STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WILLIAM E. DALY, )

)

Petitioner, )

)

vs. ) CASE No. 87-1421

) DEPARTMENT OF BANKING AND ) FINANCE, DIVISION OF )

FINANCE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on May 20, 1987 in West Palm Beach, Florida.

APPEARANCES

For Petitioner: James M. Scutti, Esquire

370 West Camino Gardens Blvd. Boca Raton, Florida 33432

For Respondent: Lawrence S. Krieger, Esquire

111 Georgia Avenue Suite 211

West Palm Beach, Florida 33401-5293 BACKGROUND

This matter began when respondent, Department of Banking and Finance, Division of Finance, issued a letter on January 15, 1987 advising petitioner, William E. Daly, that his application for licensure as a mortgage broker had been denied because of Daly's "association with First Continental Realty on which litigation is still pending, material misstatement of fact on (his) initial application and having had a license revoked or suspended by the State of Connecticut." The letter further stated the above reasons constituted grounds under Sections 494.052 and 494.055(1)(b), (c) and (i), Florida Statutes (1985), for denying the application. These grounds were later formalized in a Notice of Grounds for Denial of Application issued by the Division on March 3, 1987. Thereafter, by letter dated March 13, 1987 petitioner requested a formal hearing to contest the Proposed agency action. The matter was referred to the Division of Administrative Hearings by respondent on April 2, 1987 with a request that a hearing officer be assigned to conduct a hearing.

On April 28, 1987, respondent cited an additional statutory ground for denying the application, that being petitioner's failure to comply with a subpoena issued during the Division's investigation of First Continental Realty. Petitioner did not object to this amendment.

By notice of hearing dated April 16, 1987, a final hearing was scheduled on May 20, 1987 in West Palm Beach, Florida. At final hearing, petitioner testified on his own behalf and presented the testimony of Sam Perera. He also offered petitioner's exhibits 1-9 which were received in evidence. Respondent presented the testimony of Arlene Francis Gatto, respondent, Timothy Valentine, Ronald Lovell and John H. Williams. It also offered respondent's exhibits 1-9, 11-13, 15 and 19 which were received in evidence.

The transcripts of hearing (two volumes) were filed on June 18, 1987.

Proposed findings of fact and conclusions of law were submitted by petitioner and respondent on June 30 and July 2, 1987, respectively. A ruling on each finding has been made in the Appendix attached to this Recommended Order.

At issue is whether petitioner's application for licensure as a mortgage broker should be approved.

Based upon all of the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. Events Leading to Proposed Agency Action

   
   

   1. By application dated September 3, 1986, petitioner, William E. Daly, made application for licensure as a mortgage broker with respondent, Department of Banking and Finance, Division of Finance (Division). The application required Daly to affirm the accuracy of his answers. Question six on the application asked if the applicant had any money judgments against him, whether unsatisfied, partially satisfied or satisfied. Petitioner responded "Yes," and attached a list of eleven such judgments. The list was obtained by a title company after Daly requested it to perform a "name search" on his behalf. For some unknown reason, the search did not pick up two judgments, one in the amount of $1,907.96 owed the Internal Revenue Service (IRS) by Daly and an ex-wife, and one in the amount of $18,156.34 owed a home decorator by Daly and another ex- wife. Both had been Previously satisfied in 1985 and 1983, respectively. Because of this omission, on November 7, 1986 the Division requested a "statement" from Daly concerning these judgments, and an explanation as to why they were not included in his initial application. Daly sent a response to this inquiry later that month. Nonetheless, the Division cited this and two other reasons for Preliminarily denying the application on January 15, 1987. A fourth ground was added in April, 1987. The denial Prompted this Proceeding.

      
      

   2. Daly has lived in Florida since 1973. Before that, he resided in Stamford, Connecticut where he was in the insurance business His Connecticut insurance license was revoked in 1972. He was issued Florida real estate salesman and broker licenses in 1973 and 1976, respectively. During his first eight or nine years in Florida, Daly was principally involved in real estate work in Palm Beach County, and at one time was broker of record for his own firm, William E. Daly, Inc. In October 1983 he became broker of record for First Continental Realty Corporation (FCRC) where he remained until August 1985. After a short stint with Merrill Lynch Realty, he assumed the position of loan officer in a Boynton Beach banking institution where he is now employed.

      
      

   3. As grounds for denying the application, the Division has cited the following alleged illicit conduct on the part of Daly: (a) being associated with FCRC which is the subject of pending litigation, (b) making a material

      misstatement of fact on his application regarding judgments entered against him,

      1. having had an insurance agent's license revoked by the State of Connecticut in September, 1972, and (d) failing to comply with a Division subpoena issued in an ongoing investigation of suspected fraud by FCRC. These grounds will be discussed separately hereinafter.

