785 DOS 09
STATE OF NEW YORK
DEPARTMENT OF STATE
OFFICE OF ADMINISTRATIVE HEARINGS
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In the Matter of the Complaint of
DEPARTMENT OF STATE
DIVISION OF LICENSING SERVICES,
Complainant, DECISION
-against-
CELESTE M. PEIXOTO,
Respondent.
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The above matter was heard by the undersigned, Scott NeJame, on September 15, 2008 at the office of the Department of State located at 123 William Street, New York, New York.
The respondent was present and represented by Robert J. DeLasho, Esq., DeLASHO Law Office, 35 E. Grassy Sprain Road, Suite 506, Yonkers, New York 10710.
The complainant was represented at the hearing by David Mossberg, Esq. pursuant to a complaint prepared by Senior Attorney Linda D. Cleary, Esq.
COMPLAINT
The complaint alleges that the respondent’s real estate broker license should be suspended or revoked due to her being convicted of a Federal felony, in which she participated in and facilitated a fraudulent scheme to defraud and made a material false statement to a HUD investigator.
FINDINGS OF FACT
1) On or about April 30, 2008, the complainant served the respondent with the notice of hearing scheduling the hearing for August 19, 2008 and complaint by certified mail at one of her last known business addresses. No evidence was presented regarding the results of that service. The hearing was subsequently adjourned to September 15, 2008 (State’s Ex. 1).
2) The respondent is licensed as a real estate broker associated with Zeca Realty at 192 Nepperhan Avenue, Yonkers, New York for the period of at least August 24, 2007 to August 24, 2009. She was also licensed as an individual real estate broker for the period of at least July 24, 2007 to July 24, 2009 (State’s Ex. 2). The tribunal takes official notice of the records of the Department of State and finds that the respondent renewed her two broker’s licenses for the respective two year renewal periods ending on August 24, 2011 and July 24, 2011, respectively. At the hearing, the respondent testified that, thirty-two years ago, her husband began a travel agency, and that it subsequently expanded by also becoming a real estate agency. The respondent has worked for a significant period of time as a real estate broker.
3) On November 12, 2003, the respondent pled guilty in the United States District Court for the Southern District of New York to a charge of Conspiracy to Defraud the Department of Housing and Urban Development (“HUD”) and the Yonkers Municipal Housing Authority (“YMHA”) in violation of 18 USC §371, a class D Federal felony. On February 13, 2004, she was sentenced to six months and fifteen days home confinement and three years probation, and ordered to pay a $5,000 fine and $85,449 restitution (joint and several with other defendants) (State’s Ex. 8). On October 16, 2006, the respondent was issued a certificate of relief from disabilities (State’s Ex. 9).
4) HUD provides federal housing benefits to low income individuals though a rental assistance program (Section 8). In Yonkers, New York, the YMHA administers the Section 8 program. To qualify for Section 8 benefits, an applicant must establish that he or she is paying monthly rent to a landlord and must establish that his or her income falls below a certain threshold. Once approved, the Federal government pays part of the applicant’s monthly rent directly to the applicant’s landlord (State’s Ex. 8).
5) In general, beginning in approximately 1995 and continuing until 2002, the respondent instructed, persuaded, advised and influenced certain of her real estate customers to buy houses in Yonkers which they could not otherwise afford, and to finance the purchase of those houses by fraudulently applying for and receiving Section 8 benefits to which they were not entitled. In order to obtain Section 8 money, the respondent and others created and used false documents such as fake leases, fake real estate deeds and fake rental receipts. The respondent collected real estate brokerage commissions on at least one of those transactions (State’s Ex. 8).
6) In one of the transactions, in 1991, the respondent arranged and facilitated the purchase of a home on Colgate Avenue in Yonkers (“the Colgate house”) by Victoria and Augusto Beltran. The Beltrans purchased the home from respondent’s previous customer, Maria Guerreiro. In 1995, the respondent helped prepare a fraudulent lease for the Colgate house which was submitted to the YMHA for Victoria Beltran’s son, Alfredo Beltran, to fraudulently receive Section 8 benefits. The lease made it appear that Ms. Guerreiro was renting the Colgate house to Alfredo Beltran when, in fact, Ms. Guerreiro had moved to Portugal and knew nothing of the lease (State’s Ex. 8).
