F & S 3000, Inc. :
d/b/a 3rd Street Mart : DOCKET NO. D-2007-2006-00075
612 West 3rd Street : DIA NO. 07DOCBL038
Davenport, Iowa 52802 :
Liquor License No. LE0001172 :
______________________________
NOW, on this 27th day of November, 2007, this matter comes before the Iowa Alcoholic Beverages Division (ABD) on the timely request for review filed in this docket by F & S 3000, Inc. (Licensee).
The record in this docket discloses that on May 3, 2007, the City of Davenport (City) filed an administrative hearing complaint against the Licensee. The complaint alleged:
1. On or about September 5, 2005, and again in September 2006, the Licensee, or by an agent, manager or owner of the Licensee, did violate Iowa Code § 123.39(1)(b)(1) and Davenport Municipal Ordinance § 5.10.230(A), by misrepresenting a material fact on the application and renewal application for liquor control license LE0001172; and,
2. On or about April 13, 2007, the Licensee, or by an agent, manager or owner, did violate §§ 123.3(26)(d) and 123.39(1)(b)(4), through the happening of an event (felony conviction) that results in disqualification from holding a liquor license.
A Notice of Hearing scheduled the matter for May 30, 2007. On that date, an administrative hearing was held before an administrative law judge in accordance with Iowa Code chapters 17A and 123. Assistant City Attorney Brian Heyer represented the City. The Licensee was represented by Attorney David Treimer.
On June 21, 2007, the administrative law judge issued a Proposed Decision revoking the Licensee’s license. The Licensee timely appealed the action of the ABD and was permitted to remain open for business pending final agency action.
The Licensee and the City were given the opportunity to file exceptions and present briefs in support of their respective positions. The objections and exceptions of the Licensee were due no later than the close of business on August 15, 2007. Responsive briefs and exceptions were due by the close of business on September 14, 2007. The Licensee requested and was granted until September 7, 2007, to file a brief. The deadline for responsive briefs was extended to October 8, 2007. Both parties timely filed briefs.
Upon the motion of a party to the administrative hearing or upon the motion of the Iowa Alcoholic Beverages Division Administrator, the Administrator may review the proposed decision and may reverse or modify any finding of fact if a preponderance of the evidence will support the determination to reverse or modify the finding. Iowa Code § 17A.15(3). The Administrator may also reverse any conclusion of law that the Administrator finds to be in error. Id
In the instant case, the Administrator has reviewed the entire record and believes the Findings of Fact and Conclusions of Law and the Decision and Order should be affirmed.
The Iowa Legislature enacted Iowa Code Chapter 123 to protect the welfare, health, peace, morals and safety of Iowans. Iowa Code § 123.1. All provisions of Chapter 123 are to be construed liberally for the accomplishment of that purpose. Id. Iowa law prohibits a person or entity from manufacturing for sale, selling, offering or keeping for sale, possessing or transporting alcoholic beverages except under the terms provided in Chapter 123. Iowa Code § 123.2.
Iowa Code chapter 123 mandates certain requirements be met before a liquor license may be issued by the Division. Specifically, the chapter requires an applicant to be a person of “good moral character.” “Good moral character” is a defined term meaning any person with financial standing and good reputation sufficient to satisfy the Administrator that the person will: 1) comply with chapter 123 as well as the laws, rules and ordinances governing the license; 2) has not had a liquor license, wine permit or beer permit revoked within the past two years; 3) is a citizen of the United States and a resident of Iowa or licensed to do business in the state in the case of a corporation; and, 4) has not been convicted of a felony offense within the past five years. Iowa Code § 123.3(26).
The “good moral character” standards apply to: 1) each of the officers, directors and partners of a licensed entity; 2) all persons who directly or indirectly own or control ten percent or more of any class of stock; and, 3) all persons who directly or indirectly have an interest of ten percent or more in the ownership of the licensed entity. Id. Licensees are responsible for remaining compliant with all requirements during the entire period of the license. Id.
Iowa Code chapter 123 sets forth the content of liquor license applications. As part of the application process, the applicant must, in part, fully disclose: 1) all persons, in the case of a corporation, the officers, directors and persons owning or controlling ten percent or more of the capital stock of the corporation having a financial interest, by way of loan, ownership or otherwise, in the business; 2) a statement of whether any of the officers, directors and persons named on the application have ever been convicted of any offense against the laws of the United States, or any state or territory of the United States, or any political subdivision of any state or territory. Iowa Code § 123.31. A licensee may complete a simplified application for renewal of the license when qualifications and qualification information have not changed since the original application was filed with the Division. Iowa Code § 123.35.
