Opinion
No. WD68035
October 30, 2007
Appeal from the Circuit Court of Cole County, Missouri, Honorable Richard G. Callahan, Judge.
Samantha A. Harris, Jefferson City, MO, Counsel for Appellant.
Dennis K. Hoffert, St. Louis, MO; and Stefan J. Glynias, St. Louis, MO, Counsel for Respondent Co-Counsel for Respondent.
Before: Thomas H. Newton, P.J., Paul M. Spinden, and Lisa White Hardwick, JJ.
The Missouri Board of Accountancy (Board) appeals the decision of the Administrative Hearing Commission (Commission) granting Integrated Financial Solutions, L.L.C. (IFS) a permit to practice accountancy as a newly incorporated firm. We affirm.
Factual and Procedural Background
IFS filed for a permit to practice public accounting with the Board on February 9, 2005. The application listed Mr. Steve Strauss, Ms. Judy Elias, and Mr. Carl Kossmeyer as licensed shareholders of IFS. Mr. Strauss held a 40% interest, Ms. Elias held an 11% interest, and Mr. Kossmeyer held a 49% interest in the shares for IFS. An attached affidavit to the application explained that the Board revoked Mr. Kossmeyer's license but that he was allowed to practice until his appeal was final.
In 2001, the Board revoked Mr. Kossmeyer's license because he pled guilty to a federal charge of wire fraud. Mr. Kossmeyer appealed the revocation to the Commission, the circuit court, and the Missouri Court of Appeals respectively. Pending judicial review, a stay was issued on the license revocation, which allowed him to practice through the appellate process. The Missouri Court of Appeals, Eastern District, affirmed the revocation of his license, which became effective on September 26, 2006. The Board did not receive any complaints against Mr. Kossmeyer while his revocation was pending.
It actually revoked his permit and certificate, which are now considered a license due to legislative amendments.
On March 4, 2005, during the appeal of the circuit court's decision, the Board denied IFS a permit based on cause under section 326.310.1. This statute authorizes the Board to deny any application for permit for any cause or a combination of causes listed in section 326.310.2. The Board imputed Mr. Kossmeyer's conviction and criminal behavior to IFS and found both to satisfy sections 326.310.2(2), (5), (6), and (13) as grounds for denial. It concluded that the firm lacked the "fitness to engage in the practice of accounting" because "Mr. Kossmeyer's criminal conviction and the underlying conduct relating to the criminal offense reflect adversely on the firm as a whole." Additionally, it stated, "the revocation, once imposed, would be an additional basis for the denial of this application pursuant to sections 326.310.3 and 326.289.4(1)." IFS filed a complaint with the Commission.
Statutory references are to RSMo. (2000), and the Cumulative Supplement (2005).
It specifically stated: "the ownership group . . . will include . . . Carl F. Kossmeyer" who "entered a plea of guilty to one count of wire fraud," which is "an offense that: a) had as an essential elements fraud and dishonesty; b) involved moral turpitude; and c) was reasonably related to the qualifications, functions or duties of a CPA." It also stated that Mr. Kossmeyer's underlying conduct for the conviction demonstrated his misconduct in the performance of the functions or duties of a CPA because he used his CPA status to perpetuate his fraudulent conduct.
In its complaint, IFS argued that the Board acted in excess of its jurisdiction in denying the permit because it satisfied the requirements under sections 326.289.1 and .4, which authorizes the Board to grant permits to entities to practice as a certified public accounting firm, and lists the requirements an applicant must show at initial issuance or renewal of permits respectively. In its response, the Board denied that IFS satisfied the requirements under section 326.289 and reiterated all the grounds it listed in its denial letter. Additionally, the Board listed regulations 2010 CSR 10-3.060(1) and (4), which state a licensee shall not commit any act that reflects adversely on the firm and shall not use or participate in any form of communication about the firm's professional services that is false or deceptive. The Commission held a hearing on January 9, 2006, and granted the complaint.
All references to regulations are to the Code of State Regulations effective at the time of the administrative hearing in 2006.
First, the Commission determined that section 326.310.2 applied to firms. Second, it determined that Mr. Kossmeyer's conduct would not be imputed to the firm because the legislature failed to make conduct of officers and managers relevant to a firm obtaining an accounting license, but specifically made such conduct relevant in an entity obtaining an insurance license in section 375.141. Third, it determined that the firm did not satisfy any of the causes the Board listed simply because one of its shareholders, Mr. Kossmeyer, was convicted of wire fraud. It also refused to impute Mr. Kossmeyer's conviction to the firm even though it satisfied section 326.310.2(2), because it occurred before he became involved with IFS. Furthermore, it determined that revocation of Mr. Kossmeyer's license is not a ground for denial because it was pending and section 326.289 only requires the majority of the ownership to be licensed. The Board petitioned for judicial review.
The circuit court held a hearing and affirmed the Commission's decision. It found that "a majority of the ownership and voting interest of IFS is held by certified public accountants, licensed by the State of Missouri." It concluded that the Commission properly applied the law including section 326.289. The Board appeals and raises two points.