         
         

2. The Connecticut Episode

   
   

   1. On September 1, 1972 a hearing officer for the Connecticut Department of Insurance issued a one-page recommended order providing in relevant part as follows:

      
      

      The hearing was convened on time and William E. Daly did not appear nor was any contact made to the Department requesting a postponement or continuance.

      
      

      The evidence submitted at the hearing indicates a failure on the part of the agent to carry out the functions of an insurance agent in the best interest of the public. To wit:

      
      

      1. Failure to properly account for monies coming into his possession and belonging to others.

      2. Failure to properly settle accounts with the Home Insurance Company.

      3. Failure to properly place coverages for Miss Elizabeth Dunne, 51 Thayer Pond Road, New Canaan, Connecticut.

      4. Failure to properly place coverage for Mr. Henry Oscar, 100 Den Road, Stamford, Connecticut.

      5. Failure to properly account for monies of the Colonial Insurance Agency of Stamford, Connecticut.

         
         

         Based upon the evidence submitted, it is the finding of the hearing officer that

         William E. Daly does not meet the standards required in Section 38-72 of the Connecticut General Statutes and should not be allowed to be continued in this State as a licensed insurance agent. It is the specific recommendation of the hearing officer that all outstanding insurance agent's licenses be revoked.

         
         

         The Connecticut Insurance Commissioner "approved" this recommendation effective September 9, 1972 by placing his signature and date on the order.

         
         

   2. Other than a copy of the above recommended order and signature approval, no evidence was submitted to establish the facts underpinning the license revocation.

   3. When Daly applied for a real estate salesman license in 1973, he disclosed the foregoing action on his application. The Florida Real Estate Commission (FREC) initially denied the application, but after Daly filed letters attesting to his good character, FREC issued a license. A broker's license was later routinely issued to Daly in 1976. There is no record of any disciplinary action ever having been taken against Daly by FREC.

      
      

3. Inadvertent Omission or Intended Commission?

   
   

   1. The Division's denial is grounded in part upon Daly allegedly answering question six on the initial application with intent to deceive the Division about two prior judgments not disclosed in his answer. They were in the amounts of $1,907.96 and $18,156.34, respectively, and were obtained by the IRS and a home decorating business. The IRS judgment stemmed from an income tax overpayment to one wife, and the other from a debt incurred by a second wife.

      In both cases, the wives had Previously paid the debts.

      
      

   2. Knowing that there had been a number of money judgments entered against him in prior years, and that the application required him to disclose the same, Daly spoke with the Division's West Palm Beach area financial manager on August 1, 1986 seeking advice on how to accurately answer the question. After Daly Suggested that a "name search" through a title company might ensure complete accuracy, the manager agreed. Daly then went to Universal Title of Palm Beach County, Inc., a title company owned by a friend, and requested it conduct a name search. The search revealed eleven unsatisfied judgments against Daly over the years, the largest being $11,112.84. For some reason the search failed to pick up the two satisfied judgments. Daly listed the eleven on his application, but this was two short. After being notified of this omission by the Division, Daly immediately Procured copies of satisfactions of the judgments and forwarded the same with an explanation to the Division.

      
      

   3. At hearing Daly stated he was probably aware of these two judgments when he filled out the application but thought they did not show up on the search because both were satisfied. Consequently, he did not think it was necessary to add them to the list even though the application requested him to list all judgments, even if satisfied. However, there was no intent to deceive the Division as to his past financial history, particularly since he had listed eleven other unsatisfied judgments in his answer. Daly acknowledged there might be other judgments against him but, if any in fact exist, he does not know the names of the creditors or the amounts.

      
      

4. Association with FCRC

   
   

   1. First Continental Realty Corporation was a Florida corporation organized on December 14, 1982 by its sole shareholder, Sam Perera. It continued in operation until 1985 when it declared bankruptcy. The corporation was ostensibly formed for the purpose of selling real estate and managing investment properties. Although Perera was its sole stockholder, FCRC was actually controlled by State Capitol Corporation (SCC), a registered mortgage broker. In addition, FCRC was affiliated with a number of other companies, including Berkeley Multi-Units, Inc., Multi-National Management, Inc. and Florida Consolidated Equities Corporation. All companies, including FCRC and SCC, operated from the same location in Boca Raton and were under the control of one Victor Bergelson, 1/ who is now a defendant in various civil actions and under indictment for various alleged criminal activities. Perera himself has pled guilty to one count of racketeering and is presently on ten years probation.

