456 DOS 10

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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-

ROBERT W. SPEAR and BUFFALO

SECURITY CO, INC.,

                   Respondents.

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    The above matter was heard by the undersigned, Scott NeJame, on November 4, 2008 and August 13, 2009 at the office of the Department of State located at 65 Court Street, Buffalo, New York.

    Respondent Robert W. Spear (“respondent Spear”), was present and, after being advised of his right to be represented by an attorney, chose to represent himself. Respondent Buffalo Security Co, Inc. (“respondent Buffalo Security”) was represented by David P. Marcus, Esq. of Marcus & Cinelli LLP, 2821 Wehrle Drive, Suite 3, Williamsville, New York 14221.

    The complainant was represented by Senior Attorney Linda D. Cleary, Esq.

COMPLAINT

    The amended complaint alleges that the respondents: employed unregistered security guards; employed security guards who were not associated with respondent Buffalo Security; failed to obtain, maintain or file employee statements or fingerprint cards for security guard and non-security guard employees and registration-exempt security guard employees; failed to file a non-qualifying application for a principal in their company; and knowingly employed two convicted felons without them having received or submitted documents removing the disability.

FINDINGS OF FACT

History and Proceedings

    1) The notice of hearing initially scheduling the hearing for December 4, 2007 together with a copy of the original complaint that was drafted by Associate Attorney Whitney A. Clark, was served by certified mail addressed to the respondents at their licensed address as it appears in the records of the Department of State and posted on November 15, 2007 (State’s Ex. 1). The hearing was adjourned to December 4, 2007, April 9, 2008, August 6, 2008 and peremptorily to November 4, 2008. The hearing was held on November 4, 2008, after which Mr. Marcus was permitted to submit a written brief by December 15, 2008. Respondent Spears was permitted to issue a written statement or brief by December 31, 2008. Ms. Cleary was given a 30 day time limit from the date that she received Mr. Marcus’ brief (and Mr. Spear’s brief, if he chose to submit one) within which to submit the complainant’s brief (Hearing transcript, pp. 134-138).

    2) By cover letter dated November 20, 2008 and motion papers, Ms. Cleary moved the tribunal to re-open the hearing and amend the complaint. Neither Mr. Marcus nor respondent Spear had submitted a brief to the tribunal as of that date. By letter dated November 25, 2008, the tribunal notified Mr. Marcus and respondent Spear that they should use the current deadlines to respond to Ms. Cleary’s motion. The tribunal also provided, “After I rule on the motion, and depending on the outcome, I will either schedule another hearing date or establish new dates for the parties’ submission of their briefs/summations.”

    3) By cover letter dated December 11, 2008, Mr. Marcus submitted respondent Buffalo Security’s opposition to reopen the hearing and amend the complaint. Respondent Spears did not submit a response to Ms. Cleary’s motion.

    4) By letter dated January 13, 2009, the tribunal granted the complainant’s motion to reopen the hearing and amend its complaint (re-printed below).

    5) The tribunal scheduled the hearing to resume on April 22, 2009, but the case was adjourned to June 10, 2009. Mr. Marcus requested an adjournment of the June 10, 2009 hearing date, but the tribunal denied that request. On June 10, 2009, all of the parties and/or their attorneys were present except for respondent Spear, because the tribunal had sent the adjournment notice to respondent Spear’s old address. Therefore, the tribunal adjourned the hearing to August 13, 2009.

    6) On August 13, 2009, the hearing continued and was completed. The attorneys were granted time to submit post-hearing briefs. On October 9, 2009, respondent Spear submitted a one-page letter to the tribunal. On October 15, 2009, Mr. Marcus submitted respondent Buffalo Security’s brief. On November 13, 2009, Ms. Cleary submitted the complainant’s brief.

License Status and History

    7) Respondent Spear was the qualifying officer and president of the corporate watch, guard or patrol agency respondent Buffalo Security for the period of September 6, 2005 to June 30, 2008. On June 30, 2008, he changed his status to an individual watch, guard or patrol agency with a license that expired on September 5, 2009 (State’s Ex. 3). The tribunal takes official notice of the records of the Department of State and finds that respondent Spear is also commissioned as a notary public with a commission that is due to expire on May 31, 2010, registered as an armed car guard with a registration that is scheduled to expire on March 18, 2012, and registered as an armed security guard with a registration due to expire on March 29, 2011.

    8) On January 8, 2008, David D’Amato (“Mr. D’Amato”) was issued a corporate private investigator’s license as the qualifying officer and president of respondent Buffalo Security at 3960 Harlem Road, Suite 1A, Amherst, New York. Carl G’merek (“Mr. G’merek”) was listed as a non-qualifying officer and secretary (State’s Ex. 2). This private investigator’s license was renewed for the period of January 8, 2010 through January 7, 2012, but under the business name of Buffalo Security and Investigation LLC. For the period of February 8, 2008 through February 7, 2010, respondent Buffalo Security was issued a private investigator branch office license at 1733 Norton Street, Suite 2, Rochester, New York, with Mr. D’Amato being the qualifier (State’s Ex. 2). It is not clear whether or not that license was renewed.

