ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND FINAL ORDER

Transcription

1 ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND IN THE MATTER OF: * PRONTOWASH USA, LLC, * Case No Respondent. * * * * * * * * * * * * * * * FINAL ORDER WHEREAS, March 24, 2004, ProntoWash USA, LLC, a Florida limited liability company ( Pronto Wash ), filed an application with the Securities Division of the Office of the Attorney General of Maryland (the Securities Division ) for an initial registration to offer and sell franchises in Maryland under the Maryland Franchise Registration and Disclosure Law, MD. BUS. REG. CODE ANN et al. (2004 Repl. Vol.) (the Maryland Franchise Law ); and WHEREAS, on March 10, 2005, as a condition of granting Pronto Wash s franchise registration in Maryland, the Maryland Securities Commissioner (the Commissioner ) issued an Escrow Order authorized under section of the Maryland Franchise Law requiring Pronto Wash to escrow franchise fees until its obligations under its franchise agreements have been satisfied (the Escrow Condition ); and WHEREAS, on March 17, 2005, in order to comply with the Commissioner s Escrow Condition, Pronto Wash entered into an Escrow Agreement with Wachovia Bank, National Association ( Wachovia ) to set up Pronto Wash s escrow account in Maryland; and WHEREAS, on April 18, 2005, the Securities Division registered Pronto Wash to offer and sell franchises in Maryland, subject to the Commissioner s Escrow Condition; and WHEREAS, since April 2005, and Pronto Wash has been continuously registered to offer

2 and sell franchises in Maryland, with several brief periods of lapsed registration; and WHEREAS, the Commissioner s Escrow Condition has never been vacated or modified; and WHEREAS, in or before 2006, the Escrow Agreement between Pronto Wash and Wachovia was terminated and, on April 13, 2006, Pronto Wash entered into a new Escrow Agreement with Manufacturers and Traders Trust Company ( M&T Bank ) to set up a new escrow account in Maryland to comply with the Commissioner s Escrow Condition; and WHEREAS, the Escrow Agreement between Pronto Wash and M&T Bank provides that M&T Bank may resign as escrow agent by giving 30 days written notice to the franchisor and the Securities Division; and WHEREAS, Pronto Wash s Franchise Disclosure Document, registered with the Securities Division on May 28, 2009, stated that all franchise fees and master franchise fees will be placed in an escrow account at M&T Bank pending satisfaction of all of Pronto Wash s material pre-opening obligations to its franchisees and master franchisees; and WHEREAS, on or about December 16, 2009, M&T Bank notified the Securities Division that it was terminating Pronto Wash s Escrow Agreement as of December 14, 2009 based on Pronto Wash s failure to pay outstanding bank fees; and WHEREAS, on December 16, 2009, the Securities Division notified Pronto Wash, by certified mail, return receipt requested, that in order to maintain Pronto Wash s franchise registration in Maryland in light of M&T Bank s termination of Pronto Wash s Escrow Account, Pronto Wash must establish another escrow account at a Maryland bank, submit a copy of that executed escrow account to the Securities Division, and amend Pronto Wash s Franchise 2

3 Disclosure Document to disclose the existence of the new escrow account; and WHEREAS, Pronto Wash received the Securities Division s letter on or before December 27, 2009 and failed to respond to that letter; and WHEREAS, on January 7, 2010, counsel for the Securities Division contacted counsel for Pronto Wash by telephone and advised her that the Securities Division would issue a Stop Order as authorized under section of the Maryland Franchise Law to suspend Pronto Wash s franchise registration if Pronto Wash did not contact the Securities Division immediately about establishing a new escrow account to replace the terminated Escrow Account with M&T Bank; and WHEREAS, as of January 12, 2009, Pronto Wash did not submit evidence of a new escrow account to replace the terminated escrow account with M&T Bank, and the Securities Division received no other communication from Pronto Wash about satisfying the Commissioner s Escrow Condition; and WHEREAS, under section of the Maryland Franchise Law, the Commissioner summarily may issue a stop order to deny, suspend or revoke a registration if the Commissioner finds, among other things, there has been a violation of the Maryland Franchise Law or a regulation adopted under it; and WHEREAS, the Securities Division determined that grounds existed to allege that Pronto Wash violated section of the Maryland Franchise Law and an Escrow Order of the Commissioner by failing make arrangements to escrow fees and other money paid by franchisees and master franchisees until Pronto Wash s obligations under its franchise agreements and master franchise agreements had been satisfied; and 3

