CITY OF ROCHESTER City Council Agenda Council/Board Chambers 151 4th Street SE. Recessed Meeting October 30, :00 PM

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1 CITY OF ROCHESTER City Council Agenda Council/Board Chambers 151 4th Street SE Recessed Meeting October 30, :00 PM PLEDGE OF ALLEGIANCE A. OPEN COMMENT PERIOD. (The Open Comment Period was considered at the regularly scheduled October 16, 2017, Council Meeting) B. CALL TO ORDER C. LETTERS AND PETITIONS D. CONSENT AGENDA/ORGANIZATIONAL BUSINESS E. REPORTS AND RECOMMENDATIONS F. HEARINGS F.1. F.2. F.3. Considering Sanctions against the Massage Therapy Business License of Harmony Asian Massage Massage Therapy Business License Hearing on the application of Tuina Massage LLC DBA Lan's Spa Massage Therapy Business License Hearing on the application of Healthy Way LLC DBA Oriental Massage Rochester G. COUNCIL-INITIATED ACTIONS H. RESOLUTIONS AND ORDINANCES I. TABLED ITEMS J. OTHER BUSINESS K. ADJOURN

2 REQUEST FOR COUNCIL ACTION MEETING DATE: 10/30/2017 F.1 AGENDA SECTION: Hearings ORIGINATING DEPT: City Clerk ITEM DESCRIPTION: Considering Sanctions against the Massage Therapy Business License of Harmony Asian Massage PREPARED BY: Anissa Hollingshead On October 9, 2017, as the result of an undercover operation, there was an arrest for prostitution at the business Harmony Asian Massage, located at 915 Broadway Ave N. The individual arrested, Yuxiu Zhang, was working at the time without a valid massage therapist license from the City of Rochester. On October 16, 2017, the City Council set a public hearing to be held on October 30, 2017, to consider possible license sanctions against the Massage Therapy Business License held by Harmony Asian Massage at 915 Broadway Ave N, as well as to consider the pending massage therapist license application of Yuxiu Zhang. The known owner of Harmony Asian Massage, Xinqin Liu, was notified of the public hearing by certified mail and , and Liu signed for delivery of the certified letter relating to the business license on Oct. 20. Yuxiu Zhang was notified by certified mail at the address on her application, an apartment located at the business. No address is known for Zhang. To date, no one has signed for the letter sent to Zhang. Notice of the hearing was also published in the Rochester Post Bulletin. The business license for Harmony Asian Massage - like all massage therapy business licenses - expires on Dec. 31, 2017, and license renewals are due by Dec. 1 under R.C.O. 115A. Attached is a memorandum from the City Clerk outlining the license issues involved. The police report for the arrest is being provided to the Council under separate cover. If Xinqin Liu or any other representatives of Harmony Asian Massage provide any information or documentation in advance of the hearing, it will be provided to the Council when received. An officer from the Rochester Police Department will also be present at the hearing in order to answer any questions from the Council. COUNCIL ACTION REQUESTED: Actions the Council may take relating to the Massage Therapy Business License for Harmony Asian Massage include: 1. Revoking the Business License. 2. Suspending the Business License for a period of its determination, with or without conditions upon any reinstatement following license renewal, and directing that any renewal only occur after the business submits a full and complete application with all documents required by R.C.O. 115A. 3. Placing conditions on the Business License, to be included in its renewal for 2018 as well, and directing the applicant to provide a full and complete application as part of the renewal process. 4. Taking no action against the Business License at this time. Actions the Council may take relating to the application for a Massage Therapist License by Yuxiu Zhang include: 1. Denying the license application based on violations of R.C.O. 115A. 2. Taking no action on the license application at this time. Packet Pg. 2

