STATE OF NEW YORK

DEPARTMENT OF STATE

-----------------------------------------------------------------X

ALLSTATE PRIVATE CAR & LIMOUSINE

SERVICE, INC., MARK SLININ,

and “JOHN DOE”,                                                                             DECISION AND ORDER

Respondents-Appellants, 21 DOS APP 10

            -and- 

ALLSTATE PRIVATE CAR & LIMOUSINE

SERVICE INC. and MARK SLININ,

Respondents-Appellants,

            -against-                                                                      

DIVISION OF LICENSING SERVICES,

                                    Complainant-Respondent.

----------------------------------------------------------------X

            On November 13, 2009, Administrative Law Judge (ALJ) Roger Schneier rendered a decision (1109 DOS 09) finding that Allstate Private Car & Limousine Service, Inc. and Mark Slinin (Appellants) violated Executive Law §§ 160-jj[6] and 160-oo, and imposing a $10,000 fine upon them. The ALJ also directed that Appellants’ black car fund operator registration may not be renewed until full payment of the $10,000 fine is received by the Department of State.

            On December 11, 2009, Appellants’ counsel submitted a Notice of Appeal to the Secretary of State, stating that he was recently retained, asking for a copy of the hearing record, and requesting an extension of time within which to submit a memorandum of appeal. By Order issued on December 18, 2009, the First Deputy Secretary of State granted Appellants an extension of time until February 1, 2010 to file their Memorandum of Appeal. On January 29, 2010, Appellants timely filed a Memorandum of Appeal with the Department of State. On February 16, 2010, Division of Licensing Services (Respondent) filed a Memorandum of Law in Opposition of Appeal. This matter will now be decided on its merits.    

FINDINGS OF FACT

            At all relevant times, Appellant Allstate Private Car & Limousine Service, Inc. has been a member of the New York Black Car Operators' Injury Compensation Fund, Inc.(Black Car Fund) a licensed black car operator and a “Central Dispatch Facility” within the meaning of Executive Law Article 6-F and 160-cc(3). (State’s Ex. 3). In 2007 and early 2008, Stroz Friedberg Investigations (Stroz Friedberg) was retained by counsel for the Black Car Fund to conduct a financial audit of Appellant Allstate to “attempt to identify and quantify ‘cash’ income of Allstate” (State’s Ex. 5, at p. 1; Transcript, at pp. 8-9). Investigators from Stroz Friedberg had a series of meetings with various personnel at Appellants’ headquarters on Bond Street in Brooklyn, New York. The investigators requested, among other things, that Allstate provide driver contact information and either a printout, DVD or CD copy of the dispatch records (Transcript, at pp. 14). Appellant provided the investigators with various records including vouchers, credit card statements, bank statements, a list of driver names, and allowed the investigators to view Allstate’s dispatch records from a laptop at the headquarters, but refused to provide printed or portable electronic copies of its dispatch records (Transcript, at pp. 11-15).

            In response to Appellant Allstate’s refusal to provide printed or electronic copies of files of its dispatch records to the investigators, Stroz Friedberg issued a written request that such records be provided to its investigators in those formats (State’s Ex. 5). Appellants refused to honor that request, informing the investigators that “the system was unable to provide a printout of the records for those time periods,” but continued to allow the investigators to view its dispatch records at its headquarters (Transcript, at pp. 14-15). After concluding its review of Appellants’ files, Stroz Friedberg prepared a formal audit report noting that Appellants refusal constituted a failure to provide “unfettered access” to its computerized dispatch records (State’s Ex. 6; Transcript, at p. 16). Appellants testified at the administrative hearing that contractual confidentiality concerns with regard to client information rendered them unwilling to provide such records for off-site review, and noted that the on-site review process was acceptable when they were previously audited by auditors from Ernst & Young (Respondents’ Ex. A; Transcript, at pp. 39, 48).

            Stroz Friedberg’s final report stated that it was unable to determine whether or not Appellant was in compliance with the Black Car Fund rules, because it could not draw accurate and complete conclusions from the records reviewed (Transcript, at p. 18). One mission of the audit was to determine the amount of cash revenue received by Allstate (Transcript, at p. 28). Stroz Friedberg had knowledge of specific passengers who paid in cash for transportation in Allstate vehicles on specific dates (State’s Ex. 4; Transcript, at pp. 28-29). However, the Stroz Friedberg auditors did not find any receipts or other records of those rides or cash payments in Allstate’s records (Transcript, at 29).

