DIVISION OF OCCUPATIONAL AND PROFESSIONAL LICENSING MARK STEINAGEL, DIRECTOR DEPARTMENT OF COMMERCE P.O.

BOX 146741 160 EAST 300 SOUTH SALT LAKE CITY, UTAH 84114-6711 Telephone: (801) 530-6628

BEFORE THE DIVISION OF OCCUPATIONAL AND PROFESSIONAL LICENSING

OF THE DEPARTMENT OF COMMERCE
OF THE STATE OF UTAH

IN THE MATTER OF THE LICENSE OF UNIVERSAL CONTRACTING, LLC, LICENSE #8146797-5501, TO PRACTICE AS A CONTRACTOR IN THE STATE OF UTAH

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER CASE NO. DOPL-2012-417

COMMISSION MEMBERS:

Jerry Preston
Ed Gongaware
Scott Sessions
Kevin Clubb
Robert Campbell

BY THE ACTING DIRECTOR OF THE UTAH DIVISION OF OCCUPATIONAL AND PROFESSIONAL LICENSING AND THE UTAH CONSTRUCTION SERVICES COMMISSION:

This adjudicative proceeding was initiated through a notice of agency action issued by the Utah Division of Occupational and Professional Licensing (Division) on October 11, 2012. The notice established the matter as an informal proceeding for which a hearing is not required. On November 9, 2012, Universal Contracting, LLC (Respondent) filed a response to the Division's notice. On November 26,2012, Respondent filed a supplement to its response.

On November 28, 2012, the matter was presented to the Utah Construction Services Commission (Commission) as an agenda item during its monthly meeting. The Commission members discussed the issues, but made no rulings because there was no quorum present. The Commission held meetings on December 9, 2012 and January 30, 2013. The matter was not discussed during these meeting because there was no quorum present. However, during the January 30, 2013 meeting, the parties presented to the Commission a stipulation under which adjudication of two of the four counts set forth in the notice-both of which deal with the issue of whether the company has owners or employees who are not legally present in the United States-would be stayed pending the conclusion of the 2013 Utah Legislative Session. The chairman of the Commission accepted, approved, and entered the stipulation the same day. On February 27, 2013, the Commission held a meeting with a quorum present. Respondent attended with counsel. The Division was represented by several staff members. Counsel for the Commission was present, as was the Acting Director of the Division. Both parties were provided an opportunity to present documentary records and to make arguments regarding the proper interpretation and application of statutes relevant to this matter. Having reviewed all evidence before it, the Commission, with the concurrence of the Acting Director, (hereafter referred to jointly as "the Commission") now enters the following findings of fact, conclusions, of law, and order.
FINDINGS OF FACT

1. Respondent is an unincorporated business entity. 2. On January 13,2012, Respondent obtained a license from the Division to operate in Utah as a contractor.

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3. Every applicant for a contractor license is required to demonstrate financial responsibility. Utah Code Ann. 58-55-306(1) and (3). 4. As an unincorporated business entity, Respondent was required to disclose information about its owners in order to demonstrate that each owner satisfied the financial responsibility requirement. Respondent was required to list each owner's name, address, and Social Security number. Utah Code Ann. 58-55-302(1)(e)(iv)(A). The Division's records show, and the Commission accepts as fact, that Respondent complied with these requirements and listed one owner, Alma Faerber. 5. In reviewing the financial responsibility of the owners in an unincorporated business entity, the Division may require each owner to submit a credit report. Utah Code Ann. 58-55-306(4). The Division's records show, and the Commission accepts as fact, that Mr. Faerber did submit a credit report, which was reviewed by the Division as part of the license application process. 6. After obtaining its license on January 13,2012, and during the first 90 days of licensure, Applicant brought 725 new owners into the company. 7. Respondent's making this change resulted in a business structure under which more than five individual owners held, each individually, a direct or indirect ownership interest of less than 8%. Unincorporated business entities, if structured in this manner and licensed as a contractor, are subject to certain reporting requirements under the Construction Trades Licensing Statute, Utah Code Ann. 58-55 et seq. Specifically, any such company must submit to the Division an ownership status report every 90 days following the date of licensure. Utah Code Ann. 58-55-302(10)(a)(i).