The Iowa Alcoholic Beverages Division or the City may suspend a license for a period not to exceed one year, revoke the license, or impose a civil penalty not to exceed one thousand dollars per violation, Iowa Code § 123.39(1)(a). Grounds for the imposition of a civil penalty or the suspension or revocation of a liquor license include, but are not limited to: 1) misrepresentation of any material fact in the license application; 2) change of ownership or interest in the business not reported to and approved by the local authority and the Division; and, 3) an event which would have resulted in the disqualification from the original issuance of the license. Iowa Code § 123.39(1)(b).
The issue in the instant case is twofold: 1) whether the Licensee misrepresented ownership on its license renewal applications in 2005, and 2006, when Ghulam Chaudhry was listed as the new 50% owner in place of the prior 50% owner Ali Murtaza, because Ghulam Chaudhry and Ali Murtaza are the same person using different names and social security numbers; and 2) whether the ownership of the Licensee includes an individual who is ineligible to hold a liquor license because of a felony conviction.
On August 27, 2003, liquor license number LE0001172 was issued to the Licensee based on the information provided in the license application listing Ali Murtaza and Shahid Mahmood as equal owners of the Licensee. The application reflected the birth date of Ali Murtaza as May 15, 1965, and his social security number as 062-88-0965. Ali Murtaza signed the application on behalf of the Licensee. City’s Exhibit 1 and Proposed Decision, page 2.
The 2003, application for the liquor license states that the Licensee controls the proposed licensed premises by ownership. City’s Exhibit 1. The information is supported by an attached warranty deed for the property reflecting Ali Murtaza and Ghulam M. Chaudhry as owners of the property described as the East 24 feet of the West 52 feet in Block 17 in the Original Town (now City) of Davenport, Scott, Iowa as tenants in common. An attached commercial lease for the property shows Ali Murtaza and Ghulam Chaudhry as tenants in common leased the property to the Licensee. City’s Exhibit 1 and Proposed Decision, page 3.
On September 10, 2004, liquor license number LE0001172 was renewed based on information provided in the application signed by Ali Murtaza. The 2004, application reflects no change of ownership within the corporate structure since the license was first issued in 2003. City’s Exhibit 2 and Proposed Decision, page 3.
A special meeting of the Licensee was purportedly held on May 26, 2005, at which time the following resolutions were adopted: 1) Ghulam Chaudhry was named president and Shahid Mahmood was named treasurer of the Licensee; 2) one hundred shares of stock (50 shares each for Ghulam Chaudhry and Shahid Mahmood) were to be issued with no stock certificates; 3) Ali Murtaza was to be retained as manager and chief operating officer; and 4) Ali “Jim” Murtaza was authorized to be a signatory on negotiable instruments, to enter into contracts on behalf of the Licensee and to bind the Licensee in any such contract. City Exhibit 7 and Proposed Decision, pages 3 and 4.1
On June 20, 2005, the Licensee filed a statement of change of registered officer/agent with the Iowa Secretary of State’s Office. The registered agent was changed from Ali Murtaza at 1139 Brady Street in Davenport, Iowa to Ghulam Chaudhry at 612 W 3rd Street in Davenport, Iowa. The statement was signed by Ghulam Chaudhry as President. City’s Exhibits 3 and 6 and Proposed Decision, page 4.
According to Ghulam Mustafa Chaudhry, he paid for his 50 shares by conveying his interest in the real property that had been jointly owned by Ali Murtaza and Ghulam Mustafa Chaudhry. Ghulam Mustafa Chaudhry further testified that he gave Ali Murtaza his power of attorney because Chaudhry lives in New Jersey. However, there is question that the document is valid since it does not appear to have been recorded with the Scott County Recorder’s Office. Proposed Decision, page 5 and City’s Exhibit 29.
The following transfers by warranty deed documents are recorded with the Scott County Recorder’s Office:
a. Conveyance of the interest in the real property in the East 24 feet of the West 52 feet of Lot 3 in Block 17 from Ali Murtaza and Aileen Murtaza, husband and wife, to Ali Murtaza and Shahid Mahmood, as tenants in common, dated May 3, 2005. Proposed Decision, page 5 and City‘s Exhibit 17 and Proposed Decision, page 5.
b. Conveyance of the interest in the real property in the East 24 feet of the West 52 feet of Lot 3 in Block 17 from Ghulam M. Chaudhry, a single person, to Ali Murtaza and Shahid Mahmood, as tenants in common, dated August 19, 2005. The document is signed by Ali Murtaza on behalf of Ghulam M. Chaudhry, as power of attorney. Proposed City‘s Exhibit 16 and Proposed Decision, page 5.
c. Conveyance of the interest in the real property in the East 24 feet of the West 52 feet of Lot 3 in Block 17 from Ali Murtaza and Aileen Murtaza, husband and wife, and Ghulam Chaudhry2 to the Licensee, date August 24, 2005. City’s Exhibit 14 and Proposed Decision, page 5.