   2. State Capitol Corporation's primary purpose was to generate revenues through mortgage loans. It did so by soliciting the general public (primarily through newspaper advertisements) for investment funds which were then used as mortgage loans to other affiliated companies of SCC. The affiliates in turn purchased property with these proceeds. There were approximately 4,000 such investors who contributed millions of dollars to purchase mortgage loan investments.

      
      

   3. First Continental Realty Corporation had a staff of real estate salesmen which at one time numbered more than thirty. Although all salesmen were independent contractors, they were under the general supervision of the broker. Among other things, the salesmen searched for properties that SCC affiliates could purchase with money from mortgage loans. The sellers were generally asked to take back subordinated purchase money mortgages so that additional financing could be secured by the buyer. Indeed, this was a common feature in contracts for sale of property to an SCC affiliate, and enabled the affiliate to obtain more mortgage money on each transaction. The end result was the anomaly of having the buyer (an SCC affiliate) receive cash at the closing.

      
      

   4. The above scheme went awry when SCC and its affiliates ran short of funds to pay the principal on their mortgages. This was not surprising since it was necessary to use new investor money to pay interest to prior investors. 2/ All of the companies eventually filed for protection in bankruptcy court.

      Around the time the scheme began unraveling, an investigation was begun by both the Division and the State Attorney. Among other things, they learned that much of the investor capital had been "loaned" to SCC affiliates, including FCRC, and had mysteriously disappeared. As a result, investors were not repaid, and their losses ran in the millions. A myriad of indictments and lawsuits followed these revelations.

      
      

   5. Because FCRC was ostensibly in the real estate business, it was necessary to have a licensed real estate broker of record. In the early 1980s, one Sid Bard was broker of record. Daly knew Bard through his own real estate business, and had procured several properties for transactions in which Bard participated. When Bard left FCRC in 1983, he asked Daly if he was interested in becoming FCRC's broker. Daly agreed, and became broker of record in the fall of 1983 at a salary of $150 per week plus commissions. He also was named president and sole director of FCRC in January, 1984 since by law, these positions were required to be held by the broker of record. However, these titles were in name only and Daly actually performed only a few ministerial duties each year, such as signing the annual report. In fact, Daly did not know he was a director of FCRC until advised by his attorney just prior to final hearing. He has never read FCRC's by-laws or articles of incorporation.

      
      

   6. Although he was the only officer and director at FCRC, and the by-laws provided otherwise, Daly did not get involved in the day-to-day operations of FCRC or set policy, nor did he have access to its books and records. These responsibilities lay with Perera, Bergelson and others, and with whom Daly was not in privy. Pursuant to a written agreement, Daly was an independent contractor, and his activities were limited to occasionally attending sales meetings and obtaining persons who were interested in selling properties. At the sales meetings, he advised other salesmen of any "changes" in what the "buyers were looking for to purchase." He did not review contracts or attend closings, and actually obtained sellers of property on only a few occasions. Even then, he simply introduced the seller to the buyer and participated no further in the negotiations or closing. He was not aware of the terms or

      conditions of the deal since he had no further involvement in the transactions. There is no evidence that he knew of the overall illicit designs of Bergelson and other principals. In this regard, it is noted that even though a most intensive investigation of FCRC and SCC has been undertaken by the state attorney, Daly has not been charged with any criminal wrongdoing nor is he a defendant in any civil action concerning these entities or individuals.

      
      

   7. The Division made four extensive audits of SCC over a three month period. Daly's name was not mentioned in any audit report. It has also instituted a civil action against SCC, FCRC and various individuals. Daly is not a defendant in the lawsuit. 3/

      
      

5. Subpoena Compliance

1. On October 5, 1984 the Division served a subpoena duces tecum upon FCRC requiring the production of various corporate documents and financial records. Perera accepted service and turned it over to legal counsel for the firm. Daly was not personally served, nor did he have knowledge of the subpoena until several years later. There is no evidence to support a finding that Daly refused "to comply with a department subpoena or subpoena duces tecum" as charged in the grounds for denial, or that he was "grossly negligent in failing to learn of the subpoena's existence. Shortly after the subpoena was served, FCRC declared bankruptcy which caused the State courts to lose jurisdiction over the matter, and their ability to enforce the subpoena.

