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Resolution 2000-24 . . RESOLUTION NO. 2000-24 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY UPHOLDING THE DECISION OF THE CITY ADMINISTRATOR TO REVOKE BUSINESS LICENSE 0000106756 FOR AROMA TOUCH (JIMMY NGUYEN, OWNER) 193 WELBURN AVENUE, GILROY, CA. WHEREAS, pursuant to Gilroy City Code Section 13.4, a separate license must be obtained for each branch or location of a "fixed place of business" transacted and carried out within the City of Gilroy ("City"), said license runs from year-to-year; and WHEREAS, pursuant to the Gilroy City Code, Business License No. 0000106756 was issued to Mr. Jimmy Nguyen for the operation of Aroma Touch (the "License"), located at 193 Welburn Avenue, Gilroy, California, on September 1, 1999; and WHEREAS, pursuant to Gilroy City Code Section 13.45, in the event that the Chief of Police has reasonable cause to believe and does believe that any licensee or other person employed by or representing such licensee is violating any of the provisions of this chapter or any other law or ordinance relating to the business of the licensee, or is conducting or has conducted or operated such business so as to be detrimental to the public morals or the public welfare, all facts and information relating to such alleged violation or conduct shall be reported to the City Administrator; and WHEREAS, the City Administrator may hold an administrative hearing to revoke or suspend such business license, with his actions subject to review by the City Council; and WHEREAS, Gilroy has adopted Resolution No. 97-17 providing for an Administrative Hearing Policy ("Administrative Hearing Policy"). Said resolution provides for an evidentiary hearing in front of the City Administrator for a business license revocation or suspension; with appeal to the City Council confined to the record and oral argument; and the time within which to UH\477825.1 01.()42104706057 -1- . . seek judicial review of any final administrative determination is governed by Section 1094.6 of the California Code of Civil Procedure; and WHEREAS, on January 7, 2000 the City Administrator issued a "Notice of Intention to Revoke Business License No. 0000106756 and Notice of Opportunity for Administrative Hearing"; and WHEREAS, representatives of Aroma Touch did file a request in a timely manner for an administrative hearing which was granted. In advance of the hearing, the representative of Aroma Touch was furnished copies of the exhibits to be entered into evidence by the Police Department and a copy of the Administrative Hearing Policy; and WHEREAS, the administrative hearing on the revocation or suspension of the License for Aroma Touch was duly held on February 24, 2000, in the City Council Chambers. It lasted from 9:00 a.m. until approximately 10:30 a.m., and was recorded by audio and videotape. Aroma Touch was represented by his attorney, Mr. Stuart Kirchick. Aroma Touch's owner, Mr. Nguyen, was not present at the hearing. The Police Department was represented by Chief of Police, Gregg Guisiana, without an attorney. The hearing was held in front of City Administrator, Jay Baksa, who was represented by Assistant City Attorney Jolie Houston. The hearing was held pursuant to Gilroy's Administrative Hearing Policy; and WHEREAS, on March 17, 2000, the City Administrator issued his Findings and Decision stating that the decision of the City Administrator was to revoke the License; and WHEREAS, Aroma Touch has timely filed a request for an appeal of the City Administrator's decision to the City Council; and WHEREAS, on May 1, 2000, the City Council conducted a duly noticed hearing at a special meeting, at which the City Council reviewed the entire administrative record of this matter, including the City Administrator's Findings and Decision, Aroma Touch's Appeal of City \JH\477825.1 01-042104706057 -2- . . Administrator's Decision and all evidence introduced at that hearing, heard oral argument from the parties, and accepted public input. NOW, THEREFORE, BE IT RESOLVED THAT the City Council hereby adopts findings and makes a decision in this matter as follows: 1. The City Council hereby adopts the City Administrator's Findings and Decision in its entirety. A copy of that decision is attached hereto as Exhibit 1 and incorporated herein by this reference. The City Council adopts the Findings and Decision of the City Administrator as its own, it specifically finds that substantial evidence in the record supports each of the findings made by the City Administrator, and that his findings support his decision to revoke the License. 2. Aroma Touch's License No. 0000106756 is hereby officially revoked. The License is now of no further force and effect, and all activities conducted pursuant to it must immediately cease. PASSED AND ADOPTED this I't day of May, 2000 by the following vote: AYES: COUNCILMEMBERS: G. ARELLANO, MORALES, PINHEIRO, VELASCO, SPRINGER NOES: COUNCILMEMBERS: P. ARELLANO ABSENT: COUNCILMEMBERS: SUDOL APPROVED: Vc/ Thomas W. Springer, Ma ....,.