STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE AND ) TREASURER, )
)
Petitioner, )
)
vs. ) CASE NO. 87-3302
)
DOUGLAS ALFRED SAUER, )
)
Respondent. )
) DEPARTMENT OF INSURANCE AND ) TREASURER, )
)
Petitioner, )
)
vs. ) CASE NO. 87-3303
) JAMES EARL CONNELL, JR., )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, final hearing in the above-styled consolidated cases was held on May 25, 1988, in Sarasota, Florida, before Diane A. Grubbs, Hearing Officer of the Division of Administrative Hearings.
The parties were represented as follows:
For Petitioner: Willian W. Tharpe, Jr., Esquire
Office of Legal Services 413-B Larson Building
Tallahassee, Florida 32399-0300
For Respondents: Richard R. Logsdon, Esquire
1423 South Fort Harrison Avenue Clearwater, Florida 34616
BACKGROUND
On July 22, 1988, Petitioner filed separate Administrative Complaints against each Respondent with respect to the sale of tax-sheltered annuity contracts to several persons. Each Administrative Complaint alleged that the Respondent had failed to advise the clients of a two-tiered interest system whereby an annuity contract surrendered prior to maturity would earn less interest than one held to maturity.
Each Administrative Complaint alleged that this "omission and misrepresentation" constituted grounds for the compulsory suspension or
revocation of the Respondent's license as: a) a willful use of a license to circumvent any of the requirements or prohibitions of the Insurance Code, in violation of Section 626.611(4), Florida Statutes; b) a willful misrepresentation or deception with regard to any annuity contract, in violation of Section 626.611(5); c) a demonstrated lack of fitness or trustworthiness to engage in the business of insurance, in violation of Section 626.611(7); and d) fraudulent or dishonest practices in the conduct of business under a license, in violation of Section 626.611(9).
Each Administrative Complaint alleged that the above-described "omission and misrepresentation" constituted grounds for discretionary suspension or revocation of the Respondent's license as: a) a violation of any provision of the Insurance Code, in violation of Section 626.621(2) and b) showing himself to be a source of injury of loss to the public or detrimental to the public interest, in violation of Section 626.621(6). Each Administrative Complaint alleged that the above described "omission and misrepresentation" constituted an unfair method of competition and unfair or deceptive act or practice as: a) knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison that misrepresents the benefits, advantages, conditions, or terms of any insurance policy, in violation of Section 626.9541(1)(a)1; b) knowingly making or causing to be made a statement with respect to the business of insurance that is untrue, deceptive, or misleading, in violation of Section 62C.9541(1)(b); c) knowingly making false or fraudulent statements or representations on, or relative to, an application for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from an insurer, agent, broker, or individual, in violation of Section 626.9541(1)(k)1; and d) knowingly making any false or fraudulent statement or representation in, or with reference to, any application or negotiation for insurance, in violation of Section 626.9541(1)(k)2.
Each Administrative Complaint alleged that the above-described "omission and misrepresentation" was the making, issuing, or circulating an estimate, circular, or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby, in violation of Rule 4- 9.05, Florida Administrative Code.
On July 30, 1988, each Respondent served an Answer and Request for Administrative Hearing disputing the factual allegations and requesting a formal hearing.
At the commencement of the hearing, Petitioner amended its Administrative Complaints by adding a paragraph to each Count alleging that each Respondent made "misrepresentations or deceptive omissions [to each prospective client named in the respective Administrative Complaint] during the sale of the tax- sheltered annuity with regard to interest rates, penalties, and loan provisions of the policies." Respondents did not object to the amendment, for which leave was granted. Respondent Sauer then amended a portion of his Answer. Later, Petitioner dropped Count I of the Administrative Complaint against Respondent Sauer. The hearing proceeded as to two counts against Respondent Sauer and three counts against Respondent Connell.
At the hearing, Petitioner called five witnesses and offered into evidence twelve exhibits. Respondents called three witnesses and offered into evidence seven exhibits. All exhibits were admitted into evidence, except for Respondents' Exhibit 3.
The transcript was filed on June 8, 1988, and the parties filed proposed recommended orders. Treatment accorded the proposed findings is detailed in the Appendix.
By Order dated October 24, 1988, the Director of the Division of Administrative Hearings transferred the cases to the undersigned, pursuant to Section 120.57(1)(b)(11), Florida Statutes, for the purpose of issuing the recommended order.
FINDINGS OF FACT
At all material times, Respondent Sauer was licensed in Florida as an ordinary life agent working for Money-Plan International, Inc. (Money-Plan) and selling National Western Life Insurance Company (National Western) insurance and annuity contracts.