Findings of Fact

    9) On April 28, 2005, respondent Jerome A. Bauer (“Mr. Bauer”), the qualifying officer of respondent Bison Security of Western New York, Inc., d/b/a Bison Security Co. (“Bison Security”), executed a consent order with the Department of State, Division of Licensing Services (“DLS”), in which the respondents pled nolo contendere to employing 68 unregistered security guards, employing 83 security guards who were not registered with DLS as being associated with the respondents, failing to maintain records or other proof of due diligence for 83 security guard employees, and failing to obtain and/or maintain employee statements and/or obtain, maintain and/or file fingerprint cards for 32 non-security guard employees, and consented to the revocation of their watch, guard or patrol agency license effective July 1, 2005 (State’s Ex. 5).

    10) On or about June 26, 2006, the DLS received an anonymous complaint alleging that Mr. Bauer and the president of Bison Security, Douglas Citron (“Mr. Citron”), fraudulently maintained their ownership and operation of respondent Buffalo Security after the licenses of Mr. Bauer and Bison Security were revoked (State’s Ex. 4).

    11) During the hearing, the parties stipulated that Messrs. Bauer and Citron were employed by respondent Buffalo Security from June 1, 2006 through March 30, 2006 (Hearing transcript, pp. 50-51).

    12) Department of State License Investigator John Boyle (“Inv. Boyle”) conducted an audit and investigation of the respondents’ personnel and payroll records for the period of September 1, 2006 through February 11, 2007 (State’s Ex. 6) and compared them to the DLS’ records for that same time period. His investigation revealed the following:

    a.  The respondents employed 6 unregistered security guards (State’s Ex. 6, 9 and 10);

    b.  The respondents employed 8 security guards who were not registered because their registrations had either been denied or expired (State’s Ex. 6, 11 and 12);

    c.  The respondents employed 32 security guards who were not registered with DLS as being associated with the respondents (State’s Ex. 6, 13 and 14);¹

    d.  The respondents employed 4 non-security guard employees, 2 for which they failed to obtain and maintain employee statements, 1 for which the employee statement and fingerprint card was undated (Mr. Bauer), and 1 of which was fingerprinted 4 days after he was hired (Mr. Citron) (State’s Ex. 6 and 15);

    e.  Mr. G’merek was the owner/president of respondent Buffalo Security from December 16, 2005 (State’s Ex. 8) until he sold it to Mr. D’Amato in March or April 2008 (Hearing transcript, pp. 14, 120-121). Mr. G’merek failed to file a non-qualifier application with the DLS for his position with the company.

    f.  The respondents failed to maintain records or other proof (employee statements and fingerprint cards) of having exercised the statutorily required due diligence with regard to the hiring of 62 security guards (no employee statements, transaction numbers and dates in 61 files and 1 security guard who was fingerprinted 9 days after he was hired and 4 days after his start date (Roger E. Huff)) (State’s Ex. 16-17).

    13) In conducting his investigation and audit in March 2007, Inv. Boyle learned that Messrs. Bauer and Citron had been convicted of felonies, were employed by the respondents, that they did much of the scheduling, and that they dealt with customers, and that Mr. Citron appeared to be in control of the hiring and firing of employees. Inv. Boyle learned and Mr. D’Amato testified that Mr. G’merek, one of the owners of respondent Buffalo Security, terminated Messrs. Bauer and Citron after Inv. Boyle began his investigation and after Mr. G’merek learned that there were potential violations of the law.

    14) The respondents, including Messrs. D’Amato and G’mereck, were cooperative with Inv. Boyle in his investigation and audit.

    15) Mr. D’Amato testified for the respondents. He started as a security guard for Bison Security and continued when it became respondent Buffalo Security. He became the qualifier for respondent Buffalo Security in January 2008 and a principal in March or April 2008 by purchasing the company’s assets. Upon becoming a principal, Mr. D’Amato made changes to the company, diversified it, hired a full-time trainer to stay on top of the security guard registry, improved the company’s communication with the DLS, and improved and organized their records and files relating to security guard hirees.

OPINION AND CONCLUSIONS OF LAW

    I- As the party which initiated the hearing, the burden is on the complainant to prove, by substantial evidence, the truth of the charges set forth in the complaint. State Administrative Procedure Act §306(1). Substantial evidence “means such relevant proof as a reasonable mind may accept as adequate to support a conclusion or ultimate fact... More than seeming or imaginary, it is less than a preponderance of the evidence, overwhelming evidence or evidence beyond a reasonable doubt (citations omitted).” 300 Gramatan Avenue Associates v. State Div. of Human Rights, 45 NY2d 176, 408 NYS2d 54, 56-57 (1978); Tutuianu v. New York State, 22 AD3d 503, 802 NYS2d 465 (2^nd Dept. 2005). “In final analysis, substantial evidence consists of proof within the whole record of such quality and quantity as to generate conviction in and persuade a fair and detached fact finder that, from that proof as a premise, a conclusion or ultimate fact may be extracted reasonably probatively and logically (citations omitted).” 300 Gramatan Avenue Associates, supra, 408 NYS2d at 57.