   
   

   CONCLUSIONS OF LAW

   
   

2. The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes (Supp. 1986).

   
   

3. In its letter and notice, as - amended, denying petitioner's application, respondent has cited the following statutory grounds in Section 494.055, Florida Statutes (Supp. 1986), as bases for denying Daly's application:

   
   

   494.055 Grounds for disciplinary action.--

   (1) The following acts shall constitute grounds for which the disciplinary actions specified in s. 494.052 may be taken:

   * * *

   1. Fraud, misrepresentation, deceit, negligence, or incompetence in any mortgage financing transaction;

   2. A material misstatement of fact on an initial or renewal application;

   * * *

   1. Failure to account or deliver to any person any personal property, such as any money, fund, deposit, check, draft, mortgage, or other document or thing of value, which has come into his hands and which is not his property or which he is not in law or equity entitled to retain, under the circumstances and at the time which has been agreed upon or is required by law or, in the absence of a fixed time, upon demand of the person entitled to such accounting and delivery;

   2. Failure to disburse funds in accordance with agreements;

   3. Any breach of trust funds or escrow funds, or any misuse, misapplication, or misappropriation of personal property, such as any money, fund, deposit, check, draft, mortgage, or other document or thing of value, entrusted to his care to which he had no current property right at the time of entrustment regardless of actual injury to any person;

   4. Having a license or registration, or the equivalent, to practice any profession or occupation revoked, suspended, or otherwise acted against, including the denial of licensure by a licensing authority of this state or another state, territory, or country for fraud, dishonest dealing, or any other act of moral turpitude;

   * * *

   (o) Refusal to permit an investigation or examination of books and records, or refusal to comply with a department subpoena or subpoena duces tecum;

   * * *

   Because of the foregoing violations, the agency alleges that it may enter an order denying the application under the authority of Subsection 494.052(6), Florida Statutes (Supp. 1986). That statute reads as follows:

   
   

   494.052 Administrative penalties and fines; license violations.--When the department finds any person in violation of the grounds set forth in s. 494.055(1), it may enter an order imposing one or more of the following penalties:

   * * *

   (6) Denial of a license or registration.

   
   

4. Initially, it is noted that Daly, as the applicant, carries the burden of proving his entitlement to licensure. Therefore, he must establish a prima facie case of eligibility, and counter and satisfy those grounds cited by the agency as reasons for denying the application. Having done so, the burden then shifts to respondent to contravene that showing and to establish Daly's ineligibility to hold a license. Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 779, 787 (Fla. 1st DCA 1981). Failing this, the license must be approved.

   
   

5. It is first charged that Daly made "a material misstatement of fact on an initial ... application" as proscribed by Subsection 494.055(1)(c), Florida Statutes (Supp. 1986), by failing to disclose two satisfied judgments on his initial application. To support this ground, respondent points to the language in the application itself which requires an applicant to disclose all judgments, even if satisfied, and Daly's acknowledgment that he "probably" was aware of these two judgments when he filled out his application. To establish such a charge, two elements must be present. First, the misstated (or omitted) matter must be "material," and, secondly, it must have been made with the intent of deceiving the agency. While the omission of two satisfied judgments alone might

   arguably be considered "material," when viewed in the context of eleven other disclosed and unsatisfied judgments, they are hardly so material as to "make or break" Daly's application insofar as this item is concerned. Even if the omitted information was material, there was no intent by Daly to deceive the agency about his financial history, particularly since he disclosed eleven unsatisfied judgments. Therefore, it is concluded that no material misstatement of fact occurred, and that this statute is not an impediment to licensure. 4/

   
   

6. As to the Connecticut revocation matter, it is noted that only a copy of the Connecticut recommended order was introduced into evidence, and except for the findings in that order, no evidence was offered concerning the nature of the violations underpinning the license revocation. The notice of denial contends the Connecticut action constitutes a violation of Subsection 494.055(1)(i) since the revocation was based upon "fraud, dishonest dealing or any other act of moral turpitude" on the part of Daly. However, it is well settled that a judgment of conviction in a criminal prosecution cannot be given in evidence to establish the truth of the facts on which it was rendered. Stevens v. Duke, 42 So.2d 361 (Fla. 1949). By analogy, the same reasoning must prevail here, and in the absence of either independent or other corroborative evidence that the revocation was for fraud, dishonest dealing or an act of moral turpitude as contemplated under Florida law, 5/ the administrative order alone cannot be used to establish the truth of the facts on which it was rendered. Stevens, supra. Similarly, the contention that the Connecticut order establishes a violation of Subsections 494.055(1)(f), (g) and (h) must fail for the same reason.

   
   

7. The evidence reveals that Daly had no knowledge of the Division subpoena served upon FCRC in 1984, and consequently could not have "hampered" the Division investigation as is charged in the denial notice. Indeed, the evidence shows that the subpoena was received by FCRC's corporate owner, and was then turned over to its legal counsel, an action typically taken by the recipient of legal process. Therefore, Daly has satisfied this objection, and has shown that no violation of Subsection 494.055(1)(o) has occurred.