4 WHEREAS, the Securities Division determined that grounds existed to allege that Pronto Wash s Franchise Disclosure Document registered with the Securities Division violated section of the Maryland Franchise Law because it disclosed that Pronto Wash had a current Escrow Agreement with M&T Bank, when that Escrow Agreement had been terminated; and WHEREAS, on January 12, 2010, at the Securities Division s request, the Commissioner issued a Stop Order (the Original Stop Order ) against Pronto Wash in this matter, but the Securities Division s Stop Order reflected an incorrect issuance date of December 12, 2010 rather than January 12, 2010; and WHEREAS, to avoid any confusion caused from the incorrect date on the Original Stop Order, the Commissioner vacated the Original Stop Order and issued a Stop Order as of March 22, 2010, containing the same allegations as the Original Stop Order; and WHEREAS, pursuant to the Stop Order, effectiveness of Pronto Wash s application to register its franchise offering in Maryland was summarily suspended, pending a final determination of this proceeding, instituted under section of the Maryland Franchise Law; and WHEREAS, the Stop Order further advised Pronto Wash to show cause why a final stop order should not be issued against it, revoking Pronto Wash s franchise registration under the Maryland Franchise Law; and WHEREAS, Pronto Wash was served with a copy of the Stop Order on April 8, 2010; and WHEREAS, the Stop Order advised Pronto Wash of the opportunity for a hearing in this matter, if requested in writing, within fifteen (15) days of service, and further gave 4

5 notice that if Pronto Wash did not file an answer, including a request for a hearing, Pronto Wash s failure to file such a request would be deemed a waiver of the right to such a hearing; and WHEREAS, Pronto Wash did not file an answer or request for a hearing on the Stop Order, thereby knowingly waiving the right to a hearing; and WHEREAS, the Commissioner has determined that it is in the public interest to issue this Final Order revoking Pronto Wash s franchise registration under the Maryland Franchise Law; ACCORDINGLY, IT IS HEREBY ORDERED, that Pronto Wash s registration of its franchise offering in Maryland is hereby revoked; and IT IS FURTHER ORDERED, that jurisdiction is retained by the Commissioner for the purposes of enabling any party to this Final Order to apply for such further orders and directions as may be necessary or appropriate for the construction or enforcement of this Final Order; and IT IS FURTHER ORDERED, that Pronto Wash is hereby advised that it may appeal this Final Order to the appropriate Circuit Court of the State of Maryland within 30 days from the date this Final Order is mailed by the Securities Division. SO ORDERED:, 20 MELANIE SENTER LUBIN SECURITIES COMMISSIONER 5

6 CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing Final Order by causing copy to be sent by U.S. Mail, postage prepaid, certified delivery, to: Stuart Williams, CEO and President ProntoWash USA, LLC nd 4970 SW 52 Street, Suite 320 Davie, Florida 33314, and Jonathan Perlman, Esquire Genovese, Joblove & Battista, P.A. Bank of America Tower nd th 100 Southeast 2 Street, 44 Floor Miami, Florida 33131; and by delivering a copy to Melanie Senter Lubin, Securities Commissioner, Maryland Division of Securities, 200 St. Paul Place Twenty-fifth Floor, Baltimore, Maryland Dated:, 20 Dale E. Cantone Assistant Attorney General Maryland Division of Securities 200 St. Paul Place - 25th Floor Baltimore, Maryland (410)