Document Sample
					                                                          OAH 3-1005-20716-2

                         STATE OF MINNESOTA


In the Matter of the Real Estate                   FINDINGS OF FACT,
Salesperson License Application of                 CONCLUSIONS, AND
Brian Del Terzo                                    RECOMMENDATION

      This matter came on for hearing before Administrative Law Judge
Kathleen D. Sheehy on September 18, 2009, at the Office of Administrative
Hearings, 600 North Robert Street, St. Paul, Minnesota. The record closed at
the conclusion of the hearing.

      Michael J. Tostengard, Assistant Attorney General, 445 Minnesota Street,
Suite 1200, St. Paul, Minnesota 55101 appeared for the Department of
Commerce (the Department or DOC). Jerry P. Probst, Esq., P.O. Box 274,
Savage, MN 55378, appeared for Brian Del Terzo (the Respondent).

                          STATEMENT OF THE ISSUE

       Should the Respondent’s application for a real estate salesperson license
be denied because the recent revocation of his collection agency license and the
conduct underlying that revocation demonstrates that he is untrustworthy or
financially irresponsible or that he engaged in fraudulent, deceptive, or dishonest

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

                              FINDINGS OF FACT

       1.     On May 5, 2009, the Respondent submitted an application for
licensure as a real estate sales person.1

      2.      On the application, Respondent disclosed his involvement in an
administrative proceeding regarding his company’s licensure as a collection
agency, his registration as a debt collector, and his involvement in bankruptcy

    DOC Ex. 1.
        3.    From 2003 to 2006, the Respondent owned and operated a debt
collection agency called Walonick Consulting Company, LLC. The Respondent
had previously worked for Walonick Consulting, and he took over the agency in
2003 when the previous owner retired.3

       4.     Collection agencies are prohibited from commingling money
collected for a customer with the agency’s operating funds or using any part of a
customer’s money in the conduct of the agency’s business.4

        5.     The Respondent had a commercial agreement with MoneyGram,
under which persons seeking to make payments on their debts through
MoneyGram could provide those payments through an instant wire transfer to the
Respondent’s trust account.        Between April 2004 and March of 2006,
MoneyGram erroneously misdirected substantial sums of money (typically
between $2,000 and $4,000 per month) into the Respondent’s trust account for
debts that the Respondent was not charged with collecting. The Respondent
was aware of these erroneous deposits but allowed them to continue as long as
the amount of the erroneous deposits exceeded the amounts that MoneyGram
debited from the trust account each month. In this way, the Respondent used
the “float” on the erroneously deposited funds to increase the funds available in
the trust account over this timeframe.5

      6.      MoneyGram had electronic access to debit the Respondent’s trust
account from July 2004 until March 2006. In March 2006, MoneyGram debited a
substantial sum from the trust account. The Respondent then decided that it was
not appropriate to permit MoneyGram to have electronic access to the trust
account, and he began transferring the erroneous deposits into a separate
checking account, which MoneyGram continued to debit until December 2006.
The erroneous deposits amounted to a total of $58,283.6

       7.     On June 30, 2006, the Respondent entered into an agreement with
Information Access Technology, Inc., for the purchase of a “predictive dialer.” A
predictive dialer is a computerized telephone system that automatically dials
telephone numbers and refers only the calls that are answered to be handled by
an employee. The cost of the system was $26,200 and included a server, a
personal computer, flat panel monitors, and the software and licenses necessary
to use the system.7

      8.     The Respondent borrowed $25,000 from Wells Fargo for the
purpose of purchasing the predictive dialer.8 On July 6, 2009, a cashier’s check

  Test. of Brian Del Terzo.
  Minn. Stat. § 332.37(10) (2008). All references to Minnesota Statutes are to the 2008 edition.
  DOC Ex. 4 & Schedule 7; Testimony of Charles Bolf.
  DOC Ex. 4 & Schedule 5 (Invoice from Information Access Technology, Inc).
  Id. (Wells Fargo UCC Financing Statement including the server, the computer, and the flat panel

payable to Walonick Consulting Company, LLC, and Information Access
Technology, Inc., representing the proceeds of this loan, was deposited into the
Respondent’s trust account. On July 7, 2006, the Respondent made one
telephone transfer out of the trust account in the amount of $8,734.00 for the
predictive dialer equipment; on July 10, 2006, he made an electronic payment
out of the trust account in the amount of $11,477.40 on one of his credit cards.
Other sums were transferred to his operating account over the course of the
month ($3,000 on July 14; $2,500 on July 17; $1,000 on July 20; and $1,000 on
July 27). In this manner, the loan proceeds also functioned to increase the
amount of funds available in the trust account.9