7) Alfredo Beltran and his wife were approved for Section 8 benefits and continued to receive such benefits by misrepresenting their family income, by misrepresenting that they rented the house from Ms. Guerreiro and by failing to report that the true owners of the house, the Beltrans, also lived in the house. The monthly Section 8 benefit checks made payable to Ms. Guerreiro were delivered monthly to the respondent’s business office and were cashed by the respondent from September 1995 to September 1998. The respondent gave the money to Victoria Beltran. Between January 1995 and September 1998, the respondent collected $45,692 in fraudulently procured Section 8 benefits (State’s Ex. 8).
8) When Ms. Guerreiro moved to Portugal, the respondent told her that she would fix up the Colgate house and sell it on her behalf. The respondent even asked Ms. Guerreiro for money to cover expenses for improvements to the house. Unbeknownst to Ms. Guerreiro, while she was in Portugal, the respondent sold the Colgate house to the Beltrans. In order to accomplish the sale, Ms. Guerreiro’s name on sale documents was forged. Ms. Guerreiro discovered the sale when she returned to the United States and, without the respondent’s knowledge, went to the Colgate house and found Victoria Beltran living in the home that she thought she still owned. Ms. Guerreiro confronted the respondent, who then paid her $20,000 (State’s Ex. 8).
9) Another transaction involved Juana Diaz, who had been receiving Section 8 benefits prior to 1996. Between 1996 and 2000, Juana Diaz disclosed to YMHA that she lived alone with her two children when, in truth, she lived with her children and husband, Wilfredo Diaz. She also failed to report her husband’s income, which would have made her ineligible to receive Section 8 benefits (State’s Ex. 8).
10) Juana Diaz submitted a lease to YMHA indicating that beginning November 1, 1996, she rented an apartment on Seminary Avenue in Yonkers (“the Seminary house”) from Antonio Almeida, a relative of the respondent. That same month, YMHA began sending Section 8 checks for Juana Diaz to Antonio Almeida at the Seminary house. The respondent, who arranged for the Diazes to rent the Seminary house, knew that Juana Diaz was defrauding YMHA/HUD and encouraged the Diazes to continue the fraud so that Section 8 monies would flow from the Diazes to the Almeidas. The respondent directed the Diazes to place the Section 8 monies in a number of bank accounts for the Almeidas (State’s Ex. 8).
11) In February 2000, the respondent arranged and facilitated Juana Diaz’ purchase of the Seminary house from the Almeidas. With the respondent’s guidance and assistance, a false deed was submitted to YMHA along with Juana Diaz’ application for Section 8 benefits. With the respondent’s knowledge, the false deed made it appear that the Seminary house was owned by “Wilfredo Chavez,” who is actually Wilfredo Diaz, and that Juana Diaz was renting the property from Wilfredo. From February 2000 through September 2000, Wilfredo Diaz received Section 8 benefit checks, who cashed or deposited them into one or more bank accounts as directed by the respondent. In four months in 2000, the respondent received a total of $7,011.17 from Juana Diaz for her role in arranging and facilitating Juana Diaz’ purchase of the Seminary house (State’s Ex. 8).
12) Between 1996 and 2000, the Diazes received $60,180 in Section 8 benefits to which they were not entitled. The respondent was jointly and severally liable with the Diazes for $39,757 of that amount for her involvement in the scheme between [September 1995] and September 2000 (State’s Ex. 8).
13) The pre-sentence investigation report referred to the respondent’s having been charged with facilitating and arranging a fraudulent transaction involving the Mata family and with obstructing justice during the investigation of the Beltran transaction (State’s Ex. 8). Since the respondent’s criminal attorney disputed those references, I am not according any weight to those charges nor am I considering them in arriving at this decision.
14) By applications dated June 23, 2006 (not received by the complainant until July 2007) and August 24, 2007, the respondent applied for the two broker’s licenses she currently holds (State’s Ex. 9 and 10). Due to human error, the license applications were not forwarded to the complainant’s Application Audit Unit, where they would have been investigated, particularly with regard to the respondent’s criminal conviction (State’s Ex. 11).