On September 5, 2005, Shahid Mahmood signed and submitted a renewal application for liquor license LE0001172 to the City. Shahid Mahmood and Ghulam Chaudhry are reflected as the shareholders of the Licensee with each holding 50% of the shares. The information was documented by the attachment of minutes from a May 26, 2005, corporate meeting. City’s Exhibit 7 and Proposed Decision, page 6.
Upon review of the application, the City determined Ali Murtaza needed to be added to the ownership section. The application was returned to Shahid Mahmood and Ali Murtaza who complied with the City’s request by adding Ali Murtaza with 0% in the ownership section and the word “none” in the criminal history section of the application. The City then approved renewal of the license. City’s Exhibit 7 and Proposed Decision, page 6.
In September 2006, the Licensee applied for renewal of the liquor license by submitting an electronic application with the same ownership information that had been submitted in September 2005. City’s Exhibit 8 and Proposed Decision, page 6.
On the day before the contested case hearing, the Licensee’s registered agent was changed from Ghulam Chaudhry to Shahid Mahmood. The change occurred during a special meeting of the Licensee held on May 29, 2007. Also, during the meeting, a resolution was passed dismissing Ali “Jim” Murtaza as the financial manager of the Licensee. The changes are recorded in the minutes of the meeting of the Licensee. Licensee’s Exhibit L-3 and Proposed Decision, pages 7 and 8.
At the hearing, both Ghulam Chaudhry and Shahid Mahmood testified that during the May 29, 2007, meeting the decision was made to give Ghulam Mustapha Chaudhry 67% of the corporate shares because Shahid Mahmood had made a loan to Ali Murtaza without Chaudhry’s knowledge. No explanation was given as to why the transaction is not reflected in the minutes of the meeting. Instead, the Licensee submitted corporate minutes dated May 26, 2005 – not May 26, 2007. Proposed Decision, page 8.
The May 26, 2005, corporate minutes submitted at the hearing appear to be identical to the minutes of the May 26, 2005, corporate meeting submitted with the 2005, renewal application with several important distinctions. Specifically:
a. The first version of the May 26, 2005, minutes give Ghulam Chaudhry 50 shares and Shahid Mahmood 50 shares; however, the second version gives Ghulam Chaudhry 67 shares and Shahid Mahmood 33 shares.
b. The second version bears a “FAXED” stamp that has not been crossed out and a notary stamp for a notary whose commission expired six months before the May 29, 2007, date. Moreover, the notary does not state the date on which the signatures were witnessed and notarized. Alternatively, the first version of the minutes have neither the “FAXED” stamp nor the notary stamp.
c. Only the second version states a deed will be accepted from Ali and Aileen Murtaza for the property located at 648 Marquette Street, in Davenport, Scott County, Iowa. However, the warranty deed for the property was recorded in Scott County nearly two years earlier.3 City Exhibit 15 and Proposed Decision, page 9.
At the hearing, Ghulam Mustafa Chaudhry testified that he is the brother of Ghulam Murtaza Chaudhry, a/k/a. Ali Murtaza. Ghulam Mustafa Chaudhry further testified that in Pakistan, a person’s last name is the family name and siblings often share the same first name, but the middle name is distinctive. He estimated that there could be as many as 20 persons named Ghulam Chaudhry in his hometown in Pakistan. Proposed Decision, Page 4.
The record reflects that Ghulam Mustafa Chaudhry has been in the United States since 1985 and is a U. S. citizen. At the hearing, Ghulam Mustafa Chaudhry submitted copies of his social security card, social security number 147-85-1471, and his New Jersey commercial driver’s license. Ghulam Mustafa Chaudhry’s appearance at the hearing matched the photo on his driver’s license. For the most part, Ghulam Mustafa Chaudhry has lived in New Jersey since 2000. Licensee’s Exhibit L-1 and Proposed Decision, page 4.