            In early 2009, an investigation was commenced by Respondent, led by Division of Licensing Services Investigator Meghan Salmieri (Transcript, at pp. 31-32). In April of 2009, Investigator Salmieri met with representatives of Allstate at its business address (Transcript, at pp. 32-33). Investigator Salmieri testified that Appellants discussed the Stroz Friedberg audit with her and informed her that they “did provide the employees’ contact information, the drivers’ names and contact information” (Transcript, at p. 34). Investigator Salmieri also testified that Appellants informed her that they did not provide printed or mobile electronic dispatch records to Stroz Friedberg due to contractual confidentiality obligations (Transcript, at p. 34). Investigator Salmieri testified that she also spoke with Stroz Friedberg investigator Anthony Valante, who informed her that “they were not given the contact information for the drivers and ... they only have the list of names and no contact information” (Transcript, at p. 35). Investigator Salmieri also testified that Valante stated that Stroz Friedberg was allowed to view dispatch records from Appellants’ offices, and that Appellants expressed confidentiality concerns in refusing to supply print-outs or mobile electronic records of those documents (Transcript, at pp. 36-37).

            On September 15, 2008, an investigative hold was placed on Appellants registration as a Central Dispatch Facility (State’s Ex. 3). On or about March 5, 2009, Appellants submitted an application to renew their license as a Central Dispatch Facility pursuant to Executive Law Article 6-F (State’s Ex. 1). Respondent issued a letter proposing to deny Appellants’ license renewal application on May 19, 2009 (State’s Ex. 1). On September 29, 2009, Respondent issued the Complaint in this matter, alleging that Appellants “failed to fully comply with the financial audit” conducted by Stroz Friedberg by failing to provide driver contact information and access to its complete records, and failed to cooperate with Respondent’s subsequent investigation by stating to Investigator Salmieri that they had provided Stroz Friedberg with driver contact information although they had not (State’s Ex. 1). 

OPINION

            Article 6-F of the Executive Law establishes the Black Car Fund, a not-for-profit corporation, designed to collect worker’s compensation surcharges and secure the payment of workers' compensation to all black car operators entitled thereto. Its members are those Central Dispatch Facilities registered and licensed by the Department of State. In order to acquire the necessary monies for the purchase of workers compensation insurance or to self insure, and for administration of the fund, the Board of the Black Car Fund collects a surcharge charged to black car customers and paid by the member Central Dispatch Facilities. In order to monitor indebtedness, members are required to submit a monthly accounting to the Black Car Fund (see Executive Law § 160-jj(4)). The Black Car Fund is further empowered to conduct audits of its membership (see Executive Law § 160-jj(6)).

            The Department of State has been granted oversight and supervision of Central Dispatch Facilities and jurisdiction over member registration (see Executive Law §§ 160-ee, 160-hh, 160-nn). Should a Central Dispatch Facility fail to register, or, as a registrant, fail to make required payments, the Department of State must discontinue or deny licensure or registration (Executive Law § 160jj(3)). Hearings for suspected violations for non-compliance by fund members are initiated by either the Secretary of State or the Black Car Fund and are heard by the Department of State (see Executive Law § 160-oo(1)). A violation is punishable by, among other things, a fine of up to $10,000 (see Executive Law § 160-oo(2)).

I.         Substantial evidence supports the determination that Appellants violated Executive Law § 160-jj(6).

            The initiating party in an administrative disciplinary action has the burden of establishing by “substantial evidence” the truth and accuracy of the allegations raised in the complaint (SAPA § 306(1)). Respondent initiated the proceedings and carries the burden of proving, by substantial evidence, to the ALJ the truth of the charges set forth in the complaint. As the finder of fact, an ALJ must weigh the evidence and decide whether “substantial evidence”has been adduced, which “as a burden of proof ... demands only that a given inference is reasonable and plausible, not necessarily the most probable” (Miller v. DeBouno, 90 NY2d 783, 793 (1997); Oglesby v. New York City Housing Auth., 66 AD3d 905, 908 (2d Dept., 2009); see also Borchers, New York State Administrative Procedure And Practice § 3.12, at 55 (1995)). In reviewing a determination of an ALJ, the Secretary of State retains plenary authority to reverse or modify decisions, but accords due deference to the ALJ in terms of factual findings and credibility assessments (see Matter of Simpson v Wolansky, 38 NY2d 391, 394 (1975)).

