SC Administrative Law Court Decisions

2. Respondent Lake Swamp Ventures, LLC, d/b/a Cash Cow Pawn & Gun (Cash Cow) has held a pawnbroker Certificate of Authority and/or operated at 212 Ron McNair Blvd., Lake City, Florence County, South Carolina since May 2006.

3. Respondents John M. McCutcheon (McCutcheon) and Derek T. Owens (Owens) are the two principle officers, directors, or owners of Respondent Lake Swamp Ventures, LLC.

4. Respondents were two months delinquent in filing for a Certificate of Authority for the 2008-2009 filing year, eventually obtaining a Certificate of Authority on September 3, 2008.

5. Petitioner’s staff conducted a compliance review of Respondent Cash Cow Pawn & Gun on June 26, 2008, noting the following deficiencies in their record keeping and practices:

I. Pawn tickets were not being kept in numerical sequence, pursuant to Regulation 28-200C (1)(C), (This deficiency was also noted in an April 26, 2007 review);

II. Pawned and sold merchandise were not being properly tagged, pursuant to Regulation 28-200 C (4), (This deficiency was also noted in the April 26, 2007 review);

III Several items of sold merchandise that were being held during the seven day hold period were in a public area, but were not tagged “Not for Sale”, as required by Regulation 28-200 D.(5), (This deficiency was also noted in the April 26, 2007 review);

IV. Several items that had been sold to the Respondents and were within the seven day hold period could not be located as required by Regulation 28-200 D. (2), (This deficiency was also noted in the April 26, 2007 review); and

V. One item of merchandise that had been forfeited to Respondents was not listed as such in Respondents’ records as required by Regulation 28-200C. (2).

6. During the June 26, 2008, compliance review, the Department’s investigator noted nine instances of Respondents making unsecured consumer loans or “fresh air loans”, i.e., loans of money to consumers in which there was no item of personalty (or other collateral) pledged to secure the loan, pursuant to §40-39-10(2), (3) & (7), and in violation of S.C. Code Ann., §§37-3-502 & 37-3-512 of the South Carolina Consumer Protection Code.

7. During the June 26, 2008 compliance review, the Department’s investigator noted that there were two employees, Otis Hutchinson and Leon Graham, working in Respondents’ business even though owner/employee forms and fingerprint verification forms from law enforcement on these employees had not been submitted to the Department prior to their employment, pursuant to §40-39-20 of the Act and 28-200 B.

8. Respondent McCutcheon purported to resolve these issues in an unsigned letter submitted to the Department in August 2008.

9. Two additional employees, James Hanna and Julie Hutchinson, were working in Respondents’ business even though owner/employee forms and fingerprint verification forms from law enforcement on these employees had not been submitted to the Department prior to their employment, pursuant to §40-39-20 of the Act and 28-200 B.

10. Otis Hutchinson is a convicted felon which would not allow him to work as a pawnbroker in Respondents’ business, pursuant to § 40-39-20 of the Act, and that Respondent concealed this fact from Petitioner and continued to employ him after asserting in writing he would not do so.

11. Petitioner’s investigator visited Respondent Cash Cow on November 6, 2008, and found several employees working there including James Hanna.

12. Respondents McCutcheon and Owens were evicted from Respondent Cash Cow Pawn & Gun at 212 Ron McNair Blvd, Lake City, SC, on November 17, 2008.

13. Petitioner currently has approximately twelve (12) open unresolved complaints filed against Respondents as result of the closure of Cash Cow Pawn & Gun.

14 Petitioner has inventoried the remaining merchandise at Respondent Cash Cow, and has conducted at least three redemption opportunities for pledgors to obtain their pawned items.

15. Petitioner will conduct at least two more redemption opportunities for pledgors in January and February 2009 .

16. Petitioner is currently holding redemption monies collected from consumers in an escrow account.

CONCLUSIONS OF LAW

1. The Petitioner is an agency of the State of South Carolina and is responsible for administering and enforcing the South Carolina Pawnbroker Act (The Act)(S.C. Code Ann. §§40-39-10 et seq.)

2. Petitioner is authorized by S.C. Code Ann. §37-6-104 of the South Carolina Consumer Protection Code to “...Receive and act on complaints, take action designed to obtain voluntary compliance with this title, or commence proceedings...”.

3. Respondents have violated five separate and distinct parts of Pawnbroker Regulation 28-200 in numerous instances of improper record keeping, and handling of merchandise.

4. Respondents have engaged in making unsecured consumer loans, for which they did not have a license, in violation of S.C. Code Ann., §§37-3-502 & 37-3-512 of the South Carolina Consumer Protection Code, and which they were not permitted to do at a pawn shop location, pursuant to §40-39-10(2), (3) & (7).

5. Respondents employed personnel who had not submitted owner/employee forms or fingerprint verification forms, pursuant to S.C. Code Ann §40-39-20 of the Act and Regulation 28-200 B.