OPINION AND CONCLUSIONS OF LAW
I- In weighing whether the respondent’s license should be revoked or suspended, it is not necessary to consider the provisions of Correction Law Article 23-A, which "by its terms applies only to the 'application' for a license by a person previously convicted of a crime...; it has no bearing on disciplinary proceedings against persons already licensed." Mosner v. Ambach, 66 AD2d 912, 410 NYS2d 937, 938 (3rd Dept. 1978); Matter of Glucksman, 57 AD2d 205, 394 NYS2d 191 (1st Dept. 1977); Pisano v. McKenna, 120 Misc.2d 536, 466 NYS2d 231 (NY Sup. Ct. 1983); Markman v. Department of Education, 131 AD2d 908, 516 NYS2d 359 (3rd Dept. 1987). Nor does the issuance of the certificate of relief from disabilities deprive the Department of State of its discretion in considering what effect, if any, to give the conviction. Correction Law §701(3); People v. Honeckman, 125 Misc2d 1000, 480 NYS2d 829 (NY Sup. Ct. 1984); Family Liquor Store, Inc. v. New York State Liquor Authority, 283 AD2d 191, 724 NYS2d 61 (1st Dept. 2001).
II- The schemes in which the respondent participated directly reflect on her ability to fulfill the fiduciary duties which are basic to the business of real estate brokerage. The relationship of agent and principal is fiduciary in nature, "...founded on trust or confidence reposed by one person in the integrity and fidelity of another." Mobil Oil Corp. v. Rubenfeld, 72 Misc.2d 392, 339 NYS2d 623, 632 (NY Civil Ct. 1972), aff’d 77 Misc.2d 962, 357 NYS2d 589, rev’d on other grounds 48 AD2d 428, 370 NYS2d 943; Wende C. v. United Methodist Church, 6 AD3d 1047, 776 NYS2d 390 (4th Dept. 2004). Included in the fundamental duties of such a fiduciary are reasonable care, confidentiality, good faith, undivided loyalty, obedience, duty to account, and full and fair disclosure. Real Property Law §443; 19 NYCRR §175.2; L.A. Grant Realty, Inc. v. Cuomo, 58 AD2d 251, 396 NYS2d 524 (4th Dept. 1977); Precision Glass Tinting, Inc. v. Long, 293 AD2d 594, 740 NYS2d 138 (2nd Dept. 2002); Re/Max All-Pro Realty, Inc. v. New York State Dept. of State, 292 AD2d 831, 739 NYS2d 321 (4th Dept. 2002) (quoting Stevens, Inc. v. Kings Vil. Corp., 234 AD2d 287, 288, 650 NYS2d 307 (2nd Dept. 1996)). Such duties are imposed upon real estate licensees by license law, rules and regulations, contract law, the principles of the law of agency, and tort law. The object of these rigorous standards of performance is to secure fidelity from the agent to the principal and to insure the transaction of the business of the agency to the best advantage of the principal. Department of State v. Short Term Housing, 31 DOS 90, conf'd. sub nom Short Term Housing v. Department of State, 176 AD2d 619, 575 NYS2d 61 (1991); Department of State v. Goldstein, 7 DOS 87, conf'd. Sub nom Goldstein v. Department of State, 144 AD2d 463, 533 NYS2d 1002 (2nd Dept. 1988); see also, Coldwell Banker Residential Real Estate v. Berner, 202 AD2d 949, 609 NYS2d 948 (3rd Dept. 1994).
The respondent's conduct, as clearly established by her guilty plea and as illuminated by the pre-sentence investigation report, was a demonstration of egregious untrustworthiness. She participated in schemes which allowed two families to purchase houses which they otherwise could not afford, and she helped them pay for those houses by defrauding HUD and YMHA into paying $85,449. The fraud included, but was not limited to, fabricating leases, real estate deeds and rental receipts. Such fraud undermines the credibility of the subsidized housing system and, especially in light of current events, poses a significant threat to our economy.
