1 STATE OF IOWA BEFORE THE DEPARTMENT OF COMMERCE ALCOHOLIC BEVERAGES DIVISION IN RE: Docket No. A Epic, LLC DIA No. 12ABD023 d/b/a Lexury Night Club 2249 NW 86 th Clive, Iowa PROPOSED DECISION New Class C Liquor License Application On November 1, 2012, the Clive City Council (local authority) denied the initial liquor license application filed by 2012 Epic, LLC d/b/a Lexury Night Club (applicant) for the premises located at 2249 NW 86 th Street in Clive, Iowa. The applicant appealed the denial to the Alcoholic Beverages Division (Division). A hearing was held before Administrative Law Judge Margaret LaMarche on December 7, 2012 at 1:00 p.m. in a hearing room at the Department of Inspections and Appeals Administrative Hearings Division in Des Moines, Iowa. The local authority was represented by attorney Christian Walk. Attorney Steven P. Brick represented the applicant. The record was held open until December 17, 2012 for additional briefs from the parties. THE RECORD The record includes the electronic license renewal application, Notice of Appeal, Acknowledgment, Notices of Hearing, and the testimony of Assistant City Clerk Matthew Graham, Police Chief Michael Venema, City Manager Dennis Henderson, Insurance Agent Joseph Mauro, and applicant Andre Lottie. The record also includes Local Authority Exhibits 1-12, Local Authority Hearing Brief, Applicant s Hearing Brief, and the Local Authority Reply Brief. ISSUES Whether the local authority properly denied the application for a new class C Liquor License filed by Epic, LLC due to concerns that the applicant was not in fact the 100% owner and due to other concerns about the applicant s good moral character, including financial standing to own and operate a licensed liquor establishment and inaccurate
2 Page 2 and inconsistent information on the application. This proposed decision finds that the local authority properly denied the application. FINDINGS OF FACT 1. Liquor license applications are filed electronically (on-line) through the Alcoholic Beverages Division (Division). The appropriate local authority (city council or county board of supervisors) is then provided access to the on-line application and any supporting documentation for the purpose of making an initial decision to approve or deny the license. Matthew Graham (Graham) is the assistant to the Clive City Clerk, and his responsibilities include processing liquor license applications for the city of Clive. Graham circulates the on-line application and any supporting documentation submitted by the applicant to the city s fire marshal, police chief, building department, and code enforcement officer for their review and recommendation to the Clive City Council for approval or denial of the license. (Graham testimony) 2. On or about October 15, 2012, Mohabat LLC filed a new Class C liquor license application for the premises located at 2249 NW 86 th Street in Clive, Iowa. Abdulkadir Osman (Osman) was listed on that application as the 100% owner of Mohabat LLC. The application listed Osman s address as 2501 Rockland Drive in Urbandale, Iowa and his business and personal phone number as (404) Osman also provided a DCI criminal background check and a copy of his lease for the premises. (Exhibits 1-4) Graham gave Osman s application to Clive Police Chief Michael Venema (Venema) for his initial review. Venema recommended denial of the application based on Osman s continuing pattern of criminal violations (i.e., three arrests but no convictions) and his continuing pattern of serious driver s license violations. (Venema testimony; Exhibit 4) On October 24, 2012, Graham told Osman that Venema was recommending denial of his application. Osman asked Graham what he needed to do to get this to go through. Osman told Graham that he had a partner who did not have a criminal history and who was very reputable and owned a trucking company. Osman told Graham that his partner was going to submit an application. An October 25, 2012 entry in the Division s database for Osman s liquor license application states: 10/25/12 Joe M 1 1 Joe M is Joseph Mauro, an insurance agent who assists some of his clients in filling out liquor license applications. (Graham, Mauro testimony)
3 Page 3 filled out this application and said to withdraw it, he had filled another application. (Exhibit 1; Graham testimony) 3. On October 25, 2012, a new electronic liquor license application was submitted for the premises at 2249 NW 86 th Street in Clive, Iowa. The second application was submitted by 2012 Epic, LLC d/b/a Lexury Night Club (applicant). The second application listed Andre Lottie (Lottie) as the 100% owner of 2012 Epic, LLC. Andre Lottie was also listed as the contact person on the application. The application listed the following telephone number for 2012 Epic LLC and for Andre Lottie: (404) This was the same phone number that had been listed for Mohabat LLC and for Osman on the first application. Lottie s address was listed on the second application as 2501 Rockland Dr., Urbandale, Iowa, This was the same address provided for Osman on his application. Graham performed a search and could find no such address anywhere in Urbandale, but he did find a 2501 