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8. The 90

th

day following the date of Respondent's initial licensure and, therefore, the

deadline for the company's first ownership status report, was Friday April 13,2012. 9. At all times relevant to Respondent's first ownership status report, any such report was required by statute to list each addition or deletion of an owner; be in a format prescribed by the Division; include, at a minimum, the owner's name, address, and Social Security number; and be accompanied by a fee as established by the Division. Utah Code Ann. 58-55-302(10)(b) and 58-55-302(1)(e)(iv). 10. Utah Code 58-55-302(1)(e)(iv) was amended during the 2012 Utah Legislative Session (S.B. 92) to require ownership status reports to include each new owner's birthdate in addition to the other data listed in Paragraph 9. The new requirement went into effect on May 8, 2012, after the deadline for Respondent's first report. 11. The Division charges a fee of $20 for each new owner listed on an ownership status report. 12. Respondent submitted its first ownership status report on Monday April 16, 2012, the 93 rd day following the date of initial licensure. In its first report, Respondent listed 725 new owners by name and included addresses, but used the company address for six of the new owners. Respondent did not provide any birthdates or credit reports for the new owners, nor did Respondent have any of the new owners complete financial questionnaires as provided by the Division. On April 24, 2012, Respondent paid to the Division a fee of $8,760, an amount $5,740 short of the total required to register 725 new owners at a fee of $20 per owner. 13. On May 16, 2012, the Division sent Respondent written notice that an audit of its first ownership status report would be conducted pursuant to Utah Code Ann. 58-55

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302(1O)(c). The notice indicates that the audit would be conducted to determine whether Respondent's April 16, 2012 ownership status report was timely filed; whether Respondent paid the required fee for each new owner disclosed in its report; and whether Respondent had submitted a complete report in light of the issue regarding the use of the company address for six of the new owners and the fact that Respondent had not provided a birthdate, financial questionnaire, or credit report for any of the new owners.l The notice also directs Respondent to cure the identified deficiencies within 30 days. 14. On June 18, 2012, Respondent submitted to the Division a letter raising the following points: a) Respondent argues that the Division's investigation should be terminated on a finding that, pursuant to Utah Code Ann. 55-58-402(3), the circumstances indicate "no apparent material jeopardy to the public health, safety, and welfare." As support for this argument, Respondent claims that each owner is covered by both unemployment and workers compensation insurance; that the company complies with all applicable tax reporting requirements; that no complaint has been filed with the Division against the company; that the company has not been named as a party in any type of lawsuit; that the company has no financial problems, emphasizing that it has never been involved with a mechanic's lien; and that the company pays its bills in a timely fashion and has a healthy balance sheet.

I The Division's notice also raises issues regarding whether some of the new owners identified in the status report could be considered legally present in the United States. Respondent made arguments on these issues when it submitted a letter to the Division on June] 8, 20] 2. Thereafter, the Division issued six citations against individuals alleged to be unlawfully present, and various procedures followed. Pursuant to the parties' January 30, 2013 stipulation bifurcating the matter so as to deal with issues related to legal presence separately, no further discussion on those issues is included in this order.

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b) Respondent agrees that its April 16, 2012 ownership status report was not filed by the 90 day following the date of licensure, but points out that its tardiness was minimal ("a couple of days") and "due to a miscalculation of the due date." c) Respondent acknowledges that the Division charges a $20 fee for each new owner listed on an ownership status report, but contends that it paid the required fee in full. d) Respondent argues that Utah Code Ann. 58-55-302(l)(e)(iv) does not require an ownership status report to disclose each new owner's birthdate. Respondent further argues that, although the statute authorizes the Division to mandate the form of the ownership status report, that grant of authority does not include the ability to require whatever information or data the Division might wish to see, therefore precluding the Division from requiring birthdates. e) Respondent argues that its use of the company address for new owners who are "in transition" is appropriate and should be considered sufficient to comply with the statute. Respondent also provides updated address information for four of the new owners for whom the company address was used on the ownership status report, and explains that the other two individuals whose addresses were being audited by the Division had moved from the state and terminated their ownership interests in the company.
f) Respondent argues that, after granting a license application, the Division does not
th

have statutory authority to require the company to demonstrate an owner's financial responsibility by providing a credit report. Respondent appears to argue that, in an audit, the Division has the burden to prove unprofessional or unlawful