Standard of Review
"This Court reviews the decisions of the hearing commission and the board, not the circuit court. Factual findings are reviewed to determine whether they are supported by substantial evidence. When the commission has interpreted the law or the application of facts to the law, the review is de novo." Tendai v. Mo. State Bd. of Registration for the Healing Arts, 161 S.W.3d 358, 365 (Mo. banc 2005) (internal citations omitted). "The record is reviewed in the light most favorable to the commission's factual findings." Id.
Legal Analysis
In its first point, the Board argues that the Commission erred in finding that denial of initial application for a permit must be based on the firm's actions "and not the individual's owner's past acts" because it defeats the Board's regulatory purpose under section 326.253 in that a new firm has no history with the Board so in considering its fitness it needs to look to the owners' past conduct. The Board argues that "[o]nce a CPA no longer holds a CPA license, he may not be a firm shareholder." The Board cites to section 326.310 for authority.
The Missouri Accountancy Act (MAA), sections 326.250 through 326.331, does not expressly authorize the Board to refuse permits to entities based on one of the licensed shareholders' past conduct. Nor do the statutes expressly restrict a nonlicensee owner to an individual that has never held a CPA license. Additionally, the regulations do not address the issue at hand. No cases were found that have interpreted this section.
"When construing statutes, it is this Court's primary aim to ascertain the intent of the legislature from the language used and to give effect to that intent. Administrative agencies have only those powers expressly conferred or reasonably implied by statute." Gott v. Dir. of Revenue, 5 S.W.3d 155, 158 (Mo. banc 1999) (footnote omitted).
Section 326.289 allows the Board to "grant or renew permits to practice as a certified public accounting firm to entities that make application and demonstrate their qualifications in accordance with this section." Although section 326.289 lists the qualifications an entity must demonstrate to be issued an initial permit, it does not provide specific grounds for which a permit may be denied. IFS contends that failure to meet any of the qualifications listed in section 326.289 is the only reason to deny an initial permit. The Board argues that the grounds listed in section 326.310 apply to the initial issuance of permits.
Section 326.310.1 states that the "[B]oard may refuse to issue any license or permit required pursuant to this chapter for one or any combination of causes stated in subsection 2 of this section." The legislature defines permit as "a permit to practice as a certified public accountant firm pursuant to section 326.289." § 326.256.1(15). Giving the statute its plain and ordinary meaning, the Board may refuse to issue an initial permit to entities on any relevant ground listed in section 326.310.2.
The grounds listed in subsection 2 do not explicitly authorize the Board to deny an application for an initial permit based on past conduct of its owners. As the Commission properly decided, factual findings of the grounds must be determined based on the entity's conduct since the statute requires the entity to apply for a permit. The Board may also consider an applicant's conduct as a previous or current permit holder in granting or denying a permit. See § 326.289.7 (stating an applicant for an initial permit "shall list in their application all states in which they have applied for or hold permits as certified public accounting firms and list any past denial, revocation, suspension, or any discipline of a permit by any other state."). It would also seem logical that the majority shareholders' past conduct may be considered in deciding whether to issue a permit since both the statutes and regulations focus on the majority ownership. See § 326.289.4(1), (2); 20 CSR 2010-2.095(1)(A)1, 2.
The MAA does not define applicant but the application for a permit suggests that the applicant is the person applying for the permit on behalf of the entity.
Mr. Kossmeyer is neither the applicant nor a majority shareholder. Although he owns a 49% interest, he is not the majority shareholder. Section 326.289.4(1) characterizes the majority ownership as licensees who own "a simple majority . . . in terms of financial interests and voting rights of all partners, officers, principals, shareholders, members or managers." Mr. Strauss and Ms. Elias, collectively, own 51% of the shares, making them the majority shareholders who are CPA's. Thus, the Commission was correct in failing to impute the misconduct of a minority shareholder, to an entity in which he was not a member in 1999 when he committed the felonious act. This point is denied.
In its second point, the Board argues that the Commission erred in finding that the Board could not base its denial on the pending revocation of Mr. Kossmeyer's license "because the Board's promulgated regulations require all shareholders who have previously been licensed as an individual CPA to maintain their licensure status" and Mr. "Kossmeyer's revocation rendered him ineligible to be a shareholder of a new CPA firm."
The regulations cited by the Board do not support its proposition that all shareholders must maintain their licensure status. Rather, the regulations state that shareholders "who hold Missouri certificate issued under prior law or any individual who received an initial license after August 28, 2001 are required to have an active Missouri license to practice in a certified public accounting firm." 20 CSR 2010-2.070(3) (emphasis added); see also, 20 CSR 2010-2.051(4). Additionally, the regulation that set forth the requirements for ownership of an L.L.C. requires that the majority ownership consist of natural persons holding a CPA license and "all non-CPA members [be] active individual participants in the firm or affiliated entities." See 20 CSR 2010-2.095(1)(A)1, 4. The issue thus becomes whether Mr. Kossmeyer was indicated as a shareholder that would practice or as a non-CPA member.