~ ~dR2~ Rhonda Pellin, City Clerk IJH\477825.1 01-042104706057 -3- . . EXHIBIT 1 FINDINGS AND DECISION OF CITY ADMINISTRATOR IN THE MATTER OF BUSINESS LICENSE REVOCATION FOR AROMA TOUCH 193 WELBURN A VENUE, SUITE A GILROY, CALIFORNIA BUSINESS LICENSE NUMBER 0000106756 INTRODUCTION On January 7, 2000, the City of Gilroy ("City") Administrator issued a "Notice of Intention to Revoke Business License No, 0000106756 and Notice of Opportunity for Administrative Hearing" which was duly served on the owner of Aroma Touch, Mr. Jimmy Nguyen. The notice stated in part that the Police Department had recommended that the City revoke Business License No. 0000106756 ("License"), issued by the City to Aroma Touch, 193 Welburn Avenue, Suite A., Gilroy, California, on September 1, 1999. The notice further stated that it was the intent of the City Administrator to take action and to decide whether or not to revoke the License pursuant to Gilroy City Code Section 13.45, unless a request for an administrative hearing was filed by Aroma Touch on January 18,2000. Representatives of Aroma Touch did file a timely request for an administrative hearing. A subsequent notice for administrative hearing regarding the License was duly served on the owner of Aroma Touch, and the hearing was scheduled for February 14, 2000. The attorney for Aroma Touch, Mr. Stuart Kirchick, requested that the administrative hearing previously set for February 14,2000, at 9:00 a.m., be rescheduled to February 24,2000, at 9:00 a.m. at Gilroy City Hall. The City granted this request. In advance of the hearing, Mr. Kirchick was furnished copies of Gilroy City Code, Gilroy Resolution 97-17 (Administrative Hearing Policy) and the Police reports with regard to the Police Department's investigation of Aroma Touch. The administrative hearing on the revocation of the License for Aroma Touch was duly held on February 24,2000, in the City Council Chambers. It lasted from 9:00 a.m. until approximately 10:30 a.m., and was recorded by audio and video tape. Aroma Touch was represented by its attorney Mr. Kirchick. Aroma Touch's owner, Mr. Nguyen, was not present at the hearing. The Police Department was represented by Chief of Police, Gregg Giusiana, without an anorney. The hearing was held before the City Administrator, Jay Baksa, who was represented by Assistant City Attorney Jolie Houston. The hearing was held pursuant to the City's Municipal Administrative Hearing Policy, Resolution No. 97-17. SUMMARY OF THE HEARING The following is not intended to be a complete summary of the hearing. The official record is the videotape on file with the City. I. Prior to commencement of the taking of evidence, City Administrator, Jay Baksa, gave a brief introduction of the administrative hearing process the City would be using pursuant to Resolution No. 97-17. The City Administrator noted that the hearing was being recorded by audio and video tape. IJHI473043.2 -1- . . 2. The Assistant City Attorney then briefly described the administrative hearing process pursuant to Resolution No, 97-17. She noted for the record that notices of the hearing had been duly served on Aroma Touch. She noted that the hearing officer for the Administrative Hearing would be the City Administrator, Jay Baksa, and that a formal record of the hearing would be made by audio and video tape, In the event that the decision of Mr. Baksa is appealed to the City Council, the videotape would go to the City Council, or if the applicant wished to have it transcribed and wanted to pay for that transcription, that that could be done, but the official record would be the video tape. She noted that the hearing would not be held pursuant to formal rules of evidence and that there would not be cross-examination at this hearing. If either side had questions that they wished to pose to a witness, they should request that Mr. Baksa pose the questions, which would be at his discretion. She also noted that Mr. Baksa would issue a wrinen decision and that there was an appeal process to the City Council which was set out in Resolution No. 97-17. 3. The City Administrator asked for the Police Department and Aroma Touch to state their appearances for the record. With that, Chief of Police Giusiana stated his appearance for the Gilroy Police Department and stated that he would be calling one witness, Officer James Callahan. Mr. Kirchick, attorney for Aroma Touch, stated his appearance and stated he would not be calling any witnesses. 