6. Respondent employed a convicted felon in violation of S.C. Code Ann § 40-39-20 of the Act.

7. Respondents are required to maintain with the Department of Consumer Affairs evidence of financial responsibility in the form of a bond or letter of credit in the amount of five-thousand ($5,000.00) dollars, to be conditioned on the faithful performance of the duties and responsibilities of a pawnbroker, pursuant to S.C. Code Ann. §40-39-50.

8. Respondents bond may be assessed to repay those affected members of the public who may have a valid claim against Respondents, pursuant to S.C. Code Ann. §40-39-50.

9. Respondents have agreed in separate affidavits attached to this Order (Attachment A) that redemption monies will be held by the Department in an escrow account until this Court can determine who should benefit from the collected funds.

10. Respondents have agreed in a separate Agreement attached to this Order (Attachment B) that redemption monies on firearms collected by a third party (Steven Sauls) will be remitted and held by the Department in an escrow account until this Court can determine who should benefit from the collected funds.

11. Respondents do not have the requisite net worth and financial responsibility to continue as a pawnbroker, pursuant to S.C. Code Ann §40-39-50 of the Act, in light of the eviction for failure to pay rent at 212 Ron McNair Blvd, Lake City, SC.

12. Respondents Lake Swamp Ventures, LLC, McCutcheon, Owens, and counsel for the Department have agreed to the terms of this Order.

THEREFORE, based upon the above, Petitioner and Respondents Lake Swamp Ventures, LLC, McCutcheon, and Owens, have consented and agreed to the following terms as a full and final resolution of this matter.

Respondents Lake Swamp Ventures, LLC, McCutcheon, and Owens will:

. (a) Agree to assessment in full of their special deposit bond #LLI2008940 issued by Old Republic Surety Company in the amount of $5,000.00, and made payable to the Administrator for those affected members of the public who have causes of action against Respondents for violation of S.C. Code Ann. §§40-39-10 et seq.;

(b) Allow Petitioner to hold such monies from special deposit bond #LLI2008940 issued by Old Republic Surety Company for the statutory period until Petitioner can determine all consumers who may have been affected during the term of bond #LLI2008940 ;

(c) Pay an administrative fine of three thousand ($3,000.00) dollars for violations of the Act, pursuant to S.C. Code Ann. §44-79-80(9);

(d) Cease and Desist operating as a pawnbroker as defined in S.C. Code Ann. §40-39-10; and

(e) Voluntarily and permanently relinquish their Pawnbroker Certificate of Authority.

(f) Co-operate with the Department’s staff in resolving any current and future complaints filed against Respondents.

WHEREFORE, IT IS ORDERED THAT:

A. Respondents’ Certificate of Authority is permanently Revoked, pursuant to S.C. Code Ann. §40-39-150(B).

B. Respondents are to Cease and Desist offering pawnbroker services at 212 Ron McNair Blvd, Lake City, SC, or any other South Carolina location, pursuant to S.C. Code Ann. §40-39-150(A).

C. Respondents are enjoined from engaging in pawn transactions or acting as a pawnbroker in South Carolina , as defined in S.C. Code Ann. §40-39-10.

D. Respondent’s Bond #LL12008940 issued by Old Republic Surety and made payable to the Administrator for those affected members of the public who may have a cause of action against Respondents for the fair market value of their pawned merchandise may be Assessed, pursuant to S.C. Code Ann. §§40-39-50, 40-39-60, & 40-39-150.

E. Petitioner may hold such monies from Bond #LL12008940 for the statutory period until Petitioner can determine any consumers who may have been affected during the term of the bond.

F. Petitioner may use the monies it holds in escrow from the redemptions of merchandise it conducted, and the redemption of the guns by the third party Sauls, to further reimburse consumers should the bond not cover all claims.

G. Any money remaining at the end of the statutory period will be refunded to Respondents.

H. Petitioner will pay only those valid claims that can be substantiated through Respondents’ records or through Respondents’ co-operation in resolving the complaints.

I. Petitioner will pay such claims based on the fair market value or assessed value of merchandise and not replacement value.

J. Respondents will co-operate with Department staff in supplying any necessary records to effectuate the orderly return of pledged, layaway, or other property left at the pawn shop for security, purchase or repair.

K. Respondents are to voluntarily resolve those complaints it is aware of, make a written record of the resolution, and forward to the Department.

L. Imposing an administrative fine on Respondents of three thousand dollars ($3,000.00) for violations of the Act, pursuant to S.C. Code Ann. § 40-39-150(B).

M. Requiring such Order to take effect immediately.

AND IT IS SO ORDERED

____________________________

Honorable John D. McLeod

Administrative Law Judge

________________, 2009

Columbia, South Carolina

We Consent:

____________________________ __________________________

John M. McCutcheon, Jr. Derek Thompson Owens

________________, 2009 __________________, 2009

Lake City, South Carolina Lake City, South Carolina

_________________________

Helen Fennell

Attorney for the Petitioner SCDCA

P.O. Box 5757

Columbia, SC 29250

Columbia, South Carolina (803) 734-4241

February 28, 2009