       9.     In July 2006, the Respondent took out a Small Business
Association loan from TCF Bank in the amount of $21,000. This loan was also
intended to fund the purchase of equipment (apparently the same predictive
dialer equipment) in the amount of $20,710.10 A TCF check payable to
Information Access Technology, Inc. and Walonick Consulting Company, LLC,
representing the loan proceeds, was deposited into the Respondent’s operating
account on August 10, 2006.11 The Respondent made no payments on this loan.
On September 28, 2006, the Respondent made an additional payment for the
predictive dialer equipment in the amount of $4,000.12

        10.   In December 2006, TCF Bank seized the trust account, causing
checks written to the Respondent’s clients to be declined for insufficient funds.
The Respondent contacted the Department and successfully obtained the
Department’s assistance in recovering the trust funds for the benefit of the
clients. During the Department’s examination of the Respondent’s bank records,
it learned of the extent to which the Respondent had commingled funds and
otherwise mismanaged the trust account.13

     11.    In December 2006, the Respondent sold Walonick Consulting
Company to ABC Collections, which hired the Respondent as the

       12.    On April 13, 2007, the Respondent executed a Consent Order on
behalf of Walonick Consulting Company, LLC, in which he agreed to revocation
of the collection agency license based on the commingling of client funds with
agency operating funds in violation of Minn. Stat. § 332.37(10).15 On May 10,
2007, the Respondent executed a Consent Order in which he agreed to the
revocation of his debt collector license based on the commingling of client funds

  DOC Ex. 4 & Schedules 4 and 5; Testimony of Charles Bolf.
   DOC Ex. 4 & Schedule 6 (SBA Authorization Form, page 2, ¶ 5 (loan proceeds of $20,710 to
be used for purchase of equipment, $290 for working capital and fees).
   Id (TCF Bank Record).
   DOC Ex. 4 & Schedule 5 (Summary Statement).
   DOC Ex. 4; Testimony of Cheryl Costello.
   DOC Ex. 4 at 3.
   DOC Ex. 2.

with agency operating funds in violation of Minn. Stat. § 332.37(10), and in which
he further agreed that, prior to re-licensure, “Respondent shall demonstrate, to
the Commissioner, that reimbursement has been made to all parties for any
debts arising out of the conduct described herein.”16

       13.   On May 1, 2007, the Dakota County District Court appointed a
receiver, at the request of the Department, for the purpose of liquidating
Walonick Consulting Company, LLC.17

      14.    The clients of Walonick Consulting Company received all funds
owed to them. In addition, MoneyGram received all funds owed to it. The banks,
however, did not. The Respondent filed for personal bankruptcy, and his debts
to Wells Fargo and TCF Bank, as well as numerous other creditors, were
discharged on April 6, 2009.18

        15.    The receiver appointed to liquidate Walonick Consulting Company
took action to collect on the surety bond issued to Walonick Consulting Company
pursuant to Minn. Stat. § 332.43. The Travelers Casualty & Surety Co. of
America paid $40,000 in response to the claim. Those bond proceeds will be
distributed to Wells Fargo and TCF Bank by the receiver.19

       Based on these Findings of Fact, the Administrative Law Judge makes the


       1.      The ALJ and the Commissioner of Commerce (Commissioner)
have jurisdiction to consider this matter.20

      2.    Respondent received due, proper and timely notice of the charges
against him and of the time and place of the hearing. He timely requested a
hearing on the matter. This matter is, therefore, properly before the
Commissioner and the Administrative Law judge.

        3.    The burden of proof in this matter is on the Respondent to prove
that a license should be granted.21

       4.    The Commissioner may deny a license to an applicant if the
Commissioner finds that the applicant has engaged in an act or practice, whether
or not the act or practice directly involves the business for which the person is
licensed or authorized, which demonstrates that the applicant is “untrustworthy,

   DOC Ex. 2.
   DOC Ex. 3.
   Respondent’s Ex. 10.
   Test. of C. Bolf.
   Minn. Stat. §§ 45.027, subd. 7 and 14.50.
   Minn. R. pt. 1400.7300, subp. 5.

financially irresponsible, or otherwise incompetent or unqualified to act under the
authority or license granted by the commissioner”.22

      5.     Respondent has failed to demonstrate by a preponderance of the
evidence that he is financially responsible enough to hold a real estate
salesperson’s license within the meaning of Minn. Stat. §45.027, subd. 7(a)(4).