Rocklyn Drive. (Graham testimony; Exhibit 5) The criminal history section of the liquor license application asks the following question: Have any of the owners listed in the ownership screen ever been charged, arrested, indicted, convicted or received a deferred judgment for any violation of any state, county, city, federal or foreign law? All information shall be reported regardless of the disposition, even if dismissed or expunged. Include pending charges. DO NOT include traffic violations, except those that are alcohol related. If yes, list violations on the next screen. This question was answered no on Lottie s application. The application has a page for an electronic applicant signature. This page states This application must be completed by a person listed in the Ownership section. The electric signature is entered below the following statement: I hereby declare that all information contained in the Application is true and correct. I understand that misrepresentation of material facts in the Application is a crime and grounds for denial of the license or permit under Iowa law
4 Page 4 Andre Lottie s name and the date of 10/25/12 were electronically entered on this page of his application. (Exhibit 6, p. 10) Applicants must also submit an actual (notarized) signature below the following statement: I hereby declare that all information contained in the E-license Application is true and correct. I understand that misrepresentation of material fact in the Application is a serious misdemeanor crime and grounds for denial of the license or permit under Iowa law. Andre Lottie personally signed this page of the application and dated it Insurance Agent Joseph L. Mauro (Mauro) notarized Lottie s signature. (Exhibit 5, page 2; Lottie, Mauro testimony) 4. On or about October 25, 2012, Abdulkadir Osman and Andre Lottie went to Clive City Hall and met with Matthew Graham concerning Lottie s license application. Osman introduced Graham to Lottie as his partner and brother. Osman did most of the talking and asked Graham what documentation still needed to be submitted for the application. At the time, it appeared to Graham that Osman was helping Lottie with the application and that they would be partners in the business. Graham knew that Osman and Lottie had previously worked together at another bar in Clive (Bar 2060) where Osman was an event promoter and Lottie was a bouncer. (Graham testimony) Lottie provided Graham with a copy of the Certificate and Articles of Organization for 2012 Epic, LLC, which had been filed with the Iowa Secretary of State on October 24, On this document, Lottie was listed as the manager of the business and affairs for 2012 Epic, LLC. Article III listed the principal office of the limited liability copy as 814 Taylor St. Apt. 10, Des Moines, Iowa. At hearing, Lottie identified the Taylor street address as his residence. (Graham, Lottie testimony; Exhibit 7) Andre Lottie also provided a copy of his lease for the building at 2249 NW 86 th Street, which had been signed by the landlord and by Lottie on October 24, The lease was for a period of six months, commencing on November 1, 2012, and provided for a monthly base rent of $6500. (Exhibit 8) The lease contained the same terms as the lease previously executed by Osman on behalf of Mohabat, LLC. (Exhibit 3)
5 Page 5 Andre Lottie also provided a copy of his DCI criminal history background check, which is dated October 24, 2012 and which states no record found. On the DCI criminal background document, Lottie s address is listed as nd Street in Des Moines, Iowa. (Exhibit 9) 5. Police Chief Venema reviewed Andre Lottie s liquor license application on October 25, 2012, just about one week after he had reviewed Osman s application. Venema was concerned that both applications listed the same telephone number ( ) and the same address. He was also concerned that Lottie wanted to open his business at the same location and under the same name as Osman. (Venema testimony) Venema checked the address that was listed on Lottie s criminal history form ( nd Street in Des Moines) through Google Maps and discovered that it was the address for an industrial lot behind the Polk County jail. There was no residence located at this address. (Venema testimony; Exhibit 9) Venema also reviewed Andre Lottie s criminal history through Iowa Courts Online. He discovered that Lottie had been charged with the following criminal offenses in Iowa: DNR-Intent to Cause Pain or Injury on October 10, 1997; Theft 2 nd Degree on July 16, 2000; and Child Endangerment/No Injury on August 22, (Exhibit 11) None of the charges resulted in convictions, and the first two charges were filed while Mr. Lottie was still a juvenile. Although the application asked for all arrests or charges, regardless of disposition, Lottie had not disclosed any these charges on his application. (Lottie, Venema testimony; Exhibit 6, p. 7; Exhibit 11) 6. On October 31, 2012, Andre Lottie met with Clive City Manager Dennis Henderson (Henderson) at city hall. Henderson had decided to recommend denial of Lottie s application based on the concerns raised by Matthew Graham and Chief Venema. During their meeting, Henderson questioned whether Lottie had sufficient funds for a successful business. Lottie told Henderson that his mother and his girlfriend were his financial backers but neither of them was listed on Lottie s application as persons with a financial interest in his business. Lottie told Henderson that he had previously worked as a bouncer at Bar 2060, but he did not mention any other employment to Henderson. (Henderson testimony)