3 ROCHESTER Minnesota Office of the City Clerk F.1.a To: From: Rochester City Council Anissa Hollingshead, City Clerk Date: October 25, 2017 Subject: Recommendation to deny application for Massage Therapy Business license by Harmony Asian Massage Harmony Asian Massage Business License Xin Qin Liu notified the Office of the City Clerk on Nov. 11, 2016, she had purchased the massage therapy business located at 915 Broadway Ave N., previously known as Romantic Asian Massage and then Therapeutic Asian Massage, and that the name of the business was changed to Harmony Asian Massage. The existing license was changed to reflect the new name and ownership, but there was no application documentation received and the changes were not brought to the City Council for approval. The annual business license was renewed for 2017, and was issued on Feb. 8, 2017 through Dec. 31, Basis for Considering License Sanctions against Harmony Asian Massage On October 9, 2017, the Rochester Police Department conducted an undercover operation at Harmony Asian Massage. This operation followed an earlier report by an individual identified as the sister of Xin Qin Liu about abuse that included an allegation Xin Qin Liu was providing sexual acts in exchange for money during massages. During the undercover operation on Oct. 9, Yu Xin Zhang provided massage services to an undercover officer. Zhang did not have a massage therapist license from the City of Rochester at the time. As the result of conduct occurring during the massage, the undercover team arrested Zhang for engaging in prostitution in a public place. Harmony Asian Massage appears to have violated the following provisions of Rochester Code of Ordinances Chapter 115A relating to massage therapy: Operating requirements Section 115A.10 relating to restrictions and regulations on a license, requires in subd. 1 that a Massage Therapy Business licensee may only employ a Massage Therapist licensed under this chapter to perform Massage Therapy. Yu Xin Zhang was not licensed, and by her account had been working in the business for approximately one month at the time of the arrest. Section 115A.10 subd. 10 states the Licensee, its agents and employees must comply with all applicable ordinances, regulations and statutes. Section 115A.10 subd. 12 requires the Licensee to designate a person to be manager and responsible for the conduct and operation of the licensee s business establishment, and that Packet Pg. 3

4 F.1.a such person remains responsible for the conduct of the business until another suitable person has been designated in writing by the licensee. No one was designated as the manager, other than the indication that Xin Qin Liu was now the business owner. Prohibited conduct Section 115A.10 subd. 6 states that a Massage Therapist may not touch or offer to touch, or provide Massage Therapy to specifically identified areas of the body of any customer or person inquiring of Massage Therapy. The Police Report from Oct. 9 indicates a violation of this provision. Section 115A.10 subd. 4 requires that the person receiving Massage Therapy shall at all times have specifically identified areas of the body covered with clothing or properly draped with nontransparent material. The Police Report from Oct. 9 indicates a violation of this provision. Section 115A.10 subd. 3 states that the act of any employee of the Licensee is deemed to be the act of the Licensee. The Licensee shall be responsible for all acts and conduct attributable to and in connection with Massage Therapy Services provided by the Licensee or occurring on the Licensed Premises. The conduct violations indicated in the Police Report are the responsibility of the business, as well as the individual involved. Obtaining appropriate business licensure Section 115A.06, relating to massage therapy business license applications, requires the filing of an application containing specific minimum information about the business and its owners in order to obtain a license to operate a massage therapy business, as well as the payment of all required fees. Xin Qin Liu did not submit a license application or any documentation as required in this section when taking over operations at 915 Broadway Ave N, and opening it as a new massage business. Section 115A.10 subd. 14 states no license issued under this chapter may be transferred, and that a Massage Business Therapy license terminates upon any change in the Licensee s officers or ownership interests unless the change is approved by the Common Council. Xin Qin Liu purchased the business location, but did not continue the existing business operations of the previous owner. This section of the ordinance clearly indicates a license cannot be transferred to a different business. Although Liu should have been advised by the City Clerk s Office in Nov. of 2016 a new business application was required, as a business owner and operator, she is also obligated to be aware of and in compliance with all City ordinances and state laws governing her business. Potential findings and actions on Harmony Asian Massage Section 115A.11, subd. 1 indicates that any license issued by the City pursuant to the provisions of this chapter may be suspended, revoked or placed on probation or, in connection with the application or renewal of a license, denied upon a finding that the Licensee: A. Failed to comply with any applicable state law, city ordinance or building, safety or health regulation relating to a Massage Therapist or Massage Therapy Business; Packet Pg. 4