    II- General Business Law §72 sets forth the requirements for any person, firm, partnership, limited liability company or corporation seeking to become licensed as a watch, guard or patrol agency. General Business Law §81(1) then sets forth a requirement that the holder of any license be “legally responsible for the good conduct in the business of each and every person so employed.” 19 NYCRR §170.13 re-affirms and details that requirement by providing, “All licensees...shall be required to provide supervision of all employees engaged in the business of...security guard work. Such supervision shall consist of regular, frequent and consistent guidance, instruction, oversight and superintendence by the licensee with respect to...security guard work conducted by the licensee, and all matters relating thereto.” Thus, the qualifying officer of a watch, guard or patrol agency is responsible for the supervision of the activities of that corporation, Department of State v. Greenberg, 32 DOS 87, conf’d. Greenberg v. Shaffer, 139 AD2d 648, 527 NYS2d 287 (2^nd Dept. 1988); DLS v. Vick, 122 DOS 09 (2009) (citing Greenberg).

    As qualifying officer, respondent Spear was responsible for supervising the activities of respondent Buffalo Security and is equally liable with respondent Buffalo Security for any violations found. In his post-hearing submission, respondent Spear claimed that he was used as a pawn by the old and new owners of the company. While telling him that they were going to operate the company legally, the old and new owners went behind his back and conducted the business illegally. Respondent Spear’s statement was not made under oath and was not subject to cross examination during the hearing. He did not offer any testimony at the hearing as to his involvement in operating the company during the relevant time period. Inv. Boyle did testify that he met with respondent Spear and that respondent Spear provided him with the company’s payroll records and other documents.

    In sum, I cannot give weight to respondent Spear’s assertion that respondent Buffalo Security was being operated illegally during the time he was the qualifier. Either respondent Spear was supervising the company himself through regular, frequent and consistent oversight, or he was allowing an unlicensed, ineligible person to operate the company, which is a demonstration of personal incompetence and untrustworthiness. Either way, both he and respondent Buffalo Security are responsible for any violations alleged in the complaint.

    III- In addition to being licensed as a watch, guard or patrol agency as defined by General Business Law §71, pursuant to General Business Law §89-f(5), respondent Buffalo Security is a security guard company because it employs security guards. Therefore, it is subject to the provisions of both the statute and the regulations regarding the hiring of security guards (General Business Law Article 7-A and 19 NYCRR Part 174).

    IV- By employing 6 unregistered security guards, the respondents violated General Business Law §89-g(1) and 19 NYCRR §174.6(c) 6 times.

    V- “Generally, leave to amend a pleading is freely granted in the absence of prejudice or surprise to the opposing party. Mere lateness is not a barrier to amendment. To establish prejudice, which must be significant (see Edenwald Contr. Co. v. City of New York, 60 N.Y.2d 957, 471 N.Y.S.2d 55, 459 N.E.2d 164 [1983] ), there must be some indication that the opposing party will have been hindered in the preparation of its case or prevented from taking some measure to support its position (see Loomis v. Civetta Corinno Constr. Corp., 54 N.Y.2d 18, 444 N.Y.S.2d 571, 429 N.E.2d 90 [1981] ).” Spitzer v. Schussel, 48 AD3d 233, 850 NYS2d 431, 432 (1^st Dept. 2008); Miles v. City of New York, 251 AD2d 667, 676 NYS2d 485 (2^nd Dept. 1998), lv. denied 92 NY2d 818, 684 NYS2d 489; Cerio v. New York City Transit Authority, 228 AD2d 676, 645 NYS2d 822 (2^nd Dept. 1996); Dougherty v. Dougherty, 256 Ad2d 714, 680 NYS2d 759 (3^rd Dept. 1998); Ford v. Martino, 281 Ad2d 587, 722 NYS2d 574 (2^nd Dept. 2001) (pleadings may be amended either before or after judgment).

    I am, sua sponte, amending the pleadings to conform them to the proof by alleging that the respondents employed 8 security guards who were not registered because their registrations had either been denied or expired (rather than 6 as alleged in the complaint), and the respondents employed 32 security guards who were not registered with DLS as being associated with the respondents (rather than the 34 as alleged in the complaint). The complainant’s proof that was placed in evidence at the hearing was fully litigated by the parties and that proof clearly reflects the more accurate numbers as just-described. Neither of the parties can be surprised nor prejudiced by what the records truly reflect.

    VI- By employing 8 security guards who were not registered because their registrations had either been denied or expired, the respondents violated General Business Law §89-g(1) and 19 NYCRR §174.6(c) 8 times.

    VII- By employing 32 security guards without notifying the DLS of that employment (i.e., “unassociated” security guards), the respondents violated General Business Law §89-g(5) and 19 NYCRR §174.6(a) 32 times.

    VIII- By employing 4 non-security guard employees, 2 for which they failed to obtain and maintain employee statements, 1 for which the employee statement and fingerprint card was undated (Mr. Bauer), and 1 of which was fingerprinted four days after he was hired (Mr. Citron), the respondents violated General Business Law §81 (as well as 19 NYCRR §§170.2 and 170.3) 4 times.

    IX- The respondents failed to file a non-qualifying application for owner/president Carl Gmerek in violation of General Business Law §72.

    X- By failing to maintain records or other proof (employee statements and fingerprint cards) of having exercised the statutorily required due diligence with regard to the hiring of 62 security guards (no employee statements, transaction numbers and dates in 61 files and 1 security guard who was fingerprinted 9 days after he was hired and 4 days after his start date (Roger E. Huff)), the respondents violated General Business Law §89-g(7) and 19 NYCRR §174.6 (as well as 19 NYCRR §§170.2 and 170.3) 62 times.