4. The first witness was Chief Giusiana . Chief Giusiana stated that after a thorough investigation of the business known as Aroma Touch and reviewing the police reports, that he had reasonable cause to believe and did believe that Aroma Touch was in violation of the Gilroy City Code, the California Fire Code and the California Penal Code. Chief Giusiana stated that following a month long investigation, the Gilroy Police executed a search warrant on 193 Welburn Avenue, Suite A, Gilroy, California. The results of the search warrant resulted in the arrest of Hong Thi Nguyen on a charge of California Penal Code Section 647(b) (Solicitation of an Act of Prostitution) and the investigation also revealed business records and other compelling evidence indicating violations of California Penal Code Sections 266(H) (pimping), 266(1) (Pandering) and 316 (Keeping a House of Prostitution). Upon execution of the search warrant, it was also discovered that the only exit door to the business was locked during normal business hours in violation of California Fire Code Section 1207.3. Based on his review of the police reports in the matter, it was ChiefGiusiana's opinion that Aroma Touch was operating as an adult business pursuant to Gilroy Code Section 2A.1(a)(11) (Operating as an Adult Business). Therefore, it was a business in violation of Gilroy City Code Section 2A.2 (Operation of an Adult Business without a Permit). Furthermore, Aroma Touch had conducted business to be detrimental to the public morals and the public welfare pursuant to the provisions set forth in Gilroy City Code Section 13.45. 5. Chief Giusiana then introduced Exhibit "A" into evidence. Exhibit "A" consisted of the Superior Court of California, Santa Clara County Judicial District, San Martin Facility, Search Warrant regarding Aroma Touch, Declaration of James Callahan in Support ofthe Search Warrant, a one page print-out of a website with a description of Aroma Touch, Police Report, Case No. 99-006585 (13 pages) dated November 2, 1999, a two-page lenerto Gregory Giusiana from Deputy District Attorney Frank Carrubba and a two-page supplemental Police Report, Case No. 99-006585, dated December 29, 1999 and February 9,2000. \JI-I\473043.2 -2- . . 6. Chief Giusiana called as a witness Officer James Callahan, who is a police officer with the City of Gilroy. Officer Callahan stated that he was assigned to the investigation of Aroma Touch. Officer Callahan testified that he was familiar with Exhibit "A" and it contained the official police department documents that describe the violations at Aroma Touch and these documents were duly authorized documents and kept in the ordinary course of business. 7. Chief Giusiana then asked Officer Callahan to testify in a narrative form regarding his involvement with the investigation of Aroma Touch. 8. Officer Callahan stated that a confidential informant ("cr') who had previously been used by the Gilroy Police Department on other occasions (and was deemed reliable) had contacted the Police Department regarding Aroma Touch. The CI had gone to Aroma Touch for a massage and had been propositioned for sex which was completed. This CI went back to Aroma Touch on two other occasions and again sex was offered for money. The CI stated specific facts that were consistent with an illegal business such as prostitution. The CI noted that the front door was locked and he had to ring a bell to gain entry. 9. Officer Callahan testified that further evidence of the illegal business of prostitution was the website giving a description of the actions at Aroma Touch. 10. Based on this information, the Police Department performed surveillance of Aroma Touch, From Aroma Touch's rental agreement, the City's business license and the surveillance, the Police Department determined that there were two employees who were consistently at Aroma Touch. The Police Department also confirmed that one of them had a prior conviction for prostitution. With the information gathered from the surveillance, the Police Department submitted the information to Deputy District Attorney Frank Carrubba, who prepared a search warrant that was ultimately issued by Superior Court Judge Lee. 11. After the Police Department obtained the search warrant, an undercover agent with a body wire went into Aroma Touch for a massage. During the undercover agent's visit at Aroma Touch, the officer listening to him (Officer Callahan) heard an employee of Aroma Touch solicit sex and negotiate the dollar amount with the undercover agent. Upon solicitation of sex with the dollar amount, and upon the overt act by the employee, the police entered the building with the search warr~t. Officer Callahan testified that when one of the employees saw the police. she tried to prevent their entry. The Police executed the search warrant and seized busineSIi rQCords and cllsn. Upon interviewing the three clients who were found inside, one admitted that he was there for sex and the word on the street was that you could go to Aroma Touch for sex. Additipnally, the money given to the Aroma Touch employee by the undercover agent was marked and was r~overeQ qpring the search of the premises. 