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conduct, and that it may not use an audit to shift onto a licensee the burden to demonstrate financial responsibility, including the associated costs. Respondent notes that a credit report costs $23. Further, Respondent argues that the Division is specifically authorized by statute to require that owners submit credit reports only in conjunction with the processing of an application for licensure and, therefore, is prohibited from requiring a credit report in processing an ownership status update or conducting an audit of financial responsibility. 15. Respondent has provided no documentary evidence to prove the claims made in its June 18, 2012 letter that the company is financially healthy and responsible. In its presentation before the Commission, Respondent claimed that the company is structured so as to make it impossible for the financial liabilities of any individual owner to affect or impair the overall financial health or responsibility of the company. 16. The Division has not investigated Respondent's overall company finances. Nor has the Division investigated whether the terms of ownership outlined in Respondent's contracts with its owners would suffice to protect the company from an individual owner's financial liabilities beyond those protections that are afforded legally through its business organization as a limited liability company (LLC). Respondent has not provided its financial records to the Division, but represents that it is willing do to do. 17. On August 14, 2012, the Division replied to Respondent's June 18, 2012 letter, reiterating its request that Respondent cure the deficiencies previously identified in regard to its April 16,2012 ownership status report and giving Respondent 15 days to do so. 18. Respondent did not cure the alleged deficiencies and, on October 11, 2012, the Division issued the notice of agency action in this matter.

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19. On November 27,2012, Respondent supplemented its June 18,2012 response, reiterating its arguments and alleging that the Division has misinterpreted and misapplied the statutes on which it relies for this action. 20. The Division's research of Utah court records using the names and Social Security numbers of the owners Respondent identified on its first status report reveals the following: a) There are 132 owners who appear to have judgments entered against them, several with multiple judgments. In sum, it appears that individuals with ownership interests in Respondent are liable under 443 judgments totaling $1,451,157.63. b) There are 232 owners who appear to have criminal history, several with multiple cases. In sum, it appears that individuals with ownership interests in Respondent have been prosecuted in Utah for 1,274 misdemeanor or felony charges, including the following: theft; attempted theft; retail theft; theft by deception; theft of services; criminal trespass; forgery; attempted forgery; possession of forgery equipment; attempted possession of forgery writing device; attempt to receive stolen property; robbery; attempted robbery; burglary; burglary of a vehicle; attempted fraudulent obtainment of unemployment compensation; use or distribution of a controlled substance; possession with intent to distribute of a controlled substance; identity fraud; false information with intent to be another actual person; false information to a police officer; assault with substantial bodily injury; aggravated assault with a deadly weapon; criminal mischief; driving under the influence of alcohol; driving without a license; no valid driver license ever obtained; driving or operating a vehicle without insurance; no proof of insurance;

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use of license plates registered to another vehicle; failure to remain at the scene of an accident; purchase, transportation, possession, or use of a firearm by a restricted person; and bail jumping. c) There are 35 owners whose Social Security numbers appear to be associated with prior bankruptcies, although the names on the bankruptcy records are different from the owners' names in certain cases. Without credit reports and more specific information to verify the identity and financial circumstances of Respondent's owners, the Division is unable to determine the extent to which the above data applies to individuals holding ownership interests in Respondent. 21. Respondent filed additional ownership status reports as follows: 22. The Division's records show, and the Commission accepts as fact, that Respondent filed its second ownership status report on July 30, 2012-108 days following the previous report deadline of April 13, 2012. (The 90 th day following the previous deadline was July 12, 2012.) Respondent identified 364 new owners and paid a fee of $6,240, an amount $1,050 short of the total required to register 364 new owners at a fee of $20 per owner. 2 23. As of the date on which the notice of agency action was filed in this matter, Respondent had registered 1,089 new owners and paid registration fees of$15,000, an amount $6,780 short of the total required to register 1,089 new owners at a fee of $20 per owner. 3

2 The Division's records show that Respondent submitted additional ownership status reports on October 17,2012 and January 14,2013. It appears that the Division is prepared to demonstrate that each of these reports was filed late and with deficiencies. However, since these reports were filed after the date on which the notice of agency action was issued in this matter, the Commission does not consider them in this order. The Division may bring a subsequent action if, after the issuance of this order, the parties are not able to determine how any deficiencies identified by the Division should be corrected.

