Court Opinion

ID: 4127333
Source: CourtListenerOpinion
Date Created: 2017-02-17 23:08:28.905667+00
Date Added: 2024-06-11T14:37:35.162196
License: Public Domain

This opinion will be unpublished and
                          may not be cited except as provided by
                          Minn. Stat. § 480A.08, subd. 3 (2016).

                               STATE OF MINNESOTA
                               IN COURT OF APPEALS
                                     A16-0626

             In the Matter of the Athlete Agent Application of Donald Walthall

                                 Filed February 13, 2017
                                        Affirmed
                                      Larkin, Judge

                                Department of Commerce
                                 File No. 5-1000-32503

Bobby Joe Champion, Karlowba R. Adams Powell, Champion Law, Minneapolis,
Minnesota (for relator)

Lori Swanson, Attorney General, Christopher M. Kaisershot, Assistant Attorney General,
St. Paul, Minnesota (for respondent)

         Considered and decided by Connolly, Presiding Judge; Larkin, Judge; and Reyes,

Judge.

                         UNPUBLISHED OPINION

LARKIN, Judge

         Relator challenges respondent Minnesota Commissioner of Commerce’s denial of

his application for registration as an athlete agent, arguing that the commissioner erred in

weighing the relevant statutory factors. We affirm.
                                          FACTS

       In 2002, relator Donald Walthall formed Universal Mortgage, Inc. (Universal), a

residential-mortgage-origination business, and became its chief executive officer.

Universal served as a fiduciary agent for mortgage lenders. As a fiduciary agent, Universal

was required to provide truthful information to lenders on behalf of loan applicants and to

process loans approved by lenders. In December 2004, the Minnesota Department of

Commerce (department) licensed Walthall as a real-estate-closing agent, and the State of

Minnesota commissioned Walthall as a notary public.

       In 2005, Walthall financed his purchase of eight Minneapolis properties through

Universal. Walthall falsified information on all eight loan applications. For example, each

loan application indicated that Walthall intended to occupy the property as his primary

residence. Walthall used a different lender for each loan and omitted prior property

purchases from seven of the loan applications. Walthall inflated the purchase price in seven

of the loan applications and retained the $240,000 difference between the actual purchase

prices and the loan proceeds.

       In December 2007, the state charged Walthall with one count of felony racketeering

and four counts of felony theft by swindle. The state also charged Universal with one count

of felony racketeering and 24 counts of felony theft by swindle. The state alleged that

Walthall used “straw buyers”1 to purchase residential properties at inflated prices. The

1
 A “straw buyer” of real estate is one who buys property at the direction of another, at a
price dictated by the other, with funds arranged for by the other, generally in the form of a
bank loan.
                                             2
charged conduct was unrelated to Walthall’s initial purchase of the eight Minneapolis

properties. The state charged Walthall with eight additional counts of felony theft by

swindle based on those purchases in January 2008. In August 2008, the district court found

Walthall guilty of the eight counts of theft by swindle. Later, Walthall pleaded guilty to

the December 2007 felony racketeering charge, and the state dismissed the remaining theft-

by-swindle charges. The district court sentenced Walthall to serve 74 months in prison.

       In June 2011, respondent Minnesota Commissioner of Commerce revoked

Walthall’s real-estate-closing-agent license and notary commission, and barred him from

“engaging in residential mortgage origination or servicing.” The commissioner adopted

an administrative-law judge’s (ALJ) finding that in 2009, the district court entered a civil

judgment of $93,834 against Walthall for his participation in defrauding a mortgage lender

in 2007. The commissioner concluded:

                     The misconduct underlying [Walthall’s] convictions for
              felony racketeering and felony theft by swindle demonstrates
              that he violated a standard of conduct, committed fraudulent,
              deceptive, or dishonest practices; and engaged in acts that
              demonstrate that he is untrustworthy, financially irresponsible,
              or otherwise incompetent or unqualified to act under the
              authority or license granted by the Commissioner.

       The commissioner also concluded that the department had shown by a

preponderance of the evidence that Walthall defrauded the mortgage lender in 2007. The

commissioner fined Walthall $330,000. At the time of the proceeding underlying this

appeal, Walthall had not made any payment toward the fine.

       In November 2014, Walthall completed his sentence for his mortgage-fraud

convictions. In December 2014, Walthall sought an informal opinion from the department

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regarding whether it would allow him to register as an athlete agent if he applied. A

department staff member advised Walthall that she would recommend denying his

application because of the “nature and seriousness of the underlying conduct resulting in

the criminal charges and conviction reflected on [his] record.” The staff member also

expressed concern regarding Walthall’s outstanding $330,000 fine.