From October 10, 1984, until sometime prior to the events in question, Respondent Sauer had been an agent for Northern Life Insurance Company (Northern Life). Respondent Sauer had about five years' relevant job experience at the time of the events in question.
At all material times, Respondent Connell was licensed in Florida as an ordinary life agent working for Money-Plan and selling National Western insurance and annuity contracts.
Respondent Connell had no significant job experience prior to his employment with Money-Plan about three months prior to the events in question. His principal employment at all material times has been as a real estate broker.
During the spring of 1986, Money-Plan was soliciting employees of the Manatee County School District for the purchase of two types of National Western annuity contracts. The flexible-premium annuity contract permits periodic contributions in such amounts and at such times as the policyholder selects.
The single-premium annuity contract involves only a single premium, such as in the form of a rollover from another tax-qualified retirement plan. The Manatee County School Board had approved these National Western contracts and an annuity contract offered by Northern Life for sale to Manatee County School District employees, who could pay the premiums by a payroll-deduction plan. Each client described below, except for Jack Dietrich, is a schoolteacher employed by the Manatee County School Board; Mr. Dietrich is a principal of a Manatee County elementary school.
Each Respondent used the same general sales procedure. First, he would contact the client, set up an appointment, make the sales presentation, and often obtain a signed application at the end of the appointment. He would then leave the client a copy of the application and a National Western brochure.
Upon delivery of the annuity contract some weeks later, the client would have a chance to review the specific provisions and, if she did not like them, reject the contract without cost or further obligation.
The front side of the two-sided, one-page application requires some basic identifying information concerning the annuity contract selected and the applicant. The back side contains five disclosure paragraphs in somewhat larger print than that on the front side. The first disclosure paragraph does not apply to the annuity contracts sold by Respondents in these cases. The last disclosure paragraph reminds the policyholder to review annually the tax status of the contract.
The second disclosure paragraph applies to the single-premium contract. This paragraph warns that: a) a withdrawal of more than 10% of the Cash Value during the first seven years after the contract is issued will result in the loss of 10% of the contribution and b) if the policyholder fails to use one of the approved settlement options, the contribution will earn interest at the lower Cash Value rate rather than the higher Account Balance rate.
The third disclosure paragraph applies to the flexible-premium annuity contract. This paragraph provides:
FLEXIBLE PREMIUM ANNUITY FORM 01-1063
If, prior to the annuity date, I withdraw my contributions in excess of the renewal contributions made during the previous twelve months or if I do not use one of the retirement benefit options under the policy for distribution of my account on the annuity date, my account will be subject to the following: (a) a charge of twenty percent (20%) will be made against my contributions during the first contract year and all contribution increases during a twelve (12) month period from the date of any increase (a contribution increase occurs when the new contribution is greater than the initial contribution plus the sum of all prior increases) unless such contributions are not withdrawn prior to the end of the seventh (7th) contract year following the year of receipt, and (b) interest will be credited on my contributions at rates applicable under the Cash Value provisions and not the Account Balance provisions.
The fourth disclosure paragraph applies to both the single-premium and flexible-premium annuity contracts. This paragraph identifies two types of guaranteed interest rates. Four guaranteed annual rates, ranging from 9 1/2% for the first year after issuance of the contract to 4% after ten years, apply to the Account Balance. A single guaranteed annual rate of 4% applies to the Cash Value.
The brochure describes the flexible-premium contract as having: "Stop and Go privileges: Contributions are fully flexible and nay be increased, decreased or stopped, subject to employer rules and IRS regulations."
Elsewhere, the brochure states: "To avoid the surrender charge, the participant simply annuitizes the contract and elects one or more settlement options." (Emphasis supplied.)
The brochure states that the policyholder is not currently taxed on the portion of her salary deducted by the employer to pay for the premium or, as to both types of contract, the interest earned by the premiums within the annuity contract. National Western offers in the brochure to calculate for any policyholder the maximum amount of salary that she may defer so as to avoid current income tax on her periodic contributions.
The brochure explains how a policyholder may, subject to restrictions imposed by law, borrow her annuity funds without the loan being treated as a taxable distribution. The brochure cautions that the loan must be repaid within five years unless the proceeds are used for certain specified purposes relating to a principal residence.
The brochure states in boldface: "Each participant will have an Account Balance and a Cash Value Balance." The Account Balance is defined as all of the contributions or premiums with interest from the date of receipt to the annuity starting date (of, if earlier, the death of the annuitant). The brochure explains: "The Account Balance is the amount available when the participant retires or [elects to begin receiving payments] and selects one or more of the approved settlement options." In such event, "[t]here are no charges or fees deducted from the Account Balance ..."
