                                 Cite as 2015 Ark. App. 446

                 ARKANSAS COURT OF APPEALS
                                        DIVISION IV
                                        No. CV-14-342


CHARLES BRYAN DYER AND                            Opinion Delivered   September 2, 2015
EDWARDS TITLE, LLC
                   APPELLANTS                     APPEAL FROM THE CRAWFORD
                                                  COUNTY CIRCUIT COURT
V.                                                [NO. 17CV-12-533]

                                                  HONORABLE GARY COTTRELL,
ARKANSAS INSURANCE                                JUDGE
DEPARTMENT
                                  APPELLEE        AFFIRMED



                            WAYMOND M. BROWN, Judge

       Appellant Charles Dyer and his title-insurance agency, Edwards Title, LLC, challenge

the revocation of their insurance license by appellee, the Arkansas Insurance Department

(Department). Dyer appealed to the Crawford County Circuit Court, which affirmed the

revocation. We affirm the circuit court and the Department.

                                         I. Background

       Dyer owns Edwards Title, LLC, formerly known as Edwards Abstract Company. His

business involves selling title insurance to prospective home buyers and performing closing

services in real-estate transactions. Closing services include preparation of settlement

documents; maintenance of an escrow account, which primarily consists of the purchase

money forwarded by home buyers or their lenders; and payment of the purchase money to

the seller or the seller’s mortgagee.

       In 2003, Dyer discovered that a trusted employee named Susan Hudson had embezzled
                                 Cite as 2015 Ark. App. 446

money from his agency. Dyer did not fire Hudson but allowed her to continue as a closer for

the agency. He attempted to prevent future losses by, among other things, requiring two

signatures on checks, although Hudson was retained as a signatory. He also began reconciling

the escrow account weekly for a period of time.1

       In 2008, one of Dyer’s title-insurance underwriters, Chicago Title, conducted an audit

of Dyer’s agency. The audit found that Dyer was delinquent in performing escrow-account

reconciliations and that management did not critically review or formally approve bank

reconciliations. Dyer’s relationship with Chicago Title was later terminated by mutual

consent. Dyer then entered into a contract with another title-insurance underwriter, Stewart

Title Guaranty.

       Stewart conducted initial audits of Dyer and noted that Dyer had delayed in

reconciling escrow accounts; had outstanding checks and deposits from 2007; experienced

excessive time lapses between closing and the recording of documents; and delayed mortgage

payoffs in some files. Subsequent audits identified similar issues, plus overdraft charges;

insurance policies not being sent to Stewart in a timely fashion; and infrequent reconciliations.

       In early 2011, Dyer learned that Susan Hudson had resumed embezzling from the

agency as early as 2009. Hudson’s methodology was complex but, simply put, she

manipulated the agency’s automated escrow accounting system, into which she entered real-

estate closing information. She made entries to show that a check had been written to payoff


       1
        An escrow account is reconciled to ensure that the money in the account has
been disbursed to the proper parties in the real-estate transactions that are handled by the
agency.
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a seller’s mortgage but, in reality, the check would be voided and the funds not

disbursed—rather, the funds remained in the agency’s escrow account, or one of its old

escrow accounts that had never been closed. Hudson diverted some of the hidden funds for

her own use, thereby leaving the seller’s mortgage unpaid for a long period of time. At some

point, she would use funds from a subsequent closing to satisfy the unpaid mortgage. This,

however, simply resulted in the subsequent closing having a late payoff as well.

       Hudson’s activities were not detected by Dyer until February 2011. In that month, a

bank officer called Dyer to report that the mortgage of a Mr. Mize, who had closed at Dyer’s

agency a few months earlier, had not been paid off. While investigating the matter, Dyer

learned that Hudson had been taking money from the agency and that she had used the

proceeds from the Mize closing and other closings in furtherance of her scheme. Dyer

terminated Hudson and paid off the Mize loan with escrow-account funds. Approximately

six weeks later, Dyer obtained a personal loan and placed $185,000 into the escrow account.