5 F.1.a B. Employed or contracted with a person to perform Massage Therapy who is required to be licensed by this chapter, but who was not so licensed at the time of employment or contract; C. Violated any provision of this chapter; D. Failed to comply with any condition set forth in the license, set forth in a council action regarding the license, or set forth as part of the placement of the license on probation; E. Allowed the licensed business to be operated or maintained in a way that unreasonably annoyed, endangered or injured the safety, health, morals, comfort or repose of any considerable number of members of the public; or F. Provided false or misleading information on the application. Section 115A.11, subd. 4 states that upon a finding that the Licensee has violated any such statute or ordinance, the council may: A. Suspend the license for up to 60 days; B. Revoke the license; or C. Place the license on probation for a stated time period. The Council may impose conditions upon the license during the time of probation. Yu Xiu Zhang License Application On Sept. 20, 2017, Yu Xiu Zhang came into the Office of the City Clerk to request and complete a license application for an individual massage therapist license. She was accompanied by a man who identified himself as the husband of the owner of Harmony Asian Massage. He assisted Zhang in completing the application, and asked several questions on her behalf about how to complete the application. The City Clerk worked directly with Zhang and the man with her to ensure the application was complete, including highlighting sections of the application originally left blank and indicated a local home address was required. The man indicated there is an apartment at the same location of the business, and that was where Zhang was residing. When all the documents were submitted, the City Clerk clearly indicated to the applicant and the man with her that the license would not be issued until after it was reviewed by the Police Department and approved by the City Council, and that Zhang was not authorized to work as a massage therapist until a license was issued. Basis for Considering Action on the License Application Yu Xiu Zhang was working in the business at 915 Broadway Ave N on Oct. 9, 2017, when members of the Rochester Police Criminal Interdiction Unit conducted a sex trafficking sting there. This was 19 calendar days after her application had been submitted, and before it had been approved by the City Council. According to her responses documented in the Police Report, she had been working in the business for about one month, indicating she was likely working in the business from the time she submitted her application, perhaps even before. Obtaining appropriate licensure Section 115A.07, relating to massage therapist license applications, requires the filing of an application containing specific minimum information about the applicant, that the police Packet Pg. 5

6 F.1.a department conduct a background check before consideration by the City Council, and that all applications shall be considered and either granted or denied by the City Council. Section 115A.07 subd. 13 requires a massage therapist licensee to have the City-issued license in his or her possession while providing massage therapy. Zhang had not yet been issued a license and clearly did not have one in her possession. The license application completed by Zhang includes the following admonition immediately above Zhang s notarized signature: Prohibited conduct Section 115A.10 subd. 6 states that a Massage Therapist may not touch or offer to touch, or provide Massage Therapy to specifically identified areas of the body of any customer or person inquiring of Massage Therapy. The Police Report from Oct. 9 indicates a violation of this provision. Section 115A.10 subd. 4 requires that the person receiving Massage Therapy shall at all times have specifically identified areas of the body covered with clothing or properly draped with nontransparent material. The Police Report from Oct. 9 indicates a violation of this provision. Potential findings and actions on Yu Xiu Zhang s license application R.C.O. 115A.11 subd. 5 calls for the immediate temporary suspension of a licensee s license if a criminal complaint is filed against the Licensee alleging a violation of Minnesota Statutes sections , , , or In this instance, no license was ever granted so regardless of any pending criminal complaints, a temporary suspension is not possible. If the Council finds Yu Xiu Zhang has violated the provisions of R.C.O. 115A outlined above, those violations may form the basis of grounds to deny the license application. Packet Pg. 6

7 REQUEST FOR COUNCIL ACTION MEETING DATE: 10/30/2017 F.2 AGENDA SECTION: Hearings ORIGINATING DEPT: City Clerk ITEM DESCRIPTION: Massage Therapy Business License Hearing on the application of Tuina Massage LLC DBA Lan's Spa PREPARED BY: Anissa Hollingshead On July 5, 2017, the City Council took action to revoke the Massage Therapy Business License held by Tuina Massage at 308 Elton Hills Drive NW. The owner of record of Tuina Massage had been Ling Donnay. During the course of the revocation proceedings, it became known the business was co-owned by Julia Wang. On August 25, 2017, Yi Lan Wang came into the City Clerk's Office to apply for a massage therapy business license to operate a business at 308 Elton Hills Drive NW known as Tuina Massage LLC DBA Lan's Spa. With the help of a friend accompanying her to submit the application, she stated she had nothing to do with the prior owners of the business and the 'trouble' there. However both the business license application and Yi Lan Wang's massage therapist license application submitted in late July listed her home address as a property owned by Gary Donnay, husband of Ling Donnay. Yi Lan Wang was notified of the public hearing by certified mail at her listed home address and by . Gary Donnay signed for delivery of the certified letter. Notice of the hearing was also published in the Rochester Post Bulletin. Attached is a memo prepared by the City Clerk outlining in detail the areas of concern leading to recommending the Council consider the denial of the license. With the information known at this time, the license cannot be presented with a recommendation to approve it. As part of the public hearing process, there is an opportunity for the applicant to address some of the concerns that have surfaced, and to provide additional information so that Council is able to make a determination as to whether it approves or denies the license application at this time. If any representatives of Tuina Massage, LLC DBA Lan's Spa provide any information or documentation in advance of the hearing, it will be provided to the Council when received. An officer from the Rochester Police Department will also be present at the hearing in order to answer any questions from the Council regarding their investigation of the application and the prior history at the business location. COUNCIL ACTION REQUESTED: Actions the Council may take relating to the Massage Therapy Business License Application for Tuina Massage LLC DBA Lan's Spa include: 1. Denying the Business License; 2. Approving a probationary Business License, with or without any conditions; or 3. Approving the Business License with or without any conditions. Packet Pg. 7