The Cash Value for the flexible-premium contract is defined as 80% of the first-year premiums and 100% of renewal premiums with interest from the date of receipt to the date of withdrawal. If the policyholder increases the amount of her premiums in any year, the amount of the increase is treated as first-year premiums. The policyholder vests as to the remaining 20% of the first-year premiums seven years after the issuance of the contract or, if applicable, seven years after the year in which the premiums are increased. The brochure explains: The Cash Value is the amount received if the participant surrenders the contract without electing one of the approved settlement options, which are described in the next section of the brochure. The brochure offers no explanation of the provisions governing the vesting of 10% of the Cash Value of the single-premium contract.
The brochure sets forth the differences in interest rates between the Account Balance and Cash Value in a clear boldface table. The table notes that the Cash Value guaranteed interest rate may be higher for the first year if a higher rate is in effect at the time of the issuance of the contract.
Neither the application or the brochure mentions the interest rate applicable to policy loans.
The flexible-premium annuity contract generally conforms to the above- described provisions of the application and brochure. This is the type of contract that the Respondents sold to each of the clients described below. No sample of the single-premium annuity contract was offered into evidence. This is the type of contract that Respondent Sauer sold to Mr. Dietrich, in addition to a flexible-premium contract.
The flexible-premium annuity contract adds an important additional requirement for the policyholder to vest in the remaining 20% of the first-year premiums when calculating the Cash Value. The flexible-premium contract requires that the policyholder pay, in the six years following the first anniversary of the contract, sufficient additional premiums so that the accrued Cash Value, immediately before the 20% credit, equals anywhere from four to seven times the total first-year premium, depending upon the age of the policyholder when the contract is issued. In the case of a policyholder with an issue age of 57 years or less, the multiple is four. No such requirement would be applicable to a single-premium contract where the parties intend from the start that there shall be no additional premiums.
More favorable to the policyholder, the flexible-premium annuity- contract provides that, after ten years, the annual interest rate on the Cash Value will be the greater of the guaranteed rate or one point less than the rate then credited to the Account Balance.
Concerning policy loans, the flexible-premium annuity contract states that the policyholder may obtain a loan "using the contract as loan security." The amount borrowed may not exceed 90% of the Cash Value. Interest on the loan must be paid in advance. The rate of interest, which remains in effect for an entire contract year, is the greater of the Moody's Corporate Bond Yield Average, which is determined twice annually, or one point greater than the Cash Value interest rate in effect on the contract anniversary. The initial annual loan rate stated in the annuity contract issued to Rebecca McQuillen was 10 1/2%.
Each flexible-premium annuity contract issued contains a statement of benefits. The one-page statement contains four columns showing, by Cash Value and Account Balance, the accrual of benefits if guaranteed interest rates apply or if current interest rates apply. The statement warns: "This contract may result in a loss if kept for only 3 years, assuming withdrawal values are based on guaranteed rate and not on current rate." The initial guaranteed rates were, for a contract issued on April 15, 1986, 10 1/2% on the Account Balance and 8% on the Cash Value and, for a contract issued on May 15, 1986, 10% and 7 1/2%, respectively.
Respondent Connell visited Ms. McQuillen and Virginia Taylor on separate occasions in the spring of 1986 for the purpose of selling National Western annuity contracts. During these visits, Henry James Jackson, Jr. accompanied Respondent Connell and made the sales presentations to the clients as part of the training that Respondent Connell was then undergoing. Mr. Jackson is the vice-president of Money-Plan and supervisor of Respondent Sauer, who manages the Sarasota office of Money-Plan and supervises four or five agents, including, at the time, Respondent Connell.
Respondent Connell signed the applications of Ms. McQuillen and Ms. Taylor, as the selling agent, in order to receive the credit for the sales. Respondent Connell earned this credit by arranging the appointments.
In their applications, Ms. McQuillen projected periodic contributions totalling, on an annual basis, $2400 from her to the flexible-premium contract, and Ms. Taylor projected a total annual contribution of $2280.
Respondent Connell subsequently visited Linda Rush, to whom he was referred by Ms. McQuillen. Respondent Connell himself made the sales presentation to Ms. Rush.
