STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF INSURANCE, )

)

Petitioner, )

)

vs. ) CASE NO. 86-4404

)

JOSEPH MORTON PAISLEY, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to Notice, an administrative hearing was held before William R. Cave, a Hearing Officer of the Division of Administrative Hearings, on February 16, 1987 in Tallahassee, Florida. The issue for determination is whether the Respondent's license as a Health and Legal Expense Insurance Agent should be revoked, suspended or otherwise disciplined based on the allegations contained in the undated but signed Administrative Complaint filed herein.

APPEARANCES

For Petitioner: Robert V. Ellias, Esquire

Department of Insurance 413-B Larson Building

Tallahassee, Florida 32399-0300

For Respondent: Ben R. Patterson, Esquire

PATTERSON and TRAYNHAM

1215 Thomasville Road Post Office Box 4289

Tallahassee, Florida 32315 BACKGROUND

By an undated Administrative Complaint filed with the Division of Administrative Hearings on November 6, 1986, Petitioner seeks to revoke, suspend, or otherwise discipline the license of Joseph Morton Paisley as a Health and Legal Expense Insurance Agent in the State of Florida. As grounds therefor, it is alleged that: (1) Respondent's conviction of the offenses of conspiracy to commit fraud, in violation of Title 18, USC, Section 1341, Title 29, USC, Section 501(c) , all in violation of Title 18, USC, Section 371 and mail fraud, all in violation of Title 18, USC, Sections 1341 and 1342 by a jury in the United States District Court for the Middle District of Florida, Jacksonville Division on July 7, 1955 constitutes a felony conviction under Florida law and subjects Respondent's license to discipline under Sections 626.611(14) and 626.621(8), Florida Statutes and; (2) Respondent's action which resulted in the conviction demonstrates his lack of fitness or trustworthiness to engage in the business of insurance and thereby subjects his license to discipline under Section 626.611(7), Florida Statutes.

In support of the charges, Petitioner submitted a certified copy of the Indictment and a certified copy of the Judgment and Probation/Commitment Order, Petitioner's Exhibits Nos. 1 and 2, respectively. Respondent testified in his own behalf and presented the testimony of William Frank Sopher, Millie Seay, Charles W. Maddos and Dean Barry Morphonios. Respondent presented no exhibits.

The parties submitted post-hearing Proposed Findings of Fact and Conclusions of Law. A ruling on each proposed finding of fact has been made as reflected in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times material herein, the Respondent was a licensed Health and Legal Expense Insurance agent in the State of Florida.

   
   

2. By criminal indictment filed October 4, 1984, Respondent was charged with the crimes of conspiracy to commit fraud, use of the mails to defraud and the use of a fictitious name or address to defraud.

   
   

3. After a jury trial, Respondent was convicted of the offenses of conspiracy to commit fraud, in violation of Title 18, USC, Section 1341, Title 29, USC, Section 501(c), all in violation of Title 18, USC, Section 371, as charged in Count One of the Indictment and mail fraud, all in violation of Title 18, USC, Sections 1341 and 1342, as charged in Counts Two through Five of the Indictment.

   
   

4. The American Federation of State, County and Municipal Employees (AFSCME) was at all times material herein a labor union affiliated with the AFL- CIO, a labor organization as defined in Section 402 of Title 29, United States Code.

   
   

5. Florida Public Employees Council 79 (Council 79) was at all times material herein a labor union affiliated with AFSCME and the AFL-CIO, a labor organization as defined in Section 402 of Title 29, United States Code.

   
   

6. The scheme upon which the Respondent's conviction rests, was directed toward both AFSCME and Council 79.

   
   

7. At all times herein, Respondent was employed by either AFSCME or Council 79. Upon Council 79 being chartered, Respondent became its Tallahassee Regional Director.

   
   

8. The record does not reflect any persons as victims of the scheme upon which the Respondent's conviction rests other than AFSCME and Council 79.

