Opinion
No. 5-333 / 04-1551
Filed June 29, 2005
Appeal from the Iowa District Court for Polk County, Glenn E. Pille, Judge.
John Henss appeals from the denial of his petition for judicial review. AFFIRMED.
John L. Henss, Des Moines, appellant pro se.
Thomas J. Miller, Attorney General, and Pamela D. Griebel, Assistant Attorney General, for appellee.
Considered by Vogel, P.J., and Miller and Hecht, JJ.
John Henss appeals from the denial of his petition for judicial review. We now affirm.
I. Background Facts and Proceedings.
In 1992, Henss, then licensed as a Certified Public Accountant (CPA), and his public accounting firm were named defendants in a lawsuit brought by the United States Department of Labor. That litigation culminated in a decision of the Eighth Circuit Court of Appeals. See Martin v. Feilen, 965 F.2d 660, 663 (8th Cir. 1992). That court's decision established that Henss structured an Employee Stock Ownership Plan (ESOP) for a Des Moines-based company in 1977. Henss then recommended a series of transactions between 1977 and 1985 resulting in the complete loss of the company's ESOP retirement plans and the eventual failure of the company. The federal court decision further established that the transactions involved substantial self-dealing and constituted a breach of Henss's fiduciary duties owed under the Employee Retirement Income Security Act (ERISA). Id. at 664. The federal court enjoined Henss from serving directly or indirectly as (1) a fiduciary for any ESOP, (2) a service provider to any ERISA plan, and (3) a fiduciary or service provider for any other plan subject to ERISA. Id. at 671-673.
A complaint against Henss was filed with the Iowa Accountancy Examining Board (agency) in 1993. The complaint alleged Henss had engaged in (1) conduct discreditable to the public accounting profession, and (2) otherwise dishonest and/or grossly negligent conduct in the practice of public accounting. A properly noticed hearing was held on May 16, 1994. The federal court ruling in Feilen was considered by the agency as evidence supporting the complaint against Henss.
Contrary to Henss's assertion on appeal, the federal court's decision was not the sole basis upon which the complaint with the agency was registered. Though the final agency decision in 1994 noted Henss's CPA certificate was currently in good standing, in 1980, Henss had been placed under supervision by the agency for alleged failures to comply with "generally accepted auditing standards . . . and accounting principles."
The agency found Henss had committed "an egregious violation of the public trust." The agency (1) revoked Henss's CPA certificate, (2) ordered him to pay a civil penalty of $1,000, (3) required him to notify his clients of the revocation and supply such notice to the agency within thirty days, and (4) enjoined him from holding himself out as a CPA in any manner. Henss sought judicial review of the 1994 revocation. In 1995, the agency action was affirmed by the district court based on its conclusion that the agency's findings were supported by substantial evidence.
In 1996, Henss applied to the agency for reinstatement of his CPA certificate. A properly noticed hearing on the issue of reinstatement was held before the agency on May 20, 1997. Noting the wholesale disregard of its conditions on revocation — including the failure to pay the civil penalty and to notify clients of the revocation — the agency refused to reinstate Henss's certificate. Henss again sought judicial review. However, the district court was unable to discern whether the assignments of error contained in Henss's petition challenged the agency's 1997 decision declining to reinstate the certificate or the agency's 1994 decision to revoke the certificate. The district court dismissed the 1997 petition for judicial review as untimely to the extent it sought review of the 1994 agency decision, and ordered a more specific statement of any challenge to the 1997 agency decision. Henss filed his response to the district court's order for a more specific statement; however, no further action on the 1997 petition for judicial review was taken by Henss, and the matter languished in the district court until a hearing was finally scheduled in 2004.
Although the judicial review proceeding pertaining to Henss's 1997 petition for reinstatement was still pending, Henss filed another application for reinstatement of his certificate in 2003. The agency found Henss had failed to comply with the conditions for reinstatement established in the 1994 revocation decision. Finding it was in the public interest that Henss's certificate remain revoked, the agency denied Henss's second reinstatement request on February 27, 2004. Henss again sought judicial review, claiming the agency erred in (1) denying him due process during the 1994 revocation proceedings, (2) refusing to reinstate Henss's certificate after a two-year revocation consistent with Iowa Code section 542C.21 (1993), and (3) subjecting Henss to selective prosecution.
Despite Henss's failure to prosecute the judicial review proceeding within the time limits set forth in Iowa Rule of Civil Procedure 1.944, the clerk of court never notified the parties of the petition's dismissal, and the matter was eventually set for a hearing in 2004 and the district court affirmed the agency's 1997 decision denying the reinstatement of Henss. We address Henss's appeal of that matter in the companion case, Henss v. Iowa Accountancy Examining Board, No. 04-1714 (Iowa Ct.App. ___, ___, 2005).
Iowa Code section 542C.21 (1993) read, in relevant part: "the board may revoke or may suspend for a period not to exceed two years, a certificate issued under section 542C.5. . . ." In 2001, chapter 542C was repealed by the legislature, and readopted in chapter 542. The relevant section now provides that: "the board may revoke, suspend for a period of two years, or refuse to renew a license . . .," thereby clarifying the legislature's intent underlying the statute on which Henss now relies. See Iowa Code § 542.10 (2005).