8 ROCHESTER Minnesota Office of the City Clerk F.2.a To: From: Rochester City Council Anissa Hollingshead, City Clerk Date: October 30, 2017 Subject: Recommendation to deny application for Massage Therapy Business license by Tuina Massage LLC DBA Lan s Spa Tuina Massage LLC DBA Lan s Spa Application On August 25, 2017, an application was submitted for a massage therapy business license to be held by Tuina Massage LLC DBA Lan s Spa at 308 Elton Hills Dr NW. Yi Lan Wang submitted the application on her own behalf, and presented herself as the sole member/owner of Tuina Massage LLC. Summary of Denial Recommendation After working with Ms. Wang over a period of weeks to obtain a complete application as required under RCO 115A, and submitting the application for the review of the Rochester Police Department, it is my recommendation at this time that the request for a business license be denied. The reasons for the denial recommendation include: The previous business at this location, Tuina Massage, had its license revoked by the City Council on July 5, 2017, following a prostitution arrest. A number of circumstances lead to concern there are strong ties between the former operators of Tuina Massage and Yi Lan Wang, and that therefore her application may be an attempt to continue/restart the same business interests the Council took action to revoke without addressing the concerns that led to the revocation. o While Yi Lan Wang indicates there is no association between herself and the prior owners of Tuina Massage, she lists her home address as a property owned by Gary Donnay, the husband of an owner of Tuina Massage. That home address is also used by multiple other therapists working in businesses owned by Ling Donnay. o When Ms. Wang first came into the City Clerk s Office to apply for an individual massage therapy license, she was with Ling and Gary Donnay. o Ms. Wang has indicated she alone will be working in the business, but applied for a massage license from the City of Plymouth in September of o Tuina Massage has an active website that has continued to be updated, and still accepts phone calls at the business number which is used interchangeably with Oriental Massage in advertising on Craigslist and Backpage.com. It appears this marketing is being maintained in the expectation business can be resumed at some point, despite the license revocation. 1 P age Packet Pg. 8

9 F.2.a o Follow up s to inquire about the status of her application have been signed primarily as Yi Lan Wang however one from the same address was signed Thank you, Julia as were s previously received from Julia Wang, the prior partner/co-owner of Tuina Massage with Ling Donnay. Detail of Denial Recommendation History of Tuina Massage at 308 Elton Hills Drive NW Tuina Massage is located at 308 Elton Hills Drive NW, and previously operated in the City of Rochester until the Council revoked the prior business license on July 5, That license had been applied for and issued in late 2016 after Ling Donnay submitted a business application. The application Ms. Donnay submitted indicated the business was a partnership, but the application did not contain any information about the other partner involved nor was any of the partnership paperwork required under RCO 115A submitted. Despite these application deficiencies, a license was issued on November 3, 2016, to Oriental Massage at 308 Elton Hills Drive NW. Upon notification by Ling Donnay the business was instead operating as Tuina Massage, the license was reissued on December 13, 2016, in that name with an expiration date of December 31, On March 27, 2017, there was an undercover operation and subsequent prostitution arrest at Tuina Massage at 308 Elton Hills Dr NW. Ling Donnay was not present at the time of the arrest, but was called to come in as the manager by the individual who was working and arrested. The Rochester Police Department notified the City Clerk s Office of the arrest on April 10. At its May 1 meeting, the City Council set a public hearing for June 5 to consider sanctions against the business license. At the request of Ms. Donnay s husband on her behalf as she was out of the country at the time, and the request of her business partner Julia Wang who contacted the office after the first hearing notice was sent, the hearing was continued until July 5, 2017, when the Council voted unanimously to revoke the business license. There are a number of pieces of information which lead to the conclusion Ms. Wang may be intending to reopen the business at 308 Elton Hills Drive and operate it as a continuation of sorts of the prior business. Connections to Ling and Gary Donnay and Julia Wang There are several connections between Ms. Wang and the prior owners of Tuina Massage. Ms. Wang first came into the City Clerk s office on July 28, 2017 to apply for an individual massage therapist license, and came into the office at the same time as Ling Donnay and her husband Gary Donnay were in the office submitting papers relating to one of Ms. Donnay s businesses. The address Ms. Wang provided as her home address (39 Park Drive NW in Eyota) on both the business license application and her own application for an individual massage therapist license is a single family property owned by Gary Donnay, the husband of Ling Donnay. Although he is not listed on any application or business record as playing any role in a massage therapy business, Gary Donnay began calling the City Clerk s Office in late May of 2017 after the hearing notice was sent regarding considering sanctions against Tuina Massage. He continued calling the office over a period of several weeks to inquire about the hearing, what the action taken by the Council on July 5 meant, the status of his wife s other business license, and whether other applications for individual massage therapist licenses for therapists who would be working in one of his wife s businesses had been granted. 2 P age Packet Pg. 9