"All partners, members, shareholders and employees of these firms, who practice in this state, must obtain a license or be a provisional licensee to practice under Chapter 326, RSMo. There must be at least one (1) active individual Missouri certified public accountant (CPA) licensee or Missouri CPA provisional licensee in the firm for the firm's permit to be considered active."
The evidence reveals that Mr. Kossmeyer was listed as a shareholder with a license who owned 49% interest of IFS. On the application, Mr. Strauss declared that he listed all shareholders of IFC who are practicing or intend to practice in the firm and further declared that such shareholders practicing are "in good standing as certified public accountants" and hold or have applied for a current license to practice. It is presumed that Mr. Kossmeyer would practice public accountancy for IFS. As stated above, the regulations require all practicing shareholders to be CPAs. Thus, the Board would be correct in its assertion that IFS fails to meet the requirements of section 326.289 if Mr. Kossmeyer's appealed revocation could be considered a revocation at the time of filing. This issue turns on what effect the stay had on the Board's order to revoke Mr. Kossmeyer's license.
Relying on Reed v. Rhodes, 472 F. Supp. 603 (N.D. Ohio 1979), the Board contends that a stay does not reverse actions that were taken but merely postpones those actions. Reed states:
[a] stay does not reverse, annul, undo, or suspend what has already been done or what is not specifically stayed. Nor does a stay impair the force, or pass on the merits of the orders of the trial court. A stay merely suspends the time required for the performance of the particular mandates stayed. The sole purpose of a stay is to preserve the status quo pending an appeal so that the appellant may reap the benefit of a potentially meritorious appeal.
Id. at 605. We find Reed inapposite because in that case the lower court had issued a stay on another court's judgment.
In this case, the circuit court issued a stay on an administrative agency's order. Section 536.120 grants reviewing courts of administrative decisions the discretion to require the agency to stay the enforcement of its order. A stay is a temporary restraining order. Perseverance Common Sch. Dist. No. 90 v. Honey, 367 S.W.2d 243, 246 (Mo.App. 1963). Once a stay is granted, a revocation does not occur. See State ex rel. Dir. of Revenue v. Scott, 919 S.W.2d 296, 301 (Mo.App.W.D. 1996) (suggesting that a stay under section 536.120 would prevent the director from suspending a driver's license). Section 326.310.3 states that all stay orders shall toll any mandatory waiting time, stated in a revocation order, before applying for a new license. This also suggests that a revocation is not effective if a stay has been granted. Because neither the regulations nor the statutes require practicing shareholders' licenses to have never been disciplined, IFS met the qualifications for a permit in that Mr. Kossmeyer was licensed to practice as a CPA at the time of application and during its consideration. Therefore, the Commission did not err in finding that the pending revocation of Mr. Kossmeyer's license could not be a ground upon which to deny IFS a permit. The Board's second point is denied.
For the foregoing reasons, we affirm.
Paul M. Spinden, and Lisa White Hardwick, JJ. concur.
Missouri Board of Accountancy (Board) appeals the decision of the Administrative Hearing Commission (Commission) granting Integrated Financial Solutions, L.L.C. (IFS) a permit to practice accountancy as a newly incorporated firm. IFS sought a permit from the Board to be labeled as a Certified Public Accounting Firm. The Board denied the permit because the Board had disciplined one of the members who had a minority ownership interests and that member's license was pending revocation. IFS appealed to the Commission, and the Commission granted the permit. The Board sought judicial review, and the circuit court upheld the Commission's decision. The Board argues that the Commission erred in finding that denial of the application for a permit must be based on the firm's actions "and not the individual's owner's past acts" and in finding that the Board could not base its denial on the pending revocation of Mr. Kossmeyer's license. We affirm.
Division III holds: Thomas H. Newton, P.J., Paul M. Spinden, and Lisa White Hardwick, JJ.
Giving section 326.310, its plain and ordinary meaning, the Board may refuse to issue an initial permit to entities on any relevant ground listed in section 326.310.2. None of the grounds, however, listed in subsection 2 applied to IFS. And, although Mr. Kossmeyer's past conduct satisfies one of the grounds, no language in the statute or rules grants the Board the authority to impute past criminal conduct of a licensee to a firm of which he was not a member when he committed such conduct. Additionally, Mr. Kossmeyer is neither the applicant nor a majority shareholder. Mr. Strasuss and Ms. Elias, collectively, own 51% of the shares, making them the majority shareholders who are CPA's. Thus, the Commission was correct in failing to impute the misconduct of a minority shareholder, to an entity in which he was not a member in 1999 during the commission of the felonious act.
Furthermore, a stay was issued against the enforcement of the revocation of Mr. Kossmeyer's license. Because neither the regulations nor the statutes require practicing shareholders' licenses to have never been disciplined, IFS met the qualifications for a permit in that Mr. Kossmeyer was licensed to practice as a CPA at the time of application and during its consideration. Therefore, the Commission did not err in finding that the pending revocation of Mr. Kossmeyer's license could not be a ground upon which to deny IFS a permit. We affirm.