During that six-week interim, there were insufficient-funds charges on the escrow account,

and Dyer continued to perform closings, despite the escrow account’s being short of money.

       Dyer did not disclose Hudson’s theft to Stewart Guaranty until September 2011. At

that point, Stewart reminded Dyer to inform the Department, which Dyer did not do.

Stewart also audited Dyer and terminated its relationship with him. Stewart informed the

Department of its split with Dyer, and this marked the first notification to the Department

about Hudson’s theft.




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                               II. Insurance Department Investigation

       The Department launched an investigation upon learning of the situation at Dyer’s

agency. It obtained the files on which Hudson had been the closer between January 2009 and

February 2011, and reviewed Dyer’s bank statements and the audits that had been performed

by Chicago Title and Stewart Guaranty.

       In the course of the inquiry, investigator Sarah Gray discovered problems with over

300 of Dyer’s files. Many of the files still contained the client’s original title policy or original

warranty deed, which had never been mailed to the client. Gray also found occasions where

Dyer had waited a significant amount of time after closing to pay some insurance premiums

to Stewart and had made untimely mortgage pay-offs as well. In particular, the Department

learned that mortgage payoffs of two sellers were delayed to the extent that they received late

notices from their banks and, in one instance, a foreclosure action was filed. Gray additionally

saw that title policies were sometimes issued to the new home buyer before the previous

owner’s loan on the property was paid off, which was an incorrect procedure.

       Probing further, Gray found that Dyer’s post-2008 policies and other documents listed

his business name as Charles B. Dyer d/b/a Edwards Abstract Company rather than Edwards

Title, LLC, which had been his business name since January 2009. She observed that these

documents also lacked Dyer’s license number and the required Department contact

information. Additionally, Gray learned that, during the Stewart audits, Dyer had not reported

the existence of either his old escrow accounts or a high-yield “sweep” account, into which

monies from the escrow account were temporarily placed to earn interest for the agency.


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       Another Department examiner, Taryn Lewis, investigated Dyer’s files in an attempt

to discover the extent of Hudson’s misappropriations. Lewis observed that some of the

information she found did not coincide with the information that Dyer had provided to her

during the course of the investigation. Her inquiry also revealed errors, inconsistencies, and

changes in Dyer’s disbursement sheets and settlement statements; lack of payoff information

in some files; and several transfers between escrow accounts, or between the escrow accounts

and the high-yield account. Lewis questioned the effectiveness of the security measures that

Dyer imposed after Hudson’s 2003 theft.

       The Department also received two complaint letters regarding Dyer. In one, a

consumer complained that he waited five months for his title policy and that he had yet to

receive his original deed. In a second, a credit union complained about Dyer’s poor service

and lack of timeliness in providing recorded documents and responding to questions.

       The Department also discovered problems regarding funds in Dyer’s bank accounts.

One of his old escrow accounts had a balance of approximately $17,000 that could not be

satisfactorily explained. Dyer claimed the money as his own, despite its presence in an escrow

account. In another instance, a bank statement showed that, in November 2008, $159,000

had to be transferred from the sweep account to an escrow account to cover insufficient-funds

fees. Finally, the Department investigated an incident in which Dyer mistakenly paid a man

named James Young approximately $30,000 from an escrow account. To recover the money,

Dyer sued Young, but did not replace the money in the escrow account for several years,

doing so with a loan from his mother. Upon obtaining a judgment against Young, Dyer paid


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back his mother and put the majority of the judgment amount into his personal account.

                             III. Administrative Hearing and Order

       As the result of its investigation, the Department scheduled an administrative hearing

to address Dyer’s regulatory violations and to determine whether his license should be

revoked, suspended, or subject to other sanctions. The Department sent Dyer a hearing notice

containing the allegations against him.