   
   

8. The final ground for denial is that Daly was engaged in "fraud, misrepresention, deceit, negligence, or incompetence in any mortgage financing transaction within the meaning of Subsection 494.055(1)(b), Florida Statutes (Supp. 1986). This ground is apparently based upon Daly's association with FCRC, his assumed knowledge of FCRC's and SCC's illicit conduct, or his negligence and incompetence in failing to learn of their illicit activities. A mortgage financing transaction is defined in Subsection 494.02(12), Florida Statutes (Supp. 1986), as follows:

   
   

   (12) "Mortgage financing transaction" means the negotiation, acquisition, sale or arrangement for, or the offer to negotiate, acquire, sell, or arrange for, a mortgage loan or mortgage loan commitment.

   
   

   Crucial to the resolution of this issue is whether Daly actually arranged or negotiated a mortgage financing transaction as defined in the foregoing statute. The evidence reveals that, as to the few deals which he personally arranged, Daly simply brought parties together, and he was not involved in the negotiations or closings, or otherwise participated in the transactions.

   Moreover, even if this activity constituted an "arrangement or "negotiation" of a mortgage transaction on the part of Daly, there was no evidence that he committed "fraud, misrepresentation, deceit, negligence or competence" in

   connection with those particular transactions. 6/ The next question is whether Daly's other activities, such as generally supervising the FCRC salesmen, and holding the positions of president and director of FCRC, equate to a violation of the cited law. Through uncontradicted testimony, Daly established that, other than occasionally attending salesman meetings, he had no involvement with them. But, even if the Division's contention is correct that such general supervision over the salesmen (agents) equated to Daly's direct participation in the arranging or negotiating of mortgage financing transactions, it must still be shown that Daly had the requisite intent and scienter to commit fraud or other cited illegalities. Cf. Blume v. Department of Professional Regulation, Construction Industry Licensing Board, 489 So.2d 880, 882 (Fla. 2nd DCA 1986) (intention to participate in crime necessary to find licensee guilty of aiding and abetting an unlicensed individual); Morris v. Department of Professional Regulation, 474 So.2d 841, 843 (Fla. 5th DCA 1985) (wrongful intent or scienter necessary to find realtor guilty of fraud, misrepresentation, concealment and the like). Here, there is no evidence that Daly was aware of the illicit acts, if any, committed by FCRC employees, or that Daly intended to participate in any scheme. Therefore, their illegalities, if any, cannot be imputed to Daly.

   Finally, it is argued that in his role as president and director of FCRC, Daly had the responsibility to keep abreast of all corporate activities. By failing to do so, the argument goes, Daly was "negligent" and "incompetent" in connection with the corporation's business of arranging and negotiating mortgage transactions. The record reveals that Daly's positions were in name only, and that Daly never assumed the normal duties of those positions, or was privy to the day-to-day operations of the company. Indeed, he had no access to its books and records, nor any hand in making corporate policy. By failing to read the

   by-laws, or tend to otherwise normal officer and director activities, it may be correct to characterize Daly as being negligent in fulfilling his corporate duties. However, it is not correct to deem him "incompetent" since this term implies Daly lacked skill or ability, or was inept, something not proven in this record, particularly since he adequately performed all duties assigned him by the corporation's owner (Perera). Under respondent's theory, which is not altogether clear, Daly, president of FCRC, was legally responsible for its actions, and by being negligent in overseeing its activities, he was also negligent in FCRC's mortgage transactions. But, negligence in overseeing a business and failing to learn of corporate illegalities is not the same as negligence in the arrangement of mortgage transactions. Indeed, all such transactions were apparently carefully crafted and orchestrated so as to produce money for the affiliates, and it is not suggested that the transactions themselves were handled in a negligent manner. This being so, it is concluded Daly was not negligent in the arranging or negotiating of a mortgage transaction.

   
   

9. Finally, much of the record was devoted to retrying the SCC case. There is no question that Bergelson and SCC perpetrated a tremendous wrong upon the public which cost consumers millions of dollars. However, the issue here is whether statutory grounds exist for denying a mortgage brokerage license. There being none, the application should be approved.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of William E. Daly for a mortgage

brokerage license be GRANTED.

DONE AND ORDERED this 9th day of July, 1987, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings The Oakland Building

2900 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1987.

ENDNOTES

1/ That Bergelson controlled these operations was common knowledge among all employees, including Daly.

2/ An FCRC bank account was used at least part of the time to pay interest to investors. According to a bookkeeper, such payments through this account totaled as much as $250,000 per month.

3/ The fact that the Division filed suit against FCRC and SCC was widely known by most employees, including Daly.