The respondent’s testimony was neither credible nor re-assuring. The respondent may have cooperated with the U.S. Attorney’s Office by candidly admitting her participation in the fraud schemes and truthfully answering questions. At the hearing, she did none of that. Even though she was asked a number of times and was given multiple opportunities to explain what she did and how she was involved in the schemes, the respondent continually professed her innocence, that she never cheated the government and how she never took a penny from anyone. She continued by arguing how charitable she is, how she should be given a medal, that everything was misinterpreted, that the families that committed the crimes involving Section 8 did it themselves without her knowledge or involvement, and that she was blamed but was told by her mother to never speak ill of her clients that put food on her table. The respondent acknowledged on cross examination that she had extensive real estate experience and that she rented to Section 8 applicants and recipients, but she was never involved in preparing any documents related to Section 8 transactions. In truth, however, and by virtue of her cooperation with the U.S. Attorney’s Office and subsequent guilty plea, she helped families buy and pay for houses by lying to the government so that the government would pay most of their mortgages. She also lied to a homeowner (Ms. Guerreiro) and sold her house without her knowledge in furtherance of one of the schemes. It is absolutely unbelievable to me that the Beltran and Diaz families concocted and carried out their schemes without any involvement of the respondent, a seasoned real estate professional. The fact that she did not accept responsibility for her actions is a clear indication that she has not been rehabilitated.
Under the familiar principles of collateral estoppel, a licensee is precluded at an administrative hearing from relitigating the issue of her guilt in a criminal proceeding, in which a higher standard of proof was applied and in which rigorous safeguards were imposed to insure against an unjust conviction. Matter of Levy, 37 NY2d 279, 372 NYS2d 41 (1975); Durante v. Board of Regents of State University of New York, 70 AD2d 692, 416 NYS2d 401 (3rd Dept. 1979); Matter of Janoff, 242 AD2d 27, 672 NYS2d 89 (1st Dept. 1998). However, the licensee may introduce competent evidence in order to explain or mitigate the significance of her criminal conviction, such as the character of the offense committed and the nature of the sanction, if any, to be imposed. “The proper frame of reference, of course, is the protection of the public interest, for while a disciplinary proceeding has aspects of the imposition of punishment on the [licensee] charged, its primary focus must be on protection of the public.” Matter of Levy, supra, 37 NY2d at 282, 372 NYS2d at 44. In this case, the respondent did not introduce any evidence which explained or mitigated the significance of her conviction, and her testimony only had the opposite effect, i.e., it was an attempt to minimize the magnitude of her actions and criminal behavior.
III- It is irrelevant that the respondent may not have been acting, in part, as a real estate broker in the subject transactions. Actions for which a license as a real estate broker are not required may be considered in determining a licensee's untrustworthiness where such actions clearly indicate that the respondent cannot be expected to deal honestly and fairly with the public. Dovale v. Paterson, 85 AD2d 602, 444 NYS2d 694, 694 (2nd Dept. 1981); Blackmore v. Shaffer, 128 AD2d 494, 512 NYS2d 421 (2nd Dept. 1987); Smith v. Paterson, 88 AD2d 917, 450 NYS2d 577 (2nd Dept. 1982).
IV- The complainant granted the respondent’s applications for real estate broker’s licenses even though the respondent divulged her crime on her applications. That, however, does not create a valid claim of laches or collateral estoppel. The fact that she was granted licenses and remained licensed since then only establishes that she did not suffer prejudice. Eich v. Shaffer, 136 AD 2d 701, 523 NYS2d 902 (1988); DLS v. Maneri, 47 DOS 96 (1996), conf’d, 240 AD2d 748, 660 NYS2d 26 (2nd Dept. 1997).
V- This case is similar in nature to DLS v. Maneri, supra, and warrants the imposition of the most stringent sanction possible against the respondent.
DETERMINATION
WHEREFORE, IT IS HEREBY DETERMINED THAT Celeste M. Peixoto has engaged in fraud and demonstrated untrustworthiness in violation of Real Property Law §441-c, and accordingly, pursuant to Real Property Law §441-c, her licenses as a real estate broker are revoked, effective September 1, 2009. She is directed to send her license certificates and pocket cards, by certified mail, to Norma Rosario, Department of State, Division of Licensing Services, 80 South Swan Street, P.O. Box 22001, Albany, New York 12201-2201.
Scott NeJame
Administrative Law Judge
Dated: August 10, 2009