In his meeting with Ms. Rush, Respondent Connell explained the mechanics of the flexible-premium annuity contract. He discussed the current interest rates and how they were set by market conditions. Although he did not discuss the specifics of the Account Balance versus the Cash Value, he gave Ms. Rush a copy of the application and the brochure. He also discussed generally that the annuity contract was primarily a retirement policy and that Ms. Rush would not enjoy all of its benefits, partly due to penalties, if she failed to keep it until retirement. Ms. Rush signed an application at the conclusion of their meeting. She projected a total annual contribution of $1200.
Later, at Ms. McQuillen's request, Respondent Connell attended a meeting with her and a friend of hers named Mike Donaldson, who represents Northern Life. Mr. Donaldson had informed the clients of both Respondents, directly or indirectly, that his company's annuity contract was superior to those of National Western because of the latter's "two-tiered" interest rate whereby a lower rate of interest was credited to the Cash Value than the Account Balance. Respondent Connell did not perform well in the confrontation with his more experienced counterpart.
Subsequently, the three above-described clients timely cancelled their contracts at no cost to themselves.
In the spring of 1986, Respondent Sauer made a sales presentation to Mr. Dietrich. Mr. Dietrich's issue age was 56 years and he had owned a 15-year old tax-sheltered annuity with a surrender value of $8200.
Meeting with Mr. Dietrich six times for a total of six to eight hours, Respondent Sauer discussed at length tax-sheltered annuities, as well as life insurance. The discussions involved the flexible-premium annuity contract that was purchased by all of the other clients involved in these cases, as well as a single-premium annuity contract for the $8200 rollover contribution.
With regard to the flexible-premium annuity contract, Respondent Sauer discussed with Mr. Dietrich the lower interest rate used if the policyholder surrendered the contract, the penalty of 20% of the first-year premiums if the contract was surrendered in the first seven years, and the various ways that the policyholder could avoid the penalties. Respondent Sauer explained generally the similar penalties and lower interest rate applicable to a prematurely terminated single-premium annuity contract.
In making the sales presentations to Mr. Dietrich, Respondent Sauer emphasized the loan options available with the these tax-sheltered annuities. Respondent Sauer stressed the small margin between the interest credited on the contract and the interest charged on a policy loan and stated that, at times, a National Western policyholder could borrow his annuity funds at a lower interest rate than he was being paid on the funds by the company. He also informed Mr. Dietrich that he did not need to pay back the loan, but could instead roll it over every five years.
The loan options in the National Western annuity contracts are a major selling point and offset to some degree the so-called "two-tiered" interest rate. These tax-sheltered annuities compare favorably to other annuity contracts because the National Western policyholder does not earn a lower interest rate on that portion of the policy balance encumbered by the loan. Also, National Western has historically maintained a more favorable margin than that maintained by other companies between the loan rates charged and the interest paid on the Account Balance. At the time of the hearing, for example, the interest paid annually on the Account Balance was 9.5% and the interest charged annually on policy loans was 9.09%.
Mr. Dietrich signed two applications. In the application for a flexible-premium contract, he projected a total annual contribution of $3850. In the application for a single-premium contract, he projected a rollover contribution of $8200. Respondent Sauer left Mr. Dietrich a copy of the application and the brochure.
In the spring of 1986, Respondent Sauer made a sales presentation of the flexible-premium contract to Noah Frantz. Respondent Sauer explained to Mr. Frantz the different interest rates applicable to the Account Balance and the Cash Value, as well as the 20% penalty for early surrender.
The sales presentation to Mr. Frantz took place shortly after the confrontation between Respondent Connell and Mr. Donaldson representing Northern Life. Respondent Sauer therefore found it necessary to inform Mr. Frantz that Respondent was familiar with the Northern Life tax-sheltered annuity because he used to sell it. Respondent Sauer emphasized the point by showing his Northern Life license to Mr. Frantz.
Respondent Sauer obtained a signed application for a flexible-premium contract from Mr. Frantz, who projected a total annual contribution of $300. Respondent Sauer left Mr. Frantz a copy of the application and brochure.
Subsequently, Mr. Dietrich and Mr. Frantz timely cancelled their annuity contracts at no cost to themselves.
An important feature of the tax-sheltered annuities is their favorable federal income tax treatment. Within certain limits, the policyholder is able to exclude front his gross income the amount of his salary used to pay the premiums. The contributions, whether periodic or one-time, then earn tax-free interest, which is taxed when distributed later in the form of annuity payments.
The Tax Equity and Fiscal Responsibility Act (TEFRA) imposes certain requirements on loans involving tax-sheltered annuities. In general, if these requirements are not satisfied, a nontaxable loan is converted into a taxable distribution. Both before and after TEFRA, however, a loan would be converted into a taxable distribution if the borrower, at the time of taking out the loan, had no intention of repaying it. An intent to roll over the loan periodically rather than repay it is evidence of a taxable distribution rather than a true loan.