10 F.2.a Two individuals applied in May and listed the business address for Tuina Massage as their home address, stating they were staying at the business. One of them, Xiuxia Pan, did not provide a subsequent address, as she was cited in May for working without a license at Tuina Massage, and the completion of a police background check revealed a pending prostitution arrest in Plymouth, Minnesota, leading to the withdrawal of her application. The other applicant was Lian Wang. When she was told the business location did not permit residential use, she changed her address to 39 Park Drive NW. The license that was issued to Lian Wang was mailed to that address, and Mr. Donnay called when he did not receive it. He stated to the City Clerk that although mail is not delivered to that property, the post office in Eyota knows that s his house and puts the mail with that address in his PO Box. Yi Lan Wang s individual massage therapy license was issued on October 3, and was also sent to the Park Drive address in Eyota. The home at 39 Park Drive NW is listed in Olmsted County property tax records as a single family residence, with Mr. Donnay as the sole owner since It is not homesteaded. Mr. Donnay is also listed as the owner of a single family home at th St Ln NW in Rochester. That property is homesteaded. That is the address Ling Donnay has provided on her individual massage therapist application, as well as her business application for Tuina Massage. That address is also listed as the home address for two other individuals with active massage therapy licenses in the City of Rochester, Qingan Liu and Xue Dong. When Ms. Wang came into the City Clerk s Office on August 25, 2017 to complete the massage therapy business license application, she came in with a friend who was helping interpret for her, as her English is not very strong. She stated had nothing to do with the prior owners, and was not associated with the trouble at the business previously. However, as previously noted, her business license application listed 39 Park Drive NW as her home address. When submitting the application, Ms. Wang was told she needed to supply a copy of the lease for the location, as well as the business organization paperwork. She subsequently provided a membership conveyance agreement for the sale of Tuina Massage, LLC, from Julia Wang as the sole member to Yi Lan Wang, signed and dated Aug. 25, That membership conveyance indicated the buyer would be liable to landlord for the Tuina Massage LLC s rental obligation under the existing lease, of which she also provided a copy. The strip mall lease was dated Oct. 13, 2016, and is between C&R Elton Hills, LLC, as the landlord and Tuina Massage, LLC, as the tenant, signed by Ling Donnay and Julia Wang as the tenants to run through November 30, After submitting her business application, someone stating she was Yi Lan Wang began calling and ing the City Clerk s Office regularly to inquire about the status of the business license. When Ms. Wang has been present at the Clerk s Office in person, she is unable to communicate in English without the direct and continuous assistance of someone else either with her or on the telephone. On the telephone and via , however, communication has been solely in English, and although not perfect, understandable. The final received by the Clerk s Office on Friday, Oct. 13 from the address that had been indicated as being from Yi Lan Wang was signed not by Yi Lan Wang, but as Julia. After previously communicating with Julia Wang in the weeks before and after the revocation of the Tuina Massage license, it seems possible the phone calls and s about the license status were actually coming from Julia Wang, not Yi Lan Wang. This may indicate another strong connection between the prior business operations and the plans for a new business in the location. Continued marketing and connections between Tuina Massage and Oriental Massage 3 P age Packet Pg. 10