6 Page 6 7. On November 1, 2012, Andre Lottie went to the Clive Police Department and asked to meet with Chief Venema. Lottie asked Venema why he was recommending denial of his license. Venema told Lottie that he was concerned about the use of the same phone number on both applications and Lottie s use of a suspect address. Venema also told Lottie that he was concerned whether he had sufficient funds to operate the business. Lottie replied that he had two solid investors. Venema pointed out that Lottie had not disclosed any investors on his application and that he had claimed 100% ownership of the business. Lottie told Venema that his girlfriend had taken out a loan to help him start his business. He did not identify his other investor. Lottie asked Venema what he needed to do to make it right. Venema told Lottie that it appeared that he was acting as a front for Osman and that he needed to bring some proof to the city council to prove him wrong. (Venema testimony) 8. Prior to the city council meeting on November 1, 2012, Chief Venema called the phone number ( ) that appeared on Lottie s application as the contact number for him and for his limited liability corporation. The person answering the phone identified himself as Abdulkadir Osman. When Venema asked Osman if he would be appearing before the city council concerning Lottie s liquor license application, Osman replied that he had nothing to do with the application. (Venema testimony) 9. Chief Venema recommended denial of Andre Lottie s application at the November 1, 2012 city council meeting. Andre Lottie appeared before the city council and told the council members that he was the 100% owner of the business. Lottie admitted that Osman told him about the bar being available but denied that Osman had an ownership or other interest in the business. Lottie did not produce any documentation or proof of his sources of capital for his business. He did not provide any proof of his employment or proof of any loans that had been provided to him by his mother or girlfriend. The city council voted to deny Lottie s application. (Venema testimony; Exhibit 12) 10. Joseph Mauro (Mauro) is an insurance agent who provides dram shop insurance for licensed liquor establishments. Mauro has been with the Mauro Insurance Agency since 1964 and has filled out liquor license applications for many of his clients. He typically does not read the full criminal history question on the application to his clients. He only asks them do you have anything on your record? and if they say no, he answers the criminal history question no on the application. Mauro also tells his
7 Page 7 clients that they must provide a DCI background check with their application. Mauro testified that his clients usually do not review the on-line application before he submits it to the Division. Mauro filled out the electronic liquor license applications for Abdulkadir Osman and for Andre Lottie. He also obtained dram shop insurance for both of them. Mauro did not know either applicant prior to filling out their applications. After he assisted Osman in filling out the first application, Mauro was told Osman could not get a license so Lottie wanted to buy it. Mauro thinks that Lottie called him and told him I am going to put it in my name. Mauro recalled that someone called him and told him that the new application needed to be filled out right away so that it could get put on the city council s agenda that week. Mauro thinks he obtained most of the information for Lottie s application over the phone. Mauro testified that he used the telephone number for Lottie and for Epic 2012, LLC on the application because he did not have a telephone number for Lottie. Mauro provided the same explanation for using the 2501 Rockland address on both applications; he just used the address from Osman s application for Lottie. Andre Lottie came to Mauro s office to sign his liquor license application and to bring in his lease, corporation documents, and DCI record check. Mauro initially testified that Osman came in with Lottie but later testified that he thought Lottie came in alone to sign the application. Mauro explained that he sees a lot of people and can t be 100% certain. Lottie signed the application on October 25, 2012, and Mauro notarized Lottie s signature. Mauro testified that he handed the application to Lottie, but he does not know if Lottie reviewed the information on the application before signing it. (Mauro testimony; Exhibit 5, p. 2) 11. At hearing, Andre Lottie testified that he is the 100% owner of 2012 Epic LLC, d/b/a Lexury Night Club. Lottie, who is 29 years old, testified that he has a balance of over $65,000 in his bank account. He testified that he earned this money under the table by doing maintenance and landscaping work. Lottie testified that he does not report this income or pay taxes on it. He further testified that his mother loaned him half of the money that he needed for his liquor license ($500) and his girlfriend paid for the cups and other stuff that he needed to run the bar. He denied that he has any other source of funds and testified that he does not think the bar will cost that much to