The use of a tax-sheltered annuity as security for a loan increases the risk that the policyholder will be forced to surrender prematurely the contract. In such event, the interest rate on the policy loan would generally be greater than the interest rate credited to the Cash Value because the loan interest rate is at least one point over the current Cash Value interest rate. The only time that a favorable margin could develop would be if, subsequent to setting the loan rate for the next year, the Cash Value rate increased by more than one point.
It is more likely that a favorable margin would exist between the higher Account Balance interest rate and the loan interest rate. However, in April, 1986, the two stated rates were equal, although the effective rate charged on loans would presumably be somewhat higher because the annual interest is paid in advance at the beginning of each year. The viability of the strategy of borrowing at lower rates than are credited to the contract during the term of the loan depends upon the ability of National Western to establish and maintain a favorable margin between the Account Balance rate and the loan rate and the ability of the policyholder to retain his eligibility for the higher Account Balance rate.
Neither Respondent made any material misrepresentations or omissions with respect to the flexible-premium contracts sold to Ms. McQuillen, Ms. Taylor, Ms. Rush, or Mr. Frantz. Each sales presentation gave an accurate and
reasonably complete description of a somewhat complicated insurance product. Any possible material omissions in the presentation, or in the client's understanding of the material presented, were substantially cured by the application and brochure.
The sales presentation to Mr. Dietrich was inaccurate with respect to Respondent Sauer's recommendation that Mr. Dietrich could, by continually rolling over loans, borrow against his contract without ever repaying the loan. By neglecting to mention the possible adverse tax consequences of such a strategy, Respondent Sauer inadvertently misled Mr. Dietrich.
The sales presentation to Mr. Dietrich concerning the flexible-premium contract contained another omission. There was no mention in the application, brochure, or sales presentation of the requirement that Mr. Dietrich contribute, in the next four years, a sum equal to four times the amount of his first-year contributions in order to vest the unvested 20% of his first-year contributions when calculating his Cash Value. To the contrary, the brochure emphasized the flexibility accorded the policyholder in setting the amount of his contributions, as described in Paragraph 11 above.
Although this omission occurred in all of the presentations, it had greater significance in the case of Mr. Dietrich, who planned on making- significantly greater first-year contributions than the other clients planned to make. In purchasing the flexible-premium annuity, Mr. Dietrich was obligating himself to contribute, based on his projected first-year contributions, an additional $15,400 over the next six years into what he had assumed was a flexible-premium contract.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter. Section 120.57(1), Florida Statutes.
Petitioner has jurisdiction over the disciplining of licenses of insurance agents. Sections 626.611 and 626.621, Florida Statutes.
Petitioner must suspend or revoke a license if: a) the license is willfully used to circumvent any of the requirements of the Insurance Code, in violation of Section 626.611(4); b) the licensee makes a willful misrepresentation or deception as to any annuity contract, in violation of Section 626.611(5); c) the licensee demonstrates a lack of fitness or trustworthiness to engage in the business of insurance, in violation of Section 626.611(7); or d) the licensee engages in fraudulent or dishonest practices in the conduct of business under the license, in violation of Section 626.611(9).
Petitioner may suspend or revoke a license if the licensee: a) violates any provision of the Insurance Code or other applicable law in the course of dealing under the license, in violation of Section 626.621(2) or b) in the conduct of business under the license, engages in unfair methods of competition or in unfair or deceptive acts or practices, as prohibited in Part X of Chapter 626, or otherwise shows himself to be a source of injury or loss to the public or detrimental to the public interest, in violation of Section 626.621(6).
Unfair methods of competition or unfair or deceptive acts or practices, under Part X of Chapter 626, include: a) knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate,
illustration, circular, statement, sales presentation, omission, or comparison which misrepresents the benefits, advantages, conditions, or terms of any insurance policy, in violation of Section 626.9541(1)(a)1; b) knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public a statement, advertisement, or announcement, by way of publication, broadcast, or other means, containing any assertion, representation, or statement with respect to the business of insurance, which is untrue, deceptive, or misleading, in violation of Section 626.9541(1)(b); c) knowingly making false or fraudulent statements on, or relative to, an application for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, agent, broker, or individual, in violation of Section 626.9541(1)(k)1; or d) knowingly making any false and fraudulent statement or representation in, or with reference to, any application or negotiation for insurance, in violation of Section 626.9541(1)(k)2.