            Conduct of a “financial audit” for the purpose of identifying and quantifying cash income of a member of the Black Car Fund, as was conducted here, is governed by Executive Law § 160-jj(6). Executive Law § 160-jj(6) provides that “the fund shall have the power directly or through its agent to conduct financial audits of its members to verify their compliance with the requirements of [Article 6-F] ... the fund or its agent shall be afforded convenient access at all reasonable hours to all books, records and other documents of its members that may be relevant to such audits.” Here, the ALJ found that Appellants failure to create and provide Stroz Friedberg with print-outs or mobile electronic data files of its dispatch records constituted a violation of this provision. The record demonstrates that Appellants refused to create or provide records in such form and that, although they allowed Stroz Friedberg on-premises viewing of dispatch records under their control, they refused to allow Stroz Friedberg’s computer forensic staff to take an image of the records being viewed.

            Executive Law § 160-jj(6) requires members subject to an audit to provide the auditors with “convenient access at all reasonable hours.” “Convenient” investigative “access” to records under that section must be construed to include the ability of investigators to record, copy or take images of the documentary evidence being viewed. Otherwise, investigators would perpetually be placed in the untenable and unintended position of having to rely only on memory or hand-written notations as to the content of records viewed on systems which, as Appellants claim is the case here, cannot print or transmit content. The statute cannot be reasonably construed as empowering the subjects of investigations to forbid investigators from taking images of evidence viewed any more than it could be reasonably construed to empower them to forbid the taking of notes. Construing the term “convenient access” reasonably and in accord with the intent of the legislation, the requirement of providing auditors with convenient access to records includes the obligation to allow such auditors to take images or make copies of such records.

            Viewing Executive Law section 160-jj in its entirety, it is apparent that the legislature intended the ability of investigators to view and copy or record evidence within the phrase “convenient access.” The requirements for compliance with a “financial audit” under Executive Law § 160-jj(6) and for compliance with a “payroll audit” governed by Executive Law § 160-jj(7) both speak in terms of “access.” Executive Law § 160-jj (7) provides:

For the purposes of conducting payroll audits, an insurer providing coverage to the fund pursuant to this article may treat the members of the fund as policyholders. Members of the fund shall be required to do all things required of employers pursuant to section one hundred thirty-one of the workers' compensation law, and shall be required to provide the board access to any and all records and information as otherwise required by the workers' compensation law and the regulations promulgated thereunder, and shall be liable as provided in the workers' compensation law for any failure so to do.

Workers’ Compensation Law § 141-a(1), entitled “Civil enforcement” as referenced therein states, “to investigate violations of sections fifty-two and one hundred thirty-one of this chapter, the chair or his or her designees shall have the power to ... (a) Enter and inspect any place of business at any reasonable time for the purpose of investigating employer compliance ... (b) Examine and copy business records” (emphasis added). Thus, it is clear the provision of “access” contemplates and includes the ability to view and make copies of records. As the record demonstrates that Appellants provided on-site viewing of their dispatch records by Stroz Friedberg, but refused to allow the investigators to take images or make copies of the evidence being viewed, the ALJ’s determination that Appellants violated Executive Law § 160-jj(6) by failing to provide proper “access” to its records should be sustained.

            The record demonstrates that after driver contact information including home addresses and contact telephone numbers was requested in writing, Appellants provided Stroz Friedberg with a list of driver names only (State’s Ex. 5; State’s Ex. 6). The contact information requested was critical to Stroz Friedberg’s audit and investigation, as communications and interviews with drivers would have been an important factor in discerning the payment and receipt practices of Appellant Allstate. Appellant has maintained that it should not be faulted for failing to provide such information, because such information is also maintained by the Taxi and Limousine Commission.

            Executive Law § 160-jj(6) states, however, that agents of the Black Car Fund conducting financial audits of its members “shall be afforded” access to “all books, records and other documents of its members that may be relevant to such audits” (emphasis added). The record shows that Appellants possessed documentation regarding contact information for its drivers, but provided only a list of names in response to Stroz Friedberg’s request for information. Appellants statement that such information is provided to the public erodes the legitimacy of its argument that it refused to provide such records to the auditors based on privacy concerns. Therefore, substantial evidence in the record supports the ALJ’s finding that Appellants violated Executive Law § 160-jj(6) by “failing to provide Stroz with all of the pertinent records which its investigators requested” (see 1109 DOS 09, at p. 2).