8 Page 8 operate. Lottie testified that he has already made two $1300 cash payments to the landlord for rent. Andre Lottie also testified that he did not know that Mauro had entered Osman s telephone number and address on his on-line application. He testified that his correct telephone number is and his correct address is 814 Taylor, Apt. 10 in Des Moines. When asked about the nd Street address that appeared on his DCI criminal history, Lottie explained that this is the address that appears on his driver s license. Lottie further explained that he has never lived at that address. Lottie testified that he just picked a random address to provide to the Department of Transportation when he applied for his driver s license. He further testified that he did not know that he had to disclose his three arrests on the liquor license application. Lottie did not think that these arrests were on his record any longer. (Lottie testimony) CONCLUSIONS OF LAW In this proceeding, it is the applicant s burden to establish compliance with the requirements for holding a liquor license in the state of Iowa. 2 A liquor control license may only be issued to a person who is of good moral character as defined by this chapter. 3 A "person of good moral character is defined, in part, to mean that the person has such financial standing and good reputation as will satisfy the administrator that the person will comply with this chapter and all laws, ordinances, and regulations applicable to the person's operations under this chapter... 4 In the case of a corporate applicant, the good moral character requirement applies to a person who directly or indirectly has an interest of ten percent or more in the ownership or profits. 5 The Division s rules provide some additional guidance for evaluating a person s good reputation and financial standing IAC 4.2(4) a provides, in relevant part: a. In evaluating an applicant s financial standing, the local authority or the administrator may consider the following: An applicant s financial standing may include, but is not limited to, verified sources(s) 2 Iowa Code section (7)(2011 Supp.) 3 Iowa Code section (1)(a)(2011 Supp.) 4 Iowa Code section 123.3(34)(a)(2011 Supp.) 5 Iowa Code section 123.3(33), 123.3(34) e (2011 Supp.) IAC 4.2(4).
9 DIA NO. 12ABD023 Page 9 of financial support and adequate operating capital for the applicant s proposed establishment, a record of prompt payment of local or state taxes due, Verified applications for the original issuance or the renewal of liquor control licenses must be filed on forms prescribed by the administrator and must include, in part, the name and address of the applicant and the names and addresses of all persons having a financial interest, by way of loan, ownership, or otherwise, in the business. 7 Applicants are expected to provide complete and truthful information on the application, including accurate addresses, contact telephone numbers, and full disclosure of their criminal history. Even if someone assists the applicant in filing the application, it is still the applicant s responsibility to review the information provided on the application to ensure that it is complete and accurate. The application makes this abundantly clear because it requires applicants to attest to the truthfulness of the information on the application when they enter their electronic signature and again when they physically sign the application in front of a notary. The Iowa Alcoholic Beverages Act authorizes the local authority and the Division to sanction a licensee for misrepresentation of any material fact in the application for the license or permit. 8 It follows that misrepresentation of material facts on an application is also a factor that may be considered by the local authority or administrator in deciding whether to grant or renew a liquor license. This is true even if the application likely would have been granted if the relevant information had been fully disclosed. Indeed, the Iowa Court of Appeals has stated: An applicant who fails to disclose information specifically requested by the Division jeopardizes the legitimacy and safety of the licensing procedures of the Alcoholic Beverages Control Act. 9 The local authority was justified in doubting the accuracy of the information provided by Andre Lottie on his liquor license application, including the accuracy of his address, telephone number, and his claim of 100% ownership of the business. Andre Lottie submitted an application that included inaccurate and conflicting information 7 Iowa Code section (1), (3)(2011 Supp.) 8 Iowa Code section (1)(b)(1), (4) (2011 Supp). 9 Tony s Tap, Inc. vs. Department of Commerce Alcoholic Beverages Division, No , 705 N.W. 2d 105 (Table), 2005 WL (Text), (unpublished disposition, Iowa App., June 15, 2005.)