   
   

9. Respondent's participation in the schemes upon which his conviction rests was as follows: (a) at the directions of William Van Zandt, Assistant to Jerry Wurf, President of AFSCME, and Thomas J. Fitzpatrick, President of Council 79, Respondent enrolled David J. Michalski as an employee of Council 79 and met with David J. Michalski in November 1979 to set up an address where payments on expense account vouchers and salaries would be delivered, and assisted David J. Michalski in opening an account at the bank for this purpose, and; (b) contacted George Albert Cuneo, Jr., President and owner of Cuneo Advertising, Inc., and requested that Cuneo mail bills for printing a Council 79 newspaper directly to G.A.D., Inc.

10. G.A.D., Inc. was a corporation used by defendants other than Respondent to funnel inflated bills for advertising and public relations for payment by AFSCME or Council 79.

    
    

11. The record is clear that Respondent had no knowledge of the schemes, was following orders of his superiors, and received no money, property, or other consideration for his participation in the schemes.

    
    

12. The only evidence in the record concerning the Respondent's participation in the mail fraud is that the Respondent did apparently mail some matters concerning David R. Michalski's expense vouchers. Whether he mailed anything concerning the "kick-back scheme" or the inflated bills for advertising and public relations is not clear from the record.

    
    

13. Respondent had never been convicted of a crime before this conviction.

    
    

14. Respondent was sentenced to three (3) years on Count One but served only eight (8) months. The sentences in Count Two through Five were suspended and Respondent was placed on probation. Respondent was placed on probation for six (6) months on Counts Two through Four which began immediately and was placed on three (3) years probation on Count Five which was to run consecutively with the sentence imposed in Count One.

    
    

15. After serving the eight (8) months of his sentence, Respondent returned to Tallahassee and enrolled in, and completed, a course in insurance at Tallahassee Community College hoping to further expand his existing insurance license.

    
    

16. The record is clear that Respondent's reputation for truth and veracity in the community is good despite his conviction, and the Respondent enjoys a good reputation as far as his integrity in dealing with others in concerned.

    
    

    CONCLUSIONS OF LAW

    
    

17. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, this proceeding. Section 120.57(1), Florida Statutes (1985).

    
    

18. By statute, if an insurance agent licensed under Chapter 626, Florida Statutes is found guilty of a felony in the state of Florida involving moral turpitude, it is grounds for mandatory revocation or suspension of the agent's license or, if he is found guilty of a felony in the state of Florida not involving moral turpitude, then such revocation or suspension is discretionary with the agency. See Sections 626.611(14) and 626.621(8), Florida Statutes. However, where a federal offense results in a judgment of conviction in a federal court of a crime defined as a felony under federal law, that same offense must also constitute a felony under Florida law if it is to be the basis for disciplinary action under Sections 626.611(14) and 626.621(8), Florida Statutes. In re Weathers, 31 So.2d 543 (Fla. 1947); Rothstein v. Department of Professional and Occupational Regulation, 397 So.2d 305 (1 DCA Fla. 1981); Shields v. Smith, 404 So.2d 1106 (l DCA Fla. 1981). The fact that a federal offense, upon which a conviction of a felony under federal law is obtained, was committed in Florida, does not preclude a finding that such federal offense constitutes a felony under Florida law. In re Weathers, 31 So.2d 543, 544, (Fla. 1947); Shields v. Smith, 404 So.2d 1106, 1110 (1 DCA Fla. 1981)

19. In the instant case, Petitioner has proven that the Respondent was found guilty by the federal court in Florida of certain criminal acts which constituted a felony under federal law and contends that those same criminal acts constitute a violation of Section 817.035(2), Florida Statutes, punishable as a third (3rd) degree felony. However, a violation of Section 817.035(2), Florida Statutes requires a showing that the person accused must have engaged "in a scheme constituting a systematic, ongoing course of conduct with intent to defraud 10 or more persons, or to obtain property from 10 or more persons by false or fraudulent pretenses, representations, or promises, and who so obtains property from 1 or more such persons...." The identity of at least one person from whom the accused so obtained property must be proven in any prosecution under Section 817.035(2), Florida Statutes. Section 817.035(3), Florida Statutes.