    XI- The charge in the amended complaint that the respondents employed 2 people who had been convicted of a felony, and who had not subsequently received a document removing that disability, is dismissed inasmuch as there is not sufficient evidence supporting this charge. Even though respondent Buffalo Security’s counsel referred to the 2 individuals as felons and the DLS’ investigator learned that they had been so convicted, documents relating to and confirming their convictions (and potentially, the lack of a document removing that disability) was not allowed in evidence.

    XII- Most of the arguments made by respondent Buffalo Security’s counsel in its post-hearing brief, which were the same arguments it made in its opposition to re-open the hearing and amend the complaint, are procedural in nature and not substantive.

    Substantively, the respondents have not disputed the numbers of security guard and non-security guard violations that were established through a comparison of the respondents’ records with the complainant’s records. Procedurally, and as will be addressed below, respondent Buffalo Security was given every opportunity to contest and litigate each and every aspect of the complainant’s complaint and amended complaint. Although it may be true that the complainant’s preparation and presentment of its complaint was careless and piecemeal, the respondents were neither prejudiced nor surprised by the complainant’s actions.

    Since it is highly relevant to this decision and to the issues involved herein, the tribunal’s decision to re-open the hearing and amend the complainant’s complaint is re-printed below:

                                                                                    January 13, 2009

David P. Marcus, Esq.

2821 Wehrle Drive, Suite 3

Williamsville, New York 14221

Robert W. Spear

327 N. Pleasant Parkway

Cheektowaga, New York 14206-2428

Linda Cleary, Esq. (via email)

Division of Licensing Services

Alfred E. Smith State Office Building

80 South Swan Street

P.O. Box 22001

Albany, New York 12201-2001

            Re:      DLS v. Buffalo Security Co., Inc., et al.

                        Motion to Amend Complaint

Dear Attorneys Marcus, Spear and Cleary,

            I have reviewed the complainant’s motion to re-open the hearing and amend the complaint along with respondent Buffalo Security Co., Inc.’s opposition thereto. The complainant’s motion is granted, its complaint is amended and the hearing is re-opened for proceedings consistent herewith. A new hearing date will be scheduled and forwarded to the parties and/or their counsel.

            The complainant has moved to amend the complaint by adding or changing the following three allegations against the respondents:

5(d). The Respondents failed to obtain/timely obtain and/or maintain the employee statements and/or obtain/timely obtain, maintain and/or file/timely file fingerprint cards for non-security guard employees and/or registration exempt security guard employees, in violation of GBL §81 and 19 NYCRR Part 174. See Attachment H.

5(f). The Respondents failed to obtain/timely obtain and/or maintain the employee statements and/or obtain, maintain and/or file/timely file fingerprint cards for security guard employees, in violation of §89(g) and 19 NYCRR 174.6. See Attachment F.

5(g). The Respondents knowingly employed in connection with the business two persons, namely Jerome A. Bauer and Douglas S. Citron, who had been convicted of a felony, and who had not subsequent to such conviction received an executive pardon therefore removing the disability, or received a certificate of good conduct granted by the Board of Parole pursuant to the Executive Law to remove the disability, in violation of GBL §81, and 19 NYCRR Part 174.

            Proposed paragraph #5(d) above seeks solely to amend existing paragraph #5(d) in the complaint by removing the number 70 from it, since the proof at the hearing established that, at the time of the audit, the respondents did not employ 70 non-security guard or registration exempt employees, much less violate that particular law 70 times (Hearing transcript, pp. 50-69).

            Proposed paragraph #5(f) above seeks to add a new charge due to the complainant’s mis-wording of paragraph #5(d) of the original complaint. The complainant had intended to charge the respondents with violating the law 70 times regarding employee statements or fingerprint cards with reference to its security guard employees, not its non-security guard or exempt employees. The complainant alleges, and the respondents do not dispute, that in August 2008, as part of its response to respondents’ State Administrative Procedure Act (“SAPA”) §401(4) demand, the complainant provided the respondents with an audit worksheet establishing the basis for this proposed violation¹ (Attachment F) (Hearing transcript, pp. 59-62).

            Proposed paragraph #5(g) above seeks to add a new charge against the respondents regarding its alleged employment of two convicted felons. This charge arose at the hearing from Mr. Marcus’ opening statement to the tribunal (Hearing transcript, pp. 11-16), Ms. Cleary’s questions to complainant’s License Investigator John Boyle (“Inv. Boyle”), to which Mr. Marcus did not object (Hearing transcript, pp. 17-23), and Mr. Marcus’ cross-examination of Inv. Boyle (Hearing transcript, pp. 69-71, et seq.).