11 F.2.a The Tuina Massage location has remained as it existed as of the date of license revocation July 5, The exterior signage indicates both the business name and telephone number. A search of the telephone number online indicates there have been continuing advertisements on both Craigslist and Backpage.com for massage therapy services, using both the Tuina Massage name and address, and that of Oriental Massage at 14 6 th St NW, also operated by Ling Donnay. The website of Tuina Massage has been recently refreshed, and advertises that the business is currently open, using the same telephone number that is listed on the exterior sign. Visual inspections of the business location by police have not turned up evidence of the physical business location being open at this time, however marketing has continued to use the name and contact number. This may being done to funnel business to the Oriental Massage location at this time, but there also seems to be an intentional desire to continue marketing the Tuina Massage name and location. It appears this marketing is being maintained in the expectation business can be resumed at some point, despite the license revocation. License application for Yi Lan Wang in Plymouth The City of Rochester was contacted by the Plymouth Police Department in September to advise Ms. Wang was also applying for a massage therapy license in Plymouth. Ms. Wang indicated when applying in Rochester, she would be operating the 308 Elton Hills Drive location on her own, yet went and applied for a license in another jurisdiction. On her application with the City of Plymouth, Ms. Wang listed 39 Park Dr NW as a prior address, and gave her current address as an apartment on Shelard Parkway. The Police investigator in Plymouth indicated that the apartment listed was notorious as a site used by multiple individuals involved in businesses suspected of trafficking, and in some instances charged in prostitution. 4 P age Packet Pg. 11

12 F.2.a Tuina Massage Website active today (screenshot from ): 5 P age Packet Pg. 12

13 F.2.a Backpage.com ad for Tuina Massage from January of 2017 Backpage.com ad for Oriental Massage in August, 2017 using all the same information as Tuina, including phone number 6 P age Packet Pg. 13

14 F.2.a Dec photo of business from Google streets Current photo of business (captured on Google Streets Feb verified still current on ) 7 P age Packet Pg. 14

15 REQUEST FOR COUNCIL ACTION MEETING DATE: 10/30/2017 F.3 AGENDA SECTION: Hearings ORIGINATING DEPT: City Clerk ITEM DESCRIPTION: Massage Therapy Business License Hearing on the application of Healthy Way LLC DBA Oriental Massage Rochester PREPARED BY: Anissa Hollingshead The license for Oriental Massage was originally applied for on Jan. 20, 2015 by Xiao Li, and was issued on March 3, The license was renewed by Xiao Li on February 3, 2016, and December 14, On March 20, 2017, Ling Donnay came into the City Clerk s office and told staff she was the new owner of Oriental Massage. The only information she provided was a new insurance policy, which staff placed in the file. The account name was changed from Oriental Massage to Oriental Massage - Ling Donnay and the license reprinted with the new name. As part of the investigation into issues at Tuina Massage, also owned by Ling Donnay, following a prostitution arrest, it was looked at to see whether Donnay was involved in other businesses. At that time irregularities were discovered with the license for Oriental Massage. Because staff in the City Clerk s Office provided an updated license to Ms. Donnay in March without completion of an application, contrary to the requirements of City ordinance, a belief that requirements were met may have been perpetuated. However, that license expires Dec. 31, In addition, all business owners and operators have an obligation to know and operate in compliance with City ordinances and state law. Because the reprinted license was improperly issued and Ms. Donnay did not follow the requirements of the City ordinance to obtain the business license, the issuance of a new license to the new business entity is still required and should be enforced at the expiration of the current license period. Attached is a memo prepared by the City Clerk outlining in detail the areas of concern leading to recommending the Council consider the denial of this license. With the information known at this time, the license cannot be presented with a recommendation to approve it. In reviewing the application, the Police Department has also recommended the denial of a new license for the business. As part of the public hearing process, there is an opportunity for the applicant to address some of the concerns that have surfaced, and to provide additional information so that Council is able to make a determination as to whether it approves or denies a new license application for this business starting Jan. 1, Ling Donnay was notified of the public hearing by certified mail at her listed home address and by . Gary Donnay signed for delivery of the certified letter on Oct. 20. Notice of the hearing was also published in the Rochester Post Bulletin. If representatives of Healthy Way, LLC, DBA Oriental Massage Rochester provide any information or documentation in advance of the hearing, it will be provided to the Council when received. An officer from the Rochester Police Department will also be present at the hearing in order to answer any questions from the Council regarding their investigation of the application and the prior history at the business location. COUNCIL ACTION REQUESTED: Actions the Council may take relating to the Massage Therapy Business License Application for Healthy Way, LLC, DBA Oriental Massage Rochester include: 1. Denying the Business License; 2. Approving a probationary Business License, with or without any conditions; or Packet Pg. 15

16 3. Approving the Business License with or without any conditions. F.3 Packet Pg. 16