    
    

20. Assuming the phrases, "who so obtains property from 1 or more persons" and "from whom the defendant so obtained property" used in Section 817.035(2) and (3), Florida Statutes can be construed to encompass the obtaining of property by the accused for the use of others, the Petitioner has not proven that the scheme of which the Respondent was convicted in federal court involved

    10 or more persons. The term "person" is defined in Section 1.01(3) , Florida Statutes and includes within the definition "individuals. association...and all other groups or combinations." The term "labor organization" is defined in Section 47.02(1), Florida Statutes, and would come within the definition of "person" as defined in Section 1.01(3) , Florida Statutes. There may be circumstances wherein the facts would show that in defrauding a "labor organization" the accused has also defrauded 10 or more members of such organization. However, in the instant case there has been no showing that 10 or more members of AFSCME or Council 79 were defrauded. Likewise there has been no showing that Respondent conspired to defraud 10 or more persons under Section 777.04(3)(4)(c), Florida Statutes. There is no substantial competent evidence in the record to support Petitioner's contention that a scheme to defraud a labor organization is a scheme to defraud each and every member of such labor organization. Therefore, Petitioner has failed to meet its burden to prove that the offenses committed by the Respondent that were the basis of the federal conviction constitute a felony under Federal law and thereby subjecting the Respondent's license to discipline under Sections 626.611(14), and 626.621(8), Florida Statutes. It appears that Respondent's offenses may constitute a misdemeanor under Section 817.035(1), Florida Statutes, or a conspiracy to commit a misdemeanor under Section 777.04(3)(4)(d), Florida Statutes, but being found guilty of misdemeanor is not grounds for discipline under Sections 626.611(14) and 626.621(B), Florida Statutes.

    
    

21. Petitioner also alleges that the commission of the offenses by the Respondent demonstrates his lack of fitness or trustworthiness to engage in the business of insurance and thereby grounds for disciplinary action under Section 626.611(7), Florida Statutes. However, in considering the underlying facts that resulted in the Respondent's conviction most favorable to the Petitioner, they fail to demonstrate a lack of fitness or trustworthiness on the part of the Respondent to engage in the business of insurance, particularly in light of Respondent's reputation in the community, his desire to put the conviction "behind him" and to "get on with his life" by properly preparing himself with courses concerning insurance.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore,

RECOMMENDED that Petitioner, Department of Insurance, enter a Final Order dismissing all counts of the Administrative Complaint filed herein.

Respectfully submitted and entered this 31st day of March, 1987, in Tallahassee, Leon County, Florida.

WILLIAM R. CAVE

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 31st day of March, 1987.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4404

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case.

Rulings on Proposed Findings of Fact Submitted by the Petitioner

1. Adopted in Finding of Fact 1.

2. Adopted in Finding of Fact 2.

3. Adopted in Finding of Fact 3 as clarified.

4. Adopted in Finding of Fact 5 with the exception of the phrase "with in excess of ten numbers" which is rejected as immaterial since there was no substantial competent evidence in the record to show that any individual member had been defrauded or that any conspiracy to defraud was directed at any individual member.

Rulings on Proposed Findings of Fact Submitted by the Respondent

1. Adopted in Finding of Fact 3.

2-7. Rejected as immaterial and irrelevant.

1. Adopted in Finding of Fact 9.

2. Adopted in Finding of Fact 7.

3. Adopted in Findings of Fact 9 and 11.

4. Adopted in Findings of Fact 9 and 11.

5. Adopted in Findings of Fact 9 and 11.

6. Adopted in Finding of Fact 9.

7. Adopted in Findings of Facts 9 and 11.

8. Rejected as immaterial and irrelevant.

9. Adopted in Finding of Fact 15.

10. Rejected as immaterial and irrelevant.

11. Adopted in Finding of Fact 13.

19.-20. Adopted in Finding of Fact 16.