4/ Even with Daly's disclosure of eleven unsatisfied judgments, and two satisfied judgments, the Division has not seen fit to use this as a ground for denying his application. This lends support to the conclusion that such facts were not material.

5/ In other words, it was not shown if the acts of "failure to properly account for "monies" and "failure to properly place coverage" as charged in the Connecticut order are the same as "fraud, dishonest dealing or an act of moral turpitude" as used in Subsection 494.055(1)(i), F.S. This is necessary since the Florida statute does not make an out-of-state license revocation a per se ground for licensure denial.

6/ There is no suggestion that on the five contracts in which Daly was personally involved that the seller was the victim of fraud, misrepresentation, deceit, negligence or incompetence on the part of Daly.

APPENDIX

Petitioner:

1. Covered in finding of fact 4.

2. Covered in finding of fact 6.

3. Covered in finding of fact 8.

4. Covered in finding of fact 8.

5. Covered in finding of fact 1.

6. Covered in finding of fact 9.

7. Covered in finding of fact 14.

8. Covered in findings of fact 10 and 11.

9. Covered in finding of fact 10.

10. Covered in finding of fact 12.

11. Covered in finding of fact 13.

12. Covered in footnote 2.

13. Covered in finding of fact 16.

14. Covered in findings of fact 10, 13, 15 and 16.

15. Covered in finding of fact 13 and footnote 3.

16. Covered in finding of fact 14.

17. Covered in finding of fact 15.

18. Covered in finding of fact 15.

19. Covered in finding of fact 15.

20. Covered in finding of fact 17.

Respondent:

1. Rejected as being unnecessary.

2. Covered in finding of fact 13.

3. Covered in finding of fact 13.

4. Rejected as being unnecessary.

5. Covered in findings of fact 11 and 12.

6. Rejected as being unnecessary.

7. Rejected since Daly was supposed to receive commissions but was never paid the same by FCRC.

8. Covered in finding of fact 14.

9. Covered in finding of fact 10.

10. Covered in finding of fact 12.

11. Covered in finding of fact 12.

12. Rejected as being irrelevant.

13. Covered in finding of fact 11.

14. Rejected as irrelevant.

15. Rejected as irrelevant.

16. Covered in finding of fact 11.

17. Covered in finding of fact 12.

18. Covered in finding of fact 12.

19. Covered in finding of fact 12.

20. Covered in finding of fact 12.

21. Covered in finding of fact 12.

22. Covered in finding of fact 10.

23. Covered in finding of fact 11.

24. Covered in finding of fact 12.

25. Covered in finding of fact 10.

26. Covered in finding of fact 16.

27. Covered in finding of fact 16.

28. Covered in finding of fact 16.

29. Covered in finding of fact 16.

30. Covered in finding of fact 14.

31. Covered in finding of fact 15.

32. Rejected as being a conclusion of law.

33. Covered in finding of fact 15.

34. Rejected as being a conclusion of law.

35. Rejected as being a conclusion of law.

36. Rejected as being unnecessary.

37. Covered in finding of fact 15.

38. Covered in finding of fact 15.

39. Covered in finding of fact 15.

40. Rejected as being irrelevant.

41. Rejected as being irrelevant.

42. Rejected as being a conclusion of law.

43. Rejected as being unnecessary.

44. Covered in finding of fact 12.

45. Covered in finding of fact 15.

46. Covered in finding of fact 12.

47. Covered in finding of fact 15.

48. Rejected since the cited references in the transcript do not clearly support the suggested language in the finding.

49. Rejected since petitioner did not participate in the financing arrangements but merely introduced the seller to the buyer.

50. Rejected since the terms of the contract were negotiated by the parties, and not by Daly.

51. Partially rejected since Daly did not personally produce sellers for "numerous" mortgage loans on properties brokered by FCRC.

52. Partially rejected since Daly did not personally get involved in the negotiation or arrangement for mortgage loans.

53. Partially rejected for the same reason as given in Number 75.

54. Covered in finding of fact 12.

55. Covered in finding of fact 15.

56. Covered in findings of fact 10 and 12.

57. Covered in finding of fact 13.

58. Covered in finding of fact 13.

59. Covered in finding of fact 13.

60. Rejected as being irrelevant since there was no evidence that Daly knew that SCC was unable to meet its financial obligations.