It appears that Respondent made additional payments to the Division following the date on which the notice of agency action was issued in this matter and that the total amount owed as of the date of this order is less than $6,780.

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CONCLUSIONS OF LAW
24. The following statutory and rule provisions are relevant and controlling in this matter: a) Utah Code Ann. 58-1-501(2)(a), which establishes that a licensed contractor commits unprofessional conduct if it violates any statute, rule, or order regulating the profession. b) Utah Code Ann. 58-55-502(1), which establishes that a licensed contractor commits unprofessional conduct if it fails to establish, maintain, or demonstrate financial responsibility while licensed. c) Utah Code Ann. 58-55-102(19), which defines the term "financial responsibility" as follows: Financial responsibility means a demonstration of a current and expected future condition of financial solvency evidencing a reasonable expectation to the division and the board that an applicant or licensee can successfully engage in business as a contractor without jeopardy to the public health, safety, and welfare. Utah Code Ann. 58-55-102(19) also specifies the following: "Financial responsibility may be determined by an evaluation of the total history concerning the licensee or applicant including past, present, and expected condition and record of financial solvency and business conduct." d) Utah Code Ann. 58-55-502(2)(t), which establishes that a licensed contractor commits unprofessional conduct if it disregards or violates, either through gross negligence or through a pattern of negligence, any reporting, notification, and filing laws of the state.

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e) Utah Code Ann. 58-55-501 (16)(f), which establishes that a licensed contractor commits unlawful conduct if it fails to comply with applicable reporting, notification, and filing laws of the state. f) Utah Code Ann. 58-55-302(10)(a), which requires a licensed contractor organized according to Respondent's business model to file an ownership status report every 90 days following the date of licensure. g) Utah Code Ann. 58-55-302(1 O)(b), which requires a licensed contractor organized according to Respondent's business model to list on each ownership status report any new owners according to a format prescribed by the Division, including each new owner's name, birthdate (as of May 8, 2012), address, and Social Security number, and to pay a fee as established by the Division. h) Utah Code Ann. 58-55-302(lO)(c), which allows the Division to audit, at any time, an ownership status report to determine if the licensee's financial responsibility has been demonstrated or maintained as required under Utah Code Ann. 58-55-306. i) Utah Code Ann. 58-55-306(4)(a), which allows the Division to require each owner of a contractor business that is organized according to Respondent's business model to demonstrate financial responsibility in conjunction with an application for licensure. j) Utah Code Ann. 58-55-306(2), which allows the Division to audit an applicant's or licensee's demonstration of financial responsibility on a random basis or upon finding of a reasonable need. k) Utah Code Ann. 58-55-306(3), which places the burden of demonstrating financial responsibility on the applicant or licensee.

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I) Utah Code Ann. 58-55-306(4)(b), which allows the Division to audit the financial responsibility of an owner's demonstration of financial responsibility under Subsection 58-55-306(4)(a) at any time by, among other methods, requiring a current list of owners and requiring a credit report for each owner. m) Utah Administrative Code RI56-55a-306(l), which lists the records, including judgments, tax liens, and collection actions, the Division may consider in conducting a financial responsibility audit of a licensed contractor, and specifying that the Division may examine individuals' credit reports. 25. The Division's petition in this matter sets forth the following two counts:
a) Count I: Respondent has failed to submit timely and complete owner reports.
b) Count II: Respondent has failed to demonstrate financial responsibility.
The Commission will address each count individually.

COUNT I: FAILURE TO SUBMIT TIMELY AND COMPLETE OWNER REPORTS.