       6.      The Commissioner may by order deny a real estate salesperson’s
license if the Commissioner finds that the order is in the public interest and the
applicant has engaged in a fraudulent, deceptive, or dishonest practice.23

       7.     The Respondent’s conduct in obtaining two different bank loans
intended for the purchase of the same equipment, and his use of the loan
proceeds to pay other debts, is deceptive conduct sufficient to preclude him from
obtaining a real estate salesperson’s license.

      8.     Denial of the Respondent’s                application for a real      estate
salesperson’s license is in the public interest.

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


      The decision to deny the application of Respondent for a real estate
salesperson license should be AFFIRMED.

Dated: October 6, 2009

                                                       s/Kathleen D. Sheehy
                                                        KATHLEEN D. SHEEHY
                                                        Administrative Law Judge

Reported:          Digitally recorded, no transcript prepared


       This report is a recommendation, not a final decision. The Commissioner
of the Department of Commerce will make the final decision after a review of the
record. The Commissioner may adopt, reject or modify these Findings of Fact,
Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the final
decision of the Commissioner shall not be made until this Report has been made
     Minn. Stat. § 45.027, subd.7(a)(4).
     Minn. Stat. § 82.35, subd. 1(b)(2008).

available to the parties to the proceeding for at least ten days. An opportunity
must be afforded to each party adversely affected by this Report to file
exceptions and present argument to the Commissioner. Parties should contact
Deputy Commissioner Emmanuel Munson-Regala, 85 Seventh Place East, Suite
500, St. Paul, Minnesota 55101, 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.

       Under Minn. Stat. § 14.63, subd. 1, the agency is required to serve its final
decision upon each party and the Administrative Law Judge by first-class mail or
as otherwise provided by law.


       The Respondent maintains that although he may have shown very poor
business judgment in running his collection agency, he did nothing illegal,
dishonest, or fraudulent and that he is fully competent to be a real estate
salesperson. The Respondent’s testimony during the hearing demonstrated,
however, that he lacks significant insight into the seriousness of his
mismanagement of the trust account and the business in general. The
Respondent maintained that no client funds were misappropriated; that he
attempted to remedy the situation with MoneyGram by setting up a separate
account; and that his only mistake was in failing to transfer the Wells Fargo loan
proceeds out of the trust account before using the proceeds to make a payment
on the predictive dialer equipment and his credit card.

        It is true that all of the Respondent’s clients received the funds owed to
them. The point is, however, that the Respondent did not properly protect the
client funds in the trust account. The Respondent used the trust account as a
depository for MoneyGram’s erroneous deposits for almost two years; he also
allowed MoneyGram to electronically debit funds from the trust account for the
almost the same period of time. This was financially irresponsible. In addition,
he left the Wells Fargo loan proceeds in the trust account for one month,
withdrawing them gradually over that time, which had the effect of increasing the
funds available for payment to clients. This was improper commingling of the
agency’s operating funds with client funds.

       The Respondent also maintained that TCF Bank was well aware of the
Wells Fargo loan and security agreement and the fact that the Wells Fargo loan
had priority over it. He maintained that the TCF loan was intended to be used for
operating expenses as well as equipment purchases; the loan documentation,

however, suggests otherwise. The TCF loan proceeds were intended for
purchase of the same predictive dialer equipment, with only a minimal sum
designated for working capital. The Respondent did make about $12,000 in
payments toward the predictive dialer equipment, but he used the remainder of
both loans (which together totaled $46,000) for other purposes, including
payment of credit card debt. This was deceptive conduct.

         Finally, the Respondent’s bankruptcy filing reflects that Respondent’s
liability for almost $90,000 in credit card debt, as well as his personal liability for
the business loans, were discharged in April 2009, about one month before the
Respondent submitted his application for a real estate salesperson license. This
is even more recent evidence of financial irresponsibility.

       As a result of the aforementioned conduct, the Respondent’s collection
agency license was revoked, a receiver was appointed, and the claim on his
surety bond was paid based on his insolvency. The Respondent’s conduct has
resulted in financial harm to the state and to many private parties. A real estate
salesperson handles client funds and has access to funds held in trust. The
record as a whole supports the Commissioner’s determination that the
Respondent’s license application should be denied because he has engaged in
conduct demonstrating that he is financially irresponsible, and his conduct with
regard to the bank loans obtained in the summer of 2006 was deceptive.