            “Generally, leave to amend a pleading is freely granted in the absence of prejudice or surprise to the opposing party. Mere lateness is not a barrier to amendment. To establish prejudice, which must be significant (see Edenwald Contr. Co. v. City of New York, 60 N.Y.2d 957, 471 N.Y.S.2d 55, 459 N.E.2d 164 [1983] ), there must be some indication that the opposing party will have been hindered in the preparation of its case or prevented from taking some measure to support its position (see Loomis v. Civetta Corinno Constr. Corp., 54 N.Y.2d 18, 444 N.Y.S.2d 571, 429 N.E.2d 90 [1981] ).” Spitzer v. Schussel, 48 AD3d 233, 850 NYS2d 431, 432 (1^st Dept. 2008); Miles v. City of New York, 251 AD2d 667, 676 NYS2d 485 (2^nd Dept. 1998), lv. denied 92 NY2d 818, 684 NYS2d 489; Cerio v. New York City Transit Authority, 228 AD2d 676, 645 NYS2d 822 (2^nd Dept. 1996); Dougherty v. Dougherty, 256 Ad2d 714, 680 NYS2d 759 (3^rd Dept. 1998); Ford v. Martino, 281 Ad2d 587, 722 NYS2d 574 (2^nd Dept. 2001) (pleadings may be amended either before or after judgment). While the parties must be afforded the opportunity for the administrative hearing to be held within a reasonable time (SAPA §301), and the granting of the complainant’s motion to amend would require a further hearing session be held, these reasons do not warrant the denial of complainant’s motion, particularly given that the hearing in this matter was originally scheduled for December 4, 2007 and was adjourned to April 9, 2008, August 6, 2008, and finally, November 4, 2008, based on requests made by the parties (State’s Ex. 1).

            The respondents have not established that they would be substantially prejudiced if the complaint is amended. The record in this proceeding is not yet closed. At the close of the hearing on November 4, 2008, the respondents requested and were granted until December 15, 2008 to submit a post-hearing brief (Hearing transcript, pp. 134-138). On or about November 20, 2008, almost one month before the respondents’ brief was due, the complainant submitted its motion to amend. Therefore, since the respondents expected the tribunal to review and consider their brief in rendering its decision, they cannot claim that the record is “deemed closed” such that would prohibit further proceedings.

            The new allegations proposed by the complainant cannot come as a shock to the respondents. The first amendment simply eliminates a number in the existing complaint’s paragraph #5(d); the complainant sent the respondents Attachment F in August 2008, which is the basis for the second amendment; and the basis for the third amendment was raised first by the respondents in Mr. Marcus’ opening statement and again brought up throughout his cross examination of Inv. Boyle. The respondents will have a full and fair opportunity to litigate these new charges and they will once again be given the opportunity to submit a written brief addressing all charges.

            It is noted that, even had this motion been denied, the complainant would be entitled to file a new complaint against the respondents based on its proposed amendments, and the same procedure would have been followed as in this case. The granting of the complainant’s instant motion conserves judicial resources and wastes less time. See Spitzer v. Schussel, supra at 432 (to conserve judicial resources, the Court examined the proposed amendment (cause of action) and found it to be without merit).

            The respondents’ arguments in their opposition papers are not convincing. First, the respondents argue that the complainant’s charges against them are quasi-criminal, entitling them to protection under the Criminal Procedure Law. This argument is not accurate. See Kosich v. State Dept. of Health, 49 AD3d 980, 854 NYS2d 551 (3^rd Dept. 2008) (in an administrative proceeding, the respondent is not entitled to all of the due process rights afforded a defendant in a criminal proceeding); Clark v. New York State Dept. of Motor Vehicles, 55 AD3d 1284, 864 NYS2d 810 (4^th Dept. 2008). The case cited by the respondents, In re Simington's Estate, 147 Misc 504, 265 NYS 326 (NY Sur. Ct. 1933), is clearly distinguishable. The respondent in that case was subject to possible imprisonment and the standard of proof against him was “reasonable doubt.” In this case, the respondents cannot be imprisoned as a result of this proceeding and the standard of proof is substantial evidence.

            The respondents’ claim that the complainant’s motion to amend violates their constitutional right against double jeopardy, lacks merit. A licensees’ protection against double jeopardy does not apply to an administrative agency’s prosecution in an administrative disciplinary proceeding. The law is very clear that "the constitutional prohibitions against double jeopardy and double punishment do not prevent the legislature from enacting, and the executive from enforcing, civil as well as criminal sanctions for the same conduct". Matter of Barnes v. Tofany, 27 NY2d 74 (1970) (defendant's driver's license was suspended for 60 days in a civil administrative proceeding and was again suspended for 60 days in a subsequent criminal action). Administrative proceedings commenced to revoke a licensee's license are not criminal prosecutions, they are civil actions and are considered remedial in nature. See Waltier v. New York Police Dept., 856 F.Supp. 196 (SDNY 1994), aff'd, 52 F.3rd 311 (double jeopardy did not bar proceedings in which licensee's pistol permits were revoked, even though the events that led to the revocation proceedings were also the subject of criminal charges of which licensee was acquitted, because the revocation proceedings themselves did not constitute a criminal prosecution); Kahn v. Inspector General of U.S. Dept. of Health and Human Services, 848 F.Supp. 432 (SDNY 1994) (Secretary of Health and Human Services' five year statutory exclusion from Medicare program of podiatrist convicted of program-related state offense did not violate prohibition against double jeopardy, as exclusion was a remedial sanction, not a punitive one); Giudice v. Adduci, 176 AD2d 1175 (3rd Dept. 1991) (commencement of proceeding to revoke petitioner's chauffeur license because of petitioner's involvement in accident after petitioner was acquitted in a criminal proceeding regarding the same accident, did not constitute prohibition against double jeopardy); see also Erdos v. NYS Dept. of Education, 105 AD2d 504 (3rd Dept. 1984), appeal denied, 64 NY2d 604; People v. Bulin, 142 Misc.2d 776 (NY D. Ct. 1989); Harvey-Cook v. Steel, 124 AD2d 709 (2nd Dept. 1986); Maneri v. New York State Dept. of State, 240 AD2d 748, 660 NYS2d 26 (2^nd Dept. 1997).