       During the lengthy hearing, the Department received the abovementioned evidence,

including the Stewart Title audits, the Chicago Title audit, and the complaints filed with the

Department. The Department also heard the testimony of expert witness Lynn Wilburn, who

stated that Dyer had not met the standards for running a title agency due to his poor financial

habits and putting other people’s money at risk. Wilburn cited numerous areas of concern,

including overdrafts and insufficient-funds charges in escrow accounts; keeping old escrow

accounts open; files without payoff statements in them; failure to perform timely

reconciliations and monitor voided checks; and sellers’ payoffs not being made immediately

upon closing. She stated that Hudson was able to commit fraud because no one was paying

attention and monitoring her.

       Dyer called his own expert, who essentially testified that Dyer’s practices were not

unusual and did not cause harm to Dyer’s customers or underwriters. Dyer’s character

witnesses stated that he was a reputable and knowledgeable businessman. Dyer himself testified

that he had been involved in a serious car accident in October 2010 and had not been able

to attend to his office duties for a significant period of time. He denied any knowledge of


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Hudson’s fraud and indeed there was no evidence that he benefited in any way from Hudson’s

scheme.

       Following the hearing, the Department issued an order on October 4, 2012, revoking

Dyer’s license. The revocation was based on findings of misappropriation; failure to report or

disclose certain matters; failure to deliver or have proper information on certain documents;

and problems with record-keeping and business practices. Dyer petitioned the Crawford

County Circuit Court for review, and the court upheld the Department’s revocation. This

appeal followed.

                                    IV. Standard of Review

       The Administrative Procedure Act (APA) and the Arkansas Insurance Code provide

alternate means of seeking judicial review of an Department order.2 The APA provides that

an agency decision may be reversed if, among other reasons, it is not supported by substantial

evidence of record.3 The Insurance Code similarly provides that the Insurance

Commissioner’s findings of fact shall be conclusive if supported by substantial evidence.4

       In administrative appeals, our review is not directed to the circuit court but to the

agency’s decision.5 That is because administrative agencies are better equipped by

specialization, insight through experience, and more flexible procedures than courts, to



       2
           Travelers Indem. Co. v. Monroe, 257 Ark. 1029, 522 S.W.2d 431 (1975).
       3
           Ark. Code Ann. § 25-15-212(h)(5) (Repl. 2014).
       4
           Ark. Code Ann. § 23-61-307(g)(2) (Repl. 2012).
       5
           Obigbo v. Ark. State Bd. of Nursing, 2014 Ark. App. 675, 449 S.W.3d 335.
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determine and analyze legal issues affecting their agencies.6 As mentioned, agency decisions

will be upheld if they are supported by substantial evidence.7 To establish a lack of substantial

evidence, the appellant must demonstrate that fair-minded people could not, on the evidence

submitted, reach the conclusion arrived at by the agency.8 On appeal, we give the evidence

its strongest probative force in favor of the agency’s findings.9 The question is not whether

the evidence would support any other finding but, instead, whether the evidence supports the

finding that was made.10

                                       V. Hearing Notice

       Dyer argues first that the hearing notice sent to him by the Department did not

provide sufficient warning of the allegations against him.11 We disagree.

       The notice contained twelve lettered paragraphs describing Dyer’s alleged misconduct.

The list of allegations included: diverting, misappropriating, or failing to account for escrow

funds and premiums; failing to report employee theft; not reporting policies or timely

remitting premiums to the underwriter; issuing title policies prior to paying off the mortgage;

not delivering policies to the consumer in a timely manner; not putting proper information



       6
           Id.
       7
           Id.
       8
           Id.
       9
           Id.
       10
            Id.
       11
            Dyer does not challenge the timing of the notice.
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on documents, such as the agent’s license number, correct company name, Department

contact information, and a required statutory notice; and failing to maintain records in closing

files and records of escrow accounts. Each paragraph designated a corresponding statute or

administrative rule.