COPIES FURNISHED:

Robert V. Ellias, Esquire Department of Insurance 413-B Larson Building

Tallahassee, Florida 32399-0300

Ben R. Patterson, Esquire PATTERSON and TRAYNHAM

1215 Thomasville Road Post Office Box 4289

Tallahassee, Florida 32315

Honorable William Gunter State Treasurer and

Insurance Commissioner The Capitol, Plaza Level

Tallahassee, Florida 32399-0300

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF INSURANCE AND TREASURER

IN THE MATTER OF

JOSEPH MORTON PAISLEY Case No. 86-L-543RVE DOAH No. 86-4404

Revocation of License and Eligibility for Licensure

Health Insurance Agent

Legal Expense Insurance Agent

/

FINAL ORDER

THIS CAUSE came before the undersigned Insurance Commissioner of the State of Florida for consideration and final agency action. On September 24, 1986 the Department of Insurance filed an Administrative Complaint against the Respondent, JOSEPH MORTON PAISLEY, which alleged that the Respondent had been found guilty of a felony involving moral turpitude, and had demonstrated a lack

of fitness or trustworthiness to engage in the business of insurance. On October 15, 1986 the Respondent responded to the Administrative Complaint and filed a request for a formal hearing pursuant to Section 120.57(1), Florida Statutes. Respondent was granted a formal hearing pursuant to Section 120.57(1), Florida Statutes which was held on February 16, 1987, before William

1. Cave, Hearing Officer for the Division of Administrative Hearings. After consideration of the evidence and argument presented at the hearing and after further consideration of the Petitioner's Proposed Findings of Fact, Conclusions of Law and Recommendations, and the Respondent's Proposed Findings of Fact and Conclusions of Law, the Hearing Officer, on March 31, 1987, issued a Recommended Order (attached hereto as exhibit "A") to the Insurance Commissioner in which it was recommended, that the Department of Insurance enter a Final Order dismissing all counts of the Administrative Complaint.

   
   

   RULING ON EXCEPTIONS

   
   

   The Petitioner filed exceptions to the Hearing Officer's Findings of Fact numbers (11) and (12). These findings are as follows:

   
   

   1. The record is clear that Respondent had no knowledge of the schemes, was following orders of his superiors, and received no money, property, or other consideration for his participation in the schemes.

      
      

   2. The only evidence in the record concerning the Respondent's participation in the mail fraud is that the Respondent did apparently mail some matters concerning David

R. Michalski's expense vouchers. Whether he mailed anything concerning the "kick-back scheme" or the inflated bills for advertising and public relations is not clear from the record. (Recommended Order, p.3)

These two Findings of Fact are specifically rejected by the Department of Insurance and the exceptions to them are granted for the following reasons:

1. The Respondent entered a not guilty plea in Case No. 4-139-CR-J-14 in the United States District Court for the Middle District of Florida, Jacksonville Division. (Pet. Lxn. 2)

   
   

2. In the above case the Respondent was charged in a fourteen count Grand Jury Indictment with (in Courts Two through Four) having:

   
   

   knowingly and willfully devised and intended to devise a scheme and actifice to defraud Council 79 and for obtaining money from Council 79 by means of false and fraudulent pretenses, representations promises ... (Pet. Exh. 1)(T 1D, 11)

   
   

   In count Five of the above indictment the Respondent was charged with having:

   
   

   knowingly and willfully devised and intended to devise a scheme and actifice to

   defraud AFSCME and to obtain money from AFSCME by false and fraudulent pretenses and representations, by submitting and causing to be submitted and to be paid by AFSCME, falsified expense account vouchers for DAVID

   J. MICHALSKI, ... (Pet. Exh. 1)(T 10, 11)

   
   

3. The Respondent was found guilty by jury verdict of the above charges in Counts Three through Five of the above indictment. (Pet. Exh. 2)

   
   

4. A verdict of guilty by a jury in a criminal case does and must mean that the jury found beyond a reasonable doubt that the defendant did, in fact, commit each and every element of the crime alleged. This is the very basis of our criminal justice system. Since the jury did find the Respondent guilty in the above case, it has therefore already been decided in a way which may not be altered by an administrative tribunal, that the Respondent did knowingly participate in the fraudulent scheme alleged in the above indictment. The properly certified copies of that above indictment and verdict were introduced into evidence at the final hearing in this matter and do certainly constitute competent and substantial evidence, at a minimum, sufficient to reject the Hearing Office's Findings of Fact numbers (11) and (12). Further, given the fact and the import of a guilty verdict in the above criminal case, there is no competent and substantial evidence to support the Hearing Officer's Findings of Fact numbers (11) and (12).