In dismissing the petition, the district court noted the main thrust of Henss's 2004 judicial review petition amounted to an untimely challenge to the validity of the 1994 agency revocation decision. The district court also concluded Henss's claim that a revocation pursuant to section 542C.21 was limited to two years was unsupported by law. Finally, the district court found no evidence in the record supporting Henss's claim that he was the victim of selective prosecution by the agency. Henss now appeals.
Iowa Code section 17A.3 (2003) requires all petitions for judicial review of an agency's final decision in a contested case to be filed within thirty days of the issuance of the agency's final decision.
II. Scope and Standard of Review.
Review of an agency determination is for errors at law. Cobb v. Employment Appeal Bd., 506 N.W.2d 445, 447 (Iowa 1993). We review district court decisions on judicial review of agency action under the standards of Iowa Code chapter 17A (2003). Locate.Plus.Com, Inc. v. Iowa Dep't of Transp., 650 N.W.2d 609, 612 (Iowa 2002). As the district court is itself acting in an appellate capacity to correct errors of law on the part of the agency, on appeal "we apply the standards of Iowa Code section 17A.19[(10)] to the agency action to determine whether our conclusions are the same as those of the district court." Swanson v. Employment Appeal Bd., 554 N.W.2d 294, 296 (Iowa Ct.App. 1996).
An agency's findings of fact are binding on the court where such determinations "are clearly vested by a provision of law in the discretion of the agency." Iowa Code § 17A.19(10)(f); Mycogen Seeds v. Sands, 686 N.W.2d 457, 465 (Iowa 2004). The agency here is given specific authority to revoke a CPA's certificate where it finds the person has committed, among others, (1) acts constituting dishonesty or gross negligence in the practice of public accounting, or (2) conduct discreditable to the accounting profession. Iowa Code § 542C.21 (1993). The agency is likewise granted authority to determine whether it would be in the public interest to reinstate the revoked certificate of a person. Id. § 542C.24 (1993). On review we are bound by the factual determinations made by the agency in this case if they are supported by substantial evidence. Mycogen Seeds, 686 N.W.2d at 465. Evidence is substantial if a reasonable mind would accept it as adequate to reach a finding. Swanson, 554 N.W.2d at 296.
III. Discussion.
Henss makes three claims on appeal from the agency's denial of his 2003 application for reinstatement: (1) the agency relied on a "secret witness" when it decided to revoke Henss's certificate in 1994, and thereby violated Henss's right to due process; (2) the agency was required to reinstate Henss's certificate because section 542C.21 limits revocations to two years; and (3) the agency's decision to deny Henss reinstatement was arbitrary and capricious because Henss was selectively prosecuted.
We note at the outset that the district court has previously affirmed the agency's 1994 revocation on judicial review. In doing so, the district court concluded Henss's due process attack on the agency's decision was neither presented to the agency, nor argued in a petition for rehearing, and as such was not preserved for the district court's review. We note that even constitutional errors of the agency are subject to our error-preservation rules. See State v. Hernandez-Lopez, 639 N.W.2d 226, 234 (Iowa 2002) (rejecting suggestion that the importance and gravity of an unpreserved constitutional issue creates an exception to the rules of error preservation). Even if we found the due process attack on the 1994 revocation was somehow preserved for our review, and even if we concluded the attack was in some way exempted from our issue or claim preclusion rules, we are not persuaded that the agency's alleged reliance on the evidence in question resulted in a denial of due process. Henss's proof of his due process claim consists of a short letter from the assistant attorney general who handled the revocation proceedings to a staff member with the United States Department of Labor, thanking him for his assistance in the revocation matter. We are not persuaded on this record that the agency's failure to disclose the staff member's work on the revocation caused Henss prejudice in any way. We next address Henss's claim that section 542C.21 limits both the duration of certificate suspensions and revocations to two years. We conclude "revocation" of a certificate in this context connotes cancellation, rescission, or repeal of authority for an undefined duration to practice public accounting in Iowa. Black's Law Dictionary 1346 (8th ed. 2004). In contrast, a "suspension" of a certificate under the statute connotes only a temporary interruption of such authority for a specified duration with the expectation of future reauthorization upon compliance with conditions of the suspension. Id. at 1487. Given our understanding of these terms, we conclude the legislature intended the phrase "for a period not to exceed two years" to qualify the word "suspend" but not the word "revoke."
We also note that in addition to using unambiguous, distinctly defined terms, the drafters of section 542C.21 (1993) employed parallel structure that naturally subdivides the two disciplinary options; " may revoke or may suspend for a period not to exceed two years . . ." (emphasis supplied). This construction obviates the need for a comma to create separation between the two distinct clauses and clearly conveys the legislature's intent to apply a two-year limit only to suspensions but not revocations.
Henss's claim of selective prosecution must also fail. Henss asserts that other public accounting firms have committed dishonest or disreputable acts within the state, yet have been allowed to continue to practice in Iowa. As the district court aptly noted, Henss has failed to show any similarly situated CPA's, as individuals, have been treated disparately by the agency with regard to certificate revocation and reinstatement. The finding of the agency that Henss has not complied with many, if not all of the requirements for reinstatement imposed by the 1994 revocation is supported by substantial evidence on the record. This fact, coupled with Henss's failure to adduce sufficient proof of disparate treatment by the agency forces the conclusion that Henss's selective prosecution claim is without merit. Finding no basis on which to depart from the district court's sound reasoning on judicial review, we hereby affirm the agency's 2004 denial of Henss's application for reinstatement of his CPA certificate.