to operate under the belief that all materials submitted to the DBPR by applicants and licensees for the purpose of achieving or maintaining a license are confidential. 

The motion passed unanimously. 

 

Reports

Office of the Florida Attorney General–Mary Ellen Clark

As part of the agenda, the Board reviewed proposed Rule 61G7-10.002, which relates to change-of-status reporting requirements for employee leasing company licensees.

Ms. Clark indicated that a Statement of Estimated Regulatory Costs (“SERC”) for the proposed Rule had been prepared by Board staff for the Board’s approval. 

The FAPEO representative suggested deleting language in subsection 3 of the proposed Rule that requires licensees to notify the Board via certified mail of any changes in the licensee’s status within 14 days of the change, saying “No one knows what it means and no one’s ever done it.” 

Also under subsection 3, licensees experiencing a change in status must then file new applications and financial information with the Board within 30 days of the change.

According to subsection 2 of the proposed Rule, a change in status could include dissolution of a group into single companies, sale or transfer of company stock or resignation of a controlling person.

Referring to the 14-day notification period, a meeting participant said that it was designed to advise the Board’s Executive Director of the new application submission that would follow.

Board members, recalling that the subject had been discussed at a previous meeting, discussed that a SERC might not be needed.

Ms. Clark said, “If the Board does not believe this will have an adverse economic impact on small business in excess of $200,000, then, no, a SERC is not needed and the Board does not need to review it.”

No reports were presented by the Office of the DBPR General Counsel, the DBPR Executive Director, or the Board Chairperson.

 

Old Business

The Board continued discussion of changes to proposed Rule 61G7-10.002, subsection 3, which reads:

“(3) The notification required in subsection (1) shall be submitted to the executive director by certified mail within 14 days of a change in a licensee’s status. Within 30 days of a change in its status, the licensee, or other entity resulting from such change or both, shall submit new applications, new financial or other information, and new or additional fees to the Board’s office as needed to comply with Part XI of Chapter 468, F.S., and the rules of this Board.”

Board Member Celeste Dockery made a motion to delete the first sentence of subsection 3, which pertains to the 14-day notification requirement.

Ms. Clark said that the language requiring notification via certified mail (and therefore, sender delivery confirmation) was previously added by the Board.   She asked whether the Board intended to delete the entire first sentence or just the specific words providing for the 14-day time period.

It was discussed that, like certified mail, electronic mail also provides the sender with delivery confirmation.

Ms. Dockery then amended her motion, asking Board members to vote on deleting the first sentence of subsection 3 and adding at the end of the sentence that begins “Within 30 days . . .,” the phrase “by any form of mail that provides the sender with delivery confirmation.”

The motion passed unanimously.

 

New Business

The Board briefly discussed proposed 2012 meeting dates.

 

With no further business at hand, the meeting was adjourned.

 

 

Should you have any questions or comments, please contact Colodny Fass.

 

 

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