            The law does not require the complainant to consolidate “in one lawsuit all issues arising out of a single transaction or occurrence.” All of the criminal cases cited by the respondents are not applicable to this proceeding and the respondents have not established that the complainant is seeking to take multiple “bites at the apple” or is making this motion to take an unfair advantage over the respondents in this litigation.

            The respondents’ claim that the complainant’s motion is barred by the doctrine of res judicata is not meritorious. This often-cited doctrine “holds that, as to the parties in a litigation and those in privity with them, a judgment on the merits by a court of competent jurisdiction is conclusive of the issues of fact and questions of law necessarily decided therein in any subsequent action (citations omitted).” Gramatan Home Investors Corp. v. Lopez, 46 NY2d 481, 414 NYS2d 308, 310-311 (1979). There must be a judgment or some issue of fact or law that has been necessarily decided for the doctrine to be applicable, which is not present in this case. In both of the cases cited by the respondents, there was a prior determination made by a court that resulted in the subsequent action being dismissed. Contrary to the respondents’ assertion, there were no charges dismissed in this proceeding.

            Finally, in Glickman v. Beth Israel Medical Center, 309 AD2d 846, 766 NYS2d 67 (2^nd Dept. 2003), a case cited by the respondents, it was clear to the Court that the defendants were substantially prejudiced and the proposed new theories of recovery were not readily discernible from the original complaint and bill of particulars. In this case, the respondents have not established substantial prejudice and the proposed amendments were discernible from pre-hearing discovery and from respondents’ raising the issue at hearing. It is also apparent to this tribunal that the complainant did not intend to assert its charges in piecemeal fashion or ambush the respondents into disclosing their case and trial strategy.

            The complainant’s motion to re-open the hearing and amend the pleadings is granted and the parties will be notified of the new hearing date.

                                                                                    Very truly yours,

                                                                                    Scott NeJame

                                                                                    Administrative Law Judge

SLN/sn

            ¹There is no other reason why that attachment was sent to the respondents and the respondents could have discerned that Attachment F was related to paragraph #5(d) of the complaint.

    It is noted that the total number of violations found by this tribunal with regard to the employee statements and fingerprint cards for the respondents’ security guard and non-security guard employees (66) is close in number to the improperly stated allegation in the complainant’s original complaint (70) (State’s Ex. 1, paragraph 5(d)).

    The tribunal will address only those arguments in the parties’ briefs that were not previously addressed in the motion to re-open and amend.

    First, respondent Buffalo Security argues that the complainant was permitted, over objection, to submit additional proof at the second hearing session (August 13, 2009) on new claims for which an amended complaint was never served and despite the basis of complainant’s motion, which was to amend its complaint to conform to the proof already offered.

    While this argument is accurate, said respondent has not established that it was either surprised or prejudiced by these facts. Even though the complainant never produced an amended complaint, the three “new” allegations against the respondents were clearly set forth in the tribunal’s decision amending the complaint. The respondents were well aware of the charges in the amended complaint.

    Further, nowhere in the tribunal’s decision was it indicated that the complaint was being amended to “conform to the proof.” Had that been the case, no further hearing sessions would have been warranted or scheduled since the proof on the amended complaint was already in evidence. Respondent Buffalo Security was fully aware that the proof of the new allegations was not received into evidence at the previous hearing session because it objected to it coming into evidence and its objection was sustained. Said respondent also understood that the complainant needed to offer into evidence an investigative document (State’s Ex. 16) to prove paragraph #5(f) of the amended complaint. State’s Ex. 16 had been provided to respondent Buffalo Security long before the hearing commenced pursuant to a State Administrative Procedure Act §401(4) demand.

    Second, respondent Buffalo Security argued in its brief and during the hearing that it is fundamentally unfair that the complainant is allowed to correct its mistakes by amending the complaint while the respondents are not given any opportunity to correct their mistakes in operating their business. Counsel’s argument does not have merit as he is comparing “apples to oranges.” An attorney attempting to correct a deficient pleading cannot be compared to a security guard company correcting its numerous and repeated violations of the law.

    Since September 11, 2001, the Department of State has conducted audits (and some re-audits) of all security guard companies, has demanded strict compliance with General Business Law Articles 7 and 7-A and the regulations thereunder, and has uniformly applied sanctions in those cases. Bison Security, respondent Buffalo Security’s predecessor, was the subject of an audit and disciplinary proceeding by the complainant resulting in the licensees agreeing to the revocation of their license. With the knowledge of their predecessors’ violations and revocation, the respondents could not have been in a better position or have had a clearer picture of what they needed to do to correct their prior mistakes.