       In March 2015, Walthall formally applied to register as an athlete agent. The

department notified Walthall that it intended to deny his application. Walthall requested

and received a contested-case hearing before an ALJ under the Minnesota Administrative

Procedure Act, Minn. Stat. §§ 14.57-.62 (2016).          The ALJ recommended that the

commissioner allow Walthall to register as an athlete agent. The commissioner rejected

the ALJ’s recommendation and denied Walthall’s application. This appeal by writ of

certiorari follows.

                                      DECISION

       This court presumes agency decisions are correct. Fine v. Bernstein, 726 N.W.2d

137, 142 (Minn. App. 2007), review denied (Minn. Apr. 17, 2007). We may reverse an

agency’s decision if a petitioner’s substantial rights may have been prejudiced because the

administrative findings, inferences, conclusions, or decisions are in violation of

constitutional provisions, in excess of the statutory authority or jurisdiction of the agency,

made upon unlawful procedure, affected by other error of law, unsupported by substantial

evidence in view of the entire record as submitted, or arbitrary or capricious. Minn. Stat §

14.69 (2016). An “agency’s conclusions are not arbitrary and capricious so long as a

rational connection between the facts found and the choice made has been articulated.” In

                                              4
re Excess Surplus Status of Blue Cross & Blue Shield of Minn., 624 N.W.2d 264, 277

(Minn. 2001) (quotation omitted).

      We evaluate the evidence on which the agency relied in view of the entire record as

submitted. Pomrenke v. Comm’r of Commerce, 677 N.W.2d 85, 94 (Minn. App. 2004),

review denied (Minn. May 26, 2004). “If an agency engaged in reasoned decision-making,

a reviewing court will affirm, even though it may have reached a different conclusion than

the agency.” Id. “When parties have presented conflicting evidence on the record,

appellate courts must defer to [a] commissioner’s ability to weigh the evidence; they may

not weigh that evidence on review.” Vargas v. Nw. Area Found., 673 N.W.2d 200, 205

(Minn. App. 2004), review denied (Minn. Mar. 30, 2004).

                    Because we must afford deference to the agency’s
             decision, our review of [a] Commission’s decision is guided by
             the principle that the agency’s conclusions are not arbitrary and
             capricious so long as a rational connection between the facts
             found and the choice made has been articulated. If there is
             room for two opinions on a matter, the Commission’s decision
             is not arbitrary and capricious, even though the court may
             believe that an erroneous conclusion was reached.

In re Review of 2005 Annual Automatic Adjustment of Charges, 768 N.W.2d 112, 120

(Minn. 2009) (citation and quotation omitted).

      “The standard of review is not heightened where the final decision of the agency

decision-maker differs from the recommendation of the ALJ.” Blue Cross, 624 N.W.2d at

278. The agency decision-maker must weigh all of the evidence presented and come to an

independent decision but “owes no deference to any party in an administrative proceeding,

nor to the findings, conclusions, or recommendations of the ALJ.” Id.

                                            5
       With these standards in mind, we turn to the substantive issues in this appeal.

                                              I.

       Minnesota law prohibits an individual from acting as an athlete agent without a

certificate of registration. Minn. Stat. § 81A.04, subd. 1 (2016). An “athlete agent” is an

“individual who enters into an agency contract with a student athlete or, directly or

indirectly for remuneration, recruits or solicits a student athlete to enter into an agency

contract.” Minn. Stat. § 81A.02, subd. 3 (2016). Individuals may request registration as

an athlete agent from the commissioner of commerce. Minn. Stat. § 81A.02, subd. 5

(2016); Minn. Stat. § 81A.05, subd. 1 (2016).

       “The commissioner may refuse to issue a certificate of registration if the

commissioner determines that the applicant has engaged in conduct that has a significant

adverse effect on the applicant’s fitness to act as an athlete agent.” Minn. Stat. § 81A.06,

subd. 2(a) (2016). When making this determination, the commissioner may consider

whether the applicant has:

                      (1) been convicted of a crime that, if committed in this
              state, would be a crime involving moral turpitude or a felony;
                      (2) made a materially false, misleading, deceptive, or
              fraudulent representation in the application or as an athlete
              agent;
                      (3) engaged in conduct that would disqualify the
              applicant from serving in a fiduciary capacity;
                      (4) engaged in conduct prohibited by section 81A.14;
                      (5) had a registration or licensure as an athlete agent
              suspended, revoked, or denied or been refused renewal of
              registration or licensure as an athlete agent in any state;
                      (6) engaged in conduct the consequence of which was
              that a sanction, suspension, or declaration of ineligibility to
              participate in an interscholastic or intercollegiate athletic event
              was imposed on a student athlete or educational institution; or

                                              6
                      (7) engaged in conduct that significantly adversely
              reflects on the applicant’s credibility, honesty, or integrity.