       Dyer contends that the hearing notice was not specific enough to apprise him of the

allegations against him and complains that the Department’s Revocation Order therefore

found several violations that were not listed in the hearing notice. We see no error. The APA

required the Department to notify Dyer of the “facts or conduct warranting the intended

action.”12 The APA further requires a “reasonable notice” that includes “a short and plain

statement of the matters of fact and law asserted.”13 Under the Insurance Code, a notice must

state “ the matters to be considered at the hearing.”14

       The notice in this case met the statutory standards. It plainly charged Dyer, for

example, with diverting or misappropriating escrow funds, which coincided with the specific

instances of misappropriation found in the Revocation Order, such as the James Young

lawsuit recovery of $30,000, which Dyer put in his own account; the existence of

approximately $17,000 in an old escrow account that Dyer claimed as his own; and Dyer’s

maintaining a sweep account, which utilized escrow funds to earn interest for himself.

Similarly, other allegations in the notice reasonably informed Dyer of the type of violations


       12
            Ark. Code Ann. § 25-15-211(c) (Repl. 2014).
       13
            Ark. Code Ann. § 25-15-208(a)(2)(C) (Repl. 2014).
       14
            Ark. Code Ann. § 23-61-304(a) (Repl. 2012).
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that would later be cited in the Department’s Order as a basis for revocation. The law did not

require the Department to provide a detailed description of Dyer’s precise instances of

misconduct.

       Dyer also argues that the Department’s notice failed to advise him that his current

ability to serve as an agent would be called into question. To the contrary, the notice stated

that Dyer’s license could be revoked as the result of the listed violations.

                                      VI. Evidentiary Issues

       Dyer argues next that the Department’s hearing officer erred in admitting certain

documents into evidence. The documents in question were presented by Department

witnesses and included the Chicago Title audit; the Stewart Guaranty audits; a spreadsheet

that a Department investigator prepared with information obtained from another person; and

the complaints filed by a consumer and a credit union. Dyer asked that the documents be

excluded on hearsay and due-process grounds because they were prepared by persons who

were not present to testify at the hearing and, consequently, were not subject to cross-

examination. The hearing officer overruled Dyer’s objection.

       We agree with Dyer that the challenged documents likely contained hearsay, given that

those who authored the documents were not present at the hearing.15 We further recognize

that parties to an administrative hearing are entitled to due process,16 and have the right to




       15
            See New Empire Ins. Co. v. Taylor, 235 Ark. 758, 362 S.W.2d 4 (1962).
       16
            Sparkman Learning Ctr., Inc. v. Ark. Dep’t of Human Servs., 2012 Ark. App. 194.
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conduct cross-examination as may be required for a full and true disclosure of the facts.17

Nevertheless, we do not reverse the Department’s admission of evidence in this case.

       The rules of evidence are relaxed in an administrative proceeding.18 In fact, hearsay

evidence is normally admissible in administrative proceedings if it is reliable and probative.19

Moreover, Dyer had the ability to subpoena witnesses and could have called the document

preparers himself.20 Alternatively, he could have asked for a continuance or a rehearing to call

the declarants and cross-examine them.21 In Arkansas Department of Human Services v. A.B.,22

our supreme court held that, where an administrative scheme provides for the issuance of

subpoenas by a party, that party cannot complain that his due-process rights were violated by

not having the opportunity to cross-examine a witness. The facts in A.B. were somewhat

different than this case—there, the party subpoenaed a witness but did not call him—but the

principle remains the same. Dyer could have used the subpoena power that the law afforded

him, or he could have asked for a postponement or an extended hearing. He did neither. We


       17
            Ark. Code Ann. § 25-15-213(5) (Repl. 2014).
       18
          Ark. Contractors Lic. Bd. v. Butler Constr. Co., Inc., 295 Ark. 223, 748 S.W.2d 129
(1988).
       19
          See Ark. State Bd. of Nursing v. Long, 8 Ark. App. 288, 651 S.W.2d 109 (1983).
See also Ark. Code Ann. § 25-15-213(4)(providing that, while irrelevant, immaterial, and
unduly repetitive evidence shall be excluded during an administrative hearing any other
oral or documentary evidence, not privileged, may be received if it is of a type commonly
relied upon by reasonably prudent people in the conduct of their affairs).
       20
            See Ark. Code Ann. § 25-15-208(a)(7)(A).
       21
            See generally Farmer v. Everett, 8 Ark. App. 23, 648 S.W.2d 513 (1983).
       22
            374 Ark. 193, 286 S.W.3d 712 (2008).
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therefore uphold the administrative agency’s refusal to exclude the evidence outright.