The Petitioner filed exceptions to that part of the Hearing Officer's Second Conclusion of Law which is found in the last paragraph of page six of the Recommended Order. This Conclusion of Law reads in relevant part:

Petitioner also alleges that the

commission of the offenses by the Respondent demonstrates his lack of fitness or trustworthiness to engage in the business of insurance and thereby grounds for disciplinary action under Section 626.61(7), Florida Statutes. However, in considering the underlying facts that resulted in the Respondent's conviction most favorable to the Petitioner, they fail to demonstrate a lack of fitness or trustworthiness on the part of the Respondent to engage in the business of insurance, particularly in light of Respondent's reputation in the community, his desire to put the conviction behind him and to get on with his life by properly preparing himself with courses concerning insurance.

This conclusion of law is rejected and the exception to it granted for the following reasons:

(a) Although not stated explicitly, it is clear that this conclusion must be based, at least in significant part, on the Hearing Officer's Finding of Fact that the Respondent did not knowingly engage in the fraudulent acts alleged in the above indictment. This Finding of Fact has been rejected by the Department of Insurance as incorrect in light of the fact and import of the jury verdict of guilty to knowingly and willfully participating in the various fraudulent schemes as alleged. Consequently, the Department of Insurance concludes that

the Respondent's knowing and willful participation in the frauds does render him unfit and untrustworthy to engage in the business of insurance particularly as the crimes the Respondent was found guilty of involved the misappropriation and mishandling of funds received from others. Under the rationale of Natelson vs. Department of Insurance, 454 So.2d 31 (Fla. 1st DCA 1984) the duty of Department of Insurance to protect the public interest is clear and compelling and the Respondent's knowing and willful participation in these frauds and schemes to defraud obviously render him unfit and untrustworthy to engage in the business of insurance.

FINDINGS OF FACT

The Hearing Officer's Findings of Fact are adopted as this Agency's Findings of Fact with the exception of numbers (11) and (12).

CONCLUSIONS OF LAW

The Hearing Officer's Conclusions of Law are adopted with the exception of that part of the Hearing Officer's Second Conclusion of Law which is found in the last paragraph of page six of the Recommended Order.

Upon consideration of the foregoing and upon a review of the complete record in this case and being otherwise fully advised in the premises, it is

ORDERED;

That all licenses and eligibility for licensure heretofore issued to the Respondent, JOSEPH MORTON PAISLEY within the purview of the Department of Insurance are hereby REVOKED.

Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order Pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Fla.R.App.P. Review proceedings must be instituted by filing a petition notice of appeal with the General Counsel, acting as the agency clerk, at 413-B Larson Building, Tallahassee, Florida, 32399-0300 and a copy of the same with the appropriate district court of appeal within thirty (30) days of rendition of this Order.

DONE and ORDERED this 21st day of May, 1987.

BILL GUNTER

Insurance Commissioner and State Treasurer

ANN WAINWRIGHT

Assistant Insurance Commissioner and State Treasurer

COPIES FURNISHED:

Joseph Morton Paisley 1103 Missionwood Lane

Tallahassee, Florida 32304

Ben R. Patterson, Esquire Patterson and Traynham 1215 Thomasville Road Post Office Box 4289

Tallahassee, Florida 32315

William R. Cave, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

Robert V. Elias, Esquire Department of Insurance Office of the General Counsel 413-B Larson Building

Tallahassee, Florida 32399-0300

Docket for Case No: 86-004404

Orders for Case No: 86-004404