26. The Commission finds, pursuant to Paragraphs 12 and 22 above, that Respondent filed its first ownership status reports three days late and its second report 18 days late. The Commission concludes that, by missing these statutory deadlines, Respondent failed to comply with the reporting requirement set forth in Utah Code Ann. 58-55-302(lO)(a). Therefore, Respondent has engaged in unlawful conduct pursuant to Utah Code Ann. 58-55-501{ 16){t). 27. Respondent admits that it missed the first ownership status report deadline due to a miscalculation of the due date. The Commission concludes that these circumstances constitute negligence and that similar negligence can, more likely than not, be attributed

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to Respondent's missing the second report deadline. Therefore, the Commission finds that Respondent has engaged in a pattern of negligence regarding a statutory reporting requirement, which constitutes unprofessional conduct under Utah Code Ann. 58-1 501(2)(a) and Utah Code Ann. 58-55-502(2)(f). 28. Pursuant to Paragraph 12 above, the Commission has found that Respondent's first ownership status report failed to include a birthdate, financial questionnaire, and credit report for each of the new owners listed, and failed to provide a residential address for six of the individuals. The issue to be decided by the Commission is whether these omissions also render the report incomplete. 29. As to the issue regarding addresses, the Commission disagrees with Respondent's contention that it is appropriate to use a company address for any owner who is "in transition." It is unclear what this term means, how long a "transition" period might last, and when, if ever, Respondent would update the information if it were not challenged by the Division. Where the Division may require each owner, individually, to demonstrate financial responsibility, the Commission concludes that it is reasonable for the Division to require each individual owner to disclose his or her residential address to aid in verifying the identity of a debtor who has a common name and in order to facilitate direct communication with an owner rather than having to filter all communication through Respondent. Therefore, Respondent's failure to provide unique residential addresses for each new owner rendered its first status report incomplete. However, where Respondent has since remedied this failing, the Commission finds the issue to be moot for the purpose of assessing violations and penalties.

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30. As to the issue regarding birthdates, Respondent argues that the Division did not, at the time the first ownership status report was submitted, have statutory authority to require new owners to disclose their birthdates. The Commission disagrees. 31. In drawing this conclusion, the Commission notes the inclusive language of the statute outlining the data that must be disclosed for each new owner. Specifically, Section 58-55 302(1)(e)(iv) states that a licensee must provide Ita list ... that includes for each individual the individual's name, address, and Social Security number ... II (emphasis added). According to standard rules of statutory interpretation, such inclusive language indicates that other items may be added to the list. 4 Arguably, a reasonableness standard would apply to any added item. 32. In this case, the Division's request for birthdates was reasonable. A birthdate is necessary in order to verify the identity of a debtor named in a judgment, tax lien, or collection action. Home addresses are helpful for this purpose, though not entirely reliable, and Social Security numbers are generally not included in the information contained in court records. Where, pursuant to Utah Administrative Code RI56-55a-306(1), judgments, tax liens, and collection actions are records that can be examined by the Division in a financial responsibility audit, it is reasonable for the Division to require data, including a birthdate, from which it might be verified whether an owner and a debtor are the same person. The conclusion that it is reasonable for the Division to require owners' birthdates is further supported by fact that the Utah Legislature, in its 2012 session, amended

See, e.g., State v. Pecht, 48 P.3d 931, 937 stating that a list of factors outlined in the statute under consideration in the case was not exclusive but should be interpreted as "intended to prompt a comprehensive inquiry." It is notable that the statute under consideration by the Pecht court did not use any form of the word "include." Even so, the court held that the list of items to be considered was not exclusory.

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Section 58-55-302(1)(e)(iv) to state specifically that a licensee must provide new owners' birthdates on each ownership status report. 33. Having reached a conclusion on the specific issue as to whether the Division was, at all relevant times, authorized by statute to require Respondent to disclose its new owners' birthdates, and having found that the Division may reasonably require a company to provide data other than that specified in statute, the Commission does not find it necessary to entertain Respondent's more general arguments that the authority to dictate a form of a disclosure does not also authorize an administrative agency to dictate the content of a disclosure. 34. The Commission finds that Respondent's failure to disclose its new owners' birthdates in response to a proper and reasonable request by the Division constitutes a failure to comply with a state reporting, notification, and filing law. Therefore, Respondent's actions constitute unlawful conduct under Utah Code Ann. 58-55-501(l6)(f). 35. The Division also argues under Count I of its petition that Respondent's failure to provide credit reports and financial questionnaires for its new owners constitutes a failure to submit a complete ownership status report. The Commission agrees, but finds that this issue is better analyzed under Count II of the Division's petition.