17 ROCHESTER Minnesota Office of the City Clerk F.3.a To: From: Rochester City Council Anissa Hollingshead, City Clerk Date: October 30, 2017 Subject: Recommendation to deny application for a new Massage Therapy Business license by Healthy Way LLC DBA Oriental Massage Rochester Healthy Way LLC DBA Oriental Massage Rochester license application/renewal Application Ling Donnay, previous owner of Tuina Massage at 308 Elton Hills Dr NW, also operates Oriental Massage at 14 6 th St NW. As part of the process of reviewing the license history at Tuina Massage following an arrest for prostitution at that location and subsequent determination to revoke that license, it was discovered that Ms. Donnay had taken over the operation of Oriental Massage from the prior owner, and was operating it under a new business entity without applying for a new license as required by City Ordinances. Ms. Donnay was notified a new application would be necessary with complete information about the current business operations. For 2018, a new license is needed to the proper entity in order for business operations to continue. Summary of Denial Recommendation It is the recommendation of staff and the Rochester Police Department that the application of Ling Donnay for Healthy Way LLC DBA Oriental Massage for a new massage therapy business license be denied. The reasons for denial include: The revocation on July 5, 2017, of Ms. Donnay s prior business license for Tuina Massage. Ling Donnay has been listed as the only owner and the on-site manager previously for Tuina Massage and for Oriental Massage, and has not fulfilled the full responsibilities of an on-site manager. Ms. Donnay was out of the country for several weeks over May and June, when the City was attempting to schedule a public hearing regarding Tuina Massage s license, and at a time when she had sole responsibility for the operation of both Tuina Massage and Oriental Massage. It is clear others are involved in the operation of these businesses, but that information is not being provided as part of any applications submitted to the City. In her capacity as on-site manager and owner at Tuina Massage, violations of City ordinances and questionable business practices were allowed in that business. Under RCO 115A.10 subd. 12, as the on site manager Ling Donnay was responsible for the conduct at Tuina Massage. o The Findings of Fact adopted by the City Council in revoking the license at Tuina Massage found that: Packet Pg. 17

18 F.3.a o Charges were filed under Minn. Stat , subd. 6, Engaging in Prostitution in a Public Place. The conduct at Tuina Massage violated the restrictions and regulations placed on massage therapy licenses in RCO 115A.10, including specifically subdivisions 4 and 6. Visual evidence was noted by the arresting officer that individuals were living in the business. After the initial prostitution arrest on March 27, another therapist was cited for working in the business without a license on May 17, a violation of RCO 115A.10, subdivision 1. At both Tuina Massage and Oriental Massage it appears all therapists are treated as independent contractors, but according to the testimony of a therapist at the July 5 hearing regarding Tuina Massage s license, they are required to be on site during all open hours, exceeding 9 am until 9 pm every day. Every therapist who has applied for an individual license to work at either Tuina or Oriental Massage has used either the business address for their home address, or an address for one of two properties owned by Gary Donnay, husband of Ling Donnay. Detail of Denial Recommendation License History The license for Oriental Massage was originally applied for on Jan. 20, 2015 by Xiao Li, and was issued on March 3, The license was renewed by Xiao Li on February 3, 2016, and December 14, On March 20, 2017, Ling Donnay came into the City Clerk s office and told staff she was the new owner of Oriental Massage. The only information she provided was a new insurance policy, which staff placed in the file. In the Progressive licensing system, the transaction history shows the license was last issued 12/14/2016. In the account notes, however, it can be seen that on March 20, staff changed the account name from Oriental Massage to Oriental Massage Ling Donnay and reprinted the license with the new name. A search on the Secretary of State s website reveals Oriental Massage LLC the entity to whom this license was issued - was originally formed on 11/26/2014, but was terminated on April 5, RCO 115A.10 stipulates it is not possible to transfer a massage therapy license between entities. 115A.10. Restrictions and Regulations. Subd. 14. No license issued under this chapter may be transferred. A Massage Business Therapy license shall terminate upon any change in the Licensee s officers or ownership interests unless the change is approved by the Common Council in which case the license shall continue in force until the end of the license term. The issues involved with this license were first uncovered during the time action was being taken against the Tuina Massage license. A letter was sent to Ling Donnay on June 26, 2017 advising the license that had been issued to Oriental Massage LLC was no longer valid since the company was no longer in existence, and both the business entity and the ownership involved in operating the business location Packet Pg. 18

