On November 20, 2007, Mr. Rony Almonte and Emely Market, the Petitioners, filed a WIC vendor application. On December 18, 2007 the Department of Public Health, Respondent, denied the application for "failure to show business integrity". DPH determined that Mr. Almonte failed to show that he had obtained the store, which had been disqualified from the WIC program, from the former owner in a bona fide arm's length transaction. Petitioners requested a hearing pursuant to 7 CFR 246.8.
On August 13, 2008, I conducted a hearing pursuant to the Standard Adjudicatory Rules of Practice and Procedure, Informal Rules, 801 CMR 1.02, at the Division of Administrative Law Appeals, 98 North Washington Street, Boston. Ms. Lucy Costa of the WIC Vendor Unit testified for the Respondent and Mr. Rony Almonte testified for the Petitioners. I recorded the proceedings on a single cassette tape. I took 20 exhibits into the record. DPH's ten exhibits are marked 1 through 10. Petitioners' ten exhibits are marked A through J.
Based on all of the evidence in the record, reasonable inferences drawn from the evidence, and my assessment of the credibility of the witnesses, I make these findings.
1. La Vega Market, 168 Eastern Avenue in Springfield, and its owner, Santana Varas, held a WIC vendor license. (Ex. 9).
2. A WIC compliance buyer visited La Vega Market four times in June and July 2007 (Ex. 9).
3. Based on violations found during those visits, the WIC program terminated La Vega Market's vendor license on August 28, 2007. (Ex. 9).
4. On November 27, 2007, Rony Almonte applied for a WIC vendor license for Emely Market located at 168 Eastern Avenue in Springfield. He explained that he had purchased La Vega Market from Santana Varas on September 14, 2007. (Ex. 4).
5. On December 3, 2007, WIC asked Mr. Almonte to demonstrate that he had made a bona fide purchase of the disqualified store. (Ex. 5).
6. In response, Mr. Almonte provided WIC several documents, including (1) a bill of sale signed by him and Santana Varas on September 13, 2007, (2) a September 14, 2007 lease agreement for premises at 168 Eastern Avenue, signed by Mr. Almonte as tenant and Mr. Justin Hurst as landlord, and (3) a packet of cancelled checks from Emely Market's operating account. (Ex. 6).
7. After considering these documents, WIC determined that they did not show a bona fide purchase of the disqualified La Vega Market and, consequently, denied Mr. Almonte a WIC vendor license on December 18, 2007. (Ex. 1).
8. Mr. Almonte appealed on January 14, 2008. (Ex. 2).
9. The bill of sale shows a purchase price of $60,000 for (1) a grocery store, (2) general merchandise, (3) a refrigerator, (4) a cash register, (5) a television, (6) a radio, (7) a digital scale, and (8) a meat cutter. (Ex. 6).
10. The words "grocery store" on the bill of sale cannot refer to the premises at 168 Eastern Avenue because Mr. Hurst, not Mr. Varas, owns the premises as shown by the lease agreement. (Ex. 6).
11. The record contains no documentary evidence that either the store's "good will" or the remaining items listed on the bill of sale (general merchandise, a refrigerator, a cash register, a television, a radio, a digital scale, and a meat cutter) are worth $60,000.
12. At hearing, Mr. Almonte did not testify about the value of any of the items listed in the bill of sale or why a selling price of $60,000 was reasonable. He said only that Mr. Varas had originally asked for $80,000 and that after negotiations he and his brother, who operates a grocery store, got Mr. Varas to agree on $60,000. (Almonte Testimony).
13. The packet of cancelled checks provided in response to DPH's request shows that in October, 2007, Emely Market paid Bay State Gas (presumably for fuel for the store's cook stove), four vendors for food, and wrote two checks to the City of Springfield (presumably for permits or licenses). (Ex. 6).
14. Mr. Almonte offered no documentary evidence that he has made any of the monthly payments specified in the lease or paid any taxes.
15. At the hearing, Mr. Almonte testified that he obtained most of the $60,000 purchase price from his family. He presented a promissory note in which he agreed to repay $30,000 to his uncle at $500 per month beginning on January 1, 2008. (Ex. G). He, however, presented no evidence that he has made any of the promised payments.
16. Mr. Almonte presented a second promissory note in which he agreed to pay $11,500 to Mr. Varas at $320 each month for 35 months. (Ex. E). Mr. Almonte testified that Mr. Varas accepted this note in lieu of $11,500 of the $60,000 selling price.
17. The record contains no evidence that Mr. Almonte made the required monthly payments to Mr. Varas on the note.
18. At the hearing, Mr. Almonte introduced a receipt written in Spanish that he explained showed he had wired Mr. Varas $700 on January 17, 2008. (Ex. I).
19. Additionally, Mr. Almonte introduced a copy of a $976.35 cancelled check payable to Chase Home Finance written on Emely Market's operating account on May 5, 2008. (Ex. H).
20. Mr. Almonte testified that he wrote the check to Chase at Mr. Varas's request. He explained that Chase Home Finance holds a mortgage on property owned by Mr. Varas. Mr. Almonte said that Mr. Varas asked him to pay his mortgage in lieu of three months payment on the promissory note. (Almonte Testimony).
Any store owner or operator seeking a WIC vendor license must demonstrate business integrity. Here, a store was disqualified from the WIC program in August 2007. In November of the same year, WIC received an application for a vendor license from a new owner at the same location as the disqualified store. In these circumstances, WIC's business integrity inquiry focused on whether the sale of the store was a bona fide transaction or merely a sham to circumvent the earlier disqualification. WIC concentrated on whether the sale from Mr. Varas to Mr. Almonte was an arm's length transaction.
The documentation provided by Mr. Almonte is sparse. There is no evidence that Emely Market paid taxes. Additionally, there is no record that Emely Market paid rent on the premises at 168 Eastern Avenue. (finding 14). Further, the evidence suggests that Mr. Almonte and Mr. Varas did not engage in an arm's length transaction. There is nothing in the record to show that the $60,000 selling price related to the value of what was purchased. (finding 10 and 11). Additionally, there is no evidence that Mr. Varas received anything at the time of the sale, except for the $11,500 promissory note. The only evidence provided by Mr. Almonte of payment to Mr. Varas purport to be payments made on that promissory note.
This evidence does not support Mr. Almonte's claim of an arm's length relationship with Mr. Varas. It shows no regular monthly payments as required in the promissory note. It shows that on one occasion, Mr. Almonte wired Mr. Varas $700 (finding 18) and on another occasion paid Mr. Varas's mortgage with a check from Emery Market's operating account. (finding 19). This evidence suggests a continuing relationship rather than an arm's length sale. Thus, I conclude that the record does not support a finding of an arm's length transaction that transferred ownership of the store at 168 Eastern Avenue from Mr. Varas to Mr. Almonte. Accordingly, DPH properly denied Mr. Almonte and Emely Market a WIC vendor license.
This decision upholds DPH's determination not to select Petitioners for a WIC vendor license. DPH's action is not a disqualification. Accordingly, Petitioners may reapply for a license at any time.
DIVISION OF ADMINISTRATIVE LAW APPEALS
/s/ Francis X. Nee
DATE: March 13, 2009