COUNT II: FAILURE TO DEMONSTRATE FINANCIAL RESPONSIBILITY.

36. The parties do not dispute the following points: a) That a licensed contractor organized according to Respondent's business model is required to provide the Division with a list of owners each time it applies for licensure and every 90 days following the date on which a license is issued;

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b) That the Division is explicitly authorized by statute to require credit reports from all owners identified in conjunction with an application submitted by a contractor that is organized according to Respondent's business model; c) That a licensed contractor organized according to Respondent's business model is required to maintain financial responsibility throughout the term of licensure; d) That the Division is explicitly authorized by statute to audit a licensed contractor that is organized according to Respondent's business model with regard to the demonstration of financial responsibility made during the most recent application; and e) That the Division is explicitly authorized by statute to audit an ownership status report submitted by a licensed contractor that is organized according to Respondent's business model at any time during the period of licensure to determine whether the company maintains financial responsibility. 37. The dispute between the parties involves what the Division's audit power means
III

practice, particularly as it relates to an audit of an ownership status report. Specifically, the issue before the Commission is whether the Division may require Respondent to provide credit reports and financial questionnaires 5 for its new owners as part of an audit of a status report. 38. Respondent's central argument is that the Division, once a license has been granted, has no authority to inquire into, or audit, the financial status of new owners until such time as

5 The parties' focus during the Commission's February 27,2013 meeting was on credit reports. There was little, if any, discussion of financial questionnaires. However, to date, Respondent has declined to provide financial questionnaires in response to the Division's audit. Therefore, it appears that Respondent's position regarding financial questionnaires is the same as its position regarding credit reports. Rather than reconvening the parties to clarity Respondent's position, the Commission assumes that Respondent considers the Division to be without authority to require each new owner to complete and submit a financial questionnaire.

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the company next makes application for license renewal. Therefore, Respondent contends that a Division audit of an ownership status report is restricted to inquiry regarding the company's finances and that, if the company itself appears to be financially healthy, the Division should be precluded from considering the financial condition of any individual owner. 6 The Commission disagrees. 39. Utah Code Ann. 58-55-306 allows the Division to require individual owners of an unincorporated contractor company to demonstrate financial responsibility in order to determine whether the company itself is financially responsible. No language in this section-or in any other section brought to the Commission's attention by Respondentspecifies that there are times or circumstances when the relationship between the financial health of an unincorporated entity and the financial circumstances of its owners terminates or becomes irrelevant. As such, the statute contemplates that the financial circumstances of Respondent's owners are relevant at all times to the company's ability to demonstrate financial responsibility. 40. Respondent, in its argument before the Commission, repeatedly claimed that the company is structured so as to make it impossible for an owner's financial liabilities to impair or affect the company's overall financial standing. Respondent appears to argue that, if the Legislature sees the relationship between the financial health of an unincorporated company and its owners to be relevant, then the Legislature is-at least in some cases-wrong. If this is Respondent's position, it must take its argument to the Legislature. The Commission declines to rule on whether the mechanism outlined in statute for demonstrating financial responsibility of an unincorporated entity is overbroad
6

Respondent's argument before the Commission appears to acknowledge that, if the company's finances were to appear questionable, the Division might then have the authority to look further at the financial condition of the company's owners.

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or otherwise flawed. Therefore, the Commission concludes that, while an examination of a company's books might be useful in determining whether a company is financially responsible, the Division is not required to make such an examination before it may inquire into the financial condition of a company's owners. Nor is the Division precluded from inquiring into the financial condition of a company's owners if it appears on some level that the company is financially healthy and responsible. 41. This conclusion is supported by the statutory definition of "financial responsibility," which specifies that the term refers to the "total history" of an applicant or licensee. This language is extremely broad and allows consideration of all factors, particularly those considered relevant under the statute. In the instant case, as stated above, the statute indicates that an owner's financial circumstances are relevant. 42. Having determined that the relationship between the finances of a company and its owners is relevant at all times to the company's ability to demonstrate financial responsibility, it remains for the Commission to consider whether the statute nevertheless restricts the Division from requiring owners to submit financial questionnaires and credit reports in conjunction with an ownership status report. The Commission concludes that there is no such restriction. 43. To conclude otherwise would require the Commission to engage in an extremely narrow reading of Section 58-55-306. Essentially, Respondent requests the Commission to read the section as allowing the Division to audit nothing more than the demonstration of financial responsibility that a company has made in conjunction with its most recent application for licensure. In the instant case, such an approach would allow the Division to audit Alma Faerber's financial responsibility during Respondent's initial term of