A licensee may not make, issue, circulate, or cause to be made, issued, or circulated, an estimate, circular, or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby, in violation of Rule 4-9.05, Florida Administrative Code.
Petitioner must prove the allegations of the Administrative Complaint by clear and convincing evidence. Ferris v. Turlington, 510 So.2d 292 (Fla. 1987).
There is no evidence of any dealings by Respondent Connell as to Ms. McQuillen or Ms. Taylor, except for the signing of the application. Such an action was entirely proper and was not an attempt on the part of Respondent Connell to defraud National Western.
Respondent Connell himself solicited Ms. Rush. However, Petitioner has failed to prove that this presentation, when judged in connection with the documents that he supplied Ms. Rush, violated any of the above-cited provisions of law.
Similarly, Petitioner has failed to prove that Respondent Sauer's presentation to Mr. Frantz, when judged in connection with the documents that he supplied to the client, violated any of the above-cited provisions of law.
Petitioner has failed to prove that Respondent Sauer's presentation to Mr. Dietrich involved any intentional misrepresentations or omissions.
Petitioner has failed to prove that Respondent Sauer is a source of injury or loss to the public. No such injury or loss actually took place. Even if the contracts had not been cancelled, Petitioner did not prove by clear and convincing evidence that such injury or loss would have taken place.
Although no intentional wrongdoing occurred and no injury or loss was proven likely to take place, Respondent Sauer's presentation to Mr. Dietrich nevertheless contained two omissions. The closest questions involve Respondent Sauer's fitness and whether he showed he was detrimental to the public interest. The two proven shortcomings in his presentation are not severe enough to violate these standards.
Under then-current law, the tax treatment of loans that are continually rolled over was not invariably adverse because the question of intent to repay
is a fact question. The failure to advise Mr. Dietrich of his obligation to contribute over $15,000 in six years in order to avoid forfeiture of 20% of the Cash Value of his first-year premiums is, in itself, not clear and convincing evidence of his unfitness. In the course of six to eight hours of meetings, Mr. Dietrich may have reasonably assured Respondent Sauer of an intent to make additional contributions in such amounts. Likewise, Mr. Dietrich's circumstances may have in effect precluded the possibility of a premature surrender so that any concern with a nonvested portion of the Cash Value would have been pointless.
Petitioner must offer considerably more proof of the probable effect of these two omissions, based on Mr. Dietrich's specific circumstances, in order to prove by clear and convincing evidence that the omissions establish the unfitness of Respondent Sauer or demonstrate his detriment to the public.
In view of the foregoing, it is hereby RECOMMENDED that a Final Order be entered finding Respondent Connell and Respondent Sauer not guilty and dismissing the Administrative Complaint filed against each of them.
ENTERED this 30th day of November, 1988, in Tallahassee, Florida.
ROBERT E. MEALE
Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 30th day of November, 1988.
APPENDIX TO RECOMMENDED ORDER, CASE NOS. 88-3302, 88-3303
Treatment Accorded Petitioner's Proposed Findings 1-4. Adopted in substance.
Rejected as irrelevant.
Adopted.
7 & 9. Rejected as unsupported by the evidence.
8. First sentence adopted. Second and third sentences rejected as recitation of testimony. Fourth sentence rejected as unsupported by the evidence.
Rejected as recitation of evidence.
First sentence adopted. Second and fourth sentences rejected as unsupported by the evidence. Third sentence rejected as legal argument.
& 14. Adopted in substance.
& 15-16. Rejected as irrelevant, except that last eight words of first sentence of Paragraph 16 are adopted.
17 & 21. Rejected as unsupported by the evidence.
Adopted.
Rejected as irrelevant.
Adopted in substance, except that first 16 words arerejected as unsupported by the evidence.
Treatment Accorded Respondent's Proposed Findings 1-3 & 6. Adopted.
4 & 5. Rejected as subordinate.
7-11. Adopted in substance.
Rejected as recitation of evidence.
Adopted through word "policy." Remainder rejected asirrelevant.
Last sentence rejected as subordinate. Remainder rejected as recitation of testimony.
Rejected as recitation of evidence and legal argument.
First sentence adopted. Remainder rejected as recitation of evidence.
Rejected as irrelevant.
18-19. Rejected as recitation of evidence.
20. First two sentences adopted, except that from "and" through end of first sentence rejected as irrelevant. Last sentence rejected as not finding of fact.
21-22 & 25. Adopted in substance.
23-24. Adopted.
26. Rejected as unsupported by the evidence. 27-28. Rejected as recitation of testimony. 29-31. Adopted in substance.
30. Adopted.
32. Rejected as irrelevant through "policy." Remainder adopted in substance.
33-34. Adopted in substance, except that first sentence ofParagraph 34 is rejected as recitation of testimony.