    Third, Respondent Buffalo Security argues that the complainant’s new claims are barred by the doctrines of equitable estoppel and laches. These arguments are not valid.

    With regard to laches, traditionally, the common law rule has been that laches may not be interposed as a defense against the State when acting in a governmental capacity and the public interest. That principal has, however, been abrogated by State Administrative Procedure Act §301(1), which provides that “(i)n an adjudicatory proceeding, all parties shall be afforded an opportunity for a hearing within reasonable time.” State Administrative Procedure Act §301(1); Cortland Nursing Home v. Axelrod, 66 NY2d 169, 495 NYS2d 927 (1985).

    In order to show that a hearing has not been held within a reasonable time, the respondent must show substantial prejudice arising out of the delay. Krawitt v. KeyBank, 23 Misc3d 297, 871 NYS2d 842 (NY Sup. Ct. 2008); Correale v. Passidomo, 120 AD2d 525, 501 NYS2d 724 (2^nd Dept. 1986). Such a showing can be made with a demonstration by the respondent that his ability to present defense witnesses with a clear and detailed recollection of the events has been hampered by the delay and that the delay thwarted the respondent’s ability to mount a defense against the charges. Reddy v. State Bd. for Professional Medical Conduct, 259 AD2d 847, 686 NYS2d 520 (3^rd Dept. 1999). Respondent Buffalo Security has made no such showing.

    Inv. Boyle commenced his inspection of the respondents records in March 2007 and that inspection continued until at least May 2007. Approximately six months later in November 2007, the complainant commenced its action against the respondents and the initial hearing was scheduled to take place on December 4, 2007. Due mostly to requests made by respondent Buffalo Security, the hearing was adjourned a number of times until it was finally held on November 4, 2008. After that hearing session but before the respondents submitted their brief, the complainant moved to re-open the hearing and amend the complaint. After a decision by the tribunal in January 2009, the hearing was scheduled to conclude on April 22, 2009. For different reasons (respondent Buffalo Security did request an adjournment of one of the continued hearing dates, but that request was denied), the hearing was ultimately adjourned to August 13, 2009, at which time the hearing concluded. Clearly, it cannot be said that there was an unreasonable delay in the proceedings.

    Respondent Buffalo Security argues that the old owners of the company have long since departed and that the new owners are not responsible for the violations. The tribunal has already held that respondent Spears, as qualifier of the company, along with respondent Buffalo Security, are the parties responsible for the proper operation of the company. The indicated “owner” of the company, Mr. D’Amato, became the qualifier of respondent Buffalo Security in January 2008 and a principal in March or April 2008. Therefore, Mr. D’Amato was well aware of the complainant’s disciplinary proceeding at the time he became a qualifier and owner. With regard to Mr. G’merek, there is little information in the record about his operation of the company, other than the fact that he failed to file a non-qualifier application with the DLS until January 2008, the same time that Mr. D’Amato filed as the qualifier.

    Furthermore, respondent Buffalo Security has not in any detail established how its defense has been hindered or changed because of the alleged “delay.” See also, 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 (2^nd Dept. 1997).

    With regard to the doctrine of equitable estoppel, where a governmental agency acts “wrongfully or negligently, inducing reliance by a party who is entitled to rely and who changes his position to his detriment or prejudice, that [agency] should be estopped from asserting a right or defense which it otherwise could have raised. Bender v. New York City Health and Hospitals Corporation, 8 NY2d 662, 382 NYS2d 18, 21 (1976). However, the holding in Bender covered a very unusual factual scenario, is of very limited application, and does not diminish the validity of the general rule that estoppel is not applicable to State agencies to prevent them from discharging their statutory duties. Parkview Associates v. City of New York, 71 NY2d 274, 525 NYS2d 176 (1988); Zhao v. City of New York, 656 F.Supp2d 375 (SDNY 2009).

    Respondent Buffalo Security claims that the complainant should be estopped from bringing its amended complaint “to prevent a manifest injustice,” and cites DLS v. Rooney, 527 DOS 05 (2005).

    However, respondent Buffalo Security has not established either the prejudice or the manifest injustice it allegedly suffered. Whether or not its complaint was amended, the complainant has always had the right to bring a separate action against the respondents for the charges it failed to plead or improperly pleaded in its first action. Further, Rooney involved facts clearly distinguishable from the case at bar.

    In Rooney, the respondent private investigator signed a consent order on March 17, 1999, agreeing to the suspension of his license for one year beginning on March 27, 1999. On March 19, 1999, before his license was suspended, the respondent applied for a security guard license, failing to answer the question of whether any previous license of his had been suspended or revoked. Administrative Law Judge Felix Neals (“Judge Neals”) dismissed the charges that the respondent made a material misstatement on his application or offered a false instrument for filing. However, Judge Neals did amend the complaint to conform it to the proof by adding the charge that the DLS made a mistake or error in issuing the respondent a security guard registration. Judge Neals then dismissed that new charge because the DLS had issued the respondent a security guard registration despite the respondent having submitted an incomplete application (six years earlier), and because the DLS had renewed the respondent’s security guard registration in 2001, 2003 and 2005. The manifest injustice was that the DLS tried to correct its mistake six years later, after it had renewed the respondent’s registration three consecutive terms.