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licensure, but it would preclude the Division from evaluating any new owners who are brought into the company during that term. 44. If the Legislature intended for the statute to be read in such a narrow and restrictive manner, there would be little, if any, practical application of the statutory requirement that each owner of an unincorporated business demonstrate financial responsibility in conjunction with an application. Any company that wished to preclude the Division's review of an individual whose financial circumstances might undermine the company's ability to demonstrate overall financial responsibility could simply apply at a time when the individual were not considered an owner, then bring the person into the company shortly thereafter. 45. Similarly, there would be no reason to require a company to submit an ownership status report every 90 days other than to document the new names. This is not the purpose of Section 58-55-302(10)(c)(i), which authorizes the Division to audit an ownership status report for the specific purpose of determining whether "financial responsibility has been demonstrated or maintained as required under Section 58-55-306 .. ,II (emphasis added). The Commission notes that this language does not restrict an audit as applying only to a company's demonstration of financial responsibility as established at some past point in time; specifically, as of an application date. Rather, it authorizes the Division to audit an ownership status report submitted outside of an application for licensure, As such, the statute contemplates that the financial status of new owners might impair a company's overall financial stability, as well as its ability or willingness to maintain responsible financial policies and practices.

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46. Utah Code Ann. 58-55-306(4)(b)-which is referenced by Section 58-55-306 in regard to the requirement that a company maintain financial responsibility-states that an audit of the financial responsibility demonstrated by a company in conjunction with a license application may include the requirement that the company provide a current list of owners. The use of the word "current" reveals that the purpose of the audit is to scrutinize the financial responsibility of any new owners to determine whether a new owner's circumstances impair the company's ability to demonstrate that it maintains financial responsibility. In addition, the statute specifies that a recommended way to conduct the audit is by examining a credit report for "each owner" as named in the current list. 47. The Commission notes that the statute does not specify that the Division may require a company to submit financial questionnaires for its new owners. Having already found that the Division has the ability to require information and data beyond the items specified in Utah Code Ann. 58-55-302(1)(e)(iv), the Commission now considers whether it is reasonable for the Division to require financial questionnaires. 48. If the Division were not allowed to require new owners to submit financial disclosures in an audit, it would be very difficult for the Division to comply with the statutory mandate that it evaluate the financial responsibility of the owners in an unincorporated entity. This difficulty is illustrated by the actions taken by the Division in this case. 49. When Respondent declined to provide credit reports and financial disclosures, the Division searched the Utah court records individually for each of the 725 new owners named in Respondent's first status report. There is no information in the record regarding the number of hours required to conduct these searches or the associated administrative cost, but it is reasonable to conclude that the administrative burden was meaningful.

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50. The Division's research indicated that Respondent's new owners might include petitioners for bankruptcy, debtors, and defendants named in as many as 1,752 cases in Utah alone, with crimes involving theft, forgery, violence, and fraud. The Division has no ability to search other jurisdictions for similar information. 51. It would be impossibly burdensome to require the Division to further research those 1,752 cases to verify the identity of the individuals named and, thereafter, to determine the current status of each case involving an individual affiliated with Respondent's company so as to establish whether each such individual demonstrates financial responsibility in spite of his or her history. Even were the Division to undertake such a task, the information generated would be incomplete because it would not reflect issues adjudicated in other states. Nor would it reveal collections, delinquent accounts, and similar matters that had not been made part of a court case. However, a financial questionnaire allows the Division to focus on relevant inquiries. Therefore, the Commission concludes that it is reasonable for the Division to require Respondent's new owners to submit completed financial questionnaires. 52. Moreover, under Utah law, the Division does not have the burden of proving that an applicant or licensee lacks financial responsibility. To the contrary, Utah Code Ann. 58 55-306(3) explicitly places the burden of demonstrating financial responsibility on the applicant or licensee, and this burden is not restricted to circumstances involving an application for licensure. For this very purpose Respondent is required to submit a status report every 90 days. Further, Utah Code Ann. 58-55-302(10)(c)(i) incorporates Section 58-55-306(3) in outlining a licensee's obligation to maintain financial responsibility. Therefore, the Commission concludes that any costs associated with demonstrating that