II.        Appellants failed to cooperate with the Department’s investigation.

            The ALJ determined that “by falsely advising Investigator Salmieri that the requested information about drivers had been provided, Allstate failed to fully cooperate with the [Department’s] investigation and thereby violated Executive Law § 160-oo” (1109 DOS 09, at p. 3). At the administrative hearing, Investigator Salmieri testified that Appellants informed her that they “did provide the employees’ contact information, the drivers’ names and contact information” to Stroz Friedberg (Transcript, at p. 34). As stated in Point I, supra, the record shows that Appellants did not provide contact information beyond mere driver names, and did not provide such information as driver addresses or contact telephone numbers. To lie to or intentionally mislead an investigator is a failure to cooperate and constitutes the “willful non-cooperation” necessary to establish a violation of a licensee’s duty to cooperate (Matter of Martini, 4 DOS APP 10, at p. 4).

            Appellants contend, however, that they had no duty to cooperate with the investigator from the Department of State. It has been held that “all persons and entities licensed to conduct a comprehensively regulated occupation by the Department of State have an affirmative duty to cooperate with investigations conducted by the Department into their licensed activities, consistent with the provisions of the Federal and New York State Constitutions” (Matter of Martini, 4 DOS APP 10, at p. 3). There, the First Secretary of State reasoned:

“A licensee operating within a comprehensively regulated occupation has a continuing duty to comply with and abide by the regulatory processes established for his or her chosen licensed pursuit. That duty prevents a licensee from taking actions intended to frustrate those regulatory processes that they have chosen to avail themselves of. As such, all licensees have the inherent duty to cooperate in good faith with investigations undertaken by their licensing agency and, faced with willful non-cooperation of a licensee, the Department possesses the implied authority to charge the failure to so cooperate and seek disciplinary sanction” (Matter of Martini, 4 DOS APP 10, at p. 4).

            Appellant, as a registered central dispatch facility, is subject to the “supervision and oversight” of the Department of State (see Executive Law § 160-ee). The Department of State has been expressly authorized to adopt regulations implementing the provisions of Article 6-F of the Executive Law (Executive Law § 16–nn). The Department of State is also expressly authorized by statute to commence hearings in instances where the Secretary “believes a violation of [Article 6-F] by a fund member may have occurred,” and to impose penalties such as fines and revocations (Executive Law § 160-oo). By necessary implication from this statutory language, the Department of State possesses the authority to investigate suspected and alleged violations by central dispatch facilities, like Appellant, in order to establish the belief requisite to commence hearings and to collect the essential evidence for execution of such hearings (see City of N.Y. v. Cable T.V. Comm., 47 NY2d 89, 92 (1979), “an administrative agency . . . is clothed with powers expressly conferred by statute as well as those required by necessary implication”). As investigation is a necessary responsibility of the Department, so too is the duty to cooperate with such investigations a necessary responsibility of central dispatch facilities under the statutory scheme of Executive Law Article 6-F. Therefore, based on the foregoing, the ALJ’s determination that Appellants failed to fully cooperate with the Departments investigation should be confirmed.

III.       Based on the foregoing, the penalty imposed by the ALJ shall be confirmed.

            “A fund member that is found ... to have violated a provision of [Article 6-F], or a rule promulgated by the department pursuant to [Article 6-F], shall be liable for a fine in an amount not to exceed ten thousand dollars per violation” (Executive Law § 160-oo(2)). Here, the ALJ determined that several violations of Article 6-F were committed and imposed a total fine of $10,000 upon Appellant Allstate (1109 DOS 09, at p. 3). In light of the foregoing discussion and the totality of the evidence in the record, such penalty is neither unduly harsh nor shocking to ones sense of fairness. Therefore, the penalty imposed by the ALJ is hereby confirmed.

DETERMINATION

            Based on the foregoing, the Decision of the ALJ is hereby confirmed in its entirety.

So ordered on: May 28, 2010                        __________________________________________

                                                                                    Daniel E. Shapiro, Esq.

                                                                                    First Deputy Secretary of State