10 DIA NO. 12ABD023 Page 10 concerning his telephone number, address, and arrest record. Two of the three addresses and one of the telephone numbers that he provided were incorrect. Additional information obtained or provided after the application was filed has provided few answers and has raised even more questions. Based on this record, it appears that Andre Lottie had minimal involvement in the actual filing of his liquor license application, which included an address and contact telephone number for Abdulkadir Osman. Lottie admits that he did not review the information appearing on his application for accuracy before he signed the application and attested to its truthfulness. Lottie now also admits that his driver s license bears a false address that he provided to the Department of Transportation. Lottie presented this false address to the DCI when he applied for his criminal history check. These actions reflect poorly on Lottie s trustworthiness and good moral character. Additional circumstances surrounding Andre Lottie s application gave the local authority ample reason to question whether Abdulkadir Osman retained an undisclosed ownership interest in the proposed bar business at th Street. Andre Lottie filed his application for the same premises immediately after Osman was informed that the Clive police chief would be recommending denial of Osman s application for the same location. Lottie presented a lease that was identical to the lease executed by Osman. Lottie s application listed the same telephone number and the same (misspelled) address as Osman s application. Osman accompanied Lottie to Clive City Hall and introduced Lottie to Matthew Graham as his partner. Osman did most of the talking during this meeting. Graham knew that Osman and Lottie had both worked at another licensed liquor establishment in Clive where Lottie had been a bouncer and Osman had been an event promoter. These circumstances clearly justified questioning Lottie about his claimed 100% ownership of the business and about his source(s) of finances to operate the proposed business. When the police chief asked Lottie what operating capital he had for the business, he told the police chief that he had two solid investors. Lottie identified one investor only as his girlfriend, and did not identify the other investor. When the city manager and the city council asked Lottie this same question, he identified his mother as his other investor. Lottie did not explain how much they had invested or why his mother and girlfriend were not listed on the application as persons with a financial interest in his business.
11 DIA NO. 12ABD023 Page 11 At hearing, Lottie minimized the monetary contributions purportedly made by his mother and girlfriend to his business, and he no longer described them as investors. Lottie claimed that he had a bank account with $65,000 from his (under the table) maintenance and landscaping earnings. Lottie never mentioned this bank account or these funds when the police chief, city manager, and city council questioned him about his operating capital. Although he was well aware that his operating capital was at issue, Lottie never provided any verification of a $65,000 bank account or the source of the funds in this account. Lottie s inconsistent answers to the questions about his operating capital and investors raises serious doubts about his claimed 100% ownership of the business and reflects poorly on his financial standing. The local authority has established ample justification for its decision to deny the application filed by 2012 Epic LLC, d/b/a Lexury Night Club. Andre Lottie has failed to establish, by a preponderance of the evidence, that he is the 100% owner of the proposed business, as he claimed on the application, or that he is a person of good moral character. DECISION AND ORDER IT IS THEREFORE ORDERED that the initial application for a class C liquor control license filed by 2012 Epic, LLC d/b/a Lexury Night Club is hereby DENIED for the applicant s failure to prove the 100% ownership claimed on the application, for the applicant s misrepresentation of material information on the application, and for the applicant s failure to meet the good moral character requirement for holding a liquor license. Pursuant to the administrative rules of the division, a party to the appeal who is aggrieved by the proposed decision may file a request for review, in writing, within thirty days after issuance of the proposed decision. Requests for review shall be sent to the Administrator of the Alcoholic Beverages Division, 1918 S.E. Hulsizer, Ankeny, IA Upon receipt of the request for review, the administrator may request briefs and exceptions from the parties to the appeal on any and all issues raised in the evidentiary hearing. The administrator shall review the proposed decision on the record made at the evidentiary hearing and on the briefs and exceptions filed by the parties to the appeal. The administrator may affirm, reverse or modify the proposed decision.
12 DIA NO. 12ABD023 Page 12 A party who is aggrieved by the proposed decision shall not be deemed to have exhausted administrative remedies unless the aggrieved party files a request for review of the proposed decision within the time provided and the administrator has reviewed the proposed decision and has affirmed, reversed, or modified the proposed decision. Dated this 28th day of December, Margaret LaMarche Administrative Law Judge Department of Inspections and Appeals Division of Administrative Hearings Wallace State Office Building-Third Floor Des Moines, Iowa cc: See Attached Mailing List
13 DIA NO. 12ABD023 Page 13 Copies to: Margaret LaMarche Administrative Law Judge Department of Inspections & Appeals Lucas State Office Building Des Moines, Iowa John Lundquist Assistant Attorney General Department of Justice Hoover State Office Building Des Moines, Iowa Lt. Kunert Iowa State Patrol, District NW 48 th Place Des Moines, Iowa Karen Freund Iowa Alcoholic Beverages Licensing/Regulatory Bureau Chief 1918 SE Hulsizer Rd Ankeny, Iowa Christian P. Walk Attorney at Law 700 Walnut, Suite 1600 Des Moines, Iowa Steven P. Brick Attorney at Law 6701 Westown Parkway, Suite 100 West Des Moines, Iowa Chief Michael Venema Clive Police Department 8505 Harbach Blvd Clive, Iowa City Clerk City Hall 1900 NW 114 th St. Clive, Iowa 50325