According to the documents in a federal criminal case against Ali Murtaza and the testimony of Aileen Murtaza, Al Murtaza was born in Pakistan on May 15, 1965. His birth name was Ghulam Murtaza Chaudhry and he came to the United States in 1987. At the hearing, Aileen Murtaza submitted documents that she had obtained from Pakistan indicating Ghulam Murtaza Chaudhry had legally changed his name to Ali Murtaza in 1995. Licensee’s Exhibit L-2.
The record in the case reflects that Murtaza’s initial contact with U. S. Immigration officials occurred in Patterson, New Jersey in November 1987, when he applied for Temporary Resident Status, Special Agricultural Worker. At that time, Murtaza stated he entered the United States without a visa, not through a port-of-entry on March 21, 1985. Murtaza further stated that he was born on April 15, 1964, in Pakistan. City’s Exhibit 19. The federal government later discovered fraud on the application. Id.
In February 1988, Murtaza applied for and obtained social security number 157-82-8013 using the name Ghulam Murtaza Chaudhry and the date of birth of April 4, 1964. In July 1998, using the name Ali Murtaza and the date of birth of May 15, 1965, Murtaza applied for and obtained social security number 062-88-0965. At that time, Murtaza told federal authorities that he had never before applied for a social security number. City’s Exhibit 19. The discrepancies prompted an investigation by federal and state authorities.
The fingerprint cards used by Ali Murtaza to obtain the social security numbers were later compared by a fingerprint technician from the Iowa Division of Criminal Investigation, who determined the fingerprints belonged to the same person. Murtaza was arrested and later entered pleas of guilty to seven felony counts in the United States District Court for the Southern District. Two counts were for providing False Statements in an Immigration Document and five counts were for Misuse of a Social Security Number. Murtaza was sentenced to six months in prison on each felony count, all counts to be served concurrently. City’s Exhibits 19 through 22 and Proposed Decision, page 7.
On the date of the hearing, Ali Murtaza was incarcerated, in part for illegally obtaining the social security number he used to obtain liquor license number LE0001172 in 2003. Ali Murtaza’s wife, Aileen Murtaza, continued to work at the 3rd Street Mart as a cashier and assumed the responsibilities of Ali Murtaza by ordering inventory and making bank deposits. Shahid Mahmood, a first cousin of Ghulam Mustafa Chaudhry and Ali Murtaza, occasionally works as a cashier, but also operates another business in Dubuque. Ghulam Mustafa Chaudhry lives in New Jersey, but comes to Davenport every 6-12 weeks. Proposed Decision, page 7.
Issue I. Misrepresentation of Ownership.
The administrative law judge found the preponderance of the evidence presented at the hearing established that Ghulam Mustafa Chaudhry, a/k/a Ghulam M. Chaudhry and Ghulam Chaudhry is the brother of Ali Murtaza, a/k/a Jim Murtaza and Ghulam Murtaza Chaudhry. The Administrator agrees. Based on the record, it cannot be concluded that the Licensee misrepresented ownership information on the 2005, and 2006, applications.4
Issue II. Licensee Ineligibility – Felony Counts.
There is no question that, as a convicted felon, Ali Murtaza is ineligible to hold a liquor license because he no longer meets the standards of “good moral character” as required by Iowa Code § 123.3(26). The record in the instant case clearly demonstrates that on the date of his felony convictions, Ali Murtaza was a director of the Licensee. The standards of “good moral character” apply to the officers, directors, partners and all persons who directly or indirectly own or control 10% or more of the Licensee. Hence, the Licensee became ineligible to hold liquor license number LE0001172 on the date of Ali Murtaza’s federal felony convictions.
The May 29, 2007, corporate minutes submitted as Licensee’s Exhibit L-3, reflect the Licensee’s Board of Directors took action to dismiss Ali “Jim” Murtaza as the financial manager of the Licensee. Yet, no action was taken to address or change Murtaza’s status as a director. Even if such action had been taken, it would have been after Murtaza’s felony convictions and would not have retroactively preserved the Licensee’s right to hold the license.
The Licensee’s submission of a second set of corporate minutes presented as part of Licensee’s Exhibit L-3, raised serious credibility questions about the reliability of the corporate documents. At the hearing both Ghulam Mustafa Chaudhry and Shahid Mahmood testified that the business reflected in the minutes occurred during a meeting of the Licensee held the day before the administrative hearing on May 29, 2007.
The administrative law judge opined that minutes had no credibility due to the number of inconsistencies and irregularities discussed in items a. through c. on page 8. Moreover, the administrative law judge opined that the testimony of Ghulam Mustafa Chaudhry and Shahid Mahmood regarding Licensee’s Exhibit L-3 was not credible. “If their testimony that these Corporate Minutes reflected action they took on May 29, 2007, was to be believed, then on May 29, 2007, they specifically retained Ali Murtaza as “Manager” and “Chief Operating Officer” and authorized him to sign all negotiable instruments and contracts binding the corporation.” Proposed Decision, page 12.