Id.

       When deciding whether to refuse to issue a certificate of registration based on

conduct that has a significant adverse effect on the applicant’s fitness to act as an athlete

agent, “the commissioner shall consider: (1) how recently the conduct occurred; (2) the

nature of the conduct and the context in which it occurred; and (3) any other relevant

conduct of the applicant.” Minn. Stat § 81A.06, subd. 2(b) (2016).

       Walthall assigns error to the commissioner’s consideration of the discretionary and

mandatory factors. We address each in turn.

       Discretionary Factors under Minn. Stat. § 81A.06, subd. 2(a)

       In denying Walthall’s application, the commissioner determined that discretionary

factors (1), (3), and (7) weigh heavily against the application. The commissioner reasoned

that Walthall’s “conviction on eight counts of felony theft-by-swindle and felony

racketeering are two separate convictions,” that the convictions were for “crimes involving

moral turpitude,” that the “convictions reflect very poorly on [Walthall’s] credibility,

honesty, and integrity,” and that Walthall’s fraudulent misconduct in the mortgage industry

“would disqualify him from serving in a fiduciary capacity.”

       Walthall does not assign error to the commissioner’s reliance on discretionary

factors (1), (3), and (7) or the commissioner’s attendant reasoning. Instead, he takes issue

with the commissioner’s conclusion that “[n]one of the discretionary factors . . . weigh in

favor of [his] Application.” Specifically, Walthall argues that discretionary factors (2), (5),

                                              7
and (6) weigh in favor of his application. He notes that he “fully complied and was truthful

in his application” and that “[h]e did not make any materially false, misleading, deceptive,

or fraudulent representations in his application or as an athlete agent.” He further notes

that he “has never had a registration or licensure as an athlete agent suspended, revoked,

or denied or been refused renewal of registration or licensure as an athlete agent in any

state.” Lastly, he notes that he “did not engage in conduct the consequence of which was

that a sanction, suspension, or declaration of ineligibility to participate in an interscholastic

or intercollegiate athletic event was imposed on a student athlete or education institution.”

       Walthall therefore argues that it is “quite evident” that factors (2), (5), and (6) weigh

in his favor. He further argues that “[a]lthough the [commissioner] is not required to

consider these elements, to blatantly disregard them is most telling, and tends to suggest

that the [commissioner] failed to conduct a thorough statutory analysis.”

       Walthall’s point has some merit. Although the commissioner was not required to

consider or address any of the discretionary factors, and the clear statutory language does

not suggest that if the commissioner relies on some of the discretionary factors, the

commissioner must consider all of the discretionary factors, the commissioner stated that

“[n]one of the discretionary factors . . . weigh in favor of [Walthall’s] Application,”

implying that he considered all of the factors. To the extent that the commissioner did so,

the record establishes that factors (2), (5), and (6) weigh in Walthall’s favor.

       Mandatory Factors under Minn. Stat. § 81A.06, subd. 2(b)

       Walthall argues that the commissioner “improperly weighed” the mandatory factors

under Minn. Stat. § 81A.06, subd. 2(b). As to the first mandatory factor, Walthall argues

                                               8
that the commissioner erred in concluding that insufficient time had passed since he

engaged in mortgage fraud. The commissioner reasoned, “While it has thus been over

eight years since [Walthall’s] last criminal acts, for most of those years [Walthall] was

incarcerated and thus presumably unable to engage in mortgage fraud or other criminal

enterprises.” The commissioner concluded, “The fact that it has been more than eight years

since [Walthall] engaged in criminal fraud does not demonstrate that he is unlikely to

engage in criminal acts in the future. Accordingly, factor (1) is at best neutral.”

       According to a complaint in the record, Walthall most recently committed mortgage

fraud in July 2006.     Using this date, Walthall applied for athlete-agent registration

approximately eight years and eight months after his most recent act of mortgage fraud.

The commissioner’s determination that it has been over eight years since Walthall

committed mortgage fraud is therefore supported by the record.