Rejected as irrelevant.
Rejected as unsupported by the evidence, except that the first and tenth sentences are adopted.
Adopted in substance.
Rejected as irrelevant.
COPIES FURNISHED:
William W. Tharpe, Jr., Esquire Office of Legal Services
413-B Larson Building Tallahassee, Florida 32399-0300
Richard R. Logsdon, Esquire 1423 South Fort Harrison Avenue Clearwater, Florida 34616
Hon. William Gunter
State Treasurer and Insurance Commissioner The Capitol, Plaza Level
Tallahassee, Florida 32399-0300
Don Dowdell, Esquire General Counsel
The Capitol, Plaza Level Tallahassee, Florida 32399-0300
=================================================================
AGENCY FINAL ORDER
=================================================================
OFFICE OF THE TREASURER DEPARTMENT OF INSURANCE
IN THE MATTER OF:
JAMES EARL CONNELL, JR. DOI Case No. 87-L-575LLM DOAH Case No.: 88-3303
Revocation of License and Eligibility for Licensure
Ordinary Life including Health Agent
/ IN THE MATTER OF:
DOUGLAS ALFRED SAUER DOI Case No. 87-L-576LLM DOAH Case No. 88-3302
Revocation of License and Eligibility for Licensure
Ordinary Life Agent
/
FINAL ORDER
THIS CAUSE came before the undersigned Treasurer and Insurance Commissioner of the State of Florida for consideration and final agency action. On July 22, 1987, the Department of Insurance filed separate Administrative Complaints against both JAMES EARL CONNELL, JR. and DOUGLAS ALFRED SAUER, charging them with violations of various provisions of Chapter 626, Florida Statutes. The gravamen of the charges against both was that they had made misrepresentations to prospective clients during the solicitation for sale of tax sheltered annuities.
On July 30, 1987, each Respondent served an Answer disputing the factual allegations and requesting a formal hearing. The Department referred these cases to the Division of Administrative Hearings on August 5, 1987. On August 24, 1987, the Department moved to consolidate the two cases for hearing and consolidation was granted by order of the Hearing Officer dated September 10, 1987. A final hearing was held before Diane A. Grubbs, Hearing Officer for the Division on May 25, 1988.
A proposed Recommended Order was filed with the Division by the attorney for Respondents Sauer and Connell on June 21, 1988. The Department's Proposed Recommended Order was filed with the Division on July 15, 1988 after the Department's Motion for Extension of Time for filing its Proposed Recommended Order was granted by order of the Hearing Officer on August 1, 1988.
Thereafter, these consolidated cases were transferred by order of Sharyn L. Smith, Director, Division of Administrative Hearings dated October 24, 1988, from Hearing Officer Diane A. Grubbs to Hearing Officer Robert E. Meale pursuant to Section 120.57(1)(b)(11), Florida Statutes. This Section states:
If the hearing officer assigned to a hearing becomes unavailable, the division shall assign another hearing officer who shall use any existing record and receive any additional evidence or argument, if any, which the new hearing officer finds necessary.
On November 30, 1988, after consideration of only the record of the hearing and of the proposed findings of fact and conclusions of law submitted by the parties, Hearing Officer Meale issued a Recommended Order (attached as Exhibit "A") recommending that a Final Order be entered finding both Respondents Connell and Sauer not guilty and that the Administrative Complaints filed against both be dismissed. Neither the Department nor Respondents Sauer and Connell filed any Exceptions to the Recommended Order.
It is the Hearing Officer's function to consider all the evidence presented, resolve conflicts, judge credibility of the witnesses, draw permissible inferences from the evidence, and reach ultimate findings of fact based on competent substantial evidence. State Beverage Department v. Ernel, Inc., 115 So.2d 566 (Fla. 3rd DCA 1959); Cenac v. Florida State Board of Accountancy, 399 So.2d 1013, 1016 (Fla. 1st DCA 1981); Heifetz v. Department of Professional Regulation, 475 So.2d 1277 (Fla. 1st DCA 1985). Assuming that the Hearing Officer fulfills this responsibility, the Department is required by law to accept the Hearing Officer's Findings of Fact provided there is competent substantial evidence to support his findings. Kimball v. Hawkins, 364 So.2d 463, 465 (Fla. 1978). In the instant case, however, the Hearing Officer who heard this case was not the same Hearing Officer who submitted the Recommended Order to the Department. The latter Hearing Officer in making his recommendation was not in a position in weighing the evidence to judge the credibility of witnesses as would a Hearing Officer who has the opportunity of observing the witnesses who testify before him.