In the Licensee’s brief, the Licensee argues the administrative law judge exceeded her authority when she ruled on an issue not raised on the complaint nor litigated at the hearing. Moreover, the Licensee argues that the administrative law judge exceeded her authority when she revoked the Licensee’s license based on ineligibility of a director without providing due process rights to the licensee to cure the deficiency. Licensee’s Brief, page 5. The Administrator finds the Licensee’s arguments to be without merit.
The hearing complaint filed against the Licensee clearly contains two separate allegations: 1) whether the Licensee misrepresented ownership on its license renewal applications in 2005, and 2006, when Ghulam Chaudhry was listed as the new 50% owner in place of the prior 50% owner Ali Murtaza, because Ghulam Chaudhry and Ali Murtaza are the same person using different names and social security numbers; and 2) whether the ownership of the Licensee includes an individual who is not eligible to hold a liquor license because of a felony conviction.
The Licensee received notice of both allegations in the administrative hearing complaint attached to the notice of hearing that was served on Demarcus Couch, an employee of the Licensee, by the Scott County Sheriff on May 15, 2007. Proof of Service, Scott County Sheriff’s Office, dated May 15, 2007. Specifically, the second allegation states, “and on or about April 13, 2007, the Licensee did, or by an agent, manager or owner, did violate Iowa Code §§ 123.39(4) and 123.26(d) through the happening of an event (felony conviction) that results in disqualification from holding a liquor license.” Iowa Code § 123.3(26)(d) prohibits felons from holding a liquor license, wine permit or beer permit in the State.
The Licensee accurately points out that Ali Murtaza was not a felon and was eligible to sit as a director of the Licensee when the Licensee’s application for renewal of the license was filed in 2006. While it is true that the City was unable to prove misrepresentation on the 2006, application for renewal of the license, it is also true that Ali Murtaza became ineligible to hold any liquor license, wine permit or beer permit in the State on April 13, 2007, when he entered pleas of guilty to the seven federal felony charges. Moreover, because Ali Murtaza was a director of the Licensee on April 13, 2007, the Licensee also became ineligible to hold the license.
The Administrator hereby ADOPTS the Findings of Fact and Conclusions of Law and the Decision and Order proposed by the administrative law judge in this docket.
IT IS THEREFORE ORDERED that the Findings of Fact and Conclusions of Law and the Decision and Order in this docket are hereby AFFIRMED in their entirety. The application for renewal of liquor license number LE0001172, issued to F & S 3000, Inc., d/b/a 3rd Street Mart in Davenport, Iowa is hereby REVOKED.
The parties are notified that this Order constitutes final agency action for the purpose of Iowa Code chapters 17A and 123. The Order becomes final unless a party to the hearing files a petition for judicial review with the Iowa District Court within thirty days from the date of the final decision. Iowa Code § 17A.19.
DATED this 27th day of November, 2007, in Ankeny, Iowa.
______________________________
Copies to:
Margaret LaMarche
Administrative Law Judge
Division of Appeals and Fair Hearings
Lucas State Office Building
Des Moines, Iowa 50319
John Lundquist
Assistant Attorney General
Department of Justice
Hoover State Office Building
Des Moines, Iowa 50319
Lt. Frank Fisher
ISP, District #12
22365 20th Avenue
Stockton, Iowa 52769-9612
Craig Malin
City Administrator / Clerk
226 W 4th Street
Davenport, Iowa 52801-1398
Chief Michael Bladel
Davenport Police Department
420 Harrison Street
Davenport, Iowa 52801
John Henry Ellison
Iowa Lottery
2323 Grand Avenue
Des Moines, Iowa 50309
Beverly Zyltra
Department of Inspections & Appeals
Lucas State Office Building
Des Moines, Iowa 50319
Gayle Collins
Commissioner
Iowa Alcoholic Beverages Division
1918 SE Hulsizer Road
Ankeny, Iowa 50021
Karen Freund
Licensing Manager
Iowa Alcoholic Beverages Division
1918 SE Hulsizer Road
Ankeny, Iowa 50021
Brian Heyer
Assistant City Attorney
226 West Fourth Street
Davenport, Iowa 52801-1398
David Treimer
Attorney at Law
601 Brady Street, Suite 211
Davenport, Iowa 52803