       Walthall argues, “[T]hat is still 8 years ago. Moreover, [he] does not have any prior

or subsequent criminal history outside of the incidents that led to his conviction in 2008.”

Walthall goes on to assert that “no prior or subsequent history . . . is clearly[,] as outlined

in M.S.A. section 81A.06, [subd.](b)(1)[,] a factor that ‘shall’ not ‘may’ be considered by

the Commissioner” and “[t]his factor was clearly not considered.” Walthall’s assertion is

not supported by the relevant statutory language, which requires the commissioner to

consider “how recently the conduct occurred.” Minn. Stat § 81A.06, subd. 2(b)(1). It does

not require the commissioner to consider lack of prior or subsequent criminal history.

       Walthall argues that his “criminal conduct occurred a very long time ago, which

clearly weighs heavily in favor of his application.” Essentially, Walthall invites us to

                                              9
reweigh the evidence and substitute our assessment of the recency factor for the

commissioner’s.      Under the applicable standards of review, we cannot reweigh the

evidence or substitute our judgment for that of the commissioner. See Vargas, 673 N.W.2d

at 205.

          As to the second mandatory factor, Walthall argues that his criminal conduct

occurred during his work as a real-estate-mortgage originator and loan officer, that his

convictions stemmed from real-estate transactions, and that the real-estate context “is not

analogous to the athlete agent area.” Walthall therefore disagrees with the commissioner’s

conclusion that factor (2) weighs heavily against his application, arguing that “[u]nder such

an analysis, an individual would never overcome the stigma of a felony conviction and

could never register.”

          In determining that factor (2) weighs heavily against Walthall’s application, the

commissioner reasoned that his

                mortgage fraud schemes were an egregious violation of law
                and the fiduciary obligations he owed to lenders and the straw
                borrowers he set up to fail. These violations undermine
                [Walthall’s] fitness to act as an agent for others. The violations
                [Walthall] engaged in both by his company and individually
                cannot be squared with the obligations that he would have as
                an Athlete Agent.

          The commissioner explained that he was “very concerned that [Walthall] intends to

engage in being an Athlete Agent by using a company that is structured in the same fashion

as [his prior mortgage company] and will employ one of the co-conspirators in [his]

mortgage fraud schemes.”         The commissioner also explained that his concern was

compounded because Walthall would be “working with relatively unsophisticated

                                               10
consumers in student athletes, who likely will not understand complex compensation

schemes or endorsement deals.”

       The commissioner concluded that:

                      [Walthall’s] history of taking advantage of
              unsophisticated consumers in his mortgage fraud schemes,
              coupled with the fact that there is no conclusive evidence in the
              record of what [Walthall’s] payment arrangements will be or
              whether he will handle student athletes’ money, all weigh
              heavily against granting the application. Even the ALJ found
              that these facts gave him “reason to pause and consider
              [Walthall’s] fitness.” The Commissioner agrees that these
              facts should give us pause . . . . [And] the Commissioner finds
              that factor (2) weighs heavily against the Application.

(Citation omitted.)

       Walthall counters, “It is important that ex-offenders be afforded the opportunity to

obtain gainful employment in upstanding and viable professional occupations, so that a

criminal conviction does not become a life-long penalty.”           He complains that the

department continues to punish him for his past criminal conduct.

       Walthall’s suggestion that the commissioner erred by relying on his criminal history

is inconsistent with the plain language of the governing statute. When the commissioner

refuses to issue a certificate of registration based on prior “conduct that has a significant

adverse effect on the applicant’s fitness to act as an athlete agent,” the commissioner must

consider “the nature of the conduct and the context in which it occurred.” Minn. Stat.

§ 81A.06, subd. 2(a), (b)(2). This requirement would be significantly undermined if

criminal convictions were excluded from the analysis.

                                             11
       Moreover, we note that an athlete agent is authorized to negotiate a professional

sports-service contract or an endorsement contract on behalf of a student athlete. See Minn.

Stat. § 81A.02, subds. 2-3 (2016) (defining “Athlete agent” and “Agency contract”). We

easily envision the ways that an athlete agent—like a mortgage originator—would have

the opportunity to abuse the trust of his clients in such financial matters. It is undisputed

that Walthall abused his fiduciary position of trust as a mortgage originator on multiple

occasions. The commissioner reasonably concluded that the athlete-agent context is

sufficiently analogous to the real-estate context in which Walthall engaged in extensive,

criminal financial fraud and that the nature and context of Walthall’s prior fraudulent

conduct weighs heavily against his application.