The Fourth District Court of Appeals in Beattie v. Beattie and Celebrities, Inc., So.2d (Fla. 4th DCA 1988), 13 FLW 2459 (4th DCA, Nov. 9, 1988), recently addressed this type of situation by restating the existing law of Florida that a successor judge may not enter an Order or Judgment based upon evidence heard by a predecessor Judge. The Second District Court of Appeals, also, discussed the law in Bradford v. Foundation and Marine Construction Co., 182 So.2d 447 (Fla.
2d DCA 1966), by stating:
It is generally stated that a successor judge may complete any acts uncompleted by his predecessor where they do not require the successor to weigh and compare testimony.
48 C.J.S. Judges s.56a (1947). Also, in the absence of a statute to the contrary, a successor judge cannot generally make findings or render a final decree even though the testimony is transcribed at trial and preserved. 48 C.J.S. Judges s.56b (1947); 54
A.L.R. 959(e).
Reason and conscience lead this court, in line with other jurisdictions, to adopt the rule that where oral testimony is produced at trial and the cause is left undetermined, the successor judge cannot render verdict or judgment without a trial de novo, unless upon the record by stipulation of the parties. (Citations omitted).
Id. at 449. See, also, Salvern v. Salvern, 252 So.2d 865 (Fla. 3rd DCA 1971); Anders v. Anders, 376 So.2d 439 (Fla. 1st DCA 1979)
In light of the above-cited cases, as well as the inability of the reassigned officer to fulfill his responsibility of weighing the evidence along with the credibility of the witnesses, I find that the Hearing Officer erred by not giving the parties the opportunity to present any additional evidence or argument that might have been warranted in light of the reassignment of the Hearing Officer or in lieu thereof, the opportunity to stipulate to the use of all or a portion of the testimony taken as set forth in the transcript of the original proceeding. Because no exceptions were taken by either party to the Hearing Officer's Recommended Order and upon further consideration of the record and finding that there was substantial competent evidence to support the Hearing Officer's Findings of Fact and being otherwise fully advised in the premises, it is,
ORDERED:
The findings of fact of the Hearing Officer are adopted as the Department's findings or fact, however, for purposes of clarification and to make the Hearing Officer's findings consistent with his intent and the record, the background information supplied by the Hearing Officer shall be amended to reflect that the Administrative Complaints filed against Respondents Connell and Sauer were filed in 1987 rather than 1988 and the Answer and request for administrative hearing disputing the factual allegations and requesting a formal hearing were served on the Department, likewise, in 1987.
The Hearing Officer's Conclusions of Law are accepted and adopted as the Department's Conclusions of Law.
The Hearing Officer's recommendation that Respondent Connell and Respondent Sauer be found not guilty as well as recommending dismissal of the Administrative Complaint filed against each of them is accepted. Wherefore, the complaints against Respondents Connell and Sauer are dismissed.
Any party to the proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Fla. R. App. P. 9.110. Review proceedings must be instituted by filing a Petition or Notice of Appeal with the General Counsel, acting as the Agency Clerk, at 412 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 25th day of January, 1989.
TOM GALLAGHER
Treasurer and Insurance Commissioner
COPIES FURNISHED TO:
DOUGLAS ALFRED SAUER 6115 GOLD FINCH STREET SARASOTA, FLORIDA 34241
DOUGLAS ALFRED SAUER 3000 24TH STREET, SOUTH SUITE D
ST. PETERSBURG, FLORIDA 33711
JAMES EARL CONNELL, JR. 5539 AMERICA DRIVE
SARASOTA, FLORIDA 33481
JAMES EARL CONNELL, JR. 30000 34TH STREET, SOUTH SUITE D
ST. PETERSBURG, FLORIDA 33711
RICHARD R. LOGSDON, ESQUIRE 1423 SOUTH FORT HARRISON AVENUE CLEARWATER, FLORIDA 34616
WILLIAM W. THARPE, JR., ESQUIRE OFFICE OF LEGAL SERVICES
OFFICE OF THE TREASURER AND DEPARTMENT OF INSURANCE
412 LARSON BUILDING TALLAHASSEE, FLORIDA 32399-0300
| Issue Date | Proceedings |
|---|---|
| Nov. 30, 1988 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 25, 1989 | Agency Final Order | |
| Nov. 30, 1988 | Recommended Order | Respondent's alleged failure to advise clients that annuities surrendered prior to maturity had lower yeild not proven. Dismissal recommended. |