    This case factually is far different from Rooney, especially because the respondents in this case have not detrimentally relied upon the complainant’s mistake. On the contrary, the complainant’s mistake in its pleading has, to the respondents’ benefit, substantially delayed the outcome of the disciplinary proceeding and postponed the respondents’ payment of any fine imposed.

    Fourth, respondent Buffalo Security argues that the maximum fine that may be imposed against the respondents is $500 [per violation] for the company’s failure to notify the DLS of its employment of already registered security guards.

    Respondent Buffalo Security correctly cited Berchielli v. DLS, 5 DOS APP 03 (2003) as controlling case law. However, respondent Buffalo Security is mistaken that $500 is the maximum fine. Pursuant to General Business Law §79(1)(e), a licensee may be fined a maximum of $1,000 if the licensee has violated any of the provisions of General Business Law Article 7-A. In Berchielli, the Secretary held that $500 is the appropriate penalty where the licensee employs a security guard but does not provide written notice thereof to the DLS.

    Finally, respondent Buffalo Security claims that since the respondents were cooperative with the complainant’s investigator and the company’s new owner “cleaned up its files,” the fine against the respondents should be mitigated.

    In DLS v. International Protection New York, Inc., 3 DOS APP 03 (2003), the licensee admitted the allegations in the complaint, explained that the violations resulted from clerical errors, accepted full responsibility for the violations, and testified that the respondents’ operation came into full compliance with the applicable law. The administrative law judge (“ALJ”) imposed a fine which was one half the maximum amount he could have imposed. On appeal, the Secretary, as with many other cases, held as follows:

In adopting the “Security Guard Act of 1992” (Article 7-A of the General Business Law), the Legislature found that “the proper screening, hiring and training of security guards is a matter of state concern and [there is a] compelling state interest to ensure that such security guards meet certain minimum recruitment and training standards” (Chapter 336 of the Laws of 1992, section 1). To address this State concern and interest, the Legislature found and declared that the State should establish “uniform standards for the employment, registration, training, enforcement and liability insurance coverage of security guards . . . ” (Id.). The standards established by the Security Guard Act of 1992 include, inter alia, a requirement that security guard companies employ as security guards only persons who are currently registered (Section 89-g (1) of the General Business Law), a requirement that security guard companies report their employment of security guards to the Department of State (Section 89-g (5) of the General Business Law [see also Section 99 (2) of the Executive Law]), and a requirement that security guard companies maintain proper records with regard to each security guard it employs (Section 89-g (7) of the General Business Law). These requirements are at the very heart of the regulatory framework established by the Security Guard Act of 1992. These requirements were established for the very purpose of eliminating incompetence in the security guard industry. Violations of the type found in this matter result in complete avoidance of regulation and can not be tolerated. International Protection New York, Inc., 3 DOS APP 03, at p. 1.

The Secretary modified the ALJ’s decision by imposing the maximum $1,000 fine per violation for each unregistered security guard, and $500 fine per violation for each other violation. See also, DLS v. Mills Patrol Service, Inc., 2 DOS APP 03 (2003) (ALJ’s lesser fine imposed based on licensee’s testimony that he “fell behind in the processing of paper work,” modified by the Secretary of State); DLS v. Caputo, 31 DOS APP 02 (2002) (ALJ’s lesser fine imposed based on finding that the licensees’ violations resulted from incompetence and poor training and not intentional, reversed by the Secretary); DLS v. Hudson Valley Safety Patrol and Investigations, Inc., 30 DOS APP 02 (2002) (Secretary modified ALJ’s fine).

    While this tribunal recognizes the respondents’ arguments in mitigation, it is also clear that the respondents didn’t learn from their predecessor company’s mistakes and their coming into compliance with the applicable law was a reaction to Inv. Boyle’s inspection and audit. Based upon prior decisions of the Secretary of State, a fine of $1,000 will be imposed for each of the 14 unregistered security guards that the respondents employed (whether they were unregistered because the respondents failed to register them or because their registrations were denied or expired) and a fine of $500 for each of the remaining 99 violations, for a total fine of $63,500 ($14,000 plus $49,500).

DETERMINATION

    WHEREFORE, IT IS HEREBY DETERMINED THAT respondents Robert W. Spear and Buffalo Security Co, Inc. have violated General Business Law §§72, 81, 89-g(1), 89-g(5), 89-g(7), and 19 NYCRR §§174.6, and accordingly, pursuant to General Business Law §79, they shall pay a fine of $63,500 to the Department of State on or before July 31, 2010, and should they fail to pay the fine by that date, their licenses as a private investigator or watch, guard or patrol agency, as well as the license(s) of their successor company, including but not limited to, qualifier David D’Amato and the company named Buffalo Security and Investigation LLC, and any branch office licenses which may have been issued to them, shall be suspended effective August 1, 2010 until such time as the fine is paid in full. They are directed to send a certified check or money for the fine payable to “Secretary of State” or their license certificate(s) and pocket card(s) to Norma Rosario, Department of State, Division of Licensing Services, Alfred E. Smith Building, 80 South Swan Street, 10th Floor, Albany, NY 12201.

                                      Scott NeJame

                                Administrative Law Judge

Dated: June 8, 2010