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Reversal of license revocation upheld over board’s added findings of fact not backed by evidence

The Court of Appeals of Texas, in a March 3 decision, upheld a lower court's reversal of a license revocation by the state's Real Estate Commission, holding that the Commission had improperly altered several findings by an administrative law judge who conducted hearings for the case without providing evidence supporting those alterations.

(Texas Real Estate Commission v. Riekers)

The defendant, Josef Riekers, in addition to possessing a real estate license, was employed by the federal government as a special agent and firearms instructor for the Department of Health and Human Services. In that capacity, Riekers commingled some work ammunition—federal property—with his own personal ammunition, then traded some of that commingled ammunition for different calibers of bullets through the internet.

Riekers informed his employer of the trades and was charged with a federal crime for the thefts, eventually pleading guilty to one count of theft of government property, receiving a sentence of three years of probation, 500 hours of community service, and a small fine.

That conviction prompted the Commission to initiate discipline proceedings against Riekers. Following a hearing, an administrative law judge concluded that Riekers was fit to continue practicing under a probationary license. Unfortunately for Riekers, however, the Commission disagreed with the judge’s recommended leniency and instead revoked his license.

Riekers appealed, arguing that the Commission’s decision was arbitrary and that he had been denied due process. A trial court agreed and reversed the Commission’s decision, the Commission appealed, and the case went up to a state Court of Appeals, which issued a decision March 3 upholding the reversal of the Commission’s decision.

On appeal, Riekers argued that the Commission had failed to base its rejection of the administrative judge’s recommendations on substantial evidence. The court, in an opinion by Justice Margaret Poissant, agreed, noting several questionable findings in the Commission’s decision.

For instance, in making a finding that the administrative judge had not, the Commission had determined that Riekers was fired from his federal job. However, Riekers appears to have actually resigned that job, and the Commission had failed to introduce evidence that the resignation was anything but voluntary.

Additionally, the Commission found that Riekers had committed “a serious federal crime,” despite the fact that he received no prison time or significant fines, and the fact that a letter from a federal judiciary department described him as a “low risk” offender who had committed a “low severity violation.”

The Commission had also declared that Riekers was guilty of “stealing ammunition from a federal armory” and selling it through the internet, despite there being no evidence that he had either sold the ammunition or stolen it from an armory. He had only traded it for other ammunition, and appears to have already been in possession of the offending ammunition as part of his work.

Aside from those factual errors, Justice Poissant also took issue with the Commission’s finding that Riekers’s conviction was evidence that he was not fit to continue holding a real estate license. Analyzing the case through the use of a multi-factor test—laid in board regulations—for determining whether a criminal conviction indicates a lack of fitness, Justice Poissant found that most all of the test’s factors weighed in favor of Riekers’s maintaining his license.

Among other things, Riekers was a low-level offender with a record of good behavior and he showed willingness to cooperate with all stages of his prosecution and rehabilitation.

Additionally, although following the hearing the administrative judge had praised Riekers in glowing terms, in its final decision the Commission simply struck that passage without substituting any findings of its own about his fitness based on any proven point in the record.

“If the Commission can simply disregard the findings of the ALJ, then there is a lack of meaningful review of the Commission’s findings, in contravention of the Legislature’s express statutory provision for a . . . hearing,” the justice wrote. “While we agree that the Commission has the discretion to modify the sanction, the Commission must provide a specific reason and legal basis for doing so.”

“Here, the Commission relied upon facts not supported by the evidence, and other than stating that Riekers’s theft conviction correlates to the fiduciary duties and relationship a real estate agent has to his client, did not specify a sufficient factual or legal basis for the modification from a revoked or probated license to complete revocation.”

“The ALJ was specific in his findings of fact and conclusions of law as to the evidence presented and the basis for his findings; the Commission, however, was not.”