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financial responsibility is maintained must be borne by the licensee at all times, regardless of whether it is an application or an audit through which a licensee is requested to make the required showing. Therefore, the Commission concludes that Respondent must bear all costs associated with providing financial questionnaires and credit reports as requested by the Division. If Respondent's business model makes these costs excessively burdensome, that factor is within Respondent's control and irrelevant under the statute. 53. Given the foregoing findings that Respondent was required at all relevant times to provide financial questionnaires and credit reports for new owners listed on its status reports and to bear the associated costs, the Commission now concludes that Respondent's failure to do so constitutes a failure to demonstrate and maintain financial responsibility. Therefore, Respondent has committed unprofessional conduct under Utah Code Ann. 58-55-502(1). 54. Where Respondent has failed to demonstrate and maintain financial responsibility, the Commission concludes that there is an open question as to whether its circumstances indicate that it operates, or that it might operate, in a manner as to place in jeopardy the health, safety, and welfare of the public. Therefore, the Commission concludes that it is not appropriate under Utah Code Ann. 55-58-402(3) to resolve this administrative matter without taking an immediate action. 55. Utah Code Ann. 58-1-401(1)-(2) states that the Commission may revoke, suspend, restrict, place on probation, or otherwise act on the license of a licensee who has engaged in unprofessional conduct as defined by statute or rule, or who has engaged in unlawful conduct as defined by statute. Utah Code Ann. 58-55-306(4)(c) provides that, in

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circumstances where an owner fails to demonstrate financial responsibility, either the owner or the licensee may be prohibited from engaging in a construction trade.
ORDER

On the basis of the findings of fact and conclusions of law outlined herein, the license of Universal Contracting, LLC is placed on probation for a period of one year from the date of this order, contingent on its complying with the remainder of this order and submitting financial questionnaires and credit reports from which it may be determined that each of the company's owners demonstrates financial responsibility. Within 45 calendar days of the date of this order, Universal Contracting, LLC shall pay to the Division either the $6,780 due in outstanding fees as of October 11,2012 or, alternatively, the total amount due according to the Division's records in order to register all new owners named in the company's status reports between April 16, 2012 and January 14, 2013. By the same deadline, Respondent shall also provide to the Division birthdates, financial questionnaires, and credit reports for any owner who, as of October 11, 2012, had not provided these records. If Universal Contracting, LLC fails to comply with these requirements by the deadline stated, the Division shall immediately revoke the company's contractor license without further notice or proceeding. If Universal Contracting, LLC complies with these requirements by the deadline stated, the Division shall review the records and bring to the Commission for further consideration and action any concerns or issues regarding the company's financial responsibility. This order shall be effective on the signature date below.

Page 23

DATED this

Ill-h day of

1'-\0-.,<:...,\\

,2013.

Signed by the Acting Director pursuant to a grant of authority from the Utah Construction Services Commission and on its behalf.

UTAH DEPARTMENT OF COMMERCE

Thomas A. Brady Acting Director, Division of Occupation Professional Licensing

Notice of Right to Administrative Review Review of this order may be sought by filing a written request for administrative review with the Executive Director of the Department of Commerce within thirty (30) days after the issuance of this order. Any such request must comply with the requirements of Utah Code Ann. 630-4 301 and Utah Admin. Code R151-4-902.

Page 24

CERTIFICATE OF SERVICE

I hereby certify that on the day of March, 2013, a true and correct copy of the foregoing FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER has been served on the parties of record in this proceeding by mailing a copy thereof, properly addressed by first class mail with postage prepaid, to the following: Universal Contracting LLC 598 West 2760 North Pleasant Grove UT 84062 Daniel Watkins Peck Hadfield Baxter & Moore 399 North Main Street Ste 300 Logan UT 84321

\~

Carol Inglesby Administrative Asst. Division of Occupational and Professional

Licensing