61. Covered in finding of fact 13.

62. Covered in finding of fact 17.

63. Covered in finding of fact 17.

64. Rejected as not being supported by the evidence.

65. Rejected as being a legal conclusion.

66. Covered in finding of fact 13.

67. Covered in findings of fact 10 and 13.

68. Covered in finding of fact 17.

69. Rejected as being unnecessary.

70. Rejected as being a conclusion of law.

71. Rejected as being a conclusion of law.

COPIES FURNISHED:

James M. Scutti, Esquire

370 West Camino Gardens Boulevard Boca Raton, Florida 33432

Lawrence S. Krieger, Esquire

111 Georgia Avenue Suite 211

West Palm Beach, Florida 33401-5293

Honorable Gerald Lewis Comptroller

State of Florida The Capitol

Tallahassee, Florida 32399-0305

Charles Stutts, Esquire General Counsel

Plaza Level The Capitol

Tallahassee, Florida 32399-0305

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

AGENCY FINAL ORDER

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

STATE OF FLORIDA DEPARTMENT OF BANKING AND FINANCE

DIVISION OF FINANCE

IN RE:

Administrative Proceeding

WILLIAM E. DALY, No.: 849-F-2/87

Application for Registration DOAH Case No. 87-1421 under Chapter 494, F.S.,

Petitioner.

/

FINAL ORDER

The State of Florida Department of Banking and Finance, (hereinafter referred to as the "Department") being duly authorized and directed to administer the provisions of the Mortgage Brokerage Act, Chapter 494, Florida

Statutes (hereinafter the "Act") after due consideration of the subject matter hereof, especially after careful review and consideration of the record of the proceedings had in this matter on May 20, 1987 before the Division of Administrative Hearings, which review included all documents introduced into the record and all testimony presented as shown by the transcript of said proceedings, as required by Section 120.57(1)(d)9, Florida Statutes, does herewith enter the following Final Order and in support thereof would state as follows:

BACKGROUND FINDINGS OF FACT

1. On or about September 3, 1986, WILLIAM E. DALY (hereinafter the "Petitioner") applied to the Department for a license to act as a real estate mortgage broker under the provisions of the Act. Thereafter the Department timely denied the application by letter dated January 15, 1987, and Petitioner duly requested a formal hearing concerning said denial under the authority of Section 120.57(1), Florida Statutes.

   
   

2. The petition for formal hearing was granted and the Department requested the Division of Administrative Hearings (hereinafter "DOAH") to assign a hearing officer for the purpose of conducting said hearing. By formal order, DOAH assigned Donald R. Alexander, Esquire, as the hearing officer and designated its proceedings as William E. Daly, Petitioner vs. Department of Banking and Finance, Division of Finance, Case No. 87-1421.

   
   

3. Thereafter Hearing Officer Alexander conducted the formal hearing as provided by law on May 20, 1987, in West Palm Beach, Florida. After the conclusion of the hearing, both the Petitioner and the Department filed Proposed Recommended Orders

   
   

4. On July 9, 1987, Hearing Officer Alexander issued his Recommended Order and copies thereof were duly served on all parties. No exceptions to this Recommended Order have been filed with the Department by either of the parties.

   
   

5. In his Recommended Order, Hearing Officer Alexander set forth in separately numbered paragraphs his Findings of Fact and his Conclusions of Law. Based on these statements, Hearing Officer Alexander recommended that the license requested by Petitioner be granted.

FINDINGS OF FACT

1. In general, the Department has no disagreement with the Findings of Fact as determined by the Hearing Officer in his Recommended Order after a careful review of the record and transcript of the proceeding. These Findings of Fact, as set forth in numbered paragraphs 1 through 17, inclusive, of the Recommended Order are adopted as the Findings of Fact of this Final Order as though set forth herein at length. Each party having previously been furnished copies of the Recommended Order, no useful purpose would be served by repeating such findings in this Order.

   
   

2. However, it should be noted that the Hearing Officer entered a specific finding in paragraph 4 of the Recommended Order to the effect that Petitioner's insurance license had been revoked in 1972 by the State of Connecticut. The Connecticut Order of revocation was set forth in full and showed that Petitioner's license in that state had been revoked for failure to account for monies, failure to settle accounts, and failure to place coverage. In paragraph

   5, the Hearing Officer makes the comment that no evidence was submitted to establish the facts underpinning the license revocation in Connecticut.

   
   

3. The Hearing Officer also finds in paragraphs 10 through 16 that Petitioner, as a licensed real estate mortgage broker under the provisions of Chapter 475, Florida Statutes, had permitted his license to be used by First Continental Realty Corporation (FCRC) as a means of qualifying as a licensed real estate corporation in this state. Petitioner, because of his license, had allowed himself to be designated as the broker of record, president and sole director of FCRC at a salary of $150 per week. Petitioner never acted in any of these capacities, never had any knowledge of the operations or management of FCRC and was nothing more than a figurehead. FCRC was a wholly owned subsidiary or affiliate of State Capital Corporation whose fraudulent activities in the real estate mortgage business in Florida have cost the citizens of this state millions of dollars in losses.