19 F.3.a had changed, and that she therefore needed to complete a new application to have a new license issued. Ms. Donnay submitted a new application, however it was very incomplete and lacked much of the information and supplemental documents required on the application itself and in the ordinance. Staff worked with Ms. Donnay and her husband Gary over a period of several weeks to obtain a complete application. Recommendation Because staff in the City Clerk s Office provided an updated license to Ms. Donnay in March without completion of an application, contrary to the requirements of City ordinance, a belief that requirements were met may have been perpetuated. However, that license expires Dec. 31, In addition, all business owners and operators have an obligation to know and operate in compliance of City ordinances and state law. Because the reprinted license was improperly issued and Ms. Donnay did not follow the requirements of the City ordinance, the issuance of a new license to the new business entity is still required and should be enforced at the expiration of the current license period. It is the recommendation of staff that the new license application, for a business license to be effective January 1, 2018, when the current license has expired, be denied. The Rochester Police Department has also issued a recommendation to deny the license, on the basis of the revocation of Ms. Donnay s prior business license for Tuina Massage. Under Rochester Code of Ordinances 115A.08, the revocation that occurred with Ms. Donnay s other business license must be considered in evaluating a new license application and may be grounds for denial of the new application. Further, many of the concerns that existed in the operation of Tuina Massage are also present with Oriental Massage. Ms. Donnay is listed as the on-site manager responsible for all business operations at Oriental Massage, as she was at Tuina Massage. However, despite being the on-site manager at both businesses, and the only person indicated on either license file with any responsibility for either business, she was out of the country and unavailable for multiple weeks in May and June of 2017 when notice of the hearing was sent out for Tuina Massage. The new application for Oriental Massage also lists only Ms. Donnay as the on-site manager and the only individual with any ownership interest. She and her husband also originally indicated she alone would be working in the business at the time the new application was first submitted. Since that time, other individuals have obtained individual massage therapy licenses to presumably work in the business as well, but according to the application submitted for consideration at this time, only Ms. Donnay is responsible for the management, ownership, and oversight of the business. During the hearing held regarding Tuina Massage, concerns were raised by the City Council about the nature of the working relationship for therapists in the business. The therapist who had been arrested at Tuina testified at the hearing that despite being classified as an independent contractor, she was required to be at the business from 9 a.m. until 9 p.m. every day. Every therapist who has worked at either Tuina Massage or Oriental Massage has listed either one of the business addresses as their home address, or the address of a property owned by Gary Donnay. Packet Pg. 19

20 F.3.a Although he is not listed on any application or business record as playing any role in a massage therapy business, Gary Donnay began calling the City Clerk s Office in late May of 2017 after the hearing notice was sent regarding considering sanctions against Tuina Massage. He continued calling the office over a period of several weeks to inquire about the hearing, what the action taken by the Council on July 5 meant, the status of the business license for Oriental Massage, and whether other applications for individual massage therapist licenses for therapists who would be working in one of his wife s businesses had been granted. Two individuals applied in May and listed the business address for Tuina Massage as their home address, stating they were staying at the business. One of them, Xiuxia Pan, did not provide a subsequent address, as she was cited in May for working without a license at Tuina Massage, and the completion of a police background check revealed a pending prostitution arrest in Plymouth, Minnesota, leading to the withdrawal of her application. The other applicant was Lian Wang. When she was told the business location did not permit residential use, she changed her address to 39 Park Drive NW. The license that was issued to Lian Wang was mailed to that address, and Mr. Donnay called when he did not receive it. He stated that although mail is not delivered to that property, the post office in Eyota knows that s his house and puts the mail with that address in his PO Box. Lian Wang came into the City Clerk s Office on October 20, 2017, after notification of the October 30 hearing had been sent to Ling Donnay, and presented a letter requesting her address be updated. That letter is attached to meeting materials. Yi Lan Wang also listed 39 Park Drive NW as her home address for both an individual massage therapist license and a massage therapy business license. Yi Lan Wang s individual massage therapy license was issued on October 3, and was sent to the Park Drive address in Eyota. The Rochester Police Department was just notified by the Plymouth Police Department that Yi Lan Wang had withdrawn her application for an individual massage therapy license in Plymouth after the license investigator in Plymouth discovered discrepancies in her address information. She indicated the withdrawal in a hand written letter, attached to the meeting materials, to the Plymouth Police Department dated Oct. 12, 2017, where she stated her new address was 14 6 th St NW, Rochester, MN 55901, the address of Oriental Massage. The home at 39 Park Drive NW is listed in Olmsted County property tax records as a single family residence, with Mr. Donnay as the sole owner since It is not homesteaded. Mr. Donnay is also listed as the owner of a single family home at th St Ln NW in Rochester. That property is homesteaded. That is the address Ling Donnay has provided on her individual massage therapist application, as well as her business application for Tuina Massage. That address is also listed as the home address for two other individuals with active massage therapy licenses in the City of Rochester, Qingan Liu and Xue Dong. With the input of the Rochester Police Department, these working and living conditions indicate a possibility of human trafficking for the therapists working in the businesses owned and operated by Ms. Donnay. Packet Pg. 20

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