12, Officer Callahan testified tqat the credit card transactions also provided evidence of charges for massag~s with a second payment for the various sexual acts. The Police Department obtained an additional search warrant regarding the credit card transactions which provided them with information regarding the "double transaction" which is consistent with paying for massage and sex. The Aroma Touch employee told the undercover agent which specific sex acts were offered with their corresponding dollar amount. One of the clients who IJHI473043.2 -1- . . purchased services through a credit card gave the police a statement that confirmed that he paid for massage and was offered and accepted sex for an additional amount of money. 13. The initial CI returned to Aroma Touch on December 28, 1999, after the execution of the search warrant and was again offered sex for money. 14. Chief Giusiana asked several clarifying questions to Officer Callahan. Officer Callahan stated that the credit card receipts were to the business Aroma Touch only. The search warrant was executed during normal business hours, which would be in the evening hours for this massage business. The cash seized was approximately $7,800 and it was seized from the premises. With regard to the customers, one confirmed that he had been solicited for sex and had intended to have sex but it had not happened. The website report was another confirmation of solicitation and sex at Aroma Touch. Overall, five independent witnesses provided statements and confirmed that solicitation for sex for money was occurring at Aroma Touch. 15. The next witness was the anorney for Aroma Touch, who testified on behalf of Aroma Touch. Mr. Kirchick testified that three of the four reasons the revocation of the License were invalid. He stated that the violations of operating as an adult business pursuant to the Gilroy City Code 9 2A.l(a)(11), violation of the Gilroy City Code 9 2A.2, (Operation of an Adult Business Without a Permit), and public nuisance, were invalid and violated the state law. 16. Mr. Kirchick stated that it was his position that it would be more proper to have this hearing after the criminal investigation for the prostitution was completed before taking any action for revocation of the License. He stated that until proven guilty "beyond a reasonable doubt," that the City should not take action to revoke the License. He stated that due process required and it would be easier to find a public nuisance with a conviction. 17. Mr. Kirchick further stated that the CI information was testimony hearsay. The web site was essentially "creative writing" and not credible evidence. With regard to the 15 out of the 27 credit card receipts, he stated that the police had a conversation with one person, so the evidence provided by the credit cards did not establish that it was for a longer massage or it was for sex. He stated that even for hearsay to be admitted, it needed to be reliable, and the evidence provided here was not reliable. He again stated that the City should wait until the criminal proceeding was over, then they would have substantial evidence for this administrative hearing. 18. Mr. Kirchick stated that the pimping and pandering charges were still under review by the District Attorney's Office and it was not known if they would be filing charges. 19. At this tilI)e, the anorney for Aroma Touch admitted into evidence as Exhibit "B," consisting of seven papers with regard to Aroma Touch's business. The first document was the employee contract signed by Hong Nguyen. It was a document Aroma Touch had its employees sign stating that they would not take drugs, perform sex or take part in any other unethical behavior. The second document was signed by the customers of Aroma Touch, stating that Aroma Touch was a professional establishment and the customers should not solicit sex. The third document was a copy ofthe Rules of Conduct which were placed in the open areas for viewing by the customers. (One of the rules was not to ask the massage therapists for sex.) The fourth set of documents were management documents. Documents 5, 6 and 7 were massage IJH\473043.2 -4- . . certificates for the massage therapists, evidence that the Aroma Touch owner believed that they were valid massage therapists. 20. Mr. Kirchick testified that the $1,000.00 was actually a balance in a bank account and there was no evidence where the deposits came from, or if it were business or personal deposits. 