   
   

   CONCLUSIONS OF LAW

   
   

4. In general, the Department is not in agreement with the Conclusions of Law as established by the Hearing Officer in his Recommended Order. These conclusions were set forth in numbered paragraphs 1 through 8 of the Recommended Order under the heading "Conclusions of Law." For reasons which will hereafter become apparent, only specific elements of the Hearing Officer's Conclusions of Law will be discussed or overruled in this Order.

   
   

5. In paragraph 5 of his Conclusions of Law, the Hearing Officer disposes of the Connecticut insurance license revocation on the grounds that nothing in the record shows that this revocation was based on fraud, dishonest dealing, or moral turpitude as required by Section 494.055(1)(i), Florida Statutes. The Connecticut Order, on its face, clearly evidences dishonest dealings. Failure to account for monies received and failure to place insurance coverage bought and paid for must constitute clear and unequivocal proof of dishonest dealing absent any showing to the contrary. Furthermore, introduction of the Connecticut Order is itself proof of the facts therein stated and the Department is not obligated to reprove those charges in the present proceeding. See the Department's Final Order in Robert Earl Swain vs. Department of Banking and Finance, Division of Administrative Hearings No. 85-3575, per curiam aff'd, 506 So.2d 418 (2nd DCA 1987) and cases therein cited. It is the Department's conclusion that the Connecticut revocation was based on dishonest dealing and is therefore proper grounds for denial of Petitioner's application under Section 494.055(1)(i), Florida Statutes.

   
   

6. In paragraphs 7 and 8 of his Conclusions of Law, the Hearing Officer disposes of the grounds for denial used by the Department in connection with Petitioner's association with FCRC as its registered real estate broker, president and director. The Hearing Officer has concluded that Petitioner was not negligent or incompetent in connection with a mortgage financing transactions as defined by Section 494.02(12), Florida Statutes, since he had no knowledge and performed no functions for State Capital Corporation. Such a conclusion disregards the Hearing Officer's own Findings of Fact to the effect that FCRC was the bird-dog company for State Capital which then used properties located by FCRC to place inflated mortgages on such property with a subsequent conversion of the excess funds so generated. FCRC was therefore an integral part of the State Capital scam which was based entirely on mortgage brokerage transactions. Without the willing and intentional participation of the Petitioner in allowing his real estate license to be used by FCRC that company could not have operated as a finder for State Capital. Petitioner, therefore,

   was a participant in the State Capital activities albeit a minor one. The Hearing Officer has concluded that Petitioner was negligent in his functions with FCRC. It is the conclusion of the Department that such negligence was a part and parcel of the State Capital mortgage fraud and therefore was a violation of Section 494.055(1)(b) , Florida Statutes, for which petitioner's application should be denied.

   
   

7. Section 120.60, Florida Statutes, governs licensing procedure such as the present matter. Subsection (2) of this statute provides that any license application shall be deemed approved upon failure of the agency to approve or deny such application within forty-five days after receipt of the hearing officer's recommended order. The Recommended Order in this matter was issued on July 9, 1987. More than forty-five days having passed since that date, the Petitioner's license application is deemed approved as a matter of law.

ORDER

Based on the foregoing findings of fact and conclusions of law, it is hereby:

ORDERED, that the Department shall forthwith proceed to issue a license as a real estate mortgage broker to the Petitioner, WILLIAM E. DALY, under the provisions of Chapter 494, Florida Statutes.

DONE AND ORDERED at Tallahassee, Florida, this 23rd day of October, 1987.

GERALD LEWIS as Comptroller of the State of Florida and Head of the Department of Banking and Finance

COPIES FURNISHED:

James M. Scutti, Esquire Attorney for Petitioner

370 West Camino Gardens Boulevard Boca Raton, Florida 33432

Lawrence S. Kreiger, Esquire Attorney for the Department of Banking and Finance

III Georgia Avenue, Suite 211

West Palm Beach, Florida 33401-5293

Donald R. Alexander Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

Randy Holland, Director Division of Finance

Department of Banking and Finance

202 Blount Street

Tallahassee, Florida 32399-0350

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedures. Such proceedings are commenced by filing one (1) copy of a Notice of Appeal with the agency clerk of the Division of Administrative Hearing and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal in the appellate district where the party resides. The Notice of Appeal must be filed within thirty (30) days of rendition of the order to be reviewed.

WALTER W. WOOD Deputy General Counsel Office of the Comptroller Suite 1302, The Capitol Tallahassee, Florida 32399-0350

(904) 488-9896

Docket for Case No: 87-001421

Orders for Case No: 87-001421