       As to the third mandatory factor, Walthall argues that the commissioner

“overlooked [his] valiant efforts to turn his life around” and gave too much weight to his

failure to make any payment toward his outstanding $330,000 civil fine. He asserts that

the commissioner “only focused on the negative factors” when considering his application.

       The third mandatory factor requires the commissioner to consider “any other

relevant conduct of the applicant.” Minn. Stat. § 81A.06, subd. 2(b)(3). The record shows

that the commissioner considered positive factors when assessing Walthall’s application,

but reasoned that those positive factors were neutralized by other circumstances. For

example, the commissioner recognized that Walthall cooperated with authorities in

prosecuting other mortgage-fraud cases. But the commissioner noted that Walthall did so

as part of a plea agreement. The commissioner also recognized that Walthall “completed

various educational courses while incarcerated and earned a Bachelor of Science degree.”

                                             12
But the commissioner noted that, since Walthall’s release from custody, he “has not held a

position of trust to demonstrate his capability to handle these responsibilities.”

       Although the commissioner weighed Walthall’s “failure to make any payments on

the $330,000 civil penalty” against his application, the commissioner explained his

reasoning. The commissioner stated, “[T]he purpose of imposing sanctions is to protect

the public and to deter future misconduct by others. These purposes would be undermined

if the application was granted even though the civil penalty is outstanding.”

       Walthall dismisses the commissioner’s explanation as “clever.” He asserts that

“legislative intent was not to base an applicant’s fitness to act as an athlete agent on whether

or not [he] possessed the financial means to pay a civil penalty.” He argues that the

commissioner “assigns relevance to payment of a civil penalty under the guise of public

safety”2 and that such reasoning “defies logic and . . . continues to perpetuate the painful

reality in our society where the financially able ‘the haves’ are able to get justice while the

poor ‘the have nots’ are perpetually left without.” Walthall concludes, “This is not what

the Minnesota legislature intended.”

       Walthall summarily asserts, without legal support, that “[i]f the Minnesota

Legislature had intended payment of a civil penalty to be determinative of one’s fitness as

an athlete agent it would have said so specifically” and that the commissioner “cannot go

against the legislative intent and reinterpret the law, [he] must rely on the plain language

of the law.” Walthall’s argument is unpersuasive because the plain language of the statute

2
 We note that the commissioner’s explanation generally refers to protecting the public,
and not to “public safety.”
                                              13
broadly authorizes the commissioner to consider “other relevant conduct.” Id. That

language does not preclude consideration of an applicant’s failure to satisfy a financial

obligation stemming from “conduct that has a significant adverse effect on the applicant’s

fitness to act as an athlete agent.” Id., subd. 2(a).

       We are sympathetic to Walthall’s inability to pay the $330,000 civil penalty. But

given the broad statutory language, the absence of legal authority suggesting that the

commissioner contravened legislative intent by considering Walthall’s failure to make

“any” payments, and the commissioner’s reasonable explanation regarding why he deemed

that failure relevant, we cannot say that the commissioner erred, especially when the

commissioner ultimately concluded that factor (3) is neutral. A reasonable mind could

disagree with that conclusion, but we cannot substitute our judgment for that of the

commissioner.

       Conclusion

       In conclusion, we discern error in the commissioner’s application of the

discretionary factors, but not the mandatory factors. Given the entire record as submitted,

the discretionary-factor error does not justify reversal.     The commissioner’s factual

findings are supported by substantial evidence, the commissioner explained his application

of the governing statute, and the commissioner’s explanation reveals reasoned decision-

making.     We do not believe that the discretionary-factor error compromises the

commissioner’s ultimate decision that it is “not in the public interest to grant [Walthall’s]

application.” See Minn. R. Civ. P. 61 (stating that harmless error shall be ignored).

                                               14
       We join the commissioner in commending Walthall’s “efforts to educate himself

and earn not only a bachelor’s degree while incarcerated but also a master’s degree,” as

well as Walthall’s pursuit of employment after he completed his sentence. However, we

must respect the commissioner’s statement that he is “also mindful that he is entrusted with

protecting the public from the risk of unscrupulous actors that fall within his jurisdiction,

pursuant to his duties and responsibilities.” Unlike the commissioner, we cannot weigh

the evidence or independently assess the statutory factors in light of the evidence. The

standards that govern our review simply do not allow us to substitute our judgment for that

of the commissioner. See In re 2005 Adjustment, 768 N.W.2d at 120. And under those

standards, there is no basis to reverse the commissioner’s denial of Walthall’s application.

       Affirmed.

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