21. At this time a ten-minute break was taken. At 9:55 A.M., the hearing resumed At the break, the Police Department had an opportunity to review Exhibit "B", 22. Police Chief Giusiana recalled Officer Callahan. Chief Giusiana asked Officer Callahan if he had had an opportunity to review Exhibit "B," and he stated that he had, Officer Callahan said that he was the person who monitored the undercover agent by wire and that the undercover agent was not given a contract to sign. Officer Callahan also stated that with regard to Exhibit "B," document 2, the document signed by customers regarding Aroma Touch being a professional establishment, the dates and signatures were from January 3 and January 6, 2000, and were not during the relevant time period. (They were signed after the search warrant.) Officer Callahan stated that he had seen the Rules of Conduct posted in Aroma Touch on a wall in view of the customers. He reiterated that the CI was a reliable informant who confirmed that sex was solicited and performed at Aroma Touch. He stated that the undercover agent was a police officer and was reliable and he was also solicited for sex. Officer Callahan stated that he had also heard the solicitation. Additionally, there was one customer who told the police that he was at Aroma Touch for sex. 23. Officer Callahan testified that the 15 credit card transactions were the "double transactions" that fit the pattern for massage with sexual activity and that there was one petson from these credit card transactions who also confirmed with the Police Department the solicitation for sex and the credit card "double transaction" panern. 24. Officer Callahan clarified that the money that the police officers seized during the execution of the search warrant was not in a cash drawer but in file cabinets, purses and cars, and it was not from a bank account. 25. With regard to the delay in the District Attorney's Office filing charges, it was due to the delay in obtaining Aroma Touch's business records from the bank. However, it was the Deputy District Attorney Carrubba's opinion that, after speaking with the District Attorney's Office, they intended to file charges on Aroma Touch for the prostitution, pimping and pandering. 26. Mr. Kirchick rebutted, stating that the $5,700 seized from the BMW, it was unclear who the registered owner of the BMW was. The Police Department confirmed that the BMW was registered to Hong Nguyen, the subject of the prostitution charges. 27. Chief Giusiana stated that the evidence presented clearly establishes that illegal acts were occurring at the premises and in violation of Gilroy City Code ~ 13,45. The business records establish that solicitation and sexual acts were part of Aroma Touch's business enterprise. The business owner is responsible for his employees regardless ifthey sign contracts \JH\4730432 -'i- . . or not. Five independent witnesses described the illegal conduct and the sexual activities, on separate occasions, is evidence that Aroma Touch conducted an illegal business. 28. The undercover agent was a police officer who was solicited was a reliable witness. The CI was a reliable informant. He described and confirmed that it was a continuing business practice for Aroma Touch. An independent customer verified that the illegal conduct was occurring at Aroma Touch. The credit card user also confirmed the same illegal conduct at Aroma Touch. Additionally, the act of trying to keep the police out during the search warrant execution was evidence that they were trying to "hide something." Additionally, the statement to the undercover agent that "the next time you don't have to pay for a massage but can just have sex" establishes an ongoing and continuing illegal activity. 29. Fifteen of the 27 credit card charges establish a pattern of "double transactions" with amounts that match the rates for sex as provided by the Aroma Touch employee to the undercover agent. 30. The report by the CI that the illegal activity at Aroma Touch was ongoing even after the search warrant was executed. 31. The evidence clearly establishes that Aroma Touch was operating an adult business without a permit, and that based on the police reports and investigation, the Police Chief has reasonable cause to believe that Aroma Touch was operating its business so as to be detrimental to the public welfare and morals. 32. Mr. Kirchick stated that before the City can declare Aroma Touch a public nuisance, it would be appropriate to have the conviction of the underlying criminal offenses as charged. 33. Mr. Kirchick concluded by stating that the Gilroy City Code was not valid regarding adult businesses. The revocation is based solely on hearsay, and that the CI and the undercover agent participated in the criminal acts, therefore they were not reliable. 