                                     VII. Substantial Evidence

       Dyer argues that the violations found by the Department were not supported by

substantial evidence. Substantial evidence is that which a reasonable mind might accept to

support a conclusion and cause it to pass beyond speculation and conjecture.23 We reiterate

that we accord great deference to an administrative agency’s expertise and give the evidence

its strongest probative force in favor of the agency’s findings.24

       Dyer directs several assignments of error to various specific findings in the Revocation

Order. However, we need not recount each of the Order’s many findings, nor each of Dyer’s

individual challenges. It is sufficient to say that, based on the proof cited herein, the facts

reveal a longtime pattern by Dyer of poor record-keeping, poor management, and

questionable business practices that enabled his employee, Hudson, to commit fraud, even

after she had embezzled from the agency on a previous occasion. The evidence in particular

depicted Dyer’s continuing failure to maintain proper records of his escrow accounts and his

files. This facilitated Hudson’s being able to continue her fraudulent scheme undetected, and

led to many of Dyer’s customers not receiving their title policies and deeds in a timely fashion,

thus violating the record-keeping requirement of the Arkansas Title Insurance Act.25

       The evidence also showed Dyer’s disregard for the sanctity of his escrow accounts,


       23
            Ark. State Bd. of Chiropractic Exam’rs v. Currie, 2013 Ark. App. 612.
       24
            Obigbo, 2014 Ark. App. 675, 449 S.W.3d 335.
       25
            Ark. Code Ann. § 23-103-414 (Repl. 2014).
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which contained money belonging to clients. His personal use of or retention of funds in his

escrow accounts was shown by substantial evidence, thereby proving an appropriation or

diversion of funds for his own use in violation of the Insurance Code.26

         Additionally, there was proof of Dyer’s failure to place correct information on title

policies regarding his license, business name, and the required statutory notices.27 He argues

that forms provided by Stewart Title were to blame for these omissions, but there was

testimony that putting the proper information on the forms was his obligation and that he

could have met the obligation.

         These findings constitute substantial evidence that Dyer engaged in serious violations

of Arkansas’s insurance law, which warranted the sanction of revocation. We therefore affirm

on this point.

                                   VIII. Harshness of Sanctions

         Dyer argues that the sanction of revocation was too harsh. However, revocation was

an available sanction for the violations that occurred.28 He also argues that the Department’s

case was based on potential harm to others, rather than harm actually inflicted. The evidence

shows otherwise, but, even so, we would not fault an administrative authority for using

sanctions to prevent a foreseeable harm before it occurs.

         Dyer further contends that his violations were technical rather than substantive. Some

         26
              See Ark. Code Ann. § 23-64-223 (Repl. 2012).
         27
              See Ark. Code Ann. § 23-64-510 (Repl. 2012), and § 23-103-413(2) (Repl.
2014).
         28
              See Ark. Code Ann. § 23-64-512(a) (Repl. 2012).
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of the violations could be deemed technical, but there was also evidence that Dyer failed to

fulfill his fiduciary duties with regard to his clients’ documents and money.29

                                        IX. Conclusion

       For the above reasons, we affirm the circuit court and the administrative agency’s

revocation order.

       Affirmed.

       GLADWIN, C.J., and VIRDEN, J., agree.

       Joseph C. Self, for appellant.

       Amanda J. Andrews, Assoc. Counsel, Ark. Ins. Dep’t, for appellee.




       29
         Dyer cites other license proceedings that were heard by the Department in which
the sanction of revocation was not imposed. Without knowing the full details and
evidence in those cases, we decline to compare them with the present case.


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