Insights

At first glance, the recipient of a pardon for a criminal conviction might think that the conviction has been effectively erased and is now a legal nullity that no longer needs to be disclosed on license applications. But not every state regulator would agree. For example, the California Department of Real Estate (DRE) includes the following advice on its web site: “All convictions must be disclosed whether or not the conviction against you was dismissed or expunged or if you have been pardoned. Convictions while you were a minor must be disclosed unless the record has been sealed …” (See http://www.dre.ca.gov/lic_avoid_denial.html.) “An applicant for a real estate license is required to fully disclose any misdemeanor or felony criminal conviction(s), including any conviction(s) as a minor if the records have not been sealed. Additionally, an applicant must disclose if he or she has ever had a license in California or any other State denied, suspended, restricted or revoked, along with any pending criminal charges against them. More importantly, the failure to disclose any convictions on a real estate application may be considered an attempt to obtain a license by fraud or misrepresentation, and can result in the denial of a real estate license.” (See http://www.dre.ca.gov/pdf_docs/FAQ-RERAPS.pdf.)

In California, Connecticut, and several other states, a mortgage loan originator license application may be denied if the applicant has been “convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign or military court during the seven-year period preceding the date of the application for licensing or at any time preceding such date of application if such felony involved an act of fraud, dishonesty, a breach of trust, or money laundering, provided any pardon of a conviction shall not be considered a conviction…”
(See, e.g., Cal. Bus. & Prof. Code Section 10166.05(b) and Conn. Gen. Stat. Section 36a-489(b)(1); see also
http://mortgage.nationwidelicensingsystem.org/slr/PublishedStateDocuments/CT-Loan-Originator-Description.pdf.) That does not mean, however, that the conviction or plea should not be disclosed – on the contrary, the conviction or plea, as well as the subsequent pardon, should generally be disclosed, unless the application form or instructions clearly provide otherwise.

For example, the California Department of Real Estate cautions applicants that they are solely responsible for submitting a complete and accurate license application, and warns that the DRE will eventually find out about an applicant’s past criminal conviction history, either before or after the license application has been processed. “The failure to disclose charges/convictions will result in substantial delays in the processing of your application and may result in denial of the license application” or (if a license is issued) “disciplinary action being taken against the real estate license.” Similarly, the Georgia Department of Banking and Finance cautions mortgage license applicants that “[i]t is very important to provide honest answers in the application. Omissions regarding arrests are deemed to be a serious falsification of the application and can lead to denial regardless of the nature or outcome of the arrest.” (See http://www.georgia.gov/00/channel_title/0,2094,43414745_67610389,00.html.) The Nebraska Department of Banking and Finance specifically requires all relevant convictions to be disclosed on Form MU4, and asks that supporting material about any applicable pardons be submitted as a supplement to Form MU4. (See http://www.ndbf.ne.gov/mb/background-credit-checks-faqs.pdf.)

Cal. Bus. & Prof. Code Section 10166.05(b) was specifically amended, effective January 1, 2012, to clarify that the Real Estate Commissioner may “consider the underlying crime, facts, or circumstances of an expunged or pardoned felony conviction when determining the eligibility of an applicant for licensure…” (A similar amendment was also made to the California Financial Code with respect to the Department of Corporations’ ability to take expungements and pardons into account under the California Residential Mortgage Lending Act and the California Finance Lenders Law.) Implicitly, expungements and pardons must be disclosed so that the Department of Real Estate or Department of Corporations may take them into consideration.

In August 2009 the Connecticut Department of Banking denied a mortgage loan originator license application, where the applicant had disclosed a prior guilty plea to a felony involving securities fraud, as well the subsequent receipt of a “Certificate of Relief from Disabilities (‘Certificate’) under New York law…” Because this Certificate “does not constitute a pardon,” and because the applicant also failed to disclose prior NASD arbitration awards against the applicant for compensatory damages determined to be owed to complaining customers, as well as a denial by the South Carolina Office of the Attorney General (Securities Division) of the applicant’s securities registration request, the Connecticut Department of Banking denied the mortgage loan originator license application. (See http://www.ct.gov/dob/cwp/view.asp?a=2246&q=445666.)

Some license application forms may specifically ask for information about pardons. (See, e.g., a Massachusetts Division of Insurance application form available at http://www.mass.gov/ocabr/docs/doi/legal-hearings/1033application.pdf.) Others may simply ask for “complete information” about certain specified civil, administrative, and/or criminal proceedings. In either case, applicants may wish to err on the side of disclosure when in doubt - a regulator’s belief that an applicant has tried to hide parts of the applicant’s criminal history could potentially result in harsher regulatory sanctions than if the original conviction had been voluntarily disclosed.

Elizabeth C. Yen is a partner in the Connecticut office of Hudson Cook, LLP. Elizabeth can be reached at 203-776-1911 or by email at eyen@hudco.com.