34. At the conclusion of the Police Department's and Aroma Touch's testimony, Mr. Baksa stated that per Resolution 97-17, he had 30 days from the date of the hearing to make his findings and reminded Aroma Touch that there was an appeal process. Mr. Baksa also stated that Aroma Touch would be able to continue to operate until a final determination was made by the City. With these comments, he closed the administrative hearing. FINDINGS OF FACT The City Administrator, having heard the oral testimony and argument, and having received into evidence documentary Exhibits "A" and "B," now makes the following findings, all of which are supported by substantial evidence in the record: 1. The Police Department's evidence of illegal sexual solicitation and sexual acts at Aroma Touch was corroborated by five independent witnesses. The five independent witnesses who corroborated the illegal actions at Aroma Touch were the confidential informant, the undercover agent, the officer listening to the undercover agent, the one witness confirmed by the IJHI473043.2 -6- . . credit card transaction and the one witness inside Aroma Touch, who confirmed that he was there for sex. Mr. Kirchick argued that the CI and the undercover agent were not reliable and that the evidence was hearsay. However, the Police Department rebuned this argument by confirming that the CI and the agent were reliable, and additionally, hearsay testimony is admissible in this administrative hearing. The Police Department's evidence of illegal conduct at Aroma Touch was unrebutted. 2. The business records obtained by the search warrant establish a pattern of double charges that is consistent with massage, sexual solicitation and sexual services, Specifically, the 15 credit card transactions show the "double transaction" pattern which is evidence of the massage and sexual conduct that the CI, undercover agent, and the credit card user confirmed. This testimony was challenged by Mr. Kirchick as hearsay and not reliable. However, the Police Department rebuned this argument by providing evidence that this panern of conduct was corroborated by independent witnesses. 3. The business owner is responsible for the acts of his employees. Mr. Kirchik submitted documents regarding Aroma Touch's business such as Rules of Conduct, massage therapist certificates and contracts signed by customers to establish that it was a professional business. The Police Department offered evidence that although the Rules of Conduct were posted, the undercover agent was not given a contract to sign and that the customer contracts provided were not for the relevant time period. Although evidence was offered to establish that the business owner had made anempts to conduct its business in a professional manner, the licensee cannot delegate its responsibility to operate a lawful business. The Gilroy City Code holds that the responsibility remains with the licensee (business owner) or the person employed by the licensee to conduct its business so as not to be detrimental to the public morals or public welfare. 4. The administrative hearing was for the revocation of a business license pursuant to Gilroy City Code 9 13.45. Mr. Kirchick questioned the validity ofthe City Code Chapter 2A. and the Police Department presented testimony regarding Gilroy City Code Chapter 2A, however, the City was not proceeding pursuant to Gilroy City Code Chapter 2A. Therefore, the evidence of the alleged infirmities of Gilroy City Code 2A were not at issue and not relevant. DECISION Having heard the oral evidence and argument and having reviewed the documentary evidence, it is the City Administrator's decision that the above referenced License be revoked. The number of illegal acts corroborated by five independent witnesses and the nature of the incidents at Aroma Touch establish that it conducted business to be detrimental to the public morals and the public welfare and in violation of Gilroy City Code Section 13.45. Mr. Nguyen is responsible for the actions of his employees and must be held accountable for them. The consistent pattern of the repeated violations of the Penal Code constitute violations of the Gilroy City Code 13.45, and that they constitute repeated panerns of illegal conduct which is detrimental to the public morals and public welfare. Accordingly, the decision of the City Administrator is to revoke the License. \JH\4730432 -7- . . Pursuant to Section VI ofthe Administrative Hearing Policy (Resolution No. 97-17), the owner of Aroma Touch has 15 days from the mailing of this decision within which to appeal the decision to the City Council. If no appeal is filed with the city clerk within that period of time, then this decision shall be final on the expiration of the 15th day following the date of such mailing, and Aroma Touch shall immediately be closed. Ifa timel eal is filed, then this decision shall not be final until action is taken by the City ncil. Dated 3 -/5 -00 ~! rator ~ \JH\473043.2 -R- . - . . . I, RHONDA PELLIN, City Clerk of the City of Gilroy, do hereby certifY that the attached Resolution No. 2000-24 is an original resolution, duly adopted by the Council of the City of Gilroy at a special meeting of said Council held on the 1st day of May, 2000, at which meeting a quorum was present. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Official Seal of the City of Gilroy this 4th day of May, 2000. ~. ) .// //j ... (f;~ 'L/JUJ!^- ~,-